[For Raúl Zibechi, a member of the Editorial Council of the weekly Brecha in Montevideo, the launch of the Bank of the South is an ambitious and strategic gambit in regional integration, one that could result in a truly regional development bank. To read the original Spanish version of this article click here. --Ed]
Bank of the South: Toward Financial Autonomy
By Raúl Zibechi - americas.irc-online.org
Friday July 6, 2007
The launch of the Bank of the South is an ambitious and strategic gambit in regional integration, one that could result in a truly regional development bank. Despite Brazilian concerns, this new institution is ready to be launched.
"Positive," Joseph Stiglitz, Nobel Laureate in Economics, concluded in a recent speech to the Argentine business association in Buenos Aires. He noted that the new Bank of the South (BoS) would allow South American nations to assist each others' economies, adding that a major obstacle for emerging markets is a lack of long-term financing, and development banks have been successful in the past at filling this void.
On May 22 in Asunción Paraguay, the six founding states—Argentina, Brazil, Bolivia, Paraguay, Ecuador, and Venezuela—reached an agreement on the Bank of the South after two months of negotiations. The BoS will begin operations in 2008. It was to be formally presented to the public in the next presidential summit in Venezuela on June 26, although the date has been delayed. Unlike the International Monetary Fund (IMF) and World Bank, the BoS assigns a single vote to each member country, independent of the size of its financial contribution.
The First Steps
Venezuelan president Hugo Chávez initially proposed the idea of the Bank of the South. Argentine president Nestor Kirchner soon followed suit.
The first step was to throw down the gauntlet. Chávez and Kirchner did this on Feb. 21 in Puerto Ordaz, Venezuela, during the inauguration of the first active oil well in a joint venture between their two state energy companies, Energia Argentina S.A. (Enarsa) and Petroleos de Venezuela S.A. (PDVSA).
The two presidents proposed creation of an institution to quickly and effectively finance regional development projects in a more independent manner. Currently there are two regional banks. The River Plate Basin Financial Fund (FONPLATA), consisting of Argentina, Bolivia, Brazil, Paraguay, and Uruguay, has a mere US$410 million at its disposal. The Andean Promotional Corporation (CAF) manages US$10.5 billion, available for investment in infrastructure. Both banks are related to the World Bank and the IMF, and are structured along the same lines.
During the annual governing meeting of the Inter-American Development Bank (IADB), held in March 2007 in Guatemala, the Argentine and Venezuelan finance ministers made some progress on technical matters and solidified objectives for the proposed institution. In early May, representatives of the six countries reached a consensus known as "The Quito Declaration" that proposed the creation of the Bank in the first quarter of 20071. They also agreed to a stabilization fund designed to aid countries suffering international speculative attacks, and to develop a regional currency. The critical challenge was bringing Brazil on board.
Difficulties and Obstacles
There are two
countries professing left-wing progressive governments that are notably
absent from the bank's founding members—Chile and Uruguay.
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