Committee for the Abolition of Illegitimate Debt

I authored a book about the context in which the Bank of the South originated and the challenges it faced from its inception. Hugo Chavez came up with the idea. I believe it was the culmination of his vision of the need for Latin American unity in the face of the United States’ desire to launch the Free Trade Agreement of the Americas (FTAA). Latin America need an alternative to the American offensive and the neo-liberal policies of the International Monetary Fund IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org and the World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

, as well as bodies like the Washington-based Inter-American Development Bank, which was likewise dominated by the US.

 Why didn’t it work?

According to Ruy Mauro Marini, Brazil is a peripheral imperialist that reaps advantages from its relations with less powerful neighbouring countries

Brazil’s position as Latin America’s leading economic power has largely contributed to the problem. To understand Brazil’s special position, it is important to look at the work of Brazilian Marxist economist Ruy Mauro Marini [1], a member of the dependency school. Ruy Mauro Marini, along with other Marxist authors such as the Brazilian Theotônio dos Santos and André Gunder Frank from the Netherlands, studied Brazil’s role as a regional power in the 1960s. Brazil, according to Ruy Mauro Marini, is a peripheral imperialist that reaps advantages from its relations with less powerful neighbouring countries such as Bolivia, Ecuador, Venezuela, Paraguay, Uruguay, and, to some extent, Argentina. Since the 1960s, Brazil has behaved like a “sub-imperialist” power, with its major corporations such as Vale Rio Doce [2], Petrobras [3], Odebrecht [4] and Eletrobras. Of course, the international context has changed, especially with the formation of the BRICS BRICS The term BRICS (an acronym for Brazil, Russia, India, China and South Africa) was first used in 2001 by Jim O’Neill, then an economist at Goldman Sachs. The strong economic growth of these countries, combined with their important geopolitical position (these 5 countries bring together almost half the world’s population on 4 continents and almost a quarter of the world’s GDP) make the BRICS major players in international economic and financial activities. some fifteen years ago and the rise of China. However, the description of Brazil as a peripheral imperialist remains accurate in the present.

Lula’s government participated in the negotiations to establish the Bank of the South. However, Brazil does have a development bank, the National Bank for Economic and Social Development (BNDES). This bank provides credit to significant Brazilian corporations such as Odebrecht, Vale do Rio Doce, Petrobras, and others in order for them to expand and enhance their international operations [5]. Brazil engaged into negotiations with the Bank of the South in a way that stymied negotiations, viewing this bank as a competitor to its own BNDES.

This hindered the effective start-up of Bank of the South.

 Why was the bid to create a Bank of the South important?

For example, instead of focusing just on developing road and air lines, a Bank of the South could assist in financing a massive initiative to reconnect or connect/complement train networks across Latin America.

People in the global South need a network of Southern banks that operates transparently and democratically, with the principle of “one country, one vote”, to finance projects for the integration of peoples. For example, instead of focusing just on developing road and air lines, a Bank of the South could assist in financing a massive initiative to reconnect or connect/complement train networks across Latin America. A Bank of the South might assist in the establishment of a pharmaceutical industry for the production of generic medications, including cooperation with Cuban health services and laboratories that are doing an excellent job. If this had happened, Latin America could have dealt with the coronavirus epidemic far more efficiently than it did between 2020 and 2022, saving hundreds of thousands of lives. From an economic standpoint, South America would be in a very different situation than it is now, where we are witnessing a process of re-primarization of its activities, i.e. relative de-industrialization and greater dependence of Latin American economies on the export of raw materials. In Argentina’s case, transgenic soy is destined for China and Europe. Argentina is also dependent on the exploitation of its mineral and fossil resources. In the case of Brazil, there’s also transgenic soy and oil. Venezuela depends solely on oil exports. Chile, Ecuador, Peru and Bolivia also depend heavily on their exports of raw materials and agricultural products.

In October 2008, I delivered a talk in Caracas, at the School of Planning, as part of the international seminar entitled “Responses from the South to the World Economic Crisis”. The other speakers on the panel were Hugo Chavez, President of the Bolivarian Republic of Venezuela, Haiman El Troudi, Minister of Planning (Venezuela), Claudio Katz, left-wing economist (Argentina) and Pedro Paez, Minister of Economic Policy Coordination (Ecuador). The entire session was shown live on Venezuelan public television. The complete transcript of my talk can be found here. Hugo Chavez’s government published it on the government website, along with the other contributions. My lecture was titled “Latin America: In Favour of Regional Integration and Partial Detachment from the Global Capitalist Market. We must apply the lessons of the twentieth century to the beginning of the twenty-first” (see excerpts below). I have nothing to add to the analysis I offered in 2008, and my suggestions for meaningful Latin-American integration remain valid.

I read Luis Inácio Lula’s remarks regarding the possibility of establishing a Latin American currency in early 2023 when he was re-elected president. During his administration, from 2003 to 2011, I criticised his policies for pursuing a conciliation policy with the United States and other major countries, as well as large businesses on a national and international scale, rather than making fundamental reforms. I know him having had direct political relations with him from 1990 until his election at the end of 2002 and his ascent to the presidency in 2003. My last interaction with him was in Geneva in June 2003, on the sidelines of a G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. summit. However, the discrepancy between what he claimed and what he did left many disappointed. In contrast to Hugo Chavez, he has been unwilling or unable to pursue a more advanced strategy.

Of course, I wholeheartedly back President Lula and his government in their fight against bolsonist neo-fascists and attempted destabilisation or coup d’etat. The CADTM has joined forces with other movements and parties to organise a large international conference in Brazil to address the worldwide concerns presented by the far right and neo-fascists. It was supposed to take place in Porto Alegre from May 17 to 19, 2024, but had to be postponed to a future date because of the terrible floods inundating the city and major parts of the state of Rio Grande do Sul. It will possibly take place between November 28 and December 1, 2024, or the following weekend. This will most likely be followed by a large conference in 2025, also in Brazil. We must learn specific political lessons from the achievement of Brazil’s PT-PSOL alliance in breaking away from Jair Bolsonaro’s far-right government through a broad policy of political and social alliance…

But I am sceptical that Lula will make a real contribution to the development of a common currency with other South American countries, or to the revival of the Bank of the South, which has been dormant since its inception in 2008. Brazil is a member of the BRICS, and they do not present an alternative to the model given by traditional imperialist countries (the United States, Western Europe, and Japan).

I would like to repeat in full a passage from the lecture I delivered in Caracas on October 8, 2008, in the presence of Hugo Chavez [6].

Regarding the launch of the Bank of the South, this has already been delayed quite a bit. Discussions have not progressed. We have to get rid of any confusion and give progressive content to this new institution, whose creation was decided upon in December 2007 by seven countries in South America. The Bank of the South has to be a democratic institution (one country, one vote) and transparent (external auditing). Before using public money to finance large infrastructure projects that don’t respect the environment and are carried out by private companies whose objectives are to obtain maximum benefit, we have to support the efforts of the public powers to promote policies such as food sovereignty, agrarian reform, the development of studies in the field of health, the establishment of a pharmaceutical industry that produces high-quality generic medication, reinforce collective rail-based means of transport, utilise alternative energies to limit the impact on depleted natural resources, protect the environment, develop the integration of education systems…

Contrary to what many think, the problem of public debt has not been resolved. The external public debt has indeed been reduced, but it has been replaced by an internal public debt that, in certain countries, has acquired huge proportions (Brazil, Colombia, Argentina, Nicaragua, and Guatemala) to the point that it derails a considerable part of the state budget towards parasitically financial capital. It is very worthwhile following the example of Ecuador, which established an integral auditing commission to study the external and internal public debt to determine the illegitimate, illicit, and illegal parts of the debt. At a time when, following a series of adventurous operations, the large banks and other private financial institutions of the United States and Europe are wiping out dubious debts with an amount that by far surpasses the external public debt that Latin America owes them, we have to constitute a united front of indebted countries to obtain the cancellation of the debt.

Private banks need to be audited and strictly controlled because they run the risk of being dragged down by the international financial crisis. We have to avoid a situation where the state ends up nationalising the losses of the banks, as has happened many times before (Chile under Pinochet, Mexico in 1995, Ecuador in 1999-2000, etc.). If some banks on the brink of bankruptcy have to be nationalised, this should be done without paying compensation and exercising the right of reparations over the patrimony of their owners.

Moreover, numerous litigation cases have emerged in the last few years between the states of the region and multinationals, from the North and the South. Rather than taking them to the International Centre for Settlement of Investment Disputes (ICSID ICSID The International Centre for the Settlement of Investment Disputes (ICSID) is a World Bank arbitration mechanism for resolving disputes that may arise between States and foreign investors. It was established in 1965 when the Washington Convention of that year entered into force.

Contrary to some opinions defending the fact that ICSID mechanism has been widely accepted in the American hemisphere, many States in the region continue to keep their distance: Canada, Cuba, Mexico and Dominican Republic are not party to the Convention. In the case of Mexico, this attitude is rated by specialists as “wise and rebellious”. We must also recall that the following Caribbean States remain outside the ICSID jurisdiction: Antigua and Barbuda, Belize, Dominica (Commonwealth of) and Suriname. In South America, Brazil has not ratified (or even signed) the ICSID convention and the 6^th most powerful world economy seems to show no special interest in doing so.

In the case of Costa Rica, access to ICSID system is extremely interesting: Costa Rica signed the ICSID Convention in September, 1981 but didn’t ratify it until 12 years later, in 1993. We read in a memorandum of GCAB (Global Committee of Argentina Bondholders) that Costa Rica`s decision resulted from direct United States pressure due to the Santa Elena expropriation case, which was decided in 2000 :
"In the 1990s, following the expropriation of property owned allegedly by an American investor, Costa Rica refused to submit the dispute to ICSID arbitration. The American investor invoked the Helms Amendment and delayed a $ 175 million loan from the Inter-American Development Bank to Costa Rica. Costa Rica consented to the ICSID proceedings, and the American investor ultimately recovered U.S. $ 16 million”.

https://icsid.worldbank.org/apps/ICSIDWEB/Pages/default.aspx ), which is part of the World Bank and dominated by a handful of industrialised countries, the countries of the region should follow the example of Bolivia, which has pulled out of the organisation. They should create a regional organism for the resolution of litigation cases initiated by other countries or private companies. How can we continue to sign loan contracts or trade contracts that state that, in the case of litigation, the only valid jurisdictions are those of the US, the United Kingdom, or other countries in the North? We are dealing here with an inadmissible renunciation of the exercise of sovereignty.

It is worthwhile to establish strict control over capital movements and exchange rates to avoid capital flight and speculative attacks against currencies in the region. For the states that want to make the Bolivarian project of Latin American integration for greater social justice a reality, it is necessary to advance towards a common currency.

Naturally, integration has to have a political dimension: a Latin American parliament elected by universal suffrage in each one of the member countries, equipped with real legislative power. Within the framework of political construction, we have to avoid repeating the bad example of Europe, where the European Commission (that is, the European government) has exaggerated powers regarding the parliament. We have to move towards a democratic constituent process to adopt a common political constitution. We also have to avoid reproducing the anti-democratic procedure followed by the European Commission, which attempts to impose a constitutional treaty elaborated without the active participation of citizens and without submitting it to a referendum in each member country. On the contrary, we have to follow the example of the constituent assemblies of Venezuela (1999), Bolivia (2007), and Ecuador (2007-8). The important democratic advances achieved in the course of these three processes will have to be integrated into the Bolivarian constituent process.

Likewise, it is necessary to strengthen the powers of the Latin American Court of Justice, particularly in matters regarding guaranteeing the respect of inalienable human rights.

Until now, various processes of integration have coexisted: the Community of Andean Nations, Mercosur, Unasur, Caricom, Alba….It is important to avoid dispersion and adopt an integration process with a social-political definition based on social justice. This Bolivarian process should bring together all the countries in Latin America (South America, Central America, and the Caribbean) that adhere to this orientation. It is preferable to commence this common construction with a reduced and coherent nucleus rather than with a heterogeneous set of states whose governments follow contradictory if not antagonistic, social policies.

Bolivarian integration should be accompanied by a partial delinking from the world capitalist market. We are dealing with trying to progressively erase the borders that separate the states that participate in the project, reducing the asymmetries between the member countries, especially thanks to a mechanism of transfer of wealth from the “richer” states to the “poorer.” This will allow for the considerable expansion of the internal market and will favour the development of local producers under different forms of property. It will allow for the putting into action of a process of development (not only industrialisation) with the substitution of importations. Of course, this implies the development, for example, of a policy of food sovereignty. At the same time, the Bolivarian project, made up of various member countries, will partially delink itself from the world capitalist market. This means, in particular, the repeal of bilateral treaties in areas of investment and trade. The member countries of the Bolivarian Group should also pull out of institutions such as the World Bank, the IMF, and the WTO WTO
World Trade Organisation The WTO, founded on 1^st January 1995, replaced the General Agreement on Trade and Tariffs (GATT). The main innovation is that the WTO enjoys the status of an international organization. Its role is to ensure that no member States adopt any kind of protectionism whatsoever, in order to accelerate the liberalization global trading and to facilitate the strategies of the multinationals. It has an international court (the Dispute Settlement Body) which judges any alleged violations of its founding text drawn up in Marrakesh.

, while at the same time promoting the creation of new democratic global institutions that respect inalienable human rights.

As was mentioned before, the member state of the new Bolivarian group would equip itself with new regional institutions, such as the Bank of the South, which would develop collaborative relations with other similar institutions made up of states from other regions of the world.

The member states of the new Bolivarian group will act with the maximum number of third states in favour of a radical democratic reform of the United Nations, to ensure compliance with the United Nations Charter and the numerous international instruments that defend human rights, such as the international pact on economic, social, and cultural rights (1996), the charter on the rights and responsibilities of states (1974), the declaration on the right to development (1986), and the resolution on the rights of indigenous people (2007). Equally, it would lend support to the activities of the International Criminal Court and the International Court of Justice in The Hague. It would act in favour of reaching an understanding between states and the people to act in order to limit climate change as much as possible, given that this represents a terrible danger for humanity.

It’s a daunting task, but the prospects are there, and they’re particularly exciting because they open up the possibilities of a world based at last on absolute respect for people and the environment. It’s something we must embrace without delay.