LatAm Nations Clear IMF Loans
Ahead of Schedules

Within a context of political change termed by many analysts as the “progressive era” the countries of the region are increasingly doing without the IMF. This trend reached its highest point when Argentina and Brazil made an early payment and cancelled their debt to the IMF in December 2005.
During 2006 Uruguay followed the same path, cancelling its debt ahead of schedule and concluding its program with the institution by end-November. Venezuela and Mexico, in spite of not owing debts to the Fund, followed the same trend, making repayments to the World Bank and IDB ahead of schedule. In order to make these operations, governments made use of international reserves or resorted to the placement of bonds into capital markets.
From the economic point of view, this operation mainly implied a change in terms of debt composition; the external debt was reduced at the expense of an increase in domestic debt. On the other hand, the growing influence of Venezuela in the region, in its role of “rich neighbor” owing to oil resources resulted in economic support for countries that previously had to resort to the IMF or private banks. The latter reinforces a political interpretation of this international trend: financial institutions have lost credibility and countries are trying to escape their influence. However, this does not necessarily mean that in terms of economic policy, national governments are changing the neoliberal policies that have been implemented by previous (and current) governments. Nevertheless, this implies a change in the correlation of forces among several Latin American countries and the IMF, thus leaving them in a better position to make demands and negotiate with the institution.
Meanwhile, the poorest Latin American countries remain under the influence of IFIs. In early 2006, IMF debt cancellation became effective in favor of Bolivia, Honduras, Nicaragua and Guyana within the framework of the HIPC initiative, while the same was implemented by the World Bank in July. Both measures comply with that which was approved by G8 countries in the 2005 Gleneagles Summit. However, such cancellation is far from the one hundred per cent announced in Gleneagles, and these countries had to start a negotiation with the IDB the main creditor of Latin American countries to make it join the decision. A resolution of the issue is still pending.
With regards to the future relationship with the IMF in these cases, the election (and first moves) of Rafael Correa as President of Ecuador and of Daniel Ortega in Nicaragua, is staking out two extreme positions within a broad regional spectrum.
Correa, former Economy Minister of Ecuador, became elected on a discourse that is opposed to IMF influence and on the promise to analyze the non-payment of the external debt. Meanwhile, shortly after taking office, Ortega started to negotiate a new IMF economic program. The influence exerted by the institution is strongly criticized in Nicaragua, owing to the conditions imposed by its programs on the depressed Nicaraguan economy.

The World Bank in 2006
The World Bank resorted to the fight against corruption as a new strategy to maintain relevance in the international context, being its president Paul Wolfowitz the standard-bearer for this initiative. His detractors question the use of this policy, considering the institution to be delegitimized to fulfill a role that falls outside the main duties of the Bank, and demand a substantial reform of its internal structure.
At the same time, through the International Finance Corporation (IFC), the Bank seeks to finance new projects in the region, and analyzes how to expand its influence in middle-income countries (Argentina, Brazil and Mexico, among others) by means of new loan policies.
The annual Doing Business report, issued in September 2006, “Doing Business: How to Reform”, offers Bank's views on the ease and difficulties of doing business in 175 countries, through a wide set of indicators. The document aims at supporting and fostering the classic market reforms and praises those countries that have consented to the liberalization of their economies. However, from the other side, it is alleged that this report is another means used by the Bank to promote orthodox measures such as trade liberalization and labor flexibilization, among others, thus failing to include social and environmental aspects as part of “good business”.
An evaluation carried out by independent technical experts was released by end-2006, confirming that which many Bank's detractors have long been denouncing: the Bank uses research to promote its policies without taking into account if their outcomes are trustworthy. This evaluation, released only a few days before year-end, had already been submitted to the Bank one year ago.

The IDB in Latin America
The IDB is looking for new strategies to increase its presence and influence in the region. In the last meeting of the IDB's Board of Governors, held in April in Belo Horizonte (Brazil), the Board proposed changes to its loan policy and officially launched its operational policy on indigenous peoples. The Bank aims at expanding its lending to the private sector, granting loans without sovereign guarantees. Infrastructure projects continue to be given priority, on account of which the meeting ratified the decision to create two funds for this purpose: one for the Initiative for Regional Integration of Infrastructure in South America (IIRSA) and Plan Puebla Panama (PPP), and the other for infrastructure projects in general.
In this sense, Latin American social organizations strongly criticize the integration project that is being promoted by the IDB through its financing in infrastructure and denounce the social and environmental consequences that these projects may bring on the region.
The annual meeting was also marked by the express request made by the presidents of Bolivia and Honduras in favor of debt cancellation for the poorest Latin American countries included in the HIPC initiative: Bolivia, Honduras, Nicaragua, Guyana and Haiti. The meeting politically agreed with this measure, but as of December the operation still remains to be implemented and an agreement is expected to be reached before the next meeting of the Board of Governors to be held in March in Guatemala. One of the key aspects that still remain unresolved is related to the “cut-off date” for the cancellation and the total amount to be cancelled for the countries in question. Numerous civil society organizations (both Latin American and international) have actively worked during the whole year in order to obtain a favorable decision in this respect.