Georgieva-Led IMF Bowed to Brazil by Softening Climate Warning
(Bloomberg) -- International Monetary Fund officials including Managing Director Kristalina Georgieva -- who’s made climate change a signature issue -- softened a warning about environmental risks to Brazil’s economy after President Jair Bolsonaro’s government objected to the language.
The management decision around the end of July involved the IMF’s key annual evaluation, known as an Article IV consultation, for Latin America’s largest economy. Managers initially gave their seal of approval to the staff report on July 30 before revoking it hours later and subsequently removing disputed phrasing, IMF officials confirmed when asked by Bloomberg News about the events.
The IMF said the decision to change the language was part of the normal process that reports on any of the fund’s 190 member countries go through, with back-and-forth between the staff, their managers and officials from the country being evaluated. And it’s standard practice for senior managers to review and sign off on the country evaluations, a spokesman said.
But for management to revoke approval for a report and remove phrasing that a country objects to is rare, according to several past and current fund employees who have worked on Article IV evaluations. Management made the decision after Georgieva met with Brazil’s representative to the fund board, Afonso Bevilaqua, who had complained several times that the IMF’s evaluation wasn’t supposed to encompass the nation’s climate policy.
“The management team, including the managing director, played a constructive role, bringing together views among staff and with the authorities to find common ground,” IMF spokesman Gerry Rice said in a written response to questions from Bloomberg News. “The IMF considers climate change a globally critical economic issue and made that point with regards to Brazil very clearly in the staff report.”
IMF management’s decision to soften the Brazil climate language surprised some employees, according to people familiar with the events, given that Georgieva has advocated for the IMF to play a leading role in combating climate change since she took the helm in 2019. She herself trained as an environmental economist and spent her first decade at the World Bank, her previous employer, working on environmental issues starting in 1993.
In addition, IMF board members in May “generally agreed that coverage of climate change mitigation in Article IV consultations would be strongly encouraged for the largest emitters of greenhouse gases,” and the topic should be covered in places where it’s “macrocritical,” according to a statement at the time. Brazil is the biggest emitter in the Western Hemisphere outside of the U.S., according to the World Resources Institute, an environmental research group.
Georgieva echoed the fund’s attention to the risks from climate change in a statement to Bloomberg News on Thursday.
“I am very proud of leading the effort to make climate action part of our Article IV country reports,” Georgieva said.
Georgieva’s position at the IMF is under pressure over unrelated allegations from an investigation by law firm WilmerHale, done for the World Bank, that she pushed staff in 2017 to manipulate China data under pressure from the government to boost its ranking in a report. Georgieva, 68, has denied any wrongdoing. The IMF board was scheduled to discuss the matter in a meeting Friday.
About 1 1/2 to two hours after granting clearance for the Brazil staff report on July 30, IMF management learned that Brazil’s Bevilaqua had a strong desire to speak and share his views about the inclusion of staff climate policy analysis in the report, IMF officials said.
Brazil’s economy ministry, the main agency responsible for relations with the IMF, declined to comment.
While the final IMF report, publicly released Sept. 22 and running 84 pages, does say there are risks to Brazil’s commodity industry from increased adverse-weather events, a line with a broader point was struck compared with a prior version seen by Bloomberg News: “Climate change poses macro-critical risks to the Brazilian economy.”
The final version of the staff report also omitted language from the prior version analyzing Brazil’s policies, leaving a factual list of initiatives that the country had undertaken.
Prior language about the benefits of a “broader national strategy to reduce Brazil’s carbon footprint” and a warning about rising “emissions from agriculture and land use change” also were omitted from the publicly released report.
The IMF, in its statement to Bloomberg News, said the change in wording didn’t affect the report’s climate message. A comparison of the draft and final versions shows that about 60 words were eliminated.
Countries can detail any objections to the IMF’s findings in a statement included with the published report. They also have the right to prevent publication, and Brazil had that prerogative, though the nation didn’t exercise it.
For example, China blocked the IMF’s report on the country for a few years in the late 2000s amid differences with the fund over the yuan’s value. Argentina didn’t allow a review for about a decade starting in the mid-2000s.
Bolsonaro, who took office at the start of 2019, has questioned the existence of climate change, and his government has faced global criticism over lax policies to protect the Amazon.
But in recent months Bolsonaro’s government has been trying to improve Brazil’s environmental image. During a virtual summit organized by U.S. President Joe Biden in April, Bolsonaro committed to reducing carbon-dioxide emissions by 30% by 2025 and by 43% by 2030. He also made a commitment to eliminate illegal deforestation in the country by 2030.
The published IMF report says Brazil’s government is “undertaking several initiatives” to respond to climate-related risks, “including strengthening incentives for privately led conservation activities in agriculture, fostering the development of green public and corporate bond markets, and improving the integration of Environmental, Social, and Governance criteria in the evaluation of infrastructure projects.”
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