The rapid spread of bilateral investment treaties (BITs) during the 1990s prompted a great deal of academic inquiry aimed at understanding factors driving this phenomenon and examining its implications for the economies of developing countries. These initial investigations delved into the rationale behind countries’ decisions to sign and ratify BITs, the underlying criteria guiding partner selection, the role of international financial institutions (IFIs) in facilitating their diffusion throughout the 1990s, and the efficacy of BITs in promoting foreign direct investment (FDI). Overall, research on these matters remained largely inconclusive, probably because countries frequently entered into BITs without a full grasp either of their potential benefits or associated costs.

In her recent book, The Politics of Investment Treaties in Latin America, Julia Calvert asserts that Latin American governments only came to comprehend the costs associated with BITs in the wake of an unprecedented surge in claims filed against host nations in the 2000s. She argues that those claims, in some cases involving a significant share of countries’ GDP, generated opportunities for political learning that informed governments’ reform preferences, at the same time that they mobilized influential social forces into favoring and opposing international investment agreements (IIAs): IIAs is a more encompassing term that refers to both BITs and investment chapters in free trade agreements.

Although investment claims have resulted in a significant decrease in the number of new agreements, this trend obscures the diverse approaches to IIAs observed in Latin America. On one end of the continuum, the Equadorian government of Rafael Correa violated and subsequently terminated IIAs and disengaged from the jurisdiction of the International Center for Settlement of Investment Disputes (ICSID). In sharp contrast, successive governments in Peru responded to investor claims by adopting institutional measures that not only bolstered adherence but also expanded the range of safeguards for investments. Argentina is an intermediary case, in which the Kirchner and Fernández’s administrations froze the country’s IIA programs and refused to pay awards not ordered by national courts, but did not consider terminating BITs or abandoning the ICSID.

Calvert contends that prevailing theories that posit countries as FDI maximizers, consequently motivated by considerations of international reputation, fall short of explaining why some governments are more willing (and able) to infringe and to reform their treaty commitments. These theories anticipate that governments will steer clear of violating IIAs, and in instances where such breaches occur, they will attempt to regain their reputation through even stronger compliance.

Calvert’s alternative explanation centers on programmatic beliefs and normative ideas that delineate policy makers’ understanding of what is appropriate and desirable conduct concerning investors. It draws on the concept of “policy horizons,” defined as the “range of actions that governments perceive as acceptable and feasible given the domestic and global circumstances they confront” (p. 23). Governments’ interpretations of IIAs and subsequent claims, the author argues, are shaped by how well their policy horizons fit into the policy space that IIAs provide.

The author uses process tracing and comparative case study analyses to argue that, in Peru, governments that valued a liberal investment market and robust property rights were more inclined to function within a policy framework that aligned with the policy space allowed by IIAs. This alignment explains governments’ tendency toward limited and inadvertent breaches of contracts, as well as their diminished impetus for reform. In Ecuador and Argentina, conversely, governments embraced economic intervention and valued sovereignty and autonomy above international reputation. As such, they perceived as legitimate those actions that surpassed the policy space provided by BITs and were therefore more likely to infringe IIAs and eventually terminate them. Other factors such as economic conditions, state capacity, and social pressures are also considered in the explanation of patterns of infringement and reform.

After delineating her theory in the opening chapters, chapter 3 reviews the history of investment treaties in Latin America: it shows that perspectives on FDI have exhibited significant diversity within the region, culminating in markedly distinct approaches toward investors. The narrative challenges the notion that countries are always competing for foreign investment. It describes how during the mid-1950s—a period marked by the prevalence of import-substitution-industrialization (ISI) ideologies—instead of actively seeking investment, governments did exactly the opposite. They crafted policies aimed at limiting the entry of FDI and at increasing state influence in strategically significant sectors. This explains the rise in state-owned enterprises in that period and the frequency of renegotiations or nationalizations of concessions with foreign investors.

It was not until the 1990s that BIT signings began to skyrocket in Latin America; this turnaround can only be understood with reference to normative ideas. After a debt crisis swept through the region, governments were in desperate need of capital, and IFIs pushed market-led development models as a way to attract a rapid infusion of private funds that would lead to long-term macroeconomic stability. It was only when ideas about neoliberal market orthodoxy prevailed in the region that countries actually began to compete for FDI.

The subsequent three chapters present case studies that elucidate distinct patterns of infringement and reform in Argentina, Peru, and Ecuador, respectively. Chapter 7 concludes by providing a summary including a comprehensive discussion of the theory and a thorough comparative analysis of these cases.

Calvert does a great job of showing how normative constructs pertaining to sovereignty and international reputation play a pivotal role in explaining the diverse trajectories that countries adopt in the realm of foreign investment. The challenge of explaining the diffusion of BITs across Latin American states—which had long adhered to the Calvo doctrine and abstained from participating in international arbitration courts—is related to the simultaneous propagation of neoliberal orthodoxy.

The same applies to explaining why Peruvian governments, with a legacy of autocratic regimes, fragmented party systems, and fragile systems of checks and balances, refrained from intervening in natural resource sectors when prices skyrocketed, as Rafael Correa did with the oil sector in Ecuador. As delineated by Calvert, Peruvian administrations accorded paramount importance to upholding their international reputation, perceiving IIAs as not exerting constraints on their policy autonomy. This perspective was facilitated by the establishment of a proficient bureaucracy in Peru, which effectively safeguarded the nation in international courts and insulated the government from associated processes. Consequently, the compensation sought from Peru remained notably lower than that from Ecuador, thereby contributing to a diminished politicization of foreign investment within the country.

In reference to infringement, the Argentine case emerges as distinctive and does not lend itself to a straightforward comparison with Peru and Ecuador. A notable proportion of claims brought against Argentina were instigated by policy measures that the government was compelled to adopt to stabilize the economy after the collapse of convertibility—an economic upheaval not encountered by Ecuador or Peru within the studied timeframe. In a scenario in which both citizens and domestic enterprises suffered the consequences of this crisis, one might question whether any degree of bureaucratic autonomy could have effectively depoliticized foreign investors’ endeavors to seek protection from the turmoil.

The case of Argentina also challenges the way ideas are treated as exogenous within Calvert’s framework. Duhalde, although not necessarily aligned with left-wing politics, found himself in a circumstance where safeguarding investors from profound economic distress could have potentially precipitated an irreparable economic and political breakdown—regardless of the extent to which Duhalde and subsequently Nestor Kirchner were attuned to international reputation concerns.

This brings me to a second concern regarding the efficacy of normative ideas in explaining variations in reform strategies. After finishing this book, I was still uncertain as to why, in the aftermath of the profound crisis following the end of convertibility, Argentinian governments continued to abstain from exiting IIAs and the ICSID, akin to the course of action taken by Rafael Correa in Ecuador. Given that the normative perspectives held by the Kirchner and Fernández administrations did not markedly diverge from those of Correa, and the constraints stemming from international agreements were notably more conspicuous and subject to politicization, Argentina’s hesitancy still merits further explanation.

Overall, however, this is a noteworthy book that should reach an audience beyond students of international investment agreements; it has valuable insights for anyone interested in the role of programmatic beliefs and normative ideas in policy making.