[Marxism] Bolivia set to join trend away from IMF dependence
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Sat Mar 11 06:50:39 MST 2006
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Bolivia seen likely to end IMF financing ties
Tue Mar 7, 2006 7:39 PM ET
By Mike Dolan, Economics Correspondent
WASHINGTON (Reuters) - Bolivia will this month likely become the latest
Latin American country to end formal financing ties with the
International Monetary Fund, officials and experts said on Tuesday.
The country's current three-year IMF stand-by facility, a lending plan
linked to structural and economic performance criteria, expires on March
IMF sources say the program will probably lapse without any new
arrangement and that it will be several months at least before any
decision is made on future financing of the impoverished Andean country.
"A new agreement involving financing is not necessary right now, because
the international reserves are very high," said an IMF official.
"A PRGF (the IMF's "Poverty Reduction and Growth Facility" for poor
countries) is a possibility, but it depends on outcome of the new
government's national development program," the official said, adding
such a decision was unlikely until much later this year.
Normal monitoring, including the fund's annual economic reviews, will
likely continue with an IMF mission expected to visit South America's
poorest country as early as next month.
Experts say, however, the government of new President Evo Morales may
want to avoid funding with IMF conditions at least until his own
development program is in place.
Without any major balance of payments problems at the moment and
sizeable international reserves, Bolivia has no urgent need of IMF aid.
"On evaluating how much we need, we will see if we can -- via the IMF --
open any financing channels," Economy Minister Luis Alberto Arce was
quoted as saying in Bolivian daily La Razon on Tuesday.
"But if the amount of financing we require is low, it will not justify
an agreement with the fund. That must be evaluated," he added.
Some economists said if Bolivia allows the agreement to lapse, it will
mark a further sidelining of the IMF in Latin America. Brazil and
Argentina cleared debts to the fund in December, putting a further
squeeze on the IMF's finances.
Unlike Brazil and Argentina, Bolivia was freed of its IMF obligations
under last year's global agreement to cancel the world's 19 poorest
countries' debts to the fund.
Bolivia's relative poverty would make a decision to end ties with the
fund more significant, leading to questions over the IMF's role in
low-income countries as well as highlighting a growing desire in the
region for development independence.
Even before Brazil and Argentina paid their debts to the IMF,
middle-income countries across Asia had been building international
reserves to avoid having to turn to the lender, a result of widespread
regional mistrust over the fund's handling of the crises that swept over
Asia in 1997-98.
Mark Weisbrot, Co-Director at the Center for Economic Policy Research in
Washington, said Bolivia's long experience under IMF programs has not
always been a happy one, adding that key sticking points remain with the
The IMF opposes a hydrocarbons law, passed by Bolivia last year, which
boosted royalty payments by foreign gas companies to the government and
provided for renegotiation of some contracts and which Weisbrot said
might be critical to government finances.
A longer-running issue has been the IMF-backed social security
privatization in 1998, which still weighs heavily on the government's
"The need for new economic policies can be seen from the severe economic
failure over the last quarter of a century," Weisbrot said in a report
this week, adding Bolivia's per capita income is lower now than it was
"It would not be surprising if the new government of Bolivia were to
allow the current agreement with the IMF to expire at the end of March
and not seek any renewal," he said.
The big question, Weisbrot said, is whether an agreement with the IMF
will be a condition for other sources of funding -- especially the World
Bank, Inter-American Development Bank and high-income governments.
"In the past, this would almost certainly have been true. This may not
be true today," he said. "The power of the fund has declined drastically
since the late 1990s."
Another senior IMF official played down the significance of any hiatus
in agreements between Bolivia and the IMF.
"It's just that Bolivia does not have any kind of balance of payments
problem that would require financial support and the new authorities
would rather take some time to see whether they want (it)," he said.
However, he added: "If you put it into the Latin American context,
certainly the fund is having a problem with keeping clients and has not
been very popular in Latin America."
Credit ratings agencies seemed sanguine about the situation, but were
monitoring developments. Both Fitch and Standard & Poor's rate Bolivia's
at a sub-investment grade "B-minus" rating with a negative outlook.
"Right now the two key credit issues for Bolivia are the hydrocarbon
sector and the policy the new government pursues in that area and also
relations with the United States," said Morgan Harting, Fitch sovereign
analyst in New York.
"If it gets those two policies right, the credit will improve -- that's
what we're watching most," he added. "We've not identified a new IMF
program as a critical credit driver."
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