In late January, the government of Argentina stood up to the International Monetary Fund. And, for the second time in less than six months, the IMF backed down. Does this unprecedented move presage a major shift in the balance of power between multilateral lenders and Third World debtors? It sure looks that way to Mark Weisbrot, a liberal economist at the Washington-based Center for Economic and Policy Research, writing recently in his syndicated newspaper column.
After a recent meeting of heads of state in Monterrey, Mexico '. . . the Fund approved the latest installment of its lending to Argentina, after having failed in its efforts to get a better deal for Argentina's private creditors,' Weisbrot reports. The Bush administration, stung by criticism of its foreign policies at the Monterrey Summit, decided it was not the right time for a face-off with Argentina, and prevailed upon the IMF, the most powerful lending institution in the world, to back down. This is no small feat, considering that the Fund is used to getting its way with smaller debt-ridden countries like Argentina, which at $88 billion has racked up the biggest sovereign debt default in history.
'The case of Argentina has enormous implications for our understanding of what the Fund actually does and does not do,' Weisbrot says. 'Not only does it pay its clients to take economically destructive advice -- as it also did in Asia, Russia, Brazil, during the 1990s. It also fails to act as a 'lender of last resort' -- the common understanding among policy makers of what the Fund's purpose is -- when such a lender is most urgently needed.'
'Furthermore,' Weisbrot continues, 'we can see more clearly than ever in the IMF's 60-year history its role as organizer of a creditors' cartel, as it openly tries to use its muscle on behalf of the private foreign creditors.' Which makes it all the more ironic that the US government, the dominant voice within the Fund, decided that the IMF should back down this time.
Weisbrot predicts we'll see more confrontations like this in
coming months, as Argentina's example emboldens other poor
countries to challenge the IMF's harsh loan terms. And rightly so,
he says. Even some free market fundamentalists 'are now questioning
why the IMF (and the World Bank and other multi-lateral lenders)
shouldn't share the losses of the private sector and take a haircut
on their own loans. Now that would truly mark the end of an
-- Leif Utne
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