On September 20, the president of Venezuela, Hugo Chávez, expressed his urgent need to implement the Southern Bank. Without delving into the urgent need of president Chávez, the creation of the Southern Bank – a regional development bank – will be a very positive initiative for those countries getting involved in it, strengthening their solidarity and cooperation ties and their perspectives on autonomy with regards to international financial institutions. However, we believe it is worth pointing out some considerations since the definitions and strategic guidelines have not yet been clearly established (at least publicly).

On September 20 in a television interview, the president of Venezuela, Hugo Chávez, expressed his urgent need to implement the Southern Bank. He stated that together with Evo Morales they have already set a date next November on which the Bank should start to operate.

Without delving into the urgent need of president Chávez, the creation of the Southern Bank – a regional development bank – will be a very positive initiative for those countries getting involved in it, strengthening their solidarity and cooperation ties and their perspectives on autonomy with regards to international financial institutions.

Nevertheless, we believe it is worth pointing out some considerations on the eve of the rise of this regional financial institution. The definitions and strategic guidelines of the so-called “21st Century Socialism” have not yet been clearly established, but most probably it should be about a different development model from the one suffered quite badly by countries in the region in recent decades.

If this was the case, it would be a good idea for the Southern Bank to define an operational agenda aimed at alternative development styles from its very inception. Otherwise, if the new projected financial institution barely aims at acting as a tool for the fulfillment of a previously determined development agenda, such as the mega-projects on public works implied by the Initiative for Integration of Regional Infrastructure in South America (IIRSA, in Spanish), which have been already agreed in discreet negotiations between South American governments and the IDB, we will unfortunately have just “more of the same” – that is, pharaonic works that will have huge social and environmental impact (particularly on the most vulnerable sectors of our nations) and will make big project contractors even richer. Another catastrophic perspective is that of a new bank mainly focused on agricultural reconversion in the area of monoculture agrofuels.

In this regard, we believe it is worth mentioning a study that was coordinated at FLACSO Brazil, which was part of an agreement signed with the Brazilian Ministry of the Environment and consisted in an assessment of the environmental policy of six large federal financial institutions, and was published last year as a book (“As instituizoes financieras públicas e o meio ambiente no Brasil e na América Latina”, FLACSO, Brasilia, 2006, available at www.flacso.org.br)

The above-mentioned study relied on the consultancy work of economist Ruy de Villalobos, who has a vast experience in international institutions and economic teams within the Argentine government and carried out an evaluation of the environmental policies of development financial institutions in the region.

The analysis carried out by Villalobos showed a very poor overall performance of institutions in this area, which differs from the international overview. International credit institutions have been introducing an environmental perspective to their operations since the end-1980s (specifically 1987, in the case of the World Bank). The United Nations Environment Programme Finance Initiative (UNEP FI) managed to successfully call on large international private banks to undertake environmental commitments. Some of the conclusions of this study can turn out to be useful for the current discussion on the Southern Bank, according to perspectives that – as we just said – have already been incorporated by the world’s largest financial institutions over the last decade.

As a matter of fact, we believe that this new regional financial institution should include the considerations of an environmentally informed perspective from its inception, so as to aim its actions at a recomposition of the dramatic situation of the region in such respect. From our point of view, this would imply:

a) the incorporation of strict considerations regarding the social and environmental impact of projects to be funded, with the participation and supervision of the affected population (this implies no less than the strict fulfillment of provisions set forth in the constitutional texts of our countries, such as the chapter V of the Political Constitution of the Republic of Ecuador currently in force);

b) the consolidation of stiff environmental audit mechanisms together with the development of funded projects;

c) the creation of specific credit lines aimed at 1) the recuperation of degraded areas, with a view to making up for the heavy environmental losses we will be passing on to future generations; 2) an “environmentally friendly” technologic reconversion of industrial facilities, transportation systems, etc.; 3) the support of local micro-projects that would ensure the territorial sustainability of rural communities, based on their own knowledge and technologies, as set forth by the 1998 Ecuadorean Constitution. Singularly, our research proved that none of the Latin American development banks operate on these strategic lines.

d) to also set up consortiums of universities and research centres focused on the development of research on evironmental recovery and low-impact technologies. With the results thus obtained it would be possible to set up a data bank, which would be available to Southern Bank clients.

e) to define an active policy with regards to public financial institutions in the region, leading them to adopt equivalent criteria.

In this way, we believe that the Southern Bank – with or without “21st Century Socialism” – could significantly contribute to a gradual modification of the most negative profiles regarding the development trends that were followed in the region in recent decades. However, if it fails to do so, it will be turning its back on the most urgent needs of our nations from its very inception.

* Héctor Alimonda is professor of the Posgraduate Course on Development, Agriculture and Society, at the Federal University of Rio de Janeiro (CPDA UFRJ). He is also Coordinator of the Political Ecology Working Group of CLACSO.

http://ifis.choike.org/informes/708.html