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A Future for the Bank of the South ?
by Eric Toussaint
12 September 2008

Interviewed by Politis (French weekly paper)
September 2008.

Q.1. The implementation of the Bank of the South, which should have been effective 60 days after its foundation by seven South American countries last December, is running late. What is the current situation ? Are there pressures aiming at jeopardising the project?

You are right: 9 months have now elapsed since the heads of states of Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela signed the founding act in Buenos Aires on 9 December 2007. Divergences between governments account for the delay in the implementation of this new institution, which is intended to strengthen Latin-American integration. It is currently agreed that the headquarters of the Bank will be in Caracas, that voting will be on the basis of one country - one vote (while at the World Bank and the IMF votes are proportional to the economic and political weight of participating countries), that the launch capital will amount to USD 7 billion (which could be increased to 10 billion if more countries join).
This being said, several key elements are controversial. For instance, Brazil and Argentina, the two main economic powers in the area, would like to qualify the ‘one country-one vote’ principle by applying it only during the annual meetings of the Bank’s Board.

In fact Brazil does not really feel the need of another multilateral bank for Latin America since it has a major public development bank (BNDES) over which it has complete control and whose portfolio exceeds those of the World Bank, the Inter-American Development Bank and the future Bank of the South. BNDES already finances many projects throughout Latin America and beyond, on condition that the receiving countries buy Brazilian products. This allows Brazilian companies to export their goods or to carry out large-scale infrastructure works. Consequently, the Brazilian government only pays lip-service to the Bank of the South project, all the more so as it was initiated by Hugo Chavez, whose political stance is more radical than Lula’s whether it be towards Washington, Brussels, or Latin-American capitalists.

Q.2. What would you say are the options?

Independently of the terms negotiators use to define their divergences, there are basically two options. [1] Either the newly created bank will support a neo-developmental project that meets the expectations both of private or mixed corporations (mainly Brazilian and Argentinian) and of the governments of Argentina and Brazil (for example, the Lula government takes as its model the construction of the European Union which panders to the interests of Capital). Or it will function as an instrument to finance economic, social and cultural policies: this latter option would take the institution away from profit-seeking logic and would prioritise integration by implementing the various agreements and conventions that guarantee civic, political, economic, social and cultural rights. Concretely, the Bank of the South should finance a Latin-American policy of food sovereignty and land reform. In the area of health it should provide the continent with a public pharmaceutical industry to produce high quality generic drugs. It should revive and connect railway networks. Ensure that there is a common policy in a number of fields such as research and development, education and environment. Give priority to public control of natural resources. Finance policies that reduce the economic disparity between countries such as Bolivia, Paraguay and Ecuador on the one hand and Brazil, Argentina and Venezuela on the other. In short, a policy designed to unify social rights at a higher level.
It is thus essential that negotiations on the Bank of the South are not limited to governments. Indeed, the social movements of the concerned countries have already sent two open letters to the seven presidents with a number of proposals. [2] For instance the signatory social movements are opposed to the new institution’s executives having the same kind of privileges and impunity as those of the IMF, the WB, the IADB or other international institutions. They want guarantees as to transparency and accountability.

Q.3. The launching of the Bank of the South is an answer to the supremacy of the countries of the North and of neoliberal policies in the WB, the IMF and the IADB. Does it aim at replacing the Bretton Woods institutions and becoming an international institution? Should the UN be involved?

The Bank of the South is indeed an answer to the supremacy of the countries of the North. The launching of the Bank of the South is made possible and necessary thanks to the conjunction of several factors:
1. The WB and the IMF are going through a crisis at several levels as a result of the catastrophic consequences the Washington consensus has had on populations. Brazil and Argentina paid back all they owed to the IMF, Venezuela did the same with the WB. In April 2007 Ecuador expelled the WB permanent representative in Quito and set up a commission to audit all public debts including multilateral ones. Bolivia left the International Centre for Settlement of Investment Disputes, a kind of tribunal set up by the WB.
2. Countries that joined the Bank of the South have over USD 300 billion as foreign exchange reserves. They can pool part of this amount instead of continuing to lend it to the US government by buying treasury bonds that are remunerated in a constantly devalued currency.
3. The governments of the seven countries are left-wing or centre-left.

In my view the Bank of the South could replace the WB and the IADB. A Monetary Fund of the South should also be created, and if possible, the involved countries should use one single currency. Other areas in the South ought to create a Bank of the South, and the various Banks of the South could develop a South-South cooperation.

The Bretton Woods institutions are of course very worried about the situation: they would like to be invited to participate in the Bank of the South or at least to attend meetings, and they canvas to this end. Some sectors in the UN are deeply interested. I recently participated in an international seminar on the Bank of the South organised by its General Secretary in Quito at the end of June 2008.

The Bank of the South raises huge expectations because Latin-American citizens want the governments they elected to use the favourable historical situation to actually implement an integration policy that is different from the neoliberal model.

Translated by Christine Pagnoulle in collaboration with Judith Harris


Footnotes :

[1For a presentation of the several stages in the construction of the Bank of the South, and of the current debate on the topic, see Eric Toussaint, Bank of the South: An Alternative to IMF-World Bank, Mumbai, VAK, 2007, and a more recent assessment in the French edition Banque du Sud et nouvelle crise internationale, CADTM-Syllepse, Liège-Paris, 2008, chapters 1 to 4.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography: https://en.wikipedia.org/wiki/%C3%89ric_Toussaint
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.