Bolivia Brazil Colombia Cuba Dominican Republic Ecuador El Salvador Guatemala Guyana Haiti Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru Caribbean Regional Central American Regional Latin America and the Caribbean Regional Summary Tables Program Summary Strategic Objective Summary Notified Levels for FY 2001 Abbreviations and Acronyms Glossary Previous Years' Activities 2001, 2000, 1999, 1998, 1997 Last updated: Wednesday, 29-May-2002 18:53:09 EDT

(text taken from the FY 2002 Congressional Budget Justification)

Introduction

U.S. National Interests

The economic, social, and political development of our USAID-assisted neighbors in Latin America and the Caribbean (LAC) are closely tied to important opportunities in the U.S. national interest such as expanded trade and deepening democracy. USAID believes the overarching goal of investment in LAC for the U.S. Government and its citizens is the consolidation of democracy in the hemisphere by strengthening still fragile democratic institutions. Other important objectives in our national interest, i.e. reducing poverty, fighting the spread of infectious diseases, and protecting the environment, are made all the more critical by proximity. Therefore, USAID assists democratically elected governments and their citizens to improve governance; expand civil society participation in democratic processes; strengthen decentralized local governments; improve access to justice; address poverty, inadequate health, and environmental degradation; and promote broad-based economic growth. These efforts are aimed at preventing social and political conflict as well as enabling LAC countries to participate in the globalization of the world's economy.

Americans benefit directly when the economies of developing LAC countries expand and their markets open. Since 1990 the number of U.S. jobs supported by U.S. exports to the region has increased by over 2.3 million. U.S. trade with the LAC region is growing faster than trade with any other region in the world and the U.S. continues to be the major source of imports to LAC. President Bush's early and intense foreign policy focus on the LAC region has been strongly evident in speeches, meetings with hemispheric leaders, and active involvement in the Summit of the Americas -- including a renewed effort to promote the Free Trade Area of the Americas (FTAA). The focus is also demonstrated in the Administration's new Andean Regional and Third Border (Caribbean) Initiatives, as well as increased emphasis on Mexico.

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Development Challenge

Much progress in LAC has been made in: reducing human rights violations and making peaceful transitions of power; promoting growth and increasing trade; increasing access to basic education; reducing fertility and infant and child mortality rates; and protecting the environment. USAID's programs in LAC have contributed substantially to this progress. Skepticism continues to exist in the region about the promises of democracy and liberalized economic policies to produce tangible improvements in the lives of ordinary citizens. The region's advances in democracy, sustainable growth, and quality of life could be reversed if democratically elected governments are unable to resolve the threats of drugs and corruption, or to address income inequality and environmental degradation more effectively and substantially. In spite of concerted efforts to address poverty, income distribution in the LAC region remains the worst in the world (becoming even more skewed during the 1990s in certain countries) and nearly 40% of the population lives in dire poverty on less than $2 per day. As a result, citizens' confidence in elected officials is being undermined and surveys report that growing numbers of citizens are beginning to question whether they benefit from their nation's economic and democratic achievements. Investor confidence is just as fragile.

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USAID's core program in the LAC region is based on the Agency's leadership role in achieving objectives established in the Summit of the Americas, as agreed upon by President Bush and LAC heads of state, the Inter-American Development Bank (IDB), and other donors. The most important of those objectives is that of reducing poverty in Latin America. USAID's LAC program focuses on second generation reforms: to help eradicate poverty and inequality, to ensure access to justice, and to develop human capacity needed to deepen and sustain the region's competitiveness in the global economy.

USAID's programs in LAC countries support the Agency's "four pillars" of Economic Growth and Agriculture, Global Health, Conflict Prevention and Developmental Relief, and the Global Development Alliance (GDA)--a cross cutting business model to strengthen the other pillars by enhancing cooperation with foundations, U.S. corporations and PVOs. Activities in basic education, agriculture, environment, microcredit, and policy reform contribute to USAID's emphasis on Economic Growth and Agriculture. Activities in population, health, HIV/AIDS, and child survival contribute to the agency's focus on Global Health. The United States is continuing to help consolidate peace in Central America, strengthening endangered democracies such as Colombia and Ecuador, supporting activities that enhance the likelihood of a peaceful democratic transition in Cuba, and encouraging the emergence of pluralistic democracy in Haiti. Equally critical, the United States must ensure that post-hurricane and post-earthquake reconstruction in Central America not only replaces what was destroyed, but helps to transform these societies in ways that will lay the foundation for growth. Activities in democracy and disaster relief contribute to USAID's work on Conflict Prevention and Developmental Relief. USAID efforts in support of the Andean Regional Initiative and the Third Border (Caribbean) Initiative contribute to all three areas of emphasis but are discussed under the last category, since the primary rationale is to strengthen democracies in the Andean and Caribbean sub-regions.

There are, of course, important linkages among the activities in the three broader goal areas. Activities in rule of law and other democracy areas contribute to the investor confidence that are needed for increasing trade, which drive economic and agricultural growth in the region. Similarly, good governance can facilitate disaster preparedness, which, in turn, can minimize economic and environmental damage and set back economic growth. Finally, the failure of government to deliver health, education and social benefits to the citizenry can undermine confidence in democratic institutions.

The Economic Growth and Agriculture Pillar

Cutting poverty in half by 2015 is the key objective of the Summit of the Americas and the Organization for Economic Cooperation and Development. In spite of the recent global economic crisis and a series of devastating natural disasters, evidence now suggests that the renewed growth of the 1990s is contributing to a reduction in the level of poverty in the region. The GDP per capita growth rate has been modest in recent years-in 1998 it was 0.6%, while in 1999 and 2000, respectively, it was -1.3% and 2.4%. There is a clear realization that, to reduce poverty, the United States must help to substantially accelerate growth rates through hemispheric trade and increase participation by the poor in growing economies.

To further reduce poverty, USAID assistance is directed at increasing the income of the almost 40% of households living below the poverty line through targeted activities that increase their productivity. These activities increase access to resources such as financial services (microfinance), education, titled land, appropriate technology, infrastructure, and other assets which the poor need to achieve their full potential. LAC programs also seek to improve the enabling environment within which the poor work to assure that they have access to a level legal and regulatory playing field. USAID programs are assisting countries to prepare for participation in trade-driven growth and to address the shortcomings of government policies that hurt the poor.

Natural resources are abundant in LAC and agricultural growth potential is an important key to economic growth and poverty reduction. The region has roughly 50% of the globe's tropical forests, as well as extensive freshwater and marine resources. With 40% of the world's plant and animal species, the biodiversity in LAC countries is among the richest in the world. Increasing population pressures, continued poverty, unequal access to land, and poor environmental management are severely degrading these resources. This not only undermines the region's comparative advantages for economic growth through agriculture, but intensifies the damage caused by natural disasters which can, in turn, set back many years of economic progress. The poor suffer the most.

USAID's agricultural and environmental efforts seek to reduce poverty and reduce hunger and malnutrition; promote trade as an engine of growth for LAC; and protect the region's environment and natural resources in order to enhance income for the poor and LAC's competitiveness. USAID's agricultural assistance portfolio is currently focused on expanding access and opportunities for the poor with emphasis on the factor markets that include land, capital and improved technologies to assist the poor to link their production to higher value markets. As the FTAA moves forward under the Summit of the Americas process to create a hemispheric free trade area by 2005, USAID is providing support for the integration of smaller economies. For example, assistance has been provided to help LAC countries meet World Trade Organization requirements. A substantial portion of USAID's environmental efforts is focused on protecting and enhancing agriculture as a source of income for the poor. Watershed management and soil conservation activities are good examples of this. Agricultural and environmental programs will increasingly engage the for-profit private sector as the countries explore participation in the region's expanding free trade regimes.

Considerable progress is being made in education in the LAC region, a primary factor in promoting economic growth. Girls now enroll in school at rates equal to or greater than boys do at all levels of schooling (with the exception of Haiti, Guatemala, and Bolivia). The region's average student-teacher ratio of 24-1 is comparable to the world average. Although, excellent progress has been made in increasing access and enrollment rates, serious challenges remain. LAC schools are the most inefficient in the world in terms of high repetition, dropout rates, and low attendance. Students from ethnic and indigenous groups, rural populations, and poor families receive fewer years of schooling and poorer quality instruction -- ultimately leading to lower educational attainment and income-earning potential.

LAC basic education programs address these challenges and will increasingly emphasize a second generation of reforms to improve the quality, efficiency, equity, and relevance of education. Given the recent commitment of the IDB and the World Bank to double education funding to the region over the next five years, USAID is demonstrating and supporting innovative approaches for subsequent replication, in order to help ensure that international financial institution (IFI) funding is put to the best use. Consistent with the Administration's emphasis on education, in FY 2002 USAID will begin a "Centers of Excellence" activity in teacher training as announced at the Summit, in order to improve the quality of teaching in the region.

The Global Health Pillar

USAID assistance to the region is critical to achieving the strategic goal to protect human health and reduce the spread of infectious disease. Notable progress has been made in many areas over the last several years. The total fertility rate in USAID-presence countries in LAC declined by 16% between 1992 and 2000 (from 3.8% to 3.2%), due in large part to USAID's successful reproductive health programs. Both the infant mortality rate and the under-5 mortality rate declined in all USAID-presence countries between 1990 and 2000. Nonetheless, indigenous peoples, ethnic minorities, and rural populations have much worse health indicators than the majority of people and urban dwellers. The urban poor also suffer adverse health consequences from crowded living conditions and poverty in this highly urbanized region. Meeting the needs of these under-served and marginalized populations is a priority of USAID programs.

USAID health and family planning programs center on child survival and nutrition, maternal health, reproductive health, prevention and response to infectious diseases including HIV/AIDS, and health systems development. In the LAC region, our strategy is to sustain gains in child survival and reproductive health while gradually shifting from subsidizing service delivery to addressing quality of care and institutional sustainability of programs. To improve maternal health, we are working to increase the proportion of births attended by skilled personnel, in order to reduce maternal deaths and peri-natal morbidity and mortality.

Infectious disease programs focus on control of tuberculosis and malaria, and understanding and preventing anti-microbial resistance to drugs used for childhood illnesses and tuberculosis. Our HIV/AIDS strategy responds to the two faces of the epidemic in the region. In the majority of Latin America, prevalence is relatively low, so the most effective programs work to prevent transmission from groups with high-risk behaviors to the general population. In the Caribbean and adjacent areas of Central America, where prevalence is much higher, prevention programs address the general population as well as such high-risk groups. Infectious diseases programs respond to the proximity and high levels of travel between the United States and the Caribbean and Latin America.

The Conflict Prevention and Developmental Relief Pillar

Investments in the region have paid off handsomely over the past ten years with the successful institutionalization of democratic processes, reductions in human rights violations, and peaceful transitions of power. Today, all governments except Cuba have democratically elected governments. Democracy, however, remains fragile as clearly demonstrated by recent events in Haiti, Ecuador and Paraguay. Two important, upcoming national elections in Peru and Nicaragua require our direct assistance and observation to help ensure that the election processes are free, fair, and transparent. USAID has successfully supported an end to decades of armed conflict in Guatemala, Nicaragua, and El Salvador and the beginning of a "quiet revolution" towards local democratization with elected mayors and local officials that has resulted in a more responsible and responsive two-way relationship between citizens and government. USAID assistance will continue to substantially support the consolidation of democracy in the region, including consolidating peace in Haiti and Guatemala and democratic processes elsewhere in Central America and, as vital components in USG's support for "Plan Colombia," and the Administration's new Andean Regional (ARI) and Third Border initiatives.

Alternative Development:  USAID's programs to reduce coca production in Peru and Bolivia are continuing to produce impressive results. Programs promoting alternative licit cash crops and income generating activities, as well as local government strengthening are part of a comprehensive USG-supported approach to counternarcotics that also includes drug interdiction and eradication of coca crops. Since 1995, this comprehensive approach, coupled with strong host country political will to eliminate coca production, has produced a 70% reduction in coca cultivation in Peru and a 50% reduction in Bolivia. USAID's alternative development assistance has substantially increased the production and marketing of licit crops in the coca growing regions of both countries. In Bolivia, for example, the wholesale value of licit produce leaving the Chapare, Bolivia's coca growing region, increased by 35% from $41.0 million in 1998 to $55.7 million in 1999.

Unfortunately, increased Colombian production of coca has offset reductions in Bolivia and Peru. Colombia's internal conflict is in large part financed by drug profits, leading to erosion of civil governance and increasing numbers of internally displaced persons. The FY 2000 Plan Colombia Supplemental provided USAID with $123.4 million for Colombia, $80 million for Bolivia, and $8 million for Ecuador. In Colombia, the funds are financing 10,000 hectares of voluntary coca elimination, high profile judicial reform, stronger grassroots civil government, and assistance to over 100,000 displaced persons. In Bolivia, funds will expand voluntary coca elimination into the Yungas region while consolidating the successful eradication of 100% of coca cultivation in Chapare. In Ecuador, USAID is strengthening municipal governance along the northern border, working with indigenous groups, and increasing financial transparency. The regional nature of Plan Colombia is reflected in the FY 2002 Andean Regional Initiative.

Andean Regional Initiative:  Continuing instability in Colombia and the vulnerability of neighboring democracies argue for a regional approach to democratic governance and economic growth as bulwarks against the spread of illicit crop production. In FY 2002, the Andean Regional Initiative (ARI) will provide $388.8 million (all spigots including DA, CSD, ESF, INC--excluding PL-480) for USAID-managed activities in Bolivia, Brazil, Peru, Ecuador, Colombia, Panama, and Venezuela. Starting in FY 2002, the ARI will provide a regional framework for intensifying Alternative Development, Administration of Justice, and other democracy programs in the Plan Colombia countries and Colombia's neighbors, also seriously affected by the drug trade. Compared to FY 2001, INC and ESF have been respectively increased by $199 million and $50 million, for USAID-managed programs in those countries.

Third Border (Caribbean) Initiative:  Under this new initiative, the Administration will strengthen the U.S.-Caribbean relationship by intensifying assistance in important sectors. Thus in FY 2002, the Caribbean Regional Program (CRP) will receive an additional $4.0 in ESF to: augment HIV/AIDS activities ($2.0 million); enable the CRP to begin a scholarship/internship program aimed at fostering leadership in the private sector ($1.0 million); and, support both disaster mitigation and transportation safety related to tourism development ($1.0 million). In addition, the State Department and USAID will seek an additional $3.5 million in FY 2002 ESF for expanded rule of law, environmental and economic competitiveness activities in the Caribbean.

Development Relief (Disaster Reconstruction and Mitigation):  Hurricanes Mitch and George struck Central America and the Caribbean in late 1998, causing more than $12.0 billion in damages. They were the worst disasters to strike those sub-regions in over 100 years. In May 1999, Congress appropriated $621 million in Supplemental Funds for hurricane reconstruction, the single largest reconstruction program in the history of USAID. Thirteen USG Agencies were included in the legislation as USAID partners. As of December 31, 2000, $206.9 million or 41% of the Supplemental Funds have been expended. This is an extraordinary achievement, especially in Honduras and Nicaragua, where our missions are managing reconstruction programs that dwarf their core programs. Pursuant to an understanding reached by USAID, OMB, and the Congress, all reconstruction activities should be completed by December 31, 2001.

El Salvador was struck by two devastating earthquakes this year on January 13 and February 13, 2001, with magnitudes of 7.6 and 6.6, respectively, on the Richter Scale. There were approximately 1,150 deaths; nearly 150,000 houses were destroyed; an additional 185,000 houses were damaged; and over 1.5 million people were directly affected by these disasters. Total damage is estimated at over $2.0 billion. USAID deployed resources immediately after the first earthquake, focusing emergency assistance on shelter, water, food, and temporary health centers. To date, USAID has contributed over $14.5 million in emergency response assistance. Based on the Administration's commitment to provide $110.0 million in FY 2001 and 2002, an earthquake reconstruction package has been developed that consists of: housing; water system rehabilitation; economic growth (micro-entrepreneurs & small farmers); disaster mitigation; and rehabilitation of schools, health centers, and essential municipal infrastructure. Reconstruction has begun and will be implemented through FY 2003. Because the initial commitment of $110 million was based on the first earthquake and a second major earthquake caused more damage, USAID will continue to seek additional funds.

Other Donors

The United States is the largest provider of Official Development Assistance among all bilateral donors in this region. The other major donors in the region are the European Commission, Japan, the Netherlands, and Germany. USAID's coordination and collaboration with other donors is a critical and expanding focus of its strategy in the LAC region. Our primary multilateral partners are the IDB, the World Bank, the Pan American Health Organization, and the Organization of American States.

As a key source of development finance in the LAC region, the IDB is a natural partner for USAID. Over the past year, USAID's extensive coordination with the IDB has significantly increased the impact of our foreign assistance program in the region. USAID is using its strong ties to IDB technical staff to ensure that its grant investments enrich the loan investments of the Bank. USAID has applied its established relationships with local NGOs, flexible grant funds, and in-country presence to shape IDB programming and improve execution.

Program and Management Opportunities

USAID will support President Bush's foreign policy focus on the Western Hemisphere, including the Summit of the Americas; the Administration's new Andean Regional and Third Border (Caribbean) Initiatives; consolidating peace in Central America; and, leading other donors in responding to the devastation of natural disasters.

Economic Growth and Agriculture, Global Health, and Conflict Prevention and Developmental Relief represent important categories or "pillars" of the types of assistance USAID is managing in Latin America and the Caribbean. A fourth pillar, the Global Development Alliance (GDA), offers a model way of doing business in order to meet the expanding opportunities described above, through greatly increasing cooperation with the private sector in financing development activities. For example, USAID currently funds a Cleaner Production activity in Latin American industries of about $8 million, which has leveraged approximately four times that amount in U.S. private sector and other donor participation and which has resulted in quick payback periods and annual savings several times larger than initial investments. This type of activity will be supported under the GDA. USAID plans to use the GDA mechanism to enhance activities under the three pillars described above, in support of President Bush's foreign policy priorities.

FY 2002 Program

USAID FY 2002 resources for the LAC region total $827.6 million. Of this amount $207.3 million is Development Assistance (DA), $100.2 million is Child Survival and Disease (CSD), $170.5 million is Economic Support Funds (ESF), $241.5 million is International Narcotics Control (INC), and $108.1 million is P.L. 480 Title II. The USAID FY 2002 program for LAC addresses the highest priority goals for the region:

• Promoting broad-based growth in developing and transitional economies.
• Securing a sustainable global environment in order to protect the United States and its citizens from the effects of international environmental degradation.

• Stabilizing the world's population.
• Protecting human health and reducing the spread of infectious diseases.

• Increasing adherence to democratic practices and strengthening democratic governance with increased respect for human rights.
• Stemming the flow of illegal narcotics into the United States.
• Preventing or minimizing the human costs of natural conflict and natural disasters.

• Improving the quality and extent of partnerships with NGOs.
• Increasing and enhancing U.S. corporation and foundation financial support of, and participation in, development goal areas.