You can’t blame the guy for wanting to make a splash in the region after George W. effectively ignored Latin America for much of his presidency. Treasury Secretary Tim Geithner made his way to Medellin to support the IDB’s (Inter-American Development Bank) tripling of the bank’s capital for the region. Since 1959 the IDB has been tossing money at poverty in Latin America along with a host of others. Yet, like Africa, this money flows directly into government coffers, the same government coffers run by the usual suspects of waste and mismanagement that will remain un-named but unfortunately steer some of the region’s biggest economies.
External aid alone cannot engender economic growth or promote democratic institutions. Massive institutional loans like this simply distort the market and empower the status quo. Civic society groups, NGOs, and universities (depending on the country) typically occupy the front lines in the fight against poverty, yet their voices are all too often muzzled and kept at bay. With economic liberty and property rights being the primary drivers of development, how can bloated, inefficient government entities be expected to strategically appropriate aid money to the sectors and beneficiaries with the most experience and knowledge to implement successful programming in the field?
Not all is lost as there are some clear shining stars in the region. But it is major economies such as Venezuela, Argentina, and Mexico that could clearly use more aid money at a grassroots local level to stimulate development. Entrepreneurship and creating space for citizens to accumulate wealth works. Politically, Mr. Obama can get behind this, right?