Relations with IMF: India and Brazil Must Let Go Of The Past

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December 16, 2009

by Oliver Stuenkel

When India’s Finance Minister Pranab Mukherjee and his Brazilian counterpart Guido Mantega announced, during the IMF’s annual meeting in Istanbul in October, that India and Brazil would both lend $ 10 billion to the International Monetary Fund, it symbolised, more than anything, both countries’ transition from developing country to global player. Brazilian and Indian policymakers now face the difficult task of leading their respective societies through a conflict of identities that pits traditions, loyalties and long held beliefs against a new and unfamiliar set of challenges their new status brings with it.
Over the past decades, the IMF’s involvement has left more scars on Brazil and India’s identity than many Western analysts like to believe, and a dependency and perceived victimisation by the IMF has played an important role in shaping the way Brazil and India perceive themselves. The fund has also helped sustain an anti-Western, third worldish discourse among policy makers in both countries.

Power houses
NOW, the tables have turned: both countries have repaid their debt and become economic power houses, and their new status as lenders to the IMF puts them in a bind: Governments can no longer blame the evil imperialist institutions for domestic ills. But worse still, as their voting share in the fund increases, Brazil and India have to assume responsibility, and they suddenly find themselves in the shoes of the troublesome meddlers they so despised in the past. How do Brazil and India, having only recently emerged from IMF tutelage, deal with their past as developing countries, now that they themselves intervene, through the IMF, in poor countries?
Given the trauma both countries have suffered during IMF tutelage (Joseph Stiglitz once remarked that India’s agreement with the IMF in the early nineties was comparable to the surrender of the Maharajas to the British), it seems quite surprising that the Singh and Lula governments were so keen to embrace these very institutions in the first place. After years of what even moderate politicians have called “humiliating” interaction with the fund, engaging with it as a lender is a sign of mature and rational policy making. Brazil and India have both realised that the world needs a credible lender of last resort, and that rather than shunning the fund, it is Brazil and India’s responsibility to make the IMF more legitimate and effective. They thus prove to be much more serious and sophisticated actors than the rabble rousers in Venezuela and Iran, who give little thought to the system-wide implications of their policies.
This change of heart is particularly remarkable considering that Lula’s entire ideology is based on the confrontation between rich and poor, both domestically and on the international level. Only ten years ago, lending money to the IMF would have been considered treason among members of Lula’s Workers’ Party (PT).

This is not to say, however, that Brazil and India will uncritically assume a Western, pro-IMF mindset, nor does it mean that old identities are given up easily. Policies may change quickly, but traditions, deeply held convictions and loyalties linger. Brazil and India are, therefore, in the delicate position of lending money to the IMF, while holding on to memories of their struggle against the fund’s legendary arrogance.
President Lula embodies this dilemma better than anyone. Only days after announcing the historic move of lending money to the IMF, Lula talked himself into a rage during a rally, bawling that “those institutions (…) knew everything when we had a crisis, but they don’t know anything when the crisis is happening over there (in the rich world)”. Or at least, he speculated, “it is not permitted to give their advice in such an arrogant manner”. In India, this almost schizophrenic mindset manifests itself in an increasingly realist, big power strategy (which includes considerable meddling in Afghanistan), sprinkled with an archaic, Nehruvian- idealist rhetoric (according to which promoting democracy abroad is out of the question).
As both countries continue to grow, their identity will most likely be neither that of a developing country, nor that of today’s developed countries. Yet, it would be too easy to simply predict that Brazil and India will create their own, unique category. They will be, like all others, subject to the same rules of nature. If Brazil and India want to play in the league of big powers, they will have to, at times, step on the smaller countries’ toes. “If you’re in a bathtub with an elephant”, Harvard’s Graham Allison once said, “it may be uncomfortable, no matter how nice the elephant tries to be”. Taking a position in Afghanistan, the Middle East, or simply in the IMF’s Board of Directors about a controversial loan will cause some smaller players to criticise Brazil and India in the same way Brazil and India once denounced the United States. This transformation process will require vision, the willingness to move out of the comfort zone, and, above all, courage to be disloyal to long-held convictions.

The writer is a Visiting Professor of International Relations at the University of São Paulo and a Fellow at the Global Public Policy Institute in Berlin.

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