Back to Bretton Woods
Juan E. Notaro
Executive President of FONPLATA – Development Bank
The Bretton Woods Agreements, which ruled the functioning of the global financial system for more than three decades and laid the foundations for the birth and expansion of development banks, took place at a critical time for humanity.
It was 1944. The planet was still amid the Second World War, which stemmed from the key issues that remained unresolved at the first one, and the aftermath of the Great Depression was still being felt almost fifteen years later.
Besides, the poles of power and geopolitical dynamics that would determine the course of humanity for the next 45 years were starting to take shape. Thus, there was a need for a system that was beyond those differences.
For this reason, representatives of forty-four countries met between July 1 to 22 of that year in Bretton Woods (New Hampshire, USA) to lay the foundations for international cooperation that would guarantee growth and cooperation among the participating nations.
Later, as the system was faulty, academics and governments criticized it severely with well-founded reasons. Nevertheless, more than 190 nations continue to be part of the two main institutions derived from the agreement: the World Bank and the International Monetary Fund.
Today, the world is experiencing a new “Bretton Woods moment”. The challenges of climate change, the COVID-19 pandemic and its severe economic impact, and the readjustment of the global political chessboard that has already begun with the war in Ukraine put us in a similar place, but with some advantages.
The need to redefine the rules of the global financial system to make it more fair, sustainable, and transparent was strongly visible during the 2008 crisis and the subsequent bailout of the affected institutions.
Although progress was made in the regulatory framework and in certain laws because of that crisis, the challenges we face for the future demand much more.
The International Bank for Reconstruction and Development (which later became part of the World Bank) was born out of that conference. The objective of the institution, clearly stated in the name, left no doubt as to its purpose.
The rest of global development banking, as we know it, had its origin in that meeting along with the institutions that were born out of it. Some development banks emerged as satellites of that influence, and others for the opposite reason: to distance themselves from the United States.
As I pointed out earlier, despite the dangerous situation we face today, the current scenario has advantages. One of them is precisely a broad global network of development banks made up of more than five hundred institutions of all kinds.
Another advantage, which I suggested above, is that almost all the nations of the world are still members of the Bretton Woods institutions and participate in several multilateral organizations.
Development banks have become, in addition to financial institutions, true repositories of knowledge and experience to address development challenges at all scales. They have also become aligned with other global priorities: climate change, human rights, and gender equality, just to give a few examples.
Aware of their capacity and of their role in today's complex landscape, they have begun to provide a coordinated response to some of these issues. One example is the event “Finance in Common”, the first global summit of public development banks held in Paris in 2020.
In today's circumstances, just as 78 years ago, the world is at a crossroads that requires coordinated actions, agile and strong institutions, and cooperation mechanisms that are beyond ideologies and political junctures.
My call is not to revive that system, but to invoke the spirit of that conference, in which an attempt was made to forge mechanisms for collaboration among countries and to face the challenges of the times in an organized manner.
That is the challenge. And I am convinced that development banks have a vital role to play in financing and providing the knowledge we need to emerge from the current crises. It is time to reconvene the spirit of Bretton Woods.