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Monday, December 11, 2023
CARACAS, Feb 4 1998 (IPS) - Ministers and central bank presidents of the Group of 24 (G-24) develping nations meet here this weekend to hammer out a combined approach to the economic crisis in east Asia and the projected opening of capital markets.
The rotating president of the group Venezuela’s William Larralde said top level officials at the gathering would include the managing director of the International Monetary Fund (IMF), Michel Camdessus, the vice-president of the World Bank, Shengman Zhang, and the secretary-general of the UN Conference for Trade and Development (UNCTAD), Rubens Ricupero.
The meeting will focus on a common approach toward strategic issues such as the liberalisation of investment regimes and their possible supervision by the IMF, Larralde said.
The G-24 operates as an association of minority share-holders in the IMF and World Bank, in which developing countries account for 46 percent of the total resources while the United States alone accounts for 18 percent, Larralde pointed out.
The G-24 is comprised of Venezuela – whose year-long presidential term ends in April – Algeria, Argentina, Brazil, Colombia, Congo, Egypt, Ethiopia, Gabon, Ghana, Guatemala, India, Iran, Ivory Coast, Lebanon, Mexico, Nigeria, Pakistan, Peru, the Philippines, Sri Lanka, Syria and Trinidad and Tobago. Yugoslavia no longer participates. The group’s meetings are open to other countries from the South and he cites China, Chile, South Africa and Saudi Arabia as the most regular participants at G-24 conferences – which the attend as “observers.”
Larralde said the developing South needed to reflect on the international financial scene’s most recent developments. The three-day, closed-door meeting – that Venezuelan President Rafael Caldera will inaugurate Saturday – will provide a setting for initiating that process and coming up with short and medium-term objectives, he added.
The gathering should also take steps towards a direct dialogue on the international financial situation with the major representative group of the industrialised North, the Group of Seven (G-7), which would take place at the the G-7 summit in Britain in May.
Speaking with foreign correspondents, Larralde said that the South’s role on the international financial scene had changed drastically.
During the 1980s debt crisis, the money fleeing a particular country was mainly national investment that had lost confidence in the local economy, and the flight of capital had no real impact at the worldwide level. Today, however, the crisis in Asia shows that developing economies “have a growing importance in the world economic process” due to “an effective globalisation of the markets.”
Such globalisation has occurred before those markets – and particularly the emerging markets of the South – are sufficiently developed, informed, supervised or stable, which has increased the fragility of the international financial system.
The Asian crisis, whose predecessor in global terms was the 1994/95 Mexican debacle, upset the prices of primary materials such as copper and created situations such as the impact in Brazil of events in South Korea.
Against the backdrop of the crisis and with the volatility caused by the impact of “hot” capital demonstrated one again in the markets, the industrialised North is pushing for a quick decision to free up capital accounts, which involve both short- term, and long-term investment flows, and put them under IMF supervision.
In accordance with IMF statutes, that institution only supervises the so-called current accounts, which measure trade in goods and services. The countries of the South have doubts as to the new liberalisation and the granting of a controlling role to the IMF.
Malaysia, for example, has proposed that the liberalisation of capital accounts and their supervision should be the responsibility of the World Trade Organisation, which is already in charge of the liberalisation of goods, services, intellectual property and investments.
Hernan Oyarzabal, who is coordinating the meeting, predicted that the position that will emerge in Caracas is that the opening of capital markets is beneficial for economies, but that the emerging markets of the South have problems that can lead to a lack of symmetry with the North.
“More development is required and, in some cases , the opening of markets will have to be faster while slower in other cases – just as the conditions should differ,” he said. The position of the G-24 is that the conditions are not yet ripe for adopting a decision at the April assembly of the IMF and World Bank.
Larralde said another element to be discussed in Caracas is how the private sector reaches decisions on investing in a country or withdrawing, due to the abundant evidence that on many occasions such decisions are based on erroneous information and turn a momentary crisis into a structural one.
The apparent failure of crisis prevention systems will also be analysed, he added. “There is a capacity to manage the crises, but there is a dearth of solid prevention mechanisms,” even though the best option is to attempt to keep such crises from breaking out in the first place, said Larralde, the vice-president of Venezuela’s Central Bank.
Another issue to be addressed at the meeting will be the initiative to get the multilateral and public debt of the world’s poorest countries cancelled. Larralde and Oyarzabal underlined the need to expand and give a boost to that initiative.
Many officials are concerned at the “short-sighted selfishness” of the richest nations, whose legislatures – particularly the U.S. Congress – fail to comprehend that there are countries whose economies could collapse without debt relief, and that such crises would have damaging effects for everyone.
The participants will also discuss how to support the steps taken by the Organisation of Economic Cooperation and Development – which represents the world’s leading economies – to control measures that favour corruption in their international business deals.
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