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IMF's Support for Coup Government in 2002 May Have Influenced Venezuela's Decision to Withdraw from the Fund

For Immediate Release: May 1, 2007

Contact: Dan Beeton, 202-293-5380 x104

WASHINGTON, D.C. - The Government of Venezuela yesterday announced it would leave the International Monetary Fund (IMF) and World Bank. President Hugo Chavez announced the move saying, "We will no longer have to go to Washington, nor to the IMF, nor to the World Bank, not to anyone." The move is an unprecedented decision by a government to break with the IMF and World Bank, and follows the institutions' plummeting influence in Latin America in recent years.

Venezuela's relationship with the IMF over the last few years has been troubled. Most notably, on April 12, 2002, IMF spokesperson Thomas Dawson publicly stated that the Fund was "ready to assist the new administration [of Pedro Carmona] in whatever manner they find suitable." Dawson's statement came in a press conference only hours after Chavez was removed from office in a military coup d'etat in the middle of the night. Video and a transcript of the IMF press briefing, including Dawson's statement, is available on the IMF's website.

"This was an unprecedented, surprise announcement from the IMF at the time," said Mark Weisbrot, Co-Director of the Center for Economic and Policy Research. "The Fund is typically cautious about determining whether a new government is eligible for its lending, even when it is an elected government. In this case, the Fund determined almost instantly that the coup government would be a suitable partner."

It is likely that the U.S. government influenced the IMF's behavior. The U.S. Treasury Department has effective veto power over the Fund, and declassified U.S. government documents reveal that Washington had advance knowledge of the coup. Despite this advance knowledge, once the coup was underway, both the White House and State Department stated publicly that what had transpired was not a coup d'etat, but a popular uprising. ( Click here for links to the documents and more information).

In the video, it is clear that Dawson was reading from a prepared statement, even though he responded to a question from an Associated Press reporter about Venezuela. It is therefore likely that Dawson was speaking for the Fund, although it is not clear how IMF management could have reached a decision about the new government so quickly after the coup.

The Venezuelan government has also recently expressed dissatisfaction with the IMF's persistently pessimistic projections for Venezuela's economic growth. Venezuela, along with Argentina, has led the region in growth over the last few years. Yet the IMF has continued to lowball Venezuela's economic growth since 2003. In the fall of 2004, it projected 3.5 percent growth in 2005, which came in at 10.3 percent in 2005, for a 6.8 percentage point underestimate. For 2006, the IMF's fall 2005 estimate was 4.5 percent, while growth was again 10.3 percent - an underestimate of 5.8 percentage points.

Timeline of the April 2002 coup d'etat in Venezuela:

April 11, 2002:

At 10:20 p.m., National Guard Gen. Alberto Camacho Kairuz announces that President Chávez has abandoned his functions and that the armed forces are in control.

April 12, 2002:

At 3:25 a.m., Gen. Lucas Rincón Romero announces that Chávez has resigned and is in custody. At 4:55 a.m., Pedro Carmona announces he has been named president.

This means that the IMF could only have known that there was a "new administration" for several hours, at most, when its spokesperson Thomas Dawson stated on April 12, about 9:45 a.m.(according to the IMF transcript) that "we [the IMF] stand ready to assist the new administration in whatever manner they find suitable."