THE CHANGING DONOR LANDSCAPE IN NICARAGUA:

INFLUENCE ON DEVELOPMENT COOPERATION RELATIONSHIPS AND PRACTICES

Lauren Walshe-Roussel

International Development Research Centre

November 3, 2012

RESEARCH QUESTIONS AND METHODOLOGY

1) What influence are emerging donors having on the recipient government and traditional donors?

2) What direction does this influence suggest for the future of development cooperation in Nicaragua?

Multistakeholder approach comprised of interviews conducted in June-July 2012

BACKGROUND : INFLUENCE ON THE EXISTING AID SYSTEM

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• Emerging donors’ influence on the existing aid system is poorly understood

•‘Silent revolution in development assistance’ :

•Emerging donors are challenging the existing system and its development paradigm

• Common threads: donor distinctiveness, the donor divide

“Emerging donors are not overtly attempting to overturn rules or replace them. Rather, by quietly offering alternatives to aid-receiving countries, they are introducing competitive pressures into the existing system” (Woods, 2008; 17)

“Emerging donors are not overtly attempting to overturn rules or replace them. Rather, by quietly offering alternatives to aid-receiving countries, they are introducing competitive pressures into the existing system” (Woods, 2008; 17)

1) What influence are emerging donors having on the recipient government and traditional donors?

2)What direction does this suggest for the future of development cooperation in Nicaragua?

• Empowerment for recipient government

• Traditional donors re-evaluating their approaches

Competition vs. Cooperation?

• Donor engagement is desirable (Davies; 2008; Fues et al., 2012), but skepticism as to whether it is possible (Woods, 2011; Chandy and Kharas 2011).

BACKGROUND : COMPETITIVE PRESSURES &THE BALANCE OF POWER

NICARAGUA CASE STUDY: INTRODUCTION

Strong Donor Presence &Aid Dependency

Main Bilateral Actors at Present

Emerging donors: •Argentina, Brazil, China (Taiwan), Cuba, Korea, Mexico, Russia, Venezuela •Nicaragua = greatest recipient of bilateral south-south cooperation projects from Ibero-American states after El Salvador in 2010 (SEGIB, 2011)

Traditional donors: •Canada, EU, Finland, Germany, Japan, Luxembourg, Netherlands, Spain, Switzerland, (USA)

NICARAGUA CASE STUDY: INTRODUCTION

Nicaragua’s Changing Donor Landscape since 2006

FINDINGS: INFLUENCE ON DEVELOPMENT COOPERATION RELATIONSHIPS AND PRACTICES

Alternatives and Empowerment for the Government Nicaraguan government back in the driver’s seat of its development agenda,

Emerging donors facilitating this process

• National Human Development Plan for 2012-16

“Financing for Development” : Gvt. priority & reflection of available

resources

• Brazil – Hydroelectric plant, US$ 1,126 million• Mexico – Telecommunications,

US$ 405 million

• Venezuela – Refinery, US$ 3,939 million

• Diversified investment = fuel and leverage for

gvt’s development agenda

FINDINGS: INFLUENCE ON DEVELOPMENT COOPERATION RELATIONSHIPS AND PRACTICES Alternatives and Empowerment for the Government • Technical cooperation: enhancing the

government’s ability to manage its development priorities

• Venezuela – US$ 111.3 million to state administered social programs in the first half of 2011 alone (BCN, 2011; 11)

• Terms of engagement based on respect for national priorities

“the influx of funds has allowed Nicaragua to talk to the traditional donors in another way, because it no longer depends, in any kind of way, on what we do or do not want to fund”

Alternatives and Empowerment for the Government

“We cannot say ‘can we do this project, please sign here anymore’. And that’s okay.”

“We cannot say ‘can we do this project, please sign here anymore’. And that’s okay.”

“We were basically told ‘this is your money…we can talk about it, and if I agree and you agree, then let’s do it, and if not, just take your money home’. (…) This is a new attitude or a new strength of the government that they didn’t show before.”

“We were basically told ‘this is your money…we can talk about it, and if I agree and you agree, then let’s do it, and if not, just take your money home’. (…) This is a new attitude or a new strength of the government that they didn’t show before.”

• Donor pluralism has empowered the government to pursue a development agenda of its own on its own terms

• Resulting approach - foreign investment à la Washington Consensus - consensual cooperation priorities with bilateral donors

- state-led social programs that target the poor

FINDINGS: INFLUENCE ON DEVELOPMENT COOPERATION RELATIONSHIPS AND PRACTICES

Reality Check for Traditional Donors No change in traditional donor relationships with other bilateral

development actors• Traditional donors agree that impact of emerging donors in Nicaragua is huge• No cooperation/direct competition, but subtle & strong competitive pressures

spurred by emerging donors

Thinking about new development strategies• Strategic sectors that are consonant w/ national priorities (e.g. renewable

energy)• Public-private alliances, development component for private sector

interventions• Investment and exchange-based cooperation in areas like education• Triangular cooperation projects with objective to strengthen the aid delivery

capacity of Mexico (Japan-Mexico-Nicaragua)

FINDINGS: INFLUENCE ON DEVELOPMENT COOPERATION RELATIONSHIPS AND PRACTICES

“We (traditional donors) are less important...which is good, very good; but

this obliges us to use different instruments and to look to different sectors, strategic

sectors, for a different development cooperation context”

Breaking the Ice of Isolation

Traditional Donors Emerging Donors

FINDINGS: INFLUENCE ON DEVELOPMENT COOPERATION RELATIONSHIPS AND PRACTICES

“Making the link between bilateral donors is the single most important challenge for the development community in Nicaragua”

“We already know that we work differently (from traditional donors), that we are not competing. It would be good to have dialogue to potentially maximize development results and minimize costs.”

Discussion on inviting emerging donors to the donor roundtables

Demonstrated willingness to engage in cooperation beyond bilateral relationships with UN bodies

Initiative

Will

CONCLUDING REMARKS: BROADENING OUR UNDERSTANDING OF THE CHANGING DONOR LANDSCAPE Empowerment for Recipient Government• Modalities, principles & leverage of emerging donor cooperation→ ownership • Empowerment evinced by government’s ability to stand by its unique

development agenda, demonstrated by assertiveness with traditional donors

Reality Check for Traditional Donors• Traditional donors re-evaluating approaches, toward common ground w/

emerging donors

“Silent Revolution”• Constructive not disruptive processes – emerging donors present

opportunities for development as opposed to threats

Donor Divide• Increasingly blurry – unhelpful framework for capturing dynamic processes• Need to broaden and contextualize assessments of changing donor landscape