English

English > Current Affairs

New 'Bank of the South' shuns neo-liberal agenda

by Rob Kievit

10-12-2007

Latin America is challenging the dominance of international financial institutions like the World Bank, the Interamerican Development Bank and, most of all, the International Monetary Fund.

In 2006 president Hugo Chávez of Venezuela took the initiative towards a new Bank of the South (Banco del Sur), as a counterpart to the major funds operating from the developed North of the globe. Seven countries have now signed up, agreeing to have the bank up and running in two months. All of the signatories can be described as leftist presidents, except Paraguay's leader Nicanor Duarte.

Professor Louk de la Rive Box

Professor Louk de la Rive Box, rector of the Institute of Social Studies in the Hague, a leading European Centre of Development Studies, told RNW about the role the bank wants to play.

In the first phase of its existence, the Banco del Sur will not grant credits to countries outside the region. But its name - referring to the South in general, not just to South America - points to wider ambitions.

Neo-liberal

Banco del Sur Main aim of the bank: to finance the economic and social development of the member states of the South American Union UNASUR. Seat: Caracas, Venezuela Founding capital: 7 billion US dollars (4.8 billion euro)

Initially, the new bank will try to be a replacement for the IMF, which is not popular in Latin America.

Argentina has a good case against the IMF: it followed up the neo-liberal directives, which did them no good at all, says Professor De la Rive Box. The Bank of the South, on the other hand, will allow governments to remain involved in major projects that the Bank finances, and it will not require countries to open up to world markets.

President Hugo Chávez of Venezuela

Many people in Latin America fear that instead of a neo-liberal ideology, the new bank will attach neo-socialist conditions to its loans. The chances of this, however, seem remote. Although largely inspired by leftist president Chávez of Venezuela, he has no formal hold over the bank's actions. All member countries have equal voting rights, whatever their size.

Brazil
In addition to the equal distribution of voting powers, there is another factor that inspires confidence, according to Louk De la Rive Box.

"The idea for this bank is bigger than Hugo Chávez. Otherwise Brazil wouldn't have signed up. Brazil is the largest power, Brazil has its own very large development bank, which can finance or fund this type of huge projects just as well. And Brazil has thought for a long time whether it should or should not participate in this bank.
The fact that it is participating indicates that the biggest power in South America is also interested in this type of South American venture. It could become an interesting enterprise."Brazilian president Lula da Silva agrees: he says the bank is a decisive step in South America's integration.

Promise

Banco del Sur signatories Presidents: Nestor Kirchner of Argentina Hugo Chavez of Venezuela Lula da Silva of Brazil Nicanor Duarte of Paraguay Rafael Correa of Ecuador Evo Morales of Bolivia. (President Tabare Vasquez of Uruguay was not present)

Over the coming 60 days, the founding countries will work out in detail how the bank operates. As a lender, the Bank of the South will have to impose discipline on countries that fail to repay loans. Experience in the European Union has shown how difficult it is to impose spending limits on member countries; even states like France and Germany have overspent, despite restrictions decided by the EU leadership.

"A comparatively small bank like this one, with only seven billion US dollars in capital at this moment, could come into serious problems if one of the countries, for example Brazil, were to default on paying back."

Despite such open ends, De la Rive Box thinks the Banco del Sur holds some promise, especially for smaller countries like Bolivia or Ecuador, who are treated on an equal footing with the big ones. What is in it for the bigger countries remains to be seen.

Tags: Banco del Sur, Brazil, Chávez, Hugo, IDB, IMF, Latin America, Venezuela, World Bank

Reaction(s):

Wendy, 10-12-2007 - Canada

This is wonderful news. But if only these countries and others understood that their privately owned central banks could be nationalized and money created interest free backed by their own natural and human resources. Canada's Bank of Canada is one such bank...however, lack of political will since the mid-1970's in Canada has us borrowing from private banks and paying compound interest. $37 billion annual in federal debt interest payments $60 billion if you include provincial and municipal interest for a debt that can never be repaid.

---

---

Copyright Radio Netherlands Worldwide 2009 Disclaimer