April 1, 2019
Trump is a child. But, U.S. Foreign Aid to Central America DOES need serious re-evaluation
Trump announced over the weekend that he was suspending aid to Honduras, Guatemala and El Salvador because those governments were not doing enough to stop emigration. Does it matter? The symbolic weight of the announcement is significant. By playing to the two greatest shibboleths of the right-wing when they think of other countries (foreign aid and immigration), Trump’s tantrum continues to lower the bar on rhetoric. However, what it will actually mean to people in Central America is probably not much.
The amount of money at stake, mentioned in several media accounts, is $700 million. Though exactly how they came to this figure is hard to know. U.S. foreign aid obligations to these three countries in fiscal year 2018 totals just $142 million (Guatemala $66 million, El Salvador $46 million, Honduras $30 million). These figures are already significantly cut from fiscal year 2017 when obligations totaled $556 million (Guatemala $257 million, El Salvador $118 million, Honduras $181 million). Combining fiscal years 2017 and 2018 gets one to $700 million, but certainly most of 2017 has been delivered already, and much of 2018 assistance has already been contracted. So, exactly what is going to be cut is far from clear. Indeed, embassy staff don’t even know what Trump means.
Cutting foreign aid does not reduce the flow of money to governments by much. Why? A lot of foreign aid never even leaves the U.S. It is transferred from the accounts of a U.S. government implementing agency to a U.S based non-governmental organization, or Department of Defense contractor. Some portion eventually makes it to the country in question when program expenditures are made on-site. However, the only money that governments in the region are likely to touch is security assistance. Of course, depending on the program they may not even get to control this (if the contract is for police training, for example, the government may have to expend its own resources to participate in the program - the actual trainers are paid through a contract with a U.S. entity). At the end of the day, World Vision and Catholic Relief Services (and the people they directly serve) will lose more money than the government of Guatemala, assuming anything is actually cut.
Which brings us to another irony of foreign “aid.” Receiving countries often expend more of their own resources to participate in these programs than the U.S. government does. In 2014, following a peak in unaccompanied children migrating to the United States, the governments of Central America and Mexico announced the “Alliance for Prosperity.” The idea was to increase public and private investment in southern Mexico and the “Northern Triangle” as a means to create jobs and thus offset pressure to migrate. The governments of the region pledged far more than the United States did. The U.S. government ultimately failed to live up to the commitment made by the Obama administration and, as we can see, prior to this weekend’s Trump tantrum, had already cut foreign assistance to Central America by nearly 67%.
Total investment over the five years of the plan was initially set at $22 billion, most of it coming from host governments. The United States promised to provide $1 billion per year over five years, but in 2016, total US funding for all of Central America was shy of $750 million. The US government counts funding for development, military assistance, and the continuation of the Central America Regional Security Initiative, which is Washington’s anti-narcotics strategy in the region, as part of the Alliance for Prosperity.
U.S. foreign “aid” is often little more than a subsidy to U.S. companies. In December, a $10 billion package of “aid” was announced, $4.8 billion for Mexico and $5.8 billion for Central America as part of the Alliance for Prosperity. None of it was aid in any traditional way of thinking about development assistance. It was all investment guarantees from OPIC:
The U.S. Overseas Private Investment Corporation “is prepared to invest and mobilize $2 billion in additional funds for projects in southern Mexico that are viable and attract private sector investment,” according to the statement. “This amount is in addition to the $2.8 billion in projects for Mexico through OPIC’s current investment pipeline.”
To be clear, this is not money going to a country's government, but an investment guarantee to a U.S. company or partner corporation, to alleviate any risk from investments in Mexico and Central America. Of course, the debt accumulated through OPIC loans, should anything go wrong, will become the public debt of the countries in the region. This is capitalism at its finest (socialize risk, privatize gain). As this money is going to U.S. companies and regional partners, none of it is likely to get cut.
Which brings us back to the questions, what did Trump cut exactly, and does it matter? The answers seem to be: No one really knows for sure, and probably not much.
When the Alliance for Prosperity was first announced, many saw it as a backdoor to revive the failed Plan Puebla Panama (PPP) investment corridor; a mammoth investment program to create transportation and energy networks in Central America to ease the entry of extractive industries. Seeing the PPP as a path to even more pillage, people of the region resoundingly rejected it in 2003-4. However, the implementation of the U.S.-Central American Free Trade Agreement, U.S. security regional initiative CARSI, and the more recent Alliance for Prosperity all add up to the same neo-liberalization at the point of a gun that the PPP represented. The same instantiation of capitalist relations that people are fleeing (poverty and violence). The same political configuration that keeps the wealthy in power in the Northern Triangle and keeps investment channels open. Trump is not touching this.
Rather, it appears Trump is cutting food aid and police training. Indeed, beyond virtue signaling to his base, he may not even be doing this. However, in criticizing this move, whatever it actually turns out to be, we must also be careful not to celebrate U.S. foreign aid as a solution to dealing with the “roots of migration.” As formulated over the years, it is often part of the problem.