Within the framework of the disputes between investors-state Guatemala has made a disbursement that amounts to about US $ 166.4 million, equivalent to Q1 thousand 281.28 million in a period of 12 years by sentences that have been known at the International Difference Arrangement Center (CIADI) based in Washington DC
The award that was issued last Monday, March 31 in the arbitration presented by the company Energía y Renovación Holding, SA, (Hydroelectric) for US $ 65.4 million, which reaches some Q496.6 million is the highest against the state of Guatemala by CIADI in the 2013 to 2025 series.
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These are complaints that have come for years and that the failures known by the arbitral tribunal, but will correspond to the current government authorities complying with them, that is, honoring the commitments and the sentence issued by the international entity.
This means that budget readcations will have to be made to pay affected investors who failed to develop hydroelectric projects in Huehuetenango.
Both the Ministry of Economy and Finance must enable budget items, and make the payment in the field of judicial sentences, in the case of the ruling issued last Monday with public budget funds.
The Attorney General’s Office (PGN), is the one that provides monitoring in the part of the defense of the state of international litigation with investors and the amounts they imply.
The history
The Free Trade Agreements (FTA) or the bilateral agreements for the promotion and protection of investment that Guatemala has signed with other economic blocks, the rules are established, as well as the instruments of dispute solutions with the State. Chapter 10 of the FTA between Central America and the United States deals with investment.
When there are differences, companies make claims for “compensation for damages” that are multicausal, but a good percentage is due to the breach of contracts so they go to the CIADI that is the institution at a global scale that is dedicated to the arrangement of differences related to international investments and that has competition to know the files in the case of Guatemala.
“” Does the Government have the technical-legal capacity to meet this type of demands? What is the government doing to strengthen, since there are other demands in process “
Raúl Bouscayrol, president of the Guatemala Chamber of Industry
Of the failures issued by CIADI against the state of Guatemala and the execution of the sentence are four.
In 2013 an arbitration award for Railroad Development Corporation (Ferrovías Case) was issued, so US $ 18 million were paid.
In 2020, a Guatemala Holdings Teco for about US $ 37 million and in 2022 US $ 46 million to Teco.
Now in the execution list we add US $ 64.5 million for energy and renewal holding, SA
Fiscal risks
International demands against the state of Guatemala and respective failures is already an alarm for public finances regarding the risks it represents.
A document from the Ministry of Planning and Programming of the Presidency (Segeplán), states that erogations have been made for international arbitrations, and amounts are identified that have been paid to the CIADI that includes payment of experts, witnesses, among others.
From 2009 to 2022, the expenses of the Ministry of Economy (Mineco, which acts as administrator of the TLCS) on controversy issues are Q206.3 million. “These expenses show a behavior that is quite fluctuating that depends on the resolutions of the arbitration courts and the results obtained by the respective lawyers and experts,” says the report.
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One of the reflections of the official analysis is that “it is important to indicate that the adequate conduct of these cases of international arbitration and the execution of sentences through state -of -the -art embargo titles in the market or in the increase of these ”.
CIG: It is a negative message to investment
Raúl Bouscayrol President of the Guatemalan Chamber of Industry (CIG) analyzed the scope of this sentence for potential investors and certainty, as well as institutional strengthening to make fronts.
What does Guatemala mean is Ciadi’s judgment?
This sentence is within the framework of the FTA. Which is an international treaty, which has a section that regulates what is related to investments, including the way in which controversies will be resolved.
The above gives some certainty to the investor, to make investments, given that, before an eventual controversy, it has an international instance to raise the demand. The state of Guatemala, in this case, is the defendant.
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The question is, does the government have the technical-legal capacity to meet this type of demand? What the government is doing to strengthen, since there are other demands in process. In addition, new commercial and investment agreements are being negotiated, which will eventually generate new powers. The above is in relation to controversies. However, the demands are raised by investors, before the inaction of the government, when they have problems that, due to their nature, require the presence of the government.
With this award, what is the message for potential investors?
Investors decide to invest in projects or companies in a country, because they identify a profitable investment opportunity.
The Ciadi award has a negative message for investment, since, it reflects weaknesses in the climate to do business, in some sectors of the economy. In this case, the electricity sector.
In that sense, as CIG we point out the urgent need to regulate ILO Convention 169, as part of the solution to improve the climate to do business, as well as strengthen technical-legal capacity within the government, to properly defend the country.