Aligning North-South Financial Flows With Sustainable Development: An Unfinished Agenda

May 2002
Citation:
32
ELR 10571
Issue
5
Author
Frances Seymour, Lisa Dreier, Lily Donge

One of the most significant outcomes of the 1992 Earth Summit in Rio de Janeiro was the sobering estimate of the financing needed by developing countries to promote sustainable development and the demand that northern countries dramatically increase concessional financial flows to the South. Agenda 21, the comprehensive plan of action produced by the Earth Summit, estimated that the annual cost of implementation in developing countries would be on the order of $ 600 billion and called for a major increase in official development assistance (ODA), stating that "for developing countries . . . ODA is a main source of external funding."1 However, participants in the United Nations (U.N.) Conference on Environment and Development failed to anticipate the dramatic shift in the landscape of development finance that actually occurred in the 1990s. Instead of significant increases in ODA, it has been private financial flows to developing countries that have boomed in the last decade.

The question to be answered in this Article is: what actions has the U.S. government taken to ensure that these North-South financial flows—particularly those originating in the United States—promote rather than undermine sustainable development? Agenda 21 fails to provide much explicit guidance regarding the goals or policies that developed country governments should undertake to ensure that private North-South financial flows promote sustainable development. Chapter 33 of the Agenda on "Financial Resources and Mechanisms" calls for funding to be provided "in a way that maximizes the availability of new and additional resources and uses all available sources and mechanisms."2 Those specifically mentioned include, among others, multilateral development banks and higher levels of foreign direct investment.3

[Editors' Note: In June 1992, at the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro, the nations of the world formally endorsed the concept of sustainable development and agreed to a plan of action for achieving it. One of those nations was the United States. In August 2002, at the World Summit on Sustainable Development, these nations will gather in Johannesburg to review progress in the 10-year period since UNCED and to identify steps that need to be taken next. In anticipation of the Rio + 10 summit conference, Prof. John C. Dernbach is editing a book that assesses progress that the United States has made on sustainable development in the past 10 years and recommends next steps. The book, which is scheduled to be published by the Environmental Law Institute in June 2002, is comprised of chapters on various subjects by experts from around the country. This Article will appear as a chapter in that book. Further information on the book will be available at www.eli.org or by calling 1-800-433-5120 or 202-939-3844.]

Frances Seymour is Director of the Institutions and Governance Program at the World Resources Institute in Washington, D.C., and also directs the Institute's International Financial Flows and the Environment Project.

Lisa Dreier is completing two master's degreesat the University of California, Berkeley, one at the Goldman School of Public Policy and the other with the Energy and Resources Group. She was an intern with the International Financial Flows and the Environment Project at the World Resources Institute from June to August 2001.

Lily Donge is a Social Research Analyst at the Calvert Asset Management Company in Bethesda, Maryland. She was a Research Analyst with the International Financial Flows and the Environment Project at the World Resources Institute until November 2001.

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