CONVERGENCE CRITERIA

The important agreements described below are responsible for the advances in mechanisms and policies that make macroeconomic policy convergence possible:

• In May 1999, the Second Meeting of the Advisory Council adopted the first criterion for inflation convergence, the agreed objective being the gradual attainment of single-digit annual rates.      

• At its Fourth Meeting (June 2000), the Advisory Council defined a follow-up mechanism for the first convergence criterion, consisting of the presentation by each country of biannual reports.     

• After the Fifth Meeting (June 2001), a second criterion was adopted, this time on fiscal convergence.  It was agreed that the deficit of the non-financial public sector would not exceed 3% of GDP as of 2002 and that the balance of the consolidated public debt (external and internal) would not exceed 50% of GDP at the end of each financial year.    

• In June 2003, at its Sixth Meeting, the Advisory Council instructed the Technical Group to evaluate a proposal to revise the existing inflation convergence criterion, with a view toward reducing the level and volatility of inflation and moderating its dispersion among the Member Countries.      

• Important steps were taken toward harmonizing macroeconomic policies with the approval in May 2004, through Decision 578, of the Regime to avoid Double Taxation and Prevent Tax Evasion.  In July of that same year, an agreement was reached, through Decisions 599 and 600, on the Harmonization of Substantive and Procedural Aspects of Value-Added type Taxes and the Harmonization of Indirect Taxes, respectively.   

CONVERGENCE ACTION PROGRAM 

The Convergence Action Program (CAP) is a document that each country in the region is responsible for presenting to the General Secretariat at the beginning of the year, pursuant to Decision 543 (June 2003), to evaluate the annual attainment of Community targets.  It must be countersigned by both the Minister of Economy and the President of the Central Bank of each country for presentation to the Secretariat.   

ANDEAN COMMUNITY ADVISORY COUNCIL OF TREASURY OR FINANCE MINISTERS, CENTRAL BANK PRESIDENTS, AND ECONOMIC PLANNING OFFICERS

The Ninth Andean Council of Presidents (April 1997) set up the Advisory Council to develop a working agenda for harmonizing the macroeconomic policies of the Andean Community Member Countries, in order to create a climate of economic stability in which the region’s trade and economic relations can prosper.    

PERMANENT  TECHNICAL GROUP (PTG) 

This Group was officially established at the Fifth Regular Meeting of the Andean Community Advisory Council of Treasury or Finance Ministers, Central Bank Presidents, and Economic Planning Officers, as indicated in its report.  It was agreed at that Meeting (clause 5) “to formalize the Permanent Technical Group (PTG), made up of a delegate from each institution participating in the Advisory Council and a delegate from each of the following: the Andean Community General Secretariat, the FLAR, and the CAF, which will report to the Advisory Council and whose main function will be the overseeing of the inflation and fiscal convergence targets. The PTG will use as reference material for its analyses the Convergence Action Programs that the countries will submit in the third quarter of each year and in which they will specify the macroeconomic assumptions and the economic policies they plan to implement the following year.” 

NETWORK FOR MACROECONOMIC DIALOGUE (REDIMA)  

The key aim of the Network for Macroeconomic Dialogue (REDIMA) Project is to promote the exchange of views among those responsible for policies and to reinforce the analytical framework and the quantitative statistics and instruments.  The Economic Commission for Latin America and the Caribbean (ECLAC), which launched the project in 2000, is responsible for coordinating its activities.