BANK
OF THE SOUTH:
THE
ECONOMIC FUTURE OF SOUTH AMERICA
The
Bank of the South was founded by six South American heads of state on December
9, 2007. Representatives of Argentina,
Uruguay, Brazil, Ecuador, Bolivia, and Venezuela gathered in Buenos Aires to
sign an historic document to create an international financial institution that
would recognize the need for integration and cooperation among South American
economies while also acknowledging the sovereignty and unique characteristics
of each nation.
In addition to furthering
the development goals of South American nations, the Bank of the South promises
to reduce the dependence of the Latin American region on Washington-dominated
financial institutions like the International Monetary Fund (IMF) and the World
Bank.[1]
Critics of the Bank of the
South have questioned the need for a regional bank that would bring greater economic unity to South
America. Even before the Bank was founded, detractors claimed that the
institution would not be financially viable. However, issues of
transparency, accountability, and proper management have been prioritized by
the Bank of the South from its very inception.
DEVELOPMENT WITH A DIFFERENCE
The Bank of the South begins
operations in 2008 with around $7 billion in startup capital.[2] Contributions to this fund by each of the
six member countries corresponds directly to the size of their economies. For example, large economic players Brazil,
Argentina, and Venezuela will have greater financial responsibilities in the
Bank than the comparatively small Bolivia, Ecuador, and Uruguay. Venezuela's contribution has been estimated
at $1.4 billion, with Argentina at $350 million (10% of foreign currency
reserves), and so on.[3]
Each country will be given
an equal vote in the managerial affairs of the institution. This prevents some members from wielding more influence over others. The one-country-one-vote model was chosen to
foster equality among member countries.
Debates among founders of
the Bank of the South have revolved around the question of what the role of the
Bank will be in the region. Some
countries, including Venezuela, had advocated Bank involvement in areas such as
monetary policy and government financing.
For its part, Brazil sought the participation of the Bank in investment
matters relating the South American trading bloc Mercosur.[4] In discussions thus far, member countries
have agreed that the Bank should serve development purposes by funding projects
in areas such as infrastructure, industry, housing, transportation, and human
capacity-building. Bank initiatives aim
to solve the persistent problems of poverty and inequality in the region with
the world's biggest gap between the rich and the poor.
COMMON FUTURES: INDEPENDENCE, INTER-DEPENDENCE
South American heads of
state describe the Bank of the South as an institution that will serve to
further economic cooperation in the region.
Upon signing the founding act, Brazilian President Lula da Silva
highlighted this fact by saying, "Today we have taken the first step
toward the integration of South America. ... We have the conviction that our
futures are linked.''
Meanwhile, President Rafael
Correa of Ecuador explained that the Bank would also give member countries a
new kind of autonomy, the freedom to chose their own destinies: "The
signing of the Bank of the South agreement is going to help us establish our
financial independence."[5]
For his part, Venezuela's
President Chavez spoke of the tremendous shift in global power relations
signified by the Bank of the South.
"Not long ago there was a general chorus singing the praises of
neoliberalism. …But we are now hearing the great voice of our nations."[6]
Many experts are also
talking about the Bank of the South.
Noam Chomsky, the respected scholar and political analyst has explained:
The
Bank of the South could turn out to be a viable institution. There are plenty
of problems in the region. But one of the striking things that's been happening
in South America for quite a few years now is that they are beginning to
overcome for the first timesince the Spanish invasion, the conflicts among the
countries and the separation of the countries.… The Bank of the South is a step
towards integration of the countries. Could it weaken the IFIs, yes it can, in
fact they're being weakened already. The IMF has been mostly thrown out of
South America."[7]
As a possible solution to
past problems and a powerful bid for common progress, the Bank of the South
promises to be an important part of the economic future of South America.