Bank of the South

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The Bank of the South (Dutch: Bank van het Zuiden, Portuguese: Banco do Sul, Spanish: Banco del Sur) is a monetary fund and lending organization first proposed by Venezuelan President Hugo Chávez. The intention of the bank is to lend money to nations in the Americas for the construction of social programs and infrastructure.

1 Plans and Involvement
2 Current status
3 Fractional-reserve banking
4 See also
5 References
6 Sources

[edit] Plans and Involvement

The ultimate goal of the Bank of the South is to include every nation within the region of South America, and has been established because of the feeling of disapproval for the protocol of the World Bank. The program would lend money to any nation involved in the construction of approved programs.

The first planned mission for which funds are to be donated is an 8,000-kilometer gas pipeline from Venezuela to Argentina, to run through Brazil and Bolivia. The pipeline would cost a tremendous amount of time and money, and as such the Bank of the South would be required to raise large amounts from all involved nations.

The Bank is intended as an alternative to borrowing from the IMF and the World Bank and relies on the unpopularity of those institutions in Latin America, besides the repeated failures to raise the average Latin American citizen standard of living that several programs sponsored by the IMF and the World Bank have shown. Hugo Chávez has promised to withdraw from the IMF and encourages other member states to do so as well. It is proposed that all member countries contribute fairly equal shares to the Bank's initial capital of fourteen billion reais (seven billion dollars) so that no member state will control a dominant share.

One of the primary obstacles that the Bank will face will be the reconciliation of its stance against American influence and Brazil's good economic and political relationship with the USA. Brazil is the largest and one of the most influential economies in Latin America.

[edit] Current status

Venezuela, as the originator of the idea, will be involved upon the organization's inception. Other participating countries are Argentina, Brazil, Bolivia, Colombia, Ecuador, Paraguay and Uruguay. In April 2007, Brazil promised to donate a large amount of funding as well.

Seven South American nations met in Rio de Janeiro on October 8, 2007, to plan the beginning of the Bank. It was announced that the Bank will be headquartered in Caracas, Venezuela and would begin operations on November 3, 2007; this was later postponed to 5 December 2007,^[1] and then to 9 December 2007,^[2] when it was finally launched.^[3] Representatives from Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela were present at the meeting. All 12 South American countries will be eligible to borrow from the Bank.^[4] In a surprise move, Colombia formally requested membership in the bank on 13 October 2007.^[5]

[edit] Fractional-reserve banking

One of the main objectives is to divert the profits generated by fractional-reserve banking back to original countries instead of the present external exploitation done by "outside" banks.