How the IMF & World Bank Undermine Democracy

23 Pages·2021·0.14 MB·English

How the International Monetary Fund and the
World Bank Undermine Democracy and Erode
Human Rights: Five Case Studies

Mexico | Africa | Brazil | Colombia | Haiti

September 2001
Published by Global Exchange

Introduction

The policies of the International Monetary Fund and the World
Bank have systematically undermined democratic principles and
eroded human rights protections in dozens of countries around the globe.

By insisting that national leaders place the interests of international financial
investors above the needs of their own citizens, the IMF and the World Bank have
short circuited the accountability at the heart of self-governance, thereby corrupting
the democratic process. The subordination of social needs to the concerns of financial
markets has, in turn, made it more difficult for national governments to ensure that
their people receive food, health care, and education -- basic human rights as
defined by the Universal Declaration of Human Rights. The Bank's and the Fund's
erosion of basic human rights and their perversion of the democratic process have
made the institutions a clear and present threat to the well being of hundreds of
millions of people worldwide. The institutions, Global Exchange strongly believes,
must be abolished and redesigned from scratch through a genuinely democratic,
inclusive and transparent process involving all of the world's nations.

For more than 50 years, the IMF and the World Bank have advanced a form of
economic "development" that prioritizes the concerns of wealthy lenders and
multinational corporations in the industrialized north while neglecting the needs of
the world's poor majority. The institutions work as a kind of international loan shark,
exerting enormous influence over the economies of more than 60 countries. In order
to get loans, international assistance, and debt relief, countries must agree to
conditions set by the Bank and Fund. Under the guise of promoting "free trade,"
market liberalization, and financial stability, these two institutions have forced cuts in
health care, education and other social services for millions of people across the
planet, thereby deepening poverty and increasing inequality. By elevating concerns
about macroeconomic financial stability above all other competing values, the
institutions have created a human rights catastrophe.

The Universal Declaration of Human Rights, adopted by the United Nations General
Assembly in 1948, is the foundation of modern international human rights defense
and promotion. The Declaration is built on the principle that human rights come from
the "inherent dignity" of every person. This dignity, and the rights to freedom and
equality which derive therefrom, are inalienable.

Though best known as guarantor of liberties such as freedom from repression,
freedom of expression and freedom of association, the Declaration places as much
importance on the guarantee of economic rights as it does on the protection of
political and civil liberties. The Declaration is unequivocal and explicit in its demand
that economic security is just as central to human dignity as freedom of conscience.

For example, the Declaration establishes "the right to work, to free choice of
employment, to just and favorable conditions of work and to protection against
unemployment" as a basic human right. The "right to equal pay for equal work" as
well as a worker's "right to form and to join trade unions for the protection of his
interests" are considered central to human dignity. Basic, and free, education is also
established as a universal human right. More broadly, the Declaration asserts:
"Everyone has the right to a standard of living adequate for the health and well-
being of himself and of his family, including food, clothing, housing and medical care
and necessary social services, and the right to security in the event of
unemployment, sickness, disability, widowhood, old age or other lack of livelihood in
circumstances beyond his control."

Together, the economic security articles of the Declaration underscore that political
rights can be enjoyed only when basic human needs have been satisfied. Without
economic security, freedom of conscience -- the liberty to grow as an individual -- is
impossible. As Article 22 states: "Everyone ... has the right to social security ...
[and] the economic, social and cultural rights indispensable for his dignity and the
free development of his personality."

In dozens of countries around the world, the IMF and the World Bank have violated
that "right to social security." The institutions have forced debtor countries to cut
social spending on health, education, and other public services. They have pressured
poor nations to charge their own citizens for the use of public schools and public
hospitals. And they have demanded that countries keep their wage levels low, a
policy which harms ordinary citizens but benefits multinational corporations.

In compelling countries to adopt such policies, the IMF and the World Bank have not
only threatened communities' right to social security -- they have also undermined
countries' democratic systems. Democracy rests on the principle that government
officials and elected representatives are servants of the citizenry at large. Elected
leaders' ultimate accountability is to the people they serve. The Bank and the Fund
have severed that chain of accountability by making national leaders more concerned
with the interests of international investors than with the needs of their own people.
As soon as government officials begin worrying more about what Wall Street will
think than what their own people think, democracy has been perverted.

Since 1976, at least 100 protests against Fund and Bank policies have occurred in
dozens of countries around the world (see Appendix 1). Clearly, ordinary citizens are
outraged with the institutions' policies. The continued adoption of those policies
reveals the democracy disconnect fostered by the IMF and the World Bank.

The IMF's and World Bank's history of socially irresponsible and environmentally
unsustainable policies are too long to present in a brief statement. It is necessary,
then, to focus on just a few examples of how these institutions' policies have
threatened human rights and democracy throughout the world.

In Haiti and Mexico, the Fund and the Bank have actively worked to keep wages low,
making it more difficult for ordinary citizens to support themselves. Throughout
Africa, the IMF's and World Bank's imposition of "user fees" for health services and
the institutions' resistance to meaningful debt relief have worsened the AIDS crisis
ravaging that continent. In Colombia, the IMF has demanded social service cuts even
as the country suffers from recession and civil war. In Brazil, as in many other
countries, the World Bank has meddled in domestic politics by inserting itself into
one side of a heated social debate. And in all of these places, as in many more not
mentioned here, the institutions have directed the most political of decisions -- the
allocation of national resources -- thereby undermining national democracies.

Once again we have to say, "Enough!" The IMF and World Bank say their policies are
designed to succeed in the "long run." But after more than 20 years of managing
dozens of economies, the institutions have created more inequality, more
environmental destruction, and no real security. It is long past time for the US and
the other wealthy nations that enjoy de facto control over the institutions to call for
the abolition of the IMF and the World Bank and to begin work to create multilateral
financial institutions that are truly committed to human rights and democracy and
which can effectively respond to the new realities of the 21st century. Policy makers
everywhere must recognize that another world is possible.

Mexico: A "model student"?

For nearly 20 years, Mexico has followed almost every economic policy mandate
from the International Monetary Fund and the World Bank. Mexico's compliance with
IMF dictates has been so reliable, in fact, that in 1994 the IMF and the World Bank
lauded the country as a "model student" that other Latin American countries should
emulate. Some model. Since Mexico first adopted the IMF prescriptions of trade
"liberalization," privatization and deregulation, real wages have fallen, poverty and
inequality have increased, and the country's massive debt burden has grown.

Mexico's experience with IMF policies offers a clear example of how the Fund
sacrifices the well being of ordinary people to suit the interests of international
investors. In an effort to head off short- term financial crises -- and calm investors'
fears -- the IMF has undermined Mexico's chances of creating a stable, well-balanced
economy.

The IMF Arrives in Mexico

Many US citizens assume that Mexico's entry into the new global economy occurred
when the country signed the North American Free Trade Agreement (NAFTA) in
1993. But Mexico's economy was opened up to the forces of corporate-led
globalization long before NAFTA went into effect. Before anyone had heard of NAFTA,
the IMF was already setting Mexico on the structural adjustment path.

In 1982, a fall in international oil prices combined with a rise in interest rates in
international financial markets forced Mexico to announce that it was on the verge of
defaulting on its foreign debt. The "debt crisis" of 1982 also impacted countries

throughout Latin America, Africa and Asia, giving the IMF the chance to determine
the fiscal and monetary policies of countries around the world.

Mexico asked the IMF for assistance, and the Fund obliged with a $3.9 billion credit
package. The IMF's 1982 assistance package was strictly quid-pro-quo. To receive
the new loan -- and the Fund's all-important seal of approval, which opens the door
to other public and private credit -- Mexico would have to embark on a series of
market reforms. Public spending would have to be cut, government enterprises
would need to be privatized, industry would have to be deregulated, and the country
would have to open up to more foreign trade and investment. Subsequent
agreements with the IMF in 1986 and 1989 further cemented this policy path.

In an effort to boost foreign investment in Mexico and decrease the country's imports
-- which would hopefully lower the country's trade (or current account) deficit -- the
IMF in the late 1980s sought to contract economic activity and stabilize wages. The
IMF worked with the Mexican government and the country's businesses and
government-controlled labor unions to establish a set of social pacts, or "Pactos," to
keep wages in check. Workers' earnings were indexed to "expected" levels of
inflation. Unfortunately for Mexican workers, inflation rose more than expected.
Between the implementation of the first Pacto in December 1987 and May 1994, the
minimum wage increased by 136 percent, while the cost of a basic basket of
consumer goods rose by 371 percent.

That sort of decrease in real earnings would lead Mexicans to call the 1980s the "lost
decade." During the 1980s, real wages (adjusted for inflation) declined by more than
75 percent, and between 1981 and 1990 workers' share of national income fell from
49 to 29 percent. Government investments in education, research and development,
and infrastructure were reduced. The IMF policies, which supposedly were intended
to make Mexico more internationally competitive, were actually doing the opposite
by limiting investment in the very areas needed to make a country more productive.
It was a development "strategy" doomed to fail.

The Cost of Privatization

While ordinary wage earners saw their incomes plummet, they were confronted with
increasing consumer prices. Since 1983, Mexico has sold off nearly 1,000 public
enterprises. These privatizations were intended to inject come cash into government
coffers. While the sell-offs did, in the short term, earn the government new money,
the privatizations hurt ordinary consumers. The privatization of Telmex, the country's
phone system, is just one example of how the IMF privatization agenda hurt average
citizens more than it helped them.

In 1990 President Carlos Salinas de Gortari sold off the country's profitable phone
system, Telmex. The World Bank provided substantial technical assistance to the
Mexican government to help with the sale. The winners were multinational
communication corporations Southwestern Bell and France Telecom. Mexican phone
users were the losers. In the months before the sale -- in an attempt to make the
Telmex a more attractive buying prospect -- the government increased rates on local
calls from 16 pesos per minute to 115 pesos per minute.

In a 1992 report, the World Bank admitted that "the privatization of Telmex, along
with its attendant price-tax regulatory regime, has the result of 'taxing' consumers --

a rather diffuse, unorganized group -- and then distributing the gains among more
well-defined groups, shareholders, employees, and the government." The Bank
predicted that rates would decrease in the long run. But the long run still hasn't
arrived. Although rates on international calls have dropped, that decrease has been
offset by a rise in the cost of long distance calls within Mexico.

Other privatizations have been equally distressing for average Mexicans. The World
Bank has concluded that privatization contributed to a "worsening of the already
skewed and concentrated pattern of ownership distribution in the economy." A
glaring example of this is corn, Mexico's traditional staple crop. For years, small scale
farmers have seen government support evaporate as the IMF demanded an end to
tariffs and import quotas on the grain and an elimination of government assistance
with marketing and distribution of locally grown products. In recent years, a flood of
subsidized US corn has caused a 45 percent decrease in the prices corn farmers
receive for their commodity. This has pushed millions of farmers off their land and
into the urban ghettoes or toward the US. And yet -- because of the monopolistic
control of the Mexican corn processing industry -- consumer prices have not gone
down. In fact, tortilla prices have actually increased in the last 15 years.

A "Success" Built on Sand

By the early 1990s, after the "lost decade," the Mexican economy started to show
signs of improvement. Inflation came down, and some economic growth occurred.
But it was a success built on sand. The Mexican economy was relying more and more
on foreign capital flows, most of which were short-term portfolio investments. The
increasingly volatile capital flows boosted the Mexican peso, a benefit for foreign
investors, but it worsened the country's trade deficit by making Mexican exports
more expensive.

By mid-1994, foreign investors -- assuming the Mexican government would devalue
the peso to make exports more competitive -- began pulling their money out of
Mexico. In December 1994, Mexican officials were forced to devalue the peso. In
January 1995, the government again asked the IMF for assistance. The IMF lent the
country $7.75 billion, and the US Treasury loaned another $18 billion. A new round
of privatizations were prescribed to raise quick cash and pay off the loans. Under the
1995 agreement with the IMF, transportation, banking and finance, railways and the
petrochemical industries were all to be sold off. Once again, the IMF was offering
policies that responded to the short term financial concerns of international investors
rather than to the basic needs of or ordinary Mexicans.

The1995 peso devaluation -- combined with an IMF-mandated rise in interest rates
designed to lure investors back to Mexico -- sparked the worse depression in Mexico
in 60 years. Unemployment doubled. More than 12,000 Mexican businesses filed for
bankruptcy. And millions of families dropped below the poverty line.

As the Mexican economy came virtually to a standstill, the IMF blamed the Mexicans,
complaining that human error and mismanagement of financial variables had led to
the crisis. The IMF's attempt to shift blame for the economic collapse seemed to
many Mexicans an insult. The country had followed all of the Fund's prescriptions.
The peso devaluation, after all, was due in large part to the short-term capital
flooding the country, and that flood was precipitated by the deregulation of the
country's financial markets which the Fund had demanded.

Trading Away the Future

Even as its economy was shrinking, Mexico was implementing the other pillar of the
IMF's structural adjustment package -- trade liberalization. In 1994, NAFTA went into
effect, creating a giant "free trade" block among Mexico, the US and Canada. The
agreement contained many "reforms" the IMF had long been asking for, among them
a provision allowing 100 percent direct foreign ownership of Mexican companies.
NAFTA also modified Article 23 of the Mexican Constitution, which had protected
communal property, known as ejidos, from being broken up. The article was another
long-time object of IMF and World Bank ire. The constitutional change removed
many people's guarantee that they would have access to land, thereby putting more
people in financial jeopardy.

In the years following the 1995 crash, Mexico did enjoy some steady macroeconomic
growth. But the benefits were not evenly spread. The number of Mexicans living in
"severe" poverty (surviving on less than $2 a day) has grown by four million since
NAFTA began. Wages, instead of increasing, have declined. Mexican manufacturing
workers are today earning almost 10 percent less than they did before NAFTA. The
1990s, just like the ten years before, were a "lost decade."

Today, after two decades of following IMF prescriptions and seven years of the
NAFTA experiment, Mexico remains a country racked by poverty and inequality. A
majority of Mexicans live below the poverty line. Even the World Bank concedes that
15 years of trade liberalization in Mexico have not succeeded in closing the gap
between rich and poor. In almost every social sector -- health, nutrition, housing,
education -- virtually all of the key indicators show serious deterioration over the last
15 years. Today one can speak not just of a lost decade, but of a lost generation.

The Same Old Policies

And what about the debt burden that started Mexico down the structural adjustment
path? It has gotten even worse. In 1982, Mexico's total foreign public debt was $57
billion. In 1993 it amounted to $80 billion. By 1997, the country owed $99 billion in
public debt. This stranglehold of debt continues to force Mexico to attract foreign
investment by any means necessary, including trading away the basic rights of its
workers and failing to enforce environmental regulations.

Despite the failures of this "model student," the World Bank and IMF are still
prescribing the same old policies for Mexico. In May 2001, the World Bank offered
specific recommendations to Mexican President Vicente Fox on the country's labor
policies. The Bank said that if Mexico wanted to attract more foreign investment, it
would need to increase the "flexibility" of Mexican labor. The Bank suggested that
Mexico eliminate its regulations regarding mandatory severance pay, collective
bargaining, obligatory benefits for workers, company-sponsored training programs,
and company payments to social security and housing plans.

President Fox said the recommendations were "very much in line with what we have
contemplated." But a leading Mexican industrialist, Claudio X. González, who heads
Mexico's most influential business organization, was surprised by the Bank plan.

"Some of these proposals of the World Bank are not made even to the most
developed nations," González said. "Why are they then being recommended for the
emerging countries?"

AIDS in Africa: Dying of Debt

The immune disorder AIDS rep resents one of the greatest threats to health and
social stability in the history of humanity. Today an estimated 36.1 million people
around the world are living with HIV-AIDS. The vast majority of those infected, 25.3
million people, live in one of the globe's most impoverished regions -- Sub-Saharan
Africa.

The countries of Sub-Saharan Africa are experiencing a pandemic rivaled only by the
plague that devastated Europe in the 14th century. The statistics are staggering. In
South Africa one in five people has HIV-AIDS, and in Zimbabwe one in four. One in
seven Kenyans have the virus. In Botswana, the country with the highest rate of
infection in the world, more than one-third of all adults are HIV positive. Seventeen
million people in Sub-Saharan Africa have died since the pandemic began; 2.4
million people died in 2000 alone. If current trends continue, the number of AIDS
orphans in Africa may exceed 40 million by 2010.

Policy makers in the West have offered a variety explanations for the disaster. They
say that African leaders have failed to respond quickly or effectively enough to the
pandemic. They suggest that "African promiscuity" is to blame. To be sure, many
African governments could have done more, and today can be doing more, to stop
the disease's spread. But Western leaders' explanations -- which rely on a racist
notion of African "otherness" -- are simply a way for wealthy governments to avoid
responsibility for what is certainly the greatest health and humanitarian emergency
of our time. The fact is that Africans are dying in horrendous numbers because they
are poor -- and that poverty has been greatly exacerbated by the policies of the IMF
and the World Bank, two institutions controlled by the world's wealthy nations.

Sub-Saharan nations' continuing debt burden is one of the central causes of the
AIDS crisis and also a major obstacle to treating the disease. The region's poverty
makes its citizens more susceptible to contracting AIDS. Treatment efforts are
frustrated by debtor countries' inability to pay for health care services because they
are spending so much money on interest payments. By refusing to cancel the debts
of AIDS-ravaged countries and by continuing to force poor nations to adopt cutbacks
in government services, including health services, the IMF and the World Bank are
contributing to the deaths of millions of people. People are literally dying of debt.

The Sub-Saharan debt crisis and IMF-mandated structural adjustment policies have
helped to spread AIDS throughout the region. In the 1980s and 1990s, scores of
indebted African nations agreed to structural adjustment policies such as eliminating
subsidies on basic foodstuffs, removing assistance to farmers, and re-orienting their
agricultural economies to export production. These "reforms" had two effects: they
jeopardized people's food security and they created a new class of migrant workers.
The elimination of food subsidies in Zimbabwe, for example, led to a tripling of food
prices in the early 1990s, which forced people to cut back on what they ate. The

reorganization of agricultural land led to a displacement of farmers, who then moved
to the cities to work or became temporary laborers. The combination of an increase
in malnutrition and an increase in migration and urbanization created a situation
under which Africans were both more vulnerable to the disease and more likely to
spread it. "Structural adjustment raises particular problems for governments because
most of the factors which fuel the AIDS epidemic are also those factors that seem to
come into place in structural adjustment programs," Dr. Peter Piot, Director of the
United Nations' AIDS program, has said.

Sex isn't the sole determinant of whether a person will contract the HIV virus; sexual
behavior alone cannot explain HIV prevalence as high as 25 percent of the adult
population. After all, how much sex are we talking about that would produce, in the
absence of other factors, prevalence of HIV in Botswana that is more than 50 times
that of the US, 80 times that of France, and 1,000 times that of Cuba? The science
here is unequivocal: An individual's overall health also affects their chances of
contracting the virus, and already ill and/or malnourished people are more likely of
becoming HIV-positive. From 1970 to 1997, Sub-Saharan Africa was the only region
in the world to experience a decrease in food production, a decrease in calorie
supply, and a decrease in protein supply per capita. In three structurally adjusted
countries -- Zimbabwe, Kenya, and Malawi -- protein supply fell by more than 15
percent. Protein-energy malnutrition weakens every part of the immune system,
making people more vulnerable to viruses such as HIV and more conventional
sexually transmitted diseases such as gonorrhea, which further speed the
transmission of HIV.

Even as structural adjustment policies have increased malnutrition and community
instability in Sub-Saharan Africa, they have made it harder for African governments
to respond to the growing AIDS crisis. Governments with overwhelming foreign debt
payment obligations must cut back on what they might otherwise allocate to health
care and HIV-AIDS prevention. Export earnings that go to service foreign debts are
not available to pay for imports of pharmaceuticals and other health equipment.

At least 23 African countries spend more money on debt repayment than they spend
on healthcare. Four countries suffering from massive HIV infection rates show the
deadly forces at work.

•
Eight percent of Tanzanians are HIV positive. In 1998 the country spent 1.3
percent of its Gross Domestic Product (GDP) on health care. It spent 3.1
percent of its GDP on debt payments.
•
Fourteen percent of adults in Kenya have HIV. In 1998 Kenya spent more
than three times as much servicing its debt than it did providing public health
care services. Although the World Bank and the IMF consider Kenya a "highly
indebted poor country" (or HIPC), the institutions consider that no debt relief
is required. In Kenya there are 22,000 people for every one doctor.
•
One out of every four Zimbabweans have HIV. In 1998 Zimbabwe spent 10.3
percent of its GDP on debt payments. It spent 3.2 percent of its GDP on
health care. Unicef has reported that between 1990 and 1993, the quality of
health care services in Zimbabwe dropped by 30 percent. The World Bank and
the IMF do not classify Zimbabwe as a country eligible for debt relief.
•
In Malawi, 16 percent of adults are infected with HIV. Between 1995 and
1998, Malawi spent twice as much on its debt payments as it did on its health
care. In Malawi, there is only one doctor for every 50,000 people.

The IMF's and World Bank's imposition of "user fees" -- that is, fees for public
services -- has made it even more difficult for governments to treat the AIDS
pandemic by lowering attendance at health clinics. For example, the introduction of
fees for patients at Nairobi's Special Treatment Clinic for Sexually Transmitted
Diseases (STDs) resulted in a decrease in attendance of 40 percent for men and 65
percent for women over a nine-month period. In Dar es Salaam, Tanzania the three
public district hospitals saw attendance drop by 53.4 percent between the second
and third quarters of 1994, when user fees were introduced.

Whether someone lives or dies of AIDS depends largely on where he or she lives.
The 25 million HIV-positive people in Sub-Saharan Africa are living with a death
sentence not because the drugs to treat them do not exist, but because government
officials in the world's wealthy countries don't have the political will to put human life
above corporate profit.

The international response to the AIDS crisis must focus on two key areas --
treatment and prevention. For these challenges to be met, several steps be taken.
Wealthy countries need to make a greater financial contribution to fighting the
disease, pharmaceutical corporations must work to provide drugs at prices poor
people can afford (currently one-tenth of one percent of Africans have the money to
buy life-prolonging AIDS drugs), and international intellectual property rights rules
must be loosened. Perhaps most important, countries' debts must be cancelled
unconditionally. Until that happens, African societies will be unable to respond to the
disease that threatens to destroy them.

The World Bank's Land "Reform" in Brazil:
Unconstitutional Meddling

According to conventional mac roeconomic measures, Brazil is a wealthy country.
Well endowed with natural resources, Brazil, the biggest country in South America,
has the ninth largest Gross Domestic Product (GDP) in the world. Yet the country
remains wracked by poverty and inequality. UN figures show that 20 percent of the
population controls 80 percent of the nation's wealth, and according to government
statistics the wealthiest one percent of the populace accounts for half of the national
income. At least half of the country's workforce in this country of 165 million people
earns less then the minimum wage of $77 per month. Perhaps President Fernando
Henrique Cardoso, a former left wing radical and now a neo liberal champion, has
put it best: Brazil is not a poor country, it is an unjust one. As Brazil demonstrates,
wealth alone -- wealth without equity -- is not prosperity.

The inequities of Brazilian society are particularly stark when it comes to land
distribution. The country's legacy of colonialism has left three percent of the
population holding nearly two-thirds of Brazil's arable land. According to the Brazilian
government, 30 percent of Brazilian farmers own just 20 acres of land or less. In
contrast, the country's largest farms, those of 2,000 acres or more, comprise only
1.6 percent of all farms but sit on 53.2 percent of the usable land. Another 4.8
million rural families -- approximately 25 million people in a country with a total
population of 167 million -- have no land at all and survive as temporary laborers.

Perhaps worst of all, much of Brazil's more than 1.2 billion acres of arable land lies
unused. At least 40 percent of agricultural land lies fallow or, at best, is used only for
cattle grazing. Among the largest farms -- those geared for the export market or
held only for speculative reasons -- an estimated 88 percent of the land is
permanently idle. The twin injustices of land concentration and idle farms are largely
responsible for the chronic poverty that plagues Brazil.

In 1997, the World Bank began a pilot program to address land distribution in Brazil.
Called the "Land Bank," Cédula da Terra in Portuguese, the project is intended to
help landless families gain parcels through access to credit and technical assistance.
What may appear a well-meaning effort, however, is wrought with troubles. In
developing the Cédula, the Bank never consulted with the Brazilian citizens' groups
leading the country's land reform movement. In failing to conduct such
consultations, the Bank placed its enormous weight behind a single social actor --
landowners -- in a hotly contested political issue. To add injury to insult, it now
appears that the Bank's project may even worsen rural inequalities in Brazil.

The Land Bank experience is just one example of how the Bank inappropriately
inserts itself in domestic politics, in the process short circuiting the democratic
system. As an analyst at the Environmental Defense Fund has said, "This project is
possibly the most cynical imitation of a development project that I've ever seen, in a
very competitive field."

A Long History of Failures

The Cédula project is not the first time the IMF and the World Bank have interfered
in Brazil. In the 1970s, the institutions lent billions of dollars to the military
dictatorship then controlling the country. The loans were used to pay for massive
infrastructure projects such as dams, many of which failed to meet even the goals
set by the institutions themselves. By the 1980s, the country was borrowing new
money to pay off the old loans. Brazil's "lost decade" saw a massive transfer of
wealth outside of the country as the government paid $148 billion -- $90 billion just
in interest, the rest in principal -- between 1980 and 1989 to foreign lenders. Much
of this money went to recover the costs of Bank-initiated projects that were
unsuccessful. In 1991, the Bank itself estimated that 55 percent of its Brazilian
projects had failed.

In the 1990s, under a succession of civilian governments, the IMF and the World
Bank compelled Brazil to institute their structural adjustment policies. Industries
were deregulated, government enterprises sold off, and government spending
reduced and taxes raised. In the late 1990s, President Cardoso greatly accelerated
the neo-liberal reforms demanded by the IMF. The profitable government phone
system and a profitable publicly owned mining company were sold to multinational
corporations. Government spending on social services was reduced even further.

In November of 1999, Cardoso's administration put Brazil even more at the mercy of
the IMF when he agreed to a $41.5 billion loan package. At that time a financial crisis
was sweeping Russia, and the IMF, concerned that the "contagion" would spread to
Brazil and destabilize the entire global financial structure, was putting pressure on
Brazil not to devalue its currency, the real. The IMF forced the Brazilian treasury to
dramatically increase interest rates -- which at one point hit 41 percent -- to keep
the real strong. In the end, it didn't work. The high interest rates sent the Brazilian

economy into a recession, and Cardoso eventually had to devalue the currency
anyway. Essentially, the IMF forced Brazil to spend billions of dollars to prevent the
inevitable.

The IMF had predicted that if Brazil devalued the real hyperinflation would occur.
That never happened. But sending interest to stratospheric levels did greatly burden
ordinary Brazilians. The higher lending rates forced thousands of rural foreclosures.
According to the Brazilian government, between 1995 and 1999 an estimated 4
million Brazilians left the countryside for the cities. The Cardoso administration's and
IMF's insistence on ensuring investor confidence worsened the maldistribution of
land.

Taking Political Sides

The Brazilian Constitution of 1988 -- recognizing that excessive land concentration
not only contributes to poverty but also hinders sustainable development -- explicitly
states that land must be used for the benefit of society. Other laws that establish
mechanisms for progressive land distribution allow the government to expropriate
unused or over-large landholdings and then pay back the owners through the
issuance of government bonds. Since the mid 1980s, citizens groups in Brazil -- led
by the Landless Workers Movement (MST is the Portuguese acronym), the
Confederation of Agricultural Workers, and the Catholic Church -- have used such
laws to push for land redistribution.

In just 15 years, these groups, the MST in particular, have succeeded in securing
land titles for 250,000 families through the non-violent occupation of unused land.
That grassroots energy has also moved the Brazilian government to take stronger
action. The current administration has distributed more than 28 million acres of land,
and Cardoso administration officials concede this wouldn't have happened without
pressure from the MST and its allies.

In 1997, the World Bank decided it wanted to become involved in land reform in
Brazil. But instead of taking a neutral posture that supported land reform as such,
Bank officials supported the government and the landowners against the MST and
the civil society organizations aligned with it. By doing so, it corrupted the
democratic process.

Land reform is one of the most emotional political issues in Brazil today. Heated
rhetorical sparing between the MST and the national government is common. In the
countryside, the political struggle has turned physical. State governments, usually
allied with local landed elites, routinely repress MST activities. Police beatings of MST
activists are not unusual, and some people have been killed. The MST and the
government, then, are political adversaries.

From the outset of its involvement in Brazilian land reform, the Bank has supported
the interests of one side a political struggle. The Bank planned its land reform project
without consulting or informing any of the national citizens' organizations working on
land issues. The Bank and the Brazilian government even refused to negotiate with
rural workers when they made specific proposals.

The land reform mechanism pushed by the MST and reluctantly pursued by the
Cardoso administration relies on the idea that land can be confiscated even against
the wishes of the owner if it is not being used. In contrast, the World Bank's system
relies on free-market principles. Under the World Bank's plan, land reform is
privatized: the landless apply for loans from the Brazilian government with which
they can purchase land from landowners at market prices. However, no landowners
will be forced to sell, no matter how much of their property is lying unused.

The Cédula is just now reaching the point where a complete analysis of its success
can occur. But already preliminary evidence suggests that the program is doomed to
failure. First, the majority of borrowing farmers don't even fully understand that they
have taken out a loan -- and even fewer know the terms of their loans. The tough
terms of the loans -- interest rates on the loans can be as high as 18 percent --
make it likely that many poor farmers will lose the land again within a few years.
Also, under the Land Bank program there is only a three-year grace period (an
earlier government program had a five-year grace period), and little way to get
credit for supplies or seeds. Landless advocates also fear that the Land Bank, which
is planning on distributing $2 billion of loans over ten years, could contribute to an
inflation in land prices.

Most disturbing for landless advocates, many Brazilians perceive that the Bank's
program is not simply a complementary alternative to the constitutionally
guaranteed land reform; rather, many people believe the Bank's market-based
approach to land reform is a substitute for other kinds of land distribution. That
perception meets neatly with the political agenda of landowners and some
government officials who want to eliminate the existing means of land reform. It
also, of course, goes against the interests of the MST and its allies, who want to
pursue land reform via the constitutionally sanctioned means of expropriation.
Essentially, then, the Bank has sided with the political agenda of a particular group.
By failing to even consult with those at the forefront of Brazilian land reform, the
Bank inserted itself into the one of the country's most heated political debates.

Officials at the World Bank do not seem interested in ever holding such
consultations. In 1998, the Forum for Land Reform, an umbrella organization of
Brazilian NGOs, and Rural Justice, another NGO, asked the Bank's Inspection Panel
to investigate how the Cédula was developed. In June 1999, the Bank turned down
the request on the grounds that the complaint was based on "philosophical
differences." The groups appealed the decision through a second request. The
Inspection Panel has not responded to the second request.

Colombia and the IMF: Policies that Worsen
Problems

Colombia's relationship with the IMF is similar to the relationship between a poor,
sick patient and a costly doctor. The patient, badly in need of help, goes to the
doctor for treatment. The doctor in return prescribes the patient a very expensive,
controversial medication. The patient agrees, knowing that they cannot afford it, but,
feeling desperate, consents to the treatment. Eventually, the patient develops
terrible side effects to the treatment, and also discovers that the original problem

has worsened. The patient -- poorer, sicker and more desperate -- needs more
"medicine" than ever before.

Two years of financial "infusions" from the IMF affects Colombia in the same way.
The South American country's experience with IMF policies illustrates how the Fund
caters to the interests of international investors and the Colombian elite, while
harming the well-being of ordinary Colombians.

Ignoring massive public protests against the IMF-mandated reforms, the lending
institution's policies have systematically cut health care, education and other social
services for millions of Colombians, laying off tens of thousands in the process. The
IMF's relationship with Colombia has served to deepen poverty and inequality in the
South American country, while claiming to do the opposite -- all in the name of
"free" trade, market liberalization and financial stability.

Equally as damaging to Colombian society is the way that its government has
imposed the IMF-mandated economic strategy. Characterized by undemocratic and
authoritarian practices, and supported by billions of dollars of mostly-military US aid,
the government silences grassroots opposition, undermining the legitimacy of the
Colombian state.

The 1990s -- from Optimism to Emigration

Colombia in the early 1990s was a land of relative optimism and hope. The 1980s --
referred to by many as a "lost decade" in Latin America because of region-wide
economic woes -- passed with Colombia riding somewhat high on one of the
hemisphere's most stable and strong economies. A new constitution, not without its
critics, had been written that included more of Colombian society than ever before.
Some of the nation's guerrilla groups, weary of war, decided to involve themselves in
the political process, forming political parties. Social peace, for so long an abstract,
seemed tangible.

Considering this, perhaps not even the most hopeless of pessimists could have
imagined the troubles that Colombians have lived through during the last decade.
The economy has fallen into its' worst recession of the century, with official
unemployment hovering around 20 percent. The country's bloody civil war claimed
over 40,000 more lives. Today over 1.5 million Colombians are refugees within their
own country. As a result, Colombians began to lose the hope that had buoyed them
through the early 1990s. Between 1996 and 2000, 1,072,000 Colombians, sensing
the worst was yet to come, left their homeland behind.

The IMF and Colombian Neoliberalism -- A Future for Whom?

Not coincidentally, it was in the late 1980s and early 1990s that Colombia began to
experiment with neoliberal economic policies. Beginning with President Barcos
(1986-1990), and continuing during the administrations of Gaviria (1990-1994),
Samper (1994-1998) and Pastrana (1998-present), the neoliberal economic model
was wholeheartedly imposed by the Colombian elite.

Gaviria, blamed by 25 percent of Colombians for the economic depression in a recent
poll, proudly proclaimed to his countrymen in 1991, "Welcome to the future,"

referring to the new constitution and the neoliberal economic opening. Ten years
later, during a recent development forum, the same man who boasted with such
optimistic pride, quizzically answered questions regarding Colombia's economic
downturn. "I have to confess that the evolution of the country after my government
has left me perplexed, like many other Colombians."

Yet, while Gaviria scratches his head trying to figure out what happened, most
Colombians -- those who cannot afford the same luxury of economic theorizing -- are
jobless and hungry.

The debate surrounding who and what is to blame for Colombia's economic downturn
points to various causes. Some blame the constitution of 1991, whose new laws
turned out to be costly to create and enforce. Some say neoliberalism and the
uncontrolled opening-up of the Colombian economy to foreign investment are at
fault. The other usual suspects are the reevaluation of the Colombian peso, and bad
management of public spending by the state, among others.

Whatever the reasons, Colombia's economy slid into dire straits. And the Colombian
elite, needing a bailout, went knocking on the IMF's door, hat in hand.

The IMF and Plan Colombia

After the scandal-ridden Samper presidency, Andrés Pastrana Arango was elected in
1998 with a mandate of peace. Recognizing the nation's increasingly desperate
social, economic and political situation, the Pastrana administration developed Plan
Colombia. The Colombian and US governments ostensibly describe Plan Colombia as
a US $7.5 billion integrated strategy to meet the most pressing challenges
confronting Colombia today -- promoting the peace process, combating the narcotics
industry, reviving the Colombian economy, and strengthening the democratic pillars
of Colombian society.

Billing its support of Plan Colombia as part of the questionable "War on Drugs," the
US government has thrown its weight behind the plan with billions of dollars of
mostly-military aid, with unconvincing effectiveness. The US emphatically
characterizes the aid as counternarcotic, instead of counterinsurgent -- a semantic
tonguetwister that most Colombians know to be untrue.

Although not directly related to Plan Colombia, the IMF's Colombia loan fits in to Plan
Colombia as part of the larger strategy to revive the Colombian economy.

In 1999, Colombia appealed to the IMF for a loan for the first time in its history. The
Fund obliged with a three-year credit worth US $2.7 billion and its customary
mandate -- a structural reform agenda, or austere fiscal policies that includes
measures to streamline the revenue sharing system, reform the public pension
systems, and downsize the public sector.

Failing to implement an economic alternative that protects ordinary Colombians, the
Colombian state tightened its' fiscal belt by cutting public spending -- a move that hit
the poorer segments of society the hardest. In the words of one Colombian
economist, "What's the alternative? Increase the taxes on your elite? Do it if you
can."

Most damaging to the average Colombian are the severe cutbacks in public
investment in basic social services -- health care, education and social security. It is
a painful practice that one Colombian congressperson likened to "conducting a
complex surgery without the use of anesthesia."

Colombian Grassroots Opposition to IMF Economic Reforms

To implement the IMF's demands, the Colombian government needed to pass special
legislation, including changes to the constitution.

Many Colombians, not keen on the idea of having their well-being on the fiscal
operating table, have organized in nationwide protests against the various legislative
changes.

The first IMF protests in Colombia occurred while negotiations about the loan were
still underway. On August 31, 1999, a general strike was organized by a grassroots
coalition called the Colombian Social Movement. Consisting of Indigenous, Afro-
Colombian, farmworker, labor, women, student, youth and other civil society groups,
the movement presented an alternative program of social and economic
development that emphasized the necessity of investing in programs that advance
the well-being of ordinary Colombians.

Months later, in March 2001, hundreds of thousands of Colombian state workers
went on a 24-hour strike to demonstrate against economic policies that resulted in
mass layoffs and reduced social benefits. The layoffs are expected to total around
100,000 government employees.

Starting May 15, 2001, over 125,000 heath care workers and 300,000 public school
teachers went on a month-long nationwide strike to protest against the ley de
transferencias, or transfers law, a bill that would cap the federal money to
departments [states] and municipalities for education, healthcare and other social
needs.

Critics of the law warned that its implementation would result in the loss of
1,416,000 places for students in the public school system, adding to the estimated 3
million Colombian youths that are already outside the system. They also claimed that
some 2.5 million more Colombians would be excluded from public health care.

Upon the bill's passage on June 20, 2001, Colombia's largest teachers' and health
care workers' unions, FECODE and ANTHOC, publicly declared, "Since the time of
Pastrana's development plan, no other initiative has created such a movement of
opposition. But, it appears that the requirements of the IMF and financial capital
supersede the interests of the nation and of the Colombian people."

Next up for surgery is the pension system. The controversial reform is another
Colombian commitment to the IMF and is expected to galvanize the Colombian public
in even more anti-Fund protests.

The Authoritarianism of the Colombian State