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BANK OF THE SOUTH
Options for confronting the crisis
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.
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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. (Taken from Orbe)
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