November 2004

Walden Bello
University of the Philippines
Focus on the Global South
Phipinnes

Subject: Comments on Oscar's Proposal for an International Debt Arbitration Board

Thanks to Oscar for a fine paper that serves as a really good point of departure for the discussion.

The following are some points designed to strengthen the paper for the June 2005 conference.

I think it would be good for Oscar to compare his proposal of the IBASD with other proposals such as those of the IMF’s. Ann Krueger and George Soros (On Globalization, New York, 2002), showing points of convergence and divergence in order to show why and how the IBASD is a superior mechanism. There are, of course, others, such as various proposals for a World Financial Authority,・and it would be good to touch on these, but I think a detailed comparison with the Krueger proposal will be useful. For instance, one question that could be addressed is whether it is appropriate to consider countries like enterprises when it comes to debt crises and apply Chapter 11-like measures to them, which seems to be the model guiding the Krueger approach and some others?

It would also be important to show how the IBASD would approach different countries differently depending on their developmental status, debt load, and ability to pay. Should Argentina, for instance, be treated differently from Ethiopia? Why? How? I guess this would address one of the key issues that was never really addressed by the HIPC initiative why some countries were eligible for debt forgiveness but others were not. Related to this, should total or partial debt cancellation be an option considered by the IBASD? If yes, under what conditions?

If one key objective is that creditors must bear part of the responsibility for debt crises, what considerations would guide this, and how would it be operationalized? Is odious debt going to be a central consideration? If so, what will constitute odious debt?

Very important, how do we operationalize ecological debt in concrete processes of debt renegotiation?

What would be the role of the IMF and World Bank and other institutions, for instance, UNCTAD in the new international financial architecture centered on the IBASD? Also, should there be a role for regional financial institutions like the Asian Monetary Fund proposed during the Asian financial crisis? Of course, this would move into territory that would be covered by the coming CTT paper, but I think one cannot but tackle some of these issues e.g., capital controls--when coming up with proposals to deal with sovereign debt.

I think it would also be very important not only to deal with institutional mechanisms but also with the context of real power relations at a global level. For instance, how can we convert Argentina’s successful defiance of bondholders and the IMF into something that can increase the leverage of developing country governments in debt negotiations? How can we translate it into the creation of debt cartels that would alter the balance of power in debt renegotiations and affect the actual processes in the IBASD?

Well, these are a few suggestions towards strengthening the paper. And again, we should thank Oscar for providing us with a very good point of departure.