Dr. David Lewis

GLG News by Dr. David Lewis, Vice President

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Verizon DR tax settlement allows for purchase by AmericaMovil of Mexico

December 1, 2006

Analysis of:Verizon sales tax agreement reached | www.dr1.com

Reports from the Dominican government and US Embassy in Santo Domingo indicate that Verizon and the government have reached an agreement on the amount of sales tax to be paid on the $2bn sale of earlier this year. Reports are that both sides agreed to a sales tax payment of approx. $200m rather than the $518m originally requested by the Dominican government.

While the settlement obligates Verizon to pay the sales tax on the transaction (the company argued that since the holding company was Canadian the sales tax did not apply), it does serve to uphold investor-state agreements and buttress investor confidence in the Dominican Republic.

The resolution of this tax settlement will not pave the way for the settlement of the sale of Verizon DR to Mexican America Movil which has been aggressive in its telecomm expansion in the region, including recent purchase of Verizon in Puerto Rico as well.

However, other service investors will now be very cautious as to how they structure financial transactions in the Dominican Republic so as to avoid a similar conflict and/or a similar tax burden.

Ecuador election will result in energy and debt concerns for investors

December 1, 2006

Analysis of:A Leftist at the Helm in Ecuador | www.businessweek.com

Ecuadorian President-elect Rafael Correa announced that he wants to revise oil exploration contracts between the government and foreign companies to increase revenues and he will also not withdraw the government's unilateral cancelation of Occidental Petroleum investment contracts in the country. Coupled with his commitment to press for foreign debt renegotiation terms and/or default, the economic environment in Ecuador will be very worrisome for investors, national and foreign.

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