The
Bank Of The South: An Alternative To IMF And World Bank Dominance
By Stephen Lendman
29 October, 2007
Countercurrents.org
In
July, 2004, the IMF and World Bank commemorated the 60th anniversary
of their founding at Bretton Woods, NH to provide a financial framework
of assistance for the postwar world after the expected defeat of Germany
and Japan. With breathtaking hypocrisy, an October, 2004 Development
Committee Communique stated: "As we celebrate the 60th anniversary
of the Bretton Woods Institutions....we recommit ourselves to supporting
efforts by developing countries to pursue sustainable growth, sound
macroeconomic policies, debt sustainability, open trade, job creation,
poverty reduction and good governance." Phew.
In fact, for 63 hellish years,
both these institutions achieved mirror opposite results on everything
the above comment states. From inception, their mission was to integrate
developing nations into the Global North-dominated world economy and
use debt repayment as the way to transfer wealth from poor countries
to powerful bankers in rich ones.
The scheme is called debt
slavery because new loans are needed to service old ones, indebtedness
rises, and borrowing terms stipulate harsh one-way "structural
adjustment" provisions that include:
-- privatizations of state
enterprises;
-- government deregulation;
-- deep cuts in social spending;
-- wage freezes or cuts;
-- unrestricted free market
access for foreign corporations;
-- corporate-friendly tax
cuts;
-- crackdowns on trade unionists;
and
-- savage repression for
non-believers under a system incompatible with social democracy.
Everywhere the scheme is
the same: huge public wealth transfers to elitist private hands, exploding
public debt, an ever-widening disparity between the super-rich and desperate
poor, and an aggressive nationalism to justify huge spending on security
for aggressive surveillance, mass incarceration plus repression and
torture for social control.
An Alternative to
Debt Slavery - The Bank of the South
Last December, Hugo Chavez
announced his idea for a Banco del Sur, or Bank of the South, as part
of his crusade against the institutions of international capital he
calls "tools of Washington." The bank will be officially launched
at a presidential November 3 summit in Caracas, where it's to be headquartered,
with seven founding member-states - Venezuela, Argentina, Brazil, Uruguay,
Paraguay, Bolivia and Ecuador.
On October 12, Colombia's
President Alvaro Uribe announced his nation agreed to become the eighth
member but said "The decision is not a rejection to the World Bank
or Inter-American Development Bank, but a sign of solidarity and fraternity
towards the South American community." At this time, only four
South American states aren't included - Chile, Peru, Guyana and Surinam,
but Chile seems likely to come aboard following Colombia's lead, and
the others may decide to join them.
Finance ministers from the
founding countries met in Rio de Janeiro, Brazil October 8 to finalize
the Bank's Founding Document. Many key operating issues have yet to
be resolved, but unofficial information was that each nation will commit
10% of its international reserves and have equal oversight over the
new institution. In a concluding news conference, Brazilian finance
minister Guido Mantega stated: the participating countries "have
been able to overcome all obstacles that were in the way of an understanding
around the formation of the Bank of the South. We can now say that the
(bank) is close to becoming a reality" even though Brazil (Latin
America's largest economy) hasn't yet formalized its entry.
Venezuelan finance minister
Rodrigo Cabeza explained the bank will help develop the region by offering
South Americans more credits. It's being "created to build a new
architecture that assumes an improved relationship of the bank and its
capacity to offer credits for its people." It also aims to increase
liquidity and revive socioeconomic development and infrastructure investments
in participating countries and keep them outside the restrictive control
of the IMF and World Bank that are fast losing influence and being phased
out of the region.
In 2005, 80% of IMF's $81
billion loan portfolio was to Latin America. Today, it's 1% with nearly
all its $17 billion in outstanding loans to Turkey and Pakistan. The
World Bank is also being rejected. Venezuela had already paid off its
IMF and World Bank debt ahead of schedule when Hugo Chavez symbolically
announced on April 30: "We will no longer have to go to Washington
nor to the IMF nor to the World Bank, not to anyone." Ecuador's
Raphael Correa is following suit. He cleared his country's IMF debt,
suspended World Bank loans, accused the WB of trying to extort money
from him when he was economy and finance minister in 2005, and last
April declared the Bank's country representative persona non grata in
an extraordinary diplomatic slap in the face.
The Banco del Sur will replace
these repressive institutions with $7 billion in startup capital when
it begins operating in 2008. It will be under "a new financial
architecture" for regional investment with the finance ministers
of each member nation sitting on the bank's administrative council with
equal authority over its operations as things now stand. Venezuelan
Finance Minister Rodrigo Cabeza stressed the banks Latin roots saying:
"The idea is to rely on a development agency for us, led by us"
to finance public and private development and regional integration projects.
He added: "There will not be credit subjected to economic policies.
There will not be credit that produces a calamity for our people and
as a result, it will not be a tool of domination" like the international
lending agencies.
Hugo Chavez's vision is to
liberate the region's countries from IMF, World Bank and Inter-American
Development Bank (IBD) control that condemn millions to poverty through
their lending practices. Helped by windfall oil profits, his government
is already doing it with an unprecendented commitment to provide financial
aid and below-market priced oil to regional and other countries. So
far this year, it's on the order of around $9 billion, and, unlike the
Washington-controlled kind, it comes at low cost and with good will,
a cooperative spirit and few if any strings.
Nobel laureate economist
Joseph Stiglitz recognizes Chavez's efforts and stated his support for
the Banco del Sur on an October 10 visit to Caracas. He said "One
of the advantages of having a Bank of the South is that it would reflect
the perspectives of those in the South (while in contrast IMF and World
Bank conditions) hinder (regional) development effectiveness."
Stiglitz met with Hugo Chavez
on his visit and praised his redistributive social policies. He also
criticized Washington Consensus neoliberal practices that exploit the
regions' people, "undermin(e)....Andean cooperation, and it is
part of the American strategy of divide and conquer, a strategy trying
to get as much of the benefits for American companies" at the expense
of the region and its people.
Venezuela's acting ambassador
to the Permanent Mission to the UN, Aura Mahuampi Rodriguez de Ortiz,
warned the world body about Latin American debt during her participation
in the General Debate on Macroeconomic Policies in October. She stressed:
"The persistence of the foreign debt of the developing countries
affects negatively on its process of development. It is not worthy to
direct resources for the development of poor countries if such resources
end up directed to the payment of the foreign debt" instead of
going to economic development internally. She also spoke of the new
Bank of the South, how it will help strengthen regional integration
and also fairly distribute investments and finance projects to reduce
poverty and social exclusion.
A less publicized Bank of
ALBA (Bolivarian Alternative for the Americas) will also begin operating
by year end under "a new regional financial architecture under
principles that create a new form of channeling financial resources"
to its four country alliance - Venezuela, Cuba, Bolivia and Nicaragua.
Chavez first proposed ALBA
as an alternative to the Free Trade of the Americas (FTAA) in 2001 with
Venezuela, Cuba and Bolivia its original members in December, 2004.
Nicaragua then joined the alliance in January, 2007 under its newly
elected president, Daniel Ortega, who signed on as his first act in
office. ALBA's goal is ambitious. It's the comprehensive integration
of the region and development of its "the social state" for
all its people. It's boldly based on member states complementarity,
not competition; solidarity, not domination; cooperation, not exploitation;
and respect for each participating nation's sovereign right to be free
from the grip of other countries and corporate giants.
In April, the 5th ALBA summit
was held in Caracas to discuss ways to improve the alliance. Initiatives
covered included a Permanent (coordinating) Secretariat and a plan to
create 12 public companies to be co-managed by ALBA member states. Its
goal is to strengthen key economic sectors in areas of energy, agriculture,
telecommunications, infrastructure, industrial supplies and cement production.
ALBA country foreign ministers then agreed in June to create a development
Bank of ALBA to help finance these ventures with low-cost credit. It
will complement the Banco del Sur and also be headquartered in Caracas.
Uncertain Future
Prospects
Socially responsible regional
banks, like those discussed above, will challenge the dominant institutions
of finance capital if they fulfill their promise. But therein lies the
problem. These new institutions aren't panaceas, and they may end up
letting capital interests exploit them for their own advantage. In addition,
financial autonomy alone won't free the region from Washington's grip
without greater change. What's needed are sweeping nationalizations
of basic industries, an end to one-way WTO-style trade deals, socially
redistributing national resources, developing local economies, achieving
land and housing reform plus a sweeping commitment to social equity
and a resolve to end a 25 year neoliberal nightmare. From 1960 to 1980,
the region's per capita income growth was 82%. From 1980 to 2000, however,
it was 9%, and from 2000 to 2005 only 4%. For the region, it meant sweeping
poverty, inequality and the most extreme disparity between the super-rich
and desperate poor in the world.
Change is needed, and Venezuela
under Hugo Chavez has done most in the region to achieve it. Finance
Minister Rodrigo Cabezas just presented his government's 2008 budget
to the National Assembly that allocates 46% of it to social spending.
It devotes special attention to health and education but also to subsidized
and free food, land reform, housing, micro credit, job training, cooperatives
and more as Chavez continues to use his nation's resources to address
the needs of his people. Since he took office, social spending per person
is up more than threefold and in 2006 was 20.9% of GDP.
Chavez now has an ally in
Ecuador under Raphael Correa who's early efforts are promising. Hopefully,
they'll continue under a new constitution to be drafted in the next
six months and then put to a national referendum next year. Other Bank
of the South founding countries like Brazil, Argentina and Bolivia,
however, claim to be center-left but, in fact, embrace 1990s neoliberalism,
and financial autonomy won't change that. The Bank of the South will
only work if it fulfills a mandate to prioritize local needs and development,
not corporate ones. That's a tall order, and achieving it won't be easy
with its dominant member, Brazil under Lula, closely tied to Washington
and in its grip.
Nonetheless, small signs
of change are emerging, the Bank of the South may be one of them, and
a new generation of leftist leaders may in the end break Washington's
weakening (but still strong) hold on the region. That's the hope, and
every step forward means more power to the people and another possible
world.
Stephen Lendman
lives in Chicago and can be reached at [email protected].
Also visit his blog site
at sjlendman.blogspot.com and listen to The Steve Lendman
News and Information Hour on TheMicroEffect.com Mondays at noon US central
time.
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