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.
Mexico City and Quito, Ecuador
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.Skip to next paragraph
Subscribe Today to the Monitor
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?