Selected issues I. IMF resources and reform II. Financial - - PowerPoint PPT Presentation

Selected issues

• I. IMF resources and reform
• II. Financial Transaction Tax
• III. Tax havens

PUZZLE 1: Why did Brazil agree with the 2010 reform (incl. quota doubling, quota realignment, Board reform)?

 Brazil’s quota from 1.78 to 2.32%, but GDP

blend share is 2.65%.

 Calculated quota share would be larger than

2.65% if quota formula took into account more GDP PPP (Brazil: 2.9 %), and population.

 Overall net shift to emerging and developing

economies (EMDCs) = 2.6 % (South Korea and Singapore included).

 Executive Board : “minus 2 advanced EU

seats” (full-time equivalent) – not secured yet that these FTE seats go to EMDCs

 US veto intact – European Managing Director

 Still, Brazil committed about 13.5 billion USD

to New Arrangements to Borrow (NAB) (= Russia, India) This might be considered as a disappointing deal for Brazil. Theoretically, Brazil could have “walked away”, by not agreeing and not contributing to the NAB.

 No agreement within BRIC to take tough stance.

Brazil and India most vocal in criticizing status

• quo. China patient and “peaceful rise.”

 Partnership between US and BRICs on IMF reform

(at the expense of EU).

 Brazil responsible player at zenith of global

financial crisis, attached to IMF. Yet, Brazil contributes only 2.38 % of NAB (same order of magnitude as Belgium, Netherlands, Switzerland).

 Walking away would have been very symbolic,

but only symbolic. EU countries could compensate for non-participation by BRICs.

 Moment of truth has yet to come: revision of

Quota Formula by Jan. 2013 and new quota review by 2014 = integral part of 2010 reform package.

 Managing Director: BRICs divided…

 Brazil is already in Executive Board ! – the

stakes have to be put into perspective.

 Agenda of Brazil in favor of other EMDCs ?

 IMF asks more money, pledges up to $430

billion been made.

 But BRICs make concrete new pledges

conditional upon full implementation of 2010 reform, including quota formula (but nothing concrete on formula agreed yet).

 Timely implementation of 2010 package

jeopardized by legislative process in US.

 Unclear how Board reform will work out –

what should Europeans do ?

• Possibility that small EU countries rotate with each
• ther or with “not advanced” (i.e. transitional)

EU/European countries.

• Rotation Belgium with Turkey ? (unlikely)
• Small EU countries and Switzerland disappear from

Board ?

• Rotation among large EU countries or with small

European countries (unwilling…)

• Exit of Belgium, Netherlands, and the like is not
• nly possible option and not desirable.

 IMF is an official multilateral institution, based on free constituency formation, and should not be run by the G20.

 PUZZLE II: Where is the spirit of 2004, when

Presidents Lula and Chirac together campaigned for the Tobin tax ?

 2002: Disappointment about 2002 UN

Conference “Financing for Development” in Monterrey.

 2004: Creation of Leading Group (Groupe

Pilote) on Innovative Financing for Development (not only Tobin tax), led by

• Pres. Chirac and Pres. Lula. (sort of “coalition
• f the willing”)

 Moment of hope for African countries, civil society worldwide, etc.

 Global financial crisis  new momentum in

EU (in particular geared at letting financial sector pay for the crisis)

 At G20: Financial Transaction Tax for

development and climate finance on the agenda – campaign led by Pres. Sarkozy (incl. Bill Gates report).

 At G20 Cannes summit Nov. 2011: Pres.

Sarkozy announces support from Brazil, Argentina, South Africa and others. Pres. Roussef: “We are not opposed if others agree”.

 More forceful endorsement will be needed  Brazilian policies and debate on domestic

FTT, but outside global/G20 framework.

 Domestic FTT debate is difficult.  Position of financial establishment ?  Little momentum for global FTT in emerging

economies across the board – in EM’s other experience with crisis and role of their financial sectors therein.

 Global financial crisis  downward pressure on

• fficial development aid, but growing demand for

additional finance for climate mitigation and

• adaption. Not many creative plans on the table.

 After years of struggle some momentum in the

Euro area at the highest level, for this highly development-relevant agenda.

 But large EMDCs lukewarm…  Europeans

somewhat isolated.

 Stronger partnership between EU and Brazil

• n combatting tax havens, along with others.

 Evaluation in OECD-led Global Forum.

• “Weak” OECD standard on information exchange

upon request written stone ?

• Global and Brazilian support for EU model of

automatic information exchange ?

• Support by India
• Development-relevant agenda

 Brazil emerging, assertive, but (too)

pragmatic player ?

 EU conservative on IMF reform, but isolated in

certain progressive, development-relevant agendas ?

 Other examples: G20 and commodities; G20

development working group and aid.