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Brazil mulls new financial order

September 8th, 2009
Gabriel Strautman

Gabriel Strautman

As both the World Bank and International Monetary Fund (IMF) meet over the weekend for talks on the global financial crisis, Al Jazeera’s Gabriel Elizondo spoke to Gabriel Strautman, Brazilian economist and executive secretary of Rede Brazil – a network tracking international financial institutions – about the crisis, whether Brazil can help and how both institutions can reform.

Al Jazeera: Brazil, a few years ago, was in debt to the IMF by more than $30bn. That debt is now paid off, and recently Luiz Inacio Lula da Silva, the Brazilian president, announced that Brazil would loan the IMF $4.5bn. Does the IMF deserve this money from Brazil?

Strautman: No. The IMF doesn’t deserve to receive such a big contribution from a country like Brazil.

Al Jazeera: Why don’t they deserve it?

Strautman: From a historical perspective the IMF and the countries that govern it – the countries of the “global north” – they are the ones that owe the Brazilian society and countries of the “global south”.

Why? Because all the loans that the IMF gave to Brazil and other countries during the past decades were attached to a lot of conditions. Those conditions ultimately represented the deepening of neo-liberal policies that prevented the budget of Brazil, and other countries, from dealing with other needs of our populations. So the IMF owes a debt to Brazil.

Al Jazeera: Lula – who has been an outspoken critic of the World Bank and IMF for more than two decades – has said his country needs to lend to the IMF because that is the only way developing countries can gain influence within the organisation to bring about reforms. Do you think this will work?

Strautman: I very much doubt it. I doubt that will bring any changes to the IMF. If we analyse the institutions created from Bretton Woods, they had a clear mission: That was to create the basis of development of capitalism in the global south and to impose a mechanism of economic domination through creating debt.

I think their mission is very clear. And I think even with the participation of Brazil, China and other important countries like India, there will not be a change in the nature of the IMF or World Bank.

Al Jazeera: Do you think the World Bank and IMF are partly culpable for the current global economic crisis?

Strautman: When those organisations were created they had a clear mission of regulation of the financial system, and to apply certain policies so economies will not enter into crises.

But years later the IMF and World Bank have a large share of responsibility for all of the financial deregulation, all of the liberalisation that has allowed speculation, and for the developing of the current global economic crisis.

Al Jazeera: What do you see as the single biggest problem with the IMF and World Bank?

Strautman: One of the big problems with the IMF and World Bank is they are anti-democratic institutions. Those who put one dollar in have one vote. But if I give more money, I have more votes.

It gives more power to rich countries. And that is why those organisations are at the service of the rich countries. So the first thing to do is change that system.

Al Jazeera: There was a lot of talk by developing countries at the recent London G20 about reform of the IMF and World Bank. Isn’t that a good start?

Strautman: We need to think out of the box. I think if we just try to reform the IMF and World Bank it will be a matter of a few years before we have a new economic crisis.

Those countries that sit at the negotiation table need to have the courage to call for change. The countries from the south need to have a better attitude, more initiative, but mainly courage to think of the different possibilities.

Al Jazeera: If the IMF and World Bank are not providing the answers, who will?

Strautman: Some countries started auditing their external debt. They are going to analyse and examine all the conditions imposed when they were going to receive money from the banks. That is what is happening in Ecuador.

We also need to think of other organisations, other financial institutions at the regional level. We are discussing more trade using our own currencies. Brazil and Argentina are doing that and it will be good to expand that.

We need to think of alternative banks, such as the Bank of the South. That could be an alternative to finance other projects that the IMF and World Bank do not finance.

We need to have a different governing system for those banks that is more “one country, one vote.” That means to respect the sovereignty of countries and differences in societies.

I think that is the basis to start thinking on a new global financial architecture.

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