U.S. Foreign Assistance to Latin America and the Caribbean

CRS Report for Congress
U.S. Foreign Assistance to
Latin America and the Caribbean
Updated March 28, 2006
Connie Veillette, Coordinator
Analyst in Foreign Affairs
Foreign Affairs, Defense and Trade Division
Clare M. Ribando
Analyst in Latin American Affairs
Foreign Affairs, Defense and Trade Division
Mark P. Sullivan
Specialist in Latin American Affairs
Foreign Affairs, Defense and Trade Division

Congressional Research Service ˜ The Library of Congress

U.S. Foreign Assistance to
Latin America and the Caribbean
Trends in U.S. assistance to the Latin America and Caribbean region generally
reflect the trends and rationales for U.S. foreign aid programs globally. Aid to the
region increased during the 1960s with the Alliance for Progress and during the
1980s with aid to Central America. Since 2000, aid levels have increased, especially
in the Andean region as the focus has shifted from Cold War issues to
counternarcotics and security assistance. Current aid levels to Latin America and the
Caribbean comprise about 11.8% of the worldwide FY2006 bilateral aid budget.
Amounts requested for FY2007 would reduce this ratio to 10.6%. Two countries —
Honduras and Nicaragua — have signed compacts for Millennium Challenge
Account (MCA) funds. Aid levels to the region could increase further as more
countries become eligible for MCA. Both Haiti and Guyana are focus countries for
the President’s Emergency Plan for AIDS Relief (PEPFAR).
For FY2006, U.S. assistance to Latin America and the Caribbean is estimated
at $1.68 billion, the largest portion of which is allocated to the Andean region —
$919 million. Mexico and Central America are slated to receive $292 million, while
the Caribbean would receive $307 million. Brazil and the Southern Cone of South
America are to receive an estimated $36 million. The United States also maintains
programs of a regional nature that total an estimated $133 million in FY2006.
Aid programs are designed to achieve a variety of goals, from poverty reduction
to economic growth. Child Survival and Health (CSH) funds focus on combating
infectious diseases and promoting child and maternal health. Development
Assistance (DA) promotes sustainable economic growth in key areas such as trade,
agriculture, education, the environment, and democracy. The Economic Support
Fund (ESF) assists countries of strategic importance to the United States, and funds
programs relating to justice sector reforms, local governance, anti-corruption, and
respect for human rights. P.L. 480 food assistance is provided to countries facing
emergency situations, such as natural disasters. Counternarcotics programs seek to
assist countries to reduce drug production, interdict trafficking, and promote
alternative crop development. Foreign Military Financing (FMF) provides grants to
nations for the purchase of U.S. defense equipment, services and training.
The annual Foreign Operations Appropriations bills are the vehicles by which
Congress provides funding for foreign assistance programs. The FY2006 Foreign
Operations Appropriations Act (P.L. 109-102) provided $20.9 billion for the foreign
assistance budget worldwide. In the second session of the 109th Congress, Members
of Congress will likely continue to be interested in a number of related issues,
including the general effectiveness of foreign aid programs, and how best to address
the HIV/AIDS problem and poverty issues. Congress may also debate the U.S. role
in fighting narcotics trafficking and illegally armed groups in Colombia and
stabilizing the situation in Haiti. This report will be updated as events warrant.

In troduction ......................................................1
Assistance by Subregion............................................4
South America................................................5
The Andean Region........................................5
Brazil and The Southern Cone................................8
Mexico and Central America....................................10
Mexico .................................................10
Central America..........................................10
Caribbean ...................................................14
Cuba ...................................................15
Haiti ...................................................16
Regional Programs............................................18
Additional Issues for Congress......................................19
Effectiveness of Programs......................................19
Article 98 Agreements.........................................20
HIV/AIDS in the Caribbean and Central America....................20
Millennium Challenge Account..................................21
Terrorism ...................................................23
Appendix. Types of Assistance......................................24
Economic Assistance..........................................24
Child Survival and Health..................................24
Development Assistance...................................24
Transition Initiatives (TI)...................................25
Economic Support Funds...................................25
P.L. 480 Title II Food Aid..................................26
Migration and Refugee Assistance (MRA).....................26
Peace Corps.............................................26
Inter-American Foundation (IAF)............................26
Millennium Challenge Account (MCA).......................27
Global HIV/AIDS Initiative.................................27
Counternarcotics Assistance....................................27
International Narcotics and Law Enforcement (INL).............27
Andean Counterdrug Initiative (ACI).........................28
Military and Terrorism Assistance................................28
Foreign Military Financing.................................28
International Military Education and Training..................29
Anti-Terrorism Assistance (ATA)............................29
Multilateral Economic Assistance................................29
Inter-American Development Bank...........................30
Organization of American States (OAS).......................30
Other Types of Foreign Assistance...............................30
Highly-Indebted Poor Countries (HIPC) Initiative...............30
Trade Capacity Building...................................31
Democracy Fund.........................................31

List of Figures
Figure 1. U.S. Foreign Assistance to Latin America and Caribbean: Annual
Average, 1960 to 2007..........................................2
Figure 2. U.S. Assistance to Latin America by Subregion, FY2006..........4
Figure 3. The Andean Region........................................6
Figure 4. Mexico and Central America.................................9
List of Tables
Table 1. U.S. Foreign Assistance, Western Hemisphere: Major
Assistance Accounts, FY2004-FY2007............................3
Table 2. U.S. Foreign Assistance to the Andean Region:
FY2006 Estimates and FY2007 Funding Request.....................7
Table 3. U.S. Foreign Assistance to Brazil & the Southern Cone:
FY2006 Estimates and FY2007 Request............................9
Table 4. Mexico and the Central America: FY2006 Funding Estimates
and FY2007 Funding Request...................................13
Table 5. U.S. Foreign Assistance to the Caribbean: FY2006 Estimates
and FY2007 Requests.........................................17
Table 6. Western Hemisphere Regional Programs: FY2006 Estimates
and FY2007 Request..........................................18

U.S. Foreign Assistance to Latin America
and the Caribbean
Trends in U.S. foreign assistance to Latin America generally reflect the trends
and rationales for U.S. foreign aid programs globally. U.S. assistance spiked in the
1960s during President Kennedy’s Alliance for Progress, reflecting an interest in
preventing the spread of Soviet and Cuban influence in the region, and recognizing
poverty as one possible root cause of popular discord. In the 1980s, the U.S. focus
shifted to the Central American isthmus where leftist insurgencies were challenging
friendly governments, and where a leftist movement in Nicaragua had taken control
of government through armed combat. Substantial amounts of U.S. assistance were
provided to support Central American governments and the U.S.-backed Contras
seeking to overthrow the Sandinista government in Nicaragua.
In the aftermath of the 1989 U.S. military intervention in Panama, and the 1990
electoral defeat of the Sandinista government in Nicaragua, U.S. assistance to these
two countries increased substantially. Central America resolved many of its political
problems since the 1980s, although it is still one of the least developed areas in the
hemisphere. With the dissolution of the Soviet Union in 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 since 1990 is approximately half of what it was in the
1960s. The amounts requested for FY2007 represent the lowest level in more than
four decades. Some countries are benefitting from two new Presidential foreign aid
initiatives. Haiti and Guyana — identified as focus countries by the President’s
Emergency Plan for AIDS Relief (PEPFAR) — have received increased assistance
for HIV/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, with defense and diplomacy, of the National Security Strategy, developed
after the terrorist attacks of September 11, 2001. The U.S. Agency for International
Development (USAID) identifies five challenges to which U.S. assistance programs
are designed to respond: promoting transformational development;1 strengthening

1 USAID defines transformational development as “development that does more than raise

fragile states; providing humanitarian relief; supporting U.S. geostrategic interests;
and mitigating global and transnational ills. USAID identifies the main security
threats to the United States as the confluence of terrorism and the proliferation of
weapons of mass destruction, and global criminal networks. The focus has shifted
to strengthening the institutions of weak states, rather than on just economic growth,
because weak states are seen as permissive environments for terrorist and criminal
Figure 1. U.S. Foreign Assistance to Latin America and
Caribbean Annual Average, 1960 to 2007

Source: U.S. Agency for International Development, U.S. Overseas Loans and Grants
(Greenbook), Latin America and the Caribbean, U.S. Department of State, Congressional
Budget Justification, Summary Tables, FY2006 and FY2007.
1 (...continued)
living standards and reduce poverty. It also transforms countries, through far-reaching,
fundamental changes in institutions of governance, human capacity, and economic structure
that enable a country to sustain further economic and social progress without depending on
foreign aid.” U.S. Foreign Aid: Meeting the Challenges of the Twenty-first Century, January


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 it represents just a 3% decrease from FY2006
appropriated levels. The largest decrease occurs in the Development Assistance
account, which sustains a 28% reduction. The largest increase is for Economic
Support Funds (up 26%) and the Global HIV/AIDS Initiative (up 35%). The Child
Survival 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 to traditional economic and military assistance, two
countries — Nicaragua and Honduras — have signed compacts with the Millennium
Challenge Corporation (MCC) worth $175 million and $215 million respectively
over five years. These two countries would also see the largest cuts in Development
Assistance in the FY2007 budget request.
Table 1. U.S. Foreign Assistance, Western Hemisphere:
Major Assistance Accounts, FY2004-FY2007
(Millions of Current U.S. Dollars)
% (+/-)
Account F Y 2004Ac t u al F Y 2005Ac t u al F Y 2006Estimate F Y 2007Request F Y 06-
CSH150.0144.6140.9128.0- 9%
DA260.8247.2254.4181.9- 28%
ESF 148.9 163.0 120.8 152.1 26%
INL47.448.260.954.8- 10%
ACI737.6725.2727.2721.5- 1%
MRA21.523.824.322.0- 9%
GHAI 18.1 58.8 65.3 88.0 35%
IMET13.413.213.412.6- 6%
FMF119.6108.2111.7105.3- 6%
Total1,517.31,532.21,518.91,466.2- 3%
Source: Congressional Budget Justification, Foreign Operations, Summary Tables, Fiscal Years 2004-
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. For FY2006, Congress provided $20.9 billion out of
the President’s $22.8 billion international affairs request in the FY2006 Foreign
Operations Appropriations Act (P.L. 109-102). Increases in the FY2006 budget
request were due mainly to the new Millennium Challenge Account (MCA) and the
Global 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. The MCA program, if fully funded, represents one
of the few marked increases in U.S. foreign assistance since the Marshall Plan after
World War II, and the Alliance for Progress in Latin America during the 1960s.
Assistance by Subregion
For FY2006, U.S. assistance to Latin America and the Caribbean is estimated
at about $1.68 billion, including Peace Corps and P.L. 480 food aid. The total does
not include two Millennium Challenge 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, and Venezuela, and represents 55%
of regional assistance. Another $292 million, or 17%, is allocated to Mexico and
Central America, while the Caribbean would receive $307 million, or 18%. Brazil
and the Southern Cone of South America would receive an estimated $36 million,
or 2%. The United States also maintains aid programs of a regional nature, such as
trade capacity building, and migration 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 million for the Caribbean; $35 million for Brazil and the
Southern Cone; and $95 million for regional programs. According to the FY2007
budget request, the Andes would receive 56% of the regional total. The largest
decreases occur in Development Assistance and Child Survival and Health for
Central America, but the isthmus would benefit from increased Economic Support
Funds, largely for trade support for CAFTA countries, and Trade Capacity Building
South America
The largest recipients of U.S. foreign assistance in South America are the
Andean nations of Colombia, Bolivia, and Peru, where most of the world’s cocaine
originates. These nations receive funding from the Andean Counterdrug Initiative
(ACI), military assistance such as Foreign Military Financing (FMF) and
International Military Education and Training (IMET), as well as bilateral economic
assistance in the form of Development Assistance, Child Survival and Health, and
Economic Support Funds. The Andean countries of Venezuela and Ecuador, and the
non-Andean nations of Brazil and Panama also receive ACI funds but to a smaller
degree than Colombia, Bolivia and Peru. U.S. assistance to Argentina, Brazil, Chile,
Uruguay, and Paraguay amounts to $36 million in FY2006; the FY2007 request is
$35 million.2 By contrast, U.S. assistance to the Andean region totals $919 million
in FY2006, and $927 million requested for FY2007.
The Andean Region. The area is generally known for 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.
The region 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 Congress approved $1.3 billion in support of
PlanColombia. The United States had supported counternarcotics issues 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. Bolivia and Peru are major recipients of Development
Assistance, Child Survival and Health Funds, and food aid. Ecuador and Peru
receive sizeable amounts of Economic Support Funds. The Peace Corps maintains
programs in Bolivia, Ecuador, Panama, and Peru. Although Colombia is a major
recipient of ACI funds, it does not receive any economic assistance, although
portions of ACI funds are transferred to USAID for alternative development and
institution-building programs.

2 Brazil receives assistance from the Andean Counterdrug Initiative because it shares a 1,000
mile border with Colombia even though Brazil is not considered an Andean country. This
included $5.94 million in FY2006, and a requested $4 million for FY2007.

Figure 3. The Andean Region
Caribbean SeaAruba(Neth.)CuracaoBonaireNetherlands Antilles WillemstadOranjestad
Golfo deVenezuela(Neth.)
Lago deMaracaibo
Go l f oDePanama Venezuela
Pa ci fi cOcean Bogota
Co lomb ia
Qui to
Pe r u
Source:Map Resources. Adapted by CRS. (K.Yancey 5/20/04)
Andean Counterdrug Initiative. The Andean Counterdrug Initiative (ACI)
is the centerpiece of U.S. policy toward Colombia and the Andean region. It seeks
to curb narcotics production and trafficking, and to promote democracy and
economic development, which it is believed will strengthen regional security.
Colombia, Peru, and Bolivia produce virtually all of the world’s cocaine, and
Colombia has been a source of increasing amounts of high quality heroin destined for
the United States. The two leftist guerrilla organizations and 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), and the United Self-Defense Forces of Colombia (AUC) — have been
designated foreign terrorist organizations by the State Department. The FARC and
AUC have also been designated as Significant 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 help the region fight drug trafficking. Congress passed legislation
providing $1.3 billion in assistance for FY2000 (P.L. 106-246), and has provided a
total of $5 billion from FY2000 through FY2006 in ACI funds. Since 2002, Congress
has granted expanded authority to use counternarcotics funds for a unified campaign
to fight both drug trafficking and terrorist organizations in Colombia. ACI funding
for 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 ($79 million) 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 an estimated $91 million
in FY2006 in Foreign Military Financing (FMF) funds, most of which are allocated
for Colombia.
Table 2. U.S. Foreign Assistance to the Andean Region:
FY2006 Estimates and FY2007 Funding Request
($ in millions)
B o livia
FY2006 10.09 16.47 5.94 15.70 .79 79.20 .99 3 .13 132.31
FY2007 Req.10.0014.696.0024.00.0566.00.033.08123.85
Co lo mb ia
FY2006 1.68464.7889.105.81561.37
FY2007 Req. 1.68465.0090.003.84560.52
FY20066.58 2.97 .0519.80.503.3633.26
FY2007 Req.5.642.006.00 .0517.30.033.0834.10
FY2006 9.44 14.21 2.97 9.00 .05 106.92 .20 3 .02 145.81
FY2007 Req.9.0012.744.0013.00.0598.50.032.82140.14
FY2006 2.23 2.23
FY2007 Req. 1.50 .051.002.55
Air Bridge*
FY2006 13.86 13.86
FY2007 Req. 0.00
Critical Flight Safety
FY2006 29.97 29.97
FY2007 Req. 65.70 65.70
Total - FY200626.1130.6811.8824.702.57716.7690.7915.32918.81
Total - FY200724.6429.4317.5037.001.88713.5090.0912.82926.86
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 FY2007 budget
requests includes funding for ABD in the Colombia allocation.
Note: ACI totals exclude $5.94 million (FY2006) and $4 million (FY2007) for Brazil and $4.46
million (FY2006) and $4 million (FY2007) for Panama. Both receive ACI funding because they share
borders with Colombia, although neither is considered an Andean nation. “Other includes Non-
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 Colombia receiving 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 Denial Program,
that is operational only in Colombia, would be funded out of the Colombia
allocation. For a second year, the Administration is requesting funds for a Critical
Flight Safety Program to upgrade and refurbish aging aircraft used for eradication
For more information, see CRS Report RL33253, Andean Counterdrug Initiative (ACI)
and Related Funding Programs: FY2006 Assistance, by Connie Veillette; CRS Report
RL32250, Colombia: Issues for Congress, by Connie Veillette; and CRS Report
RL32774, Plan Colombia: A Progress Report, by Connie Veillette.
Brazil and The Southern Cone. The countries of Brazil, Argentina, Chile,
Paraguay, and Uruguay are considered middle- income countries and therefore
receive lower levels of assistance. The area is estimated to receive nearly $36 million
in FY2006, while $35 million is requested for FY2007. Most of this funding goes
to Brazil for Development Assistance and Child Survival and Health, and Paraguay
for Development Assistance, Child Survival and Health, and Economic Support
Funds. The Peace Corps maintains a program in Paraguay. As mentioned earlier,
Brazil receives ACI funding because it shares a long border with Colombia. The
focus in Brazil is on generating sustainable economic growth and addressing
extensive poverty and social inequality. Nearly one-third of Brazilians live below the
international poverty line.3 With regard to health issues, nearly 60% of all HIV/AIDS
cases in South America are in Brazil, while the country also ranks high in malaria
and tuberculosis cases. Another area of focus is environmental degradation,
particularly in the Amazon region, where deforestation is a problem. Paraguay, the
region’s second largest recipient of aid, has suffered multiple years of stagnant
growth and a large external debt. U.S. programs focus on economic growth,
reproductive health, the environment, and democracy.

3 The World Bank defines the international poverty line as U.S. $1 and $2 per day in 1993
Purchasing Power Parity (PPP), which adjusts for differences in the price of goods and
services between countries. The $1 per day level is generally used for the least developed
countries, such as in Africa, while the $2 per day level is used for middle income countries
such as in Latin America.

Table 3. U.S. Foreign Assistance to Brazil & the Southern Cone:
FY2006 Estimates and FY2007 Request
($ in millions)
Co untry DA CSH ESF ACI FM F IM ET O ther To ta l
Ar ge nt i na
FY2006 .051.09.771.91
FY2007 Req. .
B r azil
FY2006a8.013.07 5.94 .051.0518.12
FY2007 Req.8.005.99 4.00 .05.9919.03
FY2006 .59.64.471.70
FY2007 Req. .
P a r a gua y
FY20064.392.881.98 .053.0112.31
FY2007 Req. .052.9711.26
U r ugua y
FY2006 .05 0.05
FY2007 Req. .05 0.05
S. Am. Reg.
FY20061.49 1.49
FY2007 Req.2.00 2.00
Total - 200613.895.951.985.940.641.885.3035.58
Total - 200714.
Source: Figures are drawn from Congressional Budget Justification, Foreign Operations, Summary
Tables, 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 Peace Corps.
a. Brazil receives ACI funding because it shares a 1,000 mile border with Colombia, although it is not
considered an Andean nation.

Figure 4. Mexico and Central America
G r e a
t e r L
esser An
t i l l e s
Source: Map Resources. Adapted by CRS. (K.Yancey 4/18/04)

Mexico and Central America
Mexico. Although Mexico has a stronger bilateral relationship with the United
States than any other country in Latin America, it is a middle-income nation that has
not been a traditional recipient of U.S. foreign assistance. With the entry into force
of the North American Free Trade Agreement (NAFTA) in 1994, Mexico became the
United States’ second largest trading partner in 1999. Burgeoning trade ties
coincided with the election of new administrations in both countries in 2000 and
promises of greater U.S.-Mexico cooperation 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 of nearly $74 million in FY2005. Total aid to Mexico decreased slightly
in FY2006 to $69 million and the Administration has requested $63 million for
FY2007. The higher total assistance figures have been primarily the result of large
increases in counter-narcotics (INL) funding, used since 2001 to improve Mexico’s
interdiction capacity, surveillance, and intelligence capabilities. INL funding rose
from only $12 million in FY2003 to close to $40 million in FY2005 and have
remained level since that 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, accountable governance and rule of
law, infectious disease prevention and control, and educational exchange and
scholarships. 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 $39 million. The Administration also requested about
$15 million in DA, CSH, and Peace Corps funding.
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. military personnel from the jurisdiction of the ICC and thus became
subject to a suspension of IMET funds under the ASPA and of ESF funds under the
Nethercutt Amendment. Mexico received $1.3 million in 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. In addition,
Mexico was to have received FMF funding for the first time in FY2006 totaling $2.5
million, but that funding was frozen after the ICC ratification and was not included
in the FY2007 budget request. Mexico could also potentially lose $9 million in ESF
funds in FY2006 and FY2007.
Central America. Central America is a region comprised of seven small
countries with limited populations and economic resources. Although Panama and
Belize are on the Central American isthmus and receive small amounts of U.S. aid,
their distinctive histories distinguish them from the five core countries — Guatemala,
El Salvador, Honduras, Nicaragua, and Costa Rica — generally referred to as
“Central America.” Belize is considered a Caribbean nation because of its history and
linkages with the English-speaking Caribbean. Panama has a history of extensive
economic linkages with the United States because of the Panama Canal. Among the
five core Central American countries, Costa Rica enjoys a long history 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 in the 1990s, are still recovering from decades of civil war and trying
to confront high levels of poverty and violent crime. Despite these differences, each
of the countries in Central America is highly dependent on trade with the United
States, and that trade is likely to increase significantly with implementation of the
U.S.-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA).
In order to assist with implementation of DR-CAFTA, the FY2005 Consolidated
Appropriations 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 DA funds. In addition, the Central America Regional
program, for which Congress provided an estimated $12 million in FY2006 and the
Administration requested $18.7 million for FY2007, has focused on fostering
regional trade integration, democracy programs, immigration issues, organized crime
(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 was provided 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 fund economic growth, justice sector reform, and other
democracy programs. FY2007 funding for the five core Central American countries
would decline by 9% from FY2006, with the largest cuts occurring in Development
Assistance. The Central American countries received an estimated $90.6 million in
FY2006, but the Administration has requested only $66.2 million for FY2007. Some
of that funding would be shifted to the Economic Support Fund (ESF) account for
trade capacity building that was included in Development Assistance in previous
years. In FY2006, ESF funds were slated for Guatemala, Nicaragua, and Panama,
totaling an estimated $8.8 million. The FY2007 Administration request includes ESF
funds for El Salvador, Guatemala, and Nicaragua totaling an estimated $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 infectious diseases. Possessing high levels of poverty and unsustainable
levels of foreign debt, Honduras and Nicaragua 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 from the new Millennium Challenge Corporation. In June 2005, Honduras
signed a five-year, $215 million 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 became eligible
to receive MCA funds in FY2006. Although Millennium Challenge funds were
supposed to be in addition to, not a substitute for, traditional aid programs, all three
countries that have either signed, or been deemed eligible for MCC Compacts, would
have their DA and CSH funds cut under the FY2007 request.
Finally, the United States provides small amounts of IMET funding to all
countries in Central America 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 of Military Assistance
Program (MAP) funds, a program later supplanted by the FMF program, to
Guatemala that had been withheld since 1990 because of human rights concerns.
However, the FY2006 Foreign Operations Appropriations Act (P.L. 109-102)
maintained a prohibition on FMF funding 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), formerly known as
Forward Operating Locations (FOLs), in the region, and a new International Law
Enforcement Academy (ILEA). The FY2006 estimated provision of $9.9 million in
Foreign Military Financing 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 only country in Central America that may
be subject to sanctions on military aid and ESF funds in FY2006 for failing to
conclude and Article 98 agreement with the United States.
For more information, see CRS Report RL32724, Mexico-U.S. Relations: Issues for theth
109 Congress, by K. Larry Storrs; CRS Report RL30981, Panama: Political and
Economic Conditions and U.S. Relations, by Mark Sullivan; CRS Report RS21655, El
Salvador: Political and Economic Conditions and Relations with the United States, by
Clare Ribando; CRS Report RS21103, Honduras: Political and Economic Situation and
U.S. Relations, by Mark Sullivan, CRS Report RL32124; Guatemala: Political
Conditions, Elections and Human Rights, by Maureen Taft-Morales; and CRS Report
RS21943, Costa Rica: Background and U.S. Relations, by Connie Veillette.

Table 4. Mexico and the Central America:
FY2006 Funding Estimates and FY2007 Funding Request
($ in millions)
FY200614.083.999.01 .0539.60 2.1368.86
FY2007 Req.9.283.729.00 .0539.00 1.8462.89
Costa Rica
FY2006 .05 1.791.84
FY2007 Req. .05 1.841.89
El Salvador
FY200622.518.14 1.78 9.902.7945.12
FY2007 Req.7.567.3510.0 1.83 5.502.8635.10
FY20069.7012.044.4621.61.402.48 3.8454.53
FY2007 Req.7.5210.8413.0018.50.492.20 3.8056.35
H o nd ur a s
FY200618.8213.14 10.391.09 .893.3447.67
FY2007 Req.13.2912.17 16.001.29 .683.3446.77
FY200620.847.703.3711.73.59 .592.6547.47
FY2007 Req.12.996.663.0012.50.59 .502.5838.82
FY2006a4.34 .99 .794.46.993.3114.88
FY2007 Req.3.18 .654.00.783.1411.75
Central America Regional
FY20065.886.04 11.92
FY2007 Req.13.005.70 18.70
Total - FY200696.1751.0517.8343.734.7546.5412.3719.85292.29
Total - FY200766.8246.4435.0047.004.9545.207.4619.40272.27
Source: Figures are drawn from Congressional Budget Justification, Foreign Operations, Summary
Tables, 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 Andean
Counterdrug Initiative account. Panama shares a border with Colombia, although it is not
considered an Andean nation.

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 the northern coast of South
America, Guyana and Suriname, and one country, Belize, located in Central America,
that historically and culturally share similar backgrounds with the Caribbean.
The United States has provided considerable amounts of foreign assistance to
the Caribbean over 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 the Eastern Caribbean also provided
considerable assistance, especially in the aftermath of the 1983 U.S.-led military
intervention in Grenada. In the 1990s, U.S. assistance to Caribbean nations declined
to about $2 billion, or an annual average of $205 million. Haiti was the largest
recipient of 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, almost 25% 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. The bulk of U.S.
assistance was economic assistance, including Development Assistance, Economic
Support Funds, and P.L. 480 food aid. Military assistance to the region amounted to
less than $60 million during the 1990s.
Since FY2000, U.S. aid to the Caribbean region (including FY2006 aid
estimates) has amounted to almost $1.6 billion, because of increased HIV/AIDS
assistance to the region (especially to Guyana and Haiti), disaster and reconstruction
assistance in the aftermath of several hurricanes and tropical storms in 2004, and
increased support for the interim government in Haiti following the departure of
President Jean-Bertrand Aristide from power. Haiti accounted for some 51% of
assistance to the Caribbean region during this period. As in the 1990s, the bulk of
assistance to the region consisted of economic assistance. With regard to hurricane
disaster assistance, Congress appropriated $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 $2 million for other
countries affected by the storms.
For FY2007, the Administration has requested about $321 million in assistance
for the Caribbean, with about $198 million or almost 62% of the total for Haiti, $35
million for the Dominican Republic, $31 million for Guyana, and almost $17 million
for Jamaica. Assistance to the 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’s Caribbean Regional
program, which also funds some region-wide projects; for FY2007, the
Administration requested $11.6 million for the program. The Eastern Caribbean
would also receive about $1.5 million in military assistance and $3.2 million to
support a Peace Corps presence. The request of $3 million for the “Third Border
Initiative” (TBI) would fund regional projects for the 14-nation Caribbean
Community (CARICOM) plus the Dominican Republic that focus on improving

travel 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, would support efforts to increase maritime security in
the Dominican Republic, Honduras, Panama, the Bahamas, and Jamaica.
Looking ahead to future years, several Caribbean nations are potential recipients
for Millennium Challenge Account (MCA) assistance, an initiative to target foreign
assistance to countries with strong records of performance in the areas of governance,
economic policy, and investment 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 approved in 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 a result, three additional Caribbean countries — the Dominican
Republic, Jamaica, and Suriname — could become eligible for MCA funding.
For more information, see CRS Report RL32160, Caribbean Region: Issues in U.S.
Relations, by Mark Sullivan, and CRS Report RL32001, AIDS in the Caribbean and
Central America, by Mark Sullivan.
Cuba. Over the past several years, the United States has provided assistance to
increase the flow of information on democracy, human rights, and free enterprise to
Communist Cuba. The assistance has been part of the U.S. strategy of supporting the
Cuban people while at the same time isolating the government of Fidel Castro
through economic sanctions. USAID’s Cuba program supports a variety of U.S.-
based nongovernmental organizations to promote rapid, peaceful transition to
democracy, help develop civil society, and build solidarity with Cuba’s human rights
activists. These efforts are largely funded through Economic Support Funds (ESF),
but in FY2006 also included some Development Assistance funds. Funding for such
projects amounted to $6 million in FY2003, $21.4 million in FY2004 (because of re-
programmed ESF assistance to fund the democracy-building recommendations of the
Commission to Provide Assistance 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 funds will 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 will help the
Cuban people hasten the dictatorships’s end.” ESF will also continue to support
USAID-administered programs with democracy and human rights groups. Key
groups targeted for assistance include women, Afro-Cubans, and youth as well as
libraries, labor organizations, human rights groups, and other independent non-
governmental organizations in Cuba.
U.S. democratization assistance for Cuba is also provided through the National
Endowment for 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 of undertakings,
such as assistance to Cuba’s independent libraries; the promotion of general human
rights, labor rights, and women’s rights; and support for the work of the Varela
Project and National Dialogue that emphasize a peaceful democratic transition.
For more information, see CRS Report RL32730, Cuba: Issues for the 109th Congress,
by Mark Sullivan.
Haiti. Following a period of political discord and violence, 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 help restore order. This was subsequently replace by a U.N.
peacekeeping force, the U.N. Stabilization Mission in Haiti (MINUSTAH) beginning
in June 2004, with the objective of securing a stable and secure environment and
advancing the rule of law. After being postponed several times because of political
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 his supporters when it appeared that a run-off election would be
necessary. U.S. foreign aid to Haiti increased significantly in support of the interim
Haitian government. Assistance increased from about $72 million in FY2003 to
$132 million in FY2004, and $183 million in FY2005. Because Haiti is a focus
country under the President’s Emergency Plan for AIDS Relief (PEPFAR), it has
benefitted 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 a total of $194 million in assistance, largely in CSH, ESF, DA, and
counternarcotics funds. It also received $47.3 million for HIV/AIDS programs. For
FY2007, the Administration requested $198 million in assistance for Haiti, including
$63 million in GHAI funding, $50 million in ESF, $34.5 million in food aid, $23
million in Development Assistance, $15 million in Child Survival and Health
assistance, and $10 million in International Narcotics Control and Law Enforcement
For more information, see CRS Report RL32294, Haiti: Developments and U.S. Policy
Since 1991 and Current Congressional Concerns, by Maureen Taft-Morales.

Table 5. U.S. Foreign Assistance to the Caribbean:
FY2006 Estimates and FY2007 Requests
($ in millions)
Co untry DA CSH GHAI ESF PL480 IM ET INL F M F O t he r To t a l
FY2006 0.390.500.101.532.52
FY2007 Req. 0.230.500.08 0.81
B e lize
FY2006 0.20 0.201.862.26
FY2007 Req. 0.25 0.181.872.30
Cub a
FY20061.98 8.91 10.89
FY2007 Req. 9.00 9.00
Dominican Republic
FY20067.0712.72 1.98 1.29 0.943.1227.12
FY2007 Req.6.0111.34 12.00 1.09 0.733.8535.02
Guya na
FY20063.96 18.00 0.30 0.101.6123.97
FY2007 Req.4.00 25.00 0.32 0.081.6131.01
FY2006 29.70 19.80 47.30 49.50 31.48 0.21 14.85 0.99 .55 194.38
FY2007 Req.23.1415.8163.0050.0034.500.2510.000.78.56198.04
FY20069.584.47 0.890.990.592.9519.47
FY2007 Req.7.392.81 0.750.900.504.2716.62
Sur i name
FY2006 0.15 0.101.381.63
FY2007 Req. 0.15 0.081.471.70
Trinidad & Tobago
FY2007 Req. 0.05 2.852.90
Third Border Initiative
FY2006 2.97 2.97
FY2007 Req. 3.00 3.00
Operation Enduring Friendship
FY2006 3.96 3.96
FY2007 Req. 4.00 4.00
Caribbean Region
FY20064.896.44 11.33
FY2007 Req.6.005.64 11.64
Eastern Caribbean
FY2006 0.76 0.893.164.81
FY2007 Req. 0.77 0.783.234.78
Total - FY200657.1843.4365.3063.3631.484.2416.348.7617.14307.23
Total - FY200746.5435.6088.0074.0034.503.8611.407.2119.71320.82
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 Enduring
Friendship includes activities in Panama.

Regional Programs
The United States also provides assistance for programs that have a regional
scope. The Latin America and Caribbean (LAC) program is the largest regional
program and provides Child Survival and Health, Development Assistance, and
Economic Support Funds for a number of purposes, such as justice and health-related
programs. Funds are used to strengthen democratic institutions and processes,
improve education and health, and protect biodiversity and support new
environmental technologies. Anti-Terrorism funding for the Western Hemisphere
focuses mainly on Colombia, and the tri-border region of Argentina, Brazil and
Paraguay. INCLE funding is also provided to the region centering on drug transit
zones in Central America and the Caribbean.
Table 6. Western Hemisphere Regional Programs:
FY2006 Estimates and FY2007 Request
($ in millions)
ProgramFunding level
Anti-Corruption (ESF)
FY2007 —
Latin America/Caribbean Regional
Latin America Regional (INCLE)
FY2006 2.48
FY2007 —
Migration/Refugee Assistance
OAS Demining
OAS Development Assistance
OAS Fund for Strengthening Democracy
Summit of the Americas Support
Trade Capacity
Western Hemisphere Regional (NADR)
Caribbean/Central America Regional
FY2006 —

ProgramFunding level
Total - FY2006145.27
Total - FY2007106.80
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 in reducing poverty, and promoting U.S. interests abroad. Critics argue that
aid is often wasted on countries that do not responsibly use the assistance to promote
the welfare of their citizens. Others argue that programs are often ill-designed in
relation to their goals. Proponents of foreign aid argue that development is a long
term process that must be consistently implemented to see results. Recent studies
have noted a marked lack of progress in reducing global poverty, and question the
correlation between 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 as does trade.5 One of the reasons suggested to explain
this perceived lack of success is that aid programs often have objectives other than
pure development, such as national security, environmental or human rights
considerations. Another reason often pointed to is the nature and extent of corruption
in societies that have little history of transparency.
The newly created Millennium Challenge Account (MCA) seeks to address
some of these concerns, 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 discussion below.) Proponents of the MCA view it as
a way to reform foreign aid programs by rewarding good performers and by focusing
on the objectives of poverty reduction, with limited consideration of strategic or
political objectives. Critics raise concerns that by creating new aid programs,
including the HIV/AIDS initiative, which coexist with traditional aid programs, there
is a fragmentation of resources, and potentially a lack of coordination among the6
various entities administering the programs.
Secretary Rice’s announcement of a newly created position — Director of
Foreign Assistance — that will be held concurrently by the USAID Administrator,

4 Paul Collier and David Dollar, “Aid Allocation and Poverty Reduction,” The World Bank,
January 1999; Foreign Assistance in Focus: Emerging Trends, InterAction, November

2003; and William Easterly, “The Failure of Development,” Financial Times, July 3, 2001.

5 Evan Osborne, “Rethinking Foreign Aid,” Cato Journal, fall 2002.
6 Foreign Assistance in Focus: Emerging Trends, InterAction, November 2003.

was unveiled as a way to better coordinate aid programs government-wide. There
has been much debate as to whether this reorganization of foreign aid will be
effective, and some observers believe it is not ambitious enough, advocating a
complete restructuring of foreign aid accounts. Any such reform would require
legislation. It is possible that further reforms could be proposed for FY2008.
For more information, see CRS Report 98-916, Foreign Aid: An Introductory Overview
of U.S. Programs and Policy, by Curt Tarnoff and Larry Nowels.
Article 98 Agreements
A further concern of policymakers has centered on current U.S. policy opposing
the application of jurisdiction of the International Criminal Court to U.S. citizens.
Countries who have not agreed to sign so-called Article 98 agreements with the
United States are subject to a cutoff of U.S. military assistance, comprising Foreign
Military Financing, and International Military Education and Training funds. (Such
agreements, referring to Article 98 of the Rome Treaty on the International Criminal
Court, prevent the ICC from proceeding with a request for the surrender of U.S.
personnel present in the country.) These agreements are required under the American
Services Members Protection Act of 2002, that was incorporated as Title II of H.R.
4775, the FY2002 Supplemental Appropriations Act (P.L. 107-206). Section 574 of
both the FY2005 and FY2006 Foreign Operations Appropriation acts extends the
provision of law to include Economic Support Funds. The President may waive the
law if it is in the national interest. Colombia, the major recipient of military
assistance in Latin America, has signed an agreement. Others that have not, 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
negative consequences for economic and social development, and continued
increases in infection rates threaten future development prospects. In contrast to
other parts of Latin America, the mode of transmission in several Caribbean and
Central American countries has been primarily through heterosexual 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, the Dominican Republic, Jamaica, and Suriname, with rates
over 1%. In Central America, Honduras has the 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 mix of support by governments in the region, bilateral donors (such as the
United States, Canada, and European nations), regional and multilateral
organizations, and nongovernmental organizations (NGOs). The World Bank, the
Inter-American Development Bank, and the Global Fund to Fight AIDS,
Tuberculosis, and Malaria have funded numerous HIV/AIDS projects in the

Caribbean and Central America. Many countries in the region have national AIDS
programs that are supported through these efforts.
USAID has been the lead U.S. agency fighting the epidemic abroad since 1986.
USAID’s funding for HIV/AIDS in Central America and the Caribbean region rose
from $11.2 million in FY2000 to $33.8 million in FY2003. Because of the inclusion
of Guyana and Haiti as focus countries in the President’s Emergency Plan for AIDS
Relief (PEPFAR), funded through the Global HIV/AIDS Initiative (GHAI) account,
U.S. assistance to the Caribbean and Central America for HIV/AIDS increased to $47
million in FY2004, $82.5 million in FY2005, and an estimated $92.7 million 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 $25 million for non-focus countries and programs in Central
America and the Caribbean through the Child Survival and Health account.
Some Members of Congress want to expand the list of focus countries to include
14 additional Caribbean countries. In the 109th Congress, S. 600, the Foreign Affairs
Authorization Act, FY2006 and FY2007, contains a provision (Section 2516) that
would add 14 Caribbean countries to the list of focus countries targeted for increased
HIV/AIDS assistance. In other action, the 109th Congress approved H.R. 1409 (P.L.
109-95), which authorizes assistance for orphans and other vulnerable children in
developing countries, including in the Caribbean. Pending legislative initiatives in
the second session include H.R. 164, which would 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.
For more information, see CRS Report RL33485, U.S. International HIV/AIDS,
Tuberculosis, and Malaria Spending: FY2004-FY2007, by Tiaji Salaam-Blyther; CRS
Report RL31712, The Global Fund to Fight AIDS, Tuberculosis and Malaria:
Background and Current Issues, by Raymond W. Copson and Tiaji Salaam; and CRS
Report RL32001, AIDS in the Caribbean and Central America, by Mark Sullivan.
Millennium Challenge Account
The MCA initiative differs from traditional USAID programs in a number of
respects, and could have implications for the future of assistance programs in general.
First, funding is linked to performance and results. Second, the conceptualization of
development projects rests with the countries themselves and their national
development strategies, with the United States playing an advisory role. Third, MCA
funds are intended to center exclusively on development goals without regard for
other U.S. foreign policy and geostrategic objectives. While the international
community and NGOs have been generally supportive of the initiative, some
concerns have been expressed that funding for traditional assistance programs (DA
and CSH) could end up being cut to accommodate the increased funding for MCA.
The Administration has stated that it does not intend for the MCA to negatively affect
its other development programs. Despite that assertion, funding for DA and some
health programs under CSH have declined. Development assistance in Latin
America is proposed for FY2007 at 28% less than in FY2006. CSH would also

decline by 9%. The countries most affected by these proposed cuts are in Central
America — two of which have signed MCC compacts (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
capita incomes below $2,935. But in the first two years (FY2004 and FY2005),
countries with per capita incomes below $1,415, and that can borrow from the World
Bank’s International Development Association (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 amount appropriated for the MCA
in that year. However, income level is not the only criteria for participation. Some
countries may not receive funding if they do not meet certain criteria relating to
political rights and civil liberties. Performance indicators fall into three general
categories — ruling justly, investing in people, and economic freedom. Specific
measurements of each category would be taken from the World Bank, the World
Health Organization, and the Freedom House annual study on civil liberties and
political freedom, among others. It is anticipated that the list of eligible 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 qualify for “threshold assistance.” Both Guyana and Paraguay were
invited to participate in the threshold program in 2005. Paraguay has concluded an
agreement for such assistance in the amount of $37 million.
Congress has been involved in determining the criteria for country eligibility
and performance indicators, and funding levels. Congress passed P.L. 108-199
(Division D) that created the Millennium Challenge Corporation (MCC), the entity
charged with managing the initiative, and appropriated $994 million for the first year,
instead of the $1.3 billion requested by the Administration. For FY2005 and
FY2006, MCC funding was $1.5 billion and $1.7 billion; the FY2007 request is $3
With regard to Latin America, countries that have per capita incomes of less
than $1,415 and that are IDA-eligible include Bolivia, Guyana, Haiti, Honduras, and
Nicaragua. Of those candidate countries, Bolivia, Honduras and Nicaragua were
deemed eligible to participate after the MCC board met to approve participants on
May 6, 2004. In 2005, two agreements, called compacts, were signed with 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 law programs. Beyond FY2006, when eligible countries can have per capita
incomes up to $2,935, the following additional Latin American countries could
qualify: Brazil, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala,
Jamaica, Peru, St Vincent and the Grenadines, and Suriname. In November 2005, the
MCC named El Salvador as an eligible “lower middle income” country.
For more information, see CRS Report RL32427, The Millennium Challenge Account:
Implementation of a New Foreign Aid Initiative, by Larry Nowels.

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 regional cooperation. The State Department, in its annual
report on worldwide terrorism (Country Reports on 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 since 1982.
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 such areas as airport security management, hostage
negotiations, bomb detection and deactivation, and countering terrorism financing.
ATA financing is provided through the annual foreign operations appropriations
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-border area of Brazil, Paraguay, and Argentina.
For FY2006, an estimated $12.3 million in ATA will be provided for the Western
Hemisphere, with $5.3 million for Colombia and $1.5 million for the Bahamas. The
FY2007 Western Hemisphere request is $11.9 million, with $3.1 million for
Colombia, $2.8 million for Trinidad and Tobago, and $1.4 million for Jamaica.
In addition to ATA assistance, several Latin American countries would receive
small amounts of assistance in FY2007 under NADR’s Export Control and Related
Border Security Assistance (EXBS) program. The program helps strengthen the
countries’ export and border control systems to prevent the proliferation of weapons
of mass destruction, missile delivery systems, and conventional weapons. A total of
$865,000 is requested for Western Hemisphere NADR/EXBS funding 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 foreign governments or to nongovernmental organizations working in those
countries. Bilateral economic aid 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 critical transnational issues such as
HIV/AIDS, the environment, and humanitarian relief. Bush Administration officials
have maintained that U.S. policy towards Latin America is based on three broad
objectives — strengthening democracy, encouraging development, and enhancing
security.7 While hemispheric security is addressed by programs funded through
counternarcotics and military accounts, most transformational development programs
aimed at fostering social, political, and economic 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 on combating infectious
disease and promoting child and maternal health, family planning, and reproductive
health. For FY2006, the Administration requested $125.3 million for Latin America
out of a total of $1.25 billion in CSH funds globally. Congress provided nearly $1.6
billion globally but did not earmark by region. The FY2006 request for Latin
America reflected a 12.7% decrease from the FY2005 estimated allocation of $143.5
million. Traditional CSH programs are being cut in favor of new initiatives such as
the President’s Emergency Plan for AIDS Relief (PEPFAR), a State Department
administrated program currently targeting two Latin American countries, Haiti, and
Guyana. For FY2006, the Administration estimates spending $140.9 million in the
Western Hemisphere. Its FY2007 request is $128 million, a reduction of 9% from
the previous year’s estimate.
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 policy framework and strategic “prevention-to-care continuum” espoused
by PEPFAR. Child survival and maternal health programs strive to reduce the
number of deaths in children under the age of five and save the lives of women in
childbirth. Interventions used to reduce preventable child deaths include
immunizations, pneumonia and diarrhea prevention and treatment, oral rehydration,
safe birthing and prenatal care, nutrition, and breast-feeding initiatives. The final
major component of CSH funds support expanded access to information and services
concerning family planning and reproductive health.
Development Assistance. DA funds aim to achieve measurable
improvements in key areas to foster sustainable economic growth: trade and
investment, agriculture, education, environment, health, and democracy. The

7 U.S. Department of State, “Pursuit of Three Important Objectives in the Western
Hemisphere,” J. Curtis Struble, Acting Assistant Secretary of State, Bureau of Western
Hemisphere Affairs. Remarks to the Senate Committee on Foreign Relations, April 2, 2003.

Administration requested $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, Congress appropriated $1.524 billion for worldwide
programs, but did not earmark DA funds by country or region. The Administration
estimates spending $254.4 million in FY2006 in the Western Hemisphere. Congress
did include report language that Central American countries should receive no less
than they did in FY2005 in CSH and DA funds. Congress also allocated $20 million
in DA funds 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 previous year. Some of this decrease is made up
in the ESF account for trade capacity building in Cental America.
DA supports the Opportunity Alliance for Central America, which focuses on
facilitating regional integration and helping the region’s economies recover from
recent natural disasters, declining coffee prices and drought. Specific trade capacity-
building initiatives were undertaken prior to the negotiation of the Central American
Free Trade Agreement (CAFTA). Agriculture programs seek to promote non-
traditional agricultural exports and find agricultural niche markets for local
producers. DA funds basic education programs to strengthen preschool, primary, and
secondary education, as well as the Centers of Excellence in Teacher Training
(CETT) Initiative in Latin America and the Caribbean. USAID manages five
Presidential initiatives addressing various aspects of sustainable development. These
initiatives focus on encouraging natural resource management, developing alternative
energy sources, expanding clean water access, preventing illegal-logging, and
minimizing greenhouse gas emissions. There are justice sector modernization
programs underway in 12 countries in the region, as well as 15 anti-corruption
programs throughout Latin America. DA democracy programs also seek to strengthen
Latin American democracies by supporting elections, strengthening civil society, and
protecting human rights.
Transition Initiatives (TI). For FY2006, the Administration requested
funding for TI previously provided in the Development Assistance Account. 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 fragile states. In FY2005, the State Department estimated spending $25
million in Haiti, and $8.9 million in FY2004. Congress did not fully fund the TI
account, giving it $40 million, and leaving other funds in the DA account. For
FY2007, the Administration has requested $50 million.
Economic Support Funds. Through the security-related ESF program, the
United States provides economic aid to countries of strategic interest to U.S. foreign
policy. Funding decisions are made by the State Department; programs are managed
by USAID and the State Department. Although Israel and Egypt receive the majority
of ESF 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 estimates spending $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 trade assistance.

ESF assistance in the Andean region, Mexico, and Central America is used to
pursue justice sector reform, facilitate implementation of free trade agreements,
improve local governance, fight corruption, and promote respect for human rights.
The $3 million requested for the Third Border Initiative, which began in FY2002,
would enhance immigration, border security, rule of law, and disaster preparedness
in the Caribbean. A $9 million FY2007 request for Cuba would continue the
Administration’s efforts to support a transition to democracy there through
information dissemination and 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 for trade capacity building programs
in the CAFTA-DR countries.
P.L. 480 Title II Food Aid. This account, funded through the annual
Agriculture Appropriations bill, provides the funds for USAID to respond quickly to
the food assistance needs of countries facing emergency situations. Food aid is
targeted at vulnerable populations, especially those coping with, or recovering from,
natural or manmade disasters, including prolonged civil strife. This assistance
program is administered largely by U.S. private voluntary organizations and through
the United Nation’s World Food Program. For FY2005, the United States allocated
an estimated $108 million for P.L. 480 in Latin America, and the Administration
estimates spending $100 million in FY2006. For FY2007, the request is $118.5
million. The largest recipients of food aid in Latin America include Bolivia,
Guatemala, Haiti, Honduras, Nicaragua, and Peru.
Migration and Refugee Assistance (MRA). This program supports
refugee relief activities, and in some cases, helps resettle refugees. FY2006 funding
for MRA in Latin America is an estimated $24.3 million. The Administration
reduced its MRA request for FY2006 to $22 million. Most of the funding will be
used to help the more than 2 million internally displaced persons (IDPs) in Colombia
and thousands of refugees outside of Colombia. The State Department partners with
the International Committee of the Red Cross and the 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 on a people-to-people
basis. Countries in Latin America with Peace Corps programs include countries in
the Eastern Caribbean region and Central America, the Dominican Republic, Guyana,
Jamaica, Suriname, Mexico, Belize, Bolivia, Ecuador, Peru and Paraguay. Funding
in FY2006 totaled $44.5 million; the FY2007 request is $44.8 million.
Inter-American Foundation (IAF). The IAF is a small federal agency that
provides grants to non-profit and community-based programs in Latin America that
promote entrepreneurship, self-reliance, and economic progress for the poor. The
FY2006 estimated allocation for the IAF is 19.3 million, and the FY2007 request
maintains level funding at $19.3 million.

Millennium Challenge Account (MCA). The MCA is a Presidential
initiative announced in 2002 that is intended to increase foreign assistance to
countries below a certain income threshold that are pursuing policies intended to
promote democracy, social development, and sustainable economic growth. If fully
funded, the MCA would increase foreign assistance beginning in FY2004 so that by
FY2006 U.S. foreign aid would be $5 billion higher than three years earlier. The
FY2005 allocation for the MCA was $1.488 billion. The Administration 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 $175 million over five years, and with Honduras for
$215 million over five years. (For further information, see the discussion of the
MCA in the “Additional Issues for Congress” section above.)
Global HIV/AIDS Initiative. In 2003, President Bush announced the
President’s Emergency Plan for AIDS Relief (PEPFAR), a new initiative pledging
$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 for contributions to the Global Fund to Fight AIDS,
Tuberculosis, and Malaria. The other $5 billion would come from existing programs
managed by other agencies such as USAID and the Department of Health and Human
Services (HHS). The Global AIDS Initiative, which constitutes the bulk of PEPFAR
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, and for Guyana, at $13.2 million. The FY2006 estimate
provides $47.3 million for Haiti, and $18 million for Guyana. The FY2007 request
includes $ $63 million for Haiti and $25 million for Guyana. (For further
information, see the discussion on HIV/AIDS in the “Additional Issues for Congress”
section above.)
Counternarcotics Assistance
International Narcotics and Law Enforcement (INL). INL funds
bilateral, regional and global programs to assist foreign governments in strengthening
their law enforcement capabilities, including the ability to destroy drug crops, disrupt
drug production, and interdict drug trafficking. Its largest single program is the
Andean Counterdrug Initiative. Its other programs focus on fighting money-
laundering and terrorist financing, 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 promote demand reduction. It provides
some funding to the United Nations Office on Drugs and Crime to provide support
for legal frameworks to prevent and combat organized crime, and the Organization
of American States Drug Abuse Control Commission (CICAD) to strengthen national
drug commissions and to support the Multilateral Evaluation Mechanism (MEM).
MEM is the peer review system used to evaluate national anti-drug performance.
INL’s current bilateral assistance to 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 is requested for FY2007. Mexico would receive the most funding in FY2006

($40 million), and Haiti would receive the second highest allocation ($15 million).
Congress included language expressing concern about the rise in gang violence in
Central America and urged the Secretary of State to increase funds for gang-related
Interregional Aviation Support. INL manages the Interregional Aviation
Support program that operates a fleet of 189 fixed- and rotary-wing aircraft
supporting overflight drug crop imagery and aerial eradication programs in
Colombia, Bolivia, and Peru, as well as border security operations in Pakistan.
FY2006 funding is estimated at nearly $62.9 million, of which approximately half
is allocated for programs in the Andean region. The request for FY2007 is for $65.5
Andean Counterdrug Initiative (ACI). The core of U.S. counternarcotics
programs in Latin America is the ACI. The three primary global producers of
cocaine are Colombia, Peru and Bolivia. The objectives are to eliminate the
cultivation and production of cocaine and opium, build Andean law enforcement
infrastructure, arrest and prosecute traffickers, 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 for programs in
Colombia. Funds are divided between programs that support eradication and
interdiction efforts, as well as those focused on alternative crop development and
democratic institution building. On the interdiction side, this includes programs to
train and support national police and military forces, to provide communications and
intelligence systems, to support the maintenance and operations of host country aerial
eradication aircraft, and to improve infrastructure related to counternarcotics
activities. On the alternative development side, funds support economic
development programs in coca growing areas, including infrastructure development,
and marketing and technical support for alternative crops. It also includes assisting
internally displaced persons, promoting the rule of law, and expanding judicial
FY2006 funding for ACI was estimated at $727.2 million, and $721.5 million
is requested for FY2007. In the past, Congress has approved the Administration’s
requests, but often places conditions on U.S. assistance. For FY2006, Congress
changed the allocations slightly among countries and programs. (For further
information, see the discussion of the ACI in the “South America” section above.)
Military and Terrorism Assistance
Military assistance is provided by the State Department through the Foreign
Military Financing (FMF) program and the International Military Education and
Training program (IMET), although both are managed by the Defense Department.
Additional funding is provided from the Department of Defense for both
counternarcotics and military programs. Anti-terrorism assistance is provided
through the State Department.
Foreign Military Financing. FMF provides grants to foreign nations to
purchase U.S. defense equipment, services, and training. The program’s objectives
are to assist key allies to improve their defense capabilities, to strengthen military

relationships between the United States and FMF recipients, and to promote the
professionalism of military forces in friendly countries. In the Western Hemisphere,
a large portion of FMF is allocated for Colombia and the Andean region with the
objective of supporting the efforts of those nations to establish and strengthen
national authority in remote areas that have been controlled by leftist guerrilla
organizations, rightist paramilitaries, and narcotics traffickers. A portion of FMF
funding in Fiscal Years 2002 and 2003 went for infrastructure protection of oil
pipelines in Colombia. The program also seeks to improve foreign military
capabilities of countries that control land approaches to the United States and the
Caribbean, which is referred to as the “third border.” FMF also provides equipment
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. The requested FY2007 amount is for $105.3 million. For FY2006, Congress
prohibited FMF to Guatemala, 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
relationships between 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 operational procedures. The
largest IMET programs in Latin America are for Colombia, El Salvador, and Mexico.
The IMET budget for Latin America in FY2006 was $13.4 million; the FY2007
request is for $12.6 million.
Anti-Terrorism Assistance (ATA). ATA is funded through the State
Department’s Nonproliferation, Anti-terrorism, Demining, and Related Programs
(NADR). Other programs funded by NADR include Nonproliferation, and Regional
Stability and Humanitarian Assistance. The objectives of ATA are to build the
political will and operational capacity of partner countries in the fight against global
terrorism. The program provides training, equipment, and advice to foreign law
enforcement organizations. In the Western Hemisphere, Colombia has received
training and equipment for anti-kidnapping units. Funding has also been provided
for an assessment of needs study for the tri-border region of Brazil, Paraguay, and
Argentina. The State Department proposed using additional funds for training and
for the investigation of terrorist networks. For FY2006, the Administration estimates
spending $$17.9 million in the region; the FY2007 request is $15.3 million. (For
further information, see the discussion 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 Agricultural Development (IFAD). There are also regional organizations that
provide various forms of assistance, which are discussed below.

Inter-American Development Bank. The United States is a major donor
to the Inter-American Development Bank, the primary source of multilateral
financing for economic, social, and institutional development projects in Latin
America and the Caribbean. The IDB makes near-market rate loans through its
ordinary capital (OC) account and concessional loans to poor countries through its
Fund for Special Operations (FSO). Another subsidiary of the IDB, the Inter-
American Investment Corporation (IIC), makes loans and equity investments to
promote the growth of private enterprises. Since 1993, the Enterprise for the
Americas Multilateral Investment Fund (MIF), which is administered by IDB, has
provided both grants and investments to businesses and nongovernmental
organizations (NGOs) in Latin America that have demonstrated new ways to develop
small enterprises, build worker skills, and strengthen environmental 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
the Americas Multilateral Investment Fund.
Organization of American States (OAS). The OAS is a regional
organization of 35 countries in Latin America and the Caribbean that have pledged
to promote democracy, advance human rights, preserve peace and security, pursue
free trade, and tackle difficult problems caused by poverty, drugs, and corruption.
The United States contributes roughly 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 was to 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 likely to retire in the coming year.
The United States has also made substantial contributions to a few specific
funds developed by the OAS through foreign operations appropriations. The OAS
Fund for Strengthening Democracy supports OAS efforts to promote democracy and
the Inter-American Democratic Charter throughout the region; the FY2006 U.S.
contribution, and the FY2007 request, is $2.5 million. OAS Development Assistance
Programs focus on Summit of the Americas mandates pertaining to economic
prosperity, social well being, and environmental health;8 the FY2006 U.S.
contribution was $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 to
extremely poor countries facing unsustainable amounts of foreign debt. The HIPC
initiative encompasses 41 countries, mostly in Africa, but only those that have

8 The bulk of these contributions support the Inter-American Council for Integral
Development (FEMCIDI). FEMCIDI, financed by voluntary contributions from member
states and other assets, contributes to national and multinational development projects.

adopted sound fiscal policies and a poverty reduction plan may qualify. As of
January 2004, 27 countries had qualified for at least preliminary debt reduction,
although only 10 have received full HIPC relief. Latin American beneficiaries of the
HIPC initiative include Bolivia, Guyana, Honduras, and Nicaragua. Total costs of
the HIPC initiative are estimated at $51 billion (nominal terms), roughly evenly
divided between bilateral 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. financial commitment has been relatively small
in relation to the cost to all creditors. In FY2005, funding for debt restructuring
amounts to $99.20 million. The FY2006 request totaled $99.75 million, and
Congress provided $65 million. For FY2007, the Administration has requested
$182.8 million, with most of this funding going to cover the cost of completing
bilateral debt reduction for the Democratic Republic of Congo.
Trade Capacity Building. For FY2006, Congress provided 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 $20
million in DA be used to assist the CAFTA-DR countries with labor and
environmental issues. For FY2007, the Administration included these funds in the
ESF request.
Democracy Fund. For FY2006, Congress created a new account and
appropriated $95 million for it. The program is to increase the effectiveness and
oversight 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 that promotes democracy. Congress also directed that $3
million be provided for forensic assistance to Central and South America, and $2
million be provided to the National Endowment for Democracy for programs in