IMF Flirts with Venezuela

20 December 2004 by Maitane Larrañaga

After habitual scathing comments by president Chávez against 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), this institution has sent a high ranking delegation to Venezuela, in an attempt to smooth things over between the revolutionary government and this multilateral institution.

But Chávez did not meet with the IMF officials, who came to the country on an invitation by the Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

of Venezuela (BCV) and the Minister of Planning, Jorge Giordani, also a member of the board of directors of the Bank.

The commission sought a process to “foster closer relations” between their institution and Chávez, who often berates the IMF, which he charges with having spread misery throughout the countries that have consented to the application of its neo-liberal formulas as a means to overcome economic crises.

Agustín Carstens, second managing director of the IMF, led the delegation that came on a four day visit to the country. “We want to propitiate closer relations and to offer, in a way that is as open as possible, the Fund’s ample experience, that Venezuela can put into use under no obligation,” said Carstens to the press. “Also, Mr. Rodrigo Rato, new managing director of the IMF, has taken a very particular 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. in developing close relations with Venezuela,” he added.

What is really clear, is that Venezuela does not need any type of agreements with our institution, since the country -for the time being- is economically healthy, due to its high oil incomes.

Confident about the country’s current economic situation, Chávez boasts that Venezuela shall not kneel before the IMF, and that it has no interest at all in receiving a “pat on the head from the Fund for good behavior,” perhaps forgetting that at the beginning of his administration, he almost subscribed a technical assistance agreement with the Fund.

Open, but...

On December 7th , as he swore Nelson Merentes in as new Minister of Finance, Chávez welcomed the IMF’s positive impression of the Venezuelan economy, and said that the doors of the country are still open, despite their differences.

Although we totally disagree with the IMF’s policies, and have taken our own decisions in an absolutely independent and sovereign way; whenever they want to come over, we receive them, listen to them, discuss with them. We are not reluctant to discussing with anybody.

But there was some suspicion behind the flattery. “It is curious that after all these years, a high IMF official acknowledges that the Venezuelan economic policies -which are not the same as those they apply- do is a good sign. And (the fact that they also acknowledge) that the social policies that the bolivarian government is carrying out are necessary and sustainable, that is a good sign”, said Chávez.

As usual, Chávez pleaded on behalf of other peoples of the world when he said “I really hope the IMF recognizes the harsh reality our peoples are going through, especially in Latin America and the Caribbean, Third World countries, that they do away with their economic shock policy manuals, and acknowledge the sovereignty of the states, of the peoples, and the need that everyone has to elaborate his own formulas with liberty and independence”.

Chávez has severely criticized the IMF for having offered support to the short lived government of Pedro Carmona, who swore himself in as president of Venezuela during the brief overthrow of the constitutional government in 2002.

When asked about the possibility that the IMF provides technical support to Venezuela in a time of abundant oil incomes, Carstens, the Mexican IMF official, said that “Venezuela is to determine to what extent we will cooperate with them.

Dispensable policies

Tobías Nóbrega, minister of Finance until a few days ago, said last April that Venezuela has overcome its fiscal problems by doing exactly the opposite to what the IMF has recommended for its “experiments” in Latin America, and pointed out that the country can well do without the advice from the IMF, of which Venezuela is an associate.

Nobrega’s annoyance was evident when last April, the IMF estimated that the Venezuelan economy would grow 8.8% this year, but that such growth would not be sustainable throughout 2005, when it would drop to 1.1%.

The case of Venezuela for 2003 shows that all of the IMF recommendations and policies are dispensable”, said Nóbrega. He then pointed out that after the oil strike, from December of 2002 to February of 2003, Venezuela implemented economic policies that enabled it to recover, improve its country risk rate, and return to the financial markets with successful debt operations.

Venezuela is a nation that is overcoming its financial difficulties independently, without the need for the IMF, and it is doing all the opposite to what the narrow and already known IMF recipes recommend”, said the then minister

The economy of the world’s fifth largest oil exporter is recovering from record contractions: 7.6% and 8.9% in 2002 and 2003,respectively; years of political instability, in which Chávez survived a coup d’état, an entrepreneurial strike, and an oil industry lockout, all intended to drive democratically elected president Chávez from office.

The government estimates between 11% and 14% growth of the Gross Domestic Product 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.
this year, and at least a 5% growth in 2005.

The government has used abundant oil incomes to increase social spending on education, health, and employment for the depressed majority, a policy that has generated much criticism among opposition analysts, who claim that hundreds of millions of dollars have been squandered, in that they do not really address the root causes of poverty.

To others, this is the first time ever that at least part of the country’s oil incomes are invested in the vast majorities and not in personal bank accounts of governmental officials and administrators. Chávez has referred to the IMF as “ill-fated” and promised not to kneel before it, after Venezuela underwent its severe and imposed fiscal adjustments between 1989 and 1996.

Original source: Quantum N.44/ (



8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80