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Entry Into the OECD May Bring Investment Grade to Brazil

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The entry of Brazil as a full member of the Organization for Economic Cooperation and Development (OECD), a treaty between President Jair Bolsonaro and US President Donald Trump on the official trip to the United States, is expected to attract foreign investment and enable a reform agenda liberalizing economies.

This is the expectation of analysts who follow the political, economic and commercial relations between the two countries. According to Diego Bonomo, executive director of international affairs at the National Confederation of Industry (CNI), “joining the OECD helps speed up the process of internal reforms in the sense of modernizing and opening up the economy because it binds us internationally to a treaty”.

“Participation in the OECD is a hallmark for countries that are stable, low-risk, and more likely to receive foreign investment,” Bonomo says.

Guilherme Casaroes, a professor at the School of Business Administration at FGV in Sao Paulo, agrees and ponders that being in the OECD “means adhering to a set of public practices and management tools that can be positive for Brazil”.

Fernando Ribeiro, from the area of foreign trade and investments of the Institute of Applied Economic Research (Ipea), points out that entry into the OECD is “a geopolitical decision” and has the consequence of “fulfilling a long list of requirements” “to recover the degree of investment.”

The OECD has recommendations and protocols on corporate governance, anti-corruption, public transparency, taxation, defense of competition, investments of multinational companies, steel production, and trade, agribusiness, chemical derivatives, digital economy, among others.

Casaroes considers, however, that because of these guidelines’ entry into the OECD is not unanimity among experts. “The great dilemma we face is whether we want to be a faithful soldier of a set of good practices or if we want to have decision-making autonomy to make a policy that is not in the OECD’s repertoire,” he says, the nature of the conditionalities imposed by the IMF.”

He adds that joining the organization “does not create jobs overnight, but creates conditions so that with the entry of investments there may be more job offers in the future.”

Political scientist David Fleischer, born in Washington (US capital) and naturalized Brazilian, agrees with positive analyzes of Brazil’s eventual entry into the OECD. “Economists are right when they say it will help Brazil regain investment grade and attract new investments.”

Fleischer estimates that, regardless of entry into the OECD, Americans “are ready to invest,” but rather expect Brazil to find fiscal balance and change the level of public debt. “Pension reform is key,” he says. “This will open a flood of national and international investments,” he predicts.

In June 2015, Itamaraty signed a cooperation agreement with the OECD with a view to entering Brazil as a full member of the organization, where it was already considered as a key partner with the other BRIC members (Russia, India, China, and South).

David Fleischer says that the performance of Economy Minister Paulo Guedes during the trip to the United States was welcomed by the Americans, especially in the Chamber of Commerce. “With the people I spoke to in Washington, the impression was that the speech was well-received. It was quite frank and showed that Brazil is on the road to reform and is willing to open up its economy and open to new investments.”