Economy ministers of member countries of Banco del Sur are meeting today in Caracas to define the operational details and implementation of this financial institution – a new regional funding entity independent of the International Monetary Fund (IMF) and the World Bank.
Hernán Lorenzino, the minister of economy and public finance of Argentina, Luis Arce, Bolivian minister of economy and Carlos Marcio Cozendey, secretary of international affairs at the Brazilian ministry of finance, have already arrived to the Venezuelan capital.
Paraguay is the only country that has not confirmed the attendance of any representative at the meeting.
Ministers are expected to establish a ‘start date’, when each country will have to make its contribution to the newly founded institution. As a full member and founder, Argentina will provide US$400 million to Banco del Sur.
Days ago, Ricardo Patiño, Ecuadorian foreign affairs minister, had stated that the new bank “can be used to bail out a country, small or big, and meanwhile not have to submit to the dictates and conditions of the IMF.”
Banco del Sur is a result of an initiative by the late leader of Venezuela, Hugo Chávez, and was formalised in February 2007 when he and then Argentine president Néstor Kirchner signed a memorandum of creation, which also included Bolivia, Ecuador, Uruguay, Brazil and Paraguay.
The South American financial institution aims to promote development, economic growth and improvement of infrastructure in all member countries.
The entity’s constitutive agreement establishes that Banco del Sur will have US$20bn of authorised resources and subscribed capital of US$10 billion, with US$7 billion in initial contributions by partner countries. A member contributes according to the capacity of its economy.
The Court of Justice of the Republic (CJR) has not pressed criminal charges against International Monetary Fund (IMF) chief Christine Lagarde after days of investigation into a corruption case, Press TV reports.
Lagarde walked out of the court after two days of court hearings looking into her involvement in fraud and misappropriation of public funds.
The French court was probing Lagarde’s handling of a dispute in 2007 that resulted in a 400 million-euro (USD 515 million) payment to former politician and controversial business figure, Bernard Tapie.
On Friday, the former finance minister was given the status “assisting witness”. This means she will be regarded as a witness in future related questioning.
The IMF chief was France’s finance minister under the government of former French President Nicolas Sarkozy.
Reports indicate Sarkozy had promised Tapie benefits if he agreed to become a major funder in his 2007 presidential election campaign.
Some say the court’s decision is an unfair one.
“Christine Lagarde’s behavior in this affair is unacceptable, because she allowed one of France’s biggest businessmen to bypass traditional public justice and gave him a private arbitration… her decision greatly favored Mr. Tapie,” Copernic Fondation’s Pierre Khalfa said.
In 2007, Lagarde asked a panel of judges to arbitrate in a row between Tapie and the partly state-owned Credit Lyonnais over his sale of sports group Adidas in 1993.
She has been accused of “numerous anomalies and irregularities.”
The criminal charges are regarded as the second straight scandal for an IMF chief since Lagarde succeeded Dominique Strauss-Kahn, who quit over allegations of an assault on a hotel maid in New York.
French authorities are interrogating International Monetary Fund (IMF) chief Christine Lagarde in connection with a controversial payout to a French tycoon during her term as France’s finance minister.
The 57-year-old appeared in France’s Court of Justice of the Republic (CJR) on Thursday.
The court, which investigates cases of ministerial misconduct, is probing Lagarde’s handling of a dispute in 2007 that resulted in 400 million euros (USD 515 million) payment to the former politician and controversial business figure, Bernard Tapie.
The CJR prosecutors suspect that he was granted the treatment in return for backing former President Nicolas Sarkozy in the 2007 presidential race.
Lagarde, who was France’s finance minister at that time, is accused of being responsible for “numerous anomalies and irregularities” which could lead her to be charged for complicity in fraud and misappropriation of public funds.
The investigation focused on Lagarde’s move in 2007, when she asked a panel of judges to arbitrate in a row between Tapie and the partly state-owned Credit Lyonnais over his sale of sports group Adidas in 1993.
Tapie had accused the bank of defrauding him by deliberately undervaluing Adidas at the time of the sale. He further said that the state – as the former principal shareholder in the bank – should compensate him.
Tapie was previously jailed on charges of match-fixing when he was the president of French football club Olympique de Marseille.
The criminal charges are regarded as the second straight scandal for an IMF chief since Lagarde succeeded Dominique Strauss-Kahn, who quit over allegations of an assault on a hotel maid in New York.
Lagarde, however, has downplayed the investigation.
“There’s nothing new under the sun. Ever since 2011 I had known very well that I will be heard by the investigative commission of the Cour de Justice,” she said last month.
With Barack Obama putting his plan to cut Social Security and Medicare expenditures into writing in his Federal budget proposal the ability of those who voted for him to credibly deny his years of publicly stating he would do so disappeared. The pathetic pleas from liberals and progressives who only a few short months ago were assuring the unwashed masses Mr. Obama was on the cusp of a ‘liberal’ renaissance if only doubters would join them in granting him another term are today as empty as their assurances were then. And Mr. Obama’s self ‘sacrifice’ of voluntarily giving up 5% of his own $400,000 per year salary in solidarity with seniors present and future who will see their Social Security payments reduced calls into question his intelligence if sincere—the difference between the rich (Mr. Obama) voluntarily giving up a fraction of their yacht allowance versus millions of seniors choosing between eating and living indoors is fundamental.
Those whose politics begin and end with rolling off the couch every few years to vote could in theory be forgiven for perceiving a yawning chasm between the Republican and Democrat candidates. Marketing firms were paid a lot of money to create that illusion. And Mr. Obama almost certainly has the political calculus correct that the bourgeois commentariat, a/k/a/ ‘the left,’ will whimper in protest for a few days, weeks at most, before falling in line for Hillary or whatever militaristic, corporatist abomination the Democrats put forward in the next Presidential election. Early reports even have liberal pundits sticking with the line Mr. Obama is only posturing with the proposals, despite his near decade prior explaining why he believes Social Security and Medicare must be cut to be ‘saved.’ However, this is truly a ‘let them eat cake’ moment. Mr. Obama’s policies will needlessly, and in economic terms gratuitously, hurt a lot of people—overwhelmingly those who self-identify as the Democrats’ political ‘base.’ And lest there be confusion over the matter, in his first term Mr. Obama fully restored the fortunes of America’s ruling class at several trillion dollars of public expense before proposing these cuts.
The faux official hand wringing over Social Security is a result of the bi-partisan (‘Washington’) consensus that produced the trajectory of catastrophic public policy over the last forty years. Radically skewed income distribution, the result of public policy, has seen lower and middle-income wages stagnate with all economic gains delivered up to a tiny plutocracy. This has lowered the proportion of total income paid into Social Security because above the current $113,700 cap income is excluded from contribution to the program. Raising the cap would have some effect in reducing expected future shortfalls but would reframe the social insurance nature of the program because payments are also capped. The real solution—where the real money is, lies in shifting economic gains back toward lower and middle class wages. Doing this would raise the proportion of income paid into Social Security. And this leaves aside the fact the Federal Reserve created several trillion dollars ‘out of thin air’ to restore the fortunes of a dysfunctional financial system and its beneficiaries in the plutocracy and could more productively do so to fund the nation’s social insurance programs. In short, the ‘crisis’ facing Social Security and Medicare is one of skewed income distribution resulting from bad public policy and is readily solvable without cutting benefits.
To the argument proposed tax increases on the rich balance ‘sacrifice’ across economic classes, what makes Mr. Obama’s self-imposed wage cut so ludicrous is how radically it understates the degree to which a large and growing proportion of the population has been economically marginalized. It also frames income distribution as an outcome of ‘natural’ processes from which returning some proportion for the benefit of the common weal through taxes is ‘sacrifice.’ (The rich benefit from public expenditure in far greater proportion than the rest of us). About one-third of retirees exist entirely on Social Security payments that are already at bare subsistence levels. These payments constitute the bulk of monthly income for two out of three retirees. Cutting benefits for people who lack other options for obtaining income isn’t ‘sacrifice,’ shared or otherwise—it is immiseration. And Social Security belongs to those who paid into the program throughout their working lives—it is only through radically anti-democratic governance Mr. Obama and Congressional Republicans have say in the matter.
Income distribution data shows top incomes coming from two related sources—finance and finance related and corporate executive compensation. Wall Street—the F.I.R.E. sector (Finance, Insurance and Real Estate), benefited from Wall Street’s resurrection at public expense. Government ‘bailout’ policies were framed as ‘liquidity’ provision when in fact the programs went on far longer and at greater public expense than this explanation supports. In fact, Wall Street was (is) insolvent due to poor and / or fraudulent business practices meaning bankers killed ‘their’ banks, not nature. The resurrection of Wall Street, including paychecks and bonuses, took place entirely on the public dime. And a significant proportion of the rise in corporate earnings used to justify grotesquely disproportionate executive compensation came from cutting wages to labor. The ability of executives to cut wages derives from government policies specifically designed to reduce the power of labor unions and from tax breaks and incentives to shift production to low wage countries. These are no more ‘market’ forces than the bank bailouts were.
The challenge for the bourgeois commentariat is it largely accepts the political economy that produced current circumstance but objects to the outcomes. Explicit austerity economics, of which Mr. Obama’s proposals to cut social insurance programs are a component, receive their provenance from the ‘structural adjustment’ programs the IMF (International Monetary Fund) for decades inflicted on the citizens of other nations for the benefit of Western banks. The neo-liberal premises behind structural adjustment are still taught in university economics departments by ‘liberal’ economists who are leading members of the bourgeois commenting class now critical of austerity. With the aforementioned government policies to concentrate wealth within a tiny plutocracy whilst throwing labor to the wolves in mind, liberal economists defer to ‘market’ forces to explain the income and wealth skews behind the ‘natural’ austerity faced by the bulk of the working populace and then argue explicit austerity policies are ‘unfair’ and / or economically destructive. But why argue over effects when the causes can be addressed?
In the macroeconomic context in which austerity economics is argued the mainstream debate is between Keynesian economists, ‘New’ and old and Austrians. Keynesians argue in circumstances where private demand for goods and services is ‘inadequate’ government spending produces multiples of the money spent in increased economic output. Austrians argue government spending is always and everywhere less productive than private spending and taxes levied to fund government spending take away from private spending. Eighty or so years of evidence strongly favor the Keynesian understanding of how modern economies ‘work,’ but with a caveat. Austrians tend to understand the roles of money and banking in the economy whereas ‘New’ Keynesians remain willfully clueless. This difference plays out in a few ways—private credit expansion has an economic effect similar to public expenditure but it is neither in the public interest nor is it socially neutral in its political-economic effects. And public investment funded with public debt has the power of the printing press behind its repayment whereas private credit doesn’t.
Mr. Obama’s delivery of several trillion dollars of public wealth to the banks in ongoing bailouts was sold as a way to ‘get banks lending again,’ ‘private’ Keynesianism, to raise the quantity of private debt issued to bolster consumption. But wholly reviving insolvent banks has no legitimacy in any economic theory. This is why the bailouts were, and still are, framed as liquidity provision when they are in fact solvency provision. And again, private debt has the political-economic consequence of concentrating wealth and political power in the hands of lenders (Wall Street). Intellectually honest Austrian economists would have let Wall Street die at its own hands in 2008 in favor of a functioning private credit system. ‘New’ Keynesians support public spending to bolster demand when necessary under the (correct) premise the power of the printing press is a tool to serve the public interest. But their ignorance of money and banking leaves them supporting the monetary policies of solvency provision for dysfunctional banks and at utter losses as to why fiscal policies funded by this same printing press are nowhere to be found. To coin a Clintonism, it’s the class warfare stupid!
The difference between the Federal government providing ‘liquidity’ to markets and restoring solvency to insolvent banks is more than a technicality. In the case of liquidity provision the government temporarily floods markets with money to facilitate transactions during bank panics– it is the ability to transact that is restored. In the case of restoring solvency the Federal government both buys bad assets from the banks that through fraud and / or incompetence rendered themselves insolvent and it provides subsidies from which banks can ‘rebuild’ their balance sheets. Both are transfers of public resources to private interests demonstrated by history to be economically destructive.
Without apparent irony, the structural adjustment programs fiscal conservatives look to for intellectual sustenance absolutely reject using public funds to restore dysfunctional banks because dysfunctional banks inevitably bleed the economies that remain dry. Austerity economics, the bases for IMF and World Bank policies, are banker economics designed to assure bank debts are repaid regardless of the economic devastation doing so may cause. For theoretical coherence austerity requires that core banks (Wall Street), the banks for which loans be forcibly repaid by the periphery, be functional and healthy. Having now saved a parasitic and dysfunctional Wall Street at public expense, fiscal conservatives in the U.S., led by Barack Obama, seek to cut public expenditures to pay for the privilege.
If cutting the inflation assumption for Social Security would ‘save’ the program, the purported rationale for doing so, then reversing policies designed to concentrate income and wealth would do far more. But cutting the inflation assumption isn’t intended to ‘save’ the program; it is intended to cut Federal spending in which Social Security plays only an indirect role (why else include it in budget ‘negotiations’?) because it is funded through a dedicated tax, not through Federal spending. This doesn’t mean Mr. Obama isn’t locally sincere (if wrong) in promoting the Hamilton Project (Robert Rubin) line that ‘tweaking’ social insurance programs will ‘save’ them. But here context is important. And the context is public expenditures are being cut to pay for the Wall Street bailout and the economic calamity Wall Street caused. Put another way, if there is no public debt ‘crisis’ (there isn’t) and the temporary increase in public debt was to save Wall Street and undo the damage it did to the economy, why not get the money from Wall Street?
But in fact the money is still going in the other direction. And across Europe the story is remarkably similar—through assuming bank liabilities directly (Ireland), shifting public resources to the banks to ‘save’ them and public expenditure on economic stabilizers and unemployment benefits, formerly fiscally ‘disciplined’ nations are now regularly characterized by the European Central Bank and German Chancellor Angela Merkel as nations of ‘takers’ whose morally bankrupt citizenries ruined their countries with fat public welfare programs that must be cut to restore economic health. To be clear, fiscal issues the European periphery faces came from delivering public resources to Wall Street alone. (Wall Street now includes large European banks).
For the uninitiated, the endgame appears nigh. The seizure of bank deposits in Cyprus to pay for bank losses simply removed the ‘middle men,’ the European Central Bank and the political powers that be in Europe, from transferring wealth from the citizens of Cyprus to Cypriot bankers (and to European banks and U.S. hedge funds). The capitalist media storyline promoted by gullible liberals that ‘Russian mafia’ money was seized is nonsense. By reports European banks and rich Russians had little trouble getting their money out of Cyprus. The deposits being seized are in precise inverse relation to the political-economic power the depositors wield. And across the West policies of economic austerity are being imposed in similar fashion.
Mr. Obama is who he is. But those who voted for him have some explaining to do. I oppose Mr. Obama’s policies and would have likewise vocally, and otherwise, opposed those of Mitt Romney had he ‘won.’ Were this simply a matter of resentment the situation would take care of itself—you are the schmucks who cut your own Social Security and Medicare programs. But if you think this is it, that the worst is over, I humbly suggest that was your view when Mr. Obama won his second term. To those paying attention, the Dodd-Frank legislation being sold as a way to ‘reign-in’ bailed out banks contains ‘Cyprus’ clauses that leave banks (or their creditors, beginning with derivatives counter-parties) no alternative than to seize insured deposits when they need their next inevitable bailout. On the plus side, this will eliminate the time-consuming theater of austerity ‘debates.’ On the minus side, Mr. Obama is exponentially increasing the misery of society’s most vulnerable. But I’m confident he appreciates your support for his policies.
Rob Urie is an artist and political economist in New York.
The ‘big five’ of the developing world will discuss creating their own global World Bank as their 5th annual summit kicks off Tuesday in sunny Durban.
The move is linked to the developing world’s disillusionment with the status quo of world financial institutions. The World Bank and IMF continue to favor US and European presidents over BRICS nations, and in 2010, the US failed to ratify a 2010 agreement which would allow more IMF funds to be allocated to developing nations.
“Not long ago we discussed the formation of a developmental bank… Today we are ready to launch it,” South African President Jacob Zuma said on Monday.
The ‘big five’- Brazil, Russia, India, China, and its newest addition, South Africa, will come together for the annual conference this year in Durban, South Africa in hopes of establishing a new development bank which will fund infrastructure and development projects in the five member states, and will pool foreign currencies to fend off any impending financial crisis.
“We will discuss ways to revive global growth and ensure macroeconomic stability, as well as mechanisms and measures to promote investment in infrastructure and sustainable development,” Indian Prime Minister Manmohan Singh said on Monday, before heading to Durban.
The BRICS have called for a reconstruction of the World Bank and IMF, which were created in 1944, and want to put forth their own ‘Bretton Woods’ accord. And they are serious.
“Brics is not a talk show. It is a serious grouping,” Zuma told reporters at the presidential guest house in Pretoria.
The new bank will cater to developing world interests and will symbolize a great economic and political union.
“There’s a shift in power from the traditional to the emerging world. There is a lot of geo-political concern about this shift in the western world,” Martyn Davies, chief executive officer of Johannesburg-based Frontier Advisory, told Bloomberg.
“A future BRICS Investment Bank is seen as a mechanism that would help realize where money should go, agree development strategies and coordinate investment,” explained Georgy Toloraya, the executive director of Russia’s national committee for BRICS studies to SA News.
In its nebulous stage, the new BRICS bank is unanimously supported by all five member states. In Durban, problems will arise on how to govern, fund, and operate the grand venture.
“When you set up a bank like this it’s not just a question of opening the doors. There are some issues about where it is going to be located, what the capital contributions are going to be, the rules of deploying that investment. These are the sort of details that are in various stages of discussion and negotiation,” said South African Trade Minister Rob Davies, in a statement.
The leaders may not reach a specific agreement in Durban this week, as each country has its own stipulations on its creation. Russia, for example, wants to cap each side’s initial contribution to $10 billion, according to Mikhail Margelov, part of President Putin’s team in South Africa.
Emergency Currency Fund
Pooling currency to deflect a future crisis is also a high priority topic set for the conference.
Once a loose political affiliation, the BRICS bloc is now a serious economic contender in the world economy, representing 40 percent of the world’s population, and accounting for one fifth of global GDP.
Between the five countries, the bloc holds foreign-currency reserves of $4.4 trillion, and needs an institution to safeguard this amassing wealth. The reserve will also protect members from short-term liquidity volatility and balance-of-payment problems.
Presently, it is proposed the member states contribute an equal share to the fund, but there is still dispute over whether to involve IMF management. India has voiced support for IMF involvement, but other BRICS countries may resist.
“A reserve pool, I think, is still some way off, ” said Davies.
In October, Brazilian Finance Minister Guido Mantega suggested the pool be modeled after the Chiang Mai Initiative, which provides a financial safety blanket to south east Asian countries.
Trade within the group swelled to $282 billion last year and could very well reach $500 billion by 2015, according to Brazilian government data.
Many Firsts
The conference is a benchmark of many firsts. It is the first time the conference has been held on South African soil.
For China, it is President Xi’s first visit to South Africa, where China is a leading trading partner and investor. In 2012, the trade between the two countries was 201bln ZAR ($21bln), according to the South African Revenue Service.
The conference is also President Vladimir Putin’s first international visit in 2013.
For South Africa, which makes up just 2.5 percent of total gross domestic product in BRICS, the summit is a way to showcase its role as an investment gateway to Africa. South Africa is the newest and smallest member of the BRIC bloc. It has the 28th highest ranked GDP in the world: China is 2nd, Brazil 6th, Russia 9th and India 10th.
Ancestral land that for generations has served as home and livelihood for hundreds of thousands of indigenous people in Ethiopia is being leased out, on 99-year renewable contracts at nominal sums to foreign corporations. The land giveaway or agrarian reforms as the government would prefer to present them began in 2008 when the Ethiopian government, under the brutal suppressive Premiership of Meles Zenawi invited foreign countries/corporation to take up highly attractive deals and turn large areas of land over to industrial farming for the export of crops. India, China and Saudi Arabia were all courted and along with wealthy Ethiopians have eagerly grabbed large pieces of land at basement prices; rates vary from $1.10 to $6.05 per hectare (HA), comparable land in India would set you back $600 per ha.
A total of 3,619,509 ha, the Oakland Institute (OI), a US based think tank, estimate has been leased out. Land made available by the forced re-location of hundreds of thousands of indigenous people under the government’s universally condemned Villagization progamme, which aims to forcibly re-locate over 1.5 million people from their homes.
Indian corporations have taken the lion’s share, acquiring around 600,000 ha concentrated in Gambella and Afar, split between 10 investing companies. The term ‘investing’ implies benefits for Ethiopia, which is misleading; ‘profiteering’, or ‘exploiting’ sits closer to the truth of these land deals, as the OI make clear, “taking over land and natural resources from rural Ethiopians, is resulting in a massive destruction of livelihoods and making millions of locals [farmers and pastoralist communities] dependent on food handouts”. With small scale farmers being evicted from their land, prices of staples such as Teff, used by millions throughout Ethiopia to make Injera (bread), has rocketed in price, according to Ethiotribune 22/5/2012, increasing fourfold since 2008.
Corporate expansionism: small change big profits
In line with its ambitions of diversity and world food dominance – Karuturi Global, the world’s largest grower of roses, leads the Indian charge, leasing 311,700 ha in Gambella. Not satisfied with this, GRAIN (an international NGO, working to support small farmers) report Mr.Karuturi “wants to set up farming operations [throughout Eastern and Southern Africa] on more than 1 million [ha]” – too much never enough in corporate expansionism.
Almost a quarter of Gambella’s 25 million ha has been earmarked by the federal government for agricultural ‘development’. Karuturi, whose profits “rose 55.13% to Rs 1.21 crore [10 million] in the quarter ended June 2012”, took their chunk without even seeing it, paying only $1.10 per ha. For the Indian giant it is, John Vidal in ‘Land Grab Ethiopia (LGE)’ says, “the sale of the century”. ‘Green Gold’ is how Mr. Karuturi in GRAIN (‘Who’s Behind the Land Deals’), describes his 300,000 ha of Ethiopian soil, “for which he pays $46 per ha per year including water and labour and expects at least $660 [per ha] in profit per year”. (Ibid)
In addition to paddy, Indian farmers are being sub-contracted to grow maize, cereals, palm oil and sugarcane amongst others. All of which are destined for export, either to India or Europe, where companies farming in Ethiopia (and other Sub-Saharan African nations), benefit from lower import duties applied to developing countries, notwithstanding the fact that the land is leased to, and the crops produced and sold by, multi million-rupee rich companies.
Another major Indian company leasing land in Gambella is the decidedly green sounding BHO Bioproducts. Following the corporate rhetoric, BHO Chief Operating Officer Sunny Maker told Bloomberg in 2010 that, they have “plans to invest more than $120 million in rice and cotton production”, which, by 2017, should “generate about $135 million a year from sales divided equally between domestic [Indian] and international markets.” He added that the “incredibly rich fertile land”, will all be “cleared within the next three years”. Cleared yes, violently, indiscriminately and totally; villages, people, forests, woodland, all destroyed, burnt, relocated, displaced, desecrated. The governments promise to such prized investors is that the land is handed over stripped of everything and everyone. Dissent is not allowed and dealt with brutally should it occur, as Anuradha Mittal, Executive Director of OI makes clear. “The repression of social resistance to land investments is even stipulated in land lease contracts, [it is the] state’s obligation to ‘deliver and hand over the vacant possession of leased land free of impediments’ and to provide free security ‘against any riot, disturbance or any turbulent time.”
The ‘rich fertile land’, lovingly cultivated at the hands of the men and women who have farmed it for generations, is unlikely to be nurtured so carefully by Indian (or indeed Chinese or Saudi Arabian) corporations with their thirsty ‘GM seeds’ (Ibid). For as Oxfam in their detailed report ‘Land and Power’ diplomatically point out, “investors short time scales may tempt them into unsustainable cultivation, undermining agricultural production.”
The devolution of development
Land is a prime cut asset in the commercialization of everything, everywhere, and the “rich fertile land” in Ethiopia is cheap, even by Sub-Saharan African standards. Along with long-term leases, the government offers a neat bundle of carrots, including tax incentives and unrestricted export clauses, incentives that the OI state “deny African countries economic benefits” from land deals that the Ethiopian regime wraps up neatly in its complete disregard for the human rights of the indigenous people. Government indifference encouraging corporate irresponsibility – and they need little encouragement. Businesses hardly seem to be grabbing the land, so much as accepting it as a gift, parceled up and ready to be torn open.
In exchange for such attractive deals, the Ethiopian government has been extended, the OI reports “a $640 million line of credit… over five years to boost sugar production in the country’s Lower Omo region”. Not a philanthropic gesture, more a sales trap by India’s EXIM (export and import) Bank, who stipulate, “Ethiopia must import 75% of the value of the credit line in the form of Indian goods and services.”
The government-owned sugar plantations in the Lower Omo are themselves attracting a great deal of concern and criticism from human rights groups, who highlight the environmental and human damage being perpetrated. Government acts of violence and abuse, in the various land deal regions, are justified under the overused and misleading title of ‘development’; a term appropriated by the international monetary machine – the World Bank and International Monetary Fund (IMF) primarily – misunderstood and distorted by government development agencies, acting in line with foreign affairs policies by promoting national self interest and perverted by the corrupt ideologically-blinkered governments of developing nations. An undeveloped ideological trinity whose actions have drained the 21st century sacred cow and its stable mate ‘growth’ – dry of any true and relevant meaning. Far from supporting human and or social development the “unfair terms and near give-away prices [of land deals]… are hindering development…. Foreign corporations and the World Bank are pressuring African leaders to give them exemptions from taxes, import and export duties, and local labor laws – not to mention water and mineral rights that could be worth billions”, the OI confirm.
More concerned with sitting at the top table and cultivating the right international allies than with doing their constitutional duty and serving the needs of the people, the Ethiopian government is in danger of giving away, and for peanuts, it’s ‘rich and fertile’ land to overseas companies who have no interest in Ethiopia, it’s environment, its culture and even less in its people.
Increasing hunger
Hunger and poverty stalk the land of both Ethiopia and India. 12 – 15 million people survive on food aid in Ethiopia, which ranks at the bottom of the World Hunger Index at 76. India, with the highest rate of malnourished children in the world, where 25% (around 270 million) of the world’s hungry live, despite the fact that, according to the World Food Programme (WFP), “the country grows enough food for its people”, comes in 65th of the hungriest nations, below Niger and the Sudan – neither of which, to my knowledge, boast 61 billionaires and 200,000 dollar millionaires unlike India. And whereas “most countries have made consistent progress in reducing hunger, India has seen hunger rise over the last decade compared with the late 1990s.”(Ibid) This so-called economic miracle nation refuses to feed it’s own people.
Food insecurity, the WFP makes clear is caused not by lack of produce, but by an unwillingness to share the Earths bounty equitably. The states in India with the greatest numbers suffering from hunger and malnutrition, as per WFP records, “include Madhya Pradesh, Chhattisgarh, Bihar, Jharkhand, Orissa, Rajasthan and Uttar Pradesh”; these are the states where the poorest (Adivasi – indigenous and Dalit) people in the country and quite possibly in the World happen to live. The poor are dying of hunger not because India cannot feeed everyone, as the United Nations report on regional cooperation makes crystal clear, “the root cause of hunger across the sub-region and the world today is not a lack of food. It is the economic and social distribution of that food which leaves populations undernourished and hungry.”
Men women and children living in dire poverty starve to death, in India, Ethiopia and throughout the world. They starve and die for want of the food that is rotting in warehouses, food served up to rats or destroyed by the Indian government, because it is cheaper to burn it than to distribute it to those in need. As Graziano da Silva, Director-General of the Food and Agriculture Organisation of the United Nations (26/01/13) said, “globally, a third of all food produced is wasted, and… if one could avoid this waste it would be possible to feed all the hungry people [in the world] and have food to spare.” Food to spare!Such is the inhumane ethos that underpins market fundamentalism, that allows men women and children, young and old to starve – simply because the do not have the financial means to feed themselves. Shame on governments Indian and the rest, that allow such inhumane injustice to prevail, as a wise teacher said, “throughout the world there are men, women and little children who have not even the essentials to stay alive; they crowd the cities of many of the poorest countries in the world… My brothers, how can you watch these people die before your eyes and call yourselves men”.
The commercialization of the countryside in India and Ethiopia, which is displacing large numbers of small-scale farmers and concentrating crop production in the hands of multi-nationals, is intensifying existing levels of hunger. Substantive agricultural reform and real development would see the army of skilled small scale producers, with generations of local knowledge and love of the land, supported with the needed capital and technology, given access to markets that corporations bring. Such an agrarian revolution, ethically founded, environmentally healthy and socially sustained, would build long-term food security and feed the hungry.
Soft targets easy profits
India as the WFP makes clear, has no domestic need for food produced by the overseas industrial farms that are causing such far-reaching damage, to the hundreds of thousands of displaced people of Ethiopia as well as the natural environment. The movement in Ethiopia mirrors what is taking place to a much greater degree in India. The government has shifted all support away from Indian farmers and is supporting the transfer of land from the rural poor to large companies – wealthy government benefactors, causing the displacement of millions (60 million to date, according to Arundhati Roy) of indigenous people.
Corporations are targeting countries with “poor governance”, Oxfam 7/02/2013 makes clear, that “allow investors to secure land quickly and cheaply…. [They] “Seem to be cherry picking countries with weak rules and regulations”. Needy nations like hungry people make easy targets for multi-national men, whose pockets governments are desperate to nestle inside. The driving force behind such destructive land developments, undertaken by corporations obsessed by an insatiable desire for growth and world leading economic development, is, as Oxfam suggests, profit and profit alone.
The death of Hugo Chávez is a great loss to the people of Venezuela who have been lifted out of poverty and have created a deep participatory democracy. Chavez was a leader who, in unity with the people, was able to free Venezuela from the grips of US Empire, bring dignity to the poor and working class, and was central to a Latin American revolt against US domination.
Chávez grew up a campesino, a peasant, raised in poverty. His parents were teachers, his grandmother an Indian whom he credits with teaching him solidarity with the people. During his military service, he learned about Simon Bolivar, who freed Latin America from Spanish Empire. This gradually led to the modern Bolivarian Revolution he led with the people. The Chávez transformation was built on many years of a mass political movement that continued after his election, indeed saved him when a 2002 coup briefly removed him from office. The reality is Venezuela’s 21st Century democracy is bigger than Chávez. This will become more evident now that he is gone.
The Lies They Tell Us
If Americans knew the truth about the growth of real democracy in Venezuela and other Latin American countries, they would demand economic democracy and participatory government, which together would threaten the power of concentrated wealth. Real democracy creates a huge challenge to the oligarchs and their neoliberal agenda because it is driven by human needs, not corporate greed. That is why major media in the US, which are owned by six corporations, aggressively misinform the public about Chávez and the Bolivarian Revolution.
Mark Weisbrot of the Center for Economic and Policy Research writes:
The Western media reporting has been effective. It has convinced most people outside of Venezuela that the country is run by some kind of dictatorship that has ruined it.
In fact, just the opposite is true. Venezuela, since the election of Chávez, has become one of the most democratic nations on Earth. Its wealth is increasing and being widely shared. But Venezuela has been made so toxic that even the more liberal media outlets propagate distortions to avoid being criticized as too leftist.
We spoke with Mike Fox, who went to Venezuela in 2006 to see for himself what was happening. Fox spent years documenting the rise of participatory democracy in Venezuela and Brazil. He found a grassroots movement creating the economy and government they wanted, often pushing Chávez further than he wanted to go.
They call it the “revolution within the revolution.” Venezuelan democracy and economic transformation are bigger than Chávez. Chávez opened a door to achieve the people’s goals: literacy programs in the barrios, more people attending college, universal access to health care, as well as worker-owned businesses and community councils where people make decisions for themselves. Change came through decades of struggle leading to the election of Chávez in 1998, a new constitution and ongoing work to make that constitution a reality.
Challenging American Empire
The subject of Venezuela is taboo because it has been the most successful country to repel the neoliberal assault waged by the US on Latin America. This assault included Operation Condor, launched in 1976, in which the US provided resources and assistance to bring friendly dictators who supported neoliberal policies to power throughout Latin America. These policies involved privatizing national resources and selling them to foreign corporations, de-funding and privatizing public programs such as education and health care, deregulating and reducing trade barriers.
In addition to intense political repression under these dictators between the 1960s and 1980s, which resulted in imprisonment, murder and disappearances of tens of thousands throughout Latin America, neoliberal policies led to increased wealth inequality, greater hardship for the poor and working class, as well as a decline in economic growth.
Neoliberalism in Venezuela arrived through a different path, not through a dictator. Although most of its 20th century was spent under authoritarian rule, Venezuela has had a long history of pro-democracy activism. The last dictator, Marcos Jimenez Perez, was ousted from power in 1958. After that, Venezuelans gained the right to elect their government, but they existed in a state of pseudo-democracy, much like the US currently, in which the wealthy ruled through a managed democracy that ensured the wealthy benefited most from the economy.
As it did in other parts of the world, the US pushed its neoliberal agenda on Venezuela through the International Monetary Fund (IMF) and World Bank. These institutions required Structural Adjustment Programs (SAP) as terms for development loans. As John Perkins wrote in Confessions of an Economic Hit Man, great pressure was placed on governments to take out loans for development projects. The money was loaned by the US, but went directly to US corporations who were responsible for the projects, many of which failed, leaving nations in debt and not better off. Then the debt was used as leverage to control the government’s policies so they further favored US interests. Anun Shah explains the role of the IMF and World Bank in more detail in Structural Adjustment – a Major Cause of Poverty.
Neoliberalism Leads to the Rise of Chávez
A turning point in the Venezuelan struggle for real democracy occurred in 1989. President Carlos Andres Perez ran on a platform opposing neoliberalism and promised to reform the market during his second term. But following his re-election in 1988, he reversed himself and continued to implement the “Washington Consensus” of neoliberal policies – privatization and cuts to social services. The last straw came when he ended subsidies for oil. The price of gasoline doubled and public transportation prices rose steeply.
Protests erupted in the towns surrounding the capitol, Caracas, and quickly spread into the city itself. President Perez responded by revoking multiple constitutional rights to protest and sending in security forces who killed an estimated 3,000 people, most of them in the barrios. This became known as the “Caracazo” (“the Caracas smash”) and demonstrated that the president stood with the oligarchs, not with the people.
Under President Perez, conditions continued to deteriorate for all but the wealthy in Venezuela. So people organized in their communities and with Lieutenant Colonel Hugo Chávez attempted a civilian-led coup in 1992. Chávez was jailed, and so the people organized for his release. Perez was impeached for embezzlement of 250 million bolivars and the next president, Rafael Caldera, promised to release Chávez when he was elected. Chávez was freed in 1994. He then traveled throughout the country to meet with people in their communities and organizers turned their attention to building a political movement.
Chávez ran for president in 1998 on a platform that promised to hold a constituent assembly to rewrite the constitution saying:
I swear before my people that upon this moribund constitution I will drive forth the necessary democratic transformations so that the new republic will have a Magna Carta befitting these new times.
Against the odds, Chávez won the election and became president in 1999.
While his first term was cautious and center-left, including a visit by Chávez to the NY Stock Exchange to show support for capitalism and encourage foreign investment, he kept his promise. Many groups participated in the formation of the new constitution, which was gender-neutral and included new rights for women and for the indigenous, and created a government with five branches adding a people’s and electoral branches. The new constitution was voted into place by a 70 percent majority within the year. Chávez also began to increase funding for the poor and expanded and transformed education.
Since then, Chávez has been re-elected twice. He was removed from power briefly in 2002, jailed and replaced by Pedro Carmona, the head of what is equivalent to the Chamber of Commerce. Fox commented that the media was complicit in the coup by blacking it out and putting out false information. Carmona quickly moved to revoke the constitution and disband the legislature. When the people became aware of what was happening, they rapidly mobilized and surrounded the capitol in Caracas. Chávez was reinstated in less than 48 hours.
One reason the Chávez election is called a Bolivarian Revolution is because Simon Bolivar was a military political leader who freed much of Latin America from the Spanish Empire in the early 1800s. The election of Chávez, the new constitution and the people overcoming the coup set Venezuela on the path to free itself from the US empire. These changes emboldened the transformation to sovereignty, economic democracy and participatory government.
In fact, Venezuela paid its debts to the IMF in full five years ahead of schedule and in 2007 separated from the IMF and World Bank, thus severing the tethers of the Washington Consensus. Instead, Venezuela led the way to create the Bank of the South to provide funds for projects throughout Latin America and allow other countries to free themselves from the chains of the IMF and World Bank too.
The Rise of Real Democracy
The struggle for democracy brought an understanding by the people that change only comes if they create it. The pre- Chávez era is seen as a pseudo Democracy, managed for the benefit of the oligarchs. The people viewed Chávez as a door that was opened for them to create transformational change. He was able to pass laws that aided them in their work for real democracy and better conditions. And Chávez knew that if the people did not stand with him, the oligarchs could remove him from power as they did for two days in 2002.
With this new understanding and the constitution as a tool, Chávez and the people have continued to progress in the work to rebuild Venezuela based on participatory democracy and freedom from US interference. Chávez refers to the new system as “21st century socialism.” It is very much an incomplete work in progress, but already there is a measurable difference.
Mark Weisbrot of CEPR points out that real GDP per capita in Venezuela expanded by 24 percent since 2004. In the 20 years prior to Chávez, real GDP per person actually fell. Venezuela has low foreign public debt, about 28 percent of GDP, and the interest on it is only 2 percent of GDP. Weisbrot writes:
From 2004-2011, extreme poverty was reduced by about two-thirds. Poverty was reduced by about one-half, and this measures only cash income. It does not count the access to health care that millions now have, or the doubling of college enrollment – with free tuition for many. Access to public pensions tripled. Unemployment is half of what it was when Chávez took office.
Under Chávez’ revolution the oil wealth was distributed in ever rising wages and above all in ambitious social engineering. He built the fifth largest student body in the world, creating scores of new universities. More than 90% of Venezuelans ate three meals a day for the first time in the country’s history. Quality social housing for the masses became the norm with the pledge that by the end of the presidential term, now cut short, all Venezuelans would live in a dignified house.
Venezuela is making rapid progress on other measures too. It has a high human development index and a low and shrinking index of inequality. Wealth inequality in Venezuela is half of what it is in the United States. It is rated “the fifth-happiest nation in the world” by Gallup. And Pepe Escobar writes that:
No less than 22 public universities were built in the past 10 years. The number of teachers went from 65,000 to 350,000. Illiteracy has been eradicated. There is an ongoing agrarian reform.
Venezuela has undertaken significant steps to build food security through land reform and government assistance. New homes are being built, health clinics are opening in under-served areas and cooperatives for agriculture and business are growing.
Venezuelans are very happy with their democracy. On average, they gave their own democracy a score of seven out of ten while the Latin American average was 5.8. Meanwhile, 57 percent of Venezuelans reported being happy with their democracy compared to an average for Latin American countries of 38 percent, according to a poll conducted by Latinobarometro. While 81 percent voted in the last Venezuelan election, only 57.5 percent voted in the recent US election.
Chávez won that election handily as he has all of the elections he has run in since 1999. As Galloway describes him, Chávez was “the most elected leader in the modern era.” He won his last election with 55 percent of the vote but was never inaugurated due to his illness.
Beyond Voting: The Deepening of Democracy in Venezuela
This is not to say that the process has been easy or smooth. The new constitution and laws passed by Chávez have provided tools, but the government and media still contain those who are allied with the oligarchy and who resist change. People have had to struggle to see that what is written on paper is made into a reality. For example, Venezuelans now have the right to reclaim urban land that is fallow and use it for food and living. Many attempts have been made to occupy unused land and some have been met by hostility from the community or actual repression from the police. In other cases, attempts to build new universities have been held back by the bureaucratic process.
It takes time to build a new democratic structure from the bottom up. And it takes time to transition from a capitalist culture to one based on solidarity and participation. In “Venezuela Speaks,” one activist, Iraida Morocoima, says “Capitalism left us with so many vices that I think our greatest struggle is against these bad habits that have oppressed us.” She goes on to describe a necessary culture shift as, “We must understand that we are equal, while at the same time we are different, but with the same rights.”
Chávez passed a law in 2006 that united various committees in poor barrios into community councils that qualify for state funds for local projects. In the city, community councils are composed of 200 to 400 families. The councils elect spokespeople and other positions such as executive, financial and “social control” committees. The council members vote on proposals in a general assembly and work with facilitators in the government to carry through on decisions. In this way, priorities are set by the community and funds go directly to those who can carry out the project such as building a road or school. There are currently more than 20,000 community councils in Venezuela creating a grassroots base for participatory government.
A long-term goal is to form regional councils from the community councils and ultimately create a national council. Some community councils already have joined as communes, a group of several councils, which then have the capacity for greater research and to receive greater funds for large projects.
The movement to place greater decision-making capacity and control of local funds in the hands of communities is happening throughout Latin America and the world. It is called participatory budgeting and it began in Porto Alegre, Brazil in 1989 and has grown so that as many as 50,000 people now participate each year to decide as much as 20 percent of the city budget. There are more than 1,500 participatory budgets around the world in Latin America, North America, Asia, Africa, and Europe. Fox produced a documentary, Beyond Elections: Redefining Democracy in the Americas, which explains participatory budgeting in greater detail.
The Unfinished Work of Hugo Chávez Continues
The movements that brought him to power and kept him in power have been strengthened by Hugo Chávez. Now the “revolution within the revolution” will be tested. In 30 days there will be an election and former vice president, now interim president, Nicolas Maduro will likely challenge the conservative candidate Chávez defeated.
If the United States and the oligarchs think the death of Chávez means the end of the Bolivarian Revolution he led, they are in for a disappointment. This revolution, which is not limited to Venezuela, is likely to show to itself and the world that it is deep and strong. The people-powered transformation with which Chávez was in solidarity will continue.
• This article is a modified version of “The Secret Rise of 21st Century Democracy,”which originally appeared in Truthout.
On Friday, February 15, the International Monetary Fund (IMF) announced that it had concluded its most recent Article IV consultation with Honduras. The Fund’s recommendations varied little from those it has offered many other countries in recent years: cut public spending, reduce deficits, reform pensions and depress wages.
The IMF regularly conducts Article IV consultations with almost all of its member countries—with Argentina, which since 2006 has refused to take part in the process, being one notable exception. The official reviews are a way for the Fund to present its analysis of each country’s economic prospects and to advocate for a set of reforms. While it is difficult to precisely assess the influence of the consultations, it has been noted that in many cases the recommended policies have been adopted against popular public opinion. And in countries that end up borrowing from the fund, these policies are often preconditions for receiving future IMF loans.
The Fund’s recommendations on Honduras diverged little from the policies it is pushing in many other countries. Below is a selection from the IMF’s brief (347-word, to be exact) Executive Board Assessment of its most recent consultation with Honduras:
Directors . . . underscored the need to tighten macroeconomic policies and press ahead with structural reforms . . .. [They] welcomed the planned reduction of the budget deficit in 2013, and urged early adoption of the measures needed to ensure this outcome and avoid further central bank borrowing or accumulation of domestic payments arrears. They called for sustained medium-term fiscal consolidation . . . [and] supported plans to restrain the public sector wage bill . . . and emphasized the importance of reducing energy subsidies . . .. Directors concurred that monetary policy should be tightened . . . [and] regarded plans to reform state-owned enterprises as critical to strengthen the fiscal position and support growth, and encouraged timely implementation . . . and welcomed the ongoing reform of public pension funds.
It is difficult to overlook how much this assessment resembles the Fund’s recommendations to European countries struggling to emerge from the global recession. CEPR co-director Mark Weisbrot and Senior Research Associate Helene Jorgensen recently released a paper analyzing 67 Article IV consultations for European member countries between 2008 and 2012, in which the authors found that the lending body was pushing a “one-size-fits-all” approach that often included pro-cyclical policy recommendations. In the paper Weisbrot and Jorgensen summarized their findings, in part, as follows:
This content analysis finds a consistent pattern of policy recommendations, which indicates (1) a macroeconomic policy that focuses on reducing spending and shrinking the size of government, in many cases regardless of whether this is appropriate or necessary, or may even exacerbate an economic downturn; and (2) a focus on other policy issues that would tend to reduce social protections for broad sectors of the population (including public pensions, health care, and employment protections), reduce labor’s share of national income, and possibly increase poverty, social exclusion, and economic and social inequality as a result.
Given the consistency of the Fund’s advice, one might think there are no alternatives to such prescriptions. But a look at Ecuador’s economy definitively tells us otherwise.
As detailed in a new paper by CEPR’s Weisbrot, Jake Johnston and Stephan Lefebvre (and notedrecently on The Americas Blog), since Rafael Correa was sworn in as president in 2007, Ecuador’s government has taken an unorthodox approach to shoring up its macroeconomic standing. From bringing the Central Bank under the control of the executive branch, to taxing capital flight, to defaulting on illegitimate foreign debt, and launching new regulations on the financial industry, the Correa government repeatedly took steps that are antithetical to the IMF’s perspective and advice. The results? A reduction in unemployment to its lowest point on record, a 27% decline in poverty from its 2006 level, and an increase in government revenue from 26 to 40% of GDP over the same period, all in the context of greatly expanded spending on infrastructure, health, and education. The Ecuadorian example should be enough evidence that the IMF’s singular prescriptions are not the only option—in fact, they may be far worse than other “unconventional” approaches.
In the case of Honduras, it is perhaps worth noting that the IMF had a rocky response to the June 28, 2009, military coup that deposed Honduras’ democratically elected president Manuel Zelaya.
Exactly two months after Zelaya’s illegal ouster, which led most foreign governments and international lenders to freeze aid to Honduras, the IMF announced that it would extend $150.1 million in loans to the Central American country’s illegitimate government. Another $13.8 million was released just a week later. Yet on September 6, perhaps partly in response to criticism, the IMF released a statement saying the de facto government could not use the money “until a decision on whether the Fund deals with this regime or the government of Honduras.” That decision was finally made on September 24, when the IMF ordered that the funds would only be made available to the deposed president.
Despite the clumsiness of this decision and the mixed messages it sent the coup-government in Tegucigalpa, it marked an improvement over the Fund’s response to the 2002 coup that temporarily overthrew Venezuela’s socialist president Hugo Chavez. One day after the coup, a spokesman stated that the lending body stood “ready to assist the new administration in whatever manner they find suitable.”
The World Bank has joined the “doom and gloom” chorus on Venezuela’s economy. And in Haiti, the Washington-based institution again appears overly optimistic.
On Tuesday, January 15, the World Bank released its latest global economic forecast, which projects 2013 global GDP growth at 3.4%, up 0.4% from its preliminary estimate for 2012 and down a half a percentage point from its previous forecast in June. The Bank emphasized that the low rates were largely a result of sluggish growth in the U.S. and Europe. As for Latin America and the Caribbean, the regional predicted growth for 2013 is listed at 3.6%, up more than half a point from the estimated figure for 2012.
As with many media commentators over the past few years, the World Bank predicts that Venezuela’s economic recovery from the global recession cannot hold up. The Bank forecasts 1.8% growth in 2013, a sharp drop from an estimated 5.2% last year. Since the Venezuelan economy is not slowing, there is no obvious reason to predict a collapse in economic growth.
Furthermore, we can see that the projection numbers follow a trend. Both the World Bank and the IMF have been consistently underestimating growth projections in Venezuela.
Meanwhile, in Haiti the Bank predicts a sharp jump in GDP growth, from 2.2 to 6.0 percent, while the IMF has forecast growth at 6.5%. When we compare these numbers to those of previous years, we can see the opposite trend of that in Venezuela. All the projections for 2012 overestimated growth by well over 5 percentage points.
It is unclear why both the IMF and the World Bank have projected such high growth for Haiti considering the many severe challenges facing the country in the wake of the 2010 earthquake. As we have noted on an ongoing basis over the past three years, major international donor funding has been slow to materialize, progress on housing, water, sanitation and other infrastructure has been minimal, and there have been few examples of improvements that would suggest an upsurge in growth is on its way. There has been even more bad news in the wake of Hurricane Sandy at the end of October, which devastated crops and left 2.1 million people “food insecure.” The World Bank and IMF’s projections of 6 percent or higher GDP growth in 2013 seem unfounded.
The IMF’s pessimistic growth projections for Venezuela fit a pattern going back several years. GDP growth forecasts for Argentina were off by 5.0, 5.2, and 4.3 percentage points for the years 2004-2006, and for Venezuela they were off bya gigantic 10.6, 6.8 and 5.8 percentage points in the same years. These patterns suggest a politicization of the IMF’s projections for certain countries, since the Fund was consistently overly optimistic on Argentina’s growth in the years that the Argentine government was still following the IMF’s policy recommendations.
A while ago, caricatures began to appear on the internet showing the Egyptian president, Mohammed Mursi, prostrating before the International Monetary Fund (IMF). The artists were inspired by his request for a $4.8 billion loan to revive the Egyptian economy, which has been in recession since the beginning of the revolution. More recently, the media has been discussing “news” of an offer by the European Union of a $1.29 billion loan, if Egypt secures the IMF loan.
These loans are usually conditional and are intrinsically tied to a series of economic policies, such as lifting state subsidies on some basic commodities and liberating the markets. In the past, implementing these policies has led to the outbreak of popular protests in Egypt as well as in other poor countries. This is why some activists in the field of social justice call the IMF the poverty, deprivation and debt makers, keeping Third World countries under the hegemony of rich countries.
The loans also come with political conditions to do with the government’s position on “Israel” and good neighborliness. Observers in the field of development are wondering whether Egypt under the Muslim Brotherhood will take the same economic path as Hosni Mubarak’s regime despite their talk of social justice and combating poverty in the latest elections.
Resorting to conditional loans may be dictated by the reality of the Egyptian economy in a world which is suffering from consecutive financial crises. It may even be marketed as political realism. But some are wondering about the limits of this realism, particularly when the Egyptian prime minister, Hisham Qandil, announced that Egypt will not cease economic and industrial cooperation with “Israel,” in reference to the qualifying industrial zones that make Israeli-Egyptian products in every corner of Egypt.
Egypt’s new prime minister, appointed in the summer, said Sunday his government was finalizing a package of economic reforms to boost tax revenue and cut consumer subsidies and that he would present a draft to the president next week.
Hisham Kandil told Reuters in an interview the government planned to direct energy subsidies more effectively, issuing coupons or smart cards to the poor for butane cooking gas by mid-October and cutting subsidies on 95-octane gasoline in coming months.
“We want to increase our revenue. To do so we need to look at our taxation system so it covers more people, not necessarily that we tax more. But it would be better to tax more people,” he said. “We’ll try to get them into the formal economy, and we will do that very soon.”
Egypt last month requested a $4.8 billion loan from the International Monetary Fund (IMF) as the post-revolutionary country trudges through economic dire straits.
During 18 months of political turmoil since the overthrow of autocratic leader Hosni Mubarak, successive Egyptian governments negotiated with the IMF to secure emergency funding.
The Muslim Brotherhood, from which the current president hails, was originally skeptical of the IMF loan, which it feared would undermine Egypt’s sovereignty by keeping it indebted to the IMF.
Dozens of Egyptians took to the streets to protest the move which they said was antithetical to a revolution that aimed to unshackle the chains of foreign intervention.
London – The United Kingdom has refrained from backing Egypt’s request of a $4.8 billion loan from the International Monetary Fund (IMF).
“We prefer to wait and see the results of the negotiations between Egypt and the IMF,” a UK Foreign Office spokesperson told Ahram Online.
During her recent visit to Cairo, the IMF’s managing director, Christine Lagarde, received a formal request from Egypt for a $4.8 billion loan.
“The UK thinks that this is a good opportunity for dialogue between the two parties,” the spokesperson added.
Asked whether the UK would back the Egyptian request if the IMF board decides in its favour, the spokesperson replied: “We do not have anything to say for the time being.”
The UK’s caution seems to mark a significant change in its attitude towards Egypt’s calls for international assistance to overcome its economic difficulties.
The UK provides 5 per cent of the IMF budget, making it the fourth biggest contributor, with equivalent voting power. It follows the US (18 per cent), Germany (6 per cent) and Japan (6 per cent).
Early this year, the UK government was enthusiastic about an IMF offer of a $3.2 billion loan at a 1.5 per cent interest during Egypt’s period of direct military rule.
A high level UK diplomat then told Ahram Online that the offer was “an amazingly good deal” with “virtually no conditionality.”
UK support at the time followed a meeting of British representatives with the Supreme Council for Armed Force (SCAF), which until July 2012 had veto power on all political decisions.
The diplomat explained that his government felt the deal the IMF put to Egypt was very favourable.
Speaking this week, the Foreign Office spokesperson insisted there was no change in the UK positions on the IMF loan after President Morsi took the reins of power from SCAF.
During her visit to Egypt last Wednesday, Lagarde met Morsi and his prime minister Hesham Kandil, and praised the Egyptian vision for reform.
“We are impressed by the strategy that President Morsi and Prime Minister Kandil have proposed during our meetings today,” she said at a joint press conference with Kandil.
An IMF technical team is due to arrive in Cairo in early September to begin work on arrangements for the mooted loan.
“We prefer foreign borrowing at this stage given the low interest rate of the IMF loan compared to much higher rates when borrowing domestically,” said Kandil, on the matter.
He added that borrowing domestically would crowd out the private sector and the IMF loan would help ease liquidity problems.
The IMF said in a statement it had maintained close dialogue on economic policy with Egyptian authorities since the start of the transition period in February 2011. It said it has also provided considerable technical assistance upon request from the government.
Year after year, people in the Arab countries are helpless spectators to the ongoing destruction of Iraq and Palestine by the United States and Israel. They see families wiped out by bombs in Afghanistan, Iraq and Lebanon. They see Arabs tortured and humiliated in Abu Ghraib and in Guantanamo. They see Israel regularly carrying out “targeted” assassinations in the Occupied Territories (splashing death around the target) while extending its illegal settlement of land belonging to Palestinians. Probably no people have greater cause to yearn for an equitable system of international justice. But where are they to look for it?
Well, what about the International Criminal Court (ICC)? The ICC is supposed to punish perpetrators of war crimes and crimes against humanity. It has been in operation since July 2002… continue
This article will examine some of the connections between the US and UK National Security apparatus and the appearance of the anthropogenic global warming (AGW) theory beginning after the accident at Three Mile Island. … continue
This site is provided as a research and reference tool. Although we make every reasonable effort to ensure that the information and data provided at this site are useful, accurate, and current, we cannot guarantee that the information and data provided here will be error-free. By using this site, you assume all responsibility for and risk arising from your use of and reliance upon the contents of this site.
This site and the information available through it do not, and are not intended to constitute legal advice. Should you require legal advice, you should consult your own attorney. Materials accessible from or added to this site by third parties, such as comments posted, are strictly the responsibility of the third party who added such materials or made them accessible and we neither endorse nor undertake to control, monitor, edit or assume responsibility for any such third-party material.
The posting of stories, commentaries, reports, documents and links (embedded or otherwise) on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such posted material or parts therein.
Fair Use
This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more info go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.
Silver Lining
