[stop-imf] "Latin America Unchained" from IMF

[robert weissman]

http://www.tompaine.com/print/latin_america_unchained.php


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      <http://www.tompaine.com/print/latin_america_unchained.php>**Latin
      America Unchained


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        *Mark Engler


        March 16, 2006*

/Mark Engler, an analyst with Foreign Policy In Focus, can be reached
via the web site/ /http://www.DemocracyUprising.com/
<http://www.democracyuprising.com/>/. Research assistance for this
article provided by Kate Griffiths.

/*For decades the International Monetary Fund* (IMF) served as one of
the key pillars of the "Washington Consensus." Dominated by the White
House, the Fund allowed successive administrations to control the
economic policy of poorer countries in this hemisphere and beyond. Those
nations wishing to buck a U.S. agenda of corporate globalization risked
having their access to international loans cut off. The brutish IMF not
only handled its own funds but also played gatekeeper for money from
other creditors, such as the regional development banks. This power made
the institution as hated throughout the global South as it was
celebrated inside the Beltway.

Maybe it's not surprising, then, that an increasingly progressive Latin
America is starting to say good riddance.

In recent months, major countries in the region have moved to pay off
their loans to the IMF ahead of schedule and free themselves of direct
oversight from the Fund. Announcements in December from Argentina and
Brazil, which are paying off $9.8 billion and $15.5 billion
respectively, inaugurated the trend in the region. In addition, Bolivia
was relieved of its outstanding obligations to the IMF by last year's
debt relief agreement at the G8. The country's newly elected president,
Evo Morales, has indicated that he may let his standby agreement with
the IMF expire at the end of the month.

The motivation for cutting ties has been explicitly political. The Latin
American electorate is fed up with policies like privatization and
curtailed social spending; these policies, hallmarks of IMF
"neoliberalism," have hit the countries' poor majorities hardest.

It would be one thing if the Fund's prescriptions worked in creating
economies that served their people. But in country after country,
neoliberal economic mandates have produced lackluster growth at best and
often have resulted in catastrophe. Argentina was once a poster child of
IMF economics; that is, until its economy collapsed in 2001 under
neoliberal guidance. As voters throughout the region demand change and
put left-of-center governments into power, leaders like Argentinean
President N=E9stor Kirchner proclaim that throwing off the chains of IMF
debt constitutes an overdue victory=ADa move toward "political sovereignty
and economic independence."

Interestingly, within the domestic political debates of Argentina and
Brazil, the left has been critical of the decision to repay. Social
movement activists argue that the debts, some of which had been
accumulated by past military governments, were unjust and should be
renounced outright. In Argentina, critics contend that the IMF should
have to pay for a crisis it was largely responsible for creating.
Instead, billions of dollars that could have been used for needed social
programs are going back into the Fund's coffers.

The activists may have had a solid argument. But now that the deals are
going forward, it's time to assess their impact: Will freedom from the
IMF lead to a truly independent economic path?

On the face of it, distance from the IMF will provide poor and
middle-income countries with room to chart a more autonomous course.
Still, there are complicating factors. Remaining debts to institutions
like the Inter-American Development Bank and the World Bank can be used
to leverage governments to impose neoliberal policies. In Brazil, where
Lula da Silva's ostensibly progressive government has mostly adhered to
the orthodox economic prescriptions of corporate globalization,
political will to change may be lacking. Finally, the IMF will be able
to continue giving its recommendations to other creditors.

The power of such advice, however, is not what it once was. The IMF has
lost a lot of clout in recent years, due in no small part to Argentina.
Since taking power in the wake of the country's economic crisis,
Kirchner has played hardball in negotiations with the IMF and private
creditors. The strategy worked, allowing his government to negotiate a
very favorable restructuring of its loans. Argentina standing up to the
IMF was like an underdog knocking down the schoolyard bully. The aura of
invincibility surrounding the Fund was dispelled, and the institution
will likely never again inspire the same begrudging awe. Furthermore, as
the failures of neoliberalism grow increasingly evident, creditors like
the World Bank have been compelled to moderate their once-stringent
conditions on loans.

In a final critical development, the oil-rich government of Hugo Ch=E1vez
in Venezuela has stepped forward to provide other Latin American leaders
with financing they might otherwise have needed to beg from Washington.
Venezuela already bought up $2.4 billion worth of Argentina's debt to
help the country break free of the IMF, and Ch=E1vez has expressed a
willingness to do more. This source of backup funds makes the
governments of the Latin American New Left considerably less susceptible
than before to threats of capital flight.

Cutting ties with the IMF is not just a regional phenomenon. Russia and
Thailand have pursued strategies of early debt repayment, and Indonesia
and Pakistan are among those now contemplating the move. Asian countries
that were burned by the region's neoliberal financial crisis in 1997 are
building up large cash reserves so that they will not have to go back to
the Fund in times of economic downturn.

These policy trends are producing funding shortfalls for the IMF. Since
Argentina, Brazil, and Indonesia represent three of the Fund's four
largest clients, a lack of interest payments from these countries will
make a serious dent in the institution's operating budget. Currently,
the IMF expects to be $116 million short in fiscal 2006. Not that the
Fund is going broke. Among other assets, the institution sits on more
than $56 billion worth of gold. Nevertheless, Managing Director Rodrigo
de Rato has initiated a strategic review of the IMF's activity, and the
institution is contemplating a future of reduced global influence.

The bigger trial may be for the United States. As the administration's
command over its Southern neighbors declines, its rhetoric will be put
to the test. The White House has long proclaimed that promoting
democracy and reducing poverty are key foreign policy goals, even while
it has limited its support to governments willing to toe the neoliberal
line. Democratically elected leaders in Latin America are calling the
bluff. They are refusing to defer to self-serving U.S. prerogatives, and
instead they are seeking economic policies that can reverse the failures
of corporate globalization.

Washington now has a choice: It can redefine its sense of national
interest, cheer democratic renewal in the region, and acknowledge that
the rigid economic program once forced into place by the IMF cannot fit
all countries. Or it can become an ever-more-despised adversary for
citizens throughout the Americas.