Relief for the Few
LATIN AMERICA
G8’s
debt relief criteria draw harsh criticism.
The
Group of Eight countries announced a historic deal June 11 to cancel
the debt owed by 18 of some of the world’s poorest nations, among them
Bolivia, Guyana, Honduras and Nicaragua.
The
agreement, which was announced by British Chancellor Gordon Brown ahead
of the G8 Summit, which will take place in Scotland July 6-8, means
that the G8 – the governments of the world’s wealthiest countries, plus
Russia – have agreed to relieve the 18 of the 42 HIPC (highly indebted
poor countries) of US$40 billion debt.
The
deal will free the countries of a total of $1.5 billion in annual debt
repayments. According to Mario Arana, the Nicaraguan Finance Minister,
the money "can be assigned to a use of greater priority for a country
with enormous social demands and necessities." President Bharrat
Jagdeo of Guyana said the deal will allow his country to continue "investing
in education, housing, and health care; creating better infrastructure,
reducing poverty, and generating more employment".
Church
and campaign groups have pressured governments for such a debt relief
package that has been under debate for more than 10 years, but made
very little headway until now.
Economic
evaluations insufficient
Nevertheless,
the deal has generated much criticism. Countries are given HIPC status
based on narrow economic indicators such as gross domestic product (GDP)
per capita. However, evaluating economies on a macroeconomic level fails
to account for Latin America’s extreme economic inequality, meaning
that high levels of poverty are averaged out by wealth that is concentrated
in very few hands.
Peru,
for example, is classified as a middle-income country, and therefore,
does not qualify for debt relief. This is in spite of the fact that
over half the country’s population lives in poverty (less than $2 per
day), 25 percent lives in extreme poverty (less than $1 per day). In
addition, Peru’s total foreign debt accounts for 46 percent of its GDP
and debt service absorbs 20 percent of the national budget.
Within
the list of the 24 remaining HIPC countries waiting to receive debt
relief, there are no other Latin American nations. The G8 announcement
reaffirms the body’s belief in this evaluation system, even though as
Rocío Valdeavellano from the Jubilee Network Peru, said, "there
are other countries that also deserve debt relief."
The
Jubilee Network is an international debt relief campaign, with members
in more than 70 nations.
Haiti’s
exclusion from the list was highly criticized and, according to Jubilee
South — comprised of members in over 40 African, Asian and Latin American
countries — despite suffering a great humanitarian crisis, Haiti "not
only continues to be excluded from these proposals, but in addition,
the international financial institutions continue charging regardless."
Criteria
questioned
Many
have called into question the HIPC model on which the deal is based.
In order to qualify, countries must follow a series of measures to combat
corruption and "the elimination of impediments to private investment".
Throughout Latin America, the privatization model has often led to greater
suffering, especially within poorer sectors.
According
to the Honduran Social Forum for External Debt and Development, the
imposition of economic measures in order to meet the conditions for
debt cancellation has been "achieved at the expense of an increase
in poverty". Civic society groups are calling for the right of
developing countries to decide their own economic agenda, rather than
having one imposed through conditionality. The call is echoed by the
British government which made a series of announcements last March declaring
that "developing countries [should not be] forced to liberalize
through external pressure".
Another
hurdle facing Latin American countries is that while the deal proposes
to cancel all debts owed to the World Bank (WB), the International Monetary
Fund (IMF) and the African Development Bank, those owed to the Inter-American
Development Bank (IDB) or the Andean Development Corporation (CAF) will
not be cancelled.
According
to President Jagdeo, Guyana will be relieved of $336.6 million in debt,
but will still owe the IDB $446 million. In a similar case, the sum
Bolivia owes the WB and IMF accounts for only 41 percent of its total
debt, according to Bolpress.
The
debt announcement has also been criticized for the risk that it may
reduce pressure on G8 countries to meet the commitment they made to
raise official development assistance (ODA) to 0.7 percent of their
GDP by 2015 (a target only currently met by a handful of small European
nations and a underachievement by the United States, which in 2004 only
gave 0.16 percent).
In
addition there are already signs that ODA budgets will be used to meet
debt cancellation commitments, meaning a further depletion in budgets
already stretched thin by the tsunami disaster and involvement in Iraq.
Latin America is already experiencing a recent pattern of ODA withdrawal,
again due to rationale based around GDP and average income.
In
November 2003 the British Department for International Development decided
to close programs in "middle income" countries such as Peru,
and last April, the Canadian International Development Agency announced
that it will focus its ODA on just 25 countries (within Latin America
just the same four countries are due to benefit from debt cancellation).