12 December 2007

Banco Del Sur - A Reality Check On The State Of South American Relations

(Dec. 12, 2007) The signing of the "founding act" of the new Banco del Sur raises so many questions that it is difficult to know where to begin. Set against the backdrop of the assumption of Cristina Fernandez de Kirchner in Buenos Aires, Argentina, the meeting highlighted the continued difficulties South America faces as it attempts to form a continent wide union.

As reported in the BBC, Brazilian President Lula da Silva called the founding of the bank a "decisive step" towards the integration of South America; Venezuelan President Hugo Chávez called it a "political reality that forms part of an economic and social war;" and Bolivian President Evo Morales said it brings "new hope" to a region struggling to combat poverty.

The problem as we see it is that while these statements may be accurate on a hypothetical level, they completely miss the mark when it comes to describing the actual reality of regional relations.

As much as Brazil would like to think that the Banco del Sur will be a decisive step toward regional integration, the statements made Sunday by Mr. Chávez about an ongoing economic war underline the deep policy divisions between Brazil and Venezuela, the two most important members of the new bank. Instead of declaring war on the economic and social policies of the last 20 years, most South American nations are actively promoting the neoliberal policies that Chávez is trying to fight.

Ironically, three days after launching such a "major initiative" to bring the continent closer together, President Chavez slammed on the brakes Wednesday by announcing that Venezuela will not return to the Andean Community (as expected) while Colombia remains a member. Although Colombia is not a signing member of the Banco del Sur (it pulled out a month ago after Chávez placed their bilateral relations in "a freezer"), it is a member of the Union of South American Nations (Unasur), the formal political institution in charge of coordinating the development projects the bank will be asked to finance.

The statements made by Bolivia's president are perhaps the most tragicomic of the day. In what must have been a Freudian slip, Morales spoke of a new hope at the same time as his political opposition at home was declaring war against him for approving a new national constitution without opposition support.

Ruben Costas, the governor of the Bolivian province of Santa Cruz, issued a statement Monday calling on citizens to "participate militantly to defend and conquer the hate and resentment that wants to crush us," adding that the new constitution threatens "the destruction of our homes, our workplaces and, above all, the very existence of our people as free citizens." A return to authoritarian rule is nothing to hope for.

Finally, the very fact that South America is forming its own international lending agency raises the question, what is wrong with the ones the world has now?

The obvious answer is that current lending institutions are dominated by Washington. Another answer is that they aren’t offering South America any money. As we understand it, both problems are related.

The imposition of social austerity measures in the 1990s in countries that owed large amounts to foreign creditors created unacceptable social conditions in local communities, eventually leading to a broad rejection of the Washington Consensus, a subsequent default on international loans, and finally the election of number anti-U.S. populists who promised to end their respective nations' dependence on the United States.

As a result, these new political leaders were caught in a Catch-22, called on to provide national development while at the same time forced to distance themselves from the very groups they needed to finance this growth. After seven years of trying to have it both ways, the Banco del Sur has been created as a work around to provide financing without the institutional reform demanded by the international lenders.

Given these problems and the fact that no country has actually said how much money it will contribute to the bank's start-up capital, it may be too early to start celebrating a new era in South American history. However, it would be wonderful if things did turn out for the best, especially for the millions of poor children that will face the same problems tomorrow that their parents face today if something serious is not done soon.
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By Nathan Gill - Southern Affairs
www.southernaffairs.org