- In July, 2004, the IMF and World Bank commemorated the
60th anniversary of their founding at Bretton Woods, NH to provide a financial
framework of assistance for the postwar world after the expected defeat
of Germany and Japan. With breathtaking hypocrisy, an October, 2004 Development
Committee Communique stated: "As we celebrate the 60th anniversary
of the Bretton Woods Institutions....we recommit ourselves to supporting
efforts by developing countries to pursue sustainable growth, sound macroeconomic
policies, debt sustainability, open trade, job creation, poverty reduction
and good governance." Phew.
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- In fact, for 63 hellish years, both these institutions
achieved mirror opposite results on everything the above comment states.
From inception, their mission was to integrate developing nations into
the Global North-dominated world economy and use debt repayment as the
way to transfer wealth from poor countries to powerful bankers in rich
ones.
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- The scheme is called debt slavery because new loans are
needed to service old ones, indebtedness rises, and borrowing terms stipulate
harsh one-way "structural adjustment" provisions that include:
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- -- privatizations of state enterprises;
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- -- government deregulation;
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- -- deep cuts in social spending;
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- -- wage freezes or cuts;
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- -- unrestricted free market access for foreign corporations;
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- -- corporate-friendly tax cuts; -- crackdowns on trade
unionists; and
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- -- savage repression for non-believers under a system
incompatible with social democracy.
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- Everywhere the scheme is the same: huge public wealth
transfers to elitist private hands, exploding public debt, an ever-widening
disparity between the super-rich and desperate poor, and an aggressive
nationalism to justify huge spending on security for aggressive surveillance,
mass incarceration plus repression and torture for social control.
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- An Alternative to Debt Slavery - The Bank of the South
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- Last December, Hugo Chavez announced his idea for a Banco
del Sur, or Bank of the South, as part of his crusade against the institutions
of international capital he calls "tools of Washington." The
bank will be officially launched at a presidential November 3 summit in
Caracas, where it's to be headquartered, with seven founding member-states
- Venezuela, Argentina, Brazil, Uruguay, Paraguay, Bolivia and Ecuador.
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- On October 12, Colombia's President Alvaro Uribe announced
his nation agreed to become the eighth member but said "The decision
is not a rejection to the World Bank or Inter-American Development Bank,
but a sign of solidarity and fraternity towards the South American community."
At this time, only four South American states aren't included - Chile,
Peru, Guyana and Surinam, but Chile seems likely to come aboard following
Colombia's lead, and the others may decide to join them.
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- Finance ministers from the founding countries met in
Rio de Janeiro, Brazil October 8 to finalize the Bank's Founding Document.
Many key operating issues have yet to be resolved, but unofficial information
was that each nation will commit 10% of its international reserves and
have equal oversight over the new institution. In a concluding news conference,
Brazilian finance minister Guido Mantega stated: the participating countries
"have been able to overcome all obstacles that were in the way of
an understanding around the formation of the Bank of the South. We can
now say that the (bank) is close to becoming a reality" even though
Brazil (Latin America's largest economy) hasn't yet formalized its entry.
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- Venezuelan finance minister Rodrigo Cabeza explained
the bank will help develop the region by offering South Americans more
credits. It's being "created to build a new architecture that assumes
an improved relationship of the bank and its capacity to offer credits
for its people." It also aims to increase liquidity and revive socioeconomic
development and infrastructure investments in participating countries and
keep them outside the restrictive control of the IMF and World Bank that
are fast losing influence and being phased out of the region.
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- In 2005, 80% of IMF's $81 billion loan portfolio was
to Latin America. Today, it's 1% with nearly all its $17 billion in outstanding
loans to Turkey and Pakistan. The World Bank is also being rejected. Venezuela
had already paid off its IMF and World Bank debt ahead of schedule when
Hugo Chavez symbolically announced on April 30: "We will no longer
have to go to Washington nor to the IMF nor to the World Bank, not to anyone."
Ecuador's Raphael Correa is following suit. He cleared his country's IMF
debt, suspended World Bank loans, accused the WB of trying to extort money
from him when he was economy and finance minister in 2005, and last April
declared the Bank's country representative persona non grata in an extraordinary
diplomatic slap in the face.
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- The Banco del Sur will replace these repressive institutions
with $7 billion in startup capital when it begins operating in 2008. It
will be under "a new financial architecture" for regional investment
with the finance ministers of each member nation sitting on the bank's
administrative council with equal authority over its operations as things
now stand. Venezuelan Finance Minister Rodrigo Cabeza stressed the banks
Latin roots saying: "The idea is to rely on a development agency for
us, led by us" to finance public and private development and regional
integration projects. He added: "There will not be credit subjected
to economic policies. There will not be credit that produces a calamity
for our people and as a result, it will not be a tool of domination"
like the international lending agencies.
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- Hugo Chavez's vision is to liberate the region's countries
from IMF, World Bank and Inter-American Development Bank (IBD) control
that condemn millions to poverty through their lending practices. Helped
by windfall oil profits, his government is already doing it with an unprecendented
commitment to provide financial aid and below-market priced oil to regional
and other countries. So far this year, it's on the order of around $9 billion,
and, unlike the Washington-controlled kind, it comes at low cost and with
good will, a cooperative spirit and few if any strings.
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- Nobel laureate economist Joseph Stiglitz recognizes Chavez's
efforts and stated his support for the Banco del Sur on an October 10 visit
to Caracas. He said "One of the advantages of having a Bank of the
South is that it would reflect the perspectives of those in the South (while
in contrast IMF and World Bank conditions) hinder (regional) development
effectiveness."
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- Stiglitz met with Hugo Chavez on his visit and praised
his redistributive social policies. He also criticized Washington Consensus
neoliberal practices that exploit the regions' people, "undermin(e)....Andean
cooperation, and it is part of the American strategy of divide and conquer,
a strategy trying to get as much of the benefits for American companies"
at the expense of the region and its people.
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- Venezuela's acting ambassador to the Permanent Mission
to the UN, Aura Mahuampi Rodriguez de Ortiz, warned the world body about
Latin American debt during her participation in the General Debate on Macroeconomic
Policies in October. She stressed: "The persistence of the foreign
debt of the developing countries affects negatively on its process of development.
It is not worthy to direct resources for the development of poor countries
if such resources end up directed to the payment of the foreign debt"
instead of going to economic development internally. She also spoke of
the new Bank of the South, how it will help strengthen regional integration
and also fairly distribute investments and finance projects to reduce poverty
and social exclusion.
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- A less publicized Bank of ALBA (Bolivarian Alternative
for the Americas) will also begin operating by year end under "a new
regional financial architecture under principles that create a new form
of channeling financial resources" to its four country alliance -
Venezuela, Cuba, Bolivia and Nicaragua.
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- Chavez first proposed ALBA as an alternative to the Free
Trade of the Americas (FTAA) in 2001 with Venezuela, Cuba and Bolivia its
original members in December, 2004. Nicaragua then joined the alliance
in January, 2007 under its newly elected president, Daniel Ortega, who
signed on as his first act in office. ALBA's goal is ambitious. It's the
comprehensive integration of the region and development of its "the
social state" for all its people. It's boldly based on member states
complementarity, not competition; solidarity, not domination; cooperation,
not exploitation; and respect for each participating nation's sovereign
right to be free from the grip of other countries and corporate giants.
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- In April, the 5th ALBA summit was held in Caracas to
discuss ways to improve the alliance. Initiatives covered included a Permanent
(coordinating) Secretariat and a plan to create 12 public companies to
be co-managed by ALBA member states. Its goal is to strengthen key economic
sectors in areas of energy, agriculture, telecommunications, infrastructure,
industrial supplies and cement production. ALBA country foreign ministers
then agreed in June to create a development Bank of ALBA to help finance
these ventures with low-cost credit. It will complement the Banco del Sur
and also be headquartered in Caracas.
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- Uncertain Future Prospects
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- Socially responsible regional banks, like those discussed
above, will challenge the dominant institutions of finance capital if they
fulfill their promise. But therein lies the problem. These new institutions
aren't panaceas, and they may end up letting capital interests exploit
them for their own advantage. In addition, financial autonomy alone won't
free the region from Washington's grip without greater change. What's needed
are sweeping nationalizations of basic industries, an end to one-way WTO-style
trade deals, socially redistributing national resources, developing local
economies, achieving land and housing reform plus a sweeping commitment
to social equity and a resolve to end a 25 year neoliberal nightmare. From
1960 to 1980, the region's per capita income growth was 82%. From 1980
to 2000, however, it was 9%, and from 2000 to 2005 only 4%. For the region,
it meant sweeping poverty, inequality and the most extreme disparity between
the super-rich and desperate poor in the world.
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- Change is needed, and Venezuela under Hugo Chavez has
done most in the region to achieve it. Finance Minister Rodrigo Cabezas
just presented his government's 2008 budget to the National Assembly that
allocates 46% of it to social spending. It devotes special attention to
health and education but also to subsidized and free food, land reform,
housing, micro credit, job training, cooperatives and more as Chavez continues
to use his nation's resources to address the needs of his people. Since
he took office, social spending per person is up more than threefold and
in 2006 was 20.9% of GDP.
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- Chavez now has an ally in Ecuador under Raphael Correa
who's early efforts are promising. Hopefully, they'll continue under a
new constitution to be drafted in the next six months and then put to a
national referendum next year. Other Bank of the South founding countries
like Brazil, Argentina and Bolivia, however, claim to be center-left but,
in fact, embrace 1990s neoliberalism, and financial autonomy won't change
that. The Bank of the South will only work if it fulfills a mandate to
prioritize local needs and development, not corporate ones. That's a tall
order, and achieving it won't be easy with its dominant member, Brazil
under Lula, closely tied to Washington and in its grip.
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- Nonetheless, small signs of change are emerging, the
Bank of the South may be one of them, and a new generation of leftist leaders
may in the end break Washington's weakening (but still strong) hold on
the region. That's the hope, and every step forward means more power to
the people and another possible world.
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- Stephen Lendman lives in Chicago and can be reached at
lendmanstephen@sbcglobal.net.
-
- Also visit his blog site at sjlendman.blogspot.com and
listen to The Steve Lendman News and Information Hour on TheMicroEffect.com
Mondays at noon US central time.
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