[OPE] The Latin American alternative: a new financial system

Note report on and recommendations of CIM-sponsored conference -
about half way into story.

Did anyone from the list attend this conference?

In solidarity, Jerry

Green Left - The Latin American alternative: a new financial system

The Latin American alternative: a new financial system

 Tim Anderson, Caracas
 17 October 2008

 As stock markets crashed and a global credit squeeze
threatened global economies, Latin American governments pushed ahead with
plans for a new financial architecture, to replace the current bankrupt
system.

 The people of the world "no longer support" this privatised banking system,
Venezuela's President Hugo Chavez insisted at an
international conference of political economists in Caracas on October
8-10, hosted by the Miranda International Centre (CIM) and entitled
"Responses from the South to the global economic crisis".

 The International Monetary Fund (IMF) was one of those principally
responsible for the financial crisis. It should "dissolve itself" and
"disappear from the Earth".

 Ecuador's economic policy minister Pedro Paez said society must "reclaim
the leading role that has been kidnapped by the centres of political and
economic power ... the capitalist system is not the only option".

 Proposals for a new financial system also emerged from the CIM conference.
In a joint report to the Venezuelan government (see below), conference
participants
urged immediate action to socialise the banks and protect national savings
without bailing out private investors.

 The proposals emerging from Latin America differ in important respects from
the bailouts taking place in the US and Europe, which seek to underwrite
private losses and save the privatised finance cartels.

 Such proposals require substantial political will and coordinated capacity,
but such conditions may now exist. Latin America was "no longer" the weak
and compliant region of the 1980s, Ecuador's President Rafael Correa has
insisted.

 Emerging from the debt and structural adjustment policies crippling it, the
region
has seen sustained economic growth, expanding reserves and a series of new
and
independent governments.

Venezuela has already withdrawn most
of its US$40 billion in reserves from the US, and has been creating new
domestic and international state-run banks. It is still planning for
significant economic growth, even if oil prices fall back to $60 per
barrel.

 Ecuador has just passed a remarkable new constitution
that, among other things, prohibits state takeovers of private debt, such
as those envisaged by the "Paulsen Plan".

 After its own audit commission on "illegitimate debt", Ecuador is strongly
against any new round of debt and financial leverage.

The six Latin America and Caribbean countries that subscribe to Bolivarian
Alternative for the Americas (ALBA - Cuba, Venezuela, Bolivia, Nicaragua,
Honduras and Dominica) have created an ALBA Bank to
finance regional social programs. Venezuela has recently created joint
banks with Iran, Russia and China, the latter with $12 billion in
commitments.

 Chavez also wants to revive his OPEC proposal for an oil exporters' bank.

 The Bank of the South (Bancosur) has been planned over the past year, with
broad South American support. The concept is that participating countries
place
10% of their reserves into the bank. Such an institution could displace the
Washington-controlled IMF, World Bank and InterAmerican Development Bank
(IADB's chief proponent of capital liberalisation).

 Brazil and Argentina's support for Bancosur is crucial, but also
compromised by those countries' powerful private
investment groups. Whether these governments will be able to commit to a
powerful new bank that favours public investment and social projects
remains to be seen.

 With the onset of the Wall Street crash, Venezuela invited 40 political
economists to
Caracas for the CIM-hosted conference to debate the crisis and propose
alternatives.

 The conference was chaired by Venezuelan planning and development minister
Haiman El Troudi and Luis Bonilla from the CIM. The political economists
resented papers and debated for four days, before presenting the
Venezuelan government with a joint statement.

 Though wider issues were discussed, the first report focused on finance
and monetary
reform. It seems the group will meet again, in early 2009.

 Following is a summary of the recommendations of the first report:

 1. States of the region should take immediate control of their
banking systems, without indemnification, according to the principle of
the new Ecuadorian constitution (290.7: "nationalisation of private debt is
prohibited"). These measures should aim to prevent capital
flight.

 There is a need for each state to shut down offshore
banking mechanisms. Banking supervision must be strengthened. One of these
services should be to guarantee a minimum national investment level of
liquid assets.

 2. There is a need for monetary coordination to avoid a war of
"competitive devaluations" , which would worsen the crisis, blocking a
regional response and undermining the integration process of Union of
South American Nations (Unasur - a South American integration process
begun in 2007 that envisages a new continental currency).

 There must be clear signals from a Latin American
monetary agreement and the definition of a system of payments based on a
basket of Latin American currencies, which would provide measures of
liquidity for each country.

This in turn requires a substantial coordination of central banks and
"overcoming
neoliberal dogma". In this respect we propose a South Fund (Fondo del Sur)
as an alternative to the IMF.

3. Taking advantage of the excess reserves of each
country to create a payments system, we propose the immediate
implementation of Bancosur, based on a democratic system of one country
one vote. This bank can be "the heart" of the transformation of the existing
network of banks.

 It is necessary to establish exchange controls to protect reserves and
prevent
capital flight.

 4. Countries of the region should consider a suspension of payments on
public debt as a transitional measure to protect sovereign resources from
the crisis and avoid an emptying of treasuries.

 5. We propose an emergency social fund to back food and energy
sovereignty, as well as to attend to migratory problems and a possible
cutting of remittances. This fund could function within Bancosur or the
ALBA Bank.

 6. Following the principle of assisting the people and not the bankers,
social programs must be maintained, the priorities being: employment
security, universal income, public health, education and housing.

7. This is the opportunity for the countries of the
region to get rid of the IADB, the IMF and the World Bank, and to
 begin creating a new international financial architecture.

 From: International News, Green Left Weekly issue #771 22 October
2008.

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Received on Sun Oct 19 04:15:23 2008