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At the meeting held on 8 October 2007 in Rio de Janeiro, the ministers of economy and finance of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela made further progress in negotiations leading to the founding of the Bank of the South. On this occasion the founding document of the new multilateral financial institution was signed. The bank's headquarters will be in Caracas. So far there had been no agreement over the share of each country's contribution, nor about the decision-making system. At this meeting the date for the launching of the Bank was fixed for 3 November, but for the third time the ceremony was postponed to 9 December in Buenos Aires.

The Bank of the South will be a development bank and will start off with a capital of approximately USD 7 billion. The institution arises as an alternative to the World Bank and the Inter American Development Bank (IDB), hence the political importance of this initiative, which reinforces South America's sovereignty perspectives. The number of members is still under discussion. Rumour has it that as well as the seven countries who attended the Rio meeting, another five could make up the institution (Colombia petitioned for entry a few days after the meeting). The founding of the bank must be understood as a move toward creating an autonomous regional finance system which is aware of the need to prioritize above all the battle against poverty, marginalization and structural underdevelopment. The greater, then, the support the bank receives, the better it is for South America.

The agreement that were signed included three areas for negotiation: 1) the Bank of the South as a development bank; 2) functions of a South American Central Bank; and 3) monetary system. But in actual practice negotiations so far have barely focussed on the first field.

For the social movements and the organized civil society networks of the region, the Bank of the South should be part of a regional strategy, together with the creation of a stabilizing fund for the South, a common regional currency, the auditing of internal and external debt, the non-payment of illegitimate debts. This strategy should be a response that contributes to break the existing dependency in relation to the globalized capital markets, which are uncertain and highly speculative, in such a way that they may channel their own capacity for saving in order to see to the rights and needs of the people.

In an open letter to the presidents of the countries who are dealing with the founding of the Bank of the South, headed "For a Bank of the South that complies with the rights, needs, potentialities and democratic vocation of the peoples", there appeared the following proposals made by the social movements and civil society networks of the region for inclusion in the Bank of the South project:

a) The Bank should define as its main objective the promotion of development, sovereignty and solidarity of the member countries of the entire region. Development is defined as making the most of the attributes, resources and potentialities of the individuals, communities and peoples, which cannot be reached unless they themselves are its protagonists.
b) The Bank's shares and board of governors should be equally distributed among the member countries.

c) The Bank should make clear that its credit shares will serve to strengthen the public and social sector, and prioritize the redistribution of wealth and the protection of the environment, contributing to overcome current asymmetries, respecting the life and welfare of the people, their economic, social, cultural and environmental rights, and the right to their own self-determination and development. For this reason we explicitly reject that the Bank of the South should be used to finance megaprojects like the Initiative for the Integration of the South American Regional Infrastructure (IIRSA in Spanish), or investments involving extraction, pollution or social exclusion that are not accepted by or do not benefit the population.

d) The Bank should explicitly establish transparent and well-defined mechanisms for information and public control: the employees of the Bank of the South may not have any kind of immunity, or personal tax privileges; the bank's accountability should be submitted to parliament and civil society for their knowledge and consideration; and all information should be considered public. All this must be understood in the context of the Quito ministerial declaration of 13 May 2007, which states that: "the people will give their governments the mandate to provide the entire region with new integration instruments for development based on principles which are democratic, transparent, participatory and responsible to the people".

Progress in the negotiations, however, indicates that the Bank of the South may transform itself into an instrument that reproduces the asymmetries of regional power and economic domination. At the two previous meetings, in Quito and Asunción, the ministers had already signed an agreement that adopted the system of "one country, one vote", which is definitely more democratic because it does not tie the decision-making to the size of the economy or the capital each country contributes to the bank. Yet in Rio, Guido Mantegna, Brazilian minister of Finance, and the Argentinian delegation departed from the earlier agreement. They proposed that equality among members be restricted to the Bank's Board of Directors, which would only meet once a year. Decisions involving the daily management of the Bank of the South would be subjected to the power of the countries with the highest volume of shares in the bank. Brazil also insisted that the beneficiaries of credits from the Bank of the South should be restricted to the South American countries, thus excluding Central America and the Caribbean.

Social movements should put pressure on their governments in order to prevent the Bank of the South repeat errors (conditionalities, governance, etc.) and promote a social liberal type of development policy. However important the technical aspects related to the founding of the Bank of the South may be, the main problem is political: everything seems to indicate that Brazil and Argentina are directing discussions towards the repetition of the current "development" models (Andean Development Corporation, Brazilian National Bank for Economic and Social Development and IBD), which focus on development at all costs, IIRSA and other mammoth projects.

The only possible direction for the Bank of the South is to place itself at the service of a sovereign, supportive, sustainable and democratic South America. For this, the constant organized pressure of our countries' society is crucial so that governments include representatives of social movements in the organization as well as in the decisions involving the Bank of the South.

This article was first published in Portuguese language on a special magazine that Rede Brasil printed for the Week of Actions against Debt and IFIs.

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