FOREIGN INVESTMENT: A LATIN AMERICAN LEGAL FRAMEWORK COMPARISON

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1 FOREIGN INVESTMENT: A LATIN AMERICAN LEGAL FRAMEWORK COMPARISON Considering that a friendly regulatory framework regarding Foreign Direct Investment (FDI) constitutes an extremely important factor in its attraction, and that, on the other hand, investors could find many difficulties in compiling the relevant information to carry out the localization studies, the ADI has carried out the following report with the objective of facilitate the task of the investors and to present the advantages that local legislation grants to foreign investors compared with some others Latin American countries. Next are presented the most significative normative aspects regarding the treatment afforded to foreign capital in the Latin America largest FDI host countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru, Venezuela and Uruguay). This report compares the normative that rules foreign investment of the selected countries as well as the ownership to international organisms that intervene in the solution of controversies related with these investments and the signature of bilateral agreements regarding promotion and protection of foreign investment. A R G E N T I N A Legal Framework The legal regime for foreign investments is recorded in Law N / 1993 Foreign Investment Act (Ley de Inversiones Extranjeras). The Decree 1853/ 1993 regulates the text of Law N All investments of foreign capital used in economic activities within the country. Foreign investment concept Acquisition of capital shares of an existing local company by foreign investors. Foreign investor definition: Any individual or Corporation domiciled abroad, who had invested foreign capital, and the foreign capital local firms, when they have investments in other local firms. -1-

2 Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors Economic activities reserved exclusively for the state or local companies remittance of profits or repatriation of capital hiring of foreign workers Incentives to foreign investment Foreign investment may be made in Argentina without prior approval from the executive authority. At present there is no registry of foreign investment, nor a requirement to inform any institution or government agency. Foreign investors may invest in the country on the same terms as local investors. Nevertheless the possible existence of a registry with statistical purposes only is mentioned in the legislation. There is no discrimination between nationals and foreigners, nor between firms with local capital and those with foreign capital. Foreign investors have the same rights and obligations that the Argentine Constitution and laws give to national investors involved in economic activities within the country. No sectors are excluded from foreign investment. The National Constitution enshrines the principle of equal rights of nationals and foreigners, including the right to work, to operate any legal industry, to trade, and to associate freely. Profits may be remitted and/or capital repatriated at any time without prior approval or administrative formality of any kind. There is no need to notify any agency of the intention or act of doing that. Temporary remittance restrictions could be placed due to a balance of payment crisis. There are no nationality requirements to work in Argentina. Submission of an employment contract with a company located in Argentina is sufficient to obtain a visa authorizing work and legal residence in the country. There are no differences between national and foreign investors. As a result of it, existing incentives do not provide exclusive benefits to either national or foreign investments. There are no differences in taxes, tariffs or access to credit. There is equal access to industrial parks and there are no special regimes for insurance, personnel training, or any other differences. A foreign investor may use all existing incentives for an Argentine investor on the same terms. Bilateral Investment Treaties Dispute settlement mechanisms Argentina has signed 53 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with France, Germany, Italy, Spain, United Kingdom, Canada, United States of America, Israel, Australia, China, Indonesia, Malaysia, Mexico and South Africa. Argentina is a member of the International Center for Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). Other arbitration processes are available as a part of international investment agreements signed by Argentina. -2-

3 B R A Z I L Legal Framework Foreign investment concept Foreign capital in Brazil is governed by Law N 4131 / 1962 the Foreign Capital Act (Lei do Capital Estrangeiro) and is regulated by Decree N / Foreign investment is considered to be any funds brought into the country as well as any good, machinery and equipment with no initial disbursement of foreign exchange, intended for the production of goods and services, to be used in economic activities, as long as they belong to individuals or companies resident or headquartered abroad. Foreign capital could be brought into the country through direct or indirect investment, in form of financial operations with foreign institutions, loan or leasing. Existence and obligation of foreign investment registry Differences of treatment between national and fo reign investors Foreign investments must be registered with the Central Bank of Brazil through the RDE-IED. This registration is essential for offshore remittances, capital repatriation and registration of profit reinvestment. Foreign investment must be registered within thirty days of the investment date. Foreign capital invested in Brazil shall be accorded the same legal treatment as that applicable to national capital, in identical conditions. Any distinction not sanctioned by law is prohibited. Foreign firms could participate in privatizations as long as invested capital remains in Brazil for at least six years. Economic activities reserved exclusively for the state or local companies Participation of foreign capital is prohibited or restricted in: Development of activities involving nuclear energy. Ownership and management of newspapers, television, radio networks, etc. Health services. Ownership of rural areas and businesses on frontier zones. Post office and telegraph services. Airlines with domestic flight concessions and Aerospace industry. Participation of foreign capital in financial institutions is subject to the approval of the Brazilian Government, which will determine if such participation is in the country s best interests. -3-

4 There are normally no restrictions or preliminary authorization requirements on capital repatriation and distribution and remittance of profits abroad as long as those capitals were registered with the Central Bank of Brazil. Transitory restrictions could be impose due to a balance of payment crisis. remittance of profits or repatriation of capital hiring of foreign workers Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms Since 1996 remittance of profits and capital repatriation are exempt from income tax withholding. In the specific case of repatriation of capital, the Central Bank of Brazil will normally examine the net worth of the company involved, as shown on its balance sheet. If the net worth is negative, the Central Bank may decide that there was dilution of the investment, and may thus deny authorization for repatriation of a part of the investment in proportion to such negative. According to Brazilian legislation, companies may hire foreign employees who may comprise up to 33% of the general staff. A larger percentage is permitted only when there is an insufficient number of national specialists. Foreigners hired to work in Brazil must obtain a visa issued by the foreign affairs ministry. The Federal Government does not grant special incentives for foreign investment, on principle. The only exception to this rule, is the possible granting of a reduction of the customs duty levied on imports of capital goods to be used in establishing the industry which is the subject of the foreign direct investment in question. Brazil signed 14 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with France, Italy, United Kingdom, Switzerland and Chile. Brazil is a member of the MIGA but is not member of ICSID. -4-

5 C H I L E Legal Framework Foreign investment concept Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors Economic activities reserved exclusively for the state or local companies remittance of profits or repatriation of capital hiring of foreign workers Decree-Law N 600 Foreign Investment Statute (Estatuto de la Inversión Extranjera). According to the Chilean legislation the concept of foreign investment correspond to: foreign natural and legal persons, and Chileans resident and domiciled abroad, who transfer capital to Chile from abroad and enter into a foreign investment contract. Foreign investment authorizations shall be evidenced in a contract executed by means of a public deed and subscribes, on the one part, by the Foreign Investment Committee on the other part, by the foreign investor. For its part, the Central Bank registers investors and their investments when the capital is channeled through the mechanisms established in the Compendium of International Foreign Exchange Rules. The Constitution establishes that the State and its agencies may grant the foreign investor treatment no less favorable than that afforded to nationals of Chile. Foreign investors enjoy national treatment in the conduct of their economic activities, under the same conditions as national investors. Thus, foreign equity can be found in different areas or activities that produce goods and services in the economy. No sectors or economic activities exclude foreign investment. That notwithstanding, foreign investors must adhere to the rules regulating access to some specific sectors. Capital remittances may be effected only a year after the date such capital has been brought in. Profit remittances may be carried out at any time after fulfilling the relevant tax obligations. Labor Law requires that at least 85% of the employees of a particular employer must be nationals of Chile. Companies with no more than 25 employees are exempted from this requirement. -5-

6 The Chilean economic policy does not envisage more incentives for foreign than domestic investors except for: Incentives to foreign investment Holders of foreign investments are entitled to include in the contracts entered into a clause to the effect that, for a 10-year period they shall be subject to an effective fixed overall tax rate of 42% on taxable income. Foreign investors and enterprises receiving foreign investment enjoy VAT exemption (VAT=18%) on the capital goods forming part of a foreign investment project formally agreed with the State. Bilateral Investment Treaties Dispute settlement mechanisms Chile has signed 45 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with France, Germany, Spain, China, Brazil and Argentina. Chile is a signatory of ICSID, as well as the Convention on the Recognition and Enforcement of Foreign Arbitrage Awards, and the Inter-American Convention on International Commercial Arbitration. -6-

7 C O L O M B I A Legal Framework Foreign investment concept Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors Economic activities reserved exclusively for the state or local companies Foreign Investment Statute (Estatuto de Inversiones Internacionales). Resolutions 51, 52 of 1991; 53, 55, 56 and 57 of 1992 and 60 of 1993 from the National Economic and Social Policy Council and Decrees N 2348 / 1993 and N 98 / Under Colombian law two types of foreign investment are allowed: Foreign Direct Investment which is capital invested in a company that is or may be incorporated in Colombia. Such investments may take place in a variety of ways like monetary contributions, acquisition of rights in trusts, investment in subsidiaries locally established by legal entities, contracts paid with profits, etc. Portfolio Investment which is made by foreign capital investment funds in stocks or other securities negotiable on the equity market. These funds are defined as equity capital established in Colombia or abroad by any means, with resources provided by one or more foreign entity or private individuals for investment in the equity market. All foreign capital investment, including additional investment activity, capitalization, reinvestment of profits eligible for transfer, profit remittances, and capital reimbursements must be registered with the Bank of the Republic. Once an investment has been registered, the owner is entitled to number of exchange rights related with the repatriation of capital and profits. Foreign investment is subject to the same treatment as domestic investment. Therefore, no discriminatory conditions or treatment may be imposed on foreign investors. Foreign investment is welcome in almost every sector of the Colombian economy. It is prohibited only in activities concerning national defense and security and treatment and disposal of toxic, hazardous or radioactive waste not produced in Colombia. Foreign investors may invest in the Colombian economy without prior approval. However, some investments are subject to special regimes, in which -7-

8 case the investor is bound by special regulations or arrangements, such as investments in the financial sector, the hydrocarbon and mining sector, and portfolio investments. Furthermore certain restrictions are valid in radio and television broadcasting companies. The amount of foreign capital that may be invested in those sectors is restricted to the 25% and 40% respectively. Additionally radio broadcasting companies must be managed and controlled by nationals of Colombia and in the case of television companies investment must come from companies operating in the television industry in their home countries and the investor s country of origin must reciprocally offer the same investment opportunity to Colombian companies. remittance of profits or repatriation of capital hiring of foreign workers Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms Once an investment has been registered, there are no restrictions on transfers abroad of proven net profits and remittance of amounts received as proceeds from the sale of the investment within the country, or from liquidation of the company or its portfolio, or from a reduction in its capital Temporarily restrictions on remittance and repatriation could be impose when international reserves fall to levels equivalent to less than three months of imports. Companies with more than ten employees may hire foreign employees, as far as they comprise up to 10% of the general staff and 20% of management personnel and of specialized, qualified personnel. In the case of strictly lack of technical and indispensable workers, and only for the time that it takes to train Colombian staff, the employer could request the Ministry of Labor to exceed these limits. Foreigners hired to work in Colombia must obtain a visa issued by the foreign affairs ministry. No conditions may be conceded nor discriminatory treatment afforded to foreign capital investors vis-à-vis resident national private investors, neither may any more favorable treatment be granted to foreign investors than that afforded to resident national private investors. Colombia has signed Bilateral Investment Treaties to promote and protect investment with France, Spain, Peru, Chile and Cuba. Unless otherwise stated in the provisions of the prevailing international treaties and conventions, the provisions of Colombian legislation apply for the settlement of disputes involving foreign capital. Meaning that procedures envisaged in the respective procedural standards are applicable and suits are to be filed before the Colombian courts. Nevertheless Colombian law allows contracting parties to agree to submit disputes to international arbitration as long as certain conditions are met. Colombia is a member of the ICSID and the MIGA. -8-

9 COSTA RICA Legal Framework Foreign investment concept Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors There is no special foreign investment law in Costa Rica. All types of goods and rights of any kind, acquired with resources transferred to the territory of one Party, or reinvested there, by the investors of the other Party. Foreign investment may be made in Argentina without prior approval from the executive authority. At present there is no registry of foreign investment. Foreigners have the same individual and social duties and rights as Costa Ricans, with the exceptions and restriction established by this Constitution and the laws (e.g. local subcontractors enjoy preference in public works construction contracts). Road, Sea and Air Transportation and port services: Restrictions on theses sectors are based on minimum national capital requirement, as well as on the basis of reciprocity. The 51% of the capital and control of the company must remain in the hands of natural persons who are Costa Rican by nationality, in the case of remunerated international overland passenger transport services companies must have 60% of Central American capital. The transportation of cargo originating in or destined to Central America is reserved to Central American vehicles, trailers, containers and chassis. Economic activities reserved exclusively for the state or local companies Tourism services: Foreign enterprises in which 50% of the capital is owned by Costa Ricans may participate in tourist projects. In coastal areas no concessions are granted to corporations with bearer shares or to corporations domiciled abroad or incorporated in Costa Rica by foreigners. Telecommunication services: they are under the control of the State and may be operated by individuals holding an official concession. The permit to establish, administer and operate radio or television stations is granted only to Costa Ricans or naturalized citizens resident in the country for 10 years, and enterprises with a minimum of 65% national capital. The permit required to operate telegraph and telephone services is reserved exclusively to nationals, under state control. Financial services: In the case of fixed-income investment companies and investment funds, their capital may not include the participation, whether direct or indirect, of foreign institutions or groups of persons. -9-

10 Insurance: All-risk insurance contracts are by law State monopolies. Representatives of merchant insurance companies must be nationals of Costa Rica or otherwise they must be nationals of a country offering reciprocity in that area; having a residence and permanent domicile in Costa Rican territory for at least 10 years. remittance of profits or repatriation of capital hiring of foreign workers There are no restrictions to the remittances of capital; benefits, debt service, or other remittances derived from foreign investment. Labor Law prohibits employers from employing, less than 90% of Costa Rican workers. This percentage may be increased or reduced by up to 10%, during a period not to exceed five years. When a company has no more than five workers, only 80% of them must be Costa Ricans. This rule is not in force to managers, directors, administrators, supervisors and general heads of companies, as long as there are no more than two foreigners in each of these positions. Notwithstanding the above, companies are free to enter into contracts for professional services without regard to nationality requirements. Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms Foreign nationals without residency status and/or labor permits are not allowed to work in Costa Rica. In Costa Rica, there are no incentives that benefit foreign investment exclusively. Costa Rica has signed 11 Bilateral Investment Treaties (BIT s) such as the ones with France, Germany, Spain, United Kingdom and Chile. Foreign investor has access to the same legal recourse as local investors. Costa Rica is a signatory member of the ICSID, MIGA as well as the Convention on the Recognition and Enforcement of Foreign Arbitrage Awards, and the Inter-American Convention on International Commercial Arbitration. -10-

11 M E X I C O Legal Framework Foreign investment concept The Foreign Investment Law published in the Official Bulletin on December 27, 1993 (Ley de Inversión Extranjera) and its modifications and complements enacted on 1995; 1996; 1998; 1999 and Participation of foreign investors (individuals or corporations not of Mexican nationality and foreign entities with no legal personality) in the equity capital of Mexican companies. Investment made by Mexican companies with a majority of foreign capital. Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors Economic activities reserved exclusively for the state or local companies Foreign investors should register their investment with the National Registry of Foreign Investment. When foreign investors wish to acquire more than 49% of the capital stock of an existing Mexican company a resolution from the Foreign Investment Commission is required when the total value of the assets is greater than US$ 75 million. The Foreign Investment Law limits the activities in which foreigners can invest. Nevertheless, once investment is made in an enterprise registered and organized in accordance with the laws in force, it is considered to be a Mexican enterprise receiving the same legal treatment that companies belonging to nationals of Mexico. The following activities are reserved exclusively for the State: Oil production and oil refining; basic petrochemical production; sale of electricity to the public; nuclear power; telegraph and radiotelegraph services; local postal service; bill issuance and coin minting; and control, supervision and surveillance of ports, airports and heliports. Activities reserved for Mexican investors: Domestic land transportation of passengers, tourists and cargo; retail gasoline sale, and distribution of liquefied petroleum gas; radio broadcasting and television services (except cable television; credit unions; development banks. -11-

12 In the following activities, foreign investment is authorized up to the percent established by Law: Up to 10% in cooperative production companies. Up to 25% in domestic and specialized air transportation and air shuttle services. Up to 49% in insurance and financial leasing and factoring companies, currency exchange houses, investment companies fixed capital and companies operating investment companies, general deposit warehouses; manufacture and commercialization of explosives, firearms, cartridges, munitions and fireworks; cable television, basic telephone services; printing and publication of newspapers; supply of fuel and lubricants for ships, aircraft and railway equipment; integral port administration, piloting port services for interior navigation operations, shipping companies for interior and coastal navigation and fishing in fresh water, except aquaculture. Foreign investors may hold greater than a 49% interest in the following activities subject to approval of the Foreign Investment Commission: Port services such as piloting, dock services, mooring and lighterage; naval companies using vessels exclusively for high-seas traffic; administration of air terminals; private educational services; legal services; credit information companies; institutions for categorization of securities; insurance agencies; cellular telephone services; oil and gas well drilling. remittance of profits or repatriation of capital hiring of foreign workers There are no restrictions on the repatriation of capital or remittance of profits abroad. At least 90% of employees must be Mexican. In technical and professional categories employers may hire foreign workers when no Mexicans can be found for a particular specialization, the employer and foreign employees are obliged to train Mexican workers in the specialization in question. These provisions are not valid to directors, board members, or general managers. Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms There are several programs that grant advantages to exporting industries. Foreign investors are given no less favorable treatment than the treatment given, to national investors, to provide incentives. México has signed 11 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with Germany, Spain, Italy, Netherlands and Argentina. Foreign investors have the same procedural recourse as national investors. Special recourse for foreign investors is envisaged only in the dispute settlement sections of the free trade treaties to which Mexico is a party. Mexico is not a member of ICSID and MIGA. -12-

13 P E R U Legal Framework Legislative Decrees N 662 and N 757 establish the legal framework applicable to local and foreign private investments. Property contributions by foreign individuals or corporations to the national territory and shall be directed to any economic activity likely to generate income. It may be carried-out under any of the following forms: Foreign investment concept Investment carried-out by any foreign individual or Corporation in the capital of a new or preexisting Corporation. Investment carried-out through the acquisition of shares in a Peruvian company. Investments in goods and properties located in any part of the country. Existence and obligation of foreign investment registry Differences of treatment between national and fo r- eign investors Economic activities reserved exclusively for the state or local companies remittance of profits or repatriation of capital Peruvian legislation does not require any form of prior authorization from any government authority, in order to invest in Peru. Registration is voluntary and is only aimed at granting rights and guarantees in favor of the investors. Treatment granted to foreign investment is based on the principle of equality. Foreign investors have the same rights and obligations as national investors, irrespective of the nationality or geographic origin of their investment. Peruvian legislation does not limit or restrain the participation of foreign investors in economic activities with the exception of broadcasting, aviation and the ownership of properties within 50 km. of the national borders, exploitation of protected natural areas and manufacturing of war weapons. Foreign investors may freely remit foreign currency abroad, including the total amount of their profits, dividends and capital, after the appropriate tax deductions. Remittance of foreign currency abroad does not require authorization, but must be necessarily carried out through the National Financial System. -13-

14 hiring of foreign workers Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms According to labor laws foreign employees should not exceed 20% of the total number of employees and salaries paid to foreigners may not exceed 30% of the total company s payroll. It is possible to request a modification of those quotas in cases related to management personnel or highly skilled workers. Nationals of countries with whom Peru has entered into reciprocity or double nationality agreements (for example, Spain) are exempted from these limitations. There are no differences among national and foreign investors. The incentives that exist are of horizontal nature and there are no treatment differences regarding taxes. Foreign investors have the same access to incentive programs as local investors and unlimited access to local credit. Perú has signed 22 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with Argentina, France, Italy, Spain, United Kingdom, China, Thailand and Australia. Foreign investors have the same access to procedural recourse as local investors. Peru is a member of the ICSID and MIGA. -14-

15 U R U G U A Y Legal Framework Foreign investment concept Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors Economic activities reserved exclusively for the state or local companies remittance of profits or repatriation of capital hiring of foreign workers Incentives to foreign in- The Law N of January 20, 1998 (Ley de Promoción y Protección de Inversiones) establishes four sections to protect and promote Uruguayan investments made by foreign or local investors. Decree Regulation N 92/98 of April 28, All capital originating abroad with rights to repatriation and transfer of related profits, irrespective of its share in the enterprise. Foreign capital may take any form, notably foreign exchange, machinery, patents, technical processes, trademarks, or any other form considered of interest by the Government. Foreign investments will be admitted without necessity of previous authorization or registration requirements. The legislation establishes that the admission régime and treatment of the investments carried out by foreign investors will be the same one that is granted to national investors. The premise is that there is no discrimination between nationals and foreigners. Foreign investment is authorized in all areas related to economic and social development, provided that such investment is compatible with the "national interest. The telecommunications (broadcasting and television) and the passengers road transport are the only exception to this rule, for which the national character of the holders of the capital is required. Under Investment Law the remittance of profits and repatriation of capital, are guaranteed. There is a total freedom in transfers and remittances to and from the country in any currency. There is no limitation for foreign people to work in Uruguay; nevertheless they must obtain legal residence and a medical certificate of good health. -15-

16 Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms Investment incentives are equally available to foreign investors as well as to Uruguayan. There are certain areas in which a beneficial treatment is established in activities that are declared to be of national interest within the framework of the Industrial Promotion Law. Incentives mainly take the form of tax incentives. The approaches for the concession of discretionary incentives are determined in function of the technological development, increase or diversification of exports, employment creation, integration of the productive chain, geographical decentralization and foment of medium and small companies. Uruguay has signed 24 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with France, Germany, Italy, Netherlands, Switzerland and China. Foreign investors may resort to all the jurisdictional procedures that the law acknowledges for local investors. However, when a dispute arises between the State and a foreign investor couldn t be settled in that way in a prudential term, it will be subjected to the international arbitration. Uruguay is a signatory member of the ICSID and MIGA. -16-

17 V E N E Z U E L A Legal Framework Foreign investment concept Existence and obligation of foreign investment registry Differences of treatment between national and foreign investors Economic activities reserved exclusively for the state or local companies remittance of profits or repatriation of capital Decree N 356/1999 (Ley de Protección y Promoción de Inversiones). The investment property or effectively controlled by people or juridical foreigners. Foreign investment concept includes direct foreign investment, Sub-regional foreign investments, and investment made by Multinational Andean Companies. Foreign investment in Venezuela don't require previous authorization. Nevertheless registration of the investment in the Foreign Investment Superintendence (SIEX) within 60 days of its entry is mandatory. Foreign investors will be entitled to a fair and equal treatment, according to the norms and approaches of the international right. They won't be object of arbitrary or discriminatory measures that avoid their maintenance, administration, use, amplification, sale or liquidation. Foreigners have the same duties and rights as Venezuelans, with such limitations or exceptions as are established by the Constitution or by law. Except for the Television, radio, newspapers and professional services that are still reserved for national companies, sectors are open to foreign and joint investment. At the same time, the State reserves to itself the exploitation of petroleum and other hydrocarbons, as well as their manufacture and refining, transportation, storage, and trading of the substances exploited and refined. Foreign investors are allowed to transfer abroad, after payment of corresponding taxes, the proceeds of the sale of shares, equity or rights, as well as the amounts resulting from capital reduction or company liquidation, and the dividends or profits corresponding to the shares, quotas, participation, or the rights which are owned by said investors. Transitory remittance restrictions (in equal and not discriminatory form) could be impose during balance of payment crisis. -17-

18 The Organic Labor Law establishes the following nationality requirements: hiring of foreign workers At least 90% of all workers in a company that employs 10 or more workers must be Venezuelans. In addition, remuneration of foreign staff should not exceed 20% of the payroll. A larger percentage is permitted only when there is an insufficient number of national specialists. Industrial relations chiefs, chief of personnel, captains of ships or airplanes, captains or whoever performs similar functions, shall be Venezuelans. Incentives to foreign investment Bilateral Investment Treaties Dispute settlement mechanisms There are no differences between national and foreign investors. As a result of it, existing incentives do not provide exclusive benefits to either national or foreign investments. Venezuela has signed 22 Bilateral Investment Treaties to promote and protect investment among signatory countries. Among them it could be mention those signed with Germany, Spain, Sweden, Canada, Brazil and Chile. Venezuela is a signatory member of the ICSID, MIGA as well as the Convention on the Recognition and Enforcement of Foreign Arbitrage Awards, and the Inter-American Convention on International Commercial Arbitration. This document has been prepared by the ADI considering the prevailing legal framework regarding foreign investment in Latin America and information published by the Inter-American Development Bank (IDB), the United Nations Conference on Trade and Development (UNCTAD) and the Investment Promotion Agencies of the selected Latin American countries. Julio A. Roca 651 Av. Floor 5 Office 22 Ciudad de Buenos Aires (C1067AAB) Tel. (54-11) / 3313/ 3315 Fax (54-11)

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