Transcript

Transcript of the G-24 Press Conference

April 13, 2007

MS. MBOTO FOUDA: Good afternoon everyone, and welcome to the press conference of the G-24 chaired by Ms. Miceli. I will introduce the people here, and then Ms. Miceli will have the opportunity to offer opening remarks, and then we will take questions in the room.

Ms. Miceli is the chair of the G-24. To her immediate left is Mr. Mawakanu Samba, who is the First Vice-Chair, and to my immediate right is Mr. Samir El-Khouri, Second Vice-Chair. To Ms. Miceli's right is Mr. Torres, who is the Chairman of the Deputies of the G-24, and to the far right, is Mr. Amar Bhattacharya, the Director of the secretariat of the G-24.

Ms. Miceli, you have the floor for your opening remarks.

MS. MICELI: Good afternoon. I would like to thank all of you for your presence with us today. I will give you brief a summary of the morning meeting of the G-24.

I think it was a very positive meeting. Our countries have reached major agreement on three topics of particular interest within the multilateral context. The first has to do with the reform of the IMF and the World Bank, to increase the voice and representation of developing countries in the decision-making process. The second has to do with the review of the role of the IMF in view of the change in surveillance policies. And the third, has to do with the coordination of the international efforts to scale up aid in helping to attain the MDG to reduce poverty and inequality. These topics are of particular importance to the G-24 because it is correctly linked to our objectives and our development strategies. And, our involvement in the international context on the two basic pillars, linked to the role of the Bretton Woods Institutions in bringing about economic growth of the world economy in a balanced manner, and combating poverty and a multilateral environment, where developing countries, developed countries and low-income countries need to work together to promote economic development that is sustainable. So, we focused our discussion on these three topics in order to try to find consensus. In particular, the coordination of actions amongst the G-24 countries is key to strengthening the voice of the developing countries given the changes taking place in the world economy.

We should not forget that countries are seeing major changes in our history. We have moved from being debtors to international creditors. Our voice now needs to be heard in the international arena, and I think that the G-24 is a very strong and powerful tool to help us obtain these objectives.

Going back to the three topics for discussion, I would briefly like to mention the main results obtained in the area of reforming the Bretton Woods Institutions. The ministers who met understand that we need to promote fundamental changes in the governance of these institutions with two objectives in mind in order to increase the legitimacy and their efficiency. From our perspective, it is quite clear that our voice and representation needs to be increased. The developing and low-income countries represent more than 50 percent of the world economy, represent more than 80 percent of global population, and represent three quarters of the countries that are members of both institutions.

Yet, the advanced countries have more than 60 percent of the voting powers and they have direct control over policies and implementation mechanisms of the institutions. Thus, there is a very large democratic deficit which needs to be resolved, in our opinion. The G-24 countries believe that reforms should not be merely cosmetic. They need to be fundamental. They need to respond to the original objectives of the institutions, and promote greater voice and representation for developing and low-income countries, not just a mere reallocation of quotas on behalf of some emerging economies at the expense of our own countries.

The ministers have agreed to work together to ensure that this reform moves forward in the proper direction. And we are quite confident that our future steps will allow us to come to new agreement in principle.

In the areas of surveillance and the role of the IMF, the bilateral level, the G-24 members have expressed reservations on the technical proposals made, particularly with regard to the review of the 1977 decision on exchange rate policies. Basically, we believe that the objective of more targeted surveillance is not linked with the theoretical framework but rather the governance problem I mentioned earlier. In other words, the Fund has not been able to reverse the strong external imbalances that exist. It is not due to the decision, but rather to the fact that systemic countries have very strong interest in the institution, and are able to mitigate or neutralize recommendations that could affect their own domestic policies and goals. Thus, the ministers have reached agreement on certain basic principles and we believe these adequately reflect our position.

Finally, the G-24 ministers have attributed importance to the need to scale-up international aid in order to help us attain the MDGs. We believe that the present effort isn't sufficient in order to effectively combat poverty, official aid needs to be increased and greater effort must be put into providing equitable distribution of the benefits of global growth. Thus, the G-24 countries believe that greater and stronger international cooperation is necessary in order to increase the scale and predictability of the funds available to combat poverty. We appeal to all of IDA's donors to increase their aid consistent with the commitments they made in 2005 and that they convert the current Paris declaration into tangible results that can be translated into more effective multilateral cooperation.

In sum, we believe that the discussions have been fruitful and the G-24 countries renew their commitment to coordinate all of their activities in key issues that are multilateral in nature, and we will work in a strong spirit of cooperation on all of these issues.

Thank you very much. We are now ready to answer any of your questions.

QUESTIONER: Your meetings do not take place in a vacuum, so I have to ask if you think that Paul Wolfowitz should resign as head of the World Bank?

MS. MICELI: We have been working on the topics I just described. We did not discuss that particular issue, and so I think that is an issue that needs to be addressed by those who are directly responsible for administration of the institution. Our objective as members of the G-24 is to work on issues that are common to the needs of our countries, which are the ones I mentioned earlier.

QUESTIONER: This is a question on the issue of quotas. How do you see the climate at the IMF between the members who are using the PPP, which is something the G-24 has advocated for a long time? Is there more receptiveness now to using that, or at least a part of that in the formula?

MS. MICELI: Well, this is one of the topics that is still under discussion. We are still having preliminary discussions on the issue. Some technical work is being done to determine what are the implications of using one or the other methodology, and decisions will be made in the near future. Obviously, to countries such as mine and many of those who are members of the G-24, it would be good to use the PPP, but other countries would prefer the use of market values. But, I think this will be resolved after we look at all of the technical papers that have been prepared to address this issue; also, when we look at the dates established for what kind of statistical information to be used, and the decisions made over the next few weeks of work. I don't know, Hector, perhaps you have been more involved, you can make a more specific comment?

MR. TORRES: I think there is very little to add to what you have just said.

QUESTIONER: There was a seminar on the role of the IMF in Latin America, where there were very important economists criticizing and saying that the IMF is not any more significant for Latin America. I would like to know how do you make the relationship between this problem of quotas, with the influence of the IMF in the region, if there is, or if it is only a political problem of the discussion about what the IMF should be counseling or make receptive for all countries?

MS. MICELI: The need to change and modify the vote and representation of the Fund is under the aegis of creating greater legitimacy for the IMF. Obviously, whenever you undertake reform to make something more legitimate, it is because that person or that thing, in this case the IMF, does not have the legitimacy it should have or one believes is appropriate or necessary to have. So that is the framework in which this reform is taking place.

It is very clear in our minds that if this reform leads to greater participation of the advanced countries, or if the advanced countries are able to retain their participation, but the emerging countries have to distribute the common quota amongst themselves by taking from one to give to the others, then we will not have accomplished providing more vote and representation to the developing countries, and in particular to the lower income countries. So we think that it has to lead to a process, end with a process in which the developing, emerging countries that have greater possibility of becoming in the future a possible debtor or take loans from the IMF, should be the ones who should also improve their relative position.

We don't understand what the function of the International Monetary Fund would be or how it could internally survive, how could it finance its operations if the debtor countries have less voice, less representation, and take on fewer loans. That presents a problem, as well.

QUESTIONER: Earlier today WTO negotiators from Brazil, U.S. and the European Union said their talks entered a new phase and believe they will be meeting again in May. Can you share your expectations, the G-24's expectations for some kind of a breakthrough on global trade, on a global trade agreement this year?

MS. MICELI: Yes. Meetings have been scheduled. But, what we have focused on today is the reform of the Bretton Woods Institutions, those items that I mentioned. We also talked about the need of coordinating the work of these institutions with others, such as the WTO and other UN institutions. Because those issues in which the IMF is involved are affected by decisions made in these other institutions. For instance, we talk about the important assistance that more powerful countries provide to lower income countries to help them attain the MDGs. But, today, in the discussion, one of the questions asked, whether decisions made in certain areas, for instance, decisions made at the WTO, or made by countries for their own domestic policies, are not the ones that engender greater poverty that move us away from the MDGs for which you then have to put in more money to help those poor people in those poor countries. So, we think there has to be greater coordination of policies between the IMF, WTO, and other institutions, so that the economic policies proposed actually do reduce poverty so that these countries don't need to resort to donations in order to reverse the situation.

QUESTIONER: What do you consider the IMF can learn from the Argentine case before the crisis, during the crisis, and post-crisis period?

MS. MICELI: Well, the purpose of this press conference is to talk about the meeting we had today within the G-24, but if you would allow me, I will say a few words on this topic.

What we, as Argentina, we would like people to understand is something quite simple, actually. It is impossible for there to be economic policy recommendations that are one-size-fits-all for all countries in the world. We believe, instead, that one needs to understand the unique nature in which the economies of each country operate, their history, their cultural, social uniqueness because that is the only way in which one can attain successful results. Our country, as you well know, has come out of this crisis, and we are now on the path of sustained growth with social inclusion, not just sustained growth, but growth with social inclusion. So, we have not only been able to grow but maintain the basic pillars for growth, while reducing poverty significantly. Today, the level of poverty is at one of the lowest in Latin America, when three or four years ago our country began an economic policy that was quite autonomous with regard to the traditional recommendations made by the Fund before, and which has continued to recommend at present.

QUESTIONER: On occasions you have asked for the creation of a new liquidity instrument. Could you please elaborate on that concept? What kind of liquidity instrument are you thinking about?

MS. MICELI: Well, we are working on that instrument. We haven't yet defined the form of the mechanism. Many countries are thinking, and this is still subject to debate. Many are thinking that it would be a structure that has no conditionality, low cost, and countries could resort to it whenever there is an imbalance, or an external shock that could affect their economic performance. We also think that there has to be proportion, proportional relationship between the participation that country has and access to the Fund, and must be in such a way that the country does not need to meet any prior conditions at the time it needs the line of credit. Instead, what would be done is the economic performance just before the need is what would be taken into account. But I think there are still a lot of other issues that we need to discuss about this mechanism. Discussions are still underway, and as I was saying, fortunately there is not any countries needing this urgently today, but it would always be good to have this read in the event a country needs to resort to it.

QUESTIONER: [In Spanish; not interpreted.]

MS. MICELI: [In Spanish; not interpreted.]

QUESTIONER: I have a question regarding only the countries that are members of the CFA franc region. The euro is at an historically high level against the yen, and also historical high level against the dollar. This is affecting the countries that are members of the CFA franc region, because it is pegged to the euro. I want to know how damaging this can be to their competitiveness?

MS. MICELI: Well, currency movements at the global level affect competitiveness of countries and this has to do with the composition of external trade, and also the countries that one trades with. And for the countries of our region, these monetary situations are beneficial to us in terms of competitiveness. Whenever the exchange rate changes, we improve our competitiveness, and this depends, of course, on the trade flows of countries, and the impact of currency on those trade flows.

QUESTIONER: This question is for Mr. Samba. Mr. Samba, do you find it at all ironic that one of the first altercations Paul Wolfowitz had with the World Bank Board was over the issue of denying your country debt relief due to corruption and now he himself finds himself embroiled in his own form of corruption?

MR. SAMBA: Thank you very much for the question. I do not believe that this question is relevant to the matters before us at this point, because we are discussing issues related to our relations with the institution, and not the Directors of these institutions, even though we may have an opinion, but this is not the place for it. So, I suggest that you ask that question elsewhere, but not here.

Perhaps I could say a few words, however, about what the minister just said with regard to the CFA franc countries. My country is not one of those countries, a member of the CFA franc zone, but we are neighbors, and the issue of competitiveness does arise. It is, however, true that the zone enjoys monetary stability, great monetary stability and low inflation, inflationary situations in many developing countries. Those countries trade to a large extent with the euro zone countries, and so the competitiveness issue does not arise as acutely either. They form part of a community, and the CFA franc is guaranteed by the French treasury, which is also part of the euro zone. And so that zone enjoys, as I said, a great deal of stability, and a level of accountability of its currency with the euro zone. The problem arises with its relations with the non-euro area countries. But with the euro area, there is not that much of a difficulty.

MS. MICELI: I would just like to thank everyone for being here, and I will see you at the next meeting in October, when we have the annual meetings of the World Bank and Fund.