U.S. Support for Chile's OECD Accession

UNCLAS SANTIAGO 001132

SENSITIVE
SIPDIS
PARIS PLEASE PASS USOECD
FOR U/S HORMATS (E),WHA A/S VALENZUELA, EEB AA/S BORG, AND OECD AMBASSADOR KORNBLUH FROM AMBASSADOR SIMONS

E.O. 12958: N/A
TAGS: ECON OECD EFIN ECIN KIPR PREL PGOV AORC CI
SUBJECT: U.S. Support for Chile's OECD Accession


1. (U) Summary. Chile is ideally qualified to join the
Organization for Economic Cooperation and Development (OECD) as its
first South American member. U.S. support for Chile's accession
this December will recognize Chile's remarkable economic, social,
and political achievements over the past two decades, and seat an
innovative (albeit modest sized) economy at an important global
policy table. End summary.




2. (U) In October, the Chilean Congress passed the last of the
four pieces of legislation that the Bachelet Administration
portrayed as critical for OECD accession. Chile's accession
request will be considered by the OECD Council on December 10 and,
if the Council approves, Chile will be invited to become an OECD
member at the December 15 Council session.



SOLID GLOBAL CITIZEN




3. (U) Chile is an excellent citizen of the international economic
community. There is strong domestic consensus on the importance of
stable economic policies built on fiscal discipline, private sector
led growth, and market openness. Chile's foresight to run
systematic budget surpluses and to set aside over $17 billion
windfall copper profits in reserve funds has left it
well-positioned to respond to the global economic crisis. With
trade agreements with 59 countries (including the United States),
it is a leading practitioner of trade integration. These policies
have helped reduce poverty dramatically, from around 40% in 1990 to
14% in recent years. The IMF forecasts that Chile will have the
highest per capita GDP in Latin America in 2009.




4. (U) Chile has implemented an impressive system of private
sector financed concessions to establish world-class
infrastructure, an approach that it is now sharing with its
regional neighbors. And it is working to tackle its social,
educational, and health challenges in a responsible manner,
although it acknowledges more needs to be done. Chile's
conditional cash transfer system was highlighted at the September
Inter-American Social Protection Network conference hosted by the
Secretary, with President Bachelet as a guest of honor.



OECD MEMBERSHIP HELPS FRAME DOMESTIC DEBATE




5. (SBU) Chile aspires to reach developed country income levels
in the next 10-15 years, and is increasingly aware of the need to
frame its domestic agenda to conform with developed country
standards. Pursuit of OECD membership was a powerful incentive to
secure legislation relaxing bank secrecy and to allow for corporate
criminal liability. This legislation helps modernize Chile's
business framework and is a valuable step forward in our bilateral
relations -- the revised bank secrecy provisions, which permit the
national tax service to access Chileans' bank-account information
and share it with other countries' tax authorities, could allow the
United States to conclude a bilateral tax treaty with Chile, the
negotiation of which has been frozen for years.




6. (SBU) More broadly, the wide range of OECD committees and
agreements will provide important reference points for Chile as it
modernizes. For example, potential OECD membership is already
helping to reframe the domestic debate on environmental standards,
increasing awareness of the importance of moving to more stringent
environmental methodologies and enforcement mechanisms. Chile has
also worked with the International Energy Agency (IEA) to review

Chile's energy policies, and the recently published IEA energy
policy review highlights the issues Chile will have to address to
meet its energy needs while lowering its carbon footprint; OECD
membership would open the door to Chile joining the IEA and working
with us on issues of mutual interest.





7. (SBU) OECD membership would also give us an additional venue
to urge Chile to make progress in problematic areas. One of the
biggest irritants in our otherwise strong bilateral relations is
insufficient progress on intellectual property rights (IPR).
Hearing those concerns echoed in an international forum and
reinforced by other developed countries would provide additional
incentives to strengthen its IPR regime.



CHILE GIVES THE OECD A REGIONAL PLATFORM




8. (SBU) Chile would be the first South American country and
second Latin American country to join the OECD. Having a South
American member of the OECD will give the OECD and its members a
platform in the region. Just as potential OECD membership has
helped frame domestic discussions in Chile, we expect that Chilean
membership in the organization would encourage other countries in
the region to aspire to meet OECD standards. Chile recently hosted
the first meeting of the Americas Competitiveness Forum (ACF)
outside the United States, helping bring ACF themes closer to the
region and strengthening the Forum as a regional entity. We
believe Chile's OECD membership would bring similar benefits for
the OECD.



BACHELET LEGACY




9. (SBU) President Bachelet leaves office in March 2010. She sees
Chile's OECD accession as part of her legacy, and talented Finance
Minister Velasco has been particularly committed to driving forward
the accession effort. The Bachelet Administration has expended
considerable energy and political capital in moving key pieces of
legislation relatively quickly through the often slow Chilean
Congress. The Bachelet government has confidently proclaimed that
it will join the OECD on December 15, and any development that
derails those expectations would be a profound disappointment for
this close South American ally. More importantly, Chile's
accession will facilitate another strong Western Hemisphere,
Pacific-focused, market-oriented voice at the OECD policy table.
SIMONS