Committee for the Abolition of Illegitimate Debt

The CADTM congratulates the people of Ecuador for their choice of the left-wing candidate, Rafael Correa, as president, rather than his opponent, the billionaire banana tycoon, Alvaro Noboa, shown on television handing out dollars to voters during the campaign.

Rafael Correa, a former Minister of Finance, has already fought the intolerable loss of sovereignty implicit in the economic measures imposed by 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 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.

and the major powers. One such measure led Ecuador to abandon its own currency in 2000 in favour of the dollar, thus falling completely in the thrall of monetary policy decided by Washington. For decades, the wealth created by the Ecuadorian economy, especially from petroleum, has benefited the multinational companies of that sector and rich creditors, but not the population. About 40% of Ecuador’s budget is spent on servicing the debt.

The agreements signed with the IMF and the World Bank have led, amongst other things, to an end of domestic gas subsidies. Privatisation of national hydrocarbon, electricity and telecommunications companies highlights State disengagement in strategic areas. What this means is that in 2003, the Ecuadorians were faced with 35 % rises in fuel prices, an increase in VAT and a reduction in salaries for civil servants.

In July 2005, on Correa’s initiative, the Ecuadorian government decided to reform the use of petroleum resources. Instead of using it all for servicing the debt, Correa insisted that part of this income should be kept for social spending, in particular for the Indian population. The World Bank was so outraged that it blocked all the loans that had been promised to Ecuador. Pressure from Washington was such that Rafael Correa decided to resign rather than to give in. He told the World Bank and the IMF that no-one had the right to punish a country for changing its laws.

An audit of the debt is under way in Ecuador and the official Commission in charge of the audit is soon to make its report. The CADTM supports the numerous Ecuadorian social organisations involved in carrying out the audit. The CADTM asks the new Ecuadorian president to use it to totally repudiate his country’s external public debt since it has not benefited the population, of whom the majority have just voted him into power, in any way.

Correa has already announced two symbolic gestures indicating a fundamental change of logic. One is his intention to renegotiate oil contracts and go back to the Organisation of Petroleum-Exporting Countries (OPEC OPEC
Organization of Petroleum-Exporting Countries OPEP is a group of 11 DC which produce petroleum: Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, Venezuela. These 11 countries represent 41% of oil-production in the world and own more than 75% of known reserves. Founded in September 1960and based in Vienna (Austria), OPEC is in charge of co-ordinating and unifying the petroleum-related policies of its members, with the aim of guaranteeing them all stable revenues. To this end, production is organized on a quota system. Each country, represented by its Minister of Energy and Petroleum, takes a turn in running the organization. Since 1^st July 2002, the Venezuelan Alvaro Silva-Calderon is the Secretary General of OPEC.

OPEC : http://www.opec.org/opec_web/en/ ); the other is a promise to halve the presidential salary, which at present stands at 8,000 dollars. The CADTM can only give him our full encouragement.

Finally, the CADTM appeals to all leaders of countries in the South to set a new economic logic in motion, one which respects human beings and the environment, unlike the neo-liberal logic which has been forced on countries through a mainly odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. which has to be abolished.