Public Policy Restricting Free Flow of Capital, Exchange Rate Control and Possible Effects on Cross-Border Insolvency: The Case of Latin American Countries

Abstract

Purpose

The purpose of this chapter is to explore the possible relation between public policy measures, particularly relating to currency exchange rates, capital flow mechanisms and cross-border insolvency by describing the current state of insolvency regulation in Latin America and some cases that exemplify this public-private dynamic.

Methodology/approach

The first part of the chapter is based on literature review and content analysis to show the current situation of the regulation of insolvency in Latin America and the evolution of policies shaping the flow of capital and the exchange rates. The second part illustrates the proceedings in selected countries, particularly for Colombia and Venezuela.

Findings

The analysis led to the finding that some countries’ policy mechanisms such as in the case of Venezuela might lead to a problem regarding national companies involved in an insolvency proceeding, particularly when the company alleges that public policy in force have changed circumstances leading to the impossibility of paying foreign-located liabilities.

Research limitations/implications

The chapter is based largely on literature review and available data, public legal documents and cases relating public policy and cross-border insolvency; however, insolvency proceedings are not of public domain; thus, there is a large amount of information related with the mentioned cases that remain undisclosed.

Originality/value

This chapter provides a theoretical and practical perspective to analyze cross-border insolvency from a local regulatory framework. It also demonstrates the possible link between public policy and cross-border insolvency.

Citation

Gaitán-Guerrero, L.A. and Muller Sanchez, C.A. (2016), "Public Policy Restricting Free Flow of Capital, Exchange Rate Control and Possible Effects on Cross-Border Insolvency: The Case of Latin American Countries", Dead Firms: Causes and Effects of Cross-border Corporate Insolvency (Advanced Series in Management, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 113-135. https://doi.org/10.1108/S1877-636120160000015006