U.S. Foreign Assistance to Latin America and the Caribbean
Released: 2006-03-28T00:00:00

Introduction

Trends in U.S. foreign assistance to Latin America generally reflect the trends and rationalesfor U.S. foreign aid programs globally. U.S. assistance spiked in the 1960s during PresidentKennedy's Alliance for Progress, reflecting an interest in preventing the spread of Soviet and Cubaninfluence in the region, and recognizing poverty as one possible root cause of popular discord. Inthe 1980s, the U.S. focus shifted to the Central American isthmus where leftist insurgencies werechallenging friendly governments, and where a leftist movement in Nicaragua had taken control ofgovernment through armed combat. Substantial amounts of U.S. assistance were provided to supportCentral American governments and the U.S.-backed Contras seeking to overthrow the Sandinistagovernment in Nicaragua.

In the aftermath of the 1989 U.S. military intervention in Panama, and the 1990 electoraldefeat of the Sandinista government in Nicaragua, U.S. assistance to these two countries increasedsubstantially. Central America resolved many of its political problems since the 1980s, although itis still one of the least developed areas in the hemisphere. With the dissolution of the Soviet Unionin 1991, U.S. concerns about spreading communist influence lessened, and so too did levels of U.S.assistance. Since 2000, U.S. assistance has focused on support for counter-narcotics activities,largely in the Andean region.

Figure 1 indicates trends in U.S. assistance since 1960 in 2007 constant U.S. dollars. U.S.assistance has not reached levels attained during the Alliance for Progress. The annual average since1990 is approximately half of what it was in the 1960s. The amounts requested for FY2007represent the lowest level in more than four decades. Some countries are benefitting from two newPresidential foreign aid initiatives. Haiti and Guyana -- identified as focus countries by thePresident's Emergency Plan for AIDS Relief (PEPFAR) -- have received increased assistance forHIV/AIDS programs. Nicaragua and Honduras have signed Millennium Challenge Compacts.

U.S. support for development is identified by President Bush as one of the three pillars, withdefense and diplomacy, of the National Security Strategy, developed after the terrorist attacks ofSeptember 11, 2001. The U.S. Agency for International Development (USAID) identifies fivechallenges to which U.S. assistance programs are designed to respond: promoting transformationaldevelopment; (1) strengthening fragile states; providing humanitarian relief; supporting U.S. geostrategic interests; andmitigating global and transnational ills. USAID identifies the main security threats to the UnitedStates as the confluence of terrorism and the proliferation of weapons of mass destruction, and globalcriminal networks. The focus has shifted to strengthening the institutions of weak states, rather thanon just economic growth, because weak states are seen as permissive environments for terrorist andcriminal activities.

Figure 1. U.S. Foreign Assistance to Latin America and Caribbean AnnualAverage, 1960 to 2007

Source: U.S. Agency for International Development, U.S. Overseas Loans andGrants (Greenbook), Latin America and the Caribbean, U.S. Department of State,Congressional Budget Justification, Summary Tables, FY2006 and FY2007.

With regard to Latin America and the Caribbean, U.S. assistance levels requested for FY2007 show a marked decrease compared to the annual average from FY2000 to FY2006, although itrepresents just a 3% decrease from FY2006 appropriated levels. The largest decrease occurs in theDevelopment Assistance account, which sustains a 28% reduction. The largest increase is forEconomic Support Funds (up 26%) and the Global HIV/AIDS Initiative (up 35%). The ChildSurvival and Health account would be cut by 9%. When compared to other regions of the world,Latin America has received between 9.5% and nearly 12% annually since FY2002. In addition totraditional economic and military assistance, two countries -- Nicaragua and Honduras -- have signedcompacts with the Millennium Challenge Corporation (MCC) worth $175 million and $215 millionrespectively over five years. These two countries would also see the largest cuts in DevelopmentAssistance in the FY2007 budget request.

Table 1. U.S. Foreign Assistance, Western Hemisphere: MajorAssistance Accounts, FY2004-FY2007

(Millions of Current U.S. Dollars)

Source: Congressional Budget Justification, Foreign Operations, Summary Tables, Fiscal Years2004-2007. The table does not include all assistance; it excludes Peace Corps, P.L. 480 food aid,and some disaster assistance.

In Congress, the annual Foreign Operations Appropriations bills have been the vehicles by which Congress provides funding for, and exercises oversight of foreign assistance programs. Congress has not enacted a comprehensive foreign assistance authorization bill since 1985. ForFY2006, Congress provided $20.9 billion out of the President's $22.8 billion international affairsrequest in the FY2006 Foreign Operations Appropriations Act ( P.L. 109-102 ). Increases in theFY2006 budget request were due mainly to the new Millennium Challenge Account (MCA) and theGlobal HIV/AIDS Initiative. The MCA, that was unveiled in 2002 and became operational in 2004,links U.S. assistance with good governance and measures of performance of recipient nations. TheMCA program, if fully funded, represents one of the few marked increases in U.S. foreign assistancesince the Marshall Plan after World War II, and the Alliance for Progress in Latin America duringthe 1960s.

Assistance by Subregion

For FY2006, U.S. assistance to Latin America and the Caribbean is estimated at about $1.68billion, including Peace Corps and P.L. 480 food aid. The total does not include two MillenniumChallenge Compacts with Honduras and Nicaragua that were signed in 2005. The largest portion,$919 million, is allocated to the Andean countries of Bolivia, Colombia, Peru, Ecuador, andVenezuela, and represents 55% of regional assistance. Another $292 million, or 17%, is allocatedto Mexico and Central America, while the Caribbean would receive $307 million, or 18%. Braziland the Southern Cone of South America would receive an estimated $36 million, or 2%. TheUnited States also maintains aid programs of a regional nature, such as trade capacity building, andmigration and refugee assistance, that total an estimated $133 million, or 8%, in FY2006.

Figure 2. U.S. Assistance to Latin America by Subregion,FY2006

For FY2007, the President's budget request totals $1.63 billion for the region. This includes$927 million for the Andean region; $278 million for Mexico and Central America; $321 millionfor the Caribbean; $35 million for Brazil and the Southern Cone; and $95 million for regionalprograms. According to the FY2007 budget request, the Andes would receive 56% of the regionaltotal. The largest decreases occur in Development Assistance and Child Survival and Health forCentral America, but the isthmus would benefit from increased Economic Support Funds, largelyfor trade support for CAFTA countries, and Trade Capacity Building programs.

South America

The largest recipients of U.S. foreign assistance in South America are the Andean nationsof Colombia, Bolivia, and Peru, where most of the world's cocaine originates. These nations receivefunding from the Andean Counterdrug Initiative (ACI), military assistance such as Foreign MilitaryFinancing (FMF) and International Military Education and Training (IMET), as well as bilateraleconomic assistance in the form of Development Assistance, Child Survival and Health, andEconomic Support Funds. The Andean countries of Venezuela and Ecuador, and the non-Andeannations of Brazil and Panama also receive ACI funds but to a smaller degree than Colombia, Boliviaand Peru. U.S. assistance to Argentina, Brazil, Chile, Uruguay, and Paraguay amounts to $36million in FY2006; the FY2007 request is $35 million. (2) By contrast, U.S. assistance to the Andean region totals $919million in FY2006, and $927 million requested for FY2007.

The Andean Region. The area is generally knownfor its rugged terrain, from Peru's Pacific coastline to the Andes mountain range that traverses Peru,Bolivia, Colombia and Ecuador, to Amazonian basin regions marked by tropical rainforests. Theregion has large indigenous communities, high levels of poverty, and a history of political unrest.U.S. assistance to the Andean region has focused on narcotics trafficking since 2000, when Congressapproved $1.3 billion in support of PlanColombia. The United States had supported counternarcoticsissues in the Andes prior to 2000, but the levels of funding were far less.

Funding for the Andean Counterdrug Initiative (ACI) amounted to $727.2 million in FY2006. The FY2007 request is $721.5 million. The region also receives economic assistance funds. Boliviaand Peru are major recipients of Development Assistance, Child Survival and Health Funds, andfood aid. Ecuador and Peru receive sizeable amounts of Economic Support Funds. The Peace Corpsmaintains programs in Bolivia, Ecuador, Panama, and Peru. Although Colombia is a major recipientof ACI funds, it does not receive any economic assistance, although portions of ACI funds aretransferred to USAID for alternative development and institution-building programs.

Figure 3. The Andean Region

Andean Counterdrug Initiative. The AndeanCounterdrug Initiative (ACI) is the centerpiece of U.S. policy toward Colombia and the Andeanregion. It seeks to curb narcotics production and trafficking, and to promote democracy andeconomic development, which it is believed will strengthen regional security. Colombia, Peru, andBolivia produce virtually all of the world's cocaine, and Colombia has been a source of increasingamounts of high quality heroin destined for the United States. The two leftist guerrilla organizationsand a rightist paramilitary organization operating in Colombia profit from the drug trade. All three-- the Revolutionary Armed Forces of Colombia (FARC), the National Liberation Army (ELN), andthe United Self-Defense Forces of Colombia (AUC) -- have been designated foreign terroristorganizations by the State Department. The FARC and AUC have also been designated asSignificant Foreign Narcotics Traffickers under the Foreign Narcotics Kingpin Designation Act ( P.L.106-120 ).

The United States has made a significant commitment of funds and material support to helpthe region fight drug trafficking. Congress passed legislation providing $1.3 billion in assistance forFY2000 ( P.L. 106-246 ), and has provided a total of $5 billion from FY2000 through FY2006 in ACIfunds. Since 2002, Congress has granted expanded authority to use counternarcotics funds for aunified campaign to fight both drug trafficking and terrorist organizations in Colombia. ACI fundingfor FY2006 is estimated at $727.2 million. Most of the ACI request is for programs in Colombia($465 million) where 80% of the world's cocaine is produced. Peru ($107 million) and Bolivia ($79million) are also major recipients. Ecuador is allocated to receive $20 million in FY2006 funds,Brazil $6 million, Venezuela $2 million, and Panama $4 million. The region would receive anestimated $91 million in FY2006 in Foreign Military Financing (FMF) funds, most of which areallocated for Colombia.

Table 2. U.S. Foreign Assistance to the Andean Region: FY2006Estimates and FY2007 Funding Request

($ in millions)

Source: Figures are drawn from U.S. Department of State, Congressional Budget Justification,Summary Tables, Fiscal Year 2007. Updated by CRS, February 27, 2006.

* Because the Air Bridge Denial (ABD) program is only operational in Colombia, the FY2007budget requests includes funding for ABD in the Colombia allocation.

Note: ACI totals exclude $5.94 million (FY2006) and $4 million (FY2007) for Brazil and $4.46million (FY2006) and $4 million (FY2007) for Panama. Both receive ACI funding because theyshare borders with Colombia, although neither is considered an Andean nation. "Other" includesNon-proliferation, Anti-terrorism, De-mining and Related Programs (NADR) and Peace Corps.

DA - Development Assistance

CSH - Child Survival and Health

ESF - Economic Support Funds

PL 480 - emergency food aid

IMET - International Military Education and Training

ACI - Andean Counterdrug Initiative

FMF - Foreign Military Financing

For FY2007, the Administration proposes spending a total of $721.5 million, with Colombiareceiving the same amount as in the previous year and neighboring countries receiving cuts. Bolivia would receive $66 million, Peru $98.5 million, Brazil $4 million, Ecuador $17.3 million, Venezuela$1 million, and Panama $4 million. According to State Department officials, the Air Bridge DenialProgram, that is operational only in Colombia, would be funded out of the Colombia allocation. Fora second year, the Administration is requesting funds for a Critical Flight Safety Program to upgradeand refurbish aging aircraft used for eradication programs.

Brazil and The Southern Cone. The countries of Brazil, Argentina, Chile, Paraguay, and Uruguay are considered middle- income countries andtherefore receive lower levels of assistance. The area is estimated to receive nearly $36 million inFY2006, while $35 million is requested for FY2007. Most of this funding goes to Brazil forDevelopment Assistance and Child Survival and Health, and Paraguay for Development Assistance,Child Survival and Health, and Economic Support Funds. The Peace Corps maintains a programin Paraguay. As mentioned earlier, Brazil receives ACI funding because it shares a long border withColombia. The focus in Brazil is on generating sustainable economic growth and addressingextensive poverty and social inequality. Nearly one-third of Brazilians live below the internationalpoverty line. (3) With regardto health issues, nearly 60% of all HIV/AIDS cases in South America are in Brazil, while the countryalso ranks high in malaria and tuberculosis cases. Another area of focus is environmentaldegradation, particularly in the Amazon region, where deforestation is a problem. Paraguay, theregion's second largest recipient of aid, has suffered multiple years of stagnant growth and a largeexternal debt. U.S. programs focus on economic growth, reproductive health, the environment, anddemocracy.

Table 3. U.S. Foreign Assistance to Brazil & the Southern Cone: FY2006 Estimates and FY2007 Request

($ in millions)

Source: Figures are drawn from Congressional Budget Justification, Foreign Operations, SummaryTables, Fiscal Year 2006 U.S. Department of State. Table updated, March 10, 2006. "Other"includes Non-proliferation, Anti-terrorism, De-mining and Related Programs (NADR) and PeaceCorps.

a. Brazil receives ACI funding because it shares a 1,000 mile border with Colombia, although it isnot considered an Andean nation.

Figure 4. Mexico and Central America

Mexico and Central America

Mexico. Although Mexico has a strongerbilateral relationship with the United States than any other country in Latin America, it is amiddle-income nation that has not been a traditional recipient of U.S. foreign assistance. With theentry into force of the North American Free Trade Agreement (NAFTA) in 1994, Mexico becamethe United States' second largest trading partner in 1999. Burgeoning trade ties coincided with theelection of new administrations in both countries in 2000 and promises of greater U.S.-Mexicocooperation in the areas of counter-narcotics, immigration, law enforcement, and trade.

Foreign aid allocations to Mexico totaled only $31 million in FY2001, but rose to a high ofnearly $74 million in FY2005. Total aid to Mexico decreased slightly in FY2006 to $69 million andthe Administration has requested $63 million for FY2007. The higher total assistance figures havebeen primarily the result of large increases in counter-narcotics (INL) funding, used since 2001 toimprove Mexico's interdiction capacity, surveillance, and intelligence capabilities. INL funding rosefrom only $12 million in FY2003 to close to $40 million in FY2005 and have remained level sincethat time. Mexico usually receives a small amount of International Military Education and Training(IMET) funds for military training, as well as economic assistance to promote growth, accountablegovernance and rule of law, infectious disease prevention and control, and educational exchange andscholarships. For FY2006, Mexico was slated to receive $30 million in counter-narcotics funding,and Congress provided $40 million. The FY2007 request in counter-narcotics funding is $39million. The Administration also requested about $15 million in DA, CSH, and Peace Corpsfunding.

In October 2005, Mexico ratified its membership of the International Criminal Court. Mexico does not have a Bilateral Immunity (Article 98) Agreement exempting U.S. militarypersonnel from the jurisdiction of the ICC and thus became subject to a suspension of IMET fundsunder the ASPA and of ESF funds under the Nethercutt Amendment. Mexico received $1.3 millionin IMET funding in FY2005, but was slated to receive only $50,000 in IMET funds in FY2006. Mexico could lose that IMET funding in FY2006 and the FY2007 IMET request of $45,000. Inaddition, Mexico was to have received FMF funding for the first time in FY2006 totaling $2.5million, but that funding was frozen after the ICC ratification and was not included in the FY2007budget request. Mexico could also potentially lose $9 million in ESF funds in FY2006 and FY2007.

Central America. Central America is a regioncomprised of seven small countries with limited populations and economic resources. AlthoughPanama and Belize are on the Central American isthmus and receive small amounts of U.S. aid, theirdistinctive histories distinguish them from the five core countries -- Guatemala, El Salvador,Honduras, Nicaragua, and Costa Rica -- generally referred to as "Central America." Belize isconsidered a Caribbean nation because of its history and linkages with the English-speakingCaribbean. Panama has a history of extensive economic linkages with the United States because ofthe Panama Canal. Among the five core Central American countries, Costa Rica enjoys a longhistory of stable democracy and a per capita income that is 10 times greater than that of Nicaragua. The other four countries, although posting significant democratic and economic improvements inthe 1990s, are still recovering from decades of civil war and trying to confront high levels of povertyand violent crime. Despite these differences, each of the countries in Central America is highlydependent on trade with the United States, and that trade is likely to increase significantly withimplementation of the U.S.-Dominican Republic-Central America Free Trade Agreement(DR-CAFTA).

In order to assist with implementation of DR-CAFTA, the FY2005 ConsolidatedAppropriations Act ( P.L. 108-447 ) included $20 million for trade capacity building. In FY2006,Congress set aside $40 million for trade capacity building, $20 million ESF and $20 million in DAfunds. In addition, the Central America Regional program, for which Congress provided anestimated $12 million in FY2006 and the Administration requested $18.7 million for FY2007, hasfocused on fostering regional trade integration, democracy programs, immigration issues, organizedcrime (including gangs), and drug trafficking. The FY2006 Consolidated Appropriations Act ( P.L.109-102 ) provided that CSH and DA funding for Central America should not be less than what wasprovided in FY2005.

The major recipients of U.S. foreign assistance in Central America include El Salvador,Guatemala, Honduras, and Nicaragua. These nations receive Development Assistance (DA) to fundeconomic growth, justice sector reform, and other democracy programs. FY2007 funding for thefive core Central American countries would decline by 9% from FY2006, with the largest cutsoccurring in Development Assistance. The Central American countries received an estimated $90.6million in FY2006, but the Administration has requested only $66.2 million for FY2007. Some ofthat funding would be shifted to the Economic Support Fund (ESF) account for trade capacitybuilding that was included in Development Assistance in previous years. In FY2006, ESF fundswere slated for Guatemala, Nicaragua, and Panama, totaling an estimated $8.8 million. The FY2007Administration request includes ESF funds for El Salvador, Guatemala, and Nicaragua totaling anestimated $26 million. All four countries (El Salvador, Guatemala, Honduras and Nicaragua)continue to receive between $7 million and $12 million in Child Survival and Health (CSH) funds,which are especially focused on the prevention and treatment of HIV/AIDS and other infectiousdiseases. Possessing high levels of poverty and unsustainable levels of foreign debt, Honduras andNicaragua have additionally qualified for debt-relief under the Highly Indebted Poor Country (HIPC)initiative.

In 2004, Nicaragua and Honduras were selected as countries eligible to receive grants fromthe new Millennium Challenge Corporation. In June 2005, Honduras signed a five-year, $215million Compact with the MCC to promote rural development and road construction. In July 2005,Nicaragua signed a five-year, $175 million Compact with MCC to strengthen property rights,construct roads, and improve rural business productivity and profitability. El Salvador becameeligible to receive MCA funds in FY2006. Although Millennium Challenge funds were supposedto be in addition to, not a substitute for, traditional aid programs, all three countries that have eithersigned, or been deemed eligible for MCC Compacts, would have their DA and CSH funds cut underthe FY2007 request.

Finally, the United States provides small amounts of IMET funding to all countries in CentralAmerica so that both civilian and military leaders can participate in professional training programs. El Salvador, Honduras, Nicaragua and Panama also receive Foreign Military Financing (FMF)funding. On March 24, 2005, the United States announced that it was releasing $3.2 million ofMilitary Assistance Program (MAP) funds, a program later supplanted by the FMF program, toGuatemala that had been withheld since 1990 because of human rights concerns. However, theFY2006 Foreign Operations Appropriations Act ( P.L. 109-102 ) maintained a prohibition on FMFfunding to Guatemala. El Salvador is the only country in Latin America that has sent troops to Iraq. It is also home to one of the three counter-narcotics Cooperative Security Locations (CSLs), formerlyknown as Forward Operating Locations (FOLs), in the region, and a new International LawEnforcement Academy (ILEA). The FY2006 estimated provision of $9.9 million in Foreign MilitaryFinancing for El Salvador was substantially higher than the $1.5 million allocated in FY2005. The FY2007 Administration request for FMF for El Salvador is $5.5 million. Costa Rica is the onlycountry in Central America that may be subject to sanctions on military aid and ESF funds inFY2006 for failing to conclude and Article 98 agreement with the United States.

Table 4. Mexico and the Central America: FY2006 FundingEstimates and FY2007 Funding Request

($ in millions)

Source: Figures are drawn from Congressional Budget Justification, Foreign Operations, SummaryTables, Fiscal Year 2007, U.S. Department of State. Table updated by CRS, March 2, 2006.

a. International Narcotics and Law Enforcement (INL) funding for Panama is from the AndeanCounterdrug Initiative account. Panama shares a border with Colombia, although it is notconsidered an Andean nation.

Caribbean

With some 35 million people and 16 independent nations sharing an African ethnic heritage,the Caribbean is a diverse region that includes some of the hemisphere's richest and poorest nations. In addition to the 13 island nations, the Caribbean region also includes two countries located on thenorthern coast of South America, Guyana and Suriname, and one country, Belize, located in CentralAmerica, that historically and culturally share similar backgrounds with the Caribbean.

The United States has provided considerable amounts of foreign assistance to the Caribbeanover the past 25 years. U.S. assistance to the region in the 1980s amounted to about $3.2 billion,with most concentrated in Jamaica, the Dominican Republic, and Haiti. An aid program for theEastern Caribbean also provided considerable assistance, especially in the aftermath of the 1983U.S.-led military intervention in Grenada. In the 1990s, U.S. assistance to Caribbean nationsdeclined to about $2 billion, or an annual average of $205 million. Haiti was the largest recipientof assistance during this period, receiving about $1.1 billion in assistance or 54% of the total. Jamaica was the second largest U.S. aid recipient in the 1990s, receiving about $507 million, almost25% of the total, while the Dominican Republic received about $352 million, about 17% of the total. Eastern Caribbean nations received about $178 million in assistance, almost 9% of the total. Thebulk of U.S. assistance was economic assistance, including Development Assistance, EconomicSupport Funds, and P.L. 480 food aid. Military assistance to the region amounted to less than $60million during the 1990s.

Since FY2000, U.S. aid to the Caribbean region (including FY2006 aid estimates) hasamounted to almost $1.6 billion, because of increased HIV/AIDS assistance to the region (especiallyto Guyana and Haiti), disaster and reconstruction assistance in the aftermath of several hurricanesand tropical storms in 2004, and increased support for the interim government in Haiti followingthe departure of President Jean-Bertrand Aristide from power. Haiti accounted for some 51% ofassistance to the Caribbean region during this period. As in the 1990s, the bulk of assistance to theregion consisted of economic assistance. With regard to hurricane disaster assistance, Congressappropriated $100 million in October 2004 in emergency assistance for Caribbean nations ( P.L.108-324 ), with $42 million for Grenada, $38 million for Haiti, $18 million for Jamaica, and $2million for other countries affected by the storms.

For FY2007, the Administration has requested about $321 million in assistance for theCaribbean, with about $198 million or almost 62% of the total for Haiti, $35 million for theDominican Republic, $31 million for Guyana, and almost $17 million for Jamaica. Assistance tothe small nations of the Eastern Caribbean (Antigua and Barbuda, Barbados Dominica, Grenada, St.Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines) is provided through USAID'sCaribbean Regional program, which also funds some region-wide projects; for FY2007, theAdministration requested $11.6 million for the program. The Eastern Caribbean would also receiveabout $1.5 million in military assistance and $3.2 million to support a Peace Corps presence. Therequest of $3 million for the "Third Border Initiative" (TBI) would fund regional projects for the14-nation Caribbean Community (CARICOM) plus the Dominican Republic that focus on improvingtravel and border security in the region, disaster preparedness, and greater business competitiveness. A request of $4 million for Operation Enduring Friendship, a military assistance program, wouldsupport efforts to increase maritime security in the Dominican Republic, Honduras, Panama, theBahamas, and Jamaica.

Looking ahead to future years, several Caribbean nations are potential recipients forMillennium Challenge Account (MCA) assistance, an initiative to target foreign assistance tocountries with strong records of performance in the areas of governance, economic policy, andinvestment in people. While Haiti and Guyana were potentially eligible for MCA funds in FY2004(because their per capita income was below $1,415) neither country was approved to participate. Guyana was designated a MCA threshold country for FY2005 and FY2006, and could be approvedin future years for MCA funding, but Haiti would likely have difficulty meeting MCA criteria. In FY2006, the per capita income level for MCA-eligibility increased to $3,255 or below, and as aresult, three additional Caribbean countries -- the Dominican Republic, Jamaica, and Suriname --could become eligible for MCA funding.

Cuba. Over the past several years, the UnitedStates has provided assistance to increase the flow of information on democracy, human rights, andfree enterprise to Communist Cuba. The assistance has been part of the U.S. strategy of supportingthe Cuban people while at the same time isolating the government of Fidel Castro through economicsanctions. USAID's Cuba program supports a variety of U.S.-based nongovernmental organizationsto promote rapid, peaceful transition to democracy, help develop civil society, and build solidaritywith Cuba's human rights activists. These efforts are largely funded through Economic SupportFunds (ESF), but in FY2006 also included some Development Assistance funds. Funding for suchprojects amounted to $6 million in FY2003, $21.4 million in FY2004 (because of re-programmedESF assistance to fund the democracy-building recommendations of the Commission to ProvideAssistance for a Free Cuba), $9 million in FY2005, and an estimated $10.9 million in FY2006.

The FY2007 request is for $9 million in ESF for Cuba. According to the request, ESF fundswill be used to implement the recommendations of the Commission for Assistance to a Free Cuba. The goals of the assistance are to augment current activities in support of the Cuban people, to"undermine the survival strategies of the Castro regime," and "to contribute to conditions that willhelp the Cuban people hasten the dictatorships's end." ESF will also continue to supportUSAID-administered programs with democracy and human rights groups. Key groups targeted forassistance include women, Afro-Cubans, and youth as well as libraries, labor organizations, humanrights groups, and other independent non-governmental organizations in Cuba.

U.S. democratization assistance for Cuba is also provided through the National Endowmentfor Democracy (NED), which traditionally has been funded in State Department appropriations bills. NED-funded Cuba projects amounted to $1.1 million for each of FY2003 and FY2004. For FY2005,NED funded 17 Cuba projects with $2.4 million. This included grants to support a variety ofundertakings, such as assistance to Cuba's independent libraries; the promotion of general humanrights, labor rights, and women's rights; and support for the work of the Varela Project and NationalDialogue that emphasize a peaceful democratic transition.

Haiti. Following a period of political discord andviolence, President Jean-Bertrand Aristide resigned under disputed circumstances in February 2004,and an interim government was established. The United Nations authorized an international force,mainly composed of U.S. Marines, and French and Canadian police and military forces, to helprestore order. This was subsequently replace by a U.N. peacekeeping force, the U.N. StabilizationMission in Haiti (MINUSTAH) beginning in June 2004, with the objective of securing a stable andsecure environment and advancing the rule of law. After being postponed several times because ofpolitical instability and technical problems, new elections were ultimately held February 7, 2006. Former president Rene Preval was declared the winner after several days of protests by hissupporters when it appeared that a run-off election would be necessary. U.S. foreign aid to Haitiincreased significantly in support of the interim Haitian government. Assistance increased fromabout $72 million in FY2003 to $132 million in FY2004, and $183 million in FY2005. BecauseHaiti is a focus country under the President's Emergency Plan for AIDS Relief (PEPFAR), it hasbenefitted from increased assistance to combat HIV/AIDS under the Global HIV/AIDS Initiative(GHAI) account.

The FY2006 Foreign Operations Appropriations Act ( P.L. 109-102 ) provided Haiti with atotal of $194 million in assistance, largely in CSH, ESF, DA, and counternarcotics funds. It alsoreceived $47.3 million for HIV/AIDS programs. For FY2007, the Administration requested $198million in assistance for Haiti, including $63 million in GHAI funding, $50 million in ESF, $34.5million in food aid, $23 million in Development Assistance, $15 million in Child Survival andHealth assistance, and $10 million in International Narcotics Control and Law Enforcement funding.

Table 5. U.S. Foreign Assistance to the Caribbean: FY2006Estimates and FY2007 Requests

($ in millions)

Source: Figures are drawn from U.S. Department of State Congressional Budget Justification, Summary Tables, Fiscal Year 2007. Table updated by CRS, February 28, 2006. Operation EnduringFriendship includes activities in Panama.

Regional Programs

The United States also provides assistance for programs that have a regional scope. The LatinAmerica and Caribbean (LAC) program is the largest regional program and provides Child Survivaland Health, Development Assistance, and Economic Support Funds for a number of purposes, suchas justice and health-related programs. Funds are used to strengthen democratic institutions andprocesses, improve education and health, and protect biodiversity and support new environmentaltechnologies. Anti-Terrorism funding for the Western Hemisphere focuses mainly on Colombia, andthe tri-border region of Argentina, Brazil and Paraguay. INCLE funding is also provided to theregion centering on drug transit zones in Central America and the Caribbean.

Table 6. Western Hemisphere Regional Programs: FY2006Estimates and FY2007 Request

($ in millions)

Source: Figures are drawn from U.S. Department of State Congressional Budget Justification,Summary Tables, Fiscal Year 2007. Table updated by CRS, February 28, 2006.

Additional Issues for Congress

Effectiveness of Programs

Congressional debate on foreign aid issues has often focused on whether it is effective inreducing poverty, and promoting U.S. interests abroad. Critics argue that aid is often wasted oncountries that do not responsibly use the assistance to promote the welfare of their citizens. Othersargue that programs are often ill-designed in relation to their goals. Proponents of foreign aid arguethat development is a long term process that must be consistently implemented to see results. Recentstudies have noted a marked lack of progress in reducing global poverty, and question the correlationbetween levels of development assistance and program success. (4) Others argue that U.S.assistance, as currently structured, does not contribute as much to sustainable economic growth asdoes trade. (5) One of thereasons suggested to explain this perceived lack of success is that aid programs often have objectivesother than pure development, such as national security, environmental or human rightsconsiderations. Another reason often pointed to is the nature and extent of corruption in societiesthat have little history of transparency.

The newly created Millennium Challenge Account (MCA) seeks to address some of theseconcerns, in the view of the Bush Administration. The MCA links assistance to recipients'performance on a number of good governance and sound economic policy criteria. (See discussionbelow.) Proponents of the MCA view it as a way to reform foreign aid programs by rewarding goodperformers and by focusing on the objectives of poverty reduction, with limited consideration ofstrategic or political objectives. Critics raise concerns that by creating new aid programs, includingthe HIV/AIDS initiative, which coexist with traditional aid programs, there is a fragmentation ofresources, and potentially a lack of coordination among the various entities administering theprograms. (6)

Secretary Rice's announcement of a newly created position -- Director of Foreign Assistance-- that will be held concurrently by the USAID Administrator, was unveiled as a way to bettercoordinate aid programs government-wide. There has been much debate as to whether thisreorganization of foreign aid will be effective, and some observers believe it is not ambitiousenough, advocating a complete restructuring of foreign aid accounts. Any such reform would requirelegislation. It is possible that further reforms could be proposed for FY2008.

Article 98 Agreements

A further concern of policymakers has centered on current U.S. policy opposing theapplication of jurisdiction of the International Criminal Court to U.S. citizens. Countries who havenot agreed to sign so-called Article 98 agreements with the United States are subject to a cutoff ofU.S. military assistance, comprising Foreign Military Financing, and International MilitaryEducation and Training funds. (Such agreements, referring to Article 98 of the Rome Treaty on theInternational Criminal Court, prevent the ICC from proceeding with a request for the surrender ofU.S. personnel present in the country.) These agreements are required under the American ServicesMembers Protection Act of 2002, that was incorporated as Title II of H.R. 4775 , theFY2002 Supplemental Appropriations Act ( P.L. 107-206 ). Section 574 of both the FY2005 andFY2006 Foreign Operations Appropriation acts extends the provision of law to include EconomicSupport Funds. The President may waive the law if it is in the national interest. Colombia, themajor recipient of military assistance in Latin America, has signed an agreement. Others that havenot, such as Bolivia, Brazil, Costa Rica, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela,could see their assistance withheld.

HIV/AIDS in the Caribbean and Central America

The AIDS epidemic in the Caribbean and Central America has begun to have negativeconsequences for economic and social development, and continued increases in infection ratesthreaten future development prospects. In contrast to other parts of Latin America, the mode oftransmission in several Caribbean and Central American countries has been primarily throughheterosexual contact, making the disease difficult to contain because it affects the general population. The Caribbean countries with the highest prevalence or infection rates are Haiti, with a rate over 3%;the Bahamas, Guyana, and Trinidad and Tobago, with rates over 2%; and Barbados, Belize, theDominican Republic, Jamaica, and Suriname, with rates over 1%. In Central America, Honduras hasthe highest prevalence rate of 1.8%, while Guatemala has a rate over 1%.

The response to the AIDS epidemic in the Caribbean and Central America has involved a mixof support by governments in the region, bilateral donors (such as the United States, Canada, andEuropean nations), regional and multilateral organizations, and nongovernmental organizations(NGOs). The World Bank, the Inter-American Development Bank, and the Global Fund to FightAIDS, Tuberculosis, and Malaria have funded numerous HIV/AIDS projects in the Caribbean andCentral America. Many countries in the region have national AIDS programs that are supportedthrough these efforts.

USAID has been the lead U.S. agency fighting the epidemic abroad since 1986. USAID'sfunding for HIV/AIDS in Central America and the Caribbean region rose from $11.2 million inFY2000 to $33.8 million in FY2003. Because of the inclusion of Guyana and Haiti as focuscountries in the President's Emergency Plan for AIDS Relief (PEPFAR), funded through the GlobalHIV/AIDS Initiative (GHAI) account, U.S. assistance to the Caribbean and Central America forHIV/AIDS increased to $47 million in FY2004, $82.5 million in FY2005, and an estimated $92.7million in FY2006. For FY2007, the Administration requested $113 million. This request included$88 million in GHAI funding for Guyana ($25 million) and Haiti ($63 million) and another $25million for non-focus countries and programs in Central America and the Caribbean through theChild Survival and Health account.

Some Members of Congress want to expand the list of focus countries to include 14additional Caribbean countries. In the 109th Congress, S. 600 , the Foreign AffairsAuthorization Act, FY2006 and FY2007, contains a provision (Section 2516) that would add 14Caribbean countries to the list of focus countries targeted for increased HIV/AIDS assistance. Inother action, the 109th Congress approved H.R. 1409 ( P.L. 109-95 ), which authorizesassistance for orphans and other vulnerable children in developing countries, including in theCaribbean. Pending legislative initiatives in the second session include H.R. 164 , whichwould provide for the establishment of pediatric centers in developing countries, including Guyana,to provide treatment and care for children with HIV/AIDS; and S. 350 and H.R. 945 , which would provide assistance to combat infectious diseases in Haiti,including HIV/AIDS.

Millennium Challenge Account

The MCA initiative differs from traditional USAID programs in a number of respects, andcould have implications for the future of assistance programs in general. First, funding is linked toperformance and results. Second, the conceptualization of development projects rests with thecountries themselves and their national development strategies, with the United States playing anadvisory role. Third, MCA funds are intended to center exclusively on development goals withoutregard for other U.S. foreign policy and geostrategic objectives. While the international communityand NGOs have been generally supportive of the initiative, some concerns have been expressed thatfunding for traditional assistance programs (DA and CSH) could end up being cut to accommodatethe increased funding for MCA. The Administration has stated that it does not intend for the MCAto negatively affect its other development programs. Despite that assertion, funding for DA andsome health programs under CSH have declined. Development assistance in Latin America isproposed for FY2007 at 28% less than in FY2006. CSH would also decline by 9%. The countriesmost affected by these proposed cuts are in Central America -- two of which have signed MCCcompacts (Nicaragua and Honduras) and one that is eligible for the program (El Salvador).

When fully operational, the MCA initiative will be limited to countries with per capitaincomes below $2,935. But in the first two years (FY2004 and FY2005), countries with per capitaincomes below $1,415, and that can borrow from the World Bank's International DevelopmentAssociation (IDA) in FY2004, were eligible to compete for grants. Beginning in FY2006,low-middle income countries can participate, but they can only receive 24% of the amountappropriated for the MCA in that year. However, income level is not the only criteria forparticipation. Some countries may not receive funding if they do not meet certain criteria relatingto political rights and civil liberties. Performance indicators fall into three general categories --ruling justly, investing in people, and economic freedom. Specific measurements of each categorywould be taken from the World Bank, the World Health Organization, and the Freedom Houseannual study on civil liberties and political freedom, among others. It is anticipated that the list ofeligible countries could reach 115, although just 20 to 30 may ultimately qualify for MCA grants. Countries that demonstrate a commitment to meeting the MCA eligibility requirements can qualifyfor "threshold assistance." Both Guyana and Paraguay were invited to participate in the thresholdprogram in 2005. Paraguay has concluded an agreement for such assistance in the amount of $37million.

Congress has been involved in determining the criteria for country eligibility andperformance indicators, and funding levels. Congress passed P.L. 108-199 (Division D) that createdthe Millennium Challenge Corporation (MCC), the entity charged with managing the initiative, andappropriated $994 million for the first year, instead of the $1.3 billion requested by theAdministration. For FY2005 and FY2006, MCC funding was $1.5 billion and $1.7 billion; theFY2007 request is $3 billion.

With regard to Latin America, countries that have per capita incomes of less than $1,415 andthat are IDA-eligible include Bolivia, Guyana, Haiti, Honduras, and Nicaragua. Of those candidatecountries, Bolivia, Honduras and Nicaragua were deemed eligible to participate after the MCC boardmet to approve participants on May 6, 2004. In 2005, two agreements, called compacts, were signedwith Honduras ($215 million over five years) and Nicaragua ($175 million over five years). Paraguay is a 'threshold' country that will receive $37 million for anti-corruption and rule of lawprograms. Beyond FY2006, when eligible countries can have per capita incomes up to $2,935, thefollowing additional Latin American countries could qualify: Brazil, Colombia, DominicanRepublic, Ecuador, El Salvador, Guatemala, Jamaica, Peru, St Vincent and the Grenadines, andSuriname. In November 2005, the MCC named El Salvador as an eligible "lower middle income"country.

Terrorism

In the aftermath of the September 2001 terrorist attacks on New York and Washington D.C.,U.S. attention to terrorism in Latin America intensified, with an increase in bilateral and regionalcooperation. The State Department, in its annual report on worldwide terrorism ( Country Reportson Terrorism ), highlights terrorist threats in Colombia, Peru, and the tri-border region of Argentina,Brazil, and Paraguay, which has been a regional hub for Hizballah and Hamas fund-raising activities. The State Department also has designated four terrorist groups (three in Colombia and one in Peru)as Foreign Terrorist Organizations, and Cuba has been listed as a state sponsor of terrorism since1982.

Through the State Department, the United States has provided Anti-Terrorism Assistance(ATA) training and equipment to Latin American countries to help improve their capabilities in suchareas as airport security management, hostage negotiations, bomb detection and deactivation, andcountering terrorism financing. ATA financing is provided through the annual foreign operationsappropriations measure under the Nonproliferation, Anti-terrorism, Demining, and Related Programs(NADR) account. For FY2005, $7.9 million in ATA was provided for the Western Hemisphere,with $5.1 million for training anti-kidnapping units in Colombia and $0.5 million for the tri-borderarea of Brazil, Paraguay, and Argentina. For FY2006, an estimated $12.3 million in ATA will beprovided for the Western Hemisphere, with $5.3 million for Colombia and $1.5 million for theBahamas. The FY2007 Western Hemisphere request is $11.9 million, with $3.1 million forColombia, $2.8 million for Trinidad and Tobago, and $1.4 million for Jamaica.

In addition to ATA assistance, several Latin American countries would receive smallamounts of assistance in FY2007 under NADR's Export Control and Related Border SecurityAssistance (EXBS) program. The program helps strengthen the countries' export and border controlsystems to prevent the proliferation of weapons of mass destruction, missile delivery systems, andconventional weapons. A total of $865,000 is requested for Western Hemisphere NADR/EXBSfunding in FY2007, including a regional program and specific assistance for Argentina, Brazil, Chile,and Panama. In past years, some Latin American nations also received assistance under the NADR's Counterterrorism Financing (CTF) program and the Small Arms/Light Weapons Destruction(SALW) program.

Appendix. Types of Assistance

Economic Assistance

Economic assistance is generally provided by the U.S. government directly to other foreigngovernments or to nongovernmental organizations working in those countries. Bilateral economicaid to Latin America is primarily administered by the U.S. Agency for International Development(USAID). USAID strives to use that assistance to alleviate poverty and to address criticaltransnational issues such as HIV/AIDS, the environment, and humanitarian relief. BushAdministration officials have maintained that U.S. policy towards Latin America is based on threebroad objectives -- strengthening democracy, encouraging development, and enhancingsecurity. (7) Whilehemispheric security is addressed by programs funded through counternarcotics and militaryaccounts, most transformational development programs aimed at fostering social, political, andeconomic progress are funded by the Child Survival and Health (CSH), Development Assistance(DA), and Economic Support Funds (ESF) accounts.

Child Survival and Health. CSH funds focus oncombating infectious disease and promoting child and maternal health, family planning, andreproductive health. For FY2006, the Administration requested $125.3 million for Latin Americaout of a total of $1.25 billion in CSH funds globally. Congress provided nearly $1.6 billion globallybut did not earmark by region. The FY2006 request for Latin America reflected a 12.7% decreasefrom the FY2005 estimated allocation of $143.5 million. Traditional CSH programs are being cutin favor of new initiatives such as the President's Emergency Plan for AIDS Relief (PEPFAR), aState Department administrated program currently targeting two Latin American countries, Haiti,and Guyana. For FY2006, the Administration estimates spending $140.9 million in the WesternHemisphere. Its FY2007 request is $128 million, a reduction of 9% from the previous year'sestimate.

CSH funded HIV/AIDS programs focus on prevention, care, and treatment efforts,specifically targeting children affected by AIDS. They will be integrated into the overall policyframework and strategic "prevention-to-care continuum" espoused by PEPFAR. Child survival andmaternal health programs strive to reduce the number of deaths in children under the age of five andsave the lives of women in childbirth. Interventions used to reduce preventable child deaths includeimmunizations, pneumonia and diarrhea prevention and treatment, oral rehydration, safe birthing andprenatal care, nutrition, and breast-feeding initiatives. The final major component of CSH fundssupport expanded access to information and services concerning family planning and reproductivehealth.

Development Assistance. DA funds aim toachieve measurable improvements in key areas to foster sustainable economic growth: trade andinvestment, agriculture, education, environment, health, and democracy. The Administrationrequested $223.8 million for Latin America out of a total FY2006 request of $1.1 billion, an 8%decrease from the FY2005 estimated allocation of $255.5 million. For FY2006, Congressappropriated $1.524 billion for worldwide programs, but did not earmark DA funds by country orregion. The Administration estimates spending $254.4 million in FY2006 in the WesternHemisphere. Congress did include report language that Central American countries should receiveno less than they did in FY2005 in CSH and DA funds. Congress also allocated $20 million in DAfunds for labor and environment capacity building programs for CAFTA-DR countries. For FY2007,the Administration requested $181.9 million for Latin America, a 28% decrease from the previousyear. Some of this decrease is made up in the ESF account for trade capacity building in CentalAmerica.

DA supports the Opportunity Alliance for Central America, which focuses on facilitatingregional integration and helping the region's economies recover from recent natural disasters,declining coffee prices and drought. Specific trade capacity-building initiatives were undertakenprior to the negotiation of the Central American Free Trade Agreement (CAFTA). Agricultureprograms seek to promote non-traditional agricultural exports and find agricultural niche marketsfor local producers. DA funds basic education programs to strengthen preschool, primary, andsecondary education, as well as the Centers of Excellence in Teacher Training (CETT) Initiative inLatin America and the Caribbean. USAID manages five Presidential initiatives addressing variousaspects of sustainable development. These initiatives focus on encouraging natural resourcemanagement, developing alternative energy sources, expanding clean water access, preventingillegal-logging, and minimizing greenhouse gas emissions. There are justice sector modernizationprograms underway in 12 countries in the region, as well as 15 anti-corruption programs throughoutLatin America. DA democracy programs also seek to strengthen Latin American democracies bysupporting elections, strengthening civil society, and protecting human rights.

Transition Initiatives (TI). For FY2006, theAdministration requested funding for TI previously provided in the Development AssistanceAccount. The request for FY2006 was $325 million, of which Haiti was to receive $30 million. The program would support stabilization, reform and post-conflict reconstruction programs in fragilestates. In FY2005, the State Department estimated spending $25 million in Haiti, and $8.9 millionin FY2004. Congress did not fully fund the TI account, giving it $40 million, and leaving otherfunds in the DA account. For FY2007, the Administration has requested $50 million.

Economic Support Funds. Through thesecurity-related ESF program, the United States provides economic aid to countries of strategicinterest to U.S. foreign policy. Funding decisions are made by the State Department; programs aremanaged by USAID and the State Department. Although Israel and Egypt receive the majority ofESF aid, 11 Latin American countries have received some ESF funding in recent years, with Bolivia,Cuba, Ecuador, Mexico, and Peru among the largest recipients. The Administration estimatesspending $120.8 million in Latin America in FY2006. The request for FY2007 is $152.1 million,with most increases for the Dominican Republic, Ecuador, El Salvador, and Guatemala for tradeassistance.

ESF assistance in the Andean region, Mexico, and Central America is used to pursue justicesector reform, facilitate implementation of free trade agreements, improve local governance, fightcorruption, and promote respect for human rights. The $3 million requested for the Third BorderInitiative, which began in FY2002, would enhance immigration, border security, rule of law, anddisaster preparedness in the Caribbean. A $9 million FY2007 request for Cuba would continue theAdministration's efforts to support a transition to democracy there through information disseminationand support for dissidents and human rights activists.

For FY2006, Congress appropriated $2.634 billion for ESF programs globally and earmarked$116.4 million for Latin America and the Caribbean. It also directed that Haiti receive $50 million,Guatemala $5.5 million, Mexico $11.5 million, Nicaragua $1.9 million, and another $20 million fortrade capacity building programs in the CAFTA-DR countries.

P.L. 480 Title II Food Aid. Thisaccount, funded through the annual Agriculture Appropriations bill, provides the funds for USAIDto respond quickly to the food assistance needs of countries facing emergency situations. Food aidis targeted at vulnerable populations, especially those coping with, or recovering from, natural ormanmade disasters, including prolonged civil strife. This assistance program is administered largelyby U.S. private voluntary organizations and through the United Nation's World Food Program. ForFY2005, the United States allocated an estimated $108 million for P.L. 480 in Latin America, andthe Administration estimates spending $100 million in FY2006. For FY2007, the request is $118.5million. The largest recipients of food aid in Latin America include Bolivia, Guatemala, Haiti,Honduras, Nicaragua, and Peru.

Migration and Refugee Assistance (MRA). Thisprogram supports refugee relief activities, and in some cases, helps resettle refugees. FY2006funding for MRA in Latin America is an estimated $24.3 million. The Administration reduced itsMRA request for FY2006 to $22 million. Most of the funding will be used to help the more than2 million internally displaced persons (IDPs) in Colombia and thousands of refugees outside ofColombia. The State Department partners with the International Committee of the Red Cross andthe U.N. High Commission on Refugees to provide refugee assistance.

Peace Corps. The Peace Corps sends U.S.volunteers to developing countries to provide technical aid and to promote mutual understanding ona people-to-people basis. Countries in Latin America with Peace Corps programs include countriesin the Eastern Caribbean region and Central America, the Dominican Republic, Guyana, Jamaica,Suriname, Mexico, Belize, Bolivia, Ecuador, Peru and Paraguay. Funding in FY2006 totaled $44.5million; the FY2007 request is $44.8 million.

Inter-American Foundation (IAF). The IAF isa small federal agency that provides grants to non-profit and community-based programs in LatinAmerica that promote entrepreneurship, self-reliance, and economic progress for the poor. TheFY2006 estimated allocation for the IAF is 19.3 million, and the FY2007 request maintains levelfunding at $19.3 million.

Millennium Challenge Account (MCA). TheMCA is a Presidential initiative announced in 2002 that is intended to increase foreign assistanceto countries below a certain income threshold that are pursuing policies intended to promotedemocracy, social development, and sustainable economic growth. If fully funded, the MCA wouldincrease foreign assistance beginning in FY2004 so that by FY2006 U.S. foreign aid would be $5billion higher than three years earlier. The FY2005 allocation for the MCA was $1.488 billion. TheAdministration requested $3 billion in FY2006, and Congress approved $1.77 billion. For FY2007,the request is $3 billion. This assistance is administered by the Millennium Challenge Corporation(MCC), in cooperation with USAID. In 2005, the MCC signed compacts with Nicaragua for $175million over five years, and with Honduras for $215 million over five years. (For furtherinformation, see the discussion of the MCA in the "Additional Issues for Congress" section above.)

Global HIV/AIDS Initiative. In 2003, PresidentBush announced the President's Emergency Plan for AIDS Relief (PEPFAR), a new initiativepledging $15 billion over five years for the prevention and treatment of HIV/AIDS, tuberculosis(TB), and malaria. This includes $10 billion in new funding of which $1 billion would be forcontributions to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. The other $5 billionwould come from existing programs managed by other agencies such as USAID and the Departmentof Health and Human Services (HHS). The Global AIDS Initiative, which constitutes the bulk ofPEPFAR funding, is a Department of State program currently concentrated on 12 African countries,as well as Haiti and Guyana. The 2005 funding level for Haiti was estimated at $39.4 million, andfor Guyana, at $13.2 million. The FY2006 estimate provides $47.3 million for Haiti, and $18million for Guyana. The FY2007 request includes $ $63 million for Haiti and $25 million forGuyana. (For further information, see the discussion on HIV/AIDS in the "Additional Issues forCongress" section above.)

Counternarcotics Assistance

International Narcotics and Law Enforcement(INL). INL funds bilateral, regional and global programs to assist foreigngovernments in strengthening their law enforcement capabilities, including the ability to destroy drugcrops, disrupt drug production, and interdict drug trafficking. Its largest single program is theAndean Counterdrug Initiative. Its other programs focus on fighting money-laundering and terroristfinancing, enhancing security along the U.S.-Mexican border, and fighting trafficking in persons,corruption, and cybercrimes. It also includes programs to strengthen the rule of law and to promotedemand reduction. It provides some funding to the United Nations Office on Drugs and Crime toprovide support for legal frameworks to prevent and combat organized crime, and the Organizationof American States Drug Abuse Control Commission (CICAD) to strengthen national drugcommissions and to support the Multilateral Evaluation Mechanism (MEM). MEM is the peerreview system used to evaluate national anti-drug performance. INL's current bilateral assistanceto Latin America supports programs in the Bahamas, Guatemala, Haiti, Jamaica and Mexico.

FY2006 funding is an estimated $61 million for Latin America., and $54.8 million isrequested for FY2007. Mexico would receive the most funding in FY2006 ($40 million), and Haitiwould receive the second highest allocation ($15 million). Congress included language expressingconcern about the rise in gang violence in Central America and urged the Secretary of State toincrease funds for gang-related programs.

Interregional Aviation Support. INL manages theInterregional Aviation Support program that operates a fleet of 189 fixed- and rotary-wing aircraftsupporting overflight drug crop imagery and aerial eradication programs in Colombia, Bolivia, andPeru, as well as border security operations in Pakistan. FY2006 funding is estimated at nearly $62.9million, of which approximately half is allocated for programs in the Andean region. The requestfor FY2007 is for $65.5 million.

Andean Counterdrug Initiative (ACI). The coreof U.S. counternarcotics programs in Latin America is the ACI. The three primary global producersof cocaine are Colombia, Peru and Bolivia. The objectives are to eliminate the cultivation andproduction of cocaine and opium, build Andean law enforcement infrastructure, arrest and prosecutetraffickers, and seize their assets. The countries considered a part of the ACI include Bolivia, Brazil,Colombia, Ecuador, Panama, Peru and Venezuela, with the lion's share of funding allocated forprograms in Colombia. Funds are divided between programs that support eradication andinterdiction efforts, as well as those focused on alternative crop development and democraticinstitution building. On the interdiction side, this includes programs to train and support nationalpolice and military forces, to provide communications and intelligence systems, to support themaintenance and operations of host country aerial eradication aircraft, and to improve infrastructurerelated to counternarcotics activities. On the alternative development side, funds support economicdevelopment programs in coca growing areas, including infrastructure development, and marketingand technical support for alternative crops. It also includes assisting internally displaced persons,promoting the rule of law, and expanding judicial capabilities.

FY2006 funding for ACI was estimated at $727.2 million, and $721.5 million is requestedfor FY2007. In the past, Congress has approved the Administration's requests, but often placesconditions on U.S. assistance. For FY2006, Congress changed the allocations slightly amongcountries and programs. (For further information, see the discussion of the ACI in the "SouthAmerica" section above.)

Military and Terrorism Assistance

Military assistance is provided by the State Department through the Foreign MilitaryFinancing (FMF) program and the International Military Education and Training program (IMET),although both are managed by the Defense Department. Additional funding is provided from theDepartment of Defense for both counternarcotics and military programs. Anti-terrorism assistanceis provided through the State Department.

Foreign Military Financing. FMF provides grantsto foreign nations to purchase U.S. defense equipment, services, and training. The program'sobjectives are to assist key allies to improve their defense capabilities, to strengthen militaryrelationships between the United States and FMF recipients, and to promote the professionalism ofmilitary forces in friendly countries. In the Western Hemisphere, a large portion of FMF is allocatedfor Colombia and the Andean region with the objective of supporting the efforts of those nations toestablish and strengthen national authority in remote areas that have been controlled by leftistguerrilla organizations, rightist paramilitaries, and narcotics traffickers. A portion of FMF fundingin Fiscal Years 2002 and 2003 went for infrastructure protection of oil pipelines in Colombia. Theprogram also seeks to improve foreign military capabilities of countries that control land approachesto the United States and the Caribbean, which is referred to as the "third border." FMF also providesequipment and training for countries in the region that participate in peacekeeping operations.

In FY2006, FMF funding for programs in Latin America amounted to $111.7 million. Therequested FY2007 amount is for $105.3 million. For FY2006, Congress prohibited FMF toGuatemala, and required notification to Congress before any funds are allocated to Haiti.

International Military Education and Training. The IMET program provides training on a grant basis to students from allied and friendly nations. Its objectives are to improve defense capabilities, develop professional and personal relationshipsbetween U.S. and foreign militaries, and influence these forces in support of democratic governance. Training focuses on the manner in which military organizations function under civilian control,civil-military relations, military justice systems, military doctrine, strategic planning, and operationalprocedures. The largest IMET programs in Latin America are for Colombia, El Salvador, andMexico. The IMET budget for Latin America in FY2006 was $13.4 million; the FY2007 requestis for $12.6 million.

Anti-Terrorism Assistance (ATA). ATA isfunded through the State Department's Nonproliferation, Anti-terrorism, Demining, and RelatedPrograms (NADR). Other programs funded by NADR include Nonproliferation, and RegionalStability and Humanitarian Assistance. The objectives of ATA are to build the political will andoperational capacity of partner countries in the fight against global terrorism. The program providestraining, equipment, and advice to foreign law enforcement organizations. In the WesternHemisphere, Colombia has received training and equipment for anti-kidnapping units. Funding hasalso been provided for an assessment of needs study for the tri-border region of Brazil, Paraguay, andArgentina. The State Department proposed using additional funds for training and for theinvestigation of terrorist networks. For FY2006, the Administration estimates spending $$17.9million in the region; the FY2007 request is $15.3 million. (For further information, see thediscussion of terrorism in the "Additional Issues for Congress" section above.)

Multilateral Economic Assistance

Latin American countries benefit from a number of multilateral sources of assistance,including the World Bank, the United Nations and the International Fund for AgriculturalDevelopment (IFAD). There are also regional organizations that provide various forms of assistance,which are discussed below.

Inter-American Development Bank. The UnitedStates is a major donor to the Inter-American Development Bank, the primary source of multilateralfinancing for economic, social, and institutional development projects in Latin America and theCaribbean. The IDB makes near-market rate loans through its ordinary capital (OC) account andconcessional loans to poor countries through its Fund for Special Operations (FSO). Anothersubsidiary of the IDB, the Inter-American Investment Corporation (IIC), makes loans and equityinvestments to promote the growth of private enterprises. Since 1993, the Enterprise for theAmericas Multilateral Investment Fund (MIF), which is administered by IDB, has provided bothgrants and investments to businesses and nongovernmental organizations (NGOs) in Latin Americathat have demonstrated new ways to develop small enterprises, build worker skills, and strengthenenvironmental management. The FY2006 estimated U.S. contribution was $1.7 million, while the FY2007 estimate is $25 million. The FY2007 funding will be to replenish the Enterprise for theAmericas Multilateral Investment Fund.

Organization of American States (OAS). TheOAS is a regional organization of 35 countries in Latin America and the Caribbean that have pledgedto promote democracy, advance human rights, preserve peace and security, pursue free trade, andtackle difficult problems caused by poverty, drugs, and corruption. The United States contributesroughly 59% of the regular budget of the OAS. For FY2005, the U.S. contribution to the OAS was$55.7 million. Of the $55.7 million, $45.9 million was for the regular fund, and $9.8 million wasto pay tax reimbursements for U.S. employees of the OAS. The FY2006 request for the OAS was$65.9 million. The increase was to cover the cost of taxes owed for U.S. employees that are likelyto retire in the coming year.

The United States has also made substantial contributions to a few specific funds developedby the OAS through foreign operations appropriations. The OAS Fund for Strengthening Democracysupports OAS efforts to promote democracy and the Inter-American Democratic Charter throughoutthe region; the FY2006 U.S. contribution, and the FY2007 request, is $2.5 million. OASDevelopment Assistance Programs focus on Summit of the Americas mandates pertaining toeconomic prosperity, social well being, and environmental health; (8) the FY2006 U.S. contributionwas $4.7 million, while the FY2007 request $5.2 million. The OAS De-mining Program (AICMA)works to ensure that the Western Hemisphere is cleared of all land mine devices; the FY2006 U.S.contribution was $1.7 million, while the FY2006 request was for $1.8 million.

Other Types of Foreign Assistance

Highly-Indebted Poor Countries (HIPC) Initiative. The HIPC initiative was first launched in 1996 by the IMF and the World Bank to provide relief toextremely poor countries facing unsustainable amounts of foreign debt. The HIPC initiativeencompasses 41 countries, mostly in Africa, but only those that have adopted sound fiscal policiesand a poverty reduction plan may qualify. As of January 2004, 27 countries had qualified for at leastpreliminary debt reduction, although only 10 have received full HIPC relief. Latin Americanbeneficiaries of the HIPC initiative include Bolivia, Guyana, Honduras, and Nicaragua. Total costsof the HIPC initiative are estimated at $51 billion (nominal terms), roughly evenly divided betweenbilateral creditors like the United States and multilateral lenders such as the IMF and World Bank. Because only about 3% of the HIPC debt was owed to the United States, the U.S. financialcommitment has been relatively small in relation to the cost to all creditors. In FY2005, funding fordebt restructuring amounts to $99.20 million. The FY2006 request totaled $99.75 million, andCongress provided $65 million. For FY2007, the Administration has requested $182.8 million, withmost of this funding going to cover the cost of completing bilateral debt reduction for the DemocraticRepublic of Congo.

Trade Capacity Building. For FY2006, Congressprovided a total of $522 million from various accounts, including DA and ESF to assist countries'abilities to improve their trading capacities. Congress directed that $20 million in ESF and $20million in DA be used to assist the CAFTA-DR countries with labor and environmental issues. ForFY2007, the Administration included these funds in the ESF request.

Democracy Fund. For FY2006, Congress createda new account and appropriated $95 million for it. The program is to increase the effectiveness andoversight of programs that promote democracy, governance, human rights, an independent media,and the rule of law. The $95 million provided is in addition to other bilateral assistance thatpromotes democracy. Congress also directed that $3 million be provided for forensic assistance toCentral and South America, and $2 million be provided to the National Endowment for Democracyfor programs in Venezuela.