Release of Secret Loan Document in Uruguay Fuels Public Debate

1 January 2003

The leak of a usually secret document describing the terms of a recent World Bank loan to Uruguay has stoked public anger at conditions attached to the loan, according to activists and journalists there. The release also showed how much crucial information was being withheld from the public.

The document signed by Uruguay’s finance minister made newspaper headlines this summer and was fodder for many radio broadcasts. The text was even reprinted in full in a major newspaper.

For transparency activists, disclosure of the 12-page document provided evidence that such materials contain important information that should be in the public domain. The story also demonstrates how nongovernmental organizations serve as interpretive intermediaries and how the lack of Spanish translation of documents by the World Bank inhibits public knowledge.

The news took some time to emerge. When it did, Uruguayans learned that the government had promised the Bank to make cutbacks in the social security system and in unemployment benefits, according to Eduardo Gudynas, of Globalización América Latina, who played a role in publicizing the information.

The document "showed that the government is open to reduce the support of the unemployment service (just in this moment when unemployment rates are very high due to the economic crisis); will reduce salary benefits of those working in state-owned companies; and evaluate other social programs (support to families with young children, food support, etc.)," Gudynas explained to freedominfo.org.

"The impacts of these measures are very important, not only for these workers (and their labor unions), but also on the perception of the public." he said.

"Furthermore, they were presented by the press more or less at the same time that it was discovered that the government signed another secret agreement with a group of international private banks regarding the management of the largest Uruguayan commercial bank," Gudynas added.

He continued, "Following the perspective of the common people, in a few days it was discovered that the government signed agreements without informing the public and without informing the Congress. This resulted in the large coverage by the media, but also in another measures, as the request for an investigation commission at the Congress. Many people considered that the government has almost lost all capabilities to set up its own policies and that it depends on the guidelines by external institutions."

Presumption of Disclosure: Here’s how these disclosures came about.

On Aug. 8, 2002, an agreement was announced that would bring two related loans of $252 million to Uruguay to help deal with serious economic difficulties.

The first Structural Adjustment Loan (SAL) is be spent on building systems to prevent duplication and increase the efficiency in 50 social protection programs and to protect children from certain budget cuts in social protection programs. A first installment of $100 million will be disbursed immediately, with the remaining $50 million to be disbursed once policy reforms are enacted according to the government’s plan. The second loan, a $150-million Special Structural Adjustment Loan (SSAL), is for making reforms in the financial sector, specifically a government-supervised restructuring of the public banking system.

To see the Bank’s announcement and other materials click here.

The Bank’s press release, also issued in Spanish, did not address the conditions of the loan. The Bank placed on its web site a so-called Program Document, a lengthy description of the situation in the Uruguay, the loans and the terms. That document appears in English only. The press release, however, did not indicate the availability online of the Program Document.

Under World Bank policies, this Program Document (PD) is to be released after board action, providing that the borrowing government agrees. The Bank appears to be applying pressure to make sure that PDs are usually released, and in this case it was made available.

According to Gudynas, the document received little, if any, attention because of its length and because there was no Spanish version.

"It is my understanding that most journalists did not follow this kind of news; they are always short of time, more focused on precise daily news," Gudynas commented.

Several weeks later, Gudynas came into possession of another document. Dated July 17, the document also describes the government’s promises to the Bank, but in a shorter form, and it was signed by Finance Minister Alberto Bension.

Known as a Letter of Development Policy, it is a mandatory part of the loan package. These letters are often not revealed by governments, although the Bank officially encourages their release. Under the new Bank disclosure policy effective Jan. 1, 2002, there is a "presumption" that the LDP will be disclosed by the government after the World Bank’s board of directors has approved the loan. The LDP is a letter from the borrowing government to the president of the World Bank that outlines the actions the government has agreed to take in exchange for the loan they have negotiated with the World Bank. The information is similar, often word for word, to that contained in the PD. However, the LDP is generally much shorter that the PD.

The Uruguayan government chose not to disclose this Letter of Development Policy, and still has not. Nor has it revealed an "annex," the "action plan" for reforming the Banco Hipotercario del Uruguay.

In early September, Gudynas wrote about the letter in La Republica and sent a fact sheet to editors explain its contents. Meanwhile, a Spanish translation of the letter, and an annex about Banco Hipotecario was made by another NGO, the Third World Network. La Republica thought the letter was interesting enough to published them in full, in Spanish, as a special section. Later other newspapers and radio stations recognized the news value contained in the letter’s detailed descriptions of the loan conditions.

The pledge to reduce pensions further was noted in language stating: "This, in the medium term, the Government intends to undertake additional reforms in the pension system in order to reduce its burden on the fiscal accounts…." Concerning unemployment insurance, the government agreed to "implement a thorough reform" involving a cap on extensions, a reduction in benefits over time and lifetime limits.

The differences in the two documents also included a mention in the Bank’s Program Document, not contained in the LDP, about how consultations were held in Uruguay with NGOs, unions, entrepreneurs, cooperatives and academia. This assertion is "completely untrue," Bissio said, "and only there to satisfy the board of the Bank."

In an interesting footnote to the story, Bissio noted that when the labor and welfare minister was asked about the conditionalities "he quite candidly admitted ignoring the existence of such a document and commitment-one whole month after it was approved by the board of the Bank." Bissio added, "And then they claim there is country ownership."

A Sept. 6 article written by Gudynas for La Insignia can be viewed in Spanish at: http://www.lainsignia.org/2002/septiembre/econ_010.htm

By Toby McIntosh

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Filed under: IFTI Watch

ABOUT IFTI WATCH

In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
Contact: freeinfo@gwu.edu or
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