Will Bolivia kiss the IMF goodbye?
- 26 Mar 06, 04:59 PM
Could Bolivia - indeed Latin America - be about to kiss the IMF goodbye? The answer is yes – according to a this month from the Center for Economic Policy and Research. In Bolivia’s case we will find out next week: the IMF’s three-year standby facility runs out on 31 March and looks unlikely to be renewed...
In their report , Washington-based researchers Mark Weisbrot and Luis Sandoval show that, while economic growth remains inadequate – 4% is just over half what is needed to avoid poverty worsening – the growth in hydrocarbon revenues and multilateral debt write-offs have restored Bolivia’s finances.
The facts:
- In 2005 Bolivia borrowed just $80m, less than 1% of GDP.
- Since upping tax on hydrocarbons from 18% to 50% last year (under Carlos Mesa) the country has moved from a current account deficit to a surplus.
- Its external debts are $4.2bn owed to multilateral agencies, mainly the International Development Bank and World Bank.
- Its bilateral debts stand at $420m, with Spain and Brazil prominent as creditors.
- The IMF cancelled $233m last year; the World Bank is in the process of agreeing terms for the cancellation of $1.53bn (agreed at Gleneagles); while the IDB is discussing cancelling the further big chunk - $1.6bn.
All of this means that Evo Morales has inherited an exceptionally positive economic framework from a combination of a) the hydrocarbon law passed under Carlos Mesa but opposed both by Mesa and the IMF and b) the debt write-off agreed at Gleneagles. Despite this, economic performance remains weak and fairly dependent on the rise in global primary commodity prices.
The non-renewal of a small-ish, short term credit facility with the IMF would be more symbolic than substantial – but the IMF, argue the authors, has played a gatekeeper role for conditionality on the bigger debts. They point out that Venezuela, with $30bn in the bank, is beginning to play the role of underwriter for debt in the continent – and that Nestor Kirchner’s left-leaning government in Argentina recently cleared its IMF debt as a way of buying economic policy freedom. About 1/3 of Argentina’s debt buy-back was in fact financed by Venezuela.
An unnamed IMF official told on 7 March that Bolivia’s short term borrowing needs were so small that it would not need a new 3-year facility, adding: "If you put it into the Latin American context, certainly the fund is having a problem with keeping clients and has not been very popular in Latin America."
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hi,
its fascinating reading your blog on Bolivia in recent times & since Evo Morales became president. I spent time in Bolivia & La Paz last year & am extremely eager to return.
do you think there will be an attempt to recalim the land in Chile leading to their old coastline by forceful means in the near future? this seems to be the only profit making option for the country to export its gas & as Evo Morales has been involved in huge not entirely peaceful demonatrations before do you think this likely?
wishing you all the best,
with thanks L
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I have always believed that the IMF and World Bank are extensions of Colonialism and Slavery.Venezuela is now the liberator of the developing world and thank God for Chavez and i hope another African country will have a "Chavez" To deliver us from slavery.
The case of Argentina debt default and the aftermath as reported by Euromoney magazine attests to this fact that the perpetuation of colonialism and slavery to enrich the Western world are the Bretton woods institutions.Malaysia after the Asian crisis did well without the IMF i believe the world is western world vrs islamic terrorism today. In the future it will be the desirers of justice against the BrettonWoods institutions colonialism and slavery mentality.
Kind regards
Coleman.
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hi - just discovered your blog due to a prompt by peter barron in his column today. i've had a quick trawl through it and it's very interesting particularly as it's part of the world that is sadly neglected by the mainstream media.
i'm fascinated with all things south american, having spent time there on various travels.
i'm aware your blog is business orientated but do you think you'll be covering anything from the arts scene - a la newsright review? it would be fabulous if you did manage to squeeze in bits about whats happening in that arena.
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This is a key date for the continent as a whole, that has shown the results in resisting economic pressures from beyond its borders. It remains to be seen how the foreign direct investment in Bolivia will be affected in the coming years and how the potential of the Bolivianos must be paramount in the country's progression. Is the loss of business for the IMF in Bolivia not an obvious sign to all people, that its policies and motives are inherently flawed?
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Well unlike the guy above I don't think the IMF or world bank are extensions of colonialism. However, I share his vision of disbanding them. I don't want to pay for other people's mistakes, plus it is an inflationary practice.
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Hello,
Interesting blog, looks like you've had a great time in Bolivia.
I am a bit concerned about you calling the democratically elected government of Bolivia the 'MAS regime' - surely this would apply to a dictatorship. The Bolivian people would certainly object to such description, given that they fought hard to get this president elected.
As I understand, Mr. Morales is not, as you say, 'redesigning the constitution' but organising - with the support of political parties and other groups - a Constitutional Assembly, so as to reinforce the democratic process.
Finally, the marines you saw in plaza Isabel la Católica could not have been Spanish, you have to be Bolivian to join the army.
I am glad that the IMF will no longer be able to rearrange the Bolivian economy at will before issuing loans. In their own words, their policy in Bolivia failed, and it is to them 'a puzzle'
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Countries behave like people. Bolivia and many other countries in Latin America behave like the abused children that they are. Evo may not be the best answer for Bolivia, but his rise to power was predictable (though not predicted). It is time that the IMF back off and quit acting like they even partly understand the answer to poverty. The simple fact is that for citizens of the "west" to live lifestyles far beyond those deserved by their productivity levels, others must live far below theirs. It is fairly simple math that eludes most. If you want poor countries to become not-poor, prepare to pay for it.
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