| Investment, Finance and Debt in the America
Hemispheric Social Alliance & Common Frontiers-Canada Civil Society Forum, Toronto, Canada, November 1999 Trade Ministers negotiating a Free Trade Area of the Americas (FTAA) have had ample opportunity to hear the views of transnational corporations and business associations. Each time the hemisphere’s Trade Ministers have met a parallel Business Forum of the Americas has been invited to present proposals for a continental economic integration pact. The purpose of this document is to put forward a coherent alternative from the point of view of civic organizations concerned with promoting human rights, the rights of women, indigenous peoples and other disadvantaged groups, democracy, cultural diversity, social development and environmentally sustainable development. International trade has an important role in the building of the common good, but it should not be seen as an end in itself or as automatically enhancing the common good. The provisions of the FTAA and the WTO on investment and finance are as important, if not more important, than the terms on access to markets. Recent destabilizing financial crises in Latin America and Asia and the perverse transfer of wealth from South to North resulting from excessive external debt payments testify to the importance of financial issues. The former Director General of the World Trade Organization, Renato Ruggiero, has compared negotiating international investment agreements to "writing a constitution of a single world economy". Indeed the investment rules written into the North American Free Trade Agreement (NAFTA) signed by Canada, the US and Mexico which are similar to those proposed for the Multilateral Agreement on Investment (MAI) are like constitutions that determine what governments can and cannot do. The precedents set in NAFTA are clearly intended as the model for any investment chapter within a Free Trade Area of the Americas and the WTO. Transnational corporations are seeking to build on precedents set in NAFTA and to implement provisions of the MAI despite its defeat within the Organization for Economic Cooperation and Development (OECD). The defeat of the MAI was due in no small part to opposition by civil society groups that remain wary of its reemergence in other fora.
What is at stake is a struggle between the ambition of transnational corporations to be free of state controls and the capacity of the hemisphere’s citizens and the governments we elect to decide on our own destinies. (Bissio 1999:33) There is every indication that the intention is to extol the rights of large enterprises without establishing corresponding obligations towards peoples and nations. Our proposals subordinate the rights of corporations to the rights of the peoples and nations of our continent.
A. National Treatment and Performance Requirements The 1998 Business Forum of the Americas reiterated the corporations’ wish for the negotiation of an investment treaty based on the principle of "national treatment". Both NAFTA’s investment rules and the MAI are based on "national treatment" which would require governments to give foreign investors the best treatment that they give to domestic enterprises. Whereas national treatment in the GATT only applied to taxes and regulations on imported goods, NAFTA and the failed MAI are meant to apply the concept to vast areas of domestic economic activity that were previously exempt from multilateral restrictions. For example, the granting of natural resource permits; licenses to provide health and social services; concessions to supply electrical and water services; and many other activities are covered unless they are explicitly excluded. Country-specific exclusions are problematic because they will be interpreted narrowly by trade dispute panels. These reservations are only temporary as they can be eliminated by a future government and, once eliminated, cannot be restored by a future government. PERFORMANCE REQUIREMENTS The Business Forum has also called for restrictions on "performance requirements", that is, conditions on investment used by governments to hold investors accountable to domestic policy objectives. Prohibitions on performance requirements go beyond national treatment in that they deprive governments of important policy tools even if they are applied equally to domestic and to foreign investors. Thus they are absolute and not just relative prohibitions. Successive treaties have expanded the list of prohibited performance requirements. The Canada-US Free Trade Agreement (Article 1603) prohibited governments from requiring that foreign investors export a certain portion of their production, use local inputs, or hire local workers. NAFTA (Article 1106) incorporated these provisions and extended the list of prohibited performance requirements to preclude obliging foreign investors to balance imports and exports, to transfer technology or to act as an exclusive supplier of a product or a service to a specific region or world market. The draft MAI would have extended the list of prohibitions even further to ban requiring firms to achieve a given level of local production or employment, to associate with local investors or to locate their regional headquarters within a country. These prohibitions are aimed directly at strategies governments use to ensure that economic development benefits local people. The 1998 Business Forum of the Americas pressed for broadening the definition of national treatment to cover taxation. It also said that the FTAA should "extend uniform, non-discriminatory national treatment to capital originating from outside the FTAA". If accepted, investors from Europe and Asia would receive the same treatment as investors from within the Americas. (Weisbrot and Watkins 1999:6-7) he desire of some transnational corporations to incorporate provisions of the MAI into the FTAA was made clear at the San José Business Forum by the submission from the American Electronics Association which explicitly suggested that "a Hemispheric investment agreement draw upon the principles of the Multilateral Agreement on Investment under the auspices of the OECD." (Bissio 1999:37) The 1998 Business Forum also advocated that transnational corporations have the right of establishment. If this right were interpreted broadly, as it was in the draft of the MAI, then foreign corporations would be free to take over ownership of sectors that many countries now reserve for national investors or public ownership such as land, natural resources or communications media. (Bissio 1999:39)
These corporate demands present severe challenges to peoples’ democratic control over our own destinies. Civil society members need an opportunity to debate what kind of limits should be placed on foreign investment. Foreign direct investment (FDI) can play a positive role when it is invested in productive rather than speculative activities, when it transfers appropriate technology and when it facilitates access to markets and creates employment consistent with democratically determined national development plans. It can also have negative effects when it absorbs local savings, disrupts local industries and leads to excessive capital outflows or when the jobs it creates are in enclaves disconnected from the national economy. Recent experience shows that some kinds of FDI have negative effects and that countries need to have tools that enable them to be selective concerning which kinds of foreign investment should be welcomed and which kinds should be prohibited. We maintain that governments should have the right to impose performance requirements on foreign investors and treat local, family and community businesses and publicly owned enterprises more favourably than foreign enterprises. The limits to present and potential internal savings among poor countries of Latin America and the Caribbean with respect to their needs for economic growth necessitate resorting to foreign investment as a back-up to which they can turn in this context. But this does not mean proceeding to speed up the indiscriminate inflow of foreign capital as has occurred unfortunately in the majority of the region’s countries over the last decade. Both the Mexican crisis of 1994 and the so-called Asian crisis of 1997-98 have contributed to revealing the dangers and problems that surround making growth in production (and on occasion the stabilization of internal prices) depend on massive external financing. One need only mention, among other risks, the instability of growth and of macroeconomic equilibria which result when foreign investments entering the country are predominantly short term, speculative and highly volatile. Moreover, one must consider other problems that occur even when FDI is channeled into productive activities as occurred in Chile and other Latin American countries between 1994 and 1999. In the first place the abundant FDI received by Latin America over the last five years has reinforced the principal structural weakness of the growth in some of these countries, which is dependence on a few primary products or on a few markets (or on both) for export income. In effect by virtue of the sectors in which it is placed, FDI has tended to reinforce in some countries the bias towards growth dependent on the exploitation and processing of natural resources. The result is that economic cycles in these countries remain subject to variations in the international prices of these raw materials. In the Chilean case the massive infusion of FDI into copper mining has resulted in the overproduction and oversupply of the red metal at the world level which led to a period of low international prices without historical precedent. This reduced the inflow of foreign exchange into the country after 1995 which grew worse after the Asian crisis. This example points to the need for effective international commodity agreements to support the prices of primary products whose terms of trade have fallen dramatically in recent years. This massive investment in exploitation of non-renewable resources increased pressure on the ecosystem, producing multiple damages to the environment and surrounding communities. Secondly, the massive influx of foreign capital into Latin America in this last decade has tended to cause the appreciation of local currencies which weakens the competitiveness of Latin American economies, particularly of their industrial sectors. The monetary authorities have allowed these processes to occur, taking advantage of them to control and reduce internal inflation, undervaluing at times the fall in the trade balance and the growth in the current account deficit. They have only lately respond to this problem with costly monetary – and fiscal – adjustments after the impact of the Asian crisis has exposed their economies and currencies to speculative attacks. This has meant, on the one hand, a freeze on export development, understood as a process involving the diversification of products and of markets as well as increasing their value added. On the other hand, the exchange rate adjustments have accentuated the loss of national industrial capacity in the face of subsidized or temporarily low international prices. Third, the recessionary contraction of the world economy over the last 20 months has accelerated the process of mergers and acquisitions across the planet, including in the Americas. In every country and region where recession is making worse the illiquidity and insolvency of local enterprises opportunities arise for transnational corporations to acquire their assets at very favourable prices. Capital is centralized and the monopolization or acute oligopolization of markets grows worse. Some of the transnational enterprises that today are beginning to assert their hegemony in certain regional markets entered initially as junior partners, the result of strategic alliances that local groups established with the goal of "broadening their shoulders" in order to begin to penetrate into Latin American markets. But once there - with a better understanding of the markets and of the political-legal frameworks - they became the controlling partners. The ever more hegemonic role of transnational capital is obvious in this era of the transnationalization of the Latin American economy. On the other hand the weaknesses of the regulatory framework and of the ability the state in general to confront this new context are coming to light in some countries of the region. The state in countries like Chile has lacked, within the framework of the operative development model, the capacity to orient or impose certain social conditions on investments. Instead it is limited to assuring the institutional framework that the private sector demands in a given moment. The regulatory role of the state has been transformed into one of adjusting legislation and economic institutions at the service of large local economic groups and transnational corporations which identify themselves as representing the interests and aims of the country. This private sector’s decisive role in establishing stability and economic growth has become so important that the independence of legislators in such countries has been thrown into question. The weaknesses of the regulatory frameworks for economic activities in many areas dominated by foreign investment have time and again been laid bare with respect to safequards of national sovereignty; consumers’ rights; competition policies; workers’ rights; women’s rights; children’s rights; indigenous peoples rights; environmental and health standards etc. The regression in institutional frameworks in the majority of Latin American countries is not just a sign of a new historical phenomenon but also a consequence of accepting the fallacy that foreign investment is good in and of itself and must be promoted without restriction.
CIVIL SOCIETY RECOMMENDATIONS FOR TRADE MINISTERS: One point of reference for a civil society response is the Alternatives for the Americas document first discussed by civic groups at the April 1998 Peoples’ Summit of the Americas in Santiago de Chile. A.1 We reiterate Alternatives for the Americas assertion that "Foreign investment is welcome in our countries provided that it adheres to regulations that enforce the economic and social rights of citizens and promote the goal of sustainable development." We repeat Alternatives for the Americas’ challenge to the principle of national treatment for foreign investors and we maintain that it is legitimate to apply different rules to foreign investors from those that apply to local, family and community businesses and to publicly-owned enterprises. A.2 Although national treatment applies the same rules equally to all investors, we maintain that "Equal treatment among unequals is profoundly inequitable." (Castillo 1987) National treatment does not take into account our huge asymmetries, that is, our vastly different levels of development. We propose that agreements involve non-reciprocal concessions by the more powerful partners and "just treatment" that recognizes our existing asymmetries and differences. This is particularly important for small economies and island states which need special and differential treatment. A.3 Because cultural products are both trade commodities and instruments of social communication involved in the democratic functioning of any community, we recommend that a separate set of rules for investment in culture be established within the FTAA. These rules would require acceptance of government provisions such as subsidies, foreign investment restrictions, and content requirements to foster an ongoing domestic cultural presence and preserve linguistic diversity. A.4 We reiterate the Alternatives for the Americas’ proposal that no international investment treaty, such as the FTAA, or institution such as the WTO, should prevent governments from enforcing performance requirements that serve sustainable economic development, environmental or other legitimate objectives. For example, governments should have the right to require that corporations respect the ancestral intellectual property rights of communities. We maintain that governments should have the ability to require investors to meet national, regional or local content goals and to require enterprises to purchase inputs locally; to hire personnel locally; to transfer appropriate technology; to provide incentives for the reinvestment of profits, and to require corporations to give preference to small producers, women, indigenous communities and other traditionally marginalized groups when extending contracts or credit in the case of financial corporations A-5 We support government measures to control the rate of exploitation of natural resources to prevent over-production. We also support international commodity agreements to maintain prices at remunerative levels. A. 6 We repeat Alternatives for the Americas’ challenge to the transnational corporate model by advocating that governments should have the power to encourage productive investments that increase links between the local and the national economy (as well as with the world economy) and limit investments that make no net contribution to sustainable human development, especially speculative or very short-term portfolio investments that lead to volatility and instability, rapid capital outflows, and economic crises.
B. "Expropriation" and Investor-State Disputes The 1996 Business Forum of the Americas urged that an hemispheric investment agreement grant corporations more protection against expropriation and provide effective compensation when an expropriation does occur. (Bissio 1999:37) This demand must be viewed in light of the history of how corporations have taken advantage of NAFTA’s (Article 1110:1) references to "indirect" expropriation or "a measure tantamount to nationalization or expropriation". Corporations have used this ill-defined reference to indirect expropriation and NAFTA’s investor-state dispute settlement process (Articles 1115-1138) to challenge significant government policies affecting vital areas of concern. Corporations have alleged that measures which fall under the normal regulatory sphere of government action, especially in the area of protection for the environment and human health, constitute indirect expropriations of their assets because they allegedly reduce their anticipated profits. Environmental lawyer Michelle Swenarchuk (1999 and 1999a) has chronicled the following investor-state cases as of October 1999:
Collectively these suits show a wide range of challenges to government regulatory powers. They are particularly disturbing because of their implications for the ability of governments to safeguard human health and the environment. They also pose an enormous challenge to the democratic process by enabling corporations to veto national regulatory processes. In the Sun Belt and Loewen cases NAFTA is being used to challenge the results of domestic court proceedings and to circumvent normal civil litigation. These cases have a chilling effect on the willingness of governments at all levels, federal, provincial or state, and local to enact new regulatory measures lest they be challenged under NAFTA. As a result of being the target of four of the suits brought to date under NAFTA’s investor-state dispute mechanism, Canada proposed to negotiate an agreement with the US and Mexico to limit the reach of the investment Chapter and to make investor-state arbitration procedures more transparent and more consistent with procedures within the Canadian juridical system. Canada’s former Trade Minister, Sergio Marchi, wanted the three countries to adopt a joint interpretation of the NAFTA expropriation clause (Article 1110) that would make clear that the term "expropriation" does not apply to governments’ normal regulatory actions. So far only the US has agreed to talk about such a clarification while Mexico has resisted.
CIVIL SOCIETY RECOMMENDATIONS FOR TRADE MINISTERS: B.1 We oppose investor-state dispute settlement mechanisms in trade agreements, including the FTAA and the WTO. B.2 Disputes should be adjudicated first under the national laws and tribunals of the host country where citizens affected by decisions have opportunities for participation. We shall develop specific proposals for dealing with international investment disputes in future forums. B.3 Civic groups, wishing to defend the legitimate regulatory powers of governments, oppose the broad definition of investment and inclusion of "measures tantamount to expropriation" or "equivalent to expropriation" in international investment and trade agreements. We particularly object to the inclusion of cultural funding in the definition of investment and ask that separate rules on investment be created to regulate all activities whose aim is to foster an ongoing domestic cultural presence and preserve cultural identity.
C. Hot Money The 1998 Business Forum of the Americas advocated "effective measures for free transfer" of financial assets across national borders. This could mean more freedom for corporations to repatriate profits and capital investments beyond the deregulation of capital flows already established under NAFTA (Weisbrot and Watkins 1999:6).
Before cross-border capital flows are further liberalized the history of the 1994-95 Mexican peso crisis, the 1997 Asian financial crisis and the 1998-99 Brazilian crisis should be taken into account. These crises demonstrated the destabilizing effect of excessive inflows and outflows of short-term capital investment. NAFTA (Articles 1109 and 1401:2) contributed to the Mexican crisis by making it difficult for Mexico to put controls on hot money. Over a five-year period from 1989 to 1994 almost three quarters of the US$98 billion worth of foreign investment that entered Mexico was short-term "portfolio investment", that is, purchases of bonds and non-controlling shares. Only 27% of the money that flowed into Mexico was direct investment. Even so this direct investment did not create many new jobs since much of it was for the purchase of privatized state enterprises. (Arroyo 1995) During the 1994-95 peso crisis investors took over US$48.6 billion worth of portfolio investment out of Mexico.(Arroyo 1999:74) The Mexican government was forced to turn to the International Monetary Fund and the US and Canadian governments for an emergency bail out package worth about US$48 billion. Citizens of Canada and the United States were not consulted. The primary beneficiaries of this bail out were the currency speculators and lenders of hot money who were reimbursed by the Mexican government. The Mexican people were saddled with an immense debt and harsh austerity policies. (Peñaloza 1995) Mexico’s external debt rose from US$132 billion at the end of 1993 to US$166 billion in 1995 (World Bank 1998). Servicing this debt continues to cause Mexicans hardship. The East Asian crisis repeated the same pattern of excessive inflows of portfolio investment followed by very rapid and destabilizing outflows that occurred in Mexico. The turnaround in net flows of private capital to five Asian countries (South Korea, Thailand, Indonesia, Malaysia and the Philippines) was a staggering US$105 billion in just one year. Once again bailouts totaling US$117 billion from international financial institutions and Northern governments benefited investors in Thailand, Indonesia and Korea while local populations are saddled with new debts and more austerity. Human development gains were reversed and women were the first to lose their jobs and the last to be rehired. Chile was one Latin American country that escaped the "tequila effect" that destabilized Latin financial markets in the wake of the Mexican crisis. One reason Chile’s finances remained stable is because its encaje system required foreign investors to deposit a portion of the capital they brought into the country in an interest free account with the central bank. Furthermore, foreign portfolio investment had to remain within the country for a minimum of one year. While Chile has temporarily suspended the encaje in recent months, its experience demonstrates the efficacy of such controls in mitigating financial turmoil. Nevertheless, Chile’s regulations and policies with respect to foreign direct investment have not sheltered it from other problems and dangers.Chile was a pioneer in the implementation of neo-liberal policies. The most eloquent expression of this is the economic integration agreements Chile has made with countries including Canada, Central America, Mercosur and Mexico. In spite of these policies of deregulation and market opening lading to a high rate of growth, except this year, and a high level of foreign investment this model has failed because unemployment grew from 6% to 12% and 15% for women according to official sources. External debt also rose US17 billion in 1990 to over US$30 billion by the end of 1998. Chile was presented by President Clinton as the paradigm for Latin America at the last Summit in Santiago. If this is the paradigm then it is not a desirable model to imitate. In the wake of the Asian financial crisis a debate has opened up on how best to cool down hot money. At IMF and World Bank meetings and within the Group of Seven industrial countries and the new Group of Twenty industrial countries and "emerging markets", Finance Ministers are debating how to prevent private investors from precipitously withdrawing their investments and again precipitating or exacerbating financial crises. Instead of bailing out private investors with public funds as occurred in Mexico, Asia and most recently Brazil, Ministers are discussing how to make private investors bear part of the costs of resolving financial crises. Trade Ministers’ discussions of further liberalization of cross-border financial flows may contradict the efforts of Finance Ministers to find ways to cool down hot money. Private financial firms view trade pacts, like the FTAA, as opportunities to head off efforts to reestablish some kinds of capital controls. Despite the experiences of the Mexican, Asian and Brazilian crises, private money traders defend the liberalization of financial markets in the name of the "efficiency" of unregulated capital flows. However, the historical evidence shows that excessive international financial flows do not lead to an efficient use of funds but rather to manias, crises and panics. (Kindleberger 1996) Prominent mainstream economists including Dani Rodrik, Jeffrey Sachs, Jagdish Bhagwati and Paul Krugman are all warning against capital account liberalization. Their studies confirm the conclusion of World Bank chief economist Joseph Stiglitz that "Capital account liberalization has the potential of imposing greater risk and greater inequality... Studies show there is no systematic relationship between capital account liberalization and economic growth and investment." (cited in Weisbrot and Watkins 1999:19)
CIVIL SOCIETY RECOMMENDATIONS FOR TRADE MINISTERS: C.1 Capital controls, like those used in Chile and Malaysia have gained a new legitimacy in official circles. But these types of controls would not be permitted under NAFTA. We affirm the legitimacy of measures which require foreign investors to deposit a portion of the capital they bring into a country in an interest free account with the central bank or require foreign portfolio investment to remain within a country for a minimum period. We also affirm the legitimacy of capital controls like those used by Malaysia which placed restrictions on withdrawals of portfolio investments for a one-year period and imposed selective exchange controls on its currency. These measures enabled Malaysia to adopt an expansionary monetary policy and resume growth. We support the adoption of norms of banking supervision and control over banks and restrictions on offshore financing that enters a country without minimum capital deposit controls.. We view the use of capital controls as an integral part of a development strategy and not just as a tool to be used only in emergencies. Capital controls should facilitate monetary policies that enhance countries’ ability to extend loans at low interest rates to small producers, women and disadvantaged communities. We oppose allowing trade oversight bodies to assume jurisdiction over measures designed to stabilize a country’s balance of payments as occurred recently when the Appellate Body of the Dispute Settlement System of the WTO ordered India to remove quantitative restrictions used for balance of payments purposes. (Raghavan 1999) C.2 We reiterate the Declaration of Rio de Janeiro issued by the Civil Society Forum for Dialogue Europe - Latin America and Caribbean on 29 June 1999 calling for the reversal of financial liberalization and the implementation of controls over international capital flows through taxes on international investments. C.3 The proposal of James Tobin, a Nobel Laureate economist, for a tax on international financial transactions to slow down currency speculation and enable national governments to exercise more control over their monetary policies is also receiving more support. In March 1999 Canadian Members of Parliament voted 164 to 83 in favour of a non-binding motion encouraging the government to enact a tax on financial transactions in concert with the international community. A Tobin tax would also raise substantial revenue for economic and social development in less developed countries. We support the establishment of a tax on short-term capital transactions that will not interfere with the financing of productive activities. We support the dedication of the revenues from such taxes to social cohesion funds like those in the European Union. We also support measures that would oblige international financiers to take responsibility for the risks they take provoking financial crises and to share the costs of resolving financial crises. C.4 We reiterate the Alternatives for the Americas’ assertion that, "Inasmuch as the International Monetary Fund and World Bank have failed to oversee the international financial system in a manner that supports sustainable and productive development, they should either be fundamentally restructured or new institutions put in their place." We shall be developing our ideas for the democratization of international financial institutions in future forums. C.5 We support better information services concerning credit risks with a view to eliminating the interest rate premiums countries must pay and to avoid capital stampedes.
D. External Debt For the Latin American and Caribbean region as a whole foreign debt has grown from US$257 billion in 1980 to an estimated US$736 billion in 1999. (World Bank 1999) The debt crisis of the 1980’s was triggered by changes in monetary policy in Northern countries which resulted in a dramatic increase in interest rates charged on international loans. Whereas real interest rates on floating-rate loans to less developed countries had averaged only 0.5% from 1975 to 1979, between 1980 and 1984 they averaged 13.1%. While private, transnational banks had an opportunity to extract themselves partially from the debt crisis of the 1980s through the Brady Plan which allowed them to convert bank loans into tradable bonds, the people of indebted countries never escaped from its consequences. Debt reductions under the Brady Plan were not deep enough and Brady Bonds themselves have become burdensome and unpayable as evidenced by recent events in Ecuador. Large, private capital inflows during the early 1990’s masked the underlying debt problem until the Mexican crisis of 1994-95 and the Asian crisis of 1997 exposed the fragility of the international financial system. Moreover, the massive bailouts arranged by the IMF and Northern governments converted many private credits into public obligations. Foreign investors were the prime beneficiaries of these bailouts while ordinary people bear the costs.
CIVIL SOCIETY RECOMMENDATIONS FOR TRADE MINISTERS D.1 We repeat the Declaration of Rio de Janeiro’s (June 1999) call for the reduction of the burden of less developed countries’ external debts as "an indispensable condition for true co-operation" among our peoples. Moreover, we insist that any debt reduction plan must not be conditional on acceptance of orthodox Structural Adjustment Programs (SAPs). Creditor initiatives for writing-off debts are sometimes conditional on acceptance of several years of structural adjustment as is the case with the Highly Indebted Poor Country(HIPC) Initiative. SAPs involve an unacceptable degree of intervention into the national affairs of sovereign states as they are imposed without opportunities for participation or evaluation by civil society. Moreover, the austerity imposed by SAPs falls disproportionately on the poor, especially women, who have increased their hours of work at home and outside the home to compensate for the loss of public services. Studies show women bear most of the burden of unemployment and underemployment as well as the extra burden of caring for elderly and infirm family members. Furthermore, SAPs often involve the inappropriate privatization of enterprises and services that should remain in the public realm. D.2 The Latin American Jubilee 2000 movement, representing civil society groups from throughout the Americas, is calling for the annulment of the region’s unpayable and illegitimate foreign debt. We endorse the Jubilee 2000 movement’s challenge to the legitimacy of debts that grew because of the compounding of interest payments after interest rates were dramatically raised by Northern countries or that were contracted by dictatorships or by governments that were formally democratic but corrupt. D.3 The 27 January 1999 Tegucigalpa Declaration launching the Latin American and Caribbean Jubilee 2000 debt annulment campaign calls for the creation of an Arbitration Tribunal that would be similar to the procedures available for municipalities under Insolvency Law in the United States. Under Chapter Nine of the US insolvency code municipalities may have their debts written down or canceled without sacrificing spending on health, safety and welfare services. Affected people have a voice in those proceedings. (Raffer 1993) We support The Jubilee 2000 debt annulment movement’s demand that debtor and creditor governments appoint equal numbers of judges to an Arbitration Tribunal. Furthermore debtor nations should make such appointments on the basis of broad consultation with civil society. D.4 The Brazilian Jubilee 2000 campaign convened a Peoples’ Tribunal to judge the legitimacy of Brazil’s foreign debt. After hearing testimony from debt experts and representatives of the Landless Peoples Movement, the unemployed, retirees and trade unions, the Tribunal concluded that much of Brazil’s debt is unjust and illegitimate. We support the Brazilian Tribunal on the Foreign Debt’s (1999) call for a suit be brought before the International Court of Justice at The Hague seeking a judgment on both the processes that gave rise the foreign debt and the factors that caused it to grow, such as unilateral decisions by creditor countries to raise interest rates.
Conclusion The negotiators of a Free Trade Area of the Americas and of provisions within the World Trade Organization must take into account the actual experience under NAFTA’s investment provisions in evaluating proposals from the Business Forum of the Americas for further liberalization and deregulation. Civil society representatives want to be heard in this debate because the very essence of democratic self-determination is at stake. Governments must maintain the right to set rules for foreign investors, to settle investment disputes under national law and to control fly-by-night, speculative capital if economic integration is to be environmentally sound and beneficial to all the citizens of the Americas, especially historically marginalized groups including women, indigenous peoples and people of colour
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