Bank of the South takes shape as locally-led South American development agency

The creation of a Bank of the South, originally proposed by Venezuelan president Hugo Chávez as a way of financing regional development projects, has been completed with the inauguration of the bank in Caracas on November 3.

The bank will include seven South American countries - Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela, and will have up to $7 billion in initial capital, paving the way for the bank to begin operating as early as 2008. Agreement to found the new bank was reached by Argentina, Brazil, Bolivia, Paraguay, Ecuador, and Venezuela on May 22 in Paraguay.

An eighth country, Colombia, has decided it wants to be included as well as long as the new bank is an "expression of solidarity and brotherhood," and not a rejection of the international lending institutions.

The Bank of the South will be designed to promote investment in infrastructure and could help stimulate greater regional trade and integration. Chávez sees it as an alternative financing institution to the World Bank, the Inter-American Development Bank and the International Monetary Fund, all of which have significant Washington involvement. Unlike the IMF and World Bank, the BoS assigns a single vote to each member country, independent of the size of its financial contribution. "The idea is to rely on a development agency for us, led by us," Venezuelan finance minister Rodrigo Cabezas explained in mid-October.

The bank will lend for development projects at interest rates similar to those charged by other multilateral institutions. The finance ministers of each member nation will sit on the bank's administrative council.

Nobel Laureate in Economics, Joseph Stiglitz, noted in a recent speech 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.

Compiled from stories published in the International Herald Tribune Oct. 8, 2007 (Bank of the South sets launch date on Nov. 3 in Venezuela) and Oct. 22, 2007 (Bank of the South, championed by Venezuela, begins to take form) and an article entitled Brazil & Co's Bank of the South Will Have To Undo Neoliberalism's Work by Raúl Zibechi published July 9, 2007 in Brazzil Magazine. Various commentaries on the new bank can be found at:

Choike.org, Bank Information Centre, and Share the World's Resources.

 


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