Instability in Central America—particularly the "Northern Triangle" nations of El Salvador, Guatemala, and Honduras—is one of the most pressing challenges for U.S. policy in the Western Hemisphere. These countries are struggling with widespread insecurity, fragile political and judicial systems, and high levels of poverty and unemployment. The inability of the Northern Triangle govern ments to address those challenges effectively has had far-reaching implications for the United States. Transnational criminal organizations have taken advantage of the situation, utilizing the region to traffic approximately 90% of cocaine destined for the United States, among other illicit activities. The region also has become a significant source of mixed migration flows of asylum seekers and economic migrants to the United States. In FY2017, U.S. authorities apprehended nearly 163,000 unauthorized migrants from the Northern Triangle along the southwest border; about 63% of those apprehended were unaccompanied minors or families, many of whom were seeking humanitarian protection. These mixed migration flows have continued over the past year, with some migrants banding together in large "caravans" to make the journey. The Obama Administration determined that it was "in the national security interests of the United States" to work with Central American governments to improve security, strengthen governance, and promote economic prosperity in the region. Accordingly, the Obama Administration launched a new, whole-of-government U.S. Strategy for Engagement in Central America and requested significant increases in foreign assistance to implement the strategy, primarily through the State Department and U.S. Agency for International Development (USAID). Congress has appropriated an estimated $2.1 billion in aid for the region since FY2016 but has required the Northern Triangle governments to address a series of concerns prior to receiving U.S. support. The Trump Administration has begun to adjust the Central America strategy as part of its broader reevaluation of U.S. foreign policy. Although the updated strategy maintains the objectives that were adopted during the Obama Administration, the Trump Administration's policy toward Central America places more emphasis on preventing illegal immigration, combating transnational crime, and generating export and investment opportunities for U.S. businesses. The Trump Administration also has sought to scale back—and occasionally threatened to cut off—U.S. assistance to Central America. Congress has not approved most of those proposed cuts, however, and any additional shifts in funding priorities or levels will depend on legislation adopted during the 116 th Congress. This report examines the U.S. Strategy for Engagement in Central America, including its formulation, objectives, funding, and relationship to the Alliance for Prosperity plan put forward by the Northern Triangle governments. The report also analyzes the preliminary results of the strategy and several policy issues that the 116 th Congress may assess as it considers the future of U.S. policy in Central America. These issues include the funding levels and strategy necessary to meet U.S. objectives; the extent to which Central American governments are addressing their domestic challenges; the utility of conditions placed on assistance to the region; and how changes in U.S. immigration, trade, and drug control policies could affect conditions in the region. Central America is a diverse region that includes the Northern Triangle nations of El Salvador, Guatemala, and Honduras, which are facing acute economic, governance, and security challenges; the former British colony of Belize, which is stable politically but faces a difficult economic and security situation; Nicaragua, which has comparatively low levels of crime but a de facto single-party government and high levels of poverty; and Costa Rica and Panama, which have comparatively prosperous economies and strong institutions but face growing security challenges (see Table 1 ). Given the geographic proximity of the region (see Figure 1 ), the United States historically has maintained close ties to Central America and played a prominent role in the region's political and economic development. It also has provided assistance to Central American nations designed to counter perceived threats to the United States, ranging from Soviet influence during the Cold War to illicit narcotics and irregular migration today. The U.S. Strategy for Engagement in Central America is the latest in a series of U.S. efforts over the past 20 years designed to produce sustained improvements in living conditions in the region. During the Administration of President George W. Bush, U.S. policy toward Central America primarily focused on boosting economic growth through increased trade. The George W. Bush Administration negotiated the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) and the U.S.-Panama Free Trade Agreement. It also awarded Honduras, Nicaragua, and El Salvador $851 million of Millennium Challenge Corporation (MCC) aid intended to improve productivity and connect individuals to markets. U.S. policy toward Central America shifted significantly near the end of the George W. Bush Administration to address escalating levels of crime and violence in the region. The George W. Bush Administration launched a security assistance package for Mexico and Central America known as the Mérida Initiative in FY2008, and the Obama Administration rebranded the Central America portion of the aid package as the Central America Regional Security Initiative (CARSI) in FY2010. Congress appropriated nearly $1.2 billion in aid between FY2008 and FY2015 to provide Central American partners with equipment, training, and technical assistance to improve narcotics interdiction and disrupt criminal networks; strengthen the capacities of Central American law enforcement and justice sector institutions; and support community-based crime and violence prevention efforts in the region. By the beginning of President Obama's second term, the Administration had concluded that although the resources provided through MCC, CARSI, and other U.S. initiatives had "contributed to localized gains and proof-of-concept policy examples," they had "not yielded sustained, broad-based improvements" in Central America. As a result, the Obama Administration already had begun to develop a new strategy for U.S. policy in Central America when an unexpected surge of unaccompanied minors and families from the Northern Triangle began to arrive at the U.S. border in 2014. The new strategy was approved by the National Security Council in August 2014 and became technically binding on all U.S. agencies in September 2014. Congress directed the Trump Administration to review and revise the strategy, but the updated version, released in August 2017, maintains the objectives and sub-objectives that the Obama Administration approved in 2014. The U.S. Strategy for Engagement in Central America is intended to take a broader, more comprehensive approach than previous U.S. initiatives in the region. Its stated objective is "the evolution of an economically integrated Central America that is fully democratic; provides economic opportunities to its people; enjoys more accountable, transparent, and effective institutions; and ensures a safe environment for its citizens." Whereas other U.S. efforts over the past 20 years generally emphasized a single objective, such as economic growth or crime reduction, the current strategy is based on the premise that prosperity, security, and governance are "mutually reinforcing and of equal importance." The current strategy also prioritizes interagency coordination more than previous initiatives. Many analysts criticized CARSI as a collection of "stove-piped" programs, with each U.S. agency implementing its own activities and pursuing its own objectives, which sometimes conflicted with those of other agencies, international donors, or regional partners. The U.S. Strategy for Engagement is a whole-of-government effort that provides an overarching framework for all U.S. government interactions in Central America. While U.S. agencies continue to carry out a wide range of programs, the strategy is intended to ensure their efforts—and the messages they deliver to partners in the region—are coordinated. The strategy also seeks to combine U.S. resources with those of other donors and ensure that Central American governments are committed to carrying out complementary reforms. To achieve its objectives, the U.S. Strategy for Engagement in Central America supports activities grouped under three overarching lines of action: 1. promoting prosperity and regional integration, 2. strengthening governance, and 3. improving security. With the exceptions of Costa Rica and Panama, the countries of Central America are among the poorest in the Western Hemisphere. Land ownership and economic power historically have been concentrated in the hands of a small group of elites, leaving behind a legacy of extreme inequality that has been exacerbated by gender discrimination and the social exclusion of ethnic minorities. Although the adoption of market-oriented economic policies in the 1980s and 1990s produced greater macroeconomic stability and facilitated the diversification of Central America's once predominantly agricultural economies, the economic gains have not translated into improved living conditions for many of the region's residents. Central America currently is undergoing a demographic transition in which the working age population, as a proportion of the total population, has grown significantly and is expected to continue growing in the coming decades. Although this transition presents a window of opportunity to boost economic growth, the region is failing to generate sufficient employment to absorb the growing labor supply (see Table 2 ). The U.S. Strategy for Engagement in Central America seeks to address these challenges through a variety of actions designed to promote prosperity and regional integration. The strategy aims to facilitate increased trade by helping the region take advantage of the opportunities provided by CAFTA-DR and other trade agreements. For example, USAID seeks to strengthen the capacities of regional organizations, including the Central America Integration System, to analyze, formulate, and implement regional trade policies. Likewise, the Department of Commerce is providing training and technical assistance intended to improve customs and border management and facilitate trade. The strategy also seeks to diversify and connect electric grids in Central America to bring down the region's high electricity costs, which are a drag on economic growth. For example, the State Department's Bureau of Energy Resources aims to strengthen the Central American power market and regional transmission system and to enhance sustainable energy financing mechanisms to increase energy trade and attract investment in energy infrastructure.