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New European Union development cooperation strategies in Latin America

Added 27 Jun 2013

A new report on Latin America by Eurodad partner networks – including CIFCA, Grupo Sur, ALOP and APRODEV – sheds light on some of the challenges created by the current trend of using ODA to leverage public and private finance.

At a time when European Union institutions are discussing how to improve their financing modalities under the work of the EU blending platform, this report discusses the growing role that financial institutions and the European private sector are playing in development cooperation policies between the EU and Latin America.

The Latin American Investment Fund (LAIF) – one of the regional facilities set up by the European Commission to channel development monies – aims to mix grants with loans from multilateral or bilateral public European development finance institutions, regional development banks and whenever is possible private loans. The LAIF is considered as one of the financial mechanisms designed to mobilise additional financing to support development, especially large infrastructure projects, but also small and medium enterprises under the ‘green economy’ model. 

This new report includes in-depth analysis of the issues, as well as the findings of four case studies. It also includes the opinions of members of the European Parliament and civil society representatives, including Eurodad, who participated in the event Aid to the private sector: promoting responsible investment? Latin America as a testing ground, which was held at the European Parliament on 21 March.

The main findings of the report include:

  • Risk of financial incentives outweighing development principles
  • Lack of transparency and public information available to allow for public scrutiny
  • Lack of opportunities for participation by local beneficiaries
  • Absence of minimum requirements for project selection
  • Absence of criteria for monitoring and evaluation, as well as strong and transparent social and environmental safeguards and mechanisms for accountability.

The main recommendations include:

  • Defining clear criteria and guidelines on transparency and access to information
  • Presenting projects with relevant and detailed information, such as objectives, financial scheme, expected impacts and relevance to LAIF’s strategic aims
  • Carrying out prior and informed consultation with the people directly, indirectly and potentially affected by the project.
  • Including European Parliament and civil society organisations representation as part of the LAIF Strategic Board and in the Policy Group of the new EU blending platform
  • Evaluation of projects should include fundamental criteria, over and above financial profitability, the potential impact of the project on poverty reduction and social cohesion
  • Projects should undergo a prior assessment of their impacts on poverty that identifies their beneficiaries, undertakes an analysis of the stakeholders, and clearly defines objectives and the aspects of poverty they are addressing, as well as expected results.

By publishing this report, civil society organisations are seeking to make a positive contribution to the current dialogue on the challenges faced by Latin American countries to finance key infrastructure for sustainable human development and poverty reduction. The report also reflects on the impacts that these new financing instruments will have on the environment and local communities, as well as outlining the possible conflicts they could cause in the future if no clear regulation, monitoring and evaluation mechanisms are put in place as they develop beyond the early formulation phase.

Read the full report here.

Watch the video European Investments in Latin America: are they responsible?