Saturday, February 19, 2011

Colombia’s Petition to Join the OECD: The New Kid of the Block?

By Robert Valencia

In the last couple of weeks, Colombia has been on the international spotlight in the economic realm. First, President Barack Obama in his 2011 State of the Union assured that he would sign deals that “keep faith with American workers…to promote American jobs” while pursuing free trade agreements with countries like Colombia and Panama. Such a remark revived the bilateral discussion on envisioning a possible trade agreement with, what many consider in Washington, the U.S. best friend in Latin America.

Surely, the U.S.-Colombia free trade agreement that has been in the back burner might open new opportunities for Colombian manufacturers and entrepreneurs who had been largely affected by the Chávez-Uribe diplomatic impasses. But while a trade accord is in the talks, another step to a future milestone is taking place: the possibility of Colombia joining the Organization for Economic Cooperation and Development, or OECD, which is considered, by many, the “club of the wealthiest countries.”

During his tour across Europe last January, President Juan Manuel Santos formally submitted Colombia’s membership request. If granted, Colombia would become the third Latin American country—besides Mexico and Chile—to join this organization. OECD President José Ángel Gurría stated his contentment by saying that “the fact that Colombia has expressed to the council its will to join us is an important event for our organization’s lifetime.” He also hopes that Colombia will become a member in a “not so distant future,” and added that, on behalf of the 34 member countries, “they feel much honored by [Colombia’s] interest.”

Presenting its candidacy to the OECD represents not only a hope to join a selected group of developed and newly industrialized countries, but Colombia’s challenge to fill several voids, as President Santos himself pointed out: “we are committed to laying out all of the necessary measures to fight against corruption and bribery.”

Evidently, this discourse is fueled by the latest advancements in Colombia’s economy in the last four years: Bloomberg BusinessWeek named Colombia as the “world’s most extreme emerging market” due to a massive foreign direct investment, a blooming stock market, and rising security measures. Additionally, HSBC CEO Michael Geoghegan announced last year that another economic bloc that will grab the attention just like the so-called BRIC will be that of the CIVETS, which is comprised of Colombia, Indonesia, Vietnam, Egypt, Thailand, and South Africa. According to the HSBC executive, these countries share similar traits such as a young, growing population and a diverse economy. Santos admitted that Colombia’s current stability is due to former president Alvaro Uribe’s “democratic security,” which has helped demobilize more than 50,000 armed insurgents and dismantled a handful of drug cartels.

This optimistic sentiment is also coupled with Santos’ recently launched national development plan, which seeks a 6-percent economic growth by the end of his administration while giving Colombia a much more prominent presence in the international arena (starting with the restoration of Colombia’s relationship with Venezuela and Ecuador). However, Colombia faces several hurdles before crystallizing a formal membership: the GDP per capita in Colombia hovers at $8,900, roughly half of Mexico’s GDP--considered the lowest among the OECD members. In addition, Colombia’s underemployment remains high, economic output is relatively low, and the educational system requires a major overhaul.

The same OECD cited in a 2010 report that, despite Colombia’s strenuous accomplishment in economic policies, growing demand for its exports, macroeconomic stability, and security, the South American country needs to reduce the already high poverty levels and close the inequality gap among its population. Also, the report noted a weakness in infrastructure that raises business costs and aggravates low productivity, the tax system does not generate growth and “does little to improve income distribution,” and the perceived quality of public sector governance is relatively low.

This report outlined some goals for Colombia in order to overcome these socioeconomic shortcomings: enhance the distribution of benefits by “improving the functioning of labor and product markets,” as well as investment in infrastructure, skills, and reform to labor regulations. Greater resources to education is also paramount to “boost education outcomes of vulnerable groups,” while the business competition will profit from “more competition, less regulation, and greater access to finance of smaller companies.”

Certainly, the Santos administration has to do more than just lip service, and it might seem unattainable to reach all of these goals within his presidential term. Though Gurría praises Colombia’s current situation thanks to the “result of good policies,” more needs to be done to join the club of developed countries. Now is the time for Santos to lay out plans to improve the job market and the country’s outdated infrastructure; otherwise Gurría’s “not-too-distant future” premise will prove very far for the thousands living in the Andean nation.

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