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CONSIDERING: Article 10 of the AssunçãoTreaty, Decision no. 4/91 of the Common Market Council, Resolution GMC Nº.77/93 and the Recommendation No. 5 of the Work Subgroup Nº.4 "Monetary and Tax policies related to the Commerce ".

That the creation of favorable conditions for the investment of investors of one of the Member States of the MERCOSUL in the territory of any of the other Member States will intensify the economic cooperation and will speed up the integration process.

That the promotion and protection of such investments on the base of a Protocol will contribute to stimulate the initiative economic, individual and to increase the development in the four States.

Art. 1 - To approve the PROTOCOL OF COLONIA FOR THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS IN MERCOSUL, which is attached to the present Decision.

The Republic of Argentina, the Federative Republic of Brazil, the Republic of Paraguay and the Eastern Republic of Uruguay henceforth designated "Member-States";

Taking into account the Assunção Treaty, March 26, 1991, in which Member States decided to create the Common Market of the South (MERCOSUR);

Regarding the results of the work carried out for the Technique Commission for the Promotion and Protection of Investments created within subgroup IV by the Resolution 20/92 of the Common Market Group;

Convinced that the creation of favorable conditions for the investment of investors of one of the Contractor parties in the territory of another Contracting Party will intensify the economic cooperation and will speed up the process of integration between the four countries;

Recognizing that the promotion and protection of such investments based on an agreement will contribute to stimulate the individual economic initiative and will increase the prosperity in the four States;

Agreed the following:

For the purpose of the present Protocol:

1- The term "investment" will assign, any kind of assets invested directly or indirectly by investors of a Contracting Party in the territory of another Contracting party, in accordance with the law and regulations from this last one. Including, in particular yet not exclusively:

a) the property of real estate and other goods, as well as other assets, like mortgages, guarantees and pledges;

b) stocks, corporate shares and any other kind of participation in companies;

c) creditors rights and rights over bonds with an economic value; the loans will only be included when directly bounded to an specific investment;

d) intellectual and intangible property rights, specifically including royalties, patent, industrial design, brands, commercial names, technical procedures, know how and goodwill;

e) economic concessions granted by law or by contract, including concessions for research, cultivation, extraction, or exploitation of natural resources.

2- The term "investor'' will assign:

a) any natural person who is a citizen of one of the Contracting Party, or is a permanent resident of a Contracting Party, in accordance with their own legislation. The arrangements of this Agreement will not be applicable to the investment made by a natural person that is a citizen of a Member State in another Member State territory if such person, by the time the investment is made, resides permanently in this last Member State, unless it is proved that the resources for such investment is originated abroad;

c) any firm established in the state were the investment is made which are effectively controlled either directly or indirectly by firms or individuals as defined in "a" or "b" above.

3- The term " gains " will assign all the additions produced by an investment, such as profits, incomes, shares, interests, royalties and other current revenues.

4- The term " territory " will assign the domestic territory of each Contracting Party, including the adjacent maritime zone to the limit of the national territorial sea, on which the involved Contracting Party can, in compliance with the international law, exercise sovereign rights or jurisdiction.

1- Each Contracting Party will promote investment of investors from other Contracting Party and will admit them in their territory in a not less favorable way than the investment from their own investors from Third States, without any rights damage of each party to maintain transitionally limited exceptions that correspond to some sectors that appear in the Attached of this Protocol.

2- When a Contracting Party have admitted an investment in its territory, it will grant the necessary authorizations for its best development, including the execution of contracts under license, commercial or administrative assistance and the admission of key personnel.

1- Each Contracting Party will ensure at all times a fair and equitable treatment to investments of investors from another Contracting Party and will not harm their management, maintenance, use, fruition, or disposition by unjustified or discriminatory measures.

2- Each Contracting Party will give full protection to those investments and grant them a not less favorable treatment than granted to investments of their own national investors or Third State investors.

3- The dispositions in paragraph 2 of the article will not be interpreted in the sense of obliging a Contracting Party to extend to the investors of another Contracting Party the benefits of any treatment, preference or privilege as a result of an international agreement related total or partially to tax matters.

4- None of the Parties will establish performance requirements as a condition to the establishment, the expansion or maintenance of investments that require or demand exporting performance, or specify that certain goods or services are bought locally, or impose any other similar requirement.

1- None of the Contracting Parties will take steps for nationalization or expropriation nor any other measure that has the same effect, against investments that take place in their territory that belong to investors from another Contracting Party, unless such steps are taken for reasons of public utility, on a non discriminatory basis and in accordance with the proper legal proceedings. These steps will be followed by the payment of a previous, appropriate and effective compensation.

The sum of this compensation will correspond to the real value that the expropriated investment had immediately before the moment that the decision of nationalize or expropriate has been officially announced or made public by the competent authority and generate gains or will have its value updated to the date of its payment.

2- Investors from a Contracting Party, who suffer losses in its investments in the territory of another Contracting Party, as a result of war or any other kind of armed conflict, state of national emergency, revolt, rebellion or riot will have restitution, indemnization or another form of compensation, a treatment not less favorable than the one than granted by their own investors or the investors of a Third State.

1- Each Contracting Party will grant to the investors of another Contracting Party a free transfer of its investments and gains, and in particular, although not exclusively, of:

a) the capital and the additional sums necessary to the maintenance and development of an investment;

b) the revenues, profits, incomes, interests, dividends and other current incomes;

c) the reimburse funds of loans as defined in Article 1, Paragraph 1 C;

d) the royalties and fees and any other payment related to the rights foreseen in article 1, paragraph 1 D and E;

e) the results of sales or partial or total redemption of an investment;

f) the compensations, indemnizations or other payments as foreseen in Article 4;

g) the remuneration of citizens of a Contracting Party that had authorization for working with an investment related task.

2- The transference will be effected without delay, in freely convertible currency, to the effective market exchange rate on the date of the transference, in compliance with the procedures established by the Contracting Party in whose territory the investment was carried out, which will not be able to affect the philosophy of the rights foreseen in this article.

1- If a Contracting Party or one of its agencies pays an investor by virtue of a guarantee or insurance contracted to cover not commercial in relation to an investment, the Contracting Party in whose territory the investment has been performed, will recognize the validity of the subrogation in favor of the first Contracting Party or one of its agencies with respect to any right or title of the investor with the objective of getting the correspondent pecuniary compensation. This Contracting Party or one of its agencies will be authorized, inside the limits of the subrogation, to exert the same rights that the investor would have been authorized to exercise.

2- In case of a subrogation such as defined in Paragraph 1 of this article, the investor will not claim unless he is authorized to make it for the Contracting Party or its agency.

When the legal disposals of one Contracting Party or obligations of existing or future international law or an agreement between an investor of a Contracting Party and the Contracting Party in whose territory the investment was performed, contain rules that grant to the investments a treatment more favorable than the one established in the present Protocol such rules will prevail over the present Protocol in the terms that are more favorable.

1- The controversies that appear between Contracting parties related to the interpretation or the application of the present Protocol will be submitted to the procedures of solution of controversies established by the Protocol of Brasilia for Solution of Controversies of December 17,1991, henceforth called " Protocol of Brasilia" or to the System that occasionally establish in its substitution in the environment of the Assunção Treaty.

1- All controversies related to the present Protocol between an investor of a Contracting Party in whose territory the investment was performed will be, as far as possible, settled by friendly consultations.

2- If the controversy has not been decided in the stated period of 6 (six) months from the moment of its proposition by one of the Parties, it will be submitted, to one of the following procedures, by the investor's request:

I) to the competent courts of the Contracting Party in whose territory the investment was performed; or

II) to the international arbitration, as described in paragraph 4 of the present article; or

III) to the permanent system of solution of controversies with private entities that eventually will be established in the environment of the Assunção Treaty.

3- When an investor chooses for submitting the controversy to one of the procedures established in paragraph 2 of this Article, this choice will be definitive.

4- The investor may choose to appeal to the international arbitration:

a) to the International Center of Solution of Relative Controversies of Investments (C.I.S.C.I.), created for the " Convention on Solution of Controversies Relative to Investments Between National States and Other States", opened for submission in Washington in March 18, 1965, when each Member State of the present Protocol had agreed with it. While this condition is not accomplished, each Contracting Party will give its consent so that the controversy is subjected to the arbitration in compliance with the regulations of the Complementary Mechanism of the C.I.S.C.I to the administration of the conciliation, arbitration or investigation conduct;

b) to an ad-hoc Arbitration Court, established in accordance with the rules of arbitration of the United Nations Commission for international Commercial Law (UNCITRAL). .

5- The Arbitration Agency will decide the controversies based on the terms of the present Protocol, the rights of the Contracting Party that is part of the controversy, including the rules related to Law conflicts, the terms of private agreements related to the investment that are concluded, as well as the principles of international law.

6- The arbitrage sentences will be definitive and mandatory for the parts in litigation. The Member State will execute them in accordance to its own legislation.

The present Protocol will enforce all investments performed before or after the date when it takes effect. However, the terms of the present Protocol will not apply to any controversy, complain, or divergence that might have been raised before it was taken into effect.

The present Protocol will take effect 30 (thirty) days after the date of the deposit of the fourth instrument of ratification. Its validity will be of 10 (ten) years, after which it will remain in force indefinitely until its expiry date, which will be 12 (twelve) months after the date that any of the Contracting Party notifies in writing the other parties its decision to cancel the treaty.

Regarding those investments carried out before the date when the notification of the ending of this Protocol is made effective, the arrangements in articles 1 till 11 will continue in effect for a period of 15 (fifteen) years after this date.

The present Protocol is an integral part of the Assunção Treaty. The adhesion by a State to the Assunção Treaty will implicate ipso jure to the adhesion to the present Protocol.

Made in the city of Colonia do Sacramento, in January 17, 1994, with copies in the Portuguese and Spanish Languages, both texts being equally authentic. The Government of the Republic of Paraguay will be the depositary of the present Protocol and the instruments of ratification and will send duly notarized copies of the same ones to the Governments of the other Member-States.