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US food aid contracts: what lies beyond aid?

Added 01/Aug/12

By Francesca Giubilo,

Is the real purpose of aid to eradicate poverty or is it just another excuse to allow rich firms to raise their own incomes and boost the economy of developed countries? Recent research conducted by the Guardian has assessed that two-third of the US food aid contracts are awarded to three of the biggest agribusiness companies. (Louis) Dreyfus; ADM, Bunge and Cargill, also known as the ABCD group, account for between 75% and 90% of the global grain trade, yet receive the majority of US food aid contracts.

So, what lies beyond aid? Food aid refers to a specific category of ODA aimed at reducing hunger and starvation either in the short term, through emergency operations, or in the long term. However, an Oxfam study which assesses the inefficiency of US food aid, points out that in 2010 it reached roughly 65 million people despite spending more than $2 billion. According to this research, US food aid would have been able to reach between 4.8 million and 7.3 million more hungry people if food was purchased locally.

Although the US is the largest provider of food aid, accounting for 56% of all food aid, it still uses its food aid programme as 'corporate welfare' for its own companies. US food aid is problematic as it relies on “in-kind” food and shipments from US suppliers, spending most of the aid on transportation and non-food items. A more productive and less costly alternative would be to procure directly from local and regional markets in the affected areas as that would not only provide food, but also boost the incomes of local farmers and suppliers.

Studies show that multiple benefits can be achieved through local and regional procurement in terms of timeliness and cost-effectiveness as well as boosting domestic resources, accountability and country ownership, which are the core issues of Eurodad proposals on aid effectiveness.

How much longer do we have to wait before donors change their mindset towards food aid and developing countries? Food aid should not be another channel to export agricultural surpluses and to pay back political favours at home, rather it should be a tool, whose main aim should be to help developing countries to be independent and to provide for their own people.

Despite some steps towards the reform, US efforts must decouple aid from narrowly defined national or sectoral interests if developing countries are to truly benefit from these financial flows. Time for change has come! No more excuses!