Money Master

The selection of a new managing director of the International Monetary Fund is usually a discreet affair, conducted almost exclusively behind closed doors. But the competition to replace Frenchman Jacques de Larosiere, who announced his coming departure in September, has generated -- in financial circles at least -- all the excitement of a tight horse race. Last week a winner hit the wire: Bank of France Governor Michel Camdessus, 53. When he takes over next month as chief of the IMF, which provides short-term emergency loans to troubled nations, Camdessus will become perhaps the second most powerful moneyman in the world, after Federal Reserve Chairman Paul Volcker.

By tradition, a European heads the IMF and the president of the sister World Bank is an American. Generally, West European governments quietly agree on a candidate, and the IMF executive board, which represents the 151 member nations, approves the choice by acclamation. This time, though, two rivals -- Camdessus and Dutch Finance Minister H. Onno Ruding -- lobbied for the job. Ruding hit the campaign trail in an especially unbankerly fashion, creating a stir at an IMF meeting in Washington this fall by canvassing for votes. Divided on the choice between Camdessus and Ruding, the European governments left the decision up to the 22-member IMF executive board.

Camdessus thus becomes a prominent member of the bomb squad that is trying to defuse the explosive Third World debt problem. A former director of the French Treasury, he was favored by debtor nations, which expect him to be comparatively sympathetic to their plight. Ruding, known as a stern fiscal conservative, enjoyed more support among the private banks that have loaned billions to the debtors. The bankers are already uneasy about De Larosiere's last big initiative, a $12.5 billion rescue package for Mexico that called for private creditors to accept a stretched-out payment schedule for about half the country's $98 billion debt. The creditors fear that other major debtors, like Brazil and Argentina, will demand similar concessions. Camdessus' main challenge is to continue the delicate process of helping Third World debtors reduce their obligations, while avoiding the spark that could ignite a destructive chain reaction of defaults.