Rebuild The Aid Machine

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Rebuild the aid machine

Most official aid is channelled through government bureaucracies which lack the capacity or the will to use it to benefit poor people in the Third World. Yet there are alternatives. Richard Kazis argues that the Inter-American Foundation demonstrates how government aid funds can promote grassroots development.

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Hotel Camino Real

18th August

Dear James

I’m into the eigth week of my Aid Odyssey now and am struggling to mentally digest all I’ve seen. I have to admit that some of the opinions I began with have changed somewhat, but that’s not ‘really surprising I suppose.

With all your experience of co-ops at home and abroad, you might be interested to know I’ve met an interesting organisation here called the Paraguyuan Co-operative Centre. One of their staff took me to visit co-op members in six villages in the remote eastern part of the country. Though I had to drink gallons of rather unappetising ‘mate’ (a kind of tea), it was a fascinating experience. The Centre has built up a network of’ 56 co-op groups, each with 15 to 30 members. They had a hard time getting started but now seems to be flourishing, with small shops, credit schemes and arrangements for marketing produce together. Well worth a visit, if you get a chance.

What’s also interesting is that the Co-op Centre itself receives funds indirectly from the US government. The money is channelled through an outfit called the Inter-American Foundation, which somehow manages to keep its nose clean of CIA or State Dept. interference. The Foundation itself doesn’t run projects. ‘It funds local organisations like the Co-op Centre, which do the actual work on the ground. By keeping a low political profile (impossible for a government aid agency) the Foundation can work.


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In the United States, a government-funded aid agency is proving an effective means of bypassing bureaucratic and political obstacles to reaching the poor in Third World countries. The Inter-American Foundation, founded in 1969, provides direct assistance to poor people’s development projects throughout Latin American and the Caribbean.

The Foundation’s main goal, according to President Peter D. Bell, is ‘to encourage economic and social change that is bottom-up rather than top-down, self-help rather than charity’. It aims to channel American foreign aid directly to poor people, helping them to achieve their own objectives in ways which they themselves have chosen.

This sort of approach to aid is usually associated with voluntary agencies, not with government-funded organizations. The Inter-American Foundation, however, is a unique kind of hybrid. It is 100 per cent government-funded and controlled by a seven-person Board of Directors appointed by the US President. Yet it has autonomous status and is relatively free of political interference. By law, four members of the Board are from private organisations and three are from US government agencies. The unique shape of the Foundation is the result of public and Congressional frustration with US aid to Latin America during the 1950s and 1960s.

The Foundation has made 1400 grants totalling $154 million and currently has an annual budget of $26 million. Compared to total US non-military aid, these are small amounts. Yet the Foundation has had an impact far greater than its budget might suggest on the lives of many thousands of people in 35 countries.

Consider these grants:

• In Haiti the Foundation gave $186,000 in 1976 to the Community Development Movement of Pilate. This enabled the coffee growers in that small mountain town to market their produce without going through exploitative middlemen. It also established a credit union which provided the townspeople with reasonably priced loans. As a result, members’ incomes more than doubled.

• In Paraguay the Foundation made a three year grant of $731,000 to the Paraguyuan Co-operative Centre, which will organise programmes in co-operative management, agricultural marketing, technical assistance and rural credit to benefit 960 peasant families.

• In Belize, seven poor families of a Black Carib community reacted to a government threat to expropriate their land by organizing a co-operative farm. By borrowing against their homes, the families were able to raise enough money to clear the land and begin planting rice. Without draft animals or tractors, the fartners were forced to cultivate by hand. Production and profits were low. The government ignored requests for use or rental of a tractor. Finally, in 1980, the Foundation granted the co-op $31,000 to buy a tractor. This will enable the farmers to double the acreage under cultivation, increase yields —and expand the number of families in the co-operative.

• When the 1000 Quechua Indians on Taquile, a small island in Lake Titicaca in Peru, saw tourists begin to come to their community in the late 1970s, they knew that they had to do something to benefit from the influx without sacrificing their cultural heritage. They organized to prevent outsiders from building tourist hotels, offering to host tourists in their homes and building boats to transport tourists to the island. The Foundation provided the Indians with grants to buy outboard motors and to build a museum to preserve and display the community’s cultural treasures.

These grants have certain common elements. They go directly to groups that have already begun the process of organizing to promote their own development. They integrate economic assistance with concern for the social and cultural aspects of development. Most importantly, they are responsive to the local community’s own definition of its problems and its needs. And they are grants that are virtually impossible to make through the traditional government-to-government aid process.

The Foundation’s development has not been without its share of controversy and it has come under attack from many different directions. The Brazilian government decided in 1978 that all local groups receiving funding from organisations outside Brazil would have to clear their projects with the government. The Foundation refused to go along with this requirement and has spent no further money in Brazil. Within the US there has also been criticism. Every so often charges of CIA connections have surfaced but without any substantive evidence. Recently the Heritage Foundation and other groups have tried to attack the Foundation from the conservative side.

Fortunately, the openness with which the Foundation has made and reported its grants, the consistency of its funding criteria and the determination of the Board to protect the institutions integrity have enabled it to weather the storm and maintain broad political support. Today, the Foundation is more widely accepted than at any other time in its history. ‘We are more secure in our definition of ourselves,’ explains President Peter D. Bell, ‘and others have come to accept our autonomy’.

The Foundation’s basic tenet, that aid should be channelled directly to the poor for projects to which they are themselves committed, has been adopted by some other parts of the aid community. The Inter-American Development Bank has established a modest Small Projects Fund to make loans to community groups for production enterprises, and in 1980 Congress enacted legislation which established the African Development Foundation and modelled it after the Inter-American Foundation. These steps are encouraging, but the resources at the disposal of all these programmes remain small. The Inter-American Foundation has pointed the way forward, but unless more development institutions follow its lead, it will continue to swim upstream against a very powerful tide.

Richard Kazis is a freelance journalist based in Washington and a frequent contributor to the New Internationalist.

Day 49, Aug 18th.

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New Internationalist issue 126 magazine cover This article is from the August 1983 issue of New Internationalist.
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