Development Challenge Other Donors FY 2002 Program Activity Data Sheets Summary Tables Program Summary Strategic Objective Summary USAID Search: Central American Regional Program Previous Years' Activities 2001, 2000, 1999, 1998, 1997 Wednesday, 12-Feb-2003 11:47:57 EST

Introduction

The Central American Regional program is designed to strengthen regional institutions and promote the economic integration of the seven Central American countries of Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Belize, and Panama on regional economic, environmental, and health (HIV/AIDS) issues.

In response to years of instability in Central America, in 1994 the region's leaders created the Alliance for Sustainable Development (ALIDES) to increase trade and improve management of Central America's rich biodiversity. The United States signed the Central America?USA Agreement (CONCAUSA), promising U.S. technical support for the Alliance's Action Plan later that year. In May 1997, the U.S. and Central American Presidents reconfirmed their commitments under CONCAUSA and their common objectives. In March 1999, the leaders joined in two special Consultative Group (CG) meetings to coordinate donor response to the devastation brought on by Hurricane Mitch. By the end of 2001, when the Mitch Special Objective ends, they will have provided over $13.7 million of emergency disaster assistance in a two-year program to improve regional capacity to mitigate the transnational effects of disasters in Central America. In March 2001 at the Regional CG in Madrid, Central American leaders and donors (including the United States) identified both challenges and opportunities for regional modernization. In the wake of destruction by earthquakes in El Salvador in early 2001, all agreed on the continued need to reinforce disaster preparedness and mitigation. The Central American leaders presented a strategy emphasizing economic integration, infrastructure modernization, trade competitiveness, sound environmental management, and social development.

Phase I of the Central American Regional program (1996-2001) has focused on key U.S. goals and interests in the region, including: (1) expanding economic growth and prosperity through greater economic integration and open markets; (2) promoting trade and investment; (3) improving labor conditions; (4) increasing sustainable development and sound environmental practices by stemming regional resource degradation and loss of biodiversity; and (5) reducing the incidence of communicable diseases, especially HIV/AIDS. Phase II of the Central American Regional Program (2002-2007) was approved in July 2000, and continues to reflect the aforementioned U.S. goals and interests, while focusing greater attention on regional competitiveness and free trade readiness, and consolidating the Mesoamerican ecological corridor.

The Central American region encompasses seven countries: Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, with a population in 2000 of some 37 million growing at a rate of 2.5% annually. Over half of all Central Americans live in rural areas and two-thirds live below the poverty line. Beyond the challenges of poverty reduction, the Central American countries also remain ill equipped to face the cross-border spread of HIV/AIDS and other contagious diseases, frequent natural disasters, and the continuing loss of biodiversity due to environmental degradation.

To combat poverty and promote development in Central America, higher economic growth rates are needed. In 2000, USAID's Project in Support of Central American Participation in Free Trade Agreements (PROALCA), has reinforced Central America's movement toward an outward-looking, export-led strategy as the best way to achieve rapid, sustained, and equitable economic growth. Promoting the U.S. foreign policy objectives of establishing the Free Trade Area of the Americas (FTAA) by 2005 and advancing the trade liberalization agenda negotiated globally through the World Trade Organization, PROALCA contributed to the continued regional trade increase -- reaching 54% of Gross Domestic Product (GDP) in 2000 -- and to enhanced domestic policies for more open trade regimes. Central America made steady progress in trade readiness. And intra-regional trade as a percent of GDP continued to rise in 2000, while total private sector investments in the region rose sharply during 2000 in key sectors such as energy and telecommunications.

Sustained growth must be equitable and avoid the depletion of natural resources. The Central American Environmental Program (PROARCA) strengthened regional integration and produced important market-based mechanisms to protect the environment. Work to consolidate the Mesoamerican Biological Corridor (MBC) continues through support to NGOs and government agencies, along with development by Central American countries of model National Biodiversity Strategies which are now being used to prioritize interventions in the MBC. PROARCA has reduced threats to key natural resources in two additional trans-boundary sites, and during 2000 it helped bring 27 additional protected areas under improved management, enjoining the active participation of property owners in local conservation.

Working to improve Central American capacity to respond to the growing HIV/AIDS crisis, the regional HIV/AIDS strategy strengthened policy formulation across the region and expanded public and private support for effective programs responding to the HIV/AIDS challenge. The program strengthened NGOs' advocacy and prevention networks, regional Condom Social Marketing, and the exchange of information among all sectors of the HIV prevention community. Unfortunately, however, the pandemic is rapidly gaining speed. USAID's regional program focuses on areas and high-risk groups not normally covered by bilateral programs, and on activities where a regional program has comparative advantage.

A key feature of the Central American Regional program continues to be the direct involvement of Central America Ministers of Trade, Environment, and Labor in supporting regional programs to overcome barriers to trade and investment, and to a regional stewardship of the environment to assure the sustainability of growth. In 2000, all Central American participating countries remained eligible for trade benefits under the Generalized System of Preferences (GSP) and all countries under scrutiny were removed from the GSP priority workers' rights watch list, paving the way for participation in World Trade Organization (WTO) and regional Free Trade agreements and new trade and external capital flows to the region. In the environment, important mechanisms to protect the environment were established: a public-private forum for sustainable tourism and a permanent national council, both of which assist communities as well as local and national authorities in decision-making for market-based natural resource use; and a tri-national biological corridor in the Gulf of Fonseca which further consolidates the MBC.

Under the Central American and the Caribbean Emergency Disaster Recovery Fund, the Regional Program is implementing a targeted two-year effort to assist the region's Mitch-affected countries to improve their collective capacity to manage transnational watersheds, improve standards for roads, and improve education in Costa Rica in areas affected by Mitch-related migration.

FY 2001 is the final year under which Phase I activities of the Central American Regional program are being funded and is a year of transition to USAID's five year Phase II of the strategy. Of particular importance is the initiation of new activities in trade and investment to ensure that national efforts mesh with regional integration and cross-border efforts to meet trade goals, new activities in the environmental area, as well as new activities using Child Survival and Disease (CSD) funds to combat HIV/AIDS.

Besides USAID, major donors providing support on a regional basis to Central America are the United Nations agencies, the Pan-American Health Organization, Canada, the European Union, the Nordic countries, and the Inter-American Development Bank. Spain plans to join the Central American Bank for Economic Integration as the first non-regional member, and will contribute to its financial and institutional strengthening in coming years.

All FY 2002 Development Assistance (DA) funds will be obligated for activities under Phase II of the Central American program. USAID funds will support the Central American Regional trade and investment program to increase the ability of Central American governments to participate in FTAA and global markets by helping reform trade and investment policies and increasing private investment. The regional environmental program will use DA funds to support activities with regional economies of scale and cross-border impacts to consolidate a Central American system of protected areas, harmonize environmental policies, and promote environmentally-friendly products with market potential. Finally, start up activities will work to improve municipal finance in the region.

In FY 2002, CSD funds will support the regional program's efforts to help expand HIV/AIDS awareness and prevention services, especially among high-risk groups and youth, increase prevention through social marketing of condoms, and improve policies to support strong public HIV/AIDS programs.

• 596-001  Increased Central American Participation in Global Markets
• 596-002  Increased Effectiveness in Regional Stewardship of the Environment and Natural Resources in Targeted Areas
• 596-003  Enhanced Central American Capacity to Respond to the HIV/AIDS Crisis
• 596-004  Improved Reginal Capacity to Mitigate Transnational Effects of Disasters
• 596-005  Increased Central American Competitiveness in Global Markets
• 596-006   Improved Environmental Management in the Mesoamerican Biological Corridor
• 596-007  Strengthened Municipal Finance Systems for Local Governments in Central America
• 596-008 Enhanced Central America Capacity to Respond to HIV/AIDS Crisis - Phase II