Emerging Nations Have Trouble Uniting On IMF

Emerging nations like Brazil and China have long complained about wanting a bigger say in how global economic affairs are conducted. But so far, developing countries have been unable to unite around one of their own as a candidate to head the International Monetary Fund.

Europe, which has held the top spot at the IMF since its founding, this week lined up behind French Finance Minister Christine Lagarde, who announced her candidacy Wednesday and is the odds-on favorite.

Brazil, Russia, India, China and South Africa, meanwhile, in a joint statement this week called the practice of automatically selecting a European managing director obsolete. Many of those same countries, however, seem to be pulling in different directions rather than rallying around a candidate to challenge Ms. Lagarde.

Mexico has nominated its central-bank chief, Agustin Carstens, a respected economist and former deputy managing director of the IMF. No one else has been formally put forward. So far, though, Mr. Carstens has gotten little support from key emerging powers like China, India or Brazil.

South Africa has openly lobbied for one of its own, former Finance Minister Trevor Manuel. Russia said it would support Kazakhstan's central banker Grigory Marchenko. Turkey said it had at least 10 candidates suited for the job, though onetime Turkish Economy Minister Kemal Dervis has ruled himself out.

'While Europe has closed ranks around its candidate, the emerging markets are united only around the concept of making a bid for the post of IMF managing director rather than a particular candidate. This will weaken their position, so they need to act soon and decisively to agree upon a viable candidate they can all support,' said Cornell University economist Eswar Prasad.

Even from the start, some of the potential emerging-market candidates seemed unlikely to mount a serious challenge. Mr. Marchenko said he was surprised by his nomination, which he said he learned of in a text message from his prime minister. He said last week he would take the job if 'his country asked him to.'

Analysts say emerging-market nations are a more varied and less unified bloc than Europe, which has its own currency and common interests. Brazil and India have both been critical of China's policy of keeping a weak exchange-rate to boost exports.

The strongest candidate from the emerging markets so far appears to be Mr. Carstens, a 52-year-old veteran of Mexico's financial crises. Mexican officials say they are optimistic the University of Chicago-trained economist will get support from other nations in days to come.

Developing nations 'have rallied around a statement of principle that this process be transparent and open, so let's see if they can rally around a candidate that has all the qualities to lead the fund,' said one high-ranking Mexican official.

U.S. Treasury Secretary Timothy Geithner had praise for Mr. Carstens on Wednesday, saying he and Ms. Lagarde were two 'very credible' candidates. But analysts say the U.S. is likely to back Europe in a shortened selection process.

'For all of the U.S. posturing. . .they'll throw their weight behind Mrs. Lagarde,' said Desmond Lachman, a former deputy director of the IMF's policy department and now a resident fellow at the American Enterprise Institute.

Mr. Carstens is also having trouble getting support closer to home. OECD chief Angel Gurria, a Mexican, gave a ringing endorsement to Ms. Lagarde on Wednesday, saying the Europeans had clearly picked 'their best and brightest.' Wednesday, Chilean President Sebastian Pinera also praised Ms. Lagarde, as has Brazil.

As a former deputy director at the IMF and an orthodox neoliberal economist, Mr. Carstens may be seen by other emerging nations as too tied to the old IMF establishment. Brazilian officials say they want a reformer at the IMF who will continue the path followed by disgraced former IMF boss Dominique Strauss-Kahn in trying to convince Europe and the U.S. to give more power to emerging nations.

In an interview last week, Brazilian Finance Minister Guido Mantega failed to give Mr. Carstens an endorsement, saying only that 'I don't rule out any candidate.'

Mr. Mantega said Brazil divides candidates into two groups: more conservative and less conservative. 'We want one who is less conservative. By less conservative I mean less linked to the old IMF. We have an old IMF and a new IMF. We don't want anyone linked to the old IMF, who might cause a backslide to the ways of the old IMF.

Arvind Virmani, India's representative to the IMF, seemed to have given up hope of a challenge to Ms. Lagarde from emerging markets. 'As far as everything I've seen, including the statements of various leaders, the processes approved...I don't see the results will be any different than before,' he said.