-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1
Bank of the South: Another Step toward Latin Amer Integration (COHA)
Via NY Transfer News Collective * All the News that Doesn't Fit
Council on Hemispheric Affairs - Dec 7, 2007
http://www.coha.org/2007/12/07/bank-of-the-south-another-step-toward-latin-american-integration/?utm_source=prml&utm_medium=email&utm_campaign=bank-of-the-south-another-step-toward-latin-american-integration
Bank of the South: Another Step toward Latin American Integration
by COHA Research Associate Roberto Mallen
* Member countries analyze the proposal as Banco del Sur
(Bank of the South) is about to be launched
* Lula, while skeptical, is moving ahead
* Dealing with the opposition to the Bank
* Not a Ch!vez-controlled institution, but one aimed at development
and integration, infrastructure loans and aiding each others
investment requirements
Since coming to power in 1999, Venezuelan President Hugo Ch!vez may
have been seen as a controversial figure, universally known for his
confrontational stance regarding U.S. foreign policy aims. However, his
zeal for social reform, promotion of Latin American integration and his
unquestionable good will toward other nations will reach a high-water
mark on Sunday, December 9, 2007, when the Bank of the South will be
formally launched.
Integration has been a recurrent theme on Ch!vezs political agenda"not
Wa****ngtons kind, but the more regional-centric ALBA (Bolivarian
Alternative for the Americas)" which is given reality by the oil
concessions Venezuela has negotiated with various Latin American
countries, as well as his most recent proposal for a development bank
for South America, which has been given the working title of Banco del
Sur (Bank of the South).
The Bank of the South appears to be one of the regions most compelling
projects leading towards authentic Latin American financial bolstering,
as well as helping to allow for a new-found autonomy. It appears that
for the first time in its history, the region actually will have its
own entirely autonomous financial institution with each of its members
having one vote and which is most likely scheduled to be capitalized
from $7 to 8 billion dollars. This large institution will be capable of
promoting financial integration and cooperation. Under its members
jurisdiction, it will sup****t the development of badly needed
infrastructure projects, especially in the energy sector. This
initiative has the sup****t of seven South American countries
(Venezuela, Ecuador, Bolivia, Brazil, Argentina, Uruguay, and Paraguay)
in addition to several other Caribbean and Asian nations that already
have expressed varying degrees of interest in the project.
Nobel Laureate and Columbia University Professor Joseph Stieglitz gave
his blessing to the project after meeting Ch!vez in Caracas. In a
subsequent press conference, he observed that one of the advantages of
having a Bank of the South is that it would reflect the perspectives of
those in the Western Hemisphere. It would boost Latin Americas
development and provide a useful alternative to the World Bank and the
International Monetary Fund (IMF). It is a good thing to have
competition in most markets, including the market for development
lending. Some open questions and possible disagreements regarding the
Banks policy framework and its objectives persist among the founding
countries. Public opinion in Latin America in general has a low regard
for International Financial Institutions (IFIs), especially the IMF,
which has been widely chastised for its prejudicial treatment of the
Argentine economic melt-down earlier this decade and for the scores of
years it spent setting harsh conditions in return for providing access
to international credit. Therefore, given how Latin American
governments are reluctant to seek aid or credit from IFIs, the region
needs a large alternative financial institution that would be noted for
its transparency and which permits its members to actively engage in
the decision-making process, which is exactly what Bank of the South
proclaims it will do.
The Proposal
President Ch!vez initially proposed the creation of Bank of the South
at the Cochabamba Summit in December 2006. The initial proposal was to
create a development bank for South America to finance regional
development projects, while being accountable and seeing to it that
provisions be made for the necessary amount of public participation.
The bank project is well underway with a target of raising over $7
billion in initial capital (Venezuela has already offered $1.4 billion
and Argentina $350 million). However, there is some disagreement on
what the institutions objectives and framework should be. Should it be
an institution designed to aid countries in financial crisis (such as
the IMF does)? Will it be in competition with the other IFIs, such as
the Inter-American Development Bank (IDB)? Or will it be yet another
institution that will, as Prof. Stieglitz phrases it, promote
competition in the market for development lending but this time in a
higher-minded manner?
Venezuela has taken the lead in proposing the creation of an
institution that will be specifically aimed at servicing South America.
It is no surprise that Ch!vez is the leader who first envisioned this
kind of institution, considering how he chose to withdraw Venezuela
from the IMF and the World Bank earlier this year and how he has
publicly attacked those institutions for being instruments of American
imperialist design in the region. Venezuela, as the lead country of
ALBA, Ch!vezs model for an altruistic foreign and financial policy,
also insists that the main distinction between the IMF and Bank of the
South will be that the latter will not impose a definition for
cooperation based on neo-liberal mandates. Vince McElhinny of the
Bank Information Center points out that Venezuela foresees an
institution that will play a significant role in regional monetary
policy and provide financing for needy members. Colombias approach, on
the other hand, would have been pragmatic, rather than provocative, and
was not expected to cause Wa****ngton any grief.
Colombias Explosive Announcement and its Impasse with Venezuela
Colombias announcement that it would not be attending the Buenos Aires
gathering did not cause any great surprise because it came as a
consequence of Colombian President Alvaro Uribes angry spat with
Ch!vez. He also presumably felt that attending would put him in hostile
territory and that he better identify with the status quo. Uribe
managed, until the other day, to have maintained a cordial working
relation****p with his Venezuelan counterpart while relying on the White
House to aggressively lobby the Democratic Party leader****p to obtain
the necessary backing to get the approval for a Free Trade Agreement
with Wa****ngton. Uribes relation****p with Ch!vez is currently under
siege due to his abrupt termination of Ch!vezs role in attempting to
achieve, with Bogot!s consent, the release of hostages being held by
the leftist FARC (Fuerzas Armadas Revolucionarias de Colombia)
guerillas.
Following Uribes shutdown of Chavez mediation in the conflict, after
the latter spoke directly to the commander of Colombian military about
the direction of the negotiations, Ch!vez angrily announced that
relations with Colombia would be put in the freezer. Due to Uribes
intemperate actions, Ch!vez said he was no longer planning on rejoining
the Andean Community of Nations, a trade bloc of which Colombia is a
major member. The crisis is also expected to affect commerce between
the two countries, which share a healthy $5-6 billion in annual trade,
most of it in non-traditional products.
The Case of Brazil
Lulas sup****t for the project has been hesitant, even distant at
times, but in recent weeks he considerably has warmed up. Brazil
initially was hesitant to give its sup****t to the Bank because its
strategy appeared to be based on creating an emergency fund, as the IMF
does, to aid countries with urgent economic concerns. Given that the
region currently has relatively strong credit ratings and budget
surpluses"partly thanks to China and Indias quest for mineral
resources"Brazils argument that the Bank may turn into an IMF-type of
institution that is redundant. But Brazil decided to throw its full
sup****t behind the bank, after the bank planners clarified that the new
institution would be limited to promoting investment and development in
the region.
Another issue that may have promoted misunderstanding involved Brazil,
which has the regions largest economy. Brasilia had opposed the idea
that the voting structure of the Bank should be based on the principle
of one nation one vote. Rather than equal voting rights, it favored a
voting scheme based on the amount of capital that each nation will be
pledging to the financial institutions capitalization allotments.
Eventually, Brazil fell into line and agreed with the one vote per
nation formula which was espoused by the majority of the member****p.
One factor that initially complicated matters was that Brazil already
possessed a development bank"the Banco Nacional de Desenvolvimento
Econ'mico e Social (BNDES)"which already has become a powerful domestic
financial factor in the country, lending more than $15 billion in the
past year for in-country projects. Luciano Coutinho, the president of
BNDES, said he was prepared to create a fund through his bank whose
purpose would be to replicate the mission of the Bank of the South.
This brings up the question of exactly how Brazil will benefit from the
Bank if it already has a development bank that finances such projects
in the country. Apparently, Brazils vision for the Bank is one that
adheres to orthodox fiscal standards and basically finds itself
involved in financing the infrastructural investment needs of an
expanded Mercosur, the southern cone free trade area. Most of the
development projects that BNDES finances are in fact of this type and
normally tend to relate to Mercosur-associated energy policies. Given
that Brazil is Latin Americas largest economic force and a country
with immense potential, its sup****t gives the Bank of the South huge
legitimacy and will help it materialize other projects, such as a very
ambitious proposal for a gas pipeline which would eventually serve most
of South America.
Opposition to the Bank
Opposition to the Bank of the South is centered on the premise that the
Bank itself is part of Ch!vezs vision for South America, and that any
country that sup****ts the idea is backing a socialist scheme for
Venezuela as well as the rest of the region. Some have gone as far as
to say that some of the South American members are sup****ting the Bank
only to secure the good will of oil-rich Venezuela.
Roberto Teixeira da Costa, a board member of the private Banco Itau
Holding Financeira S/A and Sul America Sam, stated that the Bank will
overlap institutions dedicated to financing the region"not only the
IDB, but also the Andean Development Cor****ation (CAF), which is
partially committed to financing badly needed infrastructural projects.
He also alleges that the region is not lacking funding, but rather
sound and viable projects to be financed.
Countering the Opposition by Creating a New and Thoroughly Democratic
Structure Indeed, there is little doubt that the Banco will, to a
certain extent, overlap existing policies and goals of other lending
institutions. However, it should be clear that the proposed charter for
the Bank of the South is in sharp contrast to the IDB or CAF when it
comes to an open democratic structure in the Banks favor. According to
Venezuelas Minister of the Treasury, Rodrigo Cabezas, the Banks
charter will prevent any country from possessing a majority stock
owner****p, as well as include other clauses that will prevent the
application of adjustment mechanisms employed by the World Bank, IDB
and IMF.
Moreover, the Bank of the South should not be looked upon as trying to
undermine the role of CAF, the biggest present lender to many Andean
nations. However, as Bank of the South seeks for a more wholly
democratic structure, it does not intend to achieve this by emulating
the hierarchical structure of CAF.
Not a Ch!vez-Led Institution
The idea that any of the potential members of the Bank of the South
will be candidates to also join Ch!vezs foreign policy alternative,
ALBA, or that the Bank will be controlled by Ch!vez, is probably riding
the wrong horse. While it is true that Ch!vez took the initiative to
establish the Bank, and that Venezuela is positioned to be a major
participant in its operations, and that its main headquarters will be
in Caracas, this doesnt mean that Ch!vez in any manner will directly
control its activities, or that the Bank will be used to funnel
Ch!vezs Bolivarian vision automatically into Latin America. It is
worth noting that the Bank demonstrably will possess a structure that
will enable all of its member countries to actively participate in its
operations: or, as Cabezas has stated, the Bank will be an institution
for us, led by us. Also, while some countries, like Colombia, may
have serious ideological differences with Ch!vez and may not want to be
considered part of an institution allegedly led by him, or at least be
part of Ch!vezs ALBA, this does not mean that they are prepared to
turn their backs on the new institution, even though Bogota has now
done this, at least for the present time.
In an interview in October with the New York Times, Brazilian President
Luiz Ignacio Lula da Silva dismissed such concerns that Venezuela would
try to exert control over the Bank. He stated that it is small-minded
to think that one bank created with the multilateral representation of
many countries would be at the service of one person or one country.
Its not that simple.
Conclusion
Although Colombias relation****p with the Bank has ended, for now, all
of the other proposed members seem to be committed to actively
participating in the financial institution. Yet, much remains uncertain
regarding working out its policy framework and strategies that will be
utilized after the December 9 gathering. Much of what will eventually
make Bank of the South very successful as well as very popular with its
clientele will be its commitment to transparency, participation and
accountability.
South American countries must come to see in the Bank of the South as a
window of op****tunity to create an institutional model for development
that, if successful, could be emulated by grouping of countries around
the world. There is still a long road ahead, but the Banks member
countries are set to meet on December 9 to discuss and publicly
announce the final structure of the Banks operating framework. This
meeting is expected to come forth with reasonable understandings on how
to proceed so that the project becomes a popular reality in short
order.
*
=================================================================
NY Transfer News Collective * A Service of Blythe Systems
Since 1985 - Information for the Rest of Us
Our main website: http://www.blythe.org
List Archives: http://blythe-systems.com/pipermail/nytr/
Subscribe: http://blythe-systems.com/mailman/listinfo/nytr
=================================================================
-----BEGIN PGP SIGNATURE-----
Version: GnuPG v1.4.7 (FreeBSD)
iD8DBQFHWcnQiz2i76ou9wQRAu6sAKC/nMmLEHghH1eO76C3EF86fwlNJQCgsCpF
lajXrvNLN8rJOoAyi+WmAps=
=bi1I
-----END PGP SIGNATURE-----
|
