Paraguayan President Nicanor Duarte and Mercosur ministers of Economy and Foreign Affairs decided Tuesday, May 22,Â the creation of the Bank of the South, – an idea promoted by Venezuela – that should act as an alternative for world multilateral organizations such as the World Bank, IMF and the Inter American Development Bank.
The meeting in Paraguay's capital Asuncion is being held in the framework of the fifth extraordinary meeting of the Mercosur Council, (Foreign Affairs and Economy ministers) in preparation for the Latin American leaders' summit which is scheduled in Asuncion next month.
The future development bank, included in the Declaration of Asuncion will have equal representation and capital share from Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay and Venezuela. The initial capital is estimated between 300 and 500 million US dollars.
The main objective of the bank is to promote "development" and will be open to the rest of the Union of South American members, the whole of South American countries.
"Professional efficiency criteria" should govern the decision making bodies of the future financial institution, according to the declaration. A follow up technical meeting is scheduled for June first in Buenos Aires.
"The political decision has been taken, we'll advance together in the creation of a bank that will have us as partners and then invite the rest of the South American union of nations to join," said Argentine Minister of Economy Felisa Miceli.
Brazil's representative said that the starting capital share will be low because "we want all country members to have the same participation, so there are no differences at the moment of making decisions".
The project should be followed by a "stabilization and guarantees" fund to support member countries in monetary or financial distress, and could become the launching pad for a common currency in the region. Brazil and Argentina are scheduled to take the first steps in this direction with their bilateral trade and based on a compensation box.
In the same council meeting Uruguay called for greater trade flexibility in Mercosur. Uruguay and Paraguay are the junior members of Mercosur and regularly complain that the block has become a two members club (Argentina and Brazil) with growing difficulties to access those markets.
Both countries are seeking the right to sign trade agreements with third parties from outside the region, and calling for measures to reduce structural asymmetries in the region.
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