O RGANIZATION OF A MERICAN S TATES QUOTA SCALE QUOTAS OF MEMBER STATES TO THE REGULAR FUND Office of Budgetary and Financial Services – September 1, 2005

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE CONTENTS 1)BASIS FOR DETERMINING QUOTA ASSESSMENTS 2)BACKGROUND 3)POINTS OF CONSENSUS 4)TO GET A NEW QUOTA 5)CURRENT PROPOSAL 6)IMPACT OF PROPOSAL 7)WHERE WE ARE CONCERNS AND OPTIONS

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE BASIS FOR DETERMINING QUOTA ASSESSMENTS Article 55 “The General Assembly shall establish the bases for fixing the quota that each Government is to contribute to the maintenance of the Organization, taking into account the ability to pay of the respective countries and their determination to contribute in an equitable manner” (emphasis added).

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE 1948 The OAS is established. Charter mandate that contributions be based on the Member states’ capacity to pay is first applied in BACKGROUND The OAS scale was automatically calculated on the basis of the quotas assessed to OAS Member states at the UN, which is also based in the countries’ capacity to pay The quota scale was frozen with the proposal to lower the maximum quota.

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE BACKGROUND 1990 A new scale was approved upon the entrance of new member states into the Organization. It established a 4- year transition period, to lessen the impact of changes resulting from the introduction of the new formula. The scale adopted was not based on an objective formula, and it provided no mechanism for the adjustment of the scale to reflect changes in the capacity of the Member states to pay over time The Chair of CAAP submitted a proposal for a new quota scale based on: a mathematical equation, and the UN scale of quotas.1996 Member countries began to call for the need to review the scale in order to comply with the Charter (capacity to pay).

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE Venezuela and Chile. Whereas the UN regularly updates its scale of assessments based member states’ capacity to pay, the OAS has not done so since Countries that are ranked at the same level in the UN often have very different quotas in the current OAS scale, and vice versa. For example:  Nicaragua and Guyana.  Haiti and El Salvador.  DISTORTIONS HAVE BUILT UP OVER TIME Both pay same quota Nicaragua is 3 ½x that of Guyana El Salvador is 7x that of Haiti’s Both pay same quota Chile is 30% Higher than Venezuela’s Venezuela is 6x that of Chile

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE POINTS OF CONSENSUS Need for a mathematical formula that would allow the OAS quotas to be determined in an objective way and updated periodically. OAS quotas should be based on the UN quota scale (AG/RES 1746 XXX- O/00.) The ranking of quotas should correspond directly with the capacity to pay. Expressing the new quotas with 3 decimal places, would permit a better graduation of quotas among smaller contributors.

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE Establish a maximum quota TO GET TO A NEW QUOTA SCALE: Determine the intermediate values by way of a mathematical relation (quotas of all 35 member states should add up to 100%) Establish a minimum quota Prepare a resolution for approval of the new quota scale at the Special General Assembly If an agreement on a quota scale is not reached, repeat steps 1, 2 and 3

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE EXAMPLE  Maximum quota: % - United States  Minimum quota: 0.020% (Member States paying 0.001% would pay 0.020% at the OAS) Values for minimum and maximum quotas are strictly political decisions agreed upon by the member states

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE  The mathematical relation could be as simple as applying a proportionality constant to the intermediate member states : EXAMPLE OAS quota = UN quota x 4.951

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE WHERE WE ARE Latest proposal considered: CP/CAAP-2673/03 rev. 1 February 25, 2005 The member states have raised the following concerns regarding prior proposed quota scales: –Complex formulas with too many arbitrary parameters –Proposal to have a new scale with no reductions in current assessments –Use the latest data from the UN to update the scale A CAAP-approved scale must be ready for the Special GA tentatively scheduled for November – December 2005

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE ARE THERE OTHER (SIMPLER) FORMULAS? Yes, at least three other methodologies have been proposed and considered by CAAP since The “Traditional” Method Sets a ceiling (59.47%), a floor (0.05% for countries whose UN assessment is 0.008% or lower), and redistributes intermediate quotas in proportion to their UN assessments. 2.An “Alternative” Method Sets a ceiling (59.47%), a floor (0.05% for countries paying the minimum at the UN), and redistributes intermediate quotas using a simple exponential relation. 3.A “Hybrid” Method Sets a ceiling (59.47%), a second ceiling for the second largest contributor (14% was proposed), a floor (0.05% as above), and redistributes intermediate quotas using a simple exponential relation

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE RECONSIDERING YOUR OPTIONS Previous methodologies were not necessarily inferior, but had some drawbacks as well as advantages. All three shared some common characteristics with the one presented in CP/CAAP-2673/03 rev. 1 : 1.Resulting scales do not differ significantly 2.Variations are found in the computed percentages, but not on the rankings 3.They all require defining some arbitrary variables, which have to be agreed upon by the member states (political decisions) 4.The most significant way to affect percentages is to change either the maximum or minimum quota

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE NO REDUCTIONS IN CURRENT ASSESSMENTS? To obtain a scale that would not result in a reduction in assessments, the total quota contribution of all member states would have to be substantially raised. However, all quota reductions are always offset by an equal increase to other contributors, so that the net aggregate variation for all member states is always zero Fluctuations in quotas are inevitable, but they are also transitory The UN continuously reviews its methodology to determine the member states’ capacity to pay

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE  UN scales are adjusted every three years.  The current scale is effective for the triennium. The next one should be approved in late 2006 for the period.  Since the UN scales are not known until after the OAS General Assembly has taken place, new OAS scales will always lag one year behind those of the UN. How often will the scale be updated?

O RGANIZATION OF A MERICAN S TATES QUOTA SCALE OAS SCALES WILL HAVE A ONE-YEAR LAG UN SCALE (Approved late in the last year of cycle) OAS SCALE (Approved in the following June) CP15220