Bank of the South An alternative to the IMF World Bank
Eric Toussaint
Published by VAK, Mumbai, India in 2007
Preface by Ajit Muricken
Contrary to the common beliefs and ercei!ed notions, the IM", #orld $an% &rou does not set out to reduce o!erty but rather it reroduces and ensla!es the debtor nations' It is in fact the central force behind the neo(liberal offensi!e to inte)rate the economies of the *outh by rofound chan)es in trade, e+ort( oriented )roth model, finance and technolo)ies' The tin institutions IM", #orld $an% are the %ey instruments desi)ned to subordinated nations to the interest of the orld-s most industriali.ed he)emonic oer' The ideolo)ical orld !ie of the $an%s holds that the de!eloment of the *outh has been delayed due to insufficient domestic caital' This formulation actually meant that countries ishin) to accelerate economic )roth must firt aeal to e+ternal aid, then attract forei)n in!estments and thirdly, increase e+orts in order to rocure the hard currencies necessary for the urchase of forei)n )oods that facilitate further )roth' The ideolo)ical construct that underlies the ar)ument is fairly lo)ical ithin the neo(liberal aradi)m and is based on the folloin) rescritions / ( Micro(economic Micro(economic reform throu)h structural adustment adustment of the economy by the remo!al of all barriers to in!estment and remo!al of any imediments' "ree cometition, dere)ulation of the mar%et freedom leads to raid economic )roth that in turn contributes to the reduction of o!erty1 ( Ma+imisation of -Comarati!e Ad!anta)e- This theory ar)ues that a nation can ma+imise efficiency in resource(use by roducin) and e+ortin) commodities in hich it is relati!ely efficient and by imortin) commodities in hich it is relati!ely not so31 ( *tate dere)ulation of the economy and ma+imisin) ri!atisation is the %ey to enhancin) macro economic efficiency and consumer elfare1 ( 4emo!al of all imediments leadin) to the free mobility of caital across the )lobe1 and ( Con!ertin) e+orts into the main source of economic )roth' The conse5uences of such a olicy ha!e been traumatic for the eole of the *outh ith intensified o!erty and ine5uality' The debt reayment suc%s u art of the social surlus roduced by the or%ers of the *outh hether salary earners, small indi!iduals or family roducers, or or%ers in the informal sector3 and directs this flo of ealth toards the holders of caital in the 6orth, hile the rulin) classes of the *outh ma%e their rofit' nder the sell of neo(liberal )roth model the hole ran)e of natural resources is ri!ately aroriated hich oened u a natural resource bade for M6C-s to
lunder' This shameful illa)e of humanity-s collecti!e resources is commited under the sell of the neo(liberal economic model' E!en those areas of life( forms once considered sacred, li%e teh )enetic codes, flora, fauna, seeds and e!en natural resources li%e ater once considered common herita)e of humanity are no con!erted into commodities and tradable items to be e+loited for rofit' The orldide flo of caital follos its on oeratin) methods and creates its on las, hich not only transcend but also o!errule national le)islations' In fact, the )lobal trinity #$8IM"8#T9 dominated by the &(: countries mount inte intens nsee res ressu sure re on the the o oli lici cies es of the the bo borr rro oer er co count untri ries es'' This This lead leadss to increasin) dere)ulation, that is, the abro)ation of le)al and social control on financial and economic acti!ites by nation states' The urose is to accelerate transactions ithout hindrance and lead to henomenal )ains' The loan conditionalities attached to the #orld $an% are a maor art of the roblem that the &lobal *outh is faced ith' *uch seein) economic reforms induced by the #orld ban% are not ithout its olitical imlications' There is a )roin) realisation realisation that the conditions conditions ( co!ert and o!ert( attached to forei) forei)nn deb debt, t, secif secifica ically lly by multil multilate ateral ral finan financia ciall instit instituti utions ons,, threat threaten en to substanti!ely curb the democratic ri)hts of eole in all countries contractin) such loans' This is also true of *outh Asia' nder one )arb or the other the indeendence and ri)hts of e!en the elected reresentati!es to enact le)islations, to frame frame olici olicies, es, to monitor monitor and o!e o!ers rsee ee forei) forei)nn firms firms contrac contracted ted by these these financial institutions institutions directly directly or indirectly indirectly are under serious serious threat' These curbs ultimately affect the 5uality of life of eole and erode their control o!er their on resources' Thus these conditions se!erely undermine any serious efforts to eradicate o!erty' It is therefore necessary to form a broad eole-s alliance to monitor the acti!ities of the )lobal financial institutions, to launch audits of the debts incurred by the national or local3 )o!ernments, to critically e+amine all deals' The #orld $an% is mana)in) to be so oerful throu)h its infiltration into the bureaucracy and )ainin) access into the decision(ma%in) aaratus of the *tate, effectin) a aradi)m shift ( from its earlier roect(based role, it has no )i!en ayy to a much a much more more o oe erf rful ul o oli licy cy(b (bas ased ed role role ( infl influe uenc ncin in)) subs substa tanc ncia iall decisions in fa!our of the ban%-s a)enda' Throu)h such strate)ies the #orl ban% is effecti!ely infiltratin) the loer le!els of the Panchayats, ;illa Parishads and municialities throu)h its ri!ate, ublic artnershi roects and !arious other schemes' The structural reform romoted by the #orld $an% and I<$, hich laced secial emhasis on brin)in) about stron) institutional chan)es, has deely modi modifi fied ed the the inst instit itut utio ional nal fram frame eor or%% an andd ha hass dism dismant antle ledd stat statee re)u re)ula lati tion on caaci caacitie ties, s, hile hile reinfo reinforci rcin) n) )rous )rous and monoo monoolie lies, s, and multi multily lyin) in) the e+is e+ iste tence nce of clie client ntel elee ne net tor or%s %s and ba ban% n%(a (aid id rac racti tice ces' s' Thes Thesee ne neo( o(li libe bera rall
structural reforms ha!e been so stron) that they ha!e e!en hindered the creation of de!eloment alternati!es in the re)ion' #ith the increased control of the ban% o!er hte bureaucratic aaratus it ahs ac5uired le)itimacy and !oice in olicy ma%in) at both national and state le!el' It no commands and controls the entire macroeconomic olicy includin) future direction' The entire olicy ac%a)e ma%es a si)nificant dearture from the ast' The lon) cherished riciles of )roth ith ustice, social resonsability and accountability, e5uity and self(reliance ha!e been rendered obsolete ith the ne slo)ans of -liberalisation-, -ri!atisation-, -)lobalisation-, =efficiency- and -cometiti!eness-' The mecanisms of debt cycle ha!e subected the de!eloin) countries to the demands of #ashin)ton here IM", #orld ban% and * Treasury are all located3' Most of the economic olicy is decided here, outside teh country concerned'
and direct this flo toards the holders of caital in the 6orth, hile the rulin) of the *outh ta%e their commission' *inc *incee ?@ ?@@: @:,, thes thesee inst instit itut utio ions ns ha ha!e !e be been en un unde der) r)oi oin) n) a rof rofou ound nd cris crisis is of le)itimacy' the economic, social and en!ironmental disasters due to olicies imosed on Perihery countries by the IM" and the #orld $an% has ob!iously cost these institutions their credibility on a massi!e scale ithin the countries concerned' Trade re)ulation olicies conducted by T6C-s and attac%s on *tate so!erei)nty ha!e also made ublic oinion in both the Center and the Perihery ary of the #T9' The structural adustment olicies dictated by the IM" and the #orld $an% are hated ith a !en)eance by the !ast maority of countries her h eree thes thesee are are en enfo forc rced ed an andd ha ha!e !e lost lost all all cred credib ibil ilit ityy an andd un uni! i!er ersa sall llyy denounced, criticised and oosed' They ha!e been idely discredited, hich is hyy they h they must must be ab aban ando done nedd or dism disman antl tled' ed' *inc *incee thei theirr ince incet tio ion, n, thes thesee instituti institutions ons ha!e shon shon a mar%et reluctance reluctance to consider consider the resect resect to human human ri)hts as an inte)ral art of hteir mandate' They ha!e systematically suorted dictatorshis and their olicies ha!e often !iolated basic human ri)hts' It as in this conte+t that the President Cha!e. of Vene.uela ad!ocated the ossibility of settin) settin) u financial institutions that ould ro!ide an alternati!e to the #orld ban% and the International Monetary "und for all countries of the *outh' The formation of the $an% of the *outh ould definitely alter the oer relations ithin multilateral de!eloment ban%in), and ould reroblematise de!eloment ithin a conte+t in hich the liberal ideolo)y has bloc%ed the ay to the the mao maorr )o )oal alss of hu huma man% n%in ind, d, a art rtic icul ular arly ly to crit critic ical al an andd alte altern rnat ati! i!es es discourses and roosals for ma%in) another orld ossible' The collection of articles of Eric Toussaint and
*outh' The central ar)ument they osit is that the #orld $an% &rou has to be relaced by other )lobal institutions based on democratic accountabibilty' The ne #orld $an% and the ne International Monetary "unds, hate!er thier ne names may be, must ha!e radically different missions from those of the former institutions1 they must ma%e sure that the international treatises on the olitical, ci!ic, ci!ic, social social,, econom economic ic and cultu cultural ral33 human human ri)hts ri)hts are actual actually ly carrie carriedd out throu)h their action in the field of international credit and international monetary relations' These ne )lobal institutions must be art of a )lobal institutional system controlled by a thorou)hly reformed reformed nited 6ations 9r)anisation' 9r)anisation' it is an essential riority that the de!eloin) countries must )et to)ether into re)ional entities as soon as ossible, ith a common $an% and a common Monetary "und' "rom the ersecti!e of the *outh, the idea of the ban% of the *outh oens ossibilities for challen)in) neo(liberalism in re!ioulsy forbidden fields / on the one side, de!eloment financin) ith due resect for the so!erei)nty and inte)ration of eoles, and on the other hand, the theoretical thin%in) on a e5uitable, intercultural, democratic, so!erei),n lane and de!eloin) a eole( center de!eloment aradi)m' The authors- critical analysis of the #orld ban% )rous as instrument desi)ned to subordinate indebted nations to the interest of the industrialised 6orth and the need for an alternati!e financial institution ( the -$an% of the *outh- ro!ides )round for discussion amon) acti!ists, eole-s or)anisations, mo!ements and olicy ma%ers' *uch !ies are not ithout otential elements of contro!ersy' 6ot all readers ill a)ree on all the oints made by the authors' authors' That is a )round, e belie!e, for a healthy debate' Ait Muric%en (
Bank of the South, international context and the alternatives 1 Eric Toussaint2 !o i"#ortant o##osin$ trends at the international international level
Todays o!erridin) trend, in e+istence for 2B to 0 years, has been the ursuit of a neoliberal and imerialistic caitalist offensi!e' 9!er the last fe years, this trend has been e+ressed by more and more fre5uent recourse to imerialistic ars, the increase in arms by the suer oers, the ursuit of reinforcin) trade oeni oe nin) n) of the the domin dominat ated ed co count untri ries es,, the the )e )ene nera rali lisa sati tion on of ri! ri!at atis isat atio ion, n, a systematic attac% a)ainst a)es and collecti!e solidarity mechanisms on by or%ers' All these are art of the #ashin)ton Consensus' A counter trend has been de!eloin) since the end of the ?@@0s' Its most ad!anced form is e+ressed almost3 uni5uely in Datin America/ the election of Presidents ad!ocatin) a brea% ith neoliberalism this round be)an ith the election of u)o Cha!e. at the end of ?@@:3 or at least a !ariation of same1 Ar)entina susendin) ayment of its ublic e+ternal debt to ri!ate creditors from the end of
The crisis hich struc% struc% the * economy economy in 2000(200? has been o!ercome by a !oluntary anti(cyclical olicy of the "ederal 4eser!e $an% the * Central $an%3 hich drastically loered its official interest rate brin)in) it to almost .ero' The obecti!e as to a!oid the ban%rutcy of Enron and #orldcom e+tendin) to other lar)e hea!ily indebted cororations in the ri!ate sector' The radical reduction in interest rates alloed cororations to refinance their debts in ?
Preli"inary docu"ent #re#ared on * Au$ust %&&) for the International +ebt bservatory conference bein$ held in -aracas %%(%. Se#te"ber %&&)/ !!!/oid(ido/or$ !!!/oid(ido/or$ and and !!!/cadt"/or$ 2 0ric oussaint ho holds a Ph< in Political *cience from the ni!ersities of DiF)e and Paris :, is resident of
CA
the least cost(effecti!e manner' It as the same for 6orth American households hose debt le!el as unrecedented ?0 er cent of annual income3' The total sum of all debts in the *, both in the ri!ate and ublic sectors, is more than 7 trillion' The * as able to o!ercome this crisis and re(established a le!el of )roth suorted by domestic consumtion hich has been fed and financed e+ternally' The The econ econom omic ic reco reco!e !erry in the the * too oo%% lac lacee h hiile Eur Euro oee an andd Ja aan an e+erienced ea% )roth' The * has since then layed the role of bein) the orld orlds s econom economic ic en) en)ine ine in 200 2002(2 2(200 00'' * con consum sumti tion on imli imlies es a stron) stron) recourse to imorts, esecially Chinese roducts' The * en)ine has set China alon) in its a%e' China has thus maintained a )roth rate close to ?0 er cent' Chinas needs for combustibles and ra materials ha!e boosted the orld mar%et rices of these roducts' Accord Accordin) in) to the $an% $an% for Intern Internati ationa onall *ettle *ettleme ments nts $I*/ $I*/ 'bis'or) 'bis'or)3, 3, in 200B, China accounted for more than B7L of the incremental demand for aluminium, 0L of that for coer and o!er 0L of that for oilN $I* Annual 4eort 200, ' G?3' *ince 200, e ha!e itnessed a !ery shar rise in the real rice of oil, other ra materials and certain a)ricultural roducts' At the same time, the rices of manufactured roducts rose sli)htly' This is hy e are li!in) in a orld characterised by an imro!ement in the term termss of trad tradee in fa!o fa!our ur of de de!e !elo loi in) n) co coun untr trie iess e+ e+o ort rtin in)) ra ra mate materi rial als, s, combustibles and se!eral a)ricultural roducts' This contrasts sharly ith more than 20 years of de)radation of the terms of tradeG to the detriment of de!eloin) countries' In the case of Datin America, since 200, $ra.il, Chile, Columbia, Peru and Vene.uela ha!e all benefited from a shar rise in the rices of their e+orts +S +S -!!. , ' G03' This usin) in the terms of trade roduced an enormous increase in forei)n e+chan)e reser!es of de!eloin) countries' In fact, more than ?0 of them out of ?B3 sa an increase in their reser!es' $eteen 2000 and Aril 200, the forei)n e+chan)e reser!es of de!eloin) countries hich include the countries of the former *o!iet bloc3 ha!e almost triled from @7 billion u to 2,7@ billion3' The forei)n e+chan)e reser!es of oil roducin) de!eloin) countries ha!e 5uadruled from ??0 to GG3' Chinas reser!es ha!e increased by more than fi!e times from ? to :7B3' Datin Americas forei)n e+chan)e reser!es increased at a more modest rate of G0 er cent durin) the same same eriod' The orlds total outstandin) forei)n e+chan)e reser!e, accordin) to the $I*, reached G'?7 trillion in
There has been a donsin) in the terms of trade for de!eloin) countries durin) the ?@B0s and the ?@0s' This as folloed by an usin) durin) the ?@70s' *ince the ?@:? oil crisis until 200, e ha!e itnessed another donsin) in the terms of trade'
"or a criti5ue, see Qric Toussaint, R Des idSes de la $an5ue mondiale en matiFre de dS!eloement UThe Concets of the #orld $an% on
debts ith ri!ate forei)n ban%s or financial mar%ets' It is absurd from the oint of !ie of )eneral interest' Another absurd olicy from the oint of !ie of the nation is that the ublic treasuries of de!eloin) countries, in order to re!ent an inflationary effect lin%ed to the hi)h le!el of forei)n e+chan)e reser!es, incur debt ith local ban%s in order to ithdra surlus money from circulation' Det us ta%e another loo% at the different actions mentioned abo!e' a) Advanc Advancee payme payments nts to the the IMF IMF
"rom the end of 200B until the be)innin) of 200, Ar)entina made ad!ance reayments to the IM" by usin) art of its forei)n e+chan)e reser!es' The country, country, hoe!er, hoe!er, ould ha!e been erfectly erfectly entitled entitled to challen)e the amounts amounts due to the IM" since the "und is resonsible for a series of actions hich ha!e inflicted harm on its eole and economy' The IM" acti!ely suorted the Ar)entine dictatorshi beteen ?@7 and ?@:, a re)ime that systematically committed crimes a)ainst humanity and ut the country hea!ily into debt by imlement imlementin) in) an economic economic model reudicial reudicial to the interests interests of the nation' The IM" then demanded that the democratic )o!ernment, hich succeeded the dictatorshi, reay the odious debt contracted by the military unta' Afterards, it has continued, to this day, dictatin) an economic olicy a)ainst the nations interests' Ar)entina as erfectly ithin its ri)ht to refuse to continue reayin) its debt to the IM"' The same could be said about $ra.il and its ad!ance reayments on its debt' $y usin) their reser!es to reay the IM", Ar)entina and $ra.il ha!e asted a art of their resources that could ha!e been utilised for more useful and orthy ends' 9ne of the main reasons )i!en by the Ar)entine Ar)entine and $ra.ilian $ra.ilian )o!ernments )o!ernments for ad!ance reayment of their IM" debt as the desire to re)ain their freedom of mo!ement' It must be clearly stated that after reayment, these )o!ernments maintained an economic olicy suorted by the IM"' "or e+amle, they did not re(establish controls on the mo!ements of caital or on forei)n e+chan)e' b) Loans Loans to the US govern government ment by purch purchasing asing treas treasury ury bonds bonds
Most de!eloin) de!eloin) countries countries urchase urchase * treasury bonds' The e+act amounts are un%non, but this amounts to se!eral hundred billion dollars bein) lent to the * )o!ernment' The ar)ument most commonly ad!anced is that * treasury bonds are hi)hly con!ertible assets, i'e', they can be resold 5uic%ly and easily' $esides, it is )enerally assumed that they are ris% free since it is inconcei!able that * treasury ould be in default in the short or medium term' *imly ut, de!eloin) countries are thus contributin) to the maintenance of * imerial oer'
Det us immediately a)ree that the urchase of #est Euroean treasury bonds is in no ay a !iable alternati!e, althou)h it may be a lesser e!il' It ould be far better to use surlus reser!es roducti!ely or ma%e them a!ailable to a ban% of the *outhN' c) The pursu pursuit it of of publ public ic debt debt
In!estin) reser!es in * treasury bonds or any other treasury bonds3 )enerally means in return ne borroin)s' This may seem surrisin), but in reality, this is ho thin)s or%' 9n the one hand, a art of forei)n currency reser!es is in!ested in * or other3 treasury bonds1 on the other, all le!els of )o!ernment borro from domestic or international mar%ets in order to reay the national debt' In any case, the interest earned from in!estin) in forei)n treasury bonds is less than the interest aid to borro' This amounts to a loss for the treasury of the country concerned' Dea!in) a si)nificant amount of reser!es in the hands of the central ban% fre5uently leads to it bein) in debtW To e+lain/ The massi!e influ+ of forei)n caital in the form of forei)n e+chan)e ends u in the hands of local a)ents ho ill e+chan)e it at their on ban%s for local currency' This results in an increased accumulation of the domestic currency, a otential source of inflation' In order to a!oid this, the central ban% erforms transactions desi)ned to free.eN these reser!es so as to re!ent the influ+ of forei)n e+chan)e from bein) transformed into the local currency' There are to main ossibilities/ ?' The central central ban% ban% can decide decide to increase increase the rates rates for for reser!e reser!e assets assets of the the ban%in) system' This leads to additional costs for ban%s, hich ill certainly be reflected in the interest rates on the loans they offer' This ill ma%e credit more e+ensi!e and should thus slo don the )eneration of money since e!ery time credit is )i!en, money is )enerated, ust as there is monetary destructionN e!ery time credit is reaid3' 2' The central ban% carries out o0en)mar8et transa transacti ctions ons,, i'e', i'e', it issues issues securities, desi)ned to ta%e local currency out of circulation, thereby limitin) the ris% of inflation' The roblem ith this strate)y is that the central ban% has, on the one hand, forei)n e+chan)e reser!es that it in!ests in international caital mar%ets hich earn a T? interest3 hile on the other, the earnin)s from the securities that it issues is at T2, hich is )reater than T?, since the ris% remium has more si)n si)nif ific ican ance ce ith ithin in the the do dome mest stic ic mar% mar%et etss of de de!e !elo loi in) n) co coun untr trie iess than than in international mar%ets' It is for this reason that, in order to control inflation as ell as the rates of e+chan)e this also deends on the e+chan)e modes, hether fle+ible or of the fi+ed currency boar# tye3, tye3, both the central ban% and the state are forced to incur debt simly to finance the discreancy beteen the rates' This is the combined result of a monetary olicy hose rincial obecti!e is the fi)ht a)ainst inflation inflation accordin) accordin) to familiar familiar liberal ersecti!es3 ersecti!es3 and a )eneral )eneral economic olicy that limits the acti!e inter!ention of the state into roducti!e acti!ity and considers social e+enditure to be non(roducti!e and a source of inflation3'
A crushin) maority of )o!ernments )i!e recedence to this olicy, )i!in) rise to an increase in the national debt as a counterei)ht to the hi)h le!el of forei)n e+chan)e reser!es' This is true for China as ell as for Datin America' Instead of creatin) mountains of reser!es, in articular to rotect them from seculati!e assault, the )o!ernments of de!eloin) countries ould do better to/ ?' Ado Adot t measure measuress to con contr trol ol caital caital and currency currency mo!em mo!ement ent a far more effecti!e ay of rotectin) oneself from seculators and fi)htin) caital fli)ht31 2' se se a si)n si)nif ific ican antt a art rt of thei theirr rese reser! r!es es for for rod roduc ucti ti!e !e in!e in!est stme ment nt in industry, a)riculture a)rarian reform and so!erei)n control o!er food resources3, infrastructures, en!ironmental rotection, urban de!eloment urban imro!ement, construction8reno!ation of homes, etc'3, health care and education ser!ices, culture, research, social security, etc'1 ' se art art of their reser! reser!es es for the creati creation on of a oo ooll of common common finan financia ciall institutions $an% of the *outh, Monetary "und of the *outh, etc'31 G' Create Create a front front of indebted indebted countr countries ies for for non(ayme non(ayment1 nt1 B' Establish Establish and stren)th stren)then en cartels of countrie countriess roducin) roducin) essential essential )oods1 )oods1 ' 6e)otiate 6e)otiate barter barter a)reemen a)reements ts such as those those beteen beteen Vene.uela Vene.uela and Cuba, Cuba, recently e+tended to include $oli!ia' These ill be de!eloed in the folloin) to sections' Potential Alternatives
Det us return to the fa!ourable economic situation in de!eloin) countries in 200' As discussed abo!e, the situation is fa!orable for de!eloin) countries for se!eral reasons/ A si)nificant number of them ha!e an unrecedented le!el of international reser!es at their disosal, hile the reser!es of the * and #estern Euroe are at a historic lo le!el, The terms of trade are fa!orable to them, Most de!eloin) countries ha!e a ositi!e balance of current accounts, The IM" is resently ea%' 9ne could add that in 200B the a!era)e )roth rate in de!eloin) countries as tice that of the most industrialised nations, and international interest rates, e!en thou)h they are risin), are relati!ely lo' The remium on hi)h(ris% countries that the de!eloin) countries ha!e to co!er has also reached a historically lo le!el' 9n the olitical le!el, in se!eral countries the Deft has achie!ed successes in 200B(200/ the election of E!o Morales in 200B as President of $oli!ia1 and imortant ro)ress made by the Deft in the elections in India and Me+ico' 9n the military le!el, #ashin)ton and its allies ha!e become bo))ed don in Ira5 and Af)hanistan, hich ill ma%e it difficult for them to inter!ene directly in another country' #ith resect to the multilateral a)reements fa!orable to the bi) oers, the "ree Trade Area of the Americas as abandoned in 200B and #T9 ne)otiations on the
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#orld $an%, Global De/elo0ment Finance -!!. , ' ?BG
#ith #ithin in this this co cont nte+ e+t, t, it is o ote tent ntia iall llyy o oss ssib ible le to iml imlem ement ent an alte altern rnat ati! i!ee stra strate te)y' )y' If the the )o )o!e !ern rnme ment ntss of de de!e !elo loi in) n) co coun untr trie iess a ant nted ed to ch chal alle len)e n)e reayment on their ublic debt, they ould be in a )ood osition to do so because they ha!e hat is needed to stand u to the threats of retaliation by multilateral, bilateral and ri!ate creditors' The le!el of their reser!es )i!es them enormous room in hich to manoeu!re' If Ar)entina as able to stand u to the ri!ate creditors on its on from the end of 200? to the be)innin) of 200B they demanded it resume reayment of a debt amountin) to about ?00 billion3 and to )ain si)nificant concessions, one can easily ima)ine the stren)th that a united front of se!eral countries ould ha!e' 6o is the time time to set to or% on an audit audit of the debt' A united front of countries for non(ayment ould also be able to further the matter of restitution of the historical and ecolo)ical debt contracted by the most industrialised nations' Public oinion and social mo!ements ould lar)ely suort the )o!ernments of the *outh in ta%in) this le)itimate osition' The )o!ernments of the de!eloin) countries could ta%e the initiati!e in creatin) a $an% of the *outh and an international Monetary "und of the *outh see further on3' They could ithdra from the #orld $an% and the IM", bodies that are totally controlled by a fe of the bi))est and most industrialised countries' They could or% on de!eloin) a strate)y to stabilise the rices of ra materials and a)ricultural roducts by formin) cartels beteen roducin) nations and by stren)thenin) 9PECs osition' They could create and8or stren)then re)ional *outhern associations and, hy not, endo themsel!es ith a common currency' They could reintroduce controls o!er the mo!ement of caital and forei)n e+chan)e' They could ta%e bac% control of their countries natural resources' They could ursue audacious ublic olicies in the areas of education, culture and research articularly in health care3 ith sufficient financial means' They could be insired by the trade a)reements amon) the $oli!arian 4eublic of Vene.uela, Cuba and $oli!ia and ad!ocate ne forms of trade usin) barter for e+amle, oil in e+chan)e for health care and education ser!ices3' *uch *uch a strat rate) e)yy ou ould ld res resu uo osse )i!i )i!in) n) rio riorrity to a rad adiical cal redi redist stri ribu buti tion on of e eal alth th ith ithin in the the de de!e !elo loi in) n) co coun untr trie iess as e ell ll as beteen the *outh and the 6orth of this lanet' The social content of an alternati!e strate)y is fundamental' It is necessary to ro!ide it ith a socialist content to a!oid the ossible ris% of it becomin) an alternati!e caricatureN' The socialist content has nothin) to do ith a simle olicy for reducin) o!erty, de!eloin) social elfare measures and a !a)ue humanisation of caitalism' The socialist content imlies maor structural refo reform rms, s, be be)i )inni nnin) n) ith ith the the 5u 5ues esti tion on of o one ners rshi hi of the the means means of •
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roduction, natural resources and all common co mmon )oods' To arahrase Che/7 it is either a socialist alternati!e or a caricature thereof' Any alternati!e must also essentially include the emanciation of omen by establishin) a true e5uality beteen the se+es'
he Bank of the South and the Monetary Fund of the South
A first choice ould be to create one or to institutions' If to ere to be created, there ould be a ban% to finance de!eloment and a monetary fund hose rimary function ould be to rotect countries from seculati!e attac%s and assist them in resol!in) forei)n e+chan)e dilemmas here li5uidity is a roblem' There is also the ossibility of creatin) only one institution hich ould be resonsible for these imortant functions' In articular, articular, the $an% of the *outh rooses rooses to try brea%in) brea%in) the deendence deendence of de!elo de!eloin) in) cou countr ntries ies on intern internati ationa onall financ financial ial mar%et mar%ets, s, channe channell their their on caacity for sa!in), sto the caital fli)ht, channel central resources to riorities for indeendent social and economic de!eloment, chan)e in!estment riorities, etc' It is about a ublic ban% as an alternati!e to the Inter American
7
*ocialist re!olution or caricature of re!olution'
Future #ers#ectives for the econo"y
"or economic as ell as olitical reasons, imro!in) the terms of trade for e+orters of basic commodities does not aeal to most industrialised countries' This is because it stimulates initiati!es in countries in the *outh' *imilarly, the current le!el of reser!es held by countries in the *outh are causin) concern in the caitals of the most industrialised countries as ell as in the boardrooms of the bi) multinationals' The decisions ta%en by the )o!ernments of the most industrialised countries are aimed at chan)in) the situation in their fa!our' Meanhile, the economic cycle follos its on lo)ic see further don3' The lac% of ill on the art of the )o!ernments )o!ernments of the Perihery Perihery could ell see those those )o!ernment )o!ernmentss miss out on an historic oortunity' The central ban%s of the three economic oerhouses of the most industrialised countries are increasin) their official mar%et rate ith resect to interest rates' *ince 200G this has been the case ith the "ederal 4eser!e of the nited *tates and the Euroean Central $an%' The same can be said about the $an% of Jaan since the be)innin) of 200' An imortant art of seculati!e caital hich mo!ed toards the countries of the *outh beteen 2002 and 200 in the ursuit of )reater returns to those offered by the countries of the 6orth is comin) bac% to the 6orth' The fall of the stoc% mar%ets in emer)in) countries in May 200 is robably a harbin)er of hat is about to haen' "or the "ederal 4eser!e of nited *tates it is !ital to attract as much caital as ossible so as to ay off the enormous trade deficit' A ermanent flo of caital toards the *A is a first(ran% necessity' $ecause of this, it is necessary to increase the interest rates in order to offer forei)n in!estors a sufficient return' This is e!en more imortant since the !alue of the dollar droed articularly ith resect to the Euro and the en, and that the interest rates increase e5ually in the Euro ;one, the nited Kin)dom and Jaan' It is ossible that the current increase in interest rates ill le!el off' The * monetary authorities %no that if they raise interest rates too much, they ris% ro!o%in) an e+losion in the seculati!e real(estate bubble and a dramatic reduction in household consumtion because * householders are in a lot of debt totallin) totallin) ??,B00 billion dollars3' dollars3' Too much of an increase in interest interest rates also ris%s causin) roblems for bi) businesses in the *, startin) ith the automoti!e and a!iation sectors' 6e!ertheless, e!en if 6orthern interest rates no lon)er rise sharly in the last 5uarter of 200, they ha!e already reached a sufficiently hi)h le!el to attract a )ood art of the caital hich had re!iously been di!erted to the *outh in recent recent years' The rice trend for basic commodities has been ob!iously influenced by the le!el of economic acti!ity' It is necessary to be cautious ith the forecasts of )roth for 2007(200:' a!in) said this, a reduction of )roth in the nited *tates cannot be e+cluded' If it haens, it ill be interestin) to see the imact on )roth in #estern Euroe and Jaan' If it also slos don in these to re)ions, there is li%ely to be a decrease in the sale of ra materials as ell as in
rices, unless Chinas acti!ity is maintained o!er an e+tended eriod of time, hich ould be surrisin)' E!idently, China is )oin) throu)h a sta)e of o!er(in!estment' The rate of return is )enerally 5uite lo' Its acti!ity is lar)ely deendent uon its e+orts' The consumtion of Chinese households is )roin) but only a small minority is benefitin) from this domestic consumtion' In short, the domestic mar%et is unli%ely to relace the e+ternal mar%et as the outlet for Chinese roduction unless the Chinese authorities ma%e a radical turnaround in their model of de!elo de!elome ment nt incre increase ase in salari salaries, es, a radica radicall stren) stren)the thenin nin)) of the domest domestic ic mar%et, loo%in) for real constructi!e cooeration ith other countries of the *outh3, hich, unfortunately, aears to be !ery unli%ely' The stru))les in hich the Chinese or%ers are en)a)ed X an imro!ement in salaries, better or% o r%in in)) co cond ndit itio ions ns an andd a ri)h ri)htt to or)a or)ani nisa sati tion on X o oin intt ob obe ect cti! i!el elyy in the the direction of a radical chan)e in the model of de!eloment, but it is difficult to see ho they could obtain satisfaction in the short term' There is a ris% that the e!olution of the Chinese economy ill lead in the oosite direction' Det me e+lain' If a reduction in economic acti!ity in the nited *tates is not counterbalanced ith sufficiently stron) )roth in Euroe and Jaan, the economic acti!ity in China ill certainly slo don' &i!en that the rate of return is lo and the cororate debt le!el is 5uite hi)h, it is robable that a reduction reduction in acti!ity acti!ity ill ro!o%e si)nific si)nificant ant reductions in ersonnel ersonnel and business failure' *uch a situation ould not create conditions fa!ourable to the Chinese or%ers' #hat I ha!e ust described is lar)ely hyothetical and the time factor has not been secified/ this e!olution mi)ht lay out o!er se!eral years' 6umerous !ariables are at lay' "or e+amle, hat is )oin) to haen to the rice of oil and )asY #hat ill 9PEC doY My imression is that the rice is )oin) to remain hi)h, hich is a )ood thin)' $ut nothin) is )uaranteed' #hat is )oin) to haen to other essential roductsY The rice of certain roducts is such that e are itnessin) a classic henomenon in the e!olution of caitalist economies, mines hich ere no lon)er rofitable are bein) e+loited a)ain' *ome ha!e 5uite ele!ated in!estment costs' There is o!er(in!estment' This ill roduce a rise in suly, hich ill e+ceed demand, hich ill in turn result in rice dereciation and cororate ban%rutcy' #hat can sto thisY Either an acceleration in the orld economic )roth, hich is !ery unli%ely1 or the creation of a cartel made u of roducin) countries to lan roduction and limit )roth in order to stabilise ele!ated rice le!els' This brin)s us to the need for an alternati!e' If )o!ernments of the *outh do not rise to the challen)e, the situation ill e!ol!e unfa!ourably' 9ne can only fear hat mi)ht haen' #hat has ust been described may also haen ith the rice of oil and )as' If there is a shar decrease in the rice of )as and oil, that ould be disastrous for many countries of the *outh' Det us return to the !ariable debt reaymentN' *ince 200(200G, most indebted countries ith middle incomes no lon)er find it difficult to ser!ice their debt' This is the conse5uence of se!eral economic
factors/ )roin) estimated returns than%s to the ele!ated rice of ra materials hich they e+ort, the arri!al of seculati!e caital in search of short(term rofits notably in the stoc% e+chan)es of emer)in) countries, relati!ely lo interest rates and e+tremely lo(ris% remiums in 200G(200' All this can chan)e ithin a year y ear or a fe years' The cash re!enue and reser!e le!els can diminish, the interest rates at their hei)ht in the 6orth can increase the ser!icin) of the debt on the loans contracted at a !ariable rate, the cost of the ne loans to refinance old debts is )oin) to )ro because it ill be alied to a more ele!ated interest rate, the ris% remiums can rise a)ain' a)ain' A si)ni si)nifi fican cantt number number of indebt indebted ed coun countri tries es ris% ris% findi findin) n) thems themsel! el!es es in the situation of the cicada in the fable of Da "ontaine' At the end of the summer, hen the economic en!ironment deteriorates, they ris% findin) themsel!es in ayment difficulties and their e+chan)e reser!es ris% meltin) li%e sno in the sun' It is a furt further her ar)u ar)ume ment nt for for utti uttin) n) an alte altern rnat ati! i!ee olic olicyy ith ith res resec ectt to establishin) a common front of indebted countries for the non(ayment of the debt see oints and G3 into ractice' $efore $efore arri!in) arri!in) at conclusion conclusions, s, I ould li%e to lea!e you some imressi imressions ons and additional information' "or the last 20 years, the nited *tates has succeeded in o!ercomin) their crisis by alyin) a !ery inter!entionist olicy and in ma%in) other countries ay a art of the cost for e+tricatin) itself out of the crisis' Det us not for)et that the or%in) classes of the *A ha!e )one to )reat e+ense in e+tricatin) themsel!es out of the crisis for e+amle, throu)h massi!e layoffs in 200?(2002, a !ery stron) )roth in the casualisation of labour, and a )roth in the number of the or%in) oor, a reduction in real salaries and their share in the national re!enue3' 6e!ertheless, the * economy has not been cleaned u from the caitalist oint of !ie it has a relati!ely ea% )roth rate, a relati!ely lo rofit rate3' It ill certainly ha!e to )o throu)h a deeer ur)e, hich imlies a de!aluation8destruction of caital a si)nificant number of ban%rutcies3' #hen ill this ur)e haenY 6o(one can reasonably redict a date, but it is unli%ely to be a!oidable from the oint of !ie of the caitalist lo)ic itself' I ant to ma%e it clear that a ur)e is not synonymous ith a coll co lla ase se'' 9n the the co cont ntra rary ry,, it is ar)u ar)uab ably ly the the be best st mech mechan anis ism m that that caitalism has at its disosal to re)ain a durable ele!ated rate of rofit and stron) )roth' The domestic debt of de!eloin) countries has )ron sharly durin) the last three years in absolute fi)ures' The soar of the national debt is articularly hi)h and dis5uietin) in a lar)e number of middle(income countries' Accordin) to the #orld $an%, the national debt of indebted countries ent from ?' trillion in ?@@7 to 'B trillion in *etember 200B': The ri!ate ban%s of the 6orth, after ceasin) to )i!e ban% loans to the indebted indebted countries countries in 200?(2002, 200?(2002, ha!e resumed resumed issuin) issuin) loans as of 200' •
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#orld $an%, Global De/elo0ment Finance -!!. , ' GG
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In 200B, the number of issued loans increased from 7G er cent in relation to 200G' Alto)ether Alto)ether ?,2? loan contracts ha!e been si)ned, si)ned, rincially rincially in the areas of oil and )as' In 200B, aro+imately G0 de!eloin) countries issued ne bonds on the international financial mar%ets' The bonds issued by ?0 of those countries $ra $ra.i .il, l, Ch Chin ina, a, u un) n)ar ary, y, Indi India, a, Indo Indone nesi sia, a, Me+i Me+ico co,, Pola Poland nd,, 4u 4uss ssia ia,, Tur%ey and Vene.uela3 reresent @ er cent of the total issued by the G0 countries' Det us loo% at bonds issued in Euros and ho sharly they ha!e )ron at the )lobal le!el durin) recent years' In 2000 the securities securities issued in Euros reresented 2@': er cent of all bonds issued' In 200B they reresented GB'G er cent' $onds issued in dollars, hich reresented B?'@ er cent in 2000, reresented nothin) more than :' er cent in 200B'@ In 20 200B 0B,, a lar lar)e a arrt of forei orei)n )n dire direct ct in! n!es estm tmen entt a ass lin% n%ed ed to ri!atisations8ac5uisitions8mer)ers ri!atisations8ac5uisitions8mer)ers hich created no additional emloyment' In certain cases !alue and emloyment ere destroyed' A ne tye of deri!ati!e has been launched in the mar%et in recent years' It is %non as %re#it Default Swa0s The buyer of the bonds issued by comanies or states ays an insurance a)ainst the ris% of non(ayment' This mar%et hich has literally e+loded o!er the recent years on the )lobal scale reresents a notional !irtual3 !alue of 7' trillioa, of hich less than B er cent in!ol!es de!eloin) countries' Accordin) to the #orld $an% and the financial ress, it is difficult to measure the stren)th of this tye of deri!ati!e' #here there is a )eneral difficulty ith the reayment of debt, it ill be difficult for the insurers to %ee their commitment ithout ris%in) ban%rutcy'?0 The The inst instit itut utio iona nall in!e in!est stor ors, s, na name mely ly,, the the e ens nsio ionn fund fundss of the the most most industrialised countries, ha!e in!ested a total of G trillion i'e', an amount lar)ely )reater than the sum total of the entire orlds &
#orld $an%, Global De/elo0ment Finance -!!. , ' B@ #orld $an%, Global De/elo0ment Finance -!!. , ' 2 ?? #orld $an%, Global De/elo0ment Finance -!!. , ' B ?2 #orld $an%, Global De/elo0ment Finance -!!. , ' ?B? ?0
from ?G billion in ?@@B to G7 billion in 200' In 200, these flos in *outh(*outh in!estment reresented ' er cent of the total forei)n in!estment flos )oin) to the *outh' $an% loans from the ri!ate ban%s of the *outh to other countries and businesses of the *outh ent from 0'7 billion in ?@:B to '2 billion in 200B' "or the first time in its history, the #orld $an% dedicated an entire chater in its annual reort Global De/elo0ment Finance F inance to the flo of *outh(*outh caital?' That deser!es a secific contribution on the subect' The *outh(*outh flo ith some e+cetions lin%ed to Vene.uelan initiati!es3 comletely follos the lo)ic of caitalist )lobalisation' Chinese firms in!est lar)ely in Africa and in Datin America to ensure control of the source of ra materials' Petrobras is doin) e+actly the same thin) in $oli!ia, 6i)eria and An)ola' It is the same for the 4ussian firms' Elsehere, the #orld $an% is roosin) to the )o!ernments of the *outh to recycle a art of its enormous forei)n e+chan)e reser!es in lendin) them to ri!ate local in!estors' In short, the #orld $an% is itself on the offensi!e on the theme of the $an% of the *outh by ro!idin) it ith content in accordance ith stren)thenin) caitalism at the )lobal le!el' 4ather than roosin) to the )o!ernments of the the *out *outhh that that they they e5 e5ui ui them themssel!e el!ess ith ith *out *outh( h(*o *out uthh u ubl blic ic instruments for financin) their needs and those, as a riority, of their eole3, the #orld $an% rooses to entrust the reser!es to ri!ate caital of the *outh' That )oes ithout sayin) but that brin)s us to the contents of the roosed the $an% of the *outh, hich is discussed elsehere in this te+t' -onclusion
A ne historical oortunity is bein) resented to eole and )o!ernments in so(called de!eloin) countries to adot a liberatin) initiati!e ith international scoe' The economic situation fa!ourin) stron) initiati!es ill not be e+tended' Inaction or strate)ic errors ill lead to an unfa!ourable re!ersal' If the oortunity is not sei.ed and it is !ery robable that it ill not be sei.ed3, history ill follo its course and eole ill be stru))lin) under e!en more se!ere conditions than no' The battle ill continue and faced ith the cynical olicies of their )o!ernments, citi.ens ill become become radical and cla their ay to the to of freedom ithout &od or *ureme *u reme *a!iour' This is called re!olution' Translated by &illian *loane(*eale, Karin $aasch, Mi%e #illiams and Jean( Pierre *chermann, Coorditrad !olunteers'
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#orld $an%, Global De/elo0ment Finance -!!. , chater G, ' ?07(?
he Bank of the South a revie! of !hat is at stake 1. Eric Toussaint !o o##osite tendencies at #lay in 2atin A"erica
9n one hand, the nited *tates )o!ernment and the E countries ma%e bilateral free(trade a)reements ith the countries of the re)ion X an arran)ement hich benefits their on comanies' These comanies ha!e ta%en ad!anta)e of the massi!e ri!atisations of the ?@:0s and ?@@0s to ta%e control of numerous economic sectors that are !ital for de!eloment' Caital flos )o out of the re)ion to the most industrialised countries !ia debt ser!icin), reatriation of rofits made by the trans(national cororations of the 6orth, 6orth, and fli)ht of caital or)anised by Datin(American caitalists' The internal ublic debt is on the rise, li!i li!in) n) co cond ndit itio ions ns are are sta) sta)na nati tin) n) an andd the the e eol olee most most e+ e+l loi oite tedd are are furt furthe herr imo!erished, desite the miti)atin) effect of certain ublic aid ro)rammes in $ra.il, Ar)entina, Vene.uela, Ecuador3' 9n the other hand, a number of oular mobilisations in the last fe years has led to the election of ne )o!ernments, some of hich are tryin) to re!erse the course of the last 0 years and counteract the first tendency described abo!e by re(establishin) ublic control o!er the countrys natural resources Vene.uela, $oli!ia, Ecuador3, o!er other %ey sectors of the economy Vene.uela3 and by foilin) certain strate)ic roects of the nited *tates failure of the "TAA in 6o!ember 200B and difficulty in imlementin) Plan Colombia due to the oos o osit itio ionn of Ve Vene ne.u .uel ela, a, Ecua Ecuado dor r ?B an andd $o $oli li!i !ia3 a3'' Cert Certai ainn )o )o!e !ern rnme ment ntss underta%e social reforms by folloin) a re(distributi!e olicy' Vene.uela since ?@@@, $oli!ia since 200, and shortly afterards Ecuador, decided to modify their constitutions in a democratic direction' The $oli!arian Alternati!e for Datin America and the Caribbean AD$A3 brin)s to)ether Vene.uela, $oli!ia, Cuba, aiti, 6icara)ua and, as an obser!er, Ecuador' The creation of a $an% of the *outh scheduled for the end of 2007 is the %in)in of this counter(tendency' Pre#arations for the Bank of the South
$y "ebruary 2007, Ar)entina and Vene.uela, oined by $oli!ia, had reached an a)reement for creatin) the $an% of the *outh' Very soon Ecuador, Para)uay, and more recently, $ra.il since May3 officially oined these three countries' The te+t submitted for ministerial discussion, before Ecuador inter!ened ith an ori)inal roosal, as dated 2@ March and too% the form of a roosal ut forard by Ar)entina and Vene.uela' 4icardo PatiZo, the finance minister of Ecuador, and four members of his Cabinet dre u the Ecuadorian roosal' ?G
#ritten in May 2007' 4afael Correa, the Ecuadorian President, has announced that he ill not rene the lease on the * military base at Manta in 200@ hen the resent resent one runs out' ?B
Three non(Ecuadorians, Jor)e Marchini?, 9scar )arteche?7 and myself, ere in!ol!ed in the rocess' 9n 0 Aril, the finance minister, accomanied by his Cabinet and myself, submitted this roosal roduced o!er some ?B hours on 27, 2: and 2@ Aril3 to President Correa' e ratified this roosal, hich as immediately sent to the reresentati!es of the other countries' The ministerial meetin), held on May in [uito and chaired by the President of Ecuador, lasted some four to fi!e hours' I as in!ited to be a art of the Ecuadorian dele)ation' The other countries ere reresented by their finance ministers, and, as a )eneral rule, by a deuty minister or a Cabinet member' The focus is no on a residential summit, due to ta%e lace before the end of June as er the [uito
The initial te+t dran u by Ar)entina and Vene.uela is in its ay both surrisin) and shoc%in) since the initial dia)nosis includes considerations that are comletely in line ith the neo(liberal !ie, the !ie of the #orld $an% #$3, the !ie of dominant economic thin%in), and the !ie of the caitalist class re)ardin) the reasons for Datin Americas deficiencies' The te+t obser!es that under(de!eloment of the financial mar%ets is the main cause of Datin Americ Americas as roble roblems ms'' In its its )en )enera erall con consi sider derati ations ons,, it secif secifies ies the need need to romote the establishment of multinational cororations ith re)ional caital, ith ithou outt ment mentio ioni nin) n) that that they they must must also also be u ubl blic ic'' Kn Kno oin in)) Ar)en Ar)enti tina nas s leanin)s, the fact that nothin) is said about the cororations bein) ublic is as )ood as sayin) that they are ri!ate, or that they are mi+ed' The )eneral considerations also ma%e it clear that this means romotin) the de!eloment of caital mar%ets and re)ional financial mar%ets' *econd element/ the roect rooses the creation of a $an% of the *outh, hich ould oerate both as a de!eloment ban% and a monetary stabilisation fund' A monetary stabilisation fund means a re)ional or)anisation that comes to the aid of the countries of the re)ion hen they are faced, for e+amle, ith hostile ta%eo!ers' They need imortant e+chan)e reser!es in order to rotect themsel!es from these seculati!e attac%s' The oint Ar)entine(Vene.uelan roect roosed only a sin)le or)anisation called the $an% of the *outh, hich can oerate li%e a de!eloment ban% and a monetary fund at the same time' There is nothin) shoc%in) about this' #hat is shoc%in) is that once a)ain the declared urose is to de de!e !elo lo cai caita tall mar%e ar%ets ts,, to rom romot otee indu indust stry ry,, an andd to en enco cour ura) a)ee the the de!eloment of infrastructure, ener)y and trade' En!ironmental rotection or cultural and educational olicies are left out of the icture' Considerin) the initial dia)nosis, it is to be feared that the recommended macro(economic olicies ill remain ithin the lo)ic of structural adustment and orthodo+ ?
Member of the Deftist Economists of Ar)entina E
monetarist olicies' It is also said that the $an% ill borro on the financial mar%ets' The imortant and shoc%in) third element/ the roosal from Ar)entina and Vene.uela en!isa)es !otin) ri)hts accordin) to each countrys contribution' Thus, if Ar)entina contributes three times more than Ecuador or Para)uay, Ar)entinas !otin) ri)hts ill be three times more' This is recisely the system of !otin) ri)hts re!ailin) in the #$, the IM" and the IA$< Inter(American $an% of
Ecuador rooses three instruments/ a 4e)ional Monetary "und, a $an% of the *outh and creation of a common currency of the *outh' Ecuador rooses a shift toards a *outh American currency, hich ould allo the countries to trade beteen themsel!es in their on currency, hereas today trade beteen Datin American countries is conducted rimarily in dollars' This third instrument as immediately acceted by Ar)entina, Vene.uela, $ra.il, Para)uay and $oli!ia'
The te+t roosed by Ecuador starts ith some imortant )eneral considerations' considerations' The first consideration states that the to or)anisations ( the *outhern Monetary "und and the $an% of the *outh, or the sin)le or)anisation if there is only a $an% of the *outh, must )uarantee the effecti!e alication of human ri)hts and must allo for the alication of international a)reements, criteria and treaties hich relate to economic, social and cultural ri)hts' It is an aroach e+ressed in terms of human ri)hts' It means settin) u economic tools to be used for ensu en suri rin) n) the the a al lic icat atio ionn of fund fundam amen enta tall hu hum man ri)h ri)hts ts'' An Anot othe herr ba basi sicc consideration is that neo(liberal olicies of the #$ and the IM" tye and this is said imlicitly3 ha!e led to a deterioration in the li!in) conditions of lar)e sections of oulations, to an increase in ine5ualities in the distribution of income and resources, to a loss of control by the countries of the re)ion o!er their natural resources, and to a stren)thenin) of the mi)ratory trend' To counter all this, ublic olicies must be imlemented to reinforce ublic structures, enablin) countries to re)ain control of their natural resources and their re)ional roducti!e aaratus, a lar)e art of hich has assed into the hands of trans( national comanies in the 6orth' What other ori$inal #ro#osals have been "ade by 0cuador re$ardin$ the Bank of the South 5
It is imortant that these to or)anisations should not be indebted to the caital mar%ets, as the #orld $an% and the IA$< are' It should be noted that the #$, hich is indebted to the caital mar%ets, !ery often ustifies its neo(liberal olicy by e+lainin) that it is fundamental to maintainin) its AAA ratin) as a borroin) ban% in the caital mar%et, alloin) it to borro at the loest rate' If e ant to follo olicies here rofitability is not the first concern, e must not deend on this ratin)' This is hy the caital of the $an% of the *outh, hich enables it to )rant loans, must come from four sources/ ?3 a caital contribution from the member countries1 23 the $an%s borroin) from member countries contracts that do not deend uon bonds issued on re)ional or 6orthern caital mar%ets31 3 common )lobal ta+es, namely !arious tyes of )lob )lobal al ta+e ta+ess to be a al lie iedd by the the memb member er co coun untr trie ies, s, ith ith rece recei its ts be bein in)) tran transsmitt mitted ed to the the de de!e !elo lom men entt ba ban% n%,, li%e li%e a Tobi Tobinn ta+, ta+, a ta+ ta+ on inco incom me reatriated by the trans(national comanies, a ta+ for en!ironmental rotection, etc1 G3 donations' If a *outhern Monetary "und is set u, it is lanned that the money used to aid needy countries ould be art of the reser!es of each member state hich are ut at the "unds disosal in case of need' #hen necessary, the "und can call on 20 er cent of the e+chan)e reser!es of all the member countries' "or e+amle, if $oli!ia is attac%ed by seculators, immediately the "und as%s the central ban%s of $ra.il, Ar)entina, Vene.uela, Para)uay and Ecuador to transfer, in a fe hours, 20 er cent of their reser!es to defend $oli!ia' It is imortant to note that the funds are not ermanently bloc%ed1 they are ooled only in the e!ent of need' Another maor element in the )eneral rinciles of the Ecuadorian roosal is that the interlocutors of the $an% of the *outh or the "und should be member
states' The idea is to )rant loans to ublic comanies, small roducers, the co( oerati!e sector, indi)enous communities, etc' Theoretically, it should not )rant loans to lar)e trans(national comanies of the *outh, such as those that e+ist in *outh America/ Petrobras, the lar)e ri!ate(ublic $ra.ilian comany1 P
The The Ecua Ecuado dori rian an ro roec ectt en en!i !isa sa)e )ess that that each each mem membe berr stat statee ill ill set set u a mechanism so that, each year, it ill be accountable for the oeration and the acti!ity of the $an% and the "und' This mechanism must include a ublic arliamentary discussion' discussion' Instead of statin) that records are in!iolable, the rincile is that these records are art of the ublic domain' There can be temorary e+cetions, certain deci de cisi sions ons of the the "und "und be bein in)) ro! ro!is isio iona nall llyy clas classi sifi fied ed as co conf nfid iden enti tial al h hen en relatin) to hostile bids' The officials of the $an% of the *outh and the "und are subect to ta+' There is no immunity/ it is stated that the officials of the $an% and the "und ill be anserable to la for their actions' The $an% and the "und are defined as moral identities, and can be rosecuted' What can be assessed fro" the "inisterial "eetin$ of ' May 5
"irst of all, the outstandin) fact is that $ra.il, hich u to then had been reluctant to oin the $an%, affirmed that it adhered to the idea of a $an% of the *outh' It should hoe!er be noted that $ra.il, in accordance ith the economic and social olicy and the forei)n olicies of the Dula )o!ernment, sees this $an% of the *outh essentially as an instrument of commercial olicy, sea%s rimarily in terms of economic bloc and uncritically accets the Euroean nion E3 as its model' "or the CA
heree inte her intern rnal al bo bord rder erss ha ha!e !e be been en rem remo! o!ed ed an andd h her eree e eo ole le can can mo! o!ee e+tensi!ely' $ut it is certain that the current model of the E suorts the alication of neo(liberal olicies, and uholds the mo!ement of caital more than the mo!ement of eole, since amon) the ne member states, in the east, there are certain restrictions on the mo!ement of citi.ens' The E maintains fier fierce ce co com met etit itio ionn amon amon)) o or% r%er ers' s' #ith #ithin in the the E fram frame eor or%, %, o or% r%in in)) conditions and emloyers obli)ations to or%ers ha!e not been standardised uards' #here fa!ourable systems of social security are still to be found, for e+amle in un)ary, the tendency is to ri!atise in e+chan)e for articiation in the E' This uncritical !ision of the E, as e+ressed by $ra.il, is undoubtedly shared by other Datin American )o!ernments/ either they ha!e illusions about the E, or, more robably, and in full %noled)e of the facts, they find that Euroe is doin) !ery ell in its current state, and therefore refer a model hich remains ell ali)ned to neo(liberal olicies' olicies' What to think of Bra4il6s accession to the Bank of the South 5
&i!e &i!enn the the stre stren) n)th th of the the $ra. $ra.il ilia iann econ econom omyy in Dati Datinn Amer Americ ica, a, $ra. $ra.il ils s articiation )i!es the $an% far )reater initial imetus' The roblem ith $ra.il is the orientation of the Dula )o!ernment and the economic and social model that it ractises' It is clear that $ra.ils inte)ration into the $an% of the *outh ill lead the $an% to adot a much more traditional attern, not too far remo!ed from neo(liberalism, hile if $ra.il did not articiate, it ould be easier to reach a definition closer to the alternati!e model that e ad!ocate' $ra.il has oined the $an% of the *outh because it cannot be absent from it/ if the foundations of the $an% of the *outh had not been laid on the initiati!e of Vene.uela and Ar)entina, $ra.il ould ne!er ha!e )i!en it any thou)ht' $ut to maintain its re)ional economic dominance $ra.il cannot stay aay from the $an% of the *outh' If e loo% at it from the !ieoint of Ecuador, Vene.uela and $oli!ia, it is easy to understand hy these )o!ernments are interested in ha!in) $ra.il in the $an% of the *outh, because it is an imortant economic oer and because a series of ro)ressi!e )o!ernments in the re)ion ish to maintain )ood relations ith $ra.il so that it does not stren)then its ties ith the nited *tates, hich ould ea%en the re)ion !is(>(!is American a))ressi!eness' A truly dilomatic and )eo(strate)ic )ame is bein) layed' In a more ideal orld, the $ra.ilian )o!ernment ould adot a truly leftist olicy X an alternati!e to its alliance ith the * and its suort for the a)ro(e+ortin) industry industry and for an e+ort(base e+ort(basedd olicy olicy hich is set on con5uerin) the mar%ets of the re)ion' $ut that is a far cry from reality' Which trend !ill #redo"inate on the re$ional scale 5
The current )o!ernment of Para)uay is a ri)ht(in) one, and this )o!ernment could be relaced after this years residential elections' A Deft(in) riest may be the inner in these elections' As for Ar)entina, there is anti(IM" and anti( neo( ne o(li libe bera rall rhet rhetor oric ic bu butt the the Ar)e Ar)ent ntin inee )o )o!e !ern rnm men entt is orie orient nted ed toa toard rdss
stren)thenin) caitalism in Ar)entina' In fact, to )reat initiati!es are at or% today in Datin America' 9n the one hand e ha!e the $an% of the *outh and ME4C ME4C9* 9*4 4 h hic ichh is e+ e+a and ndin in)' )' It init initia iall llyy incl includ uded ed $ra. $ra.il il,, Ar)e Ar)ent ntin ina, a, Para)uay Para)uay and ru)uay' Vene.uela, Vene.uela, hich ants a stron)er stron)er re)ional alliance alliance in oosition to the * roosal of "TAA, has oined ME4C9*4' $oli!ia did so too, hile Ecuador is there as an obser!er' This ma%es an economic bloc defined mainly by commercial and economic relations and dominated by a caitalist model' This bloc facilitates trade and romotes a certain tye of re)ional inte)ration' Then there is another initiati!e, AD$A, or the $oli!arian Alternati!e for Datin America and the Caribbean, in hich Vene.uela and $oli!ia are members' Cuba, aiti and 6icara)ua ha!e also oined, ith Ecuador as an obser!er' A meetin) of AD$A as held in Vene.uela fi!e days rior to the [uito meetin) on the $an% of the *outh' AD$A is a olitical )rou ith Cuba(Vene.uela($oli!ia as its central a+is' The )o!ernments of these three countries state e+licitly that their obecti!e is a *ocialism of the 2?st centuryN X an anti(caitalist and anti( imerialist orientation, aimin) at solidarity amon) the eole' *o here e ha!e a hi)hly secific situation in Datin America and the Caribbean re)ion, re)ion, ith to tyes of roects, roects, artly cometin) cometin) ith each other, but hich ne!ertheless coe+ist, since se!eral countries are members of both' Vene.uela and $oli!ia are in ME4C9*4 and AD$A1 on the other hand $ra.il is not in AD$A AD$A,, be beca caus usee AD$A AD$A clea clearl rlyy ha hass a more more Deft Deft( (in in)) orie orient ntat atio ionn than than ME4C9*4, and also because Cuba is in it' $ra.il, ithout bein) oosed to Cuba, clearly affirms its friendshi ith the #ashin)ton )o!ernment' The $an% of the *outh is laced beteen the to, thou)h it is closer to an e+tended ME4C9*4 than to AD$A' It does not include %ey members of AD$A, startin) ith Cuba, but also aiti and 6icara)ua' 9f course, it ould be lo)ical lo)ical for the $an% of the *outh to e+tend to the Caribbean Caribbean re)ion and Central America in future, and hy not to Me+ico if there is a chan)e of )o!ernment, and to de!elo ri!ile)ed relations ith the other continents of de!eloin) countries, namely Africa and Asia' ME4C9*4 is rimarily an economic bloc, lar)ely dominated by $ra.il' In fact $ra.il is a sub(imerialisticN oer, an economic oerhouse in the area, hich dominates its economic artners' As for Ar)entina, Vene.uela, Ecuador or Para)uay, these countries ha!e a ne)ati!e trade balance ith $ra.il, because because $ra.il $ra.il e+orts e+orts to them much more than they e+or e+ ortt to $ra. $ra.il il'' $ra. $ra.il il is en endo doe edd ith ith tran trans( s(na nati tion onal al co cor ror orat atio ions ns li%e li%e Petr Petrob obra ras, s, h hic ichh do dom minat inatee the the %e %eyy econ econom omic ic sect sector orss of its its ne nei) i)hb hbou ours rs'' Petrobras, to)ether ith other trans(national comanies, dominates $oli!ian )as andd oil1 an oil1 othe otherr $ra. $ra.il ilia iann co com ma ani nies es do dom minat inatee Para Para)u )uay ay'' ME4C ME4C9* 9*4 4,, dominated by $ra.il and Ar)entina, somehat resembles the E dominated by the "ranco(&erman($ritish trio, ith a dominant neo(liberal caitalistic strea%, hile AD$A is a roect that is more olitical than economic, based more on e+chan)es such as barters and donations' Vene.uela donates handsomely to 6icara)ua, $oli!ia and aiti' AD$A seems to me a really interestin) roect' #hat ill be the determinin) factorsY The anser lies in the olicy directions ta%en by the )o!ernments and the stru))le of the social mo!ements'
Ecuador has a radical orientation, suortin) an income distribution olicy that fa!ours the most oressed' Ecuador ill not rene its lease for the * military base in Manta as from 200@' Ecuador 5uestions the tye of oil oerations that is destroyin) art of its territory in Ama.onia, for e+amle' #e can see that Ecuadors olicy, from this oint of !ie, is closer to Vene.uela and $oli!ia than to $ra.il' In Para)uay, there may be a chan)e of President toards the Deft' #e should also not for)et the )reat mobilisations in $ra.il, articularly that of the Mo!ement of Dandless Peasants M*T3, hich reinforces action for a true land reform, in contradiction ith Dulas olicy' In the comin) months and years, e may see e!en stron)er social mo!ement and a reinforcement of the AD$A roect' The orientation of the $an% of the *outh ill deend on the )o!ernments that suort its creation' E!en if there is reason to fear that the orientation ad!anced by $ra.il and Ar)entina ill re!ail, the field is still oen' It is no that e must mobilise all our efforts so that the $an% of the *outh roect fulfils all all the hoes e lace in it' it'
+ebt 0cuador at a historic turnin$ #oint Eric Toussaint (
Ecuador is the country in *outh America that has to dedicate the hi)hest ercenta)e of its bud)et to ser!icin) its debt' The contribution e+ected in 2007 is unsustainable since the foreseeable reayments amount to about * 2,:00 mill millio ionn i'e i'e',', : e err cent cent of its its bu bud) d)et et3' 3'?: Presi President dent 4afael 4afael Correa Correa-s -s ne )o!ernment, established since early January, has already been forced to ay substantial amounts to its creditors nearly * ?,000 million3 and conse5uently is attemtin) to staunch the haemorrha)e in order to be able to ser!e its eole' The ne )o!ernment intends to use the money hich thus becomes a!ailable in order to imro!e the social conditions of the oulation, articularly in the area of health care' Already some 00 ne health or%ers ha!e been emloyed in order to immediately imro!e the 5uality of health ser!ices to those members of the oulation ho are most in need' It aims at imro!ements in other areas too' This radical stance of President Correa and 4icardo Patino, his minister for economy and finances, has led to !arious attemts at destabilisin) the current )o!ernment by local and international financial )rous as ell as by 4i)ht(in) arties' Anythin) )oes in in order to harm them' them' A #rocess is bein$ set u# to cancel the debt
The ne )o!ernment aims to identify those elements of the countrys debt hich incontestably can be denounced and reudiated' *tartin) from the results roduced by the audit commission of the former )o!ernment, a ne audit commissi commission on is bein) set u hich should should ta%e in!esti)atio in!esti)ations ns much further further and consists of both national and international e+erts' 4icardo Patino-s aim is to set u a commission consistin) of at least si+ e+erts, three of them international ersonalities'?@ The commission ould rely on a research )rou of se!eral do.en eole ho ould identify ille)itimate debts, hether to multilateral creditors such as the #$, the IM", the Inter American
Total social sendin) is only 22 er cent of the country-s bud)et, unless the )o!ernment mana)es to radically reduce the ercenta)e de!oted to the debt and chan)e the situation' ?@ Eric Toussaint mi)ht be one of them' e as in!ited, and he acceted' It still has to be confirmed by residential decree' *ee the daily aer aer (l 3ni/erso, [uito, s]bado 2: abril 2007, ' B' 'eluni!erso'com
and many citi.ens associations ha!e been or%in) for years on auditin) the debt' This is hy the Ecuadorian authorities are ready to ta%e measures based on ell(documented research' Which !ay for!ard 5
nilateral action is necessary because ere Ecuador to ait for the international community to set u an international settlement court, it ould ta%e years before any outcome as reached' The situation is critical' In so far as debt issues are concerned, unilateral action is le)itimate and far more efficient' It is referable to ta%e the so!erei)n decision to denounce and sto ser!icin) some debts e!en if it ere subse5uently decided to ta%e u ne)otiations a)ain ith some creditors on some of them' In this case the )o!ernment ould be in the fa!ourable osition since it is the creditors ho ould be antin) ayment to be resumed and ould be more inclined to tal% and tune don their demands' Ecuador thus has e+cellent reasons to underta%e a unilateral action and decide on the basis of an audit that a lar)e art of the e+ternal debt is ille)itimate' A so!erei)n decision of the [uito authorities to sto ser!icin) debts ould be based on !arious ar)uments of internal and international la' What are the ar$u"ents in favour of cancellin$ the debts 5
Many contracts include usurious interest rates' Ecuador has to ay for roects that ere ne!er carried out or the outcome of hich does not meet re5uirements'
The transarency olicies of the ne )o!ernment mean that this nely created auditin) commission ill ma%e all its results ublic' The auditin) commission-s offices ill be oen, accessible to any member of the ublic ho ould li%e to contribute to their or% or could testify in order to identify embe..lements, roects that ere not carried out or !arious tyes of fraud hich Ecuadorian citi.ens ha!e been !ictim to hile bein) e+ected to ay the resultin) debt' In accordance ith the transarency olicy the committee ill oen a ebsite on hich most contracts ill be dislayed' If this sta)e is carried out, CA
be ready to brin) u dubious, ille)al or criminal ractices amon) creditors so as to hel the Ecuadorian authorities not to ay their ille)itimate ille)itimate debt' An i"#ortant testi"ony :ohn Perkins
This is for instance the case of John Per%ins, hose boo%, The Confessions of an Economic it Man,20 has turned into an imortant e!ent' e clearly e+lains hatt his missi ha mission on as, as, namely namely encour encoura)e a)e leaders leaders of !arious !arious countri countries es to become art of a ide netor% romotin) the nited *tates trade interests' At the end of the day, those leaders are riddled ith debts, hich ma%e sure that they remain loyal' #e can call on them for our on olitical, economic or milita military ry roec roects ts hile hile they they comfor comfortt their their oliti olitical cal ositi osition on as they they create create indu indust stri rial al area areas, s, o oe err lan lants ts an andd air airor orts ts for for thei theirr o ou ula lati tion ons' s' The The shar shareh ehol olde ders rs of * en en)i )inee neeri rin) n) an andd co cons nstr truc ucti tion on coma comani nies es thus thus be beco come me incredibly richN' e haened to or% in Ecuador for President Jaime 4oldos/ Jaime 4oldos as mo!in) forard' e too% his camai)n romises seriously andd he a an ass laun launch chin in)) an all( all(ou outt atta attac% c% on the the oil oil coma comani nies es'' U''' U''' The The oil oil comanies comanies reacted redictably redictably X they ulled out all the stos' U''' U''' They tried tried to aint the first democratically elected resident of Ecuador in modern times as another Castro' $ut 4oldos ould not ca!e in to intimidation' U''' e deli!ered a maor seech at the Atahuala 9lymic *tadium in [uito and then headed off to a small community in southern Ecuador' e died there in a fiery airlane crash, on May 2G, ?@:?'N An accident, really, as in the case of the President of Panama, 9mar Torrios, at the same timeY Per%ins ne!er belie!ed there as anythin) accidental about it/ They ere assassinated because they oosed that fraternity of cororate )o!ernment, and ban%in) heads hose )oal is )lobal emire' #e Economic it Men failed to brin) 4oldos and Torrios around, and the other tye of hit men, the CIA(sanctioned ac%als ho ere alays ri)ht behind us, steed in'N The conclusion is ob!ious/ Ecuador is aash in forei)n debt and must de!ote an inordinate share of its national bud)et to ayin) this off1 as a conse5uence the only ay Ecuador can buy don its forei)n obli)ations is by sellin) its rain forests to the oil comaniesN' This means that utterly disre)ardin) Ecuadorian so!erei)nt so!erei)ntyy the )lobal emire emire demands demands its ound of flesh in the form of oil concessions\'N John Per%ins as bac% in Ecuador on 22 May 2007 to aolo)ise to the Ecuadorian eole' 9ther officials in!ol!ed in the country-s ille)itimate debt mi)ht ish to follo suit' Action is also needed in the ;orth
In order to comlete the rocess, auditin) committees need to be created to in!esti)ate the debt reayments claimed by the )o!ernments of the 6orth from countries in the *outh' $el)ium for instance is demandin) * ? million from Ecuador, most of hich as loaned ithin tied(aid roects' E!en a cursory anal an alys ysis is of thos thosee ro roec ects ts sho shoss that that $el) $el)iu ium m-s loan loanss to Ecua Ecuado dorr e ere re condi co nditi tion onal al u uon on Ecua Ecuado dorr buy buyin in)) e5 e5ui uim ment ent,, more more sec secif ific ical ally ly elec electr tric ical al 20
*an "rancisco, $errett(Koehler Publishers, 200G'
e5uiment, from $el)ian comanies' oe!er, $el)ium itself claims that it reli relin5 n5ui uish shed ed an anyy tied tied(a (aid id o oli lici cies es ye year arss a) a)oo as be bein in)) ille ille)i )iti tima mate te'' #e the the CA
he International Situation and the +ebt he ne! challen$es facin$ -A+M Eric Toussaint Increase in forei$n exchan$e reserves
*ince 200G, the economic situation has been characterised by the hi)h rice of ra materials and a number of a)ricultural roducts' This has alloed a lar)e num nu mbe berr of de de!e !elo loi in) n) co coun untr trie iess to incr increa ease se thei theirr e+ e+o ort rt re!e re!enu nues es an andd accumulate si)nificant forei)n e+chan)e reser!es, esecially countries hich e+ort oil, natural )as and minerals' *ome a)ricultural e+orters ha!e also benefited from this fa!ourable situation' oe!er, not all the de!eloin) countries are included in this scenario1 some sub(*aharan African *tates ha!e seen their situation ta%e a turn for the orse' In 2007, the de!eloin) countries to)ether hold o!er trillion dollars2? in forei)n e+chan)e reser!es hile the industrialised countries hold only half this sum' Thi This fa! a!ou oura rabl blee situat tuatio ionn ha hass be been en sei.e ei.edd by a si)ni i)niffican icantt nu num mbe berr of )o!ernments to ay off in ad!ance all or art of their debts to the IM", the #orld $an%, the Paris Club and ri!ate ban%s' *ome ha!e created de!eloment funds, into hich they can lace some of their forei)n e+chan)e reser!es, for financin) social and infrastructure roects' 22 *e!en *outh American countries Ar)entina, $oli!ia, $ra.il, Ecuador, Para)uay, ru)uay and Vene.uela3 are ne)otiatin) the creation of a $an% of the *outh to finance their re)ional inte)ration and social roects' *ome amon) them are also contemlatin) the creation of the $an% of AD$A Cuba, aiti, 6icara)ua and Vene.uela3' The si)ns of a di!orce from the #orld $an% and the IM" are increasin)/ Ecuador e+elled the #orld $an% reresentati!e at the end of Aril 2007, Vene.uela is thin%in) of lea!in) the #orld $an% and the IM", $oli!ia does not reco)nise the authority of IC*I< International Centre for *ettlement of In!estment
Meanhile, the #orld $an% and the IM" are sufferin) a crisis of le)itimacy' Paul #olfoit., the resident of the #orld $an% since 200B, as forced to resi)n in June 2007 on char)es of neotism' #hile many member countries of the #orld $an% ar)ued for the aointment of a citi.en from the *outh to the residency, the * President has chosen a * citi.en for the ele!enth time to head the $an%' At the be)innin) of July, it as the turn of the mana)in) director of the IM", the Euroean 4odri)o de 4ato, to une+ectedly announce his 2?
The !alue of forei)n e+chan)e reser!es is calculated in dollars, the main international currency of forei)n e+chan)e reser!es, althou)h in fact, the reser!es are also made u of other currencies/ euros, yens, sterlin), *iss francs\' #orldide reser!es for 2007 are 28 in dollars, ^ in euros and the rest in other stron) currencies *ee $an% for International *ettlements, $nnual *e0ort -!!; , $ale, '@73' 22 This is the case of Vene.uela, 4ussia and China' The 6ore)ian )o!ernment has done the same thin) to ma+imise the returns on etroleum *ee $an% for International *ettlements, ibi# , ' ?0G3'
resi)nation' The Euroean states a)reed to relace him ith a "renchman,
This This ad adds ds ur)e ur)enc ncyy to the the ne need ed to bu buil ildd a ne ne inte intern rnat atio iona nall inst instit itut utio iona nall architecture hich ould lead to a thorou)h democratic reform of the nited 6ations and the substitution of the #orld $an% and the IM" by democratic institutions' Achie!in) the construction of this ne architecture ill re5uire the crea creattion ion an andd reinf einfor orce cem men entt of *out *outh( h(* *ou outh th re) e)io iona nall inte) nte)ra rattion, ion, the the establishment of one or se!eral *outhern $an%s hich ould ha!e to coordinate their actions, and the settin) u of comensatory 2 e+chan)e mechanisms hich are are mutu mutual ally ly be bene nefi fici cial al be bet tee eenn de de!e !elo loi in) n) co coun untr trie ies' s' *uch *uch e+ e+ch chan an)e )e mech mechan anis isms ms ha ha!e !e alre alread adyy yiel yielde dedd inte intere rest stin in)) resu result ltss a art rtic icul ular arly ly in Dati Datinn Amer Americ icaa an andd the the Cari Caribb bbea ean/ n/ imr imro! o!ed ed he heal alth th care care,, en ener er)y )y secu securi rity ty e') e')',', Petrocaribe3, education and information the de!eloment d e!eloment of Telesur3' he debt crisis is not resolved
These ne de!eloments, imortant as they are, must not blind us from the reality of the debt/ each year, the )o!ernments of de!eloin) countries ay o!er 2G0 billion dollars to their debtors, hich is e5ui!alent to o!er three times the amount they need to reach the Millennium
A recent de!eloment hich also has to be considered is that the domestic ublic debt is increasin) raidly' In ?@@: the internal and e+ternal debts ere
2
*ee the tyes of e+chan)es beteen $oli!ia, Vene.uela and Cuba in 200(2007 articularly in the area of hydrocarbons, the transfer of technolo)y, health and education'
e5ual, in 200 the domestic ublic debt e+ceeded the e+ternal debt by a factor of threeW2G This henomenon is !ery imortant/ from no on, it is no lon)er ossible to measure the le!el of debt of de!eloin) countries on the basis of the e+ternal debt de bt'' Most Most of the the meas measur ures es of sust sustai aina nabi bili lity ty de desi si)n )ned ed by the the fina financ ncia iall institutions are obsolete' The domestic ublic debt must be added to the e+ternal debt to measure the imact of indebtedness on ublic finances and the economy' It is e!en more imortant no that an increasin) art of the domestic ublic debt is bein) bou)ht by forei)n creditors'2B Increase in indebtedness of #rivate fir"s
#e must not lose si)ht of the increasin) indebtedness of ri!ate firms of de!eloin) countries' *ince the ra material(e+ortin) countries are itnessin) an uturn in their fortunes, the ri!ate ban%s of the most industrialised countries ha!e multilied the loans to the ri!ate comanies of de!eloin) countries' The to ri!ate sectors hich are indebtin) themsel!es most in de!eloin) countries are the ban%s and the firms dealin) ith hydrocarbons and ra materials' #e must ay articular attention to this de!eloment/ the ri!ate ban%s of the de!eloin) countries are borroin) from the 6orth at lo interest rates in order to lend this money on the domestic mar%et at a hi)her rate' If the economic situation suffers a donturn hich is li%ely in the comin) years3, e mi)ht itness a number of ban%rutcies of ri!ate ban%s of de!eloin) countries, ust li%e the financial crises hich hit Me+ico in ?@@G(?@@B, the countries of *outh( East Asia and *outh Korea in ?@@7(?@@:, Ecuador in ?@@:(?@@@ and Ar)entina in 200?' Todays ri!ate debt of ban%s mi)ht become tomorros ublic debts, hence the need for control of ri!ate sector indebtedness' The same alies to the sector of hydrocarbons and minerals' Pri!ate etroleum, )as and mineral comanies ta%e out loans to increase their roduction caacity in order to ta%e ad!anta)e of the hi)h rice of ra materials' If the rices dro, the in!estments made throu)h borroin) mi)ht turn out not to be rofit(ma%in) and the debt ould become imossible to reay' It is imerati!e to limit and control this indebtedness' ;e! !ave of indebtedness in the areas of extractive industries, industries, ener$y "e$a(#rojects and the ex#loitation of tro#ical forests
Alon)side other actors, the #orld $an% lays an acti!e role in the de!eloment of minin), etroleum and natural )as roects, as ell as in ener)y me)a( roects massi!e dams3 and the e+loitation e+ loitation of forests' The CA
2G
#orld $an%, Global De/elo0ment Finance -!!; , #ashin)ton
these de!eloments to crimes a)ainst humanity such as the massacre at Kila in Katan)a in 200G' 200G'2
6e financial roducts ha!e become more idesread, namely the Credit
Cai Caita tall fli) fli)ht ht an andd brai brainn drai drainn from from the the de de!e !elo loi in) n) co coun untr trie iess to the the most most industrialised countries ha!e )ron o!er the last fe years' The amount of rofits reatriated reatriated toards the _arent comany has multilied multilied by a factor of G'B beteen 2000 and 200 from 2: billion in 2000 to ?2B billion in 2003'2: Mo!in) in the other direction are the remittances mi)rants send to their nati!e countries, hich ha!e also increased' 4emittances, as the #orld $an% has ac%noled)ed, are much hi)her than de!eloment aid' Increase in #rices of food
The rice of food is raidly increasin)' This is mainly due to to factors' "irstly, there is the decision of many )o!ernments and multinational comanies to de!elo the roduction of biofuels, such as ethanol hich is roduced from su)arcane, mai.e, col.a or other lants' 6oadays, 20 er cent of * mai.e is used to roduce ethanol, and B0 er cent of the su)arcane in $ra.ilW 2@ The rise in rice of mai.e had reercussions in Me+ico ith the increased cost of tortillas' This is an e+amle of the de!astatin) effect of free(trade treaties' In fact, in ?@@G, a free trade a)reement beteen the *, Canada and Me+ico 6A"TA3 as si)ned' 9nce 6A"TA as in lace, * a)ro(business flooded the Me+ican mar%et ith chea * mai.e, sellin) it at a rice that as belo the cost of roduction of the small Me+ican farmers, thousands of hom subse5uently lost their obs and ha!e since tried to emi)rate to their rich 6orthern nei)hbour3' 2
*ee Myriam $our)y, _De massacre de Kila/ An!il Minin) et lA)ence MultilatSrale de )arantie des in!estissements, comlices de crimes de )uerre, in $ 4ui 0rofitent toutes les richesses richesses #u 0eu0le con1olais ? 'our un au#it #e la #ette con1olaise, edited by the CA
*ince 200, the rice of mai.e e+orted by the * has lar)ely increased because of the demands lin%ed to the roduction of ethanol' Conse5uently, the rice of food ent u in Me+ico since mai.e is the main stale food' The Me+ican easants ho used to roduce the mai.e are not there anymore to resond to the demand' They ha!e either sold their land and emi)rated to the cities or the *, or they are criled by debt and ha!e difficulties to start )roin) cros a)ain' A second henomenon orsens the food situation of the oorest' The bi) )rain comanies based in the most industrialised countries ith moderate climates ha!e reduced, in 200 and in 2007, their area of culti!ation of cereals, thus causin) a hi%e in cereal rices on the orld mar%et' This as a ris%y !enture as it had the otential to cause se!ere food shorta)es in Africa and other continents hich ha!e alon) the years become net imorters of cereals, since institutions such as the #orld $an% ha!e encoura)ed them to rioritise the culti!ation of troical roducts cocoa, coffee, tea, nuts, etc'3' Today, the #orld $an% is rin)in) the alarm bells hen it notices that cereal rices ha!e doubled in late 200(early 2007' The #orld $an% redicts the continued increase in the rice of mai.e, heat, rice and other stale foods as a conse5uence of the increase in the roduction of biofuels'0 $ecause of this, the number of eole li!in) in absolute o!erty is li%ely to increase and a se!ere food crisis mi)ht occur' Moreo!er, the e+ternal debt of the oorest countries mi)ht e5ually rise due to the hi)her imort bill for foodstuff' foodstuff' Broken #ro"ises of the rich countries
The romises made by the rich countries in 2002 at the 6 conference in Monterrey in terms of de!eloment ha!e been bro%en'? It is imossible to see ho the rich countries, startin) ith &: members, ill be able to increase their aid to Africa to B0 billion before 20?0 as romised by &: leaders at &lenea)les in 200B3' To achie!e this tar)et, they ill ha!e to increase their aid bud)et by ? er cent each year' Increase in South(South loans and the increasin$ #resence of -hina
*ome ri!ate ban%s of some de!eloin) countries China, India, Malaysia, *outh Africa3 are increasin)ly )rantin) loans to )o!ernments or other firms of de!eloin) countries' The loans of Chinese ublic ban%s to Africa are risin) sharly' $eteen 200G and 200, the Chinese ban%s loaned 2 billion dollars to de!eloin) countries for or% in the etroleum and natural )as sector' 2 China, as ell as India and *outh Africa, are in need of ra materials, and see their loans as )uaranteein) that sulies continue to flo' The most !ulnerable countries ris% e+chan)in) one sort of deendence on the most industrialised countries to another, hich ill not be necessarily better' #e must also note the 0
#orld $an%, Global De/elo0ment Finance -!!; , #ashin)ton
rise of oerful ri!ate or ublic firms of the *outh Petrobras, Petronas, P
A ne arms race has started in the be)innin) of the 2?st century under the imetus of the *' The amount sent on eaons by #ashin)ton is risin) sharly and accounts for half the )lobal sendin)' China ill increase its sendin) on arms by ?: er cent in 2007' The * has recently )i!en massi!e bilateral loans to its allies to send on eaons' This threatens of a ne rise in e+ternal ublic debt lin%ed to buyin) arms' What are the i"#lications i"#lications of the ne! international situation for -A+M5
The CA
In 200:, CA
*ee (cua#or at the cross)roa#s, cross)roa#s, For an inte1ral au#it of 0ublic in#ebte#ness, in#ebte#ness, -A+M, htt/88'cadtm'or)8si'hYarticle277 7 *ee htt/88'cadtm'or)8si'hYarticle2720
B7I-S Bank Is it an alternative for develo#"ent finance 5
Institution created in 2007 by the governments of Argentina, Brazil, Venezuela, Bolivia, Ecuador, Uruguay and araguay! Its stated "ur"ose is to finance "ro#ects that strengthen regional integration $hile reducing the de"endence of the member countries to the %orld Ban& and I'(!
)roth of China and its imact on commodity mar%ets'
*ource/ #orld $an% 20?Gb3, 6 Commtrade' &i!en this conte+t, is orth onderin) on the lon)(term imact of an economic slodon in China o!er the erformance of the $4IC* countries' *ince 20??, &
A second obstacle, hich the 6<$ ill ha!e to o!ercome, is the oer stru))le o!er the control of the $an%' E!en thou)h each of the $4IC* has committed to an e5ual subscrition of caital it is e!ident that there is a si)nif si)nifica icant nt disar disarit ityy in terms terms of their their otent otential ial con contri tribut bution ion'' "or e+amle e+amle,, hereas the initial contribution for the 6<$ reresents 20'?L of the forei)n reser!es of *outh Africa, it only e5uals to 0'L of the reser!es of China @' This disarity e+lains hy desite the lar)e scale of the initiati!e, the countries ha!e only committed to transfer their contribution to the ban% o!er a eriod of 7 years, ith annual a!era)e ayments of *< 2:B million Chac%o, 20?G3' 6onetheless, )i!en these differences, e!entually China ill start e+ertin) their economic oer in return for a )reater de)ree of control o!er the acti!ities of the 6<$' The roblem is then, that instead of creatin) a ne structure of oer, here countries are )i!en e5ual reresentation desite the differences in their economic contributions, the 6<$ ill end u emulatin) the current structure of the #orld $an%' The difference difference ould be that hereas hereas the former former or)ani.ation or)ani.ation ould be controlled by China, the latter ould remain under the control of the *' As a conse5uence, the roblems in terms of accountability and olitical influence that ha!e la)ued the history of the #orld $an% ould simly be relicated by the 6$<' The $an% of the *outh faced a similar roblem re)ardin) the control of the institution' 9n the one hand, Vene.uela suorted a one country, one !oteN rincile, in order to ensure that the smaller members of the institution ould ha!e a say in its oerations' 9n the other, both Ar)entina and $ra.il suorted a traditional multilateral ban% model, here the control o!er the acti!ities of the ban% increased ith the amount of resources de!oted to it 9rti. )arteche, 200:3' As the discussions on the $an% stalled, $ra.il )radually increased the resources de!oted to its on de!eloment ban%, the $6
)alculated on the basis of the foreign reserves, including gold, at the end of 20*+ %orld Ban&, 20*-b.!
C<$3 has become an inte)ral art of the country strate)y to stren)then its economic ties ith Datin America' The obecti!e of this olicy is to oen mar%ets to Chinese manufactured )oods and secure lon)(term access to ra materials in fa!orable conditions' Thus, beteen 200B and 20?, the C<$ has lent *< 7:' billion to the countries of the re)ion Inter(American
multilateral institutions' As such, it is bound to e+erience the same tye of roblems and disaointin) outcomes' Thus, there is still a clear need for ne thin%in) and ractices in de!eloment finance in hich reciient communities andd co an coun untr trie iess ha ha!e !e a )rea )reate terr say say in the the co cond ndit itio ions ns in h hic ichh ro roec ects ts are are underta%en as ell as ho their benefits are distributed' 9n that re)ard, the e+erience of the $an% of the *outh shos ho hard it is to brea% ith established con!entions' That doesn-t mean that countries in the *outh shouldn-t %ee tryin)' 7eferences
Chac%o, *' 20?G3' $4IC* $an% Is Mostly a Jointly Mana)ed *o!erei)n #ealth "und' uffin)tonost' 4etrie!ed July 22, 20?G, from htt/88'huffin)tonost'com8sunil(chac%o8bri htt/88'huffin)tonost'com8sunil(chac%o8brics(ban%(is(mos cs(ban%(is(mostly(a( tly(a( obB02@@B'html
htt/88'nodal'am820?G8078reali.an(i(conseo(de( htt/88'nodal'am820?G8078reali.an(i(conseo(de(administracion(del(banco( administracion(del(banco( del(sur(y(afinan(los(detalles(de(su(ues del(sur(y(afinan(los(detalles(de(su(uesta(en(funcionamiento8 ta(en(funcionamiento8 9rti., I', )arteche, 9' 200:3' $an% of the *outh/ Pro)ress and Challen)es' **46 Electronic Journal' 4etrie!ed from htt/88aers'ssrn'com8abstract?BGB0 *ector, $' 20?G3' *outh Africas scramble for ne $4IC* ban%'
