1 / 21

Foreign Investment Incentives and Policy Stability: The case of mining royalty laws in Chile and Peru

Foreign Investment Incentives and Policy Stability: The case of mining royalty laws in Chile and Peru. Jennifer Tobin Brookings Institution and Yale University. Overview.

betty_james
Download Presentation

Foreign Investment Incentives and Policy Stability: The case of mining royalty laws in Chile and Peru

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Foreign Investment Incentives and Policy Stability:The case of mining royalty laws in Chile and Peru Jennifer Tobin Brookings Institution and Yale University

  2. Overview • How do investment incentives meant to stabilize the short-term policy environment for foreign investors function in the long run?

  3. Outline • Policy Stability: • What is it? • Why do we want it? • How do we get it? • Peru and Chile: Institutional Background • Mining Royalty Laws: • What are they? • What happened? • Why? • Next Steps

  4. Technological Spillovers FDI Range and Complexity of Output Organization and Adaptability of Production Human Development Workforce Capacity Domestic Savings Growth Capital Growth FDI Human Development Household Human Development Spending Household Income Growth Government Policy Preference Government Human Development Government Revenue FDI and Growth

  5. Attracting FDI • Credibility of the investment environment: • macroeconomic stability • political stability • policy stability

  6. Policy Stability Rules of the Game: • Clear • Well known • Well enforced • Stable

  7. Why Stability? Reduces the uncertainty of the future rewards for investing Investment Growth

  8. Stability, but how? • Constitutions • Institutions • Contracts • Time horizons • International agreements

  9. International Legal Guarantees Investor-State Contracts Policy Stability Agreements Investment Incentives

  10. Investment Incentives • Short versus long-term effects

  11. Institutional Environment: Chile • Strong Presidency • Bicameral Legislature • Strong parties • Low corruption • Fiscal discipline • Conservative monetary policy

  12. Institutional Environment: Peru • Strong presidency • Few checks and balances • Party system: Weak and fragmented • Judicial system: Inefficient, corrupt, subject to political manipulation. • Recent macroeconomic stability

  13. Mining and FDI

  14. Mining and FDI

  15. FDI: Restrictions/Incentives • DL 600 • Stability Agreements • BITs • FTAs

  16. Mining Royalty Laws • Not a tax • In place in almost all developed countries and more than 120 countries world-wide

  17. Mining Royalty Laws: Chile Pro: Government Public Opinion Concertacion Con: Business and Industry Alianza IMF Rejected

  18. Mining Royalty Laws: Peru Pro: President Public Opinion Most left-parties Con: Finance Minister APRA Business and Industry IMF Passed

  19. Expectations What would we have expected to happen? Just what happened: • Peru: Instability • Chile: Stability

  20. Grand Theoretical Claim • Would they have lost investment? • Did Incentives matter? • Why not collude? • In creating short term stability--created long term policy gridlock

  21. Next Steps

More Related