Aid to Central America Rewards Bad Behavior

You get more of what you subsidize: failed states and waves of emigration
April 8, 2019 Updated: April 10, 2019

A Guatemalan congressman once shared with me that NGOs in Central America deny or are reluctant to report development achievements, fearing that, should they succeed, their funding will stop.

Herein lies the destructive impact of taxpayer-funded foreign aid. If there is money flowing, without private accountability, suddenly everyone has a problem and no incentive to fix anything. Being a Third World nation is as much a boon for people with the right connections as it is for First World workers who enjoy cushy roles and live in gated communities in exotic locations.

Perhaps sensing this recurring problem, the Trump administration recently cut $450 million in aid to the Northern Triangle: El Salvador, Guatemala, and Honduras. The straw that broke the camel’s back was their unwillingness to curb the vast flows of illegal migrants and drugs to the United States, manifested in waves now known as migrant caravans.

Not only have these nations not curbed the flows, their immense corruption, lawlessness, extortion, and violence drive more people to join the queue north. On corruption alone, aid there should have been suspect. All three are comfortably in the bottom half of Transparency International’s ranking of corruption perceptions, with El Salvador the least worst at 105th out of 180 ranked nations. The United States and Canada are 22nd and ninth, respectively.

The migrants know the risks—death, rape, and disease along the way—but even a glimpse at life in the United States is enough of an allure. The Train of Death, a network that works throughout Mexico, didn’t get its name for nothing, as highlighted by Pedro Ultreras in “La Bestia,” a 2011 documentary.

Economic Fundamentals

The rationale behind aid to Central America is that it would improve living conditions there, so residents don’t need to seek a better life abroad. Mark Jones of the Baker Institute at Rice University, for example, wrote that the “only effect [of Trump’s cut] will be to worsen the already dismal security and economic conditions … These worsened conditions will in turn push even more Guatemalans, Hondurans, and Salvadorans to embark on the arduous and dangerous journey to the United States.”

Although a well-informed scholar, Jones’s assumptions are incorrect.

Economic incentives dictate that you get more of what you subsidize. This is the fundamental law of supply: the higher the price of an item, the higher the quantity suppliers will offer, and vice versa—holding other factors constant.

In Central America and elsewhere, aid upholds not good governance but cronyism and corruption. Defense coordination, if we think in the broader sense of aid, does have a role in national security and can be utilized towards the rule of law. However, in general, foreign aid encourages dependence and is best left to private charity for emergencies.

As explained by the late, great economist Gary Becker of the University of Chicago, no nation has gotten rich on account of foreign aid or NGOs: “The foundation of economic development is the private sector.”

Piecemeal changes, the best one could hope for from aid, simply won’t suffice for stemming outward migration. Development economist Michael Clemens explained in a 2014 literature review, “Migration pressure only typically falls when [nations] grow past upper-middle-income status.” Initial development, beyond subsistence, can hasten departures, and he pointed to violence as more acute to migration waves.

Hijacked Funds

Giovanni Fratti, a prominent attorney in Guatemala, recently called for a complete halt to aid to Central America, not just the initial cut. He shared: “This decision, Mr. President, is fundamental in order for Guatemala to free herself from her tormentors … far-left NGOs and NGOs that receive money from USAID.”

Most U.S. taxpayer money to Central America, Fratti contended, has gone to socialists. They are devoted to divisive gender and racial politics and halting mining and infrastructure development. Many are rebranded Marxist guerrillas who fought on behalf of Fidel Castro in the 1970s and 1980s. The Guerrilla Army of the Poor created Guatemala’s Committee of United Campesinos, for example, which occupies land and violates property rights.

Everyone in Central America knows the drill: If you want aid money, you have to play nice and comply with social-justice parameters. This is a predictable outcome of politicized, feel-good aid not subject to scrutiny from private investors and lenders. If you are an open critic of the U.S. embassy and its progressive inclinations, for example, you can forget about aid for your cause.

Proud innovators and entrepreneurs—those with the capacity to bring the sort of development Central America needs—are not wasting their time with bureaucracy and political correctness. They are creating as much as they can amid a sea of aid that distorts the economy and rewards beggars. Entrepreneurs don’t need handouts or government loans but the rule of law, which doesn’t exist in Central America, along with free trade and foreign investment.

The tendency for aid to go to socialists isn’t new or unique to Latin America. Even on the home front, the National Endowment for Democracy awards grants to weak-kneed progressives such as the Global Americans NGO. Taxpayer dollars pay to promote a universal basic income for Central America to counter the supposed harm of automation. Such welfare pimps and Luddites are in no position to preach about economic development or the private sector.

As documented in the “The Latin Americans” by Carlos Rangel, Ernesto “Che” Guevara had the audacity in the early 1960s to criticize the United States for not delivering enough aid to Latin America. Even the hero of communists, who fought with the Castro brothers in the 1959 revolution, was ungrateful and wanted more generous handouts from the United States. It will never be enough. Meanwhile, we are waiting for his socialist paradise to arrive, as Cuba is running out of paper and Venezuela can’t supply electricity.

A half-century of U.S. aid has failed to deliver any meaningful respite to the economic and political failures of Latin America, exhibited by an endless line of people escaping. The burden of proof is on those who want more spending, since the United States is in no position to continue wasting money abroad.

Fergus Hodgson is the founder and executive editor of Latin American intelligence publication Antigua Report. He is also the roving editor of Gold Newsletter and a research associate with the Frontier Centre for Public Policy.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.