New Bank of the South to be Created To Reduce Dependency on World Bank and IDB

Agencia estado reports that seven South American countries signed an agreement to create the Bank of the South. After months of deadlock, seven South American presidents closed the agreement setting up the Bank of the South, an institution designed to finance development projects in infrastructure and regional trade integration. According to the Venezuelan president, Hugo Chávez, the bank will have initial capital of U.S. $ 20B, double what had been agreed in March.

The financial institution is an initiative launched in 2007 by the Venezuelan president, to compete and stand up to organizations such as as the Inter-American Development Bank and the World Bank. Trying to put his rethoric aside, he does make an interesting point, in that the Bank of the South Bank "will be our bank to bring back our reserves deposited on banks of the northern hemisphere, which they use to give credit to ourselves,"

Participating in the initiative the governments of Venezuela, Brazil, Argentina, Bolivia, Paraguay and Uruguay. Chile, for now, will be an observer.

The project will now be taken to each country's Congress for its final approval. Member countries agreed to a "blended formula" that delimits the power of decision of each country to the approval of loans. Brazil's position was that the votes of countries that provide capital in the bank should have a greater weight in decisions. This proposal was rejected mainly by Ecuador, which have argued that this practice is the same as applied by the World Bank. Ecuador defended a formula of 'one country, one vote', regardless of financial contribution. The formula establishes two types of loan, a "simple" and a "complex", with different levels of funding.