SANTIAGO, 5 January 2009: Of the trillions of dollars in assets circulating in international financial markets, according to OECD data, less than 1 per cent is actually used for development assistance, says Jorge García-Arias, professor of the University of Leon, Spain, in his article International finance and development: Opportunity or menace?, published in CEPAL Review Nº 96. (CEPAL is the Spanish name of ECLAC, the Economic Commission for Latin America and the Caribbean).
The article examines private capital flows, official development assistance, and external debt. García-Arias maintains that an additional 50 billion US dollar at least are needed in order to meet the Millennium Development Goals. Achieving them requires large-scale reforms of the international financial system and the instruments and mechanisms for financing development.
The sheer magnitude of financial market transactions has intensified the interconnections of national banking, monetary and financial systems, says the author. However, the connection between international finance and development faces a number of threats.
In this scenario, Official Development Assistance (ODA) could serve to compensate this imbalance and fill the gaps left by private initiatives. ODA has evolved favourably over recent years, but several problems persist: its low total amount, structure and composition, its volatility and high degree of spatial concentration and conditionality.
García-Arias suggests reforming the international financial architecture through which private capital flows, fulfilling commitments to allocate 0.7% of world GDP to ODA, reforming ODA instruments, and rebalancing its management in order to favour association more than aid from donor to recipient countries.
Lastly, he proposes implementing innovative mechanisms for financing development, specifically, the International Finance Facility (IFF) and supranational taxes.
The article International finance and development: Opportunity or menace?, published in CEPAL Review Nº 96, is available only in Spanish following the link:
http://www.eclac.cl/cgi-bin/getProd.asp?xml=/publicaciones/xml/6/34916/P34916.xml&xsl=/revista/tpl/p9f.xsl&base=/revista/tpl/top-bottom.xsl
