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OECD and Argentina: Macri’s ‘White Whale’

By | [email protected] | March 20, 2018 2:37pm

G20Secretary General of the OECD José Angel Gurría and Finance Minister Nicolás Dujovne at the G20 (Photo via Infobae)

The Organization for Economic Cooperation and Development (OECD) has long-since been President Mauricio Macri’s “white whale,” but now he’s using Argentina’s presidency of the G20 to lure more attention toward further cooperation, and perhaps, to have a seat at the table in the room where it all happens.

The OECD promotes public policies through peer-review, reports, and partnerships to stimulate economic progress and world trade. Its members are all considered developed countries, a coveted definition for the Macri administration. The organization was founded by 20 countries in 1961 – 18 European countries plus the US and Canada – and since then, 15 additional countries have joined. Latin America has two members, Mexico and Chile, the latter of which was inducted in 2010. Brazil has an “enhanced engagement” program with OECD and is listed as one of its key partners, and both Colombia and Costa Rica are in the process of accession. In May, the OECD will host its ministerial meetings, during which there will be a vote to open accession negotiations. Six countries are vying for an opportunity (though more than one can be selected): Argentina, Brazil, Bulgaria, Croatia, Peru, and Romania.

One of Macri’s objectives since taking office has been to put Argentina on the main stage. Not wanting to throw away his shot, Macri has pushed OECD membership as top priority. During last year’s G20 Finance Minister meetings, Argentine Treasury Minister Nicolas Dujovne presented OECD Secretary-General Ángel Gurría the Argentina Action Plan, in which it listed policy priorities for the country to work on with OECD, including economic policy, statistics, competition, and the fight against corruption among others. Argentina has also actively integrated itself into the OECD community without being a member, as part of 23 partnership committees to date, compared to eight in December 2015.

According to a document reviewed by Infobae, the Argentine Treasury Ministry created a memorandum that spells out the achievements the administration has made in its last two years in office for OECD’s review. The document also indicated that Argentina’s popularity has risen among the institution’s member countries in Macri’s time in office. Argentina initially had the support of six countries in its May 2016 membership submission, and it now claims to have the support of all 35 members.

At a recent OECD meeting in Paris, Dujovne said that Argentina’s admission to the OECD could be “a powerful tool to anchor and promote the ambitious process of implementation of structural reforms.”  He added that “the project is also crucial to lay the foundations of a developed country for future generations.”

OECD Secretary-General Gurría has been in town over the last few days for the G20 Finance Ministers and Central Bank Governors meetings, where he presented the OECD 2018: Going for Growth report. Argentina had its own shout-out, and well, it did not receive high marks.

   ARG – EN by The Bubble on Scribd

Despite consistent international praise regarding its reform process, including surprisingly positive remarks last week from IMF Director Christine Lagarde, the OECD gave a sobering review of Argentina’s reality.

The report’s “Country Highlights” starts off on a striking note: “The gap in GDP per capita relative to the leading OECD countries is sizeable and has not narrowed over the last years, reflecting both low productivity and employment.” It indicates that “poverty and inequality remain high by OECD standards” and together with poor quality of education, “contribute to low social mobility.”

The report also emphasizes that “priority should be given to ensuring that the multiple recent reform efforts are fully implemented,” noting that there’s still work to be done, namely “lowering barriers to entry and competition in product markets and services to unleash the growth potential via a more efficient allocation of resources.”

The OECD gave Argentina five recommendations in 2017: (i) reduce regulatory burden; (ii) enhance outcomes and equity in education; (iii) improve infrastructure and reduce regional disparities; (iv) facilitate the labor force participation of women; and (v) increase the efficiency of the tax system. This year, OECD indicated that Argentina has put in the effort to make the tax system more efficient, have reduced barriers on start-ups, and enhanced investment in infrastructure through new public-private partnerships. It’s a tall order for any country, let alone one who has decided on a “slow and steady wins the race” motto.

Access to this club provides ample benefits, including greater access to international credit and to the ever-elusive international investment, which Macri is keen to tap into. OECD affirmed in its report that investment growth in Argentina is “stagnant” though it’s a bit of circular reasoning on both sides: Macri needs international investment to continue with his administration’s agenda, OECD is saying he needs to continue with his agenda to receive international investment, and on and on we go.

But there may be good news yet. During a G20 press conference, Gurría did give praise to the reforms calling them “complicated, difficult, but indispensable.” Indeed, he gave a guiño to the administration, saying that he would “expect a process to be triggered during 2018 in which Argentina becomes a formal candidate.” Though Gurría did indicate that it’s a long game, three to four years out to joining for real. To put it in perspective, Colombia began talks to join OECD in 2013, officially launched the process to accession on 2015, and will officially enter this year. Brazil has been working with the OECD on partnership committees for over 25 years, but only in 2017 did they request a membership. But patience is a virtue Macri has, considering gradualismo is now the name of the game here in Argentina. Just call him Ishmael.

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