THE global economy is changing so rapidly that the world's major
financial institutions are having a hard time catching up.
At the joint annual meeting of the International Monetary Fund
(IMF) and the World Bank in Madrid, which concludes today, several
major shifts have demanded the attention of the assembled finance
ministers and central bankers who came from as many as 179 nations:
* Private capital has surged back into developing countries in
the past four years after nearly a decade of relative stagnation
following the external debt crisis beginning in 1982. Net private
flows of bank loans, bond and equity purchases, funds, and foreign
direct investment in developing countries totaled $30.8 billion in
1990, climbed to $68.6 billion in 1992, and reached $106.6 billion
last year, according to IMF statistics.
The Institute of International Finance (IIF) in Washington, a
global association of more than 180 major financial institutions,
also estimates that the flows are huge, though not as high as last
year. The IIF puts the capital flows into "emerging nations," a
term that includes former communist countries and developing
nations, at $190 billion in 1993. Former communist countries are
not included in the IMF tally.
Such amounts far exceed the lending of the IMF and the bank. The
World Bank and its low-interest loan affiliate, the International
Development Association, made about $21 billion in loan commitments
in their latest fiscal year.
Private creditors predominate
In the case of major borrowing nations, such as Argentina,
Brazil, China, India, Russia, Poland, and about 26 others, private
creditors now account for 90 percent of all capital flows,
according to the IIF. "While the IMF now has a smaller role as a
lender to these countries, it can and should take new steps to
promote stability in these dynamic and evolving markets," says
Charles Dallara, managing director of the IIF.
Some officials have been urging the World Bank to direct more of
its loans to countries that are not on the receiving side of
private capital flows.
The surge in private investment has been stimulated by a trend
toward market-based policies and sounder fiscal and monetary
policies in a number of Latin American and Asian countries. Some of
these nations have developed relatively sophisticated securities
markets within the past 15 years.
Mexico and China alone have received about $50 billion each of
foreign money over the past four years.
The competition of developing nations for investment has become
sharp. Investment Canada, a government agency set up to bring in
foreign investment, estimates that there are more than 9,000
programs or initiatives of some sort around the world trying to
attract foreign direct investment. …