Brazil backs alternative regional bank

The ongoing eurozone crisis has crystallized Brazilian government opinion that an alternative Bank of the South is a good idea. The Bank of the South was proposed by Venezuelan President Hugo Chavez as part of a populist agenda that aimed to steer all of Central and South America and the Caribbean toward a radical socialist Bolivarian revolution, attributed nominally to 19th-century Latin American visionary Simon Bolivar. Chavez outlined plans for a financial institution that would eliminate dependence on "imperialist" international financial organizations but didn't carry through with the idea, which won lukewarm support and was regulated to the back burner. Brazil surprised financial services analysts this week by reviving the bank plan, arguing it would provide a safety net against troubles in Europe and in the international financial system as a whole. Plans for taking a bill to congress next month are afoot and if approved the legislation will lay the ground work for the new bank with one notable difference: It will most likely be led by Brazil, not Venezuela. Brazil's economy is the largest in Latin America and the seventh largest in the world by nominal gross domestic product and eighth largest by purchasing power parity. Its nominal gross domestic product topped $2.4 trillion this year, with a $12,422 per capita estimate, despite huge income and racial disparities, social problems and some of the world's worst crime rates. Senior Brazilian officials said the plan for a regional development bank was timely as it would help the Latin American region address the global crisis and provide protection from difficulties in the eurozone and elsewhere. The bank initiative is supported by Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela. A 2009 charter for the bank, initiated by Venezuela, envisaged a $20 billion startup with a subscribed capital of $10 billion and multibillion-dollar contributions from the subscribing member countries. The bank will aim to finance manufacturing across the region, help generate jobs and reduce dependencies on forces beyond the region's control, officials said. Argentina and Brazil have faced renewed pressures as their currencies appreciated in response to international investors being drawn to their attractive interest rates. Exporters in both countries found their merchandise risks being jettisoned from the market by more competitive prices from other exporters in East Asia. Both countries reported problems sustaining international buyer interest in their automotive industries. Industry experts said dependence on foreign components made their exports less competitive. A Bank of the South, when set up, will aid growth of indigenous industries that will reduce dependence on foreign component suppliers and seek to make local industries self-sufficient, officials said. Worries over the next financial development in Europe weigh heavily. Senior officials said Latin America remains too dependent on developed countries and the next fallout from the continuing financial crisis in Europe, the slowdown in the United States and uncertainties elsewhere in the world economy.