Rethinking Bretton Woods | Wed, Mar 9, 2005
By Aldo Caliari, Financial Times
Published: Mar 08, 2005
From Mr Aldo Caliari.
Sir, in the wake of the successful culmination of the Argentine debt swap, statements that begin to raise questions about how the government's good faith towards non-participating creditors will be evaluated by the International Monetary Fund are alarming.
Your "Creditors back Argentina debt terms" (March 4) correctly states that the board of the Fund faces a tricky discussion here. As past debt restructuring experiences have demonstrated (for instance, recent restructuring attempts by Peru and Guyana), "hold-out" creditors are often motivated by the prospects of making a short-term profit, at the expense of the creditors that did accept the terms of the restructuring and, certainly, at the expense of the debtor's potential for growth. However, it seems the Fund is not empowered to assess the good faith of the creditors.
The time when the IMF could be perceived as an impartial authority to pass judgment on the good faith of its borrowers is long past. The anachronisms in the Fund's voting structure that leave a few industrial countries in charge are only too well-known. As a UN report recently put it, three years after the Monterrey heads of state summit mandated the Fund to address its governance imbalances; no substantive action has been taken. The monumental failure to achieve consensus on the sovereign debt restructuring mechanism has also shed light on the controversial role of the IMF, itself a creditor, in validating sovereign debt restructuring processes.
Any further interference by the Fund with the settlement reached by the Argentine government can only serve to further undermine the already shattered legitimacy of the institution.
Aldo Caliari, Director, Rethinking Bretton Woods Project, Washington DC, 20017, US