Mario Blejer | Argentina and the OECD need each other

Six years after its initial application and two years after being officially invited to start the accession process, Argentina has recently been given a road map for OECD membership. Given the benefits that membership would offer both sides, Argentina should be admitted without delay.

Initially established to help rebuild Europe in the aftermath of World War II, the Organisation for Economic Cooperation and Development was restructured and renamed in 1961 to stimulate economic growth and global trade. Today, its 38 member countries – 24 of them in Europe – account for nearly half of the world’s GDP.

The OECD does not provide its members with financing or credit facilities. Instead, it focuses on establishing and monitoring economic best practices, advocating for cooperation and policy coordination, and producing high-quality research. It also operates an excellent (albeit less known) development centre, studying issues relevant to emerging economies.

For Argentina, the benefits of OECD membership are clear.

After decades of economic mismanagement and turmoil, the country is finally on the path to recovery. Since taking office in December 2023, President Javier Milei’s administration has embarked on an ambitious reform programme to restore stability and order to the economy, while meeting Argentina’s obligations under the International Monetary Fund’s US$44-billion rescue package. Notably, much of the IMF plan aligns with OECD requirements.

To be sure, the path ahead is fraught with challenges. Despite the government’s commitment to stabilisation, Argentina might struggle to implement the major reforms required to meet the OECD’s standards. Given that Argentina’s economic structure and policies may differ from those of most OECD member states, its accession could impede consensus-building and undermine the effectiveness of the organisation’s guidelines and credibility.

While these concerns are not groundless, joining the OECD could also catalyse policy reforms, strengthen Argentina’s democratic institutions, and ensure economic and political stability. By boosting economic confidence, it could also stimulate domestic and foreign investment, thereby accelerating the country’s recovery.

Beyond the obvious benefits that OECD membership would offer Argentina, there are several compelling reasons for the organisation to admit the country even before it meets the membership requirements.

For starters, the OECD is a staunch advocate of market-based approaches at a time when such policies are under attack, particularly in Latin America. Under Milei, Argentina has emerged as a leading proponent of free market principles. Admitting a systemically important economy like Argentina could enhance the OECD’s regional influence.

Second, Argentina’s accession would help the OECD in its ongoing efforts to promote international financial reforms. Despite the OECD’s crucial role in this domain, its effectiveness has sometimes been questioned, owing to its lack of financial facilities. But the OECD’s value lies in its proven ability to shape policy through the quality of its research and technical advice. Moreover, by implementing critical structural reforms, Argentina could regain its global standing, demonstrating the value of OECD membership and fostering trust in the organisation.

Third, to maintain and improve its standing among international organisations and the public, the OECD must respond to evolving needs. Criticised for its lack of diversity, the OECD has been actively seeking to expand its membership to include more developing economies. In addition to Argentina, the organisation has initiated accession talks with Brazil, Bulgaria, Croatia, Peru, and Romania. Admitting Argentina would reaffirm the OECD’s commitment to supporting these economies in their pursuit of significant reforms.

At a time when the world economy is grappling with rapid changes in capital markets amid accelerating deglobalisation and heightened geopolitical tensions, admitting Argentina could also demonstrate the OECD’s openness to alternative economic models. Consequently, supporting Argentina’s accession would mean promoting a more equitable globalisation and democratisation.

Lastly, admitting Argentina immediately is simply cost-effective. Unlike the IMF or the World Bank, the OECD does not assume any financial risk when adding new members. Since OECD membership acts as a powerful policy booster, bringing Argentina on board would accelerate its reform and stabilisation process, in line with the organisation’s core mission.

Although Milei’s economic and political reforms got off to a promising start, Argentina’s economy still faces significant challenges. By encouraging the government to implement ambitious structural changes, the OECD accession process could lower the country’s risk premium. Furthermore, it offers the OECD a virtually cost-free opportunity to solidify its status as a leading force in global policymaking. Admitting Argentina would be a clear win not just for the country, but also for the OECD and its members.

Mario I. Blejer, a former president of the Central Bank of Argentina, is a former director of the Centre for Central Banking Studies at the Bank of England. © Project Syndicate 2024 www.project-syndicate.org