Andean Multinational Companies.

(Caracas, November 16, 1990).- An international seminar to promote the formation of Andean Multinational Companies (EMAs) will be held from December 19 to 21 in Hotel Macuto Sheraton in Caraballeda, Venezuela.

The main objective of the event - organized by CAF – is to provide information on the legal regime which regulates these companies.

Around a hundred Andean businesses – from the plastics, chemicals and derivatives industries, and the tourism, agro-industry, transport, services and marketing sectors, along with public officials and representatives of sectoral organizations - will meet to exchange experiences on formation of EMAs and get to know the legislation that affects them, their legal and operating structure, potential for commercial and productive association and their affect on the economic development of the subregion.

What is an EMA? Andean multinational companies are associations of businesses from two or more countries dedicated to any type of activity: industry, commerce or services. Their objective is to create and strengthen conditions for a dynamic associative and complementary process between businesses, in an effort to stimulate the association of subregional capital, facilitating execution of projects of common interest.

The basic requirements are that the EMA must be formed as a corporation, with main domicile in the territory of one of the member countries of the Andean Group, with the possibility of extra-subregional participation of 20% in the capital, except in the cases of Bolivia and Ecuador where this contribution can be up to 40%.

On the legal aspect, EMAs are governed by Andean Pact Decision 244. Any aspect not so regulated is governed by the legislation of the host country.

Foreign and subregional investors in an EMA receive special treatment: they can transfer abroad all net profits from direct investments; the products of an EMA enjoy the advantages of the Andean Pact Liberalization Program; they can open branches in any member country; double payment of tax is eliminated; they have preference for contracting technology; and the prerogative of investing or reinvesting in the host country without special authorization. These are some of the many advantages that the EMAs offer to the private sector.

CAF support To promote the formation of EMAs, CAF has set up a US$4 million special fund, which - through non-reimbursable technical cooperation grants- will support pre-feasibility studies for investment projects, market studies, and technological and information aspects. CAF may also participate with seed capital in the formation of these companies.

In the seminar to be held next week, experts will speak on the situation in the subregion in relation to promoting and attracting foreign investment, identifying priority sectors for the economy suitable for development with partners from the subregion. The legal, tax and labor aspects of the EMAs will be discussed in detail in relation to the common and national provisions of the country where they are resident.

Participants in the seminar will form working groups of businesses by economic sector. In other groups, experts will discuss formation, registration and control of these companies, examine subregional regulations, national legislation on industrial development of exports, promotion and foreign investment, and promote their links with trading companies.

Delegates from UNIDO, UNCTAD and the European Community will present the "Regional Investment Promotion Project," the evaluation study of EMAs, and the financial cooperation agreement for promotion of joint Andean-European companies, respectively.

Speakers at the opening session (Monday 19, 8:30 am) will be CAF President & CEO Galo Montaño; coordinator of the Andean Pact, Iván Gabaldón; president of Fedecameras, Eddo. Polesel; and Venezuelan Development Minister Imelda Cisneros de Pérez.

How many are there? Currently about 30 companies of this type are operating in the Andean countries, mostly in the industrial sector.

As part of this business exchange, the Andean Chamber of the Plastics Industry was formed to group all companies in this sector in the subregion. At the same time, a memorandum of intent was signed for an EMA which associates businesses of Peru, Ecuador and Venezuela for complementary manufacture of molds and dies for the Andean plastics industry and for non-Andean production contracts.

Another EMA was recently set up in the Ecuadorian-Venezuelan wood products sector in a bid to overcome past difficulties and expand the presence of the two countries overseas. In addition, Tubulares Andinos, SA was formed by Ecuador and Venezuela to recover all types of tubing used by the oil industry, finished tubing, installation of forging system and related activities with materials from a sector as vital as oil.

Cases such as Monómeros Colombo-Venezolanos; Coordinadora Internacional de Cargas, SA; CONFAGAN; Andina de Alimentos, SA; Colomural de Colombia; Hidroquip, to mention only a few, are examples of productivity, efficiency and economic performance which have used this mechanism of integration and development.