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The International Monetary Fund (IMF) and the World Bank (WB) are regarding with anxiety the possible creation of a financial entity in Latin America, which may increase the problems currently faced by these two international organisations. By the end of February, during a visit of Argentine President, Nestor Kirchner, to Caracas, his Venezuelan counterpart, Hugo Chávez announced that the two governments had agreed on a 120-day term for launching the Southern Bank.

It is undeniable that the Southern Bank represents an emancipating financial perspective for the region, in contrast to the activities of the IMF and the WB.

It has become common practice for the governments to invest their savings in Northern banks, which pay an interest rate of 1 or 2 %, and then lend this same money at rates ranging from 6 to 12%.

It is estimated that only the reserves of Venezuela, Argentina and Brazil, as a whole, amount to 100 billion dollars.

The decision to establish this Bank is already a source of concern for international financial institutions and industrialised countries, as in practice, the poorest and most populous countries lend money to the powerful.

The World Bank itself in its 2003, 2005 and 2006 Annual Reports, entitled Global Development Finance, has acknowledged this situation stating that “Developing countries, as a whole, are net lenders to developed countries” and that developing countries “export capital to the rest of the world, particularly to the US”.

“Developing countries are giving the master the baton with which to beat them up and rape them. In actual fact, the US has a vital need for outside funding to finance its enormous deficit and to maintain its military, trade and financial might. If it were to be deprived of a significant portion of those loans the US would find its position weakened”, asserts Toussaint.

It should be pointed out that, considering the falling trend the dollar has been registering for several years and that the bonds are paid off in devaluated currency, it would be more profitable to invest this capital in the social development of those nations.

The IMF is facing short-term financial difficulties, with a deficit 105 million dollars above the prospects for this fiscal year.

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Turbulence at the IMF and World Bank

If this gets off the ground within the next 120 days, capitalism and imperialism as we know it could be in serious trouble (especially if they move away from the US dollar).

Expect the anti-Chavez crowd to go in full gear.

ETA: Bet many didn't know the largest contributers to our excessive wealth was from third world deposits.

[ 15 April 2007: Message edited by: a lonely worker ]

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Wolfowitz staying on as head of World Bank
HARRY DUNPHY

Associated Press

Washington — Embattled World Bank President Paul Wolfowitz said Sunday he will continue to lead bank efforts to reduce global poverty, resisting calls to step down over his involvement in securing a huge pay increase for a close female friend.

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“I believe in the mission of this organization, I intend to carry it out, I have had many expressions of support,” he said.

Several times he was asked how he could continue as head of the 185-nation lending organization leading the fight against corruption after acknowledging a direct role in the pay increase, Mr. Wolfowitz referred to the communiqué.

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He attached excerpts that referred to his offer, when he became president of the bank two years ago, to refrain from dealings with his companion, Shaha Riza, who then worked in the bank's Middle East department. But The Washington Post said he did not include his lawyer's subsequent clarification that the recusal offer did not include a ban on “professional contact.”

Mr. Wolfowitz included a link to the package of documents, as did a posting on the bank's Web site Saturday. He has been under fire since it emerged that he secured a $193,590 job for Ms. Riza at the State Department soon after he joined the World Bank in 2005.

A deputy defence secretary and one of the architects of Bush's Iraq war strategy, Mr. Wolfowitz has been working behind the scenes at weekend meetings of finance ministers and central bankers to drum up support to stay in his post and presented reports to the bank's policy-setting Development Committee Sunday.

The White House has said President George W. Bush has confidence in Mr. Wolfowitz.
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The Brazillian moves are the most puzzling because until Lula came back from the US he was pouring cold water on the idea. Not sure what the full story is but I am suspicious of their motives.

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The Brazillian moves are the most puzzling because until Lula came back from the US he was pouring cold water on the idea. Not sure what the full story is but I am suspicious of their motives.

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Well, it might show just how good the Bush-stag is at diplomacy: talk to a potential friend. Turn him into an enemy!

Brazil questions Venezuela-backed Bank of the South proposal

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Brazil's President Luiz Inacio Lula da Silva said Tuesday his country does not see the purpose of the Bank of the South, proposed by Venezuela in the First South America Energy Summit.

"It is necessary to define, before anything else, what that Bank of the South is for," and "why we want such a bank, what is its role, in order to tell whether it is worthwhile participating, " Silva said at the end of the summit on Venezuela's Isla Margarita.

He also asked how it would distinguish itself from established lenders such as the International Monetary Fund, the World Bank or Brazil's own National Development Bank.

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Guess his progressive minute is over and he's back to being his neo-lib self again.

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Boosted by a referendum on Sunday that overwhelmingly backed his reform agenda, Rafael Correa, Ecuador's leftwing president, has accused the World Bank of extortion and threatened to kick out the multilateral lender.

The president said he would be asking the Bank's representative in Ecuador why the lender refused to disburse a $100m loan in 2005, when Mr Correa was finance minister. "If he doesn't give explications that we consider satisfactory, we will expel the World Bank representative because we won't accept any blackmail from anyone," he said.

The president's complaint is personal: as finance minister, he visited Washington in August 2005 to collect a $100m loan as part of the Bank's fiscal support programme for Ecuador. However, Mr Correa was left embarrassingly empty-handed: the Bank suspended the loan in response to Ecuador's restructuring of an oil stabilisation fund.

"This is an offence for Ecuador. A loan had been approved and was in place and they are cancelling it, completely outside any ethical or legal principle, because we changed a law," he told the FT at the time. "We are a sovereign country. Nobody can punish us because we are changing our own laws."

Speaking to the media following the referendum, Mr Correa – an ally of Hugo Chávez, the Venezuelan leader – also announced that his government had paid off all its debts to the International Monetary Fund, with a payment of $9m last week. He said the country had done so because "we don't want to have anything to do with this international bureaucracy".

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The ALBA Bank will be started with $1 billion to $1.5 billion of capital. Venezuela, with its plentiful oil earnings, will be the leading financier. The funds will go toward joint efforts from farming projects to energy ventures, such as hydroelectric energy using Dominica’s abundant rivers and Nicaraguan technology.

Chavez and the leaders of six other South American countries last month launched a similar venture, the Bank of the South, which is projected to have as much as $7 billion in startup capital and offer loans with fewer strings attached than those given by the World Bank or the International Monetary Fund.

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