Committee for the Abolition of Illegitimate Debt

Buenos Aires, June 11, 2005 - The G-8 Finance Ministers announced this afternoon a new proposal to advance toward the cancellation of part of the multilateral debt claimed of 18 South countries, mostly in Africa but also including Bolivia, Honduras, and Nicaragua. While some of them celebrated the announcement as a “historic” step that would make possible a “new beginning” in the relations between enriched and impoverished countries worldwide, other Ministers admitted that the agreement had more to do with the needs of the international financial institutions (IFIs) themselves to salvage their credibility and initiate a new cycle of indebtedness.

Today’s announcemente suggests the eventual cancellation of debt worth u$s 40 to 55 billion, once the agreement itself is approved by the IFIs, the countries involved fulfill the conditions demanded of them, and the G-8 governments comply with their promises to make new resources available in order to compensate the IFIs for their loss of revenues. The debt in question represents a minuscule part of total South country debt; the debt of African countries alone is today valued at u$s 300 billion.

Jubilee South/Americas reiterates its demand that any debt cancellation must be unconditional and take into account the broadly-evidenced illegitimacy of the debt claims held against South countries. Rather than debtors, the peoples and countries of the South are creditors of an enormous social, historical, and ecological debt. That is why any attempt by the International Financial Institutions, and the debtor governments of the North, to make cosmetic changes in order to preempt any fundamental changes, must be rejected. We must furthermore demand that 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 , 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.

, the Interamerican Development Bank and the other regional banksm conduct participatory Audits in order to determine how much they have already collected in excess.

In the same vein, the announcement made this afternoon comes as a belated recognition that after years of promises, little or nothing has really been done to recognize the illegitimacy of the debt and proceed to cancel it. Only u$s 54 billion of the u$s 2.4 trillion claimed of the so-called developing countries has been effectively cancelled. And even then, the prior condition has been that each country must certify its compliance with the conditions summed up in the widely discredited “Washington Consensus”, including the application of structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ programs, reduction of the state, privatization of essential services and basic human rights, as well as trade liberalization. This is the case of Bolivia, for example, where debt cancellation today would have minimal impact in comparison with the ongoing multi-million dollar losses and socio-political impact provoked by the policies of water, gas, and other natural resource privatizations that were imposed earlier as preconditions for debt “relief”.

Other countries which are experimenting situations of severe humanitarian crisis, such as the case of Haiti in our hemisphere, not only continue to be exluded from these proposals but indeed, the International Financial Institutions continue to force debt collection at any cost. In January of this year, the Haitian government disbursed u$s 53 million in back-due 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 order for the very same banks to release almost the same amount of money in new loans - destined in large part to help prepare the way for the privatization of the country’s telecommunications network.

JUBILEE SOUTH/AMERICAS
www.jubileesouth.org/sp
Secretaría: Piedras 730, (1070) Buenos Aires, Argentina
Telefax: (5411) 43071867 Email: jubileosur at wamani.apc.org.