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JSPES, Vol. 27, No. 1 (Spring 2002 )
p. 23-44

The Impact of Foreign Aid in Latin America

Omar Sanchez

The economic impact of foreign aid flows to Latin America (from 1974 to 1993) is examined empirically. Regressions are run to determine whether aid is invested or consumed and whether the consumption of foreign aid is reflected in indicators of human development (infant mortality, secondary school enrollment and life expectancy). However, no relationship is found between aid and improvements in human capital indicators. It is concluded that if continued aid to Latin America is to have a measurable economic impact a policy of selectivity (in the disbursement of aid) should be adopted. The merits of such a policy were recently acknowledged by the World Bank.