Bolivian and Ecuadoran authorities confirmed yesterday that plans for the bank are moving forward.
Argentina, Brazil and Venezuela agreed to put up $2 billion each in initial funding. Bolivia, Ecuador, Paraguay and Uruguay are also members, but will put up much less capital.
The goal is to launch the bank in the second half of this year, after a meeting of finance ministers scheduled for May.
But the countries involved recognize that there are still a number of hurdles to clear, such as the capital outlays of the four smaller countries. The financial crisis might hamper the plans.
Noel Aguirre, Bolivias planning minister, told Emerging Markets that setting up the bank is one of our priorities. He said it is part of a process to develop regional mechanisms that allow different kinds of relationships.
Ecuadoran officials share this position. Pedro Delgado, an Ecuador Central Bank official, told Emerging Markets: Ecuador is committed to regional integration strategies. The Bank of the South is an integration process that we believe is important to support.
Maria Viteri, Ecuadors finance minister, voiced support for the bank while also suggesting that the IDB refocus its efforts. As a regional organization, the IDB needs to start looking south, to look from below, she said.
Other officials acknowledged the problems still in front. Armando Laguna, Venezuelas ambassador to Peru, told Emerging Markets that the extent of the financial crisis could have an impact.
There could be some setbacks because of the crisis, but we are still confident. Laguna said. The faster we can create the bank, the faster countries in South America will have a new mechanism to get out of the crisis.
The banks supporters have failed to bring Chile, Colombia and Peru on board, and doing that now looks much tougher. Colombia, which had given partial agreement, decided late last year that it could not commit to the bank under the current conditions.
Colombian finance minister Oscar Zuluaga told Emerging Markets that it is more important to shore up existing multilateral structures.
Under the current circumstances, it is important to strengthen the IDB and the CAF. An option like the Bank of the South right now would require much more effort, Zuluaga commented.
Apart from its push to get the Bank of the South going, Venezuela is also working on its other regional bank initiative: the Bolivarian Alternative for the Americas (ALBA).
ALBA Bank was officially set up in 2008 and Laguna said it is for example providing mini-loans to farmers in Nicaragua with 1% interest rates and two-year grace periods.
This is not a traditional bank like the Bank of the South. It is aimed at supporting projects that can guarantee food security or energy in the member nations, he said.
Honduras is the most recent recipient of Bank of ALBA funds, receiving $50 million from Venezuela to fund a series of projects, from housing to farming cooperatives.
Bolivia, Cuba, Dominica, Honduras and Nicaragua are ALBA members along with Venezuela.