January 26, 2003

Financial Crisis Spurs Hope for Cooperation, Debt Relief

By Lucimara Nunes

PORTO ALEGRE, Brazil — Delegates to the third World Social Forum say that corporate corruption scandals, fiscal speculation and massive foreign debt are causing serious damage to developing nations’ economies.

A roundtable discussion at the forum, chaired by José Dirceu, chief minister of Brazil’s new Workers Party government, floated a number of possible actions, including total debt relief, defaulting on debt, reform of international lending agencies, and creating new political and financial unity among South American and African nations to counter American and European interests.

Alicia Castro, a member of the Argentine parliament, said that the interest on loans from the International Monetary Fund are draining her country’s financial reserves, and that South American nations should default on all such loans for at least three years.

Dirceu disagreed on the prospects of defaulting.

“If [we suspend] payment of our debts with IMF, for example, we would have to suspend the payment of internal debts too. And we would become a new Argentina,” he said.

All participants agreed that mutual cooperation between developing-world nations in South America and Africa is necessary to compete with the United States and a united Europe.

“I don’t see a way out for Brazil without unity between South American countries, and into Latin America,” Dirceu said, and noted that “the current economic system abandoned Africa. Besides the total debt forgiveness, Africa needs investment and support in order to start development. ”

Dirceu favored unity in a global context, and stated that one country or even a continent can not survive by itself.

“I do agree that current financial institutions, like the World Trade Organization, are totally obsolete and causing damage to us. We need to find our place in the world, fight for our place and not limit our perspective,” he said.

In contrast, Yashpal Tandon, a Ugandan economics professor, proposed that Africa abandon globalization completely, stating that “the U.S. and European Union put pressure on us, blocking any kind of development in our continent. So, we need to detach from this model and find a way to recover lost time.”

Mark Weisbrot of the U.S.-based Center For Economic and Policy Research, said that the current international system of finance organizations should be replaced with “a new option for every country in the world.”

Eveline Herfkens of the United Nations Development Program agreed that international finance institutions must be reformed.

“[Institutions like the IMF and WTO] don’t work well for poor countries. Public financial institutions always pay for the mistakes of private ones. It’s urgent to improve regulation of this,” she said.

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