By Hedelberto López Blanch
The International Monetary Fund (IMF) took advantage of the serious economic, monetary and social crisis that the COVID-19 pandemic has given rise to in most nations of Latin America and the Caribbean to strengthen its financial control over the countries in the region that requested loans.
The figure is overwhelming: between March and November 2020, the Fund delivered $63.74 billion to that region of the world where the IMF’s emergency financing was most concentrated.
According to reports from the IMF itself, six out of every 10 dollars of the $102.15 billion it delivered in the year, went to Latin American countries, most of which are not eligible for debt suspension or relief mechanisms as they are considered middle-income countries.
In the region, 21 countries obtained a loan during the month of May of last year, with three of these accounting for 80 per cent of the money. Chile was approved for $23.93 billion; Colombia for $16.948 billion and Peru $11 billion, all through flexible credits.
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In the 1980s and 1990s, Latin America witnessed the harsh conditions that the IMF imposed on every government in the region that accessed its loans. Today, in the context of the pandemic, the immediate effects are not seen but the story will change as the loan terms advance.
Recently, Mexican President Andrés Manuel López Obrador accused international organizations such as the IMF and the World Bank of being jointly responsible for the crises that occurred in his country in past six-year terms and added that the greatest fault lay with “servile governments.”
He said they forced neo-liberal Mexican governments to sign so-called letters of intent which established what the State had to do, “a flagrant violation of the autonomy, the sovereignty of our nation.”
The IMF and the World Bank, López Obrador pointed out, recommended that Mexican governments privatize public companies, not increase jobs, increase the price of electricity and fuels such as gasoline — guidelines that were followed by subordinate governments.
In addition to Chile, Colombia and Peru, the Fund provided loans through the rapid financing method to Ecuador for $6 billion; Dominican Republic, $650 million; Guatemala, $594 million; Jamaica, $520 million; Panama, $515 million; Costa Rica, $508 million; El Salvador, $389 million; Bolivia, $327 million; Paraguay, $274 million, and Bahamas, $250 million. Those that received less than $100 million were Barbados, Saint Lucia, Grenada, Saint Vincent and the Grenadines, and Dominica.
In this way and throughout the year, the IMF took advantage of the opportunity that the spread of the pandemic opened up to it, to re-initiate the indebtedness of the region, after a period in which it had been rejected for imposing economic policies to the detriment of the great majority of the world.
The Latin American Geopolitical Center (CELAG) assures that the global emergency implies an urgent and unforeseen need for external liquidity on the part of Latin American countries, not only to face the expenses related to the pandemic but also to deal with the capital flight that has been taking place in the region.
But unfortunately, in several of these nations, governments will use the loans to help large companies and businesses deal with the crisis and not to address the serious problems of the population.
Both the IMF and the World Bank are financial organizations created in 1944, during the meeting held in Bretton Woods shortly before the end of World War II. They have been dominated from the beginning by the United States and Western European powers, and they act against the interests of the people.
Their adjustment programs seek to bolster the confidence of international capital markets in the debtor country. Without the approval of the IMF, which, acting as a censor, determines the willingness and capacity of a country to pay the debt servicing costs, the doors generally do not open for the delivery of loans.
To exercise control they oblige the nations that receive this “benefit” to submit to conditions ranging from non-mandatory recommendations to extreme inspections with the imposition of forced sanctions.
As nations are increasingly indebted, they are forced to follow the financial, economic and social directives established by these institutions so that they pay the debts they have acquired and to be able to have access to new credits in amounts that become unpayable.
As a result, governments are forced to promote the privatization of public companies and services, lower wages and pensions, as well as increase prices for the supply of water, electricity and fuel.
These borrowing policies have meant that if in 2008 the internal and external public debt of Latin America reached 40 per cent of the Gross Domestic Product, eleven years later, in 2019, it had increased to 62 per cent of GDP.
In conclusion, the new indebtedness will further affect the sovereignty and economic and political independence of several of these nations if their governments allow it.