There was a significant agreement among the finance ministers of 13 Asian nations in Kyoto, Japan, over the weekend. On the sidelines of the Asian Development Bank's annual meeting, the ``ASEAN+3'' (Korea, China and Japan) group agreed to pool their vast foreign exchange reserves to weather future financial crises like the one that hit the region a decade ago. If nurtured well, this could develop into an Asian version of the International Monetary Fund. But don't hold your breath, yet.Next up is Bush's arch-nemesis Hugo "Boss" Chavez. I previously relayed his plans to create a gas cartel. Now, Mr. Chavez wants Venezuela to leave the IMF and set up an alternative regional economic institution composed of Latin countries with left-leaning leaders. Like the Asian countries, the other Latin ones are nowhere near as bold as Venezuela in suggesting that they will move away entirely from the IMF, but there looks like some desire for distancing at play here. From The Economist:
The Kyoto accord represents a big step toward regional financial unity, as an expanded and multilateral version of the ``Chiang Mai Initiative'' [Asian Monetary Fund] in 2000 -- a bilateral currency swap arrangement in times of financial emergencies. The regional attempts for closer financial cooperation started during the 1997-98 currency crisis, but failed to make much progress because of internal problems and strenuous U.S. opposition. Now, the conditions seem far more favorable. The biggest stumbling block still remains within, however.
Behind this renewed attempt are Asia's deep foreign currency reserves. Among the world's top-8 countries in currency reserves, all, except Russia, are Asian nations, whose combined reserves account for two thirds of the global total. Asian countries' currency reserves stood at $500 billion a decade ago but have grown six-fold to $3.1 trillion now. This does not mean, however, the region's ability to deal with a potential crisis has grown as well. The portion of speculative hot money has even risen.
SINCE winning another six-year term as Venezuela's president last December, Hugo Chávez has pushed his country swiftly towards “21st century socialism”. As well as plenty of old-fashioned state control (private banks and a steel firm are the latest threatened with nationalisation), this seems to involve Venezuela turning its back on the world. Mr Chávez says that he will leave the International Monetary Fund, the World Bank and perhaps the Organisation of American States. All, he claims, are under the thumb of “the empire”, as he calls the United States. Instead, he is proposing a new body: the Bank of the South (see article). This would make loans to Latin American governments without “neoliberal” strings.
If it does leave the IMF and the World Bank, Venezuela will join a very select club. The only countries that are not members are Cuba and North Korea. Note that the list does not include China, to which Mr Chávez is keen to sell his oil, or his new-found ally, Iran. Since Venezuela is awash with oil money, for now it has no need for either the IMF or the World Bank. Worryingly, Mr Chávez may persuade much poorer countries in Latin America—such as Bolivia, Ecuador and Nicaragua, all governed by his allies—to follow suit.
This might sound an empty threat; but in many parts of the developing world there is resentment against “the Washington consensus”. African countries leap at Chinese aid because it ostensibly comes with fewer strings attached than the World Bank's money. The IMF is hardly the most-loved institution in Latin America: one of Mr Chávez's bigger allies, Argentina, blames the fund for its economic collapse of 2001-02 (mostly wrongly). And the proposed Bank of the South has been given spurious plausibility by the American administration's misplaced determination to keep the World Bank's unpopular president, Paul Wolfowitz, in his job.
