Global Policy Forum

The Spirit of Monterrey

Foreign Policy Association
March 28, 2002

As donor nations and recipients gathered in Monterrey, Mexico last week for a United Nations conference on aid and development, increased pledges from rich nations were overshadowed by a shift in thinking regarding the way aid is distributed to poor countries. What emerged from the conference is the so-called "Monterrey Consensus," a partnership that rewards good governance, solid economic policies and legal structures with increased aid and trade initiatives. Although the United States surprised many in the development community by pledging to dramatically increase its foreign aid, several observers remain critical of the U.S. initiative for failing to address specific needs, such as debt relief and global health. The resolve of the consensus will soon be tested as meetings begin for the New Partnership for African Development in Abuja, Nigeria. "It will be weak if we fail to implement it," said UN Secretary General Kofi Annan, who has set forth an ambitious agenda to cut poverty in half by 2015. "But if we live up to the promise it contains, and continue working together, it make mark a real turning point in the lives of poor people all over the world."

Islands of Abundance

The number of people living in poverty around the world presents the strongest case for making aid distribution more efficient. Roughly 1 billion people live on less than one dollar a day, while more than half of the entire world's population lives on less then two dollars a day. In order to combat these numbers, the United Nations claims it will need an additional $50 billion added to its coffers if it is to reach Annan's ambitious goal of cutting poverty in half by 2015. "Without additional resources, we will not meet the development goals," said World Bank President James Wolfensohn, in a BBC report. As head of the World Bank, Wolfensohn has come under intense scrutiny for his management of development funds, which have often failed to "turn deep political backing, world-class brainpower and billions in funds into good results," according to Daniel Altman of the New York Times. However, his call to action in Monterrey was well received, and reform for one of the world's two largest lending institutions seems imminent.

While the impact of September 11 is still resonating throughout the Western world, the linkage between poverty and terrorism was a theme that many of the Monterrey delegates were willing to explore. United Nations General Assembly President Han Seung Soo quoted Mexican poet Octavio Paz in saying that rich nations should no longer act as, "islands of abundance in an ocean of universal misery," noting that such behavior would turn poor nations into "the breeding ground of violence." A keynote speech from U.S. President George Bush also noted the relationship between poverty and terrorism. "We fight against poverty," he said, "because hope is an answer to terror." Others, such as French Prime Minister Jacques Chirac, found hope in the vast amounts of funds and resources the U.S. has made available to fight the war on terrorism, according to a report from Le Monde. "What can be done against terrorism can surely be done against poverty, in the name of a more human, manageable globalization," he said.

Still, the international community has been less than generous in its efforts to battle poverty. "For nearly 20 years the situation has remained unchanged," said a report from Radio Netherlands. Aside from Denmark and the Netherlands, "Virtually no wealthy nation currently meets the target set by the member states of the United Nations in 1970, which calls for 0.7 percent of a country's Gross Domestic Product to be spend on development assistance." The U.S. currently spends 0.1 percent of its GDP on foreign aid, down from 0.2 in 1990.

Not a Hollywood Step

Seemingly out of nowhere, the Bush administration has finally entered the renewed discussion on foreign aid. "The U.S. is finally waking up from a 20-year sleep in the development field," said Harvard's Jeffrey Sachs in the Financial Times. "We can forgive them for not knowing everything that has been happening during their slumbers." Followed by several comments from U.S. Treasury Secretary Paul O'Neill calling into question the efficiency of foreign aid spending, Bush's unannounced $5 million annual increase came as a shock to many. "I think it is an expression of a new mood both in the administration and in the Congress that it is in America's self-interest as well as in the moral and ethical principles of the United States to increase aid, to open trade and to give assistance to countries in building capacity," said Wolfensohn on PBS Online News Hour. "It is a remarkably good start." The Economist stated that the transformation in American foreign aid, "caught many people off guard," but that, "compared with the criticisms of foreign aid in general, voiced by Mr. O'Neill until quite recently, America is sounding remarkably generous."

Overshadowing the increase, though, was the dialogue created by the U.S. and Europeans regarding how aid gets distributed. The funds pledged by the Bush administration, which still must pass through Congress, are tied to political and economic conditions that must be met by recipient nations. "Just as it is right to increase aid to effective governments, it may be wrong to send aid to dysfunctional ones," writes Sebastian Mallaby in the Washington Post. President Bush spelled it out even more clearly. "Liberty, law and opportunity are the conditions for development, he said. "Without the right conditions, no amount of development aid is ever enough." More controversial was Bush's determination to associate trade with development aid. Citing dramatic improvements from trade and investment in countries such as China, O'Neill claimed that the world's dispossessed would not rise from poverty simply through welfare. "Last year, private companies invested as much in China as the UN spent on development aid worldwide," he said. "If we are going to have real economic development in the world, most of that will come from capitol going into countries to create private enterprise that creates jobs, that create higher levels of living." Maria Livano Cattaui, secretary-general of the International Chamber of Commerce, agrees. "If the world's poor are to break out of the poverty trap, aid must be a catalyst to stimulate business enterprise, economic growth and wealth creation," she wrote in the International Herald Tribune.

A Chorus of Criticism

The conference did not escape criticism from the large number of observers and nongovernmental organizations present in Monterrey. The Bush administration's insistence on linking trade with development drew harsh words from many partners who pointed to the recent tariffs imposed on steel imports- as well as domestic subsidies for agricultural exports. Some reports claim that the U.S spends six times as much on subsidies than it does on aid. "It is no good helping dairy farmers in a country, if at the same time, you are exporting subsidized milk powder to it," said Annan.

Nor did the fact that the U.S. continues to use aid to advance its self-interest escape public scrutiny. While the U.S. is demanding, "better value for the money currently being spent," according to The New Yorker's John Cassidy, defining that value is something that needs to be looked at. "The United States is one of the world's biggest offenders when it comes to doling out aid according to political priorities, rather then directing it to where it will be best used," writes Cassidy. Israel remains the number one recipient of American foreign aid overall, while Egypt is the top recipient in the "developing world." Pakistan is also set to receive hundreds of millions in "unrestricted budgetary support" according to a report in the New York Times, as well as billions in debt relief -- leaving other poor nations wishing they had a role in the war on terror.

The failure of the conference to discuss specific issues related to aid, such as debt relief, also angered many activists and nongovernmental agencies. "Aid has monopolized everyone's attention because there has not been any progress in other important areas – the lack of solutions to the debt problem or the missing commitments to reform the unequal trade and international financial systems," said Belen Vazquez, an ActionAid campaigner in Monterrey to the BBC. William Minter, a senior researcher at Africa Action in Washington said in an interview with the Foreign Policy Association that "in the whole process leading up to Monterrey, debt was one of the major foci as well as other measures intended to mobilize finance, but it has been reduced to a fairly token commitment and there certainly is no new agreement, no new initiative on debt on the table at Monterrey." An editorial in the Irish Times also pointed out the conference's failure to address debt – a crucial challenge to development in the world's poorest nations. "Progress at Monterrey on the reduction of debt, which has crippled the economies of third world countries, was disappointing," it said.

Others, such as Africa Action's Executive Director Salih Booker, would have liked to see more specific issues, such as health, on the conference agenda. "Monterrey unfortunately seems more focused on the issue of how much aid should rich countries provide poor countries, and on what terms - in terms of better governance," Booker told the FPA. "They are not really prioritizing for Africa the critical issue of full funding for the UN Global Aids fund." The Global Aids Fund, created by Kofi Annan the pandemic as well as other health challenges throughout the world, is unable to provide half of the requests it has received from developing countries this year, according to Reuters report. Test Run

Many of the challenges coming out of the Monterrey conference will be put to the test as early as this week during the initial meetings for the New Partnership for African Development. NEPAD, as the initiative is known, is a partnership between the United States, Britain, Nigeria and South Africa that hopes to reform the way aid and development are implemented throughout Africa. Under what is being called a modern-day Marshall Plan for the continent, nations that adhere to the code of good governance and responsible fiscal policies will be eligible to receive a slice of the $64 billion needed each year to "ensure sustainable growth," according to the mission statement released by the African Union.

However, recent developments in the region, primarily the controversy surrounding the legitimacy of the reelection of President Robert Mugabe in Zimbabwe, threaten to undermine the initiative. "Here we need to address the issue of freedom, or lack of it, and on what basis we may judge the leadership of African countries," said Nigerian President Olusegan Obasanjo. "What happens to countries who are judged to fail to adhere to them? What role should our development partners play in the process? Should they be bound by the codes?" he asked. Solidarity expressed by African leaders with Mugabe have prompted U.S. officials to threaten a withdrawal from NEPAD, which would kill the initiative before it gets off the ground. If NEPAD is to achieve its goals," said an editorial in Nigeria's This Day, "it must be popularized and collectively implemented as no European or American or any non-African will do for Africa what Africans refuse to do for themselves." This same kind of self-evaluation could apply all developing nations if the Monterrey Consensus is adopted as the new method for distributing foreign aid.

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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.