Tags: IMF | Future

Carstens Questions European Leading the IMF

Tuesday, 14 Jun 2011 12:00 AM

 

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Mexican central banker Agustin Carstens said Monday that the next leader of the International Monetary Fund should not be European because those nations are borrowing heavily from the lending organization. But he also acknowledged that his own bid was a long shot.

Carstens pressed his candidacy to head the IMF during a speech at the Peterson Institute for International Economics, a Washington think tank.

European officials have closed ranks behind French Finance Minister Christine Lagarde, who has emerged as the front-runner. Carstens acknowledged the steep challenge he faces, saying the chances of Lagarde winning the job are "quite high."

Carstens he said it was important for developing countries to have a choice in the election. He made the point that Lagarde's candidacy would create "conflicts of interest" because Greece, Ireland and Portugal are borrowing heavily from the Fund. And while he may not succeed, he said he hoped his candidacy would pave the way for emerging market candidates in the future.

"If we want to have an open and unbiased process, we need to present candidates," he told an audience of more than 100 policymakers and economists. He also met with Treasury Secretary Timothy Geithner earlier in the day, but said Geithner did not endorse his candidacy.

A European has traditionally headed the IMF and an American has led its sister organization, the World Bank. Developing countries have long complained about the arrangement, which dates back to the end of World War II.

The IMF, which lends money to countries in financial difficulty, is seeking a new managing director to replace Dominique Strauss-Kahn. He resigned last month after his arrest on sexual assault charges. Strauss-Kahn has pleaded not guilty. The Fund's 24-member executive board plans to make its selection by June 30.

Lagarde consolidated her lead over the weekend by receiving endorsements from Indonesia and Egypt, a sign that her support extends beyond Europe. Carstens is far behind.

A press release issued Monday by the IMF said the selection process is down to two candidates, Lagarde and Carstens. It did not mention Stanley Fischer, an Israeli central banker who declared his candidacy for the top job on Saturday.

"The writing is on the wall," said Eswar Prasad, an economist at Cornell University and former IMF official. "I don't see any plausible scenario where Carstens can rally enough support to get the job."

In fact, some speculate that Carstens could be laying the groundwork for a future run at the job, or another top position.

"A credible run ... would certainly raise his profile in global policy circles and improve his chances of heading other major international institutions," Prasad said.

China, India and Brazil, three of the fastest growing nations in the world, have also complained that the IMF process for choosing its leader should be more open. Still, none of those countries is backing Carstens.

In fact, China, India and Brazil have declined to publicly endorse any candidate so far. Analysts say cite several reasons why the three developing nations have resisted.

China and India are historical rivals and are without many common interests, even though they are at similar stages of development.

And Brazil is vying to be an alternative to the United States and regards Mexico as a close U.S. ally, said Domenico Lombardi, a senior fellow at the Brookings Institution and former IMF official.

"Emerging countries have failed to coalesce as a unified group behind a candidate," Lombardi said.

Many have accepted that Lagarde will win and instead are looking to extract promises from her in exchange for their votes, he added.

For example, China would like to see one of its officials, Zhu Min, appointed as a top deputy at the Fund. Min is currently a special adviser to the IMF managing director. Lagarde expressed support for giving Min a leading role during a visit to Beijing last week.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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