(First published in Sinhala and dated 22 May 2007)
“We will no longer have to go to Washington nor to the IMF nor to the World Bank, not to anyone,” declared Hugo Chavez, when he recently announced Venezuela’s decision to leave the International Monetary Fund and World Bank (WB).
Once again Chavez underlined his ability to stun and enrage the US government while inspiring critics worldwide of these Washington DC based international financial institutions.
The IMF and WB in alliance with the US Treasury have pushed developing countries to adopt neo-liberal (or ‘Washington Consensus’) economic policies that are harmful to the living standards and social welfare of the poor and marginalised.
The United States has a greater voting share within these organisations than all poor countries combined.
In Venezuela itself, back in 1989, these austerity measures led to a sharp rise in the price of essential commodities, fuel and public transport, sparking riots in Caracas (Caracazo) in which 300 were killed.
Thus Chavez ensured soon after election in 1999 that outstanding loans from the IMF were repaid and recently repaid its debt to the World Bank in full allowing it to freely exit from these institutions.
The Ecuadorean government of Rafael Correa has been following in Chavez’s footsteps. It too has repaid in full its loans from the IMF.
Correa also asked the World Bank’s Country Representative to leave Ecuador complaining of “extortion by this international bureaucracy”, following pressure from the Bank to use oil revenues for debt service repayments instead of social spending.
Daniel Ortega, Nicaragua’s President, has announced his intention to escape from the “prison of IMF debt” by also withdrawing from the IMF.
The Argentine government too has been trying to repay all IMF borrowings ahead of schedule to free itself from the crippling conditionalities attached to these loans that undermine economic recovery and human development centred growth.
These developments in Latin America call into question the legitimacy and relevance of these institutions.
Chavez proposes a ‘Bank of the South’ (Banco del Sur) for Latin America that supports development and gives government greater policy space, predicting that “sooner or later [the IMF and WB] will fall due to their own weight”.
Although initially conceived as a Latin American bank, such an institution would be an influential alternative to neo-liberal hegemony around the planet.