The research presented in this article concerns la Agencia Espanola de Cooperacion Internacional (Spanish Agency for International Cooperation—AECI) and its growing presence in Latin America since the late 1990s. The aim is to evaluate the transformative potential that bilateral funding can have on educational reform in the region. The article starts with a brief history of Spain’s past and present strategies for educational initiatives in Latin America, and then it focuses on three of AECI’s successful projects: basic and adult literacy; gender mainstreaming in development projects; and multicultural and bilingual education. The article explains the effectiveness of Spanish-sponsored projects in Latin America and compares their strategies with those of other bilateral and multilateral donors, such as PREAL. The article concludes by analysing multi-sectoral development efforts that are the foundation of educational strategies sponsored with Spanish funds, based on the grounds that elimination of poverty will not result from projects that focus exclusively on the individual or the family, but rather from those at the community level. AECI’s efforts are directed at cultivating internal capacities already present in the communities through training human resources and deploying financial resources.