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Africa: Gold Industry Blocking Debt Plan
Jun 3, 2005 (050603)
(Reposted from sources cited below)
"If you could improve the lives of hundreds of millions of the
world's most destitute people with a program that might - just
might - temporarily reduce the profits of the global gold industry,
most people would probably think it is worth doing. Even most
members of Congress. That's why it has been so disturbing to see
gold producers strong-arm Congress and the White House into
blocking just such a desperately needed measure." - The New York
Times, June 3, 2005
Time is running out for agreement by rich countries on new measures
to cancel debt of developing countries. The chances are growing that
the G8 summit next month in Scotland will again be the occasion for
more rhetoric rather than for action. The latest obstacle, highlighted in
a New York Times editorial today, is lobbying by Newmont Mining and
other large gold mining companies, to block the quickest and simplest
way to cancel a significant part of the debt - namely, sale of International
Monetary Fund gold stocks.
A coalition of U.S. groups has launched a campaign to put direct
pressure on Newmont Mining to stop blocking these sales. This issue
contains the action alert from this coalition, and excerpts from an
international NGO policy paper on debt and IMF gold sales. For more
information see particularly
A free fax to Newmont Mining can be sent through the website of
Global Exchange at
For the full New York Times editorial: http://www.nytimes.com
For previous AfricaFocus Bulletins with additional background on
the issue of debt: http://www.africafocus.org/debtexp.php
Another AfricaFocus Bulletin, also sent out today, focuses on a new
Human Rights Watch report highlighting the other end of the gold
production chain and its role in promoting violence and human
rights atrocities in the northeastern region of the Democratic
Republic of the Congo.
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
50 Years is Enough * Essential Action * Global AIDS Alliance
Global Exchange * Health GAP * Jubilee USA
Action Alert: Gold Industry Blocking Debt Cancellation Plan
Call on Newmont Mining to Reverse Opposition to IMF Gold Sales;
Lives are at Stake!
International debt payments are draining poor countries of
resources desperately needed to address health, education and many
other pressing needs.
After years of offering nothing more than half-hearted measures and
worse, the rich countries have agreed to cancel the debts of the
poorest nations to the International Monetary Fund (IMF) and World
Bank. But they continue to differ over how to do it.
It is now clear a compromise agreement among the rich countries
over cancellation of IMF debt can only be reached if sale of IMF
gold is a component of the financing package for debt cancellation.
But a decision to sell some of the IMF's stock of gold is being
blocked by the gold industry, led by the world's largest gold
producing corporation, Newmont Mining Co. Newmont and the industry
say that IMF gold sales will lower the world gold price, but they
ignore a proposal from the IMF itself that would ensure IMF gold
sales have no net impact on the world gold market.
Newmont's misguided opposition is on the brink of sabotaging IMF
debt cancellation -- thus ensuring millions of poor people will be
deprived the benefit of IMF debt cancellation. This is a
TAKE ACTION: Call and fax Newmont's office and Board Members,
demanding they reverse their position and publicly state and
communicate to Congress and the White House their revised position.
KEY TALKING POINTS:
- Ensuring debt cancellation is a humanitarian imperative;
- There's no reason for Newmont to oppose IMF gold sales, since
they can be accomplished with no impact on the world gold price;
- Newmont must retract its opposition to IMF gold sales, and
publicly state that it is open to IMF gold sales;
- Action now is imperative, before the G8 (the rich countries) meet
- Newmont's failure to retract its opposition to IMF gold sales
will mean poor countries waste billions of dollars on debt payments
to the IMF, and will consign millions of people to needless
suffering, as they are deprived of health, education, clean
drinking water and other services that could be made available with
SEND A FREE FAX VIA GLOBAL EXCHANGE:
CONTACT: Newmont Mining Corporation, 1700 Lincoln Street, Denver,
Colorado, USA 80203. FAX (303) 837-6034.
Investor Relations Contacts:
Randy Engel, Phone: (303) 837-6033 Email: email@example.com
Wendy Yang Phone: (303) 837-6141 Email: firstname.lastname@example.org
Contact Board Members, listed here:
More details follow below.
Impoverished countries are impoverished in part because of the huge
debt repayments global creditors like the International Monetary
Fund and World Bank collect from them. Every year, sub-Saharan
African pays about $13 billion to those institutions and others in
wealthy countries - a figure that is roughly equal to the amount
the United Nations estimates is required to combat the AIDS
pandemic in Africa. Developing countries, in fact, send more money
to the wealthy countries than they get in grants, loans, and other
forms of aid. It's a deadly, backward game.
High-level talks among the G8 governments have been going on for
nearly a year in response to U.S. and U.K. proposals for more
substantial debt cancellation plans. The proposals could be the
most substantial debt plans in decades. The target for agreement
has been the summit of G8 heads of government in early July in
The plan is now in grave danger. That's because the major actors
cannot agree on how to "finance" the debt cancellation. The IMF has
been sitting on an endowment of about $40 billion worth of gold
since its founding. The massive gold stock is used for nothing
other than ensuring "confidence" in its financial stability. It
earns no interest and makes no resources available to anyone.
The U.K. and other governments are in favor of selling some of the
gold in order to "finance" cancellation of debt owed to the IMF.
Those are often the biggest debt problems for impoverished
countries, because the IMF is a "preferred creditor," which means
it must be paid back before all other creditors. And as long as a
country is indebted to the IMF, it must accept harsh economic
policy conditions that enrich corporations while depriving the most
vulnerable people of opportunities. If the world's poorest
countries are to recover and thrive, freeing them from IMF debt is
So what's stopping them? The U.S. government.
It's not that there is any compelling economic reason to oppose the
sales. Nor does the Bush Administration put a particularly high
priority on gold markets. But at least one politically powerful
company in the Western states has decided to use its muscle to
oppose any IMF gold sales. And because any sale of IMF gold
requires, for complex reasons, the approval of the U.S. Congress,
it has been able -- by getting 12 Senators from Western states to
send a letter to Treasury Secretary John Snow - to convince the
Administration it cannot support gold sales.
That company is Newmont Mining, the biggest gold mining concern in
the U.S. They say they do not want to risk a drop in the price of
gold that might result from the introduction of a large quantity in
Newmont executives have seen presentations demonstrating that the
sale of IMF gold would be accomplished in a way that would have no
impact on world markets --through an agreement with European
central banks that regularly sell gold -- and the IMF itself has
made it clear that IMF gold sales done through the so-called
Central Bank Gold Agreement would result in no net impact on the
world gold market. Yet Newmont continues to refuse to remove its
opposition to IMF gold sales.
The misguided assertion of interest by this gold multinational
stands against a chance to emancipate impoverished peoples and
countries - to provide healthcare, shelter, food, economic
We must fight to reverse this absurd and outrageous situation
quickly. July is approaching, and solutions to the IMF debt problem
are rapidly falling off the G8 agenda.
TAKE ACTION: Call and fax the Company's office and Board Members,
demanding they reverse their position and publicly state and
communicate to Congress and the White House their revised position.
Urge current and potential investors in the company to complain
about the position of the company. Say you have decided to not
purchase Newmont stock because of this issue. Submit opinion pieces
and letters to the editor exposing the company's misguided
opposition. Call radio call-in shows to express your view.
Circulate a joint letter to Newmont, asking religious and community
groups in the state to sign. Remind people that stopping AIDS and
poverty is a matter of compassion and justice, and it also is
critical to global security.
Note that Newmont's policy states: "Newmont's future is dependent
on its ability to develop, operate and close mines consistent with
our commitment to sustainable development, protection of human
life, health, the environment, and to adding value to the
communities in which we operate. We understand the actions and
conduct of every Newmont employee and contractor are the basis on
which our stakeholders will evaluate our commitment to achieving
the highest standards of social responsibility."
For more information on Newmont and IMF gold sales, see:
Sponsoring organization websites:
Sell IMF gold to cancel the debt: decision time is now
13th April 2005
[Excerpts. For full report see
The European Network on Debt and Development (EURODAD) is a network
on 48 NGOs in 15 European countries who work on issues related to
debt and finance, poverty reduction policies and empowerment.
CIDSE (Cooperation Internationale pour la Solidarite et le
Dveloppement) is an alliance of 15 Catholic development
organisations from Europe and North America. ...
AFRODAD is a research, lobby and advocacy regional organisation
seeking to secure positive policy changes to redress Africa's debt
and development crisis in order to achieve equitable and
sustainable development that will lead to an African and worldwide
prosperous society. ...
... over 60 organizations including labor, churches, religious
communities and institutions, AIDS activists, trade campaigners and
over 9,000 individuals are active members of the Jubilee USA
... Canadian NGOs formed the Halifax Initiative in December 1994 to
ensure that demands for fundamental reform of the international
financial institutions were high on the agenda of the G7's 1995
Halifax Summit. ...
Debt owed to the International Monetary Fund (IMF), World Bank and
other multilateral institutions has grown rapidly in recent years
and these institutions are now the major creditors of the world's
poorest countries. Because there are serious consequences for
countries which default on payments to these bodies, multilateral
debt can be extremely onerous for countries struggling to provide
for even the most basic social and development needs of their
Every year six million children die from malnutrition before their
fifth birthday. Every day more than 800 million people go to bed
hungry and 24 thousand die of starvation. HIV/AIDS kills more than
2 million people every year and adds to the league of millions of
orphans in developing countries.
Civil society organisations across the globe have long advocated
the use of the International Monetary Fund's impressive and
massively undervalued gold reserves to fund further debt relief for
impoverished nations. Now the viability of this proposal, after
years of opposition, has been formally recognised by the staff of
the IMF in a new paper. The paper states clearly that it is
possible to sell large amounts of gold on the open market without
negative impact on world gold prices. Gold sales could be managed
within the framework of the Central Bank Gold Agreement (CBGA).
This acknowledgement will alleviate the concerns of gold producing
nations, many of which are low-income countries. The paper also
states that the Fund's Articles of Agreement provide for the
outright sale of gold at prevailing market prices, the proceeds of
which could be used to cancel impoverished countries' debts. In
2005, civil society organisations are coming together under the
banner of the Global Call to Action Against Poverty. This worldwide
mobilisation for action on debt, aid and trade is the biggest civil
society movement since Jubilee. Now is the time for leaders of the
rich world when they meet in Washington on 15 April for the Spring
Meetings of the IMF and World Bank to act!
In light of the massive resource gap faced by impoverished nations
to meet the MDGs, we the signatory organisations to this paper call
on world leaders to support:
- The phased sale of all of the IMF's gold reserves in the
framework of the Central Bank Gold Agreement to fund debt
cancellation for impoverished nations. It is not justifiable to
leave these resources idle;
- Resources from these gold sales should be used to support the
cancellation of debts of all those countries which are unable to
meet the MDGs by 2015;
- The proceeds of these gold sales should be used not just to cover
debts owed to the IMF, but debts to other multilateral development
banks as well.
The clock is ticking every 3.6 seconds someone in the developing
world dies of starvation. Every 30 seconds, a child in Africa is
killed by malaria, a preventable disease. Too many have died and
too many lives have been blighted. We cannot afford to sit on our
hands anymore. Every year, every month, every day and every second
of delay is morally unacceptable. The time to act is now! The world
Since the G7 began discussing proposals for up to 100% debt
cancellation in June 2004, more than 4 million children under five
have died. How many millions must perish before world leaders move
from rhetoric to action! ...
IMF Gold: It's Possible!
The IMF is the world's third largest holder of gold after the
United States and Germany. It holds 103.4 million ounces of gold
(3.217 tons) currently valued at US$ 9 billion. At end-2004, its
market value was estimated at around US$ 45 billion. Civil society
organisations across the globe have consistently argued that the
IMF's massively undervalued gold reserves constitute a considerable
(but idle) resource which should be put to productive use to cancel
the multilateral debt of the poorest countries. Several studies by
NGOs have shown that the gold market can absorb the sale of
significant amounts of gold without negative consequences on world
gold prices, provided that gold sales are conducted in an open and
transparent manner over a reasonable period of time (for example 20
The IMF, in its paper, has now finally acknowledged that this is in
fact possible. In particular, it endorses the arguments long put
forward by civil society organisations that phased gold sales
within the framework of the Central Bank Gold Agreement (CBGA) or
direct sales to gold purchasing central banks are possible. It
states that "the CBGA has supported the capacity of the gold market
to handle significant official sales by conducting sales in a
transparent and predictable manner". ...
The paper also fully endorses NGO arguments that a revaluation of
gold reserves should be avoided because of the significant
transaction costs associated with such a measure. ... It recommends
therefore that any future operation involving the use of gold
should be "conducted through outright sales rather than off-market
transactions as used in 1999-2000". ...
A Question of Political Will
This recognition that gold sales are indeed technically possible
represents a clear victory for developing countries around the
world. The paper, however, does not go nearly far enough. For
example, the IMF recommends an overall sale of between only 13 to
16 million ounces of gold (around 12.5% and 15.5% of the IMF's
total gold reserves). It also recommends using only the profits
from gold sales to cancel poor country debt while it retains the
nominal value. Sadly, the IMF also does not appear to want to
consider the possibility that its gold reserves could be used to
cancel some of the debts owed to other multilateral institutions
such as the World Bank. Nevertheless, the technical arguments are
won. ... It is now therefore simply a question of political will.
Debt Cancellation is Good for Development
It is widely recognised that debt relief is a highly effective
resource transfer mechanism: debt relief can provide a much greater
degree of predictability than other sources of development
financing which allows governments to make the long- term
investments necessary to achieve the MDGs. It supports country
ownership since it allows countries to spend their own resources on
the priorities they themselves have identified. It is non-cyclical,
i.e. unlike aid which can decrease in times of economic downturn,
debt relief is neutral. It also has low transaction costs and poses
less administrative burden on recipient governments.
Research has also shown that partial debt relief, where granted,
has been well spent and has proven to be a highly effective tool
for poverty reduction. In Burkina Faso, HIPC debt relief has been
spent on education (39%), health (33%) and rural road (28%). In
Benin, 43% of HIPC savings went to education in 2002. In Malawi,
HIPC resources have helped to train 3600 new teachers a year. ...
The Africa Commission reports that
In Benin, 54% of the money saved through debt relief has been
spent on health including rural primary health care and HIV
- In Tanzania, debt relief enabled the government to abolish
primary school fees, leading to a 66% increase in attendance.
- After Mozambique was granted debt relief, it was able to offer
all children free immunisation.
- In Uganda, debt relief led to 2.2 million people gaining access
to clean water.
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