IMF and World Bank Face Declining Authority as Venezuela Announces Withdrawal

[Mark Weisbrot, co-director of the U.S. based Center for Economic and Policy Research (CEPR), argues that Venezuela's decision this week to pull out of the IMF and the World Bank could have an impact on both institutions, whose power and legitimacy in developing countries has been waning steadily in recent years. --Ed]

IMF and World Bank Face Declining Authority as Venezuela Announces Withdrawal

By Mark Weisbrot - Huffington Post

May 04, 2007

Venezuela's decision this week to pull out of the IMF and the World Bank will be seen in the United States as just another example of the ongoing feud between Venezuelan President Hugo Chavez and the Bush Administration. But it is likely to be viewed differently in the rest of the world, and could have an impact on both institutions, whose power and legitimacy in developing countries has been waning steadily in recent years.

Other countries may follow. President Rafael Correa of Ecuador announced last week that it was kicking the World Bank's representative out of the country. It was an unprecedented action, which President Correa punctuated by stating that "we will not stand for extortion by this international bureaucracy." In 2005, the World Bank withheld a previously approved $100 million loan to Ecuador to try to force the government to use windfall oil revenues for debt repayment, rather than the government's choice of social spending.

This is the way these two institutions have operated for decades. With the IMF as leader, and the U.S. Treasury department holding veto power, they have run a "creditors' cartel" that has been able to exert enormous pressure on governments over a wide variety of economic issues. This pressure has not only generated widespread resentment, but has also often led to economic failure in the countries and regions where the IMF and World Bank have had the most influence. Over the last 25 years Latin America has had its worst long-term economic growth performance in more than a century.

Venezuela also has specific grievances against the IMF, which are likely to generate sympathy in other developing countries with democratic, left-of-center governments. On April 12, 2002, just hours after Venezuela's democratically elected government was overthrown in a military coup, the IMF stated publicly that it was "ready to assist the new administration [of Pedro Carmona] in whatever manner they find suitable."

This instantaneous show of financial support for a newly installed dictatorship - one which immediately dissolved the country's constitution, general assembly, and Supreme Court - was unprecedented in the IMF's history. Typically the IMF does not react so quickly, even to an elected government. It is no wonder that this move was seen in Venezuela and elsewhere as an attempt by the IMF to support the coup itself. Washington, which dominates the Fund, had advance knowledge of the coup, supported it, and funded some of its leaders - according to U.S. government documents.

(click here to view entire article)

Comments

[Henry]

Well, let's wait for Chávez ACTUALLY to leave these two international bodies before we measure its impact.

After all, Chávez says so many things per day that it is almost impossible to keep track of all his promises, like ending the problem of homeless children in one year (this was about 8 years ago).