G-24 calls for North-South dialogue on new global financial system
CARACAS, Feb - The Group of 24 developing nations ended a three-day meeting from February 7 to 9, 1998 in the Venezuelan capital with a call for a North-South dialogue to create a model for a new international financial system.
The G-24, which is the counterpart in Washington of the Group of 77, said such a system should not only meet the needs of today's globalised world economy but also prevent the recurrence of crises such as one now devastating Asia.
''It is time to create a new paradigm'' in the international financial system, said Antonio Casas, the current head of Venezuela's Central Bank.
The model which emerged 52 years ago in Bretton Woods ''has systemic defects'' and was born to address a situation that differed enormously from today's realities, he said.
The newly elected Chairman of the Group of 24, Mr. Abdel Krim Harchaoui, Minister of Finance of Algeria, underlined that the South believed it was not the time for confrontation, but rather for ''harmonious dialogue between industrialised and developing countries,'' because the crises generated by the current system had an impact on everyone - including those that arise in the South.
''The Asian crisis has clearly and convincingly demonstrated that the economic activity of developing countries has a decisive influence on the global economy and also affects industrialised countries,'' said Casas.
Casas, who chairs the G-24 until April when the year-long rotating chairmanship goes to Algeria, said the call for direct dialogue with the governments of industrialised nations was not a vote of mistrust against the work of the International Monetary Fund (IMF) and World Bank.
''The gravity of the situation has forced us to take this step,'' he explained.
The G-24, which represents the G-77 in the Bretton Woods institutions based in Washington, D.C., consists of Algeria, Argentina, Brazil, Colombia, Congo, Egypt, Ethiopia, Gabon, Ghana, Guatemala, India, Iran, Ivory Coast, Lebanon, Mexico, Nigeria, Pakistan, Peru, the Philippines, Sri Lanka, Syria, Trinidad and Tobago and Venezuela. Yugoslavia, the 24th member, no longer participates in G-24 meetings.
Lal Jayawardena, economic adviser to the Sri Lankan government, said it would be more beneficial for the economies and populations of the world to engage in ''a global dialogue'' than to push for a series of changes.
Jayawardena said the Caracas Declaration II which emerged from the three-day gathering marked a juncture as significant for the G- 24 as the statement which arose from the group's first meeting here in 1972, held in response to the international crisis triggered by the U.S. abandonment of the gold standard.
The origin and effects of the Asian crisis have turned it into the worst debacle for the international financial system since that time, said Brazil's Ricupero.
The Caracas Declaration II says: ''The Asian crisis threatens to generate deflationary influences throughout the world.''
Casas, meanwhile, called for an end to ''short-sighted selfishness,'' and urged comprehension that the situation required collective measures in which public and private creditors must actively participate.
Casas stressed the alarm caused by the negative signs in the world economy and trade in the wake of the East Asian crisis, especially due to that region having been one of this decade's main engines of economic growth.
In order to prevent economic slowdown at a global level, ''a new architecture for the international financial and monetary system'' is needed, Casas maintained.
The Final Declaration adopted by the G-24 states that ''sound macroeconomic policies, transparency in the working of public institutions, and good governance are essential,'' adding that the ''prime responsibility for development and poverty reduction in the developing world continues to rest with the peoples, institutions and governments of the developing countries themselves.''
Casas said it made no sense to blame others for the failure to prevent, and later resolve, the crisis in view of the fact that the lessons from previous crises - the 1980s debt crisis in Latin America and the 1994-95 Mexican debacle - were ignored.
The defects are inherent to the system, he contended, adding that ''uncertainty remains while confidence is absent, in a situation that highlights the risks of globalisation more than its benefits.''
The G-24 has proposed the creation of a joint North-South task force to study today's new realities, gauge their implications for the world's economies and adopt international financial institutions to the new paradigms.
In the declaration, the G-24 says such a review is ''urgently'' needed.
Larralde said the Caracas Declaration II would be sent to all industrialised nations. Current discussions with Britain will also be stepped up with the aim of putting the proposal on the agenda of the May summit of the Group of Seven (G-7) industrialised countries. The summit is being hosted this year by Britain.
''The G-7 is one of our main targets-- but it is not the only one. We are not interested in an exclusive dialogue'' with that bloc, said Larralde.
Six specific points were laid out in the Declaration for a ''wide-ranging review'' by a task force.
The first is the need to analyse ''the capacities and modalities of the international monetary and development finance institutions to respond in a timely and effective manner to crises induced by large-scale capital movements.''
The Declaration also calls for discussions on ''the appropriateness of the conditions prescribed by these institutions to deal with such crises'' and ''the equitable sharing of post-crisis financial stabilisation between private creditors, borrowers and governments.''
Another element to be debated is the establishment of ''more effective surveillance of the policies of major industrialised countries affecting key international monetary and financial variables, including capital flows.''
The task force should also review ''the modalities for building domestic social safety nets as integral elements of stabilisation and adjustment programmes to protect the most vulnerable elements of the population of crisis affected countries.''
Lastly, the G-24 calls for ''increased representation and participation of developing countries in the decision-making organs of the international community, to properly reflect the developing countries' growing influence in the world economy, including the revision of the bases for determining the voting power in international financial institutions.''
African, Asian, Latin American and Caribbean nations have long demanded that their quotas in international lending institutions be increased, in order to give them greater decision-making power, given the fact that 10 countries currently control 54 percent of IMF votes.
The decisions of the G-24 meeting were conveyed to the annual meeting of the IMF and World Bank held recently in Washington D.C. The Chairman of the Group of 77 in New York, Ambassador Makarin Wibisono of Indonesia, addressed the annual meeting of the G-24 in Washington, D.C.