World Bank Joint Ventures With JP Morgan

(The following was sent by ITUC Washington representative Peter Bakvis and deserves wider distribution. While this action by the World Bank might reduce food prices at the margin, it would be far preferable for them to push for regulation of speculation in food instead of joining in a destructive game.)
 

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  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 communiqué 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 communiqué 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 communiqué is below and also available in Arabic, French and Spanish at:

http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22945434~pagePK:34370~piPK:34424~theSitePK:4607,00.html

 

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