Carstens confident of Brics backing for IMF job

Mexico’s candidate to head the International Monetary Fund has said he expects emerging markets to rally behind him, arguing that they need a stronger voice in the institution.

In an interview with the Financial Times, Agustín Carstens, governor of Mexico’s central bank, said he intended to push the cause of emerging markets within the IMF, given their growing importance in the global economy.

He said: “What we are expecting, and the flag that we are trying to carry, is the flag of emerging markets. What we want is a stronger representation.”

Mr Carstens, 52, has occupied several positions at the fund, including deputy managing director between 2003 and 2006.

His comments come after the fund’s executive directors representing the so-called Bric nations of Brazil, Russia, India and China said “adequate representation of emerging market and developing members in the fund’s management is critical to its legitimacy and effectiveness”.

The statement on Tuesday appeared to undermine claims by France that China had backed the candidacy of Christine Lagarde, the French finance minister, widely considered the frontrunner in the race to succeed Dominique Strauss-Kahn. Ms Lagarde launched her campaign for the post on Wednesday.

Mr Strauss-Kahn, also from France, resigned last week, days after he was arrested in New York over allegations of sexual assault.

Since its creation in 1945, a European has headed the institution. But emerging markets now believe that the 60-year-old tradition is out of touch with reality.

As central bank governor of Latin America’s second-largest economy, Mr Carstens believes he is the ideal candidate to represent and reflect those trends.

However, he also said that emerging markets should accept responsibility for their internal policies, and how they affect other countries.

He said: “In the same way that emerging markets will have the power of mentioning what advanced economies might be doing better, it [their increased role] should also come with the recognition that their stature is such that whatever they do has an impact on the rest of the world.

“We also have to be prepared for our policies to be debated in the context of the Fund.”

Mr Carstens said China’s exchange-rate policy was an obvious example, but stopped short of making specific recommendations.

At the same time, however, he sought to reassure European leaders that he would make their region’s evolving debt crisis the institution’s top priority.

“I can understand why Europeans think that right now it would be important for them to preserve their position at the Fund but I can assure you that not only me but any other managing director would have Europe at the top of its list … I would be willing to put my job on the line for Europe.”

He did not recommend plans for cases such as Greece and Ireland, two of the European countries facing the greatest financial challenges. However, he said that the IMF should have the general policy of supporting debt renegotiations “if the overall package is the right one”.

Mr Carstens said that the fund should increase member quotas, which he believed had lagged behind global economic growth.

This was important to prepare for future crises. He said: “The quotas of the fund have not progressed with the potential vulnerabilities that different countries face.

“We would all feel more comfortable if the fund had more adequate resources in its balance sheet.”

All candidacies must be submitted to the Fund by June 10. The next managing director is expected to be named on June 30.