The IMF can sleep easy
CARACAS AND SAO PAULO -- DREAMT up by Venezuela's Hugo Chávez as an alternative to the wicked World Bank and the even more wicked IMF, the Banco del Sur (Bank of the South), which seven South American governments signed up to on December 9th, flatters to deceive. Despite months of talks, there is still no agreement on its capital or its statutes. Rather than a gesture of defiance, the bank looks like an object lesson in why South American unity is so hard.
Mr Chávez conceived it as a political tool of his "Bolivarian revolution, to free other countries in the region from the yoke of the Bretton Woods institutions. "If we hand it over to the técnicos, then it is already dead, he said in August. He offered to donate to it up to half of Venezuela's foreign-exchange reserves of $30 billion. This week Venezuelan officials said that they would invite African countries to join.
Such technocrats are exactly the people Brazil insists should staff the bank—if it must be staffed at all. Brazilian diplomats have been unusually frank in revealing their lack of enthusiasm for the new institution. They fear it may give soft, politically driven loans that go unpaid. Brazil already has its own well-endowed development bank, the BNDES, whose lending of 62.5 billion reais ($37 billion) in the 12 months to September was 50% greater than that of the World Bank in the same period.
The Brazilians have gone along with the project only because they feel they cannot remain outside any new South American institution, especially one with money. But they have worked to limit the bank's remit and to slow its creation.
Mr Chávez can count on the vote of Bolivia and maybe that of Ecuador on the bank's board. But other members are likely to side with Brazil -- and so will Chile, Colombia and Peru if they join. So expect a modest outfit that mainly finances cross-border infrastructure. The World Bank and the Inter-American Development Bank (not to speak of the Andean Development Corporation) do that already. But competition is a fine thing -- even if it is not what Mr Chávez had in mind.