Mozambique, The IMF, And Manuel Chang

As of August 23rd, the South African government made the announcement that they will be extraditing the former Finance Minister Manuel Chang to his home country of Mozambique. He maintains that he has committed no wrongdoing. Mozambique will determine his involvement in a $2 billion debt and embezzlement scandal that crashed the Mozambique economy in a criminal trial. While Chang’s chance to stand trial is a promising signal for the nation’s stability, it’s important to recognize the nature of the geopolitical power plays that shaped and created the announcement.

The debt scandal that crippled the Mozambique economy began in 2013 and 2014. Several state-owned Mozambique companies requested $2 billion in loans from prominent American donors and the International Monetary Fund (IMF) for various fishing projects to help boost the Mozambique economy. In 2016, however, the Mozambique government defaulted on these loans, unable to pay them off. This prompted many powerful U.S. financiers to lose faith in the Mozambique government, ultimately creating a currency crisis for the Mozambique government, making money effectively worthless.

This is where Chang’s case comes into play. The U.S. Department of Justice did an investigation into the high profile scandal and found that not only were the $2 billion given to select companies in exchange for preferential treatment, much of the money was also embezzled and used for the 19 government officials’ personal gain. Chang was thrown into the spotlight, as he was the financial minister at the time, to sign off on how exactly these funds were transferred. This ultimately led to his arrest in South Africa in December 2018.

Unfortunately for the people of Mozambique, their government is still on the hook for the money, and thus the Mozambique prosecution is seeking harsh punishments for Chang and the 19 officials, one of these punishments being $2.9 billion plus interest in order to pay off the loans. While time will tell if the government will be able to get the money from Chang and others to pay off the loans, speculation is even murkier over whether or not the payment of the loans will increase confidence in the country’s currency and boost their devastated economy. Furthermore, it is important to recognize that the South African government’s choice to extradite Chang to the Mozambique government to stand trial directly contradicts the U.S. government’s request to have Chang stand trial on their turf.

This summary provides some context to the announcement, but it might still be difficult to understand the broader implications in regards to world peace. It’s important to recognize that an important facet of world peace is self determination for all peoples. In other words, a single massive global entity that eliminates both cultural and individual diversity for the sake of “peace” is far from the goals of most world peace advocates.

With this in mind, the South Africa’s choice to extradite Chang to Mozambique is far more ideal than sending Chang to the U.S. With that being said, there are notable concerns about whether it will be able to stabilize itself and provide adequate justice and care for its people. After all, Mozambique is one of the world’s poorest nations, in the middle of a devastating economic crisis, and poverty only breeds further instability. In light of these concerns, the broader picture of our global economy becomes relevant again.

While Chang and his associates are certainly to blame for this particular crisis, his actions were only a symptom of the broader failure of the U.S.-led ideals of the World Trade Organization, IMF, and the growing perspective of developmental economics. The system of giving loans to struggling nations is a practice that comes with the risk of further damaging the nations that it claims to help. This is clearly visible in the Mozambique case, as it was the Mozambique government’s inability to pay back the loans that directly caused the currency crisis (though not necessarily the corruption).

While further analysis of the morality of loans is relevant — whether they help or if they just make things worse when they can’t be paid on time — the consistent state of failure for developmental economics to produce any consistent results towards economic prosperity for those in need clearly suggests that the current IMF system is in dire need of change.

With this in mind, it becomes clear that perhaps U.S. or UN direct infrastructure construction is more valuable for these nations, as infrastructure is the lifeblood of economic growth (to build roads, hospitals, schools, better irrigation, and allow these individual nations use these tools to grow on their own). Overall, while the extradition of Chang is a small victory on the path towards world peace, the nature of the larger system has continued damaging the people of Mozambique and all countries that need loans. 

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