Article Title

Legal Stability Contracts in Colombia: An Appropriate Incentive for Investments? Historical Causes and Impact Analysis of Law 963 to 2005

Authors

Alvaro Pereira

Abstract

Current global economic order is openly dependent on foreign direct investment (FDI). At least since the 1990’s, developing countries have competed to attract FDI because it is considered the best source of technology, employment, and financial resources. Colombian Law 963 of 2005, which is a response to said competition, allows the signature of Legal Stability Contracts (LSCs) between the State and investors for the purpose of stabilizing the rules guiding investment decisions, for up to 20 years. Legal stabilization has successfully proven to increase FDI inflows. Nevertheless, incentives for FDI have been subject to several critiques that stress the excess of benefits for foreign inves- tors in exchange for weak commitments.

Wanting to examine the suitability of Law 963 in attracting FDI to Colombia and in increasing its positive impact, I studied the “state of art” of FDI and legal stabilization, the historical causes of incentives in Colombia, and the LSCs signed in the light of said Law. The results of my study reveal that the law successfully met the expectations of in- creasing investments. However, there is also evidence that early reforms and a deficient application of the law prevented it from increasing the positive social impact of investments.

Recommended Citation

Alvaro Pereira, Legal Stability Contracts in Colombia: An Appropriate Incentive for Investments? Historical Causes and Impact Analysis of Law 963 to 2005, 12 Rich. J. Global L. & Bus. 237 (2013).
Available at: https://scholarship.richmond.edu/global/vol12/iss2/4