Glossary

PML acknowledges the following sources for the information contained in the glossary of terms presented below: TIRN (Tennessee Industrial Renewal Network), Dollars and Sense magazine, Multinational Monitor, Foreign Policy in Focus.

IMF (International Monetary Fund) » Created in 1944 to stabilize currency exchange rates among trading countries and thus promote international trade. The IMF took on a new task in 1971: to provide emergency loans to countries in debt to foreign creditors.

The IMF requires governments who receive loans to first restructure their economic policies in a manner that make it most likely they can pay back their debts. Countries which need development loans from the World Bank or private banks can get such loans only if they have satisfied IMF structural adjustment requirements.

Actors: The IMF is governed by representatives of its member countries, those whose banks have the most funds to loan. The U.S. is the largest shareholder and maintains veto power over major decisions of the Fund. The executive board sets policy; the agency staff handles day-to-day operations and influences policy. The IMF is extremely secretive, developing most policy by consensus with recorded votes rarely taken. Congress has little influence on IMF policy

Implications: The economic policies of poor countries, most of them in Latin America and Africa, are highly influenced by the far fewer, wealthy nations.

Representatives of banks and large corporations in the developed world have ever-growing influence and power over the fates of governments and their people in poor, developing countries.

WB (World Bank) » Formed in 1944 to help with European post-war reconstruction. Now focuses on large infrastructure and other development projects around the world. The World Bank has been criticized for ignoring the negative consequences such projects have created for many developing country and Eastern European residents and the environment. The World Bank, like the IMF, is controlled by developed nations.

Implications: Same as above.

WTO (World Trade Organization) » Formed in 1994 at a meeting of GATT countries, a group that regulates trade across borders, mainly by reducing "barriers to trade," such as agricultural subsidies and government regulations. Its main purposes are to promote free trade and settle trade disputes. Member countries face sanctions if they fail to make their national, state and local laws conform to WTO rules. In the WTO, decisions are not publicly discussed.

Implications: In order to compete in a global markets dominated by wealthy, highly developed countries, the many poorer countries must bow to regulations and follow policies developed to favor corporations and wealthy countries, often ignoring the best interests of their own citizens.

Third World/External Debt Crisis » Created by a confluence of factors in the 1970s & 80s, including excessive amounts of cash available for loans in U.S. and British banks, low interest rates, lack of restraint in seeking and granting loans, unwise use of loaned funds by some governments, and a world-wide recession that led to a rapid increase in interest rates. Suddenly, many poor and underdeveloped countries were caught with huge debts, large interest payments, and insufficient tax and export income to service their debts. Huge amounts of money were needed to keep up payments and had to be borrowed. Having high amounts of cash out on loans to poor countries, the IMF refused to make emergency loans for debt service unless these countries restructured their internal spending and their trade policies in a manner that made it more likely they could repay these new debts.

Neo-liberalism » A world view, economically, based on a belief that a free and open world market with minimal government limits is the best method to foster economic well-being around the world that is inclusive of the most people.

Policies of neo-liberalism include: A minimal role for government in economic matters, privatization of public services, cuts in social spending, anti-unionism and structural adjustment.

Implications:

• Wealth will "trickle down" from corporations and the rich;
• Goods must flow freely and the private sector, not governments, should take over the engine of economic growth;
• Each country would compete effectively in such a global market through its "comparative advantage" -- i.e. what each country could most easily, efficiently provide for sale in the global market.
• Assumes each country can compete equally, meeting its own needs by exporting what it produces best and importing what other countries make more cheaply.
• Ignores the duplication aspect in agricultural products, e.g. Coffee, among countries with unequal ability to compete in world trade.
• Ignores the fact that "minimal government regulations" allows banks and corporations which answer to their owners the maximum power to regulate and orchestrate markets, rather than governments which are supposed to answer to their citizens.

Privatization » The sale of publicly owned goods and services to private companies. Privatization almost always results in layoffs, and frequently foreign companies take control of enterprises. Usually the World Bank plays the lead role in this aspect of structural adjustment.

Structural Adjustments » Economic policies based on neo-liberal ideas and strongly encouraged by the US Treasury, the IMF, WB, and WTO. Structural Adjustment Programs (SAPs) create a fiscal climate and financial system preferred by transnational corporations. SAPs instruct governments to privatize, export more, spend less, deregulate, i.e. greatly reduce the role of government in the economy.

Reductions in government expenditures are mandated by the IMF in return for the government receiving a loan, or loans, from the World Bank. Such loans are used for development projects or to allow a government in financial difficulty to make payments on previously incurred debts.

Actors: IMF and WB regulators; large banks who have money to lend or which have already loaned large amounts to governments unable to repay those loans; governments in poor and developing countries, faced with the dilemma of not having sufficient funds to service old debt and thus also lacking the credit worthiness to obtain further loans of money to advance projects for their countrymen.

Impacts: SAPs have diminished government influence and integrated developing countries into the global economy. SAPs have not, for the most part, created economic growth in poor countries. Emphasis on exports tends to be socially disruptive, especially in rural areas of a country. Poor farmers get crowded out by agribusiness, timber companies, and mines. They usually move to the city or settle on land not suited for farming or having a dense population. SAPs do not encourage or support regional trade.

Capitalism » An economic system characterized by private ownership of the tools, factories, and commodities used to produce goods and services. Prices, policies, and distribution of goods are established in a free, lightly regulated market.

Globalization » The name for an ongoing process in which trade, investment, people, and information travel across international borders with increasing frequency and ease. During periods of globalization, economies are increasingly integrated with one another, leading to a greater worldwide instability since problems afflicting one country carry over to other countries; corporations and capital investments are highly mobile, meaning they can leave a nation whenever they find a better opportunity elsewhere.

Globalization as it is now happening is characterized by: production wherever it is the cheapest; trade with few barriers; and short-term investments whenever the return is highest. Current globalization is fueled by deregulation and advances in transportation and communication technology. While proponents have asserted that globalization provides unlimited opportunities, it has created large-scale environmental damage, impeded the functioning of democratic institutions, and lowered the standard of living for many first and third world residents.

NAFTA (North American Free Trade Agreement) » A trade agreement between the United States, Mexico, and Canada that removes tariffs on goods and services, deregulates investment, reduces travel restrictions for entrepreneurs and white-collar workers, and safeguards intellectual property rights. It passed the U.S. congress in 1993, opposed by unions, environmental groups, and farmers in all three countries. NAFTA has had a devastating effect on US manufacturing jobs, on farmers, and on the environment in Mexico. It has not led to an increase in wages or improved working standards in any of the countries which are part of it. Negative consequences of NAFTA have been felt by rural workers, women, and small farmers. The investment chapter of NAFTA served as a blueprint for the MAI.

MAI (Multilateral Agreement on Investment) (a.k.a. "Chapter 11") » A secretly negotiated trade and investment treaty that began in 1995, halted in 1998 due to grassroots opposition when the document leaked to the public, and is likely to reappear in other forms. The MAI has been called a corporate Bill of Rights for the global economy. It would allow foreign corporations to sue governments with laws on federal, state, and local levels that cut into profits. It would require governments to pay for corporate losses when environmental, labor, public health, and consumer protection laws limit the profits of corporations. MAI terms would bind signers for 20 years. Countries which did not sign would lose out on opportunities for foreign exchange.

ALCA (Área de Libre Comercio de las Américas or Area of Free Trade of the Americas) (in English a.k.a. CAFTA, Central American Free Trade Agreement) » CAFTA is a continuation of the same policies put forward in the North American Free Trade Agreement, but this time, is a proposed agreement between the U. S. and the five Central American nations of Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica. Negotiations for the agreement opened early this year and will continue on a monthly basis until December 2003. By the end of the year, the six governments expect the treaty to be finished and ready for approval by the national legislatures. Implementation of CAFTA is considered key by the Bush administration and multinational corporations in obtaining the Free Trade Area of the Americas (FTAA), which would cover all the countries in the Western Hemisphere except Cuba. CAFTA is closely linked to Plan Puebla Panama (PPP). Very little public information about CAFTA has been released. (for more information: contact Nicaragua Network at <a href="nicanet@afgj.org">nicanet@afgj.org</a>).

PPP (Plan Pueblo Panama) » A 10-year long, multi-billion dollar mega-development project that will construct physical and industrial infrastructure throughout the Central American region. According to Nicaragua Network, civil society groups in Mexico and Central America see the PPP as paving the way for CAFTA and FTAA. These groups have protested the PPP because of the devastating impact it will have on the environment, indigenous communities, and local economies.