Interview with the economic and political analyst Eric Toussaint (First part)

“The Itaipu Treaty signed in 1973 could be declared void.”

28 December 2008 by Roberto Irrazábal


The Belgian analyst Eric Toussaint argues that Paraguay could request the invalidity of the treaty on the grounds of the principles included in the Vienna Convention. He suggested to Lugo that a comprehensive auditing of the country’s debts should be carried out, just as Ecuador did.

A few days ago, the chairman of the Committee for the Abolition of Third World Debt Eric Toussaint visited the country. He was invited by President Fernando Lugo, who asked him to be his adviser on important subjects such as the Itaipu Treaty, the global economic crisis, the review of external debt and the integration processes.

The Belgian expert says that in case Paraguay does not obtain the renegotiation, it could request the nullity of the Itaipu Treaty invoking the Vienna Convention, which regulates all international treaties.

How do you see the Paraguayan claims towards Brazil regarding Itaipu?

- I have studied the 1973 Itaipu Treaty and in my opinion, it could be declared void by both parties, or by Paraguay alone if Brazil does not agree. International law allows a State to make a sovereign act of repudiation or abrogation of a treaty. In my view, this option does not mean leading to a confrontation with Brazil, but renegotiating another treaty, which would be fair and comply with international law. Paraguay does have this right, but what is important is first to seek a friendly settlement.

How can Paraguay obtain nullity?

- This treaty was signed between two dictatorships and it includes several articles which infringe the Vienna Convention, a pact that all countries must respect and that was signed in 1963 to regulate international treaties. The respect for the equality of the parties, among other aspects, is one of the arguments.

What do you suggest about Paraguay’s debts?

- We talked with President Fernando Lugo about a comprehensive audit of the debts claimed from Paraguay, the binational debts related to Itaipu and Yacyreta, the external public debt which amounts to around 2 billion dollars and the internal public debt. This is what I recommend drawing from various experiments, among which the Ecuadorian one.

How was the experiment in Ecuador?

- Ecuador organised, following a decision of the Presidency of the Republic, a national and international commission, with twelve delegates for the former and six for the latter. Four State bodies also participated: the National Audit Office, the State Prosecution Service, the Anti-Corruption Commission and the Ministry of Economy and Finance.

Did you take part in the commission?

- I was a member of this commission and for 14 months we have been analysing the contracts in order to identify the legitimate and illegitimate debts, so as to make recommendations to the government, which took the decisions.

What could happen here?

- Paraguay could use the experiment in Ecuador and adapt it to its own situation and needs, and set up a commission. In this case, I would be willing to bring my technical support.

Venezuela and Bolivia also announced they would take this measure. Is it becoming a regional tendency?

- It is a tendency. Even in Brazil fifteen days ago a parliamentary commission was set up in Congress to investigate the debt. The audit has historical roots since in the 1930s Getulio Vargas’s government in Brazil carried out an audit which revealed many breaches of the law and as a result, Brazil obtained a reduction of more than 50 per cent on its debts.

How do you see the integration process in the region?

- When we talked with President Lugo we discussed the role of Paraguay, and what I pointed out is that it would be very interesting to build a common axis between the small countries that are part of the integration process, namely Bolivia, Ecuador, Paraguay and Uruguay.

What is the objective?

- There are various initiatives of regional integration and also the plan to form a Bank of the South with 7 countries, and the voice of the small countries is not audible enough against the giants such as Brazil, Venezuela and Argentina. Paraguay needs to find a way to determine common criteria between the small countries so as to reach a balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of power within the block and have the small countries’ interests respected.

What are the threats coming from the big countries?

- The great regional powers tend to give priority to their commercial and economic interests, at the expenses of their small counterparts. This is the case with Itaipu, Yacyreta. Thus there must be mechanisms that reduce asymmetries between the countries of the block so that integration works.

How was the European experiment in this respect?

- In the European construction, the stronger countries such as England, Germany and France transferred money to Greece, Portugal, Spain and other member countries with weaker economies to reach integration by reducing those asymmetries.

What should be given priority in this process?

- It is fundamental in any integration process to have mechanisms of transfer, to have a common architecture, a Bank of the South to finance projects that encourage integration. In my opinion, these projects should aim at food sovereignty, agrarian reform, providing the region with a pharmaceutical industry that could produce high quality generic medicines, improving the rail connections between countries, and also common programmes related to education, communication, housing and environment.

And how would investments be made secure?

- I would propose the region should set up an ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx
of the South. The ICSID is the World Bank World Bank
WB
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.

’s Court that arbitrates in disputes between transnational companies, private companies and governments. The problem is that in most cases judgments are favourable to Northern transnational companies; the ICSID is not an impartial judge, it does not take into account the Southern countries’ priorities.

How the system would be like?

- Latin American countries, when signing investment contracts with transnational companies, could include in the contracts that, in case of dispute, the complaint has to be lodged with a Latin American organ. For me, it would mean going back to something Latin America inaugurated at the beginning of last century, which is the doctrine of Carlos Calvo, an Argentinean lawyer specialized in international law who said that the jurisdiction for economic activities must be that of the region and not that of the United States or Great Britain.

Published by the paraguayan daily paper ULTIMA HORA



Translated by Stephanie Jacquemont

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