Hugo Chavez and leaders of six other South American nations launched a regional development bank Sunday that the Venezuelan leader is touting as the continent’s answer to U.S.-influenced international lenders.
With as much as $7 billion in expected startup capital, backers say the Banco del Sur, or Bank of the South, will offer Latin American countries loans with fewer strings attached than those given by the World Bank, the International Monetary Fund or the Inter-American Development Bank.
The leaders signed the “founding act” at a ceremony at Argentina’s presidential palace hosted by President Nestor Kirchner and his wife, president-elect Cristina Fernandez, who takes office Monday.
South American dignitaries and government officials cheered after the leaders signed the accord on a glass-topped table, backed by flags of their South American nations.
“This is the start of a historical moment,” said Bolivian President Evo Morales, whose country is the continent’s poorest.
He praised the bank as a new tool to fight poverty and ease inequalities and criticized what he characterized as heavy-handed lending practices of international lenders who demand austerity prescriptions as conditions for extending credit.
“Only strong and united can South America occupy its rightful place among nations,” Brazilian President Luiz Inacio Lula da Silva said. “This will be the first international bank truly controlled by the nations of our continent.”
Earlier, Chavez said the bank is “aimed at freeing us from the chains of dependence and underdevelopment.”
The institution is one of several far-reaching proposals under Chavez’s ambitious call to unite Latin American countries in a “confederation of republics.” His vision also includes a transcontinental natural gas pipeline and trade alliances.
Critics note much remains to be determined about how the bank will operate and say it might turn out to be a largely symbolic project used by Chavez to spread his oil-financed influence.
But others call it a bold stroke for Latin America’s financial independence.
“What you had in the past decade was the collapse of a very powerful creditors’ cartel headed by the IMF,” said Mark Weisbrot of the Washington-based Center for Economic and Policy Research. “This is the first step in creating an alternative.”
Finance ministers of Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela will sit on the bank’s board. Officials say it will dispense loans for projects from road-building to anti-poverty programs and regional integration plans such as cross-border rail lines.
Venezuelan officials say the bank’s loans will be issued at interest rates similar to those of other international lenders.
“The bank is not against anything or anyone. It is in favor of the people of South America,” Venezuelan Finance Minister Rodrigo Cabezas said when Brazil, the continent’s largest economy in South America, committed to joining the enterprise.
Rodolfo Sanz, a Venezuelan state bank official, said initial capitalization is expected between $5 billion and $7 billion, depending on final pledges.
The bank will be headquartered in Caracas, with Bolivian and Argentine branches.
Augusto de la Torre, World Bank chief economist for Latin America, welcomed the bank.
“It’s a very interesting initiative which I think expresses the desire to find stronger cooperation between Latin American governments,” he told The Associated Press in a recent interview. “As far as the World Bank is concerned, this new initiative is not perceived as a competitor.”
IMF-watcher Paul Blustein at Washington’s Brookings Institution said the project highlights Latin America’s yearning for greater autonomy after decades of sporadic financial crises and imposed austerity measures — such as IMF missteps ahead of Argentina’s 2002 economic meltdown.
“It’s really emblematic of how Latin America has become disillusioned with the model that the IMF and the World Bank and the U.S. Treasury promotes — the so-called Washington consensus,” he said.
But he noted the IMF and World Bank have decades of know-how.
“I’m not so sure this institution is going to be any more successful,” he said.