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Bank of the South
Type Public
Founded 2007
Headquarters Caracas, Venezuela
Industry Finance and Development

The Bank of the South (Spanish: Banco del Sur, Portuguese: Banco do Sul); or BancoSur is a monetary fund and lending organization first proposed by Venezuelan President Hugo Chávez. The intention of the bank is to lend money to nations in the Americas for the construction of social programs and infrastructure. It is expected to be headquartered in Caracas, Venezuela,[1] and will be run by a Board of Directors made up of the economy ministers of member states.[2]

Contents

Plans and Involvement

The ultimate goal of the Bank of the South is to include every state within the region of South America. It has been established because of disapproval of the protocol of the World Bank and IMF, in particular the enforcement of unrelated free market reforms on countries seeking emergency loans.[3] It also represents an attempt to achieve regional independence and endogenous development. The program would lend money to any nation involved in the construction of approved programs, and without conditions traditionally attached to such loans, such as deregulation.

The Bank is intended as an alternative to borrowing from the IMF and the World Bank. Hugo Chávez has promised to withdraw from the IMF and encourages other member states to do so as well, Indeed Latin America's dependence on the IMF fell dramatically between 2005 and 2008, with outstanding loans falling from 80% of the IMF's $81bn loan portfolio, to 1% of the IMF's $17bn of outstanding loans.[4] Brazil and Argentina are also refusing to borrow from the IMF again. In 2005, Latin America made up 80% of the IMF's lending portfolio. With Latin American countries refusing to continue dealing with it, that percentage dropped to 1% by 2007.[3]

It is proposed that all member countries contribute fairly equal shares to the Bank's initial capital of fourteen billion reais (seven billion dollars) so that no member state will control a dominant share. Argentina joined with Venezuela to officially propose such an initiative, but Brazil also became a major player.[5]

History

The concept was first raised during the first presidential campaign of Venezuelan President Hugo Chavez, in 1998.[4] The concept was originally launched in 2006 in cooperation between Venezuela and Argentina, led by their respective Presidents Hugo Chavez and Nestor Kirchner.[2] In April 2007, Brazil agreed to join.[6]

In May 2007, a meeting in Quito led to the official creation of the bank, and was said to indisputably signify another step towards Latin American integration.[5]

Seven South American nations met in Rio de Janeiro on October 8, 2007, to plan the beginning of the Bank. It was announced that the Bank will be headquartered in Caracas, Venezuela, and would begin operations on November 3, 2007; this was later postponed to 5 December 2007,[7] and then to 9 December 2007.[8] Representatives from Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela were present at the meeting. All 12 South American countries will be eligible to borrow from the Bank.[9] In a surprise move, Colombia formally requested membership in the bank on 13 October 2007.[10] As of April 25, 2008, the bank was still awaiting its member nations to have their local legislatures approve their individual capital investments. Member voting rights were yet to be determined at that time.[11]

In March 2009 a number of Latin American nations agreed to contribute $7 billion towards the bank's start-up capital. Venezuela, Argentina, and Brazil are to contribute $2 billion each, and Ecuador, Bolivia, Paraguay, and Uruguay agreed to contribute varying amounts to provide the remaining $1 billion.[1]

On Saturday, September 26, 2009, the presidents of Argentina, Brazil, Paraguay, Uruguay, Ecuador, Bolivia and Venezuela signed an agreement establishing the South Bank with an initial capital of 20 billion U.S. dollars. Leaders including Brazilian President Luiz Inácio Lula da Silva and Argentina's Cristina Fernández de Kirchner formally signed on to the pact and announced that the starting capital would be $20 billion. It was unclear how much each country would contribute, but under the previous $7 billion figure announced in May, Argentina, Venezuela and Brazil were to have each pledged $2 billion, while Uruguay, Ecuador, Paraguay and Bolivia were to have chipped in smaller amounts. [12][13 ]

See also

References

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