World Bank Joint Ventures With JP Morgan
In partnership with Wall Street investment bank JP Morgan, the World Bank has launched a food commodity hedging facility that is supposed to provide “$4 billion in protection from volatile food prices for farmers, food producers, and consumers in developing countries”.
The Bank’s press release, below, quotes World Bank president Robert Zoellick and the CEO of JP Morgan’s investment bank division as claiming that the new instrument will allow producers and consumers in developing countries “to Â access agricultural price risk management”. The World Bank’s private-sector lending arm, IFC, will share in the credit risk, thus offering financial guarantees to JP Morgan. The communiquÃ© states that IFC hopes to involve other private banks in the venture.
Several research reports published by UN agencies and the World Bank itself have blamed financial sector investments for contributing to extreme food price fluctuations since the middle of the past decade. The most recent such report, issued by UNCTAD earlier this month, blames financialization of food commodity markets, particularly through derivatives, as a major cause of food price volatility. (We sent a message about this report to the IFI-L on 6 June.) The World Bank’s communiquÃ© makes no mention of the negative impact of investment banks’ involvement in food commodity markets or of any measures the Bank is taking to limit such impact.
The World Bank’s communiquÃ© is below and also available in Arabic, French and Spanish at: