Bank of the South Launched

Sources: Why South America wants a new bank; Bank of the South could be an ‘opportunity:’ IMF chief

Seven Latin American countries established the Bank of the South—an alternative regional development bank—on December 9, 2007. While the Bank is widely understood to be part of Venezuelan President Hugo Chavez’s anti-American political agenda, it is reflective of a general sentiment in Latin America that the World Bank and the International Monetary Fund (“the IMF”) have not been responsive to their needs. Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay, and Venezuela signed the founding documents. Chile, Peru, and Colombia have postponed their decisions to join the Bank.

Despite its launch on December 9, the Bank still needs to finalize the Bank’s operational procedures. The seven founding members disagree on how funds should be raised.

Some observers have dismissed the Bank as simply another outlet for Chavez’s political motivations. However, others—including former World Bank economist Joseph Stiglitz and the current IMF Managing Director Dominique Strauss-Kahn—have suggested that the Bank may assist in the international development efforts by providing competition to the more established international financial institutions.

Discussion:

How should the Bank of the South define itself in relation to the World Bank, the IMF, and the regional development banks? Given Chavez’s express dismissal of these institutions as America’s puppets, how do you think that the new bank will cooperate with the existing institutions?