By Lucas Bergman
BUENOS AIRES, Dec 9 (Reuters) – Seven South American nations planned to found on Sunday a development bank to demonstrate their joint independence from multilateral lending practices that some have blamed for past economic crises.
Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela will be founding members of Banco del Sur, or Bank of the South, an initiative of Venezuelan President Hugo Chavez. All of the countries except Paraguay are led by leftists.
There are few details in the bank’s founding document to be signed on Sunday evening in Argentina’s national palace by leaders who are in town for the Monday inauguration of new president Cristina Fernandez de Kirchner.
The countries will agree to iron out specifics over the next two months.
The bank will be funded with some $7 billion, the bulk of which would come from Brazil and Venezuela, with Argentina contributing $800 million, according to local press reports.
A source at Argentina’s economy ministry said countries would initially fund the bank with 10 percent of their total commitments.
Local media said it was still undecided whether each member country will have one vote in the organization or votes proportional to the funds they put in.
“The Bank of the South appears to be one of the region’s most compelling projects leading towards authentic Latin American financial bolstering, as well as helping to allow for a new-found autonomy,” wrote researcher Roberto Mallen of the Council on Hemispheric Affairs, a leftist Washington, D.C., think tank.
He said the bank’s structure will not allow Chavez to dominate it, even if it is based in Caracas.
Brazil, the economic powerhouse that may provide close to half the bank’s capital, was hesitant to be involved but apparently agreed to come on board if the institution works as a development lender similar to the World Bank, rather than as a provider of loans for countries in economic crisis like the International Monetary Fund.
The IMF is widely despised in South America because it has imposed tight restrictions on government spending as conditions for lending.
Outgoing Argentine President Nestor Kirchner says IMF policies provoked the Argentine economic meltdown five years ago, partly by encouraging the country to go too deeply in debt.
Argentina and Brazil have both completely paid off their IMF debt and other countries in the region, such as Uruguay, have made steps in the same direction.
Kirchner will sign the bank agreement in his last act as president, a day before his wife Fernandez is inaugurated to succeed him after winning elections in October.
Countries that have cooler relations with Chavez — a stridently anti-U.S. leader who has used Venezuelan oil wealth to spread his influence in the region — have so far not joined the bank.
Chile, the region’s model economy, and Peru, whose leader Alan Garcia has had disputes with Chavez in the past, are not on board though they will be invited to join.
Colombia was to be part of the initiative but pulled out recently when President Alvaro Uribe fell out with Chavez over his role in helping the Colombian government negotiate a prisoner exchange with leftist guerrillas. (Writing by Fiona Ortiz, editing by Eric Walsh)