[Federal Register Volume 62, Number 48 (Wednesday, March 12, 1997)]
[Presidential Documents]
[Pages 11589-11614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6231]



[[Page 11587]]

_______________________________________________________________________

Part IV





The President





_______________________________________________________________________



Presidential Determination No. 97-18--Certification for Major Narcotics 
Producing and Transit Countries


                        Presidential Documents 



Federal Register / Vol. 62, No. 48 / Wednesday, March 12, 1997 / 
Presidential Documents

___________________________________________________________________

Title 3--
The President

[[Page 11589]]

                Presidential Determination No. 97-18 of February 28, 
                1997

                
Certification for Major Narcotics Producing and 
                Transit Countries

                Memorandum for the Secretary of State

                By virtue of the authority vested in me by section 
                490(b)(1)(A) of the Foreign Assistance Act of 1961, as 
                amended, (``the Act''), I hereby determine and certify 
                that the following major drug producing and/or major 
                drug transit countries/dependent territories have 
                cooperated fully with the United States, or taken 
                adequate steps on their own, to achieve full compliance 
                with the goals and objectives of the 1988 United 
                Nations Convention Against Illicit Traffic in Narcotics 
                Drugs and Psychotropic Substances:

                  Aruba, The Bahamas, Bolivia, Brazil, Cambodia, China, 
                Dominican Republic, Ecuador, Guatemala, Haiti, Hong 
                Kong, India, Jamaica, Laos, Malaysia, Mexico, Panama, 
                Paraguay, Peru, Taiwan, Thailand, Venezuela, and 
                Vietnam.

                By virtue of the authority vested in me by section 
                490(b)(1)(B) of the Act, I hereby determine that it is 
                in the vital national interests of the United States to 
                certify the following major illicit drug producing and/
                or transit countries:

                  Belize, Lebanon, and Pakistan.

                Analysis of the relevant U.S. vital national interests, 
                as required under section 490(b)(3) of the Act, is 
                attached. I have determined that the following major 
                illicit drug producing and/or major transit countries 
                do not meet the standards set forth in section 490(b) 
                for certification:

                  Afghanistan, Burma, Colombia, Iran, Nigeria, and 
                Syria.

                In making these determinations, I have considered the 
                factors set forth in section 490 of the Act, based on 
                the information contained in the International 
                Narcotics Control Strategy Report of 1997. Because the 
                performance of each of these countries/dependent 
                territories has differed, I have attached an 
                explanatory statement for each of the countries/
                dependent territories subject to this determination.

                You are hereby authorized and directed to report this 
                determination to the Congress immediately and to 
                publish it in the Federal Register.

                    (Presidential Sig.)<Clinton1><Clinton2>

                THE WHITE HOUSE,

                    Washington, February 28, 1997.

[[Page 11590]]

                STATEMENTS OF EXPLANATION

                Aruba

                    Aruba is a major trafficking and staging point for 
                international narcotics trafficking organizations which 
                transship cocaine and heroin from Colombia, Venezuela 
                and Suriname to the United States and Europe. Its key 
                position near the Venezuelan coast with air and sea 
                links to South America, Europe, Puerto Rico and other 
                Caribbean locations makes it a prime transshipment 
                point. Drug shipments are made primarily via 
                containerized cargo, but commercial airlines and cruise 
                ships are also used. Although USG law enforcement 
                agencies estimate that about 155 mt of cocaine are 
                transshipped through the Caribbean to the United States 
                annually, and that more than 100 international 
                trafficking organizations operate in that region, Aruba 
                seized only about 170 kg of cocaine and about 2\1/2\ kg 
                of heroin in 1996.
                    Money laundering organizations use legitimate 
                companies as fronts to invest in land development and 
                other construction projects. The Government of Aruba's 
                (GOA) Free Trade Zone (FTZ), casinos and resort 
                complexes are reported to be attractive venues for 
                money laundering and smuggling. A joint Dutch-Aruban 
                Commission in 1996 issued recommendations to improve 
                regulation of the FTZ, and invited a U.S. Customs 
                technical expert to help implement those 
                recommendations. Legislation on the FTZ, casinos and 
                off-shore corporations is pending.
                    Aruba is a part of the Kingdom of the Netherlands 
                (GON), and has independent decision-making ability in 
                many drug policy areas. The Kingdom of the Netherlands 
                (GON), a party to the 1988 UN Drug Convention, has not 
                yet extended it to Aruba. The Aruban legislature is in 
                the final stages of considering comprehensive criminal 
                law reform, expected to be adopted in 1997. The law 
                would create a basis for the Kingdom's extension of the 
                1988 UN Drug Convention, for expanded investigative 
                powers for local law enforcement, as well as for 
                extradition of nationals subject to service of 
                sentences in Aruba.
                    The GOA participated with the Netherlands, the 
                Netherlands Antilles in the establishment of a joint 
                Kingdom-Caribbean Coast Guard, designed to patrol the 
                Kingdom's Caribbean coastal waters to interdict drug 
                shipments. The GOA established money transaction 
                monitoring entities to review unusual transactions in 
                the banking sector. Aruban law enforcement officials 
                participated in USG-sponsored training courses for drug 
                enforcement during 1996. The GOA has taken limited 
                steps to punish corrupt officials, and replaced senior 
                police and justice officials in Aruba.
                    Corruption is a problem that hinders effective 
                efforts against international narcotics traffickers. A 
                joint Netherlands Antilles and Aruba court denied a USG 
                extradition request for a Colombian narcotics 
                trafficker in 1996. Despite these problems, Aruba 
                generally cooperated with the USG to meet the goals and 
                objectives of the 1988 UN Drug Convention.

                The Bahamas

                    Over the past ten years, successful combined U.S./
                Bahamian counternarcotics efforts have dramatically 
                reduced the amount of cocaine and marijuana transiting 
                The Bahamas en route to the United States. This 
                downward trend has continued over the last several 
                years. Nevertheless, significant quantities of illicit 
                drugs continue to pass through The Bahamas. The Bahamas 
                is also a dynamic financial services center and a tax 
                haven with bank secrecy laws, which are both factors 
                conducive to money laundering. Some marijuana is grown 
                in The Bahamas, but the country is not a major drug 
                producer.
                    The Government of the Commonwealth of The Bahamas 
                (GCOB) vigorously strives to combat drug trafficking 
                and is extraordinarily cooperative with USG counterdrug 
                efforts. The first country to ratify the 1988 UN Drug 
                Convention, The Bahamas took further steps during 1996 
                to implement

[[Page 11591]]

                it. Strong anti-money laundering legislation and 
                implementing regulations entered into force in 1996. 
                During the year, the GCOB continued its successful 
                efforts to strengthen its justice system, with 
                assistance from the USG. U.S. and Bahamian law 
                enforcement officials continued to work closely 
                together to apprehend drug traffickers. Domestic drug 
                abuse remains a problem, but the number of new drug 
                users has declined notably since the mid-1980s. Over 
                the past several years, The Bahamas has prosecuted and 
                convicted some middle and low-level officials on 
                charges of narcotics corruption. The GCOB is also 
                making some headway in its efforts to forfeit and 
                dispose of trafficker assets.
                    Although enormous progress has been made, more can 
                be done. In coming years, The Bahamas should continue 
                to improve the effectiveness with which its justice 
                system handles drug cases, further emphasize forfeiture 
                of trafficker assets and effectively enforce its new 
                anti-money laundering controls.

                Bolivia

                    The Government of Bolivia sustained an intense 
                counternarcotics effort again in 1996, cooperating 
                fully with the USG, and took adequate steps toward full 
                compliance with the goals and objectives of the 1988 UN 
                Drug Convention.
                    Bolivia's coca crop is the third largest in the 
                world, behind Peru and Colombia, but the high yield of 
                Bolivian coca makes Bolivia second only to Peru in 
                terms of the production of cocaine alkaloid. The vast 
                majority of the coca for cocaine production is 
                cultivated in Bolivia's Chapare region. Coca growers 
                produce cocaine base in rudimentary laboratories, then 
                sell it to more sophisticated organizations which 
                convert cocaine base into cocaine hydrochloride. 
                Bolivia is believed to be the world's second leading 
                producer of refined cocaine hydrochloride.
                    During 1996, the Government of Bolivia (GOB) 
                eradicated over 7,500 hectares of coca in the Chapare--
                the highest level of eradication since 1990. Despite 
                the GOB's commitment to this program, eradication 
                reduced Bolivia's coca crop by only one percent, as new 
                coca cultivation, both within and outside of the 
                Chapare, almost offset eradication. Total potential 
                cocaine production in 1996 declined by an estimated 10 
                percent, however, from 240 metric tons in 1995 to some 
                215 metric tons of cocaine HCl. New coca does not 
                become harvestable--and capable of producing the 
                cocaine alkaloid--for two years.
                    In order to confront the problem of new planting, 
                the government launched late in 1996 an expanded 
                campaign to detect and destroy new coca and seedbeds. 
                For the first time, the GOB also fully applied the 
                letter of its own law, arresting several peasants for 
                planting new coca.
                    The Minister of Justice produced a package of 
                legislative reforms, designed to modernize Bolivia's 
                criminal justice sector. Among the reforms were strong 
                anti-money laundering provisions. The government 
                presented the package to the Bolivian Congress in 
                January 1997, and is seeking passage before the June 
                1997 presidential elections. In addition, a new 
                extradition treaty between the United States and 
                Bolivia, which allows for the extradition of Bolivian 
                nationals, entered into force in November 1996.
                    Overall cocaine base and HCl seizures increased in 
                1996 compared to 1995, and HCl seizures in the second 
                half of the year increased dramatically. The government 
                established a Chemical Control Directorate. Meanwhile, 
                an expanded and increasingly effective Chemical Police 
                Unit, aided by counterdrug forces in the Chapare, made 
                chemical seizures well above 1995 levels. The 
                government's Seized Asset Directorate, created in 
                December 1995, began operations, while asset seizures 
                increased by some 36 percent over 1995.
                    In the coming year, the GOB must work to eliminate 
                and prevent new coca cultivation, fully applying the 
                Law 1008 prohibition on new planting, and reduce coca 
                cultivation in the Chapare by at least 10 percent. The

[[Page 11592]]

                GOB should press for the passage and rapid 
                implementation of a money laundering law along with a 
                revised Code of Criminal Procedures. Faced with an 
                increasingly sophisticated group of Bolivian 
                trafficking organizations, the GOB's enforcement 
                strategy must more effectively target cocaine HCl 
                processing and trafficking organizations, as well as 
                Chapare-based cocaine base laboratories. In addition, 
                we expect the GOB to ensure that the Blue Devils 
                Riverine Task Force can fully exercise its drug 
                enforcement authority and product results consistent 
                with its resources.

                Brazil

                    International narcotics traffickers use Brazil to 
                transship cocaine primarily from Colombia, Peru and 
                Bolivia to the United States and Europe. Brazil serves 
                as an increasingly significant transit route for air 
                shipments of cocaine base from Peru to cocaine labs in 
                Colombia. Cocaine also transits the country by river 
                and overland routes. Law enforcement agencies estimate 
                that ten to twenty mt of cocaine transit Brazil 
                annually, of which Brazilian authorities seized about 
                three mt of cocaine in 1996, a decline from last year's 
                almost six mt. Despite the decline, Brazil fully 
                cooperated with the USG to advance the goals of 
                bilateral agreements and the 1988 UN Drug Convention.
                    In 1996, the area of Brazil bordering Peru was 
                heavily used as a staging area for air shipments of 
                cocaine destined for the United States. Brazilian 
                trafficking organizations reportedly provided fuel and 
                airstrips for illicit trafficking purposes.
                    To address this threat, Brazilian authorities 
                destroyed several airstrips, and commendably repeated 
                operations when traffickers rebuilt those cratered 
                airstrips. In a strong commitment to regional 
                cooperation, Brazilian police cooperated with Peruvian 
                and Colombian police to deter trafficking in the tri-
                border area between their respective countries.
                    Focussing on the maritime trafficking problems in 
                Brazil's major seaports, which function as conduits for 
                cocaine shipped to the United States, Brazil 
                participated in one U.S. Customs port assessment visit 
                to the major ports of Rio de Janeiro and nearby Santos. 
                Brazil also tightened enforcement over its chemical 
                companies.
                    Brazil entered into an agreement with the USG to 
                train police-prosecutor-judge task forces to bolster 
                the Government of Brazil's (GOB) counternarcotics 
                effort and to enhance coordination between judges, 
                prosecutors and police. Corruption is a problem in mid 
                and lower levels of the DPF that hinders effective 
                enforcement efforts to control drug trafficking through 
                Brazil.
                    Authorities disrupted the Saavedra-Shapiama 
                Organization, which trafficked cocaine from the Amazon 
                region to the United States. With USG assistance, 
                Brazilian authorities in good faith continue to 
                investigate this and other narcotics trafficking 
                organizations in the Amazon region. In May 1996, the 
                Brazilian Senate approved the Amazon Surveillance 
                System (SIVAM). SIVAM is a detection and monitoring 
                system that will be used to protect the Amazon region, 
                in part against illicit narcotics trafficking.
                    Although the Brazilian government did not sign a 
                Letter of Agreement (LOA) that would have renewed 
                counternarcotics cooperation with the USG in 1996, the 
                GOB has demonstrated a strong interest in continuing 
                its counternarcotics relationship with the USG. The 
                almost $1 million of 1996 counternarcotics funding 
                meant for Brazil instead funded the Organization of 
                American States Anti-Drug Abuse Control Commission 
                (OAS/CICAD). In addition to demonstrating a commitment 
                to cooperate further with the USG on counternarcotics, 
                Brazil participated in important multilateral 
                counternarcotics initiatives, including an OAS/CICAD 
                meeting in Uruguay.
                    Other efforts point of Brazil's achievements in 
                1996. It proposed a National Drug Enforcement Plan in 
                1996. It also hosted several meetings of the of the 
                mini-Dublin Group in Brasilia to coordinate 
                counternarcotics assistance from major donors, 
                primarily European nations. Demand reduction and other 
                multilateral efforts have successfully raised the 
                profile of the danger of

[[Page 11593]]

                drug trafficking and abuse in Brazil. Although bank 
                secrecy remained a formidable obstacle in the battle 
                against money laundering, and money laundering occurred 
                in Brazil's banks and exchange houses, in 1996 the 
                congress initiated debate on a bill to counter money 
                laundering.

                Cambodia

                    In 1996, Cambodia made significant efforts toward 
                addressing drug trafficking and transit problems, which 
                the Royal Government of Cambodia has acknowledged. 
                There is a significant flow of heroin transiting 
                Cambodia which affects the U.S. and other countries. 
                The National Assembly passed a comprehensive 
                counternarcotics law on December 3, 1996. The statute, 
                drafted with UNDCP assistance and advice, includes 
                tough anti-money laundering provisions and commits the 
                government to becoming a party to the 1988 UN Drug 
                Convention.
                    Other measures taken by the RGC, either separately 
                or in cooperation with the U.S. and other governments 
                and international organizations, include reorganizing 
                its ill-trained and equipped 900-person National Anti-
                Narcotics Unit into a more effective 40-person National 
                Anti-Drug Unit, participating in UNDCP conferences, and 
                seeking other avenues to broaden cooperation with 
                surrounding countries and the international community. 
                Cambodian drug interdiction efforts resulted in the 
                seizure of 40 kilograms of heroin and the arrest of 12 
                heroin couriers working for Nigerian trafficking 
                organizations. The RGC also continued a program of 
                marijuana eradication.
                    The skeletal nature of Cambodia's law enforcement 
                infrastructure, coupled with an impoverished economy, 
                continues to impede efforts as assembling comprehensive 
                information about the drug trade in and through the 
                country. These weaknesses have also made the task of 
                providing appropriate assistance more critical and, at 
                the same time, more difficult. The single most 
                important issue Cambodia faces with regard to its drug 
                trafficking problem, however, is the issue of drug-
                related corruption. After the publication in 1995 of 
                allegations tying key political and business figures to 
                the drug trade, the RGC publicly called for information 
                which would aid in the prosecution of any such person. 
                There have, however, been no results yet reported in 
                connection with these charges. The U.S. will be looking 
                for efforts to deal vigorously with drug-related 
                corruption, which would otherwise eventually undermine 
                Cambodia's credibility on the issue of narcotics 
                control. USG efforts to assist Cambodia in building 
                stronger law enforcement and judicial institutions are 
                based on the premise that the upper levels of the RGC 
                will thus have available the appropriate means for 
                dealing with the issue.

                China

                    China continues to play a key role as a major 
                transit route for Southeast Asian heroin destined for 
                the U.S. and other Western markets. Addiction and 
                violent crime associated with China's proximity to the 
                Golden Triangle and its flow of narcotics continue to 
                engage the attention of Chinese authorities. In April 
                1996, China's Ministry of Public Security began a 
                nationwide anti-crime campaign called ``Strike Hard,'' 
                which placed special emphasis on drug interdiction 
                efforts: opium seizures in the first ten months of 1996 
                were up 26 percent over all of 1995, and heroin 
                seizures in the first ten months of 1996 were up 47 
                percent over the entire amount seized in 1995. China 
                continues to be an active participant in the United 
                Nations Drug Control Program and in 1996 signed mutual 
                legal assistance treaties, with specific attention to 
                narcotics trafficking, with Russia, Mexico and 
                Pakistan. It is also a party to the 1988 UN Drug 
                Convention.
                    Counternarcotics and law enforcement cooperation 
                with the United States continues to be uneven, although 
                senior U.S. and Chinese officials have publicly 
                recognized the common interest in enhanced cooperation. 
                Lower level officials continue to express a desire to 
                expand cooperation, and working-level dialogue and 
                information sharing have improved and expanded in some 
                respects. Chinese officials participated in a two-week 
                regional co

[[Page 11594]]

                operation seminar in Bangkok conducted by DEA and in a 
                program to help law enforcement officials detect and 
                prevent illegal transshipments of precursor chemicals. 
                U.S. Customs representatives also taught interdiction 
                techniques to Chinese officials in Sichuan Province. 
                But China in 1996 also denied, ``for now,'' a USG 
                request to be allowed to open a joint DEA/FBI office at 
                the U.S. Embassy in Beijing.
                    China's continued strong stand against crime and 
                official corruption has been widely publicized. Chinese 
                leaders and law enforcement authorities have recognized 
                that rapid economic growth has contributed to the 
                spread of corruption, including among lower level 
                officials. Penalties for such transgressions are severe 
                and include execution.
                    China is a major chemical producer. The interest 
                PRC officials have shown in techniques for controlling 
                sales and shipments of chemical precursors indicates 
                growing recognition of China's role as a target for 
                criminals seeking to illegally procure or divert such 
                chemicals. China's recognition of its susceptibility to 
                money laundering also appears to be growing, but 
                domestic mechanisms for assessing and addressing the 
                problem are only beginning to catch up to the 
                challenge.

                Dominican Republic

                    In 1996, the Dominican Republic's attention was 
                focused on election year politics. As a result, 
                although the out-going government cooperated with 
                counternarcotics operations, it has left the new 
                administration with unresolved, long-term narcotics-
                related issues and an environment of public concern 
                about corruption. Despite the absence of a master plan, 
                the Government of the Dominican Republic (GODR) remains 
                deeply committed to the war against narcotics 
                trafficking and consumption.
                    Following its installation in August 1996, the 
                Fernandez administration made an anti-corruption agenda 
                and judicial reform high priorities of the GODR. 
                However, the GODR lacks effective enforcement 
                mechanisms to eliminate the corruption which undermines 
                the country's fragile democratic institutions. 
                Additionally, the country's largely unpatrolled coast, 
                its porous border with Haiti, and poorly paid and 
                under-equipped police and military make it attractive 
                to Dominican and Colombian drug transshipment 
                organizations and domestic drug traffickers. The 
                majority of Dominicans condemn the use of illegal drugs 
                and support GODR efforts to combat narcotics 
                trafficking; drug consumption levels are considered 
                low.
                    The Government of the Dominican Republic cooperated 
                fully with the United States Government on 
                counternarcotics objectives and goals. Among the GODR's 
                accomplishments was the arrest of the Cali cartel's 
                Rolando Florian-Feliz, the DR's most wanted narcotics 
                trafficker.
                    Due to the absence of effective government 
                supervision of exchange houses or remittance operations 
                and the presence of large cash flows which could hide 
                money laundering activity, it is believed that 
                narcotics money continues to be laundered in the 
                Dominican Republic. Money laundering is not likely to 
                diminish until the GODR aggressively implements the 
                money laundering legislation. Many Dominicans who have 
                committed serious crimes in the United States continue 
                to find refuge in the Dominican Republic, since local 
                law bars extradition of nationals. While 1996 
                negotiations for a new extradition treaty with the 
                former government did not reach a successful 
                conclusion, the USG is currently assessing a resumption 
                of talks with the Fernandez administration.
                    Neither the GODR itself nor senior government 
                officials encourage, facilitate, or engage in drug 
                trafficking or money laundering as a matter of 
                government policy. No evidence exists that senior 
                government officials are involved in drug distribution 
                or money laundering. No senior government official has 
                been indicted for drug-related corruption in 1996.

[[Page 11595]]

                Ecuador

                    International narcotics traffickers from Colombia 
                and Peru intensified their efforts to transship cocaine 
                and coca base through Ecuador. Trafficking 
                organizations ship about 20-40 metric tons (mt) of coca 
                base from Peru through Ecuador to Colombia for refining 
                into finished cocaine, and about 30-50 mt of cocaine 
                through Ecuador to the United States and Europe. 
                Ecuador seized almost nine mt of cocaine in 1996.
                    Traffickers continued to transship cocaine overland 
                and by river, and to smuggle chemicals into Ecuador via 
                the Pan American Highway and Ecuador's extensive river 
                network, sometimes committing armed robberies of truck 
                drivers transporting chemicals from petroleum companies 
                in Ecuador's jungle region.
                    Ecuadoran authorities responded commendably to 
                counter traffickers, placing emphasis on Guayaquil as a 
                favored cocaine transshipment point. Authorities made a 
                nearly seven mt seizure of cocaine from a fishing 
                vessel, the Don Celso, and had it returned from 
                international waters to search it in Guayaquil. 
                Traffickers had loaded the cocaine into the fuel tanks 
                of the 150-ft. fishing vessel.
                    The Ecuador National Policy (ENP), with USG 
                assistance, identified a major cocaine processing 
                facility just west of Quito in a town called Santo 
                Domingo de los Colorados. Authorities dismantled the 
                lab, but many said it demonstrated a shift in 
                trafficker activity from neighboring countries to 
                Ecuador.
                    The Government of Ecuador (GOE) demonstrated its 
                commitment to regional counternarcotics cooperation 
                efforts. In an unprecedented law enforcement 
                cooperation effort with Peru, Ecuadoran police deported 
                to Peru Willer Alvarado Linares, a.k.a. ``Champa,'' a 
                Peruvian drug kingpin with close ties to the Cali 
                Cartel. With USG assistance, the ENP dismantled a major 
                drug trafficking organization in Ecuador reportedly run 
                by a Cali-connected trafficker, Jose Castrillon Henao. 
                Ecuadoran authorities continued the prosecution of 
                Jorge Hugo Reyes Torres, a jailed drug kingpin, also 
                tied to Cali.
                    Although police-military cooperation, maritime 
                cooperation, and inadequate money laundering 
                legislation remained problems, GOE officials made a 
                good faith effort to resolve these issues. The GOE 
                participated in drug enforcement and customs training 
                courses, continued some information-sharing efforts, 
                and attended a money laundering seminar.
                    The Ecuadoran Supreme Court entered into an 
                agreement with the USG on administration of justice. 
                The USG bought five computers and a laser printer in 
                support of Ecuador's ambitious judicial reform effort. 
                Allegations of corruption in the judiciary and in other 
                branches of the government plagued the former Bacaram 
                administration, and now plague the current 
                administration of interim President Alarcon, hindering 
                effective counternarcotics efforts.
                    Despite these problems, Ecuadoran government 
                officials demonstrate continued interest in working 
                with the USG to address more effectively narcotics 
                trafficking problems that threaten to erode democratic 
                institutions. Ecuador is a party to the 1988 UN Drug 
                Convention and has bilateral agreements with the USG. 
                Ecuador has fully cooperated with the USG to advance 
                the goals and objectives of these agreements.

                Guatemala

                    Despite the political distractions of the ongoing 
                peace process, Guatemala continued to cooperate fully 
                with U.S. counternarcotics goals and objectives. Law 
                enforcement cooperation between Guatemala and the 
                United States has been excellent. With USG support, 
                Guatemalan government (GOG) counternarcotics officials 
                seized almost four metric tons of cocaine, a 
                significant increase over previous years.

[[Page 11596]]

                    GOG experts estimate that at least one out of four 
                Guatemalan adults suffers from some sort of chemical 
                dependency, principally alcohol abuse. Illicit drug use 
                has not been effectively documented, but GOG officials 
                believe it has increased steadily since 1990 and 
                contributes to the extremely high level of violence in 
                the country, especially in the capital city.
                    The Department of Anti-Narcotics Operations (DOAN), 
                the country's principal counternarcotics organization, 
                fully cooperated with USG agencies on information-
                sharing, joint operations, and special investigations 
                targeting international drug trafficking networks. Also 
                in 1996, a major corruption ring centered on customs 
                tax evasion and extortion was uncovered, giving the GOG 
                further impetus to criminalize money laundering and 
                develop the capability to investigate suspect financial 
                transactions.
                    Recent information indicates that significant 
                quantities of precursor chemicals, mostly ephedrine, 
                are being diverted through Guatemala to Mexico and the 
                United States. The government has not yet taken steps 
                to halt that traffic, which is not currently illegal in 
                Guatemala. The GOG has, however, requested and will 
                receive USG technical assistance on how to combat this 
                illicit trafficking. In early 1997, Guatemala hosted a 
                regional seminar to address the problem of the control 
                and regulation of precursor chemicals.
                    The GOG does not, as a matter of government policy, 
                encourage or facilitate illicit production or 
                distribution of narcotic or psychotropic drugs or 
                controlled substances, or the laundering of proceeds 
                from illegal drug transactions. In addition, no senior 
                government official facilitates or encourages the 
                illicit production or distribution of such drugs or 
                substances or the laundering of proceeds from illegal 
                drug transactions.

                Haiti

                    Haiti continues to cooperate with U.S. 
                counternarcotics goals and objectives. The Government 
                of Haiti (GOH) confronts a staggering array of issues 
                that compete for the attention of its already stretched 
                professional and managerial talent and consequently 
                impedes rapid progress on counternarcotics issues. 
                Despite these obstacles, the GOH made definite progress 
                in counternarcotics issues in 1996.
                    The GOH began to reform its existing narcotics laws 
                and to develop a national narcotics plan and money 
                laundering legislation. With USG support, a Haitian 
                Coast Guard (HCG) unit was established; a 
                Counternarcotics Unit (CNU) was trained; and new chiefs 
                for both units were installed. The changeover in 
                leadership of the CNU proved particularly time-
                consuming and, despite sincere efforts, the CNU was not 
                functioning in its permanent quarters at the airport by 
                the end of 1996. Nevertheless, the commitment of the 
                Haitian National Police (HNP) leadership to maintain 
                high standards of performance within these two units is 
                notable.
                    The HCG began operating in August 1996 and scored 
                two major cocaine seizures amounting to 938 kgs. in its 
                first two months of operation. The interdiction and 
                maritime boarding experience in these two operations 
                represented a training opportunity that contributed to 
                the HCG's ability to eventually conduct independent 
                operations.
                    The USG has made a strong commitment to assist 
                Haiti in establishing stable democratic institutions. 
                As a part of this effort, the USG intends to work with 
                the GOH towards conclusion of a bilateral maritime 
                agreement, and to continue its efforts to assist the 
                GOH with its narcotics-related agenda and legal reform 
                programs. The USG will also assist the HNP in 
                establishing regional law enforcement contacts and 
                continue to provide support for both the HCG and the 
                CNU.
                    In 1996, the GOH continued to give USG officials 
                high-level assurances of its commitment to drug 
                control, and those assurances have been supported by 
                concrete progress in establishing Haitian counter-drug 
                institutions. How

[[Page 11597]]

                ever, Haiti still has a number of major goals to 
                achieve before it will be able to take significant, 
                independent action in counternarcotics.

                Hong Kong

                    Hong Kong's role as a money laundering base for the 
                international drug trade continues to grow, while its 
                role as a transit point for drugs appears to have 
                lessened. There were no drug seizures in the United 
                States in the first 10 months of 1996 unequivocally 
                linking Hong Kong to the U.S. as a transit point for 
                drugs. The overall pattern of drug trafficking in the 
                region, however, continues to point to Hong Kong as a 
                key transshipment point for drugs destined for the U.S. 
                and other Western markets.
                    Hong Kong authorities continued to strengthen the 
                legislative framework for combatting narcotics 
                trafficking. They extended licensing controls to an 
                additional 21 precursor chemicals, introduced 
                implementing legislation for bilateral extradition 
                agreements and proposed legislation establishing 
                heavier sentences for drug traffickers who target the 
                young. On December 20, 1996, the U.S. and Hong Kong 
                signed an agreement for the surrender of fugitive 
                offenders (an extradition agreement) and the two sides 
                have initialled a Mutual Legal Assistance Agreement 
                that will expand the basis for mutual legal assistance 
                over a wide range of criminal activity, including that 
                currently covered by a Bilateral Narcotics Agreement, 
                which will be terminated by its terms on June 30, 1997.
                    Hong Kong's mature and experienced law enforcement 
                structure is characterized by dedication and no 
                reported narcotics-related corruption among senior 
                officials. Cooperation between the United States and 
                Hong Kong on matters relating to drug trafficking and 
                money laundering continues to be excellent.

                India

                    India is the sole producer of licit opium gum for 
                the pharmaceutical industry, a significant cultivator 
                of opium poppies in remote regions of northwest and 
                northeast India and a transit country for opiates from 
                both Southwest and Southeast Asia. Controls over the 
                licit opium industry have been continuously tightened 
                for the past five years but, due to the method of 
                production, some diversion probably continues. The 
                well-developed transportation infrastructure in India, 
                combined with porous borders from neighboring source 
                countries, has made India an attractive transit country 
                for traffickers.
                    As a licit producer of opium, India must meet an 
                additional certification requirement. In accordance 
                with Section 490(c) of the Foreign Assistance Act, it 
                must maintain licit production and stockpiles at levels 
                no higher than those consistent with licit market 
                demand and take adequate steps to prevent significant 
                diversion of its licit cultivation and production into 
                illicit markets and to prevent illicit cultivation and 
                production.
                    In 1996, India continued to take steps to curtail 
                diversion of licit opium, which remains a concern. The 
                minimum qualifying yield (MQY) for relicensing to 
                cultivate opium poppy was raised from 46 to 48 
                kilograms per hectare in most growing areas, and 
                offenses related to cultivation and embezzlement of 
                opium are now on par with other trafficking crimes. 
                Sentences of up to 20 years' imprisonment can be 
                imposed.
                    Although the Government of India (GOI) did not 
                agree to direct USG participation in the 1996 opium 
                yield survey, it did allow U.S. scientists to observe 
                the survey and to work with Indian scientists to 
                include new parameters in future opium yield surveys. A 
                comprehensive opium yield survey verifies data on crop 
                yields, establishes practicable levels of MQY, and 
                better quantifies diversion.
                    Indian opium gum, a principal source of the baine 
                and other alkaloids essential to certain 
                pharmaceuticals, is in demand by U.S. and other 
                pharmaceutical firms. India once again increased opium 
                poppy cultivation because of the pharmaceutical demand 
                and a desire to establish once again a stockpile

[[Page 11598]]

                against a crop disaster. Opium production rose to 849 
                mt in 1996 from 833 mt in 1995 (all measures at ten 
                percent moisture).
                    India has illicit opium poppy cultivation, 
                primarily in areas such as Jammu and Kashmir, where GOI 
                control is challenged by insurgent groups. USG remote 
                sensing in 1996 indicated illicit cultivation on 3,400 
                hectares, with a theoretical yield of 47 metric tons of 
                opium, a decrease from the previous year's estimate. 
                However, despite efforts by the GOI based on suspect 
                coordinates provided by the USG, it was able to find 
                only small areas of poppy cultivation.
                    The GOI continues to make progress in controlling 
                the production and export of precursor chemicals. The 
                GOI has a cooperative relationship with the DEA, 
                especially on precursor chemical issues, and has agreed 
                not to allow any shipment unless DEA issues a letter of 
                non-objection. Trafficking in illegally produced 
                methaqualone (mandrax), a popular drug in Africa, is 
                still believed to be a major problem, although seizures 
                fell in 1996.
                    Authorities have had limited success in prosecuting 
                major narcotics trafficking organizations because of 
                the lack of enforcement funding and weaknesses in the 
                investigations infrastructure. The GOI stresses 
                cooperation among law enforcement entities. India 
                cooperates in ``controlled deliveries'' that have 
                resulted in arrests in six countries.
                    The USG receives reports of narcotics-linked 
                corruption, but cannot independently verify the extent. 
                No senior-level politician or bureaucrat has been 
                accused of narcotics-related corruption.
                    India is party to the 1988 UN Drug Convention, and 
                Indian officials state that it is drafting legislation 
                needed on asset seizures and money laundering. In the 
                meantime, its law enforcement agencies are without the 
                tools to achieve fully the Convention's goals and 
                objectives.
                    India fulfilled the requirements of FAA Section 
                490(c) to maintain licit production and stockpiles at 
                levels no higher than consistent with market demand. It 
                also continued to take steps to reduce diversion from 
                the licit crop, although not agreeing to use a crop 
                yield survey as the basis for setting the minimum 
                qualifying yield for license renewal. The GOI, upon 
                receipt of information on suspected illicit crops, 
                acted promptly to seek out and destroy the plots. For 
                1996, India's efforts meet the additional certification 
                requirements of FAA Section 490(c). The United States 
                continues to work with the GOI in the following areas: 
                taking effective action against major narcotics 
                trafficking syndicates and kingpins; implementing 
                effective measures on money laundering and asset 
                seizure; permitting U.S. participation in opium crop 
                surveys; and eradicating illicit poppy cultivation.

                Jamaica

                    Jamaica produces marijuana and is a significant 
                cocaine transit country. The Government of Jamaica 
                (GOJ) made some progress during 1996 to achieve the 
                goals and objectives of the 1988 UN Drug Convention, to 
                which it became a party in December 1995. In December 
                1996, the Jamaican parliament passed a money laundering 
                law, which, although somewhat limited in scope in that 
                it criminalizes only the laundering of the proceeds of 
                drug-related crime, is the beginning of a money 
                laundering control regime. Although the GOJ has yet to 
                prosecute asset forfeiture cases under the relevant 
                1994 act, it did establish a special unit which is 
                currently investigating two such cases. Action on 
                drafting a precursor chemical bill was deferred to 
                1997. GOJ-USG negotiations on a maritime 
                counternarcotics cooperation agreement, which commenced 
                in 1996, had been impeded by Jamaica's declaration of 
                exclusive law enforcement authority in its exclusive 
                economic zone (EEZ). In December 1996, the GOJ withdrew 
                its EEZ declaration, and negotiations resumed in 
                February 1997, in a spirit of cooperation and 
                willingness to conclude an agreement. Although the rate 
                of extraditions declined markedly, from six in 1995 to 
                one (under a waiver of extradition) in 1996, partly 
                attributable to new Jamaican legal procedures regarding 
                appeals, the GOJ expelled or deported to the U.S. eight 
                U.S.-citizen fugitives during

[[Page 11599]]

                1996. However, a sizeable number of extradition 
                requests to the GOJ remain open.
                    According to DEA, Jamaican police counternarcotics 
                cooperation in 1996 remained at the high levels of 
                1995, but drug arrests, cocaine seizures, and cannabis 
                eradication fell somewhat below the goals and 
                objectives of our bilateral letter of agreement (LOA). 
                Signed by the GOJ and USG, the 1996 LOA set an 
                objective of significantly increasing drug arrests and 
                cocaine and heroin seizures. Drug-related arrests in 
                1996 (3,263) were down slightly from the 1995 level 
                (3,705). Cocaine seizures in 1996 (236 kg) were also 
                reduced from the 1995 level (571 kg). Heroin seizures 
                increased slightly in 1996 (1 kg) compared to 1995 
                (zero kg). Marijuana seizures, on the other hand, 
                increased significantly (52.99 mt in 1996, compared to 
                37.20 mt in 1995), bolstered by one very large seizure 
                late in 1996. The 1996 LOA set an eradication goal of 
                800 hectares of cannabis. During 1996, 473 hectares 
                were eradicated, compared to 695 hectares in 1995, with 
                the area under cultivation estimated to be the same 
                both years. U.S.-provided helicopters used to assist 
                eradication efforts were grounded for safety reasons 
                for part of the year.
                    Jamaica's National Council on Drug Abuse (NCDA) 
                continued its demand reduction efforts, becoming 
                increasingly self-reliant and prominent. Jamaica's 
                national drug control strategy has been drafted and is 
                awaiting government approval for implementation. The 
                GOJ has not formally charged any senior government 
                official with drug-related activity, but several 
                Jamaican policemen and court employees have been 
                arrested and charged on drug and drug-related charges. 
                The Jamaican media continues to report allegations of 
                drug-related corruption among public officials 
                including the police.
                    In 1997, in order to fully carry out the goals and 
                objectives of the 1988 UN Drug Convention, the GOJ 
                needs to strengthen its money laundering control law, 
                pass a chemical control law, and continue to modernize 
                its full range of drug control laws and penalties. 
                Jamaica's greatest challenge will be decisive 
                implementation of such laws. The GOJ also needs to 
                conclude a maritime cooperation agreement, intensify 
                its effort to respond to U.S. extradition requests, 
                prosecute asset forfeiture cases, and increases the 
                conviction rate of those arrested for drug-related 
                crimes. On the bilateral level, in order to make better 
                use of U.S. counter-drug and anti-crime assistance, 
                Jamaica needs to intensify its drug law enforcement and 
                marijuana eradication efforts, tighten the security of 
                its export shipments to keep drugs out of them, and 
                participate fully in combined maritime counterdrug 
                operations. In addition, the GOJ needs to formally 
                approve its national drug control strategy and 
                systematically implement it. The GOJ should take 
                decisive measures to root out drug-related corruption 
                among public officials which undermines drug control 
                efforts.

                Laos

                    Laos is still a distant third, after Burma and 
                Afghanistan, in world production of illicit opium. The 
                1995/96 growing cycle saw an estimated increase of 11% 
                in opium production over the 1994/95 level; this was a 
                little over 50% of the record level set in 1989. 
                Regions of Laos covered by USG- and UNDCP-funded crop 
                substitution projects, however, saw only low levels of 
                poppy cultivation. In May, the Lao Government passed an 
                amendment to its existing drug control law which banned 
                opium production and increased penalties for 
                trafficking. It believes, however, that rigorous 
                enforcement of the provision outlawing opium production 
                requires adequate programs to provide alternative 
                sources of income to farmers and continues to press its 
                case for adequate assistance from the international 
                community to enable it to fully implement its anti-
                narcotics action plan.
                    Reservations about its ability to enforce the 
                legislation banning opium production notwithstanding, 
                the Government of Laos continued to participate 
                actively in regional counternarcotics efforts. It 
                signed a UNDCP-sponsored project document on regional 
                law enforcement cooperation and hosted a regional 
                working level conference on the trafficking of 
                precursor chemicals

[[Page 11600]]

                and the involvement of West African drug traffickers in 
                Southeast Asia. Bilateral cooperation with the United 
                States, however, remained at the center of Laos' 
                counternarcotics endeavors. USG funding of the Houaphan 
                crop control project continued, and the Lao formed two 
                additional Special Counternarcotics Units, one in 
                Savannakhet and one in Bokeo, with USG assistance. In 
                November, the Lao Government approved the assignment of 
                a DEA representative to the American Embassy in 
                Vientiane. Overall Lao cooperation with the USG on 
                counternarcotics matters remains excellent; while low-
                level corruption is assumed to exist, there is little 
                to indicate high-level or systematic drug-related 
                corruption in the Lao government. Laos' vigorous 
                enforcement over the coming year of its newly enacted 
                laws outlawing opium production and increasing the 
                penalties for drug trafficking will be an important 
                signal of its long-term commitment to controlling its 
                drug problem.

                Malaysia

                    Malaysia is a transit country for heroin bound for 
                the U.S., Europe and other destinations. Malaysia's 
                anti-trafficking laws include a mandatory death 
                sentence for convicted traffickers. Law enforcement 
                authorities are pressing for enactment of a conspiracy 
                law to enable prosecution of traffickers who escape 
                prosecution under existing criminal statutes. In 
                addition, the Government of Malaysia has instituted a 
                number of bureaucratic measures, including the 
                establishment of a new interagency group headed by the 
                Prime Minister, to bolster enforcement and demand 
                reduction activities. Malaysia is also a party to the 
                1988 UN Drug Convention.
                    Cooperation between Malaysian law enforcement 
                officials and DEA continued to expand in 1996. 
                Negotiation of a bilateral Mutual Legal Assistance 
                Treaty between Malaysia and the U.S. is proceeding 
                smoothly. Both governments hope to conclude the treaty 
                in 1997. Malaysia and the United States also cooperated 
                on drug abuse prevention (demand reduction) programs, 
                many of them directed at rehabilitation center inmates. 
                These programs are of particular concern to the 
                Malaysian Government in view of rising addiction rates. 
                Existing rehabilitation centers have also been a focal 
                point of the lower-level narcotics-related corruption 
                which is known to exist: guard and treatment center 
                employees have sold narcotics to inmates. The Malaysian 
                Government has proposed an amendment to the Dangerous 
                Drugs Act to strengthen the penalty for such 
                activities.
                    Malaysia is also beginning to look toward money 
                laundering as a vulnerable point in its overall legal 
                and institutional structure. Senior government 
                officials have publicly expressed concern about 
                possible misuse of Malaysia's offshore financial 
                center, Labuan, to launder money. Malaysia has now 
                endorsed the Commonwealth Secretariat's efforts to 
                produce model anti-money laundering legislation.

                Mexico

                    The Government of Mexico's (GOM) 1996 counter-drug 
                effort produced encouraging results and notable 
                progress in bilateral cooperation. President Zedillo 
                has declared the major drug trafficking organizations, 
                and the corruption they foster within governmental 
                structures, to be Mexico's principal national security 
                threat. He has intensified the country's counter-drug 
                effort, in keeping with international human rights 
                norms, both through legal reforms and operationally, 
                through the expanded participation of the nation's 
                military services.
                    Drug seizures and arrests increased in 1996. 
                Mexican authorities seized 23.8 mt of cocaine, 383 kgs 
                of heroin, 1015 mt of marijuana, 171.7 kgs of 
                methamphetamine and 6.7 mt of ephedrine (its chemical 
                precursor), and destroyed 20 drug labs. Police arrested 
                11,283 suspects on drug-related charges. Authorities 
                arrested a several major traffickers: Juan Garcia 
                Abrego, Gulf cartel leader and one of the FBI's ``Ten 
                Most Wanted'' fugitive; Jose Luis Pereira Salas, linked 
                to the Cali and Juarez cartels; and Manuel Rodriguez 
                Lopez, linked to the Castrillon maritime smuggling 
                organization.

[[Page 11601]]

                    The Mexican Congress passed two critical pieces of 
                legislation which have armed the GOM with a whole new 
                arsenal of weapons to use to combat money laundering, 
                chemical diversion and organized crime. The GOM 
                established organized crime task forces in key 
                locations in northern and western Mexico in cooperation 
                with U.S. law enforcement. In an effort to confront 
                widespread corruption within the nation's law 
                enforcement agencies, former Attorney General Lozano 
                dismissed over 1250 federal police officers and 
                technical personnel for corruption or incompetence, 
                although some have been rehired, and the GOM indicted 
                two former senior GOM officials and a current 
                Undersecretary of Tourism. He also sought to expand 
                cooperation with the United States and other 
                governments.
                    The United States and Mexico established the High-
                Level Contact Group on Narcotics Control (HLCG) to 
                explore joint solutions to the shared drug threat and 
                to coordinate bilateral anti-drug efforts. The HLCG met 
                three times during 1996 and its technical working 
                groups met throughout the year. Under the aegis of the 
                HLCG, the two governments developed a joint assessment 
                of the narcotics threat posed to both countries which 
                will be used as the basis for a joint counter-drug 
                strategy.
                    U.S.-Mexican bilateral cooperation on drug law 
                enforcement continued to improve in 1996, particularly 
                in the areas of money laundering, mutual legal 
                assistance, and criminal investigations. The USG 
                provided training, technical, and material support to 
                personnel of the Office of the Mexican Attorney General 
                (PGR), the National Institute to Combat Drugs (INCD), 
                the Mexican Treasury, and the Mexican armed forces. The 
                Government of Mexico established the important 
                precedent of extraditing Mexican nationals to the 
                United States under the provision of Mexico's 
                extradition law permitting this in ``exceptional 
                circumstances.'' This paves the way for further 
                advances in bringing fugitives to justice. Both 
                governments returned record numbers of fugitives in 
                1996.
                    Even with positive results, and good cooperation 
                with the U.S. and other governments, the problems which 
                Mexico faces remain daunting. The Zedillo 
                Administration has taken important beginning steps 
                against the major drug cartels in Mexico, and towards 
                more effective cooperation with the United States and 
                other international partners, but the strongest groups, 
                such as the Juarez and Tijuana cartels, have yet to be 
                effectively confronted. The level of narcotics 
                corruption is very serious, reaching into the very 
                senior levels of Mexico's drug law enforcement forces, 
                as witnessed by the February 1997 arrest of the 
                recently-appointed national counternarcotics 
                coordinator. President Zedillo acted courageously to 
                remove him as soon as the internal Mexican 
                investigation revealed the problem, but this has been a 
                set-back for Mexico's anti-drug effort, and for 
                bilateral cooperation.
                    Mexican police, military personnel, prosecutors, 
                and the courts need additional resources, training and 
                other support to perform the important and dangerous 
                tasks ahead of them. Progress in establishing controls 
                on money laundering and chemical diversion must be 
                further enhanced and implemented. New capabilities need 
                to be institutionalized. Above all, the GOM will have 
                to take system-wide action against corruption and other 
                abuses of official authority through enhanced screening 
                personnel in sensitive positions and putting into place 
                ongoing integrity controls.
                    While there are still serious problems, and a 
                number of areas in which the USG would like to see 
                further progress, the two governments have agreed on 
                the parameters of a joint approach to combat the 
                narcotics threat, and are at work on developing this 
                strategy. The drug issue will remain one of the top 
                issues in the bilateral agenda and will be one of the 
                main issues discussed during President Clinton's 
                planned visit to Mexico in April.

                Panama

                    Panama continued to cooperate with the United 
                States to achieve our counternarcotics goals and 
                objectives in 1996. The Government of Panama's (GOP) 
                achievements in 1996 included an eradication campaign 
                which re

[[Page 11602]]

                sulted in the elimination of the country's fledgling 
                coca cultivation and significant damage to marijuana 
                cultivation, aggressive and effective prevention and 
                education campaigns, and the first-ever conviction of a 
                major money launderer from the Colon Free Zone. In one 
                of the region's most significant arrests, the GOP 
                captured the Cali cartel's primary maritime smuggler, 
                Jose Castrillon Henao, who is scheduled for trial in 
                1997. The USG provided six helicopters to the GOP in 
                late 1996, for the express purpose of combatting 
                narcotics.
                    Following up on full congressional certification 
                for the past two years, and spurred on by last year's 
                legislation tightening money laundering regulations, 
                the Government of Panama made Latin America's first 
                financial analysis unit operational, resulting in the 
                presentation of patterns of money laundering to the 
                GOP's National Security Council for eventual 
                prosecution.
                    Panama continues to be a major financial and 
                commercial center ideally positioned for narcotics 
                smuggling and illicit financial transactions. Money 
                laundering remains the primary problem in Panama. Local 
                factors facilitating money laundering include bank 
                secrecy, the Colon Free Zone, inadequate controls on 
                cash and commodity imports/exports, lax incorporation 
                regulations, and a dollar-based economy. The GOP has 
                taken definite steps to address these problems, 
                including the start-up of a financial analysis unit and 
                the establishment of computerized data bases for 
                tracking financial movements in the Colon Free Zone. 
                The GOP also established a financial investigative unit 
                which will prepare cases of money laundering for 
                prosecution. Armed with more effective legal, policy, 
                and institutional underpinnings, the GOP expects to 
                counter money laundering activities more successfully 
                in 1997.
                    The GOP needs to continue to crack down on both 
                money laundering and drug trafficking, follow through 
                on reports of suspicious transactions by arresting and 
                convicting major money launderers, improve interdiction 
                capabilities, and make effective use of the financial 
                analysis unit.

                Paraguay

                    The government of Juan Carlos Wasmosy cooperated 
                fully with the United States in 1996. Government of 
                Paraguay (GOP) anti-drug efforts improved 
                substantially, and the government took adequate 
                measures to further its compliance with the goals and 
                objectives of the 1988 UN Drug Convention. Scarce 
                resources, public corruption, and an only partially-
                reformed legal system remain obstacles to more 
                effective counternarcotics action, but the GOP has 
                demonstrated its commitment to combatting the drug 
                trade.
                    President Wasmosy appointed an activist Director to 
                the National Anti-drug Executive Secretariat (SENAD) in 
                June, who immediately sought a closer, more productive 
                relationship with the United States and with Paraguay's 
                neighbors. Assuming the post with a reputation for 
                honesty, Carlos Ayala made cocaine trafficking groups 
                the SENAD's top priority. He has removed anti-drug 
                officers implicated in corrupt practices, and focused 
                Paraguay's investigative resources on Paraguay's top 
                traffickers. Under Ayala's leadership, SENAD developed 
                a comprehensive national anti-drug strategy, which 
                President Wasmosy presented to the nation in late fall. 
                Ayala also launched a new approach to combat drug 
                abuse.
                    The Paraguayan Congress, with strong support from 
                the executive branch, in December enacted an anti-money 
                laundering law consistent with international standards. 
                SENAD Chief Ayala initiated a revision of Paraguay's 
                anti-narcotics statute which would explicitly authorize 
                undercover operations and controlled deliveries. The 
                GOP is pushing for congressional approval of the 
                amendment early in 1997.
                    The SENAD continued large-scale marijuana 
                eradication operations, worked closely with DEA on 
                training and equipping the Anti-narcotics Police 
                (DINAR) Special Intelligence and Investigative Unit, 
                and assessed the threat of precursor chemical 
                trafficking and diversion in Paraguay. Meanwhile, on 
                the international front, the GOP signed agreements with 
                Brazil and Argen

[[Page 11603]]

                tina to cooperate in combatting trans-border criminal 
                activity, including drug trafficking, and Paraguayan 
                officials initiated working-level coordination meetings 
                with counterparts in these countries. The SENAD also 
                agreed with Bolivian counterparts to share intelligence 
                and to conduct joint operations.
                    In 1997, the GOP should secure passage of a 
                strengthened anti-drug law and begin to forcefully 
                implement its new money laundering statute. The USG 
                will assist the GOP in creating an interagency 
                financial crimes investigative unit. Paraguay also must 
                improve its ability to investigate drug and other 
                organized crime groups in the tri-border area, 
                particularly in the cities of Pedro Juan Caballero and 
                Ciudad del Este, and we expect the GOP to pursue key 
                drug trafficking and corruption cases in the coming 
                year.

                Peru

                    Peru is the world's largest coca producer. The USG 
                has consistently urged the Government of Peru (GOP) to 
                fulfill its signatory obligations under the 1961 Single 
                Convention and the 1988 UN Drug Convention, 
                particularly with regard to reducing its coca 
                production. In 1996, the GOP cooperated fully with the 
                United States in efforts to achieve the goals and 
                objectives of the UN drug conventions. Last year, total 
                coca cultivation decreased by 18 percent, from 115,300 
                hectares in 1995 to 94,400 hectares in 1996. The level 
                of cultivation in Peru was the lowest since 1986.
                    Contributing to the reduction was widespread 
                abandonment of coca fields by farmers due to depressed 
                cocaine base prices. Cocaine base prices were held 
                below the break-even point by Peruvian National Police 
                and Peruvian Air Force actions against the narcotics 
                trafficking transportation infrastructure. During 1996, 
                the joint USG-GOP alternative development program 
                established a foothold to begin economic restructuring 
                in coca cultivating areas. Some 226 communities signed 
                agreements to reduce illicit coca cultivation by 
                approximately 15,000 hectares over the next five years, 
                in exchange for assistance to increase productivity and 
                income from licit alternative crops.
                    Peruvian National Police operations seized greater 
                amounts of cocaine base and coca leaf, but less cocaine 
                hydrochloride (HCl) than in 1995. Efforts to arrest and 
                prosecute major Peruvian traffickers maintained the 
                GOP's stiff narcotics policy, and contributed to 
                disarray among major trafficking organizations. Still, 
                there was strong evidence that Peruvian traffickers 
                continued to refine cocaine hydrochloride and ship it 
                directly to Mexico for distribution in the United 
                States. President Fujimori continued to take a tough 
                public stance against narcotics corruption, and in 1996 
                created a special drug court system to handle drug 
                offenses. The U.S. Embassy reported that incidents of 
                military and police drug corruption were quickly 
                addressed by the GOP.
                    In April 1996, the GOP passed Law 824, which 
                established a civilian drug council (CONTRADROGAS). 
                CONTRADROGAS was created to coordinate the efforts of 
                the various GOP agencies involved in counternarcotics 
                efforts, and to implement the Peruvian National Drug 
                Strategy announced in 1994.
                    In 1997, the GOP must mount an aggressive effort to 
                attract additional donor funding to expand alternative 
                development efforts while coca farmers are still 
                receptive to licit economic alternatives. The GOP must 
                also ensure that the narcotics law enforcement effort 
                which has suppressed cocaine base prices is intensified 
                to address riverborne narcotics traffic and sustain the 
                existing aerial intercept effort.

                Taiwan

                    Taiwan's geographical location relative to the 
                Golden Triangle and its importance as an advanced 
                regional transportation and shipping center make it a 
                major transit point for drugs destined for the U.S. and 
                other markets. Taiwan authorities dispute this 
                assessment, citing reduced seizures and arrests as a 
                signal of the deterrent effect of their considerable 
                counternarcotics

[[Page 11604]]

                efforts. The pattern of trafficking in the region, 
                however, suggests that because of its geographic 
                location and its ports, Taiwan will remain a target for 
                drug traffickers. Taiwan law enforcement authorities, 
                in fact, recently expressed concern that Hong Kong-
                based drug traffickers may be collaborating with Taiwan 
                organized crime groups to transfer their base of 
                operations to Taiwan before Hong Kong reverts to 
                Chinese sovereignty in July of 1997, and their 
                cooperation with the U.S. on counternarcotics efforts 
                continues to be good.
                    Taiwan's law enforcement cooperation with DEA 
                (under the auspices of the American Institute in 
                Taiwan) and other U.S. agencies expanded in 1996. 
                Taiwan is setting up a new National Drug Intelligence 
                Center; we envisage increased cooperation with U.S. law 
                enforcement agencies resulting from this. The American 
                Institute in Taiwan and the Taiwan Economic and 
                Cultural Representative Office continue to negotiate a 
                Memorandum of Understanding to provide a framework for 
                even broader counternarcotics cooperation. Taiwan has 
                been conducting an aggressive anti-crime campaign on 
                other fronts, as well, including prosecuting cases of 
                public corruption. There are, however, no known cases 
                of official involvement in narcotics trafficking.
                    In 1996, Taiwan also passed money laundering 
                legislation meant to bring it into closer conformity 
                with the goals and objectives of the 1988 UN Drug 
                Convention. While the law enhances the ability of law 
                enforcement officials to deal with the problem, it 
                requires a number of revisions to enable Taiwan to meet 
                international standards.

                Thailand

                    Thailand remains a major transit route for drugs 
                destined for the U.S. and other markets and produces 
                about one per cent of Southeast Asia's opiates. It 
                continues to serve as a model for the region as a 
                result of its successful efforts to control opium 
                production and its commitment to prosecuting drug 
                producers and traffickers. Opium production in the 
                1995/96 growing season increased from an estimated 25 
                metric tons in the previous season to 30 metric tons. 
                The upsurge in opium and heroin prices shortly after 
                the destabilization of Khun Sa's trafficking operations 
                in Burma was largely responsible for more widespread 
                opium cultivation. Thailand's actions to close off 
                sections of the Thai border with Burma, however, had 
                helped create the conditions leading to Khun Sa's 
                decision to reach a settlement with the SLORC.
                    In January of 1996, Thailand extradited a former 
                Member of Parliament to the United States for 
                prosecution on drug trafficking charges. Two 
                ``Operation Tiger Trap'' defendants (part of drug lord 
                Khun Sa's trafficking operation) were also extradited 
                to the U.S. later in the year. Thirteen individuals 
                have been arrested thus far in connection with this 
                major ``sweep.''
                    Thai cooperation with U.S. law enforcement 
                officials remains excellent. Thailand's Office of the 
                Narcotics Control Board and the Police Narcotics 
                Suppression Bureau continue to exhibit a high degree of 
                professionalism. Corruption continues to be a problem 
                in the Police Department, which lacks an effective 
                internal security apparatus to hold officers 
                accountable for wrongdoing. Elements of the Royal Thai 
                Army and Thai Customs have also been publicly accused 
                of corruption. The Royal Thai Government as a whole, 
                however, supports a policy of active measures against 
                drug production and trafficking.
                    Thailand is vulnerable to money laundering. A bill 
                to enact legislation has been stalled for a number of 
                years. In late November, the newly-elected Prime 
                Minister promised the President that the legislation 
                would be given special handling to hasten its passage. 
                Passage of appropriate anti-money laundering 
                legislation would enable Thailand to become a party to 
                the 1988 UN Drug Convention.
                    Like other countries in the region, Thailand may 
                find itself becoming an even larger market for the 
                region's opium, heroin and amphetamine

[[Page 11605]]

                production as the region's economic expansion 
                continues. We will be urging Thailand to enact a 
                conspiracy law to further enhance its ability to mount 
                effective counternarcotics efforts and to establish an 
                amplified crop control program.

                Venezuela

                    Venezuela continued to be a major transit country 
                for cocaine shipped from Colombia to the United States, 
                and for chemicals transhipped through Venezuelan ports, 
                as well as a money laundering center. Law enforcement 
                agencies estimate that between 100-200 metric tons (mt) 
                of cocaine are shipped through Venezuela to the United 
                States and Europe. The Government of Venezuela (GOV) 
                seized only about six mt of cocaine, almost identical 
                to the amount it seized in 1995. Heroin seizures 
                declined by 27 percent, from 96 kilograms (kg) in 1995 
                to 70 kg in 1996.
                    A significant decision this year was President 
                Caldera's appointment of a politically powerful drug 
                czar and elevation of this position to a cabinet rank. 
                However, the GOV must produce more concrete 
                counternarcotics results to match this demonstration of 
                political will during the next year.
                    Venezuela's main port, Puerto Cabello, is a favored 
                point for illicit smuggling by narcotics trafficking 
                syndicates. The same is true of other ports along 
                Venezuela's long coastline. Venezuela's airspace offers 
                further opportunities for trafficking. Traffickers 
                transport cocaine by small aircraft primarily to 
                Venezuela's border states of Tachira and Apure. 
                Traffickers risk little by transporting cocaine through 
                Venezuela due to weak and ineffectual law enforcement 
                interdiction efforts.
                    The United States designated Venezuela as a 
                recipient of more than $12 million worth of USG 
                drawdown defense equipment. The Venezuelan Armed Forces 
                adopted a counterdrug strategy, which defines its role 
                as supporting the National Guard (GN) and police 
                forces. The GOV is working with the United States to 
                create a Joint Police/Military Counternarcotics 
                Intelligence Center. However, much more needs to be 
                done to improve communication and coordination between 
                the GN and the Navy, Air Force and Army to implement 
                the strategy.
                    Maritime cooperation was disrupted by GOV denials 
                of four USG requests from United States Coast Guard Law 
                Enforcement Detachments from third country vessels to 
                board suspected Venezuelan narcotics trafficking 
                vessels in international waters. However, USG and GOV 
                authorities are currently seeking to broker a maritime 
                agreement.
                    Although the GOV lacks effective controls over 
                certain precursor chemicals, it made significant 
                seizures of chemicals at Puerto Cabello. The GOV also 
                continued to make significant progress against illicit 
                cultivation. Venezuelan authorities identified 
                replantings of about 500 hectares (ha) of coca and 
                opium poppy fields in the Sierra de Perija region on 
                the border with Colombia. With USG assistance, those 
                replantings were eradicated. Since 1994, joint efforts 
                have reduced estimated illicit plantings from 1,000 ha 
                to 200 ha.
                    The GOV permitted the basing of United States 
                military assets and personnel in Venezuela in an effort 
                to cooperate on Operation Laser Strike, a United States 
                Southern Command regional air interdiction operation.
                    Money laundering in Venezuela continued in its 
                financial network of banks and non-bank institutions 
                because of weak banking supervision and regulatory 
                authority. Although Venezuela passed a drug law in 1993 
                that included provisions on money laundering, key 
                provisions are lacking, including one on conspiracy.
                    Allegations of corruption plague the judicial 
                branch and some elements of the GN. Law enforcement 
                agencies believe that corruption in the GN is a 
                problem, hobbling the effectiveness of counternarcotics 
                efforts. These shortfalls have raised the USG's concern 
                about trafficking through Venezuela to the United 
                States. Venezuela must move swiftly to reform its 
                judicial

[[Page 11606]]

                branch, whose corruption threatens to prevent Venezuela 
                from combatting its drug problem and from protecting 
                its democratic institutions and national territory from 
                international drug traffickers.
                    Despite such problems, eradication efforts, the 
                elevated rank of the drug czar, Venezuela's first 
                national epidemiological survey, and other 
                counternarcotics efforts reflect the GOV's spirit of 
                cooperation to advance the goals and objectives of the 
                1988 UN Drug Convention and bilateral agreements with 
                the United States. However, the USG will scrutinize 
                Venezuela's efforts in the coming year and will expect 
                the GOV to be vigorously engaged in increased 
                cooperation on drug interdiction, money laundering, 
                chemical control, anti-corruption efforts and 
                conclusion of a comprehensive bilateral maritime 
                cooperation agreement.

                Vietnam

                    Vietnam's increased trade and tourism have opened 
                new routes for Southeast Asian heroin shipments to such 
                consumer markets as Australia, North America and 
                Europe. The SRV continues to battle against narcotics 
                trafficking but has yet to overcome problems of 
                corruption within the military and police. The SRV 
                does, nonetheless, appear to be actively engaged on the 
                counternarcotics issue, conducting a demand reduction 
                media campaign as well as police operations and crop 
                eradication programs. SRV statistics reflect 
                cultivation of 1800 hectares of opium poppy during 
                1995/96. USG estimates, however, place the cultivation 
                level at 3,150 hectares.
                    Vietnam created a Drug Control Master Plan in 1995 
                which calls for the eradication of opium cultivation by 
                the year 2000. In October of 1996, the SRV promulgated 
                implementing regulations for articles of the criminal 
                code related to narcotics. The new regulations permit 
                asset seizures in narcotics cases. Vietnam joined the 
                Association of Southeast Asian Nations Drug Control 
                Cooperation Program in 1996. Vietnam has also stated 
                that it expects to ratify the 1988 UN Drug Convention 
                in 1997. It is currently drafting a comprehensive 
                narcotics control law, based on the tenets of the 1988 
                Convention, which is expected to go before the National 
                Assembly in 1997. The law will include statutes related 
                to the control of chemical precursors and provide for 
                controlled shipments as an investigative technique.
                    SRV interdiction efforts resulted in 6,000 
                narcotics-related arrests in 1996, twice as many as in 
                1995. SRV law enforcement agencies are working with the 
                UNDCP to create special counternarcotics squads across 
                the country. U.S.-SRV cooperation on narcotics issues 
                expanded throughout 1996. Training initiatives included 
                DEA training for Ministry of Interior narcotics control 
                teams in Hanoi and U.S. Customs Service training for 
                Vietnamese customs officers in Ho Chi Minh City. 
                Several senior Vietnamese narcotics officers also 
                traveled to the United States for consultations with 
                U.S. counterparts. The U.S. hopes to increase the level 
                of its assistance to Vietnam. To that end, it plans to 
                engage the SRV in drafting a Memorandum of 
                Understanding on counternarcotics cooperation; a 
                successful outcome, however, will depend to a great 
                extent on the SRV's coming to grips with the 
                conditionality involved in any expanded U.S. 
                assistance.

                VITAL NATIONAL INTERESTS JUSTIFICATIONS

                Belize

                    Because of a significant increase in the detected 
                activities of Colombian drug trafficking organizations 
                in Belize in 1995, Belize was added to the list of 
                major drug producing and transit countries for 1996. 
                Belizean traffickers are also working with Mexican 
                groups to move the Colombian cocaine north to the 
                United States. These criminal activities continued 
                throughout 1996, but the ability of the Government of 
                Belize (GOB) to combat them was severely undermined by 
                deeply-entrenched corruption, which reaches into senior 
                levels of government.

[[Page 11607]]

                    The GOB's accomplishments weighed against those 
                areas where progress was lacking have led to a decision 
                to consider denial of certification of Belize. The 
                GOB's accomplishments in 1996, such as its recent 
                accession to the 1988 UN Drug Convention and passage of 
                money laundering legislation, were achieved only after 
                the United States and other countries exerted intense, 
                coordinated pressure. Belizean cocaine seizures were 
                down 36 percent and marijuana eradication decreased by 
                4 percent from 1995. Finally, the record of arrests and 
                convictions of major drug dealers was, likewise, 
                disappointing. During 1996, the GOB took no meaningful 
                steps to uncover or punish official corruption.
                    Bungled investigations, along with several high-
                profile trials ending in acquittal, including the 
                prosecution of the Home Minister's son-in-law for 
                running an illegal airstrip and two immigration 
                officials fired from their jobs and accused of 
                corruption in an alien smuggling case, have, at a 
                minimum, demonstrated the GOB's deficiencies in its 
                efforts.
                    The USG urged the GOB to demonstrate its 
                willingness to cooperate with the United States in 
                achieving reasonable counternarcotics goals and 
                objectives. The GOB, however, is not fully cooperating 
                or taking adequate steps to meet the goals and 
                objectives of the 1988 UN Drug Convention, especially 
                promises made by the GOB toward the end of the year to 
                complete a new extradition treaty and a mutual legal 
                assistance treaty. The GOB has been operating under a 
                US-UK extradition treaty.
                    Denial of certification would be contrary to U.S. 
                vital national interests because it would require the 
                U.S. to vote against multilateral development bank 
                funding for Belize, an important element in supporting 
                our long-term democracy and economic development goals 
                for the country. Such multilateral support reinforces 
                U.S. counternarcotics assistance which is designed to 
                help Belize develop strong, independent and credible 
                institutions capable of bringing traffickers to 
                justice, stemming the flow of narcotics through the 
                country and better guarding its own borders.
                    Although Belize's counternarcotics efforts fell 
                short of full cooperation during 1996, the GOB did take 
                steps which demonstrated an effort to work with the 
                USG. It is in the vital national interests of the 
                United States to improve the GOB's counternarcotics 
                efforts and ensure that they are given the attention 
                required.

                Lebanon

                    Lebanon appears to have succeeded in the struggle 
                against illicit crop cultivation due to the joint 
                Lebanese-Syrian eradication efforts since 1992. There 
                appears to be no cultivation of opium and the cannabis 
                cultivation (for hashish production) also has all but 
                disappeared. There are some small farms in the Baalbek-
                Hermel region which are still engaged in illicit 
                cultivation, but they appear to be few in number. When 
                such farms are discovered, arrests are made immediately 
                and the crops are eradicated. Lebanese Internal 
                Security Forces (LISF) and the Lebanese Armed Forces 
                (LAF), with assistance from the Syrian Army, reported 
                eradication of approximately 70,000 square meters of 
                cannabis in the Baalbek-Hermel region of the Bekaa 
                Valley during June and July. There were no other 
                reported eradication efforts during the year.
                    However, Lebanon remains a significant transit 
                country for the purposes of re-export of cocaine, and 
                many small ``home''-type labs for processing opium into 
                heroin are still reported to operate in the Bekaa 
                Valley. Several areas of the Bekaa Valley are not under 
                the effective control the Government of Lebanon (GOL), 
                and these areas are vulnerable to the establishment of 
                illegal labs.
                    Although local authorities deny money laundering is 
                a serious problem, Lebanon still presents itself to 
                narcotics traffickers as a venue for money laundering 
                due to bank secrecy laws, which do not allow for 
                official discovery. Corruption remains endemic through 
                all levels of Lebanese society, reportedly including 
                law enforcement bodies.

[[Page 11608]]

                    In March 1996, the GOL acceded to the 1988 UN Drug 
                Convention, but with formal reservations regarding 
                certain provisions of the Convention, including those 
                which relate to bank secrecy. The United States has 
                already indicated its intention to formally object to 
                these reservations if Lebanon does not withdraw them. 
                Parliament is studying a draft anti-drug code, which 
                would make money laundering a crime.
                    The GOL has displayed a willingness to cooperate 
                with USG agencies during 1996. Unfortunately, Lebanon's 
                reservations to some of the provisions of the 1988 UN 
                Drug Convention suggest that the political will is not 
                yet sufficient to comply fully with world standards.
                    Lebanese trafficking continues to pose a threat to 
                U.S. citizens and interests. On the other hand, the 
                United States considers the provision of assistance 
                which encourages the continued development of Lebanon's 
                economy and infrastructure as critical to peace and 
                stability in the Middle East, which is also of vital 
                importance to U.S. interests and stability. These 
                factors, combined with Lebanon's sustained positive 
                performance in eradication and other anti-narcotics 
                efforts, outweigh the threat posed by drug trafficking 
                through Lebanon to the United States.

                Pakistan

                    Pakistan is an important transit country for 
                opiates from Afghanistan, a source country for 
                approximately 75 metric tons of opium, and a processing 
                country for domestic opium and opium from Afghanistan. 
                Most opium poppy cultivation and most laboratory 
                production of morphine base and heroin in Pakistan 
                takes place in the Northwest Frontier Province (NWFP), 
                which borders Afghanistan. Pakistan has a bilateral 
                agreement with the United States that provides funding 
                for law enforcement, roads and crop substitution in the 
                NWFP, and demand reduction activities.
                    Under the government of Benazir Bhutto, Pakistan's 
                counternarcotics efforts from January through October 
                1996 were seriously deficient. However, the interim 
                government of Meraj Khalid, which replaced the Bhutto 
                government in November, took a number of significant 
                counternarcotics actions in accordance with the U.S.-
                Pakistani bilateral agreement and the 1988 UN Drug 
                Convention.
                    The primary counternarcotics achievement of the 
                Bhutto government was a reduction in the cultivation of 
                opium poppy. USG estimates of land used for opium poppy 
                decreased 51 percent to 3,400 hectares and the estimate 
                of production decreased 52 percent to 75 metric tons 
                from the previous year. The Bhutto government also 
                extradited Sialek Jan, wanted by the USG on narcotics 
                trafficking charges in March. However, under Bhutto, 
                Pakistani authorities failed to act on DEA information 
                on specific cases of trafficking, severely cut the 
                budget of the Pakistani Anti Narcotics Force (ANF), 
                failed to act on recommendations of the UN Drug Control 
                Programs (UNDCP) for improvements to the Narcotics 
                Substances Act, and failed to interdict trafficking 
                caravans in Baluchistan Province. During Bhutto's 
                tenure, corruption was a significant problem, with ANF 
                officials suspected of perpetrating a hoax seizure of 
                opium base in June, and subsequently covering up their 
                actions.
                    Pakistani President Leghari November 5 dismissed 
                the Bhutto government for corruption and mismanagement, 
                an act subsequently upheld by the Pakistani Supreme 
                Court. Corruption is a severe and chronic problem in 
                the Pakistani government, including the ANF, which has 
                no bureaucratic system, such as an internal affairs 
                section for identifying, investigating and recommending 
                action against corrupt officers. No one in a policy-
                making position in either the Bhutto or interim 
                government has been accused of narcotics-related 
                corruption. Sufficient legislation exists to control 
                and punish public corruption but it is seldom enforced. 
                The interim government in November initiated a 
                comprehensive process for holding public officials 
                accountable for corrupt practices.

[[Page 11609]]

                    The interim government in November and December 
                1996 promulgated changes to the Narcotics Substances 
                Act as suggested by UNDCP, restored some funds to the 
                ANF, conducted two major raids on heroin laboratories 
                in NWFP, extradited to the United States accused 
                trafficker Nasrullah Henjrah, and arrested another 
                individual on the U.S. extradition request list, Nasir 
                Ali Khan.
                    During the course of the year, the Government of 
                Pakistan froze $3.5 million in assets from 21 
                traffickers and seized 5.4 metric tons of opium and 2.0 
                metric tons of heroin. These figures represent declines 
                from those of 1995.
                    Pakistan is a party to the 1988 UN Drug Convention, 
                which it ratified in October 1991, but implementing 
                legislation on money laundering has not yet been 
                drafted. The revisions to the Narcotic Substances Act 
                approved by the interim government bring asset seizure 
                and controlled delivery standards to the levels 
                demanded by the Convention.
                    Vital U.S. national interests could be damaged if 
                Pakistan, under the newly-elected government of Nawaz 
                Sharif, were to be denied certification. Pakistan is a 
                moderate Islamic state with a nuclear weapons 
                capability. Pakistan is the largest contributor of 
                troops for UN peacekeeping operations and has provided 
                key cooperation in the international fight against 
                terrorism. Denial of certification would be viewed in 
                Pakistan as abandonment of a loyal ally and would 
                endanger U.S.-Pakistani dialogue on vital issues. 
                Denial of certification could also bring to a halt the 
                counternarcotics momentum started in November by the 
                caretaker government, and could negatively prejudice 
                the newly elected government against counternarcotics 
                cooperation with the United States.
                    Denial of certification would further endanger U.S. 
                interests by requiring the United States to vote 
                against Pakistan in multilateral development banks 
                (MDBs). The United States has an interest in seeing 
                that the MDBs continue their support of activities such 
                as the GOP's Social Action Program and its Financial 
                Sector Reform Project, which are essential to 
                Pakistan's human and economic development. Pakistan is 
                one of the largest beneficiaries of World Bank and 
                Asian Development Bank programs.
                    These risks to vital U.S. interests outweigh any 
                potential gain from denying certification to Pakistan. 
                Pakistan is a primary conduit for opium and morphine 
                base from Afghanistan, the second largest opium 
                producer in the world. With continuing conflict and no 
                central government in Afghanistan, Pakistan's 
                cooperation is particularly important in stopping 
                Southwest Asian drugs.
                    During the period of vital national interests 
                certification, the United States will strive to work 
                with senior officials of the new government to achieve 
                the goals of the UN Drug Convention.

                STATEMENTS OF EXPLANATION

                Afghanistan

                    Afghanistan is second only to Burma as a producer 
                of illicit opium, producing approximately 30 percent of 
                the world illicit supply. Production flattened in 1996, 
                after steep annual increases earlier in the decade. 
                U.S. satellite surveys indicated a very small decrease 
                in both cultivation and production, to 37,950 hectares 
                and 1230 metric tons, respectively.
                    Civil war not only continued but intensified in 
                Afghanistan during 1996. Between September and 
                December, the Taliban, a movement started by religious 
                students, expanded the territory it controls. The 
                Taliban now control 90 percent of the land on which 
                opium poppy is cultivated. The Taliban have now 
                controlled the province producing the greatest quantity 
                of opium for over two years. Both USG and UN Drug 
                Control Program (UNDCP) surveys indicate that there 
                were no concerted eradication efforts in 1996.

[[Page 11610]]

                    Law enforcement actions were virtually non-
                existent. None of the factions controlling territory 
                made a serious attempt to disrupt narcotics 
                trafficking. Granted that none of the factions has an 
                effective law enforcement bureaucracy, the ease with 
                which narcotics caravans and refineries continued open 
                operations was nevertheless remarkable. In the few 
                instances the USG knows of where arrests were made, 
                most suspects were released upon payment of a bribe.
                    Taliban leaders, in particular, expressed a desire 
                to cooperate on counternarcotics with U.S. and UNDCP 
                officials. However, the major opium refining operations 
                are located in Taliban-controlled territory, and the 
                Taliban appear to have done nothing to date to 
                discourage cultivation of opium poppy. The leaders 
                state they cannot do so until international donors 
                provide crop substitution and other assistance.
                    Many sources have reported that all major factions 
                require farmers to pay a tax on their opium production. 
                Some reports also indicate that deeper involvement in 
                trafficking is also common among Afghan leaders.
                    The USG strongly promotes the UN Special Mission to 
                Afghanistan's efforts to develop a broad-based national 
                government that can address the problems of narcotics, 
                terrorism and humanitarian concerns. We assist the 
                peoples of Afghanistan, subject to resource 
                availability, primarily through UN programs aimed at 
                humanitarian relief, reconstruction, and 
                counternarcotics.
                    Inasmuch as legislation makes special allowance for 
                continuation of such assistance generally and of 
                assistance for Afghanistan specifically, 
                notwithstanding any other provision of law, denying 
                certification to Afghanistan would have minimal effect 
                in terms of implementation of this policy.
                    The continued large-scale cultivation and 
                trafficking in Afghanistan, combined with the failure 
                to initiate law enforcement actions, preclude a 
                determination that Afghanistan has taken adequate 
                counternarcotics steps on its own or that it has 
                sufficiently cooperated with the USG in 
                counternarcotics efforts, although Afghanistan is a 
                party to the 1988 UN Drug Convention. Accordingly, 
                denial of certification is appropriate.

                Burma

                    Burma produced 84% of the opium cultivated in Asia 
                in 1996 and remains the world's largest producer of 
                opium and heroin. Continuing lack of resources and 
                commitment to effective drug control policies led to 
                near record levels of opium cultivation, totaling 
                163,000 hectares with a potential yield of 2,560 metric 
                tons of opium gum, or enough to produce 250 tons of 
                heroin. While the State Law and Order Restoration 
                Council (SLORC) claimed an improvement in its record 
                with regard to drug and precursor chemical seizures, 
                these efforts were marginal, both in terms of results 
                and in view of the overall level of opium production 
                and trafficking in Burma. The drug lord Khun Sa 
                continues to be exempt from prosecution or extradition. 
                Ethnic drug trafficking armies such as the United Wa 
                State Army (UWSA) and the Myanmar National Democratic 
                Alliance Army (MNDAA), having negotiated ceasefires 
                with the SLORC which permit them limited autonomy, 
                remain armed and heavily involved in the heroin trade. 
                Their leaders have used their relationship with Rangoon 
                to increase their wealth, but prosperity has not 
                filtered down to the ordinary people in the areas they 
                control. Lack of enforcement against money laundering 
                and an underdeveloped banking system have created an 
                economic environment increasingly conducive to the use 
                of drug profits in legitimate commerce. While there is 
                no evidence that the government per se encourages or is 
                involved in the drug trade, drug money is beginning to 
                permeate the economy.
                    The SLORC announced no new drug control policy 
                initiatives in 1996. It did conduct some 
                counternarcotics activities in areas controlled by the 
                Kachin Defense Army, the Kokang Army, the MNDAA and the 
                UWSA,

[[Page 11611]]

                seizing a total of 493 kilos of heroin, over three tons 
                of ephedrine, 5,677,525 amphetamine tablets and 2668.4 
                gallons of acetic anhydride. These actions did not 
                seriously threaten the drug trafficking activities of 
                the organizations in question. The unprecedented 
                chemical precursor and amphetamine seizures, however, 
                have alarmed Burmese authorities because they signal a 
                possible future stimulants problem for the Burmese.
                    Negotiations involving the Burmese Government, 
                UNDCP, and Wa leaders on the ``Drug Control and 
                Development in the Wa Region of Shan State'' project 
                concluded in November. The goal is to bring about a 
                gradual reduction of opium cultivation in the Wa area. 
                The Burmese Cabinet has not yet formally approved the 
                project. While the project is designed to incorporate a 
                monitoring and evaluation component, donors have 
                concerns about implementation.
                    USG engagement of the Burmese government on 
                counternarcotics issues remains limited. DEA maintains 
                a liaison operation with Burmese police and military 
                units involved in drug enforcement activities. The 
                Burmese have also invited USG participation in a third 
                joint opium yield survey in the Shan State. The U.S. 
                will consider further assistance only upon the Burmese 
                Government's demonstration of a strong commitment to 
                narcotics control, the rule of law and significant 
                political reform.

                Colombia

                    In 1996, as in previous years, Colombia remained 
                the world's leading producer and distributor of cocaine 
                and an important supplier of heroin and marijuana. In 
                the same year, coca cultivation in the country 
                increased by approximately 30 percent.
                    As in 1995, the Colombian Government made only 
                limited progress in 1996 against the pervasive, 
                narcotics-related corruption from which it suffers. In 
                a process which can only be described as flawed, 
                President Samper was exonerated of charges of 
                corruption by the Colombian Congress. Moreover, Samper 
                remained unwilling to confront fully the drug interests 
                that contributed heavily to his Presidential campaign.
                    President Samper pledged to push for stricter 
                sentencing laws in 1994, but there was only limited 
                progress in 1996 to advance Congressional passage of 
                legislation which would increase sentences for 
                traffickers and money launderers. As an apparent 
                consequence, the Rodriguez Orejuela brothers--the 
                notorious Cali drug leaders--received very light prison 
                sentences which were not commensurate with their 
                crimes. The Colombian government did not respond to the 
                USG's request for extradition of four major drug 
                traffickers and for most of the year it took no action 
                in response to reliable USG information that narcotics 
                traffickers continue to run their operations from 
                prison. Troubling also was Samper's promotion and 
                public praise for a drug-tainted military general--
                behavior which reinforces USG concern about the 
                credibility of his stated commitment to serious 
                narcotics control for Colombia.
                    On the eradication front, the Colombian 
                Government's strong opposition to testing more than one 
                granular herbicide--in an effort to replace less 
                effective liquid herbicides--is especially problematic 
                in light of the significant expansion in coca 
                cultivation.
                    On the positive side, the serious work on the part 
                of the Colombian National Police (CNP) as well as 
                select elements of the military to confront drug 
                trafficking must be highlighted. Government agreement 
                to expand coca and opium eradication was taken on with 
                determination by the CNP despite significant challenges 
                including physical threats and lack of proper 
                resources. In this regard, the USG was encouraged by 
                evidence of increased cooperation from the Colombian 
                military for the CNP in support of illegal crop 
                eradication. The CNP and military also worked closely 
                to counter narco- and guerrilla-sponsored public 
                demonstrations against eradication.

[[Page 11612]]

                    There were signs that newly appointed members of 
                the cabinet are determined and committed to advance 
                important counternarcotics objectives. A noteworthy 
                achievement--pushed also by private Colombian 
                citizens--was pressure on the Congress which resulted 
                in passage, with retroactivity, of an asset forfeiture 
                law. However, its constitutionality is already being 
                challenged by those who would be affected by its 
                implementation. In November, bilateral agreement was 
                reached to expedite shipboarding procedures and a 
                maritime agreement was signed in February 1997. The CNP 
                and the Prosecutor General continued their efforts 
                against corruption by firing corrupt police and 
                prosecutors and by continuing investigations targetted 
                against official corruption. However, without 
                determined and committed leadership, much-needed legal 
                reform and a supportive political environment, real 
                drug control successes by the CNP and other entities 
                will be thwarted.
                    Progress observed in some areas holds promise for 
                serious drug control efforts in Colombia in the future. 
                Nevertheless, because of high-level corruption, the 
                privileged treatment accorded to major traffickers 
                currently in jail, light sentencing of traffickers and 
                the government's continued stand against extradition, 
                the USG cannot certify Columbia as fully cooperating 
                with the United States on drug control, or as having 
                taken adequate steps on its own to meet the goals and 
                objectives of the 1988 UN Drug Convention.

                Iran

                    Iran remains an important transit country for 
                opiates from Afghanistan and Pakistan destined 
                primarily for processing in Turkey. The USG has no 
                recent surveys of opium poppy cultivation in Iran, but 
                other sources believe cultivation has decreased, 
                possibly as a result of the influx of cheap Afghan 
                opium.
                    The Government of Iran (GOI) has ratified the 1988 
                UN Drug Convention, but the USG remains unaware of the 
                passage of implementing legislation that would bring 
                Iran into compliance with the requirements of the 
                Convention. According to UN Drug Control Program 
                (UNDCP) and International Narcotics Control Board 
                (INCB) missions that have visited the country, and 
                reports received from countries with embassies in Iran, 
                the GOI is attempting to meet at least some of the 
                goals and objectives of the Convention. The USG cannot 
                evaluate Iranian claims as we do not have diplomatic 
                relations. There is no bilateral narcotics agreement or 
                cooperation and Iran's performance is measured solely 
                against the standards of the 1988 UN Drug Convention.
                    The GOI has, according to reports by other nations, 
                begun reaching out to Western countries in a very 
                tentative fashion, seeking to establish a working 
                counternarcotics relationship. There are, however, 
                countervailing pressures and we know of no working law 
                enforcement relationship. The GOI, Pakistan and UNDCP 
                participate in a tripartite UNDCP law enforcement 
                project, to which Iran contributes important resources 
                according to UNDCP. In 1995, the latest year on which 
                Iran reported, it claims to have seized 126 mt of 
                opium, 2 mt of heroin and 11 mt of morphine, as well as 
                lost 133 citizens in battles against traffickers. The 
                USG cannot verify these claims. The level of narcotics 
                arriving in Turkey does not appear to have diminished 
                according to USG sources.
                    Credible reports have been received that corruption 
                remains a problem. There have been accusations of 
                corruption against individuals with access to very high 
                levels of power. Low-level corruption remains a problem 
                judging by the number of caravans that successfully 
                evade massive physical barriers at Iran's eastern 
                border. We do not know how extensively or how equitably 
                Iran administers its anti-corruption program.
                    Sentences imposed for narcotics trafficking are 
                very harsh and 1,000 people have been executed for 
                trafficking since 1989.

[[Page 11613]]

                Nigeria

                    Nigeria is the focal point of West African 
                narcotics trafficking. Narcotics producing and 
                trafficking organizations in Asia, South America and, 
                increasingly, Nigeria itself either use Nigeria as a 
                transshipment point or rely on Nigerian courier 
                networks to transport Asian heroin and South American 
                cocaine destined for U.S. or European markets. Nigerian 
                trafficking organizations are among the leading 
                carriers of Southeast and Southwest Asian heroin into 
                the United States. In addition, Nigerian traffickers 
                ship cannabis--the only illicit drug produced in 
                Nigeria--to Europe and other West African countries. 
                The Government of Nigeria (GON) has failed to address 
                corruption adequately among law enforcement and other 
                government agencies, hindering counternarcotics 
                efforts.
                    Although the Nigerian Drug Law Enforcement Agency 
                (NDLEA), the one positive internal agency working 
                against drug trafficking in Nigeria, has attempted to 
                combat trafficking and corruption, the GON has left it 
                woefully underfunded. Lack of coordination among 
                police, intelligence and other law enforcement agencies 
                also prevents effective progress against narco-
                traffickers.
                    Nigerian trafficking organizations operate 
                sophisticated money laundering operations in addition 
                to controlling courier networks. These organizations 
                have been quick to adapt in response to vigorous 
                international law enforcement, as well as to efforts 
                made by the NDLEA within Nigeria. They have found new 
                ways to evade detection and to alter and expand their 
                narcotics smuggling routes and markets; as GON 
                counternarcotics efforts have effectively reduced the 
                amount of drugs shipped through international airports 
                within Nigeria, courier networks have increasingly 
                relied on overland shipments to transport narcotics. 
                Nigerian trafficking organizations actively recruit 
                couriers of diverse nationalities, backgrounds and 
                ages.
                    Perhaps the most glaring omission by the GON is its 
                failure to provide funding for its law enforcement 
                employees, thus making them ever more vulnerable to 
                bribery and related forms of corruption, and to provide 
                funding for implementation of its laws and strategies. 
                Most law enforcement employees are paid far less than 
                is sufficient to feed, clothe and house their families. 
                In addition, the GON has taken no meaningful steps 
                towards cooperation with the United States on 
                extraditions, information sharing or prosecution of 
                arrested fraud suspects; nor has it moved significantly 
                towards meeting the goals and objectives of the 1988 UN 
                Drug Convention.

                Syria

                    For several years, Syria has been an important 
                transit country for drugs flowing into and out of 
                Lebanon and, in many cases, on to Europe and the United 
                States. The increase in seizures in 1996 over 1995 
                (especially of hashish) points to increased vigilance 
                by Syrian authorities, but could imply as well that the 
                total flow of drugs across Syria is increasing. 
                Additionally, the presence of approximately 25,000 
                Syrian troops in the Lebanese Bekaa Valley makes Syrian 
                cooperation with Lebanese officials a substantial 
                element in the fight against drug production and 
                trafficking there. Allegations of corruption against 
                Syrian military officials stationed in Lebanon 
                continued in 1996.
                    The Government of Syria (SARG) restructured its 
                Syrian National Police force in 1996, thus creating a 
                separate and independent Counter-Narcotics Division. 
                The SARG continued to assist anti-narcotics efforts in 
                Lebanon during 1996, donating more than a million fruit 
                trees for the Lebanese crop substitution program. 
                Though widespread reports claim that Syrian military 
                and security personnel continue to profit from the drug 
                trade, the SARG neither initiated corruption 
                investigations nor brought anti-narcotics charges 
                against any of these individuals in 1996.
                    Syria is a party to the 1988 UN Drug Convention. 
                Though Syria made significant progress in some anti-
                narcotics efforts in 1996, including more aggressive 
                seizures of hashish and various types of amphetamines, 
                it did

[[Page 11614]]

                not meet some of the other goals and objectives of the 
                1988 UN Drug Convention; specifically, the SARG did not 
                move aggressively enough against narcotics transiting 
                Syrian territory, especially to and from Lebanon, it 
                did not take sufficient action towards locating and 
                dismantling drug laboratories in Syrian-controlled 
                areas of Lebanon, and it ignored serious allegations 
                against Syrian officials of involvement with drug 
                traffickers. Syria does not have a bilateral narcotics 
                agreement with the United States.

[FR Doc. 97-6231
Filed 3-11-97; 8:45 am]
Billing code 4710-10-M