Mario Esquivel
THE Bank of the South, an initiative
launched in December 2007 by seven South American countries, can be described
today as a viable and real alternative to face the onslaughts of the
international financial crisis.
 The Bank of the South is to operate with a start up sum of $7 billion. |
The mission of the institution,
designed as an alternative to multilaterals of the stature of the World Bank
and the International Monetary Fund (IMF), is to promote activities to
strengthen economic integration.
In this context, the ratification of
the Bank of the South’s constitutional agreement by five of its members
(Venezuela, Argentina, Bolivia, Ecuador and Uruguay), paved the way for its
physical creation.
It is expected that a similar step
will be taken by the Paraguayan and Brazilian Parliaments.
The first meeting of the Bank of the
South’s Council of Ministers, the body responsible for moving forward the new
financial entity’s operational activities, is planned to take place shortly.
With its headquarters in Caracas,
Venezuela, the Bank of the South has two branch offices in Buenos Aires and La
Paz, and an initial capital of seven billion dollars. This sum is to be
contributed in accordance with economic strength; Argentina, Brazil and
Venezuela are providing six billion dollars (two billion each). Ecuador and
Uruguay are depositing $400 million each, while Paraguay and Bolivia will both
add $100 million.
Experts say that the bank’s funds
could reach $20 billion, taking into account its members’ potential and the
strength of Brazil, among the world elite given its international hard currency
reserves of $359 billion.
An innovative element in the
constitution is that each member has the right to a vote, at a far remove from
existing distortions in the World Bank, where – for example – one single
country (the U.S.) holds 16.3% of the total votes, and in contrast, 24 African
nations jointly hold 2.85%.
According to Nobel Economy Prize
winner Joseph Stiglitz, the advantages of a project of this kind include the
capacity of reflecting the perspectives of the South. The Bank of the South
also provides the conditions to create a new regional financial architecture,
capable of promoting development projects of a social nature in order to
overcome poverty.
The activation of the Bank of the
South is arriving at an opportune moment, given that Latin America and the
Caribbean are faced with the possibility of a downturn in the region’s rate of
economic expansion within an unfavorable scenario.
Uncertainty, volatility and
deceleration are characteristic terms of forecasts for the current period, in
which estimates point to an increase of 3.7% in the region’s GDP, as opposed to
the 4.3% growth in 2011. The Economic Commission for Latin America and the
Caribbean has stated that pressure on the world economy and turbulence in
international financial markets will have an impact on the area’s development.
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