By Mario Osava
RIO DE JANEIRO, Dec 27 1997 (IPS)

The creeping shadow of speculative capital across world markets masks the disciplinary mission of the International Monetary Fund (IMF) and the World Bank against those countries who are reckless in their internal and external accounts.

Punitive action can be direct and devastating, like in the case of Mexico in 1994 and in Asian countries this year, or indirect such as the4 case in Argentina in 1995 and in Brazil today.

The world financial institutions no longer need to make an effort to convince and pressure governments to adopt harsh measures for fiscal adjustment, equalize their balance of payments and, if necessary, submit their populations to periods of economic recession and unemployment.

Today, after a speculative attack that wipes out foreign reserves and ruins shares, the IMF appears as the savior – as has occurred in Mexico, Thailand, Indonesia and South Korea. It was impossible for these countries to resist the Fund’s recommendations.

Brazil, which lost 15 percent of its reserves, carried out its adjustment policy without interference or credit from the Fund.

Instead, it implemented an 18 billion dollar fiscal collection and doubled interest rates, in the process risking an economic recession. IMF director Michel Camdessus applauded the Brazilian government’s “courage”.

The effects of the crisis in Asia also quelled resistance to the reforms, which the left calls “neoliberal” and which have been blocked in the Brazilian Congress for two years. The measures would allow massive layoffs of public employees and the postponement of retirements.

President Fernando Henrique Cardoso has intensified his international campaign for the creation of “mechanisms” that would discipline speculative capital, considering that the IMF and the World Bank do not suffice in confronting the new reality.

But the president has yet to adopt national measures to control that kind of capital. That is because the country needs to attract it, and such unilateral measures could scare it away.

“Only a system that involves the whole world would be efficient”, says Joao Paulo de Almeida Magalhaes, of the Federal University of Rio de Janeiro.

The IMF wants total freedom for those investments, according to the economist. Only those countries with impeccable credentials could maintain control mechanisms, such as minimum requirements for investment capital remaining in the country.

But flight “can be prevented with macro-economic policies that are consistent”, argued Octavio de Barros, technical director of the Brazilian Society for the Study of Transnational Corporations and Economic Globalization (SOBEET).

Almost all the sectors have gained much liquidity in the current global economy, “even industry, because any firm can be sold easily”, Barros says. Under these conditions, the “misunderstood” speculative capital plays a kind of “disciplining role”.

This contributes to a “global convergence towards policies of greater budget restrictions and care in public finances”, after having exhausted certain forms of government financing for development which used to be very common in developing countries, said the expert.

“The model in (South) Korea, where the crisis is threatening global stability, was a story of successful growth for three decades”. But “incestuous” relations between the public and the private sectors and the mismanagement of credit on the part of the banks, were not in synch with the internationalization of the economy, he said.

Thanks to that turbulence, the IMF renewed its role as caretaker of the international finance. This time, it managed to mobilize almost 60 billion dollars to rescue South Korea, in contrast to what happened during the foreign debt crisis that affected the developing countries last decade, when it only channeled a few billion dollars.

The world is beginning to take into account the warnings and recommendations of the Fund, according to its vice-president, Stanley Fischer. During its next bi-annual meeting, the IMF intends to approve a manual of behavior for all member countries.

The prospects for the immediate future are therefore tending towards a uniformity of criteria in economic policy, under a financial optic and the threat of punishment for emerging states, which went from models to be followed to examples to be avoided.

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