Equity investment, economists say, is basic to the economic recovery of much of the developing world.
In speech after speech, U.S. and other public officials stress that more foreign business investment in Latin America and other developing countries is a key to overcoming the Third World debt problem.Such investment has been stagnant over the last four to five years.
To help revive investment flows, the United States and other governments are about to launch a World Bank agency for insuring foreign investors in developing countries. The Inter-American Investment Corporation represents another new multilateral effort to promote developing countries' investment. But a report released here by the Council of the Americas, which represents about 200 U.S. firms in Latin America and the Caribbean, suggests that there are no near-term prospects of a foreign investment boom in the region, or at least in the so-called Andean countries - Colombia, Ecuador, Bolivia, Peru and Venezuela.
The report, based on a survey of the council's member companies, is replete with reasons why U.S. firms are hesitant about expanding their presence in the five countries.
Interestingly, all five countries are on the Baker plan list of the developing countries most needing increased financial flows from abroad.
The report broadly notes that U.S. foreign direct investment in Latin America slumped (in constant 1982 dollars) from $45.3 billion in 1980 to less than $26 billion by 1984.
Over this period, U.S. investment in the Andean countries was relatively stable, the council reports. Big disinvestment, it says, came mainly in Caribbean tax shelter countries.
Yet, even in the Andean nations, U.S. firms told the council this year of the overall uncertainty of the investment climate.
Asked to name the major deterrents to investment in the Andean group, the firms cited bureaucratic delays, regulatory restrictions, labor laws, the lack of respect for industrial property rights, and terrorism.
Hovering over the area, the council pointed out, is Decision 24, adopted 16 years ago by Andean countries, to protect domestic enterprises from being overwhelmed by foreign investors.
Over the years, Decision 24 has been liberalized, but hardly enough, U.S. executives say. It still requires foreign investors ultimately to give majority control in their subsidiaries to local interests and it bars new foreign investment in banking, insurance and some other services.
Profit repatriation or reinvestment is limited and foreign parent firms are not to receive royalty payments for the use of their technology by their Andean subsidiaries.
Even in Colombia, the Andean country where U.S. investment has actually risen in recent years, corporate complaints continue.
Said one U.S. business executive: Dealing with the Colombian government's bureaucracy is a seemingly endless procession of meetings with numerous government agencies, each group having the power to disallow a segment of your business proposal, but which do not talk with each other.
Some U.S. firms, says the council, have decided that investing in Colombia is not worth the hassle, despite Colombia's officially encouraging more foreign investment.
Foreign exchange problems, social unrest and terrorism are other factors inhibiting U.S. investment in Colombia, the council found.
The present Ecuadorean government is credited by U.S. executives with seriously trying to make the nation more attractive to foreign investors. Ecuador, for instance, plans to eliminate the Decision 24 directive that foreign investors eventually turn over control of their subsidiaries to local interests.
But Ecuador's foreign debt still makes life hard for U.S. firms doing business in the country, the council said. Foreign exchange curbs, a devalued currency, high interest rates, import procedures, and crippling general strikes- all related to Ecuador's big debt - reportedly discourage investors.
The council's survey indicated that U.S. businessmen grapple with many similar problems in Peru and Venezuela, which is reputedly the toughest enforcer of Decision 24. In Venezuela, said one U.S. entrepreneur, a foreign firm must justify its existence to the government on an almost continuous basis.
Recently, another group of U.S. businessmen, members of the Brazil-U.S. Business Council, issued a similar report about Brazil. Price controls, curbs on imports, financing and profit remittances, and discriminatory laws favoring local firms were scored by this group.
Among its findings was that no foreign company that specializes in any field of relatively sophisticated technology would be advised to enter Brazil as an equity investor at this time.
Net foreign direct investment flows into Brazil this year are put at less than $100 million, part of a steady decline in recent years.
From those and other comments, a major revival of foreign investment in Latin America - and with it, an end to the debt crisis - seems a distant hope.