Technical or political, friendly or heated, these debates have explored all the aspects of the tumultuous relationship between the IMF and Latin America, except for one: What Fund do we want? How should we reform the Fund, if we could?
Over the last few decades, the International Monetary Fund has been portrayed in Latin American public opinion as a blood-sucking vampire, a saviour of bankrupt countries, and even a political ally of last resort without whom a presidential candidate can be seen as unduly risky for international investors. In the press, in Parliaments, and in cafes, discussions are held on whether or not the debt with the institution should be paid, if its conditionalities should be met, and during the last weeks, if the purchase of IMF bonds by Brazilian President Lula da Silva is a treasonous unprincipled act or if it is just a good way to branch away from US Treasury Bonds.
Technical or political, friendly or heated, these debates have explored all the aspects of the tumultuous relationship between the IMF and Latin America, except for one: What Fund do we want? How should we reform the Fund, if we could? This is the precise question that the IMF has formulated to a group of academics, unionists, and NGO activists, who have been convened to participate in an off- the-record, experimental but potentially transforming dialogue with the institution.
The governance in question, which is the focus of the debate, is “how the IMF should be formally governed, according to its constitution, as well as in practice, in relation to who really makes the decisions and can influence the results”.
To assure the credibility of this process among a sceptical public, the IMF trusted the leadership of these consultations to Jo Marie Griesgraber of the “New Rules for Global Finance” coalition and a stalwart human rights defender who was a colleague of the assassinated ex- Chilean Foreign Minister Orlando Letelier at the NGO Washington Office on Latin America.
Following the consultations, Griesgraber will submit a document with recommendations in September, including possible short-term reforms as well as those of a larger scope which would require profound changes to the institution’s constitution. There already exists a baseline agreement among the organizations that have sent in opinions via the web, which focuses on the need to enshrine the principle of responsibility, diametrically opposed to the impunity which currently shrouds the activities and employees of the IMF and its sister institution, the World Bank.
This responsibility, according to civil society institutions, includes four elements: transparency, evaluation, participation, and a complaints mechanism. The Fund is a public institution, with public financing (from contributing countries), and in many cases fulfils a de facto legislative function, especially in borrowing countries. For this reason, the same kind of parliamentary control mechanisms that oversee the governance of public institutions on a national level should also be applied to the Fund.
Formally, the Articles of Agreement of the IMF created an organization of sovereign States with equal status, which functions like a cooperative, to which all contribute and from which all can obtain loans, with those who contribute more resources receiving a larger percentage of votes. This de jure regimen does not function in practice. The “quotas” distributed based on political criteria have not been able to be modified due to the necessity of obtaining a vote of a qualified majority as well as the veto power exercised by the United States and the European Union (if its members vote jointly).
In these conditions, what real possibilities of reform exist? Why waste time on something that has not been able to be accomplished in six decades? The answer is that, beyond the reformist thinking of some of the institution’s directors, the IMF has no other choice than to reform itself because the world has changed. In order to guarantee its own survival, the IMF now needs the financial support of the countries with funds to invest (China, Brazil, Russia, and the Arab monarchies), who are little inclined to contribute without having a say in the institution. It also needs the political support of the US Congress, dominated nowadays by Democratic politicians such as Barney Frank, President of the Appropriations Committee, for whom the liberalization of finances and structural adjustment plans promoted over the last quarter century by the IMF are “transparently stupid”.
This signifies that if the Fund does not reform itself promptly in a convincing way, the final opinion which will triumph in this debate, could be that which was pointed out by Jo Marie Griesgraber in a footnote in one of the preparatory documents for the consultation: that of those who believe that the IMF is impossible to reform and propose its abolition.