Governing the Wealth of Nations: The Santiago Principles at 15

Abstract

The Santiago Principles, a set of “generally accepted principles and practices” (GAPP) adopted by most of the world’s sovereign wealth funds (SWFs), are a product of a very different political and economic moment. However, as SWF assets under management grow beyond $10 trillion and SWFs play an increasingly visible role in many countries’ political economies, the Santiago Principles are likewise growing in importance as a form of international soft law. Sovereign wealth funds contest the distinctions between politics and finance across domestic and international dimensions, and the Santiago Principles serve as a mechanism to manage some of the concerns arising from SWFs’ unique position as public actors in private markets. While the Santiago Principles have proven resilient, they have also been static. As the principles reach their 15th anniversary, this essay considers the continuing relevance of the Santiago Principles, and whether the principles will (and should) persist in their current form. Acknowledging that any voluntary set of practices are inherently limited in their power as a signal of governance credibility, the Santiago Principles provide a compelling example of how international soft law develops over time. And, as sovereign funds continue to grow in number and in wealth, the importance of the principles has never been greater.

Keywords: sovereign wealth, soft law, international economic law