The social and economic impact of the pandemic has been particularly severe for Latin America and the Caribbean. The region has suffered both the highest number of fatalities among developing regions and the steepest drop in economic activity – an average contraction of 6.5% of GDP at the regional level – exceeding that of advanced economies and all economies. other developing regions in the world. Countries in the region still face serious challenges, including outbreaks of COVID-19 variants and uneven access to vaccines, and economies remain constrained by restrictions on mobility.
After adopting large stimulus packages to support households and businesses during the pandemic and allocating additional financial resources to strengthen their health systems, the countries of the region now have less fiscal space. At the same time, investment needs persist in critical areas for economic recovery, such as digital and physical infrastructure, human capital and logistics for trade. In fact, the economic recovery of Latin America and the Caribbean will require more investment in all areas.
Consequently, attracting foreign investment will be essential for the region to reduce its investment gaps. This will require – even more so during these difficult times – duplicating efforts to improve the investment climate in Latin America and the Caribbean and attract investment. Even before COVID-19, Foreign Direct Investment (FDI) flows to the region had experienced an almost uninterrupted decline over the past decade. The pandemic further reduced the FDI in 2020, with a 45% drop according to United Nations estimates.
A key aspect of strengthening the investment climate, reducing risks and providing greater confidence to private investors is providing access to a fair resolution of differences. Since 1972, States and investors have turned to the International Center for Settlement of Investment Disputes (ICSID) to resolve their investment disputes.
To date, 156 States have ratified the multilateral treaty approved in 1966 by the Executive Directors of the World Bank to create ICSID as an independent and depoliticized institution for the settlement of disputes. Ecuador has been the country that most recently signed and ratified the Convention, on September 3, 2021.
ICSID was created with the aim of reducing risks and depoliticizing the dispute resolution process, thus encouraging cross-border investments. Available to both investors and States, ICSID functions as an impartial mechanism and administers procedures when requested by the parties. It is also available to States in the event of differences with other States under free trade treaties and agreements. ICSID does not decide on the differences itself, rather independent courts or commissions are appointed to the cases, usually by the parties themselves.
Having registered its first case in 1972, ICSID has become the world’s leading institution dedicated to the settlement of international investment disputes. To date, ICSID has administered 803 cases, representing more than 70% of all investment dispute cases at the international level.
With ICSID, States and investors have a variety of means to settle their differences. For decades, ICSID has offered specialized arbitration, conciliation, and fact-finding procedures — each designed with international investment disputes in mind. More recently, ICSID has also developed rules and expertise in mediation, thus adding another option for States and investors.
Mediation offers a completely voluntary approach, managed by the parties. The role of the mediator is to facilitate the parties’ negotiations, for example, by helping each party to identify their interests, overcome barriers to settlement, and develop possible settlement options with the parties. Given the flexibility of the mediation process, it is well suited to a variety of circumstances, including differences involving small and medium-sized businesses.
As part of the World Bank Group, ICSID shares the mission of ending poverty and promoting prosperity for the poorest people. In Latin America and the Caribbean, as well as in other regions, greater legal certainty will translate into the attraction and retention of crucial investment flows and the generation of more development opportunities. That is our main goal: more opportunities for everyone.
* Meg Kinnear is the Secretary General of the International Center for Settlement of Investment Disputes (ICSID) [email protected]
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