[Senate Hearing 106-5]
[From the U.S. Government Publishing Office]


                                                          S. Hrg. 106-5


 
           U.S. RELIEF EFFORTS IN RESPONSE TO HURRICANE MITCH

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

                                HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON WESTERN HEMISPHERE,
                  PEACE CORPS, NARCOTICS AND TERRORISM

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                              MARCH 2, 1999

                               __________

       Printed for the use of the Committee on Foreign Relations


 Available via the World Wide Web: http://www.access.gpo.gov/congress/senate


                      U.S. GOVERNMENT PRINTING OFFICE
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                     COMMITTEE ON FOREIGN RELATIONS

                 JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana            JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia              PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska                CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon              JOHN F. KERRY, Massachusetts
ROD GRAMS, Minnesota                 RUSSELL D. FEINGOLD, Wisconsin
SAM BROWNBACK, Kansas                PAUL D. WELLSTONE, Minnesota
CRAIG THOMAS, Wyoming                BARBARA BOXER, California
JOHN ASHCROFT, Missouri              ROBERT G. TORRICELLI, New Jersey
BILL FRIST, Tennessee
                     James W. Nance, Staff Director
                 Edwin K. Hall, Minority Staff Director

                                 ------                                

                  SUBCOMMITTEE ON WESTERN HEMISPHERE,
                  PEACE CORPS, NARCOTICS AND TERRORISM

                   PAUL COVERDELL, Georgia, Chairman
JESSE HELMS, North Carolina          CHRISTOPHER J. DODD, Connecticut
RICHARD G. LUGAR, Indiana            BARBARA BOXER, California
JOHN ASHCROFT, Missouri              ROBERT G. TORRICELLI, New Jersey

                                  (ii)


                            C O N T E N T S

                              ----------                              
                                                                   Page

Chapman, James, Director for Latin America Region, World Vision, 
  Washington, DC.................................................    16
    Prepared statement...........................................    18

 Fonseca, Rene, President, Consultants International, 
  Tegucigalpa, Honduras..........................................     7
    Prepared statement...........................................     9

Isaacs, James Kenneth, Director of Projects, Samaritan's Purse, 
  Boone, NC......................................................    11
    Prepared statement...........................................    14

Jaeger, Mark, Vice President and General Counsel, Jockey 
  International, Kenosha, WI.....................................     2
    Prepared statement...........................................     4

Torricelli, Hon. Robert G., U.S. Senator from New Jersey, 
  prepared statement of..........................................    30

                                 (iii)


           U.S. RELIEF EFFORTS IN RESPONSE TO HURRICANE MITCH

                              ----------                              


                         TUESDAY, MARCH 2, 1999

                           U.S. Senate,    
            Committee on Foreign Relations,
                Subcommittee on Western Hemisphere,
                      Peace Corps, Narcotics and Terrorism,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 3:06 p.m. in 
room SD-419, Dirksen Senate Office Building, Hon. Paul 
Coverdell (chairman of the subcommittee) presiding.
    Present: Senators Coverdell and Helms.
    Senator Coverdell. We are going to bring the meeting of the 
Western Hemisphere Subcommittee to order. Let me make a brief 
opening statement and then I will make a brief comment about 
each of our panelists and we will begin.
    I would hope that--I do not know how long your statements 
are, but maybe we might limit them to around 7 minutes. Of 
course everything will go into the record.
    The purpose of the hearing today is to take a careful look 
at U.S. relief efforts in the wake of one of the most deadly 
and destructive natural disasters to hit this hemisphere. 
Hurricane Mitch blazed a path of destruction through Central 
America that left 9,000 people dead and more than 1 million 
people homeless. Estimates reach as high as $8.5 billion in 
damage to homes, roads, hospitals, crops, and businesses 
throughout the region.
    I had the opportunity to travel to Central America and see 
this terrible destruction first-hand. I believe the U.S. 
Government relief efforts to date have been impressive by any 
measure. We have provided more than $300 million in food, 
medicine, and shelter and agriculture and infrastructure 
assistance. Private efforts in response to the devastation have 
been overwhelming, thanks in large part to the efforts of our 
distinguished panelists and the various organizations you 
represent.
    Yet it is clear that the region still faces major 
challenges in rebuilding countries and restoring hope. In all 
of the affected countries, clean water is scarce and disease 
from contaminated water sources is a continuous threat. As 
highlighted in an article in this morning's Los Angeles Times, 
the potential for widespread health epidemics still looms as 
water and sanitation systems were severely damaged by the 
storm. The article claims that in many places broken sewer 
pipes allow sewage to fall freely into the water.
    I think it is clear that the region is not out of trouble 
yet and we need to continue to focus our attention on the 
immediate needs of these countries. That is why I have asked 
for this hearing and I have asked these distinguished panelists 
to share their thoughts with us today.
    Our witnesses have been on the ground and have seen the 
destruction with their own eyes. They have played crucial roles 
in the recovery effort, and I look forward to hearing about 
their experiences and what they think still needs to be done. I 
look forward to your recommendations and innovative approaches 
on the long-term solution for the economic problems in the 
region.
    One final thought. In addition to short-term emergency 
disaster relief, I believe that it is critical both for the 
region and the United States that we focus on the long-term 
solutions for a successful recovery in Central America. Over 
the past several years, Central America has taken significant 
steps in strengthening democracy, promoting human rights, and 
encouraging economic opportunity. The destruction and despair 
wrought by Mitch make these important gains tenuous. The 
progress over the last decade is not irreversible. That is why 
it is so important that the United States lend a hand to its 
Central American neighbors, not only to help with the immediate 
problems of food and medicine, but also to assist this region 
in the long-term recovery.
    It is imperative that we help get economies back on their 
feet, rebuild infrastructure, and restore optimism in the 
region. We owe it to allies and friends in the affected 
nations. I believe we owe it to our own national security and 
economic prosperity that we do not allow a destabilization to 
occur because of a natural disaster in our own hemisphere.
    Now, to begin I am going to start with Mr. Mark Jaeger. The 
committee welcomes vice president and general counsel for 
Jockey International. Jockey is an international manufacturer 
and marketer of apparel products headquartered in Wisconsin. 
Jockey has a manufacturing plant in my State which employs over 
500 people and as I understand it has a plant in Honduras which 
employs 600 people.
    I look forward to your comments on long-term solutions to 
reconstruction in Central America and particularly about trade 
enhancement.
    Mr. Jaeger.

 STATEMENT OF MARK JAEGER, VICE PRESIDENT AND GENERAL COUNSEL, 
               JOCKEY INTERNATIONAL, KENOSHA, WI

    Mr. Jaeger. Thank you very much, Senator, and good 
afternoon.
    Jockey International, Inc., appreciates the opportunity to 
testify before this subcommittee on the subject of Central 
American and Caribbean reconstruction. With the approval of the 
committee, I have presented a written statement for the record.
    Jockey is an international manufacturer and marketer of 
apparel products, including underwear, bras, and sheer hosiery. 
Jockey's products are manufactured in the U.S. in places like 
Millen, GA, where there are some 500 employees. Jockey's 
offshore operations include a company-owned plant in Honduras 
that employs some 600 people.
    As general counsel for Jockey, I am familiar with trade 
issues that affect the company and the apparel industry. I am 
also aware of the devastation to Honduras and other Caribbean 
Basin countries by Hurricanes Mitch and Georges. Jockey's 
operation in Honduras was spared by the hurricane. Jockey's 
employees, however, did suffer. Many Jockey employees lost 
homes, personal possessions, or worse.
    While Jockey's plant in Honduras is fully operational, it 
is clear that the reconstruction will be a long process, as 
much of the infrastructure, housing, and crops have been 
destroyed.
    I would like to thank the committee and you, Mr. Chairman, 
for your leadership on the important issue of reconstruction in 
the Caribbean Basin following the hurricanes. I understand you 
made a personal visit to the region to view the impact of the 
hurricanes. Your bill, S. 371, takes important steps to help 
the region recover from the twin disasters.
    I would like to address one component of S. 371, CBI 
enhancement. Caribbean Basin trade enhancement will build upon 
the successful U.S.-Caribbean partnerships already at work in 
dozens of locations across the region. It would expand U.S. 
market opportunities for apparel and other products assembled 
in Central America and the Caribbean. This would put people in 
the region back to work, a critical need since many traditional 
sources of employment have been wiped out by the hurricanes.
    Because most of that apparel is manufactured using U.S. 
textiles and related inputs, American workers and their firms 
would benefit as well. Jockey, like other American apparel 
companies, has invested in the Caribbean Basin because of the 
proximity to U.S. operations and markets, and because of the 
trade incentives offered by the original 807 program. This 
program has helped Jockey to be more competitive and serves to 
support U.S.-based employment.
    The 807 incentives are straightforward. Duty is assessed on 
only the value added. Duty rates vary from 7 to 8 percent for 
underwear to 17 percent for bras to over 20 percent for other 
categories of apparel.
    Let me emphasize that the apparel production move to the 
CBI Basin has been necessary for companies like Jockey to 
remain competitive. However, with the elimination of tariffs 
under NAFTA and with the slightly easier and cheaper 
transportation between Mexico and the United States versus that 
between the Caribbean and the United States, Mexico has a 
significant trade advantage. Competition from Mexico has caused 
many United States apparel companies to move their investments 
and contracting relationships from CBI countries to Mexico.
    Mexico's total share of apparel imports has increased 
fivefold since NAFTA. While Jockey has maintained its presence 
in the Caribbean, it has increased contracting from Mexico and 
the Far East. If the business goes to the Far East, Caribbean 
and U.S.-based jobs are at risk and the progress the United 
States fostered in the Caribbean Basin will in large part be 
reversed. Such a loss, especially if Caribbean Basin jobs are 
lost to Mexico or Asia, could not come at a worse time for the 
countries affected by the hurricanes.
    In summary, passage of NAFTA adversely affected the 
competitiveness of the CBI region by diverting existing and 
potential investment from the region to Mexico. Further erosion 
has occurred with competitive pressures from Asia. Caribbean 
Basin trade enhancement assures a level playing field will 
exist between the CBI region and Mexico and makes our joint 
production arrangement with the Caribbean competitive vis-a-vis 
Asia. Without it, U.S. companies already in the region will 
disinvest existing manufacturing facilities, essentially 
destabilizing the economies of the region.
    There has long been a need for CBI enhancement legislation. 
It should have been enacted 5 years ago. The damage caused by 
Hurricanes Mitch and Georges makes it even more imperative that 
it be enacted. S. 371 should move forward and it should 
continue to include CBI enhancement provisions.
    Once again, Jockey appreciates the opportunity to submit 
this testimony, and I thank you, Mr. Chairman, for your 
leadership on the issue. I would be pleased to respond to any 
questions you may have now or throughout the hearing.
    [The prepared statement of Mr. Jaeger follows:]

Prepared Statement of Mark Jaeger, Vice President and General Counsel, 
                   Jockey International, Kenosha, WI

                              introduction
    Jockey International, Inc. (Jockey) appreciates the opportunity to 
submit testimony to the Subcommittee on the subject of Central American 
and Caribbean reconstruction. Jockey is a privately held apparel 
company headquartered in Kenosha, WI. Jockey is an international 
manufacturer and marketer of apparel products including underwear, bras 
and sheer hosiery. Jockey's products are manufactured in the U.S. in 
places like Millen, Georgia where there are some 500 employees. 
Jockey's offshore operations include a company owned plant in Honduras 
that employs some 600 people.
    As General Counsel for Jockey, I am familiar with trade issues that 
affect the company and the apparel industry. I am also aware of the 
devastation to Honduras and other Caribbean basin countries by 
Hurricanes Mitch and Georges.
    Jockey's operation in Honduras was spared by the Hurricane. 
Jockey's employees, however, did suffer. Many Jockey employees lost 
homes, personal possessions or worse. Jockey coordinated a relief 
effort using its plant to distribute supplies to affected employees and 
their families. Jockey resumed operations within twelve (12) days of 
the hurricane. Today, Jockey is operating at full capacity providing 
jobs, paychecks and a sense of economic security for employees. Many 
other apparel contractors also are back to work providing the 
opportunities the Honduran people need to help rebuild their country. 
Of course, this will be a long process as much of the infrastructure, 
housing and crops have been destroyed.
    I would like to thank the Committee and you, Mr. Chairman, for your 
leadership on the important issue of reconstruction in the Caribbean 
basin following the hurricanes. I understand you made a personal visit 
to the region to view the impact of the hurricanes. Your bill, Senate 
371 takes important steps to help the region recover from the twin 
disasters. I would like to address one component of S. 371, CBI 
enhancement.
                               cbi policy
    S. 371 includes measures for aid, debt relief and support services 
from various U.S. agencies. Such relief will help these countries 
continue their response to the crisis. U.S. support for long term 
reconstruction, however, will be necessary to sustain economic growth 
in the region. U.S. interests in this regard are clear:
     The Caribbean Basin is the 9th largest destination of U.S. 
exports worldwide, and is one of the few regions where the U.S. 
maintains a consistent trade surplus.
     U.S. commercial and security interests demand 
uninterrupted access to transit routes through the Caribbean Sea and 
the Panama Canal.
     Political and economic instability in the Caribbean basin 
often manifests itself in the U.S. through increased narcotics 
trafficking or waves of immigrants and refugees.
     Many U.S. residents and communities share family ties with 
individuals in the Caribbean basin.
                            cbi enhancement
    Expanding the U.S./CBI trade relationship will be a vital element 
in helping the countries of the Caribbean and Central America recover 
from devastation caused by Hurricanes Mitch and Georges.
    A Caribbean Basin Trade Enhancement package would build upon the 
successful U.S./Caribbean partnerships already at work in dozens of 
locations across the region. It would expand U.S. market opportunities 
for apparel and other products assembled in Central America and the 
Caribbean. This would put people in the region back to work, a critical 
need since many traditional sources of employment have been wiped out 
by the hurricanes. And because most of that apparel is manufactured 
using U.S. textiles and related inputs, American workers and their 
firms would benefit as well.
    Over the past 15 years, the U.S. government and private sector have 
invested substantial political and financial capital to secure peace 
and economic prosperity in this region. Passage of a Caribbean Basin 
Trade Enhancement package--as an element of hurricane reconstruction--
keeps that investment viable.
    Jockey, like other American apparel companies, has invested in the 
Caribbean basin because of the proximity to U.S. operations and markets 
and because of the trade incentives offered by the original 807 
program.
    This program has helped Jockey to be more competitive and serves to 
support U.S. based employment. The 807 incentives are straightforward. 
Under 807, a $5.00 bra usually has $3.00 in U.S. components and about 
$2.00 in value-added by offshore assembly. The duty is assessed on only 
the value-added. That duty is 17.6 percent for bras, which on $2.00 is 
35 cents. This is equivalent to 7 percent on the value of the entire 
garment. With wholesale and retail markups, a bra from the CBI region 
carries a penalty of approximately $.70 as compared to the same garment 
assembled in Mexico of NAFTA origin fabric.
    In 1986, 807 was modified by the creation of the 807-A program. 
Under 807-A, duty still was paid on the value-added in the region, 
however, the creation of Guaranteed Access Levels (GALs) essentially 
made many products from the region quota-free. 807-A was duplicated for 
the Mexican industry and named the Special Regime.
                      impact of no cbi enhancement
    Before commenting on the future of apparel trade in the Caribbean 
basin without CBI enhancement, I do need to emphasize that the apparel 
production moved to the CBI basin has been necessary for companies like 
Jockey to remain competitive. Without the incentives of 807-A, NAFTA 
and hopefully CBI trade enhancement, that production would probably 
have gone to the Far East where there would be little U.S. involvement 
in the manufacturing process.
    With the deflationary environment in the Far East and the prospect 
of further reduction and eventual elimination of apparel and textile 
duties and quotas, Asia will be a formidable apparel and textile 
competitor for the U.S., Mexico and the Caribbean basin. It is critical 
that duties between the U.S. and the CBI region come down quickly to 
prepare for the coming challenge. Otherwise, we may not be in a 
position in the future to rely on CBI-based industries like apparel to 
provide U.S. and Caribbean based jobs.
    With the implementation of NAFTA, apparel made of U.S. formed 
fabric assembled in Mexico enters the U.S. market quota and tariff-
free. However, duties are still charged on the offshore value added to 
garments assembled in and then imported from the CBI countries. This 
places the CBI countries at a great competitive disadvantage vis-a-vis 
Mexico. Competition from Mexico has caused many U.S. apparel companies 
to move their investments and contracting relationships from the CBI 
countries to Mexico. While Jockey has maintained its presence in the 
Caribbean Jockey has increased contracting from Mexico and the Far 
East. If the business goes to the Far East, Caribbean and U.S. based 
jobs are at risk, and the progress the U.S. fostered in the Caribbean 
Basin will, in large part, be reversed.
    With the elimination of tariffs under NAFTA, and with the slightly 
easier and cheaper transportation between Mexico and the United States 
versus that between the Caribbean and the U.S., Mexico has a 
significant trade advantage. An effective 7 percent duty may not appear 
to be significant, but the average profitability of an apparel firm in 
the U.S. is usually less than that.
    The effects of NAFTA on the CBI region have become apparent. Since 
NAFTA went into effect on January 1, 1994, apparel imports from Mexico 
have increased 611 percent. While starting from a larger base, imports 
from the CBI have increased at one-third that rate.
    Now, for the first time, the CBI region actually is losing share of 
the import market. In 1998, the CBI region accounted for less than 23.8 
percent of the garments imported into the United States, a decline of 
1.4 percentage points from the 25.1 percent market share in 1997. 
During that same year, Mexico's market share increased to just over 15 
percent--about five times its size before NAFTA took effect.
    807 production created thousands of good jobs in Mexico and the 
Caribbean Basin. By establishing business relationships in the CBI 
region, Jockey and other apparel companies have been able to maintain 
U.S. based jobs and to use U.S. based inputs like fabric and thread in 
CBI production. There is a concern that without CBI enhancement, 
desperately needed apparel jobs could be lost in the Caribbean basin. 
Such a loss could not come at a worse time for the countries affected 
by the Hurricanes.
                                summary
    Caribbean trade enhancement makes good foreign policy. It is 
clearly in the best interests of the United States to have stable, 
democratic governments in our hemisphere, and the jobs available in the 
apparel industry contribute considerably to that stability. By enacting 
legislation affording NAFTA parity for the Caribbean Basin, the U.S. 
will continue to encourage CBI countries to assume their full 
obligations under a free trade agreement and to further open their 
markets to U.S. products, services and investment.
    The continued economic health of the CBI region is tied 
inextricably to the growth of the region's apparel assembly industry. 
Export revenues generated by apparel assembly encourages Caribbean 
Basin governments to increase and accelerate economic reform, including 
investment liberalization, protection of intellectual property rights 
and market access. Job creation in the region would have been stagnant 
without the demand for apparel assembly workers. Improving economic 
conditions contributes to political stability, deters illegal 
immigration, and creates an alternative to the production and 
trafficking of illegal drugs.
    In summary, there is a strong and consistent movement by countries 
of the CBI region toward democracy, economic reforms and trade and 
investment liberalization. During the past few years, countries of the 
Caribbean Basin initiated significant economic restructuring and trade 
liberalization and continue to do so as part of their move to NAFTA 
accession.
    Programs such as CBI and 807 contributed significantly to the 
political stability and economic growth in the region. Progress in the 
region enhances each country's political security, as well as the 
United States'.
    Passage of NAFTA adversely affected the competitiveness of the CBI 
region by diverting existing and potential investment from the region 
to Mexico. Caribbean Basin trade enhancement assures a level playing 
field will exist between the CBI region and Mexico. Without it, U.S. 
companies already in the region, competitively disadvantaged by the 
elimination of Mexican duty rates and quotas, will disinvest existing 
manufacturing facilities, destabilizing the economies of the region.
    There has long been a need for CBI enhancement legislation. It 
should have been enacted five years ago. The damage caused by 
Hurricanes Mitch and Georges makes it even more imperative that it be 
enacted. S. 371 should move forward and it should continue to include 
CBI enhancement provisions.
    Once again, Jockey appreciates the opportunity to submit this 
testimony and I thank you, Mr. Chairman, for your leadership on this 
issue.

    Senator Coverdell. I believe that what we will do is 
proceed through the panelists and then open it up to a general 
dialog.
    Next we are going to hear from Rene Fonseca. He has a 
special relationship. His lovely wife is right behind him, 
Deborah, who when I first arrived here without this grey hair 
was employed with the Senate Foreign Relations Committee, and 
it is very good to see you back.
    Rene is here as a private citizen. He does not represent 
the Honduran government. He is a businessman who owns and 
operates several companies in several Central American 
countries. He has visited just about every square mile in 
Honduras, either during his highly distinguished military 
career or as a Presidential candidate in 1997.
    In addition to being an eyewitness to the devastation 
wrought by Hurricane Mitch, we are especially interested in 
your ideas as to how the United States can best help the 
Honduran people.
    Again, welcome back.

       STATEMENT OF RENE FONSECA, PRESIDENT, CONSULTANTS 
              INTERNATIONAL, TEGUCIGALPA, HONDURAS

    Mr. Fonseca. Mr. Chairman, I thank you for inviting me to 
testify today about the devastating Hurricane Mitch which 
destroyed so much of Central America, particularly in Honduras, 
my home country. It is an honor for me to appear before the 
Senate Foreign Relations Committee, for more than one reason. 
As you have mentioned, I would have not met my wife Deborah 
DeMoss if this committee had not had so much important work to 
do in Central America back in the 1980's.
    I am very grateful to this committee that now I have her 
and four precious children. But I believe that there are more 
grateful people at Foggy Bottom, for instance, that I took her 
away from Washington.
    It is a very moving experience for me to relate to you a 
firsthand perspective of Hurricane Mitch. I am a businessman 
representing U.S. companies in Central America and I have been 
asked to discuss how many of us in the private sector believe 
that U.S. aid can be utilized in the most efficient way.
    To begin, I must express deep gratitude to the Government 
and the people of the United States of America for all of the 
assistance you have sent us since the first week the deadly 
hurricane hit our beautiful Bay Islands and rapidly tore 
through our mainland. Many of the members of this committee 
worked very hard to get emergency assistance to Central 
America. The U.S. military has been instrumental and many of 
the U.S. media, most notably Ted Koppel and Nightline, have 
done a tremendous service in calling attention to our plight.
    I also am aware that so many private citizens, including 
the Capitol Hill Police, got together boxes of food, medicine, 
and clothes for the hurricane victims. There have been scores 
of doctors, missionaries, and independent citizens who have 
donated their time and skills. I know that I speak for hundreds 
of thousands of families when I say thank you from the bottom 
of my heart to all of you.
    When Hurricane Mitch struck the Honduran Bay Islands on 
October 26 last year, it registered winds of 180 miles per 
hour, the strongest recorded hurricane in history. It continued 
to sweep across the Honduran mainland as a devastating 
hurricane and then as a deadly tropical storm for more than 10 
days.
    Mitch hit the capital of Honduras, Tegucigalpa, on Friday, 
October 30, and even as it was hovering over us we had no idea 
of the magnitude of the storm. We were given virtually no 
warning.
    On October 31, I left our home at dawn with a neighbor to 
see if we could be of any help in rescue efforts throughout the 
capital. It was not until the previous evening that we were 
made aware by the media that we were in the eye of a killer 
hurricane. We wanted to do anything to help those who were 
already in grave danger.
    We went to a riverbank and saw that the river had 
dramatically risen about 20 feet and expanded over 150 feet to 
the sides. In the middle of it, a two-story middle class home 
was still standing and surrounded by violent waters. The family 
who lived there had managed to open a hole in the roof and get 
to the top of it. They were screaming for help and we were on 
the edge of the river bank watching, without being able to do 
anything.
    Then we saw how three adults and three children were 
swallowed when the house collapsed in a matter of seconds. 
Sadly, this is not an isolated story. There are many like this 
in the country.
    When Hurricane Mitch had run its fatal path, it left 
approximately 5,700 dead in Honduras and 4,000 more dead in the 
rest of Central America. Thousands more are still missing and 
thousands are injured in Honduras alone. Millions in the region 
were homeless, left homeless, too many to count. It is 
estimated in Honduras that one out of every four people has 
been affected directly by the hurricane. Many claim that this 
was perhaps the most catastrophic natural disaster since 
Biblical times.
    The emergency phase of foreign assistance should begin now 
to wind down. We are currently in the phase of repairing 
whatever can be repaired and containing epidemics. The final 
phase will be the toughest one--rebuilding $8.5 billion worth 
of destroyed infrastructure and perhaps billions more in 
recouping lost crops and rebuilding destroyed businesses 
throughout Central America.
    In Honduras some experts believe that Mitch has set us back 
about 25 years in infrastructure and perhaps twice that long in 
certain parts of the agricultural sector. It is important to 
know that, due to the lack of expertise and resources, we are 
still vulnerable to this kind of disasters in the future.
    There are many private sector and disaster relief 
organizations that are now on the ground trying to help us 
rebuild Central America, primarily Honduras and Nicaragua, 
which together sustained about 80 percent of the real damage. 
Two of these organizations are represented at this table today, 
Samaritan's Purse and World Vision. Both are doing a terrific 
job.
    My wife Deborah is the director of Samaritan's Purse in 
Honduras, so I am more familiar with their substantial 
commitment, particularly in the areas of housing, medical 
brigades, and community social services. I highly commend both 
these institutions to implement certain projects in the 
country.
    Should I go on, Senator?
    Senator Coverdell. Try to--if it only takes a few more 
minutes, go ahead and try to finish your statement. That would 
be better.
    Mr. Fonseca. I would like to address at this minute, while 
at the risk of being presumptuous, I want to mention some ideas 
which you might consider----
    Senator Coverdell. Please.
    Mr. Fonseca [continuing]. In the supplemental aid package 
for Central America. Allow me to give two typical examples of 
the type of people who suffer due to the hurricane. The first 
example is the family of our nanny, Hilda. She is from an upper 
lower class family. Several members of her immediate family had 
their own businesses, each employing others. They lost both 
their businesses and their personal belongings. Yet they do not 
qualify for any long-term credits to restart their lives.
    The second example involves a family of a prominent upper 
class lawyer who has been living in our home since they lost 
everything as a result of Mitch. They have been told everywhere 
that there will be no help for the middle class. Consequently, 
they must make an enormous further personal sacrifice.
    So I strongly recommend finding ways to help people like 
this--small business owners, middle class professionals with a 
solid work track, as well as small commercial farmers.
    There is another great way you could help Central America 
to rebuild the agricultural sector. In Honduras we have one of 
the best agricultural sciences universities in the world, El 
Samorano. I would suggest making available a substantial amount 
of funds to provide scholarships for students to attend El 
Samorano.
    In closing, let me say as a private citizen I know that I 
am not alone in saying that God can bring something good out of 
this tragedy. Honduras and other countries in Central America 
may still witness a blessing in disguise. We now have a bold 
challenge before us and one we believe we can fulfill with your 
help. We want your aid to be used in the very best manner. 
Transparency in the use of the aid should be first and foremost 
in any legislation. It would be difficult to handle such huge 
amounts of aid and investments coming into any country after a 
natural disaster of this magnitude.
    Thank you again, Mr. Chairman, for the opportunity to be 
here today.
    [The prepared statement of Mr. Fonseca follows:]

      Prepared Statement of Rene Fonseca, President, Consultants 
                  International, Tegucigalpa, Honduras

    Mr. Chairman, I thank you for inviting me to testify today about 
the devastating Hurricane which destroyed so much of Central America--
particularly in Honduras, my home country. It is an honor for me to 
appear before the Senate Foreign Relations Committee for more than one 
reason. As you know, I would not have met my wife Deborah DeMoss if 
this Committee had not had so much important work to do in Central 
America, during the 1980's. So I am very grateful to you that I now 
have her, and our four precious children! (As you can see, we've been 
busy the last 5 years since she left the Committee.)
    It is a very moving experience for me to relate to you a first-hand 
perspective of Hurricane Mitch and also as a businessman representing 
U.S. Companies in Central America, I have been asked to discuss how 
many of us in the private sector believe the U.S. aid can be utilized 
in the most efficient way. To begin, I must express deep gratitude to 
the Government and the people of the United States of America for all 
of the assistance you have sent us since the first week the deadly 
hurricane hit our beautiful Bay Islands, and rapidly tore through our 
Mainland.
    Many of the Members of this Committee worked very hard to get 
emergency assistance to Central America. The U.S. military has been 
instrumental. And many in the U.S. media--most notably Ted Koppel and 
Nightline--have done a tremendous service in calling attention to our 
plight. I also am aware that so many private citizens--including the 
Capitol Hill Police--got together boxes of food, medicine, and clothes 
for the Hurricane victims. There have been scores of doctors, 
missionaries, and independent citizens who have donated their time and 
skills. I know that I speak for hundreds of thousands of families when 
I say ``thank you from the bottom of my heart'' to all of you.
    When Hurricane Mitch struck the Honduran Bay Islands on October 26, 
last year, it registered winds of 180 m.p.h.--the strongest recorded 
hurricane in history. It continued to sweep across the Honduran 
mainland as a devastating hurricane, and then as a deadly tropical 
storm, for more than ten days. Mitch hit our capital, Tegucigalpa, on 
Friday, October 30. Even as it was hovering over us, we had no idea of 
the magnitude of the storm. We were given virtually no warning.
    On October 31, I left our home at dawn with a neighbor to see if we 
could be of any help in rescue efforts throughout the Capital. It was 
not until the previous evening that we were made aware by the media, 
that we were in the eye of a killer hurricane. We wanted to do anything 
to help those who were already in grave danger. We went to a riverbank, 
and saw that the river had dramatically risen about 20 feet and 
expanded over 150 feet to the sides. In the middle of it, a two-story 
middle-class home was still standing up and surrounded by violent 
waters. This family had not had time to evacuate, and had forced a hole 
in the roof, and climbed on top where they screamed for help. We stood 
on the edge, and watched helplessly as three children, and three adults 
were swallowed by the river in a matter of seconds. Sadly, this is not 
an isolated story.
    When Hurricane Mitch had run its deadly path, it left approximately 
5700 dead in Honduras, and 4000 more dead in the rest of Central 
America. Thousands more are still missing, and thousands are injured in 
Honduras alone. Millions in the region were left homeless. Too many to 
count. It is estimated in Honduras, that one out of every four people 
has been affected directly. Many claim that this was perhaps the most 
catastrophic natural disaster since Biblical days.
    The emergency phase of foreign assistance should now begin to wind 
down. We are currently in the phase of repairing whatever can be 
repaired, and containing epidemics. The final phase will be the 
toughest--rebuilding $8.5 BILLION dollars worth of destroyed 
infrastructure, and perhaps billions more in recouping lost crops, and 
rebuilding destroyed businesses throughout Central America. In 
Honduras, some experts believe that Mitch set us back about 25 years in 
infrastructure, and perhaps twice that long in certain parts of the 
agricultural sector. It is important to know that, due to lack of 
expertise and resources, we are still vulnerable to this kind of 
disasters in the future.
    There are many private sector and disaster relief organizations 
that are now on the ground trying to help us rebuild Central America--
primarily Honduras and Nicaragua, which together sustained about 80% of 
the real damage. Two of these organizations are represented at this 
table today--Samaritan's Purse and World Vision. Both are doing a 
terrific job. My wife, Deborah, is the Director of Samaritan's Purse in 
Honduras, so I am more familiar with their substantial commitment--
particularly in the areas of housing, medical brigades, and community 
social services. I highly commend both of these organizations to you, 
as A.I.D. seeks to implement certain projects through non-governmental 
organizations.
    In the four months since the Hurricane, my wife and I have traveled 
extensively in Honduras while involved in relief efforts. We have 
listened to hundreds of personal stories of tragedy, and of the 
struggle to start life over. We have listened to hundreds of ideas on 
the best way to rebuild Honduras--ideas from the private sector, the 
agricultural sector as well as the Honduran Government. We have also 
been briefed extensively by A.I.D. and Embassy officials. (And 
parenthetically, I think that the A.I.D. Mission in Honduras has done a 
fine job managing post-hurricane aid.) I am familiar with the aid 
package request from the Office of Management and Budget to the 
President, and believe that the United States assistance will be a very 
significant part of all aid we receive worldwide.
    At the risk of being presumptuous, I want to mention some ideas you 
might consider in the supplemental aid package for Central America. 
Permit me to give you two typical examples of types of people--close to 
us--affected by Mitch who need aid, and have been unable to qualify 
anywhere, thus far.
    1. The first is the family of our nanny Hilda. She is from an 
upper-lower class family. Several members of her immediate family had 
their own businesses, each employing others. They lost both their 
business and their personal belongings. Yet they do not qualify for any 
long-term credits to re-start their lives.
    2. The second example involves the family of a prominent, upper 
middle-class lawyer who has been living in our home since they lost 
everything as a result of Mitch. They have been told everywhere that 
there will be no help for the middle-class. Consequently, they must 
make an enormous further personal sacrifice.
    I strongly recommend finding ways to help people like this--small 
business owners, middle class professionals with a solid work track 
record, as well as small commercial farmers--to get back on their feet. 
These people are really the backbone of our society and our economy. 
They provide employment, and could be helped with long-term soft loans, 
or small grants. Enterprise Funds which provide credit and capital to 
entrepreneurs might also be very positive.
    After speaking to many other businessmen in the region, I believe 
that it might prove to be very effective if there were a way to do 
``turn-key'' projects. That way, you would employ Central Americans, 
but you would maintain control of your projects. This was done in Chile 
back in the 1960s, with A.I.D. financing, and with great success.
    I know many of you have great concern about the possible effects 
Mitch might have on illegal immigration. I understand that this issue 
will be dealt with in the future, but in the meantime, I know that we 
Hondurans are more than grateful with the generous decision by the 
Administration to allow those already in this country before the end of 
last year to stay for 18 months and work here. It is my dream to see 
all of us work hard in the next 18 months to find ways to provide jobs 
and create the conditions so that my fellow Hondurans will be able to 
return to their homeland.
    And on one other point, that I know is already being discussed by 
the Administration for future legislation, I would do a disservice not 
to mention that the Central American private sector strongly supports 
CBI enhancement and Trade Agreements. This could make a significant 
contribution towards renewed foreign investment and trade in the 
region, as well as increased employment opportunities.
    In closing, let me say that as a private citizen, I know that I am 
not alone in saying that God can bring something good out of this 
tragedy. Honduras, and other countries in Central America may still 
witness a blessing in disguise. We now have a bold challenge before us, 
and one we believe we can fulfill with your help. We want your aid to 
be used in the very best manner.
    Transparency in the use of the aid should be first and foremost in 
any legislation. It would be difficult to handle such huge amounts of 
aid and investment coming into any country after a natural disaster of 
this magnitude. So help us to build up a stronger Honduras than before, 
by providing the necessary mechanisms to ensure the most efficient use 
of the funds being donated by the people of the United States. I am 
happy to meet with your staffs to discuss details of the aid package. 
Thank you again for the opportunity to be here today.

    Senator Coverdell. Thank you, Mr. Fonseca.
    Let me now turn to Mr. Ken Isaacs, Director of Projects for 
Samaritan's Purse of Boone, NC. Samaritan's Purse is a private 
Christian humanitarian relief organization doing tremendous 
work in Honduras and Nicaragua, rebuilding homes and providing 
essential health care to people affected by Hurricane Mitch, 
and we appreciate the work that you have been doing and look 
forward to hearing your personal experience here today.

   STATEMENT OF JAMES KENNETH ISAACS, DIRECTOR OF PROJECTS, 
                  SAMARITAN'S PURSE, BOONE, NC

    Mr. Isaacs. Thank you, Mr. Chairman. It is a pleasure to be 
here and I really appreciate the invitation.
    My name is Ken Isaacs and I serve as the director of 
projects for Samaritan's Purse, a nondenominational Christian 
relief and development organization with ongoing programs in 
about 60 countries. Our work is predominantly funded by private 
donations. The president of Samaritan's Purse is Mr. Franklin 
Graham, the son of the evangelist Dr. Billy Graham. Samaritan's 
Purse, the strength of our organization, what we are known the 
most for, is rapidly responding to crises brought by war and 
natural disasters. We typically would work in places like 
Bosnia distributing relief supplies or operating a hospital in 
Sudan. We were involved in Rwanda in 1994 re-opening the 
hospital there and transitioning that to the ministry of 
health.
    I introduce myself and the organization in this way 
because, after visiting Central America, I have to say that it 
really reminds me of a war zone. I have been in some and I have 
seen them.
    Over the last 4 months I have made 6 trips to Honduras and 
spent 2 months in the country. I have met with the mayors of 
Tegucigalpa, the capital city, San Pedro Sula, and numerous 
other smaller cities. I have spent time with Honduran Federal 
officials, businessmen, relief agency personnel, and church 
leaders. I have talked in detail with many of the homeless who 
are living in the camps and the shelters.
    Death, destruction, stunned people, paralyzed local 
capacity, and crippled infrastructures are what I have 
witnessed in Honduras, Nicaragua, and the Dominican Republic. 
While we have established significant programs in all three 
countries, today I will only address the effects in Honduras 
and what we are doing there.
    I remember talking to a 65-year-old grandmother who lost 
her daughter and her son-in-law, and she took in her 9 
grandchildren, and they were living under the bleachers of a 
stadium, sleeping in a space smaller than a one-car garage. She 
did not have anywhere else to go.
    I remember meeting a 45-year-old man with 6 children. He 
had a taxicab, but their house had washed away. They had lost 
everything they owned but the clothes on their backs. He could 
not afford a down payment for a house, nor could he afford the 
typical 18 to 28 percent interest that is charged for 
commercial housing.
    We talked with a young man in Tegucigalpa who watched his 
wife and son die before his eyes when his house literally 
sheared away in front of him, and his wife was reaching for him 
and he could not get to them. He had been saving his neighbors 
and he was able to console himself knowing that he had helped 
25 other people live.
    All of these people are now living in shelters. Hurricane 
Mitch has made them homeless. A typical day in their life 
consists of sleeping on the floor behind a privacy curtain if 
they have one. They bathe in the sinks of public toilets if the 
water is running that day. Clothes are washed on the floor of 
the toilets or in buckets. The conditions are dirty and hostile 
and crowded, and nobody wants to be there.
    Many statistics of the number dead, missing, homeless, and 
affected have been released. I do not believe there are nor 
ever will be accurate numbers to portray the amount of 
suffering and loss this storm has caused. There is no doubt, 
however, that the entire region has been severely affected. I 
do not think there are any short-term or quick-fix solutions, 
however.
    During the emergency phase of the Honduran crisis, 
Samaritan's Purse supplied and distributed over 350 tons of 
food, blankets, and plastic sheeting to victims throughout the 
country. These materials were moved by the U.S. Government 
under the Denton agreement. Additionally, we have committed $9 
million to help Hondurans rebuild their lives. This is the 
largest single commitment our organization has ever made.
    Our efforts are focused mainly on housing, but we are also 
conducting mobile medical clinics. These clinics are staffed by 
dozens of volunteer American doctors. They give their time 
freely. We have also bought a helicopter to reach people in the 
most remote areas of the country.
    Those left homeless have the longest--are the greatest 
long-term need. In response, we have committed to build 4,000 
houses in Honduras and 1,000 in Nicaragua. We began 
construction in early February and to date we have completed 23 
homes and have started 135 others. Every month the amount of 
homes that we start will grow in number and we expect to 
complete 3,500 by the end of this year.
    These houses are simple block houses, built with local 
materials and labor. They are modest in size, but sturdily 
constructed so that they would not become victim to the next 
hurricane. In many cases the house may in fact be better than 
what was lost, but in all cases it will allow families an 
opportunity to begin rebuilding their lives.
    We feel it is important to the Honduran economy to work 
through the market systems that are in place. We are using 
locally available materials and we are keeping our expatriate 
staff to a minimum. We have one American and one Peruvian on 
our team of over 100 employees. We are working entirely through 
local churches to reach into the communities and towns and 
mobilize existing resources from a community-based approach. 
The leadership of the evangelical churches has been essential 
to our entire effort.
    I have seen a renewed and unified spirit of cooperation 
among Hondurans. They are working shoulder to shoulder with 
relief organizations, churches and governments to build a 
stronger and a better Honduras. This spirit is encouraging and 
refreshing to all of us involved. They do see hope on the 
horizon.
    In addition to new home-buildings, we have identified over 
1,400 houses that are inundated with mud and in need of 
cleaning so that people can return to them, and in some 
instances the people are actually living in the homes with up 
to a foot of mud in it. Since November when we began this 
response, we have cleaned over 650 homes and those families 
have in fact returned. On January 4 of this year we asked for 
OSDA assistance of $800,000 to help us in this effort.
    The situation of the homeless is an urgent need. An 
estimated 20,000 are in shelters and have no other place to go. 
Many thousands more are living with family, friends, and in 
makeshift housing. In addition to working with those in the 
shelters, we are aggressively seeking out these other people to 
find out where they are and how we may help them.
    We are finding many individuals and communities who are 
taking steps to help themselves. They do not have the materials 
and they cannot pay for construction workers, but yet they are 
doing their best. They have heard that aid is coming, but they 
have not seen it. They are gathering what meager resources they 
have to improve their situations. These type people are ideal 
to partner with because they are already motivated.
    I want to emphasize the basic need in Honduras is for 
housing for those that have been made homeless by Hurricane 
Mitch. Furthermore, I would suggest that funds for housing 
reconstruction are best utilized when channeled through 
nongovernment organizations and churches. Not only does this 
provide better accountability of the funds, transparency, and 
community ownership of the programs, but the people throughout 
Honduras typically relate to their community churches and they 
look to them in times of need to promote community development. 
The communities know their churches and the leaders of those 
churches. This relationship allows for better grassroots 
ownership and accountability.
    It has been 4 months since Hurricane Mitch did its damage. 
Anything that this Congress could do to speed the percent of 
releasing Government funds to organizations working in Central 
America would be a tremendous help. This would, of course, 
include anything to reduce the time and effort involved with 
receiving Government grants.
    Central America today stands at a critical juncture. After 
decades of instability, the region now enjoys developing 
democracies and free market systems. Hurricane Mitch impedes 
and perhaps threatens that progress. The outpouring of 
humanitarian response from the United States and its people has 
been immense, but much more must be done. The emergency phase 
is over, the situation is now off of the public's radar screen, 
but now the long-term needs must be addressed.
    Thank you for allowing me to address you today, Mr. 
Chairman.
    [The prepared statement of Mr. Isaacs follows:]

   Prepared Statement of James Kenneth Isaacs, Director of Projects, 
                      Samaritan's Purse, Boone, NC

    Mr. Chairman and members of the Subcommittee,
    Thank you for inviting me to address you today regarding the 
situation in Central America resulting from Hurricanes Georges and 
Mitch.
    My name is Ken Isaacs and I serve as the Director of Projects for 
Samaritan's Purse, a nondenominational Christian relief and development 
organization with ongoing programs in about 60 countries. Our work is 
predominantly funded by private donations. The President of Samaritan's 
Purse is Mr. Franklin Graham, son of evangelist Dr. Billy Graham. The 
main strength of Samaritan's Purse is rapidly responding to crisis 
brought by war and natural disasters.
    Normally we work in war torn areas like Bosnia distributing 
urgently needed relief items. In Southern Sudan we operate a hospital 
that serves an estimated population of 300,000.
    In July of 1994 we reopened the 600 bed Central Hospital of Kigali, 
Rwanda, and over the next two years transitioned its management to the 
newly formed Ministry of Health. Our work in Rwanda was partly funded 
by OFDA. USAID later funded our Healthcare Providers Education Program.
    I have chosen to introduce myself by speaking of these areas of 
mass destruction and suffering because Central America in many ways 
reminds me of a war zone.
    Over the last four months I have made six trips to Honduras and 
spent two months in the country. I have met with the mayors of 
Tegucigalpa, San Pedro Sula and numerous other smaller cities. I have 
spent time with Honduran federal officials, businessmen, relief agency 
directors, and church leaders. I have talked in detail with many of the 
homeless in the shelters and camps around the country.
    Death, destruction, stunned people, paralyzed local capacity and 
crippled infrastructures are what I have witnessed in Honduras, 
Nicaragua and Dominican Republic. While Samaritan's Purse has 
established significant programs in all three countries, I will address 
the effects of Hurricane Mitch on Honduras and our efforts there.
    I recall a 65-year-old grandmother who lost her daughter and son-
in-law in the flooding. She has taken in her nine grandchildren and 
they are living under stadium bleachers and sleeping on the concrete 
floor in an area smaller than a one-car garage. They have no where else 
to go.
    I met a 45-year-old man with six children. He has a taxi and earns 
a living. His house was washed away and they have no possessions but 
the clothes on their backs. He does not have the money to make a down 
payment on a house and can not afford the 18% to 28% interest typically 
charged for a home loan.
    We talked with a young man whose wife and baby died as he was 
trying to rescue them from their house as the floor sheared in two with 
only a few feet between them. The husband had been saving the lives of 
his neighbors before he took his own family to a safer area. He took 
comfort in knowing he had saved twenty-five people.
    All of the above mentioned people are now living in shelters. 
Hurricane Mitch has made them homeless. A typical day consists of 
sleeping on the floor, behind a privacy curtain if they have one. They 
bathe in the sinks of public toilets if the water is running that day. 
Clothes are washed on the floor of the toilets or in buckets. 
Conditions are dirty and hostile. No one wants to be there.
    Many statistics of the number dead, missing, homeless and affected 
have been released. I do not believe there are, nor ever can be, 
accurate numbers to portray the amount of personal suffering and losses 
caused by Hurricane Mitch. There is no doubt that the entire region has 
been severely affected and will take years to recover. There are no 
short-term or quick fix solutions.
    During the emergency phase of the Honduran crisis, Samaritan's 
Purse supplied and distributed over 350 tons of food, blankets and 
plastic sheeting to victims throughout the country. These materials 
were moved under the Denton Amendment.
    Additionally, Samaritan's Purse has committed nine million dollars 
to help Hondurans rebuild their lives. This is the largest single 
commitment we have ever made. Our efforts are focused mainly on housing 
but we also are conducting mobile medical clinics. These clinics are 
staffed by dozens of American doctors who volunteer their time. We 
supplied the program with a helicopter so that we could reach remote 
areas.
    Those left homeless have the greatest longterm need. In response, 
we are building 4,000 homes in areas across Honduras and 1,000 in 
Nicaragua.
    We began construction in early February and to date we have 
completed twenty-three homes and have started 135 others. We will begin 
construction on new houses every month in 1999, and will have 3,500 
completed by the end of the year.
    These are cement block homes built with local materials and labor. 
These homes are modest in size but sturdily constructed. In many cases 
the house may be better than what was lost, but in all cases a family 
will have a house from which they can begin rebuilding their lives.
    We feel it important to the Honduran economy to work through the 
market systems in place. We use locally available materials and keep 
our expatriate staff to the minimum. Wc have one American and one 
Peruvian on our team of over one hundred employees.
    We are working entirely through local churches to reach into the 
communities and towns and mobilize existing resources from a community-
based approach. The leadership of the evangelical churches has been 
essential to our entire effort. I have seen a renewed and unified 
spirit of cooperation among Hondurans to work shoulder to shoulder with 
NGOs, churches and governments to build a stronger and better Honduras 
This spirit is both encouraging and refreshing to those involved.
    In addition to new home building, we have identified over 1,400 
homes inundated with mud and in need of cleaning, so those residents 
can return. Since November when we began this response, Samaritan's 
Purse has cleaned over 650 homes so families can return. On January 4, 
1999, we requested about $800,000 from the Office of Foreign Disaster 
Assistance to help us in this effort.
    The situation of the homeless is an urgent need! An estimated 
20,000 are in shelters and have no other place to go. Many thousands 
more are living with family, neighbors, or in makeshift housing. In 
addition to working with those in the shelters, Samaritan's Purse is 
aggressively seeking out those who are homeless but living with family, 
friends or in shacks of plastic sheeting and cardboard.
    We are finding many individuals and communities who are taking 
steps to help themselves. They do not have materials and cannot pay for 
the construction workers, but yet they are doing their best. They have 
heard ``aid'' is coming but have not seen it and are trying to use what 
meager resources they have to improve their situation. These situations 
are ideal for us to support in partnership.
    I want to emphasize the most basic need of the country is housing 
for those made homeless.
    Furthermore, I suggest that funds for housing reconstruction are 
best utilized when channeled through the NGOs and churches. Not only 
does this provide accountability, transparency and community ownership, 
but also the people throughout Honduras relate to their community 
churches and look to them to help in times of need to promote community 
development. The communities know their churches and its leaders. This 
relationship allows for better grassroots ownership and accountability.
    It has been four months since Hurricane Mitch did its damage. 
Anything this Congress could do to speed the process of releasing 
government funding to organizations working in Central America would be 
a tremendous help. This would of course include anything to reduce the 
time and effort involved with receiving government grants.
    Central America stands today at a critical juncture. After decades 
of instability, the region now enjoys developing democracies and free 
market systems. Hurricane Mitch impedes that progress. The outpouring 
of humanitarian response from the United States and its people has been 
immense but much more must be done. The emergency phase is over; the 
situation is off of the public's radar screen, but now the long term 
needs must be addressed.
    Thank you for allowing me to testify before you.

    Senator Coverdell. Thank you very much, Mr. Isaacs.
    Now we will turn to Mr. James Chapman, Director of the 
Latin America Region for World Vision, another humanitarian 
relief organization doing outstanding work in assisting the 
people in Nicaragua, Honduras, Guatemala, and El Salvador 
affected by Hurricane Mitch. In addition to learning about the 
various projects you administer, I look forward to hearing your 
recommendations about innovative approaches to assist the 
people of Central America.
    Mr. Chapman.

STATEMENT OF JAMES CHAPMAN, DIRECTOR FOR LATIN AMERICA REGION, 
                  WORLD VISION, WASHINGTON, DC

    Mr. Chapman. Thank you very much.
    My name is James Chapman. I am a former Peace Corps 
volunteer in Peru and my first assignment with the Peace Corps 
was to land in the Peruvian Andes shortly after the May 1970 
earthquake and get directly involved in housing reconstruction 
following that significant disaster.
    I am currently Latin America Regional Programs Director for 
World Vision U.S. Thank you for inviting me to testify before 
the subcommittee to offer recommendations on how United States 
aid to hurricane-affected Central American countries channeled 
through private voluntary organizations that work with 
communities and local governments can best promote recovery and 
development in the region.
    World Vision U.S. is an international faith-based relief 
and development organization. It is part of an international 
partnership of World Vision offices that supports more than 
6,000 relief and development projects in 92 countries. In the 
United States alone, World Vision is supported financially by 
more than 800,000 families. In addition, World Vision also 
receives funding from foundations, corporations, and the U.S. 
Government to support its international programs.
    World Vision has been active in Central America for more 
than 25 years, with national offices in the four hurricane-
affected countries of Honduras, Nicaragua, Guatemala, and El 
Salvador who are heavily engaged in relief and recovery 
activities as we speak. More than $20 million in private 
funding have already been committed by World Vision 
International to relief and recovery programs in the four 
countries.
    For the purpose of this hearing, I will focus my remarks on 
the situation in Nicaragua. Hurricane Mitch inflicted its 
greatest damage in Nicaragua through severe rains that caused 
extensive flooding and mudslides. Damage to infrastructure, 
housing, and crop loss is estimated at $1.5 billion, or almost 
40 percent of GDP. The U.S. embassy reports that about 415,000 
people were displaced nationwide.
    Rivers in the northern Atlantic coastal areas of Nicaragua 
have overflowed their banks. A single mudslide in the northwest 
province of Chinadega increased the death toll and left more 
than 2,000 people missing from 10 communities situated at the 
base of the Casitas Volcano.
    Damage to roads and bridges and to the agricultural sector 
is extensive. The Pan American Health Organization reports that 
the value of the damage to the transportation network is about 
$16 million. Many of the transportation linkages link farms to 
markets.
    World Vision Nicaragua operates 13 area development 
programs. Each area program works with an average of 10 
communities in the sectors of maternal-child health, education, 
agriculture, animal husbandry, and microenterprise development. 
All were seriously damaged by the rain or its aftereffects. 
Significant crop loss occurred, with 100-percent loss in some 
locations. More than 1,200 families lost their livelihoods.
    The World Vision relief and recovery programs in Nicaragua 
target six sectors: microenterprise development, farmland 
rehabilitation, road repair, home repair and reconstruction, 
distribution of medical supplies, and reconstruction of water 
and sanitation systems.
    Mr. Chairman, natural and manmade disasters offer the 
opportunity to influence economic and social policies in 
developing countries during the process of reconstruction and 
rehabilitation. Under emergency conditions, the doors are open 
to interventions that encourage market-led development which 
may not be open under normal circumstances. As a result, rural 
communities, the local private sector, national and local 
government, and indigenous nongovernmental organizations, 
NGO's, can undertake reconstruction and development activities 
in areas where they have the greatest comparative advantage 
within a market-oriented environment.
    Following are four recommendations of how U.S. Government 
aid channeled through private voluntary organizations who work 
in partnership with communities and local governments can best 
contribute to recovery over the long term in Nicaragua.
    First, private and voluntary organizations like World 
Vision can foster private sector activity by contracting with 
and providing credit to small and microenterprises. Private 
sector companies should be responsible for repairs to roads, 
bridges, and other infrastructure. The government can stimulate 
the economy and effectively rebuild the infrastructure by 
offering contracts to private companies rather than undertaking 
the work itself.
    Various levels of government should be encouraged to 
promote private enterprise. It should not be the producer of 
goods and services. Government can be encouraged to undertake 
provision of public goods in which it has a comparative 
advantage.
    Second, national and local governments should have the role 
of coordinating disaster response. PVO's undertaking disaster 
response programs with U.S. Government funding can play a key 
role in informing national and local government disaster 
coordinators of the gaps in services and recommend who can best 
fill those gaps. They can also engage in policy dialogs in 
terms of which policies best facilitate recovery and 
development.
    Third, indigenous nongovernmental organizations or 
community associations are important components of civil 
society as they engage in development activities and provide a 
voice for communities in influencing economic and social 
policy. U.S. private and voluntary organizations should help 
strengthen local NGO's through collaboration in jointly managed 
rehabilitation and development projects.
    Fourth, the rural economies of Central America are 
beginning their recovery after a severe hurricane. World Vision 
is challenged to assist the process of sustainable economic 
growth through market-led approaches in developing the 
capacities of rural communities in production, marketing, and 
micro and small enterprise.
    The best approach is to provide an integrated package of 
development interventions which capitalize on the synergistic 
and complementary relationships. Interventions can also 
increase the capacity of local NGO's, private and government 
sectors to effectively and appropriately respond to disasters 
and long-term rehabilitation.
    Foreign aid intervention in the following areas, if 
implemented strategically, can achieve recovery that will at 
the same time help build a foundation for future growth. I will 
list a few of the areas.
    Provision of health and nutrition services, with the full 
participation of communities and government.
    Second, rehabilitation of rural infrastructure, including 
water, sanitation, roads, schools, and health clinics through 
contracts with existing and emerging contractors and private 
businesses.
    Encouragement of small and microenterprise development. 
Business goes on during and after a disaster, and entrepreneurs 
need working capital to restore and expand their businesses. 
Provision of small loans not only revitalizes business 
activity, but also instills market principles and practices.
    The promotion of agricultural recovery through rapid 
introduction of improved technologies and techniques with seeds 
and tools is also an important development intervention. 
Improved crop variety should be disseminated to farmers to 
rapidly restore agricultural productivity and enhance family 
incomes.
    Finally, development of farmer organizations for 
agricultural production and marketing should be fostered and 
encouraged.
    The provision of foreign assistance under emergency 
conditions can help instill free market practices and promote 
civil society as it helps people restore their own lives. 
Foreign aid that reinforces old economic habits and creates or 
continues dependency is a lost opportunity.
    Mr. Chairman, thank you for this opportunity that you have 
given to World Vision to offer its insights for effective 
relief and recovery in Nicaragua based on our experience 
working with local communities around the world for many years. 
I would be happy to take questions from the subcommittee. Thank 
you.
    [The prepared statement of Mr. Chapman follows:]

  Prepared Statement of Dr. James Chapman, Director for Latin America 
                  Region, World Vision, Washington, DC

    Mr. Chairman, I am a former Peace Corps Volunteer and currently, 
Latin America regional programs director for World Vision US. Thank you 
for inviting me to testify before the subcommittee to offer 
recommendations on how United States aid to hurricane-affected Central 
American countries, channeled through private voluntary organizations 
that work with communities and local governments, can best promote 
recovery and development in the region.
    World Vision US is an international faith-based relief and 
development organization. It is part of an international partnership of 
World Vision offices that supports more than 6,000 relief and 
development projects in 92 countries, In the U.S. alone, World Vision 
is supported financially by more than 800,000 families. In addition, 
World Vision also receives funding from foundations, corporations and 
the U.S. government to supports its international programs.
    World Vision has been active in Central America for more than 25 
years. Our national offices in the four hurricane-affected countries of 
Honduras, Nicaragua, Guatemala and El Salvador are heavily engaged in 
relief and recovery activities. More than $20 million in private 
funding have already been committed by World Vision International to 
relief and recovery programs in the four countries.
    For the purposes of this hearing, I will focus my remarks on the 
situation in Nicaragua. Hurricane Mitch inflicted its greatest damage 
in Nicaragua through severe rains that caused extensive flooding and 
mudslides. Damage to infrastructure, housing and crop loss is estimated 
at $1.5 billion, or almost 40 percent of GDP. The U.S. embassy reports 
that about 415,000 people were displaced nationwide. Rivers in the 
northern Atlantic coastal areas of Nicaragua have overflowed their 
banks. A single mudslide in the northwestern province of Chinadega 
increased the death toll and left more than 2,000 people missing from 
10 communities situated at the base of the Casitas Volcano. Damage to 
roads and bridges and to the agricultural sector is extensive. The Pan 
American Health Organization reports that the value of the damage to 
the transportation network is about $16 million; many of the farm-to-
market linkages.
    World Vision Nicaragua operates 13 Area Development Programs. Each 
area program works with an average of 10 communities in sectors of 
maternal-child health, education, agriculture, animal husbandry and 
microenterprise development. All were seriously damaged by the rain or 
its after-effects. Significant crop loss occurred, with 100 percent 
loss in some locations. More than 1,200 families lost their 
livelihoods.
    The World Vision relief and recovery programs in Nicaragua target 
six sectors:
     microenterprise development
     farmland rehabilitation
     road repair
     home repair and reconstruction
     distribution of medical supplies
     reconstruction of water and sanitation systems
    Mr Chairman, natural and man-made disasters offer the opportunity 
to influence economic and social policies of developing countries 
during the process of reconstruction and rehabilitation. Under 
emergency conditions, the doors are open to interventions that 
encourage market-led development which may not be open under normal 
circumstances. As a result, rural communities, the local private 
sector, national and local government, and indigenous non-governmental 
organizations (NGOs) can undertake reconstruction and development 
activities in areas where they have the greatest comparative advantage 
within a market-oriented environment.
    The following are four recommendations or how U.S. government aid, 
channeled through private voluntary organizations who work in 
partnership with communities and local governments, can best contribute 
to recovery over the long-term in Nicaragua:
    1. Private voluntary organizations like World Vision can foster 
private sector activity by contracting with and providing credit to 
small and micro-enterprises. Private sector companies should be 
responsible for repairs to roads, bridges and other infrastructure. The 
government can stimulate the economy and effectively rebuild the 
infrastructure by offering contracts to private companies rather than 
undertaking the work itself.
    The various levels of government should be encouraged to promote 
private enterprise. It should not be the producer of goods and 
services. Government can be encouraged to undertake provision of 
``public goods'' in which it has a comparative advantage.
    2. National and local governments should have the role of 
coordinating disaster response. PVOS undertaking disaster response 
programs with U.S. government funding can play a key role in informing 
national and local government disaster coordinators of the gaps in 
services, and recommend who can best fill those gaps. They can also 
engage in policy dialog in terms of which policies best facilitate 
recovery.
    3. Indigenous NGOs or community associations are important 
components of civil society as they engage in development activities 
and provide a voice for communities in influencing economic and social 
policy. U.S. private and voluntary organizations should help strengthen 
local NGOs through collaboration in jointly-managed rehabilitation and 
development projects.
    4. The rural economies of Central America are beginning their 
recovery after a severe hurricane. World Vision is challenged to assist 
the process of sustainable economic growth through market-led 
approaches, and developing the capacities of rural communities in 
production, marketing and micro- and small enterprises. The best 
approach is to provide an integrated package of development 
interventions, which capitalize on synergistic and complementary 
relationships. The interventions can also increase the capacity of 
local NGOs, private and governmental sectors to effectively and 
appropriately respond to disasters and long-term rehabilitation.
    Foreign aid intervention in the following areas, if implemented 
strategically, can achieve recovery that will, at the same time, help 
build a foundation for future growth.
     Provision of health and nutrition services with the full 
participation of communities and government;
     Rehabilitation of rural infrastructure, including water, 
sanitation, roads, schools and health clinics, through contracts with 
existing and emerging contractors and private businesses;
     Encouragement of small- and micro-enterprise development. 
Business goes on after a disaster, and entrepreneurs need working 
capital to restore and expand their businesses. Provision of small 
loans not only revitalizes business activity, but also instills market 
principles and practices;
     Promotion of agricultural recovery through rapid 
introduction of improved technologies and techniques with seeds and 
tools. Improved crop varieties should be disseminated to farmers for to 
rapidly restore agricultural productivity and enhance family incomes;
     Development of farmer associations for agricultural 
production acquisition and marketing.
    The provision of foreign assistance under emergency conditions can 
help instill free market practices and promote civil society as it 
helps people restore peoples' lives. Foreign aid that reinforces old 
economic habits and creates or continues dependency is a wasted 
opportunity.
    Mr. Chairman, thank you for this opportunity for World Vision to 
offer its insights for effective relief and recovery in Nicaragua based 
on our experience working with local communities for many years. I 
would be happy to take questions from the subcommittee.

    Senator Coverdell. Thank you.
    I am going to turn to the distinguished chairman of the 
Foreign Relations Committee, the distinguished Senator from 
North Carolina.
    The Chairman. Well, Mr. Chairman, I thank you for 
scheduling this meeting, and I fully intended to be here from 
the beginning because I have some contact and relationship with 
everybody here.
    Rene Fonseca, I cannot pronounce his name, but I can 
pronounce Deborah DeMoss.
    Senator Coverdell. Right, she is here, too.
    The Chairman. Deborah DeMoss was my boss for--how long, 
Debby? About 15 years. She came when she was 4.
    This is a great hearing and I am looking forward to reading 
the transcript of it.
    Now, Mr. Isaacs, I am a close personal friend of Billy 
Graham's son, who is head of Samaritan's Purse. I believe he is 
going to be the successor to Billy. I think that has been 
decided. He does wonderful work, as does Samaritan's Purse, or 
through Samaritan's Purse as a matter of fact. We have tried to 
help in that.
    I do not know whether you know the number of planeloads of 
boxes at Christmas time. How many did you do last time?
    Mr. Isaacs. Two and a half million.
    The Chairman. Two and a half million. We helped them get 
the planes, people all over this country and indeed all over 
the world who have more than those poor people that have 
nothing. I think Franklin Graham is just tops. I look forward 
to working with him, and you give him my best regards.
    I have got to ask about my godson, Rene, if I may call you 
that. How is he?
    Mr. Fonseca. He is doing fine, sir. He said hello.
    The Chairman. How old is he?
    Mr. Fonseca. He is four and a half years now.
    The Chairman. Four and a half years? Time does fly, does it 
not?
    Senator Coverdell. It really gets by.
    The Chairman. You ought to see a picture of him. He looks 
like his mama. No, he looks like both of them.
    Could I ask a question?
    Senator Coverdell. Please.
    The Chairman. One of my folks came in, Mr. Jaeger, and he 
said that you mentioned that most of your apparel is 
manufactured using U.S. textiles and related imports, and 
because of this American workers and their firms, he quoted you 
as saying, would benefit under CBI. Do you know the story in 
North Carolina among the textile mills?
    Mr. Jaeger. I am sorry, I did not hear that.
    The Chairman. Do you know the story under CBI what happened 
in North Carolina among the many textile mills we have there? 
In the last year alone, we have had nine textile mills of some 
size, Burlington included, close their doors, and somewhere 
between 8,000 and 10,000 workers have lost their jobs and they 
have not been able to find work. To be sure, some of them 
retired thanks to a retirement plan, but not the vast majority.
    Now, I am asked everywhere I go in North Carolina how CBI 
enhancements are going to help these kind of people when it 
happens to them. Did you explain that--well, it has not helped 
anybody yet, and I just wondered if you had any explanation 
that you could give me that I could give them.
    Mr. Jaeger. I will certainly try, Senator. Initially I 
would like to point out we do have three operations in your 
State of North Carolina, in distribution and hosiery and 
textile manufacturing. We feel with CBI as it exists today----
    The Chairman. Where are you in North Carolina?
    Mr. Jaeger. We are in the Cooleemee or Mocksville area with 
two operations, and another operation over in Randalman, NC.
    The Chairman. That is in the Piedmont section.
    Mr. Jaeger. The Piedmont section, right.
    One of our goals is to maintain those jobs in those 
facilities. We feel that with market competitive pressures that 
we are facing, with imports from the Far East, with pressures 
from Mexico with goods coming in under NAFTA, and the pricing 
pressures that we face, that we need to take steps to control 
our costs and to partner with the countries in the CBI region 
in order to develop and compete with foreign imports.
    The fact is--I am sorry, Senator.
    The Chairman. What was the total, the highest total 
employment of North Carolinians that you have had? How many 
have you lost, if you have lost any?
    Mr. Jaeger. In North Carolina?
    The Chairman. Yes.
    Mr. Jaeger. We have not lost any jobs in North Carolina, 
Senator.
    The Chairman. So you would not know anything about the 
anguish of the people, those 8,000 to 10,000.
    Mr. Jaeger. We are familiar with that, Senator. We have 
lost employment. Employment loss in the apparel industry, 
unfortunately, is inevitable. The real question I think that we 
face is where is that loss going to happen? Is it going to 
happen in the CBI region going forward because the jobs are 
going to shift to Asia, or will we be able to maintain those 
jobs that are already offshore in regions like Honduras through 
measures like CBI enhancement?
    We feel that partnering with the Caribbean provides us the 
opportunity to keep some jobs in the United States while also 
relying on our existing investments in the region.
    Senator Coverdell. Just for the purposes of the debate, for 
the panel, the fact that we are on the economic question should 
not in any way suggest that the committee is not eminently 
aware of the personal anguish and the issues that each of you 
have discussed, and we are going to come back to that in just a 
moment.
    But ours is a textile State, too, Georgia, and we have 
assembled, Mr. Chairman, a task force of textile interests on 
this question that you have raised. A general conclusion is 
that if nothing is done at all the jobs will continue to 
dwindle. Worse, if the actual manufacturing, so to speak, 
shifts to Asia, then in addition to that function moving away 
we would also lose a market for our textiles themselves that 
are manufactured.
    Currently these facilities in the Caribbean and in Mexico 
are using American goods. If that function moves to Asia, Asia 
will not use necessarily American goods. So you have two 
sectors that begin to collapse on us. Whereas if we keep these 
certain functions in the Caribbean and in Mexico, it reinforces 
at least the utility of American goods.
    This is the way at least it has been characterized as we 
have tried to confront this very serious issue. And we have 
lost some very significant jobs as well.
    Before the chairman came I was going to ask you to try to 
elaborate on that, is that premise in your mind correct or 
incorrect. So as an adjunct to the chairman's question, I will 
now pose that one. I mean, this is sort of the way we have 
sorted it out at home in Georgia.
    What is your take on that, Mr. Jaeger?
    Mr. Jaeger. I think that is correct. That is the way we 
feel about it. We feel that those jobs are going to move 
regardless of whether this bill passes or not. The real 
question is where are we going to have those jobs? Are they 
going to be in the CBI region, where U.S. goals and policies 
are well served, or are they going to be in the Far East, where 
U.S. inputs are minimized or nonexistent?
    We feel that a partnership that has been in place since the 
mid-eighties with the CBI region will serve U.S. interests of 
stability and growth and allow apparel manufacturers to provide 
jobs in that region and maintain to the extent feasible jobs in 
the United States.
    The Chairman. No further questions.
    Senator Coverdell. If I might, then, Mr. Chairman, I would 
like to turn to Mr. Fonseca, Mr. Chapman, and Mr. Isaacs and 
yourself, Mr. Jaeger, as well. You touched on this, Mr. Isaacs, 
but my exposure was probably maybe the week after it hit, about 
30 days. I was quite taken with the fact that despite the scope 
and magnitude of this crisis, the way the people themselves 
were rallying and fighting, fighting back. You alluded to that.
    So my first question is how do you find the general morale 
at this juncture? Is that fight still in your mind being waged? 
Is it setting in? Because everything does not happen as quickly 
as people would like. Is that causing there to be a sink in the 
struggle on the ground to rebuild?
    I will begin with you, Mr. Isaacs, because you alluded to 
this, and then any of the rest of you that might want to talk 
about it, please do.
    Mr. Isaacs. I can respond to it, Mr. Chairman, as an 
outsider. I am not a Honduran and I think that Rene Fonseca can 
address it from a different perspective. But I have certainly 
noticed that people are saying, let us build a new Honduras. 
And they are not talking about structures and roads and 
bridges, they are talking about political structures, they are 
talking about getting corruption out of the government, they 
are talking about a new tomorrow.
    You know, there is a certain amount of fatigue with the 
people who are long-term in the camps, that have no other 
option, and that is to be expected. But my opinion and 
observations are that society as a whole sees this as a 
devastating storm, a devastating crisis, but it is a chance for 
a new tomorrow, to build a better Honduras.
    Senator Coverdell. Rene, would you want to comment on that?
    Mr. Fonseca. Yes, Senator. I think a tragedy like the one 
we have been through changes the mentality and changes the 
attitudes of the people. I certainly could not have said it 
better than Ken, because I have seen a lot of changes in the 
people. They have a new attitude. They want to rebuild the 
country, and things have turned around very nicely.
    Honduras is turning around beautifully. I see new attitudes 
and everybody is cooperating with everybody. Political 
partisanship is not noticeable. It is going very good. I think 
this is a boost to morale, what we have been through. It is a 
good time to reflect about our new future, a change in our 
laws, political institutions and the like, and start over again 
with the new millennium. We all look forward to a new country.
    Senator Coverdell. Mr. Jaeger or Mr. Chapman, would you 
want to comment on that inquiry?
    Mr. Chapman. Yes, I would. I think after a natural disaster 
such as what has been experienced with Hurricane Mitch there is 
obviously an initial international focus, a lot of aid, a lot 
of things coming in. I think people are extremely glad to 
receive that and really feel the warmth and compassion of the 
world community.
    I think the challenge is over the medium and the longer 
term, as you brought out, and in terms of how is the thing 
going to unfold, what kinds of activities are going to go on. 
Obviously, there is the need to respond immediately to the 
relief question, to make sure people have food and shelter. But 
as you move forward you need to quickly reconstruct and 
rehabilitate the economy, get them back into business, get them 
back into agriculture, those who are farmers, and get things on 
a more normal track. That does take time.
    I think sort of after the initial shock and perhaps the 
encouragement, I think it will be a struggle, and I think we 
need to be very determined, very strategic in terms of 
providing the right kind of aid that really jump-starts the 
reconstruction of the economy.
    Senator Coverdell. Mr. Jaeger.
    Mr. Jaeger. If I could comment, the operation in Honduras, 
despite the devastation, was back to work within 12 days of the 
cessation of the hurricane. The employees clearly wanted to 
come back to work at Jockey. They walked long distances to do 
that. We were pleased to have a place for them to come back and 
work.
    We feel and it is my belief that jobs are the key to the 
long-term recoverability of the region. CBI is a good measure 
forward toward that long-term recovery.
    Senator Coverdell. Mr. Fonseca--one of you alluded to 
transparency. Now, one of the things that struck me as I went 
through the region--and as you know, we had the Presidents of 
the five major countries all here on Capitol Hill in December, 
with the exception of President Arzu of Guatemala, who was ill, 
so we had the Vice President here. We all met with Senate and 
House leadership.
    It was somewhat of an historic meeting in that sense. It 
does not happen that often. I was quite taken with the attempts 
or the efforts being made to assure that the aid was managed 
differently. At least when I was there, they were talking 
transparency and certifying, trying to avoid the pitfalls from 
previous disasters where accusations start flying.
    You are never going to escape that completely, but is it 
your combined judgment--are they achieving that or not?
    Mr. Fonseca. Well, I know there is a great concern from the 
giver and the recipient of aid about the way the funds are 
invested and used. Back in the 1960's the United States had a 
great experience with Chile. The AID--through the financing of 
AID, they built up projects that they named turnkey projects. 
In other words, they would provide the funds, but they would 
still keep the control of the projects. That guaranteed the 
good use of funds. That would be an idea.
    I know that the AID is not doing it like that in this 
instance. But there should be ways to hire auditors from 
overseas to see that the funds are committed in a clean and 
transparent way.
    Senator Coverdell. Any comment from any of the rest of you 
on this matter?
    Mr. Isaacs. I could not speak to the issue of the need for 
transparency, let me say, on the Federal Government level. But 
I do believe that it is important to conduct business in a 
practical and a commonsensical way, and it would probably be a 
better relationship for an American NGO to report about how 
they are building houses than it would be maybe a Honduran 
agency to report about how they are building houses. It would 
be more in our interest to make sure that you had all the 
information that you wanted, and it would be easier for you to 
get that information, you being the U.S. Government.
    But overall, I have heard a lot of talk there among Federal 
and city officials about the need for transparency. But I think 
that there is transparency at multiple levels. Every level that 
touches something needs to be transparent. When you are talking 
about--in the case of what our response is in the housing 
sector, you are talking about communities, you are talking 
about towns and villages, small ones. So what we are striving 
to do is maintain accountability and transparency at every 
level and really to as much as possible shy away from 
centralization of large building complexes.
    Senator Coverdell. Mr. Fonseca, you mentioned something 
that is a little disturbing in our opening statement, that 
there is a cut where accessibility to recovery is needs-tested 
in such a way that your middle class cannot get to it. If we 
constructed a device that leaves talent on the sidelines, that 
would be somewhat disturbing. These are the people that have to 
be energized and put into the mix very quickly.
    Do you want to elaborate on that?
    Mr. Fonseca. Yes, sir. I consider the middle class to be 
the backbone of the society and the economy, because they 
provide employment or they have a secure job. A great amount of 
these people have lost their belongings, their houses, and they 
knock on doors and doors do not open for them because they are 
not considered poor, whereas some of the poor that were 
abjectly poor, they are getting homes and they did not have 
anything before the Mitch.
    So the middle class had something, had employment, had a 
business, had a job, and suddenly there is nothing. The next 
morning, they do not have anything. They go to a bank, they go 
to a government institution, and all they hear is that there is 
no aid for middle class.
    So what I suggested is perhaps this aid--our local banks 
could use lines of credit providing soft terms and long terms 
for these small business people, because that would make the 
economy recover fast.
    I know that shelter is important, but having a job is more 
important. But what do I do if I have a house but I do not have 
a job? I will be unemployed. I will not have anything with 
which to feed my family. I need the security of a job, and that 
is where the middle class plays a big, vital role.
    Senator Coverdell. Mr. Chapman, you mentioned the 
microenterprise being one of your principal sectors. Would you 
want to comment on this?
    Mr. Chapman. Yes. Well, I think what Mr. Fonseca says is 
right on, and I think there is a major problem there and we 
need to target some of the aid funding toward, for example, 
providing the loans and basically helping people restart their 
businesses.
    Obviously, the bulk of the aid goes to the disaster relief 
effort, but I would say in the future, particularly in terms of 
the whole rebuilding process, we need to focus on those sectors 
of the economy that are going to be the entrepreneurs and the 
ones who are eventually, once they get established, starting 
business, providing employment, and those kinds of things.
    So I think we need to look carefully at the programs and 
target them toward those who are most able to respond and take 
advantage of the opportunities that we are offering.
    Senator Coverdell. Questions, Mr. Chairman?
    The Chairman. The massive problem in solving this situation 
baffles me. Now, the hurricane was about 4 months ago?
    Senator Coverdell. October.
    The Chairman. The latter part of October. Now, where are 
you now in terms of percentages of people without homes?
    Mr. Fonseca. It has been estimated that one out of every 
four people in Honduras have been affected directly by the 
hurricane. But the need of homes in the entire country is about 
one million out of a population of 5.5 million.
    Senator Coverdell. 20 percent.
    Mr. Fonseca. Yes.
    Senator Coverdell. I had a number of one million for the 
region. Is that an understated number?
    Mr. Fonseca. This information or statistic is from an 
organization in the country and it probably covers the pre-
Mitch situation.
    The Chairman. Any other country helping your country 
besides the United States in any material way?
    Mr. Fonseca. Yes, sir, indeed. There are other countries 
who have provided aid, but the United States is the most 
significant one.
    The Chairman. Where are you in terms of restoring your 
roads that were destroyed?
    Mr. Fonseca. They were about 70 percent destroyed in the 
entire country.
    The Chairman. 70 percent?
    Mr. Fonseca. Yes, sir. The pave was washed off from some 
roads and bridges, about 225 bridges in the country. So the 
main road system is back in operation with temporary bridges, 
like Bailey bridges. We need some--we encourage the government 
to provide concessions for private sector people to take over 
those roads and administer them from a private perspective.
    But the road situation in Honduras is deplorable right now.
    The Chairman. Mr. Isaacs, what is your organization doing 
now? I know you collected so much material, food and the rest 
of it. Are you still--where does the food that your people eat 
come from? You cannot grow it yet, can you?
    Mr. Fonseca. Well, we have not had a lot of problems food-
wise. There is food in the country, not in excess. There is a 
scarcity in some areas. But considering that the crops were 
destroyed by 60 percent, we are going to have shortages this 
year. We have not seen the effects so far, but there will be a 
dramatic situation this year.
    The Chairman. Are you shipping, are you and Franklin 
shipping help now through Samaritan's Purse?
    Mr. Isaacs. We shipped about 350 tons, Senator. You 
remember that Saturday when Franklin called you at home?
    The Chairman. Yes, sir.
    Mr. Isaacs. Well, I went to him and said: Franklin, if you 
could call Senator Helms right now and get him to call the 
Department of Transportation, I bet we could get some 
airplanes. So I was there with him when that happened.
    We were doing that during what we call the emergency phase 
of the storm, when it was really a life and death situation. 
But in our opinion that time is past now, and we are looking at 
longer term issues. Housing is the one that we are focusing on. 
So we have committed to build 4,000 houses in Honduras and 
1,000 in Nicaragua, and we have already begun that.
    Senator Coverdell. On that, how many homes are--in other 
words, if you were going to eliminate the homeless situation, 
how many homes have to be rebuilt or cleaned or reopened? What 
is the total number?
    Mr. Isaacs. Well, I said in my address that I do not 
believe that there are any accurate numbers, and I really do 
not believe that there are any accurate numbers. If you read 
the reports, there are everywhere from 1.4 million have been 
made homeless to 40,000 or 50,000. I just do not think that 
there is the data collecting capability there to know.
    But I can relate it this way. One of the big issues that we 
would have to work through is who do you give a house to, what 
are the qualifications, and how do you know that a person's 
appeal for a home is sincere? There are a lot of issues 
involved.
    But we put together two teams, one for the north of the 
country and one for the south. We felt like that we could get 
more accurate information if we were going to people and 
getting the information rather than them coming to us. We would 
not want to put an advertisement in the newspaper saying ``Free 
homes.'' Within less than 1 month, we found 3,500 families 
homeless in about 15 cities, maybe 20 cities and villages 
across the country. And seriously, we have only scratched the 
surface. We could do easily four times that much, but it is a 
lack of resources. I have capped it this year at 3,500. That is 
where we will stop this year.
    The Chairman. Rene--and I am going to call you Rene because 
you are my friend away from here and you are my friend during 
this meeting----
    Mr. Fonseca. Thank you, sir.
    The Chairman. How did your banking structure function? How 
is it functioning? I know there was a low point there.
    Mr. Fonseca. As a result of Hurricane Mitch, a lot of 
banking lines of credit are at default right now because they 
had a lot of agricultural loans. Obviously, they are going to 
need a lot of reinforcement to bring the banks back onto their 
feet. The situation right now with the banking is lack of funds 
because our central banking system cuts a great deal from 
people that save in the banks. They cut 30 percent, 35 percent 
of the savings as a reserve.
    So the banking system could get lines of credit that could 
be discounted at cheaper rates. Like right now to get a loan 
for a house you pay 28 percent. That is awfully high. Nobody 
could afford that. They would have to extend the mortgages to 
100 years perhaps to make it, to make it more bearable.
    If we could get lines of credit at somewhere around 3 to 5 
percent and then the bank would charge for the discount another 
2 percent, that would be 7 percent, which would be really good 
to build a house.
    The Chairman. I have got to confess that I do not know 
whether AID participates in that or not. Do you know?
    Senator Coverdell. I do not.
    The Chairman. Do you know, Rene?
    Mr. Fonseca. I beg your pardon?
    The Chairman. AID, Agency for International Development, 
are they helping with stabilizing the banking situation?
    Mr. Fonseca. I do not know, sir. I am not aware of that 
situation.
    Senator Coverdell. We are told by your excellent staff that 
that would be a function of Treasury. I would not think it 
would be AID, but I would have to review it. I think it is very 
interesting.
    The Chairman. All right, I will ask this smart fellow here. 
Is Treasury doing anything about it?
    Mr. Grigsby. Yes, sir, they are.
    The Chairman. Identify yourself and answer the question.
    Mr. Grigsby. Garrett Grigsby, Foreign Relations Committee 
staff.
    They are requesting some funds in the supplemental 
appropriation bill and they do technical assistance programs, 
and in addition to that they would like to forgive a 
substantial amount of debt to Honduras and Nicaragua and 
affected countries, both U.S. bilateral debt and international 
debt as well.
    The Chairman. That is important for us to look at in this 
bill.
    Senator Coverdell. That is a key component, and the 
Presidents when they visited here all raised this issue of some 
forgiveness of debt.
    The Chairman. Thanks for letting me horn in on your 
hearing.
    Senator Coverdell. I have one more question if I might, Mr. 
Chairman, and then if you have a closing comment, we will let 
these people get on with their day.
    But my closing question deals with timing. I think 
everybody has agreed or generally agreed that the initial 
crisis of life and death, water, food, was done reasonably 
well, military and NGO's, the countries themselves. And we all 
know that it is when the TV cameras go off and the helicopters 
are not buzzing around things settle down, the long-term 
buildout begins.
    I have some distinct familiarity with this because in 1994 
my State suffered a 500-year flood. It covered over 200 square 
miles. It is that long haul that is the toughest part.
    Do you have any sense of how much time we have here before 
this thing begins to turn more difficult for us? Do you have a 
sense of the timing of what we need to do here, along with the 
European Union and others that are being attentive to this 
issue? Mr. Chapman, you are raising your hand.
    Mr. Chapman. I think we are already at that stage. We do 
quite a bit of monitoring in our areas of what is happening to 
the people besides, obviously, providing services, and in three 
of the countries we are picking up acute malnutrition, setting 
in particularly among young children. So I think we need to 
look very quickly at the longer term response. I do not think--
this is not going to be a one-time short deal.
    Particularly with food production and things like that, 
while there may be sufficient stocks of food in the country, it 
is probably in many cases not out where it needs to be. The 
roads, the infrastructure, is severely damaged. Basically, we 
have got people approaching starvation now, and I think we need 
to establish a partnership, particularly with U.S. farmers, in 
terms of getting some of our excess agricultural produce down 
there and getting it out there while it is needed particularly, 
and at the same time enabling people to re-establish their 
agricultural production so that we will be able to pull back 
from that fairly quickly.
    Senator Coverdell. Thank you.
    Mr. Isaacs.
    Mr. Isaacs. We expect to be in Honduras for a minimum of 2 
years, but internally we are acknowledging it may be 5. I think 
that would probably be the----
    Senator Coverdell. More realistic?
    Mr. Isaacs. Well, that is what we are thinking. So we just 
have to see how it unfolds.
    Senator Coverdell. Mr. Fonseca?
    Mr. Fonseca. We certainly think that timing is of the 
essence here for Honduras to receive the aid package. We would 
urge the Senate to look at that bill the sooner the better. And 
we certainly need help, but we need help that does not build 
dependency in the long run, because that would not do us any 
good.
    We certainly need also a long-term commitment for long-term 
institutions, such as our political institutions, our laws, our 
infrastructure, things that do really good things for our 
economy, not a one-shot deal. We look forward to a long 
relationship of mutual help, mutual trade agreements in the 
future, too.
    Senator Coverdell. Mr. Jaeger.
    Mr. Jaeger. The longer we wait to address CBI enhancement, 
the more jobs that will be lost to the Far East and Mexico. I 
think one thing that is clear here today is the importance of 
jobs in that region. So, we think as soon as possible, action 
is indicated.
    Senator Coverdell. Please.
    The Chairman. Mr. Chapman, has the Public Law 480 program 
kicked in?
    Mr. Chapman. Yes, it has. Public Law 480 title 2 is 
working. I am not sure about the other ones. Title 2 is the one 
that works with PVO's. And also, the world food program is 
there. So there are some resources flowing. But I think, again, 
it is going to be kind of a longer term effort, and we need to 
make sure that we avoid the malnutrition cases that we are all 
familiar with in other parts of the world, and I think we can 
do it.
    The Chairman. How about the medical profession of this 
country and others? Now, I know in the Persian Gulf that a lot 
of--a great many U.S. doctors went on their own hook and 
Samaritan's Purse lined up a lot of them. Now, is that 
happening? Or did you cover that earlier?
    Senator Coverdell. No, but it has been addressed, and I am 
personally aware of some of them from my State. I do not know 
if it is sufficient.
    Mr. Isaacs. Well, I can just say what we are doing at 
Samaritan's Purse. We are probably having about 6 doctors, 6 to 
10 a month, going there to serve for 1 to 2 weeks at a time. We 
are working with the bamberos, the fire departments, to 
identify villages that are cutoff and meet medical needs that 
way.
    The Chairman. Mr. Coverdell, thank you again for letting me 
horn in. I notice we have a rollcall vote.
    Senator Coverdell. Yes, we have a vote.
    We will end on a vignette. The chairman and Deborah for a 
long time dealt with another Central America. I thought it was 
somewhat ironic when I was there that they were building these 
stands in Nicaragua, and I said, what are we going to have 
here? There was obviously going to be some sort of display.
    The Nicaraguan Army and Government, much of which we have 
struggled with in the past, were preparing to award the 
American pilots who had confronted the storm directly with the 
country's highest honor. Quite an ironic quirk in history to 
see the Nicaraguan military coming together to award our 
American pilots their highest military award. So, interesting 
note to end on.
    Thank you all very much for your testimony. We will leave 
the record open in case, for what, 2 days, in the event 
additional questions need to be asked of our panelists. We 
thank each of you for taking time to share your personal 
insight with us. Thank you very much.
    Thank you, Mr. Chairman.
    [Senator Torricelli submitted the following prepared 
statement for inclusion in the record:]

                 Statement of Hon. Robert G. Torricelli

    Last fall, our Central American and Caribbean neighbors 
were hit by two powerful hurricanes. In September, Hurricane 
Georges hit the northern and eastern Caribbean, leaving over 
$1.5 billion in damages. Haiti and the Dominican Republic were 
hit the hardest by Georges.
    In October, Hurricane Mitch battered Central America for an 
unprecedented ten day period. During this time, over 9,000 
Central Americans were killed, and over 1 million people were 
left homeless. Over 25 years of investment to infrastructure--
including roads, bridges, and sanitation facilities--was 
destroyed by the storm.
    Damage estimates are astronomical: rebuilding homes, 
hospitals, schools, farms, and businesses throughout the region 
will cost an estimated $8.5 billion.
    Nicaragua and Honduras suffered the most extensive damage. 
In Honduras, an estimated 70% of the country's crops were 
destroyed, including the decimation of nearly 90% of its banana 
industry. In Nicaragua, mudslides and extensive flooding 
resulted in damages to its GDP of up to 40% and created 
hazardous conditions conducive to outbreaks of malaria, dengue 
fever, and cholera.
    The United States has responded with a tremendous amount of 
support. Since Hurricane Mitch, over $305 million in U.S. aid 
has been provided to those affected countries in the Caribbean 
and in Central America, The presence of the Department of 
Defense, the Peace Corps, and countless volunteer and non-
government organizations in the region has helped to provide 
the support and manpower these countries need in this time of 
immense difficulty.
    Still, much remains to be done, and countries like Honduras 
and Nicaragua are years away from fully recuperating from the 
aftermath of the hurricane. In response to the continued needs 
of these countries, the Administration announced a $956 million 
supplemental disaster relief package on February 16, 1999. The 
bulk of the assistance will be provided to Central America: 
$613 million will provide direct reconstruction, the 
restoration of public health systems, economic development, 
assistance to local governments, and environmental management 
support. The package will also provide $50 million to the 
Dominican Republic, Haiti, and the Eastern Caribbean for 
reconstruction efforts. This package is an important first step 
towards placing these nations on the path towards long-term 
economic development.
    Our assistance is vital to the economic and democratic 
future of the region. We cannot ignore the plight of our 
neighbors during this time of need.

    [Whereupon, at 4:24 p.m., the subcommittee was adjourned.]

                                  
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