Source:
IFIs Latin American Monitor
Mon Dec 12 2005
Loans granted by IFIs to Latin American countries are many times diverted from their original purposes, and unfortunately this occasionally takes place with the complicity of both international institutions and local governments. Corruption is a problem that damages the development possibilities of poor countries.
The organization Transparency International releases an annual report on the perception of corruption in most countries around the world. In Latin America, the following countries are ranked among the top 60 positions (out of 158) in the corruption perception index: Paraguay, Venezuela, Guatemala, Ecuador, Bolivia, Nicaragua, Honduras and Argentina.
This information becomes particularly relevant when it comes to analyze the process of public policy implementation since corruption may be having a bearing on its final results. In many cases, national governments request loans to IFIs (World Bank and Inter-American Development Bank) so as to implement public policies which theoretically favour development. In spite of the fact that resources could end up being diverted or misused, the external debt continues to increase both in terms of volume and conditionalities.
In view of this situation, governments should pay for interests and principal on every penny they are granted and thus constrain the annual allocation of their own resources. The implementation of social policies - often designed to provide assistance to people who are most in need – is subject to strong criticism from civil society. Neither debtors nor creditors are regularly putting into practice mechanisms aimed at the supervision and assessment of those policies for which resources were requested.
The setting up of an agency - either state or non-state - to carry out an audit of the external debt could contribute to a more active control of corruption issues. The participation of civil society, as key stakeholder involved, is also of utmost priority.
Argentine irregularities and the World Bank
The World Bank has recently suspended funding for the “Heads of Household” plan in the social field, amounting to US$ 250 million, and for a public works project with regards to road-repair operations. This action was taken as a result of supposed irregularities, both in the allocation of resources granted to the poorest sectors as well as in awarding bids.
With regards to the social programme, the “Heads of Household” plan aims at delivering subsidies to unemployed men or women in charge of supporting a family. According to World Bank officials, “there were many people who received money in spite of having a job and others who were granted resources for their children when they had none. There is certainty about the practice of clientelism and favouritism”.
The World Bank has also recently rejected 10 bids of the National Road-Building agency in Argentina, forcing the government to declare them void. A few days before his resignation, former Economy Minister, Roberto Lavagna, denounced the existence of contracts awarded to bid prices higher than domestic market prices (see article in Página 12, Spanish).
"We know very well that Bank-financed projects are vulnerable to corruption”, stated Paul Wolfowitz, World Bank President, to the international press.
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