The IMF and World Bank Creative ways to not help developing countries The World Bank Promotes long-term development and poverty reduction Works on specific projects, like building schools, providing water/electricity etc. Get funding through selling bonds, interest on loans and member nations contributions Discussion What benefits would the World Bank have over individual countries giving aid? What are some disadvantages to a World Bank giving aid? Problems When individual countries give aid it is rarely altruistic, US food aid is used to subsidize US farmers Water Wars in Bolivia caused by the World Bank Bolivia World Bank wouldn't renew a $25 million loan to Bolivia unless they privatized water service in certain regions Reason was the local government was not capable of creating an efficient water service Rates increased 35% and communal wells were given metres Discussion How else could the project be salvaged? What would be reasonable conditions to attach to aid? In the Bolivian case since there was little return on the loan, privatization was seen as an alternative International Monetary Fund (IMF) Help countries to build and maintain strong economies Provides short term loans so that countries can pay their debts (see Greece) Gets funds from member nations and interest on loans SAPs With these loans there is usually economic conditions that the recipient country must follow Usually include trade liberalization, deregulated financial sector and privatization In 1982 Mexico defaulted on its loans, the IMF loan included a SAP, as a result the economy was stagnant for 10 years Discussion What are the consequences when a country defaults on their loans? Who is the IMF really serving?