The definitive agreement for the launching of the Bank of the South, a multilateral organization to help fund development and infrastructure projects, was finally reached Friday, May 8, in Buenos Aires, capital of Argentina. The document was signed by finance ministers from Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela
"We've closed all pending issues and therefore this is the last ministerial meeting on the subject, said Argentine Finance minister Carlos Fernández who nevertheless added that the final stitch is "the technical review of statutes" of the new bank and the "parliamentary approval by the seven founding countries."
The Bank of the South, started at the end of 2007 (and the brainchild of Venezuela's Hugo Chavez), will have an initial capital of 7 billion US dollars (originally it was planned 10 billion), of which Argentina, Brazil and Venezuela will supply 2 billion US dollars each; Ecuador and Uruguay 400 million US dollars each and Bolivia 200 million.
"The terms of the agreement are acceptable, so the statutes should be easily approved without much discussion," said Brazil's Finance minister. Guido Mantega. "This is the missing step for financial integration," he added.
"Given the current international context the bank should be operational as soon as possible," added Argentina's Fernandez. "It's not easy to create a financial institution of this kind in the midst of an international crisis."
According to the statutes, each country member will have "one vote" in the board but for approval of loans over US$ 70 million, support from votes representing two thirds of capital subscription will be needed, explained Fernandez.
At the same meeting Argentina and Brazil also agreed to a US$ 1.5 billion swap to reinforce their international reserves. The operation is similar to that recently agreed between Argentina and China and the one signed by the Federal Reserve and fifteen other countries, including Brazil.
The swap is "preventive" and enables each country access to a credit in Brazilian reais or Argentine Pesos equivalent to US$ 1.5 billion and valid for three years.
Brazilian minister Mantega said that when Brazil signed the agreement with the Fed he advanced that the scheme would be expanded to the region, with Argentina and Uruguay as first interested parties.
"It's a precaution mechanism to reinforce international reserves. Let's hope this becomes available as soon as possible and operational for the two central banks," said Fernandez.