U.S. GOVERNMENT PUBLISHING OFFICE

30–343PDF WASHINGTON : 2018

ADVANCING U.S. BUSINESS INVESTMENT AND

TRADE IN THE AMERICAS

HEARING

BEFORE THE

SUBCOMMITTEE ON 

THE WESTERN HEMISPHERE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS

SECOND SESSION

JUNE 7, 2018

Serial No. 115–136

Printed for the use of the Committee on Foreign Affairs

(

Available: http://www.foreignaffairs.house.gov/, http://docs.house.gov,

or http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

MO BROOKS, Alabama 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

ADAM KINZINGER, Illinois 

LEE M. ZELDIN, New York 

DANIEL M. DONOVAN, JR., New York 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

ANN WAGNER, Missouri 

BRIAN J. MAST, Florida 

FRANCIS ROONEY, Florida 

BRIAN K. FITZPATRICK, Pennsylvania 

THOMAS A. GARRETT, JR., Virginia 

JOHN R. CURTIS, Utah 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

KAREN BASS, California 

WILLIAM R. KEATING, Massachusetts 

DAVID N. CICILLINE, Rhode Island 

AMI BERA, California 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania 

DINA TITUS, Nevada 

NORMA J. TORRES, California 

BRADLEY SCOTT SCHNEIDER, Illinois 

THOMAS R. SUOZZI, New York 

ADRIANO ESPAILLAT, New York 

TED LIEU, California

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON THE WESTERN HEMISPHERE

PAUL COOK, CALIFORNIA, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

MICHAEL T. MCCAUL, Texas 

MO BROOKS, Alabama 

RON DESANTIS, Florida 

TED S. YOHO, Florida 

FRANCIS ROONEY, Florida 

ALBIO SIRES, New Jersey 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

NORMA J. TORRES, California 

ADRIANO ESPAILLAT, New York 

GREGORY W. MEEKS, New York 

(III)

C O N T E N T S 

Page

WITNESSES 

Mr. Eric Farnsworth, vice president, Americas Society/Council of the Americas ......................................................................................................................... 7

Mr. Neil Herrington, senior vice President for the Americas, U.S. Chamber 

of Commerce ......................................................................................................... 13

Ms. Kellie Meiman Hock, managing partner, McLarty Associates ..................... 30

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Paul Cook, a Representative in Congress from the State 

of California, and chairman, Subcommittee on the Western Hemisphere: 

Prepared statement .............................................................................................. 3

Mr. Eric Farnsworth: Prepared statement ............................................................ 10

Mr. Neil Herrington: Prepared statement ............................................................. 16

Ms. Kellie Meiman Hock: Prepared statement ..................................................... 33

APPENDIX 

Hearing notice .......................................................................................................... 56

Hearing minutes ...................................................................................................... 57

Written responses from Mr. Eric Farnsworth and Mr. Neil Herrington to 

questions submitted for the record by the Honorable Paul Cook .................... 58

(1)

ADVANCING U.S. BUSINESS INVESTMENT AND 

TRADE IN THE AMERICAS 

THURSDAY, JUNE 7, 2018

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON THE WESTERN HEMISPHERE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:19 p.m., in room 

2172, Rayburn House Office Building, Hon. Paul Cook (chairman 

of the subcommittee) presiding. 

Mr. COOK. A quorum being present, the subcommittee will come 

to order. 

I would like to now recognize myself for an opening statement. 

The Western Hemisphere possesses tremendous opportunities for 

further economic growth and U.S. business engagement. The 

United States already has significant economic interests in Latin 

America and the Caribbean and is the largest single source of foreign investment for many countries. 

We are also the top trading partner for most countries in the region and have free trade agreements with eleven countries and bilateral investment treaties and international investment agreements with 19 countries in the region. Yet we are seeing hedging 

in the region from some countries that don’t always play by the 

rules, which undermines U.S. economic interest. 

China has significantly increased its outreach to Latin America 

and the Caribbean, offering less stringent investment conditions 

and pledging $250 billion in investment over the next decade. However, it accounted for just 1.1 percent of foreign direct investment 

in Latin America and the Caribbean in 2016 compared with the 

United States investment of 20 percent. 

I am particularly interested in the future of U.S. economic engagement with the Pacific alliance countries of Chile, Colombia, 

Mexico, and Peru. These countries adhere to market-oriented policies, and taken together, they represent 39 percent of Latin America’s gross domestic product, offering U.S. businesses huge opportunities for greater investment in trade. 

Chile, Colombia, and Peru are among the world’s most open 

economies with almost no restrictions on foreign ownership. Half of 

the 32 economies in the region also implemented at least one regulatory reform in the last year alone, making it easier for the U.S. 

companies to do business. Notably, Argentina, Brazil, Colombia, 

and Mexico have made serious energy reforms, opening their sectors to investors, making it easier to do business. 

2

The Northern Triangle countries have also taken steps to attract 

foreign investment by creating special economic zones and working 

to integrate their markets. And the Caribbean, the Dominican Republic, and Jamaica took actions last year to improve their business climates as well. 

Ecuador now has new political leadership and has announced its 

intention to advance more market-oriented policies and address 

rule of law, press freedom, and regulatory framework issues. I 

think there is potential for change in Ecuador and—as Ecuador, El 

Salvador and Panama all use the U.S. dollar. 

American businesses have obviously some unique investment opportunities in the region. Colombia was recently invited to join the 

Organization for Economic Cooperation and Development, OECD, 

and other Latin American countries are interested in joining the 

OECD as well, which may motivate further reforms. 

While all these opportunities seem promising for the region, 

countries continue to face rampant corruption and impunity; high 

levels of crime and violence; inconsistent application of the law, 

with some laws and policies changing from week to week; burdensome regulatory frameworks; unclear tax structures; a lack of 

transparency and accountability in government processes; and central banking systems that make U.S. business investment difficult. 

Limited digitization and technological innovation, preferences for 

cash payments over credit, labor regulations and high levels of unemployment, and foreign restrictions on foreign equity ownership 

also increase U.S. investment challenges. 

I have heard from multiple U.S. companies who want to expand 

their presence, create more jobs in the region, which will lower migration to the United States and invest in communities where they 

operate. However, these investment challenges have made some 

U.S. businesses think twice about long-term investment. 

Presidential elections in Colombia, Mexico, and Brazil in the 

coming weeks and month may also shift political priorities, presenting additional obstacles to increased U.S. investment in the region and providing tremendous opportunities. 

I want to close by recalling the 57 points in the Lima Commitment that countries agreed to at the Summit of the Americas in 

April to reinforce democratic governance and anticorruption measures. It is my view that U.S. businesses play a critical role in raising standards in the region. 

And in my conversation with regional leaders at the summit, it 

was clear to me that countries see the United States as their partner of choice. I believe that our Government State Department 

could be doing more to advance U.S. business engagement in the 

Americas. And I look forward to hearing from our witnesses on 

these issues. 

With that, I will turn to our ranking member for his opening 

statements. 

[The prepared statement of Mr. Cook follows:]

3


30343d-1.eps

Chairman Paul Cook 

Opening Statement 

Page I ( L~o· Preparedjhr TJeli1·er·:v·J 

Foreign Affairs Committee's Subcommittee on the Western Hemisphere 

"Advancing U.S. Business investment and Trade in the Americas" 

Thursday, June 7, 2018 in Raybum Room2172 

The Western Hemisphere possesses tremendous opportunities for further economic 

growth and U.S. business engagement. The United States already has significant economic 

interests in Latin America and the Caribbean and is the largest single source of foreign 

investment for many countries. We are also the top trading partner for most countries in the 

region and have free trade agreements with II countries and bilateral investment treaties and 

international investment agreements with 19 countries in the region. Yet, we are seeing hedging 

in the region from some countries that don't always play by the rules, which undermines U.S. 

economic interests. China has significantly increased its outreach to Latin America and the 

Caribbean, offering less-stringent investment conditions and pledging $250 billion in investment 

over the next decade. However, it accounted for just 1.1 percent of foreign direct investment in 

Latin America and the Caribbean in 2016 compared with United States investment at 20 percent. 

1'm particularly interested in the future of U.S. economic engagement with the Pacific 

Alliance countries of Chile, Colombia, Mexico, and Peru. These countries adhere to marketoriented policies, and taken together, they represent 39 percent of Latin America's gross 

domestic product, offering U.S. businesses huge opportunities for greater investment and trade. 

Chile, Colombia, and Peru are among the world's most open economies with almost no 

restrictions on foreign ownership. Half of the 32 economies in the region also implemented at 

least one regulatory reform in the last year alone, making it easier for U.S. companies to do 
4


30343d-2.eps

Page 2 ( L~o· Preparedjhr TJeli1·er·:v·J 

business. Notably, Argentina, Brazil, Colombia, and Mexico have made serious energy reforms, 

opening their sectors to investors making it easier to do business. 

The Northern Triangle countries have also taken steps to attract foreign investment by 

creating special economic zones and working to integrate their markets. In the Caribbean, the 

Dominican Republic and Jamaica took actions last year to improve their business climates as 

well. Ecuador now has new political leadership and has announced its intention to advance more 

market-oriented policies and address rule of law, press freedom, and regulatory framework 

issues. I think there is potential for change in Ecuador, and as Ecuador, El Salvador and Panama 

all use the U.S. dollar, American businesses have some unique investment opportunities in the 

region. Colombia was recently invited to join the Organisation for Economic Co-operation and 

Development (OECD), and other Latin American countries are interested in joining the OECD as 

well, which may motivate further reforms. 

While all these opportunities seem promising for the region, countries continue to face 

rampant corruption and impunity; high levels of crime and violence; inconsistent application of 

the law (with some laws and policies changing from week to week); burdensome regulatory 

frameworks; unclear tax structures; a lack of transparency and accountability in government 

processes; and central banking systems that make U.S. business investment difilcult Limited 

digitization and technological innovation, preferences for cash payments over credit, labor 

regulations and higb levels of unemployment, and restrictions on foreign equity ownership also 

increase U.S. investment challenges. 

I've heard from multiple U.S. companies who want to expand their presence, create more 

jobs in the region (which would lower migration to the United States), and invest in communities 

where they operate. However, these investment challenges have made some U.S. businesses 
5


30343d-3.eps

Page 3 ( L~o· Preparedjhr TJeli1·er·:v·J 

think twice about long-term investment The presidential elections in Colombia, Mexico, and 

Brazil in the coming weeks and months may also shift political priorities, presenting additional 

obstacles to increased US. investment in the region or providing tremendous opportunities. 

I want to close by recalling the 57 points in the Lima Commitment that countries agreed 

to at the Summit of the Americas in April to reinforce democratic governance and anticorruption measures. It is my view that US. businesses play a critical role in raising standards in 

the region, and in my conversations with regional leaders at the Summit, it was clear to me that 

countries see the United States as their partner of choice. I believe that our government and the 

State Department could be doing more to advance US. business engagement in the Americas, 

and I look forward to hearing from our witnesses on these issues. With that, I turn to Ranking 

Member Sires for his opening remarks. 

### 
6

Mr. SIRES. Thank you, Mr. Chairman, for holding this important 

hearing, and thank you to all our witnesses for joining us today. 

Today, we are here to talk about opportunities and challenges for 

American businesses around the Western Hemisphere. I have long 

said that the U.S. can and should be doing more to enhance engagement with our friends in the Western Hemisphere. Deepening 

our economic ties is one of the best ways to improve relations, create jobs, and bring us closer to our neighbors. 

We should work together to make sure that the United States is 

the preferred partner of choice of our allies. A large part of that 

engagement is making sure that all companies invested in the 

hemisphere are playing by the same rules. Ensuring rule of law, 

consistency, and stability is key to having a climate that forces economic growth and creates jobs. 

American businesses can help strengthen democratic values by 

promoting best practices for labor rights, environmental standards, 

and transparency in financial management. That is just one of the 

reasons so many in the region have been working to promote 

anticorruption initiatives like the CICIG and the MACCIH around 

the region. 

These anticorruption efforts promote transparency and stability, 

two key ingredients to economic development. Unfortunately, we 

see politically motivated attacks against these efforts every day, 

weakening anticorruption institutions only to hinder economic 

growth and prevent job growth. 

It is this economic growth and security that can also tackle the 

root causes of migration, preventing families from fleeing their 

homes in dangerous conditions in search of a better life. Sadly, corruption and security issues aren’t the only obstacle to advancing 

U.S. investment and trade in the Americas. 

Both the rhetoric and the decisions made by the Trump administration are putting U.S. businesses and jobs at risk. Bombastic 

comments insulting our friends and allies does nothing but make 

U.S. seem like an untrustworthy partner. Imposing punishment 

tariff raises the cost of doing business for everyday Americans and 

drives uncertainty and instability. 

While China is investing billions and building inroads throughout Latin America, the President is busy punishing our friends to 

play to his political base. He is practically driving the rest of the 

world into the arms of the Chinese. At every turn, the President 

threatens to end agreements or blow up trade negotiations. This is 

no way to protect American jobs, American families, or American 

interests. 

I am eager to hear from the witnesses how they feel the administration’s recent actions and their impacts on U.S. businesses 

abroad. I look forward to hearing what Congress can do to promote 

American investment and best practices around the region. Thank 

you, and I yield back the balance of my time. 

Mr. COOK. Thank you, sir. 

Before I recognize you to provide your testimony, I am going to 

explain the lighting system in front of you. You each have 5 minutes to present your oral statement. When you begin, the light will 

turn green. When you have a minute left, the light will turn yellow. 

7

And when your time is expired, the light will turn red. I ask that 

you conclude your testimony once the red light comes on. 

By the way, I used to dream about strange things. Now I dream 

about these lights at night. And I am sure you do too after all the 

testimonies that you have done. 

Anyway, after our witnesses testify, members will have 5 minutes to ask questions. I urge my colleagues to stick to the 5-minute 

rule to ensure that all members get the opportunity to ask questions. 

Our first witness to testify will be Mr. Eric Farnsworth, the vice 

president of the Council of the Americas. Prior to this, Mr. 

Farnsworth worked at the U.S. Department of State, in the Office 

of the U.S. Trade Representative, and was appointed as the senior 

adviser to the White House Special Envoy for the Americas. 

Our second witness to testify is Mr. Neil Herrington, the senior 

vice president for the Americas at the U.S. Chamber of Commerce. 

Mr. Herrington also serves as executive vice president of the Association of American Chambers of Commerce in Latin America and 

the Caribbean, the acronym AACCLA. If you can pronounce that 

one, you get extra points. Prior to joining the chamber, Mr. 

Herrington worked at the State of California Office of Trade and 

Investment, the U.S. Trade Representative, Raytheon, and General 

Motors. 

And our last witness to testify will be Ms. Kellie Meiman Hock, 

a managing partner at McLarty Associates. Prior to this, Ms. Hock 

worked at the Office of U.S. Trade Representative, served as a Foreign Service officer with the U.S. Department of State. She is also 

a member of the Council on Foreign Relations and the Inter-American Dialogue. 

Mr. Farnsworth, you are now recognized. 

STATEMENT OF MR. ERIC FARNSWORTH, VICE PRESIDENT, 

AMERICAS SOCIETY/COUNCIL OF THE AMERICAS 

Mr. FARNSWORTH. Mr. Chairman, thank you very much. Good 

afternoon to you, Mr. Ranking Member, and members. And before 

I start with my testimony, may I congratulate you on your opening 

statements. Those were powerful, and we look forward to responding to some of the questions that you have put out there already. 

It is a privilege to appear before you again in this subcommittee. 

The news that the Trump administration has decided to move forward with steel and aluminum tariffs on Canada and Mexico, as 

well as Europe, with the possibility of additional future tariffs, coupled with cancellation of U.S. participation in the Trans-Pacific 

Partnership and an aggressive effort to reformulate and recast 

NAFTA have roiled hemispheric trade and economic relations. 

These actions have introduced a significant element of uncertainty into the trade and investment calculus, along with a normal 

and anticipated emerging market risks in Latin America and the 

Caribbean basin. And increasing uncertainty is, to be blunt, bad for 

business. 

As the United States retrenches, others are quick to fill the void 

with China in the lead. China would still be a major presence in 

the Americas, of course, as it is in other emerging markets globally, 

even under a more traditional U.S. approach to trade. But WashVerDate 0ct 09 2002 12:23 Jul 05, 2018 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\WORK\_WH\060718\30343 SHIRL
8

ington’s recent actions are accelerating preexisting trends. We may 

soon reach an inflection making impossible a return to the status 

quo ante. 

Within this framework, absent a policy shift, there are, nonetheless, any number of things that can be done to advance U.S. commercial interests in the hemisphere to the extent that we are inclined to prioritize them. The first is simply to be present. 

The Vice President’s announcement Monday that he will soon 

travel to the region for the third time in less than a year is very 

welcome news. And effective commercial diplomacy also requires 

that the United States have diplomats and senior officials in place 

to promote our interests day-to-day, including the Assistant Secretary of State for the Western Hemisphere. Personnel are policy, 

and it is difficult to have an effective policy or to advocate for U.S. 

business without strong people in place. 

Second, we should refrain from affirmatively taking steps that 

would actually reduce the regional U.S. business presence. A perfect example is the ongoing effort to excise investor State dispute 

settlement provisions within NAFTA, which would cause U.S. energy and other investors to reevaluate their investment plans going 

forward. 

Rule of law remains imperfect in Mexico, as it does across much 

of the region, and investors will be less likely to commit significant 

additional resources without greater judicial certainty. But Mexico’s hydrocarbon reserves will remain, thus opening the door wider 

to greater sectoral investment from China, Russia, and other extraregional actors. 

The same is true with other provisions being pushed by the 

United States in ongoing NAFTA negotiations, including dispute 

resolution, government procurement, and the 5-year sunset clause. 

Third, as the region develops alternatives to the United States, 

we have to contend more actively for regional commerce. Competition is fierce and we must, as a result, compete. But unless Washington is willing to engage with the region broadly on the basis of 

true partnership, we will lose ground to others with a different approach. 

I also believe that we need to get a better handle on how our 

scarce aid resources are spent. Indeed, we should increase rather 

than decrease foreign assistance, and we should use such assistance to prioritize trade facilitation and business climate reforms. 

Working with Latin American and Caribbean partners to address 

insufficient infrastructure, weak rule of law and anticorruption, inadequate workforce development, and deteriorating personal security, among others, would help create conditions attractive for 

greater U.S. commercial engagement and sales. 

Finally, we face a challenge from China and other nations who 

use development finance more effectively than current authorities 

allow the United States to do. We need to up our game in this area. 

Prompt passage of the bill to act, for example, establishing an enlarged and enhanced U.S. international development finance corporation would help address this, and there are other good ideas 

out there as well. 

9

Mr. Chairman and members, thank you again for the invitation 

to appear before you on the subcommittee today, and I look forward 

to having the opportunity to answer your questions. 

[The prepared statement of Mr. Farnsworth follows:]

10


30343a-1.eps

ADVANCING U.S. BUSINESS INVESTMENT AND TRADE IN THE AMERICAS 

HEARING BEFORE THE US. HOUSE OF REPRESENTATIVES 

COMMITTEE ON FOREIGN AFFAIRS 

SUBCOMMITTEE ON THE WESTERN HEMISPHERE 

JUNE 7, 2018 

ERIC FARNSWORTH 

VICE PRESIDENT 

COUNCIL OF THE AMERICAS 

***As Prepared for Delivery*** 

Good afternoon, Mr. Chairman, Mr. Ranking Member, and Members. It is a privilege to appear 

before you again. I am pleased to offer testimony on ways to advance US. business investment 

and trade interests in the Americas. Thank you for the opportunity to join this timely and 

important hearing. 

The Prevailing Circumstances of Hemispheric Trade and Investment Relations 

The news from last week that the Trump Administration has decided to move forward with steel 

and aluminum taritis on Canada and Mexico as well as Europe, with the possibility of additional 

future tariffs, coupled with cancellation of U S. participation in the Trans-Pacific Partnership and 

an aggressive effort to reformulate and recast NAFTA, have roiled hemispheric trade and 

economic relations. Where once the United States was unquestionably the leader in promoting 

open markets and investment climate reforms across the hemisphere, Washington has now 

become a disruptor. 

These actions have introduced a significant element of uncertainty into the trade and investment 

calculus along with normal and anticipated emerging market risks in Latin America and the 

Caribbean Basin. And increasing uncertainty is, to be blunt, bad for business. With rising costs, 

patterns of trade shift, including sourcing and fully integrated supply chains that drive 

production. Meanwhile, investments are delayed or not made at all, and productivity lags. 

As the United States retrenches, others are quick to fill the void, with China in the lead. China 

would still be a major presence in the Americas, of course, as it is in other emerging markets 

globally, even under a more traditional US approach to trade. But Washington's recent actions 

are accelerating pre-existing trends to the point where we may soon reach an inflection point 

making impossible a return to the status quo ante. This would be a selt~generated and 

unnecessary strategic setback for U.S. interests in the Western Hemisphere. 
11


30343a-2.eps

Specitic Near-Term Actions to Consider 

Within this framework, absent a policy shift, there are nonetheless any number of things that can 

be done to advance U.S. commercial interests in the hemisphere to the extent we are inclined to 

prioritize them. 

The first is to be present, and Vice President Pence's announcement Monday that he will soon 

travel for the third time to Latin America in less than a year is welcome news. We also applaud 

Secretary of State Mike Pompeo's presence at the OAS General Assembly this week and the 

leadership of UN Ambassador Nikki Haley on Venezuela. Such etl'orts must be sustained. 

Effective commercial diplomacy also requires that the United States have diplomats and senior 

officials in place to conduct day-to-day activities including the promotion of U.S. business. To 

name one example, we are just five months away from the mid-term elections and still have no 

Senate-confirmed Assistant Secretary of State for the Western Hemisphere, although I 

understand an outstanding candidate has been identified. Personnel are policy and it's difficult 

to have an effective policy without the right people in place to develop and implement it. 

Second, we should refrain from affirmatively taking steps that would actually reduce the U.S. 

investment presence in Latin America and the Caribbean. A perfect example is the ongoing 

effort to excise investor-state dispute settlement provisions from NAFTA, which would cause 

U.S. energy and other investors to re-evaluate their investment plans going forward, particularly 

if the incoming president of Mexico, whoever may be elected on July 1, seeks to rein in energy 

sector refonns implemented by the outgoing government. Rule of law remains imperfect in 

Mexico, as it does across much of the region, and investors will be less likely to commit 

significant additional resources without greater judicial certainty. But Mexico's hydrocarbon 

deposits will remain, thus opening the door wider to greater sectoral investment from China, 

Russia, and other extra-regional actors. The same is true with other provisions being pushed by 

the United States in ongoing NAFTA negotiations, including dispute resolution, government 

procurement, and a five-year sunset clause. 

Third, as the region develops alternatives to the United States, we have to contend more actively 

for regional commerce. No longer is the United States the only game in town, if we ever were. 

Competition is fierce, and we must, as a result, compete. It's one thing to promote the United 

States as a preferred partner for the region-and indeed I believe that that is the case-but 

partnership requires sensitivity to the needs of others and a search for mutually-rewarding 

solutions on issues that matter most to us and also to them. China understands this, even if 

execution is not always perfect. But unless Washington is willing to engage with the region on 

the basis of true partnership we will continue to lose ground to others with a different approach. 

A full push to return Venezuela to the democracy path is welcome, no doubt, but regional policy 

must also be based more broadly on seeking and consummating shared opportunity with regional 

partners and friends 

Finally, I believe that we need to get a better handle on how our scarce aid resources are spent. 

Indeed, we should increase rather than decrease foreign assistance. But no matter what levels of 

assistance are appropriated year to year, we should make every effort to prioritize trade 

facilitation and business climate reforms. Working with Latin American and Caribbean partners 

2 

Council of the Americas 

1615 LSt., NW 

Washington, DC 20036 

Ph: 202.659.8989 
12


30343a-3.eps

to address obstacles to U.S. trade and investment including insufficient infrastructure, weak rule 

oflaw, inadequate workforce development, and deteriorating personal security among others 

would go a long way to helping create conditions attractive for U.S. commercial engagement and 

sales. Over the past generation, the region took concrete steps to solidify the macro economy 

and, with the obvious exception of Venezuela and a handful of others, the region is far ahead of 

where it used to be. Nonetheless, inadequate efforts were made to reform the micro economy, 

which has proven to be the Achilles heel for regional development and where enhanced U.S. 

commercial diplomacy and assistance could usefully be directed. 

Improved Development Finance is Key to Competitiveness 

As well, we face a new challenge from China and other nations who are able to use development 

finance more effectively than current authorities allow the United States to do. U.S efforts are 

limited in size, scope, and a diffusion of authorities across too many agencies. This is a 

perennial issue, which the prompt passage and implementation of the BUILD Act establishing a 

full-service, self~sustaining U.S. International Development Finance Corporation would help to 

address. Without streamlined and enhanced development finance activities it will be 

increasingly difficult for the United States to compete effectively in Latin America and the 

Caribbean, and we should give attention to this matter as a priority. 

Mr. Chairman, thank you again for the invitation to appear before you and the Subcommittee 

today. I look forward to your questions. 

3 

Council of the Americas 

1615 LSt., NW 

Washington, DC 20036 

Ph: 202.659.8989 
13

Mr. COOK. Thank you very much. 

Mr. Herrington, you are now recognized. 

STATEMENT OF MR. NEIL HERRINGTON, SENIOR VICE PRESIDENT FOR THE AMERICAS, U.S. CHAMBER OF COMMERCE 

Mr. HERRINGTON. Mr. Chairman, thank you very much for the 

opportunity to be here today, Ranking Member Sires. I think I 

would echo Eric’s comments. I think you both framed our discussion today very, very well as we move this conversation forward. 

Among the multiple bilateral business councils and initiatives we 

operate, the chamber is proud to be home to the 50-year-old Association of American Chambers of Commerce of Latin America and 

the Caribbean, or ACCLA, that is the acronym. It is a mouthful. 

As we discuss ways to improve the economic climate in the 

Americas for U.S. investment, it is no exaggeration to say that 

ACCLA is its face. The 24 AmChams across the hemisphere that 

comprise ACCLA’s network boasts 20,000 member companies that 

collectively account for more than 80 percent of U.S. investment 

across the region. 

For years, ACCLA member companies have identified weak rule 

of law as the number one challenge facing U.S. companies doing 

business in the region. In response, the chamber has been at the 

forefront of promoting adherence to rule of law as key to government’s ability to increase investment in trade and help drive sustainable economic growth throughout the region. 

To bring greater attention to the importance of rule of law, 5 

years ago, the chamber’s Americas Program developed the Global 

Business Rule of Law Dashboard. What was once a regional initiative today covers 70 markets around the world and tracks five core 

factors critical to business success: Transparency, predictability, 

stability, accountability, and due process. 

We have found that where these factors are present, investment 

thrives, economies grow, jobs are created, and prosperity follows. 

Conversely, in markets where these factors are weak or absent, 

corruption thrives, informality reigns, investment dollars flee, and 

tax revenues plummet. 

In December, we published the third edition of the Global Business Rule of Law Dashboard, and one of its key findings was that 

the Americas region is lagging significantly behind, earning the 

lowest average score of any region in the world. 

In spite of this, there are reasons for optimism. The Odebrecht 

scandal, perhaps of its sheer audacity in scope, has had a silver lining. It has helped galvanize the attention of both the region’s leaders and citizens on the need for urgent action. Issues of impunity 

are being addressed as the Latin American political and business 

class are being held accountable for the first time in recent memory. 

As countries across the region carry out elections for new leaders, 

in 2018, we are also seeing hundreds of millions of citizens 

prioritize Canada’s commitments to rule of law. And just 2 months 

ago, at the Summit of the Americas in Lima, the region’s governments underscored the imperative of regional adherence to the rule 

of law by making democratic governance against corruption the 

14

overarching theme of the event, as you acknowledged, Mr. Chairman. 

The chamber was proud to be in Lima serving as the U.S. Secretary for the Americas Business Dialogue, or ABD, an initiative 

that seeks to advance a high-level public/private dialogue on regional economic development. 

Integral to this year’s efforts were recommendations that ABD 

put forward to the regional heads of state demonstrating the private sector’s commitment to promote transparency and integrity in 

business dealings throughout the region that included adoption of 

comprehensive corporate codes of conduct, regional implementation 

of good regulatory practices, and commitment to supporting permitting best practices certification for public officials. 

While developments like these are encouraging, they are only a 

start. Many challenges remain. We remain deeply concerned about 

Venezuela where Maduro’s tyrannical regime must be held accountable, as well as the growing crisis in Nicaragua, where the 

Ortega regime continues to flaunt the rule of law. 

Areas like the Northern Triangle of Central America remain 

plagued by violence, insecurity, corruption, and threats to democracy. In short, when it comes to strengthening hemispheric adherence to rule of law, the stakes for the U.S. and all countries in the 

region are enormous. 

Also imperative is the need for the U.S. to maintain its leadership in promoting a rules-based global trading system in our hemisphere that strengthens rule of law and provides a level playing 

field for American companies. We should not cede our leadership 

on trade in the region and instead need to expand our economic 

and commercial engagement. The stakes are too high to do otherwise. 

One need look no farther than Canada and Mexico, which are the 

two largest markets for U.S. exports that together support more 

than 14 million U.S. jobs. That is why the status of NAFTA negotiations is of such great concern to the chamber and our member 

companies, and we have been very vocal about that. 

Beyond the sheer enormity of the North American economic relationship, the outcome of NAFTA impacts U.S. policy across the 

Americas, which is home to 12 of the 20 FTA partner countries 

that the United States possesses and is a destination for close to 

45 percent of U.S. exports. 

Just like with rule of law, certainty in trade policy is key to success. We are facing uncertainty and potential division with allies 

at precisely the time when certainty and collaboration are required 

to confront a challenge to U.S. regional trade leadership from 

China. The chamber shares many of the administration’s concerns 

with China’s unfair trade practices and industrial policies. But that 

said, global, steel, and aluminum tariffs do little to address the real 

issue of China’s overcapacity. Instead, they risk alienating some of 

our strongest global allies at precisely the moment when a coordinated global strategy to counteract China’s trade and industrial 

policies is needed. The U.S. Government needs a robust strategy to 

help U.S. companies counter the growing economic influence in the 

region. 

15

With this, I thank you again. Mr. Chairman, Ranking Member, 

members of the committee, I thank you very much for the opportunity to appear here today, and I look forward to taking your 

questions. 

[The prepared statement of Mr. Herrington follows:]

16


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ON: Advancing U.S. Business Investment and Trade in 

the Americas 

TO: U.S. House Committee on Foreign Affairs, 

Subcommittee on the Western Hemisphere 

BY: Neil Herrington 

Senior Vice President, Americas 

U.S. Chamber of Commerce 

DATE: June 7, 2018 

1615 H Street NW I Washington, DC I 20062 

The Chamber's mission is to advance human progress through an economic, 

political and social system based on individual freedom, 

incentive, initiative, opportunity and responsibility. 
17


30343b-2.eps

The U.S. Chamber of Commerce is the world's largest business federation representing 

the interests of more than three million businesses of all sizes, sectors, and regions, as well as 

state and local chambers and industry associations. The Chamber is dedicated to promoting, 

protecting, and defending America's free enterprise system. 

More than 96% of Chamber member companies have fewer than 100 employees, and 

many of the nation's largest companies are also active members. We are therefore cognizant not 

only of the challenges facing smaller businesses, but also those facing the business community at 

large. 

Besides representing a cross-section of the American business community with respect to 

the number of employees, major classifications of American business-e.g., manufacturing, 

retailing, services, construction, wholesalers, and finance-are represented. The Chamber has 

membership in all 50 states. 

The Chamber's international reach is substantial as well. There are 117 American 

Chambers of Commerce (AmChams) abroad, 24 of these AmChams in 28 different countries, are 

members of the Chamber's Americas Program, and represent more than 20,000 companies and 

more than 80% of U.S. investment in the region. With councils in existence since 1976 and 

engagement with 32 countries in the region, the Americas Program has the breadth and depth to 

address the important trade and business issues and support long-term growth and development. 

In addition to the Am Chams, an increasing number of our members engage in the export 

and import of both goods and services and have ongoing investment activities. The Chamber 

favors strent,>thened international competitiveness and opposes artificial U.S. and foreign barriers 

to international business. 
18


30343b-3.eps

Thank you for this opportunity to testify on the issue of advancing U.S. business investment in 

the Americas. My name is Neil Herrington, and I am the Senior Vice President for the Americas 

at the U.S. Chamber of Commerce (the "Chamber"). 1 am pleased to be here on behalf of the 

Chamber to discuss advancing U.S. business investment and trade in the Western Hemisphere. 

Strategic Importance and Opportunities for the Americas 

The subcommittee's hearing on advancing U.S. trade and investment in the region is timely and 

important. I was just in Peru for the VIII Summit of the Americas and the III CEO Summit as 

part of the Chamber's delegation to this important meeting of regional government, private 

sector, and civil society leaders to foster public-private collaboration to promote investment, 

facilitate trade, and boost sustainable development across the hemisphere. 

The Summit of the Americas is one of the many reasons the spotlight is on the region, and it 

coincides with global investors taking note of bright spots where regional economies are 

introducing more market-friendly reforms. ln December, Argentina will host the G20, marking 

the first time a South American country will host this gathering of advanced economies. 

Under the leadership of President Mauricio Macri, Argentina is undertaking an ambitious 

economic refonn agenda, and seeking expanded commercial engagement with the United States. 

Similarly, there are positive signs in Ecuador, where President Lenin Moreno has distanced 

himself from his predecessor and the "2 P' Century Socialism" model of the past decade. 

Colombia is a nation that has emerged from conflict and committed to a path of economic 

development rooted in enhanced regional integration. The landmark reform that opened 

Mexico's oil and gas sector to foreign investment for the first time in nearly 80 years provides an 

opportunity for greater levels of trade with the United States as part of an increasing! y integrated 

North American energy market. 

The region overall is also showing signs of a modest rebound after years of contraction 

precipitated by the collapse of commodity prices beginning in 20I4. In its 2018 Macroeconomic 

Report for Latin America and the Caribbean, the Inter-American Development Bank forecasts 

the region will grow at an average rate of 2.6% for the years 20I 8-2020, with several markets 

projected to exceed 4.0%1 While this rate of growth may not match the turnaround in other 

regions, what happens here in the Western Hemisphere is significant for American business. As 

an example of this, in 2017 the United States traded more than $1.4 trillion dollars' worth of 

goods with the countries of our region. In so doing, the United States exported more than five 

times the goods to the countries of the Western Hemisphere than it did to China2 

This robust relationship is thanks in large part to the network of trade and investment agreements 

the U.S. enjoys with hemispheric partners that creates frameworks for commercial relationships, 

provides clear rules for investors, and encourages the adherence to market-oriented policies in 

partner countries. With I 2 of our 20 free trade agreement partners in the Americas, numerous 
19


30343b-4.eps

bilateral investment and tax treaty partners, and a Trade and Investment Framework Agreement 

(TIFA) with the Caribbean Community (CARICOM), it is little wonder that nearly half of all 

U.S. goods exports are bound for this region Thus, continued growth and development of sound 

economic policies across the hemisphere is paramount for U.S. workers, farmers, and businesses. 

This year, a record number of the hemisphere's citizens will also elect and inaugurate new 

leaders. lt is estimated that more than 350 million people, roughly 80% of Latin America's 

population, will vote in a presidential election, including in Brazil, Colombia, and Mexico. The 

results of these elections will have implications for the United States and the degree to which 

these governments remain open to greater U.S. business investment and trade. Similarly, unrest 

in Nicaragua and uncertainty surrounding what lies ahead in Venezuela's ongoing economic and 

humanitarian crises could adversely impact neighboring countries and derail regional economic 

ad van cement. 

It is in this environment that the Chamber, our bilateral business councils, and regional American 

Chambers of Commerce (Am Chams) work to deepen relationships and expand commercial ties 

across the hemisphere. 

Challenges to Advancing U.S. Trade and Investment 

Despite positive developments in the region, doing business in Latin America continues to 

present challenges to advancing trade and investment, and I would like to highlight four areas 

where obstacles exist. 

1. Rule of Law and the Needfor Legctl Certainty 

Few factors rival the rule of law when identifying critical factors in a company's ability to do 

business profitably and maintain a sustainable business model over time3 However, 

shortcomings related to rule of law are prevalent in many countries, diminishing legal certainty 

and hindering the influence and dynamism of the region in global trade. 

To help address these concerns, the Chamber established a Coalition for the Rule of Law in 

Global Markets, which articulated five essential factors necessary for businesses to make good 

investment and operating decisions, and thereby have a reasonable expectation of securing return 

on investment in any given market: 

I Transparency: Laws and regulations applied to business must be readily accessible 

and easily understood. 

2. Predictability: Laws and regulations must be applied in a logical and consistent 

manner regardless of time, place, or parties concerned. 

~Myron Brilliant, .. Good Business Demands Good Governance:· in 20/3 Jnde_'((?(Fconomic Freedom (The 

Heritage Foundation. 2013). 79-80. 
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30343b-5.eps

3. Stability: A government's rationale for the regulation of business must be cohesive 

over time, establishing an institutional consistency across administrations, and free from 

arbitrary or retroactive amendment 

4. Accountability: Investors must be confident that the law will be upheld and applied 

equally to government as well as private actors. 

5. Due Process: When disputes arise, they must be resolved in a fair, transparent, and 

predetennined process. 

We have found where these factors are present, investment thrives, economies grow, jobs are 

created, and prosperity follows. Conversely, in markets where these factors are weak or absent, 

corruption thrives, informality reigns, investment dollars flee, and tax revenues plummet This 

issue was so fundamental to our AmChams and companies operating in the region that we 

developed a Rule of Law Dashboard in 2013 to educate policymakers on the close relationship 

between adherence to the rule of law and the ability to attract investment Our December 2017 

publication, which now encompasses 72 markets, regrettably shows that the rule of law remains 

a significant challenge for companies operating in the Western Hemisphere as the Americas 

earned the lowest average score of any region 4 

Guatemala: Drawing on the results of the Dashboard, the Rule of Law Coalition designated 

Guatemala as a focus country for greater private sector engagement Currently, Guatemala is 

ranked 58 on the index, placing the country in the bottom third of the Dashboard report Given 

the long history of U.S. private sector collaboration with local partners on trade and investment 

to improve compliance standards and rule of law, the Coalition has engaged numerous partners, 

including the U.S. government and international organizations, to elevate the issues hindering 

greater progress in this area. The Coalition emphasizes the importance of Guatemala continuing 

to show progress in guaranteeing due process as a priority for investors. Part of the Coalition's 

work rests on highlighting the premium the business community places on the rule of law, 

particularly through the formalizing role of private sector actors with high compliance standards. 

Businesses play an under-recognized role in attracting other businesses and individual clients 

into the formal economy, and integrating the highest standards into formal supply chains. 

Venezuela: Nowhere is the challenge to the rule of law more acute than in Venezuela, which 

ranked 70 of 72 on the Business Rule of Law Dashboard. The Trump administration is 

considering additional sanctions against the regime of Venezuelan President Nicolas Maduro 

following what a majority of Organization of American States (OAS) members believe to have 

been a sham re-election last month. While an increasingly tyrannical Maduro regime and its 

repression of ordinary Venezuelans must not go unanswered, U.S. officials are correct to take a 

cautious approach to enacting additional sanctions that avoids harming U.S. economic interests 

and exacerbating the misery of the Venezuelan people. The Chamber and AACCLA continue to 

believe the United States should pursue multilateral sanctions in lieu of unilateral punitive action 

4 Coalition for U1e Rule of Lmv in Global!v1arkets. Unlocking Growth and J>ro!!Jperily, lhe Global Rule(?( Lt:M' and 

Business TJashhoard 2017. (U.S. Chamber of Commerce, 20 17): 7. 

https :1 /www.uschamber.com/sites/default/files/023 368 _ mleoflaw _report _fm pdf 
21


30343b-6.eps

that targets Venezuela's petroleum and petrochemical sector and could lead to unintended 

consequences such as: 

I. Worsening the country's profound economic and humanitarian crisis; 

2. Providing the Maduro regime with the ability to sustain its rule by casting the United 

States as an "imperialist" scapegoat for Venezuela's ills; and, 

3. Hanning U.S. workers and businesses even as these unilateral measures fail to achieve 

their intended objective. 5 

The Trump administration is to be commended for seeking to establish consensus among key 

allies in the region that are party to the Lima Group. Together with like-minded governments 

throughout the Americas, the European Union and beyond, the U.S. should consider applying 

targeted sanctions on hundreds of Maduro regime members. Coordinated international action to 

seize assets, limit financial transactions and/or restrict travel of every member of the regime's 

illegitimate 545-member constituent assembly and key regime members would inflict significant 

personal cost on the individuals propping up the regime while sparing both the long-suffering 

Venezuelan populace and U.S. businesses direct harm. 

2. Regulatory Frameworks 

Navigating the maze of divergent, unnecessarily burdensome, and poorly designed regulatory 

frameworks is a top challenge for multinational companies operating all over the world and often 

prevents small and medium-size businesses from entering new markets. These challenges are 

also present in the Americas, where the Chamber works to promote good regulatory design 

comprised of internationally recognized best practices. 

Data Privacy and Protection: Latin American countries are increasingly adopting new standards 

emulating European regulations since the EU's implementation of the General Data Protection 

Regulation (GDPR), which presents a fundamental shift in the protection of an individual's data 

and privacy. The EU is already exporting GDPR abroad, and many are pointing to it as the next 

global norm. For example, Brazil, Chile, Argentina, El Salvador, and Honduras are all currently 

using the GDPR as a template to create or update their privacy regulations. Through the lberoAmerican Data Protection Network's recent conference in Chile, other markets including 

Colombia, Mexico, Peru, and Uruguay have taken a cue from the European measure and are 

considering discussed next steps. 

The U.S. private sector opposes this approach as the policy is untested and there are significant 

concerns with implementation. Many countries want to adopt GDPR in order to ensure the EU 

deems them adequate, enabling data flows to and from the bloc. However, even if countries 

adapt their laws to be "GDPR-like," ditierences in culture, legal systems, and enforcement 

capabilities will ultimately create divergence. As more than 120 countries have data protection 

laws in place, the challenge now becomes ensuring interoperability and the movement of data 

between these differing privacy regimes. 

"'Jodi Hanson Bond, How to Help Venezuela Out r?(Crisis and Hmr Vot To, (U.S. Chamber of Commerce, 20 17). 

https://v..'\V\v.uschamber.com/series/above-the-fold/hmv-help-venezuela-out-crisis-and-hmv-not 
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30343b-7.eps

Like GDPR, many of these pending privacy regulations across Latin America include 

stipulations on international data transfers that could serve as significant barriers to digital 

trade. Not all of these regulations provide a list of countries whereby international data transfers 

are permitted. but those that do have not always included the United States as adequate to receive 

transfers. The shortcomings of such an 'adequacy' approach to privacy underscore the need for 

new, more ±lexible approaches to protecting privacy on a cross-border basis. 

While privacy regimes can create regulatory challenges that impede digital trade, the motives are 

not always easily discernable to label them as clear attempts to obfuscate trade commitments. 

Many countries have cited privacy concerns as the basis for requiring foreign companies to store 

data within national borders. Yet, as studies have shown, forcing data to be stored locally does 

not have any incremental impact on increasing privacy. Instead, such policies increase risks to 

privacy and security by requiring storage of data in a single centralized location that is more 

vulnerable to outside intrusion. In these instances, privacy regulations become forced 

localization requirements and a traditional "trade" type problem. 

Digital Economy: Latin America and the Caribbean is one of the fastest growing regions in terms 

of Internet adoption. In 2000, fewer than 5% of the region's population used the Internet. By 

2015, half the region was online. 

This growth presents tremendous opportunities for social and financial inclusion, digital services, 

and trade and economic growth in new and innovative ways as long as the right regulatory 

ecosystem is in place to support swift and secure movement of data. 

The ability to move data across borders and access information is arguably as important to an 

economy as the movement of capital. Virtually no company, regardless of sector, can do 

business, let alone export goods or services, without the ability to move data and access 

information across borders. Too many obstacles to data ±lows are being erected across the 

hemisphere. Without a steadfast commitment to keeping data ±lowing across geographic borders, 

the region puts its own global competitiveness and economic growth at risk. 

Many Latin American companies are increasingly looking to data localization and local content 

requirements in an effort to try to boost domestic competiveness. Requirements that force 

companies to manage, store, or otherwise process data locally, link market access or commercial 

benefits to investment in or use oflocal infrastructure and technology transfer are discriminatory 

in nature and draconian. They deter investment, delay innovation, and cut off consumers from 

the best digital products and services. Further, by protecting domestic champions, they illprepare them for competition outside of their home markets. Such efforts are often justified using 

economic development rationales that are shortsighted, unproductive, and ultimately serve to 

reinforce a path to dependency. 

Trade Facilitation: Antiquated, burdensome, complex, and costly customs procedures make it 

difficult for business to compete by slowing delivery times and raising transaction costs. Modern 

approaches to customs that address this problem by raising "de minimus" thresholds, providing 

more efficient infonnal clearance procedures for low value shipments, and streamlining customs 

procedures will support supply chains that increase economic competitiveness. 

7 
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Cybersecurity: Most governments in the region have, or have begun to develop, national 

cybersecurity strategies While it is positive that they take this step, not all approaches are 

created equal. An ill-conceived strategy that diverges from international standards and best 

practices can lower cybersecurity standards, while negatively affecting trade and investment. A 

risk management-based approach such as the National Institute of Standards & Technology 

(NlST) Cybersecurity Framework, meanwhile, enables companies to assess and address the 

cyber risks inherent to their business- raising levels of cybersecurity, without erecting non-tariff 

barriers. Of more immediate concern is the growing trend of governments incorporating noncyber related issues into national cyber strategies. Earlier this year, for example, the Central 

Bank of Brazil added data localization provisions to its proposed cybersecurity requirements for 

tlnancial institutions._ Governments around the world incorporating non-cyber related issues into 

their cyber strategies. Cyber strategies that incorporate issues such as data protection, control of 

online content, or national industrial policy distract and divert resources from the core objective 

and may create non-tariff barriers to trade. 

Energy: Mexico is one of the nations modernizing its regulatory frameworks in energy that 

merits attention. The most notable refonn has been the liberalization of Mexico's oil and gas 

sector. This sector was almost entirely closed to foreign investment until 2013, when President 

Pefta Nieto and Congress passed a comprehensive energy reform that ended the 75-year 

monopoly of state-owned Pemex. The reform spurred a wave of new investment in exploration 

and production, services, and infrastructure that continues to grow. Mexico needs this 

investment. An International Energy Agency report, which outlines various scenarios to 2040, 

notes that without implementing these reforms, Mexico's gross domestic product would fall by 

4% in 2040, resulting in a total cumulative loss of one trillion U.S. dollars in economic 

output. 6 U.S. companies will continue to play an important role in unleashing the country's 

energy potential to the benetlt of both nations, further cementing North America as an energy 

superpower. 

Similar changes have had a posltlve impact in Brazil, where the oil and gas industry is the 

country's most dynamic, owed in part to the numerous government measures undertal<en to 

attract investment. Brazil has opened up the market access to oil fields, introduced a mediumtenn schedule of bidding rounds, and adopted regulatory changes to minimize local content 

requirements. Reforms are positively benefiting U.S. company operations in Brazil as American 

business has considerably increased operations in the country during three rounds of auction. 

3, Tax Burdens 

The U.S. private sector confronts two types of taxation issues when doing business in the region: 

double taxation and tax refund delays. 

Double Taxation: Bilateral income tax treaties (BTTs) are another means of increasing legal 

certainty for U.S. investors with regard to the tax treatment of the activities in the U.S. and the 

partner country. While the U.S. has a number of tax treaties in force with regional markets, the 

0 .-'vfexico ·s Fnergy Outlook. World FnerKV Outlook Special Report, (Tntcrnntionnl Energy Agency, 20 16), 

https://www.iea.org/publications/fieepublications/publication/MexicoEnergyOutlook.pdf 
24


30343b-9.eps

support for the negotiation and implementation of additional agreements would help U.S. 

business advance investment and trade across the hemisphere. The BIT executed by the US. 

and Chile that is currently pending in the U.S. Senate remains a priority issue for Am Cham Chile 

and Chamber member companies operating in Chile. US. investors in Colombia have also 

sought greater tax protections and called for a bilateral tax treaty to incentivize greater crossborder economic activity in both markets and help diversify sources and areas of investment. 

Tax Refund Delays US. businesses operating across the hemisphere continue to face longstanding challenges in recouping refunds of Value Added Tax (VAT) and Alternative Minimum 

Tax (AMI) they are legally owed. A number of regional markets have instituted VAT collection 

via withholdings by credit and debit card processors. While these policies were well-intended to 

mitigate tax evasion, they have inadvertently resulted in an over-collection of VAT and 

potentially inaccurate reporting of government revenue. 

Similarly, some countries in the region have applied AMT rules in a way that essentially 

mandates a minimum taxable profit. The application of such tax frameworks banns local 

companies, runs contrary to local governments' goals of attracting U.S. and other foreign 

investment, and puts such investors in a position to request refunds from government institutions 

in the countries in which they operate. In some cases, there are well-defined mechanisms for 

requesting and issuing reimbursements, but this is not true in all countries. Furthennore, even 

where defined mechanisms exist, the delays in obtaining these refunds create significant cashflow pressures on American businesses. 

Tax refund issues are particularly notable in the Northern Triangle. For example, the Am Cham in 

Honduras reported in 2017 that the Government of Honduras owed more than $60 million in tax 

refunds to 49 local and U.S. companies, including seven U.S. companies that were owed more 

than $34 million. The Am Chams in El Salvador and Guatemala have similarly stated comparable 

amounts are owed to local and U.S. companies in their countries, and that requests for refunds 

are consistently met with unjustified delays or denials. While some of these laws are being 

updated, vigilance is required to ensure that all Northern Triangle governments establish and 

maintain refund policies supporting good corporate citizens like U.S. companies and setting 

powerful examples that help formalize and stimulate local economies. 

4. The Role of China in the Region 

While the trade and investment policies of the United States and our hemispheric partners have 

great impact on our ability to advance U.S. business investment and trade with the region, this 

subcommittee should not overlook the growing role of Chinese companies, often aided by the 

state, as competitors to the U.S. exporters and investors across the region. The UN's Economic 

Commission for Latin America and the Caribbean (ECLAC) estimates the region's trade with 

China increased more than 20 times between 2000 and 2013, skyrocketing during South 

America's commodities boom. These figures were recorded before President Xi Jinping 

ambitiously announced in 2015 that China would conduct $500 billion in trade within the region 

and pledged $250 billion of direct investment during the 2015-2019 period7 

-: Mcgha Ra_jagopalan, C'hina's Yi woos T.atin .1mertca 1rith $250 hill ion im·estment•;, (Reuters, January 7, 20 15), 

ltttp:II~JJJ.rsllxT]JJJ:U:: 

9 
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In a decade, China has surpassed the United States to become the largest trade partner of 

Argentina, Brazil, Chile, Peru, and Uruguay, with much of its focus on investing in natural 

resources and infrastructure projects associated with resource extraction. Nations across the 

Americas, like most other regions of the world, actively encourage foreign direct investment in 

their markets as a means to attract capital, market access, technology, and skills transfer. 

However, much of China's investment in the region has come in the form oflending for 

infrastructure through the China Development Bank and Export-Import Bank of China, often 

with limited transparency or requirement to adhere to investment standards. There is an ongoing 

risk for certain countries that should they become saddled with debt, they must repay China 

either by leasing the infrastructure back or through direct transfer of natural resources to China. 

With the regional expansion of its flagship economic development program, the "Belt and Road 

Initiative (BRI)" earlier this year, China's role in the region will become even more pronounced 

as it finances increased connectivity between China and the Americas through infrastructure and 

transportation construction efforts. China's use of one-sided, state-supported trade, investment 

and financial policies and practices are increasing the challenges for American businesses to 

compete with their Chinese competitors across the hemisphere. As Chamber President and CEO 

Thomas Donohue noted last month during the 9th China Business Conference, the Chamber is 

concerned about the impact of China's state capitalism that "tilts the playing field and distorts 

markets around the world." 8 

Public and Private Sector Collaboration to Strengthen the Investment Climate 

The Chamber is actively engaged with government leaders throughout the Americas to address 

the challenges that U.S. businesses face in the region. We carry out this work on a variety of 

fronts, including through our binational business councils that present policy recommendations 

to U.S. and partner governments as well as on a regional level through our partnership with the 

24 American Chambers of Commerce in Latin America and the Caribbean that make up 

AACCLA. 

I would like to highlight one of the Chamber's efforts to strengthen the business climate that 

exemplifies the power of public and private sector collaboration. Since the 2012 CEO Summit of 

the Americas, the U.S. Government and the U.S. Chamber have successfully partnered with the 

Inter-American Development Bank, to help build the Americas Business Dialogue (ABD), which 

aims to promote a high-level policy dialogue between the private and public sectors on the 

priorities, challenges, and opportunities for the region's development. 

The ABO network has over 80 business associations and chambers of commerce from 34 of the 

nations of the Americas. Through these organizations, more than 300 companies and major 

business associations from throughout the region, including global players and small exporters 

:-:Thomas J. Donohue, Interesting Times for the U.S-China Relationship, (U.S. Chamber of Commerce, May I, 

20 18). https:/ /v..'\V\V .uschamber.com/series/aboYe-the-fold/interesting-times-the-us-cl1ina-relationship 

10 
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and service providers, participate in working groups that made 42 recommendations intended to 

strengthen the hemisphere. 

Among the 42 recommendations in the ABO's 2018-2021 Action Plan for Growth in the 

Americas, the following seven priority actions that illustrate the private sector's commitment to 

promote transparency and integrity in the region: 

1. Ensure that comprehensive corporate codes of conduct are in place that include effective 

implementation and a periodic compliance review. 

2. Provide technical capacity building to support government implementation of a set of Good 

Regulatory Practices (GRPs), across the region. 

3. Deliver technical and financial assistance to support regional development and 

implementation of a permitting best practices certification. Ensure its availability to 

governments and public servants. 

4. Provide expertise, share best practices, and offer solutions in order to create policies that 

will expand the usage of digital payments in the region. 

5. Host capacity-building workshops with regulatory bodies on the latest developments on 

FinTech, cyber security, and anti-money laundering systems/techniques. 

6. Offer technical assistance and support implementation of pilot projects focused on Risk 

Management programs, Advanced Ruling Processes, and Single Window requirements and 

interoperability; these would position the region to be more competitive, facilitate trade and 

grow SMEs. 

7. Provide information on existing and future skills needs, highlighting the importance of 

ethical business conduct Offer a reliable pipeline of internship/apprenticeship 

opportunities in support of work-based training. 

The regional business community stands behind these recommendations and believes these 

cross-cutting priority actions will benefit investment in multiple sectors by addressing many of 

the challenges the Chamber is highlighting today. 

U.S. engagement- by both the U.S. government and the private sector- in regional partnerships 

such as the ABD will help promote U.S. investment and business principles and counter growing 

foreign competition in the Americas, in particular from countries that do not share the United 

States' commitment to global best practices and standards in the areas of transparency and anticorruption. 

Network of Free Trade Agreements Raises Regional Investment Standards 

One of the most effective ways to advance U.S. business investment and trade in the Americas to 

date has been the negotiation and implementation of free trade agreements (FTAs). Trade 

agreements open up foreign markets to U.S. exporters and reduce barriers for those exports, 

protect U.S. interests, enhance the rule of law, and strengthen their intellectual property regimes 

in order to enhance predictability in a myriad of sectors including agriculture, health, technology, 

and other innovative industries in the FTA partner country. 

II 
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The U.S. has FTAs in force with 20 countries, and 12 of those partners are in the Western 

Hemisphere: Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, 

Guatemala, Honduras, Mexico, Nicaragua, Panama, and Peru. Total trade in goods with 

countries in our region surpasses a trillion dollars. This regional network of FTAs powers 

economic growth in the U.S. and secures significant benefits for American businesses by 

enhancing market access to some of the world's fastest growing economies. However, concerns 

about the future of the North American Free Trade Agreement (NAFTA) and its impact on other 

trade agreements and negotiations are introducing uncertainty into the region. 

NAFTA: No trade agreement has proven more successful for the U.S. than the North American 

Free Trade Agreement (NAFTA). Trade with our two North American neighbors supports 

roughly 14 million U.S. jobs. Since NAFTA was enacted, U.S. trade with Canada and Mexico 

has quadrupled. The U.S. exported $341.7 billion and $276.7 billion worth of goods and 

services to Canada and Mexico, respectively, in 2017, making them the top two destinations in 

the world for U.S. exports. U.S. merchandise exports to Canada (population 36 million) have 

consistently been greater than or roughly the same as exports to the European Union (population 

over 500 million). In 2017, U.S. merchandise exports to Mexico (population 125 million) were 

nearly double those to China (population 1.4 billion)-the third largest national market for U.S. 

exports. 

The current negotiations to modernize NAFTA have the potential to bring the agreement into the 

21st century by taking account of technological, economic, and other changes in the U.S., North 

American, and global economies in recent years. For example, on digital commerce the 

negotiations provide an opportunity to create rules for finns in all sectors of the economy 

guaranteeing the freedom to move data across borders and prohibiting the forced localization of 

data. In the area of intellectual property, negotiators can work to secure strong protections for 

patents, copyrights and related rights, trademarks, designs, and trade secrets as well as strong 

enforcement tools. Other provisions relevant to trading in the 21st century include customs 

modernization, rules governing state-owned enterprise, competition policy, and regulatory and 

technical barriers to trade. 

It is also important to strengthen and maintain NAFTA provisions that have already yielded real 

benefits for Americans, including the agreement's rules on investment and procurement. 

NAFTA's procurement provisions ensure U.S. companies are able to compete on a level playing 

field when offering their goods and services to the Canadian and Mexican governments. Under 

NAFTA, the governments of Canada and Mexico also agreed to rules that guarantee U.S. 

investments will not be subject to discriminatory treatment and will be compensated in the 

unlikely event of expropriation. Critically, these obligations are enforced through the Chapter ll 

investor-state dispute settlement (ISDS) provisions, which provide for neutral arbiters to uphold 

these investment protections. In this regard, NAFTA should be modernized to ensure that all 

sectors, including financial services, as well as investment agreements are afforded the same 

level of protection and enforcement of these key protections. 

12 
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30343b-13.eps

Recommendations for Congressional Action 

There are a number of actions Congress can take to advance opportunltles for American 

businesses in the region. With external actors competing for int1uence in our hemisphere, the 

U.S. needs to find ways to expand our engagement with the region and demonstrate its 

leadership. Congress has a unique role in its oversight capacity to direct the interagency to take a 

more comprehensive approach to promoting U.S. economic interests abroad. 

The Chamber highlights the following recommendations for Congress to review and support 

• Restore Ex-Im Bank Operability: The Chamber has consistently called for the 

restoration of the U.S. Export-Import Bank to its full breadth of operations to counter the 

aggressive trade finance operations of other countries' export credit agencies, which will 

atiord U.S. companies to expand business in the region. 

• Support Promotion and Implementation of Bilateral Tax Treaties: We ask the 

Committee to support U.S industry efforts to secure bilateral tax treaties with key 

regional markets to eliminate needless additional costs for the U.S. business community. 

Reducing unnecessary burdens for American companies has direct benefits to the U.S. 

economy. 

• Support for Rule of Law Reforms in the Region: We recommend that the committee 

maintain support for regional governments as they continue in their efforts to comply 

with obligations under investment treaties with the United States, including the obligation 

to respect international arbitration awards in favor of American companies. 

• Strengthen the Congressional Caucuses/Parliamentary Unions: We encourage the 

Committee to continue outreach efforts with the hemisphere through the strengthening of 

country-specific caucuses, such as the Argentina, Brazil, and Mexico caucuses, as well as 

continued engagement through the parliamentary unions. 

• Expand support on U.S. Strategy for Engagement in Central America: Through 

initiatives, such as the Alliance for Prosperity, which impacts El Salvador, Guatemala, 

and Honduras, the Chamber encourages the Committee to call for further etl'orts from the 

U.S. Department of State to remain engaged on this issue and increase their outreach with 

the country-specific AmChams. These AmChams stand ready to assist in our quest to 

generate a virtuous circle of jobs and economic development in the Northern Triangle 

that can help deliver long-tenn prosperity and security to the deserving peoples and 

businesses of the region. 

• Expand the United States-Caribbean Strategic Engagement: The Chamber 

congratulates Congress on approving $4.3 million in funding to support energy 

diversification in the Caribbean and encourages Congress to continue to support the State 

Department, USAID, and OPIC as they explore opportunities in security and education 

throughout the Caribbean. 

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30343b-14.eps

Conclusion 

We look forward to working with the committee to advance a trade and investment agenda in the 

hemisphere and across the globe that supports the negotiation of trade and investment 

agreements that are fair and accountable, introduce legal certainty, and ensure a level playing 

field across the region capable of delivering meaningful opportunities for American workers, 

farmers and businesses. 

I~ 
30

Mr. COOK. Thank you, Mr. Herrington. 

Ms. Meiman Hock, you are now recognized. 

STATEMENT OF MS. KELLIE MEIMAN HOCK, MANAGING 

PARTNER, MCLARTY ASSOCIATES 

Ms. MEIMAN HOCK. Thank you so much. 

Mr. COOK. Did I pronounce that correctly? 

Ms. MEIMAN HOCK. In Spanish, yes, Meiman Hock, but in 

English, Meiman Hock. 

Mr. COOK. Anywhere in between so I don’t offend anybody? 

Ms. MEIMAN HOCK. It is all good. I answered it all. 

Thank you, Mr. Chairman, thank you, Ranking Member Sires 

and the rest of the distinguished members of the subcommittee for 

inviting me to testify here today. 

Economically, 14 million American jobs depend on trade with 

Canada and Mexico. By far, these are the largest export markets 

for the United States. Rather than offshoring to Asia, critical supply chains have remained in North Korea, enhancing our ability to 

compete. 

Keeping State, Commerce, and USTR fully funded in appreciation of the importance of commercial diplomacy is a strategic imperative, particularly for small- and medium-sized enterprises. Ensuring that U.S. companies from traditional manufacturing to agriculture to services to high-tech can access markets, are fairly treated, can compete effectively for government contracts, and have 

their intellectual property protected are key aspects of commercial 

diplomacy. 

The U.S. has long reinforced the need for transparency and commitment to rule of law. And countries’ desire to attract U.S. investment has often motivated economic reform. Membership in the 

WTO, achieving a free trade agreement, or OECD accession have 

provided further motivation to improve investment climate. 

However, we find ourselves at a moment today where U.S. credibility to speak on the importance of compliance with WTO and FTA 

commitments is at an all-time low. Positing that Canada, our longtime ally in conflict after conflict, creates a national security threat 

to the United States due to its steel and aluminum sales here, particularly if you consider that the United States has a $2 billion surplus with Canada on those same items, is nothing short of incredible. 

The equivalent charge against Mexico under section 232 is equally difficult to understand given our long history of collaboration on 

security, counternarcotics, and antiterrorism. The initiation of a 

national security investigation on autos last month further diminishes U.S. standing. 

This action opens the door for our trading partners to limit U.S. 

exports of virtually anything in the name of national security. 

Global concern over food security leaves U.S. farmers at risk, to say 

nothing of U.S. technology companies in an era of digital warfare. 

So, instead of successfully modernizing the NAFTA last week, 

the United States initiated a trade war, one which seems to have 

snatched the possibility of a successful NAFTA reboot from our 

grasp, at least for now. 

31

Mexican and Canadian retaliation are already in train. U.S. 

farmers, ranchers, and factories depend on exports to Canada and 

Mexico, and they will suffer. Beyond the impact on NAFTA, our actions have sent a stark signal that the United States is no longer 

a reliable partner. 

To be clear, concern over the misguided use of section 232 and 

unilateral trade actions should not be a partisan issue. If these 

were policies that actually helped the American farmer and worker 

succeed, you would see overwhelming support from both sides of 

the aisle. This is not the case. 

My concern is that the United States is damaging its ability to 

forge new commercial agreements and to enforce existing ones 

through this behavior. Should the President decide to withdraw 

from NAFTA, the U.S. Government’s ability to positively impact investor climate in the Americas will deteriorate further, leaving the 

field open for Chinese and other investors and further damaging 

U.S. credibility. 

I would argue forcefully for regaining that credibility with the 

U.S. Congress standing up against the policies that are leading to 

a deterioration of U.S. alliances. This is how we can rebuild our 

ability to defend U.S. economic interests. In the meantime, however, as the chairman noted, we may leverage OECD accession to 

pursue U.S. business goals in the hemisphere, given the high number of countries that are currently pursuing membership. 

The U.S. should insist applicants immediate the OECD’s high 

standards through enactment of needed reforms prior to granting 

accession. Some opportunities to do so, if I may say, were missed 

in Colombia’s case, given the haste to issue the OECD invitation 

in the waning weeks of the current administration. It will be important that we not repeat that mistake in the case of Argentina, 

Brazil, and Peru. 

In my written testimony, I covered priority areas to be evaluated 

in OECD accessions, including tax, customs, and regulatory policy, 

as well as rule of law considerations. I would highlight that, across 

the region, and as Neil noted, we find renewed zeal for tackling 

corruption. At the same time, overregulation and poor implementation of these efforts can inadvertently stifle enterprise and destroy 

the formalizing role of U.S. companies with high compliance standards. 

Central American countries are at a particularly critical moment 

in this anticorruption battle. My written testimony addresses some 

concerning activities in Guatemala despite progress being made 

there. U.S. and multilateral technical assistance is crucial to ensure collaboration with the private sector to expand formality and 

bring violators to justice. 

In closing, I would stress the critical role that the U.S. Government can and should play to promote a level playing field and rule 

of law throughout the Americas. I would urge this committee to 

take affirmative steps to persuade the Trump administration to put 

American farmers, ranchers, and workers first, dissuading the administration from taking further unilateral positions on trade and 

investment that prevent the United States from opening overseas 

markets and promoting rule of law in the Americas and beyond. 

32

I thank you again for the opportunity to testify, and I look forward to your questions. 

[The prepared statement of Ms. Meiman Hock follows:]

33


30343c-1.eps

"Advancing U.S. Business Investment and Trade in the Americas" 

Hearing Before the Subcommittee on the Western Hemisphere 

Committee on Foreign A±Iairs 

U.S. House of Representatives 

Thursday June 7, 2018 at 2 00 pm 

Written Testimony ofKellie Meiman Hock 

Managing Partner, McLarty Associates 
34


30343c-2.eps

Chairman of the Committee on Foreign Affairs Congressman Ed Royce, Chairman of the 

Subcommitee on the Western Hemisphere Congressman Paul Cook, and distinguished 

members of the Committee: 

Thank you for inviting me to testify at this hearing on advancing U.S. business interests in the 

Americas. From my service at the State Department and USTR to my current role collaborating 

closely with U.S. companies active throughout the hemisphere, I have worked this issue from 

various angles and applaud the Subcommittee for addressing this topic at this critical juncture. 

Commercial advocacy by the State and Commerce Departments, as well as USTR, can make the 

difference between success and failure for U.S. companies trying to expand internationally, 

particularly in the case of small/medium sized enterprises (SMEs ). These SMEs have been some 

of the biggest winners under the North America Free Trade Agreement (NAFTA). Canada and 

Mexico have become "test markets" for smaller U.S. companies seeking to go global one step at a 

time. Indeed, we have seen at our consulting firm, McLarty Associates, that as we have helped 

companies to internationalize the tirst step is almost always North America. 

Economically, fourteen million American jobs depend on trade with Canada and Mexico, by far 

the largest export markets for the United States. Our North American partners buy more than $600 

billion in U.S. manufactured goods every year, more than the next ten largest markets combined. 

Rather than offshoring to Asia, critical supply chains have been able to remain in North America, 

enhancing our country's ability to compete. U.S. services and technology companies found open 

markets in which to operate; indeed, the United States has a services surplus in North America of 

$88 billion. Comparing this strategy to that of nations like Brazil, where forced local content 

requirements and high taritis have ruled the day, making manufactured exports uncompetitive and 

local prices on items like autos and computers astronomical, the wisdom of creating a 

competitiveness zone in North America seems clear. 

Keeping State, Commerce, and USTR fully funded in appreciation of the importance of 

commercial diplomacy is a strategic imperative vis a vis U.S. interests in North America and the 

hemisphere. Ensuring that U.S. companies, from traditional manufacturing, to agriculture, to 

services and high-tech, can access markets, are fairly treated, can compete effectively for 

government contracts, and have their intellectual property protected are key aspects of commercial 

diplomacy. And we must protect America's cutting edge advanced manufacturing and technology 

jobs as much as we defend the more traditional sectors of the American economy. 

The U.S has long reinforced the need for transparency and commitment to rule of law, and 

countries' desire to attract U.S. investment often has motivated economic refonns. Membership in 

the World Trade Organization (WTO), achieving a free trade agreement (FTA), or OECD 

(Organization for Economic Cooperation and Development) accession have provided further 

motivation to improve investment climate. 

However, we tind ourselves at a moment where U.S. credibility to speak on the importance of 

compliance with WTO and FTA commitments is at an all-time low. Positing that Canada, our 

long-time ally in conflict after conflict, creates a national security threat to the United States due 

2 
35


30343c-3.eps

to its steel and aluminum sales to the United States -particularly when the United States has a 

bilateral trade surplus of $2 billion in these same products - is nothing short of incredible. The 

equivalent charge against Mexico under section 232 of the Trade Expansion Act of 1962 is equally 

difficult to understand in light of our long history of collaboration on security, counter-narcotics, 

and anti-terrorism efforts at the border. 

The initiation of a national security investigation on auto/parts imports last month- the first such 

investigation of a fully finished good under the Cold War inspired Trade Expansion Act of 1962 

- further diminishes US standing in the international trade and investment community. This 

action opens the door for our trading partners to limit US. exports of virtually anything in the 

name of national security. Global concern over food security leaves US. farmers and their exports 

particularly at risk, to say nothing of US. technology companies in an era of digital warfare. 

So instead of successfully modernizing the North American Free Trade Agreement (NAFTA) last 

week, the United States initiated a trade war- one which seems to have snatched the possibility 

of a successful NAFTA reboot from our grasp, at least for now. After a public comment period, 

Canada intends to impose retaliatory tariffs ofUS$12.8 billion on US. steel/aluminum tariffs as 

of July I, while the timing of pledged Mexican retaliation on steel, aluminum, agricultural, and 

consumer goods is expected to be July 5. US. factories dependent on exports to Canada and 

Mexico will immediately sutler. US farmers and ranchers, many of whom list Canada and 

Mexico as top export destinations, will get hit as welL Looking at the electoral map from the last 

election, it is hard to overlook that agricultural states in great measure supported the President 

In addition, North America's highly-integrated auto-sector supply chain, which has allowed the 

US. industry to compete effectively with global competitors for decades, is threatened by the most 

recent 232 filing on autos and auto parts. Beyond the impact on NAFTA, the US. failure to stick 

by our FTA partners in North America by opening a multi-front trade war sends a stark signal to 

all our hemispheric FTA partners that domestic political considerations outweigh treaty 

commitments. In other words, the United States is no longer a reliable partner. 

To be clear, concern over the misguided use of Section 232- in both the case of steel/aluminum 

and autos - is not a partisan issue. If these were policies that helped the American farmer and 

worker to succeed, you would see overwhelming support from both sides of the aisle -- not the 

case. Indeed, Republican leadership just last week reinforced the need to address the source of 

global overcapacity in steel and aluminum- China- not US. allies. My concern, pertinent to the 

topic of this hearing, is that the United States is damaging its ability to forge new commercial 

agreements and to enforce existing agreements through this behavior. Should the President decide 

to withdraw from NAFTA, the US Government's ability to positively impact investor climate in 

the Americas will deteriorate further, leaving the field open for Chinese and other investors. 

US. trading partners in the Americas look to the United States for leadership on trade and 

investment policy, technology, and transparency. Often, there are competing interests in-country, 

as local winners can benefit from relatively closed markets with non-transparent regulatory 

systems. Non-US. investors can also benefit from alack of transparency, freetrom FCPA (Foreign 

Corrupt Practices Act) constraints. U.S. engagement can support an environment where rule of 

law and liberalizing economic reforms can flourish, and where existing law, regulation, and policy 
36


30343c-4.eps

can be more consistently and transparently applied, to the benefit of US. investors. Unfortunately, 

in the current environment, the United States has waning credibility to promote this agenda using 

the WTO or our carefully constructed network ofFTAs as a vehicle. 

I would art,>ue forcefully for our regaining that credibility, with the US. Congress standing up 

against the policies that are leading to a deterioration of US. alliances. This is how we can regain 

our ability to defend US economic interests, deploying the institutions our country has 

championed and helped build in the post-World War II era. In the meantime, however, we may 

leverage the OECD to pursue US. business goals in the hemisphere, given the number of countries 

in the Americas pursuing membership. 

Latin American countries are increasingly interested in joining the OECD, with Mexico, Chile, 

and Colombia already full members and Costa Rica in formal accession talks. Argentina, Brazil, 

and Peru, among others, are also pressing to join this prestigious club, whose membership is like 

an institutional "Good Housekeeping Seal of Approval" for investors worldwide. The OECD 

accession process can and should be a vehicle for productive policy discussions with regards to 

tax and investment policy, intellectual property protection, regulatory transparency, and rule of 

law. In support of this objective, the U.S. should insist that applicants meet the OECD's high 

standards through enactment of needed reforms prior to granting accession. Using this leverage 

during the accession process is key. Some opportunities to do so were lost in Colombia's case, 

given the haste to issue the OECD invitation in the waning weeks of the current administration. It 

will be important not to repeat this mistake in the evaluation of Argentina, Brazil, and Peru. 

Many countries have put in hard work to better align their public policies with OECD standards 

and principles. Brazil has far to go on the road to accession but has been a partner to the OECD 

since 1996 when it joined its first OECD committee. While pending issues notably include tax 

policy, such as aligning Brazil's transfer pricing policies to OECD standards and simplifying the 

tax system, important strides have been made in recent years instituting structural reforms and 

combatting corruption. This clearly is a work in progress, but we hope and expect that Brazil's 

ongoing Car Wash investigation - now in its fourth year and still progressing given a strong 

institutional mandate and popular support - will mark a turning point in Brazil's battle against 

corruption and the culture of impunity that has enabled it to flourish for so long. 

In Argentina, President Mauricio Macri has led a gradual but significant political and economic 

transformation since taking office in December 2015. His handling of the recent currency crisis 

reflects responsible stewardship of the economy in an effort to prevent repeating Argentina's 

historic patterns of boom -and-bust economic cycles. Despite significant progress made by the 

Macri Administration, challenges to doing business in the country remain. While senior Argentine 

political leadership has instituted important market-oriented refonns, there is still homework to do 

to better align implementation of public policy at the bureaucratic level to OECD standards, 

especial! y with regards to taxation and customs valuation. 

This brings me to an important point. In recent years, we have seen a worrisome trend in several 

Latin American countries- including those aspiring to join the OECD- of tax authorities imposing 

steep tax assessments, penalties, and fines on companies in an apparent violation of OECD tax 

principles. Often the motivation is to try to compel domestic investment or close looming fiscal 

4 
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30343c-5.eps

deficits. And when improper tax assessments are valued in the hundreds of millions, and 

sometimes billions of dollars, the situation creates tremendous business uncertainty and can take 

years to resolve in the courts. 

Another topic relevant to OECD norms that has grown in importance is regulatory policy. The 

ability to successfully do business in- and trade with- countries is defined as much by a country's 

ret,>tilations, norms, and other technical requirements as by its laws. Transparency and 

inclusiveness in the consideration of regulations, rules, and other norms is critical to facilitating 

trade and creating an enabling environment for business. 

Unfortunately, across Latin America, there is an emerging tendency toward enacting ret,'lllatory 

updates and reforms in a less than transparent fashion. Throughout the region, we find numerous 

examples of rushed or no comment periods for significant ret,'lllations that impact stakeholders and 

overall market access conditions. This contradicts the precepts of the WTO, FTAs, and the OECD. 

Ensuring that relevant stakeholders have the opportunity to comment comprehensively before 

otiicial actions- be they called regulations, standards, norms, technical interpretations, etc. - are 

promulgated is critical to the success of any country's overall regulatory policy. 

Ensuring regulatory predictability and transparency is central to shaping a positive investment 

climate. Countries should be encouraged to partner with the U.S. Government and with U.S. 

companies in this effort. 

Across the region, renewed zeal for tacking corruption, informality, and weak rule oflaw is vitally 

important for fostering healthy economic development. At the same time, overregulation or poor 

implementation of the anticorruption drive can inadvertently stifle enterprise and destroy the 

formalizing role of U.S. companies with high compliance standards. 

While not OECD candidates, Central American countries are at a particularly critical moment in 

this anti-corruption battle. Despite recent progress in Guatemala, for example, U.S. companies 

remain concerned that the Public Ministry and Tax Administration do not always follow 

international best practices for due process, at times pursuing criminal measures to extract 

administrative settlements. In this regard, U.S. and multilateral technical assistance, including the 

important work of the International Commission Against Impunity, is crucial for ensuring 

collaboration with the private sector to expand formality and bring violators to justice. In 

Guatemala and elsewhere, authorities should be encouraged to recognize the critical role of the 

U.S. private sector in expanding formalization and strengthening rule oflaw. This helps to draw 

supply chains into formalization, making supply chains across the Americas more competitive and 

ethically sound. 

In closing, l would stress the critical role that the U.S. Government can and should play to promote 

a level playing field and rule of law throughout the Americas. I would urge this Committee to take 

affirmative steps to persuade the Trump Administration to put American farmers, ranchers and 

workers first, dissuading the Administration from taking unilateral positions on trade and 

investment policy that prevent the U.S. Government from opening overseas markets and 

promoting rule of law in the Americas and beyond. 

5 
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30343c-6.eps

Thank you again for the opportunity to testify today. I look forward to your questions. 

* 

6 
39

Mr. COOK. Thank you very much. 

What I am going to do now is I am going to yield myself 5 minutes to ask questions. 

By the way, Mr. Herrington, I don’t know if you know it or not, 

but I used to be involved with the chamber of commerce, and it was 

always difficult to raise money. And I don’t know if it is appropriate, if you want to sell raffle tickets for a copy of this hearing, 

that is something we used to do many years ago. But——

Mr. HERRINGTON. What are the rights on C-SPAN going for? 

Mr. COOK. Anyway, as I said, I will yield myself 5 minutes. 

And I want to raise an issue that I have been personally engaged 

on over the last several months. 

I have encouraged the Peruvian governor—or government to resolve the claims of many of my constituents who have invested in 

Peruvian agrarian reform bonds, commonly known as land bonds. 

This issue directly impacts a large pension plan in San Bernardino 

County and thousands of my constituents. 

It is my understanding that the Peruvian Government has suggested that it does not have an obligation to pay the debt now because it was issued over 50 years ago by a Communist regime, even 

though the Peruvian Supreme Court authorized the sale or transfer 

of these bonds on the secondary market and ruled in 2001 that the 

government must compensate bondholders in an amount equal to 

the current value. 

So are you aware of any precedent or tentative international law 

that would excuse a government from its responsibility to pay debt 

if it were issued over 50 years ago or if it were initially only given 

to Peruvians but later authorized for secondary sale? And I will 

throw it open to the panel. 

Ms. MEIMAN HOCK. Thank you, Mr. Chairman. I can take that 

question. 

You know, I am not a lawyer, but I did conduct trade negotiations at USTR, and I know that there are very clear investment obligations under our free trade agreement with Peru. I also understand that, in the case that you have noted, there are numerous 

court decisions stating the contrary to the position that you are 

saying that the Peruvian Government has put forward. 

And, I guess, I would harken back to my testimony and only urge 

that, in the consideration of OECD accession for Peru, which they 

are quite interested in, I understand, that this issue, as any issue 

that involves rule of law and transparency, be fully addressed before accession is taken place as opposed to after. 

Mr. COOK. Yeah. I hope you can see where I am coming on this 

because, you know, my opening speech I talked about how important it is, trade, this and that, and then overseas investment. And 

this kind of sends a signal that is completely contrary. And, obviously, since I represent San Bernardino County, as does my colleague, this is something that we get questions about, and we are 

concerned about. 

Anyone else want to comment on this? No? 

Okay. With that, I am going to yield—my time is expired. 

And the ranking member, you are now recognized. 

Mr. SIRES. Thank you, Mr. Chairman. 

40

You know, we have a very important election going on in Mexico. 

We have Lopez Obrador, who is up 20 to 25 points. He is more of 

a nationalist, and I think the fact that he is up 20, 25 points is 

a direct result of what—the rhetoric is coming out of the White 

House regarding trade, regarding people. 

I don’t know how—I just think it is not helpful. Once the election 

is over, how do you put this back together, because it is going to 

impact both countries. And China, to me, is just waiting in the 

wings. So it is just foolish to be at this place now. And it is nice 

to be a nationalist and beat up the United States, but then you 

have the rhetoric coming from both sides. So it is just a terrible situation. 

Can you talk a little bit about that? 

Mr. FARNSWORTH. Mr. Sires, thank you for that very important 

question. And, first, we have to see what the results actually are 

on July 1 before we declare the winner, but, yes, Mr. Lopez 

Obrador is ahead in the polls. And I think this would fundamentally change or potentially fundamentally change the relationship 

between the United States and Mexico. 

I would say that I think many, if not most, Mexican citizens will 

vote for President based on similar things that we might vote for 

in terms of their own economic conditions, their own security conditions, their hope for a better life for their families. But I agree with 

you that the rhetoric coming from north of the border is not helpful 

in that context, absolutely right. 

One of the things that has made over the years NAFTA so powerful is not just the fact that it ordered the majority of trade in 

North America investment, but it also created bumpers which allowed certain behaviors and beyond which certain behaviors were 

not allowed. 

And it was very powerful in the context in the 1990s, for example, when Mexico ran into trouble with its peso crisis. And some 

of the instincts of the political class in Mexico that would have 

closed down the Mexican economy, which would have been exactly 

counterproductive, were prevented by NAFTA. And Mexico’s economy remained open, and they came back to global capital markets 

much sooner than they had during the previous crisis in the 1980s. 

I am reviewing that history because NAFTA is precisely the tool 

that one would look to in this circumstance if Mr. Lopez Obrador 

or anybody is elected in Mexico who might take a different view in 

terms of Mexico’s relationship with the United States. The fact that 

we have a NAFTA that organizes trade and investment but also, 

in a general way, the bilateral relationship in a way that channels 

some of the conflicts into ways that can actually be resolved. 

I think it would be a strategic mistake, therefore, to pull out of 

NAFTA not just because it would hurt the United States economically but also because it would challenge our ability to keep that 

relationship with Mexico within the bounds that we might find mutually beneficial. 

So the question that you are raising, I think, is absolutely right, 

and I think we have to look at the tools that are available to us 

in the United States to help us build that relationship in a positive 

way and not pull back in a negative way. 

41

Mr. HERRINGTON. You have raised a key question, Ranking Member Sires, that not enough people are talking about. I think that 

the prospect of Lopez Obrador Presidency, as Eric said, you know, 

polling is polling, but it is something I think we are watching carefully, as the U.S. business community, in terms of what the candidate says about his commitments. 

At this point, you know, I think we are encouraged that, I think, 

his words on NAFTA have been relatively moderate. You know, a 

concern we have going forward is respect for ongoing reforms in 

Mexico in which many U.S. companies are deeply invested, specifically in telecommunications and energy. He has announced he will 

pursue a review process for that. We don’t know what that entails, 

but we are watching carefully and consulting with his advisers. 

I think in this space though in terms of—you ask an important 

question in terms of—and I think I want to answer this from the 

private sector role, you know, in terms of, irrespective of the two 

governments, we as a U.S. business community and the Mexican 

business community are 100 percent committed to this bilateral relationship. 

As my boss, Tom Donahue, said, in Mexico—sorry, excuse me, in 

Lima, in talking about the bilateral relationship, failure is not an 

option. It is a $500 billion a year bilateral trade balance. 

So we run the U.S./Mexico CEO dialogue in which we meet twice 

a year with CEOs and senior executives from a variety of companies to try and address the very issues in the bilateral relationship 

that are so imperative to keep the economic engine that is U.S./

Mexico trade going. 

Mr. SIRES. Thank you. My time is up. Thank you very much. 

Mr. COOK. Thank you very much. 

I would like to now recognize the gentleman from Florida, Mr. 

Rooney. 

Mr. ROONEY. Thank you, Mr. Chairman. 

I would like to ask for your help, all three of you, to the extent 

you can about a particularly egregious example of hostility to foreign direct investment in Guatemala and of judicial usurpation of 

the government’s desire to promote economic growth. Tahoe Resources has invested $1.7 billion in a mine in Guatemala, and some court down there has decided that the permits that 

it has are invalid due to indigenous people’s hostilities, something 

which I am used to with Panama Canal debates here years ago. 

This mine has had thousands of Guatemalan employees, and 

they have laid off a great number of them, and they are about to 

terminate 500 more right now. Even the Bank of Guatemala and 

Jimmy Morales are trying to get the court to act. I am going to call 

the court myself next week. 

We sent a letter, our committee, the chairman did to President 

Morales, both urging him to support CICIG and Ivan Velasquez’ 

work, as well as to implement the ILO conventions to give a more 

stable business environment and prevent bad things like this. So 

any advice you all might have, we would deeply appreciate. 

I would like to read this in the record, too, the chairman’s letter, 

if I could. 

Mr. COOK. So ordered. 

Ms. MEIMAN HOCK. Thank you so much, Congressman Rooney. 

42

I mentioned Guatemala briefly in my remarks. I think that that 

is definitely a country where we have seen repeated challenges 

with respect to rule of law. I do believe that there are some good 

intentions in the Guatemalan Government to try to advance on 

that score. 

But to your point, I think doubling down on both bilateral and 

multilateral efforts to do tech training and to really help our allies 

within the Guatemalan Government that see the benefit to addressing some of these challenges, we really need to build those 

folks up and give them the tools that they need to be sure that U.S. 

companies are able to favorably operate in the country and fairly, 

more importantly. 

Thank you. 

Mr. ROONEY. Thank you. Anybody else have any ideas? 

Eric, I figured you would have some good ideas of how we can 

straighten out the court. 

Mr. FARNSWORTH. Well, Ambassador Rooney, with a setup like 

that, I am not quite sure how to respond, but nonetheless, thank 

you for the question. 

I will confess to you that I am not familiar with the merits of 

this particular issue, but as you have requested, I will be happy to 

take a look at it and see if there are ideas that will be coming forward and be happy to share that with you and your staff. 

Mr. ROONEY. We would appreciate it, both you and the chamber 

because you all have important voices for business, so thank you 

very much. 

I yield. 

Mr. HERRINGTON. Oh. I am happy to answer that question, Congressman Rooney, if you want. 

Mr. ROONEY. Sure. 

Mr. HERRINGTON. So we wrote a later to President Morales last 

on this issue, in part and in general in covering the rule of law 

issues writ large in Guatemala but focused on this issue. I appreciated the letter that the committee sent to the chair and the ranking member’s letter also to the President. 

We have—you know, the ILO Convention 169 implementation in 

Guatemala, as the chair and the ranking member asserted, I think, 

is what we have really been pushing hard for on the Guatemalan 

Government. It is important. Really important within that is a—

obviously a full respect for indigenous rights is imperative, but that 

there be within the convention a very robust consultative process 

that the private sector is able to participate in. 

Mr. ROONEY. Thank you. 

Mr. COOK. Thank you, sir. 

I will now recognize the gentlewoman from California, Mrs. 

Torres. 

Mrs. TORRES. Thank you, Mr. Chairman. 

And thank you to our guests for being here, this very important 

issue that we are discussing today. 

You know, I agree with my colleague that, although over the 

years there have been some conflicts with indigenous populations 

within Latin America, certainly what has happened with the land 

bonds in Peru is just one example of how people were taken advantage of and then, ultimately, now the government is trying to make 

43

right, but at the same time our constituents were impacted by the 

sale of these junk bonds. I hope that we are able to bring some relief to the firefighters, police officers, and truckers that I represent 

that have been impacted by that. 

Mr. Herrington, because of those conflicts, I have been working 

on a bill here in Congress, Jobs for Tribes, which creates a unique 

opportunity for American Tribes to be able to work with indigenous 

populations of the Americas and trade in goods that they each either grow or make within their communities. What sort of opportunities do you see for Native American Tribes to invest in Latin 

America? 

Mr. HERRINGTON. I apologize for not being familiar with the merits of the bill. However, you know, I will say, at the chamber, we 

are all about investment and commercial promotion between the 

U.S. and across the region. And anecdotally, I can tell you there 

is some really innovative things going on in ecotourism and other 

initiatives in primarily indigenous areas of the Americas. 

While I am not a subject-matter expert at the chamber, we have 

a Native American affairs group that deals with Native American 

economic affairs, and we would be happy to come see you and talk 

about that. 

Mrs. TORRES. I would love to follow up with you on that issue. 

Mr. HERRINGTON. Okay. 

Mrs. TORRES. It is something that I have been working on very 

closely. It is a bipartisan bill. It has enjoyed, you know, bipartisan 

support. And I would like to see where we can find areas that we 

can work together to help create jobs, not only in these areas where 

we are seeing the most impact in our immigration system but also 

in areas of the U.S. where we have seen that there is lack of opportunities for jobs. 

So matching those together, I think, is important. USAID is investing in a lot of these communities. We have seen projects where 

we are eradicating coca, for example, and planting chocolate, cocoa. 

So how do we match those communities in South America, for example, the mining of silver and copper, and how can we match 

those indigenous communities with our Tribes here to create an environment of manufacturing of goods that could benefit, you know, 

both ends of the spectrum. So I do—would love to follow up with 

you on that issue. 

Ms. Meiman, regarding CICIG, how do you see the Government 

of Guatemala moving forward, from your job’s perspective? Because 

I know that it has had a major impact in U.S. companies that are 

investing there. How does U.S. companies—how are they able to 

compete fairly in a place where public corruption is rampant? 

Ms. MEIMAN HOCK. No, it is a real challenge, and I would say, 

and I comment in my remarks, that U.S. companies obviously hold 

themselves to a very high ethical standard. You know, we have got 

a CPA, but beyond that, we just have a culture in our private sector that, you know, inherently, when we do invest, when our companies invest in foreign markets, be it Guatemala or wherever, 

typically that does kind of raise the tide in that market just from 

a rule of law transparency perspective. 

One challenge that I have seen and that I think they are trying 

to grapple with in Guatemala right now is that being sure that, as 

44

large multinationals, U.S. multinationals, are doing business in 

some of these smaller markets, Central America, et cetera, that 

professionalizing impact that they have is appreciated and that it 

is allowed to flourish. 

Because often, you know, obviously, if you are going to operate 

in a country, you are going to do partnerships and deals and contracts with local players who sometimes won’t be at that same 

level. 

And so, as you are, you know, as a U.S. company, putting your 

hand down to kind of, you know, raise that level to what would be 

expected for a U.S. multinational, there needs to be some latitude 

there, not a lack of enforcement, not any sort of ethical flexibility, 

but I think that there needs to be a construct that allows that to 

happen without the U.S. company running a risk of getting 

blamed, if you will. 

And that is something I have seen, and it is something that I do 

worry about in the Central American context. But I do think again 

that it is something that, through the work that is being done bilaterally and multilaterally, it can definitely be addressed. Thank 

you for the question. 

Mrs. TORRES. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Mr. COOK. Thank you. 

I would like to now recognize the gentlewoman from Illinois, Ms. 

Kelly. 

Ms. KELLY. Thank you, Mr. Chairman. 

Given the tensions between our Nation and some of our neighbors with respect to increasing tariffs, this is such a timely and 

critical conversation. With respect to Canada, for example, President Trump has recently stated that Canadian steel and aluminum 

in Canada itself are now national security threats to the United 

States. 

I am very concerned because I represent a district which is 

urban, suburban, and rural, and it is home to numerous steel mills, 

farms, and service industry-based companies, which in turn employ 

hundreds of thousands of my constituents. 

I am concerned about the long-term employment and economic 

implications of imposing higher tariffs. There are reports upwards 

of 400,000 jobs would be lost across agricultural services and manufacturing and energy sectors if these tariffs are imposed. 

The question for any of you to address, do you believe, as the 

President said, that Canada poses a national security risk to the 

United States? And do you agree with President Trudeau that 

President Trump’s starting of a trade war with Canada is actually 

insulting? 

Mr. FARNSWORTH. Congresswoman Kelly, if I can begin the dialogue here, in part because I am originally from Illinois and so——

Ms. KELLY. Good. You know what I think. 

Mr. FARNSWORTH [continuing]. I wanted to have an opportunity 

to respond to your question. Yeah, exactly. But thank you for that 

important question. 

In a word, no, Canada is not a national security threat to the 

United States. Canada is a strategic ally of the United States. Canada is a country with which we have trade disputes and have had 

45

trade disputes for years because our economy is fully integrated 

with Canada, and the more integrated you are the more disputes 

you are naturally going to have. 

But what makes the relationship with Canada so strong is that 

we share values, including the rule of law. And so when we enter 

into trade disputes we have a process by which we can resolve 

them. And what the recent actions have done is gone outside of 

that process and begun to take unilateral actions in a way that, 

from my perspective, are unhelpful to the broader bilateral relationship. That is one side. 

But the other side that you have pointed to quite accurately, in 

my view, is what will be the impact on the U.S. economy. Canada 

and strategic relations and NATO and border cooperation and all 

that in one basket; but the other basket, what is it going to mean 

for the United States and job creation in the United States? 

And I am very sensitive to the idea that people in some parts of 

our country are hurting, and they do have questions about sustainability of jobs and industry, and that is a powerful and important 

issue, and we cannot ignore it. And I know that the members of 

this subcommittee do not. 

But from my perspective, the way to address that is not to favor 

one or another sector that will have the implication of 

disadvantaging other sectors and where the negative implications 

of the action will actually be greater than the positive implications. 

And so there is a cost-benefit analysis. There is a balance, in my 

view, that has to be struck. And I think you are pointing to something that is very, very important. 

Having said that, even if we were to pull back from the determination that was recently made that Canada is a strategic or national security threat, I should say, to the United States, we are 

doing damage to our relationship. And it is not going to be easy to 

restore that, even if today we were to decide that, in fact, Canada 

is not a national security threat to the United States, which it is 

not. 

But my point is that as these bricks in the wall begin to build 

up, you begin to have an understanding from other countries that, 

in fact, they are questioning the reliability of the United States as 

a partner. And once that happens, they begin to look for other partners, and we are seeing that happen right now in Latin America 

and right now in Canada. 

And the whole idea that China could replace the United States 

as a partner of choice in Latin America, to me, is astounding and, 

in my view, not accurate but nonetheless something that is absolutely happening right now. 

Ms. KELLY. Thank you. I just wanted to, if you guys had comments and, as you are commenting, to think about this, how do you 

think these actions impact—I might have missed—you might have 

said it already, the NAFTA negotiations. That is the other piece. 

Ms. MEIMAN HOCK. It absolutely puts a chill on the NAFTA negotiations. And beyond that, to have the one-two punch of then initiating another 232 national security investigation on autos, which 

in the history of not just the 232 statute, which comes from the 

Trade Expansion Act of 1962, but even going back to the national 

security exception in the GATT’s post World War II time era, we 

46

have never done a 232 national security case on a completely finished good like autos in the history of the trade policy of this country. 

And so to call our good allies—which if you buy into the argument that deficits matter, which I personally do not, but this administration does, we even have a $2 billion trade surplus, as I 

said, with Canada on these items. And then you extrapolate that 

into an item such as automobiles, which I think very clearly—and 

I will be fascinated to see the position of Secretary Mattis on this 

regard because he will have to weigh in, you know, I think that, 

at that point, we really are damaging our credibility as a negotiating partner to the extent that it is going to be very difficult to 

recuperate. 

Ms. KELLY. Yeah. Ford is my biggest employer. 

Mr. HERRINGTON. Yeah. You have the Chicago Assembly Plant, 

I believe, in your district? 

Ms. KELLY. What? 

Mr. HERRINGTON. You have the Chicago Assembly Plant in your 

district? Two. 

So, on that note, and Kellie gave me the perfect segue, so if I 

could quote Tom Donahue on 232 for—now, this is obviously for 

autos and auto parts, the announcement of the commencement of 

a study. But I think he would okay me by saying the same 

thing——

Mr. COOK. Sir, your time is expired. Thank you. 

I would like to now recognize the gentleman from New Jersey. 

Mr. SMITH. Thank you, Chairman Cook, and appreciate you holding this very important hearing, and Ranking Member Sires. 

I am chairing my own hearing so I can’t stay. It is on Vietnam 

human rights. 

With respect to Ecuador, I am concerned that American companies have often been treated unfairly by the Ecuadoran judicial system. For example, in the case of Merck, a U.S. pharmaceutical company, I understand there is a partial final award of the international arbitral tribunal that ruled Merck has been denied justice 

in the Ecuadorian legal system. 

I wonder if you could tell us, any of our distinguished witnesses, 

what actions are being taken in Ecuador to ensure that the word 

of the arbitral tribunal is respected by the Ecuadoran judicial system and that no further steps are taken locally to enforce the justice denying rulings of the Ecuadoran courts? Mr. Herrington. 

Mr. HERRINGTON. Yeah, I am happy to address that, Congressman. 

You know, the legacy of the Correa regime, the previous regime 

in Ecuador, is troubling so say the least. There were very few protections for rule of law. Certainly many of our members, Merck 

being certainly one of them, were challenged deeply by some of the 

policies of that regime. 

I would say that we are quite encouraged, frankly—and I know 

that the staff, the committee’s staff took a trip to Ecuador last 

week, so I am interested in their thoughts eventually too after the 

hearing. We are encouraged with the steps, the commitments that 

President Lenin Moreno, the new President, has made in the areas 

of investor protections. 

47

They have—Ecuador has certainly embraced the fact that its foreign direct investment is a key source of economic development. 

That is what we are seeing initially. But there is a long way to go. 

He has got a lot of legacy issues to clear up. 

The arbitration issue that I think you accurately put your finger 

on is absolutely essential that if they are going to show progress 

and show that they are serious about making Ecuador a more attractive destination for foreign investment, that would be an excellent next step to take. 

Mr. SMITH. I appreciate that. 

Anyone else? 

Mr. FARNSWORTH. Mr. Chairman, if I could just add very, very 

briefly, I concur that Ecuador is taking some very interesting under 

the new steps government, and we applaud that. 

In this particular case, I think there is room for the United 

States to encourage Ecuador to live up to the terms of the bilateral 

investment treaty that Ecuador has with the United States and to 

live up to any sort of arbitral awards that may be made under that 

treaty. I think that is something that we would encourage frankly 

across the region. Once companies enter into arbitration with host 

governments, if there are judgments made, judgments need to be 

respected. 

Mr. SMITH. I appreciate that very much, and thank you for your 

answers and for your advocacy. I yield back. 

Mr. COOK. Thank you very much, Congressman Smith. 

I am now going to turn it back to Congressman Sires. We had 

some time. I was trying to include this, do the balancing act. So 

I recognize the ranking member. 

Mr. SIRES. Thank you, Mr. Chairman. 

Mr. Herrington, can you just finish what you were—and I will 

ask you the question afterwards. 

Thank you, Chairman. 

Mr. HERRINGTON. I have to read back because I am going to 

quote my boss, so I better get it right. I think it is important to 

talk to, on section 232, this is specific to autos and the auto parts. 

Obviously, the announcement that the Department of Commerce 

would commence a study on applying 232 also to autos and auto 

parts. 

My boss said just last week, to your question, Congresswoman: 

This isn’t about national security. The administration has already 

signaled its true objective is to leverage this tariff threat in trade 

negotiations with Mexico, Canada, Japan, the European Union, 

and South Korea. These allies provide nearly all U.S. auto imports 

and are among America’s closest partners. Neither they nor these 

imports endanger our national security in any way. 

So I think that speaks for itself. 

Mr. SIRES. You know, my office—I am from New Jersey. I get a 

lot of pharmaceutical companies in my office constantly complaining about Canada. So one of the things that I was happy 

about is at least we are raising the issue that there are some differences or discrepancies. 

You know, where do you see, when they negotiate this NAFTA, 

that the pharmaceutical industry fits in? Because it is hurting New 

Jersey. And if the President can include that in his negotiations, 

48

I think the pharmaceutical industry in New Jersey would appreciate what the Canadians are doing. You might want to say a couple of things to the Canadians. 

Ms. MEIMAN HOCK. Maybe I will just start quickly, if I may, 

Ranking Member Sires. I think—I have participated in a number 

of the NAFTA rounds, and I know there hasn’t been a round for 

a while. But, you know, back when there was, the U.S. would try 

to raise intellectual property, would try to raise market access. 

And the response, I think somewhat understandably, from Mexico and Canada was, why would we want to talk about intellectual 

property? That is something that is important to you, United 

States of America, when you have on the table a removal of investor-state dispute settlement, a government procurement policy that 

goes against our interests, counter seasonal, AD/CVD, sunset 

clause, all of the, as they are called, poison pill provisions that the 

United States has had on the table have really prevented us as a 

country, prevented our negotiators from getting to those items, like 

intellectual property rights protection, that are very much in the 

U.S. interest. 

Mr. SIRES. It sounds like an excuse to me. 

Ms. MEIMAN HOCK. It is, you know—it is an excuse that is too 

easy for them to make, I guess, would be my concern, you know? 

Mr. SIRES. Yeah, that is what I think. 

Mr. Herrington. 

Mr. HERRINGTON. Yes. Thank you, Ranking Member Sires. 

To your point, Canada does not have IP standards commensurate 

with its status as a developed economy nor as a hub of innovation, 

which it is. And its standards need to be certainly heightened because of that. 

I think NAFTA—I think Kellie touched on a lot of the core here 

that we have these opportunities in the NAFTA space for offensive 

interest. And this is truly—along with a few other areas in the bilateral U.S./Canadian relationship, including dairy issues—some 

folks have certainly issues with the way Canada operates its dairy 

market—that the U.S. has legitimate offensive interests that are, 

frankly, being held hostage to these very unconventional proposals 

that the U.S. has put forward in government procurement, the sunset clause, the dispute resolution, suite of chapters 11, 19, and 20, 

et cetera, the rules of origin, obviously. So I would just leave it 

right there that the IP chapter actually hasn’t really even been put 

on the table because of these issues. 

Mr. SIRES. I have 52 seconds. 

Mr. FARNSWORTH. I won’t take that long. But if you bring the 

lens out a little bit further, one of the most powerful ways to help 

the United States address some of the legitimate concerns with 

China on intellectual property is to have a unified North America, 

and that is what NAFTA would allow us to do. If we were to come 

to agreement on intellectual property, as well as the other issues 

we have been talking about, that would give us a far wider and 

deeper platform from which to address some of the issues that we 

face with China. 

Mr. SIRES. Thank you, Mr. Chairman, for the extra time. 

Mr. COOK. At this time, I would like to recognize the gentleman 

from Florida, Mr. Yoho. 

49

Mr. YOHO. Thank you, Mr. Chairman. I apologize for being late. 

Thank you for being here and for your testimony. I chair the 

Asia and the Pacific Subcommittee on Foreign Affairs, along with 

being on this one, and I just find our relationships in the Western 

Hemisphere, we need to increase, and we need to show a strong 

force coming out of the United States—business, security, all those 

things. And I know the chairman here, he focuses on the same 

things we do. 

We want economics, trade, national security issues. And I think 

it is imperative that we work through these committees to generate 

policies that make us stronger for our allies and our relationships. 

And we introduced the BUILD Act, which as you know, I heard you 

talk about OPIC and how important and valuable that tool is. Well, 

with the BUILD Act, what we have done is we have expanded the 

lending capacity up from $23 billion up to $60 billion. In addition, 

we can partner up with private enterprises and work and leverage 

that capital that they have, along with the expertise they have. 

And we can lend in foreign currency, which we weren’t able to do 

before, and then we can partner up with foreign countries. 

How do you feel that we can best utilize a vehicle like that to 

build projects in these countries? Mr. Farnsworth, if you want to 

try to tackle that. 

Mr. FARNSWORTH. Yes, sir. And I appreciate both the opportunity 

to respond and also your and other leadership on this important 

act. I think it is a very important recognition that other countries 

are using tools, particularly in the Western Hemisphere, which we 

simply don’t have——

Mr. YOHO. Right. 

Mr. FARNSWORTH [continuing]. And we want to increase our authorities to be able to do that. One of the key areas that Latin 

America and the Caribbean needs and where the United States has 

great expertise is in infrastructure, and yet we have been losing 

this battle in some ways to China because China has a tool that 

we have not been able to mobilize in the same way, and that is development finance. 

China comes not just with projects, but they come with the finance to be able to do the projects. OPIC has been a successful 

agency, in my view, but it has been limited. It is small and its authorities are limited. So what the BUILD Act does is it expands 

that, gives us the ability to compete more effectively with the 

China bag of money, if you want to put it that way. 

What is important about that aspect is not simply though the 

commercial aspect. If you talk to many regional leaders and business people, they would prefer a relationship—they would prefer 

the investment from the United States because of management, because of quality, because of technology, because of anti-corruption, 

things that they are not necessarily getting from China. But if 

China is the only game in town, they have to be the partner, not 

the preferred partner; they are the only partner. So this gives us 

an opportunity to get back in the game, and I want to simply acknowledge that and say that this could be a very important tool if 

the Congress passes it soon. 

Mr. YOHO. I appreciate that. 

Mr. Herrington, do you want to weigh in on that? 

50

Mr. HERRINGTON. Absolutely. Thank you, Congressman Yoho. 

I think the U.S. Chamber is a big supporter of this bill. I think 

we have advocated—one of the things we have advocated in my 

written testimony is for an all—an inclusive, all of U.S. Government approach to supporting our exporters and our companies that 

do business in the region. 

I think that this is what the BUILD Act does, and I commend 

you and others who were involved in that. And the best part about 

this is it is a free service to U.S. taxpayers, right to companies. 

And I think that a key issue we are talking about today is Chinese 

influence in the region. And one of the ways that China is able to 

successfully insert itself into our region is through basically a 

state-owned enterprise financing—State financing. And our companies and can no longer fight with one arm tied behind their back. 

So I commend you for advancing this legislation. 

Mr. YOHO. Well, I appreciate it. Ms. Hock, do you have anything 

to add? 

Ms. MEIMAN HOCK. It might be a bit off topic since it is OPIC, 

but just to endorse also returning Ex-Im to full functionality, that 

is something that we are seeing again and again, coming up 

against Chinese development banks, finance, et cetera. 

Mr. YOHO. Right. That was the whole purpose of doing this because we had to have something to counter that, and if we are not 

leading in that area, and if we can’t complete, there is a vacuum 

created. And nature abhors a vacuum, and that gets filled by somebody. And we want to make sure it is somebody that values what 

we do, and with the Western Hemisphere, we want to make sure 

that there are people that are going to promote democracies and, 

you know, the values that we do. And so we felt this was a very 

important issue to do. 

One last thing on energy, we are blessed with an abundance of 

energy in the United States of America, and we are exporting now. 

And we have got bills on the floor to increase the amount of LNG. 

And this is something we feel very critical to send down to the 

Western Hemisphere, to the Caribbean basin, and have it as an alternative to number two diesel coming out after Venezuela, which 

is not a friendly regime. 

Mr. Chairman, I am over my time, and I am going to yield back 

and tell you I appreciate it. But that is what we are working on. 

And thank you. 

Mr. COOK. Thank you very much. We are joined by two more 

members from New York. They were late. They were watching reruns of the Mets and the Yankees. I understand their priorities, 

but right now, I am going to recognize the gentleman from New 

York, Mr. Espaillat. 

Mr. ESPAILLAT. Thank you, Chairman Cook. 

The world looks different from up here. I am usually down there, 

the southern part of the hemisphere. But thank you for what you 

have contributed to this debate, and I also want to ask some questions about China. And the Secretary of State was here last week, 

and I told him, you know: They are eating our candy in Latin 

America and the Caribbean; there is a vacuum of leadership there. 

And, of course, China has come in, and you have begun to see companies break from Taiwan. The most recent, the Dominican RepubVerDate 0ct 09 2002 12:23 Jul 05, 2018 Jkt 000000 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 F:\WORK\_WH\060718\30343 SHIRL
51

lican a couple weeks ago. And China is coming into the hemisphere, and they are coming in to do public projects and roads and 

bridges and loans and investment. And, you know, there is a strong 

push to replace us as a main partner, even though they are so far 

away, yet politically, they are—it is a whole different continent, but 

they are making a strong argument to take over or have a strong 

influence in the region. 

So what are the main obstacles? Is corruption a real obstacle for 

U.S. companies to continue to invest? La mordida, the bite they call 

it. In some countries, they say it is as high as 30 percent. And, of 

course, especially since we have very strong anticorruption laws 

here that are enforced. Is that a major problem in investment? 

Mr. FARNSWORTH. Well, if I could try my hand, Congressman, at 

responding. First, the positive story about China in the region, they 

buy a lot of products from the region, which isn’t a bad thing necessarily, and in the recession of 2008-2009, it was actually China 

that kept Latin America from falling itself into recession. There is 

legitimate trade; there is legitimate investment. So that is something that I think we should frankly celebrate because we are not 

buying all those products, and there is no reason why Latin America shouldn’t have the opportunity to sell to other markets worldwide. 

Having said that, there are broad implications of that, both for 

U.S. business and also frankly for the promotion of the U.S. strategic interest in the Western Hemisphere, and I think we have 

seen that develop over the last 10 or 15 years, which is really the 

time period that China has been directly engaged in the Western 

Hemisphere. 

It is a question fundamentally about corruption? Corruption 

plays a part; there is no question about it. China is not subject to 

FCPA. Chinese, you know, companies aren’t necessarily listed on 

the New York Stock Exchange. You don’t have the same transparency and regulatory requirements, et cetera. So that is an issue. 

But if you talk to U.S. companies, that is not necessarily the first 

thing that they raise in terms of their ability to compete. 

They really do raise the issue of development finance and the 

ability of Chinese companies to come in with financing at below 

market rates from the Chinese Government. They do raise the 

issue of Chinese ability to underbid U.S. companies because many 

of the Chinese companies are state-owned enterprises; they have 

government support, et cetera. They may not be bidding—even at 

market prices, they might be taking a loss in order to get the contract and get the investment and move forward that way. 

There are a myriad number of other things. One of the other 

things that may be retarding the United States’ ability to move forward in the region is the ability of the United States to support 

some of those efforts from the private sector side, the U.S. Government. And we have been talking about a little bit to this point. And 

I think the ability to ramp up commercial diplomacy at the very 

senior levels of the U.S. Government would really, really help and 

show Latin America that the United States is not just here on a 

transactional basis or commercial basis, but we are here on a partnership basis. And that really goes a long way in terms of the 

Western Hemisphere, what in some ways we used to do. I think we 

52

have gotten away from that a little bit. I would like to see that go 

forward in a similar way. 

Mr. ESPAILLAT. Finally, I spoke to a former President of a Latin 

American country, and he said to me: Well, show me real U.S. investment in the hemisphere, you know, that is significant right 

now in the last 20 years. Even the banks are no longer there. And, 

you know, I sort of began to think, and he was absolutely right. I 

think that we need to invest, Mr. Chairman, more in the future of 

Latin America and come back to ensure that we continue to be 

their main partner. So thank you for your testimonies. 

Mr. COOK. Thank you very much. At this time, I would like to 

recognize another Congressman from New York, my good friend, 

the gentleman from New York, Congressman Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. 

I want to kind of pick up from where Mr. Espaillat just left off. 

First, when I think about the CAFTA and, of course, the NAFTA, 

at one time, we were trying to do something in regards to a trade 

deal with all of the Americas, and even TPP, where we had various 

countries in Central and South America that would have been a 

part of that. TPP being important because it also kind of put a 

check on China, you know, to make sure they are playing by the 

rules, et cetera. So it is extremely important. 

Can you tell me what you think would have been the negative 

or the positive effects if we had stayed in the TPP and whether 

CAFTA was increasing the investments and opportunities for 

American companies and improving the relationship with those on 

the hemisphere? 

Mr. HERRINGTON. Thank you, Congressman Meeks, I think you 

raise an excellent issue. I think the U.S. Chamber was a very vocal 

supporter of the Trans-Pacific Partnership, TPP, and I think you 

correctly call out a key reason why it was important, which was to 

establish a transpacific trading system that is rules based, that 

whether the U.S. exerts its leadership on trade joined by like-minded free market-oriented economies in the effort to try and encourage the same sort of adoption of policies across Asia and other 

parts of Latin America that weren’t necessarily involved. 

The other key thing, though, that I think is really important 

about TPP is, you know, our exporters look to us every day, and 

NAFTA obviously is their priority, but they say to us, across numerous sectors, manufacturing, agriculture, they are very focused 

on Asia. Why? Because we project, by the year 2030, two-thirds of 

the world’s middle class consumers will be in Asia. 

So, when we talk to this administration following the announcement to withdraw from TPP, our question is, okay, what is your 

strategy to access these consumers that our exporters will desperately need in the future to continue growing? 

Mr. MEEKS. So let me then add, and I presume, when you are 

late, you don’t know what went on prior to you getting here, but 

I have now likewise concerns in regards to what is taking place 

with the tariffs that the President is currently placing on there. 

And I would love to get your take on the impacts these newly imposed tariffs will have on American jobs and businesses, both small 

and large, in our country, and then with the retaliations that some 

53

of our allies are talking about, I would like to get your perspective. 

Mr. Farnsworth? 

Mr. FARNSWORTH. Thank you very much. I think that is the key 

question. It is the framing question for how do you promote U.S. 

commerce and business in the region, but the overall framework is 

an atmosphere that is roiled, is the word I used in my oral testimony, by the steel tariffs that we have seen against Canada and 

Mexico and Europe and others, and voluntary export restraints 

that Brazil and Argentina have had to comply with in the steel 

context. But also, in terms of the very aggressive approach the 

United States has taken on NAFTA, which is not clear if the 

United States even wants to continue with NAFTA, that is a real 

issue in terms of sustainability for investors, the pulling out of the 

Trans-Pacific Partnership, which you also alluded to, we could go 

on perhaps on some other issues. 

But this is a circumstance where once the United States was the 

country that was actually creating the conditions for orderly business and commerce in the region, now we have become the primary 

disrupter. And the problem with that is that if you are an investor 

looking in the long term, you can’t make decisions based on that 

because there is uncertainty, but it provides the conditions that an 

outside country, like China, which we have been talking about, but 

there are others as well, can come in and take advantage, particularly if the state is behind some of these investments, as we have 

been talking about in the context of Chinese investments in the region. 

So, from my perspective, this is unhelpful, but despite that, there 

are other issues as well. Even if, as I mentioned previously in the 

testimony, even if the United States were to change course today 

and were to have a policy shift today on trade, the damage that is 

being done is going to take a long time to overcome. Supply chains, 

once they develop elsewhere, cannot just be on unwound. They are 

built, they are developed over years. If other countries began to 

look for partners that don’t include the United States, whether because of formal trade relationships or some other reason, or just 

the question about the sustainability of the relationship with the 

United States, they began to develop those relations with other 

countries. And once those are developed, they are really tough and 

very expensive to break. 

So I think we have to be very, very careful. We can be doing 

these as negotiation issues, or we can be being doing them because 

perhaps we believe in them, but nonetheless, there are consequences that go well beyond the United States as well. 

And the final thing I would say, and just concurring with my two 

colleagues on the panel as well, is that there are economic consequences to the United States. This will hurt the U.S. economy 

from the job creation perspective, and from the ability to grow the 

economy even after tax reform and some of these other things that 

have been done over the recent months, from my perspective, this 

will be a step back for U.S. economic interests. 

Mr. MEEKS. Thank you. 

Mr. COOK. Thank you very much. 

54

One further piece of business. If there is no objection, I would 

like to enter into the Congressional Record testimony from Transparency International. 

Pursuant to committee rule 7, the members of the committee will 

be permitted to submit written statements to be included in the official hearing record. 

Without objection, the hearing record will remain open for 5 business days to allow statements, questions, and extraneous materials 

for the record, subject to the length limitations in the rules. 

I did want to add, this has been kind of a crazy day. I think everybody knows that. The ranking member was saying we have like 

a fly-in day. People are coming in hot-seating it and then leaving 

from one committee, and I want to apologize. We were a little late 

because of votes. It is that time of year. We are going to be in—

I think the second series of votes is at 9 o’clock, 2100, for all the 

military folks out there. So I certainly appreciate your flexibility. 

It is great to have a committee here that is so engaging, and I try 

to get everybody—and right now, just a reminder, you know, we 

have a little meeting with the President of Honduras afterwards. 

But, once again, I can’t thank you enough for being here. 

And there being no further business, these guys can get back to 

their Yankee games—their New Jersey—there being no further 

business, the subcommittee is adjourned. Thank you. 

[Whereupon, at 3:29 p.m., the subcommittee was adjourned.] 

(55)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE RECORD

56

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SUBCOMMITTEE HEARING NOTICE 

COMMITTEE ON FOREIGN AFFAIRS 

U.S. HOUSE OF REPRESENTATIVES 

WASHINGTON, DC 20515-6128 

Subcommittee on the Western Hemisphere 

Paul Cook (CA-08), Chairman 

TO: MEMBERS OF THE COMMITTEE ON FOREIGN AFFAIRS 

You are respectfully requested to attend an OPEN hearing of the Committee on Foreign Affairs 

to be held in Room 2172 of the Rayburn House Office Building (and available live on the Committee 

website at http./ivv\Jv\V.f orei gnAffairs.house.gov): 

DATE: 

TIME: 

SUBJECT: 

WITNESSES: 

Thursday, June 7, 2018 

2:00p.m 

Advancing U.S. Business Investment and Trade in the Americas 

Mr. Eric Farnsworth 

Vice President 

Americas Society I Council of the Americas 

Mr. Neil Herrington 

Senior Vice President for the Americas 

U.S. Chamber of Commerce 

Ms. Kellie Meiman Hock 

Managing Partner 

McLarty Associates 

By Direction of the Chairman 
57

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COMMITTEE ON FOREIGN AFFAIRS 

MINUTES OF SUBCOMMITTEE ON 

Dny _ _::_T::_11::_lll:.:'sc::'l.:.:.a.c_l' __ Datcc_ _ _::Jcot:.::mc::e_:.7_,_,.::_2:c01::.:8:__Room _ ____::2c:l_:_Z:::2_::_R:.:I~IO=B'--

Starting Time _ _,2,_:,.110"'p"'I-'-'II __ Eu<ling Time --'3"'.00'2"'9"'p'""'-' _ 

Rcmses: 11/a; ( __ to __ )L____to __ )L____to __ )L____to __ )( __ to __ )L____to __ ) 

l'ilemllCI{s) 

Cludmum Caok 

Check all qftlteJilllowillg tlwt tlpJ!ly: 

Open Session 0 

Exeelltive W9sed) Session 0 Televised IZI 

TITLE OF HEARING: 

ElectronicHlly Reconl~tapell) [{] 

Stenogrnphic Rcconl W 

"AdJJancing ll.S. Rmdne.rs hlve.~'/mel1t and Trade ill tlJe AmerirM/1 

SUBCOMMITTEE MEMBERS PRESENT: 

Chairman Conk, Ranking Memhel' Sire.<, Rep. Smith, Rep. Rm.mey, Rep. Yoho, Rep. Ke/£1•, Rep. Meeks 

N0/1'-SUDCOMMITTEE MEMBERS PRESENT: (Markwiril lm "if'tltey ate not members of:tii/1 commirtee) 

NIA 

HEARING WITNESSES: Same as meeting notice attached? Yes (II No0 

(!!"no", please list be! OJ<' and include /ilk, agency, department, ~I' organizatio11.) 

STATEMENTS FOR THE RECORD: (List mlJ' statements subwittedfor the record) 

Chairman Cook QFRs 

TIME SCHEDULED TO RECONVENE ___ _ 

nr 

TIMEADJOURNED __ J_._·2~9J'--11_u __ 
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Questions for the Record 

WHFM Subcommittee Hearing: "Admncing U.S. Business Investment and Trade in the 

Americas'' 

June 7, 2018 at 2:00p.m. in Rayburn Room 2172 

Chairman Paul Cook 

TO: Mr. Eric Farnsworth 

l. State Department Role in Adyancing U.S. Business Engagement in Region: 

How can the State Department help to spread successful best practices from Mexico, Chile. 

Peru, Colombia, and Costa Rica, which are rated the highest in the World Bank's ''Ease of 

Doing Business·· ranking, throughout the Western hemisphere region° 

How could the State Department more effectively advance U.S. commercial interests in the 

regiono 

The State Department has a critically important role in advancing U.S. business interests in the Americas, 

and several steps ought to be considered in the near term to spread best practices and to support U.S. 

commerce. 

In the first instance. the Department needs a fi.1ll complement of Senate-confinned senior officials. including 

the Assistant Secretary ofWestem Hemisphere Affairs, and the Secretary of State must make clear to the 

leaders of all bureaus and U.S. missions abroad that the promotion of commercial interests is a core aspect 

of their duties which wilL in part. drive promotions and career advancement. We are now almost at the 

mid-term elections and essential positions both in Washington and abroad remain untilled. We can do 

better than this. and must. 

Second, the Department should actively solicit input from the private sector in tenns of specific actions that 

can be promoted which will advance commercial interests. both at the political and working levels. and 

then work specific, actionable, and appropriate ideas into the broader agenda. There are multiple steps that 

could be taken to support U.S. business while at the same time building target-nation competitiveness. l11c 

key. however. is that input received from the private sector must then be factored into U.S. policy and 

assistance priorities, including USA TO, MCC, and a multitude of other programs, not just presented to 

govenunents on a take it or leave it basis. There must be concrete ±allow up and implementation. Much 

ofU.S. assistance that goes for regional ''development" simply follows pre-existing priorities without much 

focus on competitiveness or support for U.S. commercial interests that will, in fact. support the broader 

development that advocates seck. l11is is a perennial problem. 

Programs for the Northern Triangle of Central America for example, designed to create conditions that 

will lessen migration pressures, must be refocused. Increased technical assistance. regionalization of 

assistance to encourage cooperation among aid recipients. anti-com1ption and the nile of lmv, and 

investment climate reforms can all be made urgent priorities. The State Department is not the 

implementation agency ±or these programs but should nonetheless exercise its significant role in leading 

U.S. foreign policy formulation to guide assistance programs toward more commercially-relevant, and 

therefore sustainable, programs. 

Third. the State Department must once again find its powerful voice in the context ofU.S. trade policy. As 

the foundations of the U.S.-led global trade stmcture continue to be dismantled by the current 

administration, the United States is not only opening the door still wider across Latin America and the 
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Caribbean for our direct competitors including China, it is also creating significant ill-will among our 

closest trading partners. T11at means higher tariffs on U.S. products_ broken supply chains, and skepticism 

about seeking new U.S. goods and services particularly when altematives are available_ as they increasingly 

are. This directly undermines U.S. commercial interest in the region. No doubt it is the role of the State 

Department to implement a president's policy under any administration, yet without a positive trade agenda 

the ability to promote U.S. commercial and strategic interests across the region will continue to suffer. At 

a minimum, this is a point that needs to be made clearly and often by senior State Department officials at 

every appropriate opportunity. 

2. Energy Opportunities: In 2013, Mexico made some significant energy reforms. In 2014, Argentina's 

refonns provided offshore exploration opportunities to investors and encouraged foreign ventures in 

the country's shale reserves. In 2016, Brazil's repeal of a requirement that its oil company (Petrobras) 

had to have a 30% stake in all operations involving its ''pre-salt" offshore oil reserves also opened up 

new opportLmities_ 

Which countries in the region present the best opportunity for greater energy investment by 

U.S. companies? 

Which countries pose the most significant challenges to energy exploration and investment 0 

What role do you sec the State Department playing in ad\ancing U_S_ business energy 

investment in the region, particularly in the Caribbean m1d in exporting US liquefied natural 

gas (LNG)O 

Perhaps more than any other resource-rich region~ Latin America routinely endures pendulum swings of 

resource nationalism in response to commodity price cycles and other political factors. The regional 

sectoral map is uneven for U.S. investors. 

Brazil is an attractive market for further energy investment by U.S. industry. Unllke other countries in 

Latin America, Brazil has never reneged on an energy contract, attesting to the emphasis it places on pri vale 

investment in one of its most strategic sectors_ The geological risks of its pre-salt basins are low_ the 

quantity of its pre-salt reserves are vast, and the productivity of the resources is mnong the highest in the 

world_ But geology alone docs not make for an attracti vc investment climate_ as the collapse ofV cnczucla' s 

oil sector has proven. Brazir s governance of its hydrocarbons sector is welcoming of foreign investment 

characterized by a trajectory of pro-market reforms in its upstream. The lifting of Petrobras's minimum 

equity m1d operator mandate allows greater operational tlcxibility for private investors_ T11e govcrmncnt 

has also eased preYiously-stringent local content mles and extended until 2040 a favorable customs and tax 

regime for industry that facilitates the import of goods and services to develop offshore resources. Brazil 

has also built out a calendar of bid rounds for the next several years that provides consistency m1d 

predictability to investors. Elections in October will be an important indicator of the sustainability of sector 

openness. 

As it currently stands, the profile of Mexico-s energy sector, aided by constih1tional refonns to promote 

private sector participation~ has tremendous complementatities \Vith investment from U.S. industry. There 

is much at stake as the new Mexican president prepares to take oftice this year. Offshore reserves in 

Mexico-s Gulf benefit from proximity to U_S_ operations, both in tem1s of geological fan1iliarity and access 

to supply and support services. Approximately 90% of Mexico-s '·proven"' and ''probable" reserves are still 

to be auctioned. SENER, Mexico's energy ministry, has rolled out a five-year timetable of bid rounds to 

provide consistency for investor spending. T11rough December 2017, upstremn auctions have generated 

$248 billion in revenues for the Mexican govemment, according to SENER. But Mexico's energy opening 

is not limited to upstremn exploration and production. Indeed, many of the benefits for Mexico's day-today economy will cmnc from reforms to its more do\vnstream markets. Electricity sector rcfonns arc 

creating a new wholesale power market to promote more cost-effective electricity capacity, reduce 
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electricity costs and transition Mexico to cleaner-burning fuels. The solution to most of those aims is 

natural gas-predominantly ±rom tl1c United States. 

Other nations present differing pictures. Despite having the world's largest proven oil reserves, Venezuela 

is no longer attracti\c as an investment target. Resource-rich Ecuador and Bolivia still have limited options 

for the concession-based or profit-sharing contract stmctures that private industry prefers. Colombia has a 

very market-{)riented frame\vork to encourage iJTvestment~ but many of its upstream opportunities are 

constrained by tense relations between tile govcmmcnt, industry. and local connnunitics and NGO's in its 

oil and gas producing-regions. The new government of Ivan Duque will have an opportunity to sort out 

tllese difficulties in a marmer ilia! restores sector attractiveness for imestors. 

Argentina boasts the largest commercial shale gas reserves in the world outside North America. 

Environmental resistance to industry operations does not mn as deep as it does in oilier countries because 

of its long legacy of hydrocarbons production. And the resources themselves are tile domain of state 

governments, an ownership structure that creates more buy-in at the local level. President Mauricio Macri 

and his government are working to unwind the worst excesses of the previous Kirchner governmenfs 

market interventions. Nonctllelcss. to exploit the cmmtry · s rich shale reserves and manage high operating 

costs stemming from labor to lack of infrastructure, industry relics heavily on subsidies from the central 

government that pay operators above-market prices for new gas developments. The broader politicaleconomic landscape affecting Argentina's fiscal situation perhaps calls into question how long Buenos 

Aires can continue to oft'cr these producer subsidies. 

In tenus of the State Department's role, energy diplomacy was brought into tile Department under Secretary 

of State Clinton, to provide a stronger diplomatic voice on global energy issues and to capture these issues 

bureaucratic<1lly. Results lmve been mixed. For example, we have long urged the Department to form " 

regional Gas Council of major gas producing nations. Such a forum would be a clearinghouse for projects 

and best practices including technicaL regulatory, infrastn1cture, environmentaL and other aspects of 

sectoral competitiveness, while providing a neutral place for dialogue on mutually-beneficial matters with 

nations, such as Bolivia, where dialogue of any consequence is otllenvise limited. Through Council of tile 

An1ericas' leadership_ this idea vvas an original recommendation of the Americas Business Dialogue_ \vhich 

we co-founded, for the Summit of the Americas. Regional governments failed to act on tile 

recommendation, but the State Department remains in a position to establish tllis important dialogue. 

Similarly, for years we have urged the United States to take a more proactive role in building out closer 

energy relations with the Caribbean Basin. From a security, commercial, and environmental perspective it 

makes sense. It is deeply frustrating tllat more has not been done to promote these issues more effectively. 

and it is long past time to sec greater progress on these complicated yet very important issues. 

3. Regional Crises: Venezuela is in the throes of a horrific economic and humanitarian crisis, resulting in 

tile spread of thousands of refugees and evoking conccms of a public hcaltll crisis. The unrest in 

Nicaragua is also stining up significant concern. 

How do economic and humanitarian crises like tllcsc aftcct the confidence of U.S. investors in 

the region? 

In your experience, have you seen other countries in tile region do enough economically and 

politically to protect themselves from similar crises? 

Venezuela is clearly a ruined state. Even if the Madura regime were to quit of±ice today it might take a 

generation or more to restore this once-proud and relatively wealthy nation. Regrettably. the Madura 

govemment has not given any indications of its willingness to depart, subverting the democratic process to 

its direction and creating conditions which support its ambitions to remain in power indefinitely. 

Deteriorating conditions arc not ':just" a tragedy for Venezuelans, though: the aggressive, extra-territorial 

ambitions of the regime in Caracas, the breathtaking com1ption at the highest levels of government which 
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facilitate drug trafficking and cross-border criminal activities, and the humanitarian crisis caused by the 

regime that pushes thousands of desperate Venezuelans each day to seck shelter and protection in 

neighboring states have all profoundly impacted the region. This is a crisis that continues to develop and 

worsens daily. A return to some semblance of sanity, including a restoration of investment flows that will 

re-capitalize the energy sector and provide any hope for the future in Venezuela, can only begin with the 

departure from office of the current leadership. 

While U,S. investors across all sectors have done vvhat they could to continue operations in Venezuela. 

prevailing and anticipated conditions there have virtually eliminated any filrther interest in the country 

except among the most aggressive tinancial speculators. What is perhaps more complicated is whether 

individual crisis. including Nicaragua's, impacts investor appetite across the region, or indeed for emerging 

markets as a class. \Ve should be wary of making such a claim. Emerging markets investors are generally 

sophisticated and easily differentiate between Venezuela and Nicaragua and, say, Argentina and Costa Rica. 

Given the macro-prudential steps that many regional governments have taken over the years to increase 

resiliency in the face of economic challenges. the threat of contagion is similarly reduced. 

More applicable in this current environment is the broader impact on emerging markets that a retum to 

more nom1al interest rates and a tun1 tovvard protectionism in the United States is having, and the subsequent 

shift in capital flows across the class. Certainly. this scenario is not helped by the impression that Latin 

America is somewhat ""troubled,"" either by V enezucla · s collapse or Nicaragua· s growing civil contlict or a 

challenging regional elections cycle or some other factor, or a combination of all. But there arc any number 

of positive examples of nations. such as Chile, which are well-managed economically and where the threat 

of meaningful political turbulence is remote. Latin America has seen this movie before, \Vith sequels more 

numerous and interesting than the Star Wars franchise. Responsible leaders in the region continue to 

monitor events and take actions accordingly. 

TO: Mr. Neil Herrington 

I. Opportunities for U.S. Investors: Which countries in Latin America and the Caribbean provide the most 

opportunities for U.S. investors? h1 what sectors? What can the U S. govemment and the private sector 

do to enhance investment opportunities for U.S. businesses'! 

The United States is the single largest source of foreign direct investment in Latin America and the 

Caribbean. According to the Commerce Department's Bureau of Economic Analysis (BEA). the stock of 

U.S. direct investment in Latin America and other markets in the Western Hemisphere totaled $843.3 billion 

as of2016, compared with $556 billion in2007. Mexico has the largest stock of U.S. direct investment as 

of 2016 ($87.6 billion), followed by Brazil ($64.4 billion), Chile ($29.4 billion), and Argentina ($13.7 

billion) 

The U.S. Chamber of Commerce and the Association of American Chambers of Commerce in Latin 

America and the Caribbean (AACCLA) carried out the Business Pulse survey in 2017, which polled more 

than 600 business leaders representing companies doing business in the 28 markets that make up the 

AACCLA network of 24 American Chan1bcrs of Connnerce (AmChams). The survey identified the 

following sectors as the most likely to attract investment over the next 12 months: energy. tourism, 

infrastructure, manutacturing, technology, and telecommunications. Free trade and economic integration 

were identified as the top policy priorities for the U.S. govenunent to address. For more intormation on the 

AACCLA 's Business Pulse survey. please click 

2. Business Climate: T11e World Bank's Annual Doing Business report shows that the bulk of Latin 

American countries have a fairly poor business climate. Last year, 15 out 20 regional countries moved 

down in the global rankings while only three moved up. 
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What arc the primary regulatory, legal and practical challenges involved in setting up and 

operating a business in Latin American and the Caribbean'' 

How does Latin America and the Caribbean fare as an investment climate compared to other 

regions of the world? 

There are few issues as essential as the rule of law when identifying the critical factors in a company" s 

ability to do business profitably and maintain a sustainable business model over time. Rule of law was 

identified as the ·'most important" issue to address in the Latin America and Caribbean regions in the 2017 

Business Pulse survey conducted by the U.S. Chamber and AACCLA. 

The U.S. Chamber's Coalition for the Rule of Law in Global Markets idcntiticd tivc factors that determine 

the ability of any business to make good investment and operating decisions, and thereby have a reasonable 

expectation of returning a profit in any given market. They are: 

Transparency - Meaning the laws and regulations applied to business must be readily 

accessible and easily understood: 

Predictability - The laws and regulations of a country must be applied in a logical and 

consistent manner regardless of time. place, or parties concerned: 

Stability- The state's rationale for the regulation of business must be cohesive over time. 

establishing an institutional consistency across administrations_ and free frmn arbitrary or 

retroactive amendment: 

Accountability- Investors must be confident that the law will be upheld and applied equally 

to go\ren1ment as \Veil as private actors; and 

Due Process - When disputes arise. they must be resohcd in a fair. transparent. m1d 

prcdctcnnined process. 

According to the 2017 World Bank's Doing Business report, Latin America and the Caribbean had 

undertaken the lowest average number of refonus designed to enhance ease of doing business than had any 

other region of the world. The only grouping of countries with a lower average number of reforms was the 

high -income OECD countries, which are already global leaders in good practices. 

This is similar to the Chamber's own findings in its Q!D.bal Bt!2lDJC8iR\ll~ of},awl.l~JJ®rd. in which the 

markets in the W estem Hemisphere eamed the lowest average score of m1y region. This Dashboard 

illustrates the close relationship between adherence to the rule of law and a com1try 's ability to attract 

investment based on the presence of the five factors listed above. Though the regulatory, legal, and practical 

challenges involved in operating a business in Latin America and the Caribbcm1 vary by co1111try. the 

adherence to the rule oflaw is a primary factor in a compm1y 's evaluation ofthcse challenges. 

In addition, the processes ofrulemaking arc otlen underdeveloped in mm1y countries throughout the region. 

\Vhile some countries routinely implement certain elements of good regulatory practices in their ndemaking 

process, most do not: sufficiently utilize components such as regulatory impact assessments. cost-benefit 

m1alysis, notice m1d conuucnt. risk measurement m1d mm1agcmcnt. data quality. m1d rclim1cc on sound 

science, focusing regulation on the core requirements needed to protect legitimate objectives m1d the least 

burdensome approach to accomplishing a desired regulatory outcome. Without all of these elements. 

rulemaking leads to poor regulatory outcomes that create a drag on the economy. 

3. Impact on Region's Refonns: Countries like Mexico. Brazil Colombia, Chile and Argentina have taken 

signiticant steps to improve regulatory conditions to facilitate foreign investment. 

How effective have these refonns been in drawing U.S. businesses into the region'' 

How institutionalized and sustainable are these refonns. and what do they mean for the future 

of U.S. business interests in the region'/ 
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What other countries can we expect to be key investment opportunities for U.S. companies? 

In yourvie\V, \Yhich refonns are most beneficial to U.S. business interests? 

Regulation and compliance arc frequently identified among the top risks facing American businesses 

overseas. Countries such as Mexico. Brazil. Colombia, Chile, and Argentina are at various stages of 

implementing ret,rulatory refon11s --including in the energy sector-- that have been successful in attracting 

significm1t U.S. imestmcnt. 

High-stm1d<1rd trade <1greements <1nd bibteml investment tre<1ties are importm1t tools for helping to 

institutionalize reforms by providing a transparent and predictable legal tfan1cwork for U.S. investors and 

by addressing regulatory trm1sparency. 

Further, adoption and adherence to good regulatory pmctices will lead to better regulatory outcomes and 

make for a more attractive investment climate. 

4. Value Added Tax: It is my m1derstm1ding that some countries in Latin Americam1d the Caribbean have 

instituted Value Added Tax (VAT) collection via withholdings by credit and debit card processors. 

While intended to mitigate ta'< evasion. this can result in an over-collection ofta'<es and leave U.S. 

businesses operating in the region in a position to request refunds from go\-cmmcnts in the countries in 

which they opemte. I've heard anecdotally that in some countries there are mechanisms for requesting 

m1d issuing refunds. 

\Vhat recommendations would you have for U.S. businesses operating in the region \Vhere a 

Value Added Tax is collected \lS withholdings by credit and debit card processors0 

\Vhat recourse do U.S. businesses have in these instances, and how do you recommend that the 

State Department assist U.S. businesses in securing the refunds ifthey are entitled to them? 

5. Altemative Minimum Ta"<: Some colllltries in tlle region have applied Altemative Minimlll11 Ta"< 

(AMT) mles in a way that mandates a minimum taxable profit. I have heard concerns tllat tlle 

application of such AMT frmneworks creates envirolllllents that are not conducive for U.S. private 

sector investment. In many countries_ there also appears to be great uncertainty as to whether or not 

U.S. companies can request and receive refunds of AMT. 

As part of its c±Iorts to help strcngtl1cn the policy m1d technical capabilities of public 

institutions in the Westcn1 Hemisphere, vvhat actions can the State Department take to ensure 

that AMT mles do not inadvertently create an uneven playing field for U.S. companies 0 

Response to 4 and 5: Many countries in Latin America and the Caribbem1 have instituted Value Added Tax 

(VAT) collection via withholdings by credit and debit card processors. While these policies were wellintended to mitigate tax evasion, they have inadvertently resulted in m1 over-.:ollcction of VAT m1d 

potentially inaccurate reporting of govemment revenue. Simi1ar1y~ some countries in the region have 

applied (Altem<1tive Minimum T<1x) AMT mles in a way th<1t essentially mandates a minimum taxable 

pro tit. The application of such tax trmncworks harms local compm1ics, mns contrary to local govcrlllllcnts · 

goals of attracting U.S. m1d other foreign investment, m1d puts investors in a position to request refunds 

from govemment institutions in the countries in which they operate. In some cases. there are \Vell-defined 

mechanisms for requesting and issuing reimbursements, but this is not tme in all countries. Furthermore, 

even where defined mechanisms exist, the delays in obtaining tl1ese reftmds create significm1t cash-flow 

pressures on American businesses. 

These tax reftmd challenges arc especially pronounced in tl1e Northem Trim1gle. For cxmnplc, tlle American 

Chamber of Commerce (Am Cham) in Honduras reported in 2017 that the Government of Honduras owed 
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more than $60 million of tax refunds to 49local and U.S. companies, including seven U.S. companies owed 

more than $34 million. T11e Am Chams in El Salvador and Guatemala have also stated that similar amounts 

are owed to local and U.S. companies in their countries, and that requests for refunds are consistently met 

with unjustified delays or denials. While El Salvador deserves credit for passing a new law clarifying that 

taxes paid in excess can be recovered by requesting a credit note that can be applied to taxes on imports, 

vigilance is required to ensure that all Northen1 Triangle goven1ments establish and maintain refund policies 

supporting good corporate citizens like U.S. companies. Such an approach will help establish a best practice 

that can help fom1alizc and stimulate local economics more broadly. 

Congress should be applauded for its efforts to encourage the Northern Triangle governments to make 

progress in improving transparency in tax collection and increasing the timeliness of tax reimbursements 

owed to U.S. companies. During the Fiscal Year (FY) 2018 appropriations cycle. Congress clarified the 

Alliance for Prosperity in the Northern Triangle certification criteria to require meaningful efforts to address 

these issues for El Salvador, Guatemala and Honduras to qualifY for U.S. foreign assistance. Further, in 

the joint explanatory statement for FY18 omnibus appropriations bill, Congress was \\ise to require the 

State Department to submit a report to the appropriations committees within 60 days detailing any 

outstanding commercial and trade disputes bet\\ecn the United States and the Northcm Triangle cmmtrics. 

This could help to create a benchmark from which to measure each country's progress. Because the Alliance 

for Prosperity is a multi-year program, Congress should consider further strenb>thening the Alliance for 

Prosperity certification criteria on resolving commercial disputes with U.S. entities as part of the FY19 

appropriations process. 

Additionally. the Chamber views the Alliance for Prosperity certification criteria as a tool the U.S. 

Government can usc to i1nprovc enfOrcement of tax rules in each of these countries as a means to increase 

government revenue. rather than over-collecting from entities that already comply with local tax laws. 

Strengthening the certification criteria as it applies to transparency in public institutions and resolution of 

commercial disputes is an opporhmity to n1eaningfully address ta"X evasion, gro\v govenunent revenue, and 

create economic opportunity. The Chamber and our member companies operating in the Northern Triangle 

would be happy to work with Congress on statutory language modifications aimed at improving 

transparency in ta"X collection and the timeliness of tax rein1bursen1ents. Furthennore, while we understand 

that the State Department is still working on the report required by the omnibus, the Chamber ultimately 

hopes the report will specifically address any outstanding issues related to tax refunds due to American 

entities operating in the Northcm Trim1gle. This will help create m1 appropriate baseline from which to 

judge the progress required for certifications to be made under the Alliance for Prosperity in the Northern 

Trim1gle. 

While the Allim1ce for Prosperity in the Northern Triangle is an appropriate tool for addressing the 

capabilities and will of public institutions in El Salvador, Guatemala, m1d Honduras to resolve tax refunds 

owed to U.S. businesses, the U.S. Govcmment must also strive to address these issues throughout the entire 

Latin Americm1 m1d Caribbean regions. Congress should be encouraged to use its oversight authorities to 

ensure the State and Commerce Departments arc engaging directly with U.S. companies and foreign 

govemment leaders to ensure a level playing field for U.S. compm1ies operating in the Westem Hemisphere. 

Where appropriate, the U.S. Government should also offer technical assistm1ce to identifY solutions to help 

strengthen local finance and tiL'< authorities, with a focus on ensuring non -compliant companies pay their 

fair share, as opposed to excessively burdening good U.S. corporate citizens. 

As we understand, the House and Senate will soon consider their FY19 State, Foreign Operations, and 

Related Programs Appropriations Bills. T11c appropriations process creates an opportunity for Congress to 

stre"b>1hen the conditions that must be met for Latin American governments to benefit from U.S. assistance 

funding. To take adyantage of U.S. taxpayer money, the Chamber believes it is imperative that foreign 

beneficiaries demonstrate efforts to create a level playing field for U.S. compm1ies investing in their 
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countries. It is also essential that Congress continue to provide adequate resources for the Commerce 

Department's International Trade Administration (ITA). Time and time again \\C hear from our member 

companies that TT A and regional Commerce Department representatives based in Latin America are critical 

to ensuring that U.S. companies maintain the ability to export U.S. products and are treated fairly in local 

jurisdictions. Finally. our diplomats operating at U.S. embassies in Latin America arc just as crucial to 

promoting American competitiveness as their Commerce Department colleagues. ·while the Chamber has 

appreciated the work of our talented charge d'affaires, our member companies are eager to have long-tenn 

ambassadors in place who arc vetted by Congress and receive specific training to position them to help 

elevate U.S. business objectives in the countries where they serve. Unfortunately. many ambassadorial posts 

in Latin America lack a nominee or a nominee remains pending Senate confirmation. The Chamber requests 

that this committee continue to encourage the president to quicklv identity qualified nominees. We also 

request that you impress upon your Senate colleagues the need to quickly confirm nominated ambassadors 

so they can be deployed overseas.