When DFID withdrew their bilateral programmes in
ODI’s mid-term evaluation of DFID’s RAP showed that the Latin American Department and its partners in the region had achieved a great deal to bring about important changes among the main regional development actors. Through various strategies they have been successful in migrating from bilateral to regional interventions. And there are many examples of DFID’s contribution to policy changes at the national and even local level.
However, the evaluation also showed that DFID’s comparative advantage was not in its direct contribution to poverty alleviation but in its capacity to steer and promote new ideas and processes to bring about pro-poor policy changes. This, therefore, is one of the main reasons for continuous involvement in the region.
The other reason why DFID should remain in
However, funding and traditional technical assistance should not be seen as the primary needs of the region. This limits the roles that donors can play.
The funding need
Latin American countries, with some exceptions, are not poor. They have the capital and human resources necessary to leap out of underdevelopment and break the vicious cycles of poverty. The problem is not a lack of funds, rather their inappropriate use of them. For example, between 1996 and 2000, the Peruvian government spent US$1.2 billion in what were labelled as nutritional programmes with a meagre effect: a reduction in one percentage point in chronic malnutrition levels. In that period, some programmes showed leakage levels of above 80%. But poor targeting was only one of the reasons for the poor results: in many cases, food rations were inappropriate and fell short of delivering the nutritional benefit even to those who did receive them.
At school, every year, most Peruvians have to take a test that carries the following instructions: “Peru is a beggar sitting on a golden stool: comment”. How true.
Official Development Assistance (ODA) for four (excluding Bolivia) of the five Andean Countries is considerably less than their Foreign Direct Investment (FDI) (3% in Venezuela), and not more than 1% of GDP (except in Bolivia where it reaches 9%) –according to IADB figures. And the recent surge in commodity prices has seen the region’s coffers swell.
Hence whatever extra funds can be sent into the region will not account for a significant portion of the funds countries have at their command. And the recent increase in commodity prices will make aid even less relevant. What Latin American countries (at least the middle income ones) need is not funding.
The capacity need
In Colombia, a country torn in half by war and battered with accusations of corruption and human rights violations, 50% of the population has confidence in the civil service to run the government. Colombian experts are everywhere to be found in regional institutions like the Inter-American Development Bank and the Andean Community, for example. And Chile is widely seen as a country with a competent government. And there are many examples of effective public sector management of key public services and processes throughout the region. By the second round of applications, in 2007, London Business School had already accepted 7 Peruvian candidates to the school’s world class MBA programme. There are Latin Americans in the Bank of England, in top positions in the FTSE 500 companies and even in the Prime Minister’s strategy unit.
Research capacity is not absent, either. Latin American experts in local and international organisations are not hard to find. Educated in competitive institutions in the region and exposed to global experience through graduate programmes and employment opportunities, Latin American experts are making the region an exporter of knowledge –and technical assistance- to other regions of the world. Only last week I ran into a Peruvian expert working for USAID in Ethiopia –and on his way to Afghanistan.
Hence, Latin American countries (at least the middle income ones) do not need technical capacity, either. And experts should be more easily shared within the region.
What then?
The partner-facilitator role
Latin America has the capital and the labour. And it has had them for a long time. It just cannot get the production right. The problem, as I see it, is an institutional one. Its institutions are the consequences of an incalculable number of adjustments (often coinciding with crisis and changes in governments –violent or democratic) that have done nothing to change the founding principles of the Spanish Colonial institutional framework on which they continue to be modelled. Spanish institutions in Latin America were set up to extract the capital that the Europeans needed to add to the labour they had extracted from Africa and among their own impoverished working classes. But like slavery, the gold and silver of the Andes (and later the cacao, gum and guano) had to be extracted at the lowest cost to the Spanish crown. Their brilliant solution, attributed to Virey Toledo was the creation of a deeply hierarchical system of exploitation for extraction in which every strata of society exploited the one below extracting the wealth of the region, all the way from the mines of Potosi, through the miners, the gang-masters, the corregidores, the traders, the businessmen and the port authorities all the way to the Viceroy and the mercantilism of the Madre Patria.
Sufficient capital, expertise and knowledge in Latin America do not yield good policies, partly because, they are corrupted by the newest versions of these institutions. Food support is poorly targeted because local governments have inherited the underlying objectives of their colonial ancestors: To take rather than to give. And the knowledge of experts breeds populist masterpieces because it is used to think of new ways to replicate power rather than to change its balance.
But the past is not the only one to blame. Latin America has also been unable to come up with new institutions -or even encourage a process to develop them. The ruling elites in Latin America, like the elites anywhere, have been too slow in accepting challenging concepts: tackling inequality will require fundamental changes in the economic, social and political structures of the region. Tackling discrimination (one of the cornerstones of the exploitation for extraction institutional framework) will demand equally critical changes. Revolutions, even.
Focusing on growth, middle income countries have swiped these and other fundamental changes under the carpet. Aid for the region has focused, for too long, on reducing poverty to ‘graduate’ them from the club of low-income countries. (Whether it has succeeded or if graduation is endogenous, is a matter for another time). And whenever it has focused on their capacity to deliver good policies it has confused the Government for the State. There has been no real State building. Funds into the reform of the police force, the judiciary, the civil service, the treasury, etc. have done nothing to change the social, economic and, crucially, political systems on top of which these other institutions rest. Its like new version of a fundamentally failed Operating System.
This is where, I think, many donors can make a difference in middle income countries. With their own problems, they cannot approach middle income countries waving their magic wands or brandishing blue prints of the perfect systems: there are no such things as the perfect political systems. But in one thing, they do have experience. They have, on their own, lived through the same processes of reform that middle income countries need to face. Latin Americans can benefit from these experiences.
But without blueprints, donors’ role can only be one of facilitators –moderators- of the process. They can use their expertise to identify barriers to change and bottlenecks and share their experiences and analogies of their own histories.
This does not require dollops of cash; rather better and more sophisticated and intimate knowledge of the region. It also requires a presence and a profile and reputation than may grant them that moderator role. They must be trusted as strategic allies.
ODI is currently working with Latin American CSOs to strengthen and improve pro-poor trade policy dialogue in the region. Research and policy engagement are locally led, with ODI's role focusing on facilitating linkages regionally and globally.
