Venezuela Leaves the IMF and the World Bank

What a way to celebrate Workers’ Day! President Hugo Chavez announced yesterday that Venezuela will withdraw from the International Monetary Fund (IMF) and the World Bank, effective immediately. Chavez explained that these institutions were instruments of American imperialism and proposed the creation of a Venezuela-funded regional bank to replace the IMF. He encouraged other Latin American countries, particularly those participating in his continental initiative ALBA, to join him in his endeavor.

The symbol is undoubtedly powerful. However, Venezuela had to clear its debts before leaving the IMF and the World Bank. Other countries not enjoying its oil revenues won’t have the same room for maneuvering. Furthermore, most of the Latin American debt is generally related not to the IMF but to private banks. Leaving the IMF will not solve the core issues. Finally, it is not obvious that the new regional bank, if it is established, will be more legitimate and democratic than the IMF and the World Bank. It will be so dependent on Venezuelan funds that Chavez will basically control it.