Wednesday, May 27, 2009

IMF vs The Bank of the South -
IMF to Clean Up Its Act?

At the Group of 20 summit in London last month, President Obama pledged to boost IMF funding to "help countries weather the global economic crisis." On Thursday, May 21st, the Senate approved the IMF funding as a part of the $91 billion funding bill for the wars in Iraq and Afghanistan. This seems appropriate somehow, since international banking institutions like the IMF have laid waste to the economies of poor countries of the global south.
The IMF, World Bank and International Development Bank (IDB) have similar stated missions: "working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world." However, a 2000 internal World Bank report concluded that poor countries are better off without structural adjustment and that some of their policies do not work. Almost a decade later no significant reforms to these antiquated policies have been made, not at the World Bank, not at the IMF nor at the IDB.
Some of the general issues that are of great concern to countries who have been burned by these institutions are outlined below. Additionally, the human rights abuses perpetrated against Haiti by the IDB are also explained. Unfortunately, when these human rights abuses were happening in Haiti, calls for accountability fell on Congress' deaf ears.
Is the global economic crisis enough to spur legislators in Washington to look into past abuses in order to avoid future missteps by these antiquated institutions? Not likely. Washington's modus operandi is to *move on* from crisis to crisis with no accountability for past abuses. When a crisis results from bad policies, the mantra from Washington is predictable; *we must look forward, and not backward*.
While it's clear that international banking institutions, sorely need to have "pre-conditions" for any new funding, what is not clear is whether the Congress has the will to impose or enforce any existing or new standards. Particularly, if it would require reform of the existing policies of these institutions.
The world banking system has virtually collapsed from greed and corruption, yet aside from show hearings, no real reform or accountability for Wall Street and banks has taken place in Congress. Also, to date the particularly predatory, criminal practices of the IMF, World Bank and IDB have not come under any substantive scrutiny from the mainstream media.
For instance, the IDB is accused of human rights violations in Haiti. An expose in 2008 by the RFK Center's Human Rights Director Monika Kalra Varma and the Director of Zamni Lasante, Loune Viaud sites internal emails at the IDB:

"In 2001, US officials threatened to use their influence to stop previously-approved IDB funding unless Haiti's majority political party submitted to political demands to accept a particular apportionment of seats in a Haitian electoral oversight body. Soon after, at the behest of the US, instead of disbursing the loans as planned, the IDB and its members took the unprecedented step of implicitly adding conditions to require political action by Haiti before the funds would be released. These actions violated the IDB's own charter, which strictly prohibits the bank and its members from interfering in the internal political affairs of member states."
... The results have been devastating. The town of Port-de-Paix, selected 10 years ago by the IDB as the first project site due to its particularly deplorable water situation, has yet to see the implementation of any water projects. A study conducted by Zanmi Lasante, Partners In Health, the Robert F Kennedy Memorial Center for Human Rights, and New York University's Center for Human Rights and Global Justice found no functioning public water sources in the city.
Researchers found three-quarters of water sources in the city contained high levels of coliform bacteria, a key indicator of contamination with faecal matter. A frightening 15% of households reported symptoms likely related to typhoid.

If the US and other member states join the IDB and take on the responsibility to improve conditions in the Americas, they cannot then use their membership to undermine the basic rights of the people they claim to serve simply to advance their own political agenda.
The IDB and the US government must take responsibility for their actions and implement the necessary transparency mechanisms to ensure that such abuses do not recur. Congressional inquiries and annual reviews of the Treasury by the Government Accountability Office could provide the oversight necessary to prevent future political misuse of the IDB and its funds. The people of Haiti, as well as US taxpayers, deserve a system that makes public the status of IDB loans and projects in Haiti in order to ensure that the US and IDB member states uphold their commitments to development and human rights."
The IMF is often criticized for undermining the basic rights of the people they claim to serve.The onerous pre-conditions they impose on poor countries for *development* loans, more often than not perpetuate poverty, underdevelopment and exploitation.

"Some IMF conditions that countries have been forced to comply with can only be described as harsh and undemocratic. Often the devaluation of a nation’s currency has been a precondition for IMF assistance. In order to qualify for IMF loans, some nations have also been forced to lower tariffs, restrict governmental subsidies and spending, balance budgets, as well as sell-off state institutions to foreign interests. In some cases, the IMF has even prohibited wage increases as some countries have tried to do so, in order to compensate for a sharp rise in food prices and other commodities. Environmental and labor rights have also taken a hit as a result of IMF policies. Under the guise of helping economic distraught countries, the IMF is really bailing out foreign investors and multinational corporations. They have further fueled chaos and instability in some of the poorest regions in the world."

-- The IMF: Raping The World, One Poor Nation at a Time

Admittedly, these international banking institutions will most likely never be held accountable for their greed and inhumanity. We have only to look at the bailout of the Wall Street speculators for confirmation of this fact.
A most significant and positive development on the global stage has been the founding of The Bank of the South by Hugo Chavez of Venezuela and his allies in May 2007. The bank is intended as an alternative to the IMF and The World Bank and intends to remedy what some perceive as "a double standard which allows richer countries to use fiscal expansion in the face of recession while poorer nations are forced into stricter economic restraints."
In fact, there has been a significant decrease in "Latin America's dependence on the IMF between 2005 and 2008, with outstanding loans falling from 80% of the IMF's $81bn loan portfolio, to 1% of the IMF's $17bn of outstanding loans.

"In April [2007], Venezuela announced that it was paying off all its outstanding debt with the World Bank—totaling $3.3 billion and dating from before President Hugo Chavez took office in (1999)—five years ahead of schedule. Venezuelan Minister of Finance Rodrigo Cabezas said that because of this, “Venezuela is free ... and thank God, neither today’s Venezuelans nor children yet to be born will owe one single cent to those organizations.” Later that month, in the wake of the Wolfowitz scandal, President Chavez declared that Venezuela was withdrawing its membership in the World Bank and the International Monetary Fund. "
The Bank of the South has been heralded as a step in the formation of a unified Latin America. As Nadia Martinez of puts it: Adios, World Bank! Also, the formation of this alternative bank could be effective in pushing the IMF to reform its ways. Free market competition for development funding from The Bank of The South, is more likely than any proposed Congressional oversight to motivate reform at the IMF, World Bank and IDB. Hopefully, this will mean that poor and developing countries can say, adios/goodbye to the antiquated politicies of the World Bank, IMF and IDB.
Interestingly, an article on the IMF website from February 2009 claims that it is focused on "...Bank Clean Up." Of course, they mean the clean up of banks "damaged" by the global economic crisis, but they should examine the IMF banking system itself for reform and "clean up."

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