International Policy

World Bank Gets It Wrong Again

World Bank president James Wolfensohn has been forced to admit that his agency "got it wrong" when it recently praised Indonesia's economy.

Now critics say the agency is getting it wrong again on a $2.1 billion pipeline project to deliver gas from Bolivia to Brazil. Both the World Bank and the Inter-American Development Bank are important sources of funding for the line. Although private funds are also involved, observers wonder why these two agencies are risking public funds on the project.

  • Critics question the clarity of World Bank thinking during a cost/benefit analysis in which it concluded the Bolivia-Brazil gas project would be profitable -- but could not receive financing in the private market.

  • The claim is made that the gas project is so large private financial markets are unable to raise sufficient capital to fund it.

  • But some of the world's richest corporations -- with combined annual revenues which surpass $75 billion -- are involved in the plans.

  • The World Bank concedes that one reason adequate private financing is not available is that "Brazilian energy markets are not yet sufficiently deregulated."

Opponents ask whether the World Bank thinks international subsidies will move Brazil any closer to deregulation. M

oreover, loans to the project are going to a Brazilian gas transport company that is majority-owned by Petrobras -- the country's state-owned oil concern. Critics say that the entire scheme does nothing to encourage privatization -- either in theory or practice. S

ource: Ian Vasquez (Cato Institute), "At the World Bank, Money Is No Object," Wall Street Journal, May 1, 1998.

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