G20 Summit in Buenos Aires: A non-event amidst citizen protests

22 December 2018 by María José Romero , Bodo Ellmers , Tove Maria Ryding

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When the global financial crisis broke, the world looked to the G20 to find solutions. But as G20 leaders recently gathered in Buenos Aires 10 years on for their 2018 Summit, it was all too clear that ‘too big to fail banks’ have grown even bigger while we’re stuck with a vastly expanded shadow banking industry and a very worrying new wave of debt crises. Even though the G20 consider themselves to be the world’s major body for economic policy coordination, they are sleepwalking into the next crisis.

Earlier this year, the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

(IMF) warned that global debt levels have reached all-time highs and that the world economy is now even more highly leveraged than before the global financial crisis began a decade ago. The number of poor countries at risk of debt crises has surged, and major emerging economies have been hit. This includes Argentina, the first South American host of the G20 G20 The Group of Twenty (G20 or G-20) is a group made up of nineteen countries and the European Union whose ministers, central-bank directors and heads of state meet regularly. It was created in 1999 after the series of financial crises in the 1990s. Its aim is to encourage international consultation on the principle of broadening dialogue in keeping with the growing economic importance of a certain number of countries. Its members are Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, India, Indonesia, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, USA, UK and the European Union (represented by the presidents of the Council and of the European Central Bank). Summit, which requested the largest IMF bail-out loan ever this year and imposed harsh austerity policies on its citizens.
Argentina, the first South American host of the G20 Summit, requested the largest IMF bail-out loan ever this year and imposed harsh austerity policies on its citizens.

Sleepwalking into the next debt crisis

In this context, one might have thought that Argentina’s 2018 presidency of the G20 would have led to substantial agreements and innovations – although its track record was not very promising. However, in terms of solutions, the summit became a non-event. The group’s policy response – or the absence of any significant policy response, as expressed in the G20 Leaders’ Declaration – is another major disappointment, if not outright dangerous. The outcome document contains just some vague and generic statements on fiscal and monetary policies, on monitoring capital flows and building debt management capacity.

The most substantial outcome is a renewed political mandate for the IMF, World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

and others “to improve the recording, monitoring and transparent reporting of public and private debt obligations”. While creating better tools to unveil hidden debts is certainly a good idea, even the amounts of debt that are already known are causing severe problems, and have already taken the first countries down.

Instead of building better institutions for the prevention and resolution of crises, the G20 is sleepwalking into the next crisis. The fact that Argentina did not use its G20 presidency to promote innovations that the country once championed – such as a multilateral legal framework for sovereign debt restructurings – was a missed opportunity. Given the serious economic crisis still facing the country, it seems that the strategy of the host government was to get international backing – including private investors’ support for its infrastructure plans – by holding 17 bilateral meetings with world leaders.

Still promoting privately financed infrastructure

Meanwhile, the problematic issue of private financing of infrastructure still dominates G20 discussions. In the communiqué, G20 leaders endorsed the Roadmap to Infrastructure as an Asset Class and the G20 Principles for the Infrastructure Project Preparation Phase. These are not new documents: the Roadmap, released in March, is shaping the work of the G20 on the controversial idea of developing infrastructure as an asset Asset Something belonging to an individual or a business that has value or the power to earn money (FT). The opposite of assets are liabilities, that is the part of the balance sheet reflecting a company’s resources (the capital contributed by the partners, provisions for contingencies and charges, as well as the outstanding debts). class – a flagship initiative of the Argentinian presidency. The Principles set out a framework that heavily focuses on achieving “a high standard of business case development” while it falls short of considering the sustainability aspects of infrastructure.

However, as Eurodad highlighted earlier this year, the G20’s work in this area does not take us any closer to finding responsible solutions to people’s infrastructure needs. It ignores the fundamental concerns, namely that: 1) there are no indications that this will work, in particular for the poorest countries, which normally lose out in the battle to attract private investment; 2) there is a very significant risk that this will come at a high price for the public purse, and potentially contribute to the already escalating debt problems worldwide; and 3) while the G20 keeps focusing on private finance, it’s distracting itself from the real question, which is how to improve the quality of infrastructure and how to mobilise the public finance that is, and always has been, crucial for building infrastructure.

Continuing failed approaches to address corporate tax avoidance

Another G20 task that has been left unresolved is the challenge of stopping international corporate tax avoidance – in technical terms known as “Base Erosion and Profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. Shifting” or BEPS. The G20’s BEPS package from 2015 included a number of very problematic loopholes, which allowed large-scale corporate tax avoidance to continue. More fundamentally, BEPS failed to address the fundamental problems in the international tax system, including finding alternatives to the failed transfer pricing system, and reconsidering the overall fairness of the tax system.

At the same time, the BEPS process was in itself highly problematic, since more than 100 developing countries were excluded from the negotiations. However, the closest the G20 has come to acknowledging these shortcoming is the fact that now, three years after the adoption of the BEPS package, some leaders are apparently starting to talk about the need for “BEPS 2.0”. But the solution does not lie in pursuing a failed and illegitimate approach. Instead, it is time for the G20 to listen to the Group of 77, a coalition of more than 130 developing countries, which has repeatedly called for a transparent process at the United Nations to develop a new, more effective and fair international tax system.

Next steps for the G20

For now, the G20 Summits are set to carry on as usual, heading for Japan in 2019 and Saudi Arabia in 2020. But so will the calls for alternative approaches. In Argentina, civil society organisations gathered at the “People’s Summit”, to call for economic justice, gender justice and environmental justice, while raising concerns about imperialism and the favouring of the interests of large multinational corporations. These points were also raised in large street protests outside the summit, serving as a stark reminder of the many concerns that the G20 has made a habit of ignoring.

Source: https://eurodad.org/g20-buenos-aires



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