Seven reasons why Rodrigo Rato is wrong for the IMF Barcelona Business John Barrass April 16, 2004 A two-horse race is afoot: a new head of the International Monetary Fund (IMF) is needed. The post fell vacant when Horst Koehler resigned on 4 March to stand for German president in the May elections. The two favourites for his successor are president of the European Bank for Reconstruction and Development, Frenchman Jean Lemierre, and former Spanish economy minister Rodrigo Rato. EU competition policy commissioner Mario Monti was also suggested for the job, but his firm treatment of large US companies in Europe has almost certainly discounted him. The matter is one of some urgency: IMF-World Bank meetings in Washington are due on 24-25 April. Why a European anyway? In a gentleman’s agreement strongly criticised by Moises Naim, editor of the magazine Foreign Policy last month, since their constitution at the end of World War II, the president of the World Bank has always been an American while presidency of its sister organisation the IMF has been held by a European. Developing countries’ entire economies can rise or fall on an IMF loan, and even the UK needed bailing out by the Fund in its worst recession years. See http://www.imf.org for an overview of the institution. How are the Lemierre-Rato factions shaping up? According to the German weekly Der Spiegel, Germany is willing to aid Lemierre’s candidacy in exchange for French support to a German, probably Günther Verheugen, for the post of the EU commissioner for economy, competition and industry. Luxembourg, Belgium, the UK and all 16 Latin America countries except Chile have voiced support for Rato. The natives are restless Gordon Brown, UK Chancellor of the Exchequer and chairman of the IMF’s international monetary and finance committee, has been asked to elicit the views of non-EU countries. He will be opening a can of very wriggly worms: in late March over 100 nations issued a joint statement of discontent with the traditional selection process, demanding that all members of the board be fully involved in the process, that they have a range of nominees to choose from, that the nationality of potential nominees should not be considered, and calling for an open and transparent process. African countries are particularly vociferous in their objections to the current selection process, as is Russia. Even if the process remains a closed shop, there are strong objective reasons for rejecting Rato, itemised below. - Rato does not have the foreign language skills to directly negotiate complex issues with his European peers, who generally speak good, often impeccable, English and French. - Short of the odd foray into Latin American affairs and some ECB lobbying, Rato has not worked in the international arena. - His ministerial record in regulatory matters is atrocious. The CNMV stock market watchdog was eventually purged long after a series of scandals had surfaced. Known infractors such as inside-dealer Cesar Alierta were promoted rather than censured. Proven monopoly abuses were tolerated and regulations were drawn up to exclude legitimate competitors, notably in satellite broadcasting. - Rato has suspect academic credentials. Last year he was awarded a PhD by Madrid’s Complutense University. This was not an honarary doctorate, but the deserts of a Rato ‘thesis’ which appears to do nothing more than affirm the mechanism of falling tax levels leading to higher tax revenue by stimulating the economy. This is neither new nor original – Professor Art Laffer, a Reaganomics advisor, formulated the mechanism over 20 years ago when he gave the world his Laffer Curve. Unlike a Spanish ‘masters’, a doctorate must conform to international standards of academic rigour, and generally requires six years of full-time research. Where did Rato find the time? - He is allegedly a crook. One of Rato’s family firms received a large unsecured loan from HSBC in Madrid during the period when the bent Gescartera brokerage was using the bank as part of its illegal operations. Rato was economy minister at the time. - He has colluded in the perversion of justice and parliamentary procedure. Rato refused to offer an explanation of his involvement in the Gescartera network, and his party colleague Maria Luisa Fernanda Rudi, the parliament’s speaker, blatently misinterpreted the constitutional clause requiring MPs to disclose their extra-parliamentary interests to protect Rato from questioning. - His position regarding Latin America is far from disinterested. Large Spanish companies in South America with key utility concessions – principally Telefónica, Repsol YPF and Endesa – and BBVA bank all have presidents either appointed by or known to be close to Rato’s Partido Popular. Rato would find it difficult to take an impartial view of issues such as monopoly abuse and tariff-setting. While Rato’s IMF candidacy is supported by Latin American leaders, their citizens regularly target Spanish multinationals for criticism and demonstrations. Return to IMF Assessment Project Return to main AdTI page