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DEVELOPMENT: Chile Pins Its Hopes on the OECD

Daniela Estrada

SANTIAGO, Jan 11 2010 (IPS) - Chilean President Michelle Bachelet signed Monday the official document inviting Chile to join the Organisation for Economic Cooperation and Development (OECD), making it the first South American member of the “rich countries’ club”.

The last step is for the Chilean Congress to ratify accession to the OECD – which group’s the world’s industrialised countries – by this South American nation of nearly 17 million people.

After participating as an observer for 13 years, Chile has thus become the second Latin American member of the Organisation created in 1961, after Mexico, which joined in 1994.

Admission as the 31st member of the OECD “is a very powerful signal that Chile is a stable, reliable country,” Bachelet said in a ceremony held in the government palace.

“This international achievement will have very concrete and positive consequences, not just for the Chilean economy, but also – especially – for the people, the families, the workers of Chile,” said the outgoing socialist president, of the centre-left “Concertación” or Coalition for Democracy, which has governed since 1990.

Bachelet said Chile’s admission to the OECD would translate into greater foreign investment and wider opportunities for Chilean entrepreneurs, and consequently more and better jobs, she said.

She added that she had hoped to end her four-year term on Mar. 11 with Chile’s formal admission to the OECD.

Both she and Finance Minister Andrés Velasco attempted to downplay the OECD’s image as a group of wealthy countries.

“This isn’t about Chile now being considered a rich country. It’s a question of aiming at growing together, but also of continuing to include and invite the entire country to take part in a national effort for the future,” the president said.

Velasco was more specific: “The OECD is not a rich countries’ club. There are also middle-income countries. But it is an association of democratic countries that follow good practices.”

After passing numerous tests, Chile was the first of the five countries invited by the OECD to join in 2007. The others were Slovenia, Estonia, Israel and the Russian Federation.

The OECD was established in 1961 to promote economic and social welfare among member countries by assisting them in the formulation and coordination of policy and to promote their support of developing nations

Its web site says the OECD “brings together the governments of countries committed to democracy and the market economy from around the world to: support sustainable economic growth; boost employment; raise living standards; maintain financial stability; assist other countries’ economic development and; contribute to growth in world trade.

“The Organisation provides a setting where governments compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies,” it adds.

OECD executive secretary Ángel Gurría said “We look forward to Chile taking its place among the OECD members. This is a place where Chile belongs, out of sheer merit….Chilean expertise will enrich the OECD on key policy issues.”

Over the years, the OECD has made various recommendations to Chile, especially improvements in terms of productivity, competiveness and education.

In a statement, the Organisation said “Chile’s acceptance for OECD membership marks international recognition of nearly two decades of democratic reform and sound economic policies.”

The OECD pointed out that the Chilean economy has grown at over five percent a year for the last 20 years.

“With both Chile and Mexico as members, and thanks to increasingly close co-operation with Brazil, the OECD will have substantially strengthened its links with Latin America,” the statement added.

Lawmakers of all stripes and business leaders attending the ceremony Monday in Santiago welcomed the news, concurring that Chile will thus be forced to improve its practices and respect international standards, which will help draw heavier foreign investment flows.

As part of the process of admission to the OECD, the government pushed through a series of legal reforms, such as the strengthening of competition laws and consumer protection and the clear separation between the state and the board of the copper mining company Codelco, Chile’s biggest state-owned enterprise.

In addition, new laws were introduced to put an end to the banking secrecy that provides a shield for possible tax evasion, and to enable prosecutors to pursue companies suspected of corruption and bribery.

One of the few critical voices was that of economist Hugo Fazio, director of the National Centre for Alternative Development Studies (CENDA), a Santiago think tank, who said Chile’s admission to the OECD would further strengthen neoliberal policies in the country.

“What is the OECD? It’s the organisation that groups the major countries, in order for them to coordinate among each other in specific areas, to study certain issues together, and to hand down guidelines to the rest of the countries. People say that Chile’s incorporation will improve the way companies are run, for example,” Fazio commented to IPS.

“But what happened to the big companies from these countries in the current crisis? Are they examples for the rest of the world to follow? Was the management of the banks an example to follow? Of the car-makers? The financial speculation? What will this bring to Chile? What new things will it contribute?” he asked.

In the analyst’s view, another illustration that admission to the OECD will not do anything for Chile is the situation in Mexico, one of the Latin American countries hit hardest by the economic crisis that broke out in the United States.

Fazio also said that much of what could be expected from membership in the Organisation already forms part of the free trade agreements that Chile has signed with the United States and the European Union.

The OECD will release its latest economic survey on Chile on Jan. 21 in Santiago, with the Organisation’s assessment and recommendations on the main economic challenges faced by this country.