02 May 2007

Bank of the South

"Sooner or later, those institutions will fall due to their own weight. They will wear away, the International Monetary Fund, the World Bank and all those institutions. We're better off without the Fund and without the World Bank."

Hugo Chávez speaking at the Bolivarian Alternative for the Americas (ALBA) summitSo the Venezuelan President Hugo Chávez has told a meeting of Latin American leaders. Mr Chávez says he wants to formalise his country's exit from the World Bank and IMF and is developing an alternative economic vision for the continent called the Bolivarian Alternative for the Americas (ALBA) to rival the Free Trade Area of the Americas (FTAA) being championed by the United States.

Following the precedent set by the Bolivian President Evo Morales, who nationalised his country's natural gas industry last year, Mr Chávez has this week taken control of Venezuela's last oil field projects that were still being run by foreign companies, which will increase his ability to provide alternative forms of credit and financial support for other countries in the region. The foreign firms, which include Britain's BP, are more than likely to remain involved, in part because of the significant investment that they have already put into the projects and in part because the country's Orinoco River basin is the world's largest known oil deposit, holding a possible 1.2 trillion barrels of extra-heavy crude, rivalling even Saudi Arabia's reserves.

Venezuela's share of the IMF is apparently worth $3.9 billion, although it is not clear how much money the fund or the World Bank might have to return to Caracas. One can't but be reminded of another intergovernmental giant and refrains of "Better off out!"