PERMANENT COUNCIL of the OEA/Ser.G s21

PERMANENT COUNCIL OF THE OEA/Ser.G

ORGANIZATION OF AMERICAN STATES CP/CAAP-2795/05

4 November 2005

COMMITTEE ON ADMINISTRATIVE Original: English

AND BUDGETARY AFFAIRS

EFFECTS OF RAISING THE MINIMUM QUOTA

(Document presented by the Secretariat at the request
of the Working Group to Study a Scale of Quota Assessments)

EFFECTS OF RAISING THE MINIMUM QUOTA

(Document presented by the Secretariat at the request
of the Working Group to Study a Scale of Quota Assessments)

At the October 17th session of the Working Group, the member states requested the Secretariat to prepare new tables showing the impact of an increase in the minimum quota from 0.020% to 0.025% and to 0.030%.

The attached tables show the impact of these increases as Exhibits 1-B025 and 1-B030. Their corresponding expressions in nominal terms (in thousands of US $), are shown as Exhibits 2-B025 and 2-B030. These labels were chosen to facilitate their comparison to Exhibits 1-B and 2-B, which were scales previously distributed to the working group as part of the document titled “Parameters for Considering a New Quota Scale”. These original tables displayed the scales that resulted from the application of the four different computation methodologies that transformed the UN assessments into an OAS scale. These tables also included a recalculation of the quota for Cuba. Member states are listed according to their UN quota, in ascending order.

The shaded areas on Exhibits 1-B025, 1-B030, 2-B025, and 2-B030 cover those quota amounts that have experienced reductions in relation to the quotas presented in Exhibits 1-B and 2-B. Since all scales must add up to 100%, naturally, these reductions occur to offset the increases that result from raising the minimum quota.

Effects of raising the minimum quota:

One of the underlying premises present in each of the methodologies under consideration is that a member state that pays the minimum quota at the UN, would be assessed the minimum quota at the OAS. The eight OAS member states that pay the minimum at the UN are: Belize, Dominica, Grenada, Guyana, Nicaragua, Saint Kitts and Nevis, Saint Vincent and the Grenadines, and Suriname.

Raising the minimum quota may also raise or lower the quotas of other member states, depending on the methodology being applied and on their numerical proximity to the minimum quota. There would be no effect on the quota of the largest contributor, since it has been capped at 59.47%.

The following analysis is limited to comparing the effects on quotas expressed as percentages. Therefore, the discussion is limited to comparing Exhibits 1-B vs. Exhibits 1-B025 and 1-B035. The same analysis may be performed using nominal quota amounts, yielding identical results. Nominal quota amounts are based on an overall contribution level of $76,652,800. These are presented in Exhibits 2-B, 2-B025, and 2-B030.

Raising the minimum to 0.025% - Exhibit 1-B025 vs. Exhibit 1-B

Traditional Methodology. Using this methodology would raise the number of member states paying the minimum from 11 to 12[1]. Member states that pay a UN quota higher than 0.005 (i.e., higher than that of Honduras) would experience a slight reduction in their quota. This reduction could be as high as 0.020 percentage points.

Alternative Methodology. Member states contributing 0.048% or less at the UN would experience a raise in their quota. This is because raising the floor would have a ripple effect on those countries whose quota is numerically close to the minimum. Member states whose quota is 0.092% or higher, would experience a slight reduction[2]. This group includes, in ascending order, Peru, Colombia, Venezuela, Chile, Argentina, Brazil, Mexico, and Canada.

Hybrid Methodology. The effects are very similar to those seen in the previous methodology, except that the quota for Canada remains at the same level. The level of variability is also of similar magnitude, notwithstanding the wide differences in the resulting scales. As an example, the calculated quota for Colombia, shown in Exhibit 1-B, is 1.154% under the Alternative methodology, and 0.746% under the Hybrid methodology. When the minimum quota is raised, as shown in Exhibit 1-B025, the new quotas are, respectively, 1.152% and 0.739%. Even though the quotas resulting from the application of these methodologies are quite different, raising the minimum quota produces only small net reductions of 0.002% and 0.007%.

Logistic Formula. Using the scale resulting from applying the parameters listed as “a.1” (with c = -0.967), member states contributing 0.092% or less at the UN would experience a raise in their quota due to the “nudging-up” effect that results from raising the minimum. Member states whose UN quota is between 0.155% and 1.883% would experience a reduction. This group includes, in ascending order, Peru, Colombia, Venezuela, Chile, Argentina, Brazil and Mexico. Canada would experience an increase in its quota. This increase in the second largest-ranked UN contributor among OAS members is intrinsic to the behavior of the logistic function. The scale resulting from applying the parameters listed as “a.2” (changing the parameter to c = -0.9505), shows that the overall quota burden is shifted to the larger contributors, Brazil, Mexico and Canada, thus relieving smaller contributors somewhat from the upward push exerted by the rise in the minimum quota.

Raising the minimum to 0.030% - Exhibit 1-B030 vs. Exhibit 1-B

Traditional Methodology. Using this methodology would raise the number of member states paying the minimum from 11 to 12. Member states that pay a UN quota higher than 0.005% would experience a slight reduction in their quota. This reduction could be as high as 0.040 percentage points.

Alternative Methodology. As in the scenario described under Exhibit 1-B025, member states contributing 0.048% or less at the UN would experience a raise in their quota. Member states whose quota is 0.092% or higher, would experience a slight reduction.

Hybrid Methodology. Again, the effects are very similar to those seen in the previous methodology, including an unchanged quota for Canada.

Logistic Formula. Using the scale resulting from applying the parameters listed as “a.1” (with c = -0.8495), member states contributing 0.035% or less at the UN would experience an increase in their quota. Member states whose UN quota is between 0.048% and 1.523% would experience a reduction. This group includes, in ascending order, Peru, Colombia, Venezuela, Chile, Argentina, and Brazil. Canada and Mexico would experience an increase in their respective quotas. This increase in the second and third largest-ranked UN contributors among OAS members is intrinsic to the behavior of the logistic function. The scale resulting from applying the parameters listed as “a.2” (changing the parameter to c = -0.83955), displays a shift in the overall quota burden towards the larger contributors, Brazil, Mexico and Canada, thus providing some relief to smaller contributors from the upward push exerted by the rise in the minimum quota.

Shaded areas indicate a reduction (see Exhibit 1-B)

Shaded areas indicate a reduction (see Exhibit 2-B)

DAF/OBFS - 1 - 11/4/2005

[1] . As explained earlier, there are eight OAS member states paying the minimum at the UN, and it would be expected that the same number would be paying the minimum in the proposed scales. However, when the Traditional Methodology is applied, the calculated quota for some member states would fall below the pre-established minimum. A correction must be applied to raise their quotas to this minimum and the difference distributed among the other member states. This results in Exhibit 1-B showing 11 member states paying the minimum, as opposed to the expected eight.

[2] . Some differences may not be readily apparent because of the rounding-off of the percentages; however, since the scales are applied using all decimals, these differences will become evident in the calculation of the nominal quota amounts. For example, Peru’s UN quota is 0.092%, and, under the alternative methodology, its calculated OAS quota would be 0.76205742% if the minimum of 0.020% were maintained. If this minimum were raised to 0.025%, its new OAS quota would be lowered to 0.7615712%. A comparison of Peru’s nominal quotas in tables 2-B and 2-B025, calculated under the same methodology, reveals a decrease in quota amounts from $568,900 to $568,500.