Questions for the record submitted to Assistant Secretary Thomas Shannon by Members of the House Committee on Foreign Relations after hearing held March 5, 2008, “With Castro Stepping Down, What is Next for Cuba and the Western Hemisphere?”

(Received after printing of transcript)

Question (#1):

The Bush Administration failed to come out with a clear inter-agency position on the extension of ATPDEA this year. Are you prepared to come out with a clear inter-agency position on whether or not ATPDEA should be extended to each of the four countries when an extension is once again needed in December of this year? What would that position be?

Answer:

ATPDEA has consistently enjoyed strong bipartisan support in the Congress and the Administration. In addition to its role in creating thousands of licit jobs, boosting investor confidence and improving economic stability in the Andean countries, ATPDEA was instrumental in encouraging Peru and Colombia to negotiate and finalize FTAs with the U.S.

We look forward to working with the Congress on shaping an appropriate preference program for the Andean countries, depending on implementation of the Peru FTA, Congressional deliberations on the Colombia FTA and our shared judgment of Ecuador and Bolivia’s eligibility for continued preferences.

Question (#2):

Given the attacks on USAID’s democracy assistance program and the problems these attacks have created for our Embassy in La Paz, why is the President significantly increasing democracy assistance to Bolivia in the FY 2009 budget?

Answer:

Democracy promotion remains one of our top priorities in Bolivia. This is reflected in our budget requests for democracy-building programs, which have been increasing since 2006.

Consistent with the OAS Inter American Democratic Charter, our assistance supports institution building at all levels of government, democratic checks and balances, strengthening civil society, democratic participation, and peaceful resolution of conflict.

Our assistance programs are transparent. All program information is available to the Government of Bolivia and the Bolivian people on the USAID website. USAID provides non-partisan assistance to more municipalities that are led by ruling MAS party mayors than by any other party. Our democracy programs aim to strengthen governance in Bolivia’s departments (similar to U.S. state governments); as such, we work with prefects (similar to governors) from the MAS party as well as opposition prefects. In fact, the prefects from the MAS party have voiced appreciation for USAID’s support.

Because of ongoing challenges, now is the time to ramp up U.S. democracy assistance. Our support is well received by working-level contacts across the political spectrum. Our commitment to strengthen democracy and civil society, monitor future elections, and build strong and independent institutions will be critical as the Bolivian government and the opposition attempt to resolve their differences over the proposed draft constitution peacefully and democratically.

Questions (#3 & #4):

Given this shift, is it accurate to say that there is a $116 million increase in development assistance for the Western Hemisphere in the FY 2009 budget?

If there is an increase, could you please give us a dollar figure on how much of a bump we are actually seeing in development assistance excluding the shift of alternative development spending from the ESF into the DA account?

Answer:

The President’s FY 2009 foreign assistance request for the Western Hemisphere includes $356.57 million in Development Assistance (DA). This represents an increase in DA of $116.14 million over the FY 2008 estimate. Approximately $53 million of this increase accounts for soft-side counternarcotics programs, including alternative development, that were previously funded out of Economic Support Funds (in FY 2008) and ACI (in FY 2007 and earlier). This leaves an increase in DA of about $63 million from the FY 2008 estimate to the FY 2009 request.

Question (#5):

I am concerned that we are not making adequate progress implementing the U.S.-Brazil Biofuels agreement more than one year after its signing. No fields have yet been opened for additional biofuels cultivation. The most impoverished of the four countries benefiting from the MOU, Haiti, has made the least progress of all, and no additional countries have yet been added. When can we expect the four countries to move forward on biofuels production? When should we expect to see expanded Jatropha cultivation in Haiti for biodiesel production? When should we expect new countries to be added to the original four?

Answer:

Since signing the U.S.-Brazil Biofuels MOU in March 2007, our intention was to produce concrete action on the ground during our first year of cooperation with Brazil – and we have done so.

To advance regional cooperation in initial target countries -- the Dominican Republic, El Salvador, Haiti, and St. Kitts and Nevis -- technical consultants from Winrock International (Winrock) and the Getulio Vargas Foundation conducted intensive field work to assess each country’s potential to develop local biofuels industries. Winrock finalized these assessments in March 2008, and in its report, identified 30 potential technical assistance projects and feasibility studies across the four countries to help each develop local biofuels industries. We confirmed the support of each target country’s government for the 30 identified projects. Among them, we prioritized eight opportunities – two per country – and have begun committing funding for them. We, and our donor partners, will support as many projects as possible, subject to available funding.

The technical assistance varies based on the country assessments. Generally, in Haiti and St. Kitts, the assistance will help the governments to create a policy and legal framework to encourage local biofuels’ production and consumption capacity and attract private investment in biofuels. In El Salvador and the Dominican Republic, where the legal and regulatory framework is more advanced, the assistance will help governments introduce, blend, and distribute ethanol and biodiesel into local fuel mixes.

In addition to our work with governments to create an enabling environment for biofuels, we will support feasibility studies aimed at attracting private sector investment in the four countries. Feasibility studies determine the commercial viability of projects and inform private sector investment decisions on whether to proceed with the project. By supporting feasibility studies, it is our goal to stimulate private sector activity in biofuels industries so that locally-grown biofuels can help meet local energy demands, create jobs, and stimulate rural economic activity. The speed at which projects are implemented that produce biofuels, therefore, will depend on the private sector’s willingness to invest in each country, which will be determined by the target country governments efforts to create an adequate legal and regulatory framework to attract investment, among other factors.

Winrock found that the Government of Haiti (GOH) is in the early stages of biofuels policy formulation and that the private sector is highly engaged. We were pleased to see that Winrock identified 15 biofuels projects in Haiti; more than any other target country. The projects are at various stages of development, and some involve jatropha cultivation for biodiesel. Jatropha has significant potential in Haiti because the demand for diesel fuel is much higher than for gasoline, as diesel is used as an energy source for both transportation and power generation. Jatropha is also a good option in Haiti because land available for this feedstock is much greater than for ethanol feedstocks, since jatropha is known for its ability to thrive in marginal conditions and on steep terrain.

The production of jatropha in Haiti depends on the private sector investment plans. Winrock found that many jatropha-based biodiesel project plans in Haiti envision a two-stage approach that would begin production of biodiesel in the near term by processing of imported feedstocks, to be replaced in the longer term through an integrated supply chain including agroindustry-scale jatropha production. This approach accounts for the fact that producing jatropha on a large scale will take several years, as the plant does not typically produce seeds until the third year, achieving full production around year five. A mature agricultural platform for domestic feedstock production is therefore still several years in the future and subject to private sector investment plans. To help stimulate both public and private sector activity in Haiti, we plan to immediately begin our technical assistance to the GOH to support the development of a regulatory and legal framework to encourage investment in the sector and to fund a feasibility study for a jatropha cultivation project.

In addition to our work to develop new markets for biofuels production and consumption in small and vulnerable economies, the United States and Brazil are working to help grow the global biofuels market through multilateral cooperation on standards and codes. This works takes place under the International Biofuels Forum (IBF), which includes Brazil, China, the European Commission (EC), India, South Africa, and the United States. The United States, GOB, and EC have advanced work on standards and codes through our respective standards bodies. The results of the collaboration are summarized in a fact sheet available at http://www.nist.gov/public_affairs/biofuels_report_fact_sheet.pdf. The complete white paper is available at: http://www.nist.gov/public_affairs/biofuels_report.pdf.

Finally, the United States and GOB cooperate bilaterally on research and development to accelerate the commercial deployment of second generation biofuels feedstock. A team of Brazilian scientists visited U.S. Departments of Energy and Agriculture labs in September 2007, and U.S. scientists will participate in a reciprocal visit to Brazil in May 2008. We expect joint agreement on areas of cooperation and an implementation roadmap shortly thereafter.

To review progress of our efforts implementing the MOU, on March 3, 2008, the U.S.-Brazil Biofuels Steering Group and Advisory Board met in Washington, DC, along with Government Officials from the Dominican Republic, El Salvador, Haiti, and St. Kitts and Nevis. Among the many topics the USG and GOB discussed, included expanding cooperation to a second tranche of target countries. Information on the meeting is available at: http://www.state.gov/r/pa/prs/ps/2008/mar/101729.htm.