Donors Plan Central America's 'Transformation'

By Abid Aslam, IPS, 24 May 1999

WASHINGTON, May 24 (IPS) - Donors and creditors are holding talks this week on Central America's 'reconstruction and transformation' following the devastation of Hurricane Mitch.

More than 9,000 people were killed and millions were rendered homeless when the storm struck last October. Entire crops were wiped out and towns remain without basic services such as water and electricity. Roads, bridges and ports were destroyed, bringing commerce to a standstill throughout the region.

The 'Consultative Group for the Reconstruction and Transformation of Central America' meets in Sweden Tuesday through Friday. The Washington-based Inter-American Development Bank (IDB) assembled the group here last December and is leading this week's sessions.

Donors and creditors aim "to foster sweeping reforms in the region to rebuild its economies, strengthen its democracies and overcome its legacies of poverty and inequality" in Honduras, Nicaragua, Guatemala and El Salvador, according to an IDB statement.

They also are considering aid for Costa Rica, which opened its borders to thousands of refugees after the hurricane.

In December, the group pledged some 6.2 billion dollars in humanitarian aid, moratoria on old debt repayments, and new loans.

That is roughly what it would take to restore the countries to their condition before Mitch struck, according to Miguel Martinez, the IDB's regional manager.

"If you had an obsolete water-treatment plant before Mitch, this would be enough to let you replace it with another equally obsolete one," Martinez says. "What is actually needed is much higher."

This week's negotiations are being held behind closed doors as international and Central American non-governmental organisations (NGOs) seek to open the 'transformation' process to broader participation.

That is a daunting task. "Donors are open to local groups' input on local priorities and projects but no one's really interested in letting them set national development priorities," says Geoff Thale of the non-governmental Washington Office on Latin America.

As a result, demands for progressive reforms in land ownership, domestic credit, and wage policy likely will be given short shrift, officials and observers warn.

Rather, negotiations are being based on national reconstruction plans drawn up by each government, says Martinez.

"A number of donors consider the plans too general and short on substance in the key areas of transparency, participation and environmental sustainability," says Thale.

"Many citizens' groups get to meet with their governments and say what they think but it all goes down a black hole," he adds. "Donors have heard complaints about this and should call for very specific mechanisms to ensure that reconstruction plans are transparent and based on partnership with civil society."

The Nicaraguan government withheld its plans from the public until early this month, when it was ready to submit them to donors and creditors. Honduran groups did not see their government's proposals until officials at the IDB handed them a copy during talks here last month.

Although that has donors worried, "they're going to pump in more money than Central America has seen in years and more than they're likely to see in years," says Thale. "Governments and civil society alike will be stretched" to manage the influx of funds and expectations.

While donors are pushing for more grassroots participation, they have made it clear that there will be no change in the official vision of development as a means to integrate the countries into global markets in goods, services, and finance.

"We want to prepare the countries of Central America for the competitive global economy of the 21st century," chief U.S. delegate and Undersecretary of State Stuart Eizenstat declared at the consultative group's December meeting.

The US Senate last week approved almost one billion dollars in relief and reconstruction assistance but the administration of President Bill Clinton has not been able to offer the region trading privileges equal to those enjoyed by Mexico under the North American Free Trade Agreement (NAFTA).

'NAFTA parity' has been a key demand of Central American leaders and "needs more attention," says IDB President Enrique Iglesias. "These countries need special treatment."

Also high on the agenda are reforestation programmes and other environmental measures to reduce the countries' vulnerability to natural disasters, says Robert Kaplan, regional environmental chief at the IDB.

All of which will cost money. Officials at the International Monetary Fund (IMF) say they are taking into account the hurricane's devastating effects in setting public-spending and other macroeconomic targets with affected governments - but add that fiscal and monetary discipline must be maintained.

Maximum flexibility will be needed if the countries are to meet increased social needs and, in the longer run, improve health, education, unemployment and other 'social safety net' programmes, says Lionel Nicol, the IDB's chief of social programmes for Central America.