International Issues

IMF Favoring Wealthy Latin American Companies

Over the years, the International Monetary Fund's International Finance Corporation -- its private-sector financing subsidiary -- has directed the bulk of its Latin American loans to wealthy companies which could easily get funds in world stock and bond markets. Small and medium-sized companies have been crowded out.

The IMF concedes as much in its annual report, saying it is "shifting resources to support second-tier companies that do not yet enjoy this access" to international capital flows.

  • The agency is supposed to help needy companies, spur sound economic development and make a profit.

  • In Latin America -- the region of the world where the IMF is most active -- only about one-third of the $4 billion plus in equity and loans in the agency's Latin American portfolio has been directed to companies with annual sales of $100 million or less.

  • Almost $2.7 billion has gone to companies Wall Street considers investment grade.

  • Critics say that loans to Mexico over the past 18 months have gone to a who's who of the country's publicly-listed blue chips -- including $25 million to a company which controls over 90 percent of Mexico's bread market, and $60 million to its second largest corn miller.

In Brazil, the IFC made a $33 million loan to a partner of Wal-Mart Stores. In Venezuela, $75 million went to a company which is controlled by U.S. telecommunications giant GTE Corporation.

One IFC loan officer defends his decisions by saying, "Bigger doesn't mean bad to me. I prefer that to small and unprofitable." Another says that big companies are often the only one which can be pioneers.

Sources: Joel Millman and Jonathan Friedland, "World Bank Finance Arm Tends to Aid Least Needy," Wall Street Journal, September 23, 1997.

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