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Rutgers Model United Nations - Institute for Domestic and ...

Rutgers Model United Nations - Institute for Domestic and ...


Rutgers Model United Nations 9 1997 East Asian Financial Crisis that were continuing to flow through Russia in 1998. The IMF set up an unorthodox temporary exchange rate peg to anchor the economy through the turbulent times ahead. The exchange lasted until 2001, when the pegged currency became untenable and the IMF was ready with loans to support the transition back into floating currency. 11 Also during this time, Brazil attempted to devalue its currency by un-pegging the real from the US dollar. The real plummeted and interest rates soared as yet another country fell victim to the repercussions of the Asian financial crisis. While this crisis did contain major inflation and began a recession in Brazil, it was a relatively minor crisis. Thanks to the strength of the Brazilian economy and their place as one of the biggest economies of South America, the country recovered rather quickly as the real found a new market mean that was representative of their economy. The currency stabilizations loans and advice of the IMF and U.S. to keep interest rates high, however, were also a big part of the success in combating the real crisis. 12 2001: Argentinean Financial Crisis The Argentinean government, long since involved with the IMF, was too deeply entrenched with the Fund to figure out a workable solution to their problem when financial panic hit the country full-force in 2000. The recession began in 1999 after Russia’s default and the Brazilian real crisis. Previous to their financial crisis, Argentina had been a model, a country to which the IMF often pointed as a success. The root of the Argentinean crisis was politics, however. None of Argentina’s politicians were ready to admit that the country was reliant on foreign money, had an overvalued currency, and were rapidly spending their reserves. The economic contraction that would have followed had they acknowledged these problems was not something with which the Argentinean 11 Ngaire Woods, Understanding Pathways Through Financial Crises and the Impact of the IMF: An Introduction, Global Governance; Oct-Dec2006, Vol. 12 Issue 4, p373-393, 21p 12 Hoover Institute, The IMF Crisis, Date Accessed 4/23/08,

Rutgers Model United Nations 10 politicians were willing to be associated. So the politicians backpedaled desperately, and they fell further and further into debt as the Argentinean peso continued to strengthen based on a lack of information about their economic pitfalls. When the economic contraction began, the Argentinean government ceased generating tax revenue, revenue that was necessary to pay previous loans, and the IMF had to step in again. Yet the IMF was paying off old loans of its own to Argentina, and a vicious money-cycle began. Things became so bad that Argentina began to issue quasi-currencies that were essentially glorified IOUs. The Crisis came to a formal close in 2005 when then-President Kirchner, with help from Venezuela’s Hugo Chavez, paid off all IMF debts, and the country, free from structured loans, began to rebound. 13 2007: Chavez Announces Banco de Sur In 2007, Hugo Chavez, president of Venezuela, announced his plans to launch a “Banco de Sur” to directly compete with the IMF and World Bank. Chavez has often decried the lending institutions as pawns of the United States. Brazil and Argentina, frequent critics of the IMF, were quick to lend their support to Venezuela in this plan. 14 Actors and Interests The International Monetary Fund (IMF) In response to the end of the Second World War, the victors of the global conflict established the International Monetary Fund. In 1944, at the Bretton Woods Conference, countries saw the IMF as a way to combat the global currency instability and inconsistencies that had contributed to the worldwide economic depression in the 1930s. The IMF is currently based in Washington D.C., has 185 member countries, and is loosely affiliated with the UN. The IMF also has twenty-four executive directors who 13 Anna Gelpern, Brad Setser, Pathways through financial crisis: Argentina, Global Governance; Oct-Dec2006, Vol. 12 Issue 4, p465-487 Academic Search Premier. 14 A World Bank Challenger. Time, 0040781X, 7/2/2007, Vol. 169, Issue 27, Academic Search Premier

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