The Geopolitics of Latin America’s Regional Development Banks

What factors help or impede international cooperation within regions of the Global South?

A new working paper from Leslie Elliott Armijo and Verónica Rubio Vega Sepehr examines how variations in the geographic scope of a region can result in different types of power (im)balances among members, in turn generating important consequences for both the depth and longevity of cooperation and the content of policy outcomes.

They assess the trajectories and international relations of three major regional development bank projects in Latin America in the past half century: the Inter-American Development Bank (IDB), the Development Bank of Latin America (CAF) and the Bank of the South (Banco del Sur).

Key findings:

• Successful policy cooperation among neighboring states becomes easier when the region is defined with a scope that avoids certain structural-systemic problems created by power imbalances among member states.
• Regional cooperation is easier to initiate and sustain when the regional scope creates an interstate distribution of capabilities that is either clearly hegemonic (wherein one country’s material capabilities unambiguously overwhelm the sum of the others) or genuinely multipolar (when a rough balance exists among three or more states).
• A unipolar-yet-not-hegemonic structure (in which one country dominates material power capabilities but can be checked by a coalition of multiple countries) tends to discourage policy regionalism, as does a bipolar structure.

The authors ultimately find that a pro-cooperation distribution of capabilities helps sustain regional multilateralism even when participating states have sharp ideological and policy differences.