At the very least, Dominique Strauss-Kahns sexual indiscretion has sparked a real contest for the IMF helm, thus putting an end to six decades of uncontested European domination. If its not this time, then the next time the post is up for grabs it will be secured by an outsider.
The protest by the BRIC countries (honestly, I hadnt realized that South Africa was now a BRIC) over the selection process will make the powers that be take notice of the developing worlds growing clout.
Mexicos candidate, central bank boss Agustín Carstens, is gathering steam, but I must insist that beyond interviews with The Financial Times and Bloomberg, he has to forge alliances (with Washington, for starters). No matter how you slice it, the voting is decided by the quota system, that is, the money each country pays into the Fund. The more you pay, the more specific weight you carry.
On Wednesday, and despite a storm thats brewing over her alleged favoritism ( abuse of power , as some have called it) towards a French businessman, Christine Lagarde, Frances finance minister, launched her campaign to become the next IMF boss.
Lagarde announced her candidacy at the finance ministry in Paris and immediately responded to widespread criticism that as a European she had a right to the job or would lack independence, insisting the Fund was not owned by anyone . Thats a nice theory, but in practice, those that chip in the most carry the most clout.
Regarded as a little less a frontrunner than she was only two days ago, Lagarde claims she would bring her experience as a lawyer, business leader, finance minister and a woman to the role.
Increasingly, her candidacy is running into opposition from emerging market countries which argue the leadership of the Fund should no longer be reserved for a European.
In a rare joint statement, the IMF executive directors for Brazil, Russia, India, China and South Africa told the IMF executive board in Washington that the obsolete unwritten convention of appointing a European as managing director undermines the legitimacy of the Fund, and called for a truly transparent, merit-based and competitive process .
The joint statement, the first time weve seen coordination among the BRICs, signals a challenge to Europe, which is uniting behind Lagarde as its candidate in an effort to keep control of the IMF job.
Oddly, even Mexicos José Ángel Gurría, secretary general of the Paris-based Organization for Economic Development and Cooperation, rallied behind Lagarde. Gurría himself was viewed as another IMF candidate, and the fact that he does not support his compatriot Carstens is somewhat disconcerting.
We are concerned with public statements made recently by high-level European officials to the effect that the position of managing director should continue to be occupied by a European, said the BRICs ministers statement.
Bold as it may be, the BRIC declaration is lacking in one key element, which is an indication that such a respectable bloc has united behind a single candidate they can all support if they are to overcome Europes votes representing a whopping 30% of IMF quotas .
Astutely, the BRICs this week dug up a 2007 statement by Jean-Claude Juncker, president of the Euro Group, who had said that the next managing director will certainly not be a European .
The joint statement also undermined a claim by the French budget minister earlier on Tuesday that China was ready to back Lagarde for the managing directorship. François Baroin told Europe 1 radio: The Chinese support the candidacy of Christine Lagarde .
Elsewhere, and just to show you how important the quota system is, it turns out that several large developing countries have not yet paid their share of an IMF capital increase, potentially weakening their voice in the selection process.
Turkey, the Philippines, the United Arab Emirates and Kazakhstan are the largest of 18 countries yet to pay their part of a US$32.9 billion round of funding that began in March, according to data from the Fund. Thus far, the funding effort has reached 95 percent.