Select Committee on International Development Minutes of Evidence




  The overall mood is that Monterrey put development on the agenda, and embarrassed America into making an increase in aid (forging a new "unity of purpose"? See section four). However, there are too many issues it didn't fully engage with (debt, access to developed countries' markets, substantial reform of international financial architecture, and a timetable for 0.7).

  For a more detailed look at the Monterrey Consensus document, which has not been changed during the course of the conference, see "Events and debates up to 18/3/02", on the ODI intranet.

  After this summary of overall attitudes, responses are broken down into the six areas: domestic and international resource mobilisation, trade, ODA, debt, and systemic issues.

I.   Monterrey is not enough

  A.  The process excluded NGOs:

  1.   NGO Caucus: the Caucus did not consider the Consensus to be a basis for combating poverty or advancing economic, social and cultural rights. While appreciating the inclusion of civil society in the round tables, the Caucus considered it an attempt to legitimise the Consensus.

  More:  http:// /ffd/pressconf/22c.htm

  http:// /es/foroglobalresolucion.html

  2.   Paul Horsman, Greenpeace: "It cannot be described as a consensus when the voices of millions of people have not been heard."

  3.   Laura Frade, Mexico Women's Eyes on the Multilaterals: "You have refused to listen to our view of how to build a human rights framework."

  B.  There is not enough commitment from developed countries:

  1.   President Vicente Fox (Mexico): the world's efforts have been "poor, late and disheartening".

  2.   Steve Tibbett, War on Want: the conference is "a huge letdown" because of the lack of detail or financial commitment. "There is new money, but it is nowhere near enough. .  . The long drawn-out negotiations underline that many countries do not have the stomach for making the sacrifices necessary for beginning to end poverty."

  3.   Greenpeace: the Consensus is a sinister bid to pressure governments in the developing world to open their markets to big business. "The only crumbs that have been offered for aid to the poor have been conditional on countries opening their markets to industry."

  C.  There is too much emphasis on trade:

  1.   John Foster, North/South Institute: "The agreement reached here is just the Washington consensus in a sombrero."

  2.   Africa Action: Monterrey misplaced its priorities, focusing on trade to the exclusion of debt relief. "The principal obstacles to reducing poverty in Africa remain the haemorrhaging of some $14 billion in annual debt repayments to rich foreign creditors and the AIDS pandemic."


  D.  It is gender blind:

  1.   Noeleen Heyzer, UNIFEM Executive Director: "You cannot talk about halving poverty without looking at the feminisation of poverty". The Monterrey conference has not honed in closely enough on the gender dimension of under-development.

  2.   June Zeitlin, Women's Environment and Development Organization: Monterrey has no recognition of the specific experiences, needs, challenges, or even successes of women and children.


  Bangkok Post: "This week's talkfest just gave a platform for Bush and others to proclaim their countries' generosity. It is a shame. The considerable money spent last week could have been saved and donated as well, by faxing the Monterrey Consensus around the world for the participants to sign."

  Fidel Castro: "The world economy today is a huge casino," run by the self-appointed "masters of the world," whose "traditional offers of assistance, always scant and often ridiculous, are either inadequate or unfulfilled."

  The European NGO caucus provided a list of seven "minimum demands" that Monterrey should have contained, including increased aid and reform of IFIs.

II.   But Monterrey did move the debate forward

  James D Wolfensohn: The Consensus is "a taste of what is possible". "There is now a unity of purpose between the leaders of the developed countries and the developing countries".

  Kofi Anan: "The `Monterrey Consensus' is not a weak document, as some have claimed. It will be weak if we fail to implement it. But if we live up to the promises it contains, and continue working on it together, it can mark a real turning point in the lives of poor people all over the world."

  Horst Köhler: "This Conference is a further milestone to understand official development aid as an investment." The fact that the UN, IMF, World Bank and WTO worked together in preparation was unprecedented and shows the significance of the conference.

  "There has been an extraordinary turnaround, not just financially, but politically."


  Jose Maria Aznar, Prime Minister of Spain: "Only a few weeks ago this summit was heading for failure . . . We therefore have reasons to be satisfied."

  Economist editorial: "America is now committed to supporting more foreign aid for poor countries with good policies. That alone made the UN gabfest worthwhile."



  There was a lot of emphasis on the importance of FDI, but very few concrete proposals or detailed discussions, either for international or domestic resource mobilisation.

  Maria Floro, UNIFEM:

  1.  Domestic resources: The Monterrey meeting should have considered institutional and legal barriers to women's advancement like, banking systems that did not lend to women and customary laws, which prevented female ownership of land.

  2.  International Resources: Monterrey failed to consider the structural or systemic foundations of poverty, like the impact of the opening of national borders to free trade, debt and the often-detrimental economic changes made to attract foreign direct investment. An example of such a change are the export processing zones set up as tax-free havens in developing countries, where labour is cheap, trade unions often banned and labour standards very low.


  A.  Subsidies, especially agricultural, came under attack.

  1.   Woflensohn: "[Agricultural] subsidies rob poor countries of markets for their products," he said. "Spending on subsidies is six times what the rich countries provide in foreign aid to the developing world."

  2.   Kofi Anan: Different actors must work "together not against each other. . . It does no good helping dairy farmers in a country if, at the same time, you are exporting subsidised milk powder to it."

  3.   Germany: Wieczorek-Zeul, Minister of Economic Development and Cooperation called for a rapid reduction of agricultural subsidies. Germany is in favour for realising the aims set up in the free trade agenda (Schleswig-Holsteinischer ZV)

  4.   Canada said that "major concessions" on trade barriers for the poorest countries would be announced in time for the G8 summit in June, with an end to "tariffs and quotas on some agricultural products" at the centre of the package. (Globe and Mail)

  B.  Meanwhile, Bush is having problems selling free trade in South America.

  Brink Lindsey, Director of the Cato Institute's Center for Trade Policy Studies: Bush's advocacy of free trade is seen as hypocritical. The current tour of Mexico, Peru and El Salvador to sing the praises of the Free Trade of the Americas process, "is likely to fall flat on its face", because:

  1.  Tariffs and quotas on steel will hurt South America.

  2.  The US anti-dumping law has hit exports of many products from South America.

  3.  Massive subsidies to US farmers further distort markets to the detriment of Latin American producers.

  4.  "Subservience to the textile lobby rounds out the picture of US trade hypocrisy".

  Many governments in the region would be all too happy to see FTAA talks drag on forever; that way they can maintain existing trade barriers as "bargaining chips" in negotiations that never end.

(Wall Street Journal, p A15)

  Sophia Murphy, Trade Program Director, Institute for Agriculture and Trade Policy: "There is nothing consensual about the statement on trade in the document before this conference. Whatever the politics that led us to the few confused paragraphs that treat trade in the document, they do not represent either the breadth of our knowledge of trade and its role in development, or the range of innovative proposals that were made in the preparations for the conference. In its narrow focus and incoherent collection of thoughts, the document does a disservice to a fundamentally important role that trade, whether local, national or international, plays in development."

3.  ODA

I.   Aid levels

  A.  A new consensus?

  1.   Wolfensohn: the consensus that aid programs must be increased is so strong, the issue is no longer one of vision but of implementation. "Two weeks ago no one was even thinking about an increase". Today, the United States and Europe are "prepared to write checks. . . That's not a Hollywood step, that's a real step." (Los Angeles Times/New York Times)

  2.   Annan: competition between the United States and the European Union over their respective levels of aid to poor nations is a sign of growing global agreement that more aid is needed, as he has long argued. "I think we're winning the argument that we do need additional development assistance".

  3.   Eveline Herfkens, Dutch Minister for Development Cooperation: The week has seen the emergence of a "coalition of the willing". Never before has the plight of the poor been so high on the international political agenda.

  4.  But in fact an earlier version of the document did include a call for rich countries to commit an extra $50 billion in FDA a year, double the present level, but it failed to win the backing of the US and was dropped. The absence of an overall funding figure in the Consensus reflects the Bush administration's conviction that private enterprise, private foreign investment and free trade are more effective than foreign aid. (AFP)

  B.  American aid increase

  1.   Timing: O'Neill confirmed "it is quite reasonable to think we may be able to begin floating some money under these new ideas in fiscal year 2003", rather than 2004 as first announced. Fiscal 2003 begins October 1 this year.

  2.   Bush's speech to Conference, meanwhile, re-emphasised that "we must tie greater aid to political, legal and economic reforms".

  3.  US officials confirmed that the US list of deserving nations will be much shorter than the list of needy ones.

  4.   Clare Short: "It is a pity that the US has not noticed that poverty reduction strategy papers are already driving forward good governance."

  5.   Mark Malloch Brown: "There is still a strong preference for bilateral action and a concern about the absence of a US brand on World Bank assistance."

  6.   Jeffrey Sachs: "The US is waking up from a 20-year sleep in the development field. We can forgive them not immediately knowing everything that has been happening during their slumbers."

  7.   Globalization Challenge Initiative: The plan "having been clearly designed to boost private foreign investment", there is concern that the money will go back to US corporations.

  C.  Other countries' aid increases

  1.   Canada: Mr. Chrétien promised a yearly increase of at least 8 per cent to Canada's official development assistance budget, which was $2.4 billion this year. (Globe and Mail, p A8)

  2.   Norway: Prime Minister Kjell Magne launched an action plan to:

    (i)  Increase ODA from 0.92 per cent to 1 per cent of GDP by 2005.

    (ii)  Advance policy coherence in all relevant government policies.

    (iii)  Forgive all debts to countries under the HIPC Initiative.

  3.   France reconfirmed commitment to 0.7:

    (i)  Northern countries must all increase their aid levels to 0.7 per cent of GNP, starting with those whose effort is the weakest.

    (ii)  The Conference was only the first realisation of the scale of the problem.

    (iii)  France proposed working together over the coming decade to conclude five projects, including the creation of an economic and social security council. (Libération, p 7)

  4.   EU: The Global NGO Forum denounced the increase of aid to 0.39 per cent of GNP as a "face-saving reaction" and last-minute recognition that "the lack of concrete commitments for achieving global poverty eradication and development goals undermines the relevance of the so-called Monterrey Consensus".


II.   Aid effectiveness

  At the start of the conference, US Treasury Secretary was dismissing ODA as "welfare". This position has softened to one of "selectivity". The basic idea that aid can work seems to have been accepted.

III.   Aid and terrorism

  A.  Many people appealed to the "war against terror" to justify more aid:

  1.   President Alejandro Toledo (Peru): "To speak of development is to speak also of a strong and determined fight against terrorism", "Global security is closely tied to the health of the world economy".

  2.   Mike Moore, WTO Director-General: Poverty is a "time bomb lodged against the heart of liberty".

  3.   Hang Seung Soo, president of the UN General Assembly: The poorest nations are "the breeding ground for violence and despair. . . In the wake of September 11, we will forcefully demand that development, peace and security are inseparable" (Speech to Conference).

  B.  But there are dangers to doing this:

  1.   Wolfensohn: "There is always a risk that terrorism could end up politicizing aid."

  2.   O'Neill acknowledged that strategic interests will continue to dictate how a great deal of aid is doled out. (New York Times, 24/3/02 sec 4, p 5)


  There were a lot of calls to make IFIs more representative of developing countries.

  Horst Köhler, Managing Director of the IMF:

  The IMF itself is in the process of reform, learning from experience and driven by its desire to make globalization work for the benefit of all.

  It is aiming to:

  1.  Make the IMF more transparent, and advocate transparency for our member countries.

  2.  Concentrate more on crisis prevention.

  3.  Try to define more clearly the roles of the IMF and private creditors in financial crises. It is essential to be able to resolve unsustainable debt situations in a more orderly, faster, and less costly manner.

  4.  Help our members to strengthen their domestic financial sectors, and to combat money laundering and the financing of terrorism.

  5.  Become more focused on the IMF's core responsibility for macroeconomic stability—not as an end in itself, but as a precondition for sustained growth, and because the poor suffer most from high inflation, unsound public finance, and volatility.

  6.  Take steps to focus IMF conditionality and make room for true national ownership of reform programs.

  7.  Poverty Reduction Strategy Papers are the right approach, but need to be tailored to individual countries.

  More: (Köhler's speech to Conference)

  Hugo Chàvez Frías, President of Venezuela and Chairman of the "Group of 77"

  The United Nations Development Programme (UNDP) had defined the areas of development as life expectancy and health, quality of education, and the real income level of the family. The IMF is not the necessary tool for that struggle; it was not created for that. The creation of new tools must be discussed on an urgent basis, such as the creation of an international humanitarian fund (Speech to Conference).

  NGO Caucus: Governments talked about reforming the World Bank and IMF and WTO but this was not reflected in the Consensus.

  Grants or loans debate continues

  France: loans

  French Minister for Cooperation Charles Josselin said that grants look attractive at first, but raise some concerns.

  1.  Putting an end to the loan policy would, in a ten-year term, dry up the World Bank's resources.

  2.  Everyone must do their own job. The UN agencies give money, the Bretton Woods institutions lend it, on conditions that can be concessional.

  3.  A loan holds a pedagogical value: it obliges the recipient state to care about its reimbursement. Thus, maybe to engage structural reforms.

  4.  The US proposal would mean that some countries have no chance to make it and to get into an "economic normality".

  5.  France believes a fraction of the aid should be given as grants, in specific sectors where there is no return on investment, such as the social area. But the proportion of the grant part should not exceed 5 per cent to 10 per cent of the loan's one. (Les Echos, p 7)

  O'Neill: "No compromise"

  US Treasury Secretary Paul O'Neill scoffed at a Clare Short's idea for a compromise on the issue.

  1.  O'Neill believes that up to 50 per cent of aid should be in the form of grants.

  2.  He ridiculed the thought that any country would prefer a loan. "I think it's a terrific idea," he joked. "I frankly don't think that any country's going to take a loan when they could have a grant". (Reuters)

  The arguments in favour and against the grant proposals are reviewed in more detail by the Bretton Woods Project:


  A.  Global Council for Economic Matters

  1.   Germany: German Development Minister Heidemarie Wieczorek-Zeul actively called for a "global council" in a speech to the conference. She gave support to the early claim of the developing countries to become better represented in the global financial institutions, such as the World Bank and the IMF. (Frankfurter Allgemeine Zeitung, p.5)

  2.   France: The creation of an economic and social security council should be pondered more deeply, as should an international tax (Chirac's speech to Conference).

  B.  Global public goods

  Jeffrey Sachs: "Fifty countries submitted proposals and there was some beautiful work in there. People were motivated because the money was finally out there. But the needs in the proposals were five to 10 times more than the money in the bank. I also heard that countries were arm-twisted to cut down the size of their proposals. That's not the world we want to create".

  D.  Environment fund

  1.   France: Chirac supported coordinated environmental protection. He says it is only by coordinated efforts that natural resources such as the forests, the air and water, "humanity's common heritage", can be safeguarded (Libération, p 7)

  2.   Germany: Negotiations were held on a new financial support for the environmental fund, said State Secretary of the Federal Ministry of Finance, Koch-Weser. An additional $2.7 billion have been discussed, but this idea is met by the opposition of the USA. (Frankfurter Allgemeine Zeitung, p 5)

6.  DEBT

New US Deal?

  O'Neill said a deal to provide crisis-torn countries with a new bankruptcy-style protection from creditors may be struck.

  1.  He was expecting that "some time in the last half of this year we could see a growing agreement, maybe even a full agreement on how to actually do this."

  2.  He was encouraged by discussions held the previous evening among a group of about 100 finance ministers and other policymakers in Monterrey.

  3.  IMF first deputy managing director Ann Krueger proposed last December setting up a new structure, similar to the bankruptcy process now available to people and firms, to protect troubled countries from creditors while they restructure. (AFP)

Chirac: more cancellation

  Debt cancellation should be considered with more generosity, and there could be more ambitious treatment for the severely indebted middle-income countries (Speech to Conference).

Overseas Development Institute

April 2002

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