Bank of the South

Hugo Chavez Wants to Take On His Enemies By Playing Their Old Game

By Garrett St. James

March 28, 2007

When President Franklin Delano Roosevelt ended direct US imperial involvement in Latin America with his Good Neighbor policies, the proponents of predatory capitalism needed another means for the continued exploitation of the region. Hence came the formation of the International Monetary Fund, the World Bank and the Inter-American Development Bank. The new scam was both simple and subtle as well as it was extremely effective.

These “international lending institutions” would first loan funds to developing nations with money contrived out of thin air. Next the developing countries were expected to pay back these loans with very real capital generated by their labor and exportation of natural resources. Don’t forget that all payments had to be made with interest. Over the years developing nations would be strongly encouraged to borrow more and more until it became impossible to recover from the ever-accruing debt.

It was nothing new for the banking dynasties instigating the scheme. They had already become enormously successful for many years in the US with the creation of the Federal Reserve System in 1913. After two World Wars and a Great Depression, the generations-long dream of the northeast establishment banking families’ total dominance of the United States Government was finally realized. It was mass extortion par excellence. Why not export it?

For more than sixty years the scheme had run smoothly. Money was lent out to everyone even if they thought they didn’t need it. Traditional industrialized world powers destroyed by World War II “miraculously” recovered and once again rose to prominence. Many of their former colonial territories were soon becoming newly sovereign nations as well. Fresh from throwing off the shackles of colonization, these fledgling states needed a great deal of instant cash. Where better to get some then by taking out loans at the local international bank?

Of course there was the threat of worldwide monolithic communism in those days but how could the red menace hope to compete against a system running on limitless credit? They were doomed to failure from the outset and the bankers knew it. After a little waiting, a military conflagration here and there, the “Peoples Republics” would eventually become “suckers” to the international credit scam as well.

By the turn of the 21st century, just about every nation in the world found itself participating in the lending/borrowing business. Trade barriers began to fall, corporations morphed into international conglomerates, closed markets were “liberated” and merged to form new regional mega-markets. The phenomenon of globalism had arrived. The American banking dynasties along with their like-minded brethren throughout the world virtually controlled everything and everyone through the issuance of credit.

Then something unexpected happened in late 2001 and it had very little to do with September 11th. Argentina defaulted on 9.8 billion dollars worth of IMF loans. The once new darling and shining star of the developing Third World suddenly went broke. What happened? Argentina simply borrowed more than it could possibly pay back. We know this sort of thing happens all the time with individual credit card users so it’s the same with entire national economies.

A real international economic crisis was now looming on the horizon. If a country like Argentina could go belly up, why not others? Scores of developing nations all over the world were in a similar exceedingly precarious situation. Globalism was being seriously threatened. Argentina was the first to go and much of the Third World could fall like dominos. Something had to be done but how?

When any business or individual defaults on debt payments, whether they are mortgages, loans or even credit card bills, they are left with only two viable options. The first is to no longer comply with the credit/debt system that initially got them into financial trouble. Everyone knows this “cold turkey” approach to fiscal responsibility can often be brutal all the while facing an uncertain future living without any other opportunity to receive more credit. The idea of spending only what you make is too arduous a task for the average consumer much less for any national economy. If both individual consumers and sovereign nations find the “cold turkey” approach repulsive then it’s anathema to the lenders.

Thus there is the second and much more popular chosen option, re-negotiation. No worries, either. The debt owed can be re-structured to more reasonable payment amounts. Although the recently defaulted debtor is placed in a “higher risk” category and will find it increasingly difficult to acquire more loans, the credit/debt system still continues as it did before. Let’s not forget that any re-negotiated defaulter also becomes much more vulnerable to the dictates of their respective lending institutions. Like an individual forced to work harder and longer to pay off personal debts, a sovereign nation must do the same. Genius…

With the Argentine crisis averted, it was business as usual and globalism could continue. The future was looking all the brighter and no war or market crash was going to get in the way. The banks were still the bosses. However with the madcap escapades Of George W. Bush’s neo-con administration, things began to take an unexpected turn. It was if the new occupants in the White House had lost all interest in world affairs except with what was going on in the Middle East. This myopic foreign policy obsession opened a door for those restive forces tired of living under the oppressive yoke of neo-liberal free trade practices. Slowly but steadily one Latin American country after another began to creep leftward.

No one better exemplified this new movement more than Venezuelan President, Hugo Chavez. The “guards” were distracted and this was the chance for a jailbreak as far as the former Army Colonel was concerned. Chavez began to openly criticize Bush and his insane militaristic policies when it was still unfashionable to do so. His rhetoric became more radical and fiery with each passing month. What amazed everyone was that Chavez was getting away with it. Some of Venezuela’s neighbors took the hint and began to openly go along with what Chavez deemed a new era of Bolivarism.

Things really began rolling when Venezuela officially joined the South American Trading Block, Mercosur in July of 2006. No longer would the organization be another lackey for the lending institutions from up North. It was time for South America to form its very own independent trading bloc. With CAFTA (the Central American Free Trade Agreement) smoldering in ruins, the nations of Paraguay, Argentina, Bolivia and Brazil teamed up with Venezuela to counter the decades long unfair trading practices of the United States throughout Latin America.

During these historic negotiations, an agreement was made between the five countries to pledge a billion dollars worth of bonds. These bonds were to be used to help with the new investment strategies composed by Mercosur’s most prominent members. It was then that a new idea for a Bank of the South was first hatched. Still, no one in the economic world took Chavez or his radical regional trade policies seriously. Not even later in the year when he again mentioned the formulation of the Bank of the South during the nonaligned nations summit in Havana, Cuba.
“.... with whom is this going to be done?” The experts scoffed. “.... Bolivia? Ecuador? Mercosur is one thing but a bank? Por favor!”

Then last week, Hugo Chavez dropped a bomb shell in which the reverberations can still be felt along the corridors of the various Third World lending institutions head-quartered in Washington D.C. Not only was the Bank of the South going to become a reality, but the nations of Bolivia, Ecuador, Argentina and Paraguay were already signed on to it. It didn’t stop there, either. There was the strong possibility of the South American giant, Brazil fully joining as well. The real kicker of it all was that the commencement of loans issued by the Bank of the South could begin as early as 2008. Now this was indeed shocking news. The experts are now taking Chavez’s new plans very seriously.

So far the establishment banks like the IADB are reacting rather coolly to the situation. Rivals can be tolerated as long as they play ball. A wait and see attitude seems to be prevailing. After all, isn’t international wheeling and dealing a bit odd for a supposedly devout leftist such as Chavez? After Bush’s recent South of the Border Tour, the Venezuelan President must have been beside himself when learning of his arch nemesis’s new and very lucrative ethanol deal made with neighboring Brazil. Hugo Chavez may be winning the hearts and minds of the South American public but is being seriously out-flanked on the economic front.

It’s understandable that Latin America wants to at long last determine it’s own financial destiny. On the surface at least, Chavez’s Bank of the South makes perfect sense. Yet the world of international lending was born out of serious Mafia-style conniving. Serious questions must be raised. Where is the money going to come from? How are the payments going to be made? Which countries get the most say when determining and formulating lending strategies? Who exactly is going to benefit? Are the new Partner States of Venezuela, Argentina, Bolivia, Paraguay, Ecuador and Brazil really both that politically and economically aligned with one another? Hugo Chavez is no stranger to great risk taking but does he have any idea of where all this could lead? Only time will tell but I think everyone is holding their collective breath on this one.