Why do the world banks insist on their hurricane cut?
The international financial institutions aren't letting a disaster stand in the way of debt repayment.
Derek MacCuish, Social Justice Committee of Montreal
As efforts get under way to rebuild the Central American countries hit by Hurricane Mitch, the international community faces an old dilemma. Should one deal with the devil, if there is some good in the outcome?
Thousands of people were killed in the hurricane. disaster, and most of the rest are now trying to patch their lives together in a context of profound poverty. They need food and medicine, clothing and shelter. People around the world understand this need, and are sending as much as they can, without hesitation.
The problem is that even as the disaster relief is pouring in to Nicaragua and Honduras, large amounts of money are being taken out. Both countries are required to continue making payments on their considerable debts to international financial institutions (IFIs) such as the World Bank and the Inter-American Development Bank.
Creditor countries have cancelled debts, or have placed the payments on hold until solutions to the debt problems are worked out. The IFIs have refused to consider either of these options, arguing that they do not have any mechanisms for cancelling debts. They insist on being paid in full, and on time.
How, then, to help these countries with the disaster recovery, if there is to be no stopping the flow of money out to the IFIs?
The response of a number of the wealthier countries, including Canada, is to contribute to a new trust fund that will make some of the payments to the IFIs on behalf of the Central American countries. Given the urgency of the situation, it is the only pragmatic solution, they say. We want to help. There really is no other way.
Why is it that the IFIs will not write down any debt, even to countries facing destruction beyond conception? There are. just a few shameful reasons.
The first is bureaucratic inertia and stubbornness. They will not because they have not before. It would require a significant effort for the IFIs to rouse themselves and make the changes necessary in their organizational charters.
The second is a professed concern that the IFIs would suffer a weakening of their rock-solid credit ratings. Supposedly this would deny them adequate access to the resources they need to do their good work helping countries in distress.
Last, and most disturbing, the IFIs are not willing to sign off on the power that these debts give them over the economic policies of these countries. New loan contracts for billions of dollars have been signed in the past few weeks, leading these countries even deeper into debt. The bulk of the loans, are on condition that the countries adopt the economic restructuring scripted for them by the International Monetary Fund.
Those in the international community that do want to help are thus caught in a bind. Do they send disaster relief money to the IFIs to cover some of the debt payments? Do they refuse, and push instead for reform of the IFIs, which is being so strongly resisted?.
Despite the protests of the non-govern. mental organizations 'and others that work on development and poverty, the deal is being completed. Time is on the side of the IFIs, and the need for disaster assistance is immediate. They are collecting the dollars they are owed and providing massive new loans, while proudly painting their actions as a contribution to the relief effort.
It is past time for the member countries to take a hard look at these institutions, and to demand that they retum to their mandate - the alleviation of poverty - and change their policies from those of blatant self-interest. We should, not get trapped in this kind of dilemma again.
Derek MacCuish is program co-ordinator at the Social Justice Committee in Manireal and policy analyst with the Halifax Initiative Coalition. He is the author of the CD-ROM Pillaged Lives: Third World Debt and Global Institutions.