Thursday, May 31, 2007
International Herald Tribune: Zoellick has a new agenda for World Bank
Wall Street Journal (posted on truthabouttrade.org): Zoellick's World Bank bid garners support
Servihoo (Mauritania): Zoellick choice as World Bank president "grotesque": activist group
Robert Zoellick, former U.S. Trade Representative under the current President Bush and Washington insider, was nominated by the U.S. President to head the World Bank in the wake of Paul Wolfowitz’s controversy-wracked resignation.
Zoellick’s nomination must now be approved by the 24-member board of the World Bank. However, most reports suggest that he will be approved by the board without much contention. Zoellick’s supporters, including former U.S. Secretary of State James Baker assert that he will bring strong leadership to the Bank and is committed to its mission of alleviating poverty. Nancy Birdsall, president of a Washington-based NGO called the Center for Global Development, stated that Zoellick’s diplomatic skill and experience will serve him well in the post, charging that former Bank president Wolfowitz had lost sight of the institution’s mission and alienated the board. She said that Zoellick is well-equipped to undertake the process of “calming and healing” which she claims is badly needed at the Bank.
Critics of the nomination voiced concerns that Zoellick, as a proponent of free-market economics, is a poor fit for the Bank in a global climate that is beginning to doubt that free markets are a sound approach to poverty alleviation. The European-based Committee for Abolition of the Third World Debt has called Zoellick’s nomination “grotesque.”
Others, notably Chilean President Michelle Bachelet, criticized not only the nominee but the nomination process itself. In particular, she took issue with the fact that the United States has for sixty years exercised it “prerogative” to select the World Bank president, despite the fact that the Bank is a multilateral institution. She suggests that the Bank presidency should rotate among nations, selecting the best people and not limiting candidates to a roster of US citizens.
Historically, the United States has selected the head of the World Bank while Europe has selected the head of the International Monetary Fund (IMF). However, developing nations and up-and-coming economic powers in particular have criticized this practice.
Of his future as Bank president, Zoellick himself has stated that he must first work to “calm the waters” at the Bank. He also stated that the Bank is undergoing “mission adjustment” but did not go into detail on this statement. Zoellick has not set forth a concrete agenda, and commentators have looked to his past—in particular his role as former U.S. Trade Representative—in attempts to forecast what his approach might be.
The fact remains, however, that such prognosticating may do little to reveal the path Zoellick will take if his nomination is approved. As the U.S. Trade Representative, Zoellick was an appointee of the Bush administration for a post in the same. In this situation, Zoellick is again an appointee of President Bush, but this time the position to which he would be elevated is not an administrative post, rather it is to head a multilateral, international institution.
1. Should only one nation or region enjoy the “prerogative” of selecting the leaders of multilateral, international institutions?
2. Do you think Zoellick is a good choice for the post?
3. Do you think that the World Bank should promote only free market economies?
Saturday, May 26, 2007
Influenced by recent Nobel Prize winner Muhammad Yunus’s concept of micro credit, the Paraguayan non-governmental organization CAMSAT (Health for
Currently, approximately 750 families are members of CAMSAT. In exchange for their monthly membership fee equivalent to three U.S. cents, family members are entitled to medical care including low cost pharmaceuticals, tutors for children, a soup kitchen for children, and skills training for adults. In addition, CAMSAT offers micro credit through
Typically, banks and other financial institutions do not offer loans to the very poor, or they require collateral, guarantors, and paperwork the poor cannot supply.
One initiative to come out of the
Tuesday, May 22, 2007
The United States is perhaps the world’s biggest proponent of “free trade”, open markets, and liberalized economies. However, the US government’s enthusiasm for globalization appears to wane when foreign countries begin to invest in domestic (US) companies or markets. This kind of trepidation resurfaced this week as the Chinese government invested a substantial sum--$3 billion--in the Blackstone Group, an aggressive US investment firm that has stakes in a number of leading US corporations.
China’s government operated entity, the State Investment Co., will hold a stake in Blackstone that amounts to just under 10% of the management company’s stocks. If the deal had met or exceeded 10%, it would have required approval by the US government. Notably, Chinese holdings in Blackstone will be tied to the management company as opposed to the funds it controls. Further, the stocks purchased by State Investment Co. are non-voting shares, so concerns about undue influence being exerted on US firms and financial markets is likely unfounded.
Reports note that this is a major move for China, a growing power in the global market. They also suggest that it is part of that country’s shift from operating almost solely as a center for affordable manufacturing (something that US and other interests have taken advantage of for years) to a player in the world of high finance. It appears that it is this transition may be the source of US concern; reports note the fact that China backed out of a bid for the oil giant Unocal in 2005 amid harsh public criticism of the proposed deal in the US.
For discussion: Do you think that US concerns over China’s growing involvement as a leader in global markets are misplaced?
Is China’s prosperity and growing economic prowess a success story, a threat, or both?
What is the goal of economic development if not to empower nations to engage globally in financial markets?
Is US discomfort linked to valid concerns regarding economic security or is it a protectionist, NIMBY (not in my backyard) approach to free markets?
Friday, May 18, 2007
We encourage our readers to use our blog to discuss the essay with the author.
We encourage our readers to use our blog to discuss the essay with the author.
Thursday, May 17, 2007
Tuesday, May 15, 2007
Wednesday, May 09, 2007
Sources: Adios, World Bank!; Ecuador President Suggests Regional Fund to Replace IMF; South American Bank Members to Inject Up to $500 Million; South American Countries Agree Creation of Development Bank
During their meeting last week in Quito, finance and economic ministers from Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay, and Venezuela agreed on an initiative to establish a new multilateral development bank—the Banco del Sur (Bank of the South) — for South America and to restructure the Latin American Reserve Fund (FLAR), transforming it into the “Fund of the South,” a macroeconomic stabilization fund to manage the reserves of South American countries and provide a single monetary unit for the region. The president of Ecuador, Rafael Correa, still irate with the World Bank’s recent cancellation of an already approved US$100 million loan, expressed his public support for a South American multilateral lending fund and the creation of a regional currency; at a meeting with the various finance ministers, he suggested the proposed bank and fund comprise a strategy to obstruct the “financial logic” of the World Bank and International Monetary Fund (IMF). The World Bank cancelled
Indeed, frustration over the last two decades across many South American countries with the World Bank and IMF, as well as other multilateral finance institutions, has gradually led to a backlash against these lenders and has simultaneously increased the momentum of plans for an alternative bank. Last month, the Venezuelan government declared it would pay off all its outstanding debt with the World Bank five years ahead of schedule; furthermore, President Chavez announced that
Will the Bank of the South be able to compete with the Inter-American Bank, whose major shareholder is the
Sources: AIDS Drug Negotiations Break Down Between
Sources: AIDS Drug Negotiations Break Down Between
Although the country has threatened to break drug patents in the past, Friday’s decree was the first time the Brazilian government had ever followed through on such a threat; in previous negotiations with large pharmaceutical companies, threatening to break patents actually won price reductions for the Brazilian government. Such was the case in 2005, when Abbott Laboratories negotiated an agreement for Kaletra, another anti-AIDS drug.
Brazil has justified its action in boosting affordable AIDS medicine on the 2001 World Trade Organization (WTO) Trade Related Intellectual Property Rights (TRIPS) agreement, which authorizes developing countries to privilege public health over intellectual property by issuing compulsory licenses in health emergencies or when pharmaceutical companies engage in abusive pricing. The compulsory license mechanism allows the developing country to legally manufacture or buy generic versions of patented drugs while paying a small royalty to the patent holder. Merck & Co.'s Vice-President Jeffrey Sturchio, in contrast, has characterized
Some news agencies report that President Lula da Silva’s Chief of Staff has yet to decide whether to allow
What kind of bargaining power exists between giant pharmaceutical companies and governments of developing countries? What is the proper balance to be struck between rewarding innovative pharmaceutical companies and promoting public health by offering free access to AIDS medications? Should intellectual property laws be enforced in a more flexible manner in order to protect the health of those living in developing countries?
The title of this entry is a statement made by a member of the New Democratic Party (NDP) in Canada. It illustrates how political tensions are mounting there over two related policies that affect international commerce:
1) The “gobbling up” of Canadian firms by foreign entities—a government agency, Investment Canada, is charged with overseeing and approving or denying bids by foreign interests to take over domestic companies—it has yet to deny a single bid.
2) A proposal by the Conservative (Tory) government that would eliminate the ability of Canadian corporations to deduct interest from loans used to finance foreign investments. The Tories claim the measure would prevent “double-dipping” by domestic companies that locate in “tax havens” and so already avoid paying Canadian taxes. The Liberals and the NDP, however, claim that the policy undermines the competitiveness of domestic companies in the global market.
Tensions regarding these policies have increased in the wake of a hostile takeover bid by the U.S. based Alcoa, Inc. of Canada’s Alcan. Both are major aluminum producers. However, it does not appear that Alcoa will be alone in trying to acquire Alcan, significant interest has come from other foreign corporations as well.
Alcan joins a growing list of Canadian companies that have been purchased by foreign interests, and minority parties are beginning to question whether or not the takeovers are serving the best interests of the Canadian people. In particular, concerns have been voiced over potential job losses. Quebec’s Industry Minister noted that “[t]he government does not intervene in financial markets or the structure of ownership of companies,” but “[w]e do intervene to preserve jobs.”
Do you think the Canadian government can “intervene to preserve jobs” without “intervening in financial markets or the structure of ownership of companies”?
Do you think job preservation is a proper role for the government?
Saturday, May 05, 2007
Frozen Funds to Help Kazakh Youth under New International Agreement
This week, the World Bank announced its plans to assist the governments of Kazakhstan, the United States, and Switzerland in setting up an independent foundation in Kazakhstan to help poor children in Kazakhstan. The foundation is called the Bota Foundation (“young camel” in Kazakh) and will use approximately $84 million of the Bank’s frozen funds.
The concept and program of the Bota Foundation was developed by the World Bank in response to a request from the three governments to develop a way to use the funds for the direct benefit of the people of Kazakhstan, a country of 15 million people with an average per capita income of $3,800. Shigeo Katsu, World Bank Vice President for Europe and Central Asia, says that it “is very gratifying to see that under this agreement the funds will go to support poor Kazakh families and children-at-risk through community-based activities and scholarships….This is a very positive step forward for the Kazakh people and government, and the World Bank is pleased to play a role in ensuring that the funds are invested in youth whose development and aspirations are so critical to Kazakhstan’s future.”
Question: Under the agreement, the funds are to be directed in the most transparent and efficient manner to the most deserving sections of society where the application of these funds would have lasting developmental impact. What mechanisms should World Bank put in place to ensure that the funds are dispersed according to their best, most beneficial use?