IMF needs leader from the developing countries

IMF needs leader from the developing countries

Sebastian Edwards, Professor of Economics, UCLA's Anderson Graduate

School of Management, Project Syndicate

Horst Kohler's resignation as Managing Director of the
International Monetary Fund (IMF) offers a unique opportunity to
reform the embattled international financial institution.

What the IMF needs, as a first step towards comprehensive
reform, is a new leader with solid technical training, a broad
vision, and first hand experience in dealing with the
macroeconomic risks faced by emerging and transition economies.
Kohler lacked all of these characteristics. A gray bureaucrat
and a mediocre economist, he was not even Germany's first choice
for the post.

Unfortunately, instead of getting the best man or woman for
the job, politics as usual is likely to prevail. The Managing
Director position is expected to go to a European. Until a few
days ago Rodrigo Rato, Spain's Finance Minister, appeared to be
the front-runner. However, now that his Popular Party has been
defeated in the Spanish general elections, it is unlikely that he
will be Europe's candidate for the IMF post.

Yet the fact that Rato was seriously considered shows how
wrecked the process is. Rato is an able politician and under his
stewardship Spain's finances have done well. However, it would
be a stretch to argue that he is the best candidate for the IMF
position.

Rato is a lawyer by training and has an MBA. But he has no
experience in crisis management, major economic reforms, or
crisis prevention. If qualifications have any weight in
selecting the next Chief of the IMF, Rato would not even make the
first cut.

Not surprisingly, the most knowledgeable people on crisis
prevention and crisis resolution are in the successful countries
of Latin America. After decades of instability, a handful of
Latin countries -- in particular, Chile and Mexico -- have become
an example of prudence, austerity and macroeconomic stability.
These Latin American nations have learned the hard way. Their
leaders understood that to achieve prosperity and social
progress, a combination of good economic policies, political
realism, and well-funded social programs was required.

Former Mexican President Ernesto Zedillo, a respected
economist and currently the Director of Yale's Center for
Globalization, is an excellent candidate for the IMF post. Under
his leadership Mexico took gigantic steps towards achieving
stability, and becoming a more open and democratic society.

Earlier in Zedillo's career he worked in restructuring
Mexico's debt, and he has a deep understanding of international
markets. Moreover, during his administration the much-admired
Progresa social program to reduce rural poverty was launched.

Alejandro Foxley, Chile's first finance Minister after the
return of democracy in 1990, and one of the architects of the
country's extraordinary economic success, is another ideal
candidate to lead the IMF.

People as different as Joseph Stiglitz, one of the IMF's most
ferocious critics, and Robert Rubin, the former U.S. Secretary of
the Treasury have praised Chile's economic accomplishments. The
list of Chile's achievements includes fast economic growth, the
halving of poverty in less than a decade, and the management of
speculative capital through market-based restrictions on short-
term inflows.

Indeed, Foxley's profile is so perfect for the position that
people who don't know him may believe that he is an invention.
With a doctorate in economics, he is a respected and widely
published scholar, an experienced manager, and an able politician
who was elected to Chile's Senate five years ago.

Foxley understands the plights of the emerging and transition
countries, and at the same time knows first hand that policies
aimed at macroeconomic stability have a tremendous pay-off in
terms of growth, prosperity and poverty reduction.

The writer was the World Bank's Chief Economist for Latin
America from 1993-1996.