The recession and the changing face of aid

26 August 2010

The recession may have quickened a move to a new aid architecture with the emergence of new players, new directions and new types of aid. Traditional donors from the G8 have failed to achieve their commitments to give 0.7% of their gross national incomes, due in part to “severe constraints of public debt”. But despite the recession, new donors have emerged, and with them a shift to new patterns and ways of giving aid. Indeed the recession has demonstrated the durability of aid during hard times but has also added to its complexity. We now need to work even harder to make sense of that complexity and ensure that aid is considered as one small part of a more joined-up and transparent development agenda.

New directions and new players
Due South has previously discussed the growing relevance of Southern trade and aid and the bolstering effect of the recession. The emergence of new players is shifting the traditional flow of aid from North-South to South-South. China’s growing presence in Africa and other developing countries is well noted. But other countries are also playing an increasingly important role in providing aid to the developing world. Brazil, in particular, is 'fast becoming one of the world’s biggest providers of help to poor countries'. Its official annual budget for aid (according to the Brazilian Cooperation Agency) is calculated at US$30 million, although the Economist estimates Brazil’s foreign direct aid commitments to be more like US$1,200 million (a disparity that requires further exploration). In addition Brazil loaned $US3,300 million to developing countries between 2008 and the first quarter of 2010.

As with all bilateral donors Brazil is motivated in part by self interest: concerns about poverty’s contribution to conflict and global political instability, and its desire for greater prominence in global governance. Its growing role as a donor may increase Brazil’s ability to assert itself at the World Trade Organisation, the G20, the IMF and the World Bank. The Guardian claims Brazil’s funding for various UN agencies and humanitarian commitments in Gaza and Haiti point towards a heightened sense of global self-awareness.

Another explanation could be the desire to generate markets for its own products and exports. The Economist claims it is spreading ethanol technology to poor countries to create new suppliers and generate business for Brazilian firms – arguably a form of tied aid.

New types of aid
Like China, Brazil does not impose any 'western-style conditionality on its aid' and Brazilian law forbids giving public money to other governments. However, the nature of Brazilian aid differs to that of China. For example, Brazil is regarded as a donor more focused on social programmes and agriculture (in keeping with its domestic focus) rather than infrastructure projects, which are at the heart of China’s aid-giving strategy. Moreover, Brazil is thought to have a lot to offer the South in terms of expertise in areas of agriculture and agricultural research, social protection, and health.

The ODI is gathering more information about Brazil’s role in development cooperation, which is currently thin on the ground. This is particularly important as it has been touted as a global “model” for development cooperation. Understanding more about the nature of the aid Brazil and China offer is vital to understanding the implications of these new models of aid for the South.

Aid: here to stay?
The growing strength of South-South aid, bolstered by players such as China and Brazil, suggests not only that global development aid will continue but that it will do so within a new architecture. Although these new players appear to be growing in their generosity it is also important to consider their wider contribution to development. Aid alone is not enough.

The Center for Global Development’s Commitment to Development Index tries to place overseas aid in context by exploring the contribution of donors to development through multiple avenues: openness to developing-country exports; policies that influence investment; migration policies; environmental policies; security policies; support for creation and dissemination of new technologies as well as quality and quantity of aid.

Commitment to Development Index 2009

Source: Center for Global Development

A country that is generous in terms of volume of aid may simultaneously implement policies that work against the outcomes that the aid is trying to achieve – thereby reducing the value of that aid and its significance to the poor. The index highlights these contradictions by penalising countries that “give with one hand, but take away with another”. In 2009, the index focused on the world’s richest 22 countries. In the future, we can hope to see Brazil and China included on this list.

The arrival of China and Brazil on the aid “scene” will no doubt be watched with keen interest. Their role in forming a new aid architecture and its ramifications for the developing world should not be underestimated. Nevertheless China and Brazil’s wider contributions to development also require greater scrutiny.

 

The blog contains the authors’ personal views and does not represent the view of IIED. IIED accepts no liability for your use of or reliance on information found on the blog. IIED does not edit and is therefore not responsible for any comments, but reserves the right to review/remove any comment at any time. If you wish to report a comment for any reason, please contact us or flag the comment on the comments system. When using the blog and posting comments you agree to be bound by the terms of the IIED website terms and conditions (which includes the privacy policy), and you agree that any blog you submit or access is subject to the terms of the blog licence.