Thursday, January 12, 2006

BUENOS AIRES — Oil-rich Venezuela, having recently helped Argentina to pay off its debt to the International Monetary Fund, is floating the idea of a new “Bank of the South” that would offer no-strings loans in competition to the U.S.-backed IMF.

The scheme would be the latest in a series of moves in which Venezuelan President Hugo Chavez has used his country’s oil revenues to expand his influence and leftist philosophy through South America.

Argentina last week repaid $9.6 billion to the IMF — a 184-nation institution with its headquarters in Washington — clearing away the staggering debt it incurred with a spectacular default and currency devaluation in 2001 and 2002.

The premature payoff was made possible in part by rising commodities prices and a strong international economy. But a key factor was Venezuela’s purchase last year of about $1.5 billion in Argentine bonds, which made Mr. Chavez’s government the largest holder of Argentine debt.

The benefit for Argentine President Nestor Kirchner, whose government is tilting sharply to the left, is that it frees his country from conditions that come with IMF loans, ranging from interest-rate policy to limits on government spending.

“Kirchner is telling the international financial institutions and the domestic audience, ‘I do not want to formulate economic policy with a permanent lobbyist around and one whose interests may not be mine,” said Sebastian Etchemendy, a political scientist at the Universidad Torcuato Di Tella in Buenos Aires.

On Tuesday, the leading Argentine newspaper, El Clarin, quoted Venezuelan Finance Minister Nelson Merentes saying that further bond purchases were possible.

Mr. Merentes also said his and other Latin American governments were considering joining together to create a “Bank of the South” that would serve as a kind of regional IMF.

“On one hand, it would be an investment bank, and on the other hand, a kind of development bank that would finance direct investments,” Mr. Merentes said.

He said the new bank would lend to countries in the region with no political or economic conditions.

In Buenos Aires yesterday, Tom Shannon, U.S. assistant secretary of state for the Western Hemisphere, said the Bush administration was familiar with the Venezuelan proposal.

“Washington has taken no position on the matter,” he said, adding that any decision would have to be made by the countries in the region.

Mr. Chavez already has been moving to establish himself at the center of a coalition of leftist Latin American governments.

Long allied with Cuba’s Fidel Castro, he is selling oil to Havana on preferential terms and has reached out to embrace Bolivia’s incoming left-wing president, Evo Morales.

Last year, he provided principle backing for a continental TV network modeled after Al Jazeera called Telesur — short for “Television of the South” — which was billed as a counterbalance to North American media.

In November, Mr. Chavez led several countries — including Argentina — in opposing President Bush’s plan for a Free Trade Agreement of the Americas during a summit in Buenos Aires.

Mr. Kirchner, meanwhile, has been moving his country into the Chavez camp, acting in recent weeks to elbow out centrists from his inner circle to make room for leftists favoring stronger ties to Caracas.

Among the casualties was Robert Lavagna, the finance minister credited with steering Argentina back from the economic abyss.

In 2001, the Argentine government defaulted on more than $100 billion in debt in a financial crisis that saw five presidents hold office within a two-week period.

Mr. Kirchner now is considering a request to sell a commercial nuclear reactor to Venezuela.

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