-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]
Sent: January 24, 2002 5:35 AM
To: Jonathan Wolsey
Cc: [EMAIL PROTECTED]
Subject: Re: [ffdngocaucus] Invitation to online discussion forum on FfD
<color><param>0100,0100,0100</param><FontFamily><param>Times New
Roman</param><bigger>Dear Mr Wolsey,
Thank you very much for your mail and Ann's attached lines.
here follows my answer. Please distribute it to the list should my
cc to it not work.
Dear friends,
I should like to express my full agreement with Ann Pettifor.
Anne Krueger's speech followed statements in favour of
sovereign insolvency by ministers of finance of important G7-
countries, and a paper by two gentlemen of the Bank of England
and the Bank of Canada drawing parallels to domestic
insolvency that have certainly influenced her. Not proposing any
specific procedures Krueger differs from some G7 finance
ministers explicitly calling for an international Chapter 11. She
does not rule out Chapter 9, the only procedure protecting
governmental powers, and thus applicable to sovereigns. The
debtor's population has a right to be heard in Chapter 9
proceedings, which would have to be exercised by
representation in sovereign cases. Chapter 9 guarantees an
appropriate form of debtor protection - a human right presently
granted to anyone but the globe's poorest. US municipalities are
allowed to maintain basic social services essential to the health,
safety and welfare of their inhabitants (details on my proposal
are available at my homepage
<FontFamily><param>Courier New</param><smaller>{ HYPERLINK
<FontFamily><param>Times New
Roman</param><bigger>http://mai�lbox.univie.ac.at<FontFamily><param>Courier
New</param><smaller> }<underline><color><param>0000,0000,FF00</param>http://
mailbox.univie.ac.at/~rafferk5</underline><color><param>0100,0100,0100</para
m><FontFamily><param>Times New Roman</param><bigger> in English,
French, and Spanish)
As only a process emulating Chapter 9 would both protect the
debtor's sovereignty and guarantee an open, transparent and
participatory way of solving overindebtedness it is important that
civil society lobby for this specific variant, particularly so as
preference for emulating US Chapter 11, corporate insolvency,
has been expressed, also by the IMF. Since corporations have
no inhabitants this variant does not include any right to be heard
of the population. Naturally, it does not foresee protection of the
debtor's governmental powers either - corporations have none.
It would allow secret negotiations behind closed doors.
One has to concur fully with Anne Krueger: �For debtor
countries, the new approach would clearly reduce the costs of
restructuring and would encourage countries to go down that
road earlier than they do now. This is not a bad thing. At the
moment too many countries with insurmountable debt problems
wait too long, imposing unnecessary costs on themselves, and on
the international community that has to help pick up the pieces.�
One might recall, though, that countries were not allowed by
creditors to chose that road. Especially the IMF's opposition
was one important reason why debtors did not dare demand it.
The unnecessary costs Krueger rightly mentions are caused by
creditors dominating international �debt management� absolutely
� they are creditor caused damages. To limit unnecessary
sufferings the solution has thus to be implemented at once, i.e.
also in the case of Argentina. As Ann has pointed out this could
be done at once. The examples of Germany's debt reduction in
1953, Indonesia's after 1969, or Poland's after the demise of
communism prove this.
As a matter of fairness to other creditors and the debtor present
multilateral debts must be treated like any other loans.
Multilateral institutions have (co)determined debtor policies. The
market mechanism demands that they be financially accountable
for their actions. The "World Bank's" Articles of Agreement
foresee debt reductions, which the IBRD denies to its clients. In
poor countries with large shares of multilateral claims reducing
these is necessary for sustainability. One must fully concur with
Krueger as she formulated in her first speech that no creditors
should be treated more favourably than others. All countries <italic>de
facto</italic> insolvent and all kinds of debts must be included in this
procedure. Please note that this is not help but justice and
economic reason. � this must be available to all. Like in the
cases of all other debtors the insolvency of A does not preclude
insolvency relief for B or C or �..
Like the advocates of a Chapter 9 based FTAP Krueger clearly
stated that the IMF - itself a creditor - should not adjudicate
disputes. This is helpful and correct. The very essence of the
Rule of Law demands that no one must be judge in their own
cause. Independent arbitrators nominated by creditors and
debtor must decide, also on reductions needed to reach
sustainability. This must not be left to the IMF, as it is one of the
most important decisions of the whole proceedings. No judge in
any decent legal system would be allowed to judge on her own
claims, nor would a correct judge demand to do so - unlike the
Paris Club and the Bretton Woods Institutions. Insolvent
sovereigns could "file" for arbitration by depositing their demand
at the UN, thus triggering a standstill. Clearly, only governments
have a right to file. Independent arbitration panels once
established must endorse standstills, not any creditor such as the
IMF.
Arbitration based on Chapter 9 must also be available for
HIPCs. The poor, too, have a right to the benefits of the Rule of
Law, a right that creditors must not be allowed to judge in their
own cases. The fact that both HIPC-Initiatives were
unsuccessful underlines this need for a change, which would
acknowledge that even the poor do have human rights. As the
IMF seems prepared to push its model through quickly, civil
society must react quickly as well.
Although much lobbying for a Fair and Transparent Arbitration
Process on debts modelled after the US Chapter 9 - the Jubilee
Framework, as Ann Pettifor calls it - remains to be done,
the new acceptance of finally granting insolvency protection to
the last group of debtors to whom it has been denied against the
Rule of Law and the demand of human rights gives hope. One
may hope that infant mortality might eventually depend a bit less
on whether they are born in heavily indebted Northern
municipalities or heavily indebted Southern countries. This is a
goal worth campaigning for.
<nofill>
Kunibert Raffer
==================================================
NOW AVAILABLE:
Kunibert Raffer and H.W. Singer
The Economic North-South Divide:
Six Decades of Unequal Development,
at E.Elgar, Cheltenham (UK)/Nothampton, MA(US)
For more detailed information - Please
click "Selected Publications" on my homepage
http://mailbox.univie.ac.at/~rafferk5
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