From Global to Local Governance:

Civil Society and the Multilateral Development Banks

Diana Tussie and Gabriel Casaburi

The World Bank and the Inter-American Development Bank (IDB), as multilateral development

banks (MDBs), seem to have become the champions of a governance quest in the developing

world. Although international networks of nongovernmental organizations (NGOs) have

mounted a persistent and high-profile campaign to make these institutions more accountable,

transparent, and participatory, the MDBs are gradually making an effort to change practices and

lending vehicles to improve the quality of their advice and the participatory nature of operations.

Facing an identity crisis, mandates, operations, and areas of intervention seem to have become a

moving target.

An unruly world economy, drastic changes in the international arena, sweeping structural

reforms in borrowing countries, and pressures from international NGOs have led the MDBs to do

some soul-searching. The role of these banks in three arenas of governance is under siege:

global economic governance, local governance in borrowing countries, and their own

institutional governance structure. These Washington-based institutions entered the 1990s with a

renewed agenda that reflects these pressures and attempts to address the frequently conflicting

goals that have piled up over the past decades, layer after layer, as they moved from financing

bridges to reshaping societies.

The studies we present in this special issue of Global Governance are the result of a two-

year project funded by the Ford Foundation and carried out by a team of U.S. and Latin

American scholars.1 We aim to shed light on the nature, scope, and real impact of recent changes

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in MDBs as they affect the new role of civil society in the governance of global and local issues.

We specifically attempt to analyze the opportunities and limits that such reforms provide for

participation and if and how new participatory practices have influenced the nature of policy

processes in borrowing countries and at headquarters. The following articles are the result of

case studies that include internal changes at the World Bank and the IDB and the impact of these

changes on three big countries in Latin America: Argentina, Brazil, and Mexico. These countries

are the largest Latin American stakeholders in both MDBs and thus have the power to move the

agenda and their own borrowing programs in ways other countries do not.2 The underlying

assumption in the choice of these three countries is that large countries tend to have a more

diversified loan portfolio and therefore offer a broader spectrum of issues, actors, and sectors.

In undertaking the case studies, project members attempt to investigate how general

principles are translated into concrete actions in the chosen countries and seek to draw regional

patterns and trends. To unbundle the country studies, we established three criteria to choose

sectors for research. The first was to choose sectors and projects that were most relevant for each

country. MDBs are currently involved in a myriad of issues in different ways, and the weight of

each issue is different in each country according to its social, political, and economic context. So

each case was asked to reflect country realities. Thus, although there are projects related to labor

law reform, the environment, or indigenous peoples in Argentina, Brazil, and Mexico, the

relative importance of these issues varies from country to country. A second criterion was that

sectors should be relevant for MDB lending and should involve both structural reforms and

compensatory social projects. Finally, as the research began to move along, we identified a major

comprehensive sectoral reform in the region that was too attractive to be left unstudied by any

single case: the health sector. This sector presented several attractive features throughout the

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region. On the one hand, health reforms were in progress as if July 1999 in sixteen countries of

Latin America with MDB funding.3 On the other hand, health epitomizes the so-called second-

generation reforms that involve both elements of adjustment and compensation to targeted

sectors of the poor. In all three cases considered, a broad array of social and political actors is

involved. In addition, MDBs and governments have converged on the need to improve

management efficiency in health services by stressing decentralization and calling for mixed

public/private delivery systems and continued public regulatory roles. Once we selected

countries and sectors, the next methodological step was to determine the level of analysis. We

decided to avoid flying at too high an altitude, given that important differences among projects

and sectors could easily be overlooked at the macrolevel. Yet we also noted two disadvantages of

the microlevel. First, analysis and monitoring of projects is a task quite akin to what the MDBs

do themselves. Second, concentrating on project level posed the further risk of not allowing the

broader picture with its new constellation of power relations to be fleshed out properly. An

intermediate levelthe mezzolevel allowed us to analyze sectors and to draw conclusions that

are both relevant and new.

In the article that follows, Paul Nelson presents an analysis of the changes that have taken

place at the headquarters of both MDBs. Governance and civil society principles have penetrated

decisionmaking processes in the MDBs in some formal institutional instances. Nelson also

shows how liaisons with social organizations are developed differently at each MDB. The World

Bank actively promotes the strengthening and participation of civil society, assuming that

increasing civil society involvement and demands will, in time, improve the quality of

governments. In contrast, the IDB concentrates on the relationship with civil society from the

governments perspective and addresses participation as part of the agenda of modernization of

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the state. Whereas the World Bank sidesteps governments by establishing a more direct

relationship, the IDB first and foremost responds to its member states. Approaches used by the

banks to engage civil society seem to be informed by different rationales. The World Banks

approach is market oriented and more akin to an Anglo-American approach. In the IDB, civil

society is considered the other side of the coin of the modernization of the state agenda. In this

sense, the IDB reflects the Latin American agenda, which is more politically oriented.5 Despite

these initial differences, results on the ground are quite similar, as country case studies show in

the following articles.

Drawing from field research in Argentina, Carlos H. Acua and Mara Fernanda Tuozzo

argue that conditions imposed by MDBs cannot be seen as mere extraneous impositions on the

government. Bank programs in Argentina have followed the agenda of the government and its

priorities. Second-generation reforms had become a part of the agenda of the government, and

social actors had voiced their stance before becoming part of lending programs. Acua and

Tuozzo illustrate the rising regional consensus on policies and reforms and reveal the

dexterousness of MDBs in influencing development strategies. The Argentine case also shows

that new lending modalities have had only a moderate impact on participatory processes.

Reforms and adjustment programs remain closed and tend to be negotiated exclusively with the

government. MDBs confine their participatory practices to compensatory and social assistance

loans and even then limit them to certain stages of the project cycle. This discriminatory

application of participatory practices shows clearly that the new agenda has its limitations. The

influence of MDBs is important in terms of the traditional macroeconomic conditionality, but it

is not genuinely relevant in terms of openness and participation. Intervention is fundamentally

directed at strengthening market-friendly policies.

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 In the next case study, Aurelio Vianna Jr. discusses Brazils uniqueness, which stems

from the effort of social and political forces to monitor and control the executives dealings with

the international financial institutions. A key feature of their case study is the active role of

Brazils Congress, absent from the scene in all other cases. The 1988 constitution requires

congressional approval of international loans and projects. This legal instance provided Congress

with the capacity to closely supervise external indebtedness and monitor the international

financial institutions. NGOs have therefore set out a campaign to inform and involve interested

members of Congress to inject accountability demands into the domestic arena. The relevance of

intervention in Brazil can be better understood when these institutions are seen as an auxiliary

intelligence of the government. However, influence not only relates to funding but also extends

to granting political support to the policies and projects of the government. The IMFs

unprecedented involvement since 1998 has deeply altered the nature of the reform processes and

the roles played by the World Bank and the IDB. Operations have suffered changes, and many

social and environmental projects were dropped to channel funds toward adjustment. With

resistance simmering, participation has been shelved.

Manuel Fernndez de Villegas and Naomi Adelsons case study on Mexico portrays the

complex double-sided relationship of the MDBs with government and civil society. Throughout

the 1980s and 1990s, the MDBs closely supported adjustment policies of the Mexican

government; but they have lately begun to include civil society organizations in rural projects,

especially in those that challenge governmental authority in the southern states. The government

poses one of the biggest obstacles to introducing participation and openness in MDB projects and

programs. Its status as one of the biggest borrowers grants the Mexican government leverage

with the banks management and the possibility of discouraging participation. MDBs resolve this

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tension in a nonconfrontational way at project level through participatory projects that involve

handouts to marginalized and disenfranchised sectors. New lending modalities have provided an

instrument that can be used to promote more openness. Since operational directives in MDBs,

and particularly in the World Bank, mandate participation in project implementation, they offer

an opening not available through the Mexican political system. This provides informed civil

society the chance to use MDB projects as a tool to claim their right to participate. The main

limitation is that the government often blocks the implementation of these reforms and exercises

its right to restrict access to key documents.

Finally, we present our conclusions. Along with Mara Pa Riggirozzi and Mara

Fernanda Tuozzo, we do so in a fashion that is concise and straightforward, to provide readers a

quick reference. Our project findings confirm that the era of restricted negotiations between

governments and MDBs seems to have come to an end. However, the degree of openness is still

very patchy and varies from bank to bank and from loan to loan, leading in turn to rising civil

society expectations. As a general rule, a key factor of the analysis in each of the country cases

has been the opportunities opened by the new practices for nontraditional actors to participate in

the governance of issues or sectors affected by externally funded projects. Civil society

participation in MDB programs can be requested or not, depending mainly on the nature of the

programs considered. In compensatory loans and programs, participation is actively pursued; in

sharp contrast, if programs involve adjustment and reform, participation is actively skirted.

These programs remain the hard core of the MDBs. This selective application of participatory

practices is translated into two streams of interaction that can be identified both at policy and

loan level, one with civil society and another with governments. They account for the different

degrees of openness in lending operations.

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 Participation and transparency mechanismsdespite patchy implementationhave

undoubtedly modified the relationship between creditors, governments, and civil society in Latin

American countries. The extent of the changes and their implications, however, remains

uncertain. Only recurrent actions from civil society actors and optimization of strategies towards

MDBs and governments will exert enough influence to permeate the narrowly negotiated

processes of decisionmaking. The likely effect of these actions on national societies is one of the

many imponderables that will shape the future in the next decade. Nonetheless, the roots of a

liberal internationalist agenda are stronger than ever before.

Notes

Diana Tussie directs the Program on International Economic Institutions at the Latin American

School of Social Sciences (FLACSO) in Buenos Aires. In 1996, she was selected as

Distinguished Fulbright Scholar in International Affairs for the fiftieth anniversary of the

Fulbright Commission. Gabriel Casaburi is senior research fellow of the Program on

International Economic Institutions at FLACSO/Argentina and researcher at the Instituto de

Estudios de la Realidad Argentina y Latinoamericana (IERAL) in Buenos Aires. He has been a

consultant for the Inter-American Development Bank and the Economic Commission for Latin

America and the Caribbean (ECLAC). Tussie and Casaburis introductory article draws together

the two-year research efforts of a team of academics and NGOs funded by the Ford Foundation.

1. Ford Foundation program officer Augusto Varas and Luis Prez Coscio provided

intellectual support and insightful criticism. Gabriela Rodrguez Lpez provided invaluable

professional support.

2. Moises Naim, From Supplicants to Shareholders: Developing Countries and the

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World Bank, paper prepared for the conference sponsored by the Group of 24 on the occasion

of the fiftieth anniversary of the Bretton Woods conference, The International Monetary and

Financial System: Developing Countries Perspectives, Cartagena, Colombia, 1820 April 1994

(Geneva: UNCTAD, 1995); Diana Tussie, The Inter-American Development Bank (Boulder:

Lynne Rienner, 1995).

3. World Bank, PIC, 1998; IDB home page, online at http://www.iadb.org. IDB funding:

Belize, Brazil, Colombia, Dominican Republic, El Salvador, Guatemala, Haiti, Jamaica,

Suriname, Trinidad and Tobago, and Venezuela. World Bank funding: Argentina, Nicaragua,

Panama, Peru, and Uruguay.

4. Nora Rabotnikof, M. Pa Riggirozzi, and Diana Tussie, Los organismos

internacionales frente a la sociedad civil: Las agendas en juego, Program on International

Economic Institutions Working Paper No. 5 (Buenos Aires: FLACSO/Argentina, 1999).