The Organization for Economic Cooperation and Development (OECD) on Tuesday invited Brazil to open membership discussions — but has imposed conditions: effective protection of the environment and action on climate, including halting deforestation, as well as the fight against corruption. The invitation to Brazil and five other countries — Argentina, Peru, Romania, Bulgaria, and Croatia — was approved by consensus by the 38 members of the OECD.
The invitation for talks come five years after Brasília formally requested membership – which has become a priority for the country’s foreign policy. It is a victory for Brazilian diplomacy, since the expectation in Europe was that this would hardly happen before the November 2022 presidential elections, due to the “great reticence” of some members towards President Jair Bolsonaro. France joined the consensus by signaling that it will be “demanding and vigilant” in negotiations with Brazil, according to European sources.
The OECD’s approval means just that — starting negotiations. The entity sent a letter to President Bolsonaro on Tuesday. And the understanding in the organization’s circles is that the country that responds first — confirming commitments to OECD values — starts the process first. In fact, there seems to be some concern that one or the other will take longer. The current government of Argentina may have some difficulty with capital controls, for example, notes one source.
Negotiations could take three to five years for the country to complete the process of compliance with the OECD’s 253 legal instruments. The invitation for membership will come after the negotiations, so not before 2025.
In a statement released early Tuesday evening, OECD Secretary-General Mathias Cormann said the process for acceptance as a member will include a strict and in-depth assessment by more than 20 technical committees of the candidate country’s alignment with OECD standards, policies and practices. As a result of those technical reviews — and prior to any invitation to candidate countries to join the organization as members — changes in the candidate country legislation, policy and practices will be required to align them with OECD standards and best practices, thus serving as a powerful catalyst for reform.
“Brazil has intensified its participation in the OECD since the request for accession [in 2017] and now we are well prepared to move forward,” said the Brazilian ambassador to the entity, Carlos Márcio Cozendey.
Last week, the Minister of Economy, Paulo Guedes, sent a letter to the OECD assuring commitment that Brazil will comply with the codes of capital liberalization and invisible transactions, the entity’s two main instruments in the economic aspect. This move strengthened “Brazil’s credentials” to finally receive the invitation, according to a government source. In any case, the parallel process in the OECD Council of Ministers was already underway. None of the other five candidate countries for membership has even begun the process of binding to the organization’s required codes.
These codes allow aspiring countries to make gradual progress toward liberalization of capital, investment, and services, with expectations of an improved business environment. And, according to sources, before sending the liberalization and intangibles codes to Congress, the government needs to comply with those requirements.
In Brazil, the new foreign exchange law has been approved. Being part of the OECD means having greater contact and more convergence with international best practices, as well as a boost to the domestic reform agenda, according to the government’s evaluation. But the OECD itself signaled that the candidates should commit themselves to other priority issues.
“The OECD invitation translates the international recognition for the agenda of structural economic reforms led by Minister Guedes and supported by President Bolsonaro,” said the Secretary of International Affairs of the Ministry of Economy, Erivaldo Gomes. “At the same time, it stresses the importance of following up on those reforms, especially the tax overhaul, a necessary condition to complete the process of joining the organization.”
For the National Confederation of Industry (CNI), this is “an extremely important step for the Brazilian productive sector,” which will serve as an impetus to leverage important reforms, increase the competitiveness of industry, and foster more sustainable growth in the country.
Brazil has been a key partner of the OECD since 2012 and formally applied to join the group in 2017. It is also admittedly the candidate country most convergent with the organization’s legal instruments — and the country most engaged with the organization’s committees and working groups, integrating discussions in more than 30 instances.
Source: Valor international