Testimony of Mr. Adolfo A. Franco,


Assistant Administrator,


Bureau for Latin America and the Caribbean


Before the House Committee on International Relations


Subcommittee on the Western Hemisphere


Thursday, February 27, 2003 at 2 o’clock p.m.


Rayburn House Office Building, Room 2172






Mr. Chairman, Members of the Committee, it is a pleasure once again to

appear before the Subcommittee on the Western Hemisphere of the House

International Relations Committee to tell you about the ways in which USAID’

s Bureau for Latin America and the Caribbean is promoting the President’s

vision for the Western Hemisphere.


President Bush's National Security Strategy reflects the urgent needs of our

country following the September 11 terrorist attacks. It states clearly that

the U.S. Government's aim is to help make the world not just a safer place

but a better place. At USAID, we work closely with our colleagues in other

agencies and departments, from the Department of State to the Office of the

U.S. Trade Representative, to promote political and economic freedom for all

nations, and particularly among our closest neighbors with whom we have such

strong social and cultural ties.


The President has said the future of our Hemisphere depends "on the strength

of three commitments: democracy, security and market-based development."

USAID’s Bureau for Latin America and the Caribbean (LAC), supports the

President’s goal of market-based development with a comprehensive program of

trade capacity building programs to support the President’s goals of a Free

Trade Area of the Americas (FTAA) and a U.S.-Central America Free Trade

Agreement (CAFTA). Both the President and Secretary Powell have said free

trade will lead to the sustained economic growth essential for development

to occur. I wish for you to know that I have made our efforts at trade

capacity building a priority for the Bureau for this year.


The LAC Bureau also supports the President’s other priorities for our

region. I will tell you about our efforts to promote democracy and good

governance, and reduce corruption, in the countries of our Hemisphere. I

will also tell you what we are doing to promote health and education, both

essential for the security about which the President spoke.


The President’s National Security Strategy recognizes the important role of

development assistance. In his landmark March 14, 2002 speech to the

community of donor nations in Monterrey, Mexico, the President pledged to

create a Millennium Challenge Account (MCA) which would make additional

development assistance available to countries that show progress in ruling

justly, in promoting economic freedom and investing in people. The

Administration has forwarded legislation authorizing the MCA to Congress,

and I hope this Committee will act quickly to enact it.


At USAID, we know that the way in which we do things is as important as what

we do. During his tenure as USAID Administrator, Andrew Natsios has taken

the President’s challenge to heart and tried to make foreign assistance more

effective and results-oriented, and I work toward this daily in my role as

Assistant Administrator for Latin America and the Caribbean. I have

initiated a substantial review of management practices in each of the

sixteen missions in my region with an eye to increasing efficiency and

reducing duplication of effort.


Despite the continuing challenges, USAID is proud of its contribution to the

broader U.S. Government policy objectives in Latin America and the

Caribbean. We have been working assiduously to remold our program to respond

to the development challenges in the region and to promote the President’s

priorities for our Hemisphere.


Continuing Challenge


Over the past several years, the Latin America and Caribbean region has

faced increasing development challenges that threaten the national security

and economy of the United States. Contracting economic growth rates,

extensive poverty, unemployment, skewed income distribution, crime and

lawlessness, a thriving narcotics industry and a deteriorating natural

resource base continue to undermine the stability of the region. The risks

of HIV/AIDS and drug-resistant tuberculosis on our borders also threaten the

population of the United States. Civil unrest due to poor economic

conditions threatens countries in Central and South America, while political

instability in Colombia, Venezuela, and Haiti continues unabated.

Increasingly, citizens’ confidence in the ability of democratically-elected

governments to provide security and prosperity is waning. Bolivia has also

recently emerged as a country where democracy is at risk.


The region’s GDP shrank by approximately 0.8% in 2002, the worst economic

performance since 1983. Inflation has edged up after eight years of steady

decline. Mediocre economic performance has caused per capita income in LAC

countries to decline significantly since 1998, while poverty has increased.

These woes have brought discontent and political turbulence, raised

questions about the health of democracy in the region, about investment

priorities, social sector policies, and the benefits of a decade of liberal

reforms. The effects in the poorest countries--Haiti, for instance—and even

regions within countries with generally solid economic performance—the

Northeast of Brazil, for example—have been even more disheartening.


Still, it is important not to portray the region in a single-minded negative

light. LAC’s economy overall is expected to recover slightly in 2003. The

Argentine economy is expected to grow about 2% this year. Chile, Mexico,

Peru, and the Dominican Republic are expected to top the growth league in

2003, with expansion of 3% or more, assuming that the slowdown in the United

States abates and strong growth resumes. Countries which adopt sound fiscal

policies and orient their economies toward foreign investment, and

rules-based trade under the World Trade Organization (WTO), have tended to

resist the recent downturn. The result of NAFTA has been phenomenal growth

for all three partners. Since 1993, trade among NAFTA nations has climbed

drastically, and U.S. merchandise exports have nearly doubled. This has had

a positive development effects on Mexico, in particular.


Another area of progress is commitment of LAC countries to good governance

as represented by the signing of the Inter-American Democratic Charter and

the Inter-American Convention Against Corruption of the Organization of

American States (OAS). Nicaragua is striving to curb government corruption,

and other countries, such as Mexico, have also made important commitments to

reduce official corruption. Recent elections conducted in Jamaica, Brazil,

Colombia, Bolivia, and Ecuador were all judged to be free and fair.




To address the myriad challenges in the LAC region, the United States is

committed strongly to helping build an entire hemisphere that lives in

liberty and trades in freedom. U.S. foreign policy priorities in the Western

Hemisphere, to which USAID is an important contributor, include promoting

equitable trade-led economic growth, strengthening democratic processes,

improving health and education standards, and fostering cooperation on

issues such as drug trafficking and crime.


Trade As The Engine Of Economic Growth


Sustained development depends on market-based economies, sound monetary and

fiscal policies, and increased trade and investment. Our efforts in LAC are

resulting in an improved enabling environment for positive and peaceful

changes. We are mindful of the critical need to continue these efforts and

build on our experiences in order to encourage further economic development.

President Bush, Secretary Powell, and Administrator Natsios have all said

trade and investment are essential to economic growth and poverty reduction.

Without an increase in trade and investment, the region’s substantial

development gains will be put at risk, and hemispheric stability could



Since the 1980s, USAID has played a lead role in the LAC region by

supporting programs aimed at strengthening the enabling environment for

trade and investment as the twin engines for economic growth and poverty

reduction. In August 2002, President Bush signed the Trade Act of 2002. On

January 8, 2003, Secretary Struble and I participated with U.S. Trade

Representative Ambassador Robert Zoellick in launching the U.S.-Central

America Free Trade Agreement negotiations, and negotiations continue on

track to establish an FTAA agreement by January 2005. USAID has responded to

these opportunities by moving quickly to assist LAC’s smaller economies and

developing countries strengthen their enabling environment for trade and

investment as the essential foundation for building greater capacity to

participate effectively in the global trading system.


Whatever the final shape of the FTAA agreement, the result will mean more

trade, more jobs, and more income for the U.S., Canada, Mexico, and the

other 31 FTAA countries of the Caribbean, Central America, and South



Trade Capacity Building


The following provides an overview of USAID support for trade capacity

building in the LAC region. From FY 1999 through FY 2001, USG support for

trade capacity building in the LAC region averaged in excess of $50 million

per year, with an estimated 70% (approximately $35 million annually)

provided by USAID. For FY 2003, USAID plans to increase its support for

trade capacity building in the LAC region to the extent that funds are

available. Let me highlight some of the current USAID program highlights in

trade capacity building across LAC sub-regions:


USAID activities will continue to build trade-negotiating capacity, develop

markets, and provide assistance for business development. Programs will

assist with complying with the "rules of trade" such as

sanitary/phytosanitary measures, customs reform, and intellectual property

rights. Support for legal, policy, and regulatory reforms will improve the

climate for trade and investment. Recognizing that remittances constitute a

potentially large source of development finance, USAID will continue to

support and implement mechanisms for remittance transfer with lower

transaction costs. Assistance will expand in the area of commercial and

contract law and property rights. USAID will continue to build on its

successful efforts with promoting rural economic diversification and

competitiveness, including non-traditional agricultural exports and access

to specialty coffee markets. Business development and marketing services

will help small and medium farmers and rural enterprises improve

competitiveness and tap new markets.


In Central America and Mexico, USAID will continue the Opportunity Alliance

(formerly the Partnership for Prosperity), emphasizing trade-led rural

competitiveness through diversification and penetrating agricultural niche

markets. The Alliance was initiated in FY 2002 in response to a protracted

drought, collapse of coffee prices and resulting unemployment of seasonal

agricultural workers. An estimated 52% of the population, more than 14

million people, is poor and chronically food-insecure in Guatemala,

Nicaragua, El Salvador, and Honduras. USAID activities in FY 2003 and FY

2004 will continue to support democratic governance, trade and employment

creation, agricultural production, sound environmental management, and

training. USAID is assisting the Central American countries in their efforts

to prepare for the FTAA and, more recently, to prepare for negotiation and

implementation of US-CAFTA. As part of this process, USAID worked closely

with other donors such as the Inter-American Development Bank to assist each

Central American country in preparing a national trade capacity building

strategy in support of their participation in the CAFTA process.


For the Caribbean, USAID has added a trade component to the Third Border

Initiative (TBI) efforts to strengthen trade capacity and competitiveness of

Caribbean countries. It will build on modest trade activities underway for

several years in a sub-region with many small island economies lacking

diverse sources of income. When launched in 2002, TBI aimed to strengthen

political, economic and security ties between the U.S. and the nations of

the Caribbean. The majority of interventions and bulk of funding thus far

have supported USAID’s HIV/AIDS program. Working closely with the

development assistance community, USAID is now moving quickly to mobilize

trade capacity building support to respond to countries’ priorities

including technical training of government trade officials; developing

trade-related databases; implementing trade agreement commitments in such

areas as customs reforms and sanitary and phytosanitary measures; providing

assistance for small business development; and fostering greater civil

society outreach. USAID’s Caribbean Regional Program is developing

initiatives to strengthen the competitiveness of CARICOM countries in

hemispheric and global trade, and will be assisting eight CARICOM countries

in preparing their national trade capacity building strategies under the

FTAA Hemispheric Cooperation Program.


In South America, USAID has added a trade emphasis to the Andean Regional

Initiative (ARI). USAID initiated trade capacity building activities in FY

2002 and is expanding the program for trade in the sub-region in FY 2003.

USAID/Peru is developing an Andean Regional trade capacity building program

to assist Andean Community countries in addressing "rules of trade" and

competitiveness issues, with an initial emphasis in providing technical

assistance in a variety of trade disciplines areas including customs

reforms, sanitary and phytosanitary measures, competition policy, and



At the bilateral level, more of our missions are developing new or building

upon existing economic growth programs to address trade and investment

issues. For example, in the Dominican Republic, USAID has supported

technical training on trade issues for government trade officials, while in

Jamaica USAID has supported a private sector-led program that provides

succinct information to private and public sector leaders on the benefits of

free trade. As a result of these USAID-supported trade capacity building

efforts, the Dominican Republic has offered better market access in recent

rounds of negotiations, while both the private sector in Jamaica and the

broader English-speaking Caribbean now have a better understanding of the

potential benefits of free trade and have become stronger advocates for the



At the hemispheric level, USAID has a new "quick response mechanism" to

provide greater capacity to address technical assistance and training needs

arising from trade negotiations. Through this mechanism, we are working with

FTAA countries, initially in Central America and Brazil, to provide

government officials and civil society—including business leaders¾ with

information on the benefits of free trade.


An important aspect of building trade capacity is broadening the education

base for a more productive workforce. USAID will support advancements at the

secondary level and in workforce training that will improve the quality of

instruction, increase worker productivity, and help youths prepare for

entering the workforce. For example, USAID’s Training, Internships,

Exchanges, and Scholarships (TIES) program in Mexico will enhance capacity

of Mexican scholars and institutions to respond to the objectives and

strategies of NAFTA and the Partnership for Prosperity, which together

define the emerging U.S.-Mexico Common Development Agenda.


Democracy, Good Governance, and Anti-Corruption


The key to sustained economic growth and poverty reduction, I believe, is

fostering a strong enabling environment for trade and investment. This

requires a mix of "economic governance" institutions vital for attracting

investment, creating jobs, and expanding trade. These systems are predicated

on democratic systems of governance with leaders responsive to citizens’

needs and supportive of transparent public administration. Administration of

justice, commercial and contracts law, property rights, and related legal

and regulatory reform are key to stimulating the enabling environment and

increasing investor confidence. USAID will continue to reinforce linkages

between economic growth and trade on the one hand, and good governance and

the rule of law on the other.


While support for democracy remains solid in the LAC region, popular

disillusionment is growing with those governments that cannot reduce

poverty, corruption, crime, and violence. Although significant strides have

been made (with the exception of Cuba every country in the Hemisphere has a

democratic, constitutionally-installed government), many of these

democracies remain fragile and must make a concerted effort to reinforce the

institutional building blocks of democracy. Economic difficulties tend to

weaken support for free market reforms and the fabric of whole societies.


An independent, efficient, and transparent judiciary is not only fundamental

for a functioning democracy but also a prerequisite for increased external

investment. USAID continues to support a broad range of institution-building

efforts to strengthen judicial systems and increase respect for the rule of

law. Increased crime and violence is consistently ranked as citizens’

primary concern, next to unemployment. The rise of violence in Jamaica has

become so paralyzing to the country’s tourist-driven economy that the

private sector and civil society are joining to help combat the problem at

the community level with USAID assistance. The endemic problems of impunity

for violent crime, as well as corruption, money-laundering and narcotics

crime, undercuts social and economic growth in many LAC countries. USAID is

responding in more than a dozen countries in the Hemisphere by providing

direct assistance for the modernization of justice sector procedures,

systems and institutions. Over the last decade, these countries have worked

to change systems of justice where crimes were not investigated and legal

files were lost. Instead, countries have created new transparent procedures,

are retraining professionals, and are gradually implementing the use of

oral, public trials to determine guilt or innocence for a range of crimes.

In Honduras, for example, USAID supported a group of local reformers who

began work in 1995 to change the justice system. In 2002, after years of

effort, the old system was swept away, and Honduras now has a new code that

entirely restructured the criminal court system and requires open trials

with defense, prosecution and the public presentation of evidence. Although

it will take years to implement these procedures fully, Hondurans are

justifiably proud of reforming a system that responds uniquely to local

needs, adapts the best solutions from many countries, and establishes the

framework for confronting and reducing impunity.


USAID also helps strengthen the capacity of national and local governments

to demonstrate that responsible regimes can deliver benefits to their

citizens. With the direct election of local mayors and the devolution of

authority to municipalities, USAID is helping citizens and elected leaders

devise community development plans that respond to local needs and generate

growth. In fourteen countries, USAID is helping mayors hold public hearings

about annual budgets and allow citizen involvement in public

decision-making. Mayors in many towns have also established transparent

accounting and financial management procedures with USAID assistance to

create the framework for greater revenue generation at the local level for

roads, schools, health centers, and job creation. In turn, citizens monitor

the use of public funds and devise "social audits" in countries such as the

Dominican Republic and Bolivia to track spending in accordance with local

development plans in order to keep officials accountable to the public.


USAID’s anti-corruption programs emphasize prevention and capacity-building

as part of attacking weak governance, entrenched political institutions, and

poor public sector management. Higher levels of corruption are associated

with lower growth and lower levels of per capita income. Since corruption

increases the cost of doing business, failure to act will seriously threaten

the benefits likely to accrue through the FTAA. To improve transparency and

decrease opportunities for corrupt behavior, USAID supports multi-faceted

approaches to anti-corruption programming. In Guatemala, a coalition of

non-governmental organizations has advocated creation of a national plan to

attack corruption as part of local implementation of the Inter-American

Convention Against Corruption. In Ecuador, the Anti-Corruption Commission

has the investigative authority to uncover cases of corruption and with

USAID support has played a leading role in exposing scandals in banking,

municipal budget transfers, and illicit enrichment of public officials. In

Nicaragua, USAID provides assistance to improve the capacity of the Attorney

General’s Office to tackle high-profile corruption cases against the former

government. USAID is also helping the new Office of Public Ethics in the

Nicaraguan Presidency which will have responsibility for setting norms and

standards for ethical conduct, training public employees and monitoring

government agencies’ compliance with internal control systems. Only a

combination of citizen oversight and improved capacity for government action

will increase the costs of fraud and illegal behavior sufficiently to reduce

corruption. USAID is working with other US agencies, international financial

institutions and international organizations to that end.


Health and Education


The LAC Bureau has placed great emphasis on two of the President’s other

stated goals for our region—health and education. In health, there has been

significant progress in raising vaccination coverage, reducing or

eliminating major childhood illnesses such as measles, and improving access

to primary education. Also, because of USAID assistance, affected countries

are more willing to discuss the HIV/AIDS problem. This is particularly

relevant in our region, as the Caribbean has the second highest rate of

HIV/AIDS in the world, after sub-Saharan Africa. USAID programs have had

some success in reducing the social stigma attached to the disease, and

prevention campaigns, including those which promote abstinence, hold even

greater promise for lowering transmission rates. While steady progress is

being made in lowering maternal mortality, and in applying proven

cost-effective protocols for combating malaria, tuberculosis and other

infectious diseases, rates remain unacceptably high, while new strains of

the causative organisms are increasingly resistant to treatment. Because

diseases do not respect geographic boundaries, and due to the high numbers

of legal as well as illegal immigrants traveling to the United States, I

believe USAID assistance to the LAC countries in health care at the policy,

institutional and technical levels is considered critical to the health and

security of the United States.


In education, the quality and relevance of primary and secondary schooling

in LAC countries continue to cause concern. The proportion of students who

complete secondary school is low compared to the number in Asian countries,

and many of those who do finish lack adequate skills to compete in the

workplace. USAID education and training programs aim to improve the poor

state of public education systems where the majority of youth attend weak

and under-funded public schools and fail to acquire basic skills in

mathematics, language, and science. USAID will continue to provide support

for improving the environment for education reform, enhance the skills of

teachers and administrators, and improve the relevance and skills of the

workforce. USAID will also continue support to the newly launched Centers of

Excellence for Teacher Training (CETT) initiative announced by Presidential

Bush in April 2001. Established in Peru, Honduras, and Jamaica, the three

sub-regional training facilities will improve the cadre of teachers in 23

LAC countries and advance education policy reform in key countries.

Advancements at the secondary level and in faculty and workforce training

will improve the quality of instruction, increase worker productivity, and

help youths prepare for entering the workforce.


Perennial Issues


Mr. Chairman, I would now like to focus on the particularly difficult

development challenges facing some specific countries and describe USAID

efforts to help countries meet these challenges.


Andean Regional Initiative




Colombia faces many problems, not the least of which is the lack of state

presence in 40% of the country which has allowed the illegal narcotics

trade, guerilla armies, and paramilitary forces to flourish. Colombia’s

civil war has the potential to destabilize other countries in the region if

guerilla activities and/or drug production spills over the borders. Events

in Colombia affect the entire region. Ecuador’s northern border is

vulnerable, and intensive eradication efforts by the Government of Colombia

may create incentives for the narco-trafficking industry in Peru and



Colombia’s President Alvaro Uribe is an invaluable ally in the war against

the illicit drug trade who is actively pursuing policies to eliminate that

trade and expand the reach of democracy and rule of law in Colombia. USAID’s

Alternative Development (AD) program in Colombia seeks to increase legal

income opportunities for small producers of opium poppy and cocaine. By

strengthening licit economic opportunities, alternative development gives

small producers a way to abandon illicit crop production permanently. The

program is on track and progressing well. AD has now benefited more that

20,000 families and supported the cultivation of nearly 16,000 hectares of

licit crops such as rubber, cassava, specialty coffee, and cacao in former

coca and poppy growing areas.


Infrastructure initiatives are an important component of the program as they

provide short term employment for laborers during construction projects as

families make the transition to licit crops. Infrastructure projects also

provide communities with the physical access to markets necessary to make a

viable, licit economy sustainable. To date, 208 social infrastructure

projects including roads, bridges, schools, and potable water have been

completed under the Alternative Development program in Colombia.


Closely associated with the Alternative Development program in Colombia is

our Administration of Justice program which is modernizing and increasing

access to the judicial system. Thirty-one casas de justicia (or "justice

houses") currently operate. These centers have handled approximately 1.5

million cases. This year at least 12 oral trial courtrooms will be

established – making the judicial system more accessible and accountable.


Respect for human rights is an important aspect of the rule of law and

administration of justice. Approximately 672 municipal human rights

officials have been trained in basic concepts of human rights, family

violence prevention, and the rights of indigenous and Afro-Colombian groups.

In addition, USAID has helped 600,000 internally displaced persons

reintegrate into Colombian society.


USAID supports numerous activities to assist Afro-Colombians. The projects

are focused on improving governance management and accountability; expanding

social infrastructure; and strengthening citizen participation. Fifteen

social infrastructure projects such as water and sewer system improvements,

schools and community centers constructed recently have benefited

approximately 7,500 Afro-Colombians. Training and assistance is being

provided to the mainly Afro-Colombian Pacific port-city of Buenaventura

(Valle de Cauca) to reduce crime and violence and foster local economic

development. In Bogota, USAID is working with one of the most significant

Afro-Colombian NGOs (AFRODES) to build a community/child education center

and develop income-generation projects.




Peruvian President Alejandro Toledo has taken steps to promote democracy and

a market-based economy. He has also promised new anti-narcotics efforts.

USAID is working closely with the Government of Peru to help it strengthen

the capacity of its counter-narcotics coordinating body, the organization

which is charged with implementation of the Government’s counter-narcotics

strategy. Projects supporting economic growth and more effective and

responsive state presence in the coca-producing regions link alternative

development to eradication and interdiction efforts directly.


In Peru, USAID’s alternative development activities focus on: providing

immediate economic and social impact through short term, income producing

activities; community organization in areas where coca has been eradicated;

promoting sustainable economic and social development in and around the

primary coca growing area through major road rehabilitation and other

infrastructure works; and assistance and training for local/regional

governments, other Government agencies, private entrepreneurs and small

farmers. To date, USAID’s Alternative Development program has provided

assistance to approximately 18,000 families to grow licit crops on more that

32,000 hectares; given credit to 4,800 clients; completed community

infrastructure projects such as schools, health clinics and sanitation

systems; and rehabilitated and maintained 1,400 kilometers of roads. This

year USAID will rehabilitate a 172 kilometer segment of the principal

national highway thus dramatically reducing transportation costs to

producers and increasing the region’s competitiveness.


Complementing the Alternative Development program are economic growth

activities aimed at increasing access to markets for micro-entrepreneurs and

small producers of licit crops and goods. Occurring mainly in the

seven-department area where Peru’s coca production is concentrated, USAID

will help identify markets for local products and then link

entrepreneurs/producers to organizations that improve their productivity and

competitiveness in the marketplace. USAID will also continue to support

sustainable forest and protected areas management including concessions for

forest products.




In Ecuador, President Lucio Gutierrez has only recently assumed power but

has made anti-corruption one of his top priorities. President Gutierrez

seeks to increase transparency in government procurement; oblige public

officials to declare their financial assets and facilitate the processing of

citizen complaints on corruption. USAID has been actively promoting

anti-corruption efforts through strengthening citizen oversight of local

governments, developing more secure and transparent information systems and

procedures for Customs, the Ministry of Finance, the domestic tax authority

and the Superintendency of Banks and eliminating frivolous and redundant

laws to make the legal system more transparent. We have just completed an

assessment of the corruption problem and will be working closely with the

government to develop strategies for addressing it.


Ecuador’s President Gutierrez also faces economic challenges. He must fight

in order to keep dollarization afloat and strengthen the country’s financial

stability in order to address long standing social issues and to reduce

Ecuador’s vulnerability to spillover from Colombia’s narcotics-related

problems. USAID is assisting the Government of Ecuador to develop a strong

and sustainable microfinance sector in Ecuador and improve the macroeconomic

climate for more equitable growth.


USAID is also paying particular attention to the northern border with

Colombia. USAID’s Northern Border program is improving the lives of people

living in six provinces adjacent to Ecuador’s northern border by

strengthening their communities. Principal activities include support for

social infrastructure such as water, sanitation, and roads; activities to

strengthen civil society organizations; and assistance to displaced

Colombians and receiving communities. Future activities include improving

local government capacity, strengthening democratic governance, and

increasing employment and income. To date, more that 132,000 Ecuadorians

have benefited from water systems or improved access to markets via bridges.

About 50,000 Ecuadorians, mostly Afro-Ecuadorians and members of the

Ecuadorian indigenous community have benefited from better-led community

organizations. During his recent trip to Washington, President Gutierrez

committed himself to a continued fight against illegal narcotics and closer

cooperation with Colombia to combat narcotraffic. We will continue to

support him in these efforts.




In Bolivia, poverty and social unrest are eating away the democratic

processes and economic stability that the country has been trying to

maintain for the past two decades. I will refer later to USAID’s efforts to

stabilize the economic situation following civil unrest earlier this month

but wanted here to mention Bolivia’s development problems. The fact is, many

Bolivian citizens feel neglected by their Government. From 1998 to 2001, due

to the success of counternarcotics efforts, there was a 70% decline in coca

at a cost of $200 million to the Bolivian economy. The loss of this illicit

income was felt most by the small-scale farmer. Financial problems in

neighboring Argentina and Brazil are exacerbating the economic problem, and

illegal coca replanting is a growing threat to the successful implementation

of Bolivia’s anti-narcotics strategy. There is also concern that the

intensive spraying program in Colombia will translate into pressure from the

narcotics industry for new production in Bolivia. These concerns and the

uprisings of early February have heightened the importance of and the need

for USAID’s Alternative Development program in Bolivia.


USAID is working closely with the Government of Bolivia (GOB) to find ways

to meet these challenges. We are working to eliminate illegal and excess

coca from Bolivia by establishing sustainable, farm-level production

capacity and market linkages for licit crops; increasing licit net household

income; and improving municipal planning capacity, social infrastructure and

public health in targeted communities. The Alternative Development program

is focused on reducing the poverty level of former and current coca

producers to allow them to make a successful transition to licit income

generation and bringing the benefits of the Government of Bolivia’s

anti-narcotics strategy to the community level.


  * In the coca-producing Chapare region of Bolivia, road maintenance and

improvement assistance will reduce transportation costs for licit crops,

while marketing services and grants will address the shorter-term problems

of farm families in the areas where coca is eradicated.


  * In the Yungas region, USAID will introduce improved agricultural

technologies for selected products to improve competitiveness. The adoption

of low cost forestry and agro-forestry practices will improve soil fertility

and increase licit crop yields. USAID will also focus on highly visible,

high-priority projects such as road improvement and bridges. These projects

will be defined by the communities themselves and be contingent on coca



Complementing the Alternative Development program is reform of the criminal

justice system through support for implementation of the new Code of

Criminal Procedures. The new code makes justice more accessible and

transparent through use of an oral system and citizen judges. The previous

written, inquisitorial system lent itself to corruption and delays and

discouraged the average citizen from seeking judicial redress. Improved

court processes have reduced case processing time by two-thirds.


Challenges to Democracy/Countries of Concern


I have cited the number of democracies in the Hemisphere as an indicator of

progress in the region. Many of these democracies are fragile, however, and

USAID works in concert with other U.S. Government organizations, in a

variety of ways, to strengthen these democracies.


Bolivia: As I have said, Bolivia has significant development challenges,

many of them linked to the narcotics trade. However, as we all saw earlier

this month, Bolivia faces significant immediate challenges to its democratic

process. Bolivia remains a strategic ally of the U.S. in Andean counter-drug

efforts and played a leading role in South America in democratic reform and

trade liberalization. Its current economic difficulties are in significant

part a result of external factors. Although Bolivia has achieved

unprecedented success in reducing illicit coca, this has also contributed to

economic hardship. The crisis began with Bolivian President Sanchez de

Lozada’s February 9 announcement of an austerity budget and payroll taxes

aimed at securing an agreement with the International Monetary Fund. Coming

on the heels of a multi-year economic downturn and high unemployment, these

fiscal measures triggered violent demonstrations which left 32 dead and over

205 injured. Of particular concern was a nationwide strike by the Bolivian

National Police who demand overdue salaries and a lifting of the salary

freeze imposed by the new budget. The army finally mobilized to restore

order. Despite the turmoil, democracy held and the elected government

remains in control, although the situation remains fragile. President

Sanchez de Lozada requested immediate support from the U.S. and other

donors. The IMF indicated it would consider a more flexible short term

solution to the budget as part of a standby agreement, provided that

additional donor funding became available immediately to meet the financing

gap. USAID intends to obligate $10,000,000 of Economic Support Funds for an

economic stabilization program in Bolivia. USAID’s assistance will be used

by the Government of Bolivia for payment of multilateral development debt

and will leverage additional bilateral and multilateral contributions.


Guatemala: As the members of this Committee are well aware, Guatemala is of

continuing concern because of lack of cooperation with U.S. anti-narcotics

efforts and because of continuing levels of corruption. When I appeared

before you last October 10, I told you about USAID efforts, working through

non-governmental organizations, to increase transparency in the court system

and promote accountability in public institutions. Since then, I have

traveled to Guatemala and expressed my continuing concern to the Guatemalan

Vice-President and Chief Justice. I intend to raise these issues again

during a meeting of the Consultative Group later this year.


Haiti: I would now like to shift to the continuing challenge presented by

Haiti, where the democratization process has stalled and is now actually

moving in reverse. A decade of poor governance and economic mismanagement

has brought the country to a near-standstill, and illegal migration to the

Dominican Republic, the Bahamas, and the United States is again on the rise.

A pernicious drought the country’s Northwest and Central Plateau regions has

made things even worse and placed additional strains on our humanitarian

relief efforts in the country. In the late nineties, USAID channeled tens of

millions of dollars through the Department of Justice’s ICITAP program to

bolster the Haitian judiciary and national police. With the overwhelming

dominance of President Aristide and his Fanmi Lavalas party, however, these

efforts bore little fruit, and we shifted our emphasis to helping civil

society resist the growing authoritarianism of the Haitian government. We

are continuing in this vein, and recently have added activities to

strengthen political parties and the independent media. The country’s

direction now depends on whether the government can establish a climate for

free and fair elections in 2003 and secure the participation of Haiti’s

opposition parties, many of which boycotted the election of President

Aristide in November 2000. We also keep in close contact with the Haitian

human rights community and incorporate these groups whenever possible into

our activities. Last but not least, we are actively engaged with the

Haitian Diaspora, seeking ways to help them foster democracy in Haiti.


In the meantime, USAID will continue with programs designed to meet the

population’s essential humanitarian needs, generate employment in a

difficult economic environment, and strengthen civil society’s ability to

resist growing authoritarianism and lawlessness. Overall, we plan to ensure

that Haiti’s funding for FY 2003 holds steady at $52.5 million (including

$22 million in food aid) in spite of the elimination of ESF funding. The

P.L. 480 Title II food program is a key element of USAID’s support for

humanitarian needs in Haiti. Some food is distributed outright -- formerly

through school feeding programs but now principally through maternal-child

health facilities located in remote areas. This shift in the program is

important to ensure that U.S. food aid is reaching the neediest and most

vulnerable Haitians -- rural children under five and nursing and/or pregnant

mothers. The bulk of the Title II food commodities are sold to local millers

and the proceeds used to finance projects in health care (including

assistance to orphans), primary education, and food production.


Venezuela: Political conflict over the policies of President Hugo Chavez has

seriously shaken Venezuela’s economy and threatened development in the

country. Since taking office, Chavez has demonstrated increasing disregard

for democratic institutions and intolerance for dissent. Venezuela now

stands at a dramatic juncture in its democratic history. The two month

strike that recently paralyzed the country has now ended, but President

Chavez is moving against strike leaders. Carlos Fernandez, President of the

Chamber of Commerce was arrested recently for his role in the strike, and

there is a warrant for the arrest of Carlos Ortega, the President of the

Confederation of Venezuela Workers. The arrest of prominent strike leaders

could undermine the dialogue between the two sides. Acts of violence against

strike leaders and participants raise concerns about respect for human

rights in Venezuela.


USAID, through its Office of Transition Initiatives (OTI), supports

non-partisan activities aimed at bringing the two sides together, lowering

tensions, and bridging divisions among the population. USAID has expanded

opportunities for government and opposition forces to meet at the bargaining

table and helped them identify common interests. USAID is also providing

training in conflict mediation and negotiation techniques to government and

opposition representatives involved in the national dialogue. We have also

assisted government institutions to increase transparency and better respond

to the needs of their constituents.


Cuba: The Only Non-Democratic Government in the Hemisphere


The "Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996, enacted

by the U.S. Congress and signed by the President of the United States,

provides important guidelines for helping promote a peaceful transition to

democracy in Cuba. I am very proud to say, since 1997, USAID has provided

more than $20 million to U.S. universities and other U.S. non-governmental

organizations to implement Section 109 of the Act. USAID assistance has been

indispensable in helping increase the flow of accurate information on

democracy, human rights, and free enterprise to, from, and within Cuba.

Among other actions, grantees have: sent more than one million books,

newsletters, videos and other informational materials on democracy, human

rights and free enterprise to the Cuban people; provided more than 7,000

short wave radios to Cuba’s human rights activists, independent journalists

and independent Cuban non-governmental organizations; provided more than 50,

000 pounds of food and medicine to the families of political prisoners and

other victims of repression; helped train over one hundred of Cuba’s

independent journalists and published thousands of their reports on the

Internet as well as in hard copy for distribution on the island; sent

international human rights monitors to the island to help build solidarity

with Cuba’s human rights activists and to report to the international

community the Cuban Government’s violations of human rights; and developed

research papers, conferences and seminars on transitions to democracy in

other countries to exchange information relevant to the future Cuban

transition and share those lessons with the Cuban people.


I believe USAID is uniquely positioned to continue to facilitate progress

toward a peaceful transition to democracy on the island. In accordance with

the President’s Initiative for a New Cuba announced in his landmark speech

of May 20, 2002, USAID has plans to expand its assistance. Additional

support will enable USAID, working with U.S. universities, to offer

scholarships in the United States for Cuban students and professionals who

try to build independent civil institutions in Cuba, and scholarships for

family members of political prisoners. USAID is currently working with

Georgetown University to implement this type of Cuba scholarship program.

There is so much work to do in Cuba, and I thank the Committee for its

continuing support of USAID efforts there.




Hemispheric commitment to democracy remains high, with the creation of the

OAS Democracy Charter and agreement to an ambitious democratic reform agenda

each time the Hemisphere’s leaders meet. So far, democratic systems have

persisted even in the face of severe economic crisis and, in some cases,

either very weak or even virtually no effective governance. The political

crises of Colombia, Venezuela, Ecuador, Bolivia, and Peru -- all very

different -- have not yet caused permanent ruptures in democratic practices.

They nonetheless demonstrate the fragility of institutions and the need to

strengthen the building blocks of democracy if the progress of the past two

decades is not to be undone. As President Bush has said, this hemisphere of

eight hundred million people strives for the dream of a better life, "A

dream of free markets and free people, in a hemisphere free from war and

tyranny. That dream has sometimes been frustrated – but it must never be

abandoned." President Bush knows there are millions of men and women in the

Americas who share his vision of a free, prosperous, and democratic

hemisphere. At USAID, our programs in trade capacity building, health,

education, and support for good governance are helping our friends and

neighbors in the Hemisphere fulfill their aspirations.


Mr. Chairman, this concludes my testimony. I would be happy to answer any of

your or the Committee’s questions.





Adam Isacson

Senior Associate, Demilitarization Program

Center for International Policy

1755 Massachusetts Ave NW, Suite 312

Washington DC 20036

+202-232-3317 fax 232-3440