A scandal has erupted at the IMF and fear reigns in Guzmán’s team

In recent days, in the financial world on Wall Street and in the corridors of the IMF, there has been talk of the possibility of a probable dismissal of IMF Managing Director Kristalina Georgieva for the so-called “Doing Business” scandal.

There are many doubts about its future as the danger of the pandemic has not yet dissipated, where Georgieva has played a key role. A rumor also began to spread that the US Secretary of the Treasury, Janet Jelen, no longer has direct contact with Georgieva. They only communicate through Treasury Advisor David Lipton.

This official was, until Georgieva’s appointment to the IMF in 2019, the number 2 of the organization. Then, surprisingly, he decided to resign from his post. Lipton was the official appointed by Donald Trump to close the $ 57,000 million loan with the government of Mauricio Macri in the tenure of former IMF Managing Director, France’s Chrisitne Lagarde.

Lipton has started to look like one of the likely replacements if Georgieva is forced to step down in the future.

What brought out the problem was the Georgieva’s resignation request for changing the statistics, in a stern editorial two weeks ago in the prestigious weekly The Economist. This article started to worry the world of business and international finance. ”

“Why IMF Chief Should Resign” is the headline of the editorial that details the events that would involve Georgieva when she was World Bank number 2 in 2018. Last week, US firm Bloomberg launched another alert and finally the English newspaper Financial Time as well.

The Economist editorial came out after part of a report by WilmerHale studio, a Washington law firm, was published. hired by the World Bank itself to investigate allegations of manipulation in the preparation of the “Doing Business” report.

It is a sort of competitiveness ranking that explains how simple or complicated, favorable or unfavorable it is for a company to operate in each of the 190 countries studied, based on a series of data and indicators. The WimerHale report accuses Georgieva and the report’s author, Bulgarian economist Simeon Djankov, of modifying information to improve grades and the post of China in this competitiveness ranking.

Research explains that from position 85 in the competitiveness or ease of doing business ranking that China had in the first draft of the report, this country surprisingly jumped to position 78 in the review that was carried out. later.

“This was due to the pressures and methodological recommendations made by Georgieva and DjankovThe WimerHale report says. China to perform better regarding ease of paying taxes and other tax matters.

The Economist editorial argues that the current IMF Managing Director cannot continue to lead the multilateral organization because she is suspected of having falsified the statistics in the Doing Business report published in 2018. At that time, Georgieva was the second from then president Jim Yong Kim, a South Korean of American nationality. One of the main consequences of this WimerHale investigation is that the World Bank authorities decided two weeks ago to cease the Doing Business which began to be published in 2003.

WilmerHale’s research explains that “World Bank officials unduly altered the results of China and three other countries, to avoid a fall in the positions of the Asian power, just as their renovations were accelerating. According to the survey, the adjustments to the indicators were made at the request of then Bank President Jim Yong Kim and Georgieva, who was responsible for implementing these issues with the help of Djankov, a Bulgarian economist of the same nationality as Georgieva.

One of the most shocking overwhelming elements of the WilmerHale report is a note that Georgieva wrote to one of the World Bank employees who participated in the overhaul of Doing Business, thank you for “have done their part for multilateralismThis is why The Economist article concludes by asking Georgieva to do his business now, and to resign, to save the reputation and credibility of the IMF, one of the key institutions of the multilateral system designed by the victors of the Second World War. for over 75 years.

Unofficially, Georgieva says she “fundamentally” disagrees with the report’s findings. According to Georgieva, these changes were to “improve” the report, but a later study by the Bank itself indicates that the methodological changes implemented led to more errors than they eliminated.

Concern in Argentina

If the situation worsens, it could impact Argentina in the negotiations led by Minister Martín Guzmán with the IMF authorities. In this regard, Héctor Torres, former representative of Argentina on the IMF’s board of directors, declares that “Georgieva’s position, although he survives the questions, is now uncomfortable, because the space for making political considerations has been reduced to possible observations or objections to an agreement with a country that Orthodox staff of the Monetary Fund can enter into. ”

This orthodoxy was reinforced with the recent appointment of the Brazilian Ilan Goldfjan as director of the Department of the Western Hemisphere, on which the relationship with Argentina depends. Guzmán, who has had a very good relationship with Georgieva, since a first meeting they had at the Vatican, sponsored by Pope Francis.

The Fund scandal could generate a renegotiation deadline a new extended facilities program. In this context, Nobel laureate in economics Joshep Stiglitz, who was Guzmán’s mentor at Columbia University and one of the international economists closest to the government, He defends Georgieva and denounces an attempted coup d’état at the IMF.

Stiglitz considered that “Georgieva caused inconvenience in certain sectors in allow an IMF less austerity-oriented and that it seeks to generate progressive changes to take into account poverty and development. He also assured that the role of the Fund in the restructuring of Argentina’s public debt with Argentina’s private creditors marked a limit to the markets, which worried the sector.

Stiglitz points out that “the efforts to eliminate it are not only unfair, but also could paralyze the management of the Fund in the years to come ”. He did this from where the Project Syndicate space usually posts its thoughts.

The economist also warns that “measures are being taken to replace or at least weaken Georgieva“about who remembers successfully defending a US $ 650 billion issue of IMF” currency “(Special Drawing Rights, or SDRs), so essential to the revival of low- and middle-income countries . ”

Stiglitz redoubles his efforts, saying the real scandal is the WilmerHale report, which leaves current World Bank President David Malpas unscathed from his intimate relationship with Saudi Arabia and Malpass’s attempt to change the methodology Doing Business to bring down China in the competitiveness ranking.

The noise surrounding the affair and the pressure on Georgieva grew stronger day by day. Economist Paul Romer, winner of the 2018 Nobel Prize in Economics, who had been Chief Economist at the World Bank, He took the opportunity to remember through a tweet why he had left the agency that year, so as not to have to report more to Georgieva.whose integrity he questioned.

US Treasury spokeswoman Alexandra Lamanna also said the institution, headed by Janet Yellen, would look into the matter, as the credibility and integrity of international organizations was at stake.

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