By María José Romero, Choike and Carlos Alonso Bedoya, Latindadd
Differences of opinion over the direction of the Bank of the South, a new regional development bank, may slow progress towards developing an autonomous alternative to the World Bank and IMF-dominated international financial architecture.
The current architecture based on the World Bank and IMF, among other institutions, has been criticised for turning financing into a mechanism for the imposition of economic policies on Southern countries. After much social resistance and the arrival of left-wing governments to power across Latin America, the necessary political momentum was created to launch financial regionalisation.
In this way, anew financial architecture based in the region has started to take shape in South America. Its design comprises – following the Quito Declaration – a development bank (Bank of the South), a monetary stabilisation fund and the unity of accounts for trade purposes.
a counter-hegemonic initiative to change the pattern of neo-liberal development
The strategy was to start with the Bank of the South (see Update 55), launched in 2006 by president Hugo Chávez of Venezuela and initially supported by the governments of Argentina, Bolivia and Ecuador, and later joined by Brazil, Paraguay and Uruguay. Now the initiative is undergoing a process of design that is facing strong tensions, particularly since not all technicians and political leaders share the original spirit of the agreement.
Despite the fact that “one country-one vote” has been the slogan of the Bank of the South, some mechanisms have already been tabled that give more power to those contributing more capital. It has been proposed that the democratic rule is used only in the board of ministers and not in all stages of decision making. This is closely related to questions of which issues will require a vote, which will be part of everyday operations (without vote), and the criteria for selecting staff.
Opening capital has been agreed at the amount of $10 billion, based on three bands of capital contributions. However, there are still different positions among officials on the use of international reserves and other alternative sources, the use of special funds (donations by other countries, private donors, trust funds and others), co-financing mechanisms with other multilateral agencies and the limit of exposure. The definition of these hot issues will determine whether or not the Bank of the South achieves real financial independence, and thus contributes to countries in the region gaining financial sovereignty.
Governance bodies have been established: a board of ministers, an administration board, an audit board and a board of directors with an executive committee.
The audit board is the result of contributions made by Latindadd, Jubilee South, Rede Brasil and CADTM, as part of the the global debt movement. They participated in the elaboration of the technical document in Quito, which was delivered to governments by the authorities of Ecuador and has been a key input during negotiation of the proposals.
The audit board proposal was a response to the debate on the transparency and social control of the Bank of the South’s operations. NGOs and social movements are in favour of a financial institution which substantially stands out from the existing ones, such as the World Bank, the IMF and Inter-American Development Bank. It is about not replicating models. This has specific implications for the governance structure, the sources of funding and the projects to be financed.
Although each government expresses different ideas regarding the purpose of the Bank of the South, the very fact that the bank has been set-up challenges dominant international financial institutions. This is a counter-hegemonic initiative but still it may not be enough to change the pattern of neo-liberal development based on the irresponsible extraction of tax, financial and natural resources from developing countries.
Besides being a proposal aimed at financial sovereignty, many believe the bank should be a mechanism to promote another type of development, based on an integration from and for nations, with emphasis on the intra-regional trade, food and energy sovereignty, free circulation of workers, and the intangibility of the Amazon region, among other issues. For others, the Bank of the South is just another development bank. The substantial differences on the purpose of the Bank among different players is based on differing alliances with the developed world and views of roles within the region. The delay to set out the guidelines of the new institution is just a sample of those conflicting interests.
What is clear is that the pace and expectations of the different governments are not the same, so everything indicates that the finalisation of the bank will not be immediate. It is still unclear whether this will encourage financial regionalisation in other places such as the Caribbean and Africa, and whether this will facilitate a new global architecture with an emphasis on a South-South cooperation. The question now is: what will be the counter-offensive of Bretton Woods institutions?