U.S. Foreign Assistance to Latin America and the Caribbean: Recent Trends and FY2016 Appropriations
Released: 2016-01-07T00:00:00

Introduction

Foreign assistance is one of the tools the United States has employed to advance U.S. interests in Latin America and the Caribbean, with the focus and funding levels of aid programs changing along with broader U.S. policy goals. Current aid programs reflect the diversity of the countries in the region. Some countries receive the full range of U.S. assistance as they continue to struggle with political, socioeconomic, and security challenges. Others, which have made major strides in democratic governance and economic and social development, no longer receive traditional U.S. development assistance but continue to receive some support for security challenges, such as combating transnational organized crime. Although U.S. relations with the nations of Latin America and the Caribbean have increasingly become less defined by the provision of assistance as a result of this progress, foreign aid continues to play an important role in advancing U.S. policy in the region.

Congress authorizes and appropriates foreign assistance to the region and conducts oversight of aid programs and the executive branch agencies charged with managing them. Efforts to reduce budget deficits in the aftermath of the recent global financial crisis and U.S. recession have triggered closer examination of competing budget priorities. Congress has identified foreign assistance as a potential area for spending cuts, placing greater scrutiny on the efficiency and effectiveness of U.S. aid programs.

This report provides an overview of U.S. assistance to Latin America and the Caribbean. It analyzes historical and recent trends in aid to the region as well as the Obama Administration's FY2016 request for State Department and U.S Agency for International Development (USAID)-administered assistance. It also examines legislative developments on foreign aid appropriations for Latin America and the Caribbean in FY2016, and raises questions Congress may examine as it considers future appropriations for the region.

Trends in U.S. Assistance to Latin America and the Caribbean

The United States has long been a major contributor of foreign assistance to countries in Latin America and the Caribbean. Between 1946 and 2013, it provided the region over $160 billion in constant 2013 dollars (or nearly $78 billion in historical, non-inflation-adjusted, dollars). U.S. assistance to the region spiked in the early 1960s following the introduction of President Kennedy's Alliance for Progress, an anti-poverty initiative that sought to counter Soviet and Cuban influence in the aftermath of Fidel Castro's 1959 seizure of power in Cuba. After a period of decline, U.S. assistance to the region increased again following the 1979 assumption of power by the leftist Sandinistas in Nicaragua. Throughout the 1980s, the United States provided considerable support to the Contras , who sought to overthrow the Sandinista government, and to Central American governments battling leftist insurgencies. U.S. aid flows declined in the mid-1990s following the dissolution of the Soviet Union and the end of the Central American conflicts (see Figure 1 ).

U.S. foreign assistance to Latin America and the Caribbean began to increase once again in the late 1990s and remained on a generally upward trajectory through the past decade. The higher levels of assistance were partially the result of increased spending on humanitarian and development assistance. In the aftermath of Hurricane Mitch in 1998, the United States provided extensive humanitarian and reconstruction aid to several countries in Central America. The establishment of the President's Emergency Plan for AIDS Relief (PEPFAR) in 2003 and the Millennium Challenge Corporation (MCC) in 2004 provided a number of countries in the region with new sources of U.S. assistance. More recently, the United States provided significant amounts of assistance to Haiti in the aftermath of a massive January 2010 earthquake.

Increased funding for counternarcotics and security programs also contributed to the rise in U.S. assistance through 2010. Beginning with President Clinton and the 106 th Congress in FY2000, successive Administrations and Congresses have provided substantial amounts of foreign aid to Colombia and its Andean neighbors in support of "Plan Colombia"—a Colombian government initiative to combat drug trafficking, end its long-running internal armed conflict, and foster development. Spending on counternarcotics and security assistance received another boost in FY2008 when President George W. Bush joined with his Mexican counterpart to announce the Mérida Initiative, a package of U.S. counterdrug and anticrime assistance for Mexico and Central America. In FY2010, Congress and the Obama Administration split the Central America portion of the Mérida Initiative into a separate Central America Regional Security Initiative (CARSI) and created a similar program for the countries of the Caribbean known as the Caribbean Basin Security Initiative (CBSI).

After more than a decade of generally increasing aid levels, U.S. assistance to Latin America and the Caribbean began to decline in FY2011. This was partially the result of reductions in the overall U.S. foreign assistance budget. The Obama Administration and Congress have sought to reduce budget deficits in the aftermath of the recent global financial crisis and U.S. recession and have identified foreign assistance as a potential area for spending cuts. U.S. assistance to Latin America and the Caribbean decreased each year between FY2010 and FY2014. While aid to the region increased slightly in FY2015, spending caps and across-the-board cuts that were included in the Budget Control Act of 2011 ( P.L. 112-25 ), as amended, could place downward pressure on the aid budget for the foreseeable future.

The recent decline in U.S. assistance to Latin America and the Caribbean also reflects changes in the region. As a result of stronger economic growth and the implementation of more effective social policies, the percentage of people living in poverty in Latin America fell from 44% in 2002 to 28% in 2013. Likewise, electoral democracy has been consolidated in the region; every country except Cuba now has a democratically elected government (although some elections have been controversial). These changes have allowed the U.S. government to concentrate its resources in fewer countries and sectors. For example, USAID closed its mission in Panama in 2012 following the country's graduation from foreign assistance, and the agency has largely transitioned out of providing support for family planning and elections administration as many governments throughout the region have demonstrated their ability to finance and carry out such activities on their own. Some Latin American nations, such as Brazil, Chile, Colombia, Mexico, and Uruguay, have begun providing foreign aid to other countries. The United States has partnered with these nations through so-called "trilateral cooperation" initiatives to jointly plan and fund development and security assistance efforts in third countries. Other countries, such as Bolivia and Ecuador, have demonstrated less interest in working with the United States, leading to significant reductions in U.S. assistance and the closure of USAID missions. As a result of these developments in the region and competing U.S. foreign policy priorities elsewhere in the world, U.S. assistance to Latin America and the Caribbean as a proportion of total U.S. foreign assistance dropped from 12% in FY2004 to 7% in FY2014.

FY2016 Foreign Assistance Request for Latin America and the Caribbean8

The Obama Administration's FY2016 budget request would increase assistance to Latin America and the Caribbean for a second consecutive year and reverse the reductions in aid to the region that have occurred since FY2011. It included nearly $2 billion for Latin America and the Caribbean, a 26% increase over the estimated FY2015 level (see Table 1 ). The requested increase in assistance was almost entirely the result of the Administration's intention to allocate over $1 billion in aid to Central America to promote prosperity, security, and good governance and to address the root causes of migration from the region.

Foreign Aid Categories and Accounts9

The Administration's FY2016 foreign aid request for Latin America and the Caribbean would shift the emphasis of U.S. assistance efforts toward development and humanitarian assistance programs (see Figure 2 ). More than $842 million (about 42%) of the request for the region would go toward such programs. Development assistance seeks to foster sustainable broad-based economic progress and social stability in developing nations. Such funding is often used for long-term projects in the areas of democracy promotion, economic reform, basic education, human health, and environmental protection. This assistance is provided primarily through the Development Assistance (DA) and Global Health Programs (GHP) accounts, which would receive $615 million and $214 million, respectively, under the Administration's FY2016 request. In terms of humanitarian assistance, the Administration requested $13 million through the Food for Peace (P.L. 480) account to address immediate food security needs in the region. While funding provided through the GHP accounts would remain relatively stable, the FY2016 request included nearly $401 million more DA funding than the United States provided to the region in FY2015. The vast majority of the additional DA funding would be used to support development efforts in Central America.

Another $597 million (30%) of the Administration's FY2016 request for the region would be provided through the Economic Support Fund (ESF) account, which has as its primary purpose the promotion of special U.S. political, economic, or security interests. In practice, the ESF account generally funds programs that are designed to promote political and economic stability and are often indistinguishable from those funded through the regular development and humanitarian assistance accounts. The Administration's FY2016 request for the region included $14 million more ESF assistance than was provided in FY2015.

The remaining $551 million (28%) of the Administration's FY2016 request for Latin America and the Caribbean would support security assistance programs. This includes $464 million requested under the International Narcotics Control and Law Enforcement (INCLE) account, which supports counternarcotics and civilian law enforcement efforts as well as projects designed to strengthen judicial institutions. It also includes $9 million requested under the Nonproliferation, Anti-terrorism, De-mining, and Related programs (NADR) account, which funds efforts to counter global threats, such as terrorism and proliferation of weapons of mass destruction. Additionally, $78 million was requested under the Foreign Military Financing (FMF) and International Military Education and Training (IMET) accounts to provide equipment and personnel training to Latin American and Caribbean militaries. Total security funding for the region would decline by about $8 million, with an increase in FMF aid more than offset by decreases in INCLE, NADR, and IMET assistance. While INCLE aid for Central America, provided through the Central America Regional Security Initiative (CARSI), would increase by $35 million, INCLE aid for Colombia and Mexico would be cut by $18 million and $30 million, respectively, compared to FY2015 estimates.

Major Country and Regional Programs10

Following a sharp increase in the number of unaccompanied children and other migrants and asylum seekers from Central America arriving at the U.S. border in FY2014, the Administration announced a whole-of-government " U.S. Strategy for Engagement in Central America " that is designed to promote prosperity, security, and good governance in the sub-region. More than $1 billion (51%) of the Administration's FY2016 aid request for Latin America and the Caribbean would be allocated to Central America, with the majority of those funds concentrated in the "northern triangle" countries of El Salvador , Guatemala , and Honduras . Compared to FY2015, bilateral aid for El Salvador would increase from $47 million to $119 million, bilateral aid for Guatemala would increase from $114 million to $226 million, and bilateral aid for Honduras would increase from $71 million to $163 million. As noted above, nearly all of the increased bilateral aid would be provided through the DA account.

About half of the Administration's $1 billion aid request for Central America would be provided through regional programs. Assistance provided through the Central America Regional Security Initiative (CARSI) , which has been the principal component of U.S. engagement with Central America in recent years and has yielded mixed results, would increase from $270 million in FY2015 to $287 million in FY2016. Assistance provided through USAID's Central America Regional program would increase from $49 million to $65 million. The request also included an additional $137 million that would be provided through the State Department's Western Hemisphere Regional program in support of the new Central America strategy. Although it is unclear how much funding from the regional programs would go to each country, the majority likely would be allocated to El Salvador, Guatemala, and Honduras.

Colombia would continue to be the single largest recipient of U.S. assistance in Latin America under the Administration's FY2016 request, though aid for the country would fall from $301 million in FY2015 to $289 million in FY2016. Colombia has received significant amounts of U.S. assistance to support counternarcotics and counterterrorism efforts since FY2000, but funding levels have declined in recent years as the security situation in Colombia has improved, the Colombian government has taken ownership of programs, and the United States has shifted the emphasis of its aid away from costly military equipment toward economic and social development efforts. According to the FY2016 request, U.S. assistance would support the Colombian government's efforts to eradicate and interdict coca, expand its institutional presence in conflict zones, demobilize and reintegrate ex-combatants, carry out land restitution, implement justice sector reforms, and provide humanitarian aid to conflict victims and vulnerable populations. U.S. assistance would also support the implementation of a potential peace agreement to end Colombia's 50-year internal conflict.

Haiti , which has received high levels of aid for many years as a result of its significant development challenges, would once again be the second-largest recipient of U.S. assistance in the region under the FY2016 request. U.S. assistance increased significantly after Haiti was struck by a massive earthquake in January 2010 but has gradually declined from those elevated levels. The Administration's FY2016 request would provide $242 million to support the Post-Earthquake U.S. Government Strategy for Haiti, which includes four strategic pillars: infrastructure and energy, food and economic security, health and other basic services, and governance and rule of law. This would be a slight reduction compared to the estimated $244 million provided in FY2015.

U.S. assistance to Mexico would decline considerably under the Administration's FY2016 request. Mexico traditionally has not been a major recipient of U.S. assistance given its status as an upper middle income economy, but it began receiving large amounts of aid through the anticrime and counterdrug program known as the Mérida Initiative in FY2008. The Administration's FY2016 request would provide $142 million for Mexico, a 14% reduction compared to FY2015. FY2016 aid would be used to support the Mexican government's efforts to combat transnational crime, reform rule of law institutions, protect human rights, strengthen border security, provide educational and vocational opportunities for at-risk youth, and carry out conservation and clean energy initiatives.

U.S. assistance provided through the Caribbean Basin Security Initiative (CBSI) would also decline under the Administration's FY2016 request. CBSI funding supports efforts to increase citizen security and address the root causes of crime and violence in the Caribbean. The FY2016 request would provide $53.5 million to implement community-based policing programs, support police and justice sector reforms, provide equipment and training to partner nation security forces, and offer vocational training and other opportunities to at-risk youth. Compared to the FY2015 funding level, assistance provided through the CBSI would decline by about 10% in FY2016.

Legislative Action

Since Congress has not enacted a comprehensive foreign assistance authorization measure since FY1985, annual Department of State, Foreign Operations, and Related Programs appropriations bills tend to serve as the primary legislative vehicles through which Congress reviews U.S. assistance and influences executive branch foreign policy. The House Committee on Appropriations reported its bill ( H.R. 2772 ) on June 15, 2015, and the Senate Committee on Appropriations reported its bill ( S. 1725 ) on July 9, 2015. Neither measure received floor consideration.

Instead, after several continuing resolutions, Congress chose to include foreign aid funding in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), which President Obama signed into law on December 18, 2015. The legislation includes $32.9 billion for bilateral economic assistance and international security assistance worldwide. This global funding level is 2.8% higher than the Administration's FY2016 request and about 1% lower than the FY2015 estimated level. It is unclear how much foreign assistance will be directed to Latin America and the Caribbean, since, for the most part, appropriations levels for individual countries and programs are not specified in the legislation or the accompanying explanatory statement.

The appropriations levels that are specified in the legislation and explanatory statement differ from the Administration's request in several respects. Perhaps the most noteworthy difference involves funding for Central America. The legislation provides up to $750 million to implement the new U.S. Strategy for Engagement in Central America , which is $250 million less than requested. This includes about $68 million for El Salvador ($51 million less than requested), $128 million for Guatemala ($98 million less than requested), and $98 million for Honduras ($65 million less than requested). It also includes $349 million for CARSI , which is $62 million more than was requested for the initiative. The legislation places a number of conditions on the funds, requiring the State Department to withhold 75% of the assistance for the "central governments of El Salvador, Guatemala, and Honduras" until the Secretary of State certifies that those governments are "taking effective steps" to improve border security, combat corruption, increase revenues, and address human rights concerns, among other actions.

There are several other instances where appropriations levels differ from those in the Administration's request. The measure appears to provide $12 million more than was requested for Colombia , $8 million more than was requested for Mexico , and $4 million more than was requested for the CBSI . In all three cases, it shifts the emphasis of aid toward security concerns by providing less assistance than was requested through the ESF account and providing more than was requested through the INCLE account. The act also stipulates that "not more than" $191 million may be provided to Haiti , which is $50 million less than was requested. It requires the State Department to withhold all assistance for the "central Government of Haiti" until the Secretary of State certifies that the Haitian government is "taking effective steps" to hold free and fair elections, strengthen the rule of law, combat corruption, and increase government revenues. While the request did not include any funding to support environmental programs in Brazil , the omnibus provides $10.5 million for such programs. It also provides $6.5 million for democracy programs in Venezuela , which is $1 million above the request.

Looking Ahead

In the coming months, Congress will continue to oversee the implementation of foreign aid programs in Latin America and the Caribbean and begin to consider the Obama Administration's FY2017 foreign assistance request for the region. As Members engage in oversight and contemplate future appropriations, they might consider questions such as:

How effective are U.S. assistance programs in the region? To what extent are aid recipients implementing the structural reforms necessary to fully benefit from assistance and sustain programs started with U.S. funding? How do conditions on U.S. assistance influence the policies and actions of recipient governments? To what extent do socioeconomic and security conditions in Latin America and the Caribbean affect the United States? How many years and what levels of U.S. assistance will be necessary to achieve U.S. objectives in the region? How do U.S. policy priorities in the Western Hemisphere compare to U.S. priorities elsewhere in the world? How did the 20% decline in annual U.S. assistance appropriations for Latin American and the Caribbean between FY2011 and FY2014 affect U.S. influence in the region? To what extent have countries in the region taken financial and administrative responsibility for programs that the U.S. government has stopped funding? How successful have recent trilateral cooperation initiatives been and should they be expanded in the future? What other forms of engagement could the U.S. government use to advance its policy priorities in Latin America and the Caribbean as U.S. relations with the region become less defined by the provision of foreign assistance?