Wavering IMF adds to investor uncertainty
Latin America faces what one analyst calls the worst period in its economic history since the middle of the 19th century. The decade of reform appears to be ending with little having been achieved. Political crises abound. Much needed foreign capital is drying up. And those looking to the IMF for salvation are likely to be disappointed.
It is July, and Adam Lerrick is on a roll. The conservative Carnegie Mellon economics professor and adviser to the US Congress is saying that Brazil is no different to United Airlines: in neither case should public money bail out private creditors. Brazil is "a political problem which has economic consequences" he says, and although the Brazilian people are perfectly free to elect a leftist as president, it's not the job of the IMF to step in and provide enough money to minimize those consequences.
"The new IMF, the new US Treasury, no longer have any sympathy for the idea of large-scale bailouts," Lerrick says. If and when the next Brazilian administration starts implementing fiscally responsible policies of its own accord, then and only then should the IMF step in to help reduce the cost that ordinary Brazilians must pay.
Three weeks later, the new IMF is a thing of the past - if it ever existed in the first place.