New Developments in the International Investment Regime: the case of Costa Rica

• In Event: Latin American Contributions to the Global Investment Regime

Abstract

Costa Rica is a small economy in Central America, but with a long tradition of investment protection and a friendly environment towards foreign direct investment. This is reflected in the amounts of foreign direct investment, which have accelerated in the past ten years to a reach an annual growth rate of 13%. Since mid-1980’s GDP per capita has been increasing and the share of population living in poverty fell from 29% to 18.5% in the 1987-2009 periods. According to OECD data, Costa Rica is a net recipient of foreign direct investment and concerning different sources including country’s authorities, FDI flows are a product of a favorable climate for investment, tax incentives, offered mainly under the special re gimes (free zones), the availability of skilled labor and the country's political and economic stability. Costa Rica has bilateral investment treaties with more than fourteen countries to June 2013, such as Canada, Chile, France, Germany and Switzerland and has concluded twelve regional trade agreements with investment chapters, such as the DR-CAFTA (plus four more in the process of conclusion or ratification). However, the country had four concluded cases before the Center of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and just in the last three years, four new cases were presented. In 2009, it was established an Inter-institutional Commission for the Settlement of International Disputes on Trade and Investment in order to coordinate, prevent and manage Costa Rica’s response to ISDS claims. However, one of the problems that OECD and other institutions point out is the lack of coherence between BITS and FTAs with investment chapters. Moreover, some of the exiting BITs are outdated compared to recent developments in IIA. This work compiles, existing problematic in outdated BITs that are in force in Costa Rica, focusing on DR-CAFTA and BITs with EU countries and it raises concerns within this framework. Moreover, it proposes a policy proposal towards modernizing existing BITs.

Author

• Carolina Palma