The article incorrectly said that Ecuador's government declared the International Monetary Fund's representative in that country "persona non grata." The designation was leveled against the World Bank representative. Ecuador's government asked the IMF representative to leave the premises of the Central Bank, where the fund's office was located. The fund says its financial problems contributed to its decision to leave Ecuador.
Latin America Appears to Warm to IMF
Tuesday, April 28, 2009
QUITO, Ecuador -- Few guests have felt so unwanted in Ecuador as the International Monetary Fund.
The country's president regularly vilifies the Washington-based multilateral organization as an arm of imperialism, and the fund's representative here left after being declared persona non grata.
But with Ecuador hit hard by the worldwide economic crisis, the government has quietly resumed talks with IMF officials, mirroring a trend in Latin America as one country after another overlooks the fund's sometimes ignominious reputation in the region to seek its assistance.
Ecuador still publicly shuns the IMF as President Rafael Correa's government openly seeks help from China and small multilateral lenders. But for the loans Ecuador needs -- economists say as much as $2 billion to alleviate a crushing $3.5 billion trade deficit -- the Correa administration may be forced to go to the IMF, which has the ability to make large loans fast. Economic Policy Minister Diego Borja has met with fund representatives in Washington and held videoconference calls with its officials, according to economists in the capital of Quito who are familiar with the country's efforts to deal with the crisis.
"It's perfectly logical that they meet with the fund," said Ramiro Crespo, president of Analytica Securities, an investment bank in Quito. "And the fund is trying to accommodate itself to Ecuador."
Flush with money and a new leadership, the fund has revamped its loan requirements to make it easier for countries, particularly those the IMF judges to have sound economic policies, to borrow. The policy is being watched especially closely in Latin America, both because of the broad scope of the loans and the once-prickly relationship the fund had with many countries here.
Nicolás Eyzaguirre, the fund's Western Hemisphere director, described a nimble organization more focused on helping countries avert crisis and strengthen investor confidence than offering condition-laden bailouts.
"If we are willing to put our money where our mouth is, investors should not fear," said Eyzaguirre, a former Chilean finance minister. "The fund could step in, if the countries want, with our money -- and it's a wall of money."
With commodity prices bolstering national treasuries, the IMF's loans to Latin America fell from $48 billion in 2003 to $803 million last year. This year, Colombia, Costa Rica, El Salvador and Guatemala are already in the pipeline for loans, and Mexico is receiving $47 billion.
Eyzaguirre said the fund hopes to appeal by stressing "prevention rather than cure," which in the past came with what some countries considered harsh structural adjustments to their economies.
The question many economists are asking is whether an organization that had become a punching bag for some Latin American leaders is implementing enough changes to attract countries such as Argentina, Bolivia and Ecuador, whose governments publicly severed ties with the IMF.
"This would be an opportunity for both sides to show that the IMF can be a different kind of institution than what it was in the past, instead of being so much of a policeman for the rich countries," said Nora Lustig, an Argentine economist teaching at George Washington University.