EXCHANGING DEBT FOR DEVELOPMENT – A NEW WEAPON AGAINST POVERTY

By Leonardo Boff and - - Reprint | | Print |

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MADRID, Sep 1 2004 (IPS) - Speaking on September 20 at the Summit against Poverty, in New York, Spanish president Jose Luis Rodriguez Zapatero announced that his government will be actively involved in exchanging debt for social development initiatives, and especially in the field of primary education, writes Antonio Vereda del Abril, president of the Iberoamerican Foundation for Development (FIDE). In this article, the author writes that exchanging foreign debt for development co-operation amounts to freeing up resources so that poor countries can invest in the education and health of their citizens, fund microcredit operations that can result in the creation of great numbers of jobs, and in general, have the resources to spur their own development. Through foreign debt, finance has become an instrument of domination and inequality. Many countries have to channel 30 percent of their budgets to service their foreign debt, thus becoming exporters of capital, which prevents them from investing in their own development.

Development and poverty elimination constitute a process of liberation from within that requires knowledge and means, which the majority of people need access to through the co-operation of a few individuals and peoples with the many who need it.

For this to happen, what is needed is a Globalisation of Solidarity, starting with education, microcredit, and development. Globalising knowledge by using the new technologies is a major opportunity that we have not had for twenty years, since the tools of globalisation can now help us bring knowledge, tools, and social and technical services to all peoples. This co-operation in the development of all human beings so that they can bring about their own development from below and from within is the new face of solidarity.

Speaking on September 20 at the Summit against Poverty, in New York, Spanish president Jose Luis Rodriguez Zapatero announced that his government will be actively involved in exchanging debt for social development initiatives, and especially in the field of primary education.

For the majority of informal workers, peasants, and indigenous peoples, foreign debt means blood, sweat, and tears. The people have already spoken through cries of suffering and desperation. The service of this debt has meant higher taxes for the poor, which traps them in poverty and cuts off their future, robs them of equal opportunity, and leaves their children staggering under the weight of foreign debt from birth.

Thus is accomplished the greatest expropriation of the income of the poorest. Although it is often said that they do not pay taxes, the reality is that they are hit with inflation and consumption taxes imposed so the state can pay its foreign debt. It is a debt that is not amortised, that is continuously refinanced, and on which only interest is paid, which grows larger and more difficult to pay. Through foreign debt, finance has become an instrument of domination and inequality. Many countries have to channel 30 percent of their budgets to service their foreign debt, thus becoming exporters of capital, which prevents them from investing in their own development.

Exchanging foreign debt for development co-operation amounts to freeing up resources so that poor countries can invest in the education and health of their citizens, fund microcredit operations that can result in the creation of great numbers of jobs, and in general, have the resources to spur their own development. It means redirecting these freed-up resources so that the countries can invest them and make them available to the majority of their citizens, who with the requisite knowledge and tools can begin a process of development from below and within.

Exchanging debt for development means investing in co-operation on development. Since the debt is foreign, with other countries, it depends on both parties, creditor and debtor, to come to an agreement, a new global contract between the rich countries and financial institutions that are the creditors, and the poor and developing countries that are the debtors. The former must offer this debt or development, but it is the latter, the debtors, who must commit to channelling the freed-up debt into programmes that benefit the people.

In the debtor nations, the equivalent of their foreign debt payments would stay in their countries to be invested in their own development. In terms of bookkeeping, for the creditor state the proposal would mean a expense-free way of shifting money owed them to finance part of the development co-operation. To debtors it would mean cancellation of foreign debt without money crossing their border.

This proposal would also mean the transfer of the management of development resources from the states, financial institutions, and major firms to civil society organisations (CSOs), which have set their sights on cutting the states’ social debt to their people. It is a new way of financing development that benefits the majority of the people and brings about the transfer of a small part of the financial resources locked in the debt to the co-operation on the development of all peoples.

With this debt exchange for development of the debtor country, plus the co-operation of the creditor, it is possible to create funds for bilateral co-operation, which through agreements between both parties, will allocate the total capital and oversee its management and control, appointing a small number of government and CSO representatives to form a bilateral or directive committee and a technical committee, with a technical office for the presentation and selection of projects.

Thus there are three methods to finance the Global Proposal for the Eradication of Poverty and the Inclusion of the Majority of the Population. More than the classic direct financing among NGOs, two other funding sources are suggested: one deriving from the social responsibility of businesses, and the second, debt-for-development swaps between states, which would provide the resources necessary to promote another form of development, from below and within. (END/COPYRIGHT IPS)