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UN Development Program "Launders Money" in Latin America, Chart and Sources Say

Byline: Matthew Russell Lee of Inner City Press at the UN: News Analysis

UNITED NATIONS, April 2 -- The UN Development Program expends significantly more in relatively affluent Latin America than in Africa, a continent-wide analysis obtained by Inner City Press reveals. In 2006, over 90% of UNDP's $1.3 billion in expenditures in Latin America were so-called "cost sharing," in which governments give UNDP money in order to do procurement or pay salaries to people already in the government's employ.

   While being little more than a bookkeeper -- or money launderer, as several inside UNDP sources put it -- UNDP collects a fee for all funds it processes, and books it as income. The model has become attractive to UNDP's offices throughout Latin America, leading to UNDP tarnishing the UN's name by becoming involved in procurement scandals such as a current one in Venezuela. A week ago, Inner City Press asked UNDP a series of question which have still not been answered. On Wednesday, Inner City Press asked Ban Ki-moon's Deputy Spokesperson for the Secretary-General's comment on how UNDP under Kemal Dervis and Ad Melkert is making the UN appear. 

   Just last month, the head of the UN-affiliated World Bank, when asked about UNDP's attempt to attribute its greater expenditure in Latin America than in Africa to its supposed "processing" of World Bank loans, expressed skepticism. The answer for UNDP's disparity, the attached chart now shows, is UNDP's "cost sharing" programs.

            UNDP's questionable work in Latin America is not limited to countries like Venezuela, where in 2006 UNDP reported $34 million in "cost sharing." In Argentina in 2006, while spending less than $1 million in "regular resources" to promote development, UNDP processed over $268 million for the government. UNDP's Argentina web site, under the heading Acquisitions, vaguely lists much of its work as "NEX" -- the so-called national execution modality that got the agency into trouble in North Korea. There are also acquisitions of servers from CISCO, a supplier that UNDP sources say is not chosen competitively, but rather is actively promoted and favored by UNDP's country offices on instructions from UNDP Headquarters.

            In Brazil in 2006, while again spending less than $1 million in "regular resources" to promote development, UNDP processed over $227 million for the government. UNDP's Brazil web site was soliciting bids, for example, up to March 28 for 100 hotel rooms for a conference to take place April 7-8, 2008 (#758).

            Inner City Press is informed by Brazilian sources that the size of UNDP's cost-sharing was revealed in that country when people UNDP paid, with government pass-through money, to work for the government argued that they should not have to pay taxes, claiming they were international civil servants. A dispute ensued, and the full size of UNDP's Brazilian program, which dwarfs African programs, became known. "UNDP is renting out the UN's powers for a fee, it is engaged in essence in money laundering," a UNDP source told Inner City Press on condition of anonymity, given UNDP's known penchant for retaliation, noted not only by the Washington-based Government Accountability Project but also, at least on a prima facie basis, by the UN Ethics Office. The analogy is that governments pay the fee to UNDP in order to work around procurement and other rules -- UNDP does not have to be transparent, and does not have to follow local rules.

UNDP's Dervis in Latin America, cost-sharing not shown

            While UNDP in Cuba in 2006 reported $7 million in cost-sharing, the UNDP figure in Guatemala was $92 million. In Bolivia it was $31 million, in Chile $23 million, Colombia $82 million, Dominican Republic $5 million, Ecuador $30 million, El Salvador $13 million, Paraguay $32 million, Uruguay $10 million.

            From poor Haiti, UNDP took in $16 million in cost-sharing, versus only $14 million in Mexico.

    UNDP's response to the controversy around a contract of less than $3 million in Venezuela with Setronix has been to direct Inner City Press to UNDP's online rebuttal. But while UNDP claims that the documents it links to show competitive bidding, the documents in fact refer to " excepcion a un proceso competitivo" - exception to a competitive process. In any case, this is just the tip of the iceberg of UNDP's $1.1 billion of "cost-sharing" in Latin America (compared to UNDP's less than $600 million in annual spending in Africa.)

            In Honduras, UNDP's cost-sharing in 2006 was a whopping $103 million. The web site refers, in Spanish, to the modalidad de Ejecucion Nacional (NEX -- national execution "modality," saying that it guarantees that national authorities keep control of the program and of the final responsibility for how the funds are used.  UNDP, it seems, just takes a fee, and repeatedly further tarnishes the UN's name in the process.

Footnote: Inner City Press is informed that while the Secretariat publicly claims to have little power over UNDP, allowing Kemal Dervis for example to set up his own Ethics Office and self-investigation panel, now several candidates as UNDP Resident Representatives in countries are being reviewed on the 38th floor. This would give the Secretariat some leverage to clean UNDP up. Will this happen? We'll see.

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Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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