On the occasion of the meeting of heads of State and Government of the Union of South American Nations (UNASUR) in Quito (February 9-11), finance ministers and directors of central banks of member countries held a meeting aimed at taking steps on policy and technical issues related to the financial integration of the region. This was a breakthrough in itself, because the meeting had not been carried out since October 2009 when it was first planned, leaving serious doubts about the real willingness of countries to advance the regional integration process.
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The current global reserve system based on a fiduciary dollar has fundamental flaws and must be reformed. There are essentially three alternatives to reform the current system. The first is to let it evolve into a multi-currency arrangement. The second is to gradually move into a system based on a truly global reserve asset. The third is to create a new institution that would issue a global currency and serve as bank of the world’s central banks. (pdf)
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The 2009 annual meetings of the Bretton Woods Institutions were convened in Istanbul in early October on the heels of the G-20 gathering in Pittsburgh a week earlier. From the point of view of the IMF, in particular, these events as well as the London Summit in April 2009 were historically important. Just before the eruption of the 2007/2008 global crisis the IMF was largely irrelevant. But now, having achieved a status as "lender of the last resort" for the much of the world, the IMF laims not only expertise but also a dominant role in the global economy. (pdf format)
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International economic policy and the Mexican actions in the sphere of international development cooperation are two issues that have multiple shortcomings and should be addressed without delay. Mexico’s presence in multilateral forums is increasingly faint and less relevant. If these two unfortunate trends are not reversed, Mexico will not be able to make its voice heard and really defend its interests in the reconfiguration process of international economic power. These issues were discussed by a panel of 17 experts who presented the document “Mexico and the crisis: towards a new course of development.”
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Former Mexican president, Ernesto Zedillo's high level commission on Bank governance released its report in October, calling for more radical reform than is currently on the table. This came too late to influence the discussions in Istanbul, but will influence debate in advance of next year's spring meetings deadline. On IMF governance, the IMF board's International Monetary and Financial Committee (IMFC) also repeated the wording from the September G20 communiqué (at least 5 per cent from over-represented countries to underrepresented countries) and ignored the demand of the G24 group of developing countries for a 7 per cent shift. Civil society organisations continued to be critical of the slow pace of reform.
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The IMF has said and done all the right things since the crisis. But now Strauss-Kahn is throwing cold water on proposals to tax international flows of “hot money.” The occasion was Brazil’s decision to impose a 2% tax on short-term capital inflows to prevent a speculative bubble and further appreciation of its currency. When asked about the role of capital controls, Strauss-Kahn said he was not wedded to any rigid ideology on the subject. Nonetheless, according to the Financial Times which reported the IMF chief’s views, “the IMF would not recommend them as a standard prescription either – as they carried costs and were usually ineffective.” Unfortunately, this makes the new IMF sound too much like the old one.
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