Presidents of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela signed on September 26th. the foundational document on the sidelines of the Africa-South America Summit in Margarita Island, Venezuela, last night, after almost four years of attempts to form a regional financial institution.
“It’s our bank, to bring our reserves, those that were in countries in the North, to increase lending between ourselves,” Venezuelan President Hugo Chavez said yesterday.
The bank’s objective will be to finance development projects in agriculture, energy and health care for member nations and boost trade, according to a copy of the document obtained from the finance ministry. The bank will have its headquarters in Caracas with smaller branches in La Paz, Bolivia, and Buenos Aires.
The bank will get $2 billion each from Venezuela, Brazil and Argentina and the remainder will come from other member countries, Rodriguez said. All members will have equal voting rights, he said
South American leaders have backed plans to create a development bank to finance projects in the region.
The Bank of the South aims to be an alternative funding source to the likes of the International Monetary Fund (IMF) and the World Bank.
It came as G20 leaders said there would be a shift in the balance of voting in the IMF towards growing nations.
Venezuela, Argentina, Bolivia, Uruguay, Paraguay, Brazil and Ecuador will create a start-up fund for the bank.
It was unclear how much of the $20bn (£12.6bn) fund would come from each of the seven member nations.
The concept of the bank was first suggested by Venezuelan president Hugo Chavez during his presidential election campaign in 1998.
Analyst Jan Randolph of IHS Global Insight said that for as long as emerging nations felt large institutions were not acting in their best interests, breakaway projects would continue.
"Until the IMF and World Bank does not just talk about inclusivity but actually acts in terms of broadening out voting shares and influence to genuinely embrace emerging nations you are going to get these alternatives," he told the BBC.
Mr Chavez also offered to help create a "South-South bank" with African countries in the future, to fund projects between the two regions.