While it appears that the 29 member nations of the Organization for Economic Cooperation and Development [OCED] will reject the MAI, an International Monetary Fund [IMF] stealth proposal provides further reason to oppose the $18 billion funding request the Administration is seeking for it in mid-April. The proposal, an amendment to the IMF's Articles of Agreement, is based on some of the most extreme MAI provisions — those forcing participatory governments to eliminate restrictions on capital flows and foreign ownership of land and other investments.

If it passes, all member countries of the IMF, including the U.S., will be forced to remove all such barriers, allowing the IMF to dictate the extent of controls a country may maintain, the rate of the capital account liberalization, and changes in macroeconomic policy.

Congress has not been informed of this change nor the substantial implications. The Administration is apparently seeking to accomplish through the secretive process of the IMF what it has not through MAI negotiations. Disagreements between members have been intensified by public interest groups, trade unions, and environmental lobbyists which have been exerting pressure since the embarrassing day in January, 1997, when activists managed to obtain a copy of the text and posted it on the Internet. Prior to that time, the public — and legislators — had been largely unaware of the negotiations, which began in 1995.

As pressure against the MAI mounted internationally, watchdog group Public Citizen warned that "a strategic retreat at the OECD may prove part of a shell game in which the MAI's agenda may wane in one venue only to wax in others like the World Trade Organization or IMF." They were right.

It has surfaced at the IMF despite the fact that that organization has been under heavy attack. Most of its loans enabling economic development to developing countries have not only failed in this goal, but have destabilized their economies, with devastating effects on the lives of the people. Loan terms were unrealistic, driving recipients deeper into debt. The IMF then offered to "help" with "structural readjustment," a system which destroys health, education and welfare programs and forces countries to sell their natural resources cheap, impoverishing all but the wealthy elite, and siphoning the country’s wealth to foreign investors.

Yet, in the face of its massive failure, the IMF seeks new power with the removal of all controls over money flowing in and out of member countries. Limiting capital flows protects the domestic economy and screens out short-term speculative investments in favor of longer-term commitment. There are three means of regulation:

Trade barriers, such as tariffs intended to foster domestic production.

Restrictions on payments for imports or on profits going to foreign investors.

Limitations on foreign corporations' abilities to invest in certain economic sectors, and to purchase stocks or bonds, make bank loans, or issue bonds.

The IMF's current controls merely adjust the way trade and investment transactions are paid. Giving it control over capital accounts [essentially a national investment policy] would move it closer to being the ultimate regulator of the global economy.

The IMF's capital account liberalization approach provides a cushy deal for corporations and investors, but little incentive for lenders to fully evaluate risks. IMF bailouts socialize private debt — under the proposed amendment, any bailout of reckless investors would be subsidized by taxpayers. In East Asia, foreign loans to private companies, though privately contracted, are guaranteed by the government. The private sector's foreign debt will be borne by the citizens of Thailand, Indonesia, and South Korea. Without the bailout, foreign banks would have had to absorb more of the losses. With it, most of the international banks' responsibility will be absolved. Furthermore, unlike private debt, debt to the IMF cannot be renegotiated, sold at a discount on the secondary market, reduced, or forgiven.

In both the IMF’s past activities and though the proposed amendment, any debt is paid by the local people who did not assume the financial risk. This clearly violates Article I of the IMF Articles of Agreement, mandating it to help member countries so they won't have to resort to "measures destructive of national and international prosperity." The IMF should be shut down, not revived, and certainly not given a broader license to loot.

Contact your Congresspeople about the IMF amendment.   To contact Public Citizen, call 202-546-4996.

Hen Cackles

©Wanda Ballentine, 1998