Is investment facilitation a substitute or supplement? A comparative analysis of China and Brazil practices

Abstract

Investment facilitation, which tackles ground-level obstacles to FDI and has no substantial challenges to regulatory space, is emerging as a new trend of global governance. Meanwhile, the content and method to implement investment facilitation are still evolving. Both as top FDI destinations and largest emerging countries in South America and Asia respectively, Brazil and China have adopted somewhat different approaches towards investment facilitation. Due to traditional resistance to BITs network, Brazilian developed a new model of investment treaty, i.e., Cooperation and Investment Facilitation Agreement (CIFA). CFIAs primarily focus on investment facilitation through institutional cooperation, but the scope and degree of investment protection are quite insufficient. China’s approaches towards investment regime are inclusive, i.e., it is a practitioner of investment facilitation as well as a proponent of IIAs with a balanced ISDS mechanism. On the one hand, while investment protection and liberalization system are essential part of good business environment, IIAs don’t necessarily lead to friendly regulatory environment to attract FDI inflows. In this regard, the policy of investment facilitation is complementary to existing international investment regime. It is suggest that China draws some experiences from Brazil in terms of institutional governance and establishing a similar and effective dispute prevention system. On the other hand, access to justice is still important to foreign investors, the policy of investment facilitation can’t act as a total substitute of traditional BITs worldwide. Considering the Brazilian investors’ increasing outbound investment and the growing needs of investment protection, it is suggested that China’s open and liberal policies are worth learning for Brazil.