Committee for the Abolition of Illegitimate Debt

In the PhD dissertation I presented at the universities of Paris VIII and Liège in 2004 [1], I discussed the support provided to the coup by Washington, the WB 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.

and the IMF 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.

http://imf.org . The relevant section is reproduced below.

Support for the Brazilian military junta after the overthrow of President Joao Goulart

President Joao Goulart’s democratic government was overthrown by the military in April 1964. WB and IMF loans, suspended for three years, resumed very soon afterwards. [2]

A brief time line: in 1958, Brazilian president Kubitschek was about to undertake negotiations with the IMF to gain access to a loan of 300 million dollars from the United States. At the end, Kubitschek refused the IMF-imposed conditions and did without the US loan. This earned him wide popularity.

His successor, Goulart, announced that he would implement a radical land reform programme and proceed to nationalise petroleum refineries: he was overthrown by the military. The United States recognised the new military regime one day after the coup. Not long afterwards, the WB and IMF resumed their suspended lending policy. As for the military, they rescinded the economic measures the United States and IMF had criticised. Note that international financial institutions were of the view that the military regime was taking sound economic measures [3]. Yet, the GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. fell 7% in 1965 and thousands of firms declared WBruptcy. The regime organised harsh repression, outlawed strikes, caused a dramatic drop in real wages, and eliminated direct ballot voting, disbanded trade unions and made systematic use of torture.

President Joao Goulart’s democratic government was overthrown

Since his first trip in May 1968, McNamara regularly visited Brazil where he did not miss meeting the military rulers. The public reports of the WB systematically praised the policies of the dictatorship in reducing inequalities [4]. Nevertheless, inside the WB, the discussions took a bitter turn. When Bernard Chadenet, Vice-President of Project of the WB declared that the image of the WB is going to degrade following the support to the repressive government of Brazil, McNamara recognized that there was a tremendous amount of repression but he added that it “is not necessarily a great deal different from what it had been under previous governments, and it did not seem to be a lot worse than in some other member countries of the WB. Is Brazil worse than Thailand?” [5] Some days later, Mc Namara followed up “No viable alternative to the Government by generals seemed open” [6]. The World WB realised very well that inequalities would not diminish and that its loans in the agricultural sector would reinforce the big landowners. Nevertheless, it decided to carry on the loans because it absolutely wanted to put the government under its influence. Now, at this juncture, the WB met an obvious failure: the military regime demonstrated a deep mistrust in the context of the WBs desire to increase his presence. Finally, at the end of the 70s, they took advantage of a profusion of loans from the international private bankers granted at a lower rate of interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. than that of the WB and moved away from the WB, which they found less useful.

How political and geostrategical considerations influence World WB lending policy

Article IV section 10 stipulates: “The WB and its officers shall not interfere in the political affairs of any member; nor shall they be influenced in their decisions by the political character of the member or members concerned. Only economic considerations shall be relevant to their decisions, and these considerations shall be weighed impartially in order to achieve the purposes (set by the WB) stated in Article I.”

The WB has found many systematic means of getting round the prohibiting its operations taking “political” and “non-economic” considerations into account, one of the primary stipulations of its charter, from its founding onwards. The WB refused loans to post-liberation France as long as the Communists remained in the government. The day after they left the government in May 1947, the loan France had requested, blocked until then, was granted [7].

The WB has repeatedly contravened article IV of its own statutes. In truth, the WB has made many choices based on political considerations. The quality of governments’ economic policies is not the determining element in its choices. The WB has often lent money to the authorities in countries despite the dismal quality of their economic policies and a great degree of corruption: Indonesia and Zaire are two cases in point. Specifically, WB choices relative to countries that play a major political role in the eyes of its major shareholders are regularly linked to these shareholders’ interests and outlooks, starting with the United States.

From 1947 to the collapse of the Soviet bloc [8], World WB and IMF decisions were determined in large part by the following criteria:

• avoid shoring up self-reliant models;
• provide funding to large-scale projects (WB) or policies (IMF) enabling major industrialised countries to increase exports;
• refuse to help regimes seen as a threat by the United States government or other important shareholders;
• attempt to modify the policies of certain governments in the so-called socialist countries so as to weaken the cohesion of the Soviet bloc. This is why support was granted to Yugoslavia, which had dropped out of the Moscow-dominated bloc from 1948, or to Romania from the 1970s at the time when Ceaucescu was attempting to take his distances from the Comecon and the Warsaw Pact Warsaw Pact A military pact between the countries of the former Soviet Bloc (USSR, Albania, Bulgaria, Hungary, Poland, the German Democratic Republic, Rumania, Czechoslovakia). It was signed in Warsaw in May 1955, as a reaction to the Federal German Republic joining NATO. Albania withdrew in 1968 after Soviet intervention in Czechoslovakia. After the dislocation of the USSR, the Pact’s military organization was dissolved in April 1991. ;
• support strategic allies of the western capitalist bloc and in particular of the US, (i.e.: Indonesia from 1965 to the present day, Mobutu’s Zaire, the Philippines under Marcos, Brazil under the dictators after the 1964 coup, dictator Somoza’s Nicaragua, Apartheid South Africa);
• Attempt to avoid or to limit in so far as possible, closer links between Third World countries and the Soviet bloc or China: for example, distancing the USSR from India and Sukarno-era Indonesia.

To carry out this policy, the World WB and the IMF have generalised a tactic: greater flexibility towards right-wing governments (less demanding in terms of austerity measures) facing a strong left opposition than to left-wing governments facing strong opposition from the right. Concretely, that means IFI are more demanding and make life more difficult for left-wing governments to weaken them and ease the right’s path to power. According to the same logic, the IFI have made fewer demands on right-wing governments facing a left-wing opposition to avoid weakening them and preventing the left from coming to power. Monetarist orthodoxy has variable geometrics: the variations depend on many political and geostrategic factors.

The IMF and World WB did not hesitate to support dictatorships when they (and other major capitalist powers) found it opportune. The author of the World Report on Human Development published by UNDP UNDP
United Nations Development Programme The UNDP, founded in 1965 and based in New York, is the UN’s main agency of technical assistance. It helps the DC, without any political restrictions, to set up basic administrative and technical services, trains managerial staff, tries to respond to some of the essential needs of populations, takes the initiative in regional co-operation programmes and co-ordinates, theoretically at least, the local activities of all the UN operations. The UNDP generally relies on Western expertise and techniques, but a third of its contingent of experts come from the Third World. The UNDP publishes an annual Human Development Report which, among other things, classifies countries by their Human Development Rating (HDR).

(1994 edition) says so in black and white: “But rhetoric is running far ahead of reality, as a comparison of the per capita ODA ODA
Official Development Assistance Official Development Assistance is the name given to loans granted in financially favourable conditions by the public bodies of the industrialized countries. A loan has only to be agreed at a lower rate of interest than going market rates (a concessionary loan) to be considered as aid, even if it is then repaid to the last cent by the borrowing country. Tied bilateral loans (which oblige the borrowing country to buy products or services from the lending country) and debt cancellation are also counted as part of ODA. Apart from food aid, there are three main ways of using these funds: rural development, infrastructures and non-project aid (financing budget deficits or the balance of payments). The latter increases continually. This aid is made “conditional” upon reduction of the public deficit, privatization, environmental “good behaviour”, care of the very poor, democratization, etc. These conditions are laid down by the main governments of the North, the World Bank and the IMF. The aid goes through three channels: multilateral aid, bilateral aid and the NGOs. received by democratic and authoritarian regimes shows. Indeed, for the United States in the 1980s, the relationship between aid and human rights has been perverse. Multilateral donors also seem not to have been bothered by such considerations. They seem to prefer martial law regimes, quietly assuming that such regimes will promote political stability and improve economic management. After Bangladesh and the Philippines lifted martial law, their shares in the total loans given by the World WB declined" [9].