Venezuelan Foreign Affairs Minister, Nicolás Maduro, announced that the Nov. 3 meeting of the Banco del Sur will be postponed until Dec. 5th. Brazil, Bolivia, Colombia, Ecuador, Paraguay, Uruguay and Venezuela were supposed to have met next week to sign on as members of the new regional bank. No reasons were given for the postponement.
The Banco del Sur was launched on Feb. 21, 2007 as a bilateral agreement between Venezuela and Argentina, with the hopes that other South American nations would soon join on. The support of the six countries is expected to inject much needed capital into the project. According to El Comercio Ecuador, the bank will have a startup capital of US$7 billion dollars to be used principally for regional development projects.
English-language news sites often refer to the bank as a populist initiative of Venezuelan President Hugo Chávez, implying that it is not a serious project. While it is true that the bank seeks to replace Washington-based lending agencies like the International Monetary Fund (IMF) the World Bank and the Inter-American Development Bank (IDB), it is too easy to write it off as just populist rhetoric, especially considering that the “populist rhetoric” is largely well-deserved criticism of the predatory lending policies historically followed by these organizations.
The history of South America and international financing is long and complicated. Briefly, the 1980s and 1990s brought a wave of neo-liberal market reforms that emphasized privatization of state industries and fiscal restraint at the expense of social spending. The Washington based lending agencies encouraged these policies, often requiring local governments to adopt certain policies in exchange for much needed funds. This interventionist policy rubbed many in the region the wrong way and is in large part responsible for the negative image the U.S. now enjoys in the region today.
Following the economic and political upheavals that swept the continent in the early years of the 21st century, in many cases as a direct result of these high interest loan payments, many South American nations now have high credit risk ratings, making it difficult to secure the low interest loans necessary to finance infrastructure and development projects.
Beginning at the 2000 Summit of South American heads of state in Brasilia, two years before the founding of Venezuela’s Bolivarian Revolution, leaders have been trying to find new and innovative ways of financing regional development projects. The Banco del Sur is an answer to these issues. It is an example of regional leaders taking responsibility for their own problems and looking for solutions at home instead of abroad. Whether the bank will be competitive in the long run is another question all together, one whose answer is linked to the long-term stability of the region.
While the international community may be hesitant to invest in South America now, regional leaders have already come to the conclusion that their national interests lie in close cooperation with their neighbors, be they risky or not.
By Nathan Gill – Southern Affairs