[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]




 
               OVERSIGHT OF THE INTER-AMERICAN FOUNDATION

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                  VETERANS AFFAIRS, AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 13, 1999

                               __________

                           Serial No. 106-108

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpo.gov/congress/house
                      http://www.house.gov/reform

                                 ______

                      U.S. GOVERNMENT PRINTING OFFICE
63-746 cc                     WASHINGTON : 2000





                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South     DENNIS J. KUCINICH, Ohio
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)
DAVID VITTER, Louisiana


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
           David A. Kass, Deputy Counsel and Parliamentarian
                      Carla J. Martin, Chief Clerk
                 Phil Schiliro, Minority Staff Director
                                 ------                                

Subcommittee on National Security, Veterans Affairs, and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
ILEANA ROS-LEHTINEN, Florida         TOM LANTOS, California
JOHN M. McHUGH, New York             ROBERT E. WISE, Jr., West Virginia
JOHN L. MICA, Florida                JOHN F. TIERNEY, Massachusetts
DAVID M. McINTOSH, Indiana           THOMAS H. ALLEN, Maine
MARSHALL ``MARK'' SANFORD, South     EDOLPHUS TOWNS, New York
    Carolina                         BERNARD SANDERS, Vermont 
LEE TERRY, Nebraska                      (Independent)
JUDY BIGGERT, Illinois               JANICE D. SCHAKOWSKY, Illinois
HELEN CHENOWETH-HAGE, Idaho

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                Robert Newman, Professional Staff Member
                  Tom Costa, Professional Staff Member
                           Jason Chung, Clerk
                    David Rapallo, Minority Counsel
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 13, 1999.................................     1
Statement of:
    Breslin, Patrick, representative for Colombia, Inter-American 
      Foundation; Daniel W. Fisk, deputy director, the Kathryn 
      and Shelby Cullom Davis International Study Center, 
      Heritage Foundation; and Alvaro Rengifo, executive 
      director, Inter-American Development Bank..................    35
    Otero, Maria, chair of the Inter-American Foundation, 
      executive vice president, ACCION International, accompanied 
      by George A. Evans, president, Inter-American Foundation; 
      and Adolfo A. Franco, J.D., senior vice president and 
      general counsel, Inter-American Foundation.................     3
Letters, statements, et cetera, submitted for the record by:
    Breslin, Patrick, representative for Colombia, Inter-American 
      Foundation, prepared statement of..........................    39
    Fisk, Daniel W., deputy director, the Kathryn and Shelby 
      Cullom Davis International Study Center, Heritage 
      Foundation, prepared statement of..........................    50
    Otero, Maria, chair of the Inter-American Foundation, 
      executive vice president, ACCION International, prepared 
      statement of...............................................     8
    Rengifo, Alvaro, executive director, Inter-American 
      Development Bank, prepared statement of....................    59


               OVERSIGHT OF THE INTER-AMERICAN FOUNDATION

                              ----------                              


                      WEDNESDAY, OCTOBER 13, 1999

                  House of Representatives,
       Subcommittee on National Security, Veterans 
              Affairs, and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:10 a.m., in 
room 2247, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays and Sanders.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; Robert Newman and Tom Costa, professional staff 
members; Jason Chung, clerk; David Rapallo, minority counsel; 
and Earley Green, minority staff assistant.
    Mr. Shays. I would like to call this hearing to order.
    Thirty years ago, Congress established the Inter-American 
Foundation [IAF], an independent and experimental Federal 
agency to reach beyond government-to-government aid programs in 
Latin America and the Caribbean working at the grass-roots 
level. Part of the IAF's cold war mission was to provide an 
economic and social alternative to the lure of communism among 
the poor of the region.
    In the intervening three decades, the world has changed 
dramatically. The Inter-American Foundation has not. So 
oversight is long overdue. Last scrutinized in 1984, the IAF 
has been beset by internal strife and management lapses, 
particularly regarding two controversial grants to leftist 
organizations. While many of the Foundation's once innovative 
strategies were being adopted by other aid agencies, the IAF 
seems to have stagnated into a fractious bureaucracy squabbling 
over reduced budgets and a lost sense of purpose.
    The administration recently acknowledged ``the need for 
change to enhance the Foundation's internal oversight 
procedures and project monitoring.'' According to IAF 
officials, the Foundation has begun to make those changes. But 
will they be enough to revitalize the IAF and make it relevant 
in the post-cold war world? Could some or all of the 
Foundation's functions be privatized? Should they?
    These are the questions we asked our witnesses to address 
this morning, and we welcome our witnesses. And at this time I 
would recognize my good friend and colleague Mr. Sanders.
    Mr. Sanders. Thank you, Mr. Chairman.
    The Inter-American Foundation was created 30 years ago to 
build a direct relationship between the people of the United 
States and the poor people of Latin America. The IAF is unique 
among U.S. Government agencies operating abroad. The Foundation 
helps the poor to help themselves by providing small grants for 
innovative community-based projects. It minimizes the 
bureaucratic waste and corruption that often plagues foreign 
aid.
    The IAF has never had more than 70 staff members. It gives 
small grants directly to local organizations rather than 
channeling millions of dollars through government 
bureaucracies. Congress created the IAF as a public corporation 
with an independent board, a structure designed to insulate the 
agency from the short-term whims of U.S. foreign policy.
    In Mexico, the Foundation supported an association of 
Mexican peasants that marketed organic coffee beans for Ben and 
Jerry's Ice Cream, in my State of Vermont, but that is not the 
reason I am here today. IAF grants helped to create one of the 
hemisphere's most successful community-controlled adventure 
travel sites on Tequile Island in Peru's Lake Titicaca, and the 
IAF backed the Colombian Artisans Network that help poor rural 
women to improve their skills and raise the incomes of their 
families.
    Mr. Chairman, I am concerned about the threats to the 
future of the Foundation and its mission. Congressional funding 
is now two-thirds of what it was since 1994, and appears likely 
to be cut to 25 percent from its current levels in the fiscal 
year 2000 budget. The Foundation's crucial political 
independence appears to be threatened.
    Over the years, and I think this is very clear, we have 
spent billions of dollars supplying and training Latin American 
militaries, many of whom have turned out not only to be 
corrupt, but to have been violent and very bad institutions. We 
have spent billions of dollars funding the bureaucracies of 
Latin American governments that were often more interested in 
the well-being of the members of the government than of the 
poor people of the countries. We have spent billions propping 
up economic policies of regimes that are more concerned with 
the needs of foreign corporations than with the peasants or the 
workers of their own countries. It seems to me that we want to 
take a very hard look about the need to continue funding an 
organization which is representing the poor people in that 
country in an independent way.
    I think we should not ignore for one moment that very, very 
serious economic problems remain in existence throughout Latin 
America and the Caribbean, and we should also be aware that 
poor people do not actively participate in many of the 
democracies in those countries.
    So I thank you very much for calling this hearing, and I 
look forward to the discussion.
    Mr. Shays. I thank my colleague, and I would like to say to 
all the witnesses before I swear them in that I just am 
basically an open book on this issue. I do not have any strong 
feelings one way or the other and look forward to what I learn 
today.
    Let me just take care of some business first and ask 
unanimous consent that all members of the subcommittee be 
permitted to place an opening statement in the record, and that 
the record remain open for 3 days for that purpose.
    Without objection, so ordered.
    I ask further unanimous consent that all witnesses be 
permitted to include their written statements in the record, 
and without objection, so ordered.
    And now let me call our witnesses. The first witness will 
be accompanied by two individuals, but there will be one 
statement. We are happy to have you, Ms. Maria Otero, Chair of 
the Inter-American Foundation. And I guess your day job is 
executive vice president, ACCION International, Washington, DC; 
accompanied by George A. Evans, president, Inter-American 
Foundation, and Adolfo A. Franco, senior vice president and 
general counsel, Inter-American Foundation.
    I am assuming that the two individuals accompanying you, 
their day job is with the IAF.
    Mr. Franco. Day and night, Mr. Chairman.
    Mr. Evans. Day and night.
    Mr. Shays. OK. Welcome. We are going to have a clock, I 
think, and we are going to set it for 5 minutes, but we will 
roll it over. We prefer you to be 5, but you have another 5 to 
say what you need to say.
    I'm sorry, I have not sworn you in. I apologize. So if you 
would stand and raise your hands, and if all of you would stand 
because we are going to ask all three of you to respond to 
questions. Is there anyone else who might respond to questions?
    Ms. Otero. This is it.
    Mr. Shays. OK.
    [Witnesses sworn.]
    Mr. Shays. I would note for the record that all three of 
our witnesses have responded in the affirmative, and now the 5 
minutes begins.

     STATEMENT OF MARIA OTERO, CHAIR OF THE INTER-AMERICAN 
  FOUNDATION, EXECUTIVE VICE PRESIDENT, ACCION INTERNATIONAL, 
   ACCOMPANIED BY GEORGE A. EVANS, PRESIDENT, INTER-AMERICAN 
 FOUNDATION; AND ADOLFO A. FRANCO, J.D., SENIOR VICE PRESIDENT 
         AND GENERAL COUNSEL, INTER-AMERICAN FOUNDATION

    Ms. Otero. Thank you, Mr. Chairman. I am honored to testify 
before this distinguished committee regarding the important 
work of the Inter-American Foundation, and I do thank you for 
the opportunity to do so.
    I am the Chair of the Board of Directors of the Inter-
American Foundation, an uncompensated position that I have held 
since July 1994, when President Clinton appointed me to this 
post. I am also the executive vice president of ACCION 
International, a nongovernment organization that promotes 
microenterprise development through the Americas. I have 
dedicated my entire professional life to development efforts 
and to the promotion of a philosophy that sound development 
assistance leads to sustainable growth, the replacement of 
welfare dependency and social economic mobility. Today I wish 
to discuss why the Inter-American Foundation, a novel, 
independent agency of the United States, dedicated to the 
principles of development that I have enunciated, is of 
critical importance to this country.
    I know the Inter-American Foundation well, not only because 
I have chaired its board for the last 5 years, but because I 
began my professional career there as an intern nearly 25 years 
ago. The Inter-American Foundation's values of 25 years ago 
today ring true. Simply stated, those values are that the 
enlightened people of the United States have a noble role to 
play in the development of our neighbors by fostering and 
promoting principles of democracy, self-reliance, and free 
enterprise that have shaped our great country.
    I wish to be clear that the Inter-American Foundation does 
not advocate welfare or dependency, but it seeks to invest in 
the creative and sustainable development projects of the poor 
to increase income, create new jobs and expand markets and, in 
the process, strengthen the free enterprise and democracy where 
it matters the most, at the grass-roots level.
    Specifically, the Inter-American Foundation operates in the 
following manner: First, the Foundation effectively channels 
funds to the private sector, not to governments. It channels 
funds to cooperatives, community development organizations, and 
nongovernment organizations. Grants are closely monitored, and 
they are audited, ensuring financial accountability and 
enhanced project quality.
    Second, the Foundation does not assign projects, but, 
rather, it supports the entrepreneurial spirit. The Foundation 
awards grants to private sector organizations that have strong 
leadership, have a proven track record, innovative ideas, and 
which invest their own resources in their work. Historically, 
the Foundation grantees have raised $1.44 in counterpart funds 
for every dollar that the Foundation has invested in them.
    Third, small projects supported by the Foundation help open 
the way for the participation of poor people in the mainstream 
economy and also demonstrates successful approaches to 
development that have been adopted by local organizations and 
by large multilateral and bilateral organizations. These tenets 
are as important and relevant to our foreign policy objectives 
today as they were 25 years ago when I served as an intern.
    The beneficiaries of the Inter-American Foundation are poor 
city dwellers housed in slums or squatter settlements, often 
living in appalling overcrowded settings, lacking access to the 
basic services of health, education and water. Their survival 
tool kit often lacks the education and the skills they need to 
enter the formal economy. Many are women, who play the dual 
role of providing income for their family and caring for their 
children. These people are more greatly exposed than others to 
the threats of contamination and to the threats of bad 
sanitation. When disaster strikes in the form of a flood or a 
hurricane, these are the ones that are most affected.
    In the rural areas, the Inter-American Foundation 
beneficiaries are land-poor, and their land is often 
unproductive and lies outside irrigated areas. Many farm in 
arid zones or on steep hills that are ecologically vulnerable. 
They live in large households, and their children are 
especially susceptible to malnutrition and disease. Most of 
these rural households patch together an income through their 
small crop production, the raising of small livestocks, and 
selling of processed goods. Without assistance, many of them 
depend on their children for work, and they weigh the 
opportunity cost of sending their children to school against 
present and future benefits.
    Mr. Chairman, as part of its program to address grass-roots 
development with the people I have just described, the Inter-
American Foundation initiated a successful corporate outreach 
initiative that began under my stewardship as Chair. The 
Foundation has established alliances with major American 
corporations, including Levi Strauss, B.P.-Amoco Corp., Dow 
Corning, Green Giant, and JP Morgan to promote in Latin America 
and the Caribbean the principles of democracy and economic 
development advanced by the U.S. Government.
    It is in its agility and private sector focus on community 
development that positions the Inter-American Foundation to 
forge innovative ventures with U.S. corporations and to 
leverage millions of private sector dollars to serve as seed 
capital for the expansion of microenterprises, for the 
enhancement of sustainable agricultural practices in soil 
conservation, and for the expansion of education and health 
care services.
    The Inter-American Foundation is also a repository of 
development knowledge as it documents and gathers data on the 
projects that it has funded to determine if its resources have 
had an impact on the lives of the poor, if access to credit and 
vocational training has helped improve incomes, if agricultural 
training has yielded larger crops or opened new markets, if 
environmental training has helped conserve vulnerable 
ecosystems, if access to improved education has increased 
literacy and mathematical skills among the poor. This results 
documentation enables the Inter-American Foundation not only to 
learn from its projects, but also to share with other 
development organizations the specific approaches that have a 
positive impact on the lives of the poor.
    From an operational perspective, the Inter-American 
Foundation presents a model for the delivery of U.S. 
development assistance. More importantly, it does not provide 
resources through foreign governments, and it does avoid some 
of the bureaucratic inefficiency that plagues other government-
to-government programs, that I know is of concern to you and 
other Members of Congress. This novel approach distinguishes 
the Inter-American Foundation from government-to-government 
programs and agencies and sets this model agency apart from 
others. It also enables the U.S. Government agency to reach 
small institutions working at the grass-roots level with 
relatively small amounts of support. The average size grant of 
the Foundation is $70,000. No other government agency has the 
capacity to reach this far down.
    I wish to take this opportunity to briefly address matters 
of concern to this committee. As with any organization, whether 
public or private, not every grant will prove a success or be 
without controversy. I am proud to report that the vast 
majority of the over 4,000 grants awarded by the Inter-American 
Foundation have served to promote political stability, free 
enterprise and economic development. However, as in a very few 
instances, the Inter-American Foundation has provided 
assistance to organizations that did not honor their agreement 
or deviated from those principles that the Foundation holds. 
Unfortunately, this was the case with two organizations that 
the Inter-American Foundation funded in Ecuador and in 
Argentina and which have been the subject of considerable 
interest in Congress.
    I wish for you to know that the aberrant activities of 
these organizations were brought to the attention of management 
and the Board of the Inter-American Foundation through the 
Inter-American Foundation's own oversight mechanisms, and the 
decision was made to address these matters in a swift, decisive 
way, consistent with the interest of the United States. The 
Embassy of the United States in Ecuador complimented the 
management of the Inter-American Foundation for the expeditious 
and professional manner in which the inappropriate activities 
of these grantees were addressed.
    I do also believe that additional measures need to be 
undertaken to improve the Foundation's program and operations. 
Accordingly, the Board of Directors has worked with management 
in the Inter-American Foundation to implement a significantly 
enhanced internal grant review and approval process to ensure 
that the Foundation never again supports organizations that 
engage in illegal or inappropriate activities that are 
incompatible with the objectives of the United States.
    To that end, I have directed that prior to the award of any 
grant by the Inter-American Foundation, all grant proposals be 
forwarded for review by the U.S. Embassy personnel in those 
countries in which the Inter-American Foundation operates. I 
believe that a careful and independent review of grant 
proposals by the State Department personnel will enable these 
grants to be appraised by qualified and informed government 
officials who have access to intelligence and economic and 
political information on nongovernmental organizations in Latin 
America.
    Mr. Chairman, it is my view that the Inter-American 
Foundation administers a valuable and necessary program and 
does so efficiently and effectively. However, I also believe 
that improvements can be made, and I pledge to work with you, 
this distinguished committee, and other committees in Congress 
to buildupon the success of the Inter-American Foundation.
    What I do consider regrettable is that, for some, a few 
unfortunate and clearly indefensible mistakes, which the Inter-
American Foundation courageously, expeditiously, and 
independently corrected, can lead to a condemnation of all of 
the important work this agency has undertaken.
    Mr. Chairman, without the Inter-American Foundation, the 
efforts of the United States to promote and foster democratic 
practices and economic revitalization at the community level 
would be stymied. The Inter-American Foundation is different 
from the U.S. Agency of International Development, USAID. It 
has a critical and unique role to serve in promoting self-help 
development efforts in this hemisphere.
    It is because of its unique role as a people-to-people 
program that I was so honored to volunteer my time and efforts 
when the President of the United States asked me to serve as 
Chair of the Inter-American Foundation. I remain as 
enthusiastic about the continued expansion and importance of 
the Inter-American Foundation as I was 25 years ago.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions that the Members may have.
    Mr. Shays. Thank you very much.
    [The prepared statement of Ms. Otero follows:]
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    Mr. Shays. Mr. Sanders, and then we can go back and forth.
    Mr. Sanders. Let me start off with a general question, if I 
might. Sometimes we read in the newspapers that everything in 
Latin America is now wonderful, the cold war is over, poor 
people are doing just fine, democratic institutions are very 
strong. So why do we need an agency like yours anymore? Is that 
the case in Latin America? Are there still one or two poor 
people in the continent? What is going on?
    Ms. Otero. I think what is important is to understand the 
context in which the Inter-American Foundation is operating 
today, 25 or 30 years after it was created. We have in Latin 
America countries that are trying to create democratic systems 
and to strengthen these systems. Many of these countries, 
especially in Central America, have come out of civil wars and 
of internal conflicts that have created huge rifts even within 
the country itself. We have efforts right now in Latin America 
on the part of governments to use a market economy as a way of 
operating the economy in these countries. All these things are 
relatively new in the hemisphere and require continued support 
and continued activity of the sort that the Inter-American 
Foundation provides.
    We continue to see that the large majority of people in 
Latin America are poor and remain poor in part because 
governments do not have the distribution channels to be able to 
reach these populations effectively.
    Mr. Sanders. What countries in Central America do you 
function in?
    Ms. Otero. We operate in El Salvador, Honduras, Nicaragua, 
Guatemala, Mexico, and Panama. We do not operate in Costa Rica.
    Mr. Sanders. The city that I am from has a sister city 
relationship with a town in Nicaragua called Puerto Cabezas, 
and I recently met with the mayor of that town. I am told the 
unemployment rate in Nicaragua now is 60 or 70 percent. Is that 
correct?
    Ms. Otero. I would not be surprised by that. I think you 
can find that the unemployment rate in most Latin America 
countries is enormous by the standards the United States is 
used to. In fact, for example, in a city like Lima, which has 6 
million people, about 3 million of those people depend on 
informal sector activities to sustain their families. Probably 
about 50 to 60 percent of the active labor force is employed in 
activities outside of the formal economy.
    This gives you a sense of the difficulties of being able to 
bring these countries toward a functioning market economy.
    Mr. Shays. If the gentleman would yield a second, I do not 
know what you mean by informal.
    Ms. Otero. I mean that people have to employ themselves in 
order to survive. Everyone from a woman that is selling oranges 
in a marketplace to a man that is taking pieces of metal and 
turning them into chairs or into pots and pans, all these 
activities.
    Mr. Sanders. Mr. Chairman, I raise these questions because 
one of the concerns I have long had is, especially with the end 
of the Soviet Union and the decline of communism, suddenly the 
concern that this Nation has had for the poor people of the 
Third World seems to be dissolving because we are not in 
competition with Communists any more.
    And I would point out Nicaragua in particular because I was 
there on several occasions. When the Sandinista government was 
in power, Nicaragua was on the front pages of The New York 
Times every single day, but in the last many years we hear 
nothing about Nicaragua. And I think the assumption on the part 
of many people is there are no problems there. We got rid of 
the terrible Sandinista government, and everything is doing 
well. And, in fact, unemployment is beyond belief there. In the 
region that my city has a sister city relationship, epidemic 
drug problems, horrible drug problems.
    So I would suggest that just because communism is no longer 
a threat to the United States does not mean to suggest that the 
United States should turn back a goal of trying to work with 
and uplift the poor people of the region.
    Did you want to ask a question, Mr. Chairman?
    Mr. Shays. Yes, I have questions, but ask some more. I 
wanted to understand her response to your question.
    Mr. Sanders. So I think what we cannot disagree on is that 
there remain enormous economic problems in the region that are 
not being effectively addressed.
    Let me ask you another question, if I might, and that is my 
understanding is that IAF field workers are now required to 
work with local governments or private corporations. Is that 
always a good idea? Are some local governments not highly 
politicized? Are some corporations not pushing their own 
interests? Should the IAF abandon communities where it cannot 
find government or business partners, even where local people 
have ideas for innovative projects? How does the IAF's new 
approach differ from what the Agency for International 
Development and the World Bank do?
    Ms. Otero. Let me address the first part of your question. 
I think, as you see civil societies evolving in Latin America 
and democracy taking hold, you also see other parts of the 
country, especially the business sector, becoming increasingly 
involved in the development of the country. I see this in my 
own work through ACCION and through the work of the Inter-
American Foundation. We also see that central governments are 
making an effort to decentralize their power and to strengthen 
local governments to play a larger role in the development of 
the country.
    The work that the Inter-American Foundation is doing is an 
effort to recognize some of these changes that are taking place 
and to enable nongovernment organizations and private sector 
organizations to be able to work alongside of these elements 
that are part of growing democracies. The efforts of the Inter-
American Foundation to leverage resources from the corporate 
sector in order to channel them toward development is precisely 
one manifestation of the importance of expanding the number of 
players in the development of a country from having it be just 
the government or outside forces.
    So from that perspective, I think the direction that the 
Foundation is taking is one that recognizes that the 
environment it is working in has, in fact, changed and evolved, 
and that its government resources, in order to make a 
difference, have to leverage resources from other sectors, 
especially the private sector.
    I do not know if the President or Mr. Franco would like to 
answer.
    Mr. Evans. I would like to just mention one. Our grants 
still go to the nongovernmental organizations. We do not give 
grants to municipal governments, and we do not give grants to 
the private sector. What we are trying to do is to get the 
nongovernmental organizations, of the type we have been 
supporting for 30 years, to work when possible and as closely 
as possible with municipal governments, most of which are now 
elected. We could not do this 10 or 12 years ago because they 
were not elected. They are now, in most countries, elected or 
appointed by a city council that is elected. So they do have 
constituents.
    And we also feel that like the private business sector 
should be investing in development because they have a lot to 
gain from it, and it will affect their bottom line. They need 
healthy, trained workers. So what we are trying to do is to get 
the nongovernmental organizations to recognize that in order to 
be sustainable over time, they need to get these other sectors 
involved.
    Sometimes the municipal government may donate money or 
office facilities. Sometimes they may just be able to give 
moral support. But we are trying to encourage that model 
because we believe that that model will be more effective, that 
there will be more benefits accruing to the poor, and that it 
will be more sustainable.
    Mr. Franco. Congressman, if I can add one thing that is 
again important from the standpoint of Congress. Starting 3 
fiscal years ago, in fiscal year 1996, the Appropriations 
Committee inserted report language in our appropriations bill, 
in the foreign operations bill, that required the Inter-
American Foundation, by law, to seek other sources of funding, 
private and public, to support the grassroots development 
efforts of the agency. So there has been a congressional 
mandate, that other sources of funding be provided for those 
efforts supported by the Inter-American Foundation.
    Mr. Sanders. Mr. Chairman, if I could, let me read from an 
article that appeared in the L.A. Times, Wednesday, August 4, 
by Jim Mann. The title of the paragraph is: Support Withdrawn 
for Cooperative, ``in Mexico, for example, the IAF has 
withdrawn support from a small farmers' cooperative in strife-
ridden Chiapas that marketed its coffee by opening a successful 
chain of cafes in Mexico City. Today, it is teaming up with 
Levi Strauss, JP Morgan Co., Green Giant and 3M to fund 
training programs in areas where U.S. corporations do 
business.''
    Do you want to comment on that?
    Mr. Evans. Well, there is a history to that project. We do 
not provide support forever for these organizations, and we had 
supported that organization for a number of years. When the 
grant expired, the grants expire. So we did not withdraw 
support for that organization, nor did we cut the grant off. 
The grant expired.
    Mr. Sanders. What was the result? What happened to that 
farmers' cooperative in Chiapas; do you know?
    Mr. Evans. I do not have all of the details, but as far as 
I know, the cooperative is still in existence.
    Mr. Sanders. Anybody else know any more?
    Mr. Franco. Yes, I would like to comment on two points. 
Just as the President of the Foundation has noted, the Inter-
American Foundation provides seed capital. Our program is not 
designed to provide long-term support to these organizations, 
nor has it been advisable from the development standpoint to do 
that. The Inter-American Foundation provides seed capital for 
organizations to get on their feet, to have an initial 
investment, and then be self-sustaining.
    Second, to address your question directly, the goal of the 
Inter-American Foundation is to influence U.S. corporations 
working in the region that have a responsibility, we refer to 
it as social investment and social responsibility, to invest in 
those programs and those projects that the Inter-American 
Foundation seeks to support.
    So, therefore, just to be very clear, the objectives and 
certainly the activities of the Foundation are not to subsidize 
or support the efforts of U.S. corporations. On the contrary, 
it is to seek support from these institutions, and they are 
private businesses, to invest in those projects we have 
historically supported.
    Mr. Sanders. Thank you, Mr. Chairman.
    Mr. Shays. Thank you very much.
    I think I come down on wondering about two issues. One is 
the uniqueness of the program and if the IAF has not succeeded 
in getting USAID to be more like you are, and whether or not 
USAID can do this and whether private groups can.
    And also the whole issue of critical mass. I noticed from 
past budgets that at one point in 1989, it was $6.6 million, 
then it grew to $25 million in 1992 to basically $31 million in 
1993 and 1994 and 1995, and then down to $20 million. And I 
understand that there is only $5 million in the budget that 
passed the House, which I think will be changed again.
    It seems to me it gets to a point where if you do not get 
enough, we should just fold you into USAID. That is kind of 
what I am wondering. So I wanted to share that with you.
    My sense is that you went from about 70 employees to about 
56, but I also wonder why 56 employees? I have an organization 
that is private in New Canaan, CT called AmeriCares, and they 
give out hundreds of millions of dollars of medicine that they 
get from companies, literally hundreds of millions. They have 
given out billions, or a billion in aid, and they do it with so 
few employees, and I am wondering why 56?
    When we looked at your roster, it seemed like you had a 
number of well-paid employees, seemed to be top-heavy. So that 
is when I look at it on the surface, and those are the kinds of 
questions that I will want to address.
    I am also interested just to know how, Ms. Otero, you have 
spent a lot of time on this, but this is your oversight 
responsibility. The agency is run by Mr. Evans and Mr. Franco 
and others. Let me just begin by saying, Mr. Franco, how many 
times have you been overseas? First, how long have you worked 
for the agency?
    Mr. Evans. Are you speaking to me or Mr. Franco?
    Mr. Shays. Mr. Evans.
    Mr. Evans. Well, I have worked for a total of about 18 
years. I was a member of the team that started the agency in 
1971. I worked there for 10 years. I went to the Peace Corps 
after that and served in the Peace Corps in staff positions for 
8\1/2\ years under Director Ruppe and returned to the Inter-
American Foundation in 1991 as executive vice president.
    Mr. Shays. Mr. Franco, how long have you worked?
    Mr. Franco. Since 1985, Mr. Chairman.
    Mr. Shays. Since 1991, how many trips overseas have you 
had, Mr. Evans?
    Mr. Evans. I would say about seven or eight.
    Mr. Shays. So you average about one a year?
    Mr. Evans. About one a year.
    Mr. Shays. In the last 3 years how often have you been 
overseas?
    Mr. Evans. I think, two or three times.
    Mr. Shays. You would remember. How many times?
    Mr. Evans. In the last 3 years? Twice, to the best of my 
knowledge.
    Mr. Shays. Twice. Where were those trips?
    Mr. Evans. To Chile.
    Mr. Shays. And where else?
    Mr. Evans. And to Argentina.
    Mr. Shays. Mr. Franco, since 1991, how many times have you 
been overseas?
    Mr. Franco. Countless. I can't give you a number, but it 
would probably be 100, 50 or 100, a very large number.
    Mr. Shays. Just the disparity between you being 100 and, 
Mr. Evans, for you not even being overseas, how would you be 
able to really have a handle on your agency if you simply 
stayed home?
    Mr. Evans. Well, obviously, with the number of operations 
we have in the different countries, we have staff members that 
are directly responsible for those countries and those 
projects, and I have to depend on them because I cannot 
possibly cover the number of countries and projects that we 
have.
    So the staff members, you were talking about the number of 
staff members that we have, do have to do a great deal of 
traveling and monitoring of projects, which they do, and they 
then report back to me. So I have to rely on my staff.
    Mr. Shays. It just strikes me that, given the kind of 
agency that you are, that you would need to be out in the field 
on more than just two occasions in the last 3 years.
    Let me deal with the whole issue of uniqueness. My sense 
is--and first I concur with my colleague, there is more poverty 
today than there ever has been in Third World, so-called 
nonwestern countries. And so I concur that there is need to be 
of assistance, tremendous need to be of assistance. But I look 
at the number of employees and wonder how do we justify 56 
employees with an agency that basically is working to give $20 
million out?
    My understanding is that we have gone from 11 percent to 
about 22 percent of cost. So over 20 percent, say, gets gobbled 
up by the agency for administrative cost. Is that an accurate 
number?
    Mr. Franco. May I?
    Mr. Shays. Let me ask Mr. Evans.
    Mr. Evans. I think the program support costs are about 22 
percent for the last fiscal year. So it is in excess of 20 
percent.
    Mr. Shays. Why?
    Mr. Evans. Well, most of that cost is for staff and travel. 
If you look at the way that we operate, you just asked me the 
question about how we keep apprised of what is going on 
overseas on the projects. We have to visit the projects, we 
have to have staff members responsible for what we call Project 
Find in each country.
    Mr. Shays. In other words, you have staff in each of the 
countries?
    Mr. Evans. No, we have no staff stationed in the countries. 
All of our staff are stationed in the office in Arlington, VA, 
but they travel quite a bit, and they have to in order to 
investigate the projects when we get a proposal. Last year we 
got over 1,000 proposals. These proposals have to be reviewed. 
We do not give a grant to an organization unless there is a 
field visit by the Foundation representative responsible for 
that country.
    And once the grant is awarded, then we have to monitor the 
grant; they have to make trips down to the countries to visit 
the organization, onsite periodically, to be able to keep up 
with what is going on. And that is a little bit different than 
operating here in the States.
    We also are a government agency, and we have to comply with 
government regulations. We have to have a personnel department, 
we have to have a financial management department. We are under 
government regulations, and that, of course, adds to our 
overhead. We also have a learning department.
    Part of our mission is to learn from our projects. So we 
have to evaluate the projects. We have to have some people to 
do that.
    Mr. Shays. I have a number of organizations in my greater 
district, outside organizations, like Trickle Up and others, 
that basically try to do a lot of what you do. One of the 
things I will be asking my staff to do is to determine whether 
or not we are getting enough money to the people in need of 
whatever we are appropriating.
    Did you want to say something, Mr. Franco?
    Mr. Franco. Yes, if I could, Mr. Chairman. First, to be 
clear here for the record, in 1996, the administrative 
obligations, or overhead, for the Inter-American Foundation 
reached a record high of 25 percent, and that was a consequence 
of a dramatic reduction in our appropriation. By one-third, by 
Congress.
    So in 1996, our overhead was 25 percent. In 1997, it was 24 
percent, and in fiscal year 1998, it was 21 percent. So it has 
gone from 25, 24, 21. We think it is still too high. We are 
conducting a grade review, in terms of your question about 
being top-heavy in positions, and having them reviewed to make 
sure that positions are not only properly classified, but also 
are needed.
    I will say this: In terms of employees, before the 
congressional reductions beginning in 1995, with contractors, 
which we have eliminated, our staff was, in reality, nearly 
100. All those contractors or consultants----
    Mr. Shays. What did you say?
    Mr. Franco. It was nearly 100 with contractors. Those 
positions were eliminated beginning in fiscal year 1996. So 
we're looking at franchising some of our functions. And we are 
conducting a review of what activities, since this has become 
the norm in government, of having some administrative functions 
being carried out by other agencies, and we can do so less 
expensively to bring our overhead lower.
    We don't disagree our overhead is high. It is a concern. 
And, also, to be candid with you, you have referred to our 
budget and our size and our impact, there is a point where if 
the budget is too small, considering the requirements of 
running an institution, that the overhead will necessarily be 
higher than we like, but it is an issue that we are addressing.
    Mr. Shays. The bottom line is at a certain point, if 
Congress doesn't and the White House doesn't fund you at a 
certain level, it does become a question as to--and I am not 
saying it becomes your fault, I am just saying there is a point 
where integrity would demand that we just simply say, given 
what Congress is funding, we need to just take this money and 
give it to another organization. I am not saying we should 
reduce it, because I do not know. I am just saying there is 
this point, and I would be interested to know where it is.
    What would happen if we gave all the $20 million to USAID 
and required that they give all that money out with no overhead 
at all, using their existing infrastructure? What wouldn't 
happen that we want to happen?
    Ms. Otero. Let me try to answer that.
    Mr. Shays. I am going to ask the two employees here first.
    Ms. Otero. That is fine, and then I will give you mine.
    Mr. Shays. Because, frankly, one of the criticisms we have 
had of the organization is that there is a lot of problems with 
the running of the organization.
    Mr. Evans.
    Mr. Evans. Your question, Mr. Chairman, is that what would 
happen if you just gave the money to AID and let them give it 
out?
    Mr. Shays. With the same mandate; that it go to grass-root 
organizations, a trickle-up kind of attitude, not for big 
projects, which they are starting to do. They have copied a lot 
of what you all did. They really have.
    So I guess what I am trying to understand is why couldn't 
they do it and use their overhead?
    Mr. Evans. Well, one thing, they are not in every country 
in Latin America. That is one thing that they do not.
    Mr. Shays. You are not either, in the sense that you don't 
have people there.
    Mr. Evans. We don't and never had any people in all of 
these countries.
    Mr. Shays. So they could just go to these countries as 
well.
    Mr. Evans. That is a possibility.
    Mr. Shays. But your point is that they do not have 
expertise in some of these countries?
    Mr. Evans. That is one point that I would make. If they 
administered the program the way that we do, which is what I 
was just talking about in terms of the staffing that we have, 
that they would have to have someone that would go and visit 
the projects, look at the proposals, do the assessments in 
order to make sure that the organization was capable of 
carrying out the project, and they would also have to have 
someone to monitor the project. We audit the projects. They 
would have to have somebody to audit the projects.
    So I am not sure that they would be able to do it without 
any overhead whatsoever. As a matter of fact, I think they 
would have to expend some funds on overhead or program support, 
the kind of activities I just mentioned, unless they just gave 
the money out blindly and didn't do a thorough analysis and 
didn't followup or monitor the project, which I think would be 
a mistake.
    Mr. Shays. Mr. Franco.
    Mr. Franco. Mr. Chairman, I think that the mandate of the 
Agency for International Development is wholly different than 
that of the Inter-American Foundation, and, therefore, an 
earmark of $20 million to reach the same populations and the 
same groups would not be possible simply because the agency is 
designed, and properly so, to work government-to-government 
programs. It works very closely, although it works with the 
nongovernmental associations----
    Mr. Shays. You are saying USAID?
    Mr. Franco. Yes. Although it works with the nongovernmental 
organizations in Latin America, it does so in tandem with our 
State Department and host governments. And there is nothing 
wrong with that, it is just a different mission. So to simply 
state that $20 million could be earmarked for smaller projects, 
I think, would change the character of the types of 
organizations that would ultimately be funded, meaning by that, 
I do not think the groups we reach and work with today would be 
reached.
    And I believe AID would attest to that, or the assistant 
administrator for Latin America would. Therefore, I think a $20 
million earmark to AID would really represent, ultimately, $20 
million to very similar programs AID works with today, which 
are of a different character.
    Second, I do agree with Mr. Evans, and that is that any 
program that would be established, there would be a 
minibureaucracy established with it even at AID.
    Mr. Shays. Well, some of the administrative costs wouldn't, 
but I hear what you are saying.
    Ms. Otero.
    Ms. Otero. I have had opportunity to work with AID at the 
mission level quite a bit through my own work, and I would say 
that the capacity of AID to do this kind of work is really not 
in place. AID, if it has taken on some of the learning that the 
Foundation has provided, it has been to apply it to providing 
grants, relatively large grants, to some of the best known 
nongovernment organizations in the country.
    But primarily its work has been and continues to be 
government-to-government. In fact, AID in Latin America right 
now is working very closely with governments to help them 
strengthen the capacity of local governments. That in itself is 
complementary to what the Inter-American Foundation is doing.
    I think what would happen, Mr. Chairman, is that AID would 
not really be able to deploy grants as small as $7,000 or 
$25,000 to organizations that are quite far away from the 
capital and that really do not have the capacity to interact 
with an organization like AID. AID would not have the staff to 
be able to visit those places. I am talking about places where 
you travel by land in jeeps and that you don't find easily.
    From that perspective, what you would find, Mr. Chairman, 
is on the one hand the elimination of the presence of a U.S. 
Government agency at the grass-roots level, and I think that 
this is an essential component of the interests of the United 
States in the hemisphere. Second, you would do away with a very 
important repository of learning and of expertise that the 
staff of the Inter-American Foundation has developed over the 
years. They may seem to be 56 people who are deploying only $20 
million, but in addition to that they are bringing important 
knowledge and disseminating important learning into 
development. And some of that learning is being accepted and 
implemented even by the World Bank or by AID or other agencies.
    So I think you need to look at the Inter-American 
Foundation and its uniqueness not only in terms of the funds 
that it is providing to these institutions, but also to the 
learning that it is able to amass and then to disseminate to 
other institutions. And for that purpose it really needs to be 
able to operate in the independent way that it has in the past.
    Mr. Shays. I think this will be my last question, unless 
your answers generate another question. I want each of you, 
start with you, Mr. Evans, and then you, Mr. Franco, to tell me 
the best project in the last year and the worst project.
    Mr. Evans. I would say one of the best projects that we 
have supported in the past year is a project in Brazil in which 
they are using sisal. It is a cooperative. It is a business. 
They are manufacturing carpets which they are selling for a 
profit. The proceeds from this business is being used not only 
to increase the income of the workers, but also to support 
community projects that improve the health and education of the 
community.
    Mr. Shays. How much was that grant for?
    Mr. Evans. I think that that project--I don't recall 
exactly, but I think the project is about--it was about 
$250,000 over 3 years. But I do not have that exact figure. I 
can certainly get it for you.
    Mr. Shays. Tell me the worst project.
    Mr. Evans. Let's see, I'd have to think about----
    Mr. Shays. I'm not saying you shouldn't have funded it, I 
am just saying----
    Mr. Evans. I'm not trying to avoid----
    Mr. Shays [continuing]. In the last 2 to 3 years. 
Obviously, I can't say the last year.
    Mr. Evans. Well, the worst project, as far as I'm 
concerned, is the one in Ecuador, in which the grantee deviated 
from what they were supposed to be doing and got involved in 
detaining two Americans and threatening----
    Mr. Shays. What was that project?
    Mr. Evans. That was the COICA.
    Mr. Shays. What was it funding?
    Mr. Evans. It was an indigenous group in Ecuador, and the 
grant was supposed to go for educational purposes to improve 
the education of these indigenous people, who are very poor 
and, in many, many cases, illiterate.
    Mr. Shays. So your mandate isn't just economic?
    Mr. Evans. Pardon?
    Mr. Shays. Your mandate isn't just economic?
    Mr. Evans. No, no.
    Mr. Shays. How much was the grant for?
    Mr. Evans. The grant in that particular case, do you 
remember----
    Mr. Shays. No, I want to ask you, Mr. Evans.
    Mr. Evans. I think that that grant was about $190,000, I 
think, again, for 3 years. I'm sorry, we have hundreds of 
grants.
    Mr. Shays. No, no, no, the good grants and the bad grants 
should stand out to the person running this agency. You 
shouldn't have to ask anyone for assistance on that.
    Mr. Franco, the worst.
    Mr. Franco. I would say, Mr. Chairman, based on kind of a 
prejudice for the grants I have visited, because there might be 
very good grants, we make 240 a year, so we can't see them all, 
but there is a grant that sticks out in my mind. It is in 
Brazil, and it is in Porto Alegre, and the name is Portosol, 
and I like it for a couple of reasons.
    It is a revolving fund that we have established where it 
generally works--a lot of these revolving loan funds encounter 
difficulties because we are dealing with poor people. But this 
is a very good fund that doesn't just provide capital, but also 
provides technical assistance in conjunction with it. The 
administrators are very committed people, but they are also 
business-minded people. They are not just people that have a 
good charitable instinct, but have a business acumen. And they 
are businesspeople that have come together, with local leaders 
in Brazil and Porto Alegre, to provide seed capital in the 
marginal neighborhoods of the city and also the technical 
assistance to make the revolving fund actually work 
effectively.
    I think the project has a lot of potential, not because I 
say so, but because it is being replicated in other places in 
Brazil. People have come from Rio and Sao Paulo, which have 
huge problems, and are replicating this approach.
    Mr. Shays. How much is that grant for?
    Mr. Franco. $197,000 for a 2-year period. So it is 
illustrative of not only a successful grant, but one that shows 
the impact of the program and how it can be replicated at a 
national level well beyond its $197,000.
    Mr. Shays. Worst grant.
    Mr. Franco. The worst grant, I would say--well, we don't 
have any worst grants, but if I have to tell you one that has a 
problem----
    Mr. Shays. I said the worst grant. You mean you have a few 
bad grants?
    Mr. Franco. Well, we have grants that do not meet our 
expectations.
    Mr. Shays. Let me say something to you. If you didn't, I 
would be amazed.
    Mr. Franco. No, no, we do. We have an audit committee, and 
we look at grants.
    Mr. Shays. Give me one.
    Mr. Franco. Let me give you one that has been a problematic 
grant. The name of it is CANDELA. It is in Peru. I became 
involved with the problem, and it was an ambitious grant to 
harvest Brazil nuts in a remote area of Peru. Actually, there 
is a processing plant in Lima itself in the south, and they are 
nut gatherers and so forth.
    Now, this grant had our good intentions of bringing the 
business community in direct contact with poor people with the 
goal of doing two things. First of all, the businesspeople had 
an interest in harvesting these Brazil nuts. Unfortunately, 
based on our review and monitoring reports of this project, 
there was not the kind of social commitment the IAF expects of 
grantee organizations. We provided funding for a school, a 
daycare center, and generally improved conditions for project 
beneficiaries. Our investment, as we have described it before, 
was designed to be seed capital so this organization, CANDELA, 
would continue to do these activities, and not just use the 
funds for its business purposes. This organization didn't live 
up to our expectations and didn't follow through.
    Why it is troublesome to me is because it left a sour taste 
in my mouth. There is a difference between something that 
didn't work; people have tried their best and it just didn't 
work out and----
    Mr. Shays. How much of an investment was this one?
    Mr. Franco. This was a total of about $188,000.
    Mr. Shays. For how long?
    Mr. Franco. For 3 years. And we did extend it once, I 
believe, for 6 months.
    Mr. Shays. Let me just conclude, Ms. Otero. There are good 
grants and bad grants. There has to be. If everything is an 
average, then you are not taking risks and so on. So I accept 
there are going to be good and bad. What I want to know is the 
confidence to know that you all have a system to identify the 
good and the bad, and duplicate the good and eliminate the bad.
    Tell me what you have learned since you have worked there 
on how to eliminate bad funding.
    Ms. Otero. I think several things are important in any 
process of reviewing proposals that come to you from the 
outside which have been designed by people on the outside.
    I think the review internally has to be done by a group of 
people rather than by one or two people. It has to be done by 
people who have some level of expertise and knowledge about the 
country, the context in which the project is taking place, and 
what the results the grantee organization it is planning to 
undertake are.
    So in the process of reviewing the grant before you approve 
it, you do need to have a serious and systematic process. And I 
think the Foundation, certainly since I have been Chair, has 
improved that process dramatically.
    The second part is the monitoring of the grant. And this is 
really where a lot of the administrative costs go, is to keep 
track of whether the activities are going on according to the 
goals that they have established and if the resources are being 
spent accordingly. And I think the Foundation not only is doing 
that effectively, but it is also gathering impact data to find 
out if, in fact, this deployment of a grant is increasing 
incomes, is changing the capacity of people to work, and is 
enabling them to really improve their lives. And in gathering 
that information, I think the Foundation is also determining 
what makes a good project and what does not.
    So I personally think the Foundation has a great deal to 
offer on that perspective.
    Mr. Shays. OK, thank you.
    Do you have any other questions?
    Mr. Sanders. Only this, Mr. Chairman. I don't claim to be 
the expert on the function of the IAF, and I share some 
concerns on the issues you raise. We want to make sure that the 
money we appropriate goes to the people who need it and does 
not go, for example, to a bureaucracy.
    But the concern I have, whether it is the IAF or any other 
agency, is that we in the United States, and certainly in the 
U.S. Government, do not believe that it is appropriate with the 
end of communism simply to withdraw our concern for the poor 
people in the world. It would be the height of hypocrisy to say 
that we were there because Fidel Castro might take advantage of 
the poverty, and now that communism is weak, we don't have to 
pay attention to that.
    You indicated, and I think you are right, that in many ways 
in Latin America and Central America for the poorest people the 
economic situation is worse than it used to be. I do know 
Nicaragua is an absolute disaster. And it is an outrage to my 
mind that when we were worried about Daniel Ortega, everybody 
was concerned about Nicaragua, and now when we have 17 percent 
unemployment, nobody is concerned.
    Now, whether these guys are doing the job that needs to be 
done, I cannot say, but I do think just because Jesse Helms has 
a concern is not a reason for all of us to suggest that we 
should be cutting back on our programs that help the poorest 
people in the world.
    Mr. Shays. Let me say this. I do think there has to be 
critical mass, otherwise then it doesn't make sense. But I 
always make an assumption when we have these hearings that we 
give you the opportunity to present your case. And, who knows, 
we could argue that funding should be increased, not decreased. 
So, obviously, that changes, too. So I don't pass judgment one 
way or the other on that issue.
    I thank you all. I would welcome any of you to make a 
closing comment before we get to the next panel. If you have 
any comments you would like to make?
    Ms. Otero. No.
    Mr. Shays. All set? OK, then, thank you very much.
    Ms. Otero. Thank you, Mr. Chairman.
    Mr. Shays. We will call our next panel, which is Patrick 
Breslin, representative for Colombia Inter-American Foundation; 
Daniel W. Fisk, Deputy Director, the Kathryn and Shelby Cullom 
Davis International Study Center, Heritage Foundation, DC; and 
Alvaro Rengifo, executive director, Inter-American Development 
Bank.
    That's it. I'm having to remember that an ``I'' in Spanish 
is an ``E.'' Is that correct; an ``I'' in Spanish is an ``E?''
    Mr. Regnifo. Yes. Double E for you.
    Mr. Shays. I'm taking Spanish lessons.
    Mr. Sanders. And you are going to conduct the rest of the 
hearing in Spanish; right?
    Mr. Shays. No hablo ingles, senor. Hablo en espanol, por 
favor. That's about it.
    We have to give you the oath. So I would ask all of you. Is 
there anyone else who will be responding? All three of you have 
testimony. If you will raise your right hands, please.
    [Witnesses sworn.]
    Mr. Shays. All three have responded in the affirmative. We 
will do it as I called you, and we would like you to keep 
within the 5 minutes, and if you need to go over a minute or 
two, that's fine, and then we will ask questions.
    Mr. Breslin.

  STATEMENTS OF PATRICK BRESLIN, REPRESENTATIVE FOR COLOMBIA, 
INTER-AMERICAN FOUNDATION; DANIEL W. FISK, DEPUTY DIRECTOR, THE 
  KATHRYN AND SHELBY CULLOM DAVIS INTERNATIONAL STUDY CENTER, 
 HERITAGE FOUNDATION; AND ALVARO RENGIFO, EXECUTIVE DIRECTOR, 
                INTER-AMERICAN DEVELOPMENT BANK

    Mr. Breslin. Thank you, Mr. Chairman. My name is Patrick 
Breslin. I have been involved in issues of development in Latin 
America since I was a Peace Corps volunteer in 1963 in 
Colombia. I have been associated with the Inter-American 
Foundation since the early 1980's, first as a freelance writer, 
later commissioned to write a book about the Foundation's first 
15 years.
    Mr. Shays. We are not picking you up well. Can you bring 
that mic a little closer and just a little lower.
    Mr. Breslin. Is that better?
    Mr. Shays. I think you probably just need to speak a little 
louder.
    I heard Peace Corps, and that obviously warms my heart, but 
other than that I didn't hear anything else you said.
    Mr. Breslin. OK. Since Peace Corps and Colombia, I have 
studied Latin America, I have lived in Latin America, I have 
been with the Inter-American Foundation in one capacity or 
another since the early 1980's, first as a freelance writer, 
visiting projects, writing about them, later writing a book 
called Development and Dignity, which recounts the first 15 
years of the Inter-American Foundation, and, most recently, as 
the Foundation representative for Colombia.
    Mr. Shays. Does that mean, basically, that that's your desk 
job? In other words, you have the Colombia desk?
    Mr. Breslin. I have the Colombia portfolio. I am the single 
representative in the Foundation responsible for the Colombia 
portfolio. That means I travel to Colombia frequently, I look 
for projects, I analyze projects, I present projects for 
funding within the Foundation, and then I continue to visit 
projects.
    Mr. Shays. If you will indulge me just a second to 
understand. About how much goes through your desk? And then we 
will get on.
    Mr. Breslin. Something on the order of $800,000 to $1 
million a year currently. That is down because the overall 
budget is down.
    Mr. Shays. Sorry to interrupt you. We will let you get on 
with your statement.
    Mr. Breslin. I wanted to start off by saying that I am very 
excited about this oversight hearing. I am excited about some 
of the issues you are raising. I think they are very healthy 
for the Foundation. And I think it is particularly healthy that 
these questions come from Congress, because uniquely in the 
U.S. Government, the Inter-American Foundation is a creature of 
the Congress.
    In the course of the discussion, I wanted to take issue 
with your opening statement about the Inter-American Foundation 
being a cold war institution. I think that really, uniquely in 
the field of foreign assistance from the U.S. Government, the 
Inter-American Foundation was most specifically not a cold war 
institution. I think it, in many ways, anticipated the end of 
the cold war in the way that it began to work and has worked 
for almost 30 years now in Latin America.
    And I think that this identification of the Foundation with 
the Congress, particularly in the early years, was extremely 
important to the success of the Foundation. In the late 1960's, 
the 1970's, Latin America was incredibly conflictive: 
ideological battles, political upheavals, and along with that a 
very deep-rooted suspicion of the United States among many 
sectors of Latin America society. The basic hurdle that the 
Inter-American Foundation had to overcome when it began to work 
was to convince Latin Americans that it was not a front for the 
CIA. That was the common suspicion of any initiative coming out 
of the United States at that point.
    The fact that Latin Americans saw the Foundation as being a 
creature of the Congress, a creation of the Congress, made a 
major difference. It was something that helped the 
representatives make contacts, get access to people, and learn 
about what was going on, because people in Latin America tended 
to see a distinction between the administration policies that 
they might have been suspicious of and the Congress, which they 
thought was representing much more directly the people of the 
United States. And I think that identification really eased the 
path for the Inter-American Foundation, particularly in the 
early years.
    There is another whole set of very relevant questions that 
should be asked about the Inter-American Foundation, and you 
touched on many of these already. They have to do with the 
impact of the projects that we have funded. That is, in my 
experience, a difficult thing to measure. There are several 
basic things regarding the Inter-American Foundation, and one 
of them is we do not plan projects. We have no project design 
capability within the Foundation. That is not the way we go 
about the work. What we have always tried to do is to be 
responsive to the ideas that are coming out of Latin America. 
We fund ideas that people bring to us. We don't go with 
preconceived ideas about what they need.
    There is another characteristic of the Inter-American 
Foundation philosophy which, I think, is also unique. AID, the 
World Bank, Inter-American Development Bank, everyone is 
working with NGO's now. I think that there is still a major 
difference in terms of the way the Foundation works. We start 
with the idea that poor people in Latin America know what they 
need.
    The first book the Foundation ever published was titled, 
``They Know How,'' and it tried to make that argument. Our 
approach to poor people, to the problem of poverty in Latin 
America, is not to view poor people as a kind of 
undifferentiated mass for whom projects have to be planned to 
bring them into the mainstream. We start with the idea that 
they need to come up with their own ideas, to form their own 
organizations, and to go about improving their lives on their 
own. And if what they are doing makes sense to us, if they can 
sell us their idea, then we put in the resources. But the 
initiative is theirs; the responsibility for the project is 
theirs.
    And that is the basic reason why, and you asked about staff 
overseas, there was a conscious decision not to place staff 
overseas, to maintain that distance between the Inter-American 
Foundation and the projects it was funding. We did not want to 
have project managers in the field. We didn't want to have 
local people ask us well, what do you think we should do? Our 
whole point is you need to know what you want to do. And if you 
can convince us that what you are doing makes sense, we will 
back you up.
    Is the Foundation still relevant? As I suggested, because I 
don't think the Foundation really had anything to do with the 
cold war, I would argue that, yes, it is, and actually more 
relevant than many other institutions that I think really did 
pursue cold war aims more than we did. The basic idea about the 
Foundation was to work directly with poor people and their 
organizations and not to go through their governments, because 
for many years U.S. assistance was used as leverage. It was a 
stick to beat people with. It was a leverage to get something 
we wanted.
    There are many cases in the history of AID and Latin 
America where funding for projects was cutoff because the 
government was not supporting us in the U.N. or because the 
government had taken a position we opposed. The whole point of 
the Inter-American Foundation was to have a continuity of 
contact with poor people and their organizations and not to be 
affected by short-term U.S. foreign policy. That was built into 
the legislation.
    The other point I would like to make, and I think I am 
running out of time, is that when Congress created the 
Foundation, it created a very complicated institution. Congress 
was really looking for a lot of different things. The board of 
directors is a structure that Congress decided on. It was meant 
to buffer us from the government. It was meant to make us a 
semi-independent agency. It was meant to give us the 
flexibility that is more characteristic of the private sector, 
but, at the same time, the identification of the Foundation as 
a government agency was to be clear and enduring. We are an 
agency of the U.S. Government. We represent the U.S. 
Government. When I am in Colombia, in a small town someplace, 
I'm the U.S. Government. I'm representing it.
    But because Congress was looking for a lot from this 
agency, I think the way it is structured has built-in tensions. 
And I think that the real test for board and management of the 
Foundation has always been how well do they deal with the 
built-in tensions of the Foundation. How do they balance the 
need to follow government regulations with the need to be 
innovative, to take risks, to take chances, and to bet on 
people.
    Because, ultimately, what we do as a Foundation is we bet. 
We are venture capitalists in that sense; we bet on people's 
ideas, and we try to talk with them, and we try to analyze what 
they are talking about. But we are really making a bet that 
they know what they are doing and that they have the 
commitment. We stay with them, we talk to them, we engage in a 
conversation with them over the life of the project, but that 
involves an element of risk and uncertainty, and a lot of 
people are uncomfortable with uncertainty. For me, the 
challenge to the Board of the Inter-American Foundation, to the 
management of the Inter-American Foundation, has always been 
how well do they deal with the challenges of uncertainty?
    I think because I have used a lot of time, I could just 
leave it there.
    Mr. Shays. Thank you.
    [The prepared statement of Mr. Breslin follows:]
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    Mr. Shays. Mr. Fisk.
    Mr. Fisk. Thank you very much, both on behalf of the 
Heritage Foundation, my new institutional affiliation, and as 
someone who has personally followed Latin America for roughly 
the last 15 years, either in terms of a policy job here in 
Washington or in the last 2 years from an academic viewpoint. 
For 5 of the years in government I had staff responsibility for 
oversight of both USAID and IAF on both the House and the 
Senate side.
    In preparation for this, I thought it was useful to go 
through the congressional presentation documents for both USAID 
and the IAF, as well as review some of the sample congressional 
notifications, so my conclusions and comments are based on both 
professional experience and then this most recent review.
    It is clear from my reading of the legislative history that 
the Inter-American Foundation was created to remedy a gap in 
programs implemented by USAID, namely the Alliance for 
Progress, which was part of the cold war architecture of the 
United States and Latin America. At the time of the 
Foundation's establishment, economic development was primarily 
defined in government-to-government terms with the focus on 
large infrastructure projects. The Inter-American Foundation's 
focus was to be people-to-people, working with and through 
nongovernmental organizations, a tradition the IAF has 
continued.
    However, over the last decade, I would say that the gap in 
philosophies on how to approach development has dramatically 
closed, reflecting dramatic changes in the hemisphere. The 
increasing focus of U.S. bilateral aid programs, specifically 
those implemented by USAID, is assistance to nongovernmental 
organizations, with a growing emphasis on local and municipal 
programs. There is no doubt that AID continues to give money to 
governments. They do, and they will probably continue to do 
that. But there is no doubt, as well, that the increasing focus 
is nongovernmental organizations.
    I conclude that it is difficult to distinguish how NGO 
development projects supported by the Inter-American Foundation 
are different from those----
    Mr. Shays. Could you just suspend one moment?
    Mr. Fisk. Yes.
    Mr. Shays. I'm sorry.
    Mr. Fisk. I can work however you want to.
    Mr. Shays. No, no, you just keep going. We have time. What 
we will do is we will just keep it rolling. Since there is only 
one vote, we will just keep it rolling. If there were a few, we 
would have to adjourn, but let us keep going.
    Mr. Fisk. Thank you, sir.
    As I was saying, it is difficult to distinguish how NGO 
development projects supported by the Inter-American Foundation 
are different from those supported by USAID. In some cases you 
have situations in which, at least in the recent past, IAF and 
USAID have supported the same NGO; maybe not the exact same 
program within the NGO, but the same nongovernmental 
organization. There is duplication of effort, and I would argue 
that this is neither necessary nor efficient.
    Now, there is one area where the Foundation's agenda is 
different from that of USAID, and that is the Foundation's 
pursuit of partnerships with U.S. corporations. These 
partnerships, understandably, raise the comfort level of U.S. 
corporations investing in Latin America and, frankly, are smart 
corporate activity, as the IAF in its own annual report 
acknowledges, ``Where corporations gain better-informed 
business decisions, loyalty, enhanced corporate and brand 
reputation through their social investments.''
    Now, for the Foundation, the partnerships are an innovative 
means of maximizing resources. There is no doubt that compared 
to what USAID does, these partnerships are out of the norm. In 
fact, AID does not do these kind of things. The Foundation does 
offer a unique group of experts and expertise and an on-the-
ground perspective that, frankly, is not replicated within the 
U.S. Government. The question, though, is whether the 
Foundation is supplying a service to U.S. corporations for 
which the Foundation should be funded or compensated by the 
corporations and not the American taxpayer.
    Given the large duplication of effort by the IAF and the 
USAID at this point in time, and the presence of a clear 
corporate interest in local development, I think it is fair to 
ask what are the options, given the 30-year mark for the 
Foundation. I would argue there are basically three: One is 
clearly the status quo. But it seems that everyone is in 
agreement that the status quo is unacceptable, including the 
Foundation.
    The second is some sort of merger, either the traditional 
development activities of the Foundation into USAID, or what I 
think is more unrealistic just given the politics of the issue, 
is the AID, Latin America bureau, being merged into the 
Foundation. The traditional development programs of both, are 
the same.
    The last option is privatization. I would suggest that the 
Foundation's partnership with U.S. corporations shows that 
there is a need that should be addressed, and that the 
Foundation has expertise and can play a role in this. I would 
argue, however, that corporations should be willing to 
compensate the IAF for its expertise. This should not be a 
taxpayer-funded entity or program. The IAF, I believe, should 
be privatized and, frankly, let the market decide its ultimate 
focus and fate.
    Thank you very much.
    Mr. Shays. Thank you very much.
    [The prepared statement of Mr. Fisk follows:]
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    Mr. Shays. Mr. Rengifo.
    Mr. Rengifo. My name is Alvaro Rengifo.
    Mr. Shays. So I didn't say your name correctly.
    Mr. Rengifo. No, you said it very well. I explained to your 
assistants that it was difficult to pronounce my R.
    Mr. Shays. Can you lower the mic and speak a little louder?
    Mr. Rengifo. OK, thank you.
    The reason why I am here today is, as we heard before by 
the people that have worked with the IAF, and I worked with IAF 
about 11 years ago, about 6 months, during my internship--I was 
at that moment with a Fulbright grant from your government, and 
I was doing a special program at the Johns Hopkins University, 
and then I entered, during my stay here 1 year in Washington, 
in four organizations. One was the IAF, which I stayed for 6 
months, and at the same time I was working with the World Bank 
in Bolivia, at the Hispanic Catholic Center, helping people 
from Central America to learn and to read Spanish. And I also 
was working for 2 months or a little more, I don't recall, with 
the USAID, working with two of my professors that needed some 
help in the rural sector.
    So the reason why I am here today, trying to, I would say, 
help maintain this organization, this institution, is because I 
do believe that you have, the U.S. parliament, the U.S. 
Congress, has a very nice, very interesting organization that I 
think is worthwhile.
    I have been reading and hearing tonight--or this morning, 
excuse me--many of the reasons why you are making this kind of 
examination of the interest of your country to devote to 
taxpayers' money to it. I do believe there are many, many 
reasons. I cannot agree with my predecessor in the word with 
the duplication or the private sector driven--being able to do 
the job this institution does.
    I have been working for the last 10 years in development. 
When I left United States, I went to Ivory Coast of Africa, 
western Africa, 4 years, and then I stayed in North Africa and 
Morocco for another 2 years, and when I came back to Spanish 
Cabinet again, I ran into problems of aid, of assistance aid to 
many parts of countries of the world, especially to Latin 
America. And for the last 3 years under the new government of 
Mr. Aznar, I have been Assistant Secretary of Commerce dealing 
with financial aid in the Spanish system that we have.
    I do believe and I think that you have an institution which 
is very interesting and very unique. We in Spain have tried to 
do things very--I would say trying to tell our Parliament to do 
something in the same way, but we have not been as successful. 
I think you are a good example that we have to follow.
    But let me just say what I think is very different. First, 
they are not an active actor in the sense that you respond to 
people's ideas, which is something we have little time to do in 
governments. What we do in the system is we try to tell them 
and try to teach people what to do. The philosophy which is 
behind IAF, which I think is very interesting not only here, 
but also in their brother institution, the Inter-African 
Development Foundation, IADF, or however you say the name, is 
to hear people and see what they have to say and then try to 
help them to do that, giving some guidance. So one idea is that 
no other institution, no other assistance agency in the world 
likes to hear and just be passive.
    I recall when I was there 11 years ago, I was impressed to 
see how many letters at that time the Inter-American Foundation 
was receiving every day proposing new projects. And one of my 
jobs was to try to go and scrutinize and decide which was more 
interesting or not. That is something in my 10 years working 
with development in Spain is very unusual. Normally you go to 
the government or somebody else, but you try to push them, and 
you are the one who makes the design. I think that is a very 
interesting point.
    Second, you work, or the IAF works, with leaders; trying to 
look for people who are capable in that country, in that part 
of the country to be a leader of that project. Otherwise you 
would never have a sustainable project. When we talk about 
development, I think it is like driving a car with a rear 
mirror. You will get the information of what you have done, 10 
years later, when you get the development evaluation and see 
what has happened. So you are always with a kind of black 
mirror in front of you, which is difficult to drive. That is 
why this kind of grass-roots approach, having leaders and 
responding to the needs, is the only way you can be more sure 
that you are doing a good job and a sustainable job.
    The third idea is that most of the projects, that I have 
followed very little in the last years, but that you also need 
to put money from the people there, so you are just a partner 
in the project. You are not the only funder. The leader or the 
organization or the community or whatever who has on the other 
side giving this idea will also put in his money.
    So these three ideas are very interesting, and I think no 
other institution have them.
    Mr. Shays. Excuse me, Mr. Rengifo, let me interrupt you. I 
am going to go vote. I will just have you continue to make your 
last point. I will have Mr. Sanders reconvene us. So we are 
going to be at ease for a few minutes. He will be back, and he 
will start us off, and then we will come back.
    Sorry to interrupt you.
    Mr. Sanders [presiding]. The chairman will be back, but he 
suggested that we continue, and, Mr. Rengifo, I gather you were 
in the middle of your testimony.
    Mr. Rengifo. Yes, yes, I was just trying to explain why I 
was here and why I have some positive words. I am trying to say 
that is needed to help you sustain and maintain this 
institution, which I think is a very interesting, unique, and 
good institution.
    I thought it was good for its three main ways of working, 
which is responsive to all good ideas, not designing them; 
looking for leadership, to be sure that this project will be 
sustainable in the future, which is one of our main concerns, 
people who, like me, work on development issues; and, third, 
that you always ask for a counterpart to be financed. That 
means you are not the only funder of the idea, but you go with 
a partner in this kind of project.
    You do it through grants, which I think is the only way you 
should do that. They have done evaluations--I mean, the last 
years I have been not participating, but in the late 1980's and 
1990's, I still received papers from the IAF, and there was 
always a permanent monitoring, which is not so very uncommon. 
And, finally, there is this very interesting job of publishing 
books and publishing these kinds of letters, which I think are 
very insightful and enlightening for those of us who work in 
this field.
    Just to end, which I think I have run out of time, I would 
say you have a very unique institution with innovative ideas 
which has helped all of us to know about grass-roots 
development and working through NGO's and local NGO's, not only 
NGO's in our western countries, but NGO's in the local 
countries. It is a small agency. It is very flexible and have 
given a lot of lessons and good practices to do. And I do 
believe, and this is something that is very personal, but I am 
very sure it has given a very good image of your country 
abroad, in Latin America and good prestige.
    I do also believe that when you talk about the size of 
projects, that you need more money. That would be my first 
idea, not less money, but more money for this institution. But, 
second, you are doing projects which average about $100,000 to 
$200,000. I know of no institution in the world in the western 
countries on the rich continent that is able to do that. We not 
only work for the IDB, Inter-American Development Bank, 
representing Spain and all the countries like France, Austria, 
and the Nordics, we in the IDB, in Latin America, we are unable 
to do projects below normally $5 to $10 million. Normally. We 
can do some lesser ones, but I don't think USAID is able to go 
far below, $2, $3, $4, $5 million.
    So this kind of institution which goes to $100,000 I think 
is a very interesting institution. And I do not know how, but I 
would say to you that I think it is a good idea to have it. 
Thank you.
    Mr. Sanders. Thank you very much.
    [The prepared statement of Mr. Rengifo follows:]
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    Mr. Sanders. I guess I will begin with questioning. I think 
that will be appropriate.
    Mr. Fisk, I apologize for not having heard your testimony. 
Let me just start off by asking you a question. Your point of 
view is that the IAF was developed as part of the cold war?
    Mr. Fisk. That is my reading of the legislative history 
and, clearly, the late Dante Fascell's focus.
    Mr. Sanders. The cold war is largely over, communism is 
largely dead. What do you think; no longer need the agency? Is 
that your point of view?
    Mr. Fisk. My point of view is that, in the traditional 
development area, its programs are the same that USAID is 
implementing. So there is a simple question of duplication. Are 
we, the American taxpayers, getting something different with 
IAF funds than we are getting from USAID funds?
    Just to give you an example, funding levels, the Ecuador 
IAF program was referred to as a 3-year program at $190,000, 
roughly $62,000 a year. The fact is that AID does this same 
thing. It will fund cooperatives or a credit union cooperative 
in Nicaragua, for example, $250,000, but it will do it over 3 
to 5 years. So it is the same funding approach. AID can and 
does fund such programs. I have given grants as low as $16,000 
to NGO's for activities. So one issue is duplication.
    I would have a larger philosophical question which goes to 
the issue of what is the best means of economic development; is 
it bilateral assistance? Clearly there is societal consensus on 
humanitarian aid. For instance, the response by the United 
States to Hurricane Mitch, I think, was entirely appropriate. 
But one can look at the same set of countries, El Salvador and 
Nicaragua, with which I know you are familiar. We have put $3 
billion into Nicaragua since 1989, and we are still looking at 
a horrendous economic situation.
    So I think one has to ask what is the better means of 
economic development. I have a question that goes to the entire 
philosophy of bilateral aid which goes beyond the IAF.
    Mr. Sanders. In other words, your basic point is that they 
are duplicating what the other agencies are doing, and they 
should be merged?
    Mr. Fisk. Yes, sir.
    Mr. Sanders. Mr. Rengifo, would you want to respond to 
that? Is that true?
    Mr. Rengifo. Well, I am happy to hear that. The USAID, when 
I was there 11 years ago, was unable to do that. But, still, I 
am very sure that it is unable to go with this kind of 
philosophy where you respond to the ideas of others.
    At that time, where I was working in rural development, 
they were most of the time designing projects. I think these 
ideas--it will be difficult to merge this kind of philosophy of 
being responsive, looking after leaders and trying to search 
for counterparts, and being a little inflexible. I think that 
is impossible in an organization like USAID.
    I would not agree with Mr. Fisk, although I respect very 
much his idea, because I think he has an interesting point 
about what is development. That is the main issue most of us 
have been dealing with that in the last--since I started 
studying. And I know it is very difficult.
    Maybe it is better not to do any kind of bilateral aid. 
That would be another question. But the point today, is about 
the IAF role, I think it has a role, and I do believe that 
there is not duplication. There is a lot of complementary, and 
maybe sometimes I think it is even good news to see they have 
funded projects together or with the same organizations. I 
think that would be helping to introduce to some of these 
organizations a new role in which you can see how this 
leadership and this sustainability, which are the projects of 
the IAF, is even larger and better than others. So I would not 
agree with the idea of merging them.
    Mr. Sanders. Mr. Breslin, would you want to comment?
    Mr. Breslin. I would love to. I worked for 1 year at USAID. 
Actually, I promised to work for a year at AID, and I worked 
for 11 months. I burned out after 11 months.
    I think that you have to go to the field. On paper all 
development agencies basically sound the same. The rhetoric is 
very similar, everybody is doing good stuff. I think to see the 
difference you really have to go ouit in the field.
    I have been the representative of the Inter-American 
Foundation in Honduras for about 3 years, and I have been the 
representative for Colombia for a good part of the last year. 
When I go out to the field, I don't see AID people in the 
field. I see AID people in a mission, because on every trip I 
usually stop by the Embassy and touch base with the Embassy and 
with AID.
    There is a major difference. The people in the AID mission 
are working at the governmental level. They are designing 
something for, say, the health sector in a given country. They 
are talking about millions of dollars. They are talking about 
health posts, and different levels of assistance, and bringing 
in equipment, and bringing in largely U.S. consultants. Most of 
AID money is spent in this country for consultants who then go 
to the country and presumably impart their expertise.
    The fundamental difference about the Foundation is what my 
colleague mentioned a few minutes ago. We are out there 
listening. Our meat and potatoes is what people tell us. It is 
their ideas. We have funded a lot of health projects around the 
hemisphere. They tend to be community-level projects where 
people have come up with their own ideas, something as simple 
as just getting resources to get a simple little health post to 
put in somebody's house. We fund at that level.
    But the difference is not really in the size of the grants 
we are making, it is that we are funding the local ideas, and, 
when we fund health projects for example, we don't think just 
about health. We want to know, and this is a question we ask on 
every single project, what is this project going to do for your 
organization? Does it strengthen your local organization? Do 
you gain experience in this? Does this allow you to move on to 
something else?
    Our focus is on people, and their ability to solve problems 
through their organizations, and the specific project, in many 
cases, is not the key thing, it is how people are handling it, 
what they will learn from it, what kind of contact this will 
give them with other people, other groups in their societies. 
So I think that we really are doing something fundamentally 
different from what AID is doing.
    Mr. Sanders. My last question is to Mr. Rengifo, and 
others. Can you comment on the fact that in recent years the 
IAF has changed its orientation a bit and now works more 
closely with corporations than was the case before? Do you want 
to comment on the wisdom of that?
    Mr. Rengifo. That would be--from my perspective, I do 
believe that it has been a strange thing that I have read 
yesterday and today. I think there should be things with the 
private sector, but I do believe that there are very, very 
different views.
    In Spain, we have this very separate two bodies, one is the 
Minister of Foreign Affairs, what is here called State 
Secretary, and the Ministry of Finance, which is called here 
Treasury, where we have two kinds of philosophy to the approach 
of development. Foreign Affairs is more with grants and NGO's 
and whatever, and my job was more with the private sector and 
trying to do some kind of aid related to tied aid, which was 
not that nice, but it was what I was told to do by my 
Parliament.
    I think that dealing with the private sector will always 
change a lot of the design of any project. It would be very 
difficult if you privatize this kind of institution to have the 
same results. You would have a very different institution, or 
foundation in this case, excuse me, a very different foundation 
and a very different code.
    It is very difficult to meet and to try to eradicate 
poverty and help self-improvement projects and self-done 
projects to do it through a private-driven idea. It would be 
very difficult, and I think it would be absolutely impossible. 
Very contrary goals. I do not know how the IAF has done this 
kind of corporate strategy, whether just the Foundation or 
other foundations helping them, or because they have merged 
some interest in the private and public sector.
    But I do believe that is a difficult task, and maybe you 
can do some kind of good merging and stay with your ideas and 
you being the one who drives it. But I don't think they will be 
able to do that if the private sector is the one who is solely 
funding you. In the end, I don't think you will maintain the 
same kind of foundation with the same goals. I don't think so.
    Mr. Sanders. Mr. Breslin, Mr. Fisk, would you want to 
comment?
    Mr. Fisk. Go ahead.
    Mr. Breslin. Yes. This is new for the Foundation, only in 
the last few years. And, frankly, for me, it is not an 
ideological question. I am dubious about this policy in some 
ways.
    Mr. Shays [presiding]. This policy being?
    Mr. Breslin. Of looking for more working relationships with 
corporations to leverage more resources for the kind of 
projects that we fund.
    We do it in two different ways. We do it in Latin America, 
and we do it with U.S. corporations in the United States. I 
think that the real question is does it distort the kind of 
things that we think we need to do in Latin America? Does it 
really get resources to people? Does it really increase the 
amount of resources going to projects? And does it increase the 
education level of people in U.S. corporations about problems 
overseas? And, fundamentally, does it change the relationship 
on the ground?
    My concern about working with corporations is that I think 
there is a tendency for it to bring us into a more top-down 
approach, the approach I was talking about before, an approach 
in which we will figure out what these people need, and we will 
do a project and give it to them.
    So I look at this kind of relationship with corporations--
and I do it a lot in Colombia because Colombia has a very long 
tradition of philanthropy going back to early in the century, 
and Colombia has some of the largest family foundations in the 
hemisphere, spun off from family businesses that spun off with 
significant resources, foundations that are working on social 
problems. I work directly with those people, and, in most 
cases, I am incredibly impressed with their commitment to the 
idea that their help should not to overwhelm people with 
charity. Many of these people come out of a background of 
charity and have grown out of that and are looking for ways 
that they can channel resources to people in ways that let 
people manage their own projects.
    So my personal experience is I find a lot of exciting 
possibilities in this link with corporations, but I think that, 
as a foundation, given our mandate, it behooves us to approach 
this critically. When we fund a group that comes to us for any 
kind of project, we subject that group to a great deal of 
analysis and constant questions. And I think that our approach 
to working with corporations should be to require at least the 
same level of analysis and of critical questioning before we go 
into a relationship.
    Mr. Fisk. Mr. Sanders, quickly, I approach your question a 
little differently in terms of philosophy. I think ultimately 
the way people are going to get out of poverty is economic 
freedom and private investment.
    I think one of the things that has plagued Latin America in 
particular has been basically repressive regimes, both 
politically and economically. Right-wing military regimes were 
just a corporate entity that benefited the military ruling 
junta. So there the masses did not have economic opportunity. 
Hopefully, Latin America now is at a point that is far 
different, even if issues of poverty and health remain out 
there.
    Whether this corporate partnership with the IAF is 
troubling or intriguing, or just raises a question, is the 
Foundation effectively becoming a mini Department of Commerce? 
Basically, these corporate partnerships are of benefit to the 
corporation. The IAF material makes that clear. I am not 
necessarily opposed to that, but I just have a question about 
whether that is the role of the Foundation; should it be in 
effect, an on-the-ground Department of Commerce, saying here is 
a local community to invest in, and if you pursue it with us, 
you are going to get more brand loyalty, you will increase 
people wanting to buy, whether it is Cheerios or Dove soap.
    So, to me, that is the question: is this the role we intend 
the Foundation to play?
    Mr. Sanders. Are you suggesting this is perhaps a bit of 
corporate welfare?
    Mr. Fisk. I would suggest that, yes.
    Mr. Sanders. If I could, Mr. Chairman.
    Mr. Shays. Sure.
    Mr. Sanders. Mr. Fisk, and maybe others would comment, what 
is your assessment of the poverty situation in Latin America 
today? Is the situation better or worse than it was 20 years 
ago?
    Mr. Fisk. The answer to whether it is better or worse, in 
some ways, is that it is not much different. The majority of 
the population is still outside what Ms. Otero referred to 
earlier as the formal economy; they are engaged in the informal 
economy. That simply means they have to survive outside the 
normal mechanisms. A lot of it is barter and subsistence.
    My experience has been mostly in Central America, in El 
Salvador and Nicaragua, including some pretty remote parts 
where no Nicaraguan Government official had been.
    Part of the problem is an infrastructure problem; part of 
it is an education problem. It is a situation in which I think 
opportunities exist that didn't exist 20 years ago for economic 
improvement, where some fundamental questions of economic 
security remain.
    Nicaragua is a classic case.
    Mr. Sanders. Am I correct in assuming that Nicaragua 
unemployment is 60 or 70 percent?
    Mr. Fisk. I have not seen recent figures. I would say 
between unemployment and underemployment, that is probably a 
fair assessment. If you get outside Managua, Leon and Esteli--I 
have been to Puerto Cabezas, I know what the situation is 
like--you see poverty, and you see an increasing drug problem. 
Your comment earlier is accurate in that regard drug 
trafficking becomes a means of employment. The drug traffickers 
bring in the drugs. They just need people to do various manual 
labor tasks.
    I would have to say, based on, my experience that the most 
effective instrument for development in that part of the world 
has been the sister cities projects and religious 
organizations. I have seen the Catholic Church do some 
phenomenal things. I have seen the Moravian Church on the 
Atlantic Coast do some fantastic things without any U.S. 
Government money. Maybe people here are getting a tax 
deduction, but they are the ones who seem to have the presence. 
In fairness to both the Inter-American Foundation and USAID, 
they have been deficient in a number of areas in terms of 
actually bringing genuine long-term development to these areas. 
I have seen American religious organizations do much more.
    Mr. Breslin. I think the major difference in poverty, the 
conditions of poverty, in Latin America, from my experience, is 
that Latin Americans are much more organized than they were. In 
actual numbers, there are more poor people now than there were 
20 years ago or 30 years ago, just because of population growth 
and the lack of really sustained economic growth in most of 
these countries. So the poverty is there.
    This goes to one of the issues that was touched on earlier 
about how many countries does the Inter-American Foundation 
work in; are we getting out of countries? We have gotten out of 
countries which are considered economically much better off: 
Chile, Uruguay, Costa Rica. I have traveled in those countries. 
There is as much poverty, if not more, than in the past. The 
GNP figures look good, but poverty is still there. So that has 
not changed.
    What is different to me is that what you find in every 
place I have been to in Latin America in the last 10 or 15 
years are organizations. People are doing something about 
poverty. When I was a Peace Corps volunteer, my job was to 
encourage local groups to form. And in the town I lived in for 
2 years, there were no local groups. And when I left, there was 
one, because I kept nagging people to do it. But I don't think 
that really had any sort of lasting influence.
    What you find throughout Latin America now is this 
incredible alphabet soup of groups. You can't walk down the 
street without tripping over four community organizations and 
six NGO's. They are just all over the place. So what you get 
coming out of that is really an incredible creativity about 
dealing with economic problems.
    Somebody mentioned the informal economy, which basically is 
market women, it's people trying to make a living on the 
fringes of what we think of as the normal economy. But to me, 
again, the striking thing about that is if you go into those 
marketplaces and start talking to people, they are all 
organized. You don't have individuals out there just trying to 
make it on their own. They're members of groups. They have 
credit programs. They vouch for each other's repayment of 
loans. There are networks like this all over the hemisphere.
    Mr. Rengifo. Yes, thank you. I just wanted to draw you a 
quick picture of the is poverty situation in Latin America. I 
think that we have had a very good decade until 1997, in which 
growth was spread around and things were becoming better and 
better, not only on the democratic side, but mostly on the 
economic side.
    Unhappily, the last 2 years have been very tough. One of 
the big issues is not only that growth is not there, but you 
can have some growth in Mexico, you have some in Dominican 
Republic, Uruguay, two or three more, but you have very huge 
strikes for many countries, like Brazil, and for some populace 
in Central America. You have lots of problems in Venezuela. And 
maybe today the oil is going up, so that's a variable. What 
about Colombia, Ecuador? Chile is having a lot of problems. The 
financial crisis and the Asian crisis has hit very hard a place 
in the world which they have done their job in doing many 
macroeconomic and very sound changes. And thanks to that, they 
are better off than they would have been 10 years ago, but, 
still, that is one question.
    Things are tough today in 1999 in the region, and it is 
very uneven in how it works. But the big question is that 
unhappily, even with growth, we have been--and when I say we, I 
am talking about all of us, all Latin America region countries 
have been able to serve with these multilateral organizations 
like the World Bank or the IDB to see how we can get this 
growth down to the poor people, and that has been a very 
difficult task.
    And one of the regions where we have less succeeded is in 
Latin America. We have seen in Southeast Asia where this has 
been able to get down in absolute and relative terms the 
poverty; whereas in Latin America, relative poverty in those 
terms have been very disadvantaged. We have not been able to 
cope with that. That is one issue.
    And the second issue, which is even more important, 
inequality has grown. Which is something that has happened all 
around the world, even in this country, I think.
    So those are two huge issues. And I think organizations, 
coming to what we are discussing this morning, like the IAF, is 
making big changes in those things. A little one, because it 
has not much money, but it is helping to disseminate the 
richness.
    So I do believe the situation is bad and that this kind of 
grass-roots approach and responsive approach is the only way 
you can give sustainable hope to these kinds of communities in 
the region.
    Mr. Shays. I am wondering about the general concept of 
being a venture capitalist without charging any obligation to 
the recipient of the money. I like the thought that you are a 
venture capitalist. I think you made a case, Mr. Breslin, for 
the fact that you are kind of getting underneath this system, 
and you are seeking out the private kind of investment, but you 
provide a grant rather than a loan. I am just wondering if 
maybe we should not see the IAF move in that direction and end 
up being a private organization eventually.
    I happen to buy the argument that poverty was bad 20 years 
ago, and it is bad today. So, I mean, there is more than enough 
to do. So I take the argument, Mr. Fisk, that whatever is done 
on the private side, we need more of it, because we just really 
are not denting it enough.
    But, that said, why shouldn't we charge some kind of 
obligation to the people that you are funding?
    Mr. Breslin. That goes to the nature of the Foundation. We 
are basically the face of the U.S. Government in poor 
communities around Latin America. We are the ones who get out 
there and listen to people and express our interest in what 
they are doing and, eventually, if they are convincing to us, 
our support for what they are doing.
    What we require of them, I think, was mentioned before. 
Eventually we ask them to present us a budget, and the budget 
contains line items for which they need to expend money in the 
project. And in all projects we ask them for their counterpart. 
It is a requirement. We do not do projects without counterpart 
funds from the grantee.
    We have historically been fairly flexible about what 
counterpart is, and in many cases it is their labor. It is 100 
days of hard labor on a project, or 1,000 days, depending on 
what the project is. It is providing rooms for meeting spaces. 
It is somebody contributing their house to store seeds in 
before the planting season. And we try to put a value on this, 
and we ask them to put a value on it. So we really try to stay 
away from the idea that we are just going to drop money on you 
out of charity. We think about these projects as partnerships 
that we are going into with them on.
    Most of the projects also have counterpart from other local 
organizations. Very typically we will fund a group of small 
farmers someplace, and there will be at least one other 
organization which provides technical assistance, or an 
organization that is an expert in sustainable agriculture, 
ecologically sustainable agriculture, organizations that 
specialize in providing all these techniques, and we ask them, 
give us a dollar figure for your contribution as well.
    Mr. Shays. So your bottom line point is that you are asking 
for there to be a commitment; that you try to leverage other 
activities with the money you give?
    Mr. Breslin. Yes.
    Mr. Shays. Mr. Fisk, does the Heritage Foundation basically 
oppose foreign aid?
    Mr. Fisk. The philosophical position is one of skepticism. 
If it is an adjunct or component of a broader foreign policy 
agenda, the Foundation has supported it. But just simply to 
presume or assume that foreign aid it is the best means of 
economic development, the Heritage Foundation disagrees with 
that conclusion.
    Mr. Shays. I am almost thinking that if I were Heritage 
Foundation, I might actually have come to the conclusion that 
you would ask the IAF to become larger in our budget and USAID 
to become smaller. In other words, this would seem to me to be 
an almost more compatible way from the Heritage standpoint.
    Mr. Fisk. From the Heritage Foundation standpoint it is a 
case where other Heritage officials have testified against AID. 
My purpose here is not necessarily to say that AID offers the 
best alternative. I think I have acknowledged in my prepared 
statement that there are deficiencies in that program.
    Mr. Shays. But how do you react to my point that, even if 
consistent with your view, and I didn't expect to be saying 
this, but that you would actually--if I gave you a choice 
between IAF or USAID, wouldn't you lean closer to this type of 
funding than USAID?
    Mr. Fisk. Given my newness with the Foundation, I would say 
that that is a fair assumption and a fair statement. I would 
say the one attraction of some of what IAF does is that it is 
more hands-on, and its development programs are, or can be at 
times, less bureaucratic.
    Mr. Shays. At least they are getting out into kind of the 
private marketplace in a way.
    Mr. Fisk. Ultimately, the philosophy would be, as I said to 
Mr. Sanders, economic freedom and private investment. Private 
investment doesn't necessarily mean foreign private investment. 
It could be indigenous investment. To just pick up on Mr. 
Breslin's comment that a lot of the grantees for either AID or 
the Foundation are engaged in an economic activity, economic 
activity is going to generate some sort of revenue.
    Mr. Shays. Right. But I was thinking, in a sense, and, Mr. 
Rengifo, first, I want to place your comments in some context. 
Are you--you are a Spanish national?
    Mr. Rengifo. Yes, yes, absolutely.
    Mr. Shays. Tell me very briefly about your bank.
    Mr. Rengifo. Where I am working now today?
    Mr. Shays. Yes.
    Mr. Rengifo. OK. The bank, the Inter-American Development 
Bank, is a regional development bank.
    Mr. Shays. With assets of how much?
    Mr. Rengifo. It is $100 billion.
    Mr. Shays. $100 billion. And your position in the bank is 
the executive director?
    Mr. Rengifo. Of the board, representing France, Austria, 
Finland, Denmark, Norway, Sweden, and Spain.
    Mr. Shays. But you are the executive director of the whole 
bank or of that part?
    Mr. Rengifo. No, no, it is a board of 14 members, and each 
member represents some countries.
    Mr. Shays. I have you down as executive director of the 
Inter-American Development Bank. Are you the executive 
director?
    Mr. Rengifo. I am one of the 14 executive directors of the 
bank.
    Mr. Shays. There are 14.
    Mr. Rengifo. We all represent our shareholders and the 
shareholders are the governments.
    Mr. Shays. Now, have you funded projects that IAF has 
provided the seed money for?
    Mr. Rengifo. Mr. Chairman, I do not know exactly what the 
IDB has done with the IAF. I know they have had cooperation. 
When I talked yesterday to here, it was that I could not talk 
on behalf of the IDB.
    Mr. Shays. I understand.
    Mr. Rengifo. I just came on a personal matter, because it 
was a foundation that mattered to me and helped me understand 
many things 11 years ago.
    Mr. Shays. But I am making an assumption that since those 
11 years you have seen IAF in operation, and so all I was 
trying to do is to assess if IAF has a relationship with your 
bank.
    In other words, one of the things----
    Mr. Rengifo. Yes, it does.
    Mr. Shays. The answer is?
    Mr. Rengifo. They do have a big relation. I do not know if 
an institutional relation. I am not quite sure of that. I tried 
to know that yesterday, but I was unable to catch up with my 
people in the bank to know if there was any kind of mixed 
cofinancing or something. But they were doing the same job in 
the region.
    Mr. Shays. That you are doing?
    Mr. Rengifo. That we are doing, yes.
    Mr. Shays. Except you are giving loans; they are giving 
grants.
    Mr. Rengifo. We have three branches in the bank. One is the 
IDB, which gives only loans of about 7 to $8 billion a year. We 
are the major loan bank in the region for a development bank, 
even more than the World Bank today. We have then an ITC 
branch, which is private-sector-driven, with small and medium 
enterprises, which are loans and venture capital, or capital 
risk. I think venture capital you call it. And then there is a 
little branch, which is a kind of a foundation made by the 
United States, Japan and Spain in the bank, which is called the 
MIF, Multilateral Investment Fund, which is for little 
projects, for grants for little projects, which is a little bit 
more than we are doing with the IAF.
    Mr. Shays. That is helpful.
    I want to kind of wrap up, but, Mr. Breslin, you wanted to 
add something?
    Mr. Breslin. Just to add a couple of items on your 
question. Historically, over the years, we have had 
relationships with the Inter-American Development Bank. We work 
with them on the Social Progress Trust Fund. But in the field 
there are several instances where the Inter-American Foundation 
funded groups to the point at which they were large enough and 
successful enough to be able to deal with a loan from the IDB. 
That happened in Uruguay.
    There is another way we worked, in a sense, with the bank: 
There is a project in Bolivia, chocolate production, poor 
farmers in a rural area of Bolivia. We had funded them for 
years. They got to the point where they were qualified, really, 
for an IDB loan. But the bureaucracy was taking so long that 
the loan fund was clearly going to collapse, while they waited 
for the IDB loan money to arrive. We came in with a bridge 
grant of $50,000 to get them over that period. That is the kind 
of flexible funding we have been able to do in the past.
    Mr. Shays. I should have asked the first panel about the 
Social Progress Trust Fund. Tell me a little bit about that. 
And I am not looking for a long explanation.
    Mr. Breslin. The Social Progress Trust Fund is basically 
local currency, repayment of loans made to----
    Mr. Shays. Who is funding that? I am going to interrupt 
you, because I want to just get to my questions. Who has funded 
that, just the United States?
    Mr. Breslin. No, this is a fund into which repayments go. 
The repayments are for development loans made to the Latin 
America countries.
    Mr. Shays. Let me do this. Do you mind if I just get the 
first panelist here?
    Ms. Otero, can you come here? Not that you cannot answer, 
but I really should have asked the first panel. Maybe just pull 
up a chair real quick.
    Ms. Otero. Yes, Mr. Chairman.
    Mr. Shays. Just explain to me the fund. I should have 
asked.
    Ms. Otero. The Social Progress Trust Fund is a fund that 
actually is constituted of moneys that are being paid back in 
local currency by Latin America countries to the IDB for loans 
that the IDB made to those governments.
    Mr. Shays. The Inter-American Development Bank?
    Ms. Otero. Yes, the Inter-American Development Bank.
    Mr. Shays. Your bank?
    Mr. Rengifo. My bank.
    Mr. Shays. OK. So you can respond to this question as well.
    Mr. Rengifo. I have been here for only 2 months, but I will 
respond as best I can.
    Mr. Shays. Good. I just did not want to follow protocol 
here.
    I'm sorry, I should have asked this before.
    Ms. Otero. These are loans that are made through the Inter-
American Development Bank by the U.S. Government and are paid 
back to the U.S. Government and set up in a trust fund, which 
is the Social Progress Trust Fund.
    Some of those funds are then allocated to the Inter-
American Foundation for the Inter-American Foundation to use 
those moneys in making grants available to those countries. So 
those moneys are earmarked by countries.
    Mr. Shays. Why is the Fund running out; do you know?
    I don't mind your having assistance here, rather than 
having one coming in one ear and out the other.
    Ms. Otero. These are funds that are being paid back by 
governments, and the repayments are coming to an end, and that 
is why the trust funds are running out.
    Mr. Shays. Well, then, there is money in the Fund to loan 
out again. That is what I am not understanding. So I am missing 
some basic fact here. Let me make an assumption here: We have a 
fund. People borrow from it. They pay back.
    Ms. Otero. No, no, no.
    Mr. Franco. Just very quickly, Mr. Chairman. These are 
loans that were made out of the Alliance for Progress in the 
1960's by our government. When the repayments were due, our 
government, by act of Congress in 1975, decided that instead of 
having those go back to general receipts to the Treasury, a 
fund would be established at the bank of which the U.S. 
Government would be the trustee. Those funds would not be 
repaid as loans, but would be directed as grants.
    Mr. Shays. As grants.
    Mr. Franco. Exactly. It is called the Fund for Special 
Operations. And part of those repayments that come in are made 
available, by law, to the Inter-American Foundation.
    Mr. Shays. OK. I understand now.
    Ms. Otero. To be used for grants.
    Mr. Shays. I'm thinking of it like the Offshore Drilling 
Trust Fund that we put a fund in and then we spend the money 
out of.
    Mr. Rengifo. Correct.
    Mr. Shays. Bottom line, that is running out.
    Ms. Otero. Yes.
    Mr. Shays. I am pretty much set in the questions that I 
wanted to ask. I will just share with you my observation of 
this hearing. I didn't expect that I would be saying that, but 
my observation is that I am told by various sources that we 
have some management problems at the IAF, and we have some 
question of whether we are too top-heavy. Those are not 
questions that are going to be answered for me in a hearing 
like this.
    So I will share with you that I may have problems with what 
is happening. I, obviously, recognize that when you go from $30 
million down to $20, and you still have the bureaucracy for 
$30, that you have problems that you have to iron out. I also 
know that Congress can be erratic in terms of whether it wants 
to fund or not; i.e., we have $5 million, which is basically 
almost saying let us get rid of the organization.
    But if I wanted people in the field looking for the smaller 
kinds of grants, I would conceptually--and clearly in my Peace 
Corps experience I want to see it happen more this way--I would 
rather have it trickle up than kind of trickle down. So I am 
more comfortable with that. And I ultimately love to think of 
ways that we can privatize and continue to seed other 
activities.
    So my questions, I think, will end up being more on the 
management of it, not as much on the mission of the program. So 
I look forward to working with you. I am summarizing my 
feelings. I don't usually do that, but I thought I would.
    Do you have any comment you want to make?
    Mr. Sanders. I don't.
    Mr. Shays. Any closing comments any of the four of you want 
to make?
    Mr. Breslin.
    Mr. Rengifo. May I?
    Mr. Shays. Well, I just thought of one thing as I was 
calling on Mr. Breslin.
    Mr. Breslin, how many people work under your oversight?
    Mr. Breslin. Just me, sir.
    Mr. Shays. So if I look at you, and I am thinking of why we 
have so many employees, we have one person who handles each 
country, give or take, which leaves me wondering why we get to 
56.
    Mr. Breslin. We currently have 13 program representatives, 
who work in the field.
    Mr. Shays. I consider you the people out in the field, you 
are the most essential part, I would think, with all due 
respect to the others.
    Mr. Breslin. Right. With the representatives, we have 
support staff, we have people who help do the paperwork of 
processing the projects that are eventually presented for 
approval.
    Mr. Shays. I hear you. You have to have the back-up.
    Real quick, any summations?
    Ms. Otero. Mr. Chairman, just one final comment is that I 
think the Foundation has suffered in the last 5 years by the 
cuts that have come its way and by the uncertainty of its level 
of funding. And I think those are reflected in some of the 
management issues and some of the other issues that are now 
problematic.
    I think we have communicated in this hearing that the 
installed capacity, if you will, of the Inter-American 
Foundation is considerable and perhaps being underutilized 
right now to address the issues of poverty that we have in 
Latin America, and I would like you to take that into account 
as you consider these things.
    Mr. Shays. I accept that.
    Sorry to interrupt you, but you get the last word, Mr. 
Rengifo.
    Mr. Rengifo. I do have something to add.
    Mr. Shays. Well, you got them.
    Mr. Rengifo. Thank you. It wasn't my idea to do that. I 
just wanted to tell you that when I entered IAF, it was to try 
to copy this institution in Spain. I have not been able to do 
that, so I hope to do it in the future.
    The one thing I can give you is that I think you need more 
hearings like this one, because only 15 years ago was the last 
one you had. I think you need much more if you want to be 
coping with this. And I do believe there is a lot of sense to 
this institution.
    Mr. Shays. OK. Thank you very much. Appreciate all you 
being here, and we will adjourn this hearing.
    [Whereupon, at 12:25 p.m., the subcommittee was adjourned.]

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