New protocol seeks to facilitate investment within Mercosur

Last week, the Protocol of Intra-Mercosur Investment Cooperation and Facilitation became effective for Brazil and Uruguay, the countries that ratified the document. Argentina and Paraguay are yet to incorporate the deal into their legislation so the accord can be brought into effect for the remaining partners in the South American bloc.

Facilitation

The protocol is said to create tools to help investors tackle practical difficulties and show them ways to increase access to information as well as the necessary steps to make their investment materialize.

The document is also believed to increase the network of existing investment cooperation agreements between Brazil and other countries, aiming to stimulate foreign investment and take Brazilian firms to the global stage.

Diplomat Luiz Cesar Gasser, director for Services and Industry with the ministry, explains that, when foreign investors have legal or administrative questions or complaints about concrete problems, they resort to government agencies designed for such demands.

In Brazil, it is the job of the Executive Secretary of the Chamber of Foreign Commerce, of the Economy Ministry, to receive inquiries or reports from investors.

Quick replies

“It works by giving quick replies to investors. It’s a tool for facilitating investment and preventing disputes,” Gasser said.

The idea, he said, is to keep problems away from litigation. Gasser explained that, traditionally, investment deals have arbitration clauses with extremely elevated costs.

“There’s a historical pattern: When a company feels damaged in its pursuits and investments, it can start an arbitration process against the country. This means a lot of expenses in contracting law firms. Each one of the parties chooses an arbitrator, and the two arbitrators choose a third one.”

The new protocol stipulates that a joint committee is formed to address the complaint. “A solution is sought among the governments in a bid to make conciliation possible. If the parties fail to reach a consensus, an arbitration may ensue as a last resort. In this case, the arbitration takes place between the two states,” the minister reported.

Gasser notes that investment attraction is of great relevance to Brazil at a moment when the government makes an effort to introduce tools to make things easier for foreign investors. “We’ve worked hard to attract investment in infrastructure, for example.”