Photo Jonathan Blair

Wednesday, May 2, 2012

Flaherty and the IMF: taking the "emergent" side?

This one could be bigger than it looks. Jim Flaherty, Canada's Finance Minister, has just published an op-ed in the Daily Telegraph where he directly targets European governments. Title: The eurozone should sort out its own mess.

He bluntly criticizes their excessive weight in IMF decisions, and the special treatment they get as a result, which he frames primarily as a question of fairness: "We cannot avoid the question of fairness. Eurozone members benefit from increased exports and price stability. Spreading the risks of the eurozone around the world, while its benefits accrue primarily to its members, is not the way to resolve this crisis. We cannot expect non-European countries, whose citizens in many cases have a much lower standard of living, to save the eurozone."

There may be consequences for Canada in Europe--beginning with the Free Trade agreement currently in negotiation-- but Flaherty's feistiness also opens up interesting possibilities for new alliances in global governance circles, because he explicitly links Europe's excessive weight with the need to give more power to emerging countries: "Emerging markets play an increasingly important role in global economic issues. Canada has been a leader in recognising changing international dynamics and advocating greater representation of emerging markets at the IMF. In this context, we believe that measures should be taken to ensure that major decisions about resources dedicated to Europe require more than a simple majority.” With Stephen Harper telling his caucus, at roughly the same time, that Canada should align with the economic winners, you almost have the basic tenets of a major reorientation of the country's foreign policy.

At the forthcoming G20, next June in Los Cabos, Mexico will be inviting two of Canada's closest partners in the Americas, Chile and Colombia. The current flare over the IMF will certainly be on the minds of the European governments present. A little push from them, and more pull from Mexico and Latin friends and suddenly, the whole emphasis of this government towards Asia and Latin America could start to have concrete diplomatic implications.

A turning point?

Tuesday, May 1, 2012

Disciplining pseudo-private companies in Brazil: After Vale, Embraer...

Last Spring, the Brazilian government god rid of mining giant Vale's CEO Roger Agnelli. The government, keen on keeping employment high, disagreed with his attempts to cut costs, including through workforce reductions. Now, Vale used to be state-owned, but it was privatized in 1997, to the dismay of many Brazilian nationalists. As with many of the privatizations that took place during Brazil's liberal turn, however, things were not quite what they looked like: the government, directly through equity ownership, or indirectly through the pension funds it controls and through its national development bank (the BNDES), kept effective control of the company.

Since January, a similar clean-up has been under way in another of Brazil's half-privatized industrial jewels. No less than eighteen of Embraer's top executives have left the company over the last six months, including its President since 2007, Maurício Botelho, the man widely credited with turning the little loss-making local aircraft producer into the third largest aeronautic company in the world. Once again, disagreements with the government about company strategy appear to have been behind the changes. Apparently, as push came to shove, the government used its various channels of ownership to get the changes it wanted.