Investment Dispute Prevention Project

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Foreign Direct Investment (FDI) has consolidated as an important complementary source to boost Mexico’s economic growth. Mexico is the second FDI destiny in Latin America and receives an average of 18 billion dollars per year. Hence, it is important for our Economy to give certainty to the investors. In light of this objective, Mexico is undertaking actions to strengthen the investment climate and prevent investment disputes.

To achieve this objective the Federal Government is running a project named Investment promotion and international dispute prevention. The project is implementing coordinated public policies among our different government levels aiming to identify and solve potential conflicts before they could turn into an international dispute. 

This project is being implemented in two phases.  First, the project is based on disseminating the knowledge at the different levels of government (including the municipalities) on international rules and Mexico’s Free Trade Agreements and Bilateral Investment Treaties, particularly on the investment disciplines. This knowledge is been shared through workshops where experts in investment matters explain different dispute settlement cases faced by the Mexican State and the underlying reasons. They also provide some alternative solutions and policy recommendations. This phase requires support from investment promotion agencies (ProMéxico) and a close coordination with the Ministry of Interior.  Its implementation is well advanced. More workshops will be held this year to cover more Mexican States. Workshops have gone beyond in scope and have also covered representatives of the Congress and judicial power.  The representation offices of the Ministry of Economy in the States are attending the workshops.  To continue informing, a periodical electronic bulletin is sent monthly in order to maintain the channels of communication open with the participants to the workshops.  This phase is critical to create capacity among the public servants at all levels of government to detect a conflict before it turns out into a formal dispute.  After the relevant actors in the different levels of government are aware of the rules and the possible consequences they can help to provide information through coordination with the federal government particularly with the Ministry of Economy in identifying possible disputes.  This coordination helps to address the problem before it becomes a notice of intention of an international dispute and as a prevention mechanism.

In parallel, the Ministry of Economy is preparing more detailed information in paper and media (video). This information will be circulated among the interested States.

 

During the second phase the federal government proposes an Agreement of Cooperation in Information Exchange to be signed between the Ministry of the Economy and the States. The Agreement will exchange information, for example, on the current legal framework that municipalities are implementing and their consistency with international commitments. The Ministry of Economy is in charge of the negotiation of international investment agreements and dispute settlement procedures. The Cooperation Agreements with the States will contribute to create a formal cooperation mechanism with the States to strengthen the conflict resolution before it turns out into a formal dispute.

Mexico is in process of implementing the second phase.  The Ministry of Economy is in close coordination with some States in order to follow up the signature process.  These Agreements will help the federal government to receive cooperation in terms of information exchange and transparency.  The legal instrument is not aiming at creating a binding legal consequence for those local governments that are not able to provide the information but to act as a “bona fide” instrument to support cooperation and information exchange.  The expectation is to contribute to the creation of a positive environment for investments from the local to the federal governments.   The mechanism for resolving issues previous to the presentation of the “notice” is based also on a serial of meetings with high level authorities when the State or the Municipalities are involved in the problem and identify possible solutions or constructive discussions.

The overall project is being coordinated by the Ministry of Economy and it is supported by the General Secretariat of the Organization of American States (OAS).  The results are publicly available in the website of the Ministry of Economy and ProMéxico.  The website informs the state of play of the Agreements signed by the States.  This site helps the States to publicize its status as a “safe destination” for investments. This second phase is still in an early stage of implementation.

The outcomes are being monitored by the OAS Secretariat as a pilot project.