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IntroductionU.S. National InterestsBecause the countries assisted by USAID's program in Latin America and the Caribbean are our neighbors, their economic, social and political development have extremely important impacts on illegal migration and drug trafficking as well as the potential for increased U.S. exports to the region. USAID supports the consolidation of still fragile democratic institutions in our own hemisphere as the most cost-effective investment for the U.S. government and its citizens. 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 to improve governance and the administration of justice and to strengthen decentralized local governments; to address poverty, inadequate health, and environmental degradation and to promote sustainable development. One of the most compelling national interests in the region is in reducing the flow of illicit drugs to our shores. Colombia's drug production and trafficking is dramatically limiting progress in other countries and the USG is supporting President Pastrana's "Plan Colombia" to address these problems while promoting peace, democracy, and economic growth in Colombia. USAID programs will support alternatives to coca and poppy production, assist displaced persons and strengthen democratic institutions. Development ChallengeUSAID's core program in Latin America and the Caribbean (LAC) is based on the Agency's leadership role in achieving objectives established in the Summit of the Americas, as agreed upon by our President with LAC heads of state, the Inter-American Development Bank 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.
Much progress 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. However, as Secretary Albright notes, the "democracy dividend" is still far from being realized. 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 40% of the population lives in dire poverty on less than $2 per day. As a result, citizens' confidence in their 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. The hurricanes that struck Central America and the Caribbean over a year ago were the worst crises to strike the region in this century and caused total physical damage of around $12 billion. This crisis negated many of the decade's most positive accomplishments and demonstrated just how vulnerable Latin America is to natural disasters. The damage and devastation caused by the Hurricanes Mitch and Georges elicited significant pledges. The United States, in particular, responded substantially with both relief and reconstruction assistance totaling approximately $1 billion of the international donor community pledges of $9 billion in aid to Central America for Hurricane Mitch. After one year, USAID humanitarian and reconstruction programs are having success. However, helping countries rebuild in ways that actually reduce threats from natural disasters will be difficult and recovery will require a sustained effort. The severe impacts of Hurricanes Georges and Mitch are resulting in profound declines in economic performance. In Honduras, for example, overall growth 1999 in per capita GDP declined by 2% (ECLAC). Political Stability, Democratic Governance and Transitions to Peace: 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 shown by recent experience in Ecuador and Paraguay. Several elections (Haiti, Nicaragua, Peru, Dominican Republic and Venezuela) will require our direct assistance and observation to ensure that the democratic process remains on track. USAID has successfully supported an end to decades of armed conflict in Guatemala, Nicaragua and El Salvador and a "quiet revolution" towards local democratization with elected mayors and local officials that has resulted in a more responsible and responsive two-way relationships between citizens and government. USAID assistance will continue to support this transition in virtually all of its programming, including along the Peru/Ecuador border, in Guatemala and as a vital component of the USG's support to "Plan Colombia." Economic Growth and Poverty Reduction: Cutting poverty in half by 2015 is the key objective of the Summit of the Americas and the OECD/DAC. 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. To further reduce poverty or reach our poverty reduction targets, USAID assistance is directed at increasing the income of the 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-induced growth and to address the shortcomings of government policies that hurt the poor. The financial system crises (e.g. Ecuador, El Salvador, and Jamaica) demonstrate serious weaknesses both in the overall policy environment as well as technical shortcomings in bank supervision and compliance.
Drug Trafficking: USAID's alternative development programs in the coca-growing regions of Peru and Bolivia are producing 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 in these countries that includes drug interdiction and eradication of coca crops as well. Since 1995, this comprehensive approach, coupled with strong host country political will to eliminate coca production, has produced a 66% 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 million in 1998 to $55.7 million in 1999. Plan Colombia: The United States has a compelling national interest in reducing the flow of cocaine and heroin to our shores, and in promoting peace, democracy, and economic growth in Colombia. Since 1991 Colombia's drug trafficking, and now production, has risen to the point where it is negating the progress made in all other countries. The guerrilla war, ongoing for 40 years, is now well financed with drugs. As a result, violence and crime are out of control. There are roughly 1.2 million displaced persons, 30,000 murders a year and 3,000 human rights violations that remain uninvestigated. "Plan Colombia," President Pastrana's comprehensive strategy, focuses on more than drug eradication and acknowledges that peace, rule of law, prosperity, and respect for human rights are not separate from one another, but rather, are mutually reinforcing. As in Peru and Bolivia, success in battling drugs requires a concerted array of programs, including improved governance, economic development, and justice reform. The Clinton Administration has proposed a multi-year integrated USG response to "Plan Colombia." The proposal includes $127 million in FY 2000 and $90 million in FY 2001 for USAID managed programs. These programs would address three high-profile areas of U.S. policy in Colombia: reduction of illicit crop production through alternative development, programs for internally displaced persons (IDPs) and increased democracy through citizen participation and rule of law. Human Capacity Development: Considerable progress is being made in education in the LAC region. 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. Excellent progress has been made in increasing access and enrollment rates. Despite this progress, serious challenges remain. LAC schools are the most inefficient in the world with high repetition and dropout rates and low/erratic attendance. The overall quality of education tends to be poor due to the decades-long emphasis on expanding access. In addition, while gender equity has dramatically improved in most countries, other serious inequities still plague education systems. 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 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 IFI funding is put to best. USAID is also fostering close coordination and sustained effort by the donor community to work toward the Summit goal of ensuring 100% access to and completion of primary school for all children by 2010. Health and Population - Curtailing the Spread of Epidemics: 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 8% between 1992 and 1998, due in part to USAID's successful family planning programs. In child survival, both the infant mortality rate and the under-5 mortality rate declined in all USAID-presence countries between 1990 and 1997. 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 underserved and marginalized populations is a priority of USAID programs in LAC. Communicable diseases, especially diarrhea and acute respiratory infections, are highly prevalent in LAC. South and Central America have the highest incidence of cholera in the world. The scope and severity of the HIV/AIDS problem in countries such as Brazil, Guyana, Haiti, Jamaica, Honduras and Dominican Republic pose an increasing challenge and threat to the U.S. As a result of USAID assistance, LAC countries are generally progressing well towards fertility levels that stabilize population and improve infant and child mortality levels. Attention is gradually shifting from subsidizing service delivery to addressing quality of care and institutional/financial sustainability of programs. USAID is focusing on cross-border HIV/AIDS transmission in Central America/Mexico, and on HIV/AIDS "hot spots". As USAID continues to implement infectious disease programs in the region, it will continue to carefully analyze the needs and trends, especially in cases such as Mexico, where the incidence of TB is posing health threats to the U.S.
Protecting the Hemisphere's Resources: Natural resources are abundant in LAC. Roughly 50% of the globe's tropical forests, 40% of its biological diversity, and extensive freshwater and marine resources are in the region. Unfortunately, shrinking public funding for environmental protection, increasing population pressures, continued poverty, unequal access to land, and poor environmental management are severely degrading these resources. USAID is in the forefront in promoting innovative, participatory, and sustainable approaches to environmental management in LAC and will continue this leadership role. USAID programs will also improve donor coordination to leverage resources and ideas, and increase resources directed to local NGOs. In LAC, USAID is replicating successful cross-sectoral programs that apply innovative technologies and methodologies, such as incorporating civil society and local government, addressing health concerns to improve environmental conservation and management programs. Environmental programs will increasingly engage the for-profit private sector as the countries of the region consider environmental issues as they explore participation in the region's expanding free trade regimes. Natural Disasters: The hurricanes that struck Central America and the Caribbean in the fall of 1998 crippled the emergence of these regions from a decade or more of political instability. The USG responded substantially, providing some $312 million in emergency relief and an additional $621 in grant assistance through USAID and 12 other USG agencies. Total estimates of physical damage from the hurricanes totaled $12 billion ($10 billion in Central America and $2 billion in the Caribbean). The Stockholm Consultative Group generated roughly $9 billion in new support to be provided by December 2003 for Central America reconstruction activities. It is clear from USAID's continuing assessments that serious and substantial reconstruction needs will be a priority for this region for some time to come. USAID has deployed its resources fully since the days and weeks following the hurricane. USAID used emergency resources, food aid, and reprogrammed ongoing activities. USAID is now applying the supplemental resources as quickly, effectively and responsibly as possible to help build back these countries. Thanks to these efforts there were no uncontrolled outbreaks of epidemics following Mitch. In Honduras, emergency shelter activities helped to move people from schools they had been occupying and gave them shelter, allowing schools to open for the new school year. Microenterprise institutions have been re-capitalized, borrowers have continued to repay their loans and economic enterprise has continued, even though the national economy has suffered. All of this has been accomplished while doing everything possible to design programs to ensure prudent levels of accountability, including concurrent auditing and use of independent accounting firms to assist the work of host country Controllers General, who play a role similar to our General Accounting Office. USAID and other donors have created additional monitoring mechanisms that will review procurements, audit financial transactions and inspect work completed under the reconstruction program. All of these steps are necessary to give the American taxpayer and the citizens of these countries greater confidence that these funds will be spent wisely in this two-year undertaking. External Debt and Debt Relief: Although the LAC debt situation has improved enormously since the crisis of the 1980s, as a result of economic recovery and the implementation of growth-enhancing policy reforms, the debt burden remains unsustainably heavy in a number of the poorest countries. To address this, the international community has developed the Heavily Indebted Poor Countries (HIPC) initiative, under which certain countries that have a track record of strong economic policies and economic, social, and governance reforms can receive reductions in the stock of debt which they owe multilateral and bilateral creditors. USAID has much to offer given the focus of the Enhanced HIPC initiative on poverty reduction, governance, and consultation with civil society. USAID is playing an increasingly important role in inter-agency discussions on debt relief under the HIPC initiative, particularly related to Bolivia, Honduras and Nicaragua. Treasury and the multilateral banks are soliciting USAID perspectives on country progress in poverty reduction and governance. Program Management Challenges: LAC is actively pursuing alternatives for streamlining and consolidating procurement and internal processes. These include the formation of an intra-bureau team to analyze, develop and implement recommendations for improving procurement actions with our Missions and Regional Contracting Officers (RCOs). Within this context LAC is implementing a significant regionalization of management support services. 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, Germany and the Inter-American Development Bank (IDB). 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 bank programming and improve execution. FY 2001 Program: USAID FY 2001 core resources for the LAC region total $ $646 million. Of this amount $264 million is Development Assistance (DA), $86 million is Child Survival, $133. 5 million is Economic Support Funds (ESF), $55.5 million is International Narcotics Control (INC) and $106.9 million is PL 480 Title II. The Clinton Administration has proposed significant support to "Plan Colombia" beginning with $127.5 million for USAID managed activities in FY 2000. USAID's FY 2001 program request includes an additional $90 million to reduce coca and poppy production though alternative development, help the internally displaced persons (IDPs) and strengthen democracy by improving human rights, citizen participation and the rule of law. These additional resources would bring total FY 2001 resources to over $736 million. The USAID FY 2001 program for LAC addresses the highest priority goals for the region:
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