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Viewing cable 07BRASILIA617, FOREIGN ASSISTANCE TO MIDDLE INCOME COUNTRIES

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Reference ID Created Released Classification Origin
07BRASILIA617 2007-04-09 21:00 2011-07-11 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Brasilia
VZCZCXRO8990
PP RUEHRG
DE RUEHBR #0617/01 0992100
ZNR UUUUU ZZH
P 092100Z APR 07
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 8610
RUEHSO/AMCONSUL SAO PAULO 9592
RUEHRI/AMCONSUL RIO DE JANEIRO 4175
RUEHRG/AMCONSUL RECIFE 6493
RUEHME/AMEMBASSY MEXICO 2049
RUEHNE/AMEMBASSY NEW DELHI 0275
UNCLAS SECTION 01 OF 02 BRASILIA 000617 
 
SIPDIS 
 
AIDAC 
SENSITIVE 
SIPDIS 
FROM COUNTRY TEAM BRASILIA 
 
F FOR RTOBIAS 
WHA FOR A/S SHANON; PDAS SHAPIRO 
USAID LAC FOR AFRANCO 
MCC FOR DANILOVICH 
 
E.O. 12958: N/A 
TAGS: EAID PREL BR
SUBJECT: FOREIGN ASSISTANCE TO MIDDLE INCOME COUNTRIES 
 
 
1. (SBU) Summary.  Internationally, in recent years there has been 
an emphasis on directing foreign assistance to lower-income 
developing countries where the levels of poverty are generally more 
acute.  However, this approach may result in insufficient support to 
the development and poverty eradication efforts of Middle Income 
Countries (MICs).   Under current USG foreign assistance plans, 
Development Assistance funding would be eliminated in MICs such as 
Brazil, India and Mexico;  USAID missions in those countries would 
drastically decrease in scale and scope or even close down. This 
strategy may prove to have serious shortcomings in terms of 
engagement with large MICs, the overall impact on development, and 
achievement of the Millennium Development Goals (MDGs).  End 
Summary. 
 
2.  (U) Definition and classification of Middle Income Countries is 
not standardized, and there is no universally agreed definition. 
However, using most income-related criteria, including that of the 
DAC (between $826 and $10,065 GNI per capita) certain USAID-assisted 
countries such as Brazil, India and Mexico are generally classified 
as MICs.  In addition, these countries share the characteristics of 
large, populous countries with growing global power. 
 
3.  (SBU) There are many reasons why the USG and the international 
community should maintain its support, appropriately defined to this 
important groups of countries, inter alia: 
 
-- to contribute to the eradication of poverty. 
-- to forestall losing ground with respect to the social and 
economic progress that has already been achieved. 
-- to help MICs serve as regional development poles 
-- to support MICs contribution in the provision of international 
public goods such as peacebuilding, prevention of communicable 
diseases, financial stability and environmental sustainability. 
 
Poverty Eradication 
------------------- 
4. (U)  According to estimates by DFID,  by 2015, around two-thirds 
of those living on less than $2/day will be living in MICs 
(particularly in the larger ones) as will one-half of those living 
on less than $1/day.  Current development priorities that focus on 
low income countries do not sufficiently address this reality and 
the changing picture of poverty.  In addition, beneath aggregate 
growth in China, India, Brazil and other countries, there is 
evidence that spatial inequality may be rising.  Certain regions of 
these countries, like the Northeast of Brazil, would be classified 
as low-income if considered as an independent state.  Moreover, 
income inequality in MICs is widely perceived to be high, as 
measured by Gini coefficients, and to contribute to political unrest 
and social instability that in turn affect people's livelihoods and 
their capacity to contribute to sustained economic growth.  Recent 
evidence indicates that MDGs may well fall short in MICs, and thus 
throughout key regions like Latin America.  In Brazil, for example, 
a recent study traced progress on seven MDGs in the Amazon region 
and showed unsatisfactory progress.  Key indicators such as 
deforestation, HIV/AIDS, and maternal deaths all increased, instead 
of declining as projected. 
 
Preserving Hard-won Gains 
------------------------- 
5. (U) "Graduation" or progression to MIC status is not always 
maintained.  Movements from one category to another can take place 
in either direction.  DFID estimates that over the last 20 years, 38 
countries have fallen back from MIC to LIC status, with only 10 
managing to return to MIC status in subsequent years.  Changes at 
the national and international level may not be connected to 
improvements in people's well being.  These improvements are neither 
inevitable nor systematic, and sustaining such achievements is 
clearly not inevitable. 
 
Poles of Development 
-------------------- 
6. (U) Particularly in the case of Brazil, India and Mexico, the 
economic size of these MICs and their dynamism makes them an 
important driving force for their regions.  The international 
community can take advantage of this to help maximize the positive 
effects of its aid programs in each recipient region.  Clearly, 
developments in MICs are important for poverty reduction elsewhere 
and in terms of trade opportunities for low income countries. 
 
International Public Goods 
-------------------------- 
 
BRASILIA 00000617  002 OF 002 
 
 
7. (U)  The large MICs such as Brazil, India and Mexico have an 
increased impact on global issues.  For example, in areas such as 
health and infectious disease, energy security, climate change and 
conservation of globally important biological diversity, it is not 
possible for the international community to seriously engage on 
these issues without addressing the MICs. 
 
Comment 
------- 
8. (U) USAID should consider the need for a more considered approach 
to MICs overall, and in particular to the large MICs with growing 
global power. Other bilateral donors, such as the U.K., Germany, and 
Japan are scaling up their engagement with MICs, especially those 
considered to be regional development poles and key points of 
influence in the regions.   USAID should devise a coherent strategy 
for this group of countries, and devise appropriate, non-traditional 
methodologies for engaging with MICs, particularly emerging powers 
who have a critical role in successfully managing global public 
goods.  A strategy should accompany a deeper understanding of the 
interests of individual MICs, among them a desire to strengthen 
their role as emerging powers, secure access to technology and 
expertise, and garner support for mutually beneficial partnerships. 
Cutting off development assistance to save a relatively small amount 
of money may be counterproductive should this close off important 
channels of bilateral communication or starves models designed to 
address critical poverty and development issues on a national scale. 
 In particular, the USG may lose influence over decision making in 
critical areas (environmental protection and control of illegal 
logging in Brazil, for example) which would eliminate precisely the 
transformational diplomacy results that are our objective. 
 
CHICOLA