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Social organizations, NGOs and churches making up the debt movement in the region have long been facing the logic prevailing within the international financial architecture, the same which by means of financial institutions such as the World Bank and the IMF has turned debt policies into domination mechanisms against Southern countries. Thanks to the impetus brought about by the International Jubilee Debt Campaign at the end of the 1990s, it was possible to achieve three results the Movement has rated as positive: the debt audit in Ecuador; Norway’s debt cancellation in favor of three Latin American countries; and the foundation of the Bank of the South.

Social organizations, NGOs and churches making up the debt movement in the region and with expression through different networks and other forms of organizations have long been facing the logic prevailing within the international financial architecture – the same which by means of financial institutions such as the World Bank and the International Monetary Fund has turned debt policies into domination mechanisms against Southern countries. The World Bank’s loan conditionalities and the IMF’s letters of intent, are the most well-known and questioned tools for the imposition of policies.

As of the 1980s crisis, the debt movement in the region has questioned both the debt’s character and the disbursements made by poor countries through budget adjustments in order to achieve fiscal surplus and pay high interests at the expense of the rights of citizens.

Thanks to the impetus brought about by the International Jubilee Debt Campaign at the end of the 1990s, it was possible to achieve three results the Movement has rated as positive. The first one is the debt audit in Ecuador; the second is Norway’s debt cancellation in favor of three Latin American countries; and the third one is the foundation of the Bank of the South.

However, it is evident that the rise of left-wing movements in the region to power has provided the necessary impulse to launch the process of financial regionalization. The official proposal for the Bank of the South was launched in 2006 by president Hugo Chávez of Venezuela and was initially supported by the governments of Argentina, Bolivia and Ecuador. Later on, the governments of Brazil, Uruguay and Paraguay also joined the initiative. Many things have happened since the time in which the Bank of the South was simply a power point paper in Caracas and some pages in Buenos Aires until now. Nowadays we have a Bank right in the process of being designed.

The Bank of the South comes to life in a scenario of great global economic instability, characterized by the rise in food prices and the volatility of the US dollar, but also at a time in which our region shows an unprecedented accumulation of international reserves. For many, this bank aims at achieving regional financial sovereignty and also at promoting integration from and for South American peoples, with emphasis on intra-regional trade, and food and energy sovereignty, among others. For many others, it is just another bank.

The process for the construction of this Bank is currently undergoing a stage of definitions. It was said that that there were four proposals of articles of agreements: one presented by Venezuela, another one by Brazil, another one by Argentina and finally one created at the Technical Workshop organized by the government of Ecuador and the United Nations Development Programme (UNDP), with certain participation of civil society. According to press information, the bank now has a draft articles of agreement.

At the 21st Meeting of the Multilateral Technical Commission, made up by officials of the Finance Ministries of Ecuador, Venezuela, Argentina, Brazil, Bolivia, Uruguay and Paraguay held on July 21 in Asuncion, the issue of capital contributions was finally defined, along the lines of the ministerial meeting of June 27 in Buenos Aires which proposed 10 billion dollars of opening capital. Two bands have been defined regarding the capital contribution of countries: one inferior to 100 million dollars and another one ranging from 400 million dollars to 2 billion dollars. Likewise, the bank’s bodies were set up: Board of Ministers, Administration Board, Audit Board and Board of Directors which will have an executive committee.

Mechanisms such as the audit board are the result of contributions made by Rede Brasil, Latindadd, Jubileo Sur, Eurodad and CADTM, which participated in the elaboration of the technical document in Quito. This document was delivered to governments by the authorities of Ecuador and has been a key input to discuss and negotiate the proposals.

Undoubtedly, this is a complex process owing to the nature of the initiative which aims at breaking with the current logic of traditional financial institutions. The idea of one country-one vote already meets resistance at the time of defining the capital contribution of each country, given that the largest states such as Brazil, Argentina and Venezuela would be burdened with a greater quota, and therefore would seek to have more influence on the Bank’s decisions.

Another issue at debate is whether the private sector shall be financed or not. According to the draft signed by ministers in Buenos Aires last June 27, the delegation of Venezuela considers that the Bank should not finance the private sector, with the exception of cooperatives, joint and community enterprises.

Although each government expresses different interests regarding the definition of the Bank, the same process questions the validity of current multilateral organizations. The Bank of the South is not just a bank, not even a further development bank. It is the expression of the struggle against a model that takes out resources from the poorest nations. If this bank no longer manages to represent such expression and becomes more of the same, the movement will have a new institution to resist.

Related information:

* Stage of definitions on the Bank of the South

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