Banco
del Sur : Latin
America's
answer to the World Bank
and IMF
A
group of regional countries is launching a development bank
to be run by Latin Americans.
El Comercio
Ministers from Paraguay, Bolivia, Argentina, Brazil, and Venezuela
met in Quito in May to discuss plans for Banco del Sur.
By Sara Miller Llana and Matthew Clark
It
is one thing when Venezuelan President Hugo Chávez dubs the World Bank and International
Monetary Fund (IMF) "tools of US imperialism" and
threatens to sever ties.
But it's not just Mr. Chavez who is shunning the global lending
organizations.
In
April Ecuador's President Rafael Correa declared the World
Bank
representative in his country "persona non grata."
Now, a group of Latin American countries is looking to form
a regional alternative in the form of Banco del Sur (Bank of
the South), a Chavez-conceived development bank that would
be run by Latin Americans for Latin America.
The
moves against the IMF and World Bank represent a popular
rejection
of the "Washington consensus" that rich-country
aid should be tied to forced privatization programs, which
have failed to make much of a dent in poverty rates.
Leftist
presidential candidates have tapped into this sentiment to
win recent elections and are increasingly looking for ways
that Latin America can solve its own problems. And as the region
readies itself for further financial and political integration – made
possible by a healthy world economy plump on high commodity
prices and Chávez's oil largesse – analysts say
the World Bank and IMF are seeing the need to adapt.
"Banco del Sur is the answer to the deterioration of
the IMF and World Bank," says Luis Maldonado Lince, a
presidential representative to Ecuador's junta bancaria, a
government body that helps regulate the country's banking sector. "Latin
America has been impoverished and harassed long enough that
we have no other choice [but to] start Banco del Sur."
The
bank's founding members would include Venezuela, Ecuador,
Argentina,
Brazil, Bolivia, and Paraguay. Uruguay said last
month that it would join as well. It's still unclear exactly
how the bank, expected to begin operations in 2008, would function – how
economies would be converged, and whether political integration
would follow. But whatever the form, left-leaning analysts
say Banco del Sur will be a vast improvement to the Western-dominated
financial institutions, which they say have lost credibility
in the region.
Mark Weisbrot, codirector of the Center for Economic and Policy
Research in Washington, says the move to create Banco del Sur
is one of many signs of a new independence from international
institutions such as the IMF, whose influence first began to
wane a decade ago with the Asian financial crisis in the late
1990s when the IMF imposed strict, unwanted austerity measures.
At
the beginning of this decade, skepticism in Latin America
was
sealed when Argentina disregarded IMF advice by defaulting
on its debt and then experienced robust economic recovery. "[Latin
American countries] don't have to care anymore what the US
thinks, and that is mainly because of the collapse of IMF influence," Mr.
Weisbrot says.
Viable lender or political tool?
Still,
many critics doubt Banco del Sur will alone be able to replace
the international financial institutions, and see
it as a vehicle for Chávez and like-minded leaders to
expand their political clout. "[Banco del Sur] is another
example of visceral thinking," says Ecuador-based financial
analyst Ramiro Crespo of Analytica Securities. "I doubt
it will be more qualified than the World Bank."
But many Latin American nations are nevertheless turning to
private capital or other institutions such as the Andean Development
Corporation (CAF) to secure loans for development projects,
because the economy is flush with money and the loans are easier
to access.
IMF's commitment in the region, for example, has fallen to
less than $3 billion from $50 billion five years ago.
Anoop
Singh, Latin America's top IMF official, says the changing
relationship
shows that the region has internalized the message
of macroeconomic stability. "This period when the Fund
is not lending anywhere near what it did five years ago is
actually a good development," he says.
IMF looks to adjust its approach
In fact, say observers, the new competition may help the global
institutions sharpen their missions.
"I'm not concerned about countries in Latin America running
away from the [IMF]," says Liliana Rojas-Suarez, a former
IMF official who is now a senior fellow at Washington's Center
for Global Development. "I'm more concerned about what
the IMF exactly should be doing, and where it should be focusing....
It's only now starting to recognize a number of policies
that could be different."
"There is the perception that the IMF has one recipe
for everybody." she adds. "They are trying to improve
that."
Another
example of change, Singh says, could be working with countries
to redefine how energy subsidies are distributed,
so more money goes to the poor. "We do believe that there
is room in the region for macroeconomic policies to be reoriented
toward poverty reduction," he says.
On July 1 the Inter-American Development Bank put into operation
a new mandate to help countries gain greater access to alternative
sources of financing, to respond to the particular needs of
each country, and to reduce the vulnerabilities of the region
to sudden changes in the world economy.
It is this type of competition from other development banks
that could ultimately serve the entire region, even as it has
put the World Bank on edge.
"The World Bank never thought of what would happen if
countries didn't really need the money; they didn't plan any
exit strategy," says the consultant, who was not authorized
by the World Bank to speak on the record. "[They] have
to compete right now, because countries don't need the money."
"Like Chávez's other regional initiatives, this
one too depends a lot on the extent to which the oil bonanza
continues," says Michael Shifter, vice president of the
InterAmerican Dialogue, a Washington think tank. "It
is doubtful that Chavez's grandiose vision on this idea will
be
fully realized."
-
Mexico
City and Quito, Ecuador
Sara
Miller Llana and Matthew Clark are staff writers of The Christian
Science Monitor. Petroleumworld
not necessarily share these views.
Editor's Note: This article was first published by The
Christian Science Monitor, July 11, 2007. Petroleumworld
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