A
girl with Chile’s national flag painted on her face at Monumental
Stadium Santiago, Chile, before Chile’s match against Bolivia,
September 6, 2016.
REUTERS/Ivan
Alvarado

  • The World Bank says changes to the methodology of its
    “Doing Business” report may have unfairly affected some
    countries’ rankings.
  • Political motivations of World Bank staff may have
    influenced the changes, and Chile may have been a
    target.
  • The World Bank says it will revise the rankings for at
    least the past four years.

The World Bank’s chief economist, Paul Romer, told The Wall Street Journal
on Friday that the organization changed the methodology of its
“Doing Business” rankings in ways that were unfair and
misleading, and the organization will recalculate the rankings
for at least the past four years.

The “Doing Business” report ranks
countries by things like the ease of opening a business,
obtaining construction permits, getting credit, or paying taxes.
Countries get penalized for things seen as making the business
environment more complicated or onerous. The rankings are one of
the World Bank’s most prominent initiatives.

Romers’ promised revision could affect the rankings of a number
of countries, but Chile may see the most significant adjustment.
Romer told The Journal that changes
to the South American country’s rank stemmed from methodological
adjustments rather than a deterioration in the country’s business
environment and could have been affected by political motivations
among the World Bank’s staff.

Chile's President Michelle Bachelet reacts after delivering her annual address at the National Congress building in Valparaiso, Chile May 21, 2015.  REUTERS/Rodrigo Garrido Chilean
President Michelle Bachelet after her annual address at the
National Congress building in Valparaiso, May 21,
2015.
Thomson
Reuters

Since 2006, Chile’s presidency has alternated between socialist
Michelle Bachelet, who was in office from 2006 to 2010 and from
2014 and 2018, and conservative Sebastian Piñera, who was in
office from 2010 to 2014 and who will start a new term this year.

Over that 12-year period, Chile’s competitiveness ranking has
shifted between 25 and 57 — rising under Piñera and falling under
Bachelet.

Chile is currently 55 out of 190 countries on the list,
down from 34 in 2014. Its ranking declined to 41 in 2015, 48 in
2016, and 57 in 2017.

Romer said World Bank staff affected how rankings were calculated
by repeatedly changing the report’s methodology and that
corrections will focus on changes that penalized Chile’s ranking
during Bachelet’s most recent term.

“Based on the things we were measuring before, business
conditions did not get worse in Chile under the Bachelet
administration,” Romer told The Journal, offering “a
personal apology” to Chile and other countries affected.

He said the report’s problems were “my fault because we did not
make things clear enough” and that he couldn’t defend “the
integrity” of the process that led to the changes in methodology.

‘Rare to see an action this immoral’

The former director of the World Bank group responsible for the
report, Augusto Lopez-Claros, defended those changes, saying
they came after “extensive internal peer review” and were
announced by the bank. “The whole process was undertaken in a
context of transparency and openness,” he told The Journal.

Lopez-Claros said claims that
methodological changes targeted Chile were “wholly without merit”
and that the country’s fall came as other countries undertook
reforms. Lopez-Claros is a former professor at the
University of Chile and is on leave from the World Bank this year
while serving as a senior fellow at Georgetown.

Chilean presidential candidate Sebastian Pinera celebrates as he delivers a speech to supporters after leading in the first round of general elections in Santiago, Chile November 19, 2017. REUTERS/Carlos Garcia RawlinsSebastian
Piñera celebrates during a speech to supporters after the first
round of general elections in Santiago, Chile, November 19,
2017.
Thomson
Reuters

In a statement, the World Bank said
it treats “all countries equally in our research, and the Doing
Business indicators and methodology are designed with no single
country in mind but so that the overall business climate can be
improved.” The statement also noted the Bank will conduct an
external review in light of Romers’ concerns.

Chile is one of Latin America’s wealthiest economies. Piñera
presided over booming growth from 2010 to
2014, largely driven by high prices for copper, which is Chile’s
chief export.

Falling prices for the commodity led to a deceleration in growth
during Bachelet’s most recent term. Piñera handily defeated
Bachelet’s preferred candidate in 2017, promising to reduce red
tape and increase investment.

Bachelet responded to the report on Twitter, calling it “very
concerning.”

“More than the negative impact on the position of Chile, the
alteration damages the credibility of an institution that must
have the confidence of the international community,” Bachelet
added, saying that her government would formally ask the World
Bank for a complete investigation. “The ranks administered by
international institutions must be trustworthy, as they impact
investment and the development of countries.”

Chile’s economy minister, Jorge Rodriguez Grossi, said it was “rare to see an
action this immoral.”

“We hope the correction to the index is rapid, but the damage has
already been done, and it is to be hoped that statistics are
never again manipulated with political objectives,” he said.

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