RIO DE JANEIRO, Oct. 21 — The idea by Hugo Chávez, Venezuela’s president, to create a Bank of the South to finance regional development projects is moving forward, aided by the tacit approval of Brazil, which has South America’s largest economy.
But doubts persist about the need for such a bank, which many economists and analysts continue to see as a political move by Mr. Chávez to try to spread his influence and carry out his crusade against Washington-based multilateral institutions like the World Bank and the Inter-American Development Bank.
Seven South American countries are expected to inaugurate the new bank at a ceremony on Nov. 3 in Caracas, Venezuela’s capital, where it will be based. At a meeting here earlier this month the countries — Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela — signed off on the idea of creating an institution with up to $7 billion in initial capital, paving the way for the bank to begin operating as early as 2008.
An eighth country, Colombia, said earlier this month that it wanted to be included as well. Colombia’s president, Álvaro Uribe, said his country would join the new bank as long as it was an “expression of solidarity and brotherhood,” and not a rejection of the international lending institutions.
The Bank of the South will be organized to promote investment in infrastructure and could help stimulate greater regional trade and integration. Mr. Chávez says he sees it as an alternative financing institution to the World Bank, the I.D.B. and the International Monetary Fund, all of which have significant Washington involvement.
“The idea is to rely on a development agency for us, led by us,” Rodrigo Cabezas, Venezuela’s finance minister, said earlier this month.
The bank’s formation comes at a time when South America is awash in development money, both public and private, and when most of the continent’s economies have increased their credit ratings to levels that make the cost of borrowing cheaper than during the past two decades. That is one reason that Chile, which has the continent’s best credit rating, has not signed onto the project.
“The macroeconomic picture in Latin America is as good as it has ever been,” Luis Alberto Moreno, the president of the I.D.B., said in an interview last week. Still, he said: “There is plenty of room for everybody. The challenges of development in Latin America are very big.”
Brazil has sent mixed messages about its support for the institution. It declined to give its support until clarifying that the bank’s role would be limited to aiding investment in the region, and would not create an emergency fund to bail out countries in economic crisis as the I.M.F. does, which Mr. Chávez had set as an initial goal.
“Brazil has shown less interest because it has the greatest credit capacity,” said Guido Mantega, the country’s finance minister. But, he said, “we continue to support the project because it will benefit our commercial partners and Brazilian businesses.”
In an interview last month, Brazil’s president, Luiz Inácio Lula da Silva, dismissed concerns that Venezuela would try to exert more control over the bank. “It is small-minded to think that one bank created with the multilateral representation of many countries would be at the service of one person or one country,” Mr. da Silva said. “It’s not that simple.”
But some analysts say that despite Brazil’s grudging support, the bank’s potential for politicization is a concern. “Brazil wants to avoid showing that it is somehow part of a Chávez-led institution that is making loans for projects that are being judged more for their political ideology than for their economic viability,” said Peter Hakim, president of the Inter-American Dialogue, a policy group in Washington that focuses on Latin America.
Brazil’s own development bank, the Banco Nacional de Desenvolvimento Econômico e Social, has become a force, lending $34 billion in the past year for Brazilian projects. Before last week’s annual meetings in Washington of the World Bank and the I.M.F., Luciano Coutinho, the president of the Brazilian bank, said he would propose creating a fund through his bank whose purpose would seem to duplicate the mission of the Bank of the South.
The fund, Mr. Coutinho said, would finance integration projects in Brazil and South America with the World Bank and the Inter-American Development Bank.
Several issues remain unresolved about how the Bank of the South would function, including how much capital each country would commit, what its lending conditions would be and whether the members would have equal voting rights.
Mr. Mantega, Brazil’s finance minister, said it was still unclear whether Brazil and Venezuela would enter the bank with higher capital levels. Brazil appeared to make a major concession last week, however, when Mr. Mantega said each country would have voting rights in the bank’s administrative council.
Meanwhile, development banks already based in the region, like the Corporación Andina de Fomento in Caracas, are waiting to see how an institution more closely aligned with Mr. Chávez’s political objectives will compete in granting loans.
The new bank could struggle to be competitive with the I.D.B., especially, which has investment grade status in the international markets due to the participation of the United States and other developed nations, and therefore obtains resources at relatively low cost. None of the future partners of the Bank of the South borrow on terms readily available to rich, industrialized nations. If the bank is able to obtain resources in the international capital markets, it is likely to be at higher costs than those paid by Brazil or Colombia, economists say.
Still, efforts by leaders in the region to remain on good terms with Mr. Chávez appear to be outweighing uncertainty about the new institution. Countries like Argentina, Brazil and Colombia, after all, are profiting as never before from exporting food and consumer goods to Venezuela, where domestic producers have been stymied by price controls and uncertainty over Mr. Chávez’s economic policies.