Panel Discussion on Voice and Vote of Developing and Emerging Countries on the boards of the World Bank and IMF, April 23, 2004

This event was organized by New Rules for Global Finance, InterAction, World Council of Churches  and Evangelischer Entwicklungsdienst

Panel discussion took place at the International Monetary Fund, 720 19th Street, N.W., Washington, D.C.

[TRANSCRIPT PREPARED FROM A TAPE RECORDING.]

P R O C E E D I N G S

         MS. GRIESGRABER:  You are very welcome, but please do join us and sit down.  I recognize that it is a little bit difficult for some people getting into the building.  The security perimeter went up a little bit earlier than planned.  Apparently, the security patrols of the United States heard 6:00 a.m. instead of 6:00 p.m., and we are a little confused.  The NGOs are being met and coming in as possible.  But I would like to get started.

         I would like to welcome all of you to this Panel on Voice and Vote of Developing and Emerging Countries on the Boards of the World Bank and the IMF.  The event is co-sponsored by New Rules for Global Finance Coalition, which I have the privilege of chairing; the World Council of Churches; the German Protestant Group known as Evangelischer Entwicklungsdienst; and InterAction which the coalition of development NGOs in the United States.

         We are very pleased to have on this panel Minister Heidemarie Wieczorek-Zeul, who is the Minister of International Cooperation from Germany, Dr. Paul Acquah, who is the Governor of the Central Bank of Ghana and also a member of the Development Committee, Dr. Ariel Buira, who is the Director of the G24 Secretariat and the G24 Caucus of Developing Country Governments on the Boards of the Bank and the Fund, and then Bishop Aldo Etchegoyen with Evangelical methodist Church in Argentina representing the World Council of Churches.

         We will have statements by the panel and then there will be an opportunity for questions. You have the earphones because the panel is being conducted in Spanish and English, and Bishop Etchegoyen will make his presentation in Spanish.

         So with that, I would like to thank each of you for coming to what I regard as the foundational issue for the well-functioning of global institutions, and that is who sets the rules, how decisions are made.  And it is no longer 1944; it is 60 years later, and it is time for us to look at how the institutions are organized.

         With that, I would like to ask Minister Heidemarie Wieczorek-Zeul to begin.  Would you like me to keep time or a reminder?

         MS. WIECZOREK-ZEUL:  Thank you very much.

         I am glad to be here to you this afternoon.  I have only just arrived.  So I might have problems with one or the other English words, which, of course, is not my mother language, but I will try to stick a bit to my text which for me is very unusual.  I do not like to stick to a written text.

         But could I at the beginning say I think this is a discussion which is necessary for many reasons.  I am very much in support for multilateral organizations because in a global world you need to multilateral organizations, but the way in which they express themselves and according to which rules they act is important for the question of justice and democracy in the world.  And that is why the discussion is very valid and important.

         We had during the last meeting as the German Government and as our ministry put forward a paper which discussed the question of strengthening the voice and voting possibilities of developing countries in the World Bank and in its institutions.  And I hope that we are going to have rapid progress on that, although I have my doubts, according to some of the reactions so far.  And the paper put forward at that time had some extensive proposals, the content and intentions of which I would like to share now.  And I think it is important that there is a discussion between governments and NGOs because we need all possibilities and all actors in this field.

         Trevor Manuel as leader of the Development Committee, President of the Development Committee, had shared, as it was discussed last time in the Development Committee his ideas for a so-called road map on enhancing the voice of developing countries.  And I think, all in all, his job that he has fulfilled is a good job.

         Far-reaching reform proposals such as, for example, increasing the number of basic votes, the issue of calculating voting shares and the reform of the structure and procedures of the Board of the World Bank will be the topic of further discussion following Trevor Manuel's road map.

         We support his road map and, as I said, I have the feeling that there might be some groups, representatives that are not so happy, but that will also be a point which will be realized during the meeting of these days.

         We believe that enhancing the voice of the developing and transition countries is something which must be tackled in a very comprehensive approach.  The decision taken so far with regard to improving the capacity of individual executive offices can be only a first step in a process of comprehensive reform, and we cannot afford to limit reform efforts to a few so-called easy measures.  Unless changes are made in the current voting structures, any reform will not be able to do justice to the complexity of the problem.

         Our ideas are based on three main pillars.  On the one hand, strengthening the ownership of the developing countries themselves; second, increasing the basic votes to their original level of about 11 percent at the beginning which have gone down now to 2.3, as you will remember; and thirdly, examining the possibility of introducing double majority voting.  I will come back to this point.

         The PRSP approach has led the foundations for greater participation by civil society in developing countries and overall for greater ownership by the developing countries in the process in their respective countries.

         The measures undertaken so far are not enough to be able to speak of real ownership by developing countries.  That I think is why we must also pay attention with regard to the formulation and initiation of World Bank projects and programs.  This means, according to our position, making greater use of the local knowledge, for example, by drawing more on local research establishments.  Of course, local setups sometimes need more capacity, but, on the other hand, they know the local situation in that country much better, and I think we should draw more on that.

         That is why those developing countries in this endeavor need the support of the World Bank so as to be able to develop these capacities.  In this context, it is important to us that the Bank takes forward the use of the instruments of poverty and social impact analyses still further.

         For me, involving local know-how is not just an end in itself.  Successful, by which I mean sustainable, programs require a thorough knowledge of the specific national situation, economy, institutional, political and social contexts in which the programs are to be implemented.  There is not such a thing as a one-size-fits-it-all approach.  Instead, the Bank's programs must in future take greater account of the respective specific country context.

         And for me, that is the heart of the idea of strengthening the ownership of developing countries.  This also applies especially to formulating and implementing macroeconomic policies.

         Incidentally, my ministry has produced a discussion paper on this question of shaping what we call a so-called post-Washington consensus, in which many aspects of stronger developing country ownership in the formulation of economic policies are addressed, and the Bank is called upon to be more accepting than it has been in the past of alternative policies and also to assume an active advisory role here.

         And if any one of you is interested in the paper, short and long versions, we are, of course, very willing to make it available to you.

         Another point in that connection in this question is also the composition of the World Bank staff.  I think that is a point also to be taken into consideration when discussing about ownership.  But I think a stronger voice also means that the decision-making and capital structures within the World Bank will have to be reformed.  As I said, the founders of the Bretton Woods institutions had the idea that the weighting of the voting power of members on the basis of quotas mainly reflecting economic and financial factors should be combined with political consideration of the traditional equality of all nations in international law.

         And I think the idea of the founders was very valid.  Unfortunately, as I said, however, the share of the so-called basic votes which were the expression of this idea, according to countries, regardless of their economic position, has fallen due to several capital increases from the original figure of more than 11 percent to the current 2.3 percent.

         This shift has, of course, has primarily been to the detriment to those countries that anyway have a very marginal share of the votes, especially the African countries.  We are, therefore, strongly in favor of at least restoring the proportion of basic votes to the original level.  This would raise the share of the votes held by all the developing and transition countries together to about 43 percent, and thus lead to a significant shift in weighting in the Board.

         Finally, we have had an outline to establish what I called before just how far a principle of double majority voting could be applied at the Bank.  It is above all decisions of an operational nature including project and staffing decisions that are appropriate for this kind of voting system, and the voting system means double majority of donor countries and donor majority of developing and emerging market countries.  It is a principle which exists, by the way, in the Global Environmental Facility.  It exists in some areas also in the European Union.  So double majority is something that is not unknown, and, as I said, we also had an outline in this field which explains a bit how the principle could be adapted and could be used.

         And also the principle of consensus so far existing in decisions of the World Bank, the fact is that the true proportions of votes are not discounted in this decision-making process.  It would, therefore, be possible to make it a requirement that there is such a double majority.  And I think that would be a point one should also directly discuss.

         So those were rather concrete proposals.  On the other hand, I mean all the declarations on more justice and more democracy in global institutions are, of course, very important and necessary.  On the other hand, to make a change in this field I think is important.  There has been a starting point when there was the debt relief combined with the poverty reduction strategies, but we think there we have to go more into the situation of the relevant developing countries and transitional countries, on the one hand, and in the contents of the matter and in the structures I will try to outline what could be possible solutions in this field.

         Thank you very much for your attention.

         MS. GRIESGRABER:  Thank you, Minister Wieczorek-Zeul.  Now you know why the NGOs love working with her.  She has been very gracious about meeting with NGOs from around the world at virtually every spring and fall meeting that she is able to attend.  And we also had the privilege of working closely with her on the debt cancellation jubilee efforts.  So we truly appreciate her leadership on this issue, and I love the fact that they are very concrete proposals.

         At this point, if I may, I would like to ask Mr. Buira to go next.  Ariel Buira is from Mexico.  He has tremendous experience as an ambassador, as an Executive Director to the IMF, a member of the Central Bank of Mexico, and as the President's personal envoy in support of the Financing for Development Conference.

         Ariel also has been the teacher for most of us NGOs on this issue.  So, Ariel.

         MR. BUIRA:  Well, I just have to first thank you for inviting me and then I feel sorry if I was a teacher, because you could have done better actually.

         Let me start by noting that the Ministers of the G24 this morning approved a communique in which they state strong disappointment at the lack of progress on the issues of voice, participation and voting power of the developing countries in the IMF and the World Bank.

         They note the conclusions of the Johannesburg March 2004 meeting of African Governors on voice and participation in the Bretton Woods institutions and they reiterate that to enhance the legitimacy of the IMF and the World Bank, the under-representation of the developing countries in the decision-making process should be seriously and promptly addressed as agreed in the Monterrey Consensus.

         Now they think that this requires a new quota formula, and that this quota formula should bring in new elements that take into account the vulnerabilities of developing countries, address particularly the problems of Sub-Saharan Africa, and they asked that the formula correctly reflects the relative economic position of countries in the world economy by computing gross national income on a purchasing power parity basis.  And they agree with the minister in that basic votes should be substantially restore the original role in relation to voting power.

         Now so why are they not happy with the present power structure?  Because it is essentially the same power structure that was there sixty years ago, and the world has changed.  And the world has changed very considerably.

         In fact, today the developing and transition economies are as large as the G7, and they have higher reserves, international reserves, and they are grossly under-represented.  They are grossly under-represented on two scores:  one, that the minister addressed, the issue of basic votes.

         You see, there was an initial compromise between two principles whether everybody would be given the same share because of the legal equality of states or whether shares of voting power should be based on contributions of voters.  And there was a compromise and the compromise was something like 11 percent to basic votes and the rest to quotas, to contributions.

         But contributions increased 37-fold, and basic votes were never increased.  So the basic votes of the original 44 members now account for one-half of one percent of total voting power.  And this 2.3 of total basic votes is because you have 140 more members than you did at the outset.  So there is a very clear case there.  The case is based on the idea that if countries are going to be regulated in some ways by the institution, they should have a say in the regulation and they should be heard.  And it would be very difficult to argue that a party that has one-half of one percent is well represented on that score.  So that is so much for basic votes.

         Now one issue that the minister did not focus on or perhaps she did and I didn't catch it very well, she did refer the capital structure had to be reformed.  And this is a parallel issue of quotas.  You know there is a relationship between quotas and capital shares.  The quotas in the Fund virtually determine the capital shares in the Bank.

         Now what is the issue here?  Well, the issue here is that the industrial countries have some 62 percent of total voting power, and the rest of world some 38 percent.  Now within the industrial countries themselves, I mean this is a big imbalance, of course, because the rest of the world, as I already mentioned, is about the same size in economic terms, and they account for something like 85 percent of the world population.  So many of them feel a little bit disfranchised, and they think that they should have a say.

         Now this is a strange idea, but anyway some people don't know their place.  But there is another problem, and it is that within the industrial countries with a very similar size of GDP, Europe has 29.8 percent of the vote, the European Union I mean, with a very similar size of GDP to the U.S. which has 17.2.  And Europe has, according to which day you look, either eight Executive Directors or nine Executive Directors at the Board and in the case of the Fund plus one European Central Bank observer who speaks on a number of issues like World Economic Outlook, financial stability, issues related to all the member countries and prospective member countries and a number of other issues.

         So we, the developing countries, feel that there is there an imbalance.  And if you look at the quotas -- the quotas are a sham, by the way, but I will come to that if I have time -- if you look at the quotas, you will find that the Europeans have very large voting power partly because the formulas give considerable weight to exports and imports.

         Now it so happens that since these quotas were calculated with this funny formula, the Europeans have moved towards single currency.  And when you have a single currency, the trade with the single currency area is the same as the trade between Calcutta and Delhi or San Francisco and New York.  It cannot give rise to balance of payments problems.  It is not effectively international trade.

         Now when you adjust the European quotas for this, you would find that they decline by 40 percent.  Now this would certainly give room for more voting power for the developing countries and more developing country representatives. 

         Now there are other problems also.  I mentioned that the formula was a sham.  Well, it is a sham and it is because it was a quota designed to attain a political objective.  And the political objective that was determined in 1944 as a result of an agreement between the President of the United States and the Secretary of State was the U.S. should have the biggest quota, about a third, followed by the British Empire with about half of that of the U.S., Russia a little less and China somewhat less.  The big four allies of the world should rule the roost.

         And they asked a young economist to work out a formula that gave this result, and the poor chap had to do all kinds of strange maneuvers and came up with a formula that eventually attained that result, but has no economic sense at all.  Okay?

         And it has -- I can read it to you.  It is 2 percent of national income, 5 percent of reserves, 10 percent of average imports, 10 percent of maximum variation in exports and the last three of these to be increased by the ratio of average exports to national income.  This is so that he could attain the result he was asked to attain.

         Now the problem, of course, is that all of this is valued and translated -- especially GDP or gross national income -- translated at current exchange rates.  Now current exchange rates are very unreliable.  You might have noticed that the euro and the dollar had experienced by the Asians over 50 percent over the last two years or so.  So a measuring rod that changes by 50 percent is not a very good measuring rod.  This is one point.  And the separate point is, of course, that there is a bias in this.  And what is the bias?

         Well, the bias is that when you measure this at market exchange rates, there is a problem.  Prices and wages in the tradable sector in the industrial countries are pretty much the same as in the non-tradable sector, but because of a smaller degree of economic integration, there are great differences in prices and wages in the tradable sector and in the subsistence sector of many less-developed countries.  The less developed you are, the more marked variations.

         The result of this is that you underestimate the GDP of these countries.  So the way to get around this is measuring GDP in terms of purchasing power parity.  You see, what you have is this bottle of water may be one dollar or two dollars in New York and the same quality water may be ten cents or twenty cents in Guatemala.  And the way it is being computed now, they say, okay, two dollars in New York, twenty cents in Guatemala, the GNP of New York is ten times greater than that of Guatemala.  Okay?

         And this is the way it is calculated.  And the only way to get around this bias is to put it all in the same purchasing power parity basis.  Now why am I bringing all of this up?  Because unless you revise the quota formulas, since quotas are really the determinant of voting power, you are not going to effect a major correction.  And the other element is, of course, unless you revise the quota formulas, you are not going to get greater contributions.

         The Europeans have not been using the Fund or the Bank for that matter for over twenty-five years.  So they are not interested in contributing to these institutions and they have let it decline, erode, diminish, become virtually -- you know, it is withering away.  It went from 58 percent of world trade to around 3 percent of world trade today, 58 percent in 1944, 3 percent today.

         What does this mean?  It means that if go to borrow, the type of program you follow depends on the amount of financing you have.  There is always a tradeoff between adjustment and financing.  If you are in the lucky position of the U.S. today, you may have huge imbalances and not adjust at least for a while.  If you have no financing, you adjust immediately very dramatically.  And this is very traumatic politically, socially, economically and so forth.  So there is a reasonable tradeoff, there is some balance somewhere, and that has been lost.  And the Europeans or the industrial countries in general, since they are not interested in using the Fund resources, they have let it become very small, and the result is harsher adjustment, stiffer conditionality and, guess what, a very high rate of program failures.

         How can you have ownership that is what we all want if the financing is not sufficient?  Well, I think my time is running up.  But I have said a few provocative things so that you will ask questions.

         Thank you.

         MS. GRIESGRABER:  Thank you, Dr. Buira.

         You can say many of us have learned considerably from him.

         I must say that from the U.S. perspective, from our Treasury, we received a letter informing us that there was no need for additional quotas; the IMF had ample liquidity.  So there was no need, but that is the only context in which you can address the voice and vote.  So we have plenty of work to do, as do our European colleagues.

         Now at this point, allow me to introduce Dr. Paul Acquah, who is the Governor of the Central Bank of Ghana, and it is the developing countries and the emerging market countries who need to have the voice on this issue.  So for that purpose I would like to take a back seat and let Dr. Acquah speak, because he speaks for very, very many countries, including the 123 countries who are part of the G11 who were calling first for more transparent method of selecting the Managing Director and who have a serious responsibility in leading us in this voice and vote matter.

         Dr. Acquah.

         DR. ACQUAH:  Thank you very much.

         I think it is a pleasure for me to have the opportunity to be present at this table, because if you are present, you can say something.    I will just start by saying one thing.  When we heard in Ghana that the MD Kohler was leaving, my President was touched by the news and he, in the letter that he sent to Mr. Kohler, said you were a voice in the International Monetary Fund, and we know you will continue to be a good voice in the German administration.  I think the issue of voice is very important .

         Now my colleague here has talked about the share of quotas of developing countries in the Fund and in the Bank.  I think that is probably not the most important.  What is important is ability to influence the decisions that affect developing countries.  Even though the size of the Fund is shrinking relative to the world economy, I think the influence of the Fund relative to developing countries has grown astronomically.

         I mean, look at the issues that have been considered over the last five years.  There is continuing discussion about conditionality, how conditionality should be adjusted.  There has been a lot of debate on debt relief, whether debt forgiveness is something that should be countenanced at all.  I mean, initially, I think the idea of debt relief or debt forgiveness was a taboo.  Because of the influence or the pressure exerted by various interest groups that had developing countries' interests in heart, the institution moved from debt rescheduling to the HIPC Initiative and debt cancellation.

         Take the case of the design of PRSPs.  We are now taking credit for the participation of countries in the formulation of PRSPs.  But what is a PRSP?  I think fundamentally the issue is ownership.  And what is ownership?  You have a PRSP.  We know that whatever the owners formulate, that is the developing countries formulate, in the form of a policy package, that policy package must be acceptable to those who will finance it.  And, therefore, those who finance it have a view as to what the product should look like.  And that is the whole issue of conditionality.

         Now what is ownership if there is no somebody at the table to determine whether the product that has been fashioned by the participatory process in those countries is acceptable to the institutions concerned?  We talk about capacity building.  You know, capacity building has been a major focus of the discussion.  What is capacity building?  Building capacity to serve people.  I think if you look at developing countries, yes, there is capacity to do a lot of things.  The civil service is not -- in some of the countries, of course, there is civil service reform and so on.  But if you look at the type of capacity building that have been put in place, you begin to wonder what the effectiveness of that capacity is.

         I will give you an example.  Just a few months ago, there was a technical assistance proposal communicated to the Government of Ghana.  It was with regard to deciding how street children could be helped.  It was a big capacity building program in terms of dollar values.  And I think 75 percent of that capacity building proposal was for studies to see how you could help street children in Accra.

         Obviously, my Minister of Finance who is very frank said that you can keep your money, because the time that the administration would take to put that technical assistance program together is more valuable than the amount that would be spent on the technical capacity consultant who will be conducting the study.  I think it comes down to the effectiveness of aid.

         That said, I think it is important when we talk of voice to really focus on the representation of developing country staff or developing country nationals on the decision-making bodies.  Because if you are not there, if you are not at the table, you have no contribution.  If I were not at this table, you would not be listening to what I am saying.

         So I think that is what voice is about.  And if you look at the Fund and the Bank and you look at the position of developing country nationals at strategic positions, you cannot say that their representation is adequate.  And I can certainly say that for the African Department, for example.  So it is a question of voice and effective voice.

         I think if nationals are represented, they have the opportunity not only to influence the agenda, but to see that the agenda is implemented and implemented well.  And clearly, when the decisions are taken to borrow from politics, when decisions are taking in a smoking room, you know, you are not there.  You only get to know of the outcome and now about dynamics of their decision.

         And I think this is very important.  Now I say this because I changed careers, you know.  When I was a staff member here, I used to talk about scenarios when a problem was tabled.  And I think I went through a lot of these conditionality, debt relief, design of PRSPs and so on and so forth.  But when you are in the field, you are on the ground, you know that the decisions that you are taking are not theoretical decisions, and that actually we have not the option of revising our scenarios as we go along.

         Every scenario is a decision, and it touches people, it touches the public funds, it touches the economy.  I am saying that because I am putting myself on the other side, and I can see that when decisions are taken, are being taken at the table, you are very conscious of the impact of that decision.

         So if developing countries are not effectively represented in these institutions, which after all, as I said initially, are serving disproportionately or devoting, I think one can say disproportionate amount of resources relative to quota to the work in developing countries, when there may be some tension and potential gap in synergy.  My colleagues say program failure and so on and so forth.  Yes, there are program failures.  I am not saying that if the Managing Director were an African, there will be zero program failures.

         But I think if those people who design these programs had -- well, let me put it differently.  If those who design these programs included a significant proportion of those whose economies will be touched directly by those programs, then they would give meaning to the concept of ownership.  And that is all that I can say.

         Thank you.

         MS. GRIESGRABER:  Wow, that is a lot to say.  A bumper sticker summary of what Dr. Acquah said is I would say we need smoke-free buildings, no more smoke-filled rooms, no more closed doors to keep the smoke in, but we need smoke-free buildings.  And that is maybe a little facile but I think it captures the need to be present, to be in the room, to know how decisions are made and to live the decisions.

         I hope you are storing up your questions.  Bishop Aldo Etchegoyen, who is with the Methodist Church in Argentina and very active in the World Council of Churches, flew in yesterday from Buenos Aires to speak with us today.  He goes directly back to the airport and home.

         So he would like to share some reflections from a more ethical and moral perspective as well as the perspective from a country that is living with the consequences of some of these decisions.

         Monsignor, pour favor.

         BISHOP ETCHEGOYEN:  Let me speak in Spanish, please, because God speaks Spanish.

         [Interpreted from Spanish.]  The first question that you may ask is what am I doing here, and what am I doing here in this world of economics, in a world where people know so much about economics.  What am I doing in such an important building?

         However, from Latin America, we can say that today it would be impossible to theologize without taking into account economics, because economics is related with live or to live, rather, and live is connected to God.

         It is a privilege for me and also a great responsibility to be representing the World Council of Churches in this important panel.  The churches that make up the World Council of Churches represent approximately 400 million believers in 120 countries in the world.  The majority of these people are suffering under poverty.

         In 1982 Consul Eteron [ph.] said we are moving toward a world of -- [end Tape 1, Side 1] -- sea of misery.  Unfortunately, those words have become a reality, and even those organizations such as the International Monetary Fund and the World Bank which were created to benefit the development of nations have failed in their purpose.

         We must remember that one of the purposes of the Fund is to facilitate the expansion and balanced growth of international trade and to contribute thereby to the promotion on maintenance of high levels of unemployment and real income and to the development of the productive resources of all members, and these are the primary objectives of economic policy.

         Today, these organizations, financial organizations do not really promote human development but rather lead to a continual and greater concentration of wealth and power amongst the eight most powerful nations in the world.  Now the poor independent nations who suffered an increase in their impoverishment since the transfer of their economic resources continues to be used to service their foreign debt.

         In addition, they suffer from the exodus of millions of persons who today offer their training and skills to the north.  Thousands of them are highly trained in the areas of science and technology.

         From the perspective of Christian faith, the unjust and unequal international economic order, which certainly has serious human consequences for millions of people, has theological implications for the member churches of the World Council of Churches and constitutes a challenge for a profound change in these organizations, beginning with its composition, structure and decision-making.

         I come from Latin America where approximately 250 million persons suffer exclusion and poverty.  On the other hand, it is a region where natural resources abound which benefit people like forests, minerals, grains, oil.  These resources benefit the richest nations of the world, and they have been doing so since 1492 when Christopher Columbus came from Spain to discover and conquer the region.

         This situation is not accidental, but it is a result of a well-developed political, economic and military plan, which has resulted in moving our countries into an enslaving dependency.  In the past four decades, in particular, the foreign debt has brought about this repressive system.  This foreign debt has been denounced from the south as inhuman, immoral and unjust.

         This can be compared to the texts that the Conquistadors faced on our land after 1492.  Let me give you an example in connection with my country, Argentina.

         In 1976, Argentina was part of a terrible military turmoil.  That is the way the military government came about.  At the outset of the military government, the foreign debt was $7.8 billion.  When this ended in 1983, the debt had increased to $45.1 billion in eight years.  If we consider Latin America and the Caribbean in 1975, the external debt came to $69 billion.  From 1975 to 1990, $795 billion was paid to service the debt.  Today, the debt of Latin America and the Caribbean is more than $800 billion.

         This is incomprehensible in mathematical terms.  The more we pay, the more we owe, and the less we have.  This is not just a financial problem.  It is also an inhuman structure that has brought about exclusion and death, especially for children, women, indigenous communities and Afro-descendant communities.  The external debt kills.

         Today, the world scene shows us the following panorama.  The non-governmental organizations and religious organizations have for decades been providing nutrition and programs and support programs for persons who are excluded, those who suffer the consequences of the decisions made in the centers of world economic power.

         The centers of economic power make their decisions based on financial and economic criteria, and the religious and non-governmental or social organizations seek to heal those who are wounded by the system.  How long will this very serious situation of injustice continue, a situation which allows limitless concentration of wealth, and the continuing impoverishment of nations and communities?

         From the south, we call for a change in the structures of the International Monetary Fund and the World Bank for several reasons.  First, human reasons.  In the present situation, it poses life or death questions for millions of people.  In Latin America, half of all deaths, half of all those who are buried are children under the age of five years who have lost their lives due to malnutrition and disease.  In addition, approximately 250 million people representing 50 percent of the population in Latin America and Caribbean as a result of low levels of employment and income live in poverty and misery.

         These grave consequences are violence, deterioration of education, deterioration of health care, deterioration of development, breakdown of family relations, to cite an example, the approximately 20 million street children, boys and girls.  So it is human reasons that move us to see the need for change.

         Also ethical considerations.  The great majority of the deaths in Latin America have resulted from loans made to illegitimate governments, as were the military governments of the 1970s and the 1980s.  Those military governments served powerful international and economic interests.  Those military governments caused the disappearance of approximately 120,000 persons in the region, and those military governments benefited from the loans which today the democratic governments have to continue to repay.

         This mechanism is ethically reprehensible.  Our decision on behalf of change would be forgiving the debt that was taken on by those military governments with the agreement and the approval of these international organizations.

         Now third, we also need changes out of considerations of justice.  The structure and makeup of the IMF and the World Bank express a clear inequality that impedes greater participation, especially by the regions of the south, in its composition and in its decision-making.  Yet, those dependent in poor countries are the ones that are hardest hit in terms of their economic situation, political liberty and the social situation by the decisions made by the economic and financial organizations.

         So we affirm the urgent need for changes in favor, first of all, of democratization, voice and vote not based on the wealth and power of countries, which runs contrary to democracy and which favors the rule of money, but rather a criteria of responsible membership in the organization.

         We talk a lot about democracy in the world.  Nonetheless, when financial interests are at stake, the values of economic power prevail, not the values of democracy.

         We know that the IMF and the World Bank are financial institutions, but after so many years the time has come where it is necessary to make an evaluation, taking into account the purpose of the Fund and I repeat real income and development of the productive resources of all members as primary objectives of economic policy.

         Participation is also important.  We need equality in the makeup of the governing bodies of the organizations which would allow for a new direction in decision-making.  Clearly, the eight wealthy nations manage and control all of the mechanisms of the IMF and the World Bank.  If there is no change in this scheme, the time will come -- if it has not come already -- when those nations will be responsible for the most massive violation of economic, social and cultural rights of millions of people, not only in the poor nations but also in the pockets of poverty in the rich ones.

         We call for some kind of mechanism whereby the debtors have voice and vote in decision-making, at the same time the opinion of religious organizations and non-governmental organizations should be guaranteed given the very important role in solidarity with those who suffer the consequences of this situation of economic inequality.

         We also affirm the need for changes out of considerations of equity.  The injustice of the lack of voice and vote for the most dependent nations is aggravated by the fact that the wealthiest nations in the world have the right to veto when its interests are detrimentally affected.  This has transformed into a very unjust privilege which may eventually have very serious consequences.  At the same time, this inequality is evident in the fact that Europe has the exclusive right to choose the head of the IMF, and the United States that of the World Bank.

         This decision rules out the democratic possibility of these important officials being elected by an open and transparent process, by persons of sufficient capacity who may come from other member countries.  This lack of equity is also seen in the constant pressure suffered by democratic governments to carry out successive economic adjustments.

         Argentina, my country, constantly suffers from this pressure, and each visit by a delegation of the IMF constitutes a direct threat to the already insecure economic stability that has been attained.  And it constitutes a direct intervention in the country's internal affairs.  The premise of non-intervention in the internal affairs of the country has long ago fallen by the wayside.  If we look to Latin America today, all of the countries are being pressured to participate in the creation of the free trade area of the Americas, a proposal that hides behind the word "freedom", a total lack of equity in international trade.

         The outline of the United States as it persists in keeping in place subsidies for its commodities is just one example of this lack of equity.  We also consider the lack of transparency.  The World Bank and the IMF have arms to cover areas that fall outside their mandate.  This methodology usurps the mandate of other multilateral institutions.  And there is a need to renegotiate the agreements defining the relationship among the IMF, the World Bank and the United Nations in order to clarify the responsibilities of these two financial organizations in relation to the UN.

         In the World Council of Churches, we are looking towards a new type of financial institution.  They should be less ideological, less bureaucratic, more flexible, and more pragmatic.  They should look to an economy that principally serves the well-being of all, and an economy that generates employment rather than hunger, and education and development rather than exclusion.  The challenge is to have a new vision in which life is worth living and is paramount.

         The World Council of Churches' concern regarding economic justice is based on a lack of power-sharing by the powerful economic and financial institutions in the world.

         I have other things to say but I am going to set them aside, because I have been told that my time is running out.  I would simply like to leave you with two questions.

         Is a change possible in the International Monetary Fund and the World Bank?  Could it be that all of this is merely a question of word games?  And the other question:  Today human rights are systematically violated by the interests of large monopolies of countries and companies.  Will the time come when life will be accorded greater priority than economic and financial interests?  Those are two questions that I ask you to consider. And I am sorry if I have gone beyond my time.

         [Applause.]

         MS. GRIESGRABER:  Gracias, Monsignor.

         I think also that what you have heard here is a range of presentations.  You have heard both Dr. Acquah and Bishop Etchegoyen speak about the reality on the ground, the reality of what unjust, unequal power structures mean.

         Dr. Buira has provided careful analysis of the source of the structural problem and possible solutions, and Minister Wieczorek-Zeul came in with very concrete, specific recommendations for moving this conversation forward.

         With this as the context, I would like to entertain questions.  And what I propose is that we hear like three questions, and, if you could, indicate the person you would like to answer it.  But I found if you have a series of questions, then we can pull them together and have short comments and get additional questions posed.

         Aldo Caliari, I saw your hand first.  I think there is a magic button somewhere on your chairs and it turns on a microphone, so you can speak directly.

         MR.         :  Thank you very much.  Thank you for introducing me.  I am from the Center of Concern.

         My question would be to Mr. Buira and Mr. Acquah.  I think Monsignor Etchegoyen, my compatriot by the way -- I am very happy to see him in the panel -- has made a very compelling case of how the management of basically the external debt and structural adjustment policies by international financial institutions has had a huge impact on the enjoyment of civil rights in Latin America, inequality, growth.

         But I want to mention we have been on several occasions with U.S. Treasury representatives, U.S. Government representatives, that every time we raise this issue of voice and vote, they would say "you know, you shouldn't really put too much faith on a change of the voting structure because that is not going to change the basic agenda of the institution, that is not going to change the policies".  And that is what we really want to change.  I mean, the issue of voice and vote is not really an abstract issue for us; I think it is an issue because we believe that the unequal power structure is an immediate cause of the acceptance of the policies.

         So to Mr. Buira and Mr. Acquah, maybe if you could give us some examples of concrete issues on which you think some changes in the voting structure could bring some changes in the policies.

         Thank you very much.

         MS. GRIESGRABER:  Thank you.  Antonio.  I know who you are but nobody else does.

         MR.         :  Antonio Tricarico, Campaign to Reform the World Bank from Italy, in Rome.

         I would like to ask the German minister a very concrete question.  We keep hearing about France and Germany discussing about unifying their seats within the UN and potentially in the mid-term within the international financial institutions, whether she can confirm this, whether this is not true, and what are the gossips.

         But more generally, I have no hope in the United States, frankly speaking, whether or not we have Bush, but I still have some limited hope in the European Union.  And the question is if we need to free up some quotas for the south, is there a political interest in someone, at least a few ministers in Europe, to give some quotas to the south, basically for reshuffling without asking the United States for a miracle that today cannot happen on the basis of this historic exhibition?

         Thank you.

         MS. GRIESGRABER:  Peter.

         MR.         :  Peter Lanzet from the Church Development Organization in Germany.

         To my minister, Ms. Wieczorek-Zeul, a question.  The three suggestions that you made, I believe the one with double voting is very interesting, but it would probably in the end lead also to a loss of influence of smaller European countries that right now have a rather disproportionate influence in the institutions. 

         Now in the political process, how would it play out?  What are your suggestions to your colleagues in the other countries to deal with that situation?  Is there any thinking going on within the ministries?

         MS. GRIESGRABER:  Okay.  We have something for Dr. Buira, Dr. Acquah and Minister Wieczorek-Zeul.

         DR. BUIRA:  Well, I was asked -- I think I was asked -- would the change in the governing structure of the IMF or World Bank make a difference to the policies?  I think the answer is a very clear yes.

         Let me give you several examples of how a different voting structure, a different power structure would lead to different outcomes.  The first issue, counter-cyclical policies.  The world has just been through a recession of four or five years.  All industrial countries have pursued counter-cyclical policies, expansionary policies, expansionary fiscal and monetary policies.  The U.S. has a large balance of payments and large fiscal deficit, Germany, France and so forth.  Most European countries have large fiscal deficits.  Several of them are breaking the Maastricht limits, and that has given rise to some frictions and so on.  But no middle-income or low-income country has been able to pursue a counter-cyclical policy.

         Why is that?  Because they are dependent on external financial markets and they do not finance it.  But there is no reason at all why the Fund could not encourage and sustain such counter-cyclical policies.  For instance, in the mid and late 1970s, following the two oil shocks, the Fund established an Oil Facility to recycle the surpluses of the large oil-exporting countries towards oil-importing countries to allow them to pursue policies that would be more expansionary and less recessionary than otherwise.

         And they did this by lending to countries who had no access to financial markets.  Most of them have no access.  Now this was done because there were several industrial countries who were interested in borrowing -- Italy, the U.K., Spain, several others.

         Now in the late 1990s and early 2000 this was not done.  Maybe the Fund did not have the vision that it had in the late 1970s, but that is one example.

         Let me give you another example, commodity shocks.  All low-income countries, and the lower the income the more vulnerable they are, low-income countries are typically dependent on one, two, three export commodities.  And this is particularly a case for countries with incomes of $1,000 per year or less.

         Now if you are dependent on one or two commodity exports, you are very vulnerable to commodity shocks, to terms of trade, to droughts, whatever.  The Fund has a facility for this purpose.  It is called the Compensatory Financing Facility.  This Facility was actively used net in the early 1980s.  It has not been used for a long time.  It is still in the books but they have overloaded it with conditionalities to make it unusable.  And in the recent discussion, it narrowly escaped being closed down.

         Well, if you have a different structure of power, a different composition, this Facility would be greatly used and of great assistance to many low-income countries, mostly in Africa.

         Third example, financial crisis.  Latin America has been ravaged but also a number of countries in Asia and elsewhere have been ravaged by the volatility of capital movements and financial crises, contagion and all of those things that you know.  The Fund established a facility, a sort of precautionary facility to deal with this, the Contingency Credit Line.  But it was designed in such a way that it was never used.  And after four or five years of existence, it was closed down last November.

         Now it will strike you as very interesting that the fellow who was the head of the Policy Development Review Development, Mr. Tim Geithner [ph.], was appointed head of the New York Fed, and three or four weeks after he had taken this new position, which is a very important position, he said that the Fund approach to crisis in emerging markets was wrong.  You shouldn't wait until the country has a crisis and then come in and lend, because by then the plates have been broken.  And, you know, devastation has been brought.  You should lend in time to maintain confidence and prevent the crisis.

         Now since I had written something like that a few years back, I was in great sympathy with this argument, but I think it is a correct argument.  But why wasn't it done?  Well, because since lending to commodity producers or to emerging markets is not to people like us, you see, it is these other guys, and we are really so interested in that, and we don't have to put more money for that.  Okay?

         SDR allocations, how is international liquidity created and distributed today?  Well, today, the main source of international liquidity is the balance of payments deficit of the U.S.  Who benefits from this?  Well, you might think it is the U.S.  They pay their bills with little green pieces of paper and people use them as money.

         As long as they use them as money, they don't come to ask for goods.  They put them away in a drawer or in a bank deposit or whatever.  And this is an enormous privilege they enjoy.  But why shouldn't the creation of liquidity benefit the international community more widely?  Why shouldn't it benefit the poorer countries?  Why couldn't this be used to finance development assistance, for instance?

         On a purely pragmatic issue, global payments and balances.  You saw the G7 meet in Boca Raton a few weeks ago, and this was very interesting because they were discussing the dollar and the payments and balances of the U.S., but this was Hamlet without the prince.  The Chinese and the Asians who have the large surpluses were not invited.

         Well, to have the world economy well managed, you need to have all the significant players there, and if the developing and emerging market economies account for about the same size as the major industrial countries, you can no longer manage the world economy with 44 percent of GDP.  You have to bring in the other 45 or whatever it is, and then you might have a better chance of a successful coordination and successful adjustment of payments and so forth.

         Well, I have just given you give examples.  I am sure there are more.

         DR. ACQUAH:  Actually, I think the five examples are sufficient.  So I will not add anything to it.

         But, you know, there is a current debate on what is called fiscal space, creating room in the fiscal framework to accommodate spending on infrastructure or health and education.  This is a very important issue.  So depending upon how effectively people advocate for this creation of fiscal space to accommodate infrastructure development or health and education so that accelerated progress can be made towards achieving the Millennium Development Goals, this is very important.

         And I think if the governance structure were skewed somehow favorably towards developing countries, I think this would achieve a very rapid resolution in terms of strategy for accelerated development in the countries.

         MS. WIECZOREK-ZEUL:  One practical question and then I will come on some of the other points, which, of course, are interlinked.

         One thing was:  Is there going to be a plan of the German and French Government to have one seat within the UN?