South America's response to Credit Crisis

The difference in tone and priorities couldn't be clearer from what our failed capitalists are saying:

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Amid increasingly destructive financial turbulence, South American leaders discussed ongoing plans to create an alternative fiscal architecture for the region. Brazilian President Luiz Inбcio Lula da Silva hosted his counterparts from Bolivia, Ecuador, and Venezuela in Manaus

The rhetoric emerging from Manaus was not muted

Chбvez likened the Summit’s purpose to South America’s “decoupling from the wagon of death.”

Bolivia’s Evo Morales (said) “In Bolivia we nationalized [gas] for the people to have money, while the United States nationalizes the crisis of the wealthy,” said Morales. “The poor should not have to pay the price of a mess made by the rich.”

Even Lula lashed out “Those who spent the past three decades telling us what to do didn't do it themselves.”

Mark Weisbrot, an economist with the Center for Economic and Policy Research (CEPR) in Washington, notes that some regional governments have amassed huge foreign exchange reserves, making them well equipped to muddle through the meltdown. (Brazil has some $200 billion saved, while Venezuela has roughly $40 billion.) A recent report published by CEPR explains that the hardest-hit countries in the region will be those that have hitched themselves onto the U.S. economy through “free trade” agreements.

In the context of this global financial maelstrom, the consummation of the quiescent Bank of the South project has gained increasing importance. The Bank of the South was designed as a cooperative, regional banking institution. With initial reserves of $7 billion, seven countries have signed on to the Bank so far: Argentina, Bolivia, Brazil, Ecuador, Paraguay, Uruguay, and Venezuela.

In Manaus, Ecuadorian President Rafael Correa called the Bank a potential “long-term structural solution” that would help “make our regional economy more independent [and] pool reserves to have a regional backup in the case of a crisis.” Correa, an economist by training, suggested buttressing South America’s economic system by creating a regional financial node—a clear allusion to Chбvez’s “multipolar world” backed by regional banking structures.

The financial crisis did not prevent the presidents from discussing the issues originally billed for the summit: cooperation and integration.

Building on previous agreements, Lula and Chбvez signed a series of bilateral cooperation accords, including the construction of an iron and steel plant to be built by a Brazilian manufacturer and operated by a local company in Venezuela’s Bolнvar state.

The two leaders also made headway in finalizing the terms of a joint refinery in the northeastern Brazilian state of Pernambuco. Brazil also agreed to help Venezuela with increased food imports and with improving low-income housing.

The four presidents also discussed ongoing plans for regional transportation infrastructure. Lula and Correa discussed an ongoing plan to build a trans-oceanic river and highway system connecting Ecuador’s Pacific port of Manta with the cities of Manaus and Belйm in Brazil. Work is slated to start in 2009 and be complete in 2011. The new route will help both countries’ products circumvent the Panama Canal, which Correa called “expensive and very slow.”

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[url=http://nacla.org/node/5097]Financial Crisis Jumpstarts Integration[/url]