Fair Contracts for Poor Countries

Author: Karl Sauvant, Executive Director, Columbia Univ. Program on International Investment, in Policy Innovations [USA], Published on: 10 March 2008

A number of countries in Latin America, Africa, Eastern Europe, and elsewhere are abrogating or renegotiating contracts with multinational enterprises (MNEs), and others are likely to follow suit... While "fairness" may well be in the eyes of the beholder, in some cases, the host country may not have had the expertise required to negotiate the best possible deal—a frequent situation when MNEs negotiate with the least developed countries... Mittal's [now ArcelorMittal] 2005 deal with Liberia (renegotiated last year) and various contracts with Congo probably fall at least partly into this category, as do some deals in ex-Soviet countries... The resulting contract is all the more problematic because it is likely to involve one of the host country's few important resources... So, even without corruption, it is not surprising when a future government demands that the contract be renegotiated. Clearly, the playing field with MNEs should be leveled... what if MNEs provided the funds?

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Related companies: Arcelor Mittal Mittal Steel (part of Arcelor Mittal)