USAID's Western Hemisphere Activities

United States Embassy, Bogota, Columbia ^ | Apr. 2, 2003 | Adolfo A. Franco, Asst. Admin. LAC

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USAID's Western Hemisphere Activities

Adolfo A. Franco,
Assistant Administrator,
Bureau for Latin America and the Caribbean

Testimony before the Senate Committee on Foreign Relations
Wednesday, April 2, 2003
Dirksen Office Building, Room SD-419

Mr. Chairman, Members of the Committee, it is a pleasure to appear before the Senate Committee on Foreign Relations to discuss with you how USAID's Bureau for Latin America and the Caribbean (LAC) is promoting the President's vision for the Western Hemisphere.

The chairman refers in his letter of invitation to this hearing to the most pressing issues facing Latin America: democracy, good governance, anti-corruption, counternarcotics, and efforts to increase support for trade capacity building. I could not agree more. My testimony will focus on these areas as well as countries of particular concern in the region -- Venezuela, Colombia, Bolivia, Guatemala, and Haiti.

President Bush's National Security Strategy reflects the urgent needs of our country following the September 11 terrorist attacks and recognizes the important role of development assistance. It states clearly that the U.S. Government's aim is to help make the world not just a safer place, but a better place. The President has said the future of our Hemisphere depends "on the strength of three commitments: democracy, security and market-based development." At USAID, we work closely with our colleagues in other agencies and departments, from the Department of State to the Office of the U.S. Trade Representative, to promote political and economic freedom for all nations, and particularly among our closest neighbors with whom we have such strong social and cultural ties.

Management

At USAID, we know that the way in which we do things is as important as what we do. During his tenure as USAID Administrator, Andrew Natsios has taken the President's challenge to heart and tried to make foreign assistance more effective and results-oriented, and I work toward this daily in my role as Assistant Administrator for Latin America and the Caribbean. With many pressing priorities and security concerns around the world, the Agency's costs of doing business have increased. I have initiated a substantial review of management practices in each of the 16 missions in my region with an eye to increasing efficiency and reducing duplication of effort. As a result, there are efforts underway to regionalize financial management and other support services. In addition, we hope there will be an opportunity for USAID and this committee to have serious discussion on the need to increase flexibility in the way we use administrative resources.

USAID is proud of its contribution to the broader U.S. Government policy objectives in Latin America and the Caribbean. We have been working assiduously to remold our program to respond to the development challenges in the region and to promote the President's priorities for our Hemisphere.

Continuing Challenges

Over the past several years, the Latin America and Caribbean region has faced increasing development challenges that threaten the national security and economy of the United States. Contracting economic growth rates, extensive poverty, unemployment, skewed income distribution, crime and lawlessness, a thriving narcotics industry and a deteriorating natural resource base continue to undermine the stability of the region. The risks of HIV/AIDS and drug-resistant tuberculosis on our borders also threaten the population of the United States. Civil unrest threatens countries in South America and the Caribbean, while political instability in Venezuela and Haiti continues. Increasingly, citizens' confidence in the ability of democratically elected governments to provide security and prosperity is waning. Bolivia's recent problems show the risks to democracy there as well.

The region's GDP shrank by approximately 0.8% in 2002, the worst economic performance since 1983. Inflation has edged up after eight years of steady decline. Mediocre economic performance has caused per capita income in LAC countries to decline significantly since 1998, while poverty has increased. These woes have brought discontent and political turbulence, raised questions about the health of democracy in the region, about investment priorities, social sector policies, and the benefits of a decade of liberal reforms. The effects in the poorest countries, such as Haiti, and even regions within countries with generally solid economic performance, such as northeast Brazil, have been even more disheartening.

Still, it is important not to portray the region in a single-minded negative light. LAC's economy overall is expected to recover slightly in 2003. The Argentine economy is expected to grow about 2% this year. Chile, Mexico, Peru, and the Dominican Republic are expected to top the growth league in 2003, with expansion of 3% or more, assuming that the slowdown in the United States abates and strong growth resumes. Countries that have adopted sound fiscal policies and oriented their economies toward foreign investment, and rules-based trade under the World Trade Organization (WTO), have tended to resist the recent downturn. The North American Free Trade Agreement (NAFTA) has resulted in phenomenal growth for all three partners. Since 1993, trade among NAFTA nations has climbed dramatically, and U.S. merchandise exports have nearly doubled.

Another area of progress is commitment of LAC countries to good governance as represented by the signing of the Inter-American Democratic Charter and the Inter-American Convention against Corruption of the Organization of American States (OAS). Nicaragua is striving to curb government corruption, and other countries, such as Mexico, have also made important commitments to reduce official corruption. Recent elections in Jamaica, Brazil, Colombia, Bolivia, and Ecuador were all judged to be free and fair.

Priorities

To address the myriad challenges in the LAC region, the United States is committed to helping build a hemisphere that lives in liberty and trades in freedom. In his landmark March 14, 2002 speech to the community of donor nations in Monterrey, Mexico, the President pledged to create a Millennium Challenge Account (MCA) which would make additional development assistance available to countries that show progress in ruling justly, promoting economic freedom and investing in people. Through programs that help governments to strengthen democratic processes, promote equitable economic growth, and improve health and education standards, USAID is helping countries in the region with the will to reform to move along a trajectory toward MCA eligibility. In addition, USAID programs foster cooperation on issues such as drug trafficking and crime, disaster mitigation, and humanitarian assistance. The LAC Bureau is committed to using our resources in the most catalytic way possible including consideration of government performance, particularly responsible governance and accountability, in our resource allocation decisions.

Democracy and Good Governance

While support for democracy remains solid in the LAC region, popular disillusionment with governments that cannot reduce poverty, corruption, or crime is growing. Although significant strides have been made, many countries' democracies remain fragile and they must make a concerted effort to reinforce the institutional building blocks of democracy. USAID is working with other donors to strengthen democracy in the LAC region through programs that include anti-corruption, rule of law, municipal governance, and civil society strengthening programs.

Anti-corruption programs emphasize prevention, citizen oversight, and building the capacity of countries to attack weak governance, entrenched political institutions, and poor public sector management. USAID provides assistance to citizens groups and non-governmental organizations to devise national and local anti-corruption plans and to monitor the dealings of public officials and government agencies. In addition, USAID supports local initiatives to establish special commissions and investigative units to expose and prosecute cases of corruption and fraud by public officials. In Ecuador, the Anti-Corruption Commission has the investigative authority to uncover cases of corruption. In Nicaragua, USAID provides assistance to improve the capacity of the Attorney General's Office to tackle high-profile corruption cases against the former government. USAID is also helping the new Office of Public Ethics in the Nicaraguan Presidency, which will be responsible for setting standards for ethical conduct, training public employees, and monitoring government agencies' compliance with internal control systems.

Increasing crime and violence is consistently ranked by citizens as one of their primary concerns. The endemic problems of impunity for violent crime, corruption, money laundering and narcotics crime, undercut social and economic growth in many LAC countries. USAID is responding in more than a dozen countries in the Hemisphere by providing direct assistance for modernization of their justice sectors.

New Criminal Procedure Codes and other criminal justice system reforms, developed and enacted over the last decade with USAID support in Nicaragua, Honduras, Guatemala, El Salvador, Bolivia, Colombia, and the Dominican Republic, are introducing profound changes as countries move from written inquisitorial justice systems toward more oral adversarial systems. The new system of oral trials makes justice more accessible and transparent, whereas the previous system lent itself to corruption and delays and discouraged the average citizen from seeking judicial redress. In Colombia and Guatemala, USAID is expanding access to alternative dispute resolution and other legal services to millions of marginalized citizens through a growing network of community-based centers.

As a key element of the justice system, it is essential that the police do their jobs responsibly and that there is trust between the police and the communities in which they work. Section 660 restrictions of the FAA limit our ability to work on critical security issues such as community policing, which is increasingly integral to development in many LAC countries. Specific legislative authorization has allowed USAID to initiate a community policing program in Jamaica and to continue a successful program in El Salvador. The program in El Salvador is part of a larger law enforcement institutional development program conducted in cooperation and collaboration with the Department of State and the International Criminal Investigative Training Assistance Program (ICITAP) of the Department of Justice.

The primary justification for the program in Jamaica is summed up in the words of the 1993 National Task Force on Crime in Jamaica, which states, "The inability of the police to control crime has largely been due to the breakdown of the relationship between the police and the citizen." The program in Jamaica is focused on moving the Jamaican Constabulary Force toward a proactive, decentralized model of community policing, reducing police fear of the inner-city communities in which they work, as well as the community's fear of the police, and engaging community stakeholders as a catalyst for change in community development and crime reduction.

Similarly the community policing initiative in El Salvador has been a proactive, solution-based, and community driven activity involving extensive community outreach. Increased police presence in communities has improved response to criminal activity and has been key in establishing credibility with people. Reported crime and homicides have dropped by 25% and 30% overall in just one year in the program's target areas. Further, 70% of citizens believe the police force has improved its ability to decrease crime. Based on this early success, the U.S.-supported program is now being replicated by the Government of El Salvador at the national level.

USAID-supported training and technical assistance helps strengthen the capacity of national and local governments to demonstrate that responsible leaders can deliver benefits to communities. With the direct election of local mayors and the devolution of authority to municipalities, USAID is helping citizens and elected leaders devise community development plans that respond to local needs and generate growth. In fourteen countries, USAID is helping mayors hold public hearings about annual budgets and allow citizen involvement in public decision-making. Many mayors have established transparent accounting and financial management procedures with USAID assistance to create the framework for greater revenue generation at the local level for roads, schools, health centers, and job creation. In turn, citizens monitor the use of public funds and devise "social audits" in countries such as the Dominican Republic and Bolivia to track spending in accordance with local development plans in order to keep officials accountable to the public.

Economic Growth

Sustained development depends on market-based economies, sound monetary and fiscal policies, and increased trade and investment. USAID's efforts in LAC are resulting in an improved enabling environment for positive and peaceful changes. We are mindful of the critical need to continue these efforts and build on our experiences in order to encourage further economic development. President Bush, Secretary Powell, and Administrator Natsios have all said trade and investment are essential to economic growth and poverty reduction. Without an increase in trade and investment, the region's substantial development gains will be put at risk, and hemispheric stability could falter.

Through support for legal, policy, and regulatory reforms, USAID has been working with LAC countries to strengthen the enabling environment for trade and investment as the twin engines for economic growth and poverty reduction. USAID support for trade capacity building has increased substantially in the last several years. In FY 2001, the LAC Bureau invested $5 million in trade-related activities. This figure climbed to more than $23.5 million in FY 2002. USAID plans to increase support for trade capacity building even more substantially in future years.

In August 2002, President Bush signed the Trade Act of 2002. On January 8, 2003, Acting Assistant Secretary Struble and I participated with U.S. Trade Representative Ambassador Robert Zoellick in launching negotiations for the U.S.-Central America Free Trade Agreement (CAFTA). Negotiations continue on track to establish a Free Trade Area of the Americas (FTAA) agreement by January 2005. In response to these opportunities, USAID has been working in partnership with the region's smaller economies to build their capacity to participate effectively in the global trading system by building trade negotiating capacity, developing markets, and providing assistance for business development. In response to requests from country governments, USAID will assist governments to comply with the "rules of trade" such as sanitary/phytosanitary measures, customs reform, and intellectual property rights.

Assistance will expand in the area of commercial and contract law and property rights. USAID will continue to promote rural economic diversification and competitiveness, including non-traditional agricultural exports and access to specialty coffee markets. Business development and marketing services will help small and medium farmers and rural enterprises improve competitiveness and tap new markets. Let me highlight some of USAID's trade capacity building programs in the region:

In Central America and Mexico, USAID will continue the Opportunity Alliance, a presidential initiative that emphasizes trade-led rural competitiveness through diversification and agricultural niche markets. The Alliance was initiated in FY 2002 in response to a protracted drought, collapse of coffee prices and resulting unemployment of seasonal agricultural workers. An estimated 52% of the population, more than 14 million people, is poor and chronically food-insecure in Guatemala, Nicaragua, El Salvador, and Honduras. USAID activities in FY 2003 and FY 2004 will continue to support democratic governance, trade and employment creation, agricultural production, and sound environmental management. USAID is assisting the Central American countries in their efforts to prepare for the FTAA as well as for negotiation and implementation of CAFTA. As part of this process, USAID worked closely with other institutions such as the Inter-American Development Bank, the Organization of American States, and the Economic Commission for Latin American and the Caribbean to assist each Central American country to prepare a national trade capacity building strategy in support of their participation in the CAFTA process.

USAID has added a trade component to the President's Third Border Initiative (TBI) to strengthen trade capacity and competitiveness of Caribbean countries. It will build on modest trade activities underway for several years in a sub-region with many small island economies lacking diverse sources of income. When launched in 2002, TBI aimed to strengthen political, economic and security ties between the U.S. and the nations of the Caribbean. The majority of interventions and bulk of funding thus far have supported USAID's HIV/AIDS program. Working closely with the development assistance community, USAID is now moving quickly to mobilize trade capacity building support to respond to countries' priorities including technical training of government trade officials, developing trade-related databases, implementing trade agreement commitments in such areas as customs reforms and sanitary and phytosanitary measures, providing assistance for small business development, and fostering greater civil society outreach. USAID's Caribbean Regional Program is helping to strengthen Caribbean Community (CARICOM) countries' competitiveness in hemispheric and global trade, and assisting eight CARICOM countries to prepare national trade capacity building strategies under the FTAA Hemispheric Cooperation Program.

In the Dominican Republic, USAID supported technical training on trade issues for government trade officials. The Dominican Republic has since offered better market access in recent rounds of negotiations. As a result of a USAID-supported program in Jamaica, which is led by the private sector and provides succinct information to private and public sector leaders on the benefits of free trade, the Jamaican private sector now better understands the potential benefits of free trade and has become a stronger advocate of the FTAA.

USAID initiated trade capacity building activities in South America in FY 2002 and is expanding the program for trade within the sub-region in FY 2003. In Peru we have developed an Andean regional trade capacity building program to assist Andean Community countries in addressing "rules of trade" and competitiveness issues, with initial emphasis on providing technical assistance in a variety of trade disciplines including customs reforms, sanitary and phytosanitary measures, and competition policy.

At the hemispheric level, USAID has a new "quick response mechanism" to provide greater capacity to address technical assistance and training needs arising from trade negotiations. Through this mechanism, we are also working with FTAA countries, initially in Central America and Brazil, to provide government officials and civil society (including business leaders) with information on the benefits of free trade.

An important aspect of building trade capacity is broadening the education base for a more productive workforce. USAID will support advancements in secondary education and workforce training to improve the quality of instruction, increase worker productivity, and help youths prepare to enter the workforce. For example, USAID's ESF-funded Training, Internships, Exchanges, and Scholarships program in Mexico will enhance capacity of Mexican scholars and institutions to respond to the objectives and strategies of NAFTA and the U.S.-Mexico Partnership for Prosperity, which together define the emerging U.S.-Mexico Common Development Agenda.

Recognizing that remittances constitute a potentially large source of development finance, USAID will continue to support and implement mechanisms for remittance transfer with lower transaction costs.

Investing in People

The LAC Bureau has placed great emphasis on two of the President's other stated goals for our region-health and education. In health, there has been significant progress in raising vaccination coverage and in reducing or eliminating major childhood illnesses such as measles. Also, because of USAID assistance, affected countries are more willing to discuss the HIV/AIDS problem. This is particularly relevant in our region, as the Caribbean has the second highest rate of HIV/AIDS in the world, after sub-Saharan Africa. USAID programs have had some success in reducing the social stigma attached to the disease, and prevention campaigns, including those that promote abstinence, hold even greater promise for lowering transmission rates. While steady progress is being made in lowering maternal mortality and in applying proven cost-effective protocols for combating malaria, tuberculosis and other infectious diseases, rates remain unacceptably high, and new strains of the causative organisms are increasingly resistant to treatment. Because diseases do not respect geographic boundaries, and due to the high numbers of legal as well as illegal immigrants traveling to the United States, I believe USAID assistance to the LAC countries in health care at the policy, institutional and technical levels is critical to the health and security of the United States.

The quality and relevance of primary and secondary schooling in LAC countries continue to cause concern. Less than 30% of students in the region complete secondary school, and many of those who do finish lack adequate skills to compete in the workplace. USAID education and training programs aim to improve the poor state of public education systems where the majority of youth attend weak and under-funded schools and fail to acquire basic skills in mathematics, language, and science. USAID will continue to provide support for education reform, enhancing skills of teachers and administrators, and improving training for application in the workforce. USAID will also continue support to the newly launched Centers of Excellence for Teacher Training, an initiative announced by President Bush in April 2001. Three sub-regional training networks established in Peru, Honduras, and Jamaica will improve the cadre of teachers in LAC countries by training 15,000 teachers, benefiting 600,000 students, and advancing education policy reform.

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Alliances

Private investments, civil society and faith-based contributions now far exceed Official Development Assistance levels. Linking our USG investments with private investments will assure a greater impact for both, as was articulated by the President at the Monterrey Conference last year. The Global Development Alliance (GDA) and the Development Credit Authority (DCA) are exciting business models where we have made the USG dollar and impact extend much farther by partnering with businesses, universities, and philanthropic groups.

Several examples of GDA-type partnerships are just getting underway in the region. USAID's Central America Regional program plans to leverage significant private sector contributions for its quality coffee and regional diversification programs. Two recently-signed agreements exemplify the emphasis on alliance building and counterpart contributions: one with the Coffee Quality Institute to develop a volunteer-based technical assistance program, and one with Green Mountain Coffee Roasters designed to generate new resources. Of the 18 partnerships between U.S. and Mexican colleges and universities recently approved for USAID's new educational exchange program in Mexico, 15 exhibit greater than one to one funding matches from higher education institutions and the private sector. The 18 agreements total about $10 million, with USAID providing approximately $4 million and non-USG public and private partners contributing $6 million.

USAID's Development Credit Authority (DCA) offers an opportunity to mobilize local capital to fund development initiatives. Through DCA, USAID/Mexico provided guarantees to two Mexican microfinance institutions. The programs were designed to allow both institutions to leverage the guarantee by capturing savings, especially longer, fixed-term savings, which are an important source of loan capital. Both programs have greatly exceeded expectations, with the banks increasing total deposits by $4.8 million and $5.7 million respectively. In Guatemala, investment efforts in market towns also exceeded expectations. The Non-Traditional Exporters Guild was directly responsible for promoting $4.25 million worth of new investments in the Peace Zone and the BANCAFE Development Credit Authority mechanism leveraged an additional $4.7 million for microlending.

Conclusion

Hemispheric commitment to democracy remains high with the creation of the Inter-American Democratic Charter and agreement to an ambitious democratic reform agenda each time the Hemisphere's leaders meet. So far, democratic systems have persisted even in the face of severe economic crisis and, in some cases, either very weak or even virtually no effective governance. These political crises (all very different) have not caused permanent ruptures in democratic practices. They nonetheless demonstrate the fragility of institutions and the need to strengthen the building blocks of democracy if the progress of the past two decades is not to be undone. As President Bush has said, this hemisphere of eight hundred million people strives for the dream of a better life, "A dream of free markets and free people, in a hemisphere free from war and tyranny. That dream has sometimes been frustrated, but it must never be abandoned." President Bush knows there are millions of men and women in the Americas who share his vision of a free, prosperous, and democratic hemisphere. At USAID, our programs in democracy and governance, trade capacity building, health, and education are helping our friends and neighbors in the Hemisphere fulfill their aspirations.

Washington, D.C.
April 2, 2003

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The endemic problems of impunity for violent crime, corruption, money laundering and narcotics crime, undercut social and economic growth in many LAC countries.

President Bush,
Isn't it just amazing that these same problems exist in ethnic communities of illegal aliens here in the United States? Hmmmm?

Are these people coming here to better their lifestyles or just bringing their insidious cultures with them?

I can't believe that every illegal alien is twisted into a world of crime however it is without a doubt that this must be the intention of a larger percentage than most Americans are willing to admit.

Please take your blinders off, open both eyes wide and realize that this idea of minimizing our national security by keeping our borders open, allowing too many undocumented aliens into America may just cost you the upcoming election.

Now, from one cowboy to another, "Partner, go soak your head that water trough, shake off and look around at what's comin. Start doin' your job before the boss puts a handful of fire ants under your saddle."