Latin America Advisor

A Daily Publication of The Dialogue

Do Latin American Members Benefit From the OECD?

File Photo: OECD. File Photo: OECD.

U.S. President Donald Trump recently expressed his support for Brazil to join the Organisation for Economic Cooperation and Development. Brazil would become the fourth Latin American country to be part of the OECD after Chile, Mexico and Colombia. Meanwhile, Costa Rica is in the process of accession to the OECD, and Peru and Argentina have both been making efforts to join the intergovernmental organization. What advantages and disadvantages does being part of the OECD bring for these specific countries and for the region in general? What is the accession process like, and what has stood in the way of membership for some countries in Latin America? How important is the support of the United States for countries to join the organization?

Anabel González, nonresident senior fellow at the Peterson Institute for International Economics and former trade minister of Costa Rica: “Accession to the OECD can help Latin American countries in the design and implementation of public policies to improve the quality of life of their people, modernize and reform the state, and strengthen certainty and the rule of law, which in turn supports increased investment and economic growth. Former Costa Rican President Laura Chinchilla used to say that OECD membership would help Costa Rica become a better version of itself. To begin accession discussions, the interested country must convince all 37 OECD members to extend their respective invitation. The candidate must then undertake the implementation of a roadmap, which entails the review of its public policies by OECD committees in some 20 policy areas, and the adoption of recommendations to amend its legal framework. Once all these reviews have taken place, OECD members will unanimously decide whether or not to extend an invitation for the country to join the organization. The support of the United States throughout the process is decisive, particularly for Latin American countries. While the accession process has a very demanding technical component, it is ultimately a political decision. OECD membership sets a baseline—from there onward, it is up to the member to identify its own priorities and leverage the OECD’s knowledge, peer reviews and standards to support improved public policies.”

Diego Guevara, professor at the economics department of Universidad Nacional de Colombia: “The OECD is known as a ‘rich nations club,’ and it’s an organization that promotes integration and development with a strong emphasis on the free market, balanced finances and macroeconomic equilibrium. The main advantages of belonging to this exclusive group are associated with a higher level of exchange and cooperation with developed countries, while at the same time standardizing many ‘good practices’ regarding governability and economic management. The problem emerges when middle-income countries and emerging economies, such as Colombia or Mexico, must make strong fiscal and trade adjustments in order to comply with the conditions that the OECD requires from member countries. Entering the ‘rich nations club’ when levels of GDP per capita are far below the median of the organization’s members leads one to wonder if many of the new members are the club’s ‘Cinderellas,’ and whether their primary production structures, based on raw materials and little value-added in their production, are consistent with OECD standards. It should be highlighted that the United States, as a superpower, is highly influential. In the case of Colombia’s recent accession to the OECD, the United States put up many obstacles because there were doubts regarding pharmaceutical and tax policies in the Andean country. Clearly, the United States has very strong clout within the organization.”

Andrés Rebolledo, former director of Chile’s general directorate of international economic relations and former minister of energy of Chile: “The OECD is not just a group of high-income nations, it is, above all, a ‘club’ of countries that apply the best practices in the fields of public policies and business conditions. For this reason, it is important for Latin American countries to participate and take advantage of its programs, recommendations and accumulated experience. Chile has been a member of the organization for nearly a decade and has benefited enormously in the design and implementation of its policies in many development areas. Accession to the OECD was not an easy process; complex economics reforms were necessary to reach the required standard. However, the benefits to the quality of policies and institutions are a sign that the effort was worthwhile. It would be advantageous for more Latin American countries to join the OECD, not just for each country in question, but also for the region as a whole. Latin America must address gaps in economic development. Brazil is the number-one economy in the region and the seventh-largest in the world, which means its accession to the OECD would be beneficial for all. The experiences of Mexico, Chile and Colombia, and those in the process of accession, are also an opportunity to deepen regional cooperation and integration. The region should aspire to converge toward the average income of the member countries of the OECD, for which important challenges must be addressed in order to increase productivity and equity in areas such as: reduction of poverty, reduction of inequality, the application of efficient policies in health and education, balanced protection of the environment and a solid macroeconomic-financial framework. To address all these challenges, the OECD is a fundamental partner and reference.”

Renata B. Vasconcellos, senior director for policy at the Brazil-U.S. Business Council: “In the eyes of investors, OECD membership is a seal of approval and adherence to good regulatory practices. It is also a forum for dialogue, cooperation and public policy alignment. U.S. support is paramount in the process of accepting a country’s accession to the OECD. Brazil’s engagement with the OECD dates back to 1998. Today, the country is the most active nonmember of the OECD (in 24 OECD programs and 36 legal instruments). Since 2017, Brazil has expressed its desire for OECD accession, with concentrated efforts domestically to comply with OECD standards and directives. Brazil’s OECD accession campaign continues and is a priority for the new government. Note that a significant distinction should be made between accession and membership: the accession path may take years to translate into full membership. While recognizing that Brazil has to make significant progress domestically, especially in the areas of tax and intellectual property, the OECD accession path period would give Brazil motivation to pursue necessary reforms. With U.S. support, Brazil’s chances of acceding to the organization are higher than ever. Brazil’s campaign and likely upcoming accession to the OECD would set good regulatory and policy precedents for other Latin American countries and would add to the region’s representation in this influential organization.”

Mario Alejandro Valencia, director de Cedetrabajo in Bogotá: “The OECD is the world’s leading organization in the implementation of a 2.0 version of the free trade model, camouflaged in the clothing of good practices. The OECD promotes a false idea that states must follow certain principles that guide enterprises, under the criteria of financial sustainability. No country in the world, at any stage of the capitalist system, has become developed by doing what the organization says it should. Its logic is to impose certain standards that developing nations don’t meet. Of course, what’s behind this is not a healthy interest in best practices, but rather a hope that the country will become an intermediary for certain corporate sectors of countries such as the United States, France, Germany and England. The organization imposes conditions on the Latin American countries that are part of it and to those in the process of accession that will not lead to further development, because the state’s participation in the economy is substantially limited. The defense of foreign investment is promoted over national rights, the economy is oriented toward the external market of commodities and the stimulation and protection of national companies is abandoned. In the case of Colombia, the United States’ support came with new demands with respect to investments and intellectual property rights.”

The Latin America Advisor features Q&A with leaders in politics, economics, and finance every business day. The publication is available to members of the Dialogue's Corporate Program and others by subscription.

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