U.S. GOVERNMENT PRINTING OFFICE

69–746 CC WASHINGTON : 2001

S. HRG. 106–876

ENVIRONMENTAL PROTECTION IN AN ERA

OF DRAMATIC ECONOMIC GROWTH

IN LATIN AMERICA

HEARING

BEFORE THE

SUBCOMMITTEE ON WESTERN HEMISPHERE,

PEACE CORPS, NARCOTICS AND TERRORISM

OF THE

COMMITTEE ON FOREIGN RELATIONS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JULY 25, 2000

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

COMMITTEE ON FOREIGN RELATIONS

JESSE HELMS, North Carolina, Chairman

RICHARD G. LUGAR, Indiana

CHUCK HAGEL, Nebraska

GORDON H. SMITH, Oregon

ROD GRAMS, Minnesota

SAM BROWNBACK, Kansas

CRAIG THOMAS, Wyoming

JOHN ASHCROFT, Missouri

BILL FRIST, Tennessee

LINCOLN D. CHAFEE, Rhode Island

JOSEPH R. BIDEN, JR., Delaware

PAUL S. SARBANES, Maryland

CHRISTOPHER J. DODD, Connecticut

JOHN F. KERRY, Massachusetts

RUSSELL D. FEINGOLD, Wisconsin

PAUL D. WELLSTONE, Minnesota

BARBARA BOXER, California

ROBERT G. TORRICELLI, New Jersey

STEPHEN E. BIEGUN, Staff Director

EDWIN K. HALL, Minority Staff Director

SUBCOMMITTEE ON WESTERN HEMISPHERE,

PEACE CORPS, NARCOTICS AND TERRORISM

LINCOLN D. CHAFEE, Rhode Island, Chairman

JESSE HELMS, North Carolina

RICHARD G. LUGAR, Indiana

JOHN ASHCROFT, Missouri

CHRISTOPHER J. DODD, Connecticut

BARBARA BOXER, California

ROBERT G. TORRICELLI, New Jersey

(II)

CONTENTS

Page

DeWalt, Dr. Billie R., director, Center for Latin American Studies; distinguished service professor of Public and International Affairs and Latin

American Studies, University of Pittsburgh, Pittsburgh, PA ........................... 28

Prepared statement .......................................................................................... 31

Eichenberger, Joseph E., Director, Office of Multilateral Development Banks,

U.S. Department of the Treasury, Washington, DC ......................................... 11

Prepared statement .......................................................................................... 14

Mr. Eichenberger’s response to additional questions submitted for the

record ............................................................................................................. 39

Leonard, Carl H., Acting Assistant Administrator, Bureau for Latin America

and the Caribbean, U.S. Agency for International Development, Washington, DC ............................................................................................................. 2

Prepared statement .......................................................................................... 6

Mr. Leonard’s response to additional questions submitted for the record ... 37

Watson, Hon. Alexander F., vice president and executive director for International Conservation, The Nature Conservancy, International

Headquaters, Arlington, VA ................................................................................ 22

Prepared statement .......................................................................................... 24

The Nature Conservancy’s response to additional questions submitted

for the record ................................................................................................. 41

(III)

(1)

ENVIRONMENTAL PROTECTION IN AN ERA

OF DRAMATIC ECONOMIC GROWTH

IN LATIN AMERICA

TUESDAY, JULY 25, 2000

U.S. SENATE,

SUBCOMMITTEE ON WESTERN HEMISPHERE,

PEACE CORPS, NARCOTICS AND TERRORISM,

COMMITTEE ON FOREIGN RELATIONS,

Washington, DC.

The subcommittee met, pursuant to notice, at 9:35 a.m. in room

SD–419, Dirksen Senate Office Building, Hon. Lincoln D. Chafee

(chairman of the subcommittee) presiding.

Present: Senator Chafee.

Senator CHAFEE. The hearing will come to order. This hearing of

the Subcommittee on Western Hemisphere, Peace Corps, Narcotics

and Terrorism will focus on environmental protection in an era of

dramatic economic growth in Latin America.’’ I would like to welcome the witnesses, and thank them all very much for appearing

before us today.

As the title of the hearing says, we are witnessing changes in

South America and the Caribbean, particularly in the growth of the

middle class and in the slow emergence of democracy and progress

in many areas. I think it is appropriate to address whether we are

seeing the same sort of progress environmental as well.

As protection, Mr. Leonard says in his testimony, the countries

in Latin America and the Caribbean have made some progress in

advancing the well-being of their citizens in the past decade. This

is great news. People are better educated and healthier than ever

before. Economic reforms have spurred more growth, and democracy has been embraced in most countries. We have recently seen

good things happening in the Caribbean and South America, and

I think it behooves us to address how the United States of America

can help these nations in environmental progress as well.

I am also the chairman of the Environment and Public Works

Subcommittee on the Superfund, and as I travel around and look

at the various Superfund sites in my home State of Rhode Island— there are 14 in all, and I just went to my twelfth visit yesterday— I am staggered by the cost of the cleanup of these sites. I would

note that much of the damage was done legally, at a time when

people did not know what to do with some of these toxic wastes.

Whether it is a landfill or a tire dump, it was legal at the time.

Just think to yourself, helping to stop other countries from making these enormously expensive mistakes is surely in everybody’s

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best interest, including the environment and the pocketbook. I

mentioned what is happening in Rhode Island, but there are other

examples such as the Hudson River and the Coeur d’Alene Valley

in Idaho. Given the massive price tag into the billions of dollars— of the cleanup from the mine wastes that have flowed through the

Coeur d’Alene Valley into the lakes and streambeds. I think that

this is something Congress should look into further.

The developing countries in the Caribbean and South America

are certainly a great test tube of developing countries. All over the

world, of course, countries are developing, Africa and Asia for example. But here in our own Western Hemisphere, we can monitor

and help, achieve progress in countries, so close to home.

Last, let me say that a few weeks ago the Senate voted on a massive aid package to Colombia, most of which went to military hardware. This should justify a pause as we look at trying to help these

countries. Is it always through arms? Is there a better way in helping these countries, making friends, promoting democracy and

achieving progress? I would hope so, and so we welcome the first

panel, and Mr. Carl Leonard, who is a long-time student of Latin

America. I believe he first became involved in 1971. I look forward

to your testimony. Welcome.

STATEMENT OF CARL H. LEONARD, ACTING ASSISTANT ADMINISTRATOR, BUREAU FOR LATIN AMERICA AND THE CARIBBEAN, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT,

WASHINGTON, DC

Mr. LEONARD. Thank you very much, Mr. Chairman, for inviting

me to speak on environmental problems in Latin America and the

Caribbean [LAC], or LAC region.

I would like to emphasize three points. First, environmental degradation in the LAC region is severe, and has serious consequences

for both the people of the region and the United States. Second,

USAID environmental programs are having a positive and significant impact, but the dimensions of the problem are well beyond the

resources of the individual donor, and third, poverty and environmental degradation are interrelated and interdependent. Poverty is

one of the major forces driving environmental degradation, while

sound natural resource management is essential for reducing poverty and ensuring future prosperity.

I request that my full written statement will be included in the

record.

Senator CHAFEE. Without objection.

Mr. LEONARD. In the past decade, the countries of the region

have significantly advanced the well-being of their citizens. People

are better educated and healthier, economic reforms have spurred

more robust growth, and democracy is embraced in most countries.

We are encouraged by this progress, but major challenges remain.

Severe degradation of the region’s environment and natural resource base is one of the most serious challenges. Most alarming,

the degradation is accelerating. The environmental services and resources upon which economic prosperity, health, security, and stability depend are being destroyed.

This environmental destruction cannot be viewed in isolation.

From my current perspective and from my experience as USAID

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Mission Director in Costa Rica, Bolivia, and El Salvador, I firmly

believe that to safeguard progress and advance prosperity sound

environmental management must be a high priority within the region’s broader development agenda.

The LAC region is blessed with an extraordinarily rich natural

resource base. However, this fortune can mask the severity of the

environmental crisis. For example, LAC has half of the world’s

tropical forest, but also one of the world’s highest rates of deforestation. The region lost more than 210 million acres of forest between

1980 and 1995. Brazil, the country with the greatest amount of

tropical forest in the world, loses more than 1 percent annually, or

an area four times that of Rhode Island.

Of particular concern, countries with the least amount of remaining forest have some of the highest deforestation rates. At these

rates, some countries will lose their remaining forest within the

next 10 to 20 years.

Similarly, the region is blessed with more fresh water per capita

than any other region of the world, but during the past 50 years

it has suffered the greatest decline per capita. The principal culprits are poor watershed management, misuse of agricultural inputs, the overdrawing of aquifers, and the lack of wastewater treatment.

The region’s marine and coastal resources include the second

longest reef in the world, and extensive mangroves and estuaries.

These resources harbor globally important biological diversity, support fisheries and tourism, buffer coastal communities against

storm damage, and are at the core of some countries’ economies.

However, siltation, pesticides, and wastewater are smothering

the region’s reefs. Scientists categorize the survival of two-thirds of

the reefs as threatened or highly threatened. Rapid urbanization,

fueled in large part by immigration from rural areas, is magnifying

cities’ already severe environmental problems.

Conditions are particularly severe in shanty towns, where almost

half of city residents live, where the greatest growth is taking

place, and where raw sewage and solid waste are dumped directly

into the environment. More than 90 percent of LAC’s urban and industrial wastewater is released to the environment untreated.

None of the numerous examples illustrates the impact of resource mismanagement more clearly than Hurricane Mitch. To describe Mitch as a natural disaster is a misnomer. Nature provides

the physical phenomena. People produce the vulnerability through

the resource use decisions we make. It is the combination of the

two that leads to disasters.

Mitch left more than 9,000 dead, 3 million people homeless, and

left $8 billion in direct damages. Experts attribute 70 percent of

the damage to poor land use decisions. The message is clear. Ignoring sound environmental practices imperils development.

Environmental degradation in the LAC region directly affects the

United States. Some impacts are immediately noticeable, for example, the 1998 fires in Mexico and Central America that fouled the

air of the southern United States. The impacts of habitat degradation are less immediate, but profound, including sharp reductions

in populations of migratory birds, an important green species.

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Environmental degradation can also lead to human flight. The

1999 report of the International Red Cross concluded that the number of people displaced by environmental degradation outstrips the

number displaced by political unrest and war. Environmental degradation contributes significantly to immigration pressures.

The most severely affected by environmental degradation are the

poor, who live in the most vulnerable environments, often squatting on marginalized areas, which maximizes their exposure to disasters. The poor also lack access to clean water and sanitation, and

often are forced to meet their needs through environmentally destructive practices such as the clearcutting of steep slopes for firewood, and slash-and-burn agriculture. Consequently, the poor are

the greatest victims of environmental degradation, but poverty is

one of the most significant forces driving that degradation.

Rapid population growth makes the challenge more difficult. Although growth rates have dropped, population levels have not yet

stabilized. Meeting the needs of a growing population places greater demands on the environment.

Recognizing that improved resource management is essential to

reduce poverty and foster prosperity, USAID follows four principles

in designing our environmental programs. First, we develop and

disseminate environmentally sound practices that ensure economic

returns competitive with or superior to current wasteful practices.

Second, we engage and empower local communities and individuals, for community action makes government more responsive and

individual ownership and tenure provide motivation for stewardship.

Third, we increase public awareness about the consequences of

and alternatives to degradation, and fourth, we promote policy reforms that direct market forces toward sustainable use.

Our environment program in the region totals approximately $65

million each year. I would like to summarize a few examples.

USAID supports sustainable tropical forest management through

policy reform, capacity building, introduction of sustainable forestry

practices, and business market development. In Bolivia, the USAID

program successfully strengthened the technical capacity of community groups and fostered partnerships with industry. The area

of tropical forest certified as well-managed has increased

fifteenfold, from 128,000 acres to 2 million acres. Exports of ecocertified timber have increased from zero to nearly $8 million annually. We are supporting similar programs in Brazil, Peru, Ecuador, Honduras, and Guatemala.

In Honduras, USAID’s land use and productivity enhancement

project, known as LUPE, improved hillside agricultural practices.

Approximately 38,000 hillside farm families adopted environmentally sustainable cultivation practices. As a result, soil erosion

losses on steep slopes were reduced from 37 tons per acre to less

than half a ton, saving an estimated 5 million tons of topsoil annually. Farmers increased their income by more than 50 percent.

LUPE’s effectiveness was vividly demonstrated during Hurricane

Mitch. Although soil erosion and landslides destroyed many farms,

adjacent LUPE sites withstood the ravages of the storm. The LUPE

approach has been adopted and spread by Central American govVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 69746 SFRELA2 PsN: SFRELA2
5

ernments and donors in their commitment to ‘‘build back better’’

after Mitch.

USAID is the leader in assisting LAC countries to conserve and

utilize their biological resources in a sustainable manner. Our programs have improved protected areas management, safeguarded

key watersheds, strengthened local NGO’s and community groups,

assisted indigenous communities to secure land tenure, and provided environmentally sound economic alternatives.

For example, the Parks in Peril program, our partnership with

the Nature Conservancy, local NGO’s and municipalities, builds

local capacity to conserve biological diversity. The program has improved protection at 37 park sites covering over 28 million acres.

Industrial pollution impairs human health and degrades economically important ecosystems. We have demonstrated that reducing pollution while enhancing business performance is a winwin approach. Our pilot projects have introduced pollution prevention technologies that reduce the consumption of water, energy,

and raw materials, and thus improve efficiency and reduce costs.

Because the challenge is beyond the means of any one actor,

partnerships are essential. Accordingly, we build local capacity and

commitment so programs will continue and have the opportunity to

expand and engage the resources and creativity of the host country.

Second, we develop models that others adopt. Practical, simple,

and culturally appropriate models have the best opportunity for

being disseminated.

Third, we form partnerships with NGO’s, universities, and other

Federal agencies. These institutions are the source of extensive

technical expertise and commitment, which we complement with

our international development experience and country knowledge.

Fourth, we encourage the ‘‘greening’’ of private investment, for

private investment in the region far exceeds levels of donor assistance.

And fifth, we coordinate closely with the multilateral development banks and other donors. USAID provides grant resources that

host countries and international financial institutions frequently

lack. We are doing the analyses and pilot activities needed for the

design of larger loan programs. Coordination among donors can

also encourage developing countries to adopt the reforms necessary

for sound development.

In conclusion, environmental degradation threatens sustained social and economic progress in our hemisphere. Environment remains the key element in our overall development strategy. We will

continue to implement and buildupon the successful approaches

outlined above to improve environmental management, conserve

biodiversity, alleviate poverty, and ensure future prosperity.

Finally, we greatly appreciate the interest of this subcommittee

in an environment and development issues, and look forward to

working with you. Thank you for the opportunity to present our

views.

[The prepared statement of Mr. Leonard follows:]

6

PREPARED STATEMENT OF CARL LEONARD

I. OPENING

Thank you, Mr. Chairman, for inviting me to speak on environmental problems

in the Latin America and Caribbean (LAC) region. Many of these problems are due

to rapid economic and population growth, and unsustainable land-use practices, as

well as other stresses on the environment. In addressing these issues, I would like

to emphasize three points:

1. First, environmental degradation in the LAC region is severe and has serious consequences for both the people of the region and the United States.

2. Second, environmental degradation cannot be addressed in isolation of

other development challenges. In particular the resolutions to poverty and environmental degradation are interrelated and interdependent—poverty is one of

the major forces driving environmental degradation, while sound natural resource management is essential for reducing poverty and ensuring prosperity

within the region.

3. USAID programs to conserve natural resources and foster their sustainable

use are achieving positive results, but the dimensions of the problem are well

beyond the resources of any individual donor.

II. INTRODUCTION

The countries of LAC have made significant progress in advancing the well-being

of their citizens in the past decade. People are better educated and healthier than

ever before, economic reforms have spurred more robust growth, and democracy has

been embraced in most countries. We should be and are encouraged by this

progress. Nevertheless, the progress is fragile and major challenges remain.

Severe degradation of the region’s environment and natural resource base is one

of the most serious challenges. Most alarming, the degradation is accelerating. The

environmental services and resources upon which economic prosperity, health, security, and political stability rest are being destroyed. But, this environmental destruction cannot be viewed in isolation. Rather, it must be addressed in the broader

context of development challenges including issues of governance, equity, and

human and institutional capacities. From my current perspective and from my experience as USAID Mission Director in Costa Rica, Bolivia, and El Salvador, I firmly

believe that to safeguard progress and advance prosperity, sound environmental

management must be a high priority within the region’s broader development agenda.

It is the good fortune of the region to be blessed with an extraordinarily rich natural resource base. But, this fortune can mask the severity of the environmental crisis. I will first outline some of the most significant problems to illustrate the extent

of this crisis. Then I will cite approaches USAID has found successful in helping

to address the region’s environmental challenges.

III. EXAMPLES OF ENVIRONMENTAL DEGRADATION

Forests—LAC has half of the world’s tropical forests, but also one of the world’s

highest rates of deforestation. The region lost more than 210 million acres of forest

between 1980 and 1995. Brazil, the country with the greatest amount of tropical forest in the world, loses more than one percent annually, or an area four times that

of Rhode Island. Of particular concern, countries with the least amount of remaining

forests have the highest deforestation rates. For example, if Jamaica, with only ten

percent of its forest remaining, does not reduce its deforestation rate, it will have

no forests by 2010.

What is lost when forests are destroyed?—watershed protections, soil stabilization, habitat for biodiversity, and employment opportunities from forest industries

and other businesses dependent on forest services. Left behind frequently are fragile

and easily degraded lands. Conversion to agriculture is the principal cause of deforestation, but paradoxically much of the cleared land is unsuitable for sustained agricultural production. The chain of events is all too common. Declining land fertility

leads to declining yields, which causes farmers to switch land to less productive uses

such as pasture, use more inputs such as chemical fertilizers, and eventually abandon unproductive lands to move on to clear remaining forests.

Fresh Water—Besides forests, the LAC region is blessed with more freshwater per

capita than any other region of the world, but during the past fifty years it is also

the region that has suffered the greatest decrease per capita. The principal culprits

are poor watershed management, misuse of agricultural inputs such as fertilizers

and pesticides, the overdrawing of aquifers, and the lack of wastewater treatment.

7

More than ninety percent of LAC’s urban and industrial wastewater is released to

the environment untreated. The consequences of water mismanagement include: severe health problems (e.g., waterborne diseases cause sixty percent of child mortality); reduced hydroelectric potential; water shortages and increased costs for industry, agriculture, and homes; reduced shipping capacity; and extensive damage to

freshwater, coastal, and marine ecosystems.

Marine Resources—The region’s extensive marine and coastal resources include

the second longest reef in the world, and extensive mangroves, sea grass beds, and

estuaries. These resources harbor globally important biological diversity, support

fisheries and tourism, buffer coastal communities against storm damage, and are at

the core of some countries’ economies. The small island nations of the Caribbean derive thirty-one percent of their GDP from a tourism industry based on the beauty

of their marine environments. Nevertheless, the region’s reefs are being smothered

and poisoned by siltation, pesticides, and wastewater. Scientists categorize the survival of two-thirds of the reefs as threatened or highly threatened. Other marine

and coastal resources, such as mangrove forests are faring no better.

Production of Illegal Drugs—Production of illegal drugs create significant environmental issues. The impact on the environment of coca production and cocaine manufacturing in Bolivia has been well-documented. Land clearing for coca alone caused

a deforestation rate estimated at 10,000 hectares/year. Cocaine processing also has

an environmental impacts. Lime and sulfuric acid, used in the manufacture of cocaine base and discarded afterwards, modifies the pH of soil and water. Kerosene,

used as a leaching agent, diminishes the oxygenation capacity of rivers, killing wildlife. During peak production times in Bolivia, annual averages of 14 million liters

of kerosene were dumped into rivers.

Urban Environment—Rapid urbanization, fueled in large part by immigration

from rural areas, is magnifying cities’ already severe environmental problems.

Urban environmental services are essentially absent. The sewage of most households goes untreated, and refuse pick up is sporadic, inadequate, or totally lacking.

Conditions are particularly bad in the shantytowns where almost half of city residents live and where the greatest growth is taking place. The rapid expansion of

the ‘‘informal’’ (unregulated) sector of the economy, which employs over sixty percent of the labor force, is adding to the solid waste and wastewater problems. Unregulated textile, leather, metal processing shops and other small manufacturing operations dispose of their chemical and solid wastes in the most expeditious manner

possible.

Disasters—None of the numerous examples illustrates the impact of resource mismanagement more clearly than Hurricane Mitch. To describe Mitch as a ‘‘natural

disaster’’ is a misnomer. Nature provides the physical phenomena, people produce

the vulnerability through the resource-use decisions we make. It is the combination

of the two that leads to disasters.

Hurricane Mitch was the most destructive disaster in the Hemisphere’s recorded

history. Central America reported more than nine thousand deaths, and three million left homeless. Total direct damage reached $8 billion, including the destruction

of social and economic infrastructure such as transportation routes, villages, schools,

and crops. Such events threaten sustainable development, by destroying years of development progress and investments and shifting development priorities from longterm goals to meeting relief and reconstruction needs.

The Central American Commission on Environment and Development (CCAD) estimated that seventy percent of the damage from Hurricane Mitch can be attributed

to poor land use decisions. The message is clear—ignoring sound environmental

practices imperils development.

Impacts on the United States—Environmental degradation in the LAC region directly affects the United States. Some impacts are immediately noticeable, for example, the 1998 fires in Mexico and Central America that fouled the air of the southern United States and reached as far as New Jersey. The impacts of habitat degradation are less immediate but profound. As examples, nearly two-thirds of the

bird species found in the United States are migratory and depend upon LAC habitats during winter months, and many U.S. commercial marine species depend upon

coastal nurseries throughout the region. Loss of habitat in the LAC region has been

a significant cause for the sharp reduction we have experienced in migratory birds

and the population of important marine species in our country.

Environmental degradation can also lead to human flight. The 1999 annual report

of the International Committee of the Red Cross concluded that the number of people displaced by environmental degradation far outstrips the number displaced by

complex disasters such as political unrest, oppression, and war. When unsustainable

practices exhaust fisheries and land, when pollution diminishes the quality of life,

and when houses, schools, and clinics disappear in a disaster, people are compelled

8

to move. There is no doubt that environmental degradation contributes significantly

to the immigration pressures we experience.

Businesses in the U.S. also have long-term interests in the sound maintenance

of our neighbors’ resource bases. U.S. timber, fishing, tourism, and agricultural companies have made significant investments that require sustainable resource management.

Finally, degradation in the LAC region affects the U.S’s interest in the global

issues of biodiversity conservation and climate change. Latin American and Caribbean countries have approximately half of the world’s biological diversity. The rapid

measurable rate of habitat destruction demands our attention. The region’s emission

of greenhouse gases is substantial and rapidly increasing. A significant portion of

this is due to deforestation, but the expansion of industrial output and growing demand for energy are major and growing contributors. If environmental practices for

land-use, and energy production and use are not improved, the region’s emission of

greenhouse gases will dramatically increase.

Poverty and Population—The most grievously affected by environmental degradation are the people of the region, particularly the poor who have no choice but to

live in the most vulnerable and degraded environments. It is the poor who depend

most directly on natural resources to meet their basic human needs, and have limited access to safe and productive lands. It is the poor who are forced to squat on

marginalized areas, such as floodplains, which maximizes their exposure to the next

disaster. When disaster strikes, it is the poor who lack a safety net. The poor also

lack access to clean water and sanitation facilities, and often are forced to meet

their needs through environmentally destructive practices such as clear cutting

steep slopes for firewood and slash-and-burn hillside agriculture. Consequently, the

poor are the greatest victims of environmental degradation, but paradoxically it is

poverty that is one of the most significant forces driving degradation.

Although alleviating poverty is the principal development and environmental

challenge, rapid population growth makes the challenge more difficult. We are encouraged that in recent years there has been a marked decrease in growth rates,

but population growth in the region has not yet stabilized. Due to the large percentage of young people in LAC countries (thirty-three percent are less than fifteen

years of age), the population will double in Latin America and the Caribbean in the

next thirty-nine years. In countries with the fastest growing populations—Guatemala, Nicaragua, and Honduras—populations will double in twenty-five years or

less. As a point of comparison, it will take one hundred-twenty years for the population in the United States to double.

Meeting the needs of a growing population and increasing standards of living to

reduce poverty will place greater demands on the resources and services the environment provides. Sustainable resource management is, therefore, not simply essential to protecting the environment but to reducing poverty and assuring future prosperity and security in the region.

IV. USAID PROGRAMS

Recognizing the relationship between poverty and natural resource management,

USAID follows four basic principles in the design and implementation of our environment programs in LAC:

1. USAID develops and disseminates environmentally sound practices that

ensure economic returns competitive with or superior to current wasteful practices, for it is essential that people have sound resource-use alternatives available to meet their needs;

2. USAID engages and empowers local communities and individuals, for community action and decentralization make government responsive to the needs

of the people; and individual ownership and tenure provide motivation for stewardship;

3. USAID increases public awareness about the consequences of and alternatives to degradation, for sound environmental management requires a broad

constituency; and

4. USAID promotes policy reforms that direct market forces toward sustainable use, for without the proper incentives the development and dissemination

of best practices will be of limited utility.

Our environment program in LAC totals approximately $65 million each year. I

would like to provide you with a few examples employing the above principles.

Sustainable Forestry—USAID supports sustainable tropical forest management

through policy reform, capacity building, introduction of improved technical practices, and business/market development. In Bolivia, USAID helped develop a comVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
9

prehensive forestry law that: (a) ensures greater accountability and transparency in

awarding concessions, (b) establishes high technical standards for management, (c)

establishes appropriate market pricing that provides incentives for sustainable management, and (d) provides a framework for local communities and indigenous groups

to obtain legal rights to forest resources. The program successfully refines and demonstrates best management practices, strengthens the technical and management

capacity of community and indigenous groups, and fosters partnerships with industry to access international markets for sustainably produced forest products.

Through the program, the area of tropical forests certified as well managed by

such groups as the Forest Stewardship Council has increased fifteen-fold from

128,000 acres to two million acres—the most in the LAC region—and exports of eco- certified timber have increased from zero to nearly $8 million annually. By 2004 we

expect that six million acres of forests will be certified and exports of certified products will surpass $20 million annually. USAID is implementing similar programs in

Brazil, Peru, Ecuador, Honduras, and Guatemala.

Hillside Agriculture—In Honduras, USAID’s Land Use and Productivity Enhancement project (LUPE) promoted improved hillside agriculture practices that increase

agricultural production with improved management of natural resources. LUPE also

assisted farmers with crop diversification and marketing, especially of high value

vegetables. Environmental education was carried out in rural elementary schools to

enhance environmental awareness, and municipalities were strengthened in small

watershed management. As a result of the program, approximately thirty-eight

thousand hillside farm families in southern and central Honduras adopted environmentally sustainable cultivation practices. Soil conservation practices reduced soil

erosion losses on steep slopes from thirty-seven tons per acre to less than half a ton

per acre, saving an estimated five million tons of topsoil annually from LUPE sites;

and in the process farmers increased their income by more than fifty percent.

The effectiveness of LUPE’s conservation practices was vividly demonstrated during Hurricane Mitch. Although many farms were destroyed by soil erosion and landslides, adjacent LUPE sites withstood the ravages of the storm. Central American

governments and international donors; in their commitment to ‘‘build back better’’ after Mitch, are replicating LUPE models that protect the environment, address

poverty, and reduce downstream vulnerability of people and economic investments

to natural disasters. USAID has similar successful hillside agriculture programs in

several other Caribbean and Central America countries.

Biological Diversity—USAID is a leader in assisting LAC countries to conserve

and utilize their biological resources in a sustainable manner. Our programs have

improved protected areas management, safeguarded key watersheds that provide

drinking water for urban populations, strengthened local NGOs and community

groups, assisted indigenous communities in securing land tenure rights, and provided environmentally-friendly economic alternatives for local people. For example,

the Parks in Peril program—a partnership among USAID, The Nature Conservancy,

local NGOs and local governments—builds local capacity to conserve biological diversity in protected areas throughout Latin America and the Caribbean. During the

past ten years, the program has improved protection at thirty-seven park sites covering over twenty-eight million acres containing globally significant biodiversity. So

far twenty parks have been transformed into fully-functioning protected areas that

require minimal donor assistance. Equally significant, USAID has assisted twentyseven local conservation NGOs to become self-sufficient organizations with effective

voices in their countries for sound environmental management.

Environment Endowments—USAID has been a global leader in establishing and

strengthening locally-managed environmental endowments. These endowments provide long-term sustainable financing to fund the proposals of local environment

NGOs and community groups. USAID has strengthened and served on the Board

of The Enterprise for the Americas Initiative’s (EAI’s) seven environmental trust

funds (in Argentina, Bolivia, Chile, Colombia, El Salvador, Jamaica and Uruguay),

totaling over $175 million. USAID also led the creation and capitalization of additional environmental trust funds in Ecuador, Guatemala, Honduras, Jamaica, Mexico, and Panama and has leveraged $42.8 million to support these endowments.

Industrial Pollution Prevention—Industrial pollution impairs human health, degrades economically important ecosystems, and decreases the competitiveness of

LAC businesses in a global economy. USAID supports pollution prevention and

cleaner production activities in seven LAC countries. These help to: (a) increase

awareness of the economic and social benefits of cleaner production, (b) develop regulatory frameworks that favor pollution prevention over end-of-pipe pollution control, (c) build local capacity for advancing cleaner production, and (d) increase available investment capital by educating lenders about the financial soundness of the

pollution-prevention approach.

10

In our programs we have clearly demonstrated that pollution-prevention practices

are a win/win approach—reducing pollution while enhancing business performance.

Pollution is often the result of not efficiently using and recycling resources. Pollution-prevention technologies can reduce the consumption of water, energy, and raw

materials—improving production efficiency and reducing business costs. In Bolivia for example, eleven plants invested $131,000 in pollution prevention and generated

annual savings of nearly $228,000, a seven month payback on investment. In the

process they reduced the amount of pollution they produced by seventy percent. In

Ecuador, sixteen plants invested approximately $4 million and generated annual

savings of more than $5 million, a ten month payback on investment.

Water Management—LAC governments are increasingly decentralizing the provision of water supply and sanitation as part of broader reforms. USAID has taken

the lead in developing low-cost, low-maintenance water supply and sanitation models for small municipalities in Central America and the Dominican Republic. In El

Salvador, USAID has helped protect watersheds to increase water supplies, reduce

surface and groundwater contamination, decentralize potable water authorities, and

create sustainable local water groups. USAID’s approach to providing rural water

and sanitation services has strongly influenced the Inter-American Development

Bank (IDB) water sector loans in El Salvador and the Dominican Republic. During

the past two years in El Salvador, nine municipalities have developed water-resource management plans, twelve municipalities have implemented potable water

systems, sixteen have constructed or rehabilitated water systems, five hundred

households have adopted improved wastewater management, and soil conservation

practices and tree planting have stabilized nearly 12 thousand acres of land.

Urban Development—LAC is marked by a concentration of political power, economic wealth, and opportunity in capitals and the largest cities. USAID programs

have focused on promoting decentralization of political, administrative, and fiscal

authority to local municipalities so that local people have the authority and resources to address their needs, including environmental services. USAID’s efforts at

increasing the availability of financing for urban infrastructure provide an example

of the success of our approach. In 1993, the Municipal Infrastructure Finance Program was launched by USAID in partnership with the Central American Bank for

Economic Integration (CABEI), establishing a $26 million credit fund. The program

started in Guatemala and Costa Rica as a pilot. In 1999, the success of the program

attracted an additional $50 million in funding from Taiwan and Germany, and was

extended to El Salvador, Honduras and Nicaragua: CABEI lends to public and private financial institutions, which in turn lend to municipalities to finance infrastructure projects such as potable-water and sewage systems, and solid-waste management. By the beginning of this year the program had financed three hundred sixtyfour projects, benefiting over one million households.

V. PARTNERSHIP WITH OTHERS

The previous examples illustrate USAID’s partnerships with other donors, host

country institutions, the private sector; NGOs, communities, and other USG agencies. These partnerships are essential. Our programs are successful, but the problems are beyond the resources of any individual organization. Consequently,

USAID’s strategic planning focuses on engaging the interest and resources of others,

providing guidance and leadership, and supporting innovations of others. Collaboration is so important to overall success in promoting sustainable development, that

I would like to outline the basic components of our approach.

1. Build local capacity and commitment—Without local capacity the end of

donor funding is the end of that activity. With it, not only does the program

continue but also has the opportunity to expand and spread as it engages the

resources and energies, and creativity of the host country and people.

2. Develop models that can be adopted by others—Practical, simple, and culturally appropriate models have the best opportunity for being disseminated

and adopted on their own merit with minimal or no further external resources.

3. Form partnerships with NGOs, Universities, and other Federal Agencies—

These institutions are the source of extensive technical expertise and commitment, which are complemented by USAID international development experience. USAID provides guidance based on our years of development experience,

our in-country knowledge, and the framework of U.S. foreign-policy interests to

create effective partnerships with U.S. entities for advancing our country’s development assistance goals.

4. Encourage the ‘‘greening’’ of private investment—Private investment in the

region far outstrips donor assistance. It is essential that these investments be

environmentally sustainable. USAID helps countries develop capacity for evaluVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
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ating investment proposals, and assists in developing and promoting environmentally improved modifications and alternatives.

5. Cooperate with other bi-lateral donors and the Multilateral Development

Banks—USAID’s in-country presence and knowledge places us in a position to

contribute to close donor coordination. USAID has been successful in providing

the up front grant resources that host countries and International Financial Institutions (IFIs) frequently do not have for doing the analyses and pilot activities needed for the design of large loan programs. Developing a consensus

among donors can also be essential in encouraging developing countries to make

tough decisions and reforms necessary for sound development.

VI. CONCLUSIONS

In conclusion environmental degradation threatens sustained social and economic

progress in the region, including aspirations in the region for a better life.

We will continue to maintain environment as a key element in our development

strategy, and will continue to implement and build upon the approaches outline

above. To make the most of limited resources and in recognition of the inter-sectoral

aspects of environment and its relationship to poverty, we will continue to integrate

environment goals into our economic, health, education, and democracy, programs.

Finally, we greatly appreciate this subcommittee’s interest in environment and

development issues and thank you for the opportunity to present our views.

Senator CHAFEE. Thank you, Mr. Leonard, very much, for your

experience and words.

Mr. Joseph Eichenberger is the Director of the Office of Multilateral Development Banks, and is a long-time expert in economic affairs in Latin America. Welcome, Mr. Eichenberger.

STATEMENT OF JOSEPH E. EICHENBERGER, DIRECTOR, OFFICE OF MULTILATERAL DEVELOPMENT BANKS, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, DC

Mr. EICHENBERGER. Thank you, Mr. Chairman. On behalf of the

Treasury Department I greatly appreciate the opportunity to discuss the role of the Multilateral Development Banks (MDB) in addressing environmental degradation in Latin America.

I also want to take this opportunity to express our sincere thanks

to you, Mr. Chairman, for your active support and leadership with

respect to two Treasury programs of particular significance in dealing more effectively with major environmental challenges. Those

programs are the Global Environment Facility and the Tropical

Forest Conservation Act. Both are enormously important programs

and both have benefited greatly from your active interest and close

engagement.

These institutions, the World Bank, the Inter-American Development Bank and the Global Environment Facility, are making important contributions, both directly and indirectly, to efforts to deal

more effectively with such key challenges as air and water pollution, biodiversity conservation, forestry preservation and land degradation.

Directly, the institutions are major lenders for environmental

purposes in Latin America, together providing over $1.6 billion in

loans and grants in 1999 alone. Indirectly, each is working to promote the policy and institutional reforms needed to create a foundation for environmentally sound growth over the long-term.

The Treasury Department has been actively engaged for more

than a decade in helping to shape MDB policy and project decisions

related to these environmental challenges. We have benefited

12

greatly in these efforts from the keen ongoing interest of Congress

and civil society groups of all kind.

I also want to acknowledge USAID’s expertise on environmental

issues and the very helpful collaboration it has had with both us

and the MDB’s on the full range of environmental issues.

I believe it is fair to say that these shared efforts have produced

major progress, and that the environmental efforts within the

banks have been advanced substantially.

But it is also fair to say that there have been disappointments.

There is clearly still a great deal of work to be done, and continued

strong U.S. leadership will be essential.

My colleague, Carl Leonard, has spoken directly, and I think effectively, about the key environmental challenges in Latin America.

I request that my complete written statement be placed in the

record and I would like to focus my oral remarks more specifically

on MDB efforts to address these challenges and on our priorities,

U.S. priorities, for the MDB’s going forward.

There is no question that the MDB’s need to play a significant

role in helping Latin America deal effectively with its urgent environmental challenges. Over the past decade, we have worked hard

to ensure that the institutions take fully into consideration the direct impact of their projects on the environment. We have also

given high priority to their important indirect role in helping

strengthen indigenous institutions and the basic policies that are

indispensable to achieving both environmentally sustainable development and enduring poverty alleviation.

Last year, the World Bank, the Inter-American Bank [IDB] and

the Global Environment Facility [GEF] provided close to $4 billion

in loans, grants and technical assistance for environmental efforts

worldwide. For Latin America, the IDB provided just under $900

million for these purposes, the World Bank, about $450 million;

and the GEF about $270 million, which includes some co-financing.

Most of the IDB and World Bank loans have been geared to address urban environment problems, to improve the supply of clean

water and to promote pollution control. They have also provided

technical assistance in such important areas as strengthening institutions, coastal resources management, watershed management,

and natural resources conservation.

My full written submission identifies a number of specific

projects that might be of particular interest to the subcommittee.

These projects, and many others, I think, reflect the MDBs’ efforts

to find innovative approaches to environmental challenges, including by forming public/private sector partnerships. We have encouraged such work by the MDB’s and we will continue to do so in the

future.

I would like to spend a moment on the Global Environment Facility, which is the primary international funding mechanism to address global environmental challenges.

Since 1991, the GEF has provided close to $570 million in grants

for operations in Latin America, leveraging an additional $1.3 billion in co-financing for such projects as, most recently, demonstrating economically viable renewable fuel technologies in Brazil

in cooperation with General Electric, and a multi-country effort to

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reduce pesticide runoff into the Caribbean by improving management practices.

In these and other areas, the GEF seeks to maximize its impact

by focusing on innovative solutions to cross-border problems and by

collaborating closely with other institutions, such as the World

Bank, to multiply the effect of its limited resources.

The formula is working. In 1999, for example, every dollar provided by the United States leveraged approximately ten additional

dollars from other donors, including recipient governments and the

private sector. What was a pilot program just a few years ago has

established a growing record of results and has garnered growing

support for its efforts. And again, we greatly appreciate the strong

support you, in particular, have given to the GEF, Mr. Chairman.

Yet, the GEF’s ability to achieve its mission is being severely

limited by the financial constraints arising largely from our inability to deliver on U.S. financial commitments. U.S. arrears to the

GEF now total $204 million, and they will expand further if the

funding levels contained in the current appropriation bills for fiscal

year 2001 are maintained. The impact of U.S. arrears is further

magnified by the fact that other countries are holding back their

contributions until we deliver on ours.

The bottom line, Mr. Chairman, is that the GEF may find itself

unable to make any new operational commitments beyond the

fourth quarter of this year in the absence of some significant new

U.S. funding.

With respect to the MDB’s—the World Bank and the Inter-American Bank—our efforts to promote environmental soundness have

focused on several key areas. First, integrating environmental considerations thoroughly into project design. Second, increasing the

amount of financing for environmentally beneficial projects. Third,

implementing stronger environmental policies fully and strengthening them where that is needed. Finally, ensuring greater transparency and effective civil society participation in bank operations.

We have achieved much at the World Bank. Operational requirements for environmental analysis are now widely considered to be

among the strongest of their kind. Public consultations are mandatory in most cases. The Bank has an information policy based on

a presumption of disclosure.

There is a centralized unit at the bank for environment and sustainable development, as well as specialized staff located throughout the operational units. And in the private sector area, the

Bank’s investment insurance arm, Multilateral Investment Guarantee Agency [MIGA], has formally adopted new environmental

and disclosure policies.

At the IDB, I would note, in particular, a series of specific policies on water resource management, coastal management, forestry

and agriculture. The IDB, as has the World Bank, has created an

independent Inspection Panel to give a voice to local people who

feel that their interests have been adversely effected by IDB

projects. There is a greater operational emphasis on energy efficiency. Environmental units now exist throughout the organization’s regional and operations departments. Most recently the IDB

has pursued what we think is an exemplary process for consulting

with civil society as it develops a new energy policy.

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I think the record is one of progress in the organizations, but

there is no question that more remains to be done. Both institutions need to make further progress in integrating environment

more thoroughly into their operations. Information disclosure policies and the Inspection Panels in these institutions are being reviewed for further improvements. We expect to be fully engaged in

this exercise to achieve those improvements.

Consistent implementation of the various safeguard policies and

enforcement of bank procedures are a key U.S. concern. The banks

are aware that they need to do more to make this a reality.

I would point out, Mr. Chairman, that the G–7 finance ministers,

as part of the Okinawa economic summit, recently agreed to a slate

of MDB reforms which I think constitutes a very substantial agenda for further progress. Among these is agreement that the MDB’s

need to focus more resources on the provision of global public

goods, including global environmental goods. I would be happy to

share that reform agenda with you if you are interested.

In conclusion, Mr. Chairman, the Treasury Department is absolutely committed that U.S. support for the MDB’s helps to protect

the environment and the natural resources in Latin America and

the Caribbean and beyond. We have a clear strategic interest in

helping our neighbors in the hemisphere achieve growth that also

protects the environment. And we believe that we have a unique

opportunity to do so through institutions that we have helped

shape for as much as 50 years. I would be pleased to answer any

questions that you have. Thank you.

[The prepared statement of Mr. Eichenberger follows:]

PREPARED STATEMENT OF JOSEPH E. EICHENBERGER

Mr. Chairman, Ranking Member Dodd, and distinguished Members of the Subcommittee.

Thank you for the opportunity to discuss the important role of the multilateral

development banks (MDBs) in addressing environmental degradation in Latin

America. The Inter-American Development Bank, the World Bank, and the Global

Environment Facility are playing a key role, both directly and indirectly, in the region to address such issues as: air and water pollution, biodiversity conservation,

forestry preservation, ozone depletion, and land degradation. Directly, the institutions are major lenders for environmental purposes, together financing over $1.6 billion in Latin American in FY 1999. Indirectly, all are involved in promoting the policy and institutional reforms. The World Bank has rightly said, ‘‘. . . lasting poverty

reduction is only possible if the environment is able to provide the services people

depend on and if natural resource use does not undermine long-term development.’’

We can all agree on that common sense principle.

The Treasury Department is actively engaged in MDB policy and project decisions

related to environment and we have been successful in promoting a stronger environmental agenda within the banks. We have benefited greatly in these efforts from

the keen on-going interest of Congress and civil society groups. I also want to acknowledge USAID’s expertise on environmental issues and the very helpful collaboration it has had with us and the MDBs on a wide range of issues. But that said,

there is clearly still a great deal of work to be done, and continued strong U.S. leadership will be essential. Today, I will focus my remarks on three main topics:

I. The key environmental challenges in Latin America;

II. MDB efforts to address these challenges; and

III. U.S. priorities for the MDBs going forward.

I. KEY ENVIRONMENTAL CHALLENGES IN LATIN AMERICA

In Latin America, as elsewhere, natural resources have traditionally been viewed

as a basis for revenue generation and economic growth, with important sustainability issues typically relegated to secondary status. Over time, this has led to over

15

exploitation of the natural resource base upon which many of these economies depend. Fortunately, the view in the region is changing, as democracy has taken

stronger hold, and as the basic economic logic of conservation and sustainable development has become better understood.

Meeting an increasing demand for energy is one of the biggest environmental

issues faced by Latin American today—be it through the use of forests as a fuel

source or emissions from power generators, rural and urban areas suffer the associated environmental impacts of energy production and usage. Urban air pollution remains a key human health and environment issue, as does water pollution in densely populated areas. Much of the region’s biodiversity resources are under threat

from forest loss, soil depletion, water pollution, fisheries exploitation, land degradation from poor agricultural practices, unsustainable forestry practices, and overgrazing. The use of persistent organic pollutants (e.g., DDT), with their insidious

impacts, is also another major challenge for the region.

The reasons for these problems are multiple and complex. Lack of institutional

capacity has long been a constraint to implementing environmental policies and programs, and to managing the environmental implications of growth and development.

In many cases, government policies in areas such as land use and energy pricing

have directly encouraged activities that are contrary to sound, long-term resource

management. Latin America’s welcome efforts to build market-based economies

have in some important respects outpaced its efforts to build capacity to regulate

and monitor natural resource use and enforce environmental laws. Poverty itself can

be directly responsible for unsustainable resources use, leading to a vicious cycle of

need and overexploitation.

II. MDB EFFORTS TO ADDRESS ENVIRONMENTAL CHALLENGES

We believe the MDBs need to play a significant and multifaceted role in helping

Latin America deal effectively with these urgent environmental challenges. Over the

past decade, we have worked hard to ensure that the MDBs take fully into consideration the direct impact of their projects on the environment. We have also given considerable emphasis to the important role of the MDBs in helping strengthen institutions across the region responsible for implementing and developing sound environmental policies for sustainable development and poverty alleviation.

With substantial leadership from the U.S., the Inter-American Development

Bank, the World Bank, and the Global Environment Facility have dedicated significant amounts of resources to environmental protection. Globally, in 1999, these

MDBs have provided close to $4 billion for environmental efforts. For the region,

the figures are also impressive. Despite the appropriate priority given to managing

the financial crisis, in 1999 the IDB approved $894 million in loans for environment

and natural resources, or 9 percent of the Bank’s overall lending total. FY 1999

World Bank lending in the region for environment totaled approximately $458 million.

Both institutions have used loans, grants, and technical assistance to build diverse environmental portfolios in the Latin American and Caribbean region, with

some very innovative projects. Most of the IDB and World Bank environmental

loans in the region have been geared to address urban environment problems, improve the drinking water supply, and pollution control. They also provide technical

cooperation to countries, in such areas as pollution control, institutional strengthening, coastal resources management, watershed management, and natural resources conservation.

To highlight several projects in particular:

• The IDB’s Multilateral Investment Fund (MIF) and the Nature Conservancy cosponsored the EcoEmpresas Fund to invest risk capital in NGOs, microenterprises, and small businesses that work to preserve the environment while making a profit. The IDB received a special recognition award from the Nature Conservancy for its work on this project.

• The IDB’s Inter-American Investment Corporation (IIC) and a U.S.-owned environmental service provider have formed a strategic partnership to handle industrial waste and harness the recovered energy resources from waste material.

• The IDB is also supporting the Coastal Resources Management program in Ecuador with the assistance of the University of Rhode Island Coastal Resources

Center.

• A World Bank Clear Air Initiative in Latin America will bring together city

managers, development agencies, leaders from public sectors, and NGOs to address air quality problems in large metropolitan areas. This three-year program

covers issues of environment, urban, transport, health, energy, industrial polluVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
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tion, and global emissions, as they relate to the quality of the air in the cities

of the most urbanized region of the developing world.

• The Meso-American Biological Corridor is a multidonor initiative which includes the World Bank and GEF investments in Belize, Costa Rica, El Salvador,

Honduras, Mexico, Nicaragua, and Panama. This initiative is helping to protect

the countries’ terrestrial and marine ecosystems through a variety of projects,

including by training indigenous peoples in natural resource management.

• In Mexico, the World Bank supported a project to test whether small- and medium-sized enterprises can successfully adopt environmental management systems. The project enlisted the private sector, local academic institutions, and

the Mexican Government.

These projects, and many similar projects reflect the MDBs’ efforts to find innovative approaches to environmental challenges, including by forming public-private

sector partnerships. We have encouraged such work by the MDBs as a concrete application of their particular assets and capabilities.

Global Environment Facility

The Global Environment Facility (GEF) has emerged as the principal international funding mechanism to address global environmental challenges (e.g., international waters, biodiversity, ozone depletion, and climate change) facing developing

countries and nations transitioning to market economies. Since its creation in 1991,

the GEF has provided close to $570 million directly in grants for operations in Latin

America, which has leveraged $1.3 billion in cofinancing.

The GEF financed $270 million, including co-financing, for Latin American

projects in FY 1999. In 1999, every dollar provided by the U.S. has leveraged approximately $10 from recipient governments, other bilateral donors, the private sector, and other multilateral institutions.

Examples of GEF Projects in Latin America include:

• Renewable fuel technology is being developed in Brazil. The GEF has worked

with the Brazilian Government, General Electric, and private Brazilian companies to develop and demonstrate generating technology that uses wood chips

from plantation forests for fuel.

• GEF is working with Colombia, Costa Rica, Panama, and Nicaragua to reduce

pesticide runoff to the Caribbean Sea by developing and implementing management practices and national regulatory systems to control the use of pesticides

and promote the use of alternative pest control systems.

• In Argentina, GEF is financing work with fisherman and tour guides off the

Patagonian coast to develop a plan enabling profitable fishing while protecting

endangered whales, elephant seals, and penguins.

The GEF seeks to maximize its efficiency and impact by collaborating closely with

other institutions, including the World Bank. In FY00, for example, joint World

Bank-GEF projects equal to $264 million were approved. In response to a new GEF

policy supported by the United States, the regional development banks are preparing to implement GEF projects. The IDB has already proposed its involvement

in two projects, a coastal zone management program in Jamaica and a technical assistance project in the Gulf of Honduras.

However, the GEF’s ability to achieve its mission is being severely limited by financial constraints arising largely from the U.S. inability to deliver on our financial

commitments. U.S. arrears to the GEF now total $204.2 million, and will expand

further if the low funding levels contained in the current Foreign Operations Appropriations bills for FY01 are maintained. The impact of U.S. arrears is further magnified by the fact that other countries are holding back their contributions until the

U.S. makes a substantial contribution. The bottom line is that the GEF may find

itself unable to make any new operational commitments beyond the fourth quarter

of this year in the absence of some significant new U.S. funding.

Tropical Forest Conservation Act

Though not a part of the MDB efforts on environment, the Tropical Forest Conservation Act (TFCA) bears mentioning. It is another priority in our environmental

agenda. The TFCA, enacted in 1998, provides eligible countries the opportunity to

reduce concessional debts owed to the United States, and at the same time generate

funds to conserve or restore their tropical forests. While the debt reduction component of the legislation is modest, the amounts generated for tropical forest conservation programs are meaningful. For example, the roughly $6 million that we have

already set aside for Bangladesh’s participation will leverage even more resources

to conserve or restore its 1.5 million hectares of tropical forests, roughly half of

17

which are in the southwestern Sunderbans region and home to the world’s sole genetically viable population of 400 Bengal tigers.

Of the 10 countries that have requested participation in the TFCA, six are from

Latin America (i.e., Peru, Belize, El Salvador, Paraguay, Ecuador, and Costa Rica).

Of these, Peru and Belize, have already been certified as eligible and are now entitled to discuss innovative debt swap mechanisms that could generate additional

funds for tropical forest conservation programs.

III. THE U.S. ENVIRONMENTAL AGENDA IN LATIN AMERICAN AND HOW WE ARE WORKING

TO ENSURE MDB OPERATIONS REFLECT THIS

The U.S. has focused its efforts on MDB reforms in several areas to promote the

overriding principle of environmentally sustainable development: (1) greater

‘‘mainstreaming’’ or integration of environmental concerns into regular operations of

the MDBs; (2) more environmentally beneficial projects; (3) ongoing implementation

of existing MDB operational policies on environment; (4) improvements in MDB

policies regarding civil society participation; and (5) further enhanced transparency

of the Bank’s operations. We pushed for progress on these fronts in our negotiations

to provide financial replenishment and have been pleased with progress in some

areas.

At the IDB, many of the positive developments stem from U.S. leadership in the

negotiations for the eighth replenishment of the IDB in 1994 to press the Bank to

provide greater protection for the environment. The accomplishments are wide-ranging:

• Development of new policies related to the environment, such as water resource

management, coastal management, forestry, energy and sustainable agriculture

development, including a commitment to not finance commercial logging in

moist tropical forests;

• Lending for environmentally beneficial projects. Lending for environmentally

beneficial projects has remained relatively constant since the General Capital

Increase (GCI) at around 9 percent of the Bank’s portfolio. However, this figure

may actually understate the environmental work of the Bank since many

projects have positive environmental aspects even though the primary objective

of the project is not environmental;

• Greater emphasis on energy efficiency. The Sustainable Energy Markets

(SMSE) program, initiated in 1996, focuses on industrial energy efficiency, renewal and efficiency in urban transport. The program has mobilized around $5

million in external donor funds to prepare efficiency projects for implementation. In addition, IIC and MIF, both members of the IDB Group, are financing

pilot projects under this program;

• Consultation with affected people and inclusion of resettlement plans as part

of environmental impact assessments; and

• Development by Management of an information disclosure policy and creation

of an independent inspection mechanism that will investigate charges by local

people that the Bank has failed to follow its own operational policies.

As a result of the negotiations for a capital increase of the Inter-American Investment Corporation (IIC) in 1999, the IIC adopted a new policy regarding environmental and labor review of projects. The IIC has also adopted the IDB inspection

panel function and, in January 1999, a policy regarding information disclosure was

approved for the first time.

The IDB has created environmental units within each regional operations department to integrate environmental considerations into project preparation and implementation. It has adopted procedures to deal with any resettlement that might be

entailed by projects. The Bank has adopted a Strategy for Integrated Water Resources Management and an implementation action plan that focuses on internal

dissemination and mainstreaming of environment into Bank operations. The IDB

has improved its capacity to integrate environmental considerations into its projects

and programs. We were pleased with the involvement of civil society in the IDB’s

development of an energy strategy. Going forward, we want to see the IDB put

greater emphasis on lending for renewable energy and energy efficiency projects.

The IDB needs to reinforce its program of consultation with civil society to ensure

this is an integrated element in all its operations. In this regard, we are working

closely with the Bank as it prepares a formal framework for consultation and public

participation.

During the 1998 negotiations for the twelfth replenishment for the International

Development Association (IDA-12)—the soft loan window of the World Bank, the

U.S. pushed for a deeper set of reforms than those achieved in prior replenishments

18

to better mainstream environmental considerations into both IDA projects and its

policy dialogue with borrowing countries. In particular:

• Adequacy of country environmental policies and regulations as a performance

criteria for allocating IDA resources;

• Integration of environmental issues into all Country Assistance Strategies

(CASs);

• Using National Environmental Action Plans as a key element when designing

Bank operations; and

• Greater IDA collaboration with the Global Environment Facility.

It should also be noted that other World Bank affiliated institutions are showing

progress on the environment. The Multilateral Investment Guarantee Agency

(MIGA) adopted new environmental disclosure policies in 1999, which are being implemented. The International Finance Corporation (IFC) is also moving forward to

better incorporate environmental concerns into its lending operations.

The World Bank has made noteworthy progress in mainstreaming environmental

issues into the Bank’s operations. Serious gaps remain, however. We do not consider

the Bank to have lived up to the expectation that it would make strong efforts to

mainstream environment throughout its regular operations, as required by the

GEF’s second replenishment agreement. A progress report on the mainstreaming efforts outlined in IDA-12 is due in December 2000, which we will be carefully analyzing to see what areas are lacking. In addition, the Bank’s Environment Strategy,

currently under preparation, provides a mechanism for securing a better commitment from the Bank to integrate environmental issues into all operations. As a result of strong U.S. advocacy, an independent Inspection Panel was created in 1994

to examine alleged violations of Bank policies in the preparation and implementation of projects. In the policy area, we are following closely the ongoing conversion

of advisory directives into more formal operational policies, especially in the area

of resettlement and indigenous peoples.

Enhancing the transparency of these institutions and increasing public participation in countries’ development programs are central policy goals of the U.S., particularly in terms of the environment. We have been at the forefront in calling upon

these institutions to increase their disclosure of information in a timely manner.

Over the last five years there have been notable successes (e.g., disclosure of country

assistance strategies by the World Bank, and public release of environment impact

assessments by both the IDB and World Bank for projects with a significant impact

on the environment before project appraisal/analysis missions leave for the borrowing country).

We believe there is much more room for improvement in both the IDB and the

World Bank policies and practices related to environment. The Banks’ record on consistent implementation of safeguard policies and enforcement of their own procedures is a key concern to the U.S. The Banks, to their credit, are also aware that

they need to do much more to ensure that staff and management make this a priority. Though we have made progress in improving the quality of loan documents

related to environment and resettlement and making them publicly available in a

timely manner, in part due to the requirements of the Pelosi Amendment, we still

find projects which do not meet the Amendment’s standards. We subsequently oppose any offending projects, sending a clear message to Bank leadership. We will

continue to use our voice and vote to urge the Banks to meet higher environmental

standards in accordance with the provisions of the Pelosi Amendment.

In a broader context, we are calling for a reform agenda for the MDBs to enhance

their focus on the provision of global public goods, including the global environment,

as a more forwardthinking approach to poverty reduction and the links between it

and our environment and natural resources. We believe the MDBs must move away

from financing sectors/projects that the private sector can easily do on its own and

focus more on social programs and international public goods that the private sector

will not or cannot finance, such as the environment. We believe that the banks potentially have an enormous contribution to make in helping to push the frontier of

international efforts to promote these kinds of goods, many of which will especially

benefit developing countries. The GEF, obviously has a key role to play, but the

World Bank and IDB also must show greater leadership in finding ways for the

international community to better protect the global resource base we share.

IV. CONCLUSION

In concluding Mr. Chairman, I would like to emphasize the importance that the

Treasury Department places on working to ensure that U.S. support of the MDBs

helps to protect the environment and natural resources in Latin America, the CaribVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
19

bean, and beyond. The U.S. has a strategic interest in helping our neighbors in the

hemisphere achieve growth that also protects the environment. I would be pleased

to answer any questions that you may have.

Mr. CHAFEE. Thank you, very much, Mr. Eichenberger, for your

testimony on behalf of the multilateral development banks and

what they can do to promote environment protection in Latin

America and the Caribbean.

My first question is for Mr. Leonard. You said that the region is

blessed with more fresh water per capita than any other region in

the world. But during the last 50 years, it is also the region that

has suffered the greatest decrease per capita.

The principle culprits are poor watershed management, misuse of

agriculture inputs such as fertilizers and pesticides, the overdrawing of aquifers and the lack of wastewater treatment. These

problems appear to be all things we can solve. And in later testimony, Dr. DeWalt will say that less than 10 percent of municipal

waste water is treated.

And it seems to me that is where we should start: the very basic

of all the problems that people care about. Treating wastewater I

should think is primary.

In my city, Warwick, of course, we are upgrading our sewage

treatment plant, not the primary treatment, not the secondary, but

the tertiary treatment as clean as the stream that runs by it. And

your testimony indicates that wastewater in the region is flowing

into water bodies completely untreated. Do you agree that that is

a good place to start? And what can we do about it?

Mr. LEONARD. Absolutely, Mr. Chairman. The problems of wastewater treatment, sanitation, portable water are serious challenges

in the region. And it is a byproduct of rapid urbanization. But

there are also issues with rural water systems.

We are working in USAID to encourage the installation of improved water systems, sanitation systems. A major effort is underway now in Central America in the aftermath of Hurricane Mitch

with the supplemental resources we received from the Congress, in

Honduras and Nicaragua. That is a major focus of attention of

ours.

Similarly, we are working in our programs of local governments,

municipal development. Very frequently what citizens most demand on their list of priorities is improved water and sanitation.

So as we work with local government to improve their capacity

to respond to citizen needs, we have a number of activities underway in the sector. It is a very important sector. The needs are enormous. We are pleased that the multilateral banks are also heavily

engaged in providing resources for this need. But the figures of 90

percent of wastewater released untreated are staggering. We have

a long way to go.

Mr. CHAFEE. I would assume since you have been studying this

region since 1971 when you were a backstop officer for Brazil, is

that accurate?

Mr. LEONARD. That is correct, sir.

Mr. CHAFEE. That you have seen over the years some changes,

as you have traveled through the region? Or is it still a tough road

ahead?

20

Mr. LEONARD. Taking the long view, my almost 30 years with

USAID, I have seen tremendous change in the region, most of it

positive. If you look at where the region was in 1971 in terms of

democratic governance, we have come a long way. When you look

at where we have come on infant mortality rates, child mortality

rates, access to primary education, if you look at economic growth

rates, there are a number of very encouraging developments.

But the degradation of the environment is one area where the

trends are going the other way, where we have not arrested those

declines and much more needs to be done.

But looking back over the time I have spent in Latin America,

I am certainly one that feels that tremendous progress and

achievements have been realized.

Mr. CHAFEE. And one last question. From your resume, it says

you have been all over the area: Brazil, Bolivia, Peru, the Caribbean, Honduras, El Salvador, and Costa Rica. Can you give a synthesis across the continent, who is doing well and who is not doing

well?

Mr. LEONARD. Well, I think, you know, I spent a lot of time in

Central America.

Mr. CHAFEE. Where are the biggest challenges and who has the

will at present to address these environmental concerns?

Mr. LEONARD. I think Central America has made a great deal of

progress. I think South America countries like Bolivia in confronting narco trafficking, they have made great progress. I think

there are real challenges in places like Colombia which you mentioned where a combination of threats and multiple factors give

rise to concern. There are certainly serious challenges in places like

Haiti. So, I guess, the places where I worry most, where the challenge seems greatest, I would put Haiti and Colombia in that

order. But I see reason to be optimistic throughout the region in

Central America and South America.

Mr. CHAFEE. Thank you. And, Mr. Eichenberger, in your testimony, you lamented the funding situation with respect to our foreign operations appropriations bills. If we fulfill our commitments,

do you believe that would bring greater progress to some of the

areas that we are discussing in this hearing?

Mr. EICHENBERGER. Yes, Mr. Chairman, I think it would for a

variety of reasons. With respect to the GEF, which I mentioned

specifically, that money goes directly to fund on grant terms a variety of environmental investments in environmental issues that I

think, generally speaking, would not have been made otherwise.

There clearly is an important leveraging issue here with respect to

U.S. funding.

As I noted, one dollar from the United States generates, attracts,

ten additional dollars from other donors. So to the extent that we

are in substantial arrears to this organization, there is clearly a

negative ratcheting effect on the GEF’s capacity to do the kind of

work that it was created to do. So, $200 million of U.S. arrears

with that degree of leveraging translates into a great deal of work

that is not being done.

With respect to the multilateral banks more broadly, we have

made substantial progress in recent years in reducing our arrears.

21

At one point, they were in excess of $800 million. We reduced them

last year down as low as about $350 million.

Unfortunately, we have taken a turn back in the wrong direction

and arrears have now gone up in the MDB’s, including the GEF,

to about $450 million and threaten to go up further at the of funding levels that the House and Senate are now talking about.

The issue for us really is one of the capacity to continue to exercise leadership in these organizations. I think it is no stretch to say

that it has been active and aggressive U.S. advocacy in these organizations over a period of years that has led to the greater environmental sensitivity and has led to strong environmental policies.

U.S. advocacy has led to a change in the internal debate in these

organizations about what really matters for environmental development. Our concern is to maintain that leadership, and we do so in

part by meeting our financial commitments. Thank you.

Mr. CHAFEE. Do these developing countries have the expertise to

do the right thing once they get the money, for example, are they

able to build the proper wastewater plants, or to properly address

some of the land use issues associated with Hurricane Mitch, which

caused such devastation? We have all learned through trial and

error here in this country. We would hate to see them make the

same mistakes. Common sense will tell you it should be a natural

partnership as we move forward; to take what we have learned, the

mistakes that we have made, and helping our neighbors make sure

they do not make them. Beyond money, do they have either the

will or the capacity and know-how to address these problems?

Mr. EICHENBERGER. Well, I think that there is no question that

capacity is a real issue. And it is a real issue not just with respect

to environmental issues, but, for example, education and primary

health and so forth.

That is clearly recognized, both in the borrowing countries themselves and in the institutions. It is for that reason, in part, that the

institutions are trying to shift a great deal of their emphasis toward making investments in what they refer to as capacity building—building the institutions and the human capacity to implement programs in a consistent way that produces results. There is

no question that we are not there yet.

I would point out a couple of things that I think are very promising. Carl spoke earlier of the importance of partnerships. One of

the very important developments, I think, over the past 5 years is

the much greater willingness and interest of the multilateral development banks to reach out to the private sector for partnerships.

Because there is a huge amount of expertise there—American firms

and in other firms—innovative solutions are being found that are

highly promising.

For example, bank research indicates that one of the most serious obstacles to effective provision of clean water is the fact that

initial investments are allowed to go to seed because maintenance

money is not paid over a period of years. The organizations are

working with countries to essentially engage private sector operators in doing the maintenance, doing the metering, doing the repairs. That has had the effect of preserving the value of the original investments. It is just one example where those partnerships

22

can help, and at the same time, build the capacity to deal with

problems as they arise.

Mr. CHAFEE. Thank you, very much. Thank you, gentlemen, very

much. We will take a short break and convene the second panel,

just a minute or two at your convenience. Thank you, gentlemen,

very much.

Mr. LEONARD. Thank you, Mr. Chairman. Look forward to working with you in the future.

[Pause.]

Mr. CHAFEE. Welcome once again. I would also like to ask if everybody can hear in the back, because there is nothing worse than

being at a hearing where you cannot hear. And if anybody cannot

hear, raise their hand. I will make sure that whoever is speaking

gets closer to the microphone or speaks up. I have been to many

a hearing where you could not hear.

Welcome, Mr. Watson and Dr. DeWalt. I look forward to your

testimony. Mr. Watson is the vice president and executive director

for International Conservation at The Nature Conservancy located

here in Arlington, Virginia. And a distinguished career. We look

forward to your testimony. Welcome.

STATEMENT OF THE HONORABLE ALEXANDER F. WATSON,

VICE PRESIDENT AND EXECUTIVE DIRECTOR FOR INTERNATIONAL CONSERVATION, THE NATURE CONSERVANCY,

ARLINGTON, VA

Mr. WATSON. Thank you very much, Mr. Chairman. And thank

you very much for inviting The Nature Conservancy to present

some views before this subcommittee. I would like to commend the

subcommittee for addressing this sensitive but crucially important

relationship between economic development and conservation of

precious natural resources in Latin America and the Caribbean.

And I think Carl Leonard did a nice job of explaining why these

issues are so closely related and why we in the United States have

a responsibility to try to address them.

With your permission, sir, I would like to summarize the key

points of my remarks and submit the balance for the record.

Mr. CHAFEE. No objection.

Mr. WATSON. The Nature Conservancy’s mission is the protection

of plants and animals that make up the natural world, what is

commonly referred to as biological diversity or biodiversity, primarily through the protection of habitats of those plans and animals.

And in my written statement, I touched on the enormous biological and economic importance of biodiversity and some of the most

serious threats that biodiversity faces in Latin America and the

Caribbean. So I will not go into those here.

Rather, I will discuss very briefly how The Nature Conservancy

addresses these issues overseas. The Conservancy works mainly domestically. And as I think you know, Mr. Chairman, we have chapters in all 50 states in the United States.

But we have long recognized the need to work with the world’s

greatest biodiversity which is beyond our borders, chiefly in the

tropics. The Conservancy operates in 19 countries in Latin America

and the Caribbean as well as others in Asia, Oceania and in CanVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 69746 SFRELA2 PsN: SFRELA2
23

ada. We also work indirectly in a couple of other Western Hemisphere countries such as El Salvador and Argentina through regional projects and liaison relationships without having formal conservation programs in those countries.

Since the beginning of our international program in 1981, we

have helped protect more than 74 million acres of biologically significant land in Latin America and the Caribbean. Funding for the

Conservancy’s work is 92 percent from private sources. In fact, we

are currently engaged in a campaign to raise 1 billion private dollars for conservation.

Nevertheless, it is important to underscore that the funding that

the Conservancy receives from the Agency for International Development is crucial to our success in Latin America and the Caribbean. And we urge members of the committee to support appropriations requests for international conservation in the AID budget as

well as to fund the U.S. contribution to the Global Environment

Facility mentioned by the representative from the Department of

the Treasury a minute ago. And also to expand the excellent and

growing international programs of such U.S. agencies as the Fish

and Wildlife Service, United States Forest Service and the National

Oceanic and Atmospheric Administration as well as the Environmental Protection Agency.

And we applaud the leadership that the Congress has displayed

in enacting the Tropical Forest Conservation Act which is essentially a congressional initiative and appropriating funds for its implementation. And we also welcome the growing interest of many

Senators and Representatives in protecting coral reefs and other

coastal marine environments.

Internationally, the Conservancy identifies highly important natural areas and helps local organizations build the capacity to protect those areas over the long term. We try to strengthen local institutional capacities, build conservation infrastructure, conduct

scientific research and involve local people in community based

conservation.

Our goal is to foster strong and sustainable local conservation organizations, usually private and nonprofit organizations, that will

involve local communities in enduring protection of their country’s

most precious natural heritage. These efforts, of course, also contribute to strengthening civil society.

We seek market oriented solutions to conservation issues involving all legitimate stakeholders in those issues. We collaborate

closely with the multilateral development banks, including the

Inter-American Development Bank, with whom we have created a

pioneering fund called the EcoEnterprises Fund which is to support

and invest in environmentally sound enterprises in the hemisphere

that will generate resources for non-government organizations to

undertake conservation work. And we also try to take lessons we

have learned from our extensive work in the United States and

apply those in Latin America and the Caribbean.

For instance, conservation easements and tradeable development

rights are concepts that have been used for years in the United

States to protect important land and water. And with the help of

some brilliant colleagues in Costa Rica, we are introducing some of

these concepts to other countries in the hemisphere. Their jurispruVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 69746 SFRELA2 PsN: SFRELA2
24

dence does not contain these ideas at this point. And this effort has

had an enormously positive reception. It involves private sector

people in conservation directly without necessarily having to rely

on the actions of government.

But the flagship of the Conservancy’s conservation program in

Latin American and the Caribbean has been the Parks in Peril program that Carl Leonard mentioned a minute ago. It has received

important funding from AID as well as private resources. It is important to note that the AID money through us leverages considerable private resources for this program.

Many of the parks and nature preserves where we work were initially created by local governments in areas that were relatively

distant from intensive settlement or development; hence, in most

cases they were largely unspoiled. But in our work we have seen

the effects of increased economic pressures even at these protected

sites. Among the greatest threats to conservation of biodiversity, as

Carl Leonard pointed out a minute ago, are inappropriate

unsustainable agriculture and destruction of coastal marine areas.

The Parks in Peril program converts what are often in effect only

paper parks—that is to say parks that exist on maps but not in reality—into well-managed protected areas capable of resisting the

destructive pressures they face.

Of course, the Conservancy strongly supports economic development in Latin America and the Caribbean and other developing regions. And we do not believe that development has to be at the expense of conservation of countries’ natural resources.

In fact, we believe that development and conservation are mutually dependent. Unless biological and other resources are managed

carefully and protected, development in countries highly dependent

on natural resources, as most developing countries are, will soon

run dry.

And yet, unless development provides economic alternatives for

the poor, they will be forced to consume natural resources on an

unsustainable basis and conservation efforts will be thwarted.

So we all must strive to assure that development and conservation are mutually supportive.

Finally, Mr. Chairman, I would like to take this occasion to express the hope that the full committee will be able before recessing

for the year to send forward to the Senate—for its favorable advice

and consent—those conservation-related international agreements

that are pending before the committee and which I believe are not

contentious. I am referring specifically to the Sea Turtle Convention, on which I believe there were hearings a few days ago, and

the special protected areas and wildlife protocol to the Cartagena

Convention. Thank you, very much, Mr. Chairman, for the opportunity to be here today.

[The prepared statement of Mr. Watson follows:]

PREPARED STATEMENT OF HON. ALEXANDER F. WATSON

Mr. Chairman, with your permission I will summarize the key points of my remarks and submit the balance of my testimony for the written record.

SUMMARY

The Nature Conservancy’s mission is the protection of the plants and animals

that make up the natural world, what is commonly referred to as biological diversity

25

or biodiversity, primarily through protection of their habitat. We work mainly domestically, but we have long recognized the need to work where the world’s greatest

biodiversity is found—beyond our borders, chiefly in the tropics. The Conservancy

operates in 19 countries in Latin America and the Caribbean, as well as others in

Asia and Oceania. We also work indirectly in additional Western Hemisphere countries, such as El Salvador and Argentina, through regional projects and liaison.

Since the beginning of our international program in 1981, we have helped protect

more than 74 million acres of biologically significant land in the Western Hemisphere alone.

Funding for the Conservancy’s work is 92 percent private. In fact, we are currently engaged in a campaign to raise one billion private dollars for conservation.

Nevertheless, the funding the Conservancy receives from the Agency for International Development (AID) is crucial to our success in Latin America and the Caribbean. We urge Members of the Committee to support increased appropriations for

international conservation: in the AID budget, as well as to fund the U.S. contribution to the Global Environment Facility (GEF), and to expand the excellent international programs of such U.S. agencies as Fish and Wildlife Service (FWS), United

States Forest Service (USFS), National Oceanic and Atmospheric Administration

(NOAA), and Environmental Protection Agency (EPA).

Internationally, the Conservancy identifies highly important natural areas and

helps local organizations build the capacity to protect those areas over the long

term. We strengthen local institutional capacities, build conservation infrastructure,

conduct scientific research and involve local people in community-based conservation. Our goal is to foster strong and sustainable local conservation organizations—

usually private and non-profit—that will involve local communities in enduring protection of their countries’ most precious natural heritage. These efforts also contribute to strengthening civil society.

The flagship of the Conservancy’s conservation program in Latin America and the

Caribbean has been the Parks in Peril (PiP) program, which has received important

funding from AID and private sources. Many of the parks and nature preserves

where we work were initially created by the local governments because they were

relatively distant from intensive settlement or development, hence in most cases

largely unspoiled. But in our work we have seen the effects of rapid economic pressures even at these protected sites. Among the greatest threats to conservation of

biodiversity are inappropriate, unsustainable agriculture and the destruction of

coastal marine areas.

Of course, the Conservancy supports economic development and we believe development does not have to be at the expense of conservation of countries’ natural resources. In fact, we believe that development and conservation are mutually dependent. Unless biological and other natural resources are managed carefully and protected, development will soon run dry. Yet, unless development provides economic

alternatives for the poor, they will be forced to consume natural resources on an

unsustainable basis.

Finally, Mr. Chairman, I take this occasion to express the hope that the full Committee will be able before recessing for the year to send forward to the Senate—

for its favorable advice and consent—those conservation-related international agreements that are pending before the Committee and uncontentious.

THE IMPORTANCE OF INTERNATIONAL BIODIVERSITY

People in developing countries rely on living natural resources for a multitude of

economic and social benefits, and the rest of the world, including the United States,

also receives benefits from them. Biological diversity is critical for the pharmaceutical industry, agriculture and a wide variety of other industrial activities. According to a study by the World Resources Institute, 4.5% of the U.S. Gross Domestic Product is due to economic benefits from wild species. Genetic diversity used in

plant breeding accounted for about one-half of all the gains in agricultural yields

in the U.S. between 1930 and 1980. Major U.S. crops now depend on infusions of

new genes from plants found in nature. One quarter to one third of all the prescriptions drugs in the U.S. contain compounds derived from wild species. 120 prescription drugs currently come from about 95 species of plants; of these, 39 grow in tropical forests. Botanists believe that more than 35,000 plant species (mostly drawn

from tropical forests) provide traditional medicines to local peoples and, hence, are

good candidates for future pharmaceutical research. Only about 2 percent of plants

have been examined for medicinal properties. There is no way to know what new

cures we may be losing with each species that goes extinct or what the health care

costs can be of remedies never developed.

26

These biological resources are increasingly imperiled. Even here in the rich nations of the North, where parks and nature preserves are generally well protected,

pressure on many forms of biodiversity is rising. In the United States, on which the

Conservancy recently completed an unprecedented study of national biodiversity

status and published the results in the book Precious Heritage, about 14 percent of

bird species are at risk, 16 percent of mammals, 37 percent of freshwater fish, and

69 percent of freshwater clams and mussels (Precious Heritage, p. 102). In the poorer countries of the developing world, the situation is worse. Biodiversity decline,

often caused by migrating populations with no economic alternatives to living off the

land, increases rapidly once the frontier of development reaches areas formerly isolated by distance, lack of roads, difficult climate and poor soil. All too often, the destruction of natural resources, including biological resources, does not even bring

local people the benefit they hope for—sustained economic development. Instead, the

land is ravaged for a quick return, and the survivors must either move on or face

a grimmer poverty than before.

The Western Hemisphere tropics are particularly notable for their forests. Such

forests are at the heart of world biodiversity. There may be 10 million species in

the world. Tropical forests house between 50 and 90 percent of the total. About 17

million hectares of tropical forests—an area four times the size of Switzerland—are

being cleared annually. E. O. Wilson, the great Harvard biologist, has estimated

that at current rates of forest destruction one-tenth to one-quarter of all tropical

rain forest species may disappear within 30 years.

Tropical forests are by no means the only threatened Western Hemisphere ecosystem. For instance, freshwater ecosystems are often the hardest hit of all, as they

battle long-term water shortages and pollution caused by population growth, expansion of settled areas, increased irrigation, and economic development without needed

environmental protections.

Coastal and marine systems face serious loss and degradation in the continental

and insular territories of the United States, as well as many countries in the Caribbean, Asia and Oceania. Coral reefs are facing threats never faced before. Coral

reefs are so rich in biological diversity that they are often referred to as the ‘‘rain

forests of the sea.’’ Irresponsible extraction and trade of both seafood and decorative

marine life, deforestation and inadequate construction and industrialization, together with global climate changes not well understood, are putting many coral

reefs at the brink of extinction for the first time in human history. We welcome the

interest shown in protecting coral reefs by many Senators and Congressmen. and

the Administration’s commitment to do more to protect marine systems, especially

coral reefs, as shown by the work of the Coral Reef Task Force and the programs

of NOAA.

The true economic value of biological, and other ‘‘renewable’’ resources such as

water are certainly immense. Credible estimates of the annual economic contributions of ‘‘environmental services’’ run into multiple trillions of dollars. But such resources are only truly renewable if properly treated. Not if species are driven to extinction, or if they become so scarce as to make them commercially useless and incapable of recovery in a lifetime. Certainly not if watersheds are destroyed. Not if

coral reefs are killed. Not if topsoil is blown or washed away. Not if complex interlocking communities of living organisms are disrupted.

The developing world’s economic progress is unquestionably tied to the careful

management and protection of its natural resources. Coastal wetlands, mangrove

forests and offshore reefs, for example, are essential for healthy fish populations

(sometimes far away from the source of impact)—and fish is currently the leading

source of animal protein in the human diet worldwide. Forests serve as ‘‘carbon

sinks’’ to help control carbon dioxide buildup in the atmosphere. Forests also promote the retention of water and prevent soil from blowing away and eroding into

critical waterways—waterways that provide drinking water, hydropower, irrigation

and transportation to millions of people, as well as essential nutrients and water

of adequate quality to coastal resources. Biodiversity provides pollination, pest control, and the recycling of essential elements, such as carbon, oxygen and nitrogen.

Parks and protected areas are critical to conserving biodiversity, and they have the

added benefit of attracting tourists who generate income and employment. Nature

tourism alone already generates $12 billion annually.

By contrast, the degradation of biological resources leads to poverty, hunger, disease and civil unrest. Massive shifts in population may occur when affected peoples

migrate from areas that once were productive but now cannot support them. The

linkages between natural resource depletion in developing countries, and the national security of the United States, are real and growing in this age of economic

globalization.

27

The Conservancy does not see this situation as necessarily development versus

conservation. In most situations, indeed in virtually all, it is possible to achieve

both. In fact, in the long run there can be no development, especially in countries

that depend heavily on natural resources as most poor countries do, without careful

management (including conservation) of the countries’ natural heritage. Conversely,

there cannot be effective conservation if the people living in or near areas that

should be protected have no economic alternatives to consuming the natural resources of those areas simply to survive. The answer is thoughtful economic development that recognizes the importance, limitations and fragility of natural biological

systems. There is a growing recognition of these facts in Latin America and the Caribbean. But, unless countries act effectively on this understanding before careless

development devours biological resources once and for all, they will lose the race—

to the severe detriment of future generations and the planet.

WESTERN HEMISPHERE COUNTRIES INCREASINGLY REALIZE THE VALUE OF

CONSERVATION

Over the course of recent decades, many nations of Latin America and the Caribbean recognized that natural resources that seemed abundant were, in fact, limited

and had to be managed thoughtfully. Many took important initial steps to conserve

their living resources by establishing systems of protected areas, to safeguard critical forests, watersheds, coastal and marine ecosystems, wildlife habitat, scenic attractions, and other areas of significance. Often, however, these nations had not succeeded in effectively managing these areas so as to truly protect them—they remained ‘‘paper parks.’’

To address this serious problem, in Fiscal Year 1990 the Agency for International

Development (AID) began supporting the Conservancy’s ‘‘Parks in Peril’’ (PiP) program, a public-private partnership that seeks to protect the most important and

threatened national parks and reserves in this hemisphere.

Parks in Peril was designed to secure minimum critical management for a series

of natural sites, transforming them into functional protected areas. The program

builds collaborative partnerships among national, international, public and private

organizations. It has become the largest in-situ biodiversity conservation project in

the tropical world and has drawn wide support from other governmental and nongovernmental constituencies in the region and around the globe, as well as from private firms and individuals.

Parks in Peril works to achieve four objective goals:

(1) To build on-site protection and management infrastructure;

(2) To integrate the protected areas with the human societies inhabiting their

surrounding regions;

(3) To create long-term funding and policy mechanisms to sustain the local

management of the Parks in Peril sites; and

(4) To influence conservation in other sites in the region’s most imperiled ecosystems.

AID and the Conservancy have designed an innovative scorecard to measure how

well particular sites meet these goals. As they do so, the sites are ‘‘consolidated’’—

having achieved the program’s original goals, they are phased out from receiving direct assistance from AID. This transition to long-term sustainability has been from

the outset a fundamental goal of the program.

CONCLUSIONS AND RECOMMENDATIONS

Mr. Chairman, Members of the Committee, our experience of international conservation has convinced the Nature Conservancy of the urgent need to do more to

protect these precious biological resources. We are currently in the midst of the largest-ever private fund-raising effort for conservation. We have set a goal of $1 billion

in private funds for conservation, of which we have earmarked $100 million for our

international conservation programs. I am proud to say that we are halfway there—

we have raised $500 million toward our goal. But the technical and financial contributions of U.S. Government agencies will remain essential to this great effort, including in our work overseas. I urge the Members, both in the Committee and in

their other activities as Senators, to support increased efforts by the United States

Government to protect global biodiversity through increased funding to the biodiversity conservation programs of AID, to the Global Environment Facility (40 percent

of whose budget goes for biodiversity conservation), and to the under-funded but immensely useful international programs of the U.S. Forest Service and the Fish and

Wildlife Service, and as well as those of NOAA and the EPA.

28

Finally, Mr. Chairman, I take this occasion to express the hope that the full Committee will be able before recessing for the year to take up those conservation-related international agreements that are pending before the Committee and

uncontentious. The Sea Turtle Convention, which received a hearing last week, is

one such. Another worthy of action is the Caribbean ‘‘SPAW’’ (Specially Protected

Areas and Wildlife) Protocol to the Cartagena Convention. We have worked with

this Protocol and know its value, and hope that the Senate is able to provide its

advice and consent this year.

I thank you once again for this opportunity to share with you and the Committee

the Nature Conservancy’s views on these important international conservation

issues.

Mr. CHAFEE. Thank you, very much for your time and your testimony. Good luck in raising the billion dollars.

Mr. WATSON. We are working on it.

Mr. CHAFEE. And we will work here on the congressional side on

the funding that you care about, the Global Environmental Facility

and others.

Mr. WATSON. Thank you.

Mr. CHAFEE. And as you said about your work, these efforts also

contribute to strengthening civil society, noble goals.

Dr. Billie R. DeWalt is the director of the Center for Latin American Studies and distinguished service professor of Public and

International Affairs and Latin American Studies at the University

of Pittsburgh, Pittsburgh, Pennsylvania. Did you get in this morning or last night?

Dr. DEWALT. Last night.

Mr. CHAFEE. Last night. Easy flight?

Dr. DEWALT. Yes.

Mr. CHAFEE. Good. Welcome. And when do you go back?

Dr. DEWALT. Today.

Mr. CHAFEE. Today. Great. Thank you for taking the time.

Dr. DEWALT. Sure.

Mr. CHAFEE. Welcome.

STATEMENT OF THE DR. BILLIE R. DE WALT, DIRECTOR, CENTER FOR LATIN AMERICAN STUDIES, DISTINGUISHED SERVICE PROFESSOR OF PUBLIC AND INTERNATIONAL AFFAIRS

AND LATIN AMERICAN STUDIES, UNIVERSITY OF PITTSBURGH, PITTSBURGH, PA

Dr. DEWALT. Well, it is a pleasure to be here. And I really appreciate the opportunity to address the subcommittee about my perspective on growth and the environment in Latin America. My remarks are based on three decades of research in Latin America and

I have consulted with a lot of the organizations that have been

mentioned here today, including the Inter-American Development

Bank, the World Bank, Global Environment Facility, World Wildlife Fund, USAID and so on.

I will briefly summarize my remarks and then submit the balance of my testimony for the written record.

There are several main points that I wish to make in my statement to the subcommittee. And I would like to emphasize first that

Latin America is quite rich in its resource endowments compared

to its population. With only 8 percent of the world’s population, it

contains rich mineral and fossil fuel deposits, 25 percent of the

world’s potentially cultivable land, 30 percent of the annual freshVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6602 69746 SFRELA2 PsN: SFRELA2
29

water runoff, and 25 percent of forest and more than 50 percent of

tropical forests in the world.

And because of the economic reforms that have taken place in

the region, several of the countries are now growing quite rapidly.

But with economic growth, the already stark socioeconomic inequalities in the region are being exacerbated. In my written testimony, I just refer to a couple of the recent studies that have been

done.

The extremes of wealth and poverty in the region are both implicated in continuing conservation degradation. We often blame the

poor because they mine resources in order to survive. But I have

also seen many cases in which the rich, because they act with impunity regarding environmental laws, regulations and norms, are

also significant causes of environmental degradation.

The poor, of course, are often also the victims of environmental

destruction. They have the least access to decent habitats, clean

water and air, suffering infectious diseases, the effects of natural

disasters like Hurricane Mitch and malnutrition.

From my perspective, conserving and improving natural resources will require interventions that directly provide economic incentives to people and to industry to maintain and enhance their

natural resources. I can provide a lot of examples in data on these

issues from my own work over the last 30 years. But I would like

to do is to mainly focus on what I see as some of the important policy solutions that are required.

Major steps, of course, I think have to occur within Latin America countries to reduce inequalities. And this is a task that I think

very few governments have been willing to tackle.

For the United States, we have relatively blunt edged policy instruments. But there are some things that I think can be very useful.

In terms of policy solutions, one thing I would like to emphasize,

and I think it reinforces what some of my colleagues here have said

today, is that it is really important to continue foreign assistance

to Latin America, honoring our international commitments to the

multilateral development banks, to the global environment facility.

I know that USAID funding for the Latin American, Caribbean region has been shrinking over the last several decades.

But this foreign assistance to Latin America ought to be really

targeted specifically on social and environmental policies.

As a result of a lot of the forms that have been undertaken in

the last several years, foreign directed investment to the region

now is huge and growing. And it is really taking care, I think, of

many of the private development needs of the region. This means

that U.S. foreign and multi-lateral development bank assistance

should address the issues that are not likely to be effected by foreign direct investment.

This, of course, includes a focus on environmental laws, regulations, particularly strengthening enforcement. We have, as I mention in my written testimony, quite a number of Latin America

countries that have adopted environmental ministries, have put in

place very fine sounding environmental laws and regulations. But

what is really lacking is enforcement of these regulations. The

main environmental protection organization in Mexico, for examVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6602 69746 SFRELA2 PsN: SFRELA2
30

ple, has 150 agents to cover the whole country. Obviously, this is

a prime area in which investment ought to be allocated.

And, of course, U.S. foreign assistance should also be targeting

health and education programs to alleviate some of the poverty in

the region.

The second thing that I stress in my written testimony is that

we need to determine how to create structures to compensate rural

people for the environmental services that they provide. That is we

need to attach a value to the production of clean water and air, soil

conservation and carbon sequestration.

As Ambassador Watson has mentioned, using mechanisms like

easements to protect forest and watersheds, determining how we

can use certification schemes for things like organic coffee and

wood that is produced in a sustainable manner and then creating

market mechanisms that actually work to get consumers to purchase these goods that are certified as being eco-friendly. I think

that Mr. Leonard mentioned there is a lot of certification efforts

going on in Latin America. I have seen in Mexico there is very substantial certification, smart wood certification of forests. Unfortunately, this kind of certification has not yet led to people being able

to market the timber that they produce at a reasonable price. In

other words, they are getting the same amount of money for ecofriendly wood as any other producer.

A third mechanism here in terms of structures I think is to look

at carbon credit markets as proposed in the Kyoto protocol to reduce greenhouse gas emissions. This is something that would allow

industries in the industrialized world to essentially purchase carbon credits in developing countries that agree to maintain forests.

The third area I would like to emphasize is the need for greater

research collaboration. USAID has quite a number of collaborative

programs in agriculture that have been operating for approximately 20 years. To my knowledge, there is only one that really focuses on the environment which is the Sustainable Agricultural

Natural Resource Management collaborative research support program. And I think we need to have additional programs that

USAID creates to link U.S. universities with universities in Latin

America that focus on the inter-related biological and social issues.

As the National Science Foundation expands its environmental

science program, I think one of the things that I have seen missing

in much of what NSF has been proposing is any mention of cross

border collaboration.

Again, there is the necessity to develop linkages between U.S.

universities and universities in Latin America and in other parts

of the world.

A particular interest of mine in terms of a third policy recommendation is that I think the United States ought to instruct its

representatives to the multilateral development banks to push for

social analysis of projects.

That is I think we need to complement the existing analyses that

are carried out within the development banks that focus on financial, economic, technical, institutional and environmental analysis

to also include social analysis. World Bank, Inter-American Development Bank, should be investing in projects that privilege resource poor people in the Latin American region. And I think that

31

1For example, between 1996 and 1998, social inequality in Mexico increased with the poorest

60% of households in Mexico seeing their income share fall from 26.9 to 25.5%, while the share

held by the wealthiest 10% rose from 36.6 to 38.1% (Economist 2000:25).

if we had social analysis of programs to really determine what the

effects of those programs are, who wins and who loses, that they

would be both more socially as well as environmentally sustainable.

So the bottom line is, from my perspective, unless we address the

issues of social inequality and poverty in Latin America more directly, then environmental degradation is going to continue. And

many of the results of that degradation will be exported to the

United States through illegal migration, production of drug crops

and political turmoil near our borders. Thank you, very much.

[The prepared statement of Dr. DeWalt follows:]

PREPARED STATEMENT OF DR. BILLIE R. DEWALT

INTRODUCTION

The tragedy that Hurricane Mitch caused in Honduras, Nicaragua and El Salvador in November of 1998 should teach us an important lesson concerning the linkages between poverty, wealth and environmental degradation in Latin America. Although the hurricane bit the Caribbean, most of the damage occurred on the Pacific

coast of Central America. There, the drenching rains fell on deforested hillsides resulting in landslides that blocked rivers and buried shanty towns, flooding that destroyed bridges, roads, power lines, crops, and aquaculture farms (DeWalt 1998).

That death and devastation were exacerbated by the deforestation and degraded watersheds of the region.

The main point of my presentation is to stress that many of the most important

environmental problems and challenges for Latin America are directly or indirectly

linked to inequality and poverty. To be sure, the increasing adoption of a market

economy by most Latin American countries has reversed the effects of the debt crisis

in the 1980s and brought positive growth rates to many countries. But positive economic growth has not reduced poverty in the region, and indeed in several countries

has exacerbated the already large inequalities between the rich and the poor (Berry

1997). Real wages in Mexico, for example, are more than 25% lower than they were

in 1980 (Economist, June 24th 2000:26).1 Progress in addressing issues like deforestation, biodiversity loss, water and air contamination, and watershed deterioration

in Latin America can be made, but only if countries and donors promote programs

that directly address the linkages between inequality and environmental degradation.

THE CURRENT SITUATION

Latin America is a region with considerable resources and a relatively sparse population so achieving sustainable development there ought to be easier than in other

parts of the developing world. Consider that although the region has only about 8%

of the world’s population, it contains:

• rich mineral and fossil fuel deposits as well as coastal and marine resources

• 25% of the world’s potentially cultivable land (Reca and Echevarria 1998:xiii)

• 25% of forests and more than 50% of the tropical forests (http://www.iadb.org/

sds/document.cfm/45/ENGLISH)

• about 30% of annual freshwater runoff (IDB 1998:5)

Despite this, estimates are that:

• 45% of the population is poor, the absolute number of poor have increased by

80 million in the last 25 years, and 60 million people in the region are malnourished (Reca and Echevarria 1998:xiii)

• 84 million had no access to clean drinking water

• over 165 million had no adequate sewer service and less than 10% of municipal

wastewater is treated (Inter-American Development Bank 1998:5)

• the region has the highest rates of deforestation in the world, losing 7.4 million

hectares per year (Dourojeanni 1999:1)

32

2One particular project that is currently of great concern is the proposed $100 billion Avanc ̧a

Brasil infrastructure program to expand soy production and exports that may result in an additional 18 million hectares of deforestation (Bonnie et. al. 2000:1763). 3 Even where an adequate legal framework is in place, enforcement is still problematical. For

example, the Attorney General’s Office for Environmental Protection (PROFEPA) in Mexico has

fewer than 150 agents for the whole country.

POSITIVE STEPS

Although it is easy to be pessimistic about environmental trends in the region,

there are a number of positive signs of progress. Relating to forests and watersheds,

for example:

Most countries no longer promote colonization schemes in tropical forests. Inequality in access to land in Latin America has been a continuing source of social conflict,

fuelling many of the revolutions and civil wars that plagued the region. Although

this led to attempts at agrarian reform particularly beginning in the 1960s, more

often than not colonization of tropical areas was promoted to relieve pressures on

land. In Mexico and Central America, this meant resettling people from highland

areas to coastal and/or tropical areas. In South America, it resulted in colonization

of the Amazon basin. Most of these schemes did not result in viable agriculture and

were failures, though they caused considerable deforestation. Although schemes like

Mexico’s ‘‘March to the Sea’’ and National Commission for Forest Clearing from the

1960s and 1970s have disappeared, road building into tropical areas continues to

lead to settlement and deforestation.2

Legal Changes Improved Incentives for Forest Conservation. Colonization efforts

were often accompanied by laws denying ownership titles to settlers until they had

put at least 50% of their land into cultivation. This resulted in substantial deforestation and in most cases planting of pasture for cattle. Such incentives for deforestation have been removed in most countries. Property rights regimes are also being

reformed to encourage conservation. For example, resin-tappers in Honduras who

worked the pine forests had little incentive to care for the trees because all trees

were owned by the state. In Mexico, timber companies were given concessions to cut

timber on the lands of indigenous communities; neither the communities or the companies had incentives to insure that sustainable forest practices were followed. Indigenous communities in the poor southern state of Oaxaca struggled for years to

have the right to work their own forests, and succeeded in having forestry laws

changed in the early 1990s. With forests now under their own control, management

has improved significantly, some communities have created their own forest reserves, and many are developing ecotourism projects with the assistance of a World

Bank program.

Requirements for Environmental Impact Assessments Are Now Common. In the

late 1980s and early 1990s, the World Bank, Inter-American Development Bank,

and USAID began requiring that environmental impact assessments be done for

projects they sponsored. This has helped to insure that donor projects do not have

negative impacts on the environment. Spurred by these models and concerns about

environmental degradation, several countries in the region (e.g. Mexico, Argentina)

are now beginning to require environmental impact assessments of major projects

within their borders.

Countries Have Established Ministries Focused on Environmental Concerns. Of

the countries in the region, 16 out of 22 now have a cabinet post that focuses on

environmental concerns. Most of these have been established within the last several

years. Legal frameworks for environmental protection are being established in most

countries and the Inter-American Development Bank has been supporting these efforts. It is critical to get such legal frameworks in place as a means of eventually

regulating private sector development within countries.3

International and National NGOs Are Intensely Involved. Led by such international organizations like the World Wildlife Fund, Nature Conservancy, Conservation International, and others, the non-governmental sector has been intensely involved in efforts to create and manage parks, reserves, protected areas, and to encourage natural resource management. These organizations understand that communities must be involved and be able to generate income if resource conservation

is to be successful. Greenpeace and others have adopted a watchdog role and are

activists in opposing projects that may lead to resource degradation (e.g. successfully

opposing the salt works proposed for San Ignacio Lagoon on the Gulf of California

in Mexico). Local nonprofit organizations with an environmental focus are being established in all countries reflecting increased public concern about the environment

(e.g. about 700 environmental NGOs are registered in Mexico).

33

CONTINUING PROBLEMS

Despite these signs of progress, environmental degradation continues unabated in

Latin America. Among the most vexing problems are the following:

Transparency and Fairness in the Application of Laws and Regulations Are Often

Lacking. Major corporations and wealthy private investors often play by different

rules than everyone else in Latin America. Abuses of power and authority, unfortunately, are all too common when it comes to environmental requirements. In Mexico

recently, a peasant told me that the laws are only applied to the poor. He and those

in his community are fined for extracting timber from forests if all of their permits

are not done exactly right. At the same time, illegal timbering goes on all around

their community and the sawmill industry is not required to document from where

they receive their logs. Local people have learned not to press charges against the

illegal timbering because the culprits are released almost immediately, and retaliate

against their accusers. Inequality means that the rich and powerful are able to engage in practices that cause environmental degradation.

Poverty Continues to Cause Environmental Degradation. Inequality and poverty in

places like the Pacific Coast of Central America. Deforestation there is caused by

the poor who plant subsistence crops on steep hillsides. Their poverty, however, coexists alongside wealth created by melon-growers producing for the export market,

shrimp producers who now cultivate this commodity in ponds along the coast, and

especially cattle producers who have appropriated much of the best land for their

ranches. The Pacific Coast of El Salvador, Honduras, and Nicaragua has long been

characterized by vast differences between the wealthy few who have appropriated

the best, flat lands, often for commodities like cattle that require little labor to

produce. The Honduran Central Bank estimated in 1988 that 48% of the valley

lands in the country were sown in pasture for cattle. The poor majority is left with

the alternatives of deforesting the steep slopes for a patch of land to cultivate, migrating to the cities where they create squatter settlements, or invading the protected areas of Honduras’ rainforest (DeWalt et. al. 1993). Poverty, infectious diseases, environmental degradation, illegal migration, cultivation of drug crops, and

other ills are all common problems affecting the poor regions of most Latin American countries.

POLICY SOLUTIONS

Attacking the linked problems of inequality and environmental degradation must

be made a priority. The solutions that are required will require public policy efforts

primarily within the countries of the region. The United States and other donors,

however, can take steps that can help. Our country’s efforts to promote democracy,

free trade, and stability in the Americas are unlikely to be successful unless people

have a livable environment (State Department 1997). Priority must be given to investments in Latin American regions that both provide economic opportunities to reduce inequalities and conserve the environment.

U.S. Assistance Targeted at Poverty and the Environment to the Region Should Be

Increased and Made More Effective. In the face of the dire needs of Africa and parts

of Asia, U.S. assistance to Latin America has diminished at the same time that we

have focused efforts on the North American Free Trade Agreement and potentially

a Free Trade Agreement of the Americas. Building more sustainable relationships

with Latin America cannot occur when environments are degraded because those

who live in these areas will migrate internally and/or internationally to seek a better life. Investing in programs run by reputable Nongovernmental Organizations

like WWF, Conservation International, Nature Conservancy, and others that try to

work with various stakeholder groups and that work with local NGOs ought to be

a priority.

We Need to Determine Ways to Compensate Rural People in Latin America for the

Environmental Services They Provide. Clean water and air have always been

thought of as free public goods. Increasingly, as part of the strategies we use to address rural poverty, we should determine ways to compensate people for the production of ‘‘ecosystem services’’ they provide. For example, the soil erosion from degraded watersheds of southern Honduras means that shrimp farms along the coast

must spend an estimated five cents a pound of shrimp tail produced just to manage

sediments in ponds (Samayoa, Thurow and Thurow 2000:16). If government were

to begin programs to ‘‘tax’’ downstream users for environmental services, it could

make significant investments in assisting upstream farmers. An example of where

this is working now is that the water management agency in Quito, Ecuador is now

allocating a percentage of user fees collected to help conservation efforts in a national park in the mountains where the water is produced. Similar kinds of programs can be established to provide rural people with income and/or investments

34

4The World Resources Institute has recently released a report indicating that, at least in the

U.S., marketbased approaches to water quality management can be more effective than regulatory approaches alone (Faeth 2000).

to maintain forests that would help provide clean water and air to Mexico City and

other large urban metropolises, to maintain forests in watersheds to prevent the siltation that reduces the life of hydropower dams, and to improve watersheds that

provide irrigation water to downstream users.4

On a global scale, tradable permits are one mechanism for doing this. There is

considerable interest in using forest conservation for carbon sequestration to help

address global climate change. The ‘‘adoption of forest carbon markets (as proposed

under the Kyoto Protocol) . . . could dramatically increase incentives for developing

nations to protect forests’’ (Bonnie et. al. 2000:1763). The Clean Development Mechanism of the Kyoto Protocol could allow industrialized nations to purchase carbon

credits to meet overall goals of reducing greenhouse gas emissions.

Consumers also have a role to play by rewarding producers who use sustainable

practices. For example, about 90,000 hectares of pine/oak forests in Oaxaca, Mexico

have received SMARTWOOD certification, yet thus far producers have not received

any market benefits from this. To guide consumers, we need to devote more resources to establishing verifiable, simple certification systems to encourage consumers to purchase products that are environmentally friendly. Organic, shadegrown coffee is an example; another is dolphin-friendly tuna.

The main point here is that unless there are economic rewards and returns that

will go to directly helping poor people, it is unlikely that they will engage in behaviors to protect natural resources. Right now, too many people in Latin America see

conservation as ‘‘prohibition’’ and contrary to their own interests. As one peasant

leader in the Monarch Butterfly Reserve in central Mexico told me just last week:

‘‘If you tell me that each year I can harvest one of every ten trees on my land, I

will be happy to cooperate. If you tell me that I can’t cut any trees, then I can assure you all ten trees will disappear immediately.’’ The U.S. Should Ask Our Representatives to Multilateral Development Banks to

Require Social Analysis of Projects. The assessment of projects in institutions such

as the World Bank and Inter-American Development Bank currently require only

financial, economic, technical, and institutional analysis, with environmental analysis now required in most cases. There are ‘‘social safeguard policies’’ on indigenous

peoples, involuntary resettlement, and women in development that are applied to

some projects, yet social analysis of projects is not required. This means that we

have no comprehensive mechanism for determining how projects might affect important issues like poverty or social inequality. Given that multilateral development

bank loans are now only a small percentage of foreign investment in Latin America,

such loans ought to be targeted in ways that can directly affect poverty and its accompanying maladies.

Invest in University Linkages Focused on Social and Environmental Research.

International NGOs have done a relatively good job of establishing linkages with

local NGOs. Although there are exceptions, U.S. universities have not developed the

same sorts of collaborative research and development linkages for environmental research and policy-making with counterparts in Latin America. The kinds of partnerships developed for agricultural research by programs like USAID’s Collaborative

Research Support Projects (CRSP) need to be expanded for work on environmental

and social research. As the National Science Foundation expands its role in addressing environmental problems (NSF 2000), it ought to provide more emphasis to supporting international research collaborations.

SUMMARY

The goal of this presentation was to emphasize the link between inequality and

environmental degradation in Latin America. Despite many positive steps that have

been taken by Latin American countries in the last several years, the continuing

disparities between rich and poor hold threats for the environment. Degradation results from the rich who consider themselves to be above the law, and from the poor

who have no alternative but to mine natural resources for current survival. Policy

makers must look for means to reduce inequalities and to directly channel resources

so that those in control of natural resources have incentives to conserve and improve

them.

BIBLIOGRAPHY

Bonnie, Robert, Stephan Schwartzman, Michael Oppenheimer, and Janine Bloomfield, 2000 Counting the Cost of Deforestation. Science 9 June: 1763-1764.

35

Berry, Albert, 1997, The Income Distribution Threat in Latin America. Latin American Research Review 32(2):3-40.

DeWalt, Billie, 1997, The Human Causes of a Natural Catastrophe (on the effects

of Hurricane Mitch on Central America). Pittsburgh Post-Gazette Forum Sunday, Nov. 22 (Op-ed).

DeWalt, Billie R., Susan C. Stonich and Sarah Hamilton, 1993, Honduras: Population, Inequality and Resource Destruction, In Carole L. Jolly and Barbara

Boyle Torrey, eds. Population and Land Use in Developing Countries, National

Academy Press: Washington, D.C., pp. 106-123.

Dourojeanni, Marc J., 1999, The Future of Latin American Natural Forests. Environment Division Working Paper, Interamerican Development Bank: Washington, D.C.

Economist, 2000, The Beginning of the End of the Longest-Ruling Party. June

24:25-27.

Faeth, Paul, 2000, Fertile Ground: Nutrient Trading’s Potential to Cost-Effectively

Improve Water Ouality. WRI: Washington, D.C.

Interamerican Development Bank (IDB), 1998, Integrated Water Resources Management in Latin America and the Caribbean. Technical Study ENV-123, Interamerican Development Bank: Washington, D.C.

National Science Foundation, 2000, Environmental Science and Engineering for the

21st Century: The Role of the National Science Foundation. NSF: Washington,

D.C. (February).

Reca, Lucio G. and Ruben G. Echeverrı ́a, 1998, Agricultura, Medio Ambiente y

Pobreza Rural en America Latina: Situacio ́n Actual y Propuestas. In Lucio G.

Reca and Ruben G. Echeverrı ́a, eds. Agricultura, Medio Ambiente y Pobreza

Rural en America Latina. Instituto Internacional deInvestigaciones sobre

Polı ́ticas Alimentarias: Washington, D.C.

Revenga, Carmen, Siobhan Murray, Janet Abramovitz, and Allen Hammond, 1998,

Watersheds of the World: Ecological Value and Vulnerability. World Resources

Institute: Washington, D.C.

Samayoa, Ma Marcela, Amy P. Thurow, and Thomas L. Thurow, 2000, A Watershed-Level Economic Assessment of the Downstream Effects of Steepland Erosion on Shrimp Production, Honduras. Soil Management Collaborative Research

Support Program, Texas A & M University Technical Bulletin 2000-01.

State Department, 1997, Environmental Diplomacy: The Environment and U.S. Foreign Policy. Washington, D.C.

Mr. CHAFEE. Thank you, very much for your time and your testimony. I especially like when you say it is easy to pessimistic, but

here are some of the positive things that are happening. Here are

some possible solutions. And let us move forward. So, thank you

very much. You really are strong on the linkage of the inequities

and progress on environmental concerns and how some of the corporations do not abide by the same laws that everybody else is required to abide by. I am sure that is a problem. The powerful can

get away with more than the regular citizens.

Mr. Watson, you have been all over the region as Ambassador,

Peru, Colombia, Bolivia, Brazil, Santo Domingo. And in your experience, your rich experience, in traveling the area during the past

few decades, how are we doing? How is change coming both on the

emergence of democracy, the growing middle class, and addressing

some of the basic environmental concerns, proper land use, wastewater treatment?

Mr. WATSON. Well, Mr. Chairman, the broad experience that you

mentioned in many countries, looking at a broad variety of issues,

I think there has been enormous progress in two or three of the

most important issues. And also there are setbacks every now and

then, there is no doubt that the countries of Latin America and the

Caribbean are essentially committed to democracy even though it

needs to be deepened and strengthened in a great variety of ways,

especially judicial systems and things like that and greater participation by some of the less fortunate people in the countries. But

36

still, compared to what it was a while ago, it has been enormous

progress.

Second, I think that most of the countries in the region have gotten the macroeconomic policies right now to all sorts of experiments, most of which failed. And every failure, of course, hurts the

poorest people more than anybody else. And I think basically the

macroeconomic policies are essentially in place if you understand

what they are.

Third, I am encouraged that there is a greater awareness on the

part of the leadership in most countries that natural resources are

not free goods as they might have been considered before. In other

words, they are not limitless goods, that they have to manage them

carefully or they are not going to have any in the future. That does

not mean have I got the right policies in place all the time. But

at least there is an awareness which is essential to start to formulate the right policies which sets a context for people like ourselves,

and like the AID programs that Carl Leonard was talking about,

much more likely to succeed.

Areas where I think there has still been enormous failure is in

the distribution of income. In most of the countries, Latin America

and the Caribbean, the economic growth has been terrific but has

not benefited everybody even close to equally.

This I think has been compounded to a certain extent, to a great

extent, by failure of education systems to really be equal, to really

bring people who are, let us say, outside the modern sector of the

economy into the economy, be able to give them the skills to do

that. And I have been worried for a long time that the revolution

in communications that is taking place now will widen this gap. We

will just have two classes, those who are on the Internet if you will

and those who have no idea what it is.

And I think that another area that is relevant in this respect is

public health. There has been a lot of improvement in a lot of

places, but there is still a long way to go. And it is profoundly in

the interest of all the countries of the hemisphere. Even if all you

are concerned about is having an adequate labor force to be able

to keep your economy booming, to have well-educated and healthy

citizens, irrespective of the ethical and moral considerations that I

think are important to many of us.

I think that we are now, at least my perspective now in The Nature Conservancy—I just spent a week in Guatemala. I came back

last night. You are beginning to see much more creative approaches to reconciling the differences or the potential tensions between development and management of natural resources or conservation of resources. And I think there is a greater awareness of

the need to involve the local people in positively constructed and

long-term engagement in the solution, designing the solutions and

implementing the solutions of those problems.

So obviously, if one has spent a long time in the hemisphere like

I have thinking about a lot of these things, I could go on forever

and bore everybody in this room. But those would be some of the

highlights, at least from my experience.

Mr. CHAFEE. Thank you, very much. I suppose it all does start

with education and public health. And those are the building

37

blocks. Gentlemen, I do not have any other questions. I look forward to working with you in the future as we go forward.

I think there is a tremendous opportunity for our country to be

involved across our borders in a positive way, and I hope you can

share with us any other ideas you have as we go forward. And we

appreciate your taking the time to come all the way from Pittsburgh and back from Guatemala. We are very indebted to sharing

your wisdom with us here this morning and wish you the very best.

And thank you again.

Mr. WATSON. Thank you, very much, sir.

Dr. DEWALT. Thank you.

Mr. CHAFEE. The hearing is concluded.

[Whereupon, at 10:38 a.m. the hearing was adjourned.]

Additional Questions Submitted for the Record

RESPONSE OF CARL H. LEONARD TO ADDITIONAL QUESTIONS FOR THE RECORD

SUBMITTED BY SENATOR CHAFEE

PRIORITIZATION OF ENVIRONMENTAL ISSUES

Question. This hearing covered a great many environmental issues and problems

in Latin America/Caribbean that need to be addressed. It appears that USAID, the

multilateral development banks (MDBs), and NGOs are working on all of them.

Would you find it useful to prioritize these problems so that our resources are allocated appropriately? Which problems pose the greatest threat to human health

over the long-term?

Answer. There is a broad array of environmental issues in the Latin America and

Caribbean region. In this regard, USAID brought up a subset of what we feel are

some of the most pressing and where we believe we can have an impact: deforestation, water mismanagement, coastal degradation, absence of urban environmental

services, and vulnerability to natural disasters. Within this subset, it would be difficult to prioritize because each poses a significant threat to the region’s future prosperity and stability, and to United States interests.

With regard to human health, of the myriad of environmental problems facing the

region, water scarcity and water pollution may pose the greatest direct threat.

Roughly 25 percent of the population in Latin America and the Caribbean lacks access to safe drinking water and almost 60 percent do not have adequate sanitation

facilities. Moreover, it is estimated that only 5-10 percent of all municipal wastewater receives any sort of treatment before being discharged. The results are not

unexpected: heavily contaminated receiving waters, unhealthy living conditions, and

high levels of mortality and morbidity from waterborne diseases, especially among

children.

In fact, The World Bank estimates that roughly 60 percent of mortality in children under five years of age is attributable to waterborne diseases. These problems

are most acute in pen-urban and rural areas.

USAID and the multilateral development banks (MDB) do have distinct primary

areas of focus based on our respective and complementary capacities. In general,

USAID focuses on natural resource management issues where the development and

dissemination of best practices can be effective, including watershed management

and rural water supply and sanitation. The MDBs focus on urban and energy issues

that require large capital investments. In the urban and energy sectors, USAID does

coordinate with the MDBs by providing grant assistance for the technical analyses

and the piloting of promising approaches that can become the basis for MDB loans.

URBAN ENVIRONMENTAL INFRASTRUCTURE

Question. What are the major impediments to providing basic environmental infrastructure in urban areas?

Answer. Historically, central governments have been unable to adequately finance, deliver and maintain roads, sewage, water systems, and solid waste collection for their countries’ exploding urban populations. Now, as a result of the recent

wave of decentralization throughout Latin America, many of these challenges still

exist, albeit at the city level. While decentralization ushered in legal reform which

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gave cities the authority to make decisions on service delivery, many new city governments, especially smaller municipalities, remain ill-equipped to respond. Capacity building is needed to help cities learn to plan, finance and deliver infrastructure

and environmental services. In addition, further reform at the policy level is required to ensure that cities are granted the authority to access the needed financing—either from capital markets or from local revenue collection—to carry out this

new function. In fact, access to capital markets is a major impediment to providing

environmental services in the larger urban centers which are home to a growing

percentage of the Latin America and the Caribbean population and which require

large capital investments. This is a primary focus of the multilateral development

banks (MDB).

The recent natural disasters in Latin America, especially Central America and the

Caribbean, highlighted the need to build capacity in city governments for responding to the destruction left by floods, earthquakes, and hurricanes. In 1998, for example, Hurricanes Georges and Mitch left millions homeless and without potable water

and sanitation services. In such situations, city governments act as primary agents,

not only in responding to the disaster themselves, but also in directing the influx

of resources from international aid agencies. Under the new framework of decentralization, strong city government capacity in physical and financial management

is crucial to rebuilding urban environmental infrastructure and planning for future

disasters.

LATIN AMERICAN EQUIVALENT OF U.S.-AEP

Question. The U.S.-Asia Environmental Partnership [U.S.-AEP] program is a

USAID program that brings U.S. firms together with Asian governments and businesses to find solutions to Asian environmental programs, leveraging private sector

cooperation and funds to increase the relatively low levels of U.S. government funds.

Do you believe that a Latin American equivalent would be equally successful?

Should this be considered for Latin America? Are U.S. efforts to promote environmentally preferable technologies leading to real market advantages for U.S. firms?

Answer. The concept of bringing United States firms together with Latin America

and Caribbean (LAC) governments and businesses to help solve environmental problems is an excellent one and one which USAID has been actively pursuing for several years through programs such as the Environmental Initiative for the Americas

(EIA), the Hemispheric Free Trade Expansion (HFTE) Program, and the Environmental Pollution Prevention Program (EP3).

Most recently, the USAID’s LAC Bureau launched the U.S.-LAC Environmental

Partnership (LACEP) program with the principal purpose of forging lasting partnerships between the U.S. and LAC public and private sectors to address the region’s

severe environmental degradation problems. LACEP embraces many of the U.S.-

AEP principles and makes use of similar implementation mechanisms. For instance,

LACEP seeks to enhance the performance of targeted LAC business by supporting

U.S. and LAC private sector engagement in the application of innovative, marketbased solutions to environment problems. LACEP also will strive to leverage the resources of other donors. In addition to introducing appropriate technologies such as

industrial clean production, LACEP will work to identify and overcome the numerous institutional and financial barriers that hinder implementation and dissemination of sound technical solutions.

According to the World Bank, during the last five years, the rate of increase for

the demand of environmental goods and services for Latin America and the Caribbean (LAC) exceeded all regions of the world, including Asia and Japan. The annual

growth rate for the region is 12 percent as compared to 2 percent for Japan and

10 percent for the rest of Asia. For instance, in the next decade, the demand for

environmental goods and services in the water sector alone is expected to be about

$220 billion. Additionally the amount of private investment capital flowing into LAC

last year has, for the first time, exceeded that of Asia. USAID, through various

mechanisms such as the Latin American Initiative for Environmental Technology

(LA-IET) implemented in partnership with the Environmental Export Council (EEC)

and our work with regional trade and environment committees, has been successful

in introducing U.S. private sector ‘‘know-how’’ and expertise to this growing market

and in identifying strategic opportunities for U.S. firms to capitalize on this demand.

ECO-REGIONAL APPROACHES

Question. I understand that USAID’s Center for Environment is working with

NGO partners on conservation programs on an eco-regional scale in selected regions

around the world. Does this mean that the agency intends to expand eco-regionalVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
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based conservation in other regions and cross border areas in other parts of the

world where USAID is present, as well as more broadly in Latin America and the

Caribbean? If so, can you identify the areas in the Latin American/Caribbean region

that USAID has targeted for large scale conservation action at the eco-region scale?

Answer. USAID feels that conservation planning at the eco-regional scale is critical to conservation success. USAID’s Center for Environment, as well as the Agency’s regional bureaus, have been incorporating this approach into conservation efforts for the past decade, and are increasingly identifying opportunities to expand

the tool where appropriate. Focusing on the sites, populations, ecological processes

and threats that are relevant to an eco-region as a whole allows for an integrated

approach to conserving biodiversity that transcends political boundaries. Eco-regional approaches use a number of priority criteria and include relevant stakeholders in the planning process, while considering the broader social, economic and

political factors that are critical to long-term success.

Specifically, in the Latin America and Caribbean (LAC) region, USAID has been

working in partnership with NGOs in several sites to conserve biodiversity, several

of these on an eco-regional or transboundary scale. USAID is currently working in

the Southwest Amazon Ecological Corridor, the Atlantic Rainforest, the Guyanan

Rainforest Corridor, the Cerrado and Pantanal eco-regions, the Yasuni-Napo Forest,

a portion of the Northwestern Andes, and the Chaco eco-region.

USAID has also targeted additional areas in the LAC region for eco-regional conservation efforts, for example, the Central America Regional Program (PROARCA)

is expanding efforts in the MesoAmerican Biological Corridor, including portions of

the MesoAmerican Coral Reef. An eco-regional planning approach is underway in

Paraguay, Brazil and Bolivia, which will expand the conservation efforts in the

Pantanal eco-region. In addition, discussions are underway concerning the applicability of an eco-regional approach for the eastern slope of the Andes, a region that

USAID has targeted for possible, large scale conservation efforts. USAID, in partnership with several NGOs, has also funded a number of eco-regional priority setting projects in the LLAC region, for example, ‘‘A Regional Analysis of Geographic

Priorities for Biodiversity Conservation in Latin America and the Caribbean’’ and

‘‘Freshwater Biodiversity of Latin America and the Caribbean: A Conservation Assessment.’’

Although USAID is increasingly identifying opportunities to use eco-regional approaches to target threats to biodiversity and work across national boundaries, there

are many cases where a site-by-site or policy specific approach is still the most effective conservation tool. For example, working with the local municipality in Quito,

Ecuador, USAID supported a market-based, water-use fee pilot project for CayambeCoca Reserve, the watershed serving as the source of the city’s potable water supply.

The lessons learned and documented at this site will allow the user-fee model of watershed protection to be replicated in other areas containing critical watersheds.

RESPONSE OF JOSEPH E. EICHENBERGER TO ADDITIONAL QUESTIONS FOR THE RECORD

FROM SENATOR CHAFEE

Question 1. What is the status of the World Bank-sponsored Clean Air Initiative?

What results have been achieved to date, and what achievements are ultimately expected?

Answer. The World Bank Institute in partnership with the Bank’s Environmentally and Socially Sustainable Development unit in the Latin America and Caribbean (LAC) region and a number of other agencies and companies, launched the

Clean Air Initiative in Latin American Cities in December 1998, as a three-year program. The Initiative covers issues of environment, urban, transport, health, energy,

industrial pollution, and global emissions, as they relate to the quality of the air

in the cities of the most urbanized region of the developing world. Its three goals

are: (a) to promote the integrated development or enhancement of city clean air action plans based on the participation of all relevant stakeholders; (b) to advance the

exchange of knowledge and experience among all partners; and (c) to foster public

participation and the active involvement of the private sector in implementing innovations in the use of low-emissions, low-carbon technologies.

The $1 million budget for calendar year 2000 includes funding from the World

Bank, bilateral donor funds and contributions from the private sector Steering Committee members of the Initiative (DaimlerChrysler, Volvo, Renault, Shell). In addition, recipient cities also contribute. Activities being funded include:

• City Specific Workshops (Buenos Aires, Santiago) $190,000

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• City Action Plans (Buenos Aires, Lima, Rio, Santiago, Mexico) $450,000 • Distance Learning Course $80,000 • Web-site Update $70,000 • Other Communication Tools (brochure, progress report) $80,000 • Information Pool for Clean Technologies $40,000 • Clean Air Toolkit $45,000 • Program Management $90,000

With respect to operational investments, World Bank projects are either under

preparation or implementation in most of the cities currently involved in the Clean

Air Initiative (e.g., Mexico City Air Quality II, Buenos Aires Urban Transport, Lima

Urban Transport, and Rio de Janeiro Mass Transit). Through the development or

enhancement of the city action plans, which account for approximately half the Initiative’s budget, cities will identify further areas requiring investment. This additional investment may come from a vanety of sources, including local, private sector,

bilateral or multilateral financing.

Question 2. A review of the Inter-American Development Bank (IDB) environmental programs shows a great deal of emphasis on wastewater treatment projects.

Is this emphasis advisable, given the magnitude of other problems?

More than 50% of Latin Americas poor live in urban areas and lack access to

clean water and basic sanitation. Consequently, emphasis on water and sanitation

generally reflects both borrower priorities and borrower needs. In 1999, IDB lending

for water and sanitation accounted for 73% of environmental lending. In 1998 and

1999, the region, especially Central America, was struck by natural disasters that

killed thousands and destroyed property and infrastructure. The IDB responded

with natural disaster funding for rehabilitation and reconstruction of basic infrastructure that included funding for environmental mitigation measures to reduce

vulnerability to future disasters, solid waste management, and water, and for

strengthening emergency response capacity. Natural disaster loans accounted for

around 21% of the environmental portfolio for 1999. The remainder of the environmental portfolio consists of support for natural resource conservation and environmental management.

Other pressing environmental issues require attention by the IDB and its borrowers. For example, we have encouraged the Bank to do more in the field of energy

efficiency and global public goods related to the environment. The IDB is in the

process of establishing a Trust Fund with the U.S. Department of Energy to identify

and prepare IDB projects that can benefit from U.S. energy efficiency technologies.

It has also established a sustainable energy markets program, focussed on energy

efficiency, which mobilized $5 million to prepare energy efficiency projects last year.

The IDB recently signed an agreement with the Global Environmental Facility that

will permit the Bank to access funding for activities related to global environmental

issues. These activities relate to climate change, biodiversity, international waters,

depletion of the ozone layer, and degradation of lands, mainly through

desertification and deforestation.

Question 3. A World Bank analysis for Santiago found that reducing air pollution

from cars, trucks, and buses, and converting wood burning industrial sources to

other fuel would generate benefits that outweighed pollution control costs by at least

a factor of 1.7. Even with a positive benefit-cost ratio, are such investments feasible

in the region?

Answer. The World Bank’s cost benefit-analysis of an air pollution control scenario for Santiago, Chile, focused on: (a) fixed sources; (b) gasoline vehicles; (c)

buses; and (d) trucks, resulted in a benefit/cost ratio of 1.7 and indicated that investments in these areas are highly economically justified. In fact, a number of

these measures have been carried out in Santiago and other Latin American cities

and have proven the high feasibility of such investments.

The analysis for Santiago focuses on putting in place the appropriate emission

standards for vehicles, fuels and stationary sources. To overcome obstacles to the

successful implementation of these measures in the region, it is important to: (i) include all relevant stakeholders in the design and implementation of these activities

(i.e., energy, transport and environment sectors, NGOs, civil society, etc.); (ii)

strengthen compliance and enforcement capacity; (iii) raise public awareness

through health studies; (iv) establish the necessary institutional coordination arrangements; and (v) complement these efforts through the use of economic incentives.

The World Bank has worked with its clients in the region in the design and implementation of these measures. For instance, through the Transport Air Quality Management Project in Mexico City, the Bank supported the: (a) development and enforcement of emission standards; (b) implementation of an inspection and mainteVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
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nance system for vehicles; (c) carrying out of health studies; (d) development of economic incentives (such as fuel pricing and vehicle taxation); (e) strengthening of institutional capabilities to implement air quality measures; and (f) establishment of

an environmental coordination commission.

Question 4. What are the major impediments to providing basic environmental infrastructure in urban areas?

Answer. The impediments to providing basic environmental infrastructure in

urban areas are complex and multiple. The expense of infrastructure is enormous

making it very difficult for developing countries to finance the level of infrastructure

needed to serve ever-growing populations. Many developing countries lack the capital markets necessary to finance expensive infrastructure projects such as wastewater treatment facilities and urban sanitation. In addition, environmental infrastructure investments do not easily attract private sector finance, particularly in

secondary cities. Many of these countries also maintain investment policies or have

investment climates that severely impede private sector investment.

Unlike the energy sector in Latin America, infrastructure is not considered by the

private sector to be sufficiently profitable. In the case of a wastewater treatment

plant, profits are relatively low and the consumers are generally quite poor. To have

a positive profit margin, a company would need to set the tariff at a profitable level.

This is difficult due to the limited incomes of consumers. In the U.S., such services

may be priced at a reasonable level given the average income of its customers. In

many of these countries, even small tariffs can surpass the level customers can pay,

with one-quarter of the world’s population earning less than one dollar a day.

Beyond the financing obstacles, the lack of institutional capacity among municipalities is also a serious impediment to project implementation and successful operation in some cases. Cities must have the capacity to train workers. They must also

have knowledge about project design, planning, construction, facility operations, and

mechanisms to collect tariffs.

RESPONSE OF THE NATURE CONSERVANCY TO ADDITIONAL QUESTIONS FOR THE

RECORD SUBMITTED BY SENATOR CHAFEE

Question 1. Given that, ‘‘Integrated coastal zone management (ICZM) and marine

ecosystem management are recognized as urgent needs to deal with the off coastal

resources in the LAC region.’’ What do you believe would be needed to bring about

more widespread integrated management in the Latin America and Caribbean

(LAC) region?

Answer. To bring about more widespread integrated management in the LAC region there is a need for financial resources to be invested in:

• educational initiatives to build awareness of the important and basic role of marine resources, their economic value, and their nearly ubiquitous state of degradation;

• building the local capacity to manage these resources, as many LAC nations

lack the technical expertise for taking on these complex management challenges;

• beginning and improving collaboration among the governmental and nongovernmental entities in the LAC countries that have a vested interest in marine resource management;

• initiating cross-border international collaboration, as the marine ecosystems

being managed are fluid in nature and cannot be managed properly in isolation;

and

• supporting U.S. Government initiatives, such as those envisioned by USAID

Caribbean Region Regional Office in Jamaica, to improve coastal zone management.

We have been working to support the objectives and provisions of the Cartagena

Convention Protocol (1983) on Specially Protected Areas and Wildlife in the Wider

Caribbean Region (SPAW). This has been accomplished in partnership with the

United Nations Environmental Program (UNEP) Caribbean Regional Seas Program

to implement training programs for coastal zone managers.

Question 2. Are there successful models that can be replicated?

At a multinational level, the USAID funded PROARCA project is a good place to

begin. With The Nature Conservancy, World Wildlife Fund and the University of

Rhode Island Coastal Resource Center leading a team of in-country partners,

PROARCA has attempted to bring the government and non-government commuVerDate 11-MAY-2000 13:16 Feb 22, 2001 Jkt 000000 PO 00000 Frm 00045 Fmt 6633 Sfmt 6621 69746 SFRELA2 PsN: SFRELA2
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nities together to set common goals for ICZM. There has been work at the local level

but also with a Central American Commission for the Environment, which has

touched on regional issues including the harmonization of policies for marine resource management. A basic step here is seeing that all countries have similar calendars for closed fishing seasons, so fishermen don’t just jump across borders from

month to month (in which case the target species never get any relief to reproduce).

As basic building blocks of ICZM, national parks should be established and managed for the protection value they present to many living and non-living marine resources. Our Parks in Peril program (PiP) demonstrates how progress can be made

in this regard. Through the implementation of PiP in Parque del Este (PDE), Dominican Republic, many advances have been made toward achieving the balance between conservation and economic development. For example:

• there is now a vibrant constituency focused on protecting the marine resources

of the park, spearheaded by local (Dominican) environmental NGO’s, and regional organizations like CAST, the Caribbean Alliance for Sustainable Tourism;

• large quantities of important ecological and resource utilization information

have been compiled and used in the development of terrestrial and marine habitat maps and recommendations for improving park management;

• local communities surrounding the park are much more engaged in park management and resource-use issues, and work closely with local partners;

• significant strides have been made in improving critical park infrastructure to

accommodate the thousands of tourists visiting PDE on a monthly basis.

The Nature Conservancy has contributed to the well being of marine natural resources by developing publications that document successful work. An examples is

the ‘‘Rapid Ecological Assessment Series: Parque Nacional del Este,’’ that provides

critical and new information on marine biodiversity conservation planing and management. Through the use of such documents, we are able to use our specific sitebased work to leverage conservation training and education across the region.

Question 3. Is the relative lack of Integrated CZM a question of financial resources alone, or are major changes in attitudes and approach needed by government and private sector interests in the region?

Answer. It is not just a financial issue. The awareness of the public must be increased. The public needs to understand and appreciate that ICZM is important because coastal zones harbor flora and fauna important to countries’ natural heritage,

provide food, contain resources (that can be managed sustainably) used locally or

exported, and attract tourists. At the end of the day, it is a quality of life issue.

Life for the human population will be improved if the coastal zone is managed well.

Government and private sector interests in the region need to set mutual longterm goals and work together to see the resources managed sustainably, not in

short-term actions that degrade the resource base.

The biggest change in attitude needed is a commitment to protect the resources

for long term sustainability. Establishment of a series of marine parks in high priority coastal systems around the region would demonstrate a major positive change

in attitudes. These parks would serve as places for general marine biodiversity protection, but would also serve to protect fishery resources. If these areas were chosen

carefully, they would help significantly in both species conservation and fisheries.

The fish would spill out of these habitat refuges and provide local fishermen with

a resource and would be a highly prized resource by not only the local populations

but also the growing tourism sector.

Question 4. What do you believe are the coastal and marine areas and resources

most at risk today?

Answer. Coastal wetlands (marshes and mangrove forests) and shallow water marine ecosystems (like seagrass beds and coral reefs) are very sensitive to disturbance

and over-fishing. They are at risk wherever they occur in Latin America and the

Caribbean. Every country should have a strategy for protecting a significant percentage of them, as they form the basis of many food resources. Many of these areas

are destroyed slowly through pollution and other go directly under the plow as

coastal areas are developed rapidly.

All the common fishery targets (finfish and invertebrates) in the region have been

dramatically overfished and should be protected, as most populations are perilously

close to crashing.

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