By DPA
Buenos Aires : Seven South American presidents will formally start a regional alternative to global development lenders when they gather in Buenos Aires Sunday to establish the Bank of the South.
An initiative of controversial Venezuelan President Hugo Chavez, the Bank of the South is intended as a regional choice to counter the International Monetary Fund (IMF) and the World Bank.
It will be headquartered in Caracas, with additional offices in Buenos Aires and La Paz, and is scheduled to be operational in early 2008, with an estimated initial capital of $7 billion.
But no details about the source of the money have been made public.
The bank is to finance development and integration projects with low interest rates. It will keep its focus in the Americas and is not expected to lend money outside the region, at least initially.
Oil-rich Venezuela, which already finances many projects across the region, is likely to make an important contribution to the lender’s budget. Participating countries are to have one vote each on the bank’s board, regardless of their size.
The international monetary institutions established at the Bretton Woods conference after World War II are highly unpopular in South America, where they have been blamed with imposing restrictive economic policies that have affected the welfare of the population.
Chavez, a leftist-nationalist, has accused the World Bank and IMF of “extortion” and called them instruments of imperialism.
However, more moderate governments, like those of Argentina and Brazil, are also suspicious of the two multilateral organisations headquartered in Washington. Indeed, the two countries used their central banks’ foreign exchange reserves to pay off their debt to the IMF in late 2005.
“The IMF has acted toward our country as a promoter of, and vehicle for, policies which provoked poverty and pain among the Argentine people, at the hand of governments that were lauded as exemplary students of permanent adjustment,” Argentine President Nestor Kirchner complained after paying off the country’s obligations to the IMF.
By turning their backs on the IMF and the World Bank, Bank of the South founders aim to expand regional economic growth and trade by financing development projects using their own money. They expect the Bank of the South to play “a central role in a new regional financial architecture”.
Argentine officials said that host Kirchner will be joined by presidents Luiz Inacio Lula da Silva of Brazil, Tabare Vazquez of Uruguay, Hugo Chavez of Venezuela, Rafael Correa of Ecuador, Nicanor Duarte Frutos of Paraguay and Evo Morales of Bolivia.
Sunday will be Kirchner’s last day in office before he steps aside for the inauguration of his successor, his wife and president-elect, Cristina Fernandez Kirchner. The presidents are expected to stay on for the inauguration Monday.
The finance ministers of the countries involved agreed upon the foundation principles of the Bank of the South in early November in Rio de Janeiro.
Colombian President Alvaro Uribe requested to join the bank in October, although he has since fallen out with Chavez.
Brazilian Finance Minister Guido Mantega has insisted that the bank will be a serious institution and will not “finance adventures” of reckless governments. Instead, he said it would benefit the region.
The new institution was to be launched Nov 3 in Caracas, but the date was postponed first to Dec 5 and then to Dec 9.
Chavez, who had his first electoral defeat since becoming Venezuelan president in 1999 when voters Sunday turned down a constitutional referendum he sought, will seek to draw some consolation from the initiative’s implementation.
His country’s vast oil wealth puts him in a good position to be at the centre of development projects across South America, and he has in the past made good use of that platform as a key to regional power, even without a Bank of the South.