Coming Soon to Latin America: A New Development Bank?

Sources: Delays at Bank of the South; Bank of the South, championed by Venezuela, begins to take form; Venezuela to skip IMF, World Bank meetings

The Venezuelan government announced today that the Bank of South will begin its operations on December 5, a month later than initially planned. The Bank of the South is a new institution proposed by Hugo Chávez as an alternative to the World Bank, the Inter-American Development Bank, and the International Monetary Fund (“IMF”) based in the United States. To symbolize its clear break with the extant international financial institutions, the Bank will be located in Caracas, Venezuela. Its founding members include Argentina, Brazil, Bolivia, Colombia, Ecuador, Paraguay, and Uruguay, in addition to Venezuela.

The Bank of the South will open later than originally anticipated because many important details of its governance structure have not been fixed. The founding members are still trying to determine the appropriate size and purpose for the Bank, as well as the dues for its member states. The Bank’s founding members have tempered the exclusivity sought by Chávez. Brazil has stated that the Bank will not duplicate the IMF by creating a bail-out fund. Additionally, Colombia has announced that its membership in the Bank is not to be construed as a repudiation of other international financial institutions.

These efforts are in contrast to those of Venezuela. While the country remains a member of both the World Bank and the IMF, the Venezuelan finance minister did not attend the 2007 Annual Meetings last weekend. Instead, he led a delegation to promote the Bank of the South during that time.

Discussion:

Is the Bank of the South simply a political ploy of the Venezuelan government, or will it provide an alternative source of funding for the Latin American countries? Do you think this Bank will be able to address those concerns unanswered by the Bretton Woods Institutions, when the main difference appears to be the absence of the United States, rather than a change in banking practices?