Divided We Fall: Mexican Agustin Carstens' IMF Bid

♠ Posted by Emmanuel in ,, at 6/03/2011 12:03:00 AM
[NOTE: I highly recommend reading Agustin Carstens' manifesto for an LDC IMF head before moving on.] Although you may occasionally get the feeling that I'd happily back boxing legend Julio Cesar Chavez as the next IMF managing director, let's just say I am more a fan of third world solidarity than most of the rest. Following up on my previous post about a lack of LDC unity on the matter--aside from rhetoric (only) pointing toward consideration of an LDC IMF chief, we have a really sad case on our hands here.

As I trod through the lonely road of lost causes, let me just say that Banco de Mexico Governor Agustin Carstens would have been my choice for the post among declared candidates in the running to be the next IMF managing director. He certainly has the qualifications as a former IMF deputy managing director. As Mexico's central bank governor, he too has overseen the transformation of an economy that, in previous decades, suffered from chronic balance of payments crises. Nowadays, foreign investment is flooding into the country as the peso--that former symbol of chronic devaluation--is becoming positively muscular.

So what's the problem? Well again, there's next to no backing from other LDCs. Uruguay aside [?!], nobody has indicated support for Carstens despite him going on a roadshow to garner support:
Mexican central bank Governor Agustin Carstens, nominated to lead the International Monetary Fund, criticized European nations for publicly backing French Finance Minister Christine Lagarde before all the candidates are known. “I find it strange that they are advocating in some forums for an open, transparent, merit-based candidate and they have made up their minds before the candidates are on the table,” Carstens, 52, said in an interview today in Sao Paulo. “All the other countries are playing by the book.”

Carstens, who has won a single public endorsement abroad, from Uruguay, said he expects emerging markets to support his candidacy once there is a final list of nominees to serve as the IMF’s next managing director. He met with his counterpart from Brazil today before traveling to Buenos Aires in a bid to rally support among developing countries for his candidacy.
Still, there is hope that while he isn't yet a name to rival Christine Lagarde among the central banker / finmin crowd, he is building name recognition so that he will be the front-runner when Lagarde or whomever European candidate gets the nod steps down.
While Carstens’ campaign is unlikely to succeed, his strong credentials as a former IMF deputy managing director are impossible to overlook and may advance his bigger goal of giving emerging markets more say in how the world economy is run, Guillermo Le Fort, a former IMF economist from Chile, said in a telephone interview. “Carstens is making a principled stand,” Le Fort, who was also a director on the IMF’s board for Chile and five South American nations from 2000 to 2004, said. “If he’s successful in advancing the cause of emerging markets, the Europeans might feel red in the face and decide to hold more honest, open elections based on merit in the future.”

Any of the IMF’s 187 member nations has until June 10 to nominate candidates for the managing director’s position, the fund said in a May 20 statement. The IMF executive board, which will select a managing director by June 30, is aiming for consensus rather than a majority vote, according to the fund.
And as the title says, divided we fall, although Carstens may be wily in thinking longer term:
Emerging economies that advocate a merit-based selection process appear unlikely to break Europe’s hold on the top job because so far they have been unable to rally around a single candidate, Arturo Porzecanski, a professor of international economics at American University in Washington, said. “The likes of Brazil, Russia, China, India will not support one another -- never mind Mexico,” he said in a telephone interview June 1. “Emerging countries are not being supportive.”

Carstens’ trip is similar to that of a political campaign designed to gain support in emerging countries for his bid, Morris Goldstein, senior fellow at the Peterson Institute for International Economics in Washington, said in a May 31 telephone interview. Carstens’ meeting today in Sao Paulo with central bank President Alexandre Tombini followed a meeting yesterday in Brasilia with finance chief Mantega. He’ll be traveling to Ottawa after Buenos Aires to promote his candidacy.

Brazilian officials and Carstens share the view that IMF needs to continue to reform and give developing markets more representation, the Mexican official said. “What is clear is that we have very similar views on the challenges and the solutions that need to take place in the institution,” said Carstens about his meeting with Tombini.

Carstens could be building his reputation for a successful future run if his bid for the IMF top job fails this year, Kevin Gallagher, associate professor of international relations at Boston University, said in a telephone interview June 1. “He’s trying to carve out a space for emerging markets and let people know who he is,” Gallagher said. “He’s all of a sudden become a household name in this community. Maybe five years from now the world will think that maybe it will be Carstens’ turn.”

To be sure, Carstens’ campaign isn’t necessarily doomed, according to Goldstein, who was an IMF official for 24 years. “It’s a matter of whether he can get support first of all in the rest of the emerging market world,” he said. “If he were able to unite the emerging markets, he would have a real chance.”
It's put up or shut up time. Unfortunately, it seems LDCs are squandering a perfectly good opportunity with a more than viable candidate to break the US-Europe stranglehold on Bretton Woods institutions. It's a shame--a real shame.