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South America: Bank of the South

(Nov. 2, 2007) Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay, and Venezuela have agreed to create a regional development bank based on a proposal of Venezuelan President Hugo Chavez, in order to improve regional trade and growth with their own resources. The Presidents of the seven countries inaugurated the Bank of the South (Banco del Sur) on November 3, 2007, in Caracas, following the schedule set out in the "Declaration of Rio de Janeiro" signed on October 8, 2007, by their respective finance ministry officials. The Bank will have its headquarters in Caracas and two regional offices, one in Buenos Aires and another in Rio de Janeiro.

Chavez proposed the creation of the bank as part of a drive to counter the influence of the United States in Latin America and to use oil profits from record-high crude prices to finance social and economic development programs. The amount each country will contribute to the bank and how it will raise additional capital are issues to be worked out in the 60 days after the Caracas signing ceremony, Guido Mantega, Brazil's finance minister, said at a press conference. In addition to agreeing to set up the bank, the participants decided that each country will have one vote on the bank's board of directors. Chile, Peru, and Colombia have not yet joined the new financial institution. However, Colombia announced on October 12 that it has requested membership.

No conditions will be set on loans to members. Brazil, which will make a "large" contribution to the bank, emphasized the goal of creating a self-sustaining institution that will earn enough interest on investments to increase the amount of capital available for loans to promote regional integration projects for both the private and public sectors.

The bank will not give grants, only loans, and will operate only within South America. This means that Central American and Caribbean countries will not be included. The bank plans to increase its capital from the initial national contributions through borrowing, possibly through international capital markets and other regional financial development organizations.

The bank hopes to make its first loan in 2008 and plans to work with existing regional financial institutions, such as the Corporacion Andina de Fomento, the InterAmerican Development Bank, and regional banks such as the Banco Nacional de Desarrollo (BNDES) of Brazil and the Banco de la Nacion Argentina of Argentina. (El Banco del Sur se lanzara oficialmente el 3 de Noviembre, DIARIO CLARIN, Oct. 8, 2007.)