IMFWORLD BANKWORLD TRADE ORGANIZATION • Who? What? When? Where? Why?
at the end of this lecture you’ll... • ... have a basic understanding of the IMF, World Bank and WTO • ... be able to identify some Caribbean countries that have engaged the IMF and World Bank • ... recognize the pros and cons of financial assistance from the IMF and World bank • ... identify some ways the WTO affects the Caribbean
IMF & world bank • WHAT? • IMF and World Bank are international organizations that provide financial assistance to countries in need. • The World Bank is comprised of 5 agencies - (1) International Bank for Reconstruction and Development (IBRD), (2) International Development Association (IDA), (3) International Finance Corporation (IFC), (4) the Multilateral Investment Guarantee Agency (MIGA), (5) International Centre for Settlement of Investment Disputes (ICSID)
IMF & world bank • The IBRD provides loans to middle-income and creditworthy low-income countries. • The IDA provides interest-free loans (credits) and grants to the poorest countries. • The IFC provides loans, equity and technical assistance to stimulate private sector investment in developing countries. • The MIGA provides guarantees against losses to investors in developing countries. • The ICSID provides international facilities for conciliation and arbitration of investment disputes.
IMF & world bank • The IMF is a specialized agency of the United Nations but has its own charter, governing structure and finances. • 187 countries are members of the IMF which uses a quota system to assign voting rights to each member. Each member’s assigned quota is based on the relative size of its economy. • The top 5 members of IMF are USA, Japan, Germany, UK, France (as of 2010).
IMF & world bank • When? • Established in 1944 at the Bretton Woods Conference • Where? • Both are headquartered in Washington, D.C but have small overseas offices in some member countries
IMF & world bank • Why? • Initially, both the Fund and Bank were established to provide short-term financial assistance for reconstruction of European countries devastated by World War II.
IMF & world bank • In the 1970s oil prices rose by as much as 400% causing prices of goods to soar • Governments around the world, especially in developing countries found it extremely difficult to pay for goods and services • IMF and World Bank were seen as an option for providing short-term liquidity and (possibly) long-term assistance for development.
imf & wb - pros and cons • PROS • provide short-term financing to assist with specific projects • provide much needed cash that can be used to address a country’s immediate financial needs • provide technical expertise to governments in various areas
imf & wb - pros and cons • CONS • Historically, the structural adjustment features of currency devaluation and open trade markets have weakened rather strengthened economies. • Increased debt burden on developing countries (Caribbean countries among the most indebted countries in the world). • Increased debt increases the likelihood of future increases in taxes
imf, world bank & the caribbean • WORLD BANK & THE CARIBBEAN • Antigua & Barbuda (IBRD) • Belize (IBRD) • Dominica (Blend) • Grenada (Blend) • Guyana (IDA) • Haiti (IDA) • Jamaica (IBRD) • St. Kitts & Nevis (IBRD) • St. Lucia (Blend) • St. Vincent (Blend) • Trinidad & Tobago (IBRD)
imf, world bank & the caribbean • IMF & The Caribbean • Antigua & Barbuda • Dominica • Grenada • Jamaica • St. Kitts & Nevis • St. Lucia • St. Vincent & the Grenadines • (these countries either have Rapid Response Facilities [RRF] or Exogenous Shock Facilities [ESF] arrangements with the IMF).
world trade organization • WHAT? • The WTO is an international organization that focuses on the rules of trade among nations. • Made up of approximately 150 member countries • When? • Established in 1995
world trade organization • Where? • Headquartered in Geneva, Switzerland • Why? • The WTO facilitates trade negotiations, implements and monitors trade agreements, and arbitrates disputes.
wto and the caribbean • The “Banana War” • Removed protective trade agreements between the ACP countries and EU • Forced the small banana producers of the Caribbean to compete on on “equal” terms with large, U.S. based, multinational corporations (e.g. Chiquita)
wto and the caribbean • US Omnibus Appropriations Act ruling • WTO ruled in favour of Cuba against U. S. • Section 211 of the Act hindered foreign investment in Cuba as it related to world-known Cuban products while allowing a U. S. company to illegally sell its product under a Cuban trademark.