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.
from the July 11, 2007 edition
Page 2 of 3
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.
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