Understanding IMF Stand-By Arrangements from the Perspective of International and Domestic Law: The Experience of Venezuela in the 1990s

Abstract

In the 1990s, the International Monetary Fund (IMF) granted assistance to developing countries that faced severe financial crises in South America. Disbursements of financial assistance were conditioned on the fulfilment of a set of requirements. Conditions were described in the letter of intent addressed to the Fund by the government of the distressed country and linked to an instrument known as ‘stand-by arrangement’ (SBA) agreed between the IMF and the rescued country. The IMF Guidelines on Conditionality state that arrangements are not international agreements. Based on this assumption, SBAs were often agreed by South American governments without legislative authorisation in spite of containing commitments to undertake legal reforms. The implementation of IMF agreements caused tension in developing countries where domestic legal systems required congressional approvals for the adoption of the type of commitments included in a standard SBA.Reviewing a SBA agreed by the IMF and the administration of President Rafael Caldera in 1996 under the so-called ‘Agenda Venezuela’ program, this paper explores the legal nature of SBAs as a form of international law, and the interaction between these arrangements and domestic law. The main argument develops in this paper is that SBAs are international agreements that govern rights and obligations between the IMF and its state members and therefore, governments must comply with the requirements prescribed by the domestic legal system in order to enter into this type of contracts.Presented SIEL Singapore 2012.