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 LAC Bureau Program Summary LAC Countries Program Summary Notified Levels for FY 2002 Notified Levels for FY 2003 Abbreviations and Acronyms Glossary Previous Years' Activities 2002, 2001, 2000, 1999, 1998, 1997 Last updated: Wednesday, 29-May-2002 18:51:35 EDT

(text taken from the FY 2003 Congressional Budget Justification)

THE DEVELOPMENT CHALLENGE: This past year has been witness to an exciting mixture of heartening triumphs and disconcerting challenges throughout Latin America and the Caribbean. Despite the highly polarized atmosphere of Nicaragua's elections, and the abrupt resignation of President Alberto Fujimori in Peru, these countries ushered in democratically elected governments that must break from the past, rise to the challenge, and respond to their citizens' calls for transparency and accountability. However, there is growing concern that the economic crisis and the rising populist sentiment in Argentina could spill over to neighboring countries and endanger the region's commitment to market-based reform and the establishment of a Free Trade Area of the Americas (FTAA) by January 2005. USAID's efforts will help our regional partners stay the course on the hard road of reform and implement the trade, democracy, and education commitments agreed upon by President Bush and leaders of the Western Hemisphere at the Third Summit of the Americas held in Quebec, Canada.

Looking back, USAID investments in the region helped spread democratic processes and reduce human rights violations. Today, all governments in the LAC region, with the exception of Cuba, have democratically elected governments. USAID efforts have also contributed toward the continued reduction of the region's infant mortality rate, which now stands at 30 per 1000 live births as compared to 91 in the late 1960s. Additionally, access to basic education has increased and adult illiteracy rates have been more than cut in half. Coupled with this, USAID assistance has helped countries in the region increase and diversify their agricultural exports. Cultivation of licit crops in Bolivia and Peru has increased as USAID's alternative development programs in South America have given small farmers new economic options. USAID has also helped countries mitigate the effects of disasters. As part of hurricane reconstruction programs in Central America and the Caribbean and the El Salvador earthquake reconstruction program, improved environmental standards have been developed to protect physical and social investments. Houses constructed after Hurricane Mitch withstood the shocks of the devastating El Salvador earthquakes. The Rio Lempa watershed did not flood with the heavy rains of Hurricane Keith in 2000. USAID has also been highly successful in promoting the adoption of agriculture, forestry, energy, and industrial production practices that are environmentally sound and economically competitive.

Despite these encouraging trends, substantial challenges remain. Although the 1990s brought the region a welcome recovery from the economic troubles of the 1980s, the achievements of the past decade have not created enough economic horsepower to reduce poverty and income inequality. Persistent poverty still characterizes the LAC region today, with more than one-third of the population living below the poverty line. While roughly two-thirds of the poor live in urban areas, people living in rural areas are twice as likely to be poor. The skewed income inequality in the LAC region is the worst in the world with countries like Nicaragua, Honduras, Brazil, and Guatemala at the top of the global list. The lack of economic opportunities in Latin America and the Caribbean makes the region the number one source of illegal immigration into the United States, with 88% of illegal immigrants coming from these countries. An additional concern is the cross-border spread of communicable diseases such as tuberculosis and HIV/AIDS.

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These challenges are compounded by the current worldwide recession, which has depressed commodity prices. Coffee, a major export earner for Latin American countries, is experiencing its lowest price levels in 30 years due to the entry of Vietnam and Indonesia into the market. Many coffee-producing areas of Central America have been devastated, a situation further exacerbated by two years of severe drought. Effects of the crisis will be felt in the region for a number of years, as coffee prices remain low. With the economic downturn, even the region's bright spots have dimmed - Mexico's sterling growth and job creation rates, which were fueled by the North American Free Trade Agreement (NAFTA), have plunged. The aftershock of the tragic terrorist attacks of September 11, 2001, has accelerated the economic deterioration in the region. Countries with significant trade and tourism sectors are particularly vulnerable. Sixty-five percent of Caribbean holiday bookings were cancelled after the September 11th attacks. The decrease in tourism revenue has reduced many governments' budgets and boosted unemployment rates. Worsening economic conditions could fuel an increase in narcotics trade, other criminal activities, and violence, especially since the region has already proven to be fertile ground for transnational crime networks (Jamaica and the Eastern Caribbean), guerilla insurgency and terrorism (Colombia), and money laundering (Paraguay).

Continued efforts are needed to solidify democracy and reduce the potential for conflict. While impressive gains in democratic institution building have taken place in the region, these new institutions are still fragile and not all political processes are fair and democratic. Electing democratic governments is one step in the process of creating a democratic society; however, to sustain and achieve further gains in democracy, people in the LAC region must be able to envision the linkages between democracy and direct improvement in their daily lives. Many citizens have lost their early fervor for a return to democracy, especially as crime and corruption continue to erode the legitimacy of freely elected governments. There is still a great deal of work to be done to improve the responsiveness of government institutions, especially for the poor and the indigenous groups who find themselves relegated to the margins of the political process, to help strengthen the rule of law, and to eliminate corruption.

The area's natural resource base is under increasingly intense pressure. The region has rich soils and fisheries and is home to one-half the world's remaining tropical forests and biodiversity. Unfortunately, it also has one of the world's highest rates of deforestation. Two-thirds of the region's coral reefs are either dead or highly threatened, and available fresh water per capita is one-fifth that of 50 years ago. Environmental degradation has a negative impact on development efforts. The World Bank estimates that environmental degradation reduces the gross domestic product (GDP) of developing countries by roughly 4 to 8 percent. Additionally, the International Committee of the Red Cross has concluded that environmental degradation, not war or political repression, is the greatest cause of displaced people and refugees.

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Although considerable progress has been made in the health and education sectors, HIV/AIDS is taking its toll, especially in the Caribbean where the prevalence of HIV/AIDS in adults is second only to sub-Saharan Africa. More work is needed to reduce maternal mortality, through increased access to professional care during delivery, and to reduce malnutrition. Malnutrition has declined in the rest of the region, but in Central America, the rates of underweight and stunting in children have remained stagnant for 20 years. While there have been significant reductions in child mortality rates and an increase in the use of family planning region-wide, focus needs to shift to younger infants for whom death rates remain high, and family planning efforts must expand to reach all couples who want this important service, especially in remote rural areas. In the education sector, remarkable progress has been made in providing access to basic education, but major failings still exist in the quality, equity, and efficiency of education systems. The majority of LAC children attend weak and under-funded public schools, where they fail to acquire basic skills in mathematics, language, and science. In the region, only 56% of students who start school finish six grades and only about one-third of those children attend secondary school. When comparing LAC countries with countries of similar incomes, students in LAC enter the labor force with far less education than their counterparts. This under-investment in human capital, if not reversed, will ensure that world markets turn elsewhere and that labor, not commodities, will become the region's chief export.

USAID's approach to addressing the challenges faced by Latin American and Caribbean countries is based upon the Agency's four pillars: Economic Growth, Agriculture, and Trade; Global Health; Democracy, Conflict, and Humanitarian Assistance; and Global Development Alliances.

To address the myriad challenges in the LAC region, USAID has developed subregional initiatives that cut across the Agency's pillars. These initiatives are: the Partnership for Prosperity, a trade-led rural economic growth strategy for Central America and Mexico that focuses on reducing poverty, particularly in rural areas; the Andean Regional Initiative, a multi-country counternarcotics program which emphasizes political stability and addresses widespread poverty reduction through activities in democracy, economic growth, trade, and alternative development in South America; and the Third Border Initiative, which includes measures to address poverty, trade, fragile democracies, health, education, and crime in the Eastern Caribbean.

The Economic Growth, Agriculture, and Trade pillar strengthens U.S. efforts to ensure that the people of Latin America and the Caribbean are able to take advantage of the potential of globalization, rather than become its victims. USAID activities under this pillar fully support the commitment made at the Third Summit of the Americas held in Quebec, Canada, to establish FTAA by 2005, as well as the summit themes of creating prosperity and realizing human potential. The activities underscore the interrelationship of economic growth and agricultural development, environmental sustainability, and the development of a country's human capital with the ultimate goal of creating and cultivating vibrant, broad-based market economies. Moreover, the approach to achieving this goal centers on improving rural livelihoods and contributes toward the prevention of conflict as the poor and often disenfranchised are better able to envision and take steps toward a more prosperous future. This is important in LAC where many countries still have serious stability issues that emanate from rural areas (e.g., Colombia, Nicaragua, and Guatemala).

For example, USAID's Partnership for Prosperity (PfP) program, to be initiated in FY 2002, will provide market development, business services, and access to finance to small farmers; build trade capacity and competitiveness; support applied agricultural research and biotechnology; enhance education; and improve disaster preparedness. The PfP initiative will signal a new way of doing business by forging strong partnerships with the U.S. Hispanic community, corporations, private foundations, U.S. state governments, and international financial institutions. USAID is planning to partner with private groups in order to help coffee farmers tap premium specialty markets, including the environmentally certified, or "green," market. PfP will also explore ways to reduce transaction costs and facilitate the use of remittances for development purposes. Remittances play a critical role in the Central American and Caribbean economies, for example, accounting for over 10% of GDP in Nicaragua and El Salvador.

Under the Andean Regional Initiative (ARI), USAID is playing a central role in helping Colombia and its neighbors address the economic, social, and institutional problems linked to illicit coca and drug production. USAID will continue programs under this initiative aimed at developing viable alternatives to coca production. USAID will also undertake trade capacity-building activities in the Andean region, which, in addition to being vital to identifying markets for alternative crops in coca growing areas, will also be key to promoting the FTAA. Similarly, as part of the Third Border Initiative, the Eastern Caribbean regional program will assist countries with trade-capacity development. USAID is committed to developing alliances with non-governmental organizations, foundations, corporations, and others in order to leverage resources and new technologies to address the most important development issues.

USAID encourages the development of human potential through education programs that focus on improving service delivery in basic education, particularly to disadvantaged populations including girls, indigenous and rural people. In FY 2002, USAID will implement a new initiative creating Centers of Excellence for Teacher Training to serve as regional teacher training and resource centers in the Caribbean, the Andean region, and Central America. The focus of the program will be on improving reading instruction and upgrading the knowledge and pedagogical skills of poorly qualified teachers.

USAID's environment and natural resource management programs focus on promoting policies and practices that are both environmentally sustainable and economically competitive. USAID helps farmers to implement hillside agriculture practices that reduce erosion while increasing household income. Focus is placed on management practices that increase the profitability of sustainable natural forest management while reducing the incentive to convert forested lands to other uses. In Brazil, Bolivia, Ecuador, Central America, and Mexico, USAID has promoted low-impact harvesting techniques that provide timber on a sustainable basis at costs comparable to the traditional destructive cutting practices. Additionally, USAID promotes pollution prevention practices and technologies to a variety of industries, which have helped to reduce production costs. USAID also supports conservation through the Parks in Peril program, through which 28 million acres of fragile ecosystems are protected and supported by local communities.

The Global Health pillar includes activities to promote maternal and child health, nutrition, and women's reproductive health and to combat HIV/AIDS and other infectious diseases such as tuberculosis (TB) and malaria. These are global issues with global consequences: the health of a population directly affects their productivity, and unchecked infectious diseases in other countries pose threats to our own. USAID carries out population, health, and nutrition programs in 14 countries in the region. The major areas of focus include family planning, child survival, HIV/AIDS, infectious diseases, health sector reform, and maternal health. USAID targets its assistance to countries with the most needs, and within these countries, to the most needy populations. Our approach to health challenges in the region reflects an in-depth understanding of national health-sector resources and weaknesses combined with on-the-ground coordination with other major donors and host-country public- and private-sector organizations. Recently, programs in HIV/AIDS and TB have shown the most growth, as a concrete response to the increasing concern that these infectious diseases are literally on our doorstep.

The Democracy, Conflict, and Humanitarian Assistance pillar integrates the existing portfolio of USAID democracy programs with new approaches to crisis and conflict analysis and resolution. LAC democracy programs, with their emphasis on institutional reform and citizen participation, are at the heart of conflict prevention. The Peace Accords program in Guatemala for example, promotes good governance, which is critical to reducing the economic, health, and environmental vulnerabilities that continue to breed instability. As a result of USAID's efforts under the Andean Regional Initiative, community participation is improving local democratic processes and government decentralization in Colombia. USAID will continue programs under this initiative aimed at establishing a fair and transparent justice system, attaining a greater voice in government decision-making, and improving basic human rights making crime, insurgency, and drug trafficking less attractive alternatives. In El Salvador, the USAID-funded community policing pilot activity has been adopted nationwide. USAID activities under this pillar also support the Summit of the America's action plan in the areas of anti-corruption, human rights, access to justice, and political participation.

PROGRAM AND MANAGEMENT CHALLENGES: LAC is actively supporting the Administration's foreign-policy objectives by integrating and focusing the impact of our activities through major initiatives: the Partnership for Prosperity, the Andean Regional Initiative, and the Third Border Initiative. The major management challenge faced by LAC continues to be constraints on the human resources needed to implement the planned programs. Having successfully completed regionalization of management support services in the field on a sub-regional basis over the past few years, LAC will continue to examine approaches to further restructure the workforce for greater efficiency. Initial steps will include a series of management assessments to identify options for more efficient management within and across individual operating units.

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 Union, Japan, the Netherlands, and Germany. USAID's collaboration with other donors is a critical and expanding focus of its strategy in the LAC region. Our primary multilateral partners are the Inter-American Development Bank (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 our natural partner. USAID's extensive coordination with the IDB continues to bring positive results. USAID is using its strong ties to IDB technical staff to ensure that its grant investments enrich the World Bank loan investments. USAID has applied its established relationships with local NGOs, flexible grant funds, and in-country presence to shape IDB programming and improve implementation.

FY 2003 PROGRAM: USAID FY 2003 resources for the LAC region total $894 million. Of this amount, $417 million is for Development Assistance (DA), $96 million is Economic Support Funds (ESF), $278 million is Andean Counterdrug Initiative, and $103 million is P.L. 480 Title II. The USAID FY 2003 program for LAC addresses the highest priority goals for the region. In Economic Growth, Agriculture, and Trade, activities focus on promoting trade-led and 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; improving equity and quality in education and training, and reducing the risk of future disasters by promoting disaster mitigation measures. In Global Health, activities focus on stabilizing the world's population and protecting human health and reducing the spread of infectious diseases. In Democracy, Conflict, and Humanitarian Assistance, activities focus on 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, and preventing or minimizing the human costs of conflict and natural disasters.