Bank of the South: Not Everything is the Color of Roses

It is a truism that each country has its own interests, which vary according to the leading social class and the type of government in power. In Latin America, that is perfectly perceived in the different positions assumed by the states.

It is a truism that each country has its own interests, which vary according to the leading social class and the type of government in power. In Latin America, that is perfectly perceived in the different positions assumed by the states.

Some are signatories of the Free Trade Agreements (FTAs) with the United States, pacts that affect most of the population. Others seek social justice and want to improve the living conditions of the poor. Some do not accept the FTAs and maintain a somewhat nationalistic policy, although they do not abandon the neoliberal schemes.

In sum, disunity is on occasion easier than unity when it comes to facing the challenges that beset the region.

The Common Market of the South (Mercosur) might be the best example of what I say. The four countries that formed it at its inception (Brazil, Argentina, Uruguay and Paraguay) did not go beyond simple trade relations, from which Brazil, the world’s 10th economic power, took the lion’s share, followed by Argentina.

Venezuela’s incorporation last year, Hugo Chávez’s plans to guarantee energy to the whole region, the proposals for development and economic complementation, and the solution of the serious social problems that afflict most of the people in those five nations have permitted some positive change in the positions held by Mercosur, which the incorporation of Bolivia and maybe Ecuador could strengthen.

In other words, the conditions are being created for the economic and political integration of the region, particularly of those countries that do not have an FTA with the United States. Still to be seen is what path the Uruguayan government will take, Brazil’s next steps, and the results of the elections in Paraguay, which might endanger the process of integration.

Part of that task of integration was the creation of the Community of South American Nations, which, despite problems and contradictions, is the principal step toward Latin American unity taken since the days of independence from Spain. Not even the main allies of the United States in the region — such as Colombia, Peru and Chile — have refused to join the Community.

The Bank of the South is part of that great project of economic and political integration. Its main objective is to help the member countries, from an economic standpoint, to deal with the problems that might lead to speculation in their currencies. To make low-interest loans for the construction of social works and infrastructure, either separately or together with other members.

In other words, to free Latin American nations from the loans and measures of international financial institutions such as the International Monetary Fund (IMF), the World Bank (WB), and the Inter-American Development Bank (IDB), which have caused so much harm to the region’s economies with their readjustment and privatization programs.

The remarkable fact is that, so far, several countries have paid up their debts to the IMF and the WB. Others, like Venezuela, have withdrawn from such institutions or do not recognize their authority on their nations’ economies.

I don’t think it’s a revolt against international financial institutions; rather, it’s a logical reaction to the consequences of the meager results their impositions have created. Argentina is the best example, though not the only one.

The idea couldn’t be better: to create a bank that makes its participants financially independent and eventually creates a common currency for commercial transactions, instead of the dangerous dollar. That currency could later become an international currency, which would give Latin American nations greater power on the international arena.

Not everyone agrees on the Bank of the South’s role, much less on how it should operate or the rules it should follow. However, the claws of the neoliberal model have left their marks on some of the proposals, generating discord in an entity that should be built on mutual aid and complementation.

That may be because some of the people who draft the statutes of the Bank of the South are permeated by a neoliberal ideology to which not everyone is willing to renounce (or knows how to renounce) or just because neoliberalism suits their interests.

Observers have been struck by the fact that Argentina’s and Venezuela’s proposal, submitted on March 29, contains many neoliberal elements that have been rejected by the government of Ecuador, one of the main promoters of the Bank’s creation.

The ideas of the government of Brazil, which officially joined on May 3, as to how the Bank should operate are still not exactly known.

Without going into economic aspects that would be too hard to explain, let us look at the two proposals for the statutes of the Bank of the South, to be analyzed at the summit of presidents of member countries, late in June.

Argentina and Venezuela, the first two countries to take up the idea, propose the creation of a Bank that would simultaneously function as a Development Bank and a Monetary Fund for Stabilization.

According to critics, the proposal stresses that the Bank’s function should be the development of capital markets, industry, energy, trade and infrastructures (roads, railroads, etc.) and does not give the necessary priority to cultural and educational policies or to environmental protection.

Elsewhere, the Argentine-Venezuelan proposal posits that voting rights, whenever a decision must be made, should be proportional to each country’s contribution. For example, if Brazil or Venezuela contributes twice or three times as much money as Paraguay or Ecuador, its vote should count for two or three.

That would mean applying the same decision criteria used by the IMF, the WB and the IDB, something that has often been criticized.

The Argentine-Venezuelan project also allows for the possibility that Asian or African countries participate as observers. That option, however, would alter the Bank’s dimension as a South American institution.

What’s worse, critics say, is that the proposal talks about “immunity, exemption and privilege” for the Bank’s employees, as well as the “inviolability of the archives.” That seems to have been copied from the statutes of the international financial institutions named above.

Belgian economist Eric Toussaint, president of the Third World Committee Against Foreign Debt, points out (with reason, in my opinion) that the text proposed by Argentina and Venezuela is totally consistent with the political orientation of the government of Néstor Kirchner and totally incompatible with the positions adopted by President Hugo Chávez. Toussaint assumes (and with reason, I believe) that the proposal was neither read nor approved by the Venezuelan president.

We shall find that out soon enough. But if we take into account that Venezuela will be one of the main contributors to the Bank, and that the policy of the Bolivarian Revolution is to stimulate development and find a solution to social problems, its right of veto should allow it to prevent that Bank loans end up in the hands of some oligarchs who need money for their businesses.

We should also bear in mind that not all the governments that will participate in the Bank have the same principles or objectives, and that some privilege the interests of the rich, to the detriment of the poor.

The project proposed by the government of Ecuador envisions the creation of three instruments: a Regional Monetary Fund, a Bank of the South, and a Southern unit of currency, that is, a single currency used for trade among the regional countries. According to the press, the single currency was accepted by Venezuela, Brazil, Argentina, Paraguay and Bolivia.

The Ecuadorean project indicates that those institutions must guarantee “the effective exercise of human rights and allow the application of those international accords, criteria and treaties that deal with the economic, social and cultural rights of the peoples.”

It also posits that the funds must come from capital contributions from the member countries, from loans made to the Bank by the member countries, and from common taxes, which would be transferred to the Bank. The report mentions the Tobin rates, taxes on the profits repatriated by transnational corporations, environmental protection, etc.

A substantial difference between the Argentine-Venezuelan and the Ecuadorean projects is that the latter stresses that each state must implement a mechanism that will provide an annual account of the Bank’s and the Fund’s operations and activities. The Bank’s and the Fund’s records must be in the public domain, Ecuador says, except in the case of information that might provoke speculation and in other instances.

These are the two proposals that will give birth to the Bank of the South and the Regional Monetary Fund, in case a decision is made. As you see, there are major differences between the two texts, even though the objective is the same. It will be up to the presidents, then, to decide which plan will be adopted or if a third plan, adopting the best elements of the first two, is created.

This couldn’t come at a better time, because several of the future members of the Bank of the South have large monetary reserves, particularly Brazil, Argentina and Venezuela.

In most cases, as President Hugo Chávez pointed out, those reserves, deposited in the banks of capitalist countries, are being used to bankroll the expenses and waste of those nations, instead of promoting the development of national economies and regional integration, as well as solving the grave social problems that afflict the countries in the region.

If its members so wish, the Bank of the South could have enough funds to initiate a process that clearly goes beyond a simple solution of the historic problems of South America. It could become the foundation for economic independence and — by extension — for political independence.

It remains to be seen if the presidents have enough political will to deal with this measure, which (needless to say) will have many and powerful opponents. Let’s wait. Time will tell.

Source: Progreso Weekly