Uruguay escapes IMF debt-and-conditions trap
17 November 2006
Uruguay has become the latest Latin American country to flee the International Monetary Fund (IMF) debt-and-conditions trap, by paying off all its outstanding debt to the IMF.
Uruguay had already made early repayments of some of its debt to the IMF, and in November 2006 announced that it was paying off the remaining US $1.08 billion which it was due to pay off over the next five to ten years. The debt comes from a loan made by the IMF in 2005; the early repayment frees Uruguay from the need to stick to the rigid policy conditions set by the IMF as a condition of the original loan. Uruguay’s Finance Minister said that it would remain 'friendly' with the IMF, but said that from now on "we'll be exchanging ideas and suggestions." Countries in debt to the IMF have long complained that, far from exchanging ideas, the IMF uses its position of power to impose its favoured policies.
The decision puts Uruguay in a similar position to other Latin American countries, including Brazil and Argentina, which have also paid off debts to the IMF early in order to escape from the conditions that the IMF imposes on its debtors. Conditions have included, for instance, requirements that countries cut back their public spending, privatise public industries, or liberalise their banking sector. These conditions undermine democracy by taking decisions away from governments and parliaments – and have often been imposed in completely inappropriate circumstances, with terrible results for the poorest people.
These conditions are just as much – or even more – of a concern for the most impoverished countries as they are for the larger middle-income countries of Latin America. But the poorest countries do not have the resources available to pay off the IMF. That is why Jubilee Debt Campaign is calling on the rich world not only to cancel all unjust and unpayable debts, but also to cut the strings attached to debt cancellation.
Debt cancellation for poorest Latin American countries
20 November 2006