Transcript of a Press Conference of the chair of the Intergovernmental Group of Twenty Four (G24) on International Monetary Affairs and Development

Washington D.C. October 19, 2007
View a Webcast of the press briefing

Participants:

Mr. Oscar Tangelson, Chair, Vice-Minister of Economy and Production, Argentina
Mr. Jean Claude Masangu Mulongo, First Vice-Chair, Governor of the Central Bank, Democratic Republic of Congo
Hector Torres, Chair of the Deputies, Alternate Executive Director at the IMF
Amar Bhattacharya, Head of the G24 Secretariat
Lucie Mboto Fouda, IMF

Ms. Mboto Fouda - Good afternoon, ladies and gentlemen, I am Lucie Mboto Fouda of the External Relations Department of the IMF. I would like to welcome all of you to this press conference of the chair of the G24, which is, as you know, the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development. The press conference today will be chaired by Minister Oscar Tangelson who is Vice Minister of Economy and Production of Argentina. To his left is Mr. Jean Claude Masangu Mulongo, the First Vice Chair and Hector Torres, who is the Chair of the Deputies. To the far right is Mr. Amar Bhattacharya, who is the head of the G24 Secretariat. We are still missing one invitee. Hopefully he will join us soon. I will now give the floor to the chair for his opening remarks, then he will take questions in the room. As usual, please identify yourself before asking your question as well as your media outlet. Thank you. Mr. Chair, you have the floor.

Mr. Tangelson - Thank you. Good afternoon. As you know, the G24 is a multilingual group. Then I will speak in Spanish.

I would like to welcome you all to this meeting of the press report of the G24 today. We have decided to focus on a number of issues. The current problems and the possible impact on our countries, the first issue; second, the reform of voice and representation at the Bretton Woods Institutions; and, third, the implications of climate change on developing countries and poverty reduction issues.

Regarding the first subject, it is clear that developing countries have promoted economic growth in recent years with higher rates of growth than in the developed countries. Our strong contribution to growth has not just been the result of a favorable financial or commercial situation. It arises from implementation of consistent macroeconomic policies to increase output, employment, and our insertion into international trade. Thanks to this policy we have been able to overcome or face the current crisis with few problems. This is an unprecedented situation. It is the developed countries that are in crisis, and the developing countries have to take up the slack for demand in the international field, so the Ministers of the G24 believe that it is our responsibility to maintain our economic growth policies and social equity.

Apart from that, the G24 Ministers realize we need to increase the multilateral financial architecture in two particular areas. First it is necessary to strengthen surveillance and regulation of the international financial system to avoid speculation protected by nontransparent financial activities which we have seen which increase risks, negatively impact investments, and therefore the whole world economy.

We also have to consider the role of the IMF in this context. There are two implications here. On the one hand, we G24 Ministers stress the need for the Fund to exercise its surveillance activity over the economies of the member countries on an impartial basis. So far the Fund has done its best only to survey our economies rather than developed countries, but as this recent crisis shows, this is a problem for the whole international financial system. We Ministers reiterate the need to have a new contingent credit fund, the RAL, and we express our disappointment at the lack of concrete proposals on this subject. We think there is clear interest for the developing countries to have an automatic line of access without conditionalities and emphasize the need to make rapid progress on this subject.

The second subject which we dealt with in our meeting was the voice and representation issue in the Bretton Woods Institutions, something that is currently being addressed in the IMF. There is a strong consensus in our group as to the need for thorough going changes in the structure of the IMF, a sine qua non condition for improving the health of the institution, bringing back to it legitimacy and efficiency. The G24 Ministers reaffirm our conviction that this requires a reform which gives the developing countries greater voice and more decision making powers in the institution. Changes and restrictions in quotas are not acceptable. We believe that even one, two, three percent increase in votes for developing countries would be the appropriate way to go, but that would be only cosmetic and would maintain an unfair prejudicial status quo for the multilateral character of the International Monetary Fund. You will find in the communiqué that we have approved the main proposals that the Ministers of the G24 agreed to carry out this process. Unanimously we were in favor of a new form of quota calculation where domestic GDP of groups be expressed in terms of PPP. It is not just that the most advanced countries, the richest should be the ones who have the greatest capacity for borrowing. We need changes in the Fund governance and not just exceptional loans and there should be well over 300 percent of quotas. This in financial terms is an exceptional cost and would promote the accumulation of reserves for self-insurance which goes against the original purpose of the Fund. We Ministers have also agreed that reforms should be a continuous process over time to ensure that our quotas do not fall behind. Periodical reviews of quotas of member countries therefore needs to be undertaken.

Finally, we are all agreed that it would be of greatest importance to reform significantly the basic votes of Fund members, at least tripling our weight in the voting structure of the institution. Anything else would be to condemn less developed countries to playing a marginal role. We need to recognize in the Fund's decision making process that we all have equal rights and obligations. To allow the Fund to continue taking decisions based on one dollar for one vote goes against its credibility. Surveillance is not credible, nor policy advice nor conditionalities of an institution managed only by the rich. This is our consideration that for all institutions should be adapted to situation, and they should change their instruments over time, and the Bretton Woods Institutions need to become institutions of the 21st Century and need to adjust the logic of their development.

Third, we have discussed climate change and its implications for our countries and development and poverty reduction. The subject of clean energy sources should be immediately addressed by the international community. The G24 believes that we should find multilateral solutions in the context of the principle of common responsibilities but differentiated depending on the degree of development of each country. The World Bank should help this by favorizing access to the new technologies and financial assistance. The G24 Ministers reiterated our support for the conclusions of the framework convention of climate change and the United Nations Environmental Program. We welcome the progress of the energy investment undertaken by the World Bank. However, this needs to be coordinated to effectively meet this challenge and the global consequences that will in particular affect the developing world.

To sum up, the G24 is concerned that their dimension of equity be included in this debate and that they become concrete actions that will help fulfill our social development and environmentally sustainable activities. We believe that there is intergenerational responsibility regarding the environment throughout the world. Climate change is in particular affecting production in less developed countries and is obviously in contradiction with poverty reduction goals that are the Millennium Development Goals. I think our discussions therefore were very fruitful, and the G24 has set out a common position for its members, has offered technical support for our Executive Directors in the Fund and the World Bank.

Finally, I would like to point out that Argentina is very pleased at being able to serve the members of the G24 as chairman of the group, and I would like to welcome the Democratic Republic of the Congo and wish them every success in the coming year. Thank you very much.

Questioner: Mr. De Rato has said that there is a narrowing of views on quota proposals, and I wanted to hear from you if you think that this narrowing of views on quotas could lead to an agreement in the end?

The other thing is as far as I understand, countries are still far apart on an agreement on quotas. What happens if this tends to drag on beyond 2008, which is the deadline?

Mr. Tangelson: What the G24 countries put forth was the establishment of fundamental parameters around which we would build a new criterion on this question of quota issue, and we believe that the fundamental step of a number of meetings has achieved unanimous view on the criterion factors to be taken into consideration. We must not forget there have been various proposals, and what happened today I think is a fundamental step forward in the determination of the basic criteria. The G24 has taken on this proposal that we should work on specifying the kind of proposal that will enable us to make compatible the visions which indeed still need to be further brought into consensus.

Questioner: I just wondered, in your discussions, did you have a chance to talk about China and the impact of the Yuan and the possible impact that it might be having on other developing economies?

Mr. Tangelson: Well, although China is an observer in the G24, we did not specifically address the relationship of the Yuan with other currencies. During our meeting, there was no discussion of any specific currency. What we looked at were the general financial conditions and our concerns on all financial international relations. There was no specific discussion of any specific currency.

Questioner: I am going to raise my question in Spanish. You, Mr. Vice Minister, have just said that if there is no change in the Bretton Woods Institutions, it will be necessary to create institutions for the 21st Century. Does this mean that the poor countries are thinking of replacing the International Monetary Fund and the World Bank with some other kind of institutions? That is my first question.

My second is, in the case of Argentina, one subject of concern is the way in which its debt has been restructured and it has not paid about 20 percent of the bondholders, those things. So what is your reaction to those two points?

Mr. Tangelson: Well, first I did not say we were going to replace the institutions. What I said was that the Bretton Woods Institutions need to become appropriate institutions for the 21st Century. This is the same as what happens in biology, organs that are not used suffer from atrophy, and you have to have others adapt over time to new situations. So the Bretton Woods Institutions were created at a time which is very different from what we have now. Conditions are no longer like they were at the end of World War II. We cannot remain static. We must adapt. This does not mean to reduce the possibility of countries like my own who are part of various areas and unions of a regional character, it does not make that incompatible with the others. We need to construct financial architecture that will face up to the phenomena that are appearing in the regions.

Your second question, I think it is appropriate here, since I am representing the G24, not to refer to bilateral terms, but after the meeting we could discuss the relevance of what has been done and try to understand the process of changing debt negotiation to phenomena. We are dealing with international financial institutions and also there were options or shares of stock, financial instruments that were market instruments. It is a broad debate, and I would be prepared to discuss this after the meeting, but now we are discussing what we did in the G24 but not what happens in bilateral relations.

Questioner: Your communiqué issued today indicated that the Ministers were calling for better representation of Africa and other highly under-represented regions in the staff in management of the Bretton Woods Institutions. I would like to know what type of time frame to these recommendations or suggestions, and if they agree, how would this impact on countries targeting to the MDGs?

Mr. Tangelson: First of all, there is a timetable for the changes and reform to be brought about, which is next year, and what we are doing within the G24 is working towards consensus, precisely as I already pointed out, so as to reconcile the different positions of countries with different levels of development, but there is, indeed, already a consensus in particular regarding the poorest countries of the planet that there should be a significant meaningful increase in their participation, and this is duly reflected in the communiqué.

Something that was shared in the meeting was this idea of shared responsibility and solidarity whereby global development is not possible unless it includes everyone, and there is particular concern on the part of all the G24 Ministers to do something specific for Africa, and this is something that we clearly agreed during the meeting. Now, it might seem difficult, for example, to have the achievement of World Bank aims, for example, to have greater and more equitable income distribution as in the World Bank documents when, for example, you have in Latin America Gini indices of 0.52 or 0.53, and this you will find in Africa as well. That reflects the lack of equity in income distribution, but the global figure is 0.6 for the Gini index. So if we cannot get better equity within individual countries, what are you to do about an even deeper inequity and how will this affect the global situation? This is the basis on which we have a vision of solidarity within our G24 group because we believe that you cannot have improvements for some at the expense of a lack of improvement or a decrease for others.

Questioner: I am just wondering, you have called for the Fund to increase its surveillance over developed countries. I was wondering if you could just elaborate on that, what do you think the Fund could do to enhance that?

Mr. Tangelson: I think there is one important point which is that all Fund member countries agree to certain obligations, in particular Article IV, according to which the Fund has to carry out surveillance over all countries, members of the IMF. It is very important that that kind of analysis be applied to all. We, ourselves, had to deal with this, and you have to have all the necessary data in order to assess the performance of economies. We also have to see what are the prospects for international financial stability, given the levels of imbalances that are found in some of the developed countries, and this can have very significant long-term effects if these major disequilibria are not redressed. As a multilateral institution in which there are a large number of member countries, what is indispensable to understand is not to have a mechanistic approach of them and us but rather the kind of interrelationship which is necessary for global balance which would take into account the situations of all the members and not just a few.

Questioner: All over the world there has been diversity conflicts. When you have a country with two diverse groups, one is 80 percent, the other one is 20 percent, you are practicing majority system, the 20 percent is like zero because 80 percent is already a majority, and there has been the suggestion now across the world that there should be a reform in the democratic practices because whoever is denied a share in political power is automatically denied a share in social economy...What is the G24 group doing to reform the democratic practices, taking care of diversity-based problems?

Mr. Tangelson: I can reply but not on behalf of the G24 because it is not something that we addressed directly within our group, but I can nonetheless say that the overall multilateral organizations in which many of us participate, each of them have their own remit, but we in the G24 look in particular at the relationship between our countries and the World Bank and the IMF, and I think that one way to contribute what you are talking about is to try to see that in our relations with the Bretton Woods Institutions in particular with the application of more equitable, more transparent, more democratic, more comprehensible practices, this is precisely what we are seeking, and this is what we are claiming vis-à-vis the leadership of these institutions, this is what is in our communiqué. I think it is clear that all the G24 want greater equity when we talk about solidarity, and here this is my personal opinion because we in the G24 did not actually discuss this in these terms, but we do acknowledge the recent work of the World Bank in respect of diversity, but it is impossible to imagine sustainability and growth if inequity and inequality prevails, and there are many forms of inequality. All of them will, in fact, exacerbate inequalities in individual countries, and we have to approach this from the global level as well. This is a way of contributing to a more democratic and equitable vision of what should be relations within countries and amongst countries, members of the international community, so there is a key concern and conviction which is that sustainable development and growth is one which will ultimately not allow inequity to prevail.

Question: Mr. Zoellick unveiled a new strategy of seeking the engagement of the private sector businesses in aid, and it has already raised some eyebrows as far as getting companies involved in public aid, and I would like to hear if the G24 has discussed this and if so, what is your reaction?

Mr. Tangelson: Well, this is not a topic that we addressed, and I must say that when we heard from Mr. Zoellick, he did not say anything about that to us this morning. He did talk about public goods, however, that is to say it is necessary to preserve certain public goods and in particular those deriving from climate change and the threat to them. I think that many of our countries work with both the Bank and the Fund and we are implementing measures which have to do with growing convergence between public and private sectors so that together they can contribute to growth in accordance with the features and characteristics of each country. What the G24 is convinced of is that there is no one-size-fits-all that can be applied to everybody. It is important to take into account the specificity of each country and find measures that are in accordance with their own idiosyncratic approach to growth.

Now, I would venture to say today, however, that we have to speak not only of aid but, rather, about responsibility and cooperation as well. It is going to be very difficult, indeed, to achieve the Millennium Development Goals if we continue to have assistance of 30 billion dollars per annum to try to address poverty whereas at the same time there is this huge amount of agricultural subsidy which is being spent in certain countries which exacerbates poverty in other countries. That is why there has to be a broader approach, and we discussed this. It is important to narrow inequalities and achieve better income distribution, fairer income distribution, but we cannot achieve this unless we link up aid mechanisms with the overall economic functioning of the entire globe. Now, this is something that we have not delved into specifically during this meeting, but it is something that needs to be brought to the fore.

Question: I just want to seek clarification on the voices of the minorities or less developed countries in the World Bank and the IMF system. I want to know whether we should be expecting an expansion in terms of employment opportunities or if this is going to be by expansion or by replacement? How do you manage the process? How do you intend to manage it? How do you intend to manage this transition?

Mr. Tangelson: Well, I think you have to distinguish between two things. Firstly, and here again looking at the concept of majorities and minorities, in the countries that we represent which represent, by the way, the majority in the Bank and the Fund, and yet we are not adequately represented in the governance of the institutions. So it is not just a matter of the rights of the minorities but also the rights of the majority in this particular instance, and I can tell you that the G24 has called specifically for a greater share of staff positions being made available in senior staff levels. A substantive part of our meeting was devoted to enhancing the participation of our countries in policy-making, in institutions enhancing our voice and representation. There was also a request which we supported as a group for the enhanced staff numbers in particular from Africa, so it is not just a matter of policy-making but also in management of the Fund that we want to see increased representation in particular for African nationals. We want to see this to come about in a transition process because the two institutions, at least the two heads told us this, they are engaged in in-depth reflection as to how they can adjust the operations of the organizations to bring them into tune with our times. This is something that we will, of course, be accompanying and monitoring ourselves as time goes on, to see whether they are complying with these intentions, but there was a very large emphasis placed on questions of participation, voice and representation in the policy-making of the institutions, and we have specifically called for an increase in management input from our group as well.

Question: I am coming back to the quota. I am trying to figure out if the G24 has come up with a size of the increase that needs to happen to rebalance the voting power. So should it be more than 12 percent, 5 percent? I think Mr. Strauss-Kahn has suggested somewhere around 5 percent, but I think the U.S. wants much bigger.

Mr. Tangelson: Well, there is no figure, there is no magic figure that we agreed on. We agreed on a process because to come up with a figure is something that might be engraved in stone, and we want it to be a dynamic process. It is clear that we are in a time of flexibility, it is a time of change, and any rigid institution will be out of step with the times, and that is why we in the G24 say that this has to be an ongoing negotiation with an evolving consensus. These are the basic terms to address this whole issue. Now, we are stressing the participation aspect and representation, and this has to be, of course, in tune with purchasing power parity, PPP has to be taken into account with GDP, and we are going to reach agreement with all the different countries involved, so to see how we will act at any given point in time, but it is an ongoing process. I thank you very much.

Ms. Mboto Fouda - Thank you, Mr. Chairman. Thank you all for coming.



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