OECD headquarters
OECD Brazil

OECD headquarters

During a visit to Brasília, Angel Gurria, the Secretary-General of the Organization for Economic Co-operation and Development (OECD), said that Brazil is close to becoming a full member of the Paris-based think tank. Five other nations are also trying to enter the elite club of the global economy.

The OECD is a forum of countries that describe themselves as committed to democracy and the market economy. Most of its 35 members are wealthy nations (China, however, is not a member).

Back in May, Brazil formally requested membership, in an effort to send a positive message to investors. Being a fully-fledged OECD member could influence the perception of other countries and investors, increasing their willingness to do business here. It would also reinforce the idea that Brazil is recovering from the recession.

But aside from boosting the country’s image, what would joining OECD mean to Brazil?

How does the OECD operate?

The OECD provides the world with massive amounts of studies concerning the global economy – focusing, naturally, on its member states. Subjects vary from education, corruption, and governance, with an emphasis on free-market practices.

In theory, these studies are used by member states to subsidize discussions on public policy at both national and international levels. The institution also monitors whether members are implementing policies decided upon by the organization. If that’s not the case, the organization tries to push forward its agenda.

While Brazil is not a full-time member, it has participated in OECD studies as a “key partner” since 2007. Recently, Brazil was placed at the very bottom of a ranking of economic education among 15-year-olds across several countries. Such rankings aim to pressure countries into promoting policies that the organization deems important.

Consequences for Brazil

According to Brazil’s Central Bank President Ilan Goldfajn, being accepted as an OECD member would improve Brazil’s international image – and could even lead to the reduction of interest rates for loans contracted by the federal administration.

The country, however, would have to drastically change some of its economic policies. Especially in trade issues. According to the OECD, Brazil is isolated from global opportunities due to its high barriers against foreign competitors.

Per the OECD, Brazil’s import tariffs are higher than those of neighboring countries – the disparity reaches 130% for some products. Moreover, the country imposes demands for local content in several sectors.

“High trade barriers prevent Brazil from enjoying the benefits of a global and integrated global economy,” stated a report published on Wednesday. Among Latin American countries, Brazilian companies use the least imported production inputs.

Brazil also has celebrated fewer trade deals than similar countries. While Chile and Peru have trade accords covering roughly 70-80 percent of the world’s GDP, Brazil’s bilateral accords with other countries represent just 10 percent of the global GDP.

If the OECD approves the request, Brazil would become the largest emerging economy in the group, and the third Latin American nation admitted to the group. Mexico and Chile are already members. And Colombia has been in membership talks since 2013.

That marks a shift in Brazil’s diplomatic action. While previous administrations have focused on relations with developing nations, Michel Temer’s government wants to strengthen ties with the U.S. and Europe. Instead of being the richest of the poor, we would be the poorest of the rich.

MoneyMar 01, 2018

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