Abstract

Foreign aid is a post-war phenomenon which was introduced to help the Third World countries to escape from the underdevelopment and poverty. The paper argues that foreign aid programmes originated as part of the ideological confrontation known as the Cold War and that the motives behind aid were always more political than economic. The objective of this paper is to portray foreign aid as the mechanism which explains the relationship between the rich and the poor nations in the world today, in other words, the paper explains the relationship between the Official Development Assistance and the level of development. The research is explanatory in nature. Both social and economic indicators were utilized to investigate the research problem. Because of the limited time factor, the immediate focus of the analysis was on Guatemala and Peru as case study. The study concludes that foreign aid retards and distorts the process of economic development of the recipient countries and results in dependence and exploitation. It also replaces domestic savings and flows of trade. It seems clear that most countries are economically dependent on the rich. Furthermore, in many ways the working of the international capitalist economy clearly intensifies the condition of dependence. Giving aid for development seems almost the exact reverse. Power does play a part in the relations between the rich and the poor. Turning to the future, foreign aid programmes are bound to change to reflect the new realities of global international relations.