New Internationalist

Bank off!

July 2007

Countries are booting out the World Bank

Paul Wolfowitz’s indiscretions are not the only cause of headaches at the World Bank. Latin American countries are paying off their loans early, cutting ties with the institution, and creating their own financing instruments instead.

Since its creation over 60 years ago, the World Bank has provided trillions of dollars in loans to poor countries. In Latin America, financing by the Bank accounts for 20 per cent of multilateral lending, and comes with policy prescriptions, made into ‘conditions’, that interfere with governments’ rights to make sovereign decisions.

At the same time, persistent poverty in Latin America has barely budged. Now there is a clear backlash. In 2006, presidential elections were held in 12 Latin American countries. In six, leftwing candidates won, and in another four, Left parties made considerable progress. Economic policy was a dominant theme in all the campaigns. Candidates who were critical of the conservative, pro-business, free-market economic policies of their predecessors fared much better than supporters of the Washington-favoured status quo.

In April, Venezuela announced that it was paying off all its $3.3 billion debt to the World Bank, five years ahead of schedule. Venezuelan Minister of Finance Rodrigo Cabezas said: ‘Venezuela is free… and, thank God, neither today’s Venezuelans nor children yet to be born will owe one single cent to this organization.’ Argentina, Brazil and Ecuador have also paid off their debts to the International Monetary Fund (IMF) – and others have expressed a desire to do the same.

Later in April, in the wake of the Wolfowitz corruption scandal, President Chávez declared that Venezuela was withdrawing from membership of the World Bank and the IMF completely. At the same time, Ecuador expelled the Bank’s representative in that country, declaring him persona non grata. These decisions could help strengthen the efforts of other developing countries seeking to reform the World Bank, by demonstrating that choosing not to be part of it is a real option.

Increasingly frustrated by their dependence on capital – and influence – from the United States and Europe, some governments have begun thinking about alternatives. While the World Bank suffers its most damaging scandal to date, plans for a new, independent regional bank have been advancing quickly.

Earlier this year, Venezuela and Argentina launched the new Banco del Sur (Bank of the South), pledging more than $1 billion to get the institution up and running in the next few months. Brazil, Bolivia, Ecuador and Paraguay have agreed to join, and Nicaragua, several Caribbean countries and a few Asian nations have also expressed interest.

In a clear departure from the undemocratic and paternalistic governance structure of the World Bank – where voting privileges are based on financial contribution, giving the US Treasury the largest share of the vote – Banco del Sur assures potential members that no-one will be the ‘sole owner’. Although not yet fully defined, indications are that voting power will be based on financial need, rather than monetary contribution or political weight.

The real challenge will be to create an institution that not only looks different to its predecessors, but actually thinks and acts differently.

Nadia Martinez/Foreign Policy in Focus

This column was published in the July 2007 issue of New Internationalist. To read more, buy this issue or subscribe.

Comments on Bank off!

Leave your comment


  • Maximum characters allowed: 5000
  • Simple HTML allowed: bold, italic, and links

Registration is quick and easy. Plus you won’t have to re-type the blurry words to comment!
Register | Login

...And all is quiet.

Subscribe to Comments for this articleArticle Comment Feed RSS 2.0

Guidelines: Please be respectful of others when posting your reply.

Get our free fortnightly eNews


Videos from visionOntv’s globalviews channel.

Related articles

Recently in Currents

All Currents

Popular tags

All tags

This article was originally published in issue 402

New Internationalist Magazine issue 402
Issue 402

More articles from this issue

  • Burundi

    July 1, 2007

    A small landlocked state in central Africa, sandwiched between its vast neighbours Tanzania and Democratic Republic of Congo, Burundi has suffered as much from ethnic conflict as its other (equally tiny) neighbour, Rwanda. Yet while the 1993 Rwandan genocide continues to commandeer international attention, Burundi’s travails tend to slip under the radar.

  • Of robbers and plants

    July 1, 2007

    Economic crunch in Mauritius

  • Edible Earth

    July 1, 2007

    In search of bright ideas, David Ransom begins by learning some very basic lessons about how to design a more sustainable, permanent culture.

New Internationalist Magazine Issue 436

If you would like to know something about what's actually going on, rather than what people would like you to think was going on, then read the New Internationalist.

– Emma Thompson –

A subscription to suit you

Save money with a digital subscription. Give a gift subscription that will last all year. Or get yourself a free trial to New Internationalist. See our choice of offers.