By Diana Cariboni
MONTEVIDEO, Oct 10 2003 (IPS)

Latin America, the region with the biggest rich-poor gap, is drawing an ever-shrinking portion of foreign aid, and European aid in particular.

This is happening while the markets of the industrialised North remain closed to many of Latin America’s products, and poverty affects 44 percent of the region’s 505 million people.

Meanwhile, the remittances sent home by Latin American immigrants in the North have become a source of revenue that far exceeds the inflow of aid.

One part of Latin America that has been especially hard-hit by the waning of foreign aid is Central America, where more than half of the population is poor, and the main export products, especially coffee, are fetching record low prices.

Aid to Central America has fallen by 40 to 50 percent in the past 10 years, according to the director of the regional Foundation for Peace and Democracy, Cecilia Cortés.

That drastic reduction was a consequence of the end of armed conflicts in several countries in the region, namely Nicaragua, El Salvador and Guatemala, in the late 1980s and early 1990s, and the end of the Cold War, as well as the emergence of new areas in urgent need of assistance, like the countries that emerged from the ex-Yugoslavia after the wars in that region.

The European Union (EU) plans a total of 74.5 million euros (87 million dollars) in aid to Central America for the 2000-2006 period.

Of that, 60 percent will go towards ”strengthening common policies” and helping consolidate democratic institutions, 30 percent will be earmarked for mitigating the effects of natural disasters like Hurricane Mitch, which devastated Honduras and Nicaragua in 1998, or the earthquakes that hit El Salvador in 2002, and 10 percent will go towards bolstering civil society.

In the meantime, countries like Argentina, Brazil, Chile, Mexico and Venezuela receive virtually no foreign, and especially European, aid.

After the Cold War came to an end, development aid began to shrink, as it had largely been focused on curbing the supposed advance of communism, said a diplomat in Brazil who preferred not to be identified.

Brazil receives no foreign aid, and only around 100 million dollars a year in bilateral technical assistance, including 53 million dollars from Japan and 41 million from the EU in 2002.

But a large part of that technical assistance goes to the salaries paid to foreign technical experts or to scholarships for Brazilians to study abroad. ”The budget of each project actually ends up partially or totally overseas,” rather than in the local economy, said the source.

The director of cooperation and development at the governmental Institute of Applied Economic Research, Mauricio Mendonça, told IPS that ”there are cases of projects where the entire budget goes to paying technical experts from rich countries to tell us what we should do here.”

Of most interest to Brazil is scientific and technological assistance and cooperation, but that has never been the forte of the countries with which Brazil has traditionally had close ties, like Portugal or Spain.

In many fields of research, ”Brazil is ahead of China, India and South Africa,” and it also offers lower costs than those of European nations, in a setting that is rich in biological diversity and in terms of the development of medicine and biotechnology.

Venezuela, where 45 percent of the population of 25 million is poor even though the country is one of the world’s leading oil exporters, received just 96.5 million euros (113 million dollars) from the EU between 1992 and 2000, for programmes in education, health, the environment, human rights, and fighting poverty.

Mexico receives just 34 million dollars a year in development aid, including 12.2 million from the United States and 11 million from the EU.

That aid is ”insignificant compared to the country’s exports,” which total 160 billion dollars a year, an analyst in trade and aid, Germán de la Reza, told IPS.

”Mexico is no longer in the category of the poor countries. In four of five years, instead of receiving, it should be giving out development aid,” said former foreign minister Jorge Castañeda. However, 60 percent of the population of 100 million live in poverty.

For the 2000-2006 period, the EU plans to provide 65.7 million euros (77 million dollars) to Argentina, where over 50 percent of the population of 38 million has fallen below the poverty line.

Japan’s technical assistance agreements with Argentina, amounting to around 20 million dollars a year, do not involve ”disbursements of money, but seminars, visits by foreign technical experts, and scholarships,” Antonio Rivolta, with the Argentine Foreign Ministry’s Office of International Cooperation, pointed out to IPS.

The European bloc plans to extend 20 million dollars in aid to Uruguay for the 2000-2006 period, and has provided Paraguay with around 100 million euros (117 million dollars) since 1991.

But ”EU aid to Paraguay is highly inefficient,” Sergio Britos, chief economist at the PriceWaterhouseCoopers consultancy in that country, told IPS. ”Its objectives generally overlap, as does its financing of projects that already receive financial support from other foreign entities.

”A little more than 50 percent of the aid is employed in expanding the staff of public officials, and thus does not meet its goals,” said Britos, a former Central Bank official.

The question is: do the EU’s trade preference schemes do anything to mitigate the distorting effect of the bloc’s agricultural subsidies? According to the analysts consulted by IPS in several countries, the answer is no.

Pablo Amor, with the Science and Technology Section of the European Commission Delegation in Uruguay and Paraguay, said the aid does serve to alleviate tension surrounding trade questions.

But independent analyst Marcos Algorta said ”There is no way to attenuate the impact of EU subsidies on Uruguay’s exports. Access to markets in a setting of healthy competition is the only possible way, and there is no sign of that occurring in the short or medium-term.”

Under the system of trade preferences that the EU extends to the Andean nations to encourage and reward efforts to fight drug trafficking, up to 80 percent of Venezuela’s export products should be allowed to enter the European bloc without paying tariffs.

But in practice, only 40 percent of Venezuela’s exports to the EU, which totalled 2.7 billion dollars last year, enter the bloc duty-free.

Brazil, meanwhile, is actually hurt by the trade preferences that the industrialised powers grant to poor countries.

The EU benefits extended to the former European colonies in the Asian, Caribbean and Pacific regions and to the Andean countries undermine the competitiveness of Brazilian exports like sugar and instant coffee, and the same is true of Caribbean and Central American exports that enter the U.S. market under preferential conditions.

Nor is the effect of the farm subsidies mitigated in the case of Mexico, despite its accord for economic association, coordination and political cooperation with the EU, which went into effect in 2000, but only covers a few non-sensitive farm products.

The EU Generalised System of Preferences, which was renewed until 2004 for Central America, favours access to European markets for agricultural commodities like bananas and a few manufactured items.

But Honduras’s total sales of coffee and bananas, its main exports, were equivalent to just half of the revenues that entered the country last year in the form of expatriate remittances.

Amor maintained that the enlargement of the EU from 15 to 25 members, scheduled for 2005, will not lead to an increase in farm subsidies and will not affect the funding earmarked for foreign aid.

But the EU will maintain its 51.7 billion dollar farm budget, which will also have to stretch soon to include 10 new member states.

Brasilia does not expect anything good to come of EU enlargement, and predicts greater resistance to eliminating the bloc’s farm subsidies, as well as the loss of some markets in future EU members which currently purchase Brazilian exports.

Mexico’s de la Reza painted a dim outlook in which the bloc’s aid could be ”redirected” to some of its new, less-privileged members, further reducing assistance to Latin America, while there would be little change on the trade front.

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Those Blessed Remittances

– Around four million Central Americans live in the United States, most of whom work in low-paying jobs.

– El Salvador will receive some two billion dollars in expatriate remittances this year, equivalent to 64.5 percent of its total exports, and to 13.5 percent of GDP. These revenues offset between 70 and 80 percent of the country’s trade deficit.

– Nicaragua received 700 million dollars in remittances last year, and a similar amount is expected for 2003.

– Some 700 million dollars were sent home last year by 600,000 Hondurans working in the United States, more than double the total revenues brought in by coffee and banana exports.

– Brazil received a total of 2.6 billion dollars in remittances in 2002.

– There are no official estimates of remittances in Venezuela, a country that has traditionally drawn many immigrant workers. It is the only Latin American nation that figures on the World Bank list of the 20 largest sources of remittances in the world. The list is headed by the United States, and Venezuela ranks 19th, ahead of Norway.

– Chileans living abroad sent home 181 million dollars last year.

– Uruguay, a country of just 3.3 million which has experienced a growing outflow of emigrants in the last few years of economic crisis, received 40 million dollars from people living abroad last year, in the form of money as well as on-line food purchases.

– The remittances sent home by Paraguayans abroad averaged 150 million dollars a year up to 2001, but dropped to 98.7 million in 2002. The total so far this year is just 24.5 million, due to the depreciation of the local currency in crisis-stricken neighbouring Argentina, where many Paraguayan immigrants live and work.

– Mexican remittances are on the rise. In the first seven months of this year, they ran to 7.2 billion dollars, 30 percent up from the same period in 2002.

* Mario Osava (Brazil), Humberto Márquez (Venezuela), José Eduardo Mora (Costa Rica), Raúl Pierri (Uruguay), Alejandro Sciscioli (Paraguay), Gustavo González (Chile) and Marcela Valente (Argentina) contributed to this report.

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