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Gambling on Conflict: Profiling Investments in Conflict Countries
Unformatted Document Text:  Andreea Mihalache Updated: March 20, 2008 Over the past three decades, foreign investment flows to the developing world have been on the rise. Research reveals several reasons for this phenomenon, ranging from developments in communication and transportation technology to changes in the economic policy of developing countries. A 2004 UNCTAD report on development and globalization notes the existence of “about 64,000 transnational corporations (TNCs) engaged in international production, with about 866,000 affiliates located abroad” (UNCTAD/PRESS/PR/SPA/2004/006 13 ). Approximately a quarter of the TNCs and more than half of the foreign affiliates worldwide are located in developing countries. Asia is host to the majority of these affiliates, followed by Latin America and the Caribbean (UNCTAD 2004). Most importantly, several of these affiliates are located in countries with recent or ongoing political violence. First, there is the case of Kimberly-Clark, already mentioned in the introduction to this paper. This firm continues to invest in Colombia in spite of the ongoing civil conflict, which has reached high intensity levels several times over the past 20 year. Other telling examples come from the history of OPIC’s determinations on insurance claims. For instance, Cuirs Hawtan, the Haitian affiliate of Hawtan Leathers, LLC, has been operating in Port-au-Prince since 1970, despite political violence-related losses it suffered over time. In 1989, following the attempted coup against President Avril, the enterprise lost $46,463; in 1992, because of the civil disorder associated with the 1991 coup against president Aristide, the enterprise lost $159,078; in 1995, due to the trade embargoes caused by the 1991 coup, the enterprise lost $420,000. Despite all this, Hawtan Leathers has not looked for a different host country for its tannery. Haitian Tropical, another Haitian affiliate of a US corporation, also continues to function in Port- 13 http://www.unctad.org/Templates/webflyer.asp?docid=4889&intItemID=2807&lang=1 6

Authors: Mihalache, Andreea.
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background image
Andreea Mihalache
Updated: March 20, 2008
Over the past three decades, foreign investment flows to the developing world
have been on the rise. Research reveals several reasons for this phenomenon, ranging
from developments in communication and transportation technology to changes in the
economic policy of developing countries. A 2004 UNCTAD report on development and
globalization notes the existence of “about 64,000 transnational corporations (TNCs)
engaged in international production, with about 866,000 affiliates located
abroad” (UNCTAD/PRESS/PR/SPA/2004/006
). Approximately a quarter of the TNCs
and more than half of the foreign affiliates worldwide are located in developing countries.
Asia is host to the majority of these affiliates, followed by Latin America and the
Caribbean (UNCTAD 2004). Most importantly, several of these affiliates are located in
countries with recent or ongoing political violence.
First, there is the case of Kimberly-Clark, already mentioned in the introduction to
this paper. This firm continues to invest in Colombia in spite of the ongoing civil
conflict, which has reached high intensity levels several times over the past 20 year.
Other telling examples come from the history of OPIC’s determinations on insurance
claims. For instance, Cuirs Hawtan, the Haitian affiliate of Hawtan Leathers, LLC, has
been operating in Port-au-Prince since 1970, despite political violence-related losses it
suffered over time. In 1989, following the attempted coup against President Avril, the
enterprise lost $46,463; in 1992, because of the civil disorder associated with the 1991
coup against president Aristide, the enterprise lost $159,078; in 1995, due to the trade
embargoes caused by the 1991 coup, the enterprise lost $420,000. Despite all this,
Hawtan Leathers has not looked for a different host country for its tannery. Haitian
Tropical, another Haitian affiliate of a US corporation, also continues to function in Port-
13
http://www.unctad.org/Templates/webflyer.asp?docid=4889&intItemID=2807&lang=1
6


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