Hugo Chávez moves into banking

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: There have been few more assiduous customers of the International Monetary Fund and the World Bank than Latin American governments. Even as they privately welcomed the economic rationality that comes with loans from the fund and the bank, the region’s leaders often blamed them for unpopular but needed measures. So it is not surprising that many Latin Americans revile the two multilateral institutions. They see them as dominated by the United States, and as having imposed the “Washington consensus” of macroeconomic stability at the expense of other priorities.

It is that sentiment that Hugo Chávez, Venezuela’s leftist president, is trying to tap with his plan for a Banco del Sur (Bank of the South), a development bank funded and run by Latin American countries themselves. If all goes to plan, it will be formally launched next month, and could start operating next year. The preparatory talks involve Argentina, Brazil, Bolivia, Ecuador and Paraguay as well as Venezuela.

But there is a big difference between Mr Chávez’s vision for the bank and that of others, especially Brazil. This will probably be papered over at a meeting in Rio de Janeiro—but it just might develop into an open split between South America’s two most powerful countries.

Mr Chávez sees his bank as part of a wider anti-American political project and as an alternative to the IMF and the World Bank, from which he says Venezuela will withdraw. He has re-nationalised American-owned telecoms and electricity companies. He also threatens to pull out of the Organisation of American States if its sister body, the Inter-American Human Rights Court, condemns his government in a pending media-freedom case.

It is one thing to badmouth the multilaterals but another to leave them, even for oil-rich Venezuela. Pulling out of the IMF would amount to a technical default on Venezuela’s bonds and would raise the cost of future borrowing.

Leaving the World Bank would tear up bilateral investment treaties that Venezuela has signed with other countries (and which use the bank’s investment-dispute machinery).