[Peace-discuss] FW: Good news: BRICS Bank, the Bank of the South and Bank of ALBA

[Karen Aram via Peace-discuss]

 The one note of good news these days of horror is:










"Dear friends,




 
Adding to the BRICS Bank discussion, many of us have been following and supporting the Bank of the South. The
Banco del Sur plans to utilize regional reserves to finance the development of its member countries, strengthening regional integration,  reducing poverty and social exclusion, promoting employment and activating a virtuous cycle of sustainable development,
 fundamental for the economic, social and political transformation of the region.

 
After a powerful start in 2007, when the Founding Charter of Bank of the South was signed by the Presidents of Argentina, Bolivia, Brazil, Ecuador, Paraguay,
 Uruguay and Venezuela, progress was halted due to internal divergences, mostly from Brazil who already had a (national) development bank —the BNDES— with a much larger investment portfolio than the World Bank in the region. A key disagreement was the issue
 raised by Rathin Roy and John Weeks - “One country, one vote” or “one dollar, one vote”?, among other issues described in the article
"The Bank of the South: Progress and Challenges"

 
Good news - this
July 2014 there was the
 first meeting of the Governing Body of the Bank of the South in Caracas. The announcement of the BRICS bank eclipsed the news, but hopefully we will have these southern banks operating soon. 
http://www.nodal.am/2014/07/realizan-i-consejo-de-administracion-del-banco-del-sur-y-afinan-los-detalles-de-su-puesta-en-funcionamiento/ 
 
FYI there is also the small but pioneering Bank of ALBA. Given the delays and realpolitik re: Banco del Sur, the Bank of ALBA was launched in January 2008
 by smaller group of countries.  Currently, it includes contributions from 
Venezuela, Cuba, Bolivia, Nicaragua, Dominica and St. Vicent and the Granadines. This is a less know development bank, with a small portfolio to support ALBA regional integration processes. ALBA was created in 2006 to address the ''social debt'' of Latin America,
 that is, address the needs of those who have lost out in the process of globalization –and as an alternative to the Free Trade Area of the Americas (FTAA). ALBA countries argue that a new set of public policies is needed to redress social asymmetries and raise
 living standards, based on social spending, public investment, and macroeconomic policies geared towards employment and the expansion of national markets. ALBA is using policies of regional solidarity to pursue social transformations at both national and regional
 level; from literacy programs and regional universities to the promotion of industrial technology policies; from radio/TV media with indigenous content to investments in energy generation/distribution and nationally-produced pharmaceuticals.
http://www.bancodelalba.org/

  


 


The BRICS Bank

For many years various officials of governments in African, Asian and Latin American have urged the creation of a "development" bank that they would control.  On Tuesday 15 hopes become reality in
Forteleza, Brazil with the formal creation of the New Development Bank by the leaders of the so-called BRICS group of countries (Brazil, Russia, India, China and South Africa).
            This event raises several political questions for progressives:  1) what is a type of "bank" do the BRICS leaders propose, 2) why is it needed, 3) are these the appropriate leaders to organize and
 control the new institution, and 4) is it something progressives should view favourably?  

            The BRICS proposal has two parts,

a "development" bank and a US$ 100 billion reserve of international currencies.  The former has similarities to the operations of the World Bank, while the latter would have some functional kinship with the International Monetary Fund.  At this point the
 plans for the second -- short term support for balance of payments problems -- remain a work process.  Those for the first are quite clearly specified.
            A little tedious background is necessary.  An international "development" bank is a non-profit, cross-country, public sector institution that makes loans to governments for long term projects, either
 directly productive ones (e.g., a hydro-electric dam) or supportive of productive activities (e.g., roads and highways).  A development bank's
sine qua non lies in offering loans at more favourable terms than private banks.
             The Bretton Woods conference of 1946 created the World Bank to provide loans of this type.  In addition, African, Asia and Latin America each has a regional development bank (the
African Development Bank, the 
Asian Development Bank, and the 
Inter-American Development Bank).  Why is another one needed?
The answer is simply stated -- global power and its changing distribution over the last fifty years.  The proposals for the IMF and the World Bank at the end of WWII assigned voting power to
 the contribution of each member government to the capital base of the institution.  In contrast, each country would have had one vote in the
International Trade Organization (ITO), proposed at the Havana conference of 1947-1948 to regulate world trade.  The Open Democracy reader will not be startled to learn that opposition from
 US government resulted in the early death of the ITO. 
In practice the IMF and World Bank voting shares conformed to the demand of the US government to have control of both institutions.  The governments of the countries that emerged as the victors
 in WWII held the overwhelming 
majority of votes in both the IMF and the World Bank with the US government grabbing the largest share.
The institutional power held by the United States, Great Britain, France and Canada became increasingly disproportional to their economic power as the Federal Republic of Germany ("West Germany")
 and Japan emerged to be major economic actors (this anomaly would be even greater in the UN Security Council with no permanent seat for either).  Bitter complaints about this imbalance resulted in marginal adjustments to voting shares among the developed countries,
 but peanuts for the economically blossoming BRICS.
The first complain by the BRICS governments that prompts the new bank is lack of power.  They want a financial institution in which they hold the controlling shares.    Closely related to this
 aspect of institutional power is the long-standing opposition -- even outrage -- among governments in the developing world at the policy conditions attached to IMF and World Bank loans (and grants for the latter). 

In the World Bank the use of these well-known and notoriously anti-development conditions substantially increased with the institution's shift from "project lending" -- most of it for infrastructure
 -- to "budget support".  In the 1970s almost all World Bank lending went to projects.  In the 1980s came the Latin American debt crisis and with it a massive shift in the World Bank to loans directly to governments with their use not specified. 

For example, in place of a requirement that US$ 200 million to Zambia be used to build a hydro-electric damn, conditions would require the government to privatize public enterprises, savagely
 cut government employment, and drastically slash public sending.  The implicit and frequently explicit purpose of these conditions was to convert the recipient governments to extreme neoliberal economic policies.  Brazil (in the 1980s) and Russia (in the 1990s)
 especially suffered from this ideological driven 
"structural adjustment".  All the regional development banks joined into the neoliberal conditionality game with varying degrees of enthusiasm.

            In summary, the BRICS bank would provide a less ideological source of lending for infrastructure, and in doing so shift some power in global governance away from the governments of the G7 countries. 
 It would appear that any government in the developing world could qualify to join and apply to borrow.  However, it is a bit geographically challenged to describe it as the development bank of the "South" given that Russia is one of the founding members, the
 largest founding member is entirely north of the Tropic of Cancer except for a tiny sliver (China), and a third was entirely north of the equator the last time I checked a world map (India).
            Setting aside pedantries about location, is this Gang of Five likely to shift international lending in a humane and flexible direction

as Oxfam hopes?  We should note that the voting proposal for the BRICS bank follows the IMF/World Bank model -- money votes with shares reflecting each government's financial contribution.  The
 largest voting share goes to China, whose record on investments in Africa is nothing short of appalling (see my
 discussion of Chinese capital in Zambia).  
Given the BRICS objection to US domination of the IMF and World Bank, I would have expected them to take the obvious lesson that they should not locate the institution in the territory of the
 largest member (see "BRICS bank to be headquartered in Shanghai").  The

warm endorsement of the New Development Bank by the president of the World Bank suggests complementarily rather than tension between it and the Bretton Woods "Twins".
            How should progressives react to the BRICS bank?  Many predict or at least hope that the new lending institution will improve the access of middle and low income countries to financing for infrastructure. 
 This is likely to be realized, because World Bank project loans not only carry neoliberal conditions, the procedures to obtain them are extremely bureaucratic.  If the BRICS bank can operate less bureaucratically than the World Bank, that would be a substantial
 gain in itself.     
-- 


 

NEW Book

Now Published


<Weeks_1%_40.jpg>


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Information sheet @

http://jweeks.org 


 
 
 
This week leaders of the BRICS countries meet in Brazil to forge historic new financial arrangements in a Development Bank and Foreign Exchange fund.
Conveniently scheduled at the end of the World Cup, leaders of the BRICS countries travel to Brazil in mid-July for a
 meeting that presents them with a truly historic opportunity. While in Brazil, the BRICS hope to establish a new development bank and reserve currency pool arrangement.
 
This action could strike a true trifecta - recharge global economic governance and the prospects for development as well as pressure the World Bank and the
 International Monetary Fund (IMF) - to get back on the right track.
 
The two Bretton Woods institutions, both headquartered in Washington, with good reason originally put financial stability, employment and development as their
 core missions.
 
That focus, however, became derailed in the last quarter of the 20th century. During the 1980s and 1990s, the World Bank and the IMF pushed the "Washington
 Consensus," which offered countries financing but conditioned it on a doctrine of deregulation.
 
The legacy of the "Washington Consensus"
With the benefit of hindsight, the era of the Washington Consensus is seen as a painful one. It inflicted significant economic and political cost across the
 developing the world.
What is more, the operations of the World Bank and the IMF are perceived as rigged against emerging market and developing countries. The unwritten rule that
 the head of the IMF is always a European and the World Bank chief is to be an American is only a superficial but no less grating public expression of that.
 
Worse still is the fact that the voting structure of both institutions is skewed toward industrialized countries - and grants the United States veto power to
 boot.
 
It wasn't always that way. As Eric Helleiner shows in one of his two new books Forgotten
 Foundations of Bretton Woods: International Development and the Making of the Postwar Order, China, Brazil, India and other countries 
 
 
 





















































































































 		 	   		  
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