Bargaining Power and Strategy in the Foreign Investment Process: A Current Andean Code Analysis

Abstract:     
In 1970, the countries of the Andean Common Market (the Andean Pact or ANCOM), adopted uniform foreign investment regulations. The Andean Foreign Investment Code, as Decision 24 of the Andean Commission is called, regulates both the treatment of foreign capital entering or within ANCOM, and related agreements on the transfer of technology, patents, licenses, and royalties. The member countries of ANCOM were required by Decision 24 to implement this Code as domestic legislation following its adoption by the Andean Commission.

The governments of the ANCOM members were motivated by both common and individual interests when they adopted the Andean Code. Among these were the desire to achieve a reduction in foreign economic influence and to be able to plan more efficiently a regional industrial structure. This was to be done in a way which would give no individual member country a significant economic advantage over the others.

Since the adoption of the Andean Foreign Investment Code, there have been important changes in the political and economic situations of the member countries (for example, the quadrupling of oil prices which has made Venezuela a new economic power in the Western Hemisphere), and there have been several important developments in the Code's local implementation. This Article is designed to apprise the practitioner concerned with Latin America of progress in the implementation of the Andean Code and related regulations in the six ANCOM countries, and to discuss implications for the investment lawyer. It examines the progress of the Andean Pact's efforts in the field of foreign investment regulation in terms of bargaining theories previously used solely by economists, political scientists, and military strategists, but which have recently begun to receive attention from international lawyers. It is the premise of this Article that both international lawyers and government officials should begin to see the forces which influence the foreign investment process in a general theoretical framework in order to fully understand and perhaps better control these forces.

Number of Pages in PDF File: 40

Keywords: Andean Common Market, Decision 24, foreign investment, technology transfer

JEL Classification: F15, F21, K33, L52, N66, O32, O54

Accepted Paper Series