LATIN AMERICA:
The Use - and Abuse - of Development Aid
Alberto Mendoza*

GUATEMALA CITY, (IPS) - Hundreds of millions of dollars in foreign aid flows into the poorest countries of Latin America every year. But the money does not always reach its destination. For that reason, governments and civil society organisations have begun to apply new mechanisms to guarantee transparency.

Public accountability and a major increase in the quantity and quality of development aid and financing are among the goals of the Global Call to Action Against Poverty (GCAP), which is carrying out a Sept. 16 - Oct 17 month of action worldwide under the theme Stand Up Against Poverty.

Events scheduled around the world will culminate in the commemoration of the International Day for the Eradication of Poverty, on Oct. 17.

In Nicaragua, one of the poorest countries in the hemisphere and one of the biggest recipients of development aid in Central America, public funds and foreign aid are overseen and monitored by several institutions that use special software and can take action under laws against corruption, Haydeé Acosta, director of the governmental Office of Public Ethics, told IPS.

But donors did not begin to implement accountability measures for development aid until after civil society and the media launched anti-corruption campaigns, triggered by the scandal in which former president Arnoldo Alemán (1997-2001) was sentenced to 20 years in prison for embezzlement and other charges.

Teófilo Jiménez, with the anti-corruption programme of the non-governmental Ethics and Transparency Civic Group, the national branch of the Berlin-based Transparency International, said government oversight of foreign aid is still weak in Nicaragua.

Although Ethics and Transparency is not aware of any current ongoing cases of corruption, Jiménez said "there is a perception that most of the aid is squandered or goes to wages and perks for the employees and advisers of high-level officials, and never reaches the projects it is to go to."

That view is supported by the fact that Nicaragua failed to improve its position on the Transparency International "Corruption Perceptions Index". "In the 2005 report, we had a rating of 3.6 out of 10, and in 2006 it was 3.7, which meant the perception of corruption" barely changed, said Jiménez.

Furthermore, last year the government acknowledged that more than 12.5 million dollars that were to go towards poverty alleviation were used to hire 60 local and foreign advisers in different public offices.

Last year, the World Bank and Inter-American Development Bank (IDB) questioned the use of funds in several road construction projects, because of administrative shortcomings. The funds were temporarily suspended, but were disbursed this year.

Among the mechanisms created to ensure transparency in the use of funds is the Caja Única del Estado, created in 2002 to channel all foreign aid, which in the past was sent to the different public institutions. Another is an integrated system of administrative financial management and auditing, which allows oversight and monitoring of the budget in real time, according to official sources.

In Bolivia, on the other hand, the anti-corruption mechanisms adopted are participative. The National Social Control Mechanism, a body providing for citizen oversight of public administration, was created in 2002, the representative of that institution, Juan José Diez de Medina, explained to IPS.

The new mechanism, in which professional associations, trade unions and non-governmental organisations (NGOs) all participate, was created thanks to a law that emerged from a national debate on the proper use of state funds and the fight against poverty, with the support of the Catholic Church.

Passed in 2001, the new law, number 2231, established "the right of civil society organisations and institutions to be informed of, oversee and evaluate the results and impact of public policies and participative decision-making processes, as well as the right of access to information and analysis on social control instruments."

The initiative was backed by the 314 municipal governments that were functioning in the country in 2002, and civil society representatives were elected shortly thereafter. Bolivian citizens took on a new oversight role, focusing their attention on procurement of goods and services and on the implementation of social projects.

However, provincial public offices have reduced their participation in the social control mechanism, which has a stronger presence in rural areas, where representatives of trade unions and small farmers’ associations keep a close eye on the municipal governments.

One of the mechanism’s highest profile actions was to accuse the second administration of Gonzalo Sánchez de Lozada (2002-2003) of diverting funds from international lenders earmarked for the fight against poverty to reserved expenditure.

In Guatemala, the auditing of foreign aid is especially complex since NGOs handle around 535 million dollars a year, equivalent to 30 percent of the state budget, according to figures from the Comptroller-General’s Office, which is charged with overseeing the proper use of public funds.

Conrado Monroy, an adviser to the Comptroller-General’s Office, estimates that 30 percent of the funds in the hands of NGOs go towards purposes that have nothing to do with development. But the Office only has the authority to audit NGO accounts in the case of funds that have come from the state or public collections.

One example of this kind of corruption occurred in the municipality of San Diego, in eastern Guatemala, one of the poorest areas in the country, where several U.S. NGOs are involved. Monroy said the NGOs were billed for river dredging and road paving projects that were never actually carried out.

The destination of foreign aid funds and their impact in Guatemala are overseen by both the Comptroller-General’s Office and donor agencies.

The Spanish International Cooperation Agency (AECI), which will invest around 15.2 million dollars in the country this year, and as much as 31.5 million dollars next year, operates by opening a joint bank account with its local counterpart, where it deposits the funds for the project to be carried out.

Every month, AECI officials evaluate whether the project is going ahead according to plan, study the bills and receipts that have been presented, and authorise the withdrawal of new amounts from the account.

Francisco Sancho, the head of Spain’s Technical Cooperation Office, said he had "no doubts regarding the transparency of the aid," and that the "majority of the Guatemalan counterparts and ministries fulfill the work plans."

In 2002, the Coalition for Transparency was created by Acción Ciudadana (Citizen Action - the local chapter of Transparency International), the Chamber of Commerce, and representatives of academia.

The Coalition’s biggest achievement was to get the administration of President Óscar Berger, of the conservative Great National Alliance, to adopt a minimum agenda for transparency in 2004, which according to Coalition coordinator Mayra Palencia "is moving forward slowly, but is moving."

Manfredo Marroquín, director of Acción Ciudadana, said "the Comptroller-General’s Office is part of the problem"of lax oversight of funds.

But Marroquín also pointed to progress made towards transparency, like the use of the Guatecompras system. Since 2004, more than 90 percent of public institutions use this Internet-based contracting and procurement information system, which allows public access to information.

However, Guatecompras cannot prevent corruption on its own, since overseeing the more than 30,000 public contracts and procurements a year goes beyond the capacity of organisations like Acción Ciudadana.

* With additional reporting by Franz Chávez (Bolivia) and José Adán Silva (Nicaragua).