Legislation for Foreign Investment Statutes in Countries in the Americas
Comparative Study
1. Legal bases for foreign investment
Objective: Indicate if there is a Foreign Investment Statute and describe it. In the paragraphs below, indicate the legal rank of the norms contained in the Statute, i.e., regulations for expropriation fall under which rank?
1.1 Constitutional
At the constitutional level, the following articles establish the legal framework for foreign investment:
Article 58 establishes free private initiative.
Article 59 promotes and guarantees the freedom to work, and freedom of enterprise, trade, and industry.
Article 60 states that public and nonpublic business activities receive equal treatment.
Article 61 establishes that the State facilitates and supervises free competition.
Article 82 provides that disputes arising from contractual relationships are settled only through arbitration or the judicial system and establishes the authority of the State to grant guarantees and security through contract-laws.
Article 83 establishes that national and foreign investments are subject to the same terms. It also establishes the authority of the State and institutions of public law to submit disputes arising from contractual relationships to arbitration tribunals established under the treaties in force and to national or international arbitration.
Article 64 guarantees the freedom to hold and dispose of foreign currency.
Article 70 guarantees the inviolability of property and admits the possibility of expropriation strictly on grounds of national security or public necessity, declared by law and after payment in cash of fairly assessed compensation.
Article 71 establishes equality of foreigners and nationals in property matters. In exceptional circumstances, foreigners are prohibited from owning property within 50 kilometers of the border, except in cases of public necessity expressly approved by the Cabinet Council.
1.2 Legal
The basic framework law for foreign investment is given in Legislative Decree 662 (Foreign Investment Promotion Law), Legislative Decree 757 (Framework Law for Private Investment), and Supreme Decree 162-92-EF (Regulation of the Legal Stability Regimes).
1.3 Administrative
The procedures for foreign investment are contained in Supreme Decree 162-92-EF and CONITE Board Resolution No. 002-94-EF/35. On June 28, 19, Board Resolution No. 001-96-EF/35 on juridical agreements and registry of foreign investments, was published in the Official Gazette.
Objective: It is essential that both the investor and the nature of the investment be identified, so as to determine to which activity and to whom the regulations will be applied. This is also essential at the international level, especially in case of dispute and arbitration.
2.1 Is foreign investment in your country legally defined or conceptualized?
Yes. Article 1 of Legislative Decree 662 defines as foreign investments any investments coming from abroad made in income-generating activities under any of the following modalities:
a) Property contributions by foreign individuals or corporations to the capital of a company, be they in the form of cash handled through the national financial system or in physical or tangible goods, investments in national currency from resources authorized to be remitted abroad, conversion of foreign private obligations into shares, investments in real property, intangible technological contributions, and reinvestment.
b) Investments assigned to the purchase of securities.
c) Resources assigned to joint venture contracts.
d) Any other foreign investment modality contributing to the country’s development.
2.2 Are there registered records or mechanisms to clearly identify both the foreign investor and the nature of the investment?
Articles 3, 7, and 20 of Legislative Decree 662 establish the obligation to register foreign investment with the national competent entity. Article 30 indicates that the national competent entity is CONITE.
2.3 Is it possible for a natural person to resort to the foreign investment legislation?
Yes.
2.4 Is it possible for a citizen or resident to resort to the foreign investment regime?
The Framework Law on Private Investment approved by Legislative Decree 757 extends access to the Legal Stability Regime established by the Foreign Investment Promotion Law to national investors. The guarantee for remittances abroad extends to nationals who make investments from abroad.
2.5 Can a recipient company funded with both domestic and foreign capital resort to foreign investment regulations? Is this subject to restrictions?
Companies established in the country are deemed to be national companies for the purposes of domestic legislation and they have equal status regardless of the capital composition. Investments of a local company of foreign capitals are considered national investment, except when the investments are made with resources from abroad.
2.6 Is there a time limit for a foreign investor to be considered as such?
No.
2.7 Are restrictions imposed on the executive body or other staff of an enterprise. Are there nationality quotas? Under what conditions can the executives or other staff hired abroad send their earnings to their country of residence?
The labor laws set the maximum quota of foreign employees in an enterprise at 20% of the total number of employees. Their compensation should not exceed 30% of the payroll.
The company may request that this quota be waived for highly skilled workers. Employment contracts are subject to authorization and registration with the Ministry of Labor.
There are no nationality restrictions for employees. Foreign executives or employees may freely remit their earnings after payment of the relevant taxes.
3. Scope of foreign investment activities
Objective: Define the legal scope of foreign investment in your country, as well as their conditions and limitations.
3.1 Describe the regulating principles of economic activity in your country.
a) Describe how economic freedom is guaranteed.
The Political Constitution recognizes and guarantees private initiative, promotes free enterprise, trade, and industry, recognizes economic pluralism, and establishes that the State recognizes and supervises free competition.
b) Is the principle of economic nondiscrimination guaranteed? Describe how.
The Constitution establishes the principle of nondiscrimination in economic activity. Current legislation has eliminated any reference inconsistent with this principle. Investors and enterprises may report any discriminatory act on the part of the authorities to the National Institute for the Defense of Competition and the Protection of Intellectual Property.
c) Public and private enterprises (local and foreign): do they compete on equal terms, or does the State have higher benefits?
Under the Constitution, the State and private enterprise compete on the same terms, receiving the same legal treatment. Business activity is a subsidiary activity for the State, which it conducts only with express authorization by law and in cases where there it is major public interest or it is clearly advisable for the nation.
In 1991, the State embarked on a radical process of privatization of enterprises in which it held equity.
3.2 Indicate the scope of foreign investment, i.e., does it include movable and immovable property, assets, concessions, claims to money, intellectual property, industrial property, leasing, technology, etc.
Foreign investment may be made in any income-generating activity, under the modalities referred to in item 2.1 above.
The State protects intellectual and industrial property rights, thus the rights of foreigners are subject to the same terms applicable to nationals. Licensing contracts for use of technology, patents, trademarks, or other industrial property rights of foreign origin, as well as technical assistance, basic and precision engineering, management and franchising are freely negotiated between the parties and subsequently registered with INDECOPI.
3.3 Reserved sectors
Exploitation of protected natural areas.
Manufacturing of weapons of war.
a) Indicate the sectors or economic activities reserved exclusively for the state in your country. Explain the regulations pertinent to these areas.
b) Indicate the sectors or economic activities in which only foreign investment is excluded, restricted or limited in your country. Explain in what consists said exclusion, restriction or limitation.
c) Does the Principle of International Reciprocity exist in the legislation of your country?
The Principle of Reciprocity exists in the bilateral investment promotion and protection agreements signed.
d) Is foreign investment subject to performance requirements?
Only if the State assumes a commitment, by contract, to that effect, for example, in the case of privatization, in oil concessions, or in legal stability agreements.
e) Can foreign investors take part in the privatization processes of your country?
Yes
4. Rights and protection of foreign investment
Objective: Identify the type of treatment granted foreign investment i.e.: its rights, protection and incentives.
4.1 Treatment granted to the foreign investor and the investment.
a) National treatment or Most-Favored-Nation clause? (Refer to paragraphs 3.1 and 3.3).
The treatment of foreign investment is based on the principle of equality. Foreign investors have the same rights and obligations as national investors, irrespective of the nationality or geographic origin of their investment.
4.2 Protection of Property
a) Constitutional or legal grounds that may lead to expropriation of, or limitations to property.
Article 70 of the Constitution guarantees the inviolability of property and admits the possibility of expropriation strictly on grounds of national security or public necessity, declared by law and after payment in cash of fair compensation.
b) How is compensation determined? Which value is it based on? How is it settled?
Compensation takes the form of payment of a fairly appraised amount, which covers the market value of the expropriated good or goods and the reparation of damages caused by the forced nature of the transfer.
The market value is determined by appraisal or valuation in accordance with Peru’s General Appraisal Regulation. The fair compensatory established at the assessment date will be adjusted at the settlement date.
The duly adjusted compensation shall be paid in cash.
c) Can the authorities take possession of expropriated assets prior to paying compensation?
No
d) Is property of both corporal and incorporeal assets equally guaranteed?
Yes
4.3 Transfers of investment, remittances of capital and benefits.
a) Under what conditions may investments in the form of foreign exchange, capital goods, technology, associated credits, etc., be brought into the country? Are there specific regulations for each item?
Contributions in foreign currency and related credits are handled through the financial system.
Physical goods are brought in through customs and are subject to the relevant taxes.
b) Are there restrictions to the remittances of capital, benefits, debt service, or other remittances derived from foreign investment?
No. The Constitution guarantees the freedom to hold and dispose of foreign currency.
c) Are there different kinds of exchange rates? To which does the foreign investor have access?
There is only one type of exchange market, which is governed by supply and demand.
4.4 Taxes and incentives to foreign investment.
a) Explain briefly the taxes that foreign investments are subject to.
The main taxes applicable to any unit of production in Peru are:
a) Income tax
b) General sales tax (VAT)
c) Excise tax
d) Tariff duties
b) Are there special tax rules for foreign investment?
No.
c) Has your country signed agreements with other countries in the Americas to avoid double taxation? If yes, list those countries.
Switzerland.
d) Are there other incentives to foreign investment, such as access to domestic credit, investment insurance, industrial parks, customs exemptions, etc.?
Access to domestic credit is free.
Investors are entitled to contract insurance, inside and outside the country, to protect their investment against commercial and noncommercial risks. At the multilateral level, Peru is a member of MIGA.
There are special customs regimes, such as the Temporary Admission Regime, Temporary Import Regime, and drawbacks.
5. Dispute settlement
Objective: Because Bilateral Investment Treaties (BITs) will be part of another study, only an overview of the subject is required here.
5.1 Domestic settlements: Can the foreign investor resort to the same procedures as the national investor? Are there special forms of appeal available to foreign investors? Please describe.
The terms for procedural recourse are the same for foreign investors as for local investors.
5.2 International settlements: Is your country a member of ICSID or other international arbitration mechanisms on the subject of investment?
Yes. Peru ratified the ICSID Convention in 1993. Disputes may also be referred to UNCITRAL.
5.3 Has your country signed BITs with other countries in the Americas? What is the present status of said agreements, i.e., approved, ratified, in effect?
Switzerland In effect
The United States (OPIC) In effect
Bolivia In effect
United Kingdom In effect
France Approved
Paraguay In effect
Czech Republic In effect
Colombia Approved
Sweden In effect
Argentina Approved
Spain Approved
Portugal Approved
Denmark In effect
Netherlands Approved
Germany Approved
Norway In effect
Finland Approved
Thailand In effect
South Korea In effect
People’s Republic of China In effect
Under domestic law, agreements are first signed then approved by Supreme Decree.
5.4 Where in the juridical hierarchy of your country are international treaties and specifically the Investment Protection Agreements? Analyze your response in relation to the Constitution and domestic laws.
5.5 Do said agreements have "direct effect", that is to say, can they be invoked by the parties directly before the Courts and then applied to the case in question? If not, under what circumstances can they be invoked and applied?
6. National authorities
Objective: To identify the agencies in charge of foreign investment, their organization and functions.
6.1 Is foreign investment handled by specially appointed offices in your country? What is their hierarchical status? How are their actions integrated? What are their main attributions?
The entity responsible for foreign investment in Peru is the National Commission of Foreign Investment and Technology (CONITE).
CONITE is an arm of the Economy and Finance Sector. It comprises a five-member Board, which reports to the Ministry of Economy and Finance, and a General Secretariat, which carries out its technical/executive work.
CONITE’s main functions are:
a) To propose and execute policy for the treatment of foreign investment, issuing the relevant regulatory rules.
b) To act as the national competent entity for the application of the rules contained in the Foreign Investment Promotion Law approved by Legislative Decree 662.
c) To take action to promote foreign investment flows.