Brazil stands up to Chavez

NY Times:

President Hugo Chávez’s efforts to curb the influence of the United States in the developing world range from creating a leftist television network for Latin America to selling cheap oil to his allies, but few of his projects were begun as enthusiastically as the Bank of the South.

Now the fervor surrounding the Bank of the South, a project heralded here as a regional financing alternative to Washington-based institutions like the World Bank and Inter-American Development Bank, has cooled as Brazil seeks to diminish the new bank’s clout.

Ahead of a meeting in Rio de Janeiro set for August, at which the bank’s creation is expected to be formally announced, Venezuela and Brazil have diverged on its base of operations, size, startup capital and mission, according to people briefed on the negotiations.

The diverging views of the project point to contrasts between Brazil’s president, Luiz Inácio Lula da Silva, a longtime socialist who embraced market-friendly policies once in power in Latin America’s largest country, and Mr. Chávez, who favors a more assertive role for Venezuela’s government in guiding economic policy here and elsewhere in the region.

Some sectors in Brazil are chafing at Mr. Chávez’s ambitions to lead integration efforts. At the same time, tension persists over a spat between Mr. Chávez and Brazil’s Senate over Venezuela’s pushing a critical television network off its public airwaves — a move many in Brasília saw as stifling dissent — and Mr. Chávez’s recent criticism of the use of food crops to produce automotive fuels, a cornerstone of Brazil’s economy.

“Brazil has demonstrated its conservatism in relation to Venezuela’s thinking,” said Vince McElhinny, a Latin America analyst at the Bank Information Center, a Washington group that tracks development banks. “A project that began with enthusiasm over egalitarian principles is dealing with Brazil’s decisiveness in trying to limit its scope.”

Venezuelan officials, who want the Bank of the South to be based in Caracas, have had to deal with Brazilian proposals to have it function from a smaller South American capital like Montevideo, Uruguay, or Asunción, Paraguay. Also, earlier Venezuelan ambitions for the bank to start operations with $7 billion in capital have been countered by Brazil’s more modest suggestion of $3 billion.

Discussions around forming the bank have also focused on how many technical employees each country can nominate, whether financing should come from each country’s foreign currency reserves and how transparent the bank’s lending policies should be.

In addition, Brazil would prefer to limit membership to South American countries, while Venezuela wants to include Central America and the Caribbean, which would allow staunch Chávez allies like Nicaragua and Cuba to become shareholders.

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Brazil and South America would be wise to avoid any investment with Chavez who has the economic sense of a dingbat. His belief in socialism alone should disqualify him from being taken seriously when it comes to matters of economics. Brazil has already demonstrated taht the leftest fear of using food crops for fuel is misguided at best. It has been doing so for years and has made itself energy self sufficient. It is in fact the reason why so many other countries are turning to that effort. The Caribbean would be wise to follow Brazil's example and not Venezuela's.