Colombia must enact reforms before joining rest of world on the economy

Colombia must enact reforms before joining rest of world on the economy
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While serving as an ambassador in the U.S. State Department during the Obama administration, I vice chaired an Organization for Economic Cooperation and Development ministerial meeting on the digital economy in Mexico. Colombia made important contributions, but participated as an observer because it has not joined OECD as a full member. I believed then, and I continue to believe now, that the growth and success of the OECD and Colombia are in the interests of each other, and in the interest of global development.

Colombia is well on its way to full OECD membership, but it is not yet there. Its president, Juan Manuel Santos, has said, “The accession process has initiated several institutional reform processes and triggered very important internal reflections…This is a region that has much to learn and much to offer in experiences of social and economic policies…Indeed, it is not easy to decide which is more true…Latin America needs the OECD or the OECD needs Latin America.”

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President Santos is undeniably correct. Colombia is more than capable of joining the community of markets that lean on the OECD and our communal expertise to drive economic success, but in my opinion and that of much of the investor community, our friend to the south is not yet ready to assume a full member seat at the OECD and still requires some additional reform and reflection.

The OECD has served as a sort of Good Housekeeping seal of approval for international investors since its creation. Pursuing membership is a nation’s way of telling the world that it intends to make an effort at cooperative and collaborative public policymaking on the basis of objective economic evidence and compliance with widely recognized best practices. Rather than give Colombia a premature green light towards OECD membership, this is the moment for the organization to underscore the importance of good governance and international norms to investor confidence.

Today, investors are weary about some of what they see happening in Bogota and hopeful that the OECD and others can work to buttress the efforts of reformers. Last year, the Colombian government seized a foreign-owned utilities company, a surprise intervention despite ongoing negotiations. That wasn’t an isolated case. The United States has expressed its concern about local Colombian certification requirements to the World Trade Organization. Finalized in August 2015, the requirements maintain any foreign product imported to Colombia that it designates as “medium” or “high” risk must obtain local conformity certifications in order to be sold in the country. That’s not just burdensome, it’s unfair. Colombia has never established criteria by which it designates products as “medium” or “high risk.”

These practices do not signal readiness for the high standards of the OECD, nor do the intellectual property laws and regulations that remain enormous barriers to doing business. Just last month, the U.S. trade representative identified Colombia among countries that fail to establish appropriate protections regarding intellectual property rights, and for good reason. Pirated goods continue to cross Colombia’s borders. Bus companies continue to play pirated videos without appropriate licenses. The government intervened in the health care market, forcing arbitrary price caps for medicines and instituting an approval process for biological and biosimilar medicines that the United States describes as “inconsistent with international norms.”

Colombia is in many ways a governing miracle. It has successfully ridden on a road to progress and peace over the last two decades by acknowledging hard truths and making hard decisions in the wake of a narco-fueled civil war. We should acknowledge, reward and invest in that success. But it would devalue the currency of the OECD and send a false signal to the market to grant accession now. Absent reform, Brazil and Argentina, with substantial market access and regulatory concerns of their own, would believe they too could skip the hard work of economic modernization and find open arms at the OECD. It is true that the OECD needs Latin America as much or more than Latin America needs the OECD, but not at the expense of the integrity of the institution.

This is a moment for Colombia to continue its rise, lead the region, and do the hard work at home of embracing fairness and open competition, so that one day soon it won’t just have a seat at the Organization for Economic Cooperation and Development. It will elevate it to the next level as a stronger and more diverse group of like-minded nations.

Daniel Sepulveda served as ambassador, deputy assistant secretary, and coordinator for information policy at the U.S. Department of State during the Obama administration. He is now a consultant and nonresident fellow at the German Marshall Fund. The views expressed are his own.