In May 2017, Brazil sent a formal request to join the OECD.
The Brazilian government believed that becoming an OECD member
would help attract foreign investment into the economy.
However, the acceptance of Brazil as an OECD member is
Just a few years ago, Brazil’s chances for
acceptance into the OECD were much more favorable.
Brazil’s historical membership
In 2009, the former OECD Secretary Angel Gurría, who
was visiting Brasília to present an analysis on the
Brazilian economy, noted that "the possibility of Brazil
becoming a formal partner of the OECD is up to the Brazilians;
our doors are open to Brazil".
Such an invitation was to be evaluated by Guido Mantega, the
former Brazilian Finance Minister. However, at the time,
Mantega expressed a lack of interest in the invitation.
Subsequently, the opportunity to join the OECD then was
Nowadays, the conditions to join the OECD have changed, and
Brazil’s 2017 request has been subject to a more
stringent evaluation with additional requests for economic
adjustments and the possibility to be subject to veto by OECD
member countries. Currently, Mexico, Chile and Colombia are the
only Latin American members of the OECD.
Following Brazil’s application for OECD
membership in 2017, which was supported by former President
Michel Temer, several lobbying attempts by the Brazilian
authorities have been made to expedite the process.
At the beginning of 2018, Henrique Meirelles, the then
Finance Minister, along with Angel Gurría, the OECD
Secretary-General, and Jorge António Rachid, the
Secretary of the local tax authorities, launched an OECD-Brazil
work programme to start making local transfer pricing (TP)
rules more compatible with the OECD TP guidelines. This
programme seeks to align Brazil’s rules and unique
characteristics with internationally accepted practices.
OECD membership requirements
The decision to accept Brazil into the OECD is now partly
dependent on the OECD Committee for Tax Affairs, one of the 23
committees that advise the OECD Council. The
committee’s assessment, which is related to local
TP rules, can vary ranging from:
Acceptance with a specified deadline for
Acceptance after reservations or modifications to local
TP rules, to rejection of local TP rules.
The 23 OECD Committees deal with various topics that range
from fiscal, to the environment, education, and policies
specific to topics such as the working group on bribery on
international business transactions, which are all guided by
OECD's core values.
These core values include a commitment to pluralistic
democracy based on the rule of law, respect for human rights,
adherence to open and transparent market economy principles,
and sustainable development.
The recent election of Jair Bolsonaro as the new president
of Brazil, and Paulo Guedes as Finance Minister, has raised
doubts on whether the government would continue to seek
membership of the OECD. However, last January, during the World
Economic Forum at Davos, Guedes met with Gurría and
indicated Brazil's intention to enter the OECD as soon as
possible. The OECD secretary characterised the meeting as very
As mentioned above, the acceptance of Brazil to the OECD is
subject to veto from its members. In March 2019, during a state
visit by the Brazilian president to the US, Bolsonaro secured
US President Donald Trump's support for the
country’s entry into the OECD. However,
Trump’s support did not come free, and came with
conditions that notably included Brazil renouncing preferential
treatment as a "developing country" by the WTO.
Protectionism and preferential treatment of developing
countries by the WTO was harshly criticised by Trump in a press
conference in October 2018. He noted:
They charge us what they want…If you ask some people,
they say that Brazil is among the toughest in the world
– may be the toughest in the world. And we don't call
Brazil and say, 'Hey, you're treating our companies unfairly,
treating our country unfairly….’
BaseFirma believes that Brazil’s acceptance to
the OECD should not be contingent upon its non-inclusion in the
list of countries that the WTO supports in its effort to
overcome poverty and become more developed.
That was not the case for countries such South Korea, Mexico
and Turkey, which are members of both the G20 and the OECD, and
are also included in the WTO’s list of developing
Transfer pricing alignment
From a local perspective, BaseFirma supports aligning
Brazilian TP rules with the OECD model in order to create a
more favorable treatment of multinationals doing business in
Brazil’s unique methods in testing import and
export transactions with fixed statutory margins fail to
consider risks and functions assumed by the local entity. The
required fixed margins may require up to a 66% mark-up for
tangible goods imported from related parties, depending on the
company's economic sector.
If Brazil wants to minimise the reasons why OECD members may
veto its acceptance, it should start by giving up its current
TP system, and re-design it to be more in line with
internationally accepted principles.
Taxpayers and international investors have been waiting for
changes to the Brazilian TP rules for decades. It is about time
to move on and make it easier to do business in Brazil.
||Davi Santana de Jesus
This article was written by Davi Santana de Jesus
(email@example.com) of BaseFirma