There's a page at our State Department on it here: The Merida Initiative: United States – Mexico – Central America Security Cooperation.
From that page, it appears that the money is being spent on more than just fencing:
To achieve these goals, President Bush has requested $550 million as part of a multi-year program to provide:* Non-intrusive inspection equipment, ion scanners, canine units for Mexican customs, for the new federal police and for the military to interdict trafficked drugs, arms, cash and persons.
* Technologies to improve and secure communications systems to support collecting information as well as ensuring that vital information is accessible for criminal law enforcement.
* Technical advice and training to strengthen the institutions of justice – vetting for the new police force, case management software to track investigations through the system to trial, new offices of citizen complaints and professional responsibility, and establishing witness protection programs.
* Helicopters and surveillance aircraft to support interdiction activities and rapid operational response of law enforcement agencies in Mexico.
* Initial funding for security cooperation with Central America that responds directly to Central American leaders’ concerns over gangs, drugs, and arms articulated during July SICA meetings and the SICA Security Strategy.
* Includes equipment and assets to support counterpart security agencies inspecting and interdicting drugs, trafficked goods, people and other contraband as well as equipment, training and community action programs in Central American countries to implement anti-gang measures and expand the reach of these measures in the region.
I think it's a huge waste of our taxpayer money.
I cannot see why Mexico cannot simply put up its own fence with its border with Guatemala, and I think that the rest of that list is an even greater waste of money than at least the tangible effects of putting up a good fence between Mexico and Guatemala.