Foreign investment yes, foreign investment no

Extreme stances for or against foreign investment, whatever it may be and regardless of the conditions in which it comes, leads to mistakes that have consequences. It is worth making it explicit when and why a foreign investment can contribute to the national development and when and why, affect it negatively. There are ideological fundamentalists or masked defenders of spurious interests that consider foreign investment as an indispensable factor for national development, whatever it may be and regardless of the conditions in which it comes; this is an extremely dangerous mistake.

There are other ideological fundamentalists that consider all foreign investments as an absolutely negative factor for national development, whatever it may be and regardless of the conditions in which they come; this is another serious mistake that also has consequences.

It is not about finding a mere middle ground between both extreme stances but about making it explicit when and why a foreign investment can contribute to national development and when and why, affect it negatively.

Factors to consider

To assess if it is advisable or not to receive a certain foreign investment, it is necessary to consider a series of factors, among others the following:

(i) The type and strength of the State that could have been built, particularly if it is determined to defend the interests of the whole society or if it is controlled by minority interests; if it acts effectively or ends up being a structure with no capacity or reflexes to adjust trajectories to the always changing circumstances of national and international context.

(ii) The type of desired development. Very different roles would a foreign investment play in a concentrative development driven by neoliberal policies than in an inclusive, sustainable development based on transformational policies to favor economic vigor, social justice and environmental care.

(iii) The development phase in which the different economic sectors are. One thing is a country with a consolidated economic structure and national actors that can complement new foreign investments without being subordinated to them, and a very different one is if its economic structure is fragile with ¨emerging¨ activities that are developing, still needs to consolidate and requires State involvement to generate relationships with the foreign investment that will favor society as a whole.

(iv) The type of investment it may be. It is not in the national interest foreign investments that look to extract value instead of generating it, but those that will get the legitimate results they deserve with their productive and not speculative effort. It is worth making it explicit that by approving investments not only contractual obligations are established but also rights ensured.

(v) Impact on the trade balance. It is necessary to assess the short and medium term effects that a foreign investment will have on the trade balance; this is to say, how it will influence imports, exports, payment of royalties and dividends. In situations of serious restrictions of foreign currency availability, as is the case in many emerging economies, this factor acquires substantial importance.

(vi) The foreign investor´s trajectory. As in all aspects of life, generalizations are not helpful; there will be foreign investors that have operated responsibly respecting the regulations of the countries they invested in, and others with very questionable trajectories. This factor cannot be ignored while assessing foreign investments.

(vii) Political impact. There are awful experiences in several emerging economies of foreign investments that have acted illegally financing and mobilizing sectors of the political system, the media and the Judiciary in favor of their interests, promoting public policies that went against common wellbeing and national sovereignty. It would represent a huge mistake (apart from the legal implications that these cases could have) not to consider this crucial factor.

Positive and negative effects

Considering the factors that were ultimately chosen as criteria to evaluate eventual foreign investments, the State and individuals should identify (i) probable negative effects of each foreign investment and the measures that could be adopted to avoid them, as well as (ii) the opportunities that will emerge in each case and the actions that the State and individuals could carry out to make the best of them. According to that assessment the investment would or would not be approved.

In these brief lines it is not possible to deepen the analysis of all the implications that evaluating a foreign investment entails. For demonstrational purposes we will consider a couple of examples from the economic field; the other spaces and factors mentioned above are left unaddressed.

The chosen examples are about foreign investments that could present risks of deteriorating the environment and destroying local productive ventures. In these cases it is indispensable to condition the foreign investment approval to the explicit adoption of appropriate environmental standards and the acceptance of collaborating with the State to eliminate eventual negative impacts on employment and companies.

Appropriate environmental standards are relatively well known so this issue cannot be addressed by simply signing a friendly statement of environmental responsibility; it would instead require an agreement on terms of verification that will establish specific indicators and modalities to verify compliance.

As regards to probable negative effects on other productive activities, a responsible foreign investment would need to contribute with the State in promoting a balanced development of its entire value chain. Among other possible measures, the new investment should try to use mostly local suppliers ensuring fair and sustained prices, participate in promoting new ventures that will generate added value locally and help in eventual efforts of productive restructuring. When it comes to large-scale projects, foreign investments should be involved in infrastructure works that will serve the region where it is established; when it comes to medium-scale projects, foreign investments should commit to carrying out specific communitarian improvements in their immediate environment.

At the same time and to the right extent eventual positive effects of the different foreign investments must be appreciated, such as opening of trade channels with international markets, the country insertion in value chains of promising sectors, the support that the national scientific and technologic development could get, a likely increase of tax revenues as long as appropriate regulations to prevent tax evasion and elusion can be guaranteed.

In other words, it is necessary both to ensure the compliance of established regulations and agreements to avoid eventual negative effects as well as, at the same time, adopt specific measures to effectively materialize positive effects. The fact is that even though opportunities can be generated, they do not usually materialize spontaneously. Here a space unfolds where the State and individuals would benefit from complementing their efforts, always aiming to favor not only the parties directly involved in the specific foreign investment but also society as a whole.

Effectiveness and democratic spaces

Economic processes do not come to a halt waiting for us to figure out how to organize ourselves so that we can benefit from the opportunities that arise; if we do not act in time and with the necessary effectiveness, other economic structures and relationships will keep developing with the globalized world, which will then turn out to be very hard to revert or transform.

In that search for better trajectories there is no auto-pilot and much less answers that can be generalized. Nothing can replace our own capacity to differentiate threats from opportunities, to make decisions and then implement them with the necessary agility and effectiveness. Of course, in order to make those decisions it is necessary to count with a reference of the desired country (a referential utopia) that can be adjusted over time as our democracies unfold.

The desired country needs to be debated among all social forces as to agree, with the largest possible support, the course and national interests that will be defended. It is not a simple task to balance diverse opinions without blocking or delaying government actions but it is a challenge worth facing and solving appropriately. This is something that democracies face on a daily basis and implies a double responsibility both from the government and the opposition whose function in many cases is not certainly to impede but, on the contrary, to add value to public initiatives and policies ensuring probity and effectiveness of government actions. It is precisely in that context of desired trajectory, social requirements and political construction of a full democracy, that we will have to assess the convenience of any foreign investment that wishes to settle in our countries.

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