If they are brought to fruition, a few Latin American proposals might prove truly significant as measures to counter the negative aspects of capitalist globalization and its recurrent crises.
Capitalism in the core, advanced economies has not yet overcome one of its most serious financial crises, comparable only to the Great Depression in the 1930s. The volatility of financial markets, speculative practices, and the precarious state of even weak regulatory proposals bring into question the commercial and financial structure of the globalized economy, which is responsible for the crises faced by the world in recent years.
In the present world crisis, Latin America faces circumstances in which its systems of production have been dismantled. In response, the region is now experiencing renewed political momentum towards a new system of economic and financial governance, as an effective alternative to international integration. The new system features the Union of South American Nations (Unión de Naciones Suramericanas, UNASUR) and the Community of Latin American and Caribbean States (Comunidad de Estados Latinoamericanos y Caribeños, CELAC).
This system is also supported by several pillars: accountability on the part of the Bretton Woods institutions, the creation of the Banco del Sur (Southern Bank), and the introduction of the Unidad Monetaria del Sur (Southern Currency Unit).
The Banco del Sur, founded in 2007 and constituted in September 2009 by the heads of state of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela, is a multilateral financial institution that plays a fundamental role in the strengthening of finances and integration within the continent. Its aim is to promote the participation of every Latin American nation, from Mexico to Chile (the latter taking part as an observer, just like Peru), which would allow them a greater degree of independence regarding the international financial institutions – IMF, World Bank, and the Inter-American Development Bank (IADB). Together with the Common Reserve Fund of the South, the institution in charge of monetary and exchange stabilization, and with the creation of the Unidad Monetaria del Sur, the Bank will set up a new financial scheme in the region, aimed at channeling its own resources for development.
These good political intentions require realization. So far, the Banco del Sur has only been ratified by Argentina, Bolivia, Ecuador and Venezuela. Ratification by one additional country is still needed for it to become effective. When it is operational, the Bank must finance only those projects which meet eligibility criteria. For instance, projects must be environmentally sustainable, advance the goals of diversification in sources of production and in energy generation, and avoid a disproportionate focus on the export primary sector, which exhausts mining and hydrocarbon resources and degrades ecosystems.
However, this agenda is undermined by Bilateral Investment Treaties (BITs) — documents signed by countries promising to provide favorable legal conditions to foreign investors and submit to the jurisdiction of an international tribunal, such as the International Center for the Settlement of Investment Disputes (ICSID). The ICSID, which is part of the World Bank Group, comes full circle to favor foreign capital in a court in which national sovereignty is downgraded and considered equivalent to the pecuniary interests of transnational capital.
BITs have made it impossible for countries to pursue public policies (e.g., financial, tax, environmental, labor, legislative and legal) for several years. They have also made capital accumulation impossible and prevented states from implementing regulations that discriminate in favor of national agents. In short, BITs are responsible for inhibiting the process of capital formation in Latin America, while, at the same time, they infringe upon the state’s discretionary powers that are necessary to protect the general welfare.
In the last few years, certain Latin American nations (Bolivia and Ecuador) denounced BITs and the ICSID. This represents progress because it asserts an alternative approach to trade, wherein equity for all parties prevails over the natural advantage of the party with the most resources and power.
It is essential to persevere in creating a space for “the settlement of disputes” exclusive to the region (UNASUR has unsuccessfully attempted to promote consensus towards a joint position as of 2009). This regional process must occur in parallel to the denunciation of BITs and the ICSID, a forum in which countries, such as Argentina, are undergoing a tortuous process due to the lawsuits worth millions regarding transnational corporations’ actions.
To sum up, the integration of Latin American countries is necessary to help them ride out the current crisis and move beyond their traditional role as providers of raw material. Integration must be speedily achieved with the participation of the people and in harmony with the environment.
Moreover, new international governance arrangements should support decentralized, regional financial architecture and challenge the “executive arms” of capital, such as BITs.