BUENOS AIRES (Dow Jones)–Argentina will contribute nearly $190 million to development bank Corporacion Andina de Fomento as part of a broader initiative by South American nations to build up the region’s multilateral institutions amid early signs of a new global recession.
The capital contribution will be made in seven annual installments starting with $10 million this year, according to a law published in the Official Bulletin on Thursday.
Earlier this month, finance ministers from the 12-member Union of South American nations pledged to strengthen the development bank, known as CAF, and find mechanisms to better coordinate the use of central bank reserves to ensure financial stability in South America.
South America exited the 2008-09 global financial crisis relatively unscathed thanks to solid banking systems, a short-lived drop in commodities prices, and strong public finances that gave many governments room to engage in counter-cyclical fiscal spending.
After growing 6.6% last year, the IMF’s latest forecast puts South America’s economic growth at 4.7% this year and 4.1% in 2012.
But regional policy makers fear the global economy might be headed into a fresh downturn as the heavily indebted U.S. and euro zone flirt with recession.
Caracas-based CAF provides loans for infrastructure projects and loan guarantees, among other financial products and services, to promote economic development in the region.
The bank, whose shareholders are 18 Latin American, Caribbean and European countries, made loans for $26.34 billion during the 2006-10 period.
-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740, ken.parks@dowjones.com
Source: online.wsj.com