Brazil and six other South American countries agreed to establish Banco del Sur (Bank of the South), a regional development bank championed by Venezuelan President Hugo Chavez, in an effort to expand regional trade and growth with their own resources.
Chavez, Brazilian President Luiz Inácio Lula da Silva and the presidents of Argentina, Bolivia, Ecuador, Paraguay and Uruguay will inaugurate the bank on Nov. 3, in Caracas according to the Declaration of Rio de Janeiro signed by finance ministry officials of the seven countries this Monday, October 8.
"Banco del Sur is the beginning of a new financial architecture for the South," said Rodrigo Cabezas, Venezuela's finance minister, in comments to reporters in Rio de Janeiro. "Our development won't be put at the service of other countries."
Monday's meeting included officials from Brazil, Argentina, Paraguay, Uruguay, Bolivia, Ecuador and Venezuela.
Chavez proposed the bank as part of a drive to counter the influence of the U.S. in Latin America and use oil profits from record high crude prices to finance social and economic development programs. Brazil has resisted efforts to use the bank as an alternative to the International Monetary Fund and is opposed to using bank funds to support currencies.
"Lula and Brazil are not socialists like Chavez but they are under pressure from Brazilian companies who do a lot of business in Venezuela to keep relations good," said José Botafogo, a former Brazilian Ambassador and head of Brazil's Foreign relations association in an interview.
"Brazil would probably rather not have a new bank, but it's willing to accept one if it's a real bank and not just a Chavez social program."
According to the declaration, the Caracas-based bank will have regional offices in La Paz and Buenos Aires, said a spokeswoman for the Brazilian finance ministry, which hosted the meeting of finance ministers in Rio de Janeiro.
The amount each country will contribute to the bank and how it will raise additional capital are issues to be worked out in the 60 days after the Caracas signing ceremony, Guido Mantega, Brazil's finance minister said at a press conference.
In addition to agreeing to set up the bank, they decided each country will have an equal voice on the bank's board of directors. Chile, Peru, Colombia, Suriname and Guyana are yet to say whether they will join the bank.
Venezuela, which had wanted the bank to make loans to Cuba and Central American nations such as Nicaragua emphasized the bank's difference from older international institutions such as the World Bank and International Monetary Fund.
"No conditions will be set on loans to members," Cabezas said, adding that the lending practices of the International Monetary Fund and the World Bank in the region had been a "neo- liberal disaster."
Brazil, which according to Mantega will make a "large" contribution to the bank, emphasized the goal of creating a self-sustaining institution that will earn enough interest on investments to increase the amount of capital available for loans.
"We will not be making adventures; this will be a serious bank," Mantega said. "We see it as a way of promoting regional integration projects and both the private and public sector."
The bank will not make grants, only interest-bearing loans and operate only within South America. The bank will also seek to increase its capital to "three, four or five times" the initial national contributions through borrowing, possibly through international capital markets, said Mantega.
The bank hopes to make its first loan in 2008, Mantega and Cabezas said. They also said the bank plans to work with existing regional financial institutions such as Brazil's state development bank BNDES and the Corporacion Andina de Fomento.