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Tag: Financial crisis

  • To Put a Stop to Siphoning off Money, Start with Data

    To Put a Stop to Siphoning off Money, Start with Data

    Illicit financial flows. Credit: IPS
    • Opinion by Khalid Saifullah (new york)
    • Inter Press Service

    NEW YORK, Oct 04 (IPS) – Khalid Saifullah, Fellow, Save Bangladesh USA Inc.The commonly used Bangla phrase for siphoning off money out of the country – “taka pachar” – is rather misleading. Because taka, the Bangladeshi currency, is never taken out of Bangladesh. It’s not useful anywhere else. What goes out is its equivalence in foreign currencies, especially, US dollars. The technical term for such criminal act is Illicit Financial Flows (IFFs). Mistakenly, sometimes IFFs are referred to as money laundering – a processing of criminal proceeds to disguise their illegal origin.

    Money laundering and illicit transfers of funds

    Although there are some links between money laundering and IFFs, they are not the same activity. The United Nations Office on Drugs and Crime defines money laundering as “the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions”.

    On the other hand, Illicit financial flows (IFFs) refer to illegal movements or transfers of money or capital from one country to another. However, sources of such funds may not be illegal (e.g., corruption, smuggling).

    In practice, IFFs can also involve ill-gotten money – the worst case as in Bangladesh. The billions of dollars that were taken out of the country were mostly obtained through corruption and stealing of public funds.

    How do illegal fund transfers happen?

    Nearly US$3.15 billion flows out illicitly from Bangladesh annually. If a common person wants to travel abroad with a few hundred of thousand dollars, they can simply slip it in their pocket and catch a flight which is perfectly legal if that amount is within the legal limit of a country. For example, one can legally take out a maximum of AUD10,000 out of Australia (or bring in) without having to make declaration. For Bangladesh, it is only USD5,000.

    But cronies of the Hasina’s kleptocratic regime robbed and transferred millions and billions of dollars. According to a recent report, close to US$150 billion was siphoned off the country during 15 years of kleptocratic Hasina regime’s mis-rule. So, they must have carried out these very illegal activities through legal channels. How did it work though?

    Well, it’s very difficult to know for sure, but it is believed that most IFFs happen through trade mis-invoicing or trade-based money laundering. Let’s try to understand the design with an example.

    Let’s say, you want to launder one million dollars. Either you or your accomplice have an export-import business. Let’s say you need to import 10,000 units of a product each costing $50. But instead of $50, you declare that their unit value was $150. By “securing” assistance from some key people within the authorities, you get Bangladesh Bank to transmit one and half million dollars as the payment for your grossly over-declared imports to a foreign company you set up for this purpose. You pay the exporter half a million dollars for your legitimate imports, and in the process, you have succeeded in laundering the one million dollars you wanted to get out of Bangladesh. The same can be done for exports but in reverse. This is of course a simplistic example and there can be many creative variations of this menace.

    There are reasons to believe that this happened a lot in the case of Bangladesh. Why? Well, to begin with, Bangladesh does have a vibrant export-import sector which can make trade-based money laundering accessible and difficult to trace. Secondly, many of Hasina’s cronies themselves were involved in international trading. Thirdly – and I don’t think many people know this – Bangladesh stopped sharing detailed international trade data with the UN after 2015. There can of course be other explanations for this, but the timing nevertheless raises questions. UN Comtrade, world’s largest source of international trade data, has data on most countries in the world but not Bangladesh, world’s eighth largest population and thirty-fifth largest economy.

    We need detailed trade data

    International trade data has the special characteristic that it’s a two-sided account. Bangladesh’s export of cotton T-shirts to US is also US’ import of cotton T-shirts from Bangladesh. In practice, there are some other factors at play but overall, this is how it is. Users can easily compare international trade data and any glaring disparities become immediately apparent.

    One could argue that this still could be done since Bangladesh Bureau of Statistics (BBS), Exports Promotion Bureau (EPB) and Bangladesh Bank (BB) all publish external trade data. It would seem so but that’s not really the case. Without going into much details, the data published by these agencies lack the necessary details to be comparable. Their data is at an aggregated level and not disseminated in a comparable manner. EPB doesn’t even publish imports data (it’s probably not in their mandate).

    Then, there’s the issue of accuracy. Weeks before Sheikh Hasina’s ouster, BB revised exports data stating that EPB’s figure was 10 billion USD higher than actual exports. The Chief Adviser Muhammad Yunus in his most recent address to the public promised to publish accurate trade data. It is a very necessary and welcome step. However, it is not sufficient. We need the necessary details in the data to allow for comparison with our trading partner countries’ data. In particular, we need:

    • Data by calendar year (Jan-Dec) and not only fiscal year.
    • Data by monthly frequency.
    • Breakdown by commodity codes up to at least HS (Harmonized System) 6-digits level. There are around 6,000 HS 6-digits codes available from the World Customs Organization (WCO). These codes can specify a commodity with sufficient details.
    • Commodity descriptions.
    • Breakdown by trading partner (ISO codes for country of origin for imports, country of last known destination for exports).
    • Breakdown by country of consignment (ISO codes for any third country the commodities may have passed through).
    • Mode of transport (sea, air, road, rail, etc.).
    • Breakdown by customs procedure codes (for what purpose the commodity was imported or exported).
    • Breakdown by trade flow (exports, imports, re-exports, etc.)
    • Value (free-on-board basis for exports; cost, insurance, and freight basis for imports), net weight and quantity.

    Towards modernization and automation of financial intelligence

    Accurate, timely and detailed trade data is important for analyses of possible trade mis-invoicing but it’s not sufficient in preventing money laundering altogether. What we need is an overhaul and automation of financial intelligence itself.

    The backbone of such an automated system should be a Business Register (BR). A BR is exactly what it sounds like – it’s a register of all businesses in a country. A key component of the BR is the unique identifier. Each business or enterprise is assigned a unique ID. Once set up, businesses must be required to use this ID in all types of activities, from setting up bank accounts to trading.

    The BR can contain many other information on the businesses including size, sector, economic activities and so on. Thanks to the unique identifier, BR can be used to link data from different domains, e.g., linking trade data with businesses and their banking activities.

    Given the treasure trove of linked data available from customs declarations, banks and other sources – much of which cannot be published for public use due to confidentiality- the information can nevertheless be used to build very intelligent and sophisticated systems thanks to statistical modelling, machine learning and artificial intelligence which can flag any suspicious activities in real time. I mean, something has to be “off” in a transaction involving money laundering and the technology is out there to detect it.

    The existence of such a system itself could lessen the problem of money laundering to a great extent because it will serve as a strong deterrent. Building this level of data capacity will of course take investment. But looking at the estimated 150 billion dollars laundered by Sheikh Hasina’s kleptocratic regime, it seems the return on investment is very enticing.

    Khalid Saifullah is a trained statistician with 14 years of experience working in international organizations.

    IPS UN Bureau


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  • The Global South in the New Cold War

    The Global South in the New Cold War

    • Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)
    • Inter Press Service

    KUALA LUMPUR, Malaysia, Sep 11 (IPS) – Marginalised and dominated economically by the Global North, developing countries must urgently cooperate to better strive for their shared interests in achieving world peace and sustainable development.

    Jomo Kwame SundaramCold War rivalry
    During the first Cold War between the US, NATO, and other allies, on the one hand, and the Soviet Union and its allies, the former prided itself on sustaining economic growth, especially during the post-war Golden Age.

    Since the 2008 global financial crisis (GFC), successive governments – led by Obama, Trump and Biden – have all strived to sustain full employment in the US. However, real wages and working conditions for most have suffered.

    Exceptionally among monetary authorities, the US Fed’s mandate includes ensuring full employment. However, without the US-Soviet rivalry of the first Cold War, Washington no longer seeks a buoyant, growing world economy.

    This has affected US relations with its NATO and other allies, most of which have been hit by worldwide economic stagnation since the GFC. Instead of ensuring worldwide recovery, ‘unconventional monetary policies’ addressing the ensuing Great Recession have enabled further financialisation.

    Interest rate hikes slow growth
    Since early 2022, the US has raised interest rates unnecessarily. Stanley Fischer, later IMF Deputy Managing Director and US Federal Reserve Bank Vice Chair, and colleague Rudiger Dornbusch found low double-digit inflation acceptable, even desirable for growth.

    Before the fetishisation of the 2% inflation target, other mainstream economists reached similar conclusions in the late 20th century. Since then, the US Fed and most other Western central banks have been fixated on inflation targeting, which has no theoretical or empirical justification.

    Fiscal austerity policies have complemented such monetary priorities, compounding contractionary macroeconomic policy pressures. Many governments are being ‘persuaded’ that fiscal policy is too important to be left to finance ministers.

    Instead, independent fiscal boards are setting acceptable public debt and deficit levels. Hence, macroeconomic policies are inducing stagnation everywhere.

    While Europe has primarily embraced such policies, Japan has not subscribed to them. Nevertheless, this new Western policy dogma invokes economic theory and policy experience when, in fact, neither supports it.

    The US Fed’s raising interest rates since early 2022 has triggered capital flight from developing economies, leaving the poorest countries worse off. Earlier financial inflows into low-income countries have since left in great haste.

    New Cold War contractionary
    The new Cold War has worsened the macroeconomic situation, further depressing the world economy. Meanwhile, geopolitical considerations increasingly trump developmental and other priorities.

    The growing imposition of illegal sanctions has reduced investment and technology flows to the Global South. Meanwhile, the weaponisation of economic policy is fast spreading and becoming normalised.

    After the Iraq invasion fiasco, the US, NATO and others often do not seek UN Security Council to endorse sanctions. Hence, their sanctions contravene the UN Charter and international law. Nonetheless, such illegal sanctions have been imposed with impunity.

    With most of Europe now in NATO, the OECD, G7 and other US-led Western institutions have increasingly undermined UN-led multilateralism, which they had set up and still dominate but no longer control.

    Inconvenient international law provisions are ignored or only invoked when useful. The first Cold War ended with a unipolar moment, but this did not stop new challenges to US power, typically in response to its assertions of authority.

    Such unilateral sanctions have compounded other supply-side disruptions, such as the pandemic, and exacerbated recent contractionary and inflationary pressures.

    In response, Western powers raised interest rates in concert, worsening the ongoing economic stagnation by reducing demand without effectively addressing supply-side inflation.

    The internationally agreed sustainable development and climate targets have thus become more unattainable. Poverty, inequality and precariousness have worsened, especially for the most needy and vulnerable.

    Limited options for South
    Due to its diversity, the Global South faces various constraints. The problems faced by the poorest low-income countries are quite different from those in East Asia, where foreign exchange constraints are less of a problem.

    IMF First Deputy Managing Director Gita Gopinath has argued that developing countries should not be aligned in the new Cold War.

    This suggests that even those walking the corridors of power in Washington recognise the new Cold War is exacerbating the protracted stagnation since the 2008 global financial crisis.

    Josep Borrell – the second most important European Commission official, in charge of international affairs – sees Europe as a garden facing invasion by the surrounding jungle. To protect itself, he wants Europe to attack the jungle first.

    Meanwhile, many – including some foreign ministers of leading non-aligned nations – argue that non-alignment is irrelevant after the end of the first Cold War.

    Non-alignment of the old type – a la Bandung in 1955 and Belgrade in 1961 – may be less relevant, but a new non-alignment is needed for our times. Today’s non-alignment should include firm commitments to sustainable development and peace.

    BRICS’s origins are quite different, excluding less economically significant developing countries. Although not representative of the Global South, it has quickly become important.

    Meanwhile, the Non-Aligned Movement (NAM) remains marginalised. The Global South urgently needs to get its act together despite the limited options available to it.

    IPS UN Bureau


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    © Inter Press Service (2024) — All Rights ReservedOriginal source: Inter Press Service

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  • African Development Bank chief criticizes opaque loans tied to Africa’s natural resources

    African Development Bank chief criticizes opaque loans tied to Africa’s natural resources

    LAGOS, Nigeria — The head of the African Development Bank is calling for an end to loans given in exchange for the continent’s rich supplies of oil or critical minerals used in smartphones and electric car batteries, deals that have helped China gain control over mineral mining in places like Congo and have left some African countries in financial crisis.

    “They are just bad, first and foremost, because you can’t price the assets properly,” Akinwumi Adesina said in an interview with The Associated Press in Lagos, Nigeria, last week. “If you have minerals or oil under the ground, how do you come up with a price for a long-term contract? It’s a challenge.”

    Linking future revenue from natural resource exports to loan paydowns is often touted as a way for recipients to get financing for infrastructure projects and for lenders to reduce the risk of not getting their money back.

    The shift to renewable energy and electric vehicles has caused a spike in the demand for critical minerals, driving these kind of loans. That includes a China-Congo deal that strengthens Beijing’s position in the global supply chain for EVs and other products as it taps into the world’s largest reserves of cobalt, a mineral used to make lithium-ion batteries, in the impoverished central African country.

    Adesina, whose Abidjan, Ivory Coast-based institution helps finance development in African countries, said these arrangements come with a litany of problems.

    He highlighted the uneven nature of the negotiations, with lenders typically holding the upper hand and dictating terms to cash-strapped African nations. This power imbalance, coupled with a lack of transparency and the potential for corruption, creates fertile ground for exploitation, Adesina said.

    “These are the reasons I say Africa should put an end to natural resource-backed loans,” Adesina said. He pointed to a bank initiative that helps “countries renegotiate those loans that are asymmetric, not transparent and wrongly priced.”

    Adesina said loans secured with natural resources pose a challenge for development banks like his and the International Monetary Fund, which promote sustainable debt management. Countries may struggle to get or repay loans from these institutions because they have to use the income from their natural resources — typically crucial to their economies — to pay off resource-tied debts, he said.

    Adesina specifically mentioned Chad’s crippling financial crisis after an oil-backed loan from commodity trader Glencore left the central African nation using most of its oil proceeds to pay off its debt.

    A Glencore spokesperson did not immediately respond to a request for comment.

    After Chad, Angola and the Republic of Congo approached the IMF for support, the multilateral lender insisted on the renegotiation of their natural resource-backed loans.

    At least 11 African countries have taken dozens of loans worth billions of dollars secured with their natural resources since the 2000s, and China is by far the top source of funding through policy banks and state-linked companies.

    Western commodity traders and banks, such as Glencore, Trafigura and Standard Chartered, also have funded oil-for-cash deals, notably with the Republic of Congo, Chad and Angola.

    Standard Chartered didn’t immediately respond to an email seeking comment, while Trafigura pointed to its 2020 report called “Prepayments Demystified,” which says that “trading firms are enabling production that would otherwise not be possible — thus underpinning economic growth, job creation and the generation of fiscal revenues in the countries concerned.”

    Adesina said there was no “fixation” on one country as being behind these types of loans when asked about criticisms over China’s lending backed by oil; critical minerals such as cobalt and copper used in electric vehicles and other products; and bauxite, the main mineral in aluminum manufacturing, which has been used in China’s recent resource-backed loan contracts with Guinea and Ghana.

    “It is not about one country or the other; any country can exploit when you don’t know what you are doing,” he said, adding, “The capacity to negotiate at the country level, the capacity to plan, the capacity for debt management is very important.”

    Mao Ning, spokesperson for China’s Ministry of Foreign Affairs, told reporters last year that Beijing operates with the “principle of transparency and openness” in relations with Africa.

    Congo has been looking to review the infrastructure-for-minerals agreement it signed with China in 2008 over concerns it gets too few benefits from the arrangement. That grants Chinese firms Sinohydro and China Railway Group a 68% stake in a joint venture for copper and cobalt with Congo’s state mining company, Gecamines.

    Last year, Congo’s state auditor demanded China’s infrastructure investment commitment be increased to $20 billion from the original $3 billion to match the value of the resources sold by the state under the deal. China rejected the auditor’s report.

    Adesina, a former Nigerian minister for agriculture, said the African Development Bank’s new Alliance for Green Infrastructure in Africa aims to mobilize $10 billion to help countries finance “bankable” sustainable infrastructure, including in the energy and transport sectors, which could limit the allure of problematic financing.

    ___

    The Associated Press’ climate and environmental coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.

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  • Rental markets are softening, but half of U.S. tenants spend more than they can afford, Harvard report finds

    Rental markets are softening, but half of U.S. tenants spend more than they can afford, Harvard report finds


    Sneksy | E+ | Getty Images

    Rent prices are coming down in some areas, but not at the pace needed to relieve tenants struggling to pay rent.

    Half of renters in the U.S. spent more than 30% of their income in 2022 on rent and utilities, according to the new America’s Rental Housing report by the Joint Center for Housing Studies of Harvard University.

    The report considers those who spend 30% or more of their income on housing “rent burdened” or “cost burdened,” which means those high costs may make it difficult for them to meet other essential expenses.

    The share of cost-burdened renters increased by 3.2 percentage points from 2019 to 2022.

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    “Places in the market that need the most relief are at the very low end, and it’s hard to reach those people through market rate supply alone,” said Whitney Airgood-Obrycki, lead author and senior research associate focused on affordable housing at the Joint Center for Housing Studies of Harvard University.

    While cost burden has increased across income levels, the consequences are much higher for low-income households, said Airgood-Obrycki.

    ‘We have a very unaffordable country right now’

    The average residual income, or the amount of money available after paying for rent and utilities to cover other needs, has significantly dropped for lower earners, the study found.

    “It’s a really important part of the conversation because … it makes it more humanizing how big this problem is,” Airgood-Obrycki said.

    Renter households with annual incomes below $30,000 had a record-low median residual income of $310 a month in 2022, the Harvard study found. For perspective, a single-person household in even the most affordable counties need about $2,000 a month for non-housing needs, according to the Economic Policy Institute.

    “The underlying problem is we have a very unaffordable country right now,” she said. “If you go through any sort of life crisis, you’re on the brink of homelessness.”

    Most young adults have either stayed at home with their parents or are moving back in because of the cost of living.

    Share of young adults living at home goes back to 1940s

    Historically, what kept young adults living at home was the lack of a job; today, it’s the lack of affordable housing, according to Susan M. Wachter, a professor of real estate and finance at The Wharton School of the University of Pennsylvania.

    The percentage of Gen Z adults living at home “takes us all the way back to 1940, the end of The Great Depression,” said Wachter.

    The share of young adults between the ages of 18 and 29 who live at home with parents is almost at 50%, according to a study Wachter co-authored.

    That is a result of young adults competing with potential homebuyers, who themselves are being priced out of the single-family housing market.

    “They’re competing in a way that they haven’t before,” she said. “The home mortgage market is indirectly causing a huge spillover demand into the rental market, making the rental market not affordable.”



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  • World Bank Enables Private Capture of Profits, Public Resources

    World Bank Enables Private Capture of Profits, Public Resources

    • Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)
    • Inter Press Service

    KUALA LUMPUR, Malaysia, Dec 20 (IPS) – The World Bank insists commercial finance is necessary for achieving economic recovery and the Sustainable Development Goals (SDGs), but does little to ensure profit-hungry commercial finance serves the public interest.

    By failing to address pressing challenges within their purview, the second-ever Bretton Woods institutions’ (BWIs) annual meetings on the African continent, in Marrakech in October 2023, set the developing world even further back.

    Jomo Kwame SundaramThe International Monetary and Financial Committee, which oversees the International Monetary Fund (IMF), could not agree, by consensus, on the usual end-of-meeting ministerial communique for ‘geopolitical’ reasons. The Development Committee, which governs the World Bank Group, fared little better.

    New World Bank playbook
    Little was achieved on crucial outstanding issues of governance reform and sovereign debt. Implicitly acknowledging past failure, World Bank Governors endorsed a “new vision to create a world free of poverty on a livable planet”.

    After all, even the World Bank now acknowledges recent increases in global poverty have been the worst since the Second World War as economic stagnation, debt distress and inflation spread across the developing world.

    The Bank’s new Evolution Roadmap proposes a just energy transition plan to mobilise private capital to scale up, secure and deploy climate finance. This is mainly for mitigation, rather than adaptation, let alone losses and damages.

    The blueprint wants international financial institutions to help developing country governments de-risk private investments. For Muchhala, this reflects “the failure of the Bank’s wealthy shareholders to help ensure a more equitable multilateral system that is truly fit for purpose to meet the challenges of the 21st century”.

    Blending finance for private profits
    The strategy proposes ‘de-risking’ foreign investment with various types of ‘blended finance’ – such as co-financing, loan guarantees, political risk insurance or public equity co-investments – as well as complementary legal and other reforms.

    The Bank and its allies have been promoting ‘blended finance’ for development, the environment and global warming since before the 2008 global financial crisis. Their main recommendation has been to induce profit-seeking private capital to fill growing financing gaps.

    Undoubtedly, most poor developing countries have limited public resources to make needed social and environmental, including climate investments. In such arrangements, public funds are used to ‘de-risk’ or otherwise subsidise commercial finance, ostensibly to serve public policy priorities.

    However, private commercial involvement in public services and infrastructure is costly and risky for the public sector and citizens, by deploying limited public resources for private gain. Civil society and other critics have already expressed grave concerns about the new Roadmap.

    The World Bank Group also set up a Private Sector Investment Lab to scale up private finance in developing economies. It claims to be creating a “business enabling environment that unleashes private financing”.

    Billions to trillions
    The World Bank’s ‘billions to trillions’ slogan has been the pretext for privileging commercial finance as supposedly necessary to achieve the SDGs. But it has done little to ensure that such profit-seeking private investments will help achieve the SDGs or otherwise serve the public purpose.

    The Bank does not consider that profit-seeking private investments expecting attractive returns may not serve the public interest and priorities. Nor do they necessarily support desirable transformations. Worse, their economic, social and environmental consequences may be for the worse.

    The privatisation of previously public social services and infrastructure has worsened development and distribution. Unequal access to public services – increasingly linked to affordability and ability to pay – threatens hundreds of millions.

    Such blended finance arrangements have also contributed to the debt explosion in the Global South – exacerbating, rather than alleviating developmental, environmental and humanitarian crises.

    Debt distress spreading
    Developing countries are in their worst-ever debt crises, with debt service obligations higher than ever before. Current debt-to-GDP ratios are more than twice those of LICs before the 1996 HIPCs’ debt relief came into effect, and even higher than for Latin American nations before the 1989 Brady plan.

    Unlike the 1980s’ sovereign debt crises, market finance is now more important. Much more government debt from commercial sources involves relying on bond markets, rather than commercial bank borrowings.

    With official credit much less important, commercial finance has become much more important compared to the 1980s. Unlike official creditors, most private creditors typically refuse to participate in debt restructuring negotiations, making resolution impossible.

    Debt servicing costs equal the combined expenditure for education, health, social protection and climate. In Africa, debt servicing has risen by half. Debt service levels of the 139 World Bank borrowers are higher than during the heavily indebted poor countries’ (HIPCs) and Latin American debt crises peaks.

    Debt service is absorbing 38% of budget revenue and 30% of spending on average by developing country governments. In Africa, the levels are much higher, at 54% of revenue and 40% of spending!

    The BWIs’ joint debt sustainability framework insists debt-distressed economies must have lower debt-to-GDP ratios than other countries, limiting this LICs’ external ratio to 30% or 40%. This BWI policy effectively penalises the poorer and more vulnerable nations.

    In 38 countries with over a billion people, loan conditionalities during 2020-22 resulted in regressive tax reforms and public spending cuts. Less expenditure has hit fuel or electricity subsidies and public wage bills, deepening economic stagnation.

    Despite severe debt distress in many developing countries, no meaningful debt relief has been available for most. The most recent debt restructuring deals have left debt service levels averaging at least 48% of revenue over the next three to five years.

    Debt distress limits government spending capacity, desperately needed to address social and environmental crises. Hence, overcoming stagnation and achieving the SDGs will require much more debt cancellation, relief and borrowing cost cuts.

    IPS UN Bureau


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  • Rich Nations, IMF Deepen World Stagnation

    Rich Nations, IMF Deepen World Stagnation

    • Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)
    • Inter Press Service

    KUALA LUMPUR, Malaysia, Dec 13 (IPS) – With the US Fed raising interest rates, the world economy is slowing as debt distress spreads across the global South, increasing poverty worldwide to pre-pandemic levels, with the poorest countries faring worst.

    Extreme poverty continues to be high and is now worse than before the pandemic in low-income countries (LICs) and among those affected by fragility, violence and conflict. The promise of eradicating poverty worldwide by 2030 has become unachievable.

    Jomo Kwame SundaramThe Bretton Woods institutions’ (BWIs) annual meetings in Marrakech in October were only the second-ever in Africa. But the rich nations-dominated BWIs failed yet again to rise to the challenges of our times, setting Africa and the global South even further back.

    Instead of fostering cooperation to address the causes and effects of the contemporary catastrophe, neither the International Monetary Fund nor the World Bank governors could agree on joint communiques due to the greater politicisation of multilateral fora.

    Indebtedness immobilises governments
    Indebtedness and restrictive creditor rules prevent governments from spending more counter-cyclically to overcome the many contractionary tendencies of recent times, besides preventing them from addressing looming social and environmental crises.

    The G20’s largest twenty economies have urged strengthening “multilateral coordination by official bilateral and private creditors … to address the deteriorating debt situation and facilitate coordinated debt treatment for debt-distressed countries”.

    But its Common Framework to restructure debt has been roundly criticised by civil society, think tanks and even the World Bank on many grounds, including the paltry concessional credit relief offered to a few of the very poorest countries.

    In contrast, the G24 caucus of developing countries at the BWIs has emphasised the need for “durable debt resolution measures while collaborating on resolving the structural issues leading to such vulnerabilities.”

    But all those advocating purported solutions are not even trying to ensure fiscal space and public spending capacity for counter-cyclical efforts, let alone achieve the Sustainable Development Goals and national development objectives.

    Surcharges
    The IMF currently imposes additional charges on countries that do not quickly clear their debts to the Fund. Besides the usual fees and interest, borrowing countries paid over $4 billion in such surcharges in 2020-22, during the COVID-19 pandemic.

    Surcharges will cost debt-distressed countries about $7.9 billion over six years. The G24 has emphasised that surcharges are pro-cyclical and regressive, especially with monetary tightening.

    Governments have undertaken contractionary policies and cut imports for lack of foreign exchange. This deepens the problems of heavily indebted poor countries who cannot but count on the Fund for relief and solutions.

    At Marrakech, the governing International Monetary and Financial Committee decided to “consider a review of surcharge policies”. The G24 called for “a suspension of surcharges while the review – which we hope will lead to substantial permanent reduction or complete elimination – is being conducted.”

    Rich nations have been divided over surcharges. With Ukraine now among the top surcharge payers, following civil society criticisms, the Biden administration’s refusal to review surcharges in 2022 was heavily criticised by the US Congress.

    Deepening austerity
    IMF fiscal austerity measures of the 1980s returned with a vengeance after the 2008 global financial crisis, and then again during the Covid-19 pandemic from 2020. Most Fund loans require cutting the public sector wage bill (PSWB), the budget line to pay employees.

    Most wage earners in many LICs, including nurses, teachers and other social service workers, work for the state, directly or indirectly. Although much needed, these employees have been more likely to be targeted by such budget cuts.

    PSWB cuts may involve hiring or wage freezes, or limiting, or even cutting wages. These inevitably undermine government capacities and services. Fiscal consolidation has also involved raising more indirect, consumption taxes, and tax exemptions, e.g., for essential goods such as food.

    In 38 countries with over a billion people, loan conditionalities during 2020-22, the three years of the Covid-19 pandemic, meant regressive tax reforms and public spending cuts. PSWB and fuel or electricity subsidy cuts are also common demands worsening economic contractions.

    Austerity bound to fail
    But the IMF’s own research suggests such austerity policies are generally ineffective in reducing debt, their ostensible purpose. The April 2023 IMF World Economic Outlook acknowledged austerity programmes and fiscal consolidations “do not reduce debt ratios, on average”. Yet, its Fiscal Monitor still demands “fiscal tightening” of most developing countries.

    The new IMF-World Bank debt sustainability framework sets the LICs’ external debt-to-GDP ratio limit at 30% or 40%. It insists debt-distressed economies must have lower ratios than ‘strong’ countries, effectively further penalising the weak and vulnerable.

    Instead of enabling consistently counter-cyclical macroeconomic frameworks, the IMF’s current short-termist approach is mainly preoccupied with annual, or worse, quarterly balances, mimicking corporate reporting practices.

    Such short-termism further limits fiscal space, effectively preventing or deterring public sector investments requiring longer-term macroeconomic frameworks to realise benefits. This discourages ‘patient’ medium- to long-term investments required for national economic planning and transformation, essential for sustainable development.

    Restrictive debt and fiscal targets have meant even less public investment. This is typically required of borrowing countries as a credit conditionality. Annual IMF Article IV consultations cause other countries to also accept similar constraints to avoid Fund disapproval.

    While a few better-off economies enjoy full employment, most countries face further economic contraction, not least due to interest rate hikes led by the US Fed and their many effects. Instead of being part of the problem, the IMF should be part of the solution.

    IPS UN Bureau


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  • Big bank executives will assure lawmakers the industry's crisis is over, KBW CEO Thomas Michaud predicts

    Big bank executives will assure lawmakers the industry's crisis is over, KBW CEO Thomas Michaud predicts

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  • Suicides, Another Face of the Crisis in Venezuela

    Suicides, Another Face of the Crisis in Venezuela

    Suicide rates doubled in Venezuela during the harshest years of its humanitarian crisis. Males between the ages of 30 and 50, a productive age when it is very hard to be left without employment and income, are a group particularly vulnerable to self-inflicted violence. CREDIT: Ihpi
    • by Humberto Marquez (caracas)
    • Inter Press Service

    CARACAS, Nov 28 (IPS) – In the wee hours of one morning in early November, Ernesto, 50, swallowed several glasses of a cocktail of drugs and alcohol in the apartment where he lived alone in the Venezuelan capital, ending a life tormented by declining health and lack of resources to cope as he would have liked.

    In the last message to his relatives, which they showed to IPS, he wrote that “I can’t stand what’s happening to my eyes, I can’t afford an ophthalmologist, my molars are falling out, it hurts to eat, I can’t afford a dentist after years of being able to pay my expenses, now my dreams, plans, goals are disappearing…”

    Years ago Ernesto, a fictitious name at the request of his family, was a successful salesman in various fields, a breadwinner for family members, a supporter of causes he found just. In his last note, he scribbled rather than wrote: “I did what I could, for my family and my country, but I will not continue being dead in life.”

    The cascade of crises that have placed Venezuela in a complex humanitarian emergency have given rise to many complicated cases like Ernesto’s, reflected in an increase in suicides, especially in the sectors most vulnerable to lack of resources and to uncertainty and hopelessness.

    The suicide rate “doubled between 2018 and 2022 compared to 2015, and it is very likely that the complex humanitarian emergency has been a determining factor in the increase,” demographer Gustavo Páez, of the non-governmental Venezuelan Observatory of Violence (OVV), told IPS.

    This country of just over 28 million people went from a rate of 3.8 suicides per 100,000 people to 9.3 in 2018, with slight declines to 8.2 in 2019 and 7.7 in 2022, according to the OVV.

    The annual average number of cases registered in the last four years is 2,260.

    Rossana García Mujica, a clinical psychologist and professor at the public Central University of Venezuela, told IPS that these rates, although lower than the world average of 10.5 per 100,000 inhabitants and low in relation to other countries in the region, may nevertheless conceal underreporting.

    The expert pointed out that “added to our complex humanitarian crisis, the last official yearbook (on the issue) came out in 2014,” and said that the decrease in the rate “could be due to the apparent economic improvement, but 2023 has been a difficult year and most probably these figures will not remain steady.”

    A man carries a few items in his market bag in Caracas. The situation of poverty, of being unemployed and without the possibility of bringing home enough food and other products is recognized as a determining cause of crises leading to suicide. CREDIT: Provea
    A man carries a few items in his market bag in Caracas. The situation of poverty, of being unemployed and without the possibility of bringing home enough food and other products is recognized as a determining cause of crises leading to suicide. CREDIT: Provea

    Humanitarian emergency

    The HumVenezuela platform, made up of dozens of civil society organizations, says the crisis in the country classifies as a complex humanitarian emergency due to the combined erosion of the economic, institutional and social structures that guarantee the life, security, liberties and well-being of the population.

    Starting in 2013 Venezuela suffered eight consecutive years of deep recession that cost four-fifths of its GDP, more than two years of hyperinflation, and collapsed local currency and wages, health and basic services in much of the country.

    The multidimensional crisis also triggered the migration of more than seven million Venezuelans, according to United Nations figures.

    In 2021 and 2022 there was a slight recovery in the economy, especially in consumption, partly due to the influx of remittances from hundreds of thousands of migrants, which came to a standstill this year.

    The suicide rate “fluctuates at the pace of the complex humanitarian emergency,” said Paez, because “as the macro economy deteriorates, so does the family’s ability to access food, services, recreation and medicine. This leads to mental disorders associated with suicidal behavior.”

    R. was an impoverished young woman who recorded a video that she posted on the social networks. She lived in the interior of the country, coming every month to Caracas to seek chemotherapy treatment in medicine banks provided by the government. She said that the last time, like other times, “they sent me from one end of the city to the other.”

    “They were providing chemo until three in the afternoon. I arrived 15 minutes late. They refused to give it to me. I went to sleep at a relative’s house. I climbed about 200 steps (the steep hills in Caracas are crowded with poor neighborhoods). I’m so tired, my legs hurt, I give up, I don’t want to fight anymore,” she said in a quiet voice.

    Paez said that another reason that may influence frustration and depression leading to self-harming behaviors is the grief in families due to migration, associated with the humanitarian emergency and impacting millions of families.

    Clinical psychologists observe an increase in anxiety and depression disorders associated with suicidal behavior in adults. Among young people, self-injury and eating disorders are frequent. CREDIT: The Conversation Clinical psychologists observe an increase in anxiety and depression disorders associated with suicidal behavior in adults. Among young people, self-injury and eating disorders are frequent. CREDIT: The Conversation

    Ages and networks

    In Venezuela “the economic issue, for those over 30 and especially for men between 40 and 50, is a determining factor,” psychologist Yorelis Acosta, who works with groups and individuals vulnerable to depression and fear, told IPS.

    Acosta, who also teaches at UCV, said that “self-harm or the decision to take one’s life is closely related to ‘I don’t have a job’, ‘I’m out of work’, or ‘I have a disease and I can’t afford my treatment’.”

    “During economic crises, suicides go up,” she said.

    García Mujica said that “when we stop to look at which are our most vulnerable groups, men between 30 and 64 years old and young people between 15 and 24 lead the way.”

    “In my practice I have observed a subjective increase in anxiety disorders and depression in adults, both closely associated with suicide and self-injury in young people, along with eating disorders,” said García Mujica.

    Along with suicide, “self-harm is a way of coping with emotional pain, sadness, anger and stress that could have to do with intolerance of frustration and the immediacy associated with social networks,” said the expert.

    “In my opinion, apart from our complex humanitarian crisis, we do not escape the problems also inherent to globalization and we have a very severe problem at the family level of face-to-face communication,” she added.

    In this regard, she said that “it seems that family life takes place more on the phone than live, leaving the field open for adolescents to be nourished more by social networks than by real interactions.”

    Between 2019 and 2022, of the cases of suicides reported in the media, 81 percent involved men and 19 percent women, according to the OVV; between 50 and 57 percent were adults between 30 and 64 years of age.

    Teen suicide, meanwhile, has increased: there were 20 cases in 2020, 34 in 2021 and 49 in 2022. And 17 of the victims were under the age of 12.

    View of an elevated viaduct (bridge) linking two parts of the Andean state of Merida. Authorities protect its sides with metal nets, to prevent it from being used by people to commit suicide, a phenomenon in which this mountainous region stands out since the beginning of the century. CREDIT: Government of Merida
    View of an elevated viaduct (bridge) linking two parts of the Andean state of Merida. Authorities protect its sides with metal nets, to prevent it from being used by people to commit suicide, a phenomenon in which this mountainous region stands out since the beginning of the century. CREDIT: Government of Merida

    Suicide in the mountains

    One particularity is that Mérida, one of Venezuela’s 23 states, located in the Andes highlands in the southwest of the country, which has abundant agriculture and is home to some 900,000 people, has had the highest suicide rates for 20 years, reaching a peak of 22 per 100,000 in 2018.

    “One of the reasons may be the character of the Merideños, especially in rural areas. They are introverted, quiet Andean people, who have a hard time letting things out, they bottle up a lot of negative feelings and thoughts or family conflicts,” said Paez.

    Paez, coordinator of the OVV in Merida, also mentioned as a probable cause the widespread consumption of alcohol, and “in this state specialized in agriculture, the easy access to agrochemicals, often used to commit suicide.”

    In the country 86 percent of the suicides registered last year by the OVV were carried out by hanging, poisoning or shooting.

    Mérida continues to have the highest rate, 8.3 per 100,000 inhabitants, followed by the Capital District (west of Caracas) with 7.6, and Táchira, another Andean state, with 6.9.

    According to the World Health Organization (WHO), there are at least 700,000 suicide deaths per year worldwide, with the most affected territories being the Danish island of Greenland (53.3 per 100,000 inhabitants), Lesotho in southern Africa (42.2) and Guyana on the northern tip of South America (32.6)

    In the Americas, the countries with the highest rates, after Guyana, are Suriname (24.1), Uruguay (21.2), Cuba (14.5), the United States (14.1), Canada (10.7), Haiti (9.6), Chile (9.0) and Argentina (8.4); and the lowest rates are in the small Caribbean island states of Antigua and Barbuda, Barbados and Grenada (0.4 to 0.7 per 100,000 inhabitants).

    Another aspect of the multidimensional crisis in Venezuela is the severe lack of face-to-face and family communication. According to some specialists, it seems that family life takes place more on the phone than live, leaving the field open for teenagers to feed more on social networks than on real interactions. CREDIT: The Conversation Another aspect of the multidimensional crisis in Venezuela is the severe lack of face-to-face and family communication. According to some specialists, it seems that family life takes place more on the phone than live, leaving the field open for teenagers to feed more on social networks than on real interactions. CREDIT: The Conversation

    Waiting for the government to take action

    The experts consulted agree that in order to curb the rise in suicides, it is necessary to strengthen public health systems – “they are in crisis, if you call to make an appointment, you have to wait several months,” said Acosta – develop prevention programs and identify vulnerable groups or individuals with greater precision.

    Paez added the need for the government to produce and maintain “updated and relevant statistics, disaggregated nationally and regionally by age, sex and other data that identify vulnerable groups and areas,” and more education “so that the issue is no longer stigmatized and taboo.”

    García Mujica pointed out that “we need to direct our resources towards rescuing family values and preventing domestic violence in order to protect one of the most vulnerable groups, which are young people.”

    “It is vital to take into account any comments regarding taking one’s own life and refer them to a specialist. In addition, we need to train more people in psychological first aid, so that the public is aware of the early signs of suicidal behavior,” added García Mujica.

    These early signs may be followed by what become farewell messages received too late, a piece of paper or a video, traces of a humanitarian crisis.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Argentines Get Used to the Fact that Inflation Can Always Get Worse

    Argentines Get Used to the Fact that Inflation Can Always Get Worse

    José Lonardi stands in his tiny candy and beverage shop in downtown Buenos Aires. Customers, he says, have lost all reference points for the price of products in Argentina and so nothing surprises them anymore. CREDIT: Daniel Gutman / IPS
    • by Daniel Gutman (buenos aires)
    • Inter Press Service

    BUENOS AIRES, Nov 16 (IPS) – People in Argentina have become accustomed to the fact that nothing costs the same today as it did the week before and they take price hikes in stride with resignation, says Mariano Cohen. “Almost nobody gets angry or complains anymore. They just don’t buy something if they can’t afford it,” he explains in his disposable goods store in Villa Crespo, one of Buenos Aires’ most commercial neighborhoods.

    Mariano sells plastic cups, plates and bowls, cardboard packaging rolls and aluminum containers. He serves bars, restaurants and the public. He has a large sales room, about 80 square meters, and a mezzanine of the same size, which he uses as a warehouse and is a great asset for a merchant who sells non-perishable products.

    The business owner tells IPS that he buys and stocks as much merchandise as he can, to anticipate price hikes.

    “If I don’t have more, it’s because there’s no more coming in or because they don’t want to sell me large quantities. The other day a supplier suspended a very important delivery from one minute to the next and gave me back the money I had already paid him,” he comments, with the same gesture of resignation that, he says, his customers make when faced with the prices in his store.

    The economy of this South American country, with a long history of imbalances and inflation, has entered a spiral of permanent price increases that has already squelched the capacity for amazement of its 46 million inhabitants.

    In Argentina, the absurd has been normal for some time: here you can buy a pair of shoes in six installments without interest, with financing subsidized by the government or even by private banks, but to buy a house you must pay in cash, because mortgages are almost non-existent. Today, price rises are so common that people are surprised the few times that a price is the same from one week to the next.

    In 2021, there was concern when inflation climbed to 50 percent per year, partly attributed to the impact of the COVID-19 pandemic, which forced an increase in currency issuance to meet social assistance needs. However, people soon became nostalgic for this figure: in 2022 the index climbed to 95 percent, the highest since 1991.

    Even so, the economy of this nation – where more than 40 percent of the population is poor and practically no private sector employment has been created for the last 12 years – seems to be determined to prove that it can always get worse.

    This year inflation climbed again, to an accumulative 103 percent in the first nine months alone, reaching 138 percent in the interannual index (from September 2022 to September 2023), according to official data. Projections indicate that 2023 will end with an increase in consumer prices of around 150 percent.

    An employee uses a machine to count banknotes in a store in Patagonia in southern Argentina. The constant increase in prices has meant that many products must be paid for with dozens of bills of the devalued Argentine peso and has forced stores to buy counting machines to save time. CREDIT: Daniel Gutman / IPS
    An employee uses a machine to count banknotes in a store in Patagonia in southern Argentina. The constant increase in prices has meant that many products must be paid for with dozens of bills of the devalued Argentine peso and has forced stores to buy counting machines to save time. CREDIT: Daniel Gutman / IPS

    Emerging and drowning again

    “I feel that the day I get paid my salary is the best day of the month, but also the worst,” Ariel Machado tells IPS, laughing bitterly.

    “I’m happy when I get paid, but when I set aside the money for fixed expenses and calculate how much I’ll have left, I feel like I’m drowning again,” says Ariel, who has a son and is separated from his wife, and who is employed by a well-known public relations agency in Buenos Aires and also sells selected wines over the Internet to supplement his income.

    A typical member of the strong middle class of Buenos Aires, used to going on vacation to the beaches of Brazil and dining in restaurants a couple of times a week, Ariel says that those things are now just memories and that today he sometimes feels like he’s spinning “on a wheel of unhappiness, because of the amount of things I want to do and can’t.”

    He tries to forget about it, but doesn’t succeed. “Worrying about money consumes a lot of energy. Three years ago I couldn’t save either, but this didn’t happen to me. Now there are days when even having a cup of coffee outside the office seems like a wasteful luxury,” he says.

    By his own admission, Ariel is not even remotely among the most vulnerable segments of the population, who spend practically all their income on food, prices of which have been rising more than average.

    Latin America’s third largest economy is immersed in a process of stagnation and deterioration that began in 2012 and caused the governing parties to lose the last two presidential elections, in 2015 and 2019.

    On Sunday Nov. 19, the next president will be chosen in a runoff election in which the ruling party’s centrist candidate Sergio Massa will compete against the far-right opposition candidate Javier Milei.

    Only the extravagant proposals of Milei, who calls for the free carrying of arms and the creation of a market for the sale of organs, in addition to immediate dollarization and the elimination of the local peso from the Central Bank, have made Massa, who since 2022 is the Minister of Economy, competitive.

    Elections always generate even more instability in the economy and situations that are difficult for visitors to understand.

    Those who can afford to do so stock up on items in anticipation of what will happen to prices and consumption after the elections.

    Thus, September, the month prior to the first round of elections, showed a strong increase in consumption in supermarkets (eight percent above the previous month, according to private sector data), comparable only to March 2020, when the pandemic confinement began.

    In any case, the impact of inflation on the poorest is especially visible in the outskirts of the capital. Greater Buenos Aires is home to 15.5 million people, or one third of Argentina’s population, where more and more people sleep on the streets or wander around in search of something to eat.

    The poor suffer from a decline that is measured not only in terms of income but also with respect to access to basic services and to environmental conditions.

    A paper published in October by the Argentine Catholic University’s (UCA) well-respected Observatory of Social Debt found that since 2018 a process of reduction of the inequality gap began in Greater Buenos Aires, but due to the worsening living conditions of the middle class rather than to improvements in households in the most impoverished neighborhoods.

    Members of these vulnerable sectors of Buenos Aires told IPS that the escalation of inflation is more a problem of the middle class people living in the city, who have to lower their standard of living and who are becoming poorer, while in their case “we were and are so bad off that a jump in inflation of 100 to 150 percent does not change anything for us.”

    In addition, part of the poorest population of Buenos Aires and its outlying areas receives social assistance from the central or city governments, or from non-governmental organizations.

    A supermarket in Buenos Aires displays a sign from the "Fair Prices" program, which consists of an agreement between the Argentine government and companies to curb the prices of basic products. People frequently complain that the products are often not available, due to the reluctance of the companies to comply with this commitment. CREDIT: Daniel Gutman / IPS
    A supermarket in Buenos Aires displays a sign from the “Fair Prices” program, which consists of an agreement between the Argentine government and companies to curb the prices of basic products. People frequently complain that the products are often not available, due to the reluctance of the companies to comply with this commitment. CREDIT: Daniel Gutman / IPS

    No reference point

    José Lonardi owns a tiny shop selling candy, beverages and cigarettes on Paraguay Street, a few blocks from the Obelisk, an icon of downtown Buenos Aires. The prices of the merchandise, he tells IPS, increase almost every week, sometimes by three to five percent, and sometimes by 20 to 30 percent.

    “Two or three years ago, customers still complained when prices went up, because they had some point of reference. Today, inflation has picked up so fast that nobody knows how much things are worth and nobody says anything anymore,” he remarks.

    Against this backdrop, contradictory advice is rampant. The value of pesos is melting like ice cream under the sun and people want to get rid of them. On afternoon TV programs, a steady parade of economists advise people to buy large quantities of toilet paper to beat inflation.

    Many people, however, do not pay attention to them: in different neighborhoods of Buenos Aires restaurants are always full, even on weekdays. “In the Argentine economy nobody knows what might happen next week. So pesos are burning holes in people’s pockets, and people, as long as they have them, spend them,” says José.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

    Global Issues

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  • Argentina: Unpalatable Choices in Election Plagued with Uncertainty

    Argentina: Unpalatable Choices in Election Plagued with Uncertainty

    Credit: Tomás Cuesta/Getty Images
    • Opinion by Ines M Pousadela (montevideo, uruguay)
    • Inter Press Service

    MONTEVIDEO, Uruguay, Nov 03 (IPS) – For many of Argentina’s voters the choice in the 19 November presidential runoff is between the lesser of two evils: Sergio Massa, economy minister of a government that’s presiding over a once-in-a-generation economic meltdown with a whopping 140-per cent inflation rate, or Javier Milei, a far-right libertarian who admires Donald Trump, wants to shut down the Central Bank and wields a chainsaw in public as a symbol of his willingness to slash the state. Many will rue that it ever came to this.

    A peculiar outsider

    A post-modern media celebrity, Milei’s performance style is a perfect fit for social media. He’s easily angered, reacts violently and insults copiously. He’s unapologetically sexist and mocks identity politics.

    Milei bangs the drum for ‘anarcho-capitalism’, an ultra-individualistic ideology in which the market has absolute pre-eminence: earlier this year, he described the sale of human organs as ‘just another market’.

    To expand his appeal beyond this extreme economic niche he forged an alliance with the culturally conservative right. His running mate, Victoria Villarruel, represents the backlash against abortion – legalised after decades of civil society campaigning in 2020 – and sexual diversity and gender equality policies, along with reappraisal of the murderous military dictatorship that ruled Argentina between 1976 and 1983.

    In the run-up to primary elections in August, the two mainstream coalitions – the centre-left incumbent Union for the Homeland (UP) and the centre-right opposition Together for Change (JxC) – displayed a notable lack of leadership and indulged in internal squabbles that showed very little empathy for people’s daily struggles. All they had to offer in the face of widespread concerns about inflation and insecurity were the candidacies of the current minister of the economy and a former minister of security. They made it easy for Milei to hold them responsible for decades of corruption, ineffectiveness and failure.

    In Milei’s discourse, the hardworking, productive majority is being bled dry by taxation to maintain the privileges of a parasitic and corrupt political ‘caste’. His proposal is deceptively simple: shrink the state to a minimum to destroy the caste that lives off it, clearing their way for individual progress.

    Milei gained traction among young voters, particularly young men, via TikTok. He found fertile ground among a generation that no longer expect to be better off than their parents. While many of his followers concede that his ideas may be a little crazy, they appear to be willing to take the risk of embracing the unknown on the basis that the really crazy plan would be to allow those long in control to retain their power and expect things to turn out differently. Milei has capitalised on the despair, hopelessness and accumulated anger so many rightfully feel.

    Surprise after surprise

    The first surprise came on 13 August, when Milei won the most votes of any candidate in the primaries.

    Milei only entered politics in 2021, when the 17 per cent vote he amassed in the capital, Buenos Aires, sent him and two other libertarians to the National Congress. In the 2023 primaries he went much further, winning 30 per cent of the vote. He placed ahead of JxC, whose two candidates received a joint 28 per cent, and UP, the current incarnation of the Peronist Party, which took 27 per cent. The bulk of the UP vote, 21 per cent, went to Massa. That Peronism, once the dominant force, came third was a historic first.

    The second surprise came on 22 October. Following the primaries, all talk was of Milei winning the presidency. He trumpeted his intent to win the first round outright. Measured against these expectations, his second place looks like an underperformance. But the fact that a candidate who wasn’t on the radar before the primaries has made the runoff shows how quickly the political landscape can shift.

    In the October vote Milei took almost the exact share he’d received in the primaries. Massa finished above him with almost 37 per cent, displacing JxC, which lost four points on its second-place performance in the primaries.

    The fact that the economy minister was able to distance himself from the government he’s part of – one often described as the worst in 40 years – to come first was viewed as a notable victory, even though his share was just about the lowest Peronism has ever received.

    One explanation for Massa’s improved performance was turnout, which increased by eight points to almost 78 per cent – still low for a country with compulsory voting, but enough to make a difference. Much of the increase could be credited to the political machinery that mobilised voters on election day, aided by the minister-candidate pulling as many levers as he could to improve his chances. This included putting lots of instant cash into voters’ pockets, including through tax breaks benefiting targeted groups of workers and consumers.

    An unpalatable decision

    There’s still much uncertainty ahead. Economic failure is Milei’s best propaganda, so much will depend on how the economy behaves over the next couple of weeks. Milei and the destruction he represents can’t be written off.

    Neither those currently in power nor those in the mainstream opposition recognise the obvious: Milei is their fault. They’ve held power for the best part of the past 40 years without effectively tackling any of the issues that concern people the most.

    Many voters now feel they face an unpalatable choice between a corrupt and failing government and a dangerous disruptor. They fear that if they choose to keep Milei out, their votes may be misinterpreted as a show of active support for a continuity they also reject. What’s at stake here is more than one election. If Milei is kept at bay, the political dynamics leading to the current economic dysfunction will still need to be addressed – or the far-right threat to democracy won’t end with Milei.

    Inés M. Pousadela is CIVICUS Senior Research Specialist, co-director and writer for CIVICUS Lens and co-author of the State of Civil Society Report.

    © Inter Press Service (2023) — All Rights ReservedOriginal source: Inter Press Service

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  • Migration Puts the Brakes on Venezuela’s Vehicles

    Migration Puts the Brakes on Venezuela’s Vehicles

    On residential streets of Caracas with little traffic it is possible to see cars that have been abandoned by their owners for years. They probably migrated from Venezuela or cannot afford to repair and sell their vehicles. CREDIT: Humberto Márquez / IPS
    • by Humberto Marquez (caracas)
    • Inter Press Service

    CARACAS, Oct 23 (IPS) – Diego has just enrolled to study journalism at a university in the Venezuelan capital and, with 2,000 dollars that his family members managed to gather, has bought his first car, a small 2007 Ford that can take him to class from his home in the neighboring Caribbean port city of La Guaira.

    Tomás, an experienced physiotherapist who sold Diego the car, is leaving for Spain where a job awaits him without delay, “so I’m quickly selling off things that will give me money to settle there, such as furniture, household goods and appliances, but for now I sold only one of my two cars,” he told IPS.

    “This Ford Fiesta was my first car, I loved it very much, but it doesn’t make sense for me to hold on to two vehicles. I’m keeping a 2011 pickup truck that is in good condition, just in case I don’t do well and I have to return,” added the professional who, like other sources who spoke to IPS, asked not to disclose his last name “for safety reasons.”

    The migration of almost eight million Venezuelans in the last 10 years, and the general impoverishment of the population, have led to the deterioration of what was once a shiny fleet of vehicles, with one out of every four vehicles left standing now due to lack of maintenance and leaving much of the rest aging and on the way to the junkyards.

    In the basements of parking lots, and in the streets of towns and cities, thousands and thousands of vehicles are permanently parked under layers of dust and oblivion, because their owners have left or because they do not have the money to buy spare parts and pay the costs of repairs.

    Along the streets of any Venezuelan city can be seen old rundown vehicles with no sign that the necessary repairs will be made. The impoverishment of the population is at the root of this decline. CREDIT: RrSs
    Along the streets of any Venezuelan city can be seen old rundown vehicles with no sign that the necessary repairs will be made. The impoverishment of the population is at the root of this decline. CREDIT: RrSs

    Aging vehicle fleet

    Omar Bautista, president of the Chamber of Venezuelan Automotive Manufacturers, told IPS that “the vehicle fleet in Venezuela – a country that now has 28 million inhabitants – is about 4.1 million vehicles, with an average age of 22 years, and 25 percent of them are out of service.”

    “The loss of purchasing power of the owners has caused most of them to delay the maintenance of their vehicles and the replacement of the spare parts that suffer wear and tear, such as tires, brakes, shock absorbers and oil,” Bautista said.

    Moreover, in contrast to the immense oil wealth in its subsoil, gasoline in Venezuela is scarce and, after more than half a century being the cheapest in the world, it is now sold at half a dollar per liter, a cost difficult to afford for most owners of private vehicles or public transportation.

    The country needs some 300,000 barrels of fuel per day and for several years it has had less than 160,000 barrels, according to oil economist Rafael Quiroz, who added that interruptions in the work of Venezuela’s refineries are frequent.

    There is almost no residential building that does not have at least one vehicle in storage waiting for its owners to return from abroad. They are part of the 1.5 million vehicles that are permanently parked in the country. CREDIT: Humberto Márquez / IPS
    There is almost no residential building that does not have at least one vehicle in storage waiting for its owners to return from abroad. They are part of the 1.5 million vehicles that are permanently parked in the country. CREDIT: Humberto Márquez / IPS

    Not enough money

    The minimum wage in Venezuela is four dollars a month. Most workers receive up to 50 dollars in non-wage compensation for food, and the average income according to consulting firms is around 130 dollars a month.

    Luisa Hernández, a retired teacher, earns a little more giving private English classes, but “the situation at home is very difficult. I can’t afford to pay for the repair of my Toyota Corolla, but a mechanic friend agreed to do the work, and I can pay him in installments,” she told IPS.

    Mechanics have their finger on the pulse of the situation. “People leave and the cars often sit idle for years, and then the owners end up selling them, from abroad. Quite a few of those I have gone to pick up and have fixed them, to sell them,” Daniel, who runs a garage in the capital’s middle-class east side, told IPS.

    He said that “many people do not sell their cars before leaving the country, thinking that they’re just going abroad to ‘see how it goes’. But they stay there and then decide to sell their vehicle before it further deteriorates and depreciates.”

    Another mechanic, Eduardo González, told IPS that “There are people who go away and leave their cars in storage and from abroad they contact us so that from time to time we can check them and do some maintenance. Or they entrust their vehicle to a relative. There are people who travel and come back, but most of them end up selling.”

    This situation “has favored buyers, who can get cars at a low price. But the problems come later, because that very used car will require spare parts and maintenance, and that is expensive and often the parts are difficult to get,” added González.

    The same difficulty is also a concern for owners of cabs, buses and private vans that transport passengers, as well as cargo trucks.

    “At least half of the truck fleet in the region is affected by the shortage and scarcity of spare parts,” said Jonathan Durrelle, president of the Chamber of Cargo Transportation of Carabobo, an industrial state in the center of the country.

    Large and small buses for passenger transport in Venezuelan cities, including Caracas, as well as cargo vehicles, also suffer from the lack of sufficient revenue, as well as spare parts, to keep them in proper working condition. CREDIT: Humberto Márquez / IPS
    Large and small buses for passenger transport in Venezuelan cities, including Caracas, as well as cargo vehicles, also suffer from the lack of sufficient revenue, as well as spare parts, to keep them in proper working condition. CREDIT: Humberto Márquez / IPS

    Industries have closed down

    Elías Besis, from the Chamber of Spare Parts Importers, attributed this to the closure of companies that “years ago manufactured 62 percent of the spare parts needed in the country, and now that production has plunged to two percent.”

    Thousands of manufacturing companies closed down in Venezuela during the eight years (2013-2020) in which the country was in deep recession, suffering a loss of four-fifths of its GDP according to economic consulting firms.

    Financial and banking activity has also declined, as has the vehicle loan portfolio, which peaked at 2.3 billion dollars in 2008 and plummeted to just 227,000 dollars by late 2022, according to economist Manuel Sutherland.

    Vehicle assembly plants, of which there were a dozen until recently, also closed their doors. In addition to selling to hundreds of dealerships, they used to export vehicles to the Andean and Caribbean markets.

    Their production peaks were recorded in 1978, with 182,000 new vehicles – Venezuela then had 14 million inhabitants and 2.5 million vehicles – and in 2007, when 172,000 cars were assembled.

    In 2022 only 75 vehicles – trucks and buses – were assembled, and in the first six months of this year just 22.

    Newer vans and cars drive through middle and upper class neighborhoods, but are part of the "bubble," the small segment of the population less impacted by the deep economic crisis that Venezuela has suffered over the last decade. CREDIT: Motorpasión
    Newer vans and cars drive through middle and upper class neighborhoods, but are part of the “bubble,” the small segment of the population less impacted by the deep economic crisis that Venezuela has suffered over the last decade. CREDIT: Motorpasión

    Farewell to the bonanza

    The result of this scenario is the aging and non-renewal of the vehicles circulating on Venezuela’s roads.

    The new ones, Daniel pointed out, “are SUVs, crossovers and off-road vehicles that cost a lot of money and can only be bought by those who live in the bubble,” the term popularly used to refer to the segment of high-level officials and businesspersons whose finances are still booming in the midst of the crisis.

    In addition, in view of the almost total closure of automotive plants, individuals are opting to import new vehicles directly from the United States, favored by the elimination of tariffs for the importation of most models.

    For that reason, said Bautista, “there is no shortage of new vehicles, what there is is a shortage of consumers with the necessary purchasing power and conditions to buy new vehicles.”

    These consumers were part of the hard-hit middle class – nine out of 10 families in that socioeconomic category had fallen below the middle class by 2020 according to the consulting firm Anova – and they no longer buy new or newer cars because they have swelled the legion of migrants, selling or leaving behind their main assets.

    Since the days of the oil boom (1950-1980), Venezuelans developed a sort of sentimental relationship with their vehicles, associating them with comfort and enjoyment that favored cheap gasoline and a network of paved roads that made it easier to travel to places of recreation.

    In middle class and even lower middle class families, it was quite common to change cars every two years and to give one to their children when they turned 18. They were helped by credit facilities, and were encouraged to buy cars in cities where public transportation has always fallen short.

    They have had to say goodbye to their easy past on wheels, like migrants have said farewell to their country and homeland. Or at least “see you later”.

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  • Seniors Thriving Through Plastic Waste in Zimbabwe

    Seniors Thriving Through Plastic Waste in Zimbabwe

    Tabeth Gowere (76) makes extra cash from weaving plastic waste. A group of seniors started weaving plastic out of a need to improve the environment and make some extra cash. Credit: Jeffrey Moyo/IPS
    • by Jeffrey Moyo (harare)
    • Inter Press Service

    HARARE, Oct 20 (IPS) – They do not have a pension nor financial support from families or relatives, but they have themselves. Now they have become collectors of plastic waste, which they turn into products as they battle for survival – earning money from the growing plastic pollution in Zimbabwe.

    Such are the lives of the country’s senior citizens, like 76-year-old Tabeth Gowere and 81-year-old Elizabeth Makufa, both hailing from Harare’s Glenora high-density suburb, where they become famous as plastic waste collectors.

    Gowere and Makufa, thanks to plastic waste, now care for themselves financially despite their old age, so they said.

    “At first, we saw plastic waste just being flown around by the wind, and we started to pick these, cleaning the environment, burning it, but later realized we could make something out of these plastics and earn money.  So, using plastic waste, we started weaving different things, including mats to decorate sofas. Many people were impressed by our work, and they started placing orders for the plastic products we were making,” Gowere told IPS.

    Makufa, like Gowere, has also seen gold in the dumped plastic waste.

    “We say this is waste, but from it, we find something that is helping us to sustain us in life. I make 30 US dollars daily at times from selling the products I make from plastic waste, which means at least I get something to survive,” Makufa told IPS.

    The young are learning from the lessons from the senior plastic waste entrepreneurs – like 40-year-old Michelle Gowere.

    “Weaving things using plastics is a skill I learned from my mother-in-law, Mrs Gowere. We spend time together daily, and because of this, I ended up learning the skill from her; this is helping me to, at least, help my children with food to carry in their lunch boxes when they go to school,” Michelle told IPS.

    To Michelle’s mother-in-law and many others, the environment has been the secondary beneficiary of the geriatrics’ initiative collecting plastic waste.

    “You would see that in our area, waste collectors from the council rarely come to empty the refuse bins. So, as we use plastic waste to make our products, we are making our environment clean,” Michelle told IPS.

    Zimbabwe Environmental Management Agency (EMA) about 1.65 million tonnes of waste are produced annually in Zimbabwe, with plastic making up 18 percent of that.

    However, Makufa says it was not the love of money that swayed them into getting into plastic waste but improving the environment.

    “It was not because we lacked money that we turned to collecting plastic waste, but we copied some people who were doing it, and we started doing the same. We thought of removing plastic waste from our environment, and we told ourselves if we could take those plastics and weave them together, we could have impressive products that we could sell and earn some money,” Makufa told IPS.

    As the group of elderly people are making a difference in collectively fighting plastic waste, the local authorities welcome their contribution but add that it is everybody’s responsibility to care for the environment.

    “The job of caring for the environment is not a responsibility of the council alone. In fact, it is the duty of everyone to make sure where they live there is cleanliness. As a council, we thank people who are beginning to realize that there is money in plastic waste. It’s not every waste that should be dumped; there is what we call recycling, and some people make money from it, but the duty to take care of our surroundings is not a prerogative of the council, but ordinary people as well,” Innocent Ruwende, Harare City Council spokesperson, told IPS.

    Priscilla Gavi, director of Help Age Zimbabwe, a non-governmental organization mandated to take care of the elderly’s needs, says the elderly, too, are critical in the fight against plastic waste.

    “Old age does not make someone incapable of supporting their families and taking care of themselves. It doesn’t stop the aged from working for their country. In fact, old age gives people opportunities to use skills gained during their prime ages, and they, for instance, make use of plastics, producing different things for sale from plastic waste as they also rid the environment of the plastic waste,” Gavi told IPS.

    Yet for many like Makufa, collecting plastic waste has also turned out to be therapeutic in addition to being an economic venture.

    “These things that we make with our own hands using plastic waste help us to rest from mental stress owing to problems we have these days that strain us psychologically. So, this helps us to be always occupied and refrain from overthinking about things we don’t have control over,” said Makufa.

    According to the Environmental Management Agency (EMA), an estimated 1.65 million tonnes of waste are produced annually in Zimbabwe, with plastic making up to 18 percent of that.

    Gowere and Makufa and other elderly recyclers and plastic entrepreneurs have drawn the admiration of organizations like EMA.

    “This is a commendable initiative that is promoting upcycling of waste and upscaling recycling as a business. This reduces the amount of waste that ends up in landfills and the environment. Plastic waste takes hundreds of years to decompose, and it releases harmful toxins into the environment when burned,” Amkela Sidange, spokesperson for EMA, told IPS.

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  • We Must Act to Bridge the Gap Between Words and Deeds

    We Must Act to Bridge the Gap Between Words and Deeds

    • Opinion by Patricia Scotland (london)
    • Inter Press Service

    LONDON, Sep 18 (IPS) – The author is Commonwealth Secretary-GeneralIn today’s increasingly interconnected world, marked by grave economic, environmental, and security crises that transcend global boundaries, it’s abundantly clear that our interdependence is an undeniable reality.

    Rt Hon Patricia ScotlandThese challenges loom large as countries from across the world gather at the United Nations General Assembly in New York. Our world is under pressure, and people are looking to its leaders for action.

    Since world leaders last gathered in New York, we have seen a litany of natural disasters continue to devastate our world. Flooding, wildfires, storms and droughts have hit countries across the Commonwealth and the world. From Rwanda to India, the USA to New Zealand the whole world is feeling the impact of climate change.

    If you listen to individuals from all walks of life, you can hear the fear and the desperation in their conversations, the anxiety that though we all recognise the problem, leaders are not taking the action we all need to tackle the challenges we face.

    Our history serves as a poignant reminder that our choices boil down to two paths: cooperation, where we harness our collective humanity or to suffer in isolation.

    The capacity to unite behind the moral force of our principles enshrined in our Commonwealth Charter, and the power of our practical purpose, is the foundation and beauty of the modern Commonwealth.

    Our independent member states, stretched across five continents and home to one-third of humanity embody a remarkable blend of ingenuity and determination. This fusion of qualities not only propelled India to land a spacecraft on the moon but also instilled in us the shared resolve to stand united in confronting the challenges of climate change, instability, and economic adversity.

    On the margins of the General Assembly, the citizens of the Commonwealth can be assured that our Foreign Affairs Ministers, and our Environment Ministers, will meet to further deepen their commitment to action on the threats to resilience and sustainability in our member states, and the wider world. Moreover, in a recent milestone, youth ministers, education stakeholders, and young leaders from across the Commonwealth convened in London just last week. Together, they forged agreements on policies and initiatives designed to bolster and empower our youth. At the core of these discussions were our young leaders, whose energy, passion and innovation we will need to take us forward.

    United in purpose, we remain steadfast in our commitment to advancing pioneering initiatives, exemplified by the Commonwealth Climate Finance Access Hub, an endeavour that has successfully mobilized over $250 million in crucial support for the countries most in need. Simultaneously, intensifying calls for reform in global development finance to equip the most vulnerable nations with the resources they need to tackle the long-term impacts of environmental breakdown.

    When we gather this week in New York, we seek to bridge the gap between rhetoric and implementation, deepening the alliances which transcend borders and self-interest, and advance the vital work to build a resilient and sustainable future for all.

    We will set the stage for the next Commonwealth Heads of Government Meeting (CHOGM) which is to be held in Samoa in October 2024.

    The road to CHOGM 2024 starts in New York and winds its way through the great capitals of our Commonwealth Family before culminating in Apia. And while we can never underplay the scale of the challenges we face, the fact that the Commonwealth nations sit together as partners with an equal voice and an equal stake in a shared mission means that we approach them – like India’s space mission – with the mindset of what is possible.

    Our ministers will gather to reaffirm our dedication to resilience, sustainability, and equitable development. We are never just observers; we are active participants, ready to tackle the urgent issues of our time. We will act to bridge the gap between words and deeds, working together to build a better future.

    In October next year when our Heads of Government meet in Samoa, we know that our strength will be in our unity. Progress is always difficult, and the challenges we face sometimes seem insurmountable, but we know that through the Commonwealth, and our unwavering commitment to unity and collective action, we shall prevail.

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  • Exchange Rate Movements Due to Interest Rates, Speculation, Not Fundamentals

    Exchange Rate Movements Due to Interest Rates, Speculation, Not Fundamentals

    • Opinion by Jomo Kwame Sundaram (kuala lumpur, malaysia)
    • Inter Press Service

    KUALA LUMPUR, Malaysia, Jul 26 (IPS) – Currency values and foreign exchange rates change for many reasons, largely following market perceptions, regardless of fundamentals. Market speculation has worsened volatility, instability and fragility in most economies, especially of small, open, developing countries.

    US Fed pushing up interest rates
    For no analytical rhyme or reason, US Federal Reserve Bank (Fed) chairman Jerome Powell insists on raising interest rates until inflation is brought under 2% yearly. Obliged to follow the US Fed, most central banks have raised interest rates, especially since early 2022.

    Jomo Kwame SundaramThe US dollar or greenback’s strengthening has been largely due to aggressive Fed interest rate hikes. Undoubtedly, inflation has been rising, especially since last year. But there are different types of inflation, with different implications, which should be differentiated by nature and cause.

    Typically, inflationary episodes are due to either demand pull or supply push. With rentier behaviour better recognized, there is now more attention to asset price and profit-driven inflation, e.g., ‘sellers inflation’ due to price-fixing in monopolistic and oligopolistic conditions.

    Recent international price increases are widely seen as due to new Cold War measures since Obama, Trump presidency initiatives, COVID-19 pandemic responses, as well as Ukraine War economic sanctions.

    These are all supply-side constraints, rather than demand-side or other causes of inflation.

    The Fed chair’s pretext for raising interest rates is to get inflation down to 2%. But bringing inflation under 2% – the fetishized, but nonetheless arbitrary Fed and almost universal central bank inflation target – only reduces demand, without addressing supply-side inflation.

    But there is no analytical – theoretical or empirical – justification for this completely arbitrary 2% inflation limit fetish. Thus, raising interest rates to address supply-side inflation is akin to prescribing and taking the wrong medicine for an ailment.

    Fed driving world to stagnation
    Thus, raising interest rates to suppress demand cannot be expected to address such supply-side driven inflation. Instead, tighter credit is likely to further depress economic growth and employment, worsening living conditions.

    Increasing interest rates is expected to reduce expenditure for consumption or investment. Thus, raising the costs of funds is supposed to reduce demand as well as ensuing price increases.

    Earlier research – e.g., by then World Bank chief economist Michael Bruno, with William Easterly, and by Stan Fischer and Rudiger Dornbusch of the Massachusetts Institute of Technology – found even low double-digit inflation to be growth-enhancing.

    The Milton Friedman-inspired notion of a ‘non-accelerating inflation rate of unemployment’ (NAIRU) also implies Fed interest rate hikes inappropriate and unnecessarily contractionary when inflation is not accelerating. US consumer price increases have decelerated since mid-2022, meaning inflation has not been accelerating for over a year.

    At least two conservative monetary economists with Nobel laureates have reminded the world how such Fed interventions triggered US contractions, abruptly ending economic recoveries. Although not discussed by them, the same Fed interventions also triggered international recessions.

    Friedman showed how the Fed ended the US recovery from 1937 at the start of Franklin Delano Roosevelt’s second presidential term. Recent US Fed chair Ben Bernanke and his colleagues also showed how similar Fed policies caused stagflation after the 1970s’ oil price hikes.

    De-dollarization?
    However, the US dollar has not been strengthening much in recent months. The greenback has been slipping since mid-2023 despite continuing Fed interest rate hikes a full year after consumer price increases stopped accelerating in mid-2022.

    Many blame recent greenback depreciation on ‘de-dollarization’, ironically accelerated by US sanctions against its rivals. Such illegal sanctions have disrupted financial payments, investment flows, dispute settlement mechanisms and other longstanding economic processes and arrangements authorized by the World Trade Organization, International Monetary Fund and UN charters.

    Even the ‘rule of law’ – long favouring the US, other rich countries and transnational corporate interests – has been ‘suspended’ for ‘reasons of state’ due to economic warfare which continues to escalate. Unilateral asset and technology expropriation has been justified as necessary to ‘de-risk’ for ‘national security’ and other such considerations.

    Horns of currency dilemma
    For many monetary authorities, the choice is between a weak currency and higher interest rates. With growing financialization over recent decades, big finance has become much more influential, typically demanding higher interest income and stronger currencies.

    Central bank independence – from the political executive and legislative processes – has enabled financial lobbies to influence policymaking even more. For example, Malaysia’s household debt share of national output rose from 47% in 2000 to over four-fifths before the COVID-19 pandemic, and 81% in 2022.

    There is little reason to believe recent exchange rates have been due to ‘economic fundamentals’. Currencies of countries with persistent trade and current account deficits have strengthened, while others with sustained surpluses have declined. Instead, relative interest rate changes recently appear to explain more.

    Thus, both the Japanese yen and Chinese renminbi depreciated by at least six per cent against the US dollar, at least before its recent tumble. By contrast, British pound sterling has appreciated against the greenback despite the dismal state of its real economy.

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  • Greener Pastures Not So Green for Zimbabweans in the Diaspora

    Greener Pastures Not So Green for Zimbabweans in the Diaspora

    Even as they face their own challenges abroad, Zimbabweans living overseas say they can not consider heading back home to face the economic challenges – especially now with hyperinflation. Credit: Jeffrey Moyo/IPS
    • by Jeffrey Moyo (dordrecht, netherlands)
    • Inter Press Service

    DORDRECHT, NETHERLANDS, Jul 05 (IPS) – They have high-paying jobs, a high standard of living, and almost everything they need, but for Zimbabweans abroad, all that glitters is not gold.

    Twenty-eight-year-old Gift Gonye, based in Germany, is one such Zimbabwean, and he is apparently not satisfied with his life abroad.

    Homesickness is one disease that has hit Zimbabweans like Gonye, but despite this, they are afraid to wade back into the suffering in the southern African nation.

    “On my behalf and the behalf of other Zimbabweans in the diaspora, yes, we miss home, but even then, there is nothing we can do about it because there is suffering back home. We can’t go back home to face poverty,” Gonye told IPS.

    “You just find yourself with no choice except to endure the challenges here in the diaspora in order to survive.”

    Based on the latest figures from the Zimbabwe National Statistics Agency (Zimstats) in the 2022 national housing and population, less than one million Zimbabweans have left the country since 2012, looking for greener pastures abroad.

    Records from Zimstats have indicated that 908,914 left the southern African country in the last decade, with South Africa, Botswana and the United Kingdom being the preferred destinations for Zimbabweans.

    South Africa has accounted for 773,246, Botswana 74,928, Britain 23,166 and the USA 8,565.

    Gonye and several other Zimbabweans that have fled from the economic hardships in their African country have had to endure some difficulties in their stay abroad.

    “The life we live here is expensive. We pay high taxes. The tough life back home in Zimbabwe complicates our lives in the diaspora, for we have to support the people back home because people there look forward to our help, and this results in us here in the diaspora not investing in terms of our future and for ourselves at old age,” Gonye said, referring to a system often referred to as “black tax” where wealthier and more successful people are expected to assist their families.

    While many Zimbabweans back home have high regard for diaspora nations, many like Gonye see otherwise, thanks to the daily pressure migrants endure to survive.

    “I want to let people back home know we have no social life here. It’s not easy living here. The money we earn is enough for rent and food and other basics, and it ends there. It is hard for us in the diaspora,” said Gonye.

    “If you see someone sending you some bit of money back in Zimbabwe—some 30 dollars or seventy dollars, that person would have endured saving that amount.”

    As a result, Zimbabweans abroad live under pressure from their kith and kin back home and meet their needs as well.

    Despite official government figures about people that have relocated overseas, about 4 to 5 million Zimbabweans are said to be abroad, largely forced abroad by a fractured national economy since 2000 when authorities seized white-owned commercial farms.

    Ellen Mazorodze, based in Australia, as elections loom in Zimbabwe on August 23 this year, migrants like herself would like to have a chance to change things in their country. However, only those residents living in the country can vote, and she encouraged them to vote.

    “If you want to choose a person to represent you, go and vote. Your vote will be counted. It will help you to have a person fulfilling your wishes get in office,” Mazorodze told IPS.

    Privilege Kandira (30), living in Norway, says: “Diaspora life is a mixture of both good and bad.”

    “On one side, I can testify that I have enjoyed the opportunity of coming to a better life here in the diaspora, but on the other side, let me hasten to say that I have met lots of challenges, amongst which is racial discrimination,” he told IPS.

    Kandira is not alone in battling racial discrimination.

    In the UK, many Zimbabweans, like 29-year-old Tariro Muungani, a professional social worker, have had to face racial discrimination.

    “I will give an example of where I live here in England. It’s a place where there are few black people. When you walk the streets, white people look at you curiously. When you board a bus, for instance, and sit next to a white person, they may drift away from you because they don’t want to be in contact with you, which makes living in such areas painful,” she (Muungani) told IPS.

    Like Gonye in Germany, Muungani said, “Zimbabweans back home look at us in the diaspora as people who have made it in life and think we have no problems, and they look forward to us with trust that diaspora people can help them.”

    Muungani said most people back in her home country do not believe people abroad can sometimes lack money.

    Yet other Zimbabweans overseas say they miss the social unity back in their country as they fight to earn a better living abroad.

    “What comes to mind is the togetherness we had back home, the spirit of neighbourliness, which is not there here. Nobody really cares for the next person. Children live just anyhow with no strangers bothering to discipline them, unlike what happens back home culturally,” Sophia Tekwane, a Zimbabwean woman based in Sweden, told IPS.

    But Tekwane also said with the suffering in Zimbabwe, many like herself have no choice except to endure being abroad.

    “The suffering in Zimbabwe makes things tough for all of us in the diaspora because it forces us to work even harder to support the loved ones back home.”

    “You end up having no choice. Sometimes you end up sacrificing – starving yourself to support the people back home. You end up working abnormally long hours,” added Tekwane.

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  • How UBS became Switzerland’s mega bank

    How UBS became Switzerland’s mega bank

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    UBS Group AG, with over $5 trillion in invested assets, is Switzerland’s largest bank. The company has a sprawling international footprint, with over half of its wealth management assets coming from clients in the United States. Experts believe these customers are drawn to strict bank-client laws in Switzerland. In recent decades, scandals have embroiled both UBS and its latest acquisition, Credit Suisse. After regulators quickly approved of the merger, fresh litigation risks have come to light.

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  • As Game of Thrones Rages in Sudan, the Neighbors Pay the Price

    As Game of Thrones Rages in Sudan, the Neighbors Pay the Price

    Long wait at the border between Sudan and Egypt. Credit: Hisham Allam/IPS
    • by Hisham Allam (cairo)
    • Inter Press Service

    CAIRO, May 25 (IPS) – The conflict in Sudan is impacting the economy in Egypt, and those who make their living moving goods across the borders have spent weeks hoping the situation will normalize.

    Muhammad Saqr, a truck driver, left Cairo with a load of thinners on April 13, heading to Khartoum. By the time he had arrived at the border, the battle had flared up. Saqr remained, like dozens of trucks, waiting for the borders to be reopened.

    On April 15, 2023, clashes erupted in Sudan between the army led by Lieutenant General Abdel Fattah al-Burhan and the Rapid Support Forces led by Lieutenant General Muhammad Hamdan Dagalo, known as “Hamidti.” According to the UN, the clashes have resulted in hundreds of deaths and displaced more than a million people, with 840,000 internally displaced while another 250,000 have crossed the borders.

    Saqr was stuck at the border for 28 days.

    “We began to run out of supplies, and we reassured ourselves that the situation would improve tomorrow. Twenty-eight days passed while we slept in the open. The information we received from the bus drivers transporting the displaced from Sudan to Egypt convinced us that there would be no immediate relief. We knew that if we entered Khartoum alive, we would leave in shrouds,” Saqr told IPS.

    “The merchant to whom we were transferring the goods asked us to wait and not return (home), particularly because he could not pay the customs duties due to the banks’ closure.”

    Muhammad Saqr at the border of Sudan and Egypt.
    Muhammad Saqr at the border of Sudan and Egypt.

    Eventually, they returned with the goods to Cairo, Saqr said.

    Mahmoud Asaad, a driver, was stuck on the Sudanese side of the border. Due to customs papers and permits, the livestock he was transporting had already been stuck in the customs barn in Wadi Halfa, Sudan, for thirty days. Then when the conflict broke out, the cows were trapped for another thirty days.

    “We used to transport shipments of animals from Sudan to Egypt regularly,” Asaad explains. The average daily transport of animals to Egypt was roughly 60 trucks laden with cows and camels. This trade has stopped, and many Sudanese importers have fled to Egypt while waiting for the conflict to end.

    “Sudan is regarded as a gateway for Egyptian exports to enter the markets of the Nile Basin countries and East Africa, and the continuation of war and insecurity will reduce the volume of trade exchange between the two countries, negatively impacting the Egyptian economy, which is currently experiencing some crises,” Matta Bishai, head of the Internal Trade and Supply Committee of the Importer’s Division of the General Federation of Chambers of Commerce, told IPS.

    According to Bishai, commodity prices have risen significantly in recent months as the Egyptian pound has fallen against the US dollar. He also stated that the current situation in Sudan would result in additional price increases in the coming months, particularly for commodities imported from Sudan, such as meat.

    Bishai explained that while Egypt had an ample domestic meat supply, it was nevertheless reliant on imports. Importing it from other countries such as Colombia, Brazil, and Chad would take longer and be more expensive than importing it from Sudan, as land transport is more convenient and cheaper than transporting the goods by sea.

    According to Bishai, Sudan is a major supplier of livestock and live meat to Egypt, supplying about 10 percent of Egypt’s requirements. Higher meat prices will put additional pressure on Egypt’s inflation rates.

    “Rising commodity prices, combined with the current situation in Sudan, are expected to result in higher inflation rates in Egypt in the coming months,” said Bishai.

    According to data from the General Authority for Export and Import Control on trade exchange between Egypt and the African continent during the first quarter of this year, Sudan ranked second among the top five markets receiving Egyptian exports, valued at USD 226 million.

    According to Ahmed Samir, the Egyptian Minister of Trade and Industry, the volume of trade exchange between Egypt and African markets amounted to about USD 2,12 billion in the first quarter of this year, with the value of Egyptian commodity exports to the continent totaling USD 1,61 billion and Egyptian imports from the continent totaling UD 506 million.

    Mohamed Al-Kilani, an economics professor and member of the Egyptian Society of Political Economy, said: “The negative consequences will be felt in the trade exchange, which has recently increased and reached USD2 billion. Egypt has attempted to expedite the import process from Sudan by expanding the road network and building a railway.”

    Credit rating agency Moody’s warned that should the conflict in Sudan continue for an extended period, it would have an adverse credit impact on neighboring countries and impact multilateral development banks. Moody’s added that if the clashes in Sudan turn into a long civil war, destroying infrastructure and worsening social conditions, there will be long-term economic consequences and a decline in the quality of Sudan’s multilateral banks’ assets, as well as an increase in non-performing loans and liquidity.

    As the conflict entered its sixth week, attempts at a ceasefire have failed – with both sides accusing each other of violating agreements.

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  • Reserve Bank of Australia Review Fails Ordinary Australians

    Reserve Bank of Australia Review Fails Ordinary Australians

    • Opinion by Anis Chowdhury (sydney)
    • Inter Press Service

    SYDNEY, May 15 (IPS) – The Reserve Bank of Australia (RBA)’s latest interest rate hike comes before the ink of the much-awaited review of the RBA, released on 20 April, has dried. The threat of more increases to come is a clear sign of an emboldened RBA as the government accepts all of the panel’s utterly disappointing 51 recommendations.

    Anis ChowdhuryRBA Review
    The Treasurer, Hon Dr Jim Chalmers, announced the Review in July 2022, designed to ensure that Australia’s monetary policy arrangements and the operations of the RBA continue to support strong macroeconomic outcomes for Australia in a complex and continuously evolving landscape.

    The recommendations of the three-person panel, charged with reviewing the structure, governance, and effectiveness of the RBA, range from creating a separate board to make decisions on interest rates, to giving the Bank a simpler dual mandate to pursue both price stability and full employment.

    Utter disappointment
    The Review report fails to question the long-held taboos about inflation and Central Bank’s role in a social democracy. While the Review panel leaves the RBA’s 2-3% inflation target unchanged, it outrageously recommends dropping from the RBA’s mandate “economic prosperity and welfare of the people of Australia” and the removal of government’s power to intervene in the RBA’s decisions.

    This will make the RBA more inflation hawkish, and more aggressive in its use of the blunt interest rate tool without much regard for the consequences on jobs, especially when the RBA’s full employment mandate is left vague.

    Without the power to intervene in the RBA’s decisions, such hawkish interest rate hikes will force the government to cut its expenditure as it has to pay more on interest for its debts while its tax revenue shrinks when the economy slows.

    Thus, the well-being of ordinary citizens, especially those who will lose jobs, will worsen as the government struggles to find money for targeted budget support. No wonder the Treasurer termed the latest RBA interest rate decision as “Pretty brutal”.

    Voodoo of 2-3% inflation target
    In accepting the RBA’s current 2-3% inflation target, the Review panel ignores the fact that the 2-3% inflation target has become a “global economic gospel” without any empirical or theoretical basis.

    The 2-3% target was plucked out of the air and it became a universal mantra after a chance remark by the then Finance Minister of New Zealand in a television interview followed by relentless preaching.

    The recommendation ignores the changed circumstance since the 2-3% inflation target was first adopted. In the wake of the 2008-2009 Global Financial Crisis, many, including the then IMF’s Chief Economist, Olivier Blanchard suggested a 4% inflation target would be more appropriate.

    The inflation-unemployment trade-off relationship (i.e., the Phillips curve) has become flatter over the years due to labour market deregulations, off-shoring and other developments. This means trying to dogmatically achieve such a low inflation target would require a much higher unemployment rate as recognised by the former Fed Chair and current US Treasury Secretary Janet Yellen. That is, the interest rate must rise more steeply inflicting serious damages to the business finances, household spending and government budget.

    Full employment, a poor cousin
    The Review panel recommends “full employment” mandate along with inflation target. However, while the inflation target has a numerical figure (2-3%), there is no such specific target mentioned for unemployment that may be consistent with the concept of full employment. When asked during a press conference, the Treasurer said, “It’s a contested concept”.

    The report mentions full employment 100 times! But does not say what it means; instead, the panel accepts the current RBA’s definition and measure of full employment based on a contestable concept of a “non-accelerating inflation rate of unemployment” (NAIRU). That is, full employment is consistent with an unemployment rate below which inflation will accelerate.

    There is general consensus that models based on NAIRU are basically wrong. An article in the RBA Bulletin acknowledged, “Model estimates of the NAIRU are highly uncertain and can change quite a bit as new data become available”. Thus, James Galbraith argued for ditching the NAIRU. And an op-ed in The Financial Times concluded, “The sooner NAIRU is buried and forgotten, the better”.

    Social democracy sacrificed
    The panel thinks, there are too many factors that affect prosperity and welfare. So, it recommends removal of the RBA’s third mandate “economic prosperity and welfare of the people of Australia”, enshrined in the 1959 RBA Act.

    Furthermore, the panel seeks to remove the government’s ability to overrule an RBA decision because it “undermines the independent operation of monetary policy”.

    With these recommendations implemented, the RBA will not be bound to the commitment to build a fairer society, although economic prosperity and people’s welfare can remain as an “overarching purpose”.

    The Winner
    A super independent RBA will have all the power it needs to use its sole weapon, interest rate rises, to keep inflation at 2-3%. The emboldened RBA will declare the consequences to its actions on the job markets as consistent with a vaguely defined full employment, and economic prosperity and welfare of the people.

    It can simply assert that job and income losses are short-term pains for long-term gains, without having to provide any evidence. There are no such things as short-term pains.

    For many, job loss may cause permanent damages to their mental health, self-esteem and social life often leading to suicides. IMF research shows that the scarring effects of recessions can be permanent.

    Thus, the clear winner of the recommended reforms, is the RBA, not the ordinary people struggling to find decent jobs to enable them to put a roof over their heads and two square meals on their tables.

    Meanwhile, the RBA’s ideological anti-inflationary fight with a blunt interest rate tool benefits the big four banks. They are “tipped to rake in record $33 billion” in profits from rising interest rates when everyday Aussies and small businesses battle rising bankruptcies and job losses.

    Anis Chowdhury is Adjunct Professor, School of Business, Western Sydney University. He held senior United Nations positions in the area of Economic and Social Affairs in New York and Bangkok.

    IPS UN Bureau


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  • Privatization: Egypts Only Weapon To Survive the Repercussions of the War in Ukraine

    Privatization: Egypts Only Weapon To Survive the Repercussions of the War in Ukraine

    Egypt plans to sell shares in 32 state-owned businesses, including three banks. Credit: Hisham Allam/IPS
    • by Hisham Allam (cairo)
    • Inter Press Service

    Cairo, Apr 06 (IPS) – Egypt intends to sell shares in 32 state-owned businesses within a year, including three banks, two military-owned businesses, and numerous businesses in the energy and transportation sectors. This is part of the administration’s efforts to reduce the role of the state in the economy and attract foreign capital.

    That also follows the government’s December USD 3 billion deal with the IMF to resume privatization initiatives.

    The IMF approved the USD 3 billion loan to strengthen the private sector and reduce the state’s footprint in the economy.

    Egypt planned to sell 23 state-owned enterprises in 2018, but the plan was postponed due to the worldwide crisis.

    The Russia-Ukraine conflict has put pressure on the Egyptian economy and currency, making the proposal more urgent.

    According to Rashad Abdo, head of the Egyptian Forum for Economic Studies, Egypt had already received sovereign loans from many donors, including international institutions, such as the International Monetary Fund and Gulf countries, and these parties either set harsh lending conditions or would be reluctant to lend due to increased risks.

    The State Ownership Policy Plan, adopted by President Abdel-Fattah El-Sisi in December, outlines how the government would participate in the economy and how it would increase private sector involvement in public investments. Egypt wants to increase the contribution of the private sector to the nation’s economic activity from 30 percent to 65 percent within the next three years. One-quarter of these enterprises will be listed by the government within six months.

    Egypt announced the offering of these companies, intending to sell them to strategic investors, specifically Gulf sovereign funds. Egypt is expected to sell enterprises worth USD 40 billion within three years, including those held by the army.

    Attracting foreign investment requires strengthening the investment climate, lowering inflation rates, and expanding anti-corruption efforts, Abdo told IPS.

    The State Ownership document states that 32 Egyptian state companies will be listed on the Egypt Exchange (EGX) or sold to strategic investors within a year, beginning with the current quarter and ending in the first quarter of 2024. Stakes in three significant banks, Banco du Caire, United Bank of Egypt, and Arab African International Bank, are among the scheduled transactions. Insurance, electricity, and energy companies, as well as hotels and industrial and agricultural concerns, will also be on the market. Prime Minister Moustafa Madbouly announced that the first stakes would be offered in March and a quarter by June, and more businesses could be added over the next year.

    Abdo pointed out that the Monetary Fund affirmed the Egyptian government’s commitment to implementing the State Ownership Document when it agreed to grant it this loan and the Egyptian government saw it as a favorable opportunity to implement the terms of the document set by the Organization for Economic Cooperation and Development.

    Mohamed Al-Kilani, professor of economics and member of the Egyptian Society for Political Economy, said the privatization effort seeks to eliminate the dollar gap in Egypt and thus provide indirect compensation in the form of services and benefits from the International Monetary Fund’s debt.

    The state would also send a message to foreign investors that it responds to the private sector and is willing to withdraw from certain sectors to benefit the private sector.

    “The state is attempting to exploit this proposal to stimulate and revitalize the Egyptian Stock Exchange while taking into account the fair valuation of these companies in comparison to the global market. However, the state was unclear about the details of this offering and whether it is a long-term or short-term investment, and it has not clarified the size of employment or the percentages offered in terms of ownership and management,” Al-Kilani told IPS.

    “The state is trying to create new types of foreign investment to attract foreign currency due to the fluctuation in exchange rates and high-interest rates,” Al-Kilani added.

    According to external debt data published on the central bank’s website in mid-February, Egypt’s external debt fell by USD 728 million to USD 154.9 billion at the end of last September, but its foreign exchange reserves remain low, prompting renewed demand for state assets. The Russia-Ukraine conflict has further pressured the economy and local currency, prompting the proposal for new urgency.

    Despite its relatively modest improvement in the latest data from the central bank at the beginning of February (USD 34.2 billion), it lost about 20 percent of the level of USD 41 billion at the end of February last year.

    Last January, the IMF suggested that the volume of the financing gap in Egypt would reach about USD 17 billion over the next 46 months in light of its decline in foreign exchange resources and the high cost of its imports as one of the largest countries in the world to import its food and the first importer of wheat in the world.

    IPS UN Bureau Report


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  • Americans’ faith in banks low after failures: AP-NORC poll

    Americans’ faith in banks low after failures: AP-NORC poll

    WASHINGTON — Only 10% of U.S. adults say they have high confidence in the nation’s banks and other financial institutions, a new poll finds. That’s down from the 22% who said they had high confidence in 2020.

    Following the collapse of Silicon Valley Bank this month, the poll from The Associated Press-NORC Center for Public Affairs Research also finds that a majority say the government is not doing enough to regulate the industry.

    The underwhelming assessment of America’s banks and bank regulation comes after a series of shocks brought back disturbing memories of the 2008-2009 financial crisis.

    Silicon Valley Bank, the nation’s 16th-biggest, failed March 10 after making risky bets in the bond market. Two days later, regulators closed New York-based Signature Bank, which had gotten involved in cryptocurrencies. Across the Atlantic Ocean, long-troubled Credit Suisse was acquired by rival UBS on Sunday in a shotgun marriage designed to restore confidence in global financial institutions.

    In the United States, the tumult has raised questions among policymakers about 2018 legislation that rolled back strict regulations put in place after the financial crisis.

    The poll suggests the U.S. public shares that concern: 56% say the government isn’t doing enough to regulate banks and other financial institutions, while 27% say it’s doing the right amount and 15% say it’s regulating too much. The worry about under-regulation is bipartisan: 63% of Democrats say current bank regulation is insufficient, as do 51% of Republicans.

    U.S. Marine Corps veteran Philip Metscher, 53, a stay-at-home father of seven in Sacramento, California, said he has little faith in bankers or the government agencies that are supposed to regulate them.

    “It’s like they have free rein to do whatever they want with money,’’ said Metscher, a Republican.

    The poll finds that in addition to the 10% of Americans saying that they have high confidence in the nation’s banking institutions, 57% do have some confidence; 31% have hardly any.

    Though confidence in banks and financial institutions has decreased even since the last time that question was asked on an AP-NORC poll in 2020, low confidence among Americans in their public institutions is nothing new — the General Social Survey, which has tracked trends in public opinion for decades, shows that confidence in institutions ranging from the financial industry to organized religion and from the news media to Congress has declined substantially since the 1970s. The new poll shows few Americans have high confidence in any branch of the U.S. government.

    There’s been little change in the already glum assessment of the U.S. economy since a month ago, before the recent banking system turmoil, the poll shows. Only a quarter say national economic conditions are good; three quarters call them poor.

    But 43% of Democrats call the economy good, versus just 7% of Republicans.

    About half of U.S. adults describe their personal financial situations as good, a drop from last year when about 6 in 10 said that. About 6 in 10 Democrats and about half of Republicans give positive assessments of their current finances.

    With a Democrat in the White House, Republicans are more likely than Democrats (36% versus 15%) to say their finances will get worse over the next year; 38% of Democrats say they expect their finances to improve, versus 22% of Republicans.

    Overall, about half of U.S. adults expect U.S. economic conditions to deteriorate over the next year. Again, there’s a political divide: About three-quarters of Republicans but only a third of Democrats expect the national economy to worsen.

    American households have been hit hard by inflation, which began to pick up in the spring of 2021. Adjusted for inflation, U.S. hourly wages have fallen for 23 straight months compared to a year earlier.

    “You never know what’s going on. It’s paycheck to paycheck,’’ said Metscher in Sacramento. “I’m looking at food prices, gas prices. It reminds me of being a kid growing up’’ during the high-inflation 1970s.

    Tyronda Springer, 28, a mother of two in Banks, Alabama, who works in a warehouse loading trucks, is struggling with the cost of living.

    “I get paid every two weeks,’’ she said. “One of my checks goes straight to daycare. The rest is what I have to use to pay the bills. It’s just ridiculous.’’ But Springer, a Democrat, blames businesses, not President Joe Biden or the government, for ratcheting prices higher. “The government can only do so much,’’ she said.

    In response to surging consumer prices, the Federal Reserve has raised its benchmark interest rate nine times over the past year, including by a quarter-point on Wednesday. But the rate hikes are putting a strain on banks. In fact, Silicon Valley Bank ran into trouble as higher rates pushed down the value of its investments in bonds.

    “It’s a financial house of cards,’’ said Bryan Martin, 49, of Westfield, New York, who works at a sewage treatment plant.

    “The Fed is stuck,’’ said Martin, who does not identify with either political party but leans Republican. The central bank has to raise interest rates to fight inflation, but higher rates are hurting the financial system. “These banks,’’ he said, “are starting to fail.’’

    Darlene Brady, 72, a retired nurse’s aide in Butler, Pennsylvania, has limited confidence in banks. Still, Brady, a Democrat, is not worried about her own bank savings, thanks to federal deposit insurance that covers up to $250,000.

    “I’m way below that,’’ she said. ___

    The poll of 1,081 adults was conducted Mar. 16-20 using a sample drawn from NORC’s probability-based AmeriSpeak Panel, which is designed to be representative of the U.S. population. The margin of sampling error for all respondents is plus or minus 4.0 percentage points.

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