A New Development Deal for the Atlantic

The recent substantial rollback of the US State Department aid programs and USAID’s operations in Latin America, after six decades of activity, exposed deep structural dependencies and opened a critical window for transatlantic reinvention. It has also left a deep void. Social protection programs are abruptly halted, migration management disrupted, access to basic health services and food support diminished, and democratic institutions are more vulnerable. Long-standing efforts to address corruption, inequality, drug trafficking, and displacement are weakened, emboldening authoritarian regimes and opening an opportunity for the United States’ geopolitical rivals to step in. As the Washington Office on Latin America put it, the aid freeze has been an “exquisitely wrapped gift” to those who benefit from instability, whether they be criminal networks, autocrats, or global powers such as China.

This moment of upheaval, however, also offers a unique occasion to rethink the development model in Latin America and to reimagine a broader Atlantic partnership, one that extends beyond the United States and the EU. It is a chance for Europeans, Latin Americans, and other eager actors to develop a more balanced, inclusive, and politically sustainable framework, one rooted in mutual trust and shared strategic interests across all shores of the Atlantic basin. 

A Developing Development Landscape

The United States, under accounts managed by the State Department and USAID, allocated in 2024 over $2.4 billion in assistance to Latin America and the Caribbean (in contrast to the $3.4 billion sent to the region by EU member states in 2021, which makes the bloc the biggest donor to the region). The largest portion of American funds were committed to long-term development programs aimed at fostering economic growth, security, governance, and social welfare to promote regional stability, contain organized crime and narcotrafficking, and dissuade migration. Colombia, the region’s top recipient, relied heavily on US support for implementing its peace accord, promoting rural development, and supporting migrants. Other major recipients included Mexico and Haiti.

Much of the assistance was funneled through bureaucratic and donor-centric mechanisms that often fell short of local expectations, a criticism also commonly leveled at European and multilateral aid. Programs were designed in Washington, administrative overhead was often high (roughly 7%-10% of the aid budget), and in some regions, such as Central America, actual appropriations and on-the-ground disbursements were much lower than amounts originally pledged. Many projects still produced measurable benefits, while others failed to have a lasting impact on local capacity or ownership.

The United States may not be completely eliminating its development assistance—USAID’s withdrawal is partial, and American action will most likely be rechanneled through the International Development Finance Corporation, the State Department, and US-based NGOs—but European and Latin American actors must take stock of the current criticism around aid. They must build a new architecture for cooperation that benefits all concerned parties.

A Model Structure

For decades, the international aid system has faced four core criticisms: It is said to foster dependency, wastes resources through inefficiency, imposes donor priorities over local needs, and sidelines grassroots actors. These critiques are especially salient in Latin America. It is time for a development model that supports reforms in local governance, increased triangular and South-South cooperation, and private-sector mobilization. A new model must also offergreater coherence between development aid and developed countries’ policies that support international trade, tax, and regulatory frameworks restricting developing countries’ equitable participation in global markets. A new model must also promote stronger regional integration through close-knit collaboration between willing Atlantic partners and their Latin American counterparts.

European countries have a momentous opportunity to accomplish this. With its historical connections and long-standing commitment to multilateralism, the EU, in particular member states such as Spain and Portugal, with their linguistic, economic, and cultural ties, can help lead a shift from aid to co-investment, thereby widening perhaps the concept of official development assistance (ODA). (Spain is currently the second-largest state investor in the region after the United States.) Under this scenario, external assistance would more closely resemble a joint venture with public and private Latin American partners. Increased funding would be channeled directly to local actors (e.g., governments, NGOs, businesses), which would lead projects. Donors would assume supporting roles. This push should nonetheless continue to embrace the contributions of US companies and civil society organizations, and local and state actors.

Rather than offering conditional grants or externally driven programs, Europe can work with Latin American partners to build public goods, such as resilient health care systems, and increase access to digital infrastructure, climate-adaptation measures, and equitable education. Development should continue by promoting foreign direct investment in addition to ODA, but without depending on the US government as an intermediary. Additionally, multinational companies (European, Latin American, and North American) with a global presence could be brought into the fold through the creation of a Development Promotion Trust Fund for the Americas. Such an agency would raise capital from multiple public-and private-sector donors. It would rely on the support of initiatives such as the EU’s Global Gateway or Spain’s COFIDES to establish a common fund that blends grants, loans, and guarantees, using public funds to offer de-risking guarantees for private donors.

Funding should also be channeled through increased borrowing by regional institutions such as the Inter-American Development Bank, the North American Development Bank, CAF-Development Bank of Latin America and the Caribbean, and the Central American Bank for Economic Integration, thus continuing to mobilize private capital to advance public projects. Priority should be given to institutions where the current US administration has limited influence to reduce the risk of funds being blocked for political reasons. Considering that only 4.5% of the financing needs of countries from the region come from multilateral development banks, a target of funneling at least 10% of development funding through the regional banks by 2027 could be set. Additionally, through increased triangular cooperation, the development agencies of countries such as Brazil, Mexico, Chile, Colombia, and Peru should receive more external funding for regionally designed projects.

This approach would strengthen local ownership and shield partnerships from political backlash. UN agencies, such as the UN Development Program, the World Health Organization, the Food and Agricultural Organization, the International Organization for Migration, and non-UN bodies such as the Organization for Economic Co-operation and Development and the International Committee of the Red Cross (for humanitarian aid), would play crucial roles in supporting implementation. At the same time, Atlantic partners should continue to promote joint efforts to reform UN institutions, improving their efficiency, plurality, and capacity to deliver on the ground.This may also be the right moment to support ongoing UN efforts to revamp global commercial and tax architecture, and push for fairer, more coherent rules that enable developing countries to benefit from international markets.

Beijing at the Ready

As US development leadership retreats, China is expanding its presence in Latin America through strategic investments, including loans and infrastructure projects through state and private initiatives, such as COSCO’s stake in Peru’s Chancay port. Chinese state banks, such as the China Development Bank and Export-Import Bank, have lent over $120 billion to Latin American governments since 2005. Beijing’s growing clout has had tangible benefits for the region, but some projects have raised concerns over a lack of transparency, labor violations, environmental abuses, and producing “debt traps”. Still, the recent regional expansion of the Belt and Road Initiative, signed by 22 countries including Colombia, has been accompanied by increased access to soft loans and grants from the BRICS New Development Bank. This is an appealing potential alternative to traditional Western financing. In addition, the recent enlargement of BRICS+ and their “de-dollarization” plan reflect years of groundwork by Beijing and Moscow to foster a multipolar order through a network of ideologically aligned partners and a parallel financial system less reliant on the US dollar and euro. The Chinese yuan has meanwhile gained influence as a transactional and reserve currency.

Rather than try to compete on Beijing’s terms, the transatlantic community should offer a distinct alternative, one based on transparency, local agency, and long-term economic inclusion. Such an effort would not be new, but a gap between rhetoric and action has often existed. This has caused delays in concluding bilateral agreements and a pact with MERCOSUR. It has also caused slow disbursement of promised funds. An alternative approach would entail reforms such as open contracting to prevent kickbacks, rigorous social and environmental impact assessments, and oversight by civil society. It would also mean aligning development programs with democratic principles such as supporting free media, gender equality, and inclusion as cross-cutting priorities. Development would no longer be treated as a value-neutral business. 

In contrast to the direction set by the current US administration, Atlantic partners should continue to place Indigenous communities, descendants of Africans, women, and girls at the heart of development programs through participatory budgeting, territorial approaches, or culturally tailored co-investment mechanisms. A new, dedicated chapter of the EU’s Global Gateway initiative, with its plan to mobilize €300 billion worldwide by 2027, could provide a promising model. Its flagship program on sargassum sets a good example, combining joint research, investment, and capacity building to turn the recurring seaweed crisis into a catalyst for sustainable development in the Caribbean, and reflecting a partnership model based on shared priorities and regional ownership. Countries such as Germany, the Netherlands, Portugal, and Spain are well positioned to build sector-specific partnerships with Latin American entities that respect national development goals, advance shared global priorities, and respect donors’ interests. Given China’s rise, Europe should aim to complement or provide alternatives, not polarize. It can engage in areas such as climate finance or digital standards without resorting to zero-sum rhetoric, while leveraging its comparative advantages—trust, regulatory credibility, strong local partnerships, and its image as a benign political actor.

This renewed engagement must, however, be mindful of history. Contemporary EU-Latin America relations are grounded in mutual respect and multilateralism, but perceptions of paternalism linger. Acknowledging this legacy, without being paralyzed by it, is crucial to building trust. EU efforts to center local leadership, prioritize transparency, and avoid conditionality could serve not just as best practices but responses to lingering historical sensitivities.

The rethinking of transatlantic cooperation should also harness the often-untapped potential of local and regional actors. In the United States, subnational jurisdictions often steer climate diplomacy, migrant integration, and innovation when federal leadership lags. Europe has a similar strength. Spain’s city diplomacy networks and the EU’s commitment to regional partnerships, for example, offer concrete avenues for bottom-up engagement, echoing the work of initiatives such as the Arizona-Mexico Commission.

Civil society on both sides of the Atlantic should also be placed in the center. NGOs, faith-based groups, universities, and grassroots networks often have deeper ties, longer memories, and more credibility than national governments. Their involvement is essential to ensure that cooperation adapts to the real needs and aspirations of Latin American societies. Together, these actors can construct a more horizontal, inclusive, responsive, and truly transatlantic ecosystem. The US government may continue to dismantle most aid projects, but foreign aid remains highly valued by American society.

Supporting Democratic Resilience

One of USAID’s key contributions was its democracy work, its support for civil society, independent media, and democratic oversight mechanisms. Its withdrawal, as well as the defunding of the National Endowment for Democracy and the rollback by the private sector of programs such as Meta’s third-party fact-checking, has left many relevant organizations exposed, especially in countries where authoritarianism and corruption reigns. A more viable development model should diversify its donors and prioritize the strengthening of local infrastructure for democratic accountability. This includes electoral commissions, investigative journalism and fact-checking, judicial independence, and anti-corruption frameworks. There should also be a strong focus on pro-democracy programs that combat foreign information manipulation and interference, and that promote gender equality, goals and values that Europe and Latin America deeply share. 

Atlantic partners can play a leading role in this area through decentralized cooperation, including more structured information and practice sharing. City-to-city collaboration, peer learning among public institutions, and platforms under the EU-LAC Foundation or the Ibero-American General Secretariat can help build resilience without triggering political resistance. An early alert system or a center of excellence (CoE) to counter foreign information manipulation and interference (emulating NATO’s Hybrid CoE or the EU’s East StratCom task force countering Russian propaganda) are two options to explore. They could be brought under the EU-LAC Digital Alliance. Democratic principles can also be embedded, quietly but firmly, within broader agreements on trade, climate, and migration, as in Brussels’ most recent agreements with Mexico and MERCOSUR. Final approval and enactment of those agreements should constitute a political priority for the EU.

Conclusion

The near dismantling of USAID in Latin America is, without a doubt, a moment of profound loss. But it is also one of reflection. For Europe and all Atlantic partners, it represents an opportunity to move toward a shared framework based on co-investment, local ownership, and regional agency. It is a chance for Latin America and its allies to diversify donors, avoid duplication, rethink the concept and use of ODA, and harness complementary strengths.

If seized thoughtfully, this moment could lay the groundwork for a more balanced and forward-looking Atlantic partnership. The upcoming International Conference on Financing for Development in Seville in June provides a timely platform to bring this vision into focus and to start building a new era of collaboration. That era is one that Latin Americans help shape from the start, and one in which a forthcoming US administration could contribute to a pluralistic and resilient development ecosystem.

Rubén Beltrán Guerrero is a retired Mexican career diplomat and ambassador eminent of Mexico since 2017. He has held senior roles in the country’s foreign affairs ministry, including deputy secretary for Latin America and the Caribbean. He served as ambassador to Russia and Chile. He also worked with the World Intellectual Property Organization, as Latin America and Caribbean director, and the UN Industrial Development Organization, as director of planning.