Chile Demands Answers in World Bank Business-Ranking Controversy


Source: Bloomberg Markets

Chilean President Michelle Bachelet demanded an investigation into a World Bank report after the bank’s chief economist said its global rankings on the ease of doing business in different countries may have been manipulated for political reasons.

Michelle Bachelet

The World Bank’s Paul Romer told the Wall Street Journal that Chile’s recent decline in the annual “Doing Business” rankings was almost entirely due to methodological changes that could have been politically motivated, and that it wasn’t driven by an actual deterioration in the South American nation’s business environment.

“Given the seriousness of what happened, as a government, we will formally request a full investigation by the World Bank,” Bachelet said Saturday on her Twitter account. “Beyond the negative impact on Chile’s position, the alteration harms the credibility of an institution that must count on the confidence of the international community.”

The “Doing Business” report ranks nations on data points that include how easy it is to get construction permits or register property.

While Chile’s rank in the World Economic Forum’s global competitiveness report has hovered between 33 and 35 in the past five years, its “Doing Business” position has been more volatile.

Chile ranked as high as 34 under the pro-business administration of President Sebastian Pinera in 2010 to 2014, but as low as 57 during Bachelet’s two terms in office, which ran from 2006 to 2010, and from 2014 to now.

Pinera won a new term during elections in December and takes office on March 11. He swept to victory in the second round of Chile’s presidential election in December by a wider than expected margin after pledging to reverse four years of sluggish economic growth. The billionaire businessman has pledged a respite for industry after four years of the most radical reforms in three decades under Bachelet, including increased corporate taxes and moves to empower labor unions.

Chilean economist Augusto Lopez-Claros, who was in charge of compiling Chile’s ranking for the World Bank report, said accusations of political manipulation were “wholly without merit.” Chile’s recent rankings decline was due to other countries, including Mexico and Colombia, stepping up their efforts, as well as fully-justified and transparent methodological changes, Lopez-Claros said in an emailed note.

That wasn’t how Romer saw it.

“I want to make a personal apology to Chile, and to any other country where we conveyed the wrong impression,” Romer told the Wall Street Journal.

Lopez-Claros is on leave from the World Bank this year while serving as a senior fellow at at the Edmund Walsh School of Foreign Service at Georgetown University in Washington.

Source: Bloomberg Markets