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2022 | OriginalPaper | Chapter

9. Alternatives to the International Monetary Fund in Asia and Latin America: Lessons for Regional Financial Arrangements

Authors : William W. Grimes, William N. Kring

Published in: South—South Regional Financial Arrangements

Publisher: Springer International Publishing

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Abstract

This chapter presents a comparative analysis of the background, governance and economic impacts of two existing short-term liquidity mechanisms, the Chiang Mai Initiative Multilateralization (CMIM) and the Latin American Reserve Fund (referred to by its better-known Spanish acronym, FLAR—Fondo Latinoamericano de Reservas). We find that the structures of regional financial institutions as well as the amount of resources available to member countries are contingent on regional dynamics, the economic characteristics of members and members’ reluctance to approach the IMF for short-term balance-of-payments support. This study offers an up-to-date assessment of the two RFAs, based primarily on on-site interviews with their respective staff members, regional government and central bank officials, and scholars. Those interviews, conducted in 2016, revealed how, in the wake of the 2008 financial crisis, RFAs advanced efforts to improve their internal research capacity, develop strategic alliances and increase the resources available to their members.

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previous chapter Toward a Regional Financial Architecture: The East Asian Experience with a Focus on Defense

next chapter Conclusion

Much of the history outlined here is drawn from Grimes 2009 and 2012.

There are many scholarly and popular journals that make this argument. The IMF’s own review (IMF 2003) offers perhaps the best account of the rescue packages’ flaws, although it understandably chooses not to level a wholehearted attack on the IMF as an institution, as does Stiglitz (2002), for example.

Kawai (2015: 6), for example, takes at face value the moral hazard concern, while Lee (2008) argues strongly that United States resistance to the AMF proposal was political in nature.

See Hill and Menon (2012),one of the few to offer even minimal details on the ASEAN Swap Agreement.

See Grimes (2009) for the most complete account of the workings of the original CMI.

Authors’ interviews (in August 2016) with those involved in discussions on the creation of the Andean mechanisms.

Ironically, Colombia utilized the mechanism four times.

See: http://flar.net/about_us/objetivos.

This section draws from interviews, published works (Grimes 2009, 2011, 2012, 2015; Siregar and Chabchitrchaidol 2013; Pardo and Rana 2015), ASEAN+3 finance ministers’ statements and other official documents from the AMRO website (http://www.amro-asia.org).

Much of the discussion of institutional and procedural characteristics of AMRO is based on interviews with AMRO officials, government and central bank officials, and scholars, in research trips to Tokyo and Singapore in June, July and August 2016.

The FLAR issued three balance-of-payments loans to Ecuador in the amounts of $480 million (2009), $515 million (2012) and $617.58 million (2014), and to the Bolivarian Republic of Venezuela in the amount of $482.5 million (2016). It also issued a liquidity loan to Ecuador of $156.46 million (2016).

The IMF also issued $364 million to Ecuador in 2016 as emergency assistance through the Rapid Financing Instrument, but this was not for balance-of-payments support.

China’s overall financial contribution and voting share is formally split between the People’s Republic of China and Hong Kong (China), reflecting a compromise between China and Japan over shares. However, Hong Kong does not vote independently from China. To reduce unnecessary complication, this report refers to the combined role of the Peoples’ Republic of China and Hong Kong (China) as “China.”

The ASEAN-5 are the five original ASEAN members (Indonesia, Malaysia, Philippines, Singapore and Thailand), which are also the region’s largest (on a nominal basis) and most open economies.

See IMF Governance Structure at: https://www.imf.org/external/about/govstruct.htm.

Interview with Carlos Giraldo, FLAR’s Director of Economic Studies.

AMRO is a new and understudied organization. This paper appears to represent the first scholarly description of its organizational and procedural characteristics. Since AMRO has not yet issued its first publicly available annual report, this study relies heavily on interviews with current and former AMRO officials.

Author interviews at FLAR in August 2016.

For the time being, AMRO is likely to have to rely on IMF guidance, as it lacks the institutional resources and experience to independently determine the needs of a requesting member. It is also likely, even going forward, that in at least some cases, CMIM funds will be provided along with IMF funds, whether via a precautionary and liquidity line or a stand-by arrangement.

See IMF Rates Query at: http://www.imf.org/external/np/fin/data/queryoutput.aspx?origin=imf-finances (accessed 16 September 2016).

For more details, see Copelovitch 2010, Vreeland 2007, Ban and Gallagher 2014, Broome 2015, Ban 2015, Chwieroth 2010, and Grabel 2011.

Author interview with FLAR staff, August 2016.

The FLAR issued four balance-of-payments loans to Ecuador, for $400 million (2005/2006), $480 million (2009), $515 million (2012) and $617.58 million (2014) and one balance-of-payments loan to the Bolivarian Republic of Venezuela for $482.5 million (2016). It also issued a liquidity loan to Ecuador for $156.46 million (2016).

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Title: Alternatives to the International Monetary Fund in Asia and Latin America: Lessons for Regional Financial Arrangements
Authors: William W. Grimes
William N. Kring
Publisher: Springer International Publishing
Book: South—South Regional Financial Arrangements
Print ISBN: 978-3-030-64575-5

Electronic ISBN: 978-3-030-64576-2

Copyright Year: 2022
DOI: https://doi.org/10.1007/978-3-030-64576-2_9