A new development bank for South America, called Banco del Sur, spearheaded by Venezuela’s president, Hugo Chavéz, should be set up within months, after the region’s economy ministers decided that each member state would have one vote on the board.
The bank – which is being established as an alternative to Washington-based multilaterals, including the IMF, the World Bank, and the Inter-American Development Bank – will have initial capital of $10 billion. Sources indicate that Argentina, Brazil and Venezuela will each contribute $1 billion; $400 million will come from Ecuador and Uruguay; and $100 million from Bolivia and Paraguay. Colombia, Peru, Chile, Suriname and Guyana will contribute the remaining $3 billion.
Banco del Sur will have headquarters in Caracas, Buenos Aires and Bolivia’s capital, La Paz.
Carlos Fernández, Argentina’s new economy minister, says: "The Banco del Sur has entered the final stage of completion, as set out in its constitutional charter." He adds that the bank aims eventually to have a capital base of $20 billion.
A heated debate has taken place throughout the region about whether the new bank is necessary and about what its objectives will be. South America already has two other regional development banks: the Andean Development Corporation (CAF in Spanish) and the Financial Fund for the Development of the River Plate Basin (Fonplata in Spanish).
It is understood that Brazil was originally against the proposed bank but did not want to provoke a diplomatic crisis with Chavéz by resisting it. Brazil’s president, Lula da Silva, has also pushed for the creation of a new regional political and economic association, called the Union of South American Nations (Unasur in Spanish), and there is speculation that Lula supported the bank as a quid pro quo for Chavéz’s commitment to the new regional grouping.
Marcelo Resico, a professor of economics and institutions at the Argentine Catholic University in Buenos Aires, says: "I think politics has played a big role in the establishment of the Banco del Sur. Chavéz sees it as a way of extending his influence and spreading his ideas throughout the region."
Analysts see the establishment of the Banco del Sur as a threat to the IDB, as it is not clear what role that multilateral will have in the region when South American countries have their own development bank in place.
Peter Hakim, president of Washington think-tank the Inter-American Dialogue, says: "The IDB needs to grant a certain level of loans to earn the interest for its administrative costs. It has been suffering, anyway, because Latin American countries have been borrowing less and have more capital available from private sources."
At a recent press conference, Henry Paulson, US Treasury secretary, said: "In many ways the IDB is the regional bank for this area. If the question is, really, where IDB should be headquartered, then maybe that’s something that should be open for discussion."
Luis Alberto Moreno, president of the IDB, says: "It seems to me that this is a sovereign decision for the countries that wish to be part of the Banco del Sur.
"For Latin America, the important thing is to have alternatives. For ourselves, this means being more competitive, every day granting loans – whose significance is not so much their size but their quality – which really have an impact on development."