By Matthew Russell Lee
UNITED NATIONS, February 10 -- The International Monetary Fund has just released its Article IV review of Bolivia, in which it criticizes the country's new Financial Services Law, specifically that
"the law’s general thrust is to subordinate financial sector activities to social objectives with instruments that could create risks to financial stability. Main features of the law include: (i) provisions to regulate lending rates and set minimum lending quotas for the productive sector and social housing; (ii) discretion to set floors on deposit rates; and (iii) mechanisms to enhance consumer protection and financial access in rural areas."
Inner City Press asked the IMF's Mission Chief for Bolivia Ana Corbacho to explain this criticism, and more generally to reconcile Bolivia's and President Evo Morales' public critique of the IMF with this visit.
In response to a question from Inner City Press at UN headquarters last month, Morales recounted how the IMF dominated Bolivia in the past, but now decision making had passed from the "Chicago to the Bolivia boys."
The IMF staff report says they met with "Minister of Economy and Public Finances Arce, Central Bank President Zabalaga, Minister of Planning Caro, other senior public officials, and representatives of the private sector. Mr. Tamez and Ms. Kroytor (LEG) provided inputs on the new Financial Services Law at headquarters."
The IMF staff report also says that "the instruments chosen (interest rate caps and minimum credit quotas) could reduce the profitability and lending funds of financial institutions, over-leverage target beneficiaries, and complicate the conduct of monetary policy."
Ms. Corbacho, on an embargoed press conference call largely in Spanish on which only three media asked questions, replied that Bolivia for example capping interest rates might impact financial institution's profitability and thus "financial stability."
She said the government responded that financial inclusion has not progressed fast enough and so they are taking these steps. She the Article IV discussion, which are held with each IMF member, were "very open and frank" with Bolivia, and thus positive.
To Inner City Press, the IMF's willingness to question consumer protection in Bolivia stands in contrast to the IMF's deference to the US on the how to manage and communicate the Federal Reserve's tapering, the debt ceiling -- anything, essentially.
This IMF position was propounded at last Thursday's IMF media briefing, at which questions on Africa -- the Sudans, Areva in Niger -- submitted over the Online Briefing Center by Inner City Press were not taken by IMF Spokesperson Gerry Rice, nor answered afterward by IMF staff. This is how the IMF is operating; we will have more on this. Watch this site.
