UPDATE 1-World Bank defends Chile rankings after bias accusation -letter

(Adds statement from Romer)

SANTIAGO, Jan 16 (Reuters) - The World Bank told Chile it did not treat the South American country unfairly in its closely watched annual "Doing Business" index, disputing accusations of bias made by its own chief economist, according to a document seen by Reuters on Tuesday.

Chilean officials have called for an investigation after World Bank Chief Economist Paul Romer suggested last week that changes in the report's methodology caused Chile's ranking to decline under socialist President Michelle Bachelet, and that the changes may have been politically motivated.

In a letter dated Monday sent to Chilean Finance Minister Nicolas Eyzaguirre, World Bank Chief Executive Officer Kristalina Georgieva said it was "unfortunate" that Romer had questioned the report, which ranks countries' competitiveness based on factors like the ease of paying taxes and getting credit.

"This is not the view of World Bank management," Georgieva wrote. "We do not have any evidence to support the notion that the methodology is skewed to disfavor Chile."

Romer, who had made his original comments in an interview with The Wall Street Journal, on Tuesday issued a statement saying he had not seen any sign of manipulation of the numbers published in the Doing Business report.

"In the production of the Doing Business report, we changed our methods for solid reasons. These changes were carefully considered. But when we implemented the changes, we could have explained more clearly why, for example, Chiles ranking fell," he said in the statement.

Since taking office in 2014, Bachelet has introduced progressive tax and labor reforms that Chile's business community say have crimped investment, but her administration has not fundamentally altered the country's longstanding free-market model.

Romer's comments have angered government officials, who say that the World Bank index, widely reported in the Chilean media, had lent unfair weight to critics' arguments that Chile's openness to business had declined under Bachelet, and may have been a factor in center-right Sebastian Pinera's win in last month's presidential election.

On Saturday, the World Bank said the index was designed with no single country in mind, but that it would review Chile's indicators in light of Romer's comments. The economist in charge of the index, Augusto Lopez-Claros, defended the study.

In the letter, Georgieva said Chile was particularly affected by changes to the "Paying Taxes" component of the index, which were finalized in November 2015.

"The drop in the country's ranking was due to the methodology expansion in Paying Taxes and there was no absolute decline in the efficiency and quality of business regulation in Chile," she wrote, noting that the bank issued a Chile-specific statement in October 2016 explaining the change.

If the methodology had not changed, Chile would have ranked 37th in 2015 instead of 41st, and 43rd in 2017 instead of 57th, Georgieva wrote.

In a blog post dated Jan. 15, Romer said that if there had been no changes Chile's rank would have declined from 46th to 48th in those years. He could not immediately be reached for comment on Tuesday. (Reporting by Antonio de la Jara; Writing by Luc Cohen; Editing by Rosalba O'Brien and Leslie Adler)