Bank of the South to rival Bank of the North (IMF and World Bank)
Venezuela’s leftist government is leading Brazil, Argentina and other regional economies in creating a new bank with the ambition of casting off unwelcome oversight by the IMF and World Bank.
The idea was first announced by Venezuela’s President Hugo Chavez last December as part of his crusade against US influence and international financial institutions that he says are merely “tools of Washington.”
The finance and economy ministers of Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela met last week in Rio de Janeiro to outline the main elements of the “Banco del Sur” — or Bank of the South.
The lender will provide “a new financial architecture” for development in the region, according to the seven backers, whose initiative comes just ahead of annual meetings of the IMF and World Bank this weekend.
“There will not be credit subjected to economic policies. There will not be credit that produces a calamity for our people and as a result, it will not be a tool of domination,” said Venezuelan Finance Minister Rodrigo Cabeza.
Chavez speaks of liberating regional countries from the tutelage of the IMF, the World Bank and the Washington-based Inter-American Development Bank (IDB) which, he argues, impose economic policies that condemn millions to poverty.
Bolstered by robust economic growth, Latin American countries are displaying a new assertiveness toward the IMF now that several of them — notably Brazil and Argentina — have paid off their debts early.
The new bank enjoys backing from Brazilian President Lula Inacio Lula da Silva, who despite his leftist profile has overseen an economic policy marked by fiscal restraint and growing reserves since coming to power in 2003.
But South America’s economic giant declined to give its agreement until clarifying that the bank’s role would be limited to aiding investment in the region.
“Brazil shows less interest because it has the greatest credit capacity,” said the country’s finance minister, Guido Mantega.
However, “we continue to support the project because it will benefit our commercial partners and Brazilian businesses,” he added.
The Bank of the South is supposed to finance public and private projects for development and regional integration. The official launch and the signing of a founding charter is set for November 3 in Caracas, which will host the bank’s headquarters.
With seven billion dollars in capital, the Bank of the South will begin operating in 2008.
“The idea is to rely on a development agency for us, led by us,” Cabeza said.
The seven founders hope to secure the membership of five other countries: Chile, Colombia, Peru, Guyana and Suriname.
Colombian President Alvaro Uribe said Friday on the margins of a summit with Chavez that his country wanted to join the Bank of the South, as long as it was “not a rejection of the World Bank and the International Monetary Fund but an expression of solidarity and brotherhood.”
In 2006, the World Bank and the IDB allocated six billion dollars in credit for the region, according to Interamerican Dialogue, based in Washington.