23 October 2007
The idea by Hugo Chávez, Venezuela’s president, to create a Bank of the South to finance regional development projects is moving forward, aided by the tacit approval of Brazil, which has South America’s largest economy.
Summary by BIC
The idea by Hugo Chavez, Venezuela’s president, to create a Bank of the South to finance regional development projects is moving forward, aided by the tacit approval of Brazil, which has South America’s largest economy.
Seven South American countries are expected to inaugurate the new bank at a ceremony on Nov. 3 in Caracas, Venezuela’s capital, where it will be based. At a meeting here earlier this month the countries — Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela — signed off on the idea of creating an institution with up to $7 billion in initial capital, paving the way for the bank to begin operating as early as 2008.
The new bank could struggle to be competitive with the I.D.B., especially, which has investment grade status in the international markets due to the participation of the United States and other developed nations, and therefore obtains resources at relatively low cost. None of the future partners of the Bank of the South borrow on terms readily available to rich, industrialized nations. If the bank is able to obtain resources in the international capital markets, it is likely to be at higher costs than those paid by Brazil or Colombia, economists say.
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