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The theory that institutions such as the World Bank and International Monetary Fund are currently undergoing different types of crisis has even been accepted by their own policy supporters. The Colombian economic policy has been characterised so far by the disciplined implementation of policies "recommended" by multilateral institutions. Colombia may well remain outside the dynamics of Latin America, bearing the cost of staying tied to economic policies and institutions that have already evidenced their inability to solve their own crises.

It is common nowadays to read in the national and international press that International Financial Institutions are facing serious criticism and high levels of delegitimacy. The economic crises brought about in several countries across different continents have a common origin: the application of measures produced by International Financial Institutions (IFIs). Thus, the theory that institutions such as the World Bank and International Monetary Fund are currently undergoing different types of crisis has even been accepted by their own policy supporters. The first type of crisis has to do with their role, since from being institutions aimed at the prevention of monetary crises and at development finance, they have now become promoters of neo-liberal reforms. The second one is a legitimacy crisis, since their actions have led several countries to financial chaos, both in Latin America and in Southeast Asian countries. The third one is a financial crisis, resulting from the early payments made by some countries, thus reducing their interest income.

Until now, four possible scenarios have been proposed in order to solve the critical situation faced by the International Monetary Fund. The first one is a proposal from the IMF itself, suggesting a reform from within, without making deep changes to its present functions. The second one is a proposal made by several economists, bankers and statesmen about the need to decisively shut down the Fund, acknowledging that it has caused more damage than good. The third one is a proposal from the global South Society, which starts by acknowledging that this role should be played by an institution with a regional vision and without the existence of the same conditionalities, highlighting the advantage of regionalisation regarding customised measures according to regions, thus abandoning the one-size-fits-all global policy strategy. The fourth one proposes a structural reform of the Fund, which starts by giving equal importance to all countries regardless of their size and the possibility of participating in the nomination for executive director.

Of these scenarios, the creation of a Southern Bank has rapidly made its way, being an entity that was first regarded as an additional part of multilateral institutions, but which has gradually taken on a greater dimension, following the idea that it may turn into a monetary stabilisation entity for Latin America, with a view to proposing an autonomous development where problems could be solved through South-South financing.

By means of the creation of the Southern Bank, the governments of Venezuela, Argentina, Ecuador, Bolivia, Brazil and Paraguay have undertaken the political commitment to advance in two specific strategies: i) a change in the way of thinking and producing development policies and ii) the protection of the regional economy in support of stability. This initiative allows to think of a different construction model for society, by redisigning (or eliminating) the concepts of development, poverty, etc., previously introduced by multilateral policies and generating different dynamics of credit access. Thus, the proposal also includes a democratic and including structure, where each country has a representative, decisions are jointly agreed with social organisations and productive sectors and agendas are made known to the public.

This proposal will have to be submitted to different discussions, including the creation of a unified currency and the stabilisation of the regional economy, the relationship of regional currencies with the dollar and their position vis-à-vis current multilateral entities, which in no case should be of subordination; the forms of financing and quotas of the different countries and credit lines; the discussion about the creation of a Latin American Monetary Fund and the role of institutions such as the Andean Development Corporation (CAF in Spanish) and the Latin American Reserve Fund (FLAR in Spanish), within the framework of a broader process of regional economic integration. All these discussions should reach a technical level sufficient so as to ensure decisions are made both by countries and the regional institution. Meetings among technical teams and finance ministers have progressed to such an extent that documents aimed at giving rise to the Southern Bank in a few months were already exchanged last May 3.

The Colombian economic policy has been characterised so far by the disciplined implementation of policies “recommended” by multilateral institutions. In fact, World Bank and IMF reports always underscore Colombia’s compliance in terms of fiscal deficit reduction through reforms on transfers, the pension system, the encouragement of foreign direct investment and its protection, and debt restructuring, among others.

However, the Colombian economy is undergoing a critical situation. In spite of growth rates, which are above last year’s 6%, employment continues to decrease and the country’s production system apparently fails to increase. Besides, the repercussions of a US policy-dependent economy have shown its risks in recent weeks. On the one hand, political changes in the US Congress have made some of the flagship projects of Uribe’s administration stagger (such as the Colombia Plan, tariff preferences and the Free Trade Agreement). On the other hand, the dollar’s devaluation has destabilised the country’s economy and measures adopted so far have not had the expected results neither to stop the fall nor to control inflation. This is an element that may lead to think that the dollar problem in Colombia lies neither in the appreciation of the local peso, nor in the increase of foreign direct investment or remittances but rather it is someting related to the US fiscal problems, which neither the Bank of the Republic nor the national government can have anything to do about.

Additionally, the country’s debt maturity profile shows how the government has requested foreign loans to comply with the maturities of those public debt securities issued by the National Treasury, thus accepting conditionalities by multilateral banks.

In spite of all the evidence, statements made by Finance Ministers Carrasquilla and Zuluaga are emphatic when saying that the international financial architecture has indeed worked for the country and that proposals for the Southern Bank and new economic integration processes in the region have no raison d'être for Colombia, even daring to assert that they are politically, economically and technically unfeasible.

Colombia may well remain outside the dynamics of Latin America and even fail to acknowledge the crises being faced by neoliberalism and international financial institutions, thus bearing the cost of staying tied to economic policies and institutions that have already evidenced their inability to solve their own crises and abandoning the possibility of taking the lead in the construction of regional power blocs.

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