Source:
Americas Program
Seven Latin American Finance Ministers have agreed on the basis for establishing the Bank of the South. The motivation for forming the new development bank is based on the belief that keeping Latin America's precious reserves at home—to loan to other Latin American governments for their mutual development—is preferable to accepting aid and development loans from the Inter-American Development Bank and other multilateral development banks.
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BACKGROUND
The Bank of the South is one of the three pillars of the new regional financial architecture in South America, together with a Southern Fund and a South American Monetary Unit. This fact was agreed upon by the presidents of Argentina, Bolivia, Brazil, Ecuador, Paraguay and Venezuela in the Quito Declaration signed on May 3, 2007. This Bank is intended to be an expression of sovereignty and financial independence from the international financial institutions (IFIs) and their policies, as well as an entity which will finance another kind of integration with emphasis on the energy sovereignty, food security and intra-regional trade. However, the negotiation process that led to its creation and the debates that have arisen after its foundation show that the path will not be so easy to take.
The creation of the Bank of the South was made official on December 9, 2007, in Buenos Aires, Argentina, when the presidents of the seven member countries, Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela signed the foundation charter of this institution. As from that moment, the Committee in charge of the technical aspects of the Bank set themselves the task to agree on a proposal of articles of agreement to be drafted within 60 days, so as to submit them to the presidents’ consideration and in the last instance submit said proposal for it to be ratified by the respective parliaments.
However, said term was long overdue without the Commission reaching a consensus proposal. As stated by Gabriel Strautman of Jubilee Brazil, "debate has been marked by disputes between those who aim at the idea of breaking up with the international financial system and those who believe in respecting the rules imposed by globalized finance and who, therefore, just consider the regional multilateral institution as a new source of finance for old projects". ("South Bank: 90 days of silence")
The different technical instances complied with as from December aimed at the achievement of political and technical agreements – capital contribution and Bank management being two of the most controversial issues.
The currency unit and the creation of the Bank of the South are doubtlessly paving the way towards a new regional financial architecture, which seeks to reinforce the independence of the region as regards the policies promoted in the 1990s. The Bank of the South has been vindicated by the South American debt movement, which is working in pursuit of the initiative and watching negotiations with expectation, and this grants legitimacy to the process. But the moment they stop feeling the initiative as their own, the Bank will lose one of its major assets and turn into a financial institution just like any other.
The neo-liberal model shows clear signs of erosion in Latin America. This has been expressed in voter support for candidates who have been critical of neo-liberalism. Moreover, some governments need to keep not only a formal but also a real distance from the IMF, but does not imply that they are launching a process to revert neo-liberal policies. In this context, the creation of the Bank of the South should not be considered from a financial point of view but rather from a geopolitical and epistemological perspective, implying: the reformulation of development finance contents. March, 2007
Chavez has proposed institutionalizing his lending to some Latin American countries with a regional organization he calls the Banco del Sur. This is bad news for the IMF. March, 2007
The announcements of the inauguration of the first Latin American office of the planned Bank of the South and the adhesion of new members countries have come as a direct challenge to the Northern based IFIs struggling to remain relevant to the region. An update and analysis of recent announcements about Bank of the South, focusing on the implications for the ongoing crises of relevance in Latin America confronting the IMF, World Bank and IDB, as well as the challenges for deeper South American integration. May, 2007
Several Latin American governments as well as civil society organizations and movements are looking for alternatives sources for financing development in the region. The proposal of a Bank of the South is an attempt to fulfill this objective. However, we must ensure that it be a democratic institution, as well as an economically, socially and environmentally fair one. Above all, the Bank of the South should not reproduce the institutional, economic or political model of current multilateral financial institutions. May, 2007
The initiative to create the Bank of the South as a "financial alternative for the economic recovery and integration of South American countries", was originally fuelled by president Hugo Chávez, of Venezuela, and Néstor Kirchner, of Argentina. The presidents of Ecuador, Bolivia, Paraguay and Brazil eventually added their support, although they have different ideas about what should be done by this Bank. Would Latin America have found an alternative to the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank (IDB)? May, 2007
On May 3rd, Finance Ministers from the six countries in favour of establishing the Bank of the South met in Quito to debate what responsibilities this institution should have. The previous week, Ricardo Patiño, Finance Minister of Ecuador, discussed Ecuador's proposals for the Bank during the international seminar "The Illegitimacy of External Debt" which took place in Quito from the 25th to 27th of April. May, 2007
The preparations for the Bank of the South have shown two opposite tendencies at play in Latin America: the relationship with the US and the European Union through bilateral free trade agreements; and the development of strategic alternative projects that compose the "Alternativa Bolivariana para las Américas (ALBA)". Two texts were put into consideration by the Bank of the South's representatives. The first one was written by Argentina and Venezuela, while the second one was a proposal from Ecuador. Both texts contribute to the debate on the objetives of the new institution. May, 2007
On Tuesday, May 22, the presidents of MERCOSUR countries gathered in Asuncion had the possibility of making a historical decision: the creation of the Bank of the South. Initially proposed by Argentina and Venezuela, the Bank of the South must be at the same time a development bank and a regional reserve fund to protect its partners against speculative attacks. Beyond the evident economic significance, this initiative will have a huge political impact, since it will perceptibly reduce the power exerted by the United States in South America through the IMF and the World Bank. May, 2007
The proposal to fund the Bank of the South has generated enthusiasm but also scepticism among political leaders, civil society representatives and regional analysts. The challenge that this institution will have to face is considerable , even more so when it is to be created with the principal objective of becoming an alternative to the IMF, IDB and World Bank in order to build the biggest financial integration tool for the development of Latin American peoples. June, 2007
The launch of the Bank of the South is an ambitious and strategic gambit in regional integration, one that could result in a truly regional development bank. It will be, above all, a different kind of bank: its members shouldn't see it as a way of advancing their personal careers, its funds should not be destined to accumulate maximum earnings but dedicated to fulfilling the needs of the peoples and those who have historically been excluded. July, 2007
Different from Europe and the United States, the countries of Latin America, do not have sufficient tax earnings available to guarantee the enjoyment of social rights for their populations. These countries base the sustainability of their budgets on the generation of fiscal surpluses to obtain sufficient recourses to pay in service of debt. This situation makes them realize the necessity of independent and sovereign financing in the region. July, 2007
Since the month of June, when the Bank of the South was about to be launched at the Summit of South American Presidents in Asuncion, we started to see a slow-down. Some governments have started to dig in their heels to curb the drive launched first by Chavez in 2005, then by Chavez and Kirchner in 2006 and finally by Correa in 2007, who spoke of broadening the concept of the Bank of the South to one of regional financial architecture. The greatest resistance of the Brazilian government is that they would like the Bank of the South to finance the initiative for Integration of Regional Infrastructure in South America (IIRSA). August, 2007
The theory that institutions such as the World Bank and International Monetary Fund are currently undergoing different types of crisis has even been accepted by their own policy supporters. The Colombian economic policy has been characterised so far by the disciplined implementation of policies "recommended" by multilateral institutions. Colombia may well remain outside the dynamics of Latin America, bearing the cost of staying tied to economic policies and institutions that have already evidenced their inability to solve their own crises. August, 2007
On September 20, the president of Venezuela, Hugo Chávez, expressed his urgent need to implement the Bank of the South. Without delving into the urgent need of president Chávez, the creation of the Bank of the South – a regional development bank – will be a very positive initiative for those countries getting involved in it, strengthening their solidarity and cooperation ties and their perspectives on autonomy with regards to international financial institutions. However, we believe it is worth pointing out some considerations since the definitions and strategic guidelines have not yet been clearly established (at least publicly). October, 2007
"Developing nations must create their own mechanisms of finance instead of suffering under those of the IMF and the World Bank, which are institutions of rich nations... it is time to wake up." That was Lula da Silva, the president of Brazil, speaking in the Republic of Congo. Although US foreign policy establishment remains in cozy denial about it, the recognition that Washington's economic policies and institutions have failed miserably in Latin America is broadly shared among leaders in the region. October, 2007
At the meeting held on 8 October 2007 in Rio de Janeiro, the ministers of economy and finance made further progress in negotiations leading to the founding of the Bank of the South. On this occasion the founding document of the new multilateral financial institution was signed. At this meeting the date for the launching of the Bank was fixed for 3 November, but for the third time the ceremony was postponed to 9 December in Buenos Aires. November, 2007
Other regional financial institutions in Latin America
For at least two centuries South America has experienced integration processes and their outcome is ambiguous. This paper is an exploration of scenarios, a trip to possible futures. It takes into account the current financial earthquake that is shaking the US financial system, flashing seismic waves throughout the economy of world capital. It asserts that a financial architecture always serves a certain development pattern and policy, therefore is not politically ‘neutral’. January, 2009 (pdf format)
Little by little, other regional financial organisms have been exploring the niche vacated by the IFIs in the region. Their focus is Latin America and their roles are similar to those of the IFIs. Many of them are less well known than the IFIs and their activities not always so evident, but they manage enormous funds and they are highly influential. Most of these new institutions are Latin American, and their management is in the hands of Latin American governments. This article describes this group of Regional Financial Institutions (RFIs), identifies its members, and analyzes their main characteristics.
This report includes the outcomes of the technical consultation non-binding with the National Technical Comissions on the Bank of the South, experts in banking and finance, academics and civil society representatives aims at proposing options for the Bank of the South in the areas of management and administration; capital, stock and gathering of funds; investment policies and instruments for the social, environmental and financial development of the region; cycle of operations, safeguards and purchases of the Bank; participation and transparency. The workshop was held in Quito, Ecuador, from June 23 to 26 with the support of the Ecuadorian government and the Unites Nations Development Programme (UNDP).
For civil society organization the bank must be based on a logic that is not dominated by financial criteria, but by the complementariness, reciprocity and solidarity based on development strategies different from the neoliberal development policies. (This report was prepared for the workshop on the Bank of the South held in Montevideo within the framework of the South American People's Summit - December, 2007)
The "Summit for the Friendship and Integration of the Ibero-American Peoples" took place in Santiago, Chile,
from 8 to 10 November, concurrently with the Summit of Ibero-American Heads of State and Government. Rede
Brasil and Jubilee South/Americas organized a workshop on 8 November to discuss the implications of the
creation of the Bank of the South and define strategies for advocacy.
Seven Latin American Finance Ministers have agreed on the basis for establishing the Bank of the South. The motivation for forming the new development bank is based on the belief that keeping Latin America's precious reserves at home—to loan to other Latin American governments for their mutual development—is preferable to accepting aid and development loans from the Inter-American Development Bank and other multilateral development banks.
After the launching of the Bank of the South in Buenos Aires the countries had to reach an agreement on the contribution that experts considered would be made in equal parts. Argentina, with the support of Brazil, said that this was unreasonable; that the contribution of the larger countries should be greater, and their power within the Bank should therefore also be greater. Naturally this distorts the idea of a democratic Bank with a board composed by seven equal associates in which each country would have a vote. January, 2008
In the closing weeks of 2007, a region in revolt against the economics of corporate globalization issued its most unified declaration of independence to date. Seven Latin American presidents signed the founding charter of the Bank of the South. By itself, the bank represents a serious challenge to U.S.-dominated institutions, such as the IMF, the World Bank, and the Inter-American Development Bank. As part of a larger trend, it signals a major break from the policies of "free trade" neoliberalism that dominated in the region throughout the '80s and '90s. January, 2008
It took a while to get formalised, and even now there are several hurdles to be crossed before it becomes operational. Nevertheless, the signing of the agreement on December 9, 2007 in Buenos Aires, to create the Banco del Sur is a very welcome sign that the complacent world of development finance run by the Bretton Woods lending institutions is about to get some much-needed shocks. January, 2008
At the launching event for the Bank of the South, held in Buenos Aires on December 9, 2007, the presidents of Bank member countries set a 60-day deadline to define the structure and guidelines of the new South American multilateral financial institution. In practice, the idea was to set a deadline in order to eliminate the existing divergences among members on the role of the Bank. However, the deadline expired on February 9 without having made any progress. March, 2008
After several postponements over the year 2007, the Bank of the South was formally created in Buenos Aires on December 9, 2007, when the presidents of the seven countries signed its founding charter. At that time, a 60-day deadline was established for the member countries to define the Bank's Articles of Incorporation. However, it was only recently, on April 25, 2008, in a meeting held in Montevideo that the matter was taken up again by the members. These suspensions and delays may be justified by some important differences that exist among the countries involved in the bank’s founding process and which constitute key factors in this sense. May, 2008 (pdf format)
The Bank of the South is one of the three pillars of the new regional financial architecture in South America, together with a Southern Fund and a South American Monetary Unit. This fact was agreed upon by the presidents of Argentina, Bolivia, Brazil, Ecuador, Paraguay and Venezuela in the Quito Declaration signed on May 3, 2007. This Bank is intended to be an expression of sovereignty and financial independence, as well as an entity which will finance another kind of integration with emphasis on the energy sovereignty, food security and intra-regional trade. After its creation, nevertheless, a series of facts and debates have arisen which show that this path will not be so easy to take. July, 2008
The current architecture based on the World Bank and IMF, among other institutions, has been criticised for turning financing into a mechanism for the imposition of economic policies on Southern countries. After much social resistance and the arrival of left-wing governments to power across Latin America, the necessary political momentum was created to launch financial regionalisation. However, differences of opinion over the direction of the Bank of the South may slow progress towards developing an autonomous alternative to the World Bank and IMF. September, 2008
Social organizations, NGOs and churches making up the debt movement in the region have long been facing the logic prevailing within the international financial architecture, the same which by means of financial institutions such as the World Bank and the IMF has turned debt policies into domination mechanisms against Southern countries. Thanks to the impetus brought about by the International Jubilee Debt Campaign at the end of the 1990s, it was possible to achieve three results the Movement has rated as positive: the debt audit in Ecuador; Norway’s debt cancellation in favor of three Latin American countries; and the foundation of the Bank of the South. September, 2008
A year since the Bank of the South was launched, a number of key structural and policy issues remain. And now the current financial, food and fuel crisis may also threaten the availability of member country resources for the project. As a result of these various hurdles, it seems unlikely that the Bank will begin operations before even mid-2009. As the 2008 global financial crisis has seen the loan portfolio and influence of the IMF grow once again, the time is right for a regional alternative to the IFIs. The Bank of the South is a powerful idea. December, 2008
