Publication Details

G. Garcia, 'Understanding IMF stand-by arrangements from the perspective of international and domestic law: the experience of Venezuela in the 1990s' (Paper presented at the SIEL Third Biennial Global Conference, National University of Singapore, Faculty of Law Centre for International Law, Singapore, 12-14 July 2012).


During the 1990s, international financial institutions such as the World Bank and the International Monetary Fund (IMF) promoted the so-called 'Washington Consensus'. One of the premises of the consensus was that developing countries needed to embrace a market economy and build a legal system supportive of the rule of law in order to promote progress and defeat poverty. The onset of financial crises across South America and the inability of governments to deal with problems derived from this financial meltdown provided the proitious conditions for the IMF to implement its agenda of promoting a market economy and the rule of law in this region. Disbursements of IMF financial asistance were conditioned on thefulfilment of a set of requirements by the assisted country. Conditions were listed in the letter of intent addressed to the Fund by the government of the distressed country and linked to an instrument known as 'stand-by arrangement' (SBA). The IMF Guidelines on Conditionality state the SBAs were not international agreements. Based on this assumption, SBAs were often agreed by government without complying with the requirements stipulated by domestic law. The implementation of SBAs caused tension in countries where legal systems required congressional authorisation for the adoption of the type of commitments included in a standard SBA. Reviewing a SBA agreed by the IMF and the administration of President Rafael Caldera in 1996 under the so-called 'Agenda Venezuela' program, this paper explores the legal nature of SBAs as a form of international law, and the interaction between these arrangements and domestic law. The main argument develops in this paper is that SBAs are international agreements that govern rights and obligations between the IMF and its state members and therefore, governments must comply with the requirements prescribed by the domestic legal system in order to enter into this type of contracts.

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