Committee for the Abolition of Illegitimate Debt

Make the public understand the connection between the lack of resources for health and education and the payment of foreign debt is no easy task for the social movements. And it is made even more difficult by the
fact that the governments make it difficult to get information on the
extent of their countries’ indebtedness and on adjustment measures
enforced by 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.

http://imf.org (IMF). Eric Toussaint,
president of the Committee for Cancellation of the Thirld World Debt
(CADTM) explains that the alliance between governments and the ruling
class is one of the reasons why the idea of an audit that would expose
how the debt was contracted still is taboo. “Governments and ruling
classes don’t like to question this fact because they have interests in
maintaining a high level of indebtedness” he told us. For Toussaint, a
sovereign decision of the governments to investigate on the payment of
the debt and to demand its cancellation is necessary. “What kind of
sanction could this yield Yield The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. ? Will the United States invade Brazil ?" He
asked ironically. Toussaint underlined the advantages of control on
capital flows implemented by the Venezuelan government and showed that
contrary to what is claimed by the business world such measure does not
deter investors. "The country risk rating is the same for Venezuela as
for Brazil. What investors are attracted by is purchasing power."

Brasil de Fato - How do you explain such resistance to tackling the debt problem?

Eric Toussaint - There are two reasons. Governments do no want to deal
with this issue. The Brazilian government, for instance, wants a social
pact between the big capital and the people. President Luiz Inácio Lula
da Silva represents this pact. He doesn’t want to deal with the debt
issue because the Brazilian bourgeoisie - whose income is largely based
on loan revenues - has obvious economic assets in the debt payment. This
upper class “invests” in the international financial markets or
“invests” in its own country by lending money to the State, which
generates a huge internal debt. Of course, they don’t want the president
to question the debt payment. This would affect them as a social class.
And Lula doesn’t want to stand up against them, or against the IMF, or
against 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.

. He insists that the orthodox monetary policy
which demands a budgetary surplus of more than 4.5% mustn’t be
questioned. The second reason is that as a rule social movements in
Latin America do not enough relate the lack of resources for social
needs to the consequences of debt payment. It is a mistake. If there is
no money for land reform or for education, this is related to debt
payment.

BF - Is this related to the cousin concept of the “unpayability” of the
debt?

Eric Toussaint - The debt has been paid, it is payable Payable A sum of money that one person (debtor) or group of people owes to another (creditor). . The problem is
that the debt payment is unacceptable. It is scandalous that the people
should have to pay for a debt that they never contracted. The finance
ministry uses the revenue of taxes paid by the population for it. Tax
revenues in Brazil are among the highest in the world. Poorer people pay
very heavy duties when they buy fuel or food. This tax, which generates
revenues, should be invested in social expenditures such as new job
opportunities, health, and education. It is currently used to pay the
external and internal public debt. This is scandalous, unfair, and
inacceptable. A debt that has been paid many times, that was contracted
by a military dictatorship, or indeed by democratic regimes that
contracted new debts in order to pay the old one hasn’t any legitimacy.

BF - Could the audit of the debt be a useful tool ?

Eric Toussaint - The conclusion of an audit of the external debt would be
that it is illegitimate. On this basis, it is possible to think that a
social movement could organize to demand the suspension of payment. The
repudiation of debt can be founded on legal basis, on the argument of a
sovereign government that would claim it does not acknowledge it. It is
possible to say: “I will not pay”. The Argentinian government suspended
the payment of the public debt due to private creditors at the end of
December 2001. This amounts to a hundred billion dollars that Argentina
simply doesn’t pay back. There haven’t been any sanctions, there hasn’t
been any intervention, nothing has happened. The consequence of this has
been economic growth. If Argentina can do it, why not Brazil, which has
a more powerful economy ?

BF - But is it not an isolated decision?

Eric Toussaint - It shouldn’t be isolated. Chávez proposed Kirchner and
Lula to invest resources into health and education with the creation of
an international humanitarian fund to replace the IMF instead of paying
their creditors. This is Chávez’ proposal. In the mean time Venezuela
still paying its external debt. The difference is that part of the
country’s oil revenues is devoted to social programmes. Chávez’ is the
only government in the capitalist world that takes advantage of popular
mobilisations and actually uses a large part of its tax revenues to
improve the people’s living conditions. This is extraordinary. Because
Venezuela is in a different situation from Argentina or Brazil (where
payment is more difficult because they cannot rely on high oil
revenues), Venezuela will not decide on the non payment of the debt on
its own. The decision can’t be taken alone. Reprisals are often
mentioned, but what reprisals ? The US will not invade Brazil because
its government no longer pays its external debt, will they ?

BF - The Brazilian government implements a budgetary surplus at a higher
rate (4.5%) than the 3.75% demanded by the IMF. How can this be
accounted for ?

Eric Toussaint - I think that Lula’s strategy is an electoral one. In
running for the presidential elections of 2006, he claims to be the
candidate of the bourgeoisie and at the same time the people’s candidate
(PT). But this will not work. The bourgeoisie will say: “Thank you Sr
Lula, you have been very useful for us but now we have our own
candidate”. Lula’s government does the opposite of what had been
promised by the PT: a break away from the pattern applied by Fernando
Henrique Cardoso. If the IMF and the World bank support Brazil, it is
because Lula actually conforms to the same pattern.

BF - Another issue that shows the vulnerability of this economic policy
is the control on the flows of capital. What do you think of the
strategy of Venezuelan government to maintain the control on currency
exchange rates?

Eric Toussaint - I enthusiastically support Chávez’ policy on that
matter. The control over exchange rates is essential because it prevents
speculation against the national currency and because it prevents a
massive outflow of capital. In Brazil and Argentina there is no such
control; which makes the evasion of capital quite easy. In Venezuela
capitalists must get the state’s permission to convert bolivars into
euros or into dollars.

BF - Is the thesis that control on capital deters investors valid?

Eric Toussaint - Not at all. It is wrong. Control prevents capital from
flowing out, not from flowing in. There is an inflow of capital to
Venezuela because people have purchasing power. When the Venezuelan
government decides giving out about 500,000 scholarships of 100 dollars
each for people to get educated, what is the consequence? How will the
Venezuelans use this money? They buy food, clothes, this money is
injected into the economy as purchasing power. It stimulates the economy
through the internal market. This is basic. This is not socialism, this
is not marxism, this is different, but it makes good sense.

BF - Why are governments so reluctant to control the flows of capital if
it is as simple as that ?

Eric Toussaint - Because the Brazilian bourgeoisie for instance will not
accept any control on its money or what it does with it. The bourgeoisie
told Lula that if the government wants to serve its 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. , it cannot
use this kind of control. This is the only explanation. In this respect
the policy carried out by the Minister of Economics and Finance, Antonio
Palocci is actually Lula’s. The Brazilian president knows very well what
he is doing. To say the contrary would be to underestimate him. What
Chávez is doing shows that it is possible to apply other economic
measures without provoking financial and economic sanctions against
Venezuela. Despite the control on exchange rate, the risk rating is the
same for Venezuela as for Brazil. If sanctions against Venezuela were
considered, its risk rating would be twice or three times higher. Such
measures can be taken, to improve the country’s economic situation and
to control the capitalists.

BF - What do you think of the political process that takes place in
Venezuela beyond the economic sphere ?

Eric Toussaint - The secret of the process, which is one of Chávez’ big
assets, is the capacity of the Venezuelan people to mobilize in order to
defend what it have gained. If Chávez recovered the presidency on April
13, 2002 when the bourgeoisie, the catholic hierarchy and part of the
army had made an alliance to push him out, it is because the people
invaded the streets to defend him. The issue of popular mobilisation is
prominent. Labels can prove dangerous. Venezuela still is a capitalist
society in which the public sector, such as the oil company PDVSA, has a
place it has lost in other capitalist countries. Venezuela is a
capitalist country with a left government that relies on popular
mobilisations and carries out social reforms. In the international
context this is not so bad. Unfortunately, in the current conjuncture,
socialist revolutions are not on the agenda. We can’t compare the
Bolivarian revolution with the guerrilla of the 26 July Movement in Cuba
that destroyed Batista’s state apparatus. In Venezuela, the state
apparatus has not disintegrated. Moreover, with his ’Missions’, Chávez
can circumvent ministers in order to plough ahead in his social
reforms.

BF - What are the limits of the process?

Eric Toussaint - As Chávez puts it himself, the limits are related to
the debate between Stalin and Trotsky, when Trotsky claimed that
socialism in one country alone couldn’t work. An international strategy
is necessary. And Chávez claims there is no solution on a national
level. The future of the Bolivarian process highly depends on what’s
going on in the country and with the capacity of Venezuelan people to
defend what it has gained and its president. We have to be attentive to
what is going on in neighbouring countries. I consider support and
solidarity with Venezuela as important as the social mobilisations in
Europe, in Asia and in Africa. For all the riches of the process, if
Venezuela remains isolated, we cannot be optimistic about its future. We
saw how the United States intervened to support the coup on April 11,
2002, along with Aznar. If there is no international development, the
forces against Chávez could act again.