The Nobel prize-winning economist Joseph Stiglitz has endorsed an ambitious plan by Venezuela's president, Hugo Chávez, to create a pan-regional bank for Latin America. Professor Stiglitz, a Washington insider and former World Bank chief economist, said the Bank of the South would benefit the region and give a welcome shakeup to western lending institutions.
The bank, known in Spanish as Banco del Sur, is due to be founded next month in Venezuela's capital, Caracas, with start-up capital of up to $7bn from seven South American countries. It represents a victory for Mr Chávez, who conceived the project and drove it through numerous obstacles. Mr Chávez, a self-described socialist revolutionary, argued that the bank would wean the region off Washington-dominated prescriptions and help to deliver economic independence.
Prof Stiglitz gave his blessing after meeting the president in Caracas. "One of the advantages of having a Bank of the South is that it would reflect the perspectives of those in the south," he told a media conference. It would boost Latin America's development and provide a useful alternative to the World Bank and the International Monetary Fund.
"It is a good thing to have competition in most markets, including the market for development lending," Prof Stiglitz said.
The celebrity economist and bestselling author has argued that globalisation could benefit everyone if the rules of the game were not rigged in favour of the US and other rich countries. Coming from a former member of Bill Clinton's administration and chief economist at the World Bank, the view carries the weight of an insider.
Latin America has an unhappy history with western lending institutions. It racked up huge debts in the 1970s and 1980s and was forced into painful retrenchement to repay the loans in the 1990s, prompting complaints that the international financial system was a form of neo-colonialism which kept the region mired in poverty.
The leaders of Argentina, Bolivia, Brazil, Ecuador, Paraguay and Uruguay are expected to join Mr Chávez in Caracas at a November 3 summit to launch the Bank of the South.