U.S. Foreign Assistance to Latin America and the Caribbean: FY2006-FY2008

U.S. Foreign Assistance to Latin America and the
Caribbean: FY2006-FY2008
December 28, 2007
Connie Veillette, Mark P. Sullivan,
Clare Ribando Seelke, and Colleen W. Cook
Foreign Affairs, Defense, and Trade Division

U.S. Foreign Assistance to Latin America and the
Caribbean: FY2006-FY2008
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 5.8% of the worldwide FY2007 aid budget, including both
bilateral and multilateral assistance. Amounts requested for the regular FY2008
budget would increase this ratio to 6.1%, and to 7.2% if Congress approves
supplemental funds for a new counternarcotics initiative in Mexico and Central
America. Three countries — Honduras, Nicaragua, and El Salvador — have signed
compacts for Millennium Challenge Account (MCA) funds worth a combined $851
million. 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 the FY2008 regular budget, the Administration has requested $1.57 billion
in assistance to Latin America and the Caribbean, the largest portion of which would
be allocated to the Andean region, or $823.8 million. Mexico and Central America
are slated to receive $220.4 million in regular funds, plus $550 million in
supplemental counternarcotics funds. The Caribbean would receive $365.5 million.
Brazil and the Southern Cone of South America are to receive an estimated $18.5
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. Counternarcotics programs seek to assist countries to
reduce drug production, interdict trafficking, and promote alternative crop
development. Military assistance provides grants to nations for the purchase of U.S.
defense equipment, services, and training.
The annual State Department, Foreign Operations, and Related Programs
Appropriations bills are the vehicles by which Congress provides funding for foreign
assistance programs. Congress will likely continue to take interest in a number of
related issues, including the level of aid, the effectiveness of counternarcotics
assistance, and how best to address the spread of HIV/AIDS, and address poverty in
the region. This report will be updated as country level funding figures for FY2008
become available.

In troduction ......................................................1
Historical Trends..................................................2
Assistance by Subregion............................................5
Andean Region................................................6
Andean Counterdrug Initiative................................7
Mexico and Central America.....................................7
Mexico ..................................................7
Central America...........................................9
Caribbean ...................................................11
Haiti ...................................................13
Cuba ...................................................14
Brazil and Southern Cone......................................15
Regional Programs............................................16
Issues for Congress...............................................16
Effectiveness of Programs......................................16
Aid Reform.................................................17
Article 98 Agreements.........................................19
HIV/AIDS in the Caribbean and Central America....................19
Millennium Challenge Corporation...............................20
Narcotics ...................................................22
Interregional Aviation Support..............................22
Appendix A. U.S. Assistance to Latin America, FY2006-FY2008,
by Subregion, Country, and Account..............................23
Appendix B. Types of Assistance....................................31
Economic Assistance..........................................31
Child Survival and Health..................................31
Development Assistance...................................31
Transition Initiatives (TI)...................................32
Economic Support Funds...................................32
P.L. 480 Title II Food Aid..................................32
Migration and Refugee Assistance (MRA).....................32
Peace Corps.............................................32
Inter-American Foundation (IAF)............................32
Millennium Challenge Account (MCA).......................32
Global HIV/AIDS Initiative.................................33
Counternarcotics Assistance....................................33
International Narcotics and Law Enforcement (INL).............33
Andean Counterdrug Initiative (ACI).........................33
Military and Anti-Terrorism Assistance...........................34
Foreign Military Financing.................................34
International Military Education and Training..................34
Anti-Terrorism Assistance (ATA)............................34
Multilateral Economic Assistance................................35

Organization of American States (OAS).......................35
Other Types of Foreign Assistance...............................35
Highly-Indebted Poor Countries (HIPC) Initiative...............35
Democracy Fund.........................................36
List of Figures
Figure 1. U.S. Foreign Assistance to Latin America and the Caribbean,
FY1946 to FY2007(in billions constant 2007 dollars).................3
Figure 2. U.S. Assistance, Selected Sectors FY2000 to FY2007
(millions constant 2007 dollars)...................................5
Figure 3. Percentage Share of Total Aid to Latin America and the Caribbean,
by Subregion, FY2007..........................................6
List of Tables
Table 1. U.S. Assistance to Latin America and Caribbean, Major
Assistance Accounts, FY2000 to FY2008...........................4
Table 2. Supplemental Funding Request for Mérida Initiative, FY2008........9
Table 3. Millennium Challenge Corporation, Compacts and Threshold
Grants in Latin America........................................21

U.S. Foreign Assistance to Latin America
and the Caribbean: FY2006-FY2008
The United States has maintained foreign aid programs in Latin America and
the Caribbean since the 1940s, although funding levels were minimal until the early
1960s. U.S. objectives have varied over the years. Recent programs are meant to
address poverty, health, economic growth, counternarcotics, and trade capacity
building. The region is considered important to U.S. interests as countries of Latin
America and the Caribbean are important trading partners, sources of immigration
to the United States, and production centers and transit points for illegal narcotics.
Environmental concerns are also prominent, particularly in the Amazon basin.
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. Globally, the U.S. Agency for
International Development (USAID) identifies five challenges to which U.S.
assistance programs are designed to respond: promoting transformational1
development; strengthening 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 activities.
A foreign aid reform initiative, begun in 2006, categorizes countries in one of
five categories: transforming; developing; sustaining partners; rebuilding; and
restrictive. These categories, representing common development challenges, are
linked to strategic objectives, promoting: peace and security; governing justly and
democratically; investing in people; economic growth; and humanitarian assistance.
(See section below for more details on the effects of aid reform in Latin America.)
This report tracks foreign aid funding levels to Latin America and the Caribbean
over the last three years. The annual State Department, Foreign Operations, and

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


Related Programs Appropriations bills are the vehicles by which Congress funds
foreign assistance programs. Congress completed action on FY2008 funding in a
Consolidated Appropriations Act, Division J (H.R. 2764) passed the week of
December 17, 2007. Congress will likely continue to take interest in a number of
related issues, including the level of aid, the effectiveness of counternarcotics
assistance, and how best to address the spread of HIV/AIDS, and address poverty in
the region. This report will be updated as country specific aid levels for FY2008
become available.
ACIAndean Counterdrug Initiative
CSHChild Survival and Health
DADevelopment Assistance
DFDemocracy Fund
ERMAEmergency Refugee and Migration Assistance
ESFEconomic Support Fund
FMFForeign Military Financing
IDFAInitiative International Disaster and Famine Assistance
IMETInternational Military Education and Training
INCLEInternational Narcotics Control and Law Enforcement
MCCMillennium Challenge Corporation
MRAMigration and Refugee Assistance
NADRNon-proliferation, Anti-Terrorism, Demining, and Related Programs
PEPFARPresident’s Emergency Plan For AIDS Relief
PL 480Food for Peace aid
PMIPresident’s Malaria Initiative
TITransition Initiatives
Historical Trends
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. Countries in Central America have resolved
a number of their 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 for a time. Since 2000, U.S. assistance has focused on
support for counternarcotics activities, largely in the Andean region.
Figure 1 indicates trends in U.S. assistance since 1946 in real terms (adjusted
for inflation). U.S. assistance has not returned to levels attained during the Alliance
for Progress in the 1960s. The annual average since 1990 is approximately half of
what it was in the 1960s. During the 1990s, the regional annual average aid level
was approximately $1.9 billion; since 2000, it has averaged $2.4 billion, largely a
reflection of increases in counternarcotics resources directed at the Andean region.
The FY2008 request of $1.6 billion in the regular budget2 represents a decrease in the
average since 2000, but is consistent with levels since FY2006. When including an
additional $550 million in counternarcotics funds for Mexico and Central America
requested as part of the supplemental budget, the FY2008 request is $2.1 billion, an
increase from the previous year.
Some countries are benefitting from two new presidential 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 prevention
and treatment programs. El Salvador, Nicaragua, and Honduras have signed
Millennium Challenge Corporation (MCC) compacts that total $846 million over five
years. In addition, Guyana and Paraguay are receiving MCC Threshold grants to help
prepare them for possible compacts.
Figure 1. U.S. Foreign Assistance to Latin America and the
Caribbean, FY1946 to FY2007
(billions constant 2007 dollars)


007 $$

5.0t 2
2.0ns C
46 950 54 58 62 66 70 74 78 82 86 90 94 98 02 06
19 1 19 19 19 19 19 19 19 19 19 19 19 19 20 20
1946 to 2007
Source: USAID, U.S. Overseas Loans and Grants and Assistance from International Organizations;
U.S. State Department, Congressional Budget Justification, FY2008; and CRS calculations.
Note: Figures include annual disbursements of Millennium Challenge Corporation compacts that have
been signed with El Salvador, Nicaragua, and Honduras, and assistance provided by the Department
of Defense.
2 The $1.6 billion figure does not include some food assistance that will likely raise the total.
Food assistance is contingent on need, and allocations take place later in the budget process.

Since 2000, the region has seen an increase in assistance for counternarcotics,
military training, and HIV/AIDS programs. Other accounts have seen steady
decreases. Table 1 tracks funding since FY2000 for major assistance accounts with
figures adjusted for inflation. Figure 2 represents funding trends of major sectors
over the same period.
In the last eight years (FY2000-FY2007), the United States has funded
counternarcotics programs totaling $6.7 billion, or roughly $841 million per year.
By contrast, counternarcotics funding during the 1990s averaged $134 million per
year. The FY2008 regular request of $493.3 million, together with a $550 million
supplemental request for Mexico and Central America, amounts to $1.04 billion,
surpassing the annual average since 2000.
Table 1. U.S. Assistance to Latin America and Caribbean, Major
Assistance Accounts, FY2000 to FY2008
(millions constant 2008 U.S. dollars)
Account Actua l Actua l Actua l Actua l Actua l Actua l Actua l Est i ma t e Request
CSH 98.6 117.8 170.1 187.8 168.2 157.1 147.5 142.3 107.8
DA 251.3 269.1 258.6 299.7 292.5 268.6 274.7 246.1 197.1
ESF 152.0 143.4 195.6 96.7 167.0 177.1 126.2 127.4 363.7
INL 20.4 27.4 74.3 30.3 48.3 52.4 66.5 58.8 50.5
ACI 1 ,434.1 184.6 757.6 968.9 827.2 787.9 727.2 721.5 442.8
MRA 20.1 16.2 16.1 23.5 24.1 25.9 26.5 22.6 21.0
GHAI 20.363.968.495.0104.3
IMET 12.1 12.9 15.0 16.3 15.0 14.3 13.5 12.4 12.0
FMF 4 .3 6.0 13.7 38.2 134.1 117.6 115.2 105.5 82.8
NADR 8.4 9 .4 35.0 6 .0 9.3 11.8 14.3 15.7 11.3
Source: Congressional Budget Justification, Foreign Operations, Summary Tables, Fiscal Years 2002-
FY2008. Figures for FY2008 do not include a $550 million supplemental request for counternarcotics
activities in Mexico ($500 million) and Central America ($50 million).
Assistance for health programs since 2000 has increased from a low of nearly
$99 million in FY2000 to a high of $237 million in FY2007, for an annual average
of $179.6 million. A large proportion of the increase can be attributed to assistance
to two countries — Guyana and Haiti — as PEPFAR focus countries. HIV/AIDS
funding accounted for $95 million in FY2007 and a proposed $104 million in

Security assistance,3 on the other hand, has fluctuated since 2000, but has
averaged $161.9 million per year. The average during the 1990s was $459.8 million.
Military assistance, the total of Foreign Military Financing (FMF) and International
Military Education and Training (IMET), has increased since 2000, largely a factor
of increased FMF assistance to Colombia. Military assistance from 2000 to 2007
averaged $80.8 million. During the 1990s, military assistance averaged $96.7 million
per year.4
Figure 2. U.S. Assistance, Selected Sectors
FY2000 to FY2007
(millions constant 2007 dollars)



1,60007 $

1,400t 20ESF
1, 2 00tan Narc ot i c s
800 CoDA
FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07
Source: U.S. Department of State, Congressional Budget Justifications for years FY2003 to FY2008.
Figures do not include Department of Defense assistance, or Millennium Challenge Corporation
grants. Narcotics includes ACI and INCLE accounts; Health includes CSH and GHAI accounts.
Assistance by Subregion
For FY2007, the largest portion of U.S. assistance occurs in the Andean region,
a result of counternarcotics programs focused on Colombia. The Andean region’s
share of the total Western Hemisphere aid budget is currently 52.9%. The second
largest share (20.8%) goes to countries in the Caribbean where Haiti receives 2/3 of
the subregion’s share. Mexico and Central America receive 16.2% of the total with
most funds for programs in Mexico, El Salvador, Guatemala, Honduras, and
Nicaragua. Brazil and countries of the Southern Cone (Chile, Argentina, Uruguay,
and Paraguay) receive 2% of the region’s aid. The United States also maintains
3 Security assistance is defined as including Economic Support Fund (ESF) and
Nonproliferation, Anti-Terrorism, Demining and Related Programs (NADR) accounts. ESF
is provided to countries of strategic importance, although the activities funded may be
similar to development programs.
4 Figures for some years includes the Military Assistance Program (MAP), which was
phased out in 2000 in favor of FMF grants.

programs of a regional nature, such as trade capacity building, and migration and
refugee assistance, that receive 8% of the aid budget.
The ratio of assistance requested for FY2008 is similar to the previous year.
The Andean region would receive 52.4% while Mexico and Central America would
receive 14%. These figures could change substantially if Congress approves the
budget request, and a $550 million supplemental request for Mexico and Central
America. If approved, assistance to the Andean region and the Mexico/Central
America region would be comparable at 39% and 36% respectively.
Figure 3. Percentage Share of Total Aid to Latin America and
the Caribbean, by Subregion, FY2007

Mexico & Central ProgramsBrazil & Southern
Car ibbean
Andean Region
Source: CRS calculations based on U.S. State Department and USAID budget documents.
Notes: The percentage share of each subregion may change for FY2008 if Congress approves a
pending $550 million supplemental request for Mexico and Central America. If that occurs, the
Andean regions share would decrease from its current 53% to approximately 39% of the budget,
while the share for Mexico and Central America would increase from 16.2% to 36.3%.
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 area 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 since 2000, when
Congress approved a $1.3 billion package in support of Plan Colombia. The United
States had supported counternarcotics programs in the Andes previously, but at far
lower levels of funding than the current Andean Counterdrug Initiative (ACI).
Concerns with the influence of the populist Venezuelan leader President Hugo
Chávez has also driven aid policy in the region.
The Andean region also receives assistance for economic development and
health programs. Bolivia and Peru are major recipients of Development Assistance,
Child Survival and Health funds, and food assistance. Ecuador and Peru receive

sizeable amounts of Economic Support Funds. The Peace Corps maintains programs
in Bolivia, Ecuador, Panama, and Peru.
Andean Counterdrug Initiative. The Andean Countredrug Initiative (ACI)
is the centerpiece of U.S. counternarcotics assistance to the region. The program
supports counternarcotics efforts in the three cocaine producing countries — Bolivia,
Colombia, and Peru — as well as neighboring drug transit countries. The countries
considered a part of ACI are: Bolivia, Brazil, Colombia, Ecuador, Panama, and Peru.
Colombia receives the majority of ACI funding. Venezuela was previously
considered part of ACI, but the Administration did not request any ACI funds for
Venezuela in its FY2008 budget request. ACI currently supports a combination of
enforcement and alternative development efforts which aim to reduce the flow of
drugs into the United States and increase government stability in ACI countries.
Enforcement programs include drug crop eradication and interdiction of drug
shipments. Alternative development funds support economic development programs
in coca growing regions, including infrastructure development and marketing and
technical support for alternative crops. The FY2008 budget shifts support of
alternative development programs from the ACI account to the ESF account.
FY2006 funding for ACI was $727.2 million, and an estimated $721.5 million
for FY2007. The FY2008 request is for $442.8 million, a 39% decrease from
FY2006 levels. This cut is largely due to the transfer of alternative development
funds to the ESF account, though aid levels to Ecuador and Peru would be lower in
FY2008. Since the program’s inception in 2000, the United States has allocated more
than $6 billion for the effort.
For more information, see CRS Report RL32250, Colombia: Issues for Congress, by
Colleen Cook; CRS Report RL32580, Bolivia: Political and Economic Conditions and
Relations with the United States, by Clare Ribando Seelke; CRS Report RS22715, Peru:
Political Situation, Economic Conditions, and U.S. Relations, by Miranda Louise Jasper
and Clare Ribando Seelke; and CRS Report RL32488, Venezuela: Political Conditions and
U.S. Policy, by Mark Sullivan.
Mexico and Central America
Because of proximity and lingering issues of poverty, Mexico and the isthmus
of Central America are sources of immigration, often illegal, to the United States.
The area is also considered a key transit zone for the flow of narcotics from its own
production centers, and from South America. All the nations are trading partners,
Mexico, under NAFTA, and the countries of Central America, under the U.S. —
Dominican Republic — Central America Free Trade Agreement (CAFTA — DR).
Environmental concerns are also prominent especially along the shared border with
Mexico. Although U.S.-Mexico cooperation on counternarcotics, law
enforcement, and trade has improved significantly in the last decade, Mexico, a
middle income country, is not a major recipient of U.S. foreign assistance. U.S.
assistance to Mexico may increase significantly in the near-term if Congress approves

a new counternarcotics initiative (the Merida Initiative). An initial installment of
$500 million was requested as part of the FY2008 emergency supplemental.
Foreign aid allocations to Mexico are typically between $60 million and $70
million. In FY2006, $68 million in aid was allocated and an estimated $67 million
was spent in FY2007. The majority of U.S. assistance to Mexico is for international
narcotics and law enforcement programs. In FY2006 nearly $39 million, or 58%, of
aid was through the INCLE account. An estimated $37 million was spent on
narcotics and law enforcement programs in FY2007. In FY2006 some $27 million
was spent on CSH, DA, and ESF programs in Mexico. That figure appears to have
remained constant in FY2007, with an estimated $27 million allocated for CSH, DA,
and ESF programs.
The Administration’s FY2008 regular budget request cuts aid to Mexico by 30%
from FY2007 funding levels. The most significant cuts are in the Development
Assistance (DA), and International Narcotics Control and Law Enforcement (INCLE)
accounts. No funding is requested for DA in 2008, and INCLE programs — which
fund counternarcotics and rule of law programs — are cut by $12 million. The
Administration maintains that these cuts are justified because Mexico is the 13th-
largest economy in the world. However, in October 2007, the Administration
announced a new multi-year, counternarcotics initiative for Mexico and Central
Mérida Initiative. On October 22, 2007, the United States and Mexico issued
a joint statement announcing a multi-year plan for $1.4 billion in U.S. assistance to
Mexico and Central America to combat drug trafficking and other criminal
organizations. The Administration requested $500 million for Mexico and $50
million for Central America in the FY2008 supplemental appropriations request. The
joint statement highlights current efforts of both countries, including Mexico’s 24%
increase in security spending in 2007. The stated objective of the Mérida Initiative
is “to maximize the effectiveness of our efforts to fight criminal organizations — so
as to disrupt drug-trafficking (including precursor chemicals); weapons trafficking,5
illicit financial activities and currency smuggling, and human trafficking.”
All of the proposed FY2008 funding for the Mérida Initiative is through the
INCLE account, administered by the Department of State’s Bureau of International
Narcotics and Law Enforcement Affairs. The proposed $500 million in funding for
Mexico is largely in the form of equipment and training, providing helicopters,
surveillance aircraft, scanners, training, and information technology improvements
for Mexican federal law enforcement and intelligence agencies.
The Central American portion of the Mérida Initiative includes $50 million in
initial funding to bolster the capacity of Central American governments to inspect
and interdict drugs, goods, arms and people and to support the regional anti-gang
strategy discussed at the July 2007 Central American Integration System (SICA)
Summit. At that meeting, the United States pledged support to strengthen regional

5 U.S. Department of State and Government of Mexico, “Joint Statement on the Mérida
Initiative,” October 22, 2007.

security coordination and to fund community action programs engaged in gang
prevention and rehabilitation activities. Assistant Secretary of State for Western
Hemisphere Affairs Thomas Shannon recently indicated the State Department’s
intent that the $50 million for Central America is slated to receive as part of the
Merida Initiative will be followed by a larger, multi-year aid package for that region.
Central American officials have said that they may need between $600 and $800
million to fund the increased law enforcement and equipment that would be
necessary to implement a comprehensive regional security strategy.6
Table 2. Supplemental Funding Request for
Mérida Initiative, FY2008
(millions U.S. dollars)
MexicoCentral America
Counternarcotics, Counterterrorism & Border Security306.316.6
Public Security and Law Enforcement56.125.7
Institution Building and Rule of Law100.67.7
Program Support37.0 —
Source: U.S. Department of State.
Central America. Central America is a region composed of seven small
countries with limited 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.
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. Trade ties between Central America and the United States
have expanded since the implementation of the U.S.-Dominican Republic-Central
America Free Trade Agreement (CAFTA-DR).
The Central America Regional program, for which Congress provided $16.8
million in FY2006 and an estimated $7.7 million in FY2007, has focused on
fostering regional trade integration, including funds to ensure that countries enforce
labor and environmental laws as required by CAFTA-DR. The FY2008

6 “U.S. Offers Funds to Fight Central America Gangs,” Washington Post, July 18, 2007;
U.S. Department of State Press Release, “Briefing on Mexico, Central America Security
Cooperation Package-Assistant Secretary Shannon Discusses Security Cooperation
Initiative,” October 23, 2007.

Administration request for regional programs in Central America is for $10.7 million,
including $5 million to support ongoing government efforts to streamline and
harmonize customs regulations. Regional funding will also support cross-border
efforts to combat HIV/AIDS in Guatemala, El Salvador, Nicaragua, Belize, Costa
Rica, and Panama. The latter three countries only receive HIV/AIDS assistance
through the regional program.
In addition to trade, environmental issues, and HIV/AIDS, Administration
officials and Members of Congress have expressed ongoing concerns about another
transnational problem facing Central America: organized crime and gang violence.
The House-passed version of the FY2008 State, Foreign Operations, and Related
Agencies Appropriations bill (H.R. 2764; H.Rept. 110-197) would provide $8
million to the State Department to combat crime and youth gangs, an increase of $3
million from the Administration’s request. In Central America, that funding would
support a regional anti-gang initiative aimed at prevention, police training, and
judicial reform, as well as bilateral anti-gang efforts in specific countries, particularly
El Salvador, Guatemala, and Honduras.
The major recipients of U.S. bilateral foreign assistance in Central America
include El Salvador, Guatemala, Honduras, and Nicaragua. These four countries
received $204 million in total assistance from the United States in FY2006, but only
an estimated $173.6 million in FY2007. The FY2008 request for El Salvador,
Guatemala, Honduras and Nicaragua was for an estimated $155.5 million.7
The bulk of U.S. bilateral assistance to Central America is provided through the
Development Assistance (DA), Economic Support Fund (ESF) and Child Survival
and Health (CSH) accounts. DA is provided to El Salvador, Guatemala, Honduras,
Nicaragua, and Panama, totaling $77.6 million in FY2006, but falling to $59.5
million in FY2007. The FY2008 request for DA for Central America was for $49.4
million, a 17% decline from the previous year. Panama is not slated to receive DA
assistance. In FY2006, a total of $9.8 million in ESF funds went to Guatemala,
Nicaragua, and Panama. In FY2007, an estimated $8 million in ESF funds went to
El Salvador, Guatemala, and Nicaragua. The FY2008 request included some $10
million in ESF funds, but all of those funds were requested for Guatemala. El
Salvador, Guatemala, Honduras, and Nicaragua continue to receive between $7
million and $12 million in CSH funds each fiscal year, which are used to support 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.
Three Central American nations — Honduras, Nicaragua, and El Salvador —
also receive economic assistance through the Millennium Challenge Corporation
(MCC), totaling $851 million. Although Millennium Challenge funds were supposed
to be in addition to, not a substitute for, traditional aid programs, all three countries
experienced cuts in either (or both) of their DA and CSH funds from FY2006 levels

7 These figures include Peace Corps allocations and food assistance provided through P.L.

480 Title II.

in FY2007. Aid cuts have continued in the FY2008 request. Aid has decreased since
FY2006 by 43% to El Salvador, 19% to Honduras, and 35% to Nicaragua.
In addition to economic assistance, the United States provides military
assistance to some of the governments of Central America. International Military
Education and Training (IMET) funding provides training to both civilian and
military leaders in all 5 Central American countries. El Salvador, Honduras,
Nicaragua and Panama have also received Foreign Military Financing (FMF) funding
in recent years. 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) and the FY2007 Continuing Resolution (H.J.Res.
20/P.L. 109-289, as amended by P.L. 110-5) maintained a prohibition on FMF
funding to Guatemala. The Guatemalan government’s recent approval of the
establishment of an International Commission Against Impunity in Guatemala
(CICIG) prompted the U.S. House and Senate to approve Foreign Military Financing
for Guatemala in FY2008, pending Department of State certification that certain
human rights conditions have been met.
El Salvador is the only country in Latin America that still has troops in Iraq. It
is also home to one of the three counternarcotics Cooperative Security Locations
(CSLs), formerly known as Forward Operating Locations (FOLs), in the region, and
a new International Law Enforcement Academy (ILEA). The FY2006 provision of
$9.9 million in Foreign Military Financing for El Salvador was substantially higher
than the $1.5 million allocated in FY2005. El Salvador received an estimated $7.2
million in FMF in FY2007. It is the only country in Central America slated to
receive FMF funds in FY2008.
For more information, see CRS Report RL32724, Mexico-U.S. Relations: Issues for
Congress, by Colleen Cook; CRS Report RL34215, Mexico’s Drug Cartels, by Colleen
Cook; CRS Report RL30981, Panama: Political and Economic Conditions and U.S.
Relations, by Mark P. Sullivan and Nelson Olhero; CRS Report RS21655, El Salvador:
Political and Economic Conditions and Relations with the United States, by Clare Ribando
Seelke and Miranda Jasper; CRS Report RL34027, Honduran-U.S. Relations, by Mark P.
Sullivan and Nelson Olhero; CRS Report RS22727, Guatemala: 2007 Elections and Issues
for Congress, by Colleen W. Cook and Miranda Jasper; and CRS Report RL31870, The
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR),
by J. F. Hornbeck.
With some 42 million people encompassing 16 independent countries and 13
overseas territories, the Caribbean is a diverse region that includes some of the
hemisphere’s richest and poorest nations. In addition to 13 island countries, 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.
From FY2000 through FY2007, U.S. aid to the Caribbean region totaled about
$1.9 billion, with increases reflecting 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 Haiti following the departure of President Jean-Bertrand Aristide from power.
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. Overall assistance to the
Caribbean amounted to $308 million in FY2006, and an estimated $337 million in
For FY2008, the Bush Administration requested almost $366 million in
assistance for the Caribbean, with about 61% for Haiti, almost 13% for Cuba
democracy programs, almost 10% for the Dominican Republic, and just over 7% for
Guyana. The Caribbean regional program would be funded at $9.3 million, while
Eastern Caribbean nations would also receive about $3.2 million for a Peace Corps
program, $0.6 million for International Military and Training (IMET) assistance, $0.5
in counternarcotics assistance, and $0.5 million in anti-terrorism assistance (ATA).
While in past years, Caribbean nations have received some Foreign Military
Financing (FMF) — for example, almost $4 million in FY2006 — the
Administration did not request any FMF for Caribbean nations in FY2008. Funding
for the Third Border Initiative would decline, and has been subsumed into a Western
Hemisphere Regional Program, with at least $1.750 million identified for the TBI in
the State Department’s FY2008 Congressional Budget Justification for Foreign
Over the past several years, several Caribbean nations have become eligible for
Millennium Challenge Account (MCA) assistance, but none has yet to be selected for
the program, which provides assistance to countries with strong records of
performance in the areas of governance, economic policy, and investment in people.
Although Haiti and Guyana have been candidate countries potentially eligible for
MCA funds since FY2004 (because of low per capita income levels), neither country

has been approved to participate in the program because they have not met MCA
performance criteria. Guyana has been designated as an MCA “threshold” country
since FY2005, and in June 2007 was slated to receive $7.2 million in assistance
(from FY2005 MCA funds) to help the country improve its fiscal policy so that it
may become eligible for regular MCA funding. For FY2006 and FY2007, the per
capita income level for MCA-eligibility increased, and as a result, in addition to
Guyana and Haiti, three other Caribbean countries — the Dominican Republic,
Jamaica, and Suriname — became potentially eligible for MCA funding but
ultimately were not approved for participation.
Haiti. Haiti, the poorest country in the Western Hemisphere, has long been one
of the top recipients of U.S. foreign aid in Latin America. Total assistance to Haiti,
including food aid, increased from about $72 million in FY2003 to an estimated
$214.9 million in FY2007. Some of the recent increases in assistance to Haiti have
supported U.S. and international efforts to restore security and functioning
democratic institutions in the country following the February 2004 ouster of
embattled former President John-Bertrand Aristide. U.S. assistance has also
supported the ongoing efforts of the U.N. Stabilization Mission in Haiti
(MINUSTAH), which assumed authority in June of 2004. The United States funds
programs to help the Haitian government combat urban crime, counter drug
trafficking, and address trafficking in persons. 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. Haiti continues to receive assistance for basic healthcare,
education, environmental conservation, and sanitation programs.
Haiti also receives significant amounts of food assistance through P.L. 480 Title
II, which is aimed at helping improve household nutrition for vulnerable groups.
Haiti received $36 million in P.L. 480 Title II food aid in FY2006 and an estimated
$32.5 million in food aid in FY2007. FY2008 food aid allocations by country have
yet to be determined. An increasing percentage of U.S. assistance to Haiti is
supporting efforts to increase trade and employment opportunities, particularly since
the recent enactment of the Haitian Hemispheric Opportunity through Partnership
Encouragement/HOPE Act of 2006, (Title V, P.L. 109-432).
The United States provided almost $226 million in overall assistance for Haiti
in FY2006, including $20 million in supplemental assistance. Supplemental
assistance provided $2.5 million in Child Survival and Health funds and $17.5
million in Economic Support Funds for police and judicial reform programs and job
creation programs. In FY2007, U.S. assistance totaled an estimated $214.9 million.
The Administration’s FY2008 request was for almost $223 million, including $83
million to combat HIV/AIDS and $25.5 million for an integrated conflict mitigation
program to target urban crime.
The House-passed FY2008 State, Foreign Operations and Related Programs
Appropriations bill, H.R. 2764, approved June 22, 2007, would fully fund most
categories of assistance for Haiti, and would provide an additional $10 million in
Development Assistance and an additional $2 million in Child Survival and Health
assistance above the request. It also would provide $1 million in Foreign Military
Financing (FMF) funding, pursuant to the regular notification procedures discussed

below. The Senate Appropriations Committee report to the FY2008 foreign
operations appropriations bill (H.R. 2764; S.Rept. 110-128) would provide $73.4
million in Economic Support Funds (ESF) for Haiti, $10 million above the
Administration’s request. Of that amount, no less than $5 million would be made
available for programs to improve case management and reduce pre-trial detention
in the Haitian judicial system, and no less than $5 million would be made available
to support USAID’s watershed reforestation program in Haiti. Congress has
monitored aid to Haiti closely, and has established a number of conditions on this
assistance over the years.
Cuba. Over the past several years, the United States has provided assistance,
primarily through the U.S. Agency for International Development (USAID), but also
through the National Endowment for Democracy (NED) — 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
USAID’s Cuba program has supported a variety of U.S.-based non-
governmental organizations with the goals of promoting a rapid, peaceful transition
to democracy, helping develop civil society, and building solidarity with Cuba’s
human rights activists.8 These efforts are largely funded through Economic Support
Funds (ESF). Funding for such projects amounted to about $5 million for each of
FY2001 and FY2002, $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), and $8.9 million in FY2005.
In FY2006, $10.9 million in Cuba democracy funding was provided, including $8.9
million in ESF and $2 million in Development Assistance, while in FY2007, an
estimated $13.3 million in ESF for Cuba democracy programs is being provided,
about $4.3 million more than that originally requested.
In mid-November 2006, the Government Accountability Office (GAO) issued
a report examining U.S. democracy assistance for Cuba from 1996-2005, and
concluded that the U.S. program had significant problems and needed better
management and oversight. According to GAO, internal controls, for both the
awarding of Cuba program grants and oversight of grantees, “do not provide
adequate assurance that the funds are being used properly and that grantees are in
compliance with applicable law and regulations.”9 Investigative news reports on the
program maintained that high shipping costs and lax oversight have diminished its
effect i v eness.10

8 See USAID’s Cuba program website: [http://www.usaid.gov/locations/latin_america
9 U.S. Government Accountability Office, U.S. Democracy Assistance for Cuba Needs
Better Management and Oversight, GAO-07-147, November 2006.
10 Oscar Corral, “Federal Program to Help Democracy in Cuba Falls Short of Mark,” Miami
Herald, November 14, 2006, and “Is U.S. Aid Reaching Castro Foes?” Miami Herald,
November 15, 2006.

For FY2008, the Administration requested $45.7 million in ESF for democracy
assistance for Cuba, more than four times the amount provided in FY2006 and more
than five times the amount requested in FY2007. According to the State
Department’s FY2008 Congressional Budget Justification (CBJ), the increase in
assistance is to fulfill the recommendations of the July 2006 report of the
Commission for Assistance to a Free Cuba to provide support for Cuban civil society,
expand international awareness, break the regime’s information blockade, and
continue support for a democratic transition. That report recommended $80 million
over two years for a variety of measures to hasten Cuba’s transition to democracy,
and not less than $20 million annually thereafter for Cuba democracy programs.
Both the House and Senate-passed versions of the FY2008 State, Foreign
Operations, and Related Agencies Appropriations Act, H.R. 2764, would fully fund
the Administration’s request for $45.7 million in ESF for Cuba democracy programs.
While the House and Senate agreed on democracy funding for Cuba, each body had
different provision regarding funding for counternarcotics cooperation with Cuba.
The House version would prohibit such funding, while the while the Senate version
would provide $1 million.
NED funding for Cuba has steadily increased over the past several years:
$765,000 in FY2001, $841,000 in FY2002, $1.14 million in FY2003, and $1.15
million in FY2004. For FY2005, NED funded 17 Cuba projects with $2.4 million.
For FY2006, NED funded 13 projects with almost $1.5 million, including $0.4
million from State Department ESF.
For more information, see CRS Report RL34157, Caribbean-U.S. Relations: Issues in theth

110 Congress, by Mark P. Sullivan; CRS Report RL32001, AIDS in the Caribbean andth

Central America, by Mark P. Sullivan; CRS Report RL33819, Cuba: Issues for the 110
Congress, by Mark P. Sullivan; and CRS Report RL32294, Haiti: Developments and U.S.
Policy Since 1991 and Current Congressional Concerns, by Maureen Taft-Morales and
Clare Ribando Seelke.
Brazil and 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
received $31.2 million in FY2006, an estimated $33.7 million in FY2007, and a
request of $18.5 million for FY2008. The 45% reduction from the previous year is
largely due to reductions in assistance to Brazil, from nearly $16 million in FY2007
to $3.7 million in FY2008.
Of the two top recipients in the area, Brazil receives Development Assistance
(which is proposed to be phased out in FY2008), and Child Survival and Health
programs. Paraguay receives Development Assistance, Child Survival and Health,
and Economic Support Fund programs. (ESF is also planned to end in FY2008 for
Paraguay.) The Peace Corps maintains a program in Paraguay.
Brazil receives some ACI funding because it is a drug transit country, though
it does not produce illicit drugs. Brazil borders the three cocaine producing nations

of Colombia, Bolivia, and Peru, and is a transit point for drug shipments to North
America and Europe. ACI funding in Brazil has focused on increasing the country’s
capacity to interdict drug shipments. Other assistance has centered on generating
sustainable economic growth and addressing extensive poverty and social inequality
issues. Nearly one-third of Brazilians live below the international poverty line.11
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 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. Assistance to Paraguay would fall 20% from FY2007,
from $23.4 million to $9.7 million in FY2008. Argentina, Chile, and Uruguay
receive small sums of assistance for military training and anti-terrorism programs.
For more information, see CRS Report RL33456, Brazil-U.S. Relations, by Clare
Ribando Seelke.
Regional Programs
The United States also maintains programs that have a regional scope. These
funds are not attributed to any one country and often are focused on issues of a
transnational nature, such as trade, migration, biodiversity, and anti-terrorism.
Including two regional funds (Latin America and Caribbean Regional, and Western
Hemisphere Regional), and the portion of the Migration and Refugee account
allocated for Latin America, funding in FY2007 amounted to $110 million, and a
requested $88 million for FY2008.
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. Some studies have
suggested a marked lack of progress in reducing global poverty, and question the
correlation between levels of development assistance and program success.12 Others

11 Defined as less than $2 per day by the World Bank.
12 Paul Collier and David Dollar, “Aid Allocation and Poverty Reduction,” The World Bank,
January 1999; Foreign Assistance in Focus: Emerging Trends, InterAction, November 2003;

argue that U.S. assistance, as currently structured, does not contribute as much to
sustainable economic growth as does trade.13 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 the
various entities administering the programs.14
Aid Reform
In response to the evolution of an aid program that has been criticized for being
fragmented, uncoordinated, incoherent, and opaque, Secretary of State Rice began
a reform effort in January 2006. She created a new position and a new bureau to
coordinate aid. The changes were made in the context of achieving the
Administration’s development initiatives. To that end, she created a new State
Department position, Director of Foreign Assistance (DFA), and a new Bureau of
Foreign Assistance (F). The DFA serves concurrently as Administrator of USAID.
It is argued that the dual-hatted nature of the position, along with a rank equivalent
to Deputy Secretary, allows for the better coordination of aid programs.
The DFA has authority over assistance programs managed by the State
Department and USAID, and provides guidance for foreign assistance delivered
through other government agencies. While the FY2008 foreign operations budget
request was written under his direction, the DFA has had very little input, except
informally, over the aid provided by other agencies and departments, that according
to one USAID document now totals more than 50 government entities.15
In 2006, the DFA presented a new Strategic Framework for Foreign Assistance16
that links aid programs to U.S. strategic objectives. Countries are grouped into five

12 (...continued)
and William Easterly, “The Failure of Development,” Financial Times, July 3, 2001.
13 Evan Osborne, “Rethinking Foreign Aid,” Cato Journal, fall 2002.
14 Foreign Assistance in Focus: Emerging Trends, InterAction, November 2003.
15 See “USAID-US Government Coordination,” at [http://www.usaid.gov/policy/
coordination/us_gov_ coordination.html].
16 The Strategic Framework is available at [http://state.gov/f/reform/].

categories representing common development challenges. Rebuilding countries are
those in, or emerging from, internal or external conflicts. Transforming countries
include low and lower-middle income countries that meet certain performance
criteria based on good governance and sound economic policies. Developing
countries are those low and lower-middle income countries that are not yet meeting
performance criteria. Sustaining Partnership countries include upper-middle income
countries with which the United States maintains economic, trade, and security
relationships beyond foreign aid. Restrictive countries include authoritarian regimes
with significant freedom and human rights issues, most of which are ineligible to
receive U.S. assistance except for humanitarian purposes. Programs in these
countries operate through non-governmental organizations or through entities outside
the country. A sixth category was created to encompass global or regional programs
that transcend any one country’s borders. Countries are expected to graduate from
one category to another, and then eventually from aid entirely.
The following are country categories with corresponding countries in Latin
America and the Caribbean:
!Rebuilding: Colombia and Haiti.
!Transforming: Bolivia, Brazil, El Salvador, Honduras, Nicaragua,
and Uruguay.
!Sustaining Partner: Argentina, Bahamas, Belize, Chile, Costa Rica,
Eastern Caribbean, Mexico, Panama, and Trinidad and Tobago.
!Developing: Dominican Republic, Ecuador, Guatemala, Guyana,
Jamaica, Paraguay, Peru, and Suriname.
!Restrictive: the State Department does not provide a list of
restrictive countries, although the FY2008 Foreign Operations
Congressional Budget Justification lists certain countries with no
categorization, including Cuba and Venezuela.
Each category represents common development challenges around which aid
programs are to be designed, and linked to strategic objectives. Those objectives
include peace and security; governing justly and democratically; investing in people;
economic growth; and humanitarian assistance. Countries in each category may
receive assistance under several or all objectives.
The initial reception to the Framework and the DFA position within the
development community is mixed. Some observers hail the effort as a timely and
necessary attempt to provide some coherence to a growing number of assistance
programs. These analysts see the effort as a good first step to address a fragmented
assistance structure. They also argue, however, that the reform does not go far
enough in addressing the weakened state of technical expertise at USAID in the
context of decreasing operating budgets. USAID staff numbers have been cut in half
since the early 1980s as most development activities are carried out by private
contractors and the non-governmental organization community, with many observers
remarking that instead of development experts, the agency now has contract

managers. Others criticize the new Framework for being insufficiently ambitious.
They contend that unless the DFA has authority over all U.S. assistance programs,
the serious problem of lack of coordination and coherence will not be solved.
For more information, see CRS Report RL34243, Foreign Aid Reform: Issues for Congress
and Policy Options, by Connie Veillette.
Article 98 Agreements
During 2006, the Administration and Congress began to reassess some aspects
of U.S. policy towards the International Criminal Court (ICC) because of unintended
negative effects of that policy on relations with some ICC member countries,
especially in Latin America. In Congress, support for aid restrictions on foreign aid
to ICC member countries that have not agreed to sign Article 98 agreements
exempting U.S. citizens from the court’s jurisdiction has diminished. The FY2007
Defense Authorization Act (H.R. 5122/P.L. 109-364), which President Bush signed
into law on October 17, 2006, modifies the American Servicemember’s Protection
Act or ASPA (P.L. 107-206, title II) to end the ban on International Military
Education and Training (IMET) assistance to affected countries. Restrictions on
Foreign Military Financing (FMF) and Economic Support Funds (ESF) remain in
The Nethercutt Amendment to the FY2006 Foreign Operations Appropriations
Act (H.R. 3057/P.L. 109-102) prohibited some economic assistance to the
governments of ICC member countries that do not have Article 98 agreements in
place. On November 28, 2006, pursuant to section 574 of P.L. 109-102, President
Bush waived Nethercutt restrictions on FY2006 Economic Support Funds (ESF) to

14 countries worlwide, including Bolivia, Costa Rica, Ecuador, Mexico, Paraguay,

and Peru. Nethercutt aid restrictions continued in the FY2007 Continuing
Appropriations Resolution (P.L. 109-289, as amended) and in the FY2008 Foreign
Operations Appropriation bill (H.R. 2764).
For more information, see CRS Report RL33337, Article 98 Agreements and Sanctions on
U.S. Foreign Aid to Latin America, by Clare Ribando Seelke.
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 in several countries, and
continued increases in HIV infection rates threaten future development prospects.
In contrast to other parts of Latin America, the mode of HIV 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 countries with the highest prevalence or infection rates are Belize,
the Bahamas, Guyana, Haiti, and Trinidad and Tobago, with rates between 2% and
4%; and Barbados, the Dominican Republic, Honduras, Jamaica, and Suriname, with
rates between 1% and 2%. 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). Many
countries in the region have national HIV/AIDS programs that are supported through
these efforts.
U.S.-government funding for HIV/AIDS in the Caribbean and Central America
has increased significantly in recent years. Aid to the 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 largely through the Global HIV/AIDS Initiative (GHAI) account,
U.S. assistance to the region for HIV/AIDS increased to $47 million in FY2004, $83
million in FY2005, $93 million in FY2006, and an estimated $118 million in
FY2007. For FY2008, the Administration requested almost $132 million in HIV
assistance for the Caribbean and Central America. This included $83 million for
Haiti and $21 million for Guyana from the GHAI account and the balance for non-
focus countries and programs in Central America and the Caribbean through the
Child Survival and Health (CSH) account.
Some Members of Congress want to expand the list of focus countries. In the
110th Congress, H.R. 848 (Fortuño), introduced February 6, 2007, would add 14
Caribbean countries to the list of focus countries targeted for increased HIV/AIDS
assistance. The additional countries are Antigua and Barbuda, Barbados, the
Bahamas, Belize, Dominica, Grenada, Jamaica, Montserrat, St. Kitts and Nevis, St.
Vincent and the Grenadines, St. Lucia, Suriname, Trinidad and Tobago, and the
Dominican Republic.
For more information, see CRS Report RL33485, U.S. International HIV/AIDS,
Tuberculosis, and Malaria Spending: FY2004-FY2008, by Tiaji Salaam-Blyther, and CRS
Report RL32001, AIDS in the Caribbean and Central America, by Mark P. Sullivan.
Millennium Challenge Corporation
The Millennium Challenge Account, administered by the Millennium Challenge
Corporation, differs from traditional aid 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
on a global scale, but that some country level funding could be affected in order to
avoid duplication and enhance coordination. Funding for DA and some health

programs under CSH have declined. Development Assistance17 in Latin America is
proposed for FY2008 at 28% less than in FY2006. CSH would also decline by 27%.
The countries most affected by these proposed cuts are in Central America — three
of which have signed MCC compacts (Nicaragua, Honduras, and El Salvador).
The MCA initiative is limited to countries with per capita incomes below
$2,935. 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 could 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.
Countries that demonstrate a commitment to meeting the MCA eligibility
requirements can qualify for “threshold assistance.”
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 to strengthen property rights, construct roads, and
improve rural business productivity and profitability. In November 2006, El
Salvador signed a $461 million compact aimed at stimulating economic growth in
the country’s impoverished northern border region. Both Guyana and Paraguay are
receiving threshold aid to prepare them for compacts.
Table 3. Millennium Challenge Corporation, Compacts and
Threshold Grants in Latin America
(millions U.S. dollars)
CountryDate SignedAmount/Duration
El Salvador — Compact2006$460.95 million/5 years
Honduras — Compact2005$215 million/5 years
Nicaragua — Compact2005$175 million/5 years
Guyana — Threshold2007$6.7 million/2 years
Paraguay — Threshold2006$34.65 million/2 years
Source: Millennium Challenge Corporation website, [http://www.mcc.gov].
For more information, see CRS Report RL32427, Millennium Challenge Account, by Curt

17 Part of the decline in DA can be attributed to the FY2008 budget proposal to transfer
some DA-funded activities to ESF. Consequently, ESF increases from $126 million in
FY2006 to $364 million in FY2008.

Counternarcotics assistance is one of the largest components of U.S. assistance
to Latin America, with one-third of the FY2008 budget request targeted for such
assistance. The Andean Counterdrug Inititative (ACI) is the single largest component
of U.S. counternarcotics assistance to the region. Other funds are provided through
the International Narcotics Control and Law Enforcement (INCLE) account. ACI
and INCLE funding are used to prevent drug trafficking, including limiting the
involvement of terrorist organizations and organized criminal groups in the drug
trade. Funding also aims to increase the capacity of Latin American law enforcement
agencies to combat these threats and reduce corruption. INCLE funds also support
drug education and demand reduction programs throughout the region. These funds
are administered by the Department of State’s Bureau of International Narcotics and
Law Enforcement Affairs (INL). A new plan focused on Mexico, the Mérida
Initiative, would further increase U.S. counternarcotics activities in the hemisphere.
In FY2006, the United States provided $63.5 million in INCLE funding to Latin
America. An estimated $57.3 million in INCLE aid was provided in FY2007. In
FY2006 and FY2007 bilateral INCLE assistance was provided to the Bahamas,
Guatemala, Haiti, Jamaica, and Mexico. Mexico received the majority of bilateral
INCLE assistance both years; receiving $39.6 million in FY2006 and an estimated
$36.7 million in FY2007. The Administration requested just $50.5 million in INCLE
funding for FY2008. The decline in funding is largely due to cuts in bilateral
assistance to Mexico and Haiti. Mexico would receive $27.8 million in the regular
FY2008 budget. The Administration maintains this cut in bilateral assistance is
justified because Mexico is the 13th-largest economy in the world. However, the
Mérida Initiative would increase counternarcotics aid to Mexico more than 10-fold
over FY2006 levels. Haiti would receive $9 million in FY2008, down from $17.5
million in FY2006 and an estimated $14.9 million in FY2008.
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 counternarcotics aviation needs in
Colombia, Peru, and Bolivia in Latin America. This program also supports aerial
eradication programs in Colombia. Funds in this program are not limited to Latin
America and include support of counternarcotics aviation programs in Afghanistan
and border security operations in Pakistan. In FY2006, $62.9 million was spent on
interregional aviation support programs globally. The request for FY2008 is $60.1

Appendix A. U.S. Assistance to Latin America,
FY2006-FY2008, by Subregion, Country,
and Account
(millions current U.S. dollars)
F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
Mexico and Central America301.84262.84770.40
Mexico 68.56 67.22 547.01
Development Assistance11.3612.28 —
Child Survival & Health3.993.722.50
Economic Support Fund11.3911.3514.00
International Military Education & Training0.010.050.39
International Narcotics Control & Lawa
Enforce 39.60 36.68 527.82
Nonproliferation, Anti-terrorism, Demining0.631.300.42
Peace Corps1.581.841.88
Costa Rica1.792.242.07
Child Survival & Health — 0.24 —
International Military Education & Training — 0.050.19
Peace Corps1.791.951.88
El Salvador47.9435.2027.52
Development Assistance24.1713.0611.48
Child Survival & Health8.148.436.00
Economic Support Fund — 2.00 —
Foreign Military Financing9.907.234.80
International Military Education & Training1.781.751.68
International Narcotics Control & Law
Enforce. — — 0.80
Nonproliferation, Anti-terrorism, Demining0.42 — 0.11
PL480 0.86 0.00 0.00
Peace Corps2.672.732.65
Guatemala 54.32 53.70 53.40
Development Assistance10.5018.227.50
Child Survival & Health12.0414.0112.50
Economic Support Fund5.453.0010.00
International Military Education & Training0.490.470.50

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
International Narcotics Control & Law
Enforce. 2.48 2.20 5.30
PL480 19.52 12.00 14.00
Peace Corps3.843.803.60
H o nduras 52.62 45.90 42.51
Development Assistance20.6014.7916.73
Child Survival & Health13.1412.0310.60
Foreign Military Financing0.890.68 —
International Military Education & Training1.221.230.88
International Narcotics Control & Law
Enforce. — — 0.75
Nonproliferation, Anti-terrorism, Demining0.320.63 —
PL480 13.11 12.72 10.00
Peace Corps3.343.823.55
Nicaragua 50.24 38.77 32.09
Development Assistance22.1713.0013.70
Child Survival & Health7.707.747.50
Economic Support Fund3.373.00 —
Foreign Military Financing0.590.50 —
International Military Education & Training0.740.570.50
International Narcotics Control & Law
Enforce. — — 1.60
Nonproliferation, Anti-terrorism, Demining0.01 — 0.08
PL480 13.01 11.27 6.00
Peace Corps2.652.692.71
P anama 10.52 12.14 5.10
Development Assistance0.203.18 —
Child Survival & Health — 0.46 —
Economic Support Fund0.99 — —
Andean Counterdrug Initiative4.464.001.00
Foreign Military Financing0.990.78 —
International Military Education & Training0.890.620.19
Nonproliferation, Anti-terrorism, Demining0.180.121.10
Peace Corps2.812.982.81

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
Central America Regional16.847.6760.70
Development Assistance10.676.006.70
Child Survival & Health6.171.674.00
International Narcotics Control & Lawb
Enforce — — 50.00
Caribbean 328.19 337.41 365.51
B ahamas 1.75 0.84 1.20
Foreign Military Financing0.100.08 —
International Military Education & Training0.400.220.20
International Narcotics Control & Law
Enforce. 0.50 0.50 0.50
Nonproliferation, Anti-terrorism, Demining0.750.040.50
B a rbados 0.00 0.04 0.00
Nonproliferation, Anti-terrorism, Demining — 0.04 —
B e lize 2.35 3.25 2.49
Development Assistance — — 0.20
Child Survival & Health — 0.49 —
Foreign Military Financing0.200.18 —
International Military Education & Training0.290.340.17
Peace Corps1.862.242.12
Cuba 10.89 13.30 45.70
Development Assistance1.98 — —
Economic Support Fund8.9113.3045.70
Dominican Republic27.8435.6734.65
Development Assistance7.8416.0111.10
Child Survival & Health12.7211.897.50
Economic Support Fund0.842.0010.00
Foreign Military Financing0.940.73 —
International Military Education & Training1.331.040.98
International Narcotics Control & Law
Enforce. — — 1.15
Nonproliferation, Anti-terrorism, Demining1.290.500.50
Peace Corps2.883.503.42

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
Guyana 23.94 31.28 27.34
Development Assistance3.924.004.31
Global HIV/AIDS Initiative18.0025.3121.30
Foreign Military Financing0.100.08 —
International Military Education & Training0.310.310.25
International Narcotics Control & Law
Enforce. — — 0.10
Peace Corps1.611.581.38
Haiti 225.53 214.87 222.90
Development Assistance29.7029.7014.81
Child Survival & Health22.3019.8018.00
Global HIV/AIDS Initiative47.3067.2983.00
Economic Support Fund67.0049.5063.39
Foreign Military Financing0.990.99 —
International Military Education & Training0.210.220.20
International Narcotics Control & Law
Enforce. 17.50 14.85 9.00
Transition Initiatives4.57nana
PL480 35.96 32.52 34.50
Jamaica 17.78 14.92 13.66
Development Assistance7.827.397.39
Child Survival & Health4.472.811.22
Foreign Military Financing0.590.50 —
International Military Education & Training0.910.720.75
International Narcotics Control & Law
Enforce. 0.99 0.90 1.01
Nonproliferation, Anti-terrorism, Demining0.110.300.51
Peace Corps2.892.302.78
Suriname 1.78 2.09 1.98
Development Assistance — — 0.20
Foreign Military Financing0.100.08 —
International Military Education & Training0.200.140.15
Nonproliferation, Anti-terrorism, Demining0.100.36 —
Peace Corps1.381.511.63

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
Trinidad and Tobago0.231.311.48
International Military Education & Training — 0.050.09
International Narcotics Control & Law
Enforce. — — 0.50
Nonproliferation, Anti-terrorism, Demining0.231.260.89
Eastern Caribbean Regional4.775.004.80
Foreign Military Financing0.910.99 —
International Military Education & Training0.700.730.63
International Narcotics Control & Law
Enforce. — — 0.50
Nonproliferation, Anti-terrorism, Demining — — 0.50
Peace Corps3.163.283.17
Caribbean Regional11.3314.849.31
Development Assistance4.898.204.31
Child Survival & Health6.446.645.00
Andean Region884.06858.14823.78
B olivia 136.91 125.16 114.58
Development Assistance10.0914.7039.00
Child Survival & Health17.2316.8911.50
Economic Support Fund5.944.5017.00
Andean Counterdrug Initiative79.2066.0030.00
Foreign Military Financing — 0.03 —
International Military Education & Training — 0.050.19
International Narcotics Control & Law
Enforce. — — 0.60
Nonproliferation, Anti-terrorism, Demining — — 0.43
Transition Initiatives5.37nana
PL480 15.95 20.00 13.00
Peace Corps3.132.992.86
Colombia 564.00 556.07 589.71
Economic Support Fund — — 139.50
Andean Counterdrug Initiative464.78465.00366.97
Foreign Military Financing89.1085.5078.00
International Military Education & Training1.671.611.50
Nonproliferation, Anti-terrorism, Demining5.483.963.74

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
PL480 2.97 0.00 0.00
Ecuador 32.81 35.13 23.44
Development Assistance6.588.147.01
Child Survival & Health — 2.00 —
Economic Support Fund3.274.506.00
Andean Counterdrug Initiative19.8017.307.00
Foreign Military Financing — 0.03 —
International Military Education & Training — 0.050.19
International Narcotics Control & Law
Enforce. — — 0.20
Nonproliferation, Anti-terrorism, Demining — 0.050.18
Peace Corps3.163.062.86
P eru 144.43 139.11 93.00
Development Assistance9.3711.0011.22
Child Survival & Health14.2112.7412.00
Economic Support Fund2.773.0030.00
Andean Counterdrug Initiative106.92103.1736.84
Foreign Military Financing — 0.03 —
International Military Education & Training — 0.03 —
Nonproliferation, Anti-terrorism, Demining0.210.330.11
PL480 8.25 5.90 0.00
Peace Corps2.702.912.83
Venezuela 5.91 2.67 3.05
Development Assistance — — 3.00
Economic Support Fund — 1.63 —
Andean Counterdrug Initiative2.231.00 —
International Military Education & Training — 0.040.05
Transition Initiatives3.68nana
Brazil and Southern Cone31.1633.7418.53
B r azil 13.57 15.99 3.72
Development Assistance2.908.00 —
Child Survival & Health3.613.202.00
Andean Counterdrug Initiative5.944.001.00
International Military Education & Training — 0.050.19

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
Nonproliferation, Anti-terrorism, Demining1.120.740.53
Argentina 1.63 1.89 2.03
Foreign Military Financing — 0.40 —
International Military Education & Training1.081.090.95
International Narcotics Control & Law
Enforce. — — 0.31
Nonproliferation, Anti-terrorism, Demining0.550.400.77
Chile 1.71 1.44 1.35
Foreign Military Financing0.590.50 —
International Military Education & Training0.650.660.60
International Narcotics Control & Law
Enforce. — — 0.10
Nonproliferation, Anti-terrorism, Demining0.470.280.65
P araguay 12.76 12.37 9.74
Development Assistance4.394.134.70
Child Survival & Health2.883.101.30
Economic Support Fund1.981.50 —
International Military Education & Training — 0.050.20
International Narcotics Control & Law
Enforce. — — 0.28
Nonproliferation, Anti-terrorism, Demining1.010.540.27
Peace Corps2.503.052.99
Uruguay 0.00 0.05 0.19
International Military Education & Training — 0.050.19
South American Regional1.492.001.50
Development Assistance1.492.001.50
Latin America & Caribbean Regional 80.0657.1538.40
Development Assistance71.7446.1732.20
Child Survival & Health8.3210.986.20
Western Hemisphere Regional32.9631.3028.15
Economic Support Fund26.0724.9528.15
Foreign Military Financing3.964.00 —
International Narcotics Control & Law
Enforce.2.482.20 —
Nonproliferation, Anti-terrorism, Demining0.450.15 —

F Y 2006 F Y 2007 F Y 2008
Subregion, Country, AccountActualEstimateRequest
Migration & Refugee Assistance25.3421.9621.00
Inter American Foundation19.3119.3019.00
Inter American Development Bank3.401.7036.50
Latin America and Caribbean Total1,706.321,623.542,121.27
a. Includes $500 million requested for Mexico as part of the FY2008 emergency
supplemental request.
b. Includes $50 million requested for Central America as part of the FY2008 emergency
supplemental request.
Subregion F Y 2006 F Y 2007 F Y 2008
Mexico and Central America (% of total LAC aid)17.7%16.2%36.3%
Caribbean (% of total LAC aid)19.2%20.8%17.0%
Andean Region (% of total LAC aid)51.8%52.9%38.8%
Brazil and Southern Cone (% of total LAC aid)1.8%2.1%0.9%
Regional Funds (% of total LAC aid)9.5%8.0%7.0%
Latin America and Caribbean (% of all U.S. aid)6.8%5.8%7.2%
Source: U.S. Department of State and USAID budget documents, FY2006-FY2008, and
CRS calculations.
Notes: Figures include supplemental funds and PL480 food assistance. Food assistance for
FY2008 has not yet been allocated. The total could increase when allocations are made.

Appendix B. 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) and the Department of State.
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.18 While hemispheric security is addressed by
programs funded through counternarcotics and military accounts, most 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. 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. 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

18 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.

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
largest beneficiary of funding is Haiti. The program supports stabilization, reform
and post-conflict reconstruction programs in fragile states, and is designed to provide
short-term programming to spur a country’s progress to stability.
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.
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.
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.
Migration and Refugee Assistance (MRA). This program supports
refugee relief activities, and in some cases, helps resettle refugees. Most of MRA
funds have been 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. Latin America 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.
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.
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. This

assistance is administered by the Millennium Challenge Corporation (MCC), in
cooperation with USAID.
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. 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.
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.
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, and
aviation programs in Afghanistan.
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,
and Peru, with the lion’s share of funding allocated for programs in Colombia.
Venezuela had bee included since 2000, but is slated to receive no ACI funds in
FY2008. 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
Military and Anti-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. 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.
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.
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.

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 (IDB), 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.
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. 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. OAS Development
Assistance Programs focus on Summit of the Americas mandates pertaining to
economic prosperity, social well being, and environmental health.19 The OAS De-
mining Program (AICMA) works to ensure that the Western Hemisphere is cleared
of all land mine devices. The OAS also monitors the disarmement and
demobilization of Colombian armed groups through its Mission to Support the Peace
Process in Colombia.
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
adopted sound fiscal policies and a poverty reduction plan may qualify. Latin
American beneficiaries of the HIPC initiative include Bolivia, Guyana, Honduras,
and Nicaragua. Total costs of the HIPC initiative are estimated at $51 billion

19 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.

(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.
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