Out of Disillusionment Brazil and South America Create Own IMF

South America's chief of states The Bank of the South (Banco del Sur) was launched Sunday in Buenos Aires by six South American presidents, including the Brazilian one. The initiative is the region's answer to the World Bank and the International Monetary Fund as a source for development funds.

Presidents Nestor Kirchner, of Argentina, Luiz Inácio Lula da Silva, of Brazil, Nicanor Duarte, of Paraguay, Rafael Correa, of Ecuador, Evo Morales, of Bolivia and Hugo Chavez, of Venezuela, signed the bank into being.

Uruguay is also a signatory of the initiative but given the border controversy with President Kirchner over the construction of a pulp mill on a shared river, President Tabare Vazquez was not present. Chile, Peru and Colombia have not adhered to the Bank.

South American dignitaries and government officials cheered after the leaders signed the accord on a glass-topped table, backed by flags of their South American nations in the Argentine presidency seat, Casa Rosada.

It was Kirchner's last official act as president before his wife, Cristina Kirchner takes over on Monday.

Chavez and Kirchner pushed the initiative to create the regional bank in 2006, hoping it will help wean the region off what are widely seen as the negative influences of the IMF and World Bank, responsible for failed policies in the region.

President Chavez said it was extremely important the region had its own financing sources to break its dependency on multilateral lending institutions such as the IMF.

Chavez said the banking systems of the region had over US$ 200 billion deposited in the "north," banks, resources which could be used to finance development and infrastructure in each country.

"This is the start of a historical moment," said Bolivian President Evo Morales, whose country is the continent's poorest.

He praised the bank as a new tool to fight poverty and ease inequalities and criticized what he characterized as heavy-handed lending practices of international lenders who demand austerity prescriptions as conditions for extending credit.

"Only a strong and united South America can occupy its rightful place among nations," Brazilian President Luiz Inácio Lula da Silva said. "This will be the first international bank truly controlled by the nations of our continent."

US educated Ecuador's Correa said that the Bank of the South will help Latin America break out of its financial chains and insisted that political decisions are far more important and significant socially than the efficiency theories of the neo-liberal economic schools.

The bank will start operations in 2008 with an initial capital of seven billion dollars. Based in Caracas, the Bank of the South will have regional offices in Buenos Aires and La Paz. The economy ministers of the member countries have 60 days to draw up an agreement on how the bank should be run, an Argentine official said.

However the agreement will establish several procedures, including its contribution system and whether the entity will take into account the differences in economic weight of the nations, which remains a controversial issue.

The bank will be run by a Board of Directors made up of the economy ministers of member states.

Augusto de la Torre, World Bank chief economist for Latin America, welcomed the bank.

"It's a very interesting initiative which I think expresses the desire to find stronger cooperation between Latin American governments," he underlined. "As far as the World Bank is concerned, this new initiative is not perceived as a competitor."

IMF-watcher Paul Blustein at Washington's Brookings Institution said the project highlights Latin America's yearning for greater autonomy after decades of sporadic financial crises and imposed austerity measures, such as IMF missteps ahead of Argentina's 2002 economic meltdown.

"It's really emblematic of how Latin America has become disillusioned with the model that the IMF and the World Bank and the U.S. Treasury promotes the so-called Washington consensus," he said.



  • Show Comments (5)

  • Lloyd Cata

    Big Ideas & Small Steps
    – the debacle a few years ago when they refused to pay what they had agreed on –

    Argentina rightfully refused this debt because it was granted during a military dictatorship. How easy it is for the IMF and World Bank to lend to the most despicable regimes in the world. It would be better if all the debts owed to these ‘lenders’ was refused to be returned. The patrons of the IMF and World Bank readily lend to the most corrupt governments because it allows them to financially enslave the people. If they had the least consideration for ‘democracy’ then they would turn the generals away; lending only to ‘credit-worthy’ governments.

    Banco del Sur may not be the best solution to the vicious cycle of IMF and World Bank social engineering, but it is a good step in the right direction. I agree that the bank should have FDI and other controls to safeguard “the peoples money”. Remember, the money going into this bank belongs to the people of the region and not to Chavez or Lula or any of the other leaders.

  • ch.c.

    Bravo ! Bravo ! ???????
    Ohhhhh yessssss…….You have been the only idiots on earth, with some Asian countries, to buy, buy buy buy buy buy buy…..a depreciating currency !!!!!!!

    And now you are stucked with it. If you reduce it, you will put more downside pressure, thus obliging you to buy, buy and buy more…..just to support it.

    As long as the weakness in the US$ wont create inflation in the USA, more more and more US$ will be issued.

    For America, 1 US$ will remain 1 US$, but for those with thousands of tons of US$, 1 US$ is less less and less of your local curenencies.

    What an autogoal you put to yourself. Bravo…bravo and again….BRAVO !

    You may be good in football, but certainly not in finances !

    Laugh….laugh….laugh….laugh…. !

    What YOU are saying is like if it would have been good for others to buy YOUR currencies when they were collapsing time and time again.

    Laugh….laugh…laugh…laugh !

  • panamakid

    why “northern” banks??
    Chavez said that the $200 billion in resources — to be used by the Banco del Sur — are in “north[ern]” banks. Does this mean “Western?”
    Until large depositors and the varied big-money actors in Latin America have enough trust in their own financial systems to keep their money in-country, the historical mistrust, inefficiencies, and lacking FDI will continue to haunt and subvert the Bolivarian “dream.”

  • jo

    So, the leaders spurn one mafia to create another. Some, like Argentina are just happy anyone is stupid enough to give them money after the debalcle a few years ago when they refused to pay what they had agreed on….Let the s.a. mafia leaders play their game, this is going nowhere as so many ill planned acts before. What is sure is that this new bank will not benefit people, just corrupt regimes and a few clever multi-national companies.

  • Lloyd Cata

    !Bravo! Banco del Sur !Bravo!
    It is never easy to begin a new direction. There are many difficult times in the days ahead for this agreement. The nations involved know what is at stake – freedom.

    I salute the leaders of each signatory nation and ask that they not be deterred when pressured by those who would have them return to the IMF and World Bank ‘regimes’. All understand the hardships their people have experienced at the hands of these ‘lending institutions’ who perform more the function of ‘social engineers’.

    It would be a great step forward if Banco del Sur could become the primary resource for all funding to protect Amazonia. This will facilitate regional cooperation in the area. Track the flow of goods and service into and out of the region. And prevent all this ridiculous talk of UN, WTO, NGO, or ‘private’ administration of the area. Amazonia belongs to the peoples of the region and should not be used as an international football to be discussed as a ‘resource’ for all mankind. The people and governments outside the region have already behaved badly concerning their own habitats and wildernesss. For what reason do they now think they can ‘administer’ this region as an ‘international preserve’? It is a straightforward attempt at grabbing a new colonial area.

    Again, my sincerest congratulations.

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