Source:
Rebelión
Hedelberto López Blanch
Wed Mar 07 2007
The International Monetary Fund (IMF) and the World Bank (WB) are regarding with anxiety the possible creation of a financial entity in Latin America, which may increase the problems currently faced by these two international organisations. By the end of February, during a visit of Argentine President, Nestor Kirchner, to Caracas, his Venezuelan counterpart, Hugo Chávez announced that the two governments had agreed on a 120-day term for launching the Southern Bank.
Chávez explained that by the end of that period an action plan is to be laid out, “with a view to the creation of the bylaws, in addition to a five-year term implementation plan, a fund-raising programme and estimates of the initial capital”.
The Venezuelan government is ready to transfer at least 10% of its reserves for this purpose and its President has called upon other countries to follow his steps in the creation of a bank which will be modest at first but within a few years “the IMF, the WB or going around the world begging for loans will become unnecessary”.
During the Kirchner-Chavez meeting, it was informed that the base document for the creation of the Southern Bank has been drawn on ethical, economic, political and social grounds and that the main headquarters of the Bank shall be in Caracas, with another branch in Buenos Aires. The project’s guidelines offer advantageous conditions enabling other governments to join this initiative at any of its stages, allowing a greater Latin American integration. The Ecuadorian Minister of Economy, Ricardo Patiño, stated that the Southern Bank will become a reality within a few months and that his country, as well as Bolivia, will become part of this institution which will operate with resources provided by its member countries.
It is undeniable that the Southern Bank represents an emancipating financial perspective for the region, in contrast to the activities of the IMF and the WB.
It has become common practice for the governments to invest their savings in Northern banks, which pay an interest rate of 1 or 2 %, and then lend this same money at rates ranging from 6 to 12%.
As a result of the increase in international reserves registered in the last few years, developing countries are now in a favourable situation to achieve an independent policy regarding more industrialised capitalist nations.
It is estimated that only the reserves of Venezuela, Argentina and Brazil, as a whole, amount to 100 billion dollars.
The decision to establish this Bank is already a source of concern for international financial institutions and industrialised countries, as in practice, the poorest and most populous countries lend money to the powerful.
The World Bank itself in its 2003, 2005 and 2006 Annual Reports, entitled Global Development Finance, has acknowledged this situation stating that “Developing countries, as a whole, are net lenders to developed countries” and that developing countries “export capital to the rest of the world, particularly to the US”.
Eric Toussaint, President of the Committee for the Abolition of Third World Debt (CADTM in Spanish), explains in a substantial review on the matter that most developing countries purchase US Treasury bonds because these bonds are highly convertible assets, i.e., they can be resold quite easily. Developing countries are thus contributing to the maintenance of US imperial power.
“Developing countries are giving the master the baton with which to beat them up and rape them. In actual fact, the US has a vital need for outside funding to finance its enormous deficit and to maintain its military, trade and financial might. If it were to be deprived of a significant portion of those loans the US would find its position weakened”, asserts Toussaint.
It should be pointed out that, considering the falling trend the dollar has been registering for several years and that the bonds are paid off in devaluated currency, it would be more profitable to invest this capital in the social development of those nations.
The IMF is facing short-term financial difficulties, with a deficit 105 million dollars above the prospects for this fiscal year. This had not taken place since 1985 when a default in debt payment was declared by several countries.
The reason now is quite different and is due to the fact that several member countries have been making early payments, aiming at reducing their debts, having used part of their international reserves to this effect.
This situation is not new; it started during the Asian crisis at the end of the 1990s, when the affected countries decided to fulfil their debt liabilities in exchange for milder control on the part of the IMF.
Both the IMF and the WB, as well as other international financial institutions controlled by developed countries, impose economic policy recommendations which must be strictly followed on their loans. Such policies always represent a detriment to the social strategies which favour indebted populations.
Brazil, Argentina and Uruguay have made early payments amounting to over 25 billion dollars (to avoid huge interests). Serbia and Indonesia have done the same and other countries such as Colombia, Chile, Mexico, Peru and Venezuela have been granted credit lines but have not used them. Since the foundation of the IMF and the WB in 1944, these institutions have operated as domination tools of the most powerful nations which have imposed disadvantageous neo-colonial, neo-liberal and free trade policies to the detriment of the large majorities.
The project for the creation of a Southern Bank rises in view of this undeniable reality, being based on a multilateral philosophy and aiming at the much-needed Latin American integration.
During his visit to Caracas, the Argentine President, Nestor Kirchner, pointed out that the characteristics and philosophy of this financial institution shall be different from those of international banks which have also emerged with investment promotion purposes but throughout the years have turned into a “true mortification for peoples”.
The Southern Bank, together with the Bolivarian Alternative for the Americas (ALBA in Spanish) is another
emancipating awakening for Latin American nations.
Related information:
IMF facing financial crisis, needs revenue overhaul, by SUNS
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