“I am not giving away any secret when I affirm that the worst consequences of the current international economic and financial order, which are deeply unfair, undemocratic, speculative and exclusive, hit developing countries harder,” said Cuban President Miguel Díaz-Canel Bermúdez. at the Palais de la Bourse in Paris, where a summit for a new global financial pact was held last week.
Hosted by French President Emmanuel Macron, the event brought together world leaders, international institutions and non-governmental organizations to discuss various issues including debt restructuring, international taxation and financing the fight against climate change.
“These two days have allowed us to reach a new consensus,” Macron assured at the final press conference. We have concluded with a document detailing a shared policy vision that will structure the path towards profound reform of international financial architecture and governance.”
The French leader acknowledged that the aim was to “build unity among members of the international community” in the face of the twin challenges facing the world today: “the fight against inequalities and climate change”.
There was self-criticism, but a lack of core proposals that would restore our belief that the culprits are suddenly becoming the saviors of the planet.
Photo: @Presidency
Special Drawing Rights
The final declaration reaffirms that in 2021, developed countries have met the target set in 2015 to transfer 100 billion of their Special Drawing Rights (SDRs) to developing countries.
SDRs are part of the universal financial architecture that maintains power. The instrument was created in 1969 to supplement the official reserves of the member countries of the International Monetary Fund (IMF) and with the aim of “timely” affecting the liquidity of international currencies.
Originally, the value of the SDR was backed by gold and the US dollar. In 1973, the institution replaced this exclusivity with a five-currency basket, a composition that is revalued every five years. It currently includes the US dollar, the euro, the Japanese yen, the British pound sterling and since 2016 also the Chinese renminbi.
In theory, SDRs provide access to international currency reserves and can be exchanged for foreign currencies. It is those in power who decide when and how much SDRs are allocated, which has only happened four times in history: between 1970 and 1972, when SDRs were introduced as a unit of account; between 1979-81; in 2009 to help recover from the 2008 financial crisis (at that time there was a special quota for countries joining the IMF after 1981); and the most recent in 2021, which was the biggest of them all.
Under this 2021 allocation, high-income countries (HICs) received nearly $400 billion worth of SDRs, middle-income countries (MICs) received $230 billion, and low-income countries (LICs) received just $21 billion. Dollar.
IMF experts acknowledged that this unprecedented issuance of SDRs was intended to help the most vulnerable countries “manage the impact of the Covid-19 crisis” and that HICs are unlikely to have used much of the SDRs allocated. Faced with this reality, several business groups, including the G7, called on the international financial institution to on-lend some of these SDRs to the countries that need them most (MIC and LIC).
At the summit on the new global financial pact in Paris, the nations of the underdeveloped world, represented by Cuban President Miguel Díaz-Canel Bermúdez in his capacity as interim president of the Group of 77 plus China, acknowledged that “they have seen”. Their external debt has nearly doubled over the past decade and they had to spend $379 billion of their reserves to defend their currencies in 2022, nearly double the amount of new SDRs the IMF has allotted them.”
The voice of the South was also represented by Lula da Silva and Gustavo Petro, Presidents of Brazil and Colombia, who agreed that fundamental changes are needed for our countries to achieve the Sustainable Development Goals before 2030, one of the international Community agreed goal and that is obviously being ridiculed.
And Díaz-Canel made it clear: “Our peoples cannot and should not continue to be laboratories of colonial recipes and renewed forms of domination, using debt, the current international financial architecture and unilateral coercive measures to perpetuate underdevelopment and increase the treasury of the few at the expense of the south”.