[Senate Hearing 108-70]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 108-70
 
                 FOREIGN ASSISTANCE OVERSIGHT (PART II)

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                              APRIL 2, 2003

                               __________

       Printed for the use of the Committee on Foreign Relations


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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee           BILL NELSON, Florida
NORM COLEMAN, Minnesota              JOHN D. ROCKEFELLER IV, West 
JOHN E. SUNUNU, New Hampshire            Virginia
                                     JON S. CORZINE, New Jersey

                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)




                            C O N T E N T S

                               ----------                              

                 Hearing Segment I.--Sub-Saharan Africa

                                                                   Page

Bellamy, William A., Principal Deputy Assistant Secretary of 
  State, Bureau of African Affairs, Department of State..........     4
    Prepared statement...........................................     6
    Response to an additional question for the record from 
      Senator Feingold...........................................   107
Newman, Hon. Constance Berry, Assistant Administrator, Bureau for 
  Africa, United States Agency for International Development 
  [USAID], Washington, DC........................................     9
    Prepared statement...........................................    11
    Response to an additional question for the record from 
      Senator Feingold...........................................   108

                Hearing Segment II.--Europe and Eurasia

Hill, Hon. Kent R., Assistant Administrator, Bureau for Europe 
  and Eurasian Affairs, United States Agency for International 
  Development [USAID], Washington, DC............................    31
    Prepared statement...........................................    33
Ries, Charles P., Acting Assistant Secretary of State, Bureau of 
  Europe and Eurasian Affairs, Department of State...............    24
    Prepared statement...........................................    26

                Hearing Segment III.--Western Hemisphere

Franco, Hon. Adolfo A., Assistant Administrator, Bureau for Latin 
  America and the Caribbean, United States Agency for 
  International Development [USAID], Washington, DC..............    71
    Prepared statement...........................................    73
    Responses to additional questions for the record from Senator 
      Biden......................................................   100
Struble, J. Curtis, Acting Assistant Secretary of State, Bureau 
  of Western Hemisphere Affairs, Department of State, Washington, 
  DC.............................................................    63
    Prepared statement...........................................    65
    Responses to additional questions for the record from Senator 
      Biden......................................................    95
    Response to an additional question for the record from 
      Senator Feingold...........................................   110

                                 (iii)




                 FOREIGN ASSISTANCE OVERSIGHT (PART II)

                              ----------                              


                        WEDNESDAY, APRIL 2, 2003

                                               U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:34 a.m. in room 
SD-419, Dirksen Senate Office Building, Hon. Richard G. Lugar 
(chairman of the committee), presiding.
    Present: Senators Lugar, Allen, Brownback, Alexander, 
Coleman, Biden, Dodd, Feingold, and Bill Nelson.
    The Chairman. This hearing of the Senate Foreign Relations 
Committee is called to order. We were very pleased last week to 
hear testimony from three Assistant Secretaries of State and 
the Assistant Administrator for USAID. They provided insights 
into foreign assistance priorities with respect to the Near 
East, South Asia, and East Asia.
    Today, we hope to hear how the administration's fiscal year 
2004 budget request will support U.S. foreign policy interests 
in three other regions of the world--Africa, Europe, and the 
Western Hemisphere. Since the first of this year, this 
committee has held a number of hearings and briefings in which 
representatives from the administration and experts from the 
private sector have provided insights into the funding and 
authorizing legislation the State Department needs to carry out 
a successful foreign policy. These inquiries have proven 
especially valuable to the committee in recent weeks as we were 
able to explain to our colleagues in the Senate the critical 
role that the State Department must play in the world and the 
hurdles it must overcome to fulfill that role.
    With the support of many members of the Foreign Relations 
Committee, I offered an amendment to the budget resolution to 
restore $1.15 billion to the 150 account, and I am pleased to 
report that that amendment was passed and was included in the 
Senate budget resolution. The success of the amendment on the 
Senate floor during a process when few amendments receive 
favorable votes illustrates that the Senate's appreciation of 
the work of Secretary of State Powell and the State Department 
is certainly growing.
    I am very pleased that three of our subcommittee chairs 
will preside over the three panels of this hearing today. 
Senator Alexander, the subcommittee chair for African Affairs, 
will lead the first segment of our discussion. Across the 
entire continent of Africa, the repercussions of the HIV/AIDS 
pandemic, droughts, and instability in governance have weakened 
an alarming number of societies. U.S. national security is 
increasingly affected by events and conditions in Africa. We 
look forward to a detailed inquiry into how the United States 
can improve its assistance to African Nations.
    In the second segment of our hearing, our subcommittee 
chair for European Affairs, Senator Allen, will lead the 
discussion of foreign assistance issues pertaining to Europe. 
We hope to learn how foreign assistance can help strengthen the 
nations that will soon enter NATO and how it can foster 
democratization, economic reforms, and conflict mitigations in 
southeastern Europe. We also will be interested in discussing 
the administration's proposal to reduce assistance to Russia 
and Ukraine in the coming fiscal year.
    Finally, Senator Coleman will lead the third segment in his 
capacity as our subcommittee chair for the Western Hemisphere. 
In Latin America and the Caribbean, we have witnessed enormous 
progress in achieving democratization. All countries but Cuba 
now are led by democratically elected heads of state. However, 
several countries face considerable challenges that threaten 
political and economic stability. Venezuela, which until 
recently provided 15 percent of our imported oil, is struggling 
with the erosion of democratic institutions and civil society. 
Colombia remains an enormous challenge to the United States, 
and we are closely following the economic situations in Brazil, 
Argentina, and several other nations. We look forward to 
hearing how fiscal year 2004 foreign assistance request seeks 
to address those concerns.
    It is a pleasure to welcome our distinguished witnesses. 
Mr. William Bellamy, Mr. Charles Rice, and Mr. Curtis Struble 
join us from the State Department. Ms. Constance Berry Newman, 
Mr. Kent Hill, and Mr. Adolfo Franco will be representing 
USAID. We look forward to your testimony and to our discussion 
of the role that U.S. foreign assistance can play in Africa, 
Europe, and the Western Hemisphere.
    And now it is my privilege to yield the gavel to Senator 
Alexander, who will conduct the first portion of our hearing 
today. And I thank the Senator.


                 hearing segment i.--sub-saharan africa


    Senator Alexander [presiding]. Thank you, Mr. Chairman. 
Thanks for arranging the hearing. And thanks very much to the 
witnesses, Mr. Bellamy and Ms. Newman, for being here today.
    For the first hour this morning, we are going to take a 
look at the administration's request for foreign assistance to 
sub-Saharan Africa. And as chairman of the African Affairs 
Subcommittee, I am delighted to have the opportunity to 
participate in this.
    I am grateful to my colleague, Senator Feingold, who I 
expect to be here, and who has had an intense interest in 
Africa for many years as either the chairman or ranking member 
of the subcommittee, and I have had a good number of 
discussions with him about our agenda for the next couple of 
years, and we look forward to working together.
    The African Continent is faced with a great many 
challenges. The chairman has mentioned several--combating HIV/
AIDS, promoting conservation as a way to further good 
government, strengthening economies, combating corruption. Our 
responsibility is to try to make our foreign aid, our foreign 
assistance, as effective as it can possibly be toward those 
objectives. That is why I am especially pleased with the 
President's proposal. I like his Millennium Challenge Account. 
I like the idea behind it. It is a revolutionary new way of 
spending American taxpayer dollars to help other countries 
succeed. Rewarding poor countries for strengthening democracy, 
growing their economy, I think, is the right way to do it, and 
it is a way that Americans will be able to support at a time 
when we also have important needs that we want to meet here at 
home; and then using this foreign assistance toward a major 
project in a country, something that will lift the country even 
higher, a project that goes to the heart of what makes that 
country special. All those things seem to me to be the right 
approach.
    There is a lot more that I could say. Senator Feingold is 
here now, and I want to ask him if he has any opening remarks.
    Russ, I said before you came that we have worked together 
already and that I salute your interest and your background and 
your bipartisan approach and the amount of time you have spent 
on Africa, and I look forward to working with you.
    We will have your statement, and then we will go to the 
witnesses and then we will have time for questions.
    Senator Feingold. Thank you, Mr. Chairman. I want to thank 
Senator Lugar and you for holding this hearing, and I certainly 
look forward to working with both chairmen in the weeks and 
months ahead. I thank you very much, Mr. Chairman, for the kind 
words. We already are enjoying working together, and I 
appreciate the fact that on the Republican side, the African 
Affairs Subcommittee is kept in Tennessee's good hands as we go 
from Senator Frist to Senator Alexander. And I really do look 
forward to working with you on this, what I regard as a very 
important subcommittee.
    In this opening portion of the hearing, we are focusing on 
assistance to Africa, and I would like to take just a moment to 
comment on how well-monitored, responsibly delivered assistance 
to sub-Saharan Africa is so important today even as the 
headlines are rightly focused on the Middle East.
    It was not so long ago that a major news magazine ran a 
cover story entitled ``Hopeless Africa,'' and the sentiment 
that that cover reflected, the notion that African problems are 
too complex, too entrenched, and too big to address, is still 
very much with us. But this is both wrong and dangerous. It is 
wrong because there is a whole other side of the story, the 
``hopeful Africa,'' that rarely gets covered and discussed.
    But over the course of 10 years on the African Affairs 
Subcommittee, I have had a chance to see some of ``hopeful 
Africa.'' I have met the citizens of Mozambique organizing to 
fight corruption. I have talked with doctors and nurses of 
South Africa who fight the onslaught of AIDS every day with 
often minimal resources. I have heard the religious leaders of 
Senegal courageously reach out to their followers to talk to 
them about AIDS prevention. I have met the independent 
journalists of Zimbabwe, who refuse to accept the notion that 
citizens of that country do not deserve access to objective 
facts that allow them to draw their own conclusions. And I 
could go on, Mr. Chairman, literally for hours on this. We have 
strong partners in Africa, and we would be foolish to ignore 
them.
    The idea of ``Hopeless Africa,'' I think, Mr. Chairman is 
also very dangerous to this country, to our country, to the 
United States. In the wake of September 11, we cannot afford to 
write off a continent, to ignore the obvious opportunities that 
lawlessness can present and has already presented to those who 
would do us harm. We cannot afford to disregard our African 
partners, because the fight against terrorism is truly a global 
one, and we cannot prevail without them. From helping our 
partners tighten up their financial systems and border controls 
to very positively reaching out to Africa's Muslim communities 
in a spirit of partnership and respect, we have important work 
to do, and it cannot wait.
    So, once again, I thank the chairman, and I look forward to 
hearing from our witnesses.
    Senator Alexander. Thank you, Senator Feingold.
    And our first witness this morning is Mr. Bellamy, who is 
the Principal Deputy Assistant Secretary of the Bureau of 
African Affairs at the Department of State.
    Mr. Bellamy, we are glad to have you here. You are welcome 
to summarize your comments and submit them for the record or 
however you would like to do so that we can have time after you 
and Ms. Newman speak to go back and forth with questions.

  STATEMENT OF WILLIAM A. BELLAMY, PRINCIPAL DEPUTY ASSISTANT 
 SECRETARY OF STATE, BUREAU OF AFRICAN AFFAIRS, DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Bellamy. Thank you. Thank you very much, Mr. Chairman, 
Senator Feingold, members of the committee. Thank you for 
inviting me today to talk about budget priorities in sub-
Saharan Africa. I will summarize my statement and submit the 
rest of it for the record and then yield to my colleague from 
USAID, Connie Newman.
    At a time when the global war on terrorism and efforts to 
rid Iraq of weapons of mass destruction have captured the 
world's attention, we cannot afford to neglect Africa. 
Engagement with Africa advances significant U.S. interests from 
fighting terrorism to promoting democracy to expanding our 
trade and investment opportunities.
    Africa is a continent of great potential, rich in human 
resources and in human talent, yet it remains the world's 
poorest region. Chronic conflict, poverty, and disease hinder 
effective government and inhibit economic progress.
    Increasingly, Africa's problems are our problems, as well. 
The effects of refugee flows, arms and drug trafficking, the 
spread of disease, and environmental degradation are felt well 
beyond Africa's borders. Because of its porous frontiers and 
limited law-enforcement capabilities, Africa has become a 
potentially attractive target for international criminal and 
terrorist organizations. The East Africa bombings of 1998 and 
the attacks by al-Qaeda in Kenya last November remind us of 
Africa's vulnerabilities to exploitation both as a hiding place 
for terrorists and as a venue for terrorist attacks on 
Americans and others.
    No one is more sensitive to these vulnerabilities than 
Africans themselves. Despite its exposure to terrorist attacks, 
Africa, as a whole, was steadfast in support of the United 
States following the 9/11 attacks. Almost without exception, 
African governments joined the global war on terrorism. Some 
African states offered bases and ports to U.S. and coalition 
forces; others shared intelligence; others apprehended 
terrorist suspects. Many remain eager to receive counter-
terrorism training and assistance from the United States.
    I believe the most important message we can send to African 
audiences in these challenging times is that our priorities 
have not changed and our commitment to reform and progress in 
Africa remains as strong as before.
    Our five overriding goals in Africa are to promote economic 
growth through support for market reforms in the private 
sector; help resolve conflicts that are blocking economic and 
political development; foster democratic reforms, good 
governance, and respect for human rights; combat the HIV/AIDS 
pandemic and other infectious diseases; and protect Africa's 
natural environmental and renewable resources.
    The President's budget for fiscal year 2004 addresses these 
key goals. It requests $1.5 billion for the State Department, 
USAID, and other foreign affairs agencies working to achieve 
our objectives in Africa.
    Mr. Chairman, economic growth is critical to African 
development and expanded U.S. commerce with the continent. Our 
strategy to promote growth includes an emphasis on rewarding 
and reinforcing successful government policies and on opening 
doors and creating opportunities for private-sector 
development.
    The chairman of the Senate Foreign Relations Committee was 
personally instrumental in the conception and adoption of the 
African Growth and Opportunity Act, AGOA. AGOA will remain a 
flagship program in fiscal year 2004.
    Conflict resolution remains a critical issue for Africa. 
Instability and war jeopardize all our efforts to promote 
development and improve the lives of African people. The United 
States plays an important role in conflict resolution in Africa 
and will continue to do so in the future. The end of the civil 
war in Sierra Leone, to which the United States made important 
diplomatic and material contributions, shows that determined 
U.S. engagement can make a difference. Our diplomatic 
initiatives in the Sudan have created the best chance in many 
years of achieving a negotiated end to this long-running and 
tragic civil war.
    Diplomacy alone, however, is not enough. It is essential 
that African states and regional organizations acquire the 
capability to cope with African conflicts, from conflict 
prevention to conflict resolution. Creating this kind of peace 
support capacity requires resources and long-term commitment. 
In fiscal year 2004, we will use most of the $24 million in 
Voluntary Peacekeeping Operations funds requested in the 
President's budget to continue our capacity-building programs.
    Good governance, observance of the rule of law, respect for 
human rights, and democratization are factors that mitigate 
against civil strife and violent conflict. Much of the $77 
million in the President's budget request in fiscal year 2004 
for Economic Support Funds [ESF] for Africa will go to promote 
free and fair elections and the rule of law and to strengthen 
civil societies, human rights organizations, and independent 
media.
    The bulk of our ESF spending will be concentrated in ten 
nations chosen because of their regional importance. The 
remainder of our 2004 ESF funds will go to support political 
and economic reform in other less strategic countries, 
especially those without a USAID presence, to support 
environmental initiatives, to fund programs against trafficking 
in persons, and to implement various counter-terrorism 
initiatives.
    Africa remains ground zero in the fight against HIV/AIDS 
and other infectious diseases. We will continue to help African 
countries combat this pandemic that places immense strains on 
the social, economic, and security prospects of so many 
governments. The President's initiative on HIV/AIDS was greeted 
in Africa as a major breakthrough, an enormously positive step 
by the United States. It represents a substantial, tangible 
commitment by the United States to stand with Africa in what is 
literally a life-or-death struggle.
    Africa's rich biological diversity and natural resources 
are inextricably linked to national and international peace and 
security. In 2004, our ESF and Development Assistance Funds 
will be used to achieve more sustainable use of Africa's 
natural resources, protect habitats and species, promote 
involvement in decisionmaking of all stakeholders at national 
and regional levels, and build local capacity.
    Mr. Chairman, we were invited to identify additional 
authorities or modifications of restrictions which might help 
us to achieve our goals. We are reviewing within the 
administration areas where changes could be beneficial to 
achieving our mission, and we anticipate discussing any changes 
with the committee after this review is complete. I will be 
pleased to discuss these issues in greater depth with members 
of the staff or with your committee.
    Thank you.
    [The prepared statement of Mr. Bellamy follows:]

 Prepared Statement of William M. Bellamy, Principal Deputy Assistant 
   Secretary of State, Bureau of African Affairs, Department of State

    Mr. Chairman, Ranking Member Biden and members of the Committee, 
thank you for inviting me to testify before the Committee today on our 
budget priorities for sub-Saharan Africa.
    At a time when the global war on terrorism and efforts to rid Iraq 
of weapons of mass destruction have captured the world's attention, we 
cannot afford to neglect Africa. Engagement with Africa advances 
significant U.S. interests from fighting terrorism to promoting 
democracy to expanding our trade and investment opportunities.
    Africa is a continent of great potential, rich in resources and 
human talent. Yet it remains the world's poorest region. Chronic 
conflict, poverty and disease hinder effective government and inhibit 
economic progress. Increasingly, Africa's problems are our problems as 
well. The effects of refugee flows, arms and drug trafficking, the 
spread of disease, and environmental degradation are felt well beyond 
Africa's borders.
    Because of its porous frontiers and limited law enforcement 
capabilities, Africa has become a potentially attractive target for 
international criminal and terrorist organizations. The East Africa 
bombings of 1998 and the attacks by Al Qaida in Kenya last November 
remind us of Africa's vulnerabilities to exploitation both as a hiding 
place for terrorists and as a venue for terrorist attacks against 
Americans and others.
    No one is more sensitive to these vulnerabilities than Africans 
themselves. Despite its exposure to terrorist threats, Africa as a 
whole was steadfast in support of the United States following the 9/11 
attacks. Almost without exception, African governments joined the 
global war on terrorism. Some African states offered bases and ports to 
U.S. and coalition forces, others shared intelligence, others 
apprehended terrorist suspects. Many remain eager to receive counter-
terrorism training and assistance from the United States.
    The most important message we can send to African audiences in 
these challenging times is that our priorities in Africa have not 
changed, and that our commitment to reform and progress in Africa 
remains as strong as before.
    Our five overriding goals in Africa are to: promote economic growth 
through support for market reforms and the private sector; help resolve 
conflicts that are blocking economic and political development; foster 
democratic reforms, good governance, and respect for human rights; 
combat the HIV/AIDS pandemic and other infectious diseases; and protect 
Africa's natural environment and renewable resources.
    The President's budget for FY 2004 addresses these key goals. It 
requests $1.5 billion for the Department of State, USAID and other 
foreign affairs agencies working to achieve our objectives in Africa.
    Economic growth is critical to African development and expanded 
U.S. commerce with the continent. Our strategy to promote growth 
includes an emphasis on rewarding and reinforcing successful government 
policies, and on opening doors and creating opportunities for private 
sector development. The chairman of this committee was personally 
instrumental in the conception and adoption of the African Growth and 
Opportunity Act (AGOA). AGOA will remain a flagship program in FY04. In 
2002, when our overall two-way trade with sub-Saharan Africa fell 15 
percent, U.S. imports under the AGOA program rose 10 percent. In tiny 
Lesotho, AGOA has added ten thousand jobs to the economy. In nearby 
Swaziland, more than 20 new textile factories have gone up as a result 
of AGOA. In Namibia, AGOA has spurred $250 million in new investment. 
AGOA is a striking example of how to generate investment, create jobs 
and stimulate trade through open markets.
    AGOA has also met its stated purpose to serve as a stepping stone 
toward the first U.S. Free Trade Agreement in sub-Saharan Africa. 
Negotiations will begin this spring toward an FTA with the five-member 
Southern African Customs Union. This further demonstrates the readiness 
of these countries to undertake the rights and obligations of full 
membership in the global economy.
    The Africa Bureau will also continue its Sovereign Credit Rating 
Initiative in FY04. Under this initiative, sixteen countries have 
signed up for ratings, two ratings have been issued, and a number of 
rating missions are underway. Throughout Africa, we will reinforce our 
official assistance programs with steps to stimulate private sector 
activity:

   Private sector growth is crucial to diversifying and 
        sustaining the Angolan economy in this post-war period. We are 
        working closely with USAID to provide technical assistance to a 
        new, private sector bank that will provide capital on 
        reasonable credit terms to micro, small and medium sized 
        enterprises.

   In Kenya, where a free market economy has the capacity to 
        serve as an engine for regional growth, we will provide 
        technical advisors to the stock exchange and management 
        training for private sector umbrella groups.

   In Ethiopia, which is in a slow transition from a state-
        directed economy, we will provide consultancy and training for 
        the fledgling Chamber of Commerce's capital market organization 
        work, for the National Bank's auditing and oversight 
        mechanisms, and for the new anti-corruption commission.

    Conflict resolution remains a critical issue for Africa. 
Instability and war jeopardize all our all efforts to promote 
development and improve the lives of Africa's people. Regrettably, the 
descent of weak states into chronic internal conflict has become an 
all-too familiar phenomenon in recent years. Instability has spilled 
over borders, triggering tragic, needless fighting among African 
governments and their proxy forces.
    The United States plays an important role in conflict resolution in 
Africa and will continue to do so in the future. The end of the civil 
war in Sierra Leone, to which the United States made important 
diplomatic and material contributions, shows that determined U.S. 
engagement can make a difference. Our diplomatic initiatives in the 
Sudan have created the best chance in many years of achieving a 
negotiated end to this long running and tragic civil war.
    Diplomacy alone, however, is not enough. It is essential that 
African states and regional organizations acquire the capability to 
cope with African conflicts--from conflict prevention to conflict 
resolution. Over the past several years, our work with the Economic 
Community of West African States (ECOWAS) and with selected West 
African states through the West African Stabilization Program (WASP), 
Operation Focus Relief (OFR), the African Crisis Response Initiative 
(ACRI) and now the African Contingency Operations Training and 
Assistance Program (ACOTA) made important contributions to African 
peacekeeping capacity. West African forces are today deployed alongside 
French forces to uphold the ceasefire in Cote d'Ivoire. This deployment 
thus far has obviated the need for a more costly UN operation.
    Creating this kind of peace support capacity requires resources and 
long-term commitment. In FY 2004 we will use most of the $24 million in 
voluntary peacekeeping operations funds requested in the President's 
budget to continue capacity building programs. At the same time, we 
must acknowledge that no matter how successful our capacity building 
efforts prove to be, instability and conflict in Africa will at times 
be of such severity or complexity as to require UN peacekeeping.
    Good governance, observance of the rule of law, respect for human 
rights and democratization are factors that mitigate against civil 
strife and violent conflict. They are also essential to economic 
development. Much of the $77 million in the President's budget request 
in FY 2004 for Economic Support Funds (ESF) for Africa will go to 
promote free and fair elections and the rule of law, and to strengthen 
civil societies, human rights organizations and independent media. One 
of the most stirring successes in Africa last year was the Kenyan 
election that brought a peaceful transition at the conclusion of 
President Moi's 24-year rule. Following this historic event, it is 
important that we do everything possible to help the new Kenyan 
government succeed, including its promise to vigorously combat 
corruption. We plan to use roughly $4 million in FY 2004 ESF to support 
a reform program in Kenya that will, among other things, set up an 
Ombudsman's office, train magistrates, implement a public asset 
disclosure system, and provide public sector ethics training.
    The bulk of our ESF spending--over 70 percent--will be concentrated 
in ten nations chosen because of their regional importance. In this 
program we will seek not only to strengthen governance and democratic 
practices, but also to consolidate reconciliation and recovery in post-
conflict situations. For example, building a durable peace in the war-
torn Great Lakes region will require the reintegration and resettlement 
of excombatants, a task for which ESF is well suited.
    The remainder of our FY 2004 ESF will go to support political and 
economic reform in other, less strategic countries, especially those 
without a USAID presence, to support environmental initiatives, to fund 
programs aimed against trafficking in persons, and to implement various 
counterterrorism projects. For example, under the Safe Skies for Africa 
Program, we will continue to fund the provision of security equipment 
and technical assistance by the Transportation Department to seven key 
African states to improve aviation safety and security. In the area of 
terrorist financing and money laundering, we will continue to work with 
the Treasury Department to help African states that may be especially 
vulnerable to these activities.
    Africa remains ground zero in the fight against HIV/AIDS and other 
infectious diseases. We will continue to help African countries combat 
this pandemic that places immense strains on the economic, social and 
security prospects of so many governments. In his 2003 State of the 
Union address, President Bush announced a new Emergency Plan for AIDS 
relief. The plan calls for a five year, $15 billion initiative to turn 
the tide in the global fight against AIDS. It calls for treatment, 
prevention and care. It aims to prevent seven million new infections, 
treat two million HIV-infected people and care for ten million HIV-
infected individuals and AIDS orphans.
    The President's initiative on HIV/AIDS was greeted in Africa as a 
major breakthrough, an enormously positive step by the United States. 
It represents a substantial, tangible commitment by the United States 
to stand with Africa in what is literally a life-or-death struggle.
    Africa's rich biological diversity and natural resources are 
inextricably linked to national and international peace and security. 
Poor conservation practices and conflict over resources undermine 
stability and hamper prospects for economic growth. Over the past two 
years, USAID's and State's support for environmental programs has 
increased transparency, accountability and participation, and 
strengthened governance in places like Senegal, Namibia, Botswana, and 
the Congo Basin Forest region. There also has been substantial progress 
towards Africa-wide ratification of the UN Convention on 
Desertification and regional cooperation on watershed management.
    FY 2004 ESF and Development Assistance (DA) funds will be used to 
help achieve more sustainable use of Africa's natural resources, 
protect habitats and species, promote involvement in decision-making of 
all stakeholders at national and regional levels, and build local 
capacity.
    Mr. Chairman, you have invited us to identify additional 
authorities or modifications of restrictions which might help us 
achieve our goals. We are reviewing within the Administration areas 
where changes could be beneficial to achieving our mission and 
anticipate discussing any changes with the Committee after this review 
is complete. I would be pleased to discuss these issues in greater 
depth with the members or staff of this Committee.

    Senator Alexander. Thank you.
    Constance Berry Newman, better known as Connie Newman, 
Assistant Administrator for the Bureau of Africa for USAID, 
welcome Connie Newman.
    Ms. Newman. Thank you.

      STATEMENT OF HON. CONSTANCE BERRY NEWMAN, ASSISTANT 
  ADMINISTRATOR, BUREAU FOR AFRICA, UNITED STATES AGENCY FOR 
       INTERNATIONAL DEVELOPMENT [USAID], WASHINGTON, DC

    Ms. Newman. Mr. Chairman and Senator Feingold, I would like 
to thank you for inviting me to appear before your committee to 
discuss a continent with much promise and with significant 
challenges. That continent is, of course, Africa. Today, 
promise, potential and opportunity exist in Africa. The hope 
for the future is based on current experiences in many 
countries on the continent. And this is good news for the 
United States. A more prosperous, healthy and stable Africa is 
in America's best interest and contributes to the U.S. interest 
to foster worldwide economic growth and increase trade and to 
combat transnational security threats.
    For now, though, I want to really focus on the good news 
for the same reason as the Senator's opening remarks. I find 
that too often the press and all the rest of us do not 
celebrate the very good news of the continent. Positive 
results, as my colleague mentioned, from the Africa Growth and 
Opportunity Act, in 2002 imports under that act totaled almost 
$4 billion, a 20 percent increase over the same period a year 
earlier.
    Second, according to Freedom House, over the last decade 
the number of free democracies in Africa has more than doubled. 
More than half of the countries on the continent are in 
transition from partly free to free. And I think we all are 
prepared to celebrate the recent election in Kenya and the 
anti-corruption drive in Zambia.
    I emphasize the positive news in trade and democracy 
because the United States has played a strong role in both of 
these developments. The missions have been actively involved in 
promoting trade capacity building. In 2002, USAID missions 
spent over $85 million in such activities.
    Regarding the growth of democracy and democratic values, 
embassies and U.S. missions have promoted values through 
diplomacy, through support for elections, through bolstering 
civil society and advocacy groups, and through strengthening 
parliaments and judiciaries to strengthen the rule of law. 
These positive U.S.-backed developments are further reinforced 
by the initiative that has been taken by the Africans 
themselves through the New Partnership For Africa's 
Development, NEPAD. As an aside, I think we must understand 
that until the leadership on the continent takes responsibility 
for the problems and developing the solutions, the donors will 
forever be on the continent. And the Africans know that, and 
that is why I believe they are as committed as they are to 
NEPAD.
    But there are challenges, challenges that my colleague 
mentioned. Almost half of Africa's 690 million people live on 
less than 65 cents a day. HIV/AIDS, we all know about. The 
population growth rate of 2.5 a year with an annual growth rate 
of only--way under 7 percent. We understand that that continent 
will not reach the millennium development goal of reducing 
poverty levels in sub-Saharan Africa by 50 percent by 2015 at 
the rate they are going and the rest of the world is going. It 
is not going to happen.
    But there are examples on the continent that it can. 
Mozambique is in double-digits for the past 7 or 8 years, 
except for the years of the devastating floods. We see in 
Uganda and Ghana sustained growth rates that I think can be 
replicated in other parts of Africa.
    To reach the goals for reducing poverty, though, we must 
operate on several fronts--increasing agricultural 
productivity; improving competitiveness; diversifying the 
economic base; building human capacity through improved 
educational opportunities, especially for girls; expanding 
information and telecommunications; and strengthening African 
capacity to manage economic and natural resources. We are 
helping Africa to do all of this, but we are doing it more so 
in the context of their leadership.
    During question and answer, I will be prepared to answer 
more questions about the Congo Basin Forest Partnership, where 
we are very much involved in preserving the forest in the Congo 
Basin.
    Of existing programs, by far the largest is our request for 
$325 million for HIV/AIDS pandemic. And $134 million is 
requested for agriculture, and $121 million is requested for 
education. A significant part of what the United States does 
comes, however, from private investments. So in addition to 
this request, I think you should understand that we are 
spending a great deal of our time attempting to leverage the 
U.S. dollars with private dollars in order to extend the 
resources available to address these problems. In fiscal year 
2002, the Africa Bureau committed over $30 million from 50 
agreements where USAID contribution was matched or exceeded by 
corporations, universities, or other groups.
    I do not know if you want to hear the sad story about our 
personnel levels and operating expenses. It is in the full 
statement. I do hope that you and the staff cover it, because 
we are concerned. If we do not have safe operations, if we do 
not have a safe environment, it is going to be much more 
difficult for us to recruit the kinds of people that we need.
    So, in summary, Mr. Chairman and Senator Feingold, American 
national interests in combating terror, diffusing regional 
conflict, and promoting democratic freedoms, and promoting 
global economic growth and American core values make it 
imperative that we accord a high priority to Africa. We are 
seeing the fruits of our development efforts. There are 
promising signs of change in many African countries, and we are 
heartened by the new spirit of collaboration and partnership as 
reflected through NEPAD.
    I would like to close by saying it is a pleasure to serve 
on the panel with Mr. Bellamy. And I would like to introduce 
two colleagues from USAID who are here to help answer your 
questions. First, Dr. Ann Peterson, who is the Assistant 
Administrator for Global Health, and Garrett Grigsby, the 
Deputy for Democracy, Conflict, and Humanitarian Assistance.
    So I thank you very much.
    [The prepared statement of Ms. Newman follows:]

     Prepared Statement of Hon. Constance Berry Newman, Assistant 
    Administrator, Bureau for Africa, U.S. Agency for International 
                              Development

``U.S. Assistance to Promote Economic Freedom and Democracy in Africa''

                         i. good news in africa
    Mr. Chairman, Ranking Member Biden and members of the Committee, I 
would like to thank you for inviting me to appear before your committee 
to discuss a continent with much promise and with significant 
challenges. That continent is, of course, Africa. Today, promise, 
potential and opportunity exist in Africa. The hope for the future is 
based on current experiences in many countries on the African 
continent. This is good news for the United States. A more prosperous, 
healthy and stable Africa is in America's best interest, and 
contributes to U.S. efforts to foster world-wide economic growth and 
increased trade and to combat transnational security threats.
    At the same time, there are serious threats to Africa's future from 
the devastating effects of the HIV/AIDS pandemic to long-standing armed 
conflicts. Today, however, I will be focusing predominantly on the 
encouraging developments taking place in Africa. Unfortunately, much of 
the good news coming out of Africa is often not carried in 
international media reports.
    First, the positive results of the African Growth and Opportunity 
Act (AGOA) of 2000 demonstrate Africa's potential to increase its share 
of world trade. In the first six months of 2002, imports under the AGOA 
and Generalized System of Preferences program totaled almost $4 
billion, a 20% increase over the same period a year earlier. Under 
these programs, apparel imports increased seven-fold and transportation 
equipment more than doubled. Second, according to Freedom House, over 
the last decade, the number of free democracies in Africa has more than 
doubled from four to 10 and more than half the countries on the 
continent are in the transition from partly free to free. The 
successful 2002 democratic elections in Kenya, the efforts by Angola to 
secure peace and a prosperous future after decades of war, and the 
anti-corruption drive in Zambia further underscore this trend toward 
improving political and economic governance in Africa.
    I emphasize the positive news in trade and democracy because the 
U.S. played a strong role in both of these developments. When the 
Congress passed AGOA, it signaled to Africa that the U.S. wanted Africa 
to become an important trading partner. Africa has responded. Our 
missions have been actively engaged in promoting trade capacity 
building. In 2002, USAID missions spent over $85 million in such 
activities, from workshops on the complex rules of the international 
trading system to programs that help African businesses build on their 
strengths to become globally competitive.
    Regarding the growth of democracy and democratic values, embassies 
and USAID missions have promoted democratic values through diplomacy, 
through support for elections, through the bolstering of civil society 
organizations and advocacy groups, and through strengthening 
parliaments and judiciaries to strengthen the rule of law. The 
Administrator's report, ``Foreign Aid in the National Interest,'' makes 
a strong case for institutions of democratic and economic governance as 
the basis for promoting prosperity and well-being. The Bureau for 
Africa has promoted democracy throughout the continent with the 
resources made available for this purpose.
    These positive U.S.-backed developments are further reinforced by 
the initiative that has been taken by Africans themselves through the 
New Partnership for Africa's Development (NEPAD). NEPAD is first and 
foremost a pledge by African leaders to the people of Africa to 
consolidate democracy and sound economic management, and to promote 
peace, security and people-centered development. Experience has shown 
that for countries to realize their full potential, and to take 
advantage of opportunities to address the principal constraints to 
poverty reduction, they must reform from within, in partnership with 
the international community. NEPAD, which was launched in 2001, 
provides a welcome new framework for Africans who plan to take charge 
of their own destiny. Given what we know about ownership of the ways in 
which the challenges of the continent can he met, the U.S. and the 
international community have pledged to develop partnerships with those 
countries that demonstrate adherence to NEPAD's principles.
         ii. challenges to overcome through foreign assistance
    Despite the encouraging trends, we must not be blind to the serious 
challenges facing Africa. Sub-Saharan Africa is the world's poorest 
region, and average living standards lag far behind those in the rest 
of the world. Almost half of Africa's 690 million people live on less 
than 65 cents a day. HIV/AIDS is having a tremendous impact on the most 
economically productive part of the population in many African 
countries, and the recent famine in southern Africa in part is rooted 
in reductions in agricultural productivity related to HIV/AIDS. At the 
current population growth rate of 2.6% a year, reaching the Millennium 
Development Goal (MDG) of reducing poverty levels in sub-Saharan Africa 
by 50% by 2015 will require a 7% annual growth rate. Africa's greatest 
challenge is to achieve rapid and sustained economic growth. It is not 
currently doing so, but there is reason to believe it can do so. First, 
countries such as Uganda, Ghana and Mozambique have achieved sustained 
growth rates at or exceeding five percent per year, an accomplishment 
no one believed possible until they did so. Mozambique's objective is 
to sustain its double-digit growth by attracting foreign direct 
investment and ensuring the investment climate is attractive for 
domestic and foreign investors alike. Its performance over the past 
seven to eight years, with the exception of the year of the devastating 
floods, shows what can be accomplished. Other African countries have 
taken notice.
    To reach the MDG for reducing poverty, concerted action is required 
along multiple fronts: increasing agricultural productivity and 
improving the competitiveness of African products; diversifying the 
economic base; building human capacity through improved educational 
opportunities, especially for girls; expanding information and 
telecommunications networks; strengthening African capacity to manage 
economic and natural resources; improving the enabling environment for 
trade and investment and curbing the spread of HIV/AIDS, malaria, and 
tuberculosis.
    The U.S. is helping Africa do all this through the initiatives that 
are the centerpieces of USAID's program. These are the two Presidential 
Initiatives: Trade for African Development and Enterprise (TRADE) and 
the Africa Education Initiative and the two administration initiatives: 
the Initiative to End Hunger in Africa and the Congo Basin Forest 
Partnership. These initiatives constitute $133 million of the $1.041 
billion requested for fiscal year 2004. They represent the most 
innovative, targeted programming of the resources requested to address 
Africa's challenges. The initiatives build upon the successes of our 
current programs which make up $908 million of the $1.041 billion 
requested. Of the existing programs, by far the largest is our request 
is the $325 million in funding to combat the HIV/AIDS pandemic. $134 
million is requested for agriculture and $121.5 million is requested 
for education. These are the highest priority sectors in our budget 
request.
    Mr. Chairman, the United States can assist Africa to carry out all 
of these programs and to achieve its goals for durable and measurable 
development results. A significant part of what the U.S. does comes 
from private investments, civil society and faith-based contributions 
all of which combined now far exceed official development assistance 
levels. We active seek public-private partnerships, focusing on ways to 
leverage our own public resources investments with private investments 
to assure a greater impact for both. These are the basic principles of 
development articulated by the President at the Monterrey Conference 
last year. In fiscal year 2002, the Africa Bureau committed over $30 
million in over fifty agreements where the USAID Contribution was 
matched or exceeded by funding from corporations universities and 
philanthropic groups. We also made use of the Development Credit 
Authority to mobilize local capital to fund development initiatives. 
The best example of this has been the mobilization of mortgage 
financing for low-income HIV/AIDS-affected households in South Africa.
    Whatever innovations we use to increase the impact of our 
investments in development assistance our objectives are clear. We 
believe it is critical for the U.S. in Africa to assist all people to 
prosper through the pursuit of equitable, Sustained economic growth on 
the foundation of strong institutions of democratic and economic 
governance. We see everything we do in Africa as building upon these 
basic American values: rewarding individual initiative and enterprise 
in a free market system and promoting individual liberties and freedom 
in democratic societies. These values are universally shared and are 
the foundation for everything we want to help Africans Achieve.
                  iii. managing the assistance program
    As we strive to assist Africa in achieving its development 
objectives, we are mindful of the challenge posed to our officers and 
employees in the medium-term from increased security risks. Six of 22 
USAID Missions and two of the three Regional Offices in sub-Saharan 
Africa exist in critical and high-threat situations. Of these eight 
field offices, funding for new facilities that meet new security 
standards has been allocated for three. We will continue to work to 
secure the funding that is critical for safe operations.
    As we stated in the Congressional Budget Justification, USAID 
continues to determine the human resource needs required to have the 
most efficient and effective field operations. This has resulted in 
shifting direct hire staff positions in the field based on priorities. 
Overseas direct-hire field staff levels will increase from 216 to 227, 
including nine additional HIV/AIDS professionals and training positions 
for junior officers entering the workforce. Washington-based Africa 
Bureau staff levels will remain constant at 91. Even as the program has 
grown in size and complexity, we have worked hard to streamline 
operations. Operating expense constraints are such that we have decided 
to scale down significantly several of our small to medium size 
missions and reallocate staff to regional platforms. This will permit 
USAID to oversee assistance programs more efficiently throughout 
Africa.
    USAID also anticipates working in close cooperation with potential 
Millennium Challenge Account countries and with the Millennium 
Challenge Corporation that will implement recipient country programs. 
As the Administrator has said, ``USAID is the official U.S. development 
agency and as such the best practices of USAID will not only be desired 
but required if MCA is to succeed. Therefore we will embrace this 
chance to offer some of our own USAID professionals to complement this 
new organization and to provide our best experience and know how.'' We 
anticipate the opportunity to develop substantial new assistance 
programs in Africa that respond to the intent of NEPAD and the 
principles of the Millennium Challenge Account; that is to say that 
those countries that are ruling justly, investing in people, and 
promoting economic freedom should be further assisted in their efforts.
    In summary, Mr. Chairman, American national interests in combating 
terror, defusing regional conflict, promoting democratic freedoms, and 
promoting global economic growth and American core values that champion 
human dignity make it imperative that we accord a high priority to 
Africa. Today, we are seeing the fruits of our development efforts. 
There are promising signs of change in many African countries. We are 
heartened by the new spirit of collaboration and partnership as 
reflected through NEPAD and are committed to match Africa's efforts to 
untap its full potential. We have confidence that under your leadership 
the United States will contribute substantially to a better future for 
a prosperous and democratic Africa.

    Senator Alexander. Thank you, Ms. Newman.
    Why do we not move on now to questions and, Senator 
Feingold, if it is all right with you, why do we not take 5 
minutes each, and we will go back and forth, and maybe other 
Senators will come and join in. We will finish at 10:30 or 
before.
    Each of you mentioned protecting Africa's natural 
environment; Mr. Bellamy as one of the five major objectives, 
and Ms. Newman, you talked about the Congo River Basin. It 
seems to me that there has been some significant success in 
Gabon, for example. Would you agree that there has been some 
success in Gabon in terms of preserving the natural 
environment? And what are your thoughts about this whole 
subject? Is this simply an environmental concern, or is it a 
way that we can help individual countries focus on some unique 
aspect that they have that might be developed and become a 
project around which the country might unify, build 
institutions, increase levels of income? How do you see the 
whole question of helping African countries protect their 
natural environment?
    Mr. Bellamy, let us start with you, unless you would rather 
start with Ms. Newman.
    Ms. Newman. No, he can start.
    Mr. Bellamy. I thought I might respond to your general 
question, Mr. Chairman, and perhaps my colleague can talk a 
little bit about the Congo Basin Initiative, which is, I think, 
one of the more interesting flagship programs in which Gabon is 
very much involved.
    Senator Alexander. Yes.
    Mr. Bellamy. I did a quick, rough count, yesterday and came 
up with 17 African countries with which we are actively 
conducting environmental programs. And out of our projected ESF 
budget for 2004, we are looking at between $4 and $5 million 
that we hope to invest in these programs. And there are various 
programs here.
    Senator Alexander. Give me examples of the kinds of things.
    Mr. Bellamy. I will give you an example, Mr. Chairman, of 
one that I witnessed personally a couple of months ago and 
about which I am extremely enthusiastic. For several years, we 
have been funding an operation in Namibia called the Nature--
well, this is a conservancy program. The program essentially 
puts communities, rural communities, in charge of managing vast 
areas of relatively unpopulated landscapes. The successes that 
have been enjoyed there are truly fascinating. We have seen in 
some of these large conservancies the reintroduction of 
wildlife, better controls on farming, the introduction of 
profitable ecotourism. Local communities have formed management 
committees. They are able to generate income, and use this 
income to build schools and clinics. And in the process of 
managing these natural areas and generating income in this way, 
they have also developed new techniques for self-governance. 
And I have seen cases of nature conservancies which would 
become centers for, for example, distributing information on 
HIV/AIDS.
    So I think there are numerous examples around Africa where 
it can be shown that protecting resources and the environment, 
in fact, creates sustainable livelihoods and empowers local 
communities in areas that we were not aware of when we began 
these projects.
    Senator Alexander. Of the $4 or $5 million you are talking 
about spending, in addition to the Namibia idea, what kind of--
on what would you spend that money? What kinds of things?
    Mr. Bellamy. There are plans for baseline studies in the 
Congo, the DRC and Congo-Brazzaville, to look at establishing 
programs similar to the Congo Basin Forest Partnership. We are 
looking at trans-boundary cooperation, where three or four 
countries will come together to manage an area across borders. 
There is a program in Zambia, Namibia, and Botswana. There is a 
program between the Congo, Rwanda, and Uganda. These are trans-
border projects. We are looking at investing in several areas 
in Mozambique. These are large natural areas that have 
significant potential for creating livelihoods for the local 
population and encouraging ecotourism.
    Senator Alexander. Is it planning money and organizing 
money, or is it money to buy land? What is the money spent for?
    Mr. Bellamy. I do not believe much of the money is actually 
going to buy land. I think the set-asides have generally been 
on the part of the governments involved. But the money is going 
to actually fund the organizations and to stand up the groups, 
to give them the administrative capacity, to actually launch 
and operate schemes of the kinds we have seen in Namibia.
    Senator Alexander. Ms. Newman, what about the Congo River 
Basin Initiative?
    Ms. Newman. USAID has been funding a project in the River 
Basin since 1994 at about $3 million a year. And what has 
happened is, working with partners--World Wildlife Fund, World 
Resources Institute, Conservation--I can give you the list--
there has been built a foundation for understanding the 
importance of logging of regulations, understanding the 
importance of local resource management systems, community-
based management of protected areas. And based on the 
experience through that period of time, there was a 
determination by this administration to expand the work, going 
from $3 million to $15 million a year, with the partners who 
are now working in the Congo Basin and to go even beyond that.
    Gabon is a good example, but Gabon is not the only place in 
that area where there are people, civil society, and government 
interested in preserving the Congo Basin. I think people 
understand the relationship between the Basin being preserved 
and a decent, adequate living. So there is a combination here 
of preserving the environment, but improving the poverty level 
of the people who are in the Basin.
    Senator Alexander. We will go to Senator Feingold now, but 
a point I am driving at, and which both of you mentioned, is 
that it is not just a matter of preserving the natural 
environment, per se; that these activities go to the very 
nature of some of these countries--what is unique, what is 
special about them--and in the organizing of the effort to 
preserve the environment, institutions are created, communities 
are developed, procedures are established, and it becomes a 
stepping stone toward economic development and institutional 
development and community building. And to the extent that is 
true, I think that is something I am very interested in 
encouraging.
    Senator Feingold.
    Senator Feingold. Thank you, Mr. Chairman.
    Let me first ask you, Mr. Bellamy, and if Ms. Newman has a 
comment, the same question I asked Secretary of State Powell in 
February. The fiscal year 2004 request for development 
assistance programs in Africa represents a $42.7 million 
decrease from the fiscal year 2003 request. Countries slated 
for serious cuts include Kenya, Mozambique, South Africa, 
Somalia, and Tanzania. And when I consider the importance of 
building on positive developments, particularly in Kenya and 
Mozambique, and consider the tremendous importance of several 
of these countries in the campaign against terrorism, I am a 
little puzzled by these reductions. I do not completely 
understand the priorities reflected by this request. Can you 
explain?
    Ms. Newman. Well, do you----
    Senator Feingold. Start with Mr. Bellamy, please.
    Mr. Bellamy. Senator Feingold, I think our overall budget 
for Africa--you are quite right to point out there have been 
decreases in the development assistance side. There have been 
increases in other areas of the budget which I think result in 
an overall increase in the budget for Africa. But it is true 
that when development assistance funds go away, we have to take 
steps to try to fill the gap. One of the ways we are going to 
try to fill the gap in 2004 is through more creative use of our 
ESF money. And I am hopeful that our ESF funds in 2004 will 
stay at least the same level that they were in 2003.
    Senator Feingold. Well, I would just follow, Mr. Bellamy, 
you know, if you could specifically respond to the point I was 
trying to make about these countries. I mean, Kenya and 
Tanzania are two countries that were directly attacked by the 
terrorists prior to our experience on 9/11, and these are--
countries like South Africa and Somalia are countries that, at 
least at some level, interface with questions of terrorism and 
threats of terrorism that we face as a nation. I think it is 
their No. 1 priority. And I am concerned about the signal that 
we are sending of decreasing assistance to these countries at 
this moment in our history. I am wondering if you could respond 
to that.
    Mr. Bellamy. In the case of--Kenya, as you know, was a 
recipient of a substantial amount of supplemental funding in 
2002, specifically for the purposes of combating terrorism, and 
we are going to continue to work with Kenya, other countries in 
the Horn, and other countries in Africa that we have identified 
as especially vulnerable, and we will continue to try to tap 
other available sources of money where necessary to ensure that 
we are working with them to help them develop the kind of 
terrorism capabilities they need to have.
    We will also, I think, in the case of Kenya and in the case 
of several of the other countries you have mentioned, do what 
we can out of ESF money to ensure that we are addressing some 
of the democratization, the rule of law, sort of challenges 
that we have to address in those countries in order to make 
them more effective partners in the war on terrorism.
    Senator Feingold. Ms. Newman do you want to comment?
    Ms. Newman. Yes, Senator. With regard to, I think, some of 
these countries being flat, Kenya does not really have a 
decrease in our funding, but it is fairly flat. But there are 
several things I will say.
    First of all, it is the very tough question of how do we 
balance addressing HIV/AIDS where there is the highest 
percentage with our desire to improve--recognize that the 
entire continent needs development assistance. And it is a very 
difficult conversation that we all have within the Agency 
about, How do we do this? And there are some calls that we make 
that, were it not for HIV/AIDS, we would not make.
    I will say, also, that there is much more communication 
with other donors through the poverty reduction strategy 
planning process and an effort to determine who is doing what 
so that we can match up our resources with other resources. And 
so there is a certain amount of information that we owe you 
that will say who else is putting money into these places in 
programs that we also support.
    The final thing I will say is that the major initiatives in 
education, trade, less so agriculture, have not identified yet 
which countries will receive their funding, and it is 
conceivable that the countries that you have identified will be 
bumped up as a result of their receiving funding through these 
initiatives, for which they would apply, really.
    Senator Feingold. I thank you for that comment. I know my 
time is up. I just want to make a quick comment and wait for 
another round. I, of course, have total respect for what you 
have said about the HIV/AIDS issue and how that affects many of 
these decisions. I would just make this comment to you and my 
colleagues, that as we start thinking about this global war 
against terrorism, if we do not think about what is going on in 
terms of the attitude toward the United States of America in 
countries like Kenya and South Africa and Somalia, Tanzania, 
the countries that are along this border, so close to the 
Middle East, then we are missing an important part of this 
whole puzzle. My view is that these countries are up for grabs. 
In my view, at least, some of the ones I have mentioned are 
not, in any real sense, anti-American. We have a real 
opportunity if we send the right signals to the countries as a 
whole, and in particular to the Islamic populations in those 
countries, that we care about what is going on in those 
countries and we are committed to their future. I think it has 
an enormous impact on our national security, and I would be the 
first to agree with you that it is so hard to balance all these 
priorities for Africa, but this is a new element that I am not 
sure has been completely incorporated into the thinking when we 
think about the priorities for Africa.
    Thank you, Mr. Chairman.
    Senator Alexander. Senator Biden.
    Senator Biden. Thank you very much, Mr. Chairman.
    It is a little unfair to ask either of you the questions I 
am about to ask, because neither one of you make policy. You 
make policy, but you do not. You are given a number, you are 
told how much you have, and you have no impact, as qualified as 
you are. You are trumped by a tax cut. You are trumped by a 
budget. You are trumped by--and you said very 
straightforwardly, Ms. Newman, you said that we are making 
decisions that we would not otherwise make were it not for the 
HIV/AIDS problem. And we approach this like probably the 
Governor used to approach it, and every Governor gets stuck 
with approaching it when the national economy turns down, is 
you make the blind fight the deaf fight the cripple rather than 
fight for--you know, you never have the aid packages in 
competition with anyone else other than other aid packages. And 
so my question--I almost did not come to the hearing, because 
my questions and comments to you were basically useless, and 
your answers are useless to me, because----
    Ms. Newman. Wow----
    Senator Biden. No, I am serious, and you are good people--
because what you are given is, you know you do not have enough 
money. Bottom line, you do not have enough money. That is the 
bottom, bottom, bottom line. And so we come along, and we very 
graciously say--it is in our own interest, in my view--we 
graciously say we are going to plus-up the AIDS account. And 
the administration backs off that, by the way. But we pass here 
a substantial bill; you all back off it--not you, the guys in 
the White House--in terms of total money that we are going to 
be spending and how we are going to spend it. And then we come 
along and we all sign on to a position that says, look, when we 
are going to be dealing with moneys for assistance for 
democracy and conflict resolution and anti-corruption and 
economic growth, that is important to do, because we are going 
to base who we give aid to based upon whether or not they can 
absorb it honestly and effectively. So if they are not moving 
down the democratic path, if they are a corrupt outfit, so on, 
so forth, we are going to measure what aid we give them based--
worldwide, not just Africa. And it makes sense. It makes sense. 
If you give aid to countries that are corrupt, it does not get 
to the people we want it to get to.
    So here, what have we done? We have come along and 
flattened out that portion of the funding for the continent of 
Africa that deals with--and I am going to oversimplify in the 
interest of time, but I would stand to be corrected if you tell 
me I am off the mark in the points I am making--we flatten out 
the money for assistance, conflict resolution, anti-corruption, 
economic growth, we impose a test that says, by the way, we 
ain't going to give you money unless you get rid of corruption 
and unless you become more democratic and unless you have an 
economic growth that's based upon a market economy, and then we 
say, the reason we can't do that is because we're spending more 
money on AIDS. It is all true. It is all true. But it reminds 
me of the book, ``Catch-22.'' So, what are we doing?
    What we are doing is, we are not addressing the problem. 
What is the problem? The problem is a combination of lack of 
democratic institutions, lack of an ability for people to 
understand how the market economy works and become a part of 
it, lack of efforts dealing with anti-corruption, compounded by 
this God-awful pandemic of AIDS, which is stripping those 
countries of the leadership that we helped train and Europe 
helped train in order to be able to deal with these issues. And 
now you are left in the terrible position of saying things 
like--I have been doing this too long. I can say to Mr. 
Bellamy, I have been doing this too long. When I hear an 
incredibly qualified person like you say, ``We'll get money 
from other sources and we'll use creative ways.'' That, to me, 
in Washington, means you do not know what in the hell you are 
going to do, you have no idea how you are going to get this 
money, you do not have enough, and you are going to rob Peter 
to pay Paul, and the bottom line is, we ain't going to get the 
job done.
    So I am not going to ask any questions, just tell you I am 
going to try to get you money. My effort here--which is not 
likely--my effort here is to try to figure out how we can get 
more money into this account, more money overall into this 
account. So I do not have any questions, because we are kidding 
ourselves here.
    Thank you all very much.
    Senator Alexander. Thank you, Senator Biden.
    Senator Brownback.
    Senator Brownback. Well, thank you for the good work that 
you are doing. I think you are doing----
    Senator Biden. Excuse me. You are doing good work. You just 
do not have the resources.
    Senator Brownback. And I think if we could cut taxes and 
get the economy growing, you will have more resources to be 
able to put----
    Senator Biden. Make sure you have got a $350,000 cut.
    Senator Brownback [continuing]. Forward, and that will help 
out. I think as we have shown improvement in the past when 
President Kennedy cut taxes and President Reagan cut taxes and 
we grew the economy and that that created more that we could be 
able to do, and that that is an important way for us to press 
on forward.
    Also, I want to really commend the administration for the 
Global HIV Initiative. That is an outstanding initiative that 
the administration has put forward. I know the House is 
considering the bill. I think they mark up today on that. We 
have been working here to try to get something pulled together 
and moving forward, and I think that is a really a key 
initiative for us to press forth.
    I also want to say that it seems to me that the time has 
come for the United States to focus a lot more on Africa. And I 
feel it coming. I am hearing and seeing a lot more comments 
from people talking about what we need to do in Africa, and 
they do not necessarily couch it in the terms of vital and 
strategic interest, which is where we used to--used to be our 
matrix of how we decide where we are going to invest time and 
resources. But now it is out of a humanitarian need and it is 
some off of what Senator Feingold said, the view of the world 
toward us. We are a Nation that has been greatly blessed and 
that we need to help in return. To whom much is given, much is 
expected. And I appreciate your stepping forward with things 
like the Millennium Account and the Global HIV Fund to do these 
items.
    One item that I want to get your numbers for is a basic 
issue that we have seen coming up, is whether on the level of 
the food aid in total--that is, the food aid in total that is 
needed and how much has been conveyed to Africa to make sure--
as I look at the numbers, what I am getting is that we have got 
food aid, we have got food aid going to Africa in the quantity 
that we need, but we are not sure that we are going to have 
enough into the future if the current crisis in the various 
places throughout the continent continue. I would like to hear 
what your perspective is on that, because I want to make sure 
that we have got the food aid necessary pressing on forward and 
into Africa.
    Ms. Newman. Yes. Senator, I think that everyone recognizes 
the lead role that the United States has played in addressing 
the potential famine in Eritrea and Ethiopia and the countries 
in southern Africa. More than a third, and, to some extent, a 
half of the metric tons required have been provided by the 
United States. I think we are trying to push other donors to 
step up to the plate.
    But, more importantly, all of us have to work on 
agriculture, because that is the key food security ensuring 
that for the future there will be the opportunity for Africans 
to feed themselves and to use food for trade purposes. This 
means that the administration has done the right thing by 
having as one of its major initiatives an agriculture 
initiative whereby money is being made available, stating in 
Mali and Mozambique and Uganda, made available for transfer of 
technology, for training, for preparing people to use new 
seeds.
    Senator Brownback. My time is so limited. May I cut in 
here? I understand that point of view in the administration. 
Will you have sufficient food aid to meet the food needs--the 
food needs, not the development needs--the food needs this 
year?
    Ms. Newman. Today. I think that there is a gap that we, 
alone, are not going to be able to fill. But we are spending a 
great deal of our power to encourage other donors. The EU has 
now stepped up, and a few of the other donors have increased 
their pledge.
    Senator Brownback. What would you estimate that gap to be 
for this year?
    Ms. Newman. I have the numbers by country and the number of 
people. I would much prefer to have the Food for Peace people 
give you the exact numbers. But what I see now in a number of 
the countries is that the earlier estimates--there was an 
estimate--take Ethiopia. At one point, people were using 
numbers like 16 million people might have a famine potential. 
That number is down to 11 now, as of the latest assessment. But 
we are providing, say, about a third of that.
    So in answer to your question, the most recent legislation 
adding a certain amount, $200 million, for Ethiopia and Eritrea 
will help a great deal. Does not cover the entire gap? No. And 
also, frankly, we believe that this should be shared with the 
rest of the world.
    Senator Brownback. OK, because we are--in the supplemental, 
we have got a couple of hundred million more for food aid or 
possibilities for use for food aid in that supplemental, and 
I--do you know, is that sufficient to meet the gap that is----
    Ms. Newman. No, it will not be. We will give you--you mean 
the gap in Eritrea, Ethiopia, and in southern Africa?
    Senator Brownback. Yes, the food needs.
    Ms. Newman. No. But what I owe you is people giving you the 
exact metric tons required, dollar required, by country. And I 
will tell you one other thing. The problem is not only what is 
the total amount needed, but it is where is it in the pipeline 
and will it be available when the reserves are down? So that 
some of the reports that I see say that May and June may be a 
problem time for some of the countries in southern Africa and 
Ethiopia, not because pledges have not been made, but that the 
food will not have gotten on the ground in time. But we will 
give you a more detailed report on that. We owe you that.
    Senator Brownback. And we need it soon, because the 
supplemental is coming to the floor this afternoon. If we are 
going to address it in that issue, we need it now.
    Thank you, Mr. Chairman.
    Senator Alexander. Thank you, Senator.
    We have 5 minutes left. Maybe if I ask a short question and 
you give a short answer, each of the three of us will have time 
to ask a short question and gat a short answer before we move 
on to the next hearing.
    My question is this. With this significant amount of new 
dollars that we will be spending, and hopefully other countries 
will be spending, to combat HIV/AIDS, especially in Africa, do 
you have any suggestions for what the role of this committee 
should be in making sure that the money is well spent?
    Ms. Newman. Mr. Chairman, I think this would be a wonderful 
time for you to hear from----
    Senator Alexander. Well, we have got about one minute or 
two.
    Ms. Newman. Oh.
    Senator Alexander. So that person needs to move rapidly so 
Senator Feingold can ask his question. Thank you.
    Dr. Peterson. Good morning, Mr. Chairman. I am Dr. Ann 
Peterson. I am in charge of the Bureau for Global Health, and I 
am working closely with State Department, with HHS, with ONAP 
to use the funds that we have now and to plan for scaling up 
our response to HIV/AIDS. We are building from very successful 
experience. We have both programmatic levels----
    Senator Alexander. Now, my question is, What can we do as a 
committee, to make sure that--to help you make sure the money 
is spent wisely?
    Dr. Peterson. Ask us for accountability. Ask us for what we 
are doing in each of the different areas of endeavor. That is 
prevention, care of orphans, care of people living with AIDS, 
as well as both treatment, which we are starting to do, ARV 
treatment, and non-ARV treatment, and the areas where we are 
able to track making a difference. For the Presidential 
initiative we will be tracking very closely both the dollars 
and the effect of those dollars.
    Senator Alexander. Thank you. May I invite you to--one of 
the underutilized functions of the Senate, I believe, is the 
oversight function, not to try to tell you what to do, but to 
make sure the goals are being met--I invite you to submit to us 
some suggestions about how we can work together to form our 
oversight role to see that your executive role is as effective 
as possible.
    Dr. Peterson. Marvelous, and I would love to have your--
working together. Thank you.
    Senator Alexander. Thank you.
    Senator Feingold.
    Senator Feingold. Thank you, Mr. Chairman, and thank you 
for your courtesy in making it possible for me to ask another 
question.
    The HIV/AIDS pandemic is a problem we can all agree is of 
such horrifying scope and scale in Africa that it demands a 
truly historic international response. And the chairman just 
referred to the significant new moneys that, at least in 
theory, would be provided for this. And I greatly appreciated 
the President's commitment in his State of the Union Address. I 
hope we can all work together to make the U.S. commitment to 
prevention, care, and treatment a reality.
    And I will tell you, I was in Botswana and South Africa a 
few weeks after that. They know about it. Expectations have 
been raised enormously. And it is one of the most heartbreaking 
situations in human history. So we are on the line on this one 
when we start talking about $15 billion.
    The President committed to spend new funds on AIDS rather 
than robbing existing foreign assistance accounts, and I was 
very pleased to hear that. But even before this announcement, 
it has become clear for some time that increasing our focus on 
HIV/AIDS sometimes means decreasing the resources available for 
other programs. And you were referring to that earlier, Ms. 
Newman.
    I am looking for some silver lining to this zero-sum 
scenario. So I would ask Mr. Bellamy to tell me more about the 
positive spillover effects of our AIDS programs. How are we 
empowering girls and women and improving health infrastructure 
through these targeted assistance efforts, and how are we 
maximizing that spillover element?
    Mr. Bellamy. Well, Senator, I am not sure that I am best 
qualified to talk in detail about the success of our HIV/AIDS 
and programs on the ground in Africa. I can say what I think is 
well known, is that we have had varying degrees of success 
around Africa. We have had better success in some countries 
than others.
    I would simply like to say that I think where we have 
enjoyed the most success is where we have listened and observed 
most closely what is actually needed, not necessarily what kind 
of assistance we would like to provide, what kind of assistance 
we prefer to provide, but have been very closely attuned to the 
situations of individual countries. And in that respect, I 
would like to urge members of this committee to come out and 
see for themselves, as you have, Senator Feingold, what we are 
doing on the ground, to talk our embassies and to actually see 
for yourselves what we are doing on the ground in Africa.
    Senator Feingold. Mr. Chairman, I would like--obviously, if 
we had the time to do a lot more, particularly on this subject, 
but our time is up--I would like to submit some questions for 
the record if I could.
    Senator Alexander. Of course. Without objection.
    Senator Feingold. Thank you, Mr. Chairman.
    Senator Alexander. The questions will be submitted. I want 
to thank the witnesses, Mr. Bellamy and Ms. Newman, for coming. 
This has been very helpful. If you have any additional 
statements you would like for us to have, we would like to have 
them for the record.
    We will adjourn the hearing now for a moment. Senator Allen 
will be here shortly to begin the next phase of the hearings on 
the President's budget.
    Thank you.
    [Recess.]

                HEARING SEGMENT II.--EUROPE AND EURASIA

    Senator Allen [presiding]. The next segment of the Foreign 
Relations Foreign Assistance Oversight hearing will continue. 
Thank you.
    And I want to say good morning to everyone who has been 
listening to the first segment. This will be the second 
segment. I want to thank Mr. Ries and Mr. Hill for coming to 
outline the Bush administration's plan and proposals for 
assistance to Europe. This is an important topic, and I look 
forward to exploring, listening, learning and then making the 
right decisions on the strategies and plans for implementing 
assistance programs to the countries of Europe.
    Foreign assistance to Europe continues to be a necessary 
and essential investment for the United States, and while the 
nations of Europe, specifically those which may be considered 
the East, but also looked upon as northern Europe, which is 
northern Central Europe and southeastern Europe and Eurasia, 
which generally is Russia and the former Soviet Republics, all 
need to be examined differently. And you have concerns all the 
way from Northern Ireland to some extent, all the ``-stans.'' 
And clearly in there is Turkey all the way up to the Baltics.
    Now, foreign assistance, while it is important, needs to be 
made in a logical way. The countries, especially the newly 
freed countries who are still nascent democracies for the last 
decade, have developed in many cases into vibrant free-market 
economies with more opportunities for all their citizens. Those 
in Central Europe, we have been having hearings on the 
expansion of NATO to seven aspirant countries, of which I am a 
strong supporter. But we do have to look at concerns such as 
the assassination of the Serbian Prime Minister to recognize 
that the concepts of the rule of law and democracy still are 
not firmly rooted and are in a tenuous situation in certain 
southeastern European countries.
    The foreign assistance that we want to utilize, which 
should be utilized, is to promote democratic principles and 
transparency, and I think that is an effective way to ensure 
that the trend of democratization does not fade away. We also 
need to be wary of reducing assistance to countries which maybe 
still are not where they should be. You look at countries like 
Armenia, which have seen a reduction in U.S. aid, while the 
rate of poverty continues to hover around 50 percent.
    I do think that we have to recognize that we cannot spend 
everything. We are not the guarantor of all countries. But what 
we need to do is look at it in our interest, how it does help 
the United States have stability, to have free markets, and to 
have freedom. And, indeed when you look at some, especially the 
Eurasia countries, the Central European countries that have 
armament capabilities, the issue for our security, not 
economic, but physical security, is in the reduction of 
proliferation and making sure that we have airtight export-
control mechanisms. And that is an essential part of safety for 
Americans all over the world.
    Also, we have the war on terrorism, which will continue, 
and many of these countries--in fact, every single one of these 
countries--can be essential and right now, in many cases, are 
very helpful in our war against terrorism. We must make sure 
that none of these countries become a refuge for any of these 
terrorist organizations, but also make certain that they assist 
us in the war on terrorism with information, security matters, 
and others. And of course, as I alluded to previously, making 
sure that these countries are not in any way arming terrorists 
or terrorist rogue states. In their efforts to get money, that 
should not be the way to do so.
    And so we have many interests for security, for economic 
opportunities, and our instinctive Jeffersonian love of 
individual liberty at stake in all of these areas, and to the 
extent that those Jeffersonian liberties and the concepts of 
individual freedom and governments being formed to protect 
those individual rights, not only will that be good for jobs in 
this country, but I think it is clearly good for the security 
and safety of the American people. We all are uplifted when we 
see people living happier, freer lives than being under 
repressive totalitarian or tyrannical governments.
    So I look forward to the testimony of our two witnesses, as 
well as a vigorous dialog on our priorities and our obligations 
in Europe. Your portfolio is diverse and one that is very much 
on our minds today, particularly with countries such as Turkey, 
where the Secretary of State has just left from a meeting.
    When Senator Biden arrives, he will make a statement and 
ask questions, and I am sure you will also be happy to answer 
questions from members who may submit their questions in 
writing if they do not show up today.
    So, with that, I would like to turn it over to our 
witnesses. Have you all agreed who wants to go first on this? 
Mr. Ries, are you going to give Mr. Hill a break, since he 
already has been in here?
    Mr. Ries, if you would please proceed first.

  STATEMENT OF CHARLES P. RIES, ACTING ASSISTANT SECRETARY OF 
  STATE, BUREAU OF EUROPE AND EURASIAN AFFAIRS, DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Ries. Thank you very much, Senator. Let me say at the 
outset how grateful we are in the European Bureau for the 
committee's initiative to undertake these hearings. We think 
that it is truly a wonderful opportunity for us to describe, as 
I shall, how the foreign assistance funds that the American 
people put in the hands of the administration help advance our 
foreign policy priorities.
    But, first of all, let me express my regrets for my boss, 
Assistant Secretary Beth Jones. Beth very much looked forward 
to this hearing, spent a lot of work on the written statement, 
which we have submitted for the record, and was looking forward 
to coming here today. On Monday, however, Beth was asked by the 
Secretary of State to accompany him to Turkey, where they have 
just left to Belgrade, where they are on their way to--should 
be on the ground shortly--and to Brussels, where they will be 
tomorrow. The Secretary of State is making this trip in order 
to take forward the dialog with our key friends and allies on 
the very many high-priority foreign policy challenges in the 
world today, not least present hostilities in Iraq and the 
post-hostilities reconstruction and recovery for that country.
    Mr. Chairman, we never lose sight of the fact that foreign 
assistance is a tool to advance U.S. policy goals. And I might 
just say that, from our standpoint, the U.S. policy goals we 
are advancing in Europe and Eurasia are the promotion of 
democracy, market reform, stability, increased respect for 
human rights, and the securing of borders against weapons of 
mass destruction and terrorism.
    We see, in fact, our key challenges at the moment to how we 
can use our foreign assistance, and our foreign policy, more 
generally, to help stop terrorist networks and related 
activity, like drug trafficking, that support them. And we see 
that these goals also intersect with other objectives at the 
border--trafficking in human beings, movement of conventional 
weapons, as well as weapons of mass destruction.
    We, in the European Bureau, are, we believe, truly blessed 
by the organizational advantages we have in this integration of 
foreign assistance and policy. Behind me is Tom Adams, who is 
our coordinator for assistance to Europe and Eurasia, acting 
coordinator. This position was established nearly a decade ago 
to coordinate assistance to the emerging democracies of Eastern 
Europe and the former Soviet Union. It used to be two positions 
that were integrated as we brought the whole bureau together 2 
years ago. This enables us to bring about this policy 
integration that we have been talking about.
    I should also say that, with my colleague, Kent Hill to the 
side of me, we have, we believe, a super relationship with 
USAID. It is a key to the success on the ground that we--we 
talk about policies. We understand the programs. The 
coordinator's office works closely with USAID, and this is what 
helps make it all happen.
    Let me cite just a few examples of how we think we can 
achieve this policy integration. First of all, take as a policy 
objective the national objective of preventing conflict and 
resolving the conflict that has happened in the Balkans. We 
provide assistance in a number of ways in the Balkans. An 
example is the assistance that we have given to the U.N. police 
force in Kosovo. We have been training the multi-ethnic Kosovo 
police force. The result is that in the last 2 years, the crime 
in Kosovo has been cut in half and we are seeing gradual 
stabilization.
    Another example is our goal to stop illegal narcotics 
trafficking in Central Asia. With assistance, we have funded a 
U.N. program to create a drug-control agency in Tajikistan with 
vetted, better-paid personnel. The result has been seizures of 
Afghan heroin in Tajikistan have doubled, and the coordination 
with other Central Asian states and the Russians has improved.
    Another objective is our goal of promoting free markets and 
democracy. We have been providing technical assistance in 
Ukraine to help the Ukranian Government to privatize land and 
give ownership rights to farmers. The result has been that 1.5 
million land titles have been issued thus far, and Ukranian 
agricultural production increased 9 percent last year. Ukraine 
is now once again an exporter of food after a very, very long 
period during the Soviet era of being a net importer.
    The final objective that I would point out, we obviously 
have a high priority national objective to stop proliferation 
and the development of weapons of mass destruction. We have 
been funding civilian research and development foundations, 
science centers, and bio-redirect programs all in the former 
Soviet Union. The result has been that thousands of former 
weapons scientists have engaged in peaceful scientific research 
and collaborative research efforts with the U.S. Over 50,000 
scientists, a majority of whom are categorized as weapons-of-
mass-destruction-capable scientists, have participated in the 
science centers programs since 1992.
    Mr. Chairman, you asked us for suggestions as to where we 
think legislative authorities could be streamlined. We have a 
number of suggestions. In border control, we think some of the 
different programs that are oriented toward different 
objectives--customs, anti-narcotics, and anti-proliferation--
there could be additional flexibility added so that we would 
have less stove-piping and we could take advantage of the 
natural complementaries of these programs. We will followup 
with the committee staff for the actual legislative 
suggestions. We also share the committee's interest in looking 
at the reports and certifications that the committee asked us 
for.
    The funding trends that we have made in our request for 
fiscal year 2004 represent, in our view, a keen adjustment of 
the assistance proposals to current situations. We have made 
some small reductions in Eastern Europe, in the Balkans, 
reflecting continued stabilization in the region, and the 
graduation that we have planned from assistance programs for 
Bulgaria and Croatia in fiscal year 2006. We have a larger 
reduction in the FSA accounts. A good part of this reflects the 
administration's decision to move exchange funding from our 
accounts to the exchange accounts and treat all the exchanges 
that we do in the public diplomacy area together. We continue 
to ask for increases in nonproliferation IMET and FMF funding.
    In conclusion, Mr. Chairman, let me just say that we would 
always like to see more resources for the EUR region out of our 
own parochial interests, but we think that the Secretary of 
State and the President have to make the tough choices and 
tradeoffs among different priorities. And we think that the 
administration's fiscal year 2004 request represents just this 
balanced tradeoff, and we are pleased to put it forward to you 
today.
    Thank you.
    [The prepared statement of Mr. Ries follows:]

   Prepared Statement of Charles P. Ries, Principal Deputy Assistant 
 Secretary of State, European and Eurasian Affairs, Department of State

    Chairman Lugar, Senator Biden and other distinguished Committee 
members, I am very pleased to participate today in your examination of 
U.S. foreign assistance programs. I commend you for focussing on this 
crucial tool of U.S. foreign policy, and I look forward to an ongoing 
dialogue with the Committee about our assistance budgets and 
activities.
    Like my counterparts in the Department's other regional bureaus, I 
approach assistance programs with a basic question in mind: how can 
these programs best advance U.S. interests in Europe and Eurasia? In 
the Bureau of European and Eurasian Affairs, we are fortunate to have a 
unique structure, the Office of the Coordinator of U.S. Assistance. 
Created by Congress under the Support for East European Democracy 
(SEED) Act of 1989 and the FREEDOM Support Act of 1992, the Assistance 
Coordinator helps to ensure the tightest possible integration between 
our assistance programs and our foreign policy goals. Acting 
Coordinator Tom Adams is with me here today, and I talk to Tom 
literally every day about how assistance can best support policy.
    In large part because of the structures created under the SEED and 
FREEDOM Support Acts, we are also fortunate to have a unique 
relationship with our colleagues at the U.S. Agency for International 
Development, with whom we work very closely to develop effective 
programs. Kent Hill, USAID's Assistant Administrator for Europe and 
Eurasia is also here today and will give his perspective on assistance 
in our region and on the State-USAID partnership.
    Mr. Chairman, in recent months much of the world's attention has 
understandably been focussed on the Trans-Atlantic relationship, and 
the differences that emerged with some of our European friends and 
allies over Iraq. What has received relatively less attention has been 
the steadfast support the U.S. has received from a number of countries 
in the formerly Communist parts of Europe. Clearly, one of the reasons 
we enjoy such a close and supportive relationship with these countries 
is the intense engagement we have practiced--through foreign assistance 
and diplomacy--during their difficult transition from Communism to 
market economies and democratic political systems. Some of these 
countries have essentially completed the transition; some are still 
struggling in the middle of it. But over the past nearly 15 years, the 
U.S. has sought to foster movement toward market-based democracy and to 
integrate these states into Euro-Atlantic and international economic 
and political structures. And this persistent, long-term effort has 
earned us credibility and created a reservoir of trust that is paying 
off in the current situation.
    The U.S. has important interests in Europe and Eurasia that go 
beyond supporting the transition of the formerly Communist countries 
and, particularly after September 11th, these global interests--such as 
combating terrorism, weapons proliferation, and drug and other illicit 
trafficking--have come to the fore. I want to highlight how our 
assistance directly supports these U.S. national interests, and give 
examples of how this works in practice. Then I will explain what has 
changed in terms of assistance priorities since September 11th, and how 
that change is reflected in the President's fiscal year 2004 budget 
request, both in terms of programmatic priorities and country budgets.
    Finally, I know that the Committee is interested in our views 
regarding legislative authorities and current restrictions on our 
ability to carry out assistance programs, so I will share some thoughts 
on that subject.
         how assistance supports u.s. foreign policy interests
    We have an interest in cooperating with European and Eurasian 
countries in counterterrorism and in stopping a variety of things from 
moving across borders, including members of terrorists groups, weapons 
of mass destruction, illegal drugs, and trafficked persons. We have an 
interest in resolving and, where possible, preventing violent conflicts 
that threaten regional stability. And we also have an interest in 
seeing all countries of the region become democratic, market-oriented 
states: this is the best long-term guarantee of regional stability and 
of positive, mutually beneficial relations.
    There are also specific characteristics of the region that give 
rise to specific U.S. national interests. The large group of formerly 
Communist nations in Central and Eastern Europe and the former Soviet 
Union are gradually becoming integrated into European, Euro-Atlantic 
and international political and economic institutions. We should not 
forget that we fought and won a fifty-year Cold War against Soviet 
Communism, and that the Soviet legacy is still reflected in many of the 
region's persistent problems. To see this process through--to ``win the 
peace''--we have a compelling interest in promoting this integration 
and helping it become broader and deeper.
    Finally, the Soviet legacy of weapons of mass destruction (WMD)--an 
issue the Chairman has been particularly engaged with for many years 
now--remains a critical U.S. security interest in the region. Our 
assistance efforts have and continue to be targeted at the detection, 
deterrence, interdiction, control and reduction of the vast Soviet 
military arsenal, with its widely dispersed sources of WMD and WMD 
expertise. The bulk of assistance dealing with this challenge is funded 
through programs managed by the Departments of Defense and Energy. 
Nevertheless, the State Department manages important non-proliferation 
programs, provides diplomatic support for DOD and DOE efforts, and 
helps coordinate interagency approaches to nonproliferation and threat 
reduction assistance. My bureau devotes particular attention to 
nonproliferation efforts since so much of the weapons and weapons 
expertise originates in our region.
    Mr. Chairman, our interest in stopping a variety of cross-border 
threats--whether they be in the form of weapons of mass destruction, 
other lethal weapons, illegal narcotics, or individuals belonging to 
terrorist groups--is not new, but clearly has shot to the top of the 
priority list in the wake of 9/11. We cooperate with nearly all 
European and Eurasian countries on counterterrorism, non-proliferation, 
transnational crime, and border security, and a number of countries 
also receive significant U.S. assistance directly aimed at these 
problems through programs funded under the FREEDOM Support Act, the 
SEED Act, and other Foreign Operations accounts, such as the 
Nonproliferation, Anti-Terrorism, Demining, and Related Programs (NADR) 
account. These assistance programs have greatly enhanced the ability of 
states in the region to deal with the challenge of cross-border 
threats, and have led to some notable successes.
    For example, assistance provided to Uzbekistan under the Export 
Control and Related Border Security programs funded by the FREEDOM 
Support Act and NADR helped the Uzbeks to interdict several shipments 
of WMD material transiting their border. Similarly, through our Anti-
Crime Training and Technical Assistance (ACTTA) Program, substantial 
U.S. support for a UN drug control program in Tajikistan has enabled 
authorities in Tajikistan to seize record quantities of Afghan heroin 
on its way to Russia and Western Europe and additional support has made 
it possible for our U.S. Drug Enforcement Administration to set up the 
first ``vetted'' counter-narcotics unit in Central Asia, in Uzbekistan. 
Day by day, month by month, the countries of Europe and Eurasia are 
becoming better equipped, better trained and better coordinated with 
one another to deal with transnational threats. And our assistance has 
played a critical role in catalyzing and now sustaining that process.
    I should point out here that enhancements of border security and 
law enforcement capabilities aid in responding to many threats and 
challenges, including the major problem of trafficking in persons. This 
Administration is deeply committed to addressing this human tragedy. 
Several European and Eurasian states are ``source countries'' for 
trafficking, and over the past several years we have directed SEED and 
FSA resources to confront the problem at every point: in the 
communities where former and potential future victims need job 
opportunities and other kinds of support; in schools and the media 
where public awareness of the problem can be increased; in the legal 
system where specific laws and mechanisms are needed; and of course, at 
the borders, where the traffickers must be stopped.
    A second major U.S. interest in the region concerns conflict 
resolution and prevention. Here is perhaps the clearest example where 
our diplomacy and assistance programs need to work hand in glove. From 
the Balkans, where U.S. support for training civilian police forces has 
been crucial to post-war stabilization, to Central Asia, where we seek 
to head off future conflict in the volatile Fergana Valley by improving 
infrastructure and creating employment opportunities, we are devoting 
substantial assistance resources in this area. While admittedly foreign 
aid can never substitute for the genuine desire of the parties involved 
to find peaceful solutions to their conflicts, we can do a great deal 
to support countries recovering from conflict and to address the 
social, economic, and political conditions that sow the seeds of 
conflict. Most importantly, we need to stay vigorously engaged with 
these countries through our diplomacy and our assistance. We do not 
need more Afghanistans.
    We also have a strong interest in the successful transition of the 
formerly Communist states of the region to democratic political systems 
and market-based economies, and their integration into Euro-Atlantic 
and international institutions. This is clearly a long-term process, 
and progress has been slower and more uneven than many expected when 
Congress passed the SEED and FREEDOM Support Acts.
    The good news is that eight of the 15 countries covered by the SEED 
Act have progressed sufficiently in their transitions to ``graduate'' 
from SEED assistance: the Czech Republic, Estonia, Hungary, Latvia, 
Lithuania, Poland, Slovakia, and Slovenia. All eight are either NATO 
members already or have been invited to join. All are scheduled to 
become EU members in 2004. We should all be gratified by their success, 
and proud of the continued role played by our assistance and political 
support. The Department also intends to graduate Poland, Hungary and 
the Czech Republic from our export control and border security 
assistance programs in 2004, as these countries have registered solid 
progress in these areas.
    The unfinished news is in Southeastern Europe and the former Soviet 
Union. But many--not all--of these countries are on the right track; 
our SEED and FSA assistance is having a positive impact. Southeastern 
Europe is now experiencing steady progress in efforts to overcome the 
destruction and dislocation of the Balkan wars, meet the grave 
challenges of crime and poverty, and open the area to business and 
investment. In Kosovo, for example, we are particularly proud of 
participation by American police officers in the UN Police Force, and 
equally proud of our leading role in training up a new multi-ethnic 
Kosovo Police Service--including women officers. These efforts have 
helped to cut the crime rate in Kosovo in half. In Croatia, in a recent 
positive development on court reform, the U.S., the EU and other donors 
obtained the government's agreement to implement a standardized court 
and case management system that would unblock the one million case 
backlog, expediting the long awaited commercial court due process.
    The former Soviet states lag further behind in making the 
transition. Across the region, corruption is a drag on reform. Some 
countries that made initial progress in both democratic and market 
change have backslid on democracy in recent years. Still, there have 
been notable achievements over the past ten years, thanks to U.S. 
assistance. In Russia, for example, which has probably moved the 
furthest both economically and politically, major reforms have been 
adopted over the past three years, including a complete overhaul of the 
Soviet-era judiciary and criminal justice system, a new simplified and 
investor-friendly tax code, and the right to private land ownership. 
All were adopted with the help of U.S. technical assistance. Again with 
substantial U.S. help, Ukraine has privatized land and given titles to 
roughly two million farmers, helping it become a net food exporter 
again for the first time in nearly a century.
    In every former Soviet state, we are also helping carve out a role 
for thousands of nongovernmental organizations, independent media 
outlets, and democratic political parties--where none existed ten years 
ago. Under repressive conditions--such as those existing in Belarus and 
Turkmenistan--these efforts are mostly aimed at keeping alive hope for 
long-term change. In other countries though, civil society is 
increasingly able to act as a real counterweight to arbitrary 
government behavior. We saw examples of this in the past year in 
Ukraine, where the opposition won a majority in parliamentary elections 
due to substantial involvement of NGOs in monitoring the vote count; in 
Kyrgyzstan, where NGO pressure led to revocation of a presidential 
decree limiting freedom of the press; and in Tajikistan, where a 
sustained campaign by NGOs led to the registration of that country's 
first independent radio station.
    With respect to integration into Euro-Atlantic and international 
institutions, our assistance is supporting WTO accession in several of 
the former Soviet states; Georgia, Armenia, Moldova, and Kyrgyzstan 
have already acceded, and several others, including Russia and 
Kazakhstan, are getting close. Our security assistance is aimed at 
enhancing interoperability with NATO and U.S. forces. This has proven 
invaluable as we continue the global war on terrorism and undertake 
Operation Iraqi Freedom.
                         fy 2004 budget request
    Mr. Chairman, I would like to turn to the President's fiscal year 
2004 budget request, and what has changed in it from previous years. 
The first and most important shift to note relates to the challenge of 
international terrorism. Counterterrorism has become a more prominent 
element of our assistance, cutting across a number of programs. Our 
FY2004 request for global Anti-Terrorism Training (ATA) assistance 
increased significantly over previous years. We are putting more 
resources into counter-narcotics and law enforcement cooperation across 
the region, but particularly in Central Asia and the Caucasus, where 
porous borders and weak law enforcement entities have created 
significant opportunities for terrorists and those trafficking in 
illicit weapons and drugs to operate. The FY2004 budget request 
reflects continued support for our Anti-Crime Training and Technical 
Assistance Programs across Eurasia specifically for law enforcement and 
counter-narcotics assistance programs in Central Asia creating a 
foundation of new programs in that region initiated after September 11. 
The FY2004 budget request also reflects increased funding in both the 
FREEDOM Support and NADR accounts for Export Control and Related Border 
Security programs in Europe and Eurasia. This program provides 
assistance to help establish infrastructure to control the movement of 
weapons and dangerous material across borders. It also provides 
equipment and training--including radios, vehicles, patrol boats and 
helicopters--to enforce such controls.
    We have also energized efforts to address terrorist financial flows 
and money laundering by providing assistance in drafting the necessary 
laws and regulations, and by giving technical advice to financial 
intelligence units and bank regulators throughout the region. These 
programs do not cost a large amount but have a potentially huge pay-
off, and we fund them in the FY 2004 budget request.
    Accompanying the increased emphasis on counterterrorism is a shift 
in regional focus towards Central Asia. While the overall request for 
FREEDOM Support Act countries is well below the appropriated FY 2003 
level, the five Central Asian states are slotted for an increase of 
around $14 million in FSA and exchanges funding. These are the front-
line states in the ongoing effort in Afghanistan, and expanded 
assistance there will bolster stability and attack the root causes of 
extremism: economic desperation, political frustration, social 
degradation, and isolation.
    Our request for FY2004 funding to support regional security 
programs such as Foreign Military Financing, International Military 
Education and Training, and peacekeeping operations also increases 
significantly. Especially in light of Operation Iraqi Freedom, these 
programs are critical foreign policy tools to enhance interoperability, 
promote defense reforms, and enhance peacekeeping abilities.
    Now let me briefly highlight the most significant features of the 
President's budget with respect to specific country requests. The 
declining SEED budget reflects continued stabilization in the region 
and a shift towards more regular assistance funding. This allows us to 
achieve savings for other high-priority foreign assistance needs, while 
maintaining our sharp focus on the transitional states of Southeastern 
Europe. The FY04 request maintains strong funding for Serbia and 
Montenegro, Kosovo, Bosnia and Albania. Graduation from SEED funding is 
planned for Croatia and Bulgaria in FY 2007, after final bilateral 
funding in fiscal year 2006, and we are currently looking at the 
possibility of setting a graduation date for Romania. All of these 
countries continue to make progress, and yet each faces severe economic 
and political challenges. We and other donors, particularly the EU, 
will have to stay engaged to make certain the region does not revert to 
the strife which characterized too much of the past decade. The 
emphasis of SEED programs in FY2004 will increasingly be in the area of 
civil security and rule of law, while we continue to work on promoting 
good governance and private sector-led economic growth.
    Regarding the FREEDOM Support Act, I should first note that while 
we are requesting a significant reduction ($179 million below the FY03 
appropriated level), it is not as dramatic a drop as it seems. Due to a 
decision to shift exchange programs in both SEED and FSA countries from 
those accounts into the Educational and Cultural Exchanges (ECE) 
account, the FSA request is approximately $90 million lower than it 
would have been otherwise; the SEED request is approximately $10 
million lower. The Department expects to fund these exchange programs--
which we consider to be a vital component of our effort to change 
attitudes and mindsets in these former Communist societies--for 
European and Eurasian countries at the $100 million level in FY 2004. I 
am working very closely with my colleague Patricia Harrison, Assistant 
Secretary for Educational and Cultural Affairs, to make sure we secure 
these funds for programs in Southeastern Europe and Eurasia and that 
coordination between SEED and FSA and ECA programs continues at a high 
level.
    Even taking the shift of exchange programs into consideration, the 
FSA account is significantly reduced, with most of the reduction coming 
from Russia and Ukraine. This reduced request is first a reflection of 
difficult decisions that had to be made among a large number of foreign 
assistance priorities. Beyond that, it is recognition of the progress 
these countries have made--particularly Russia--toward market and 
democratic reform. We are currently developing a strategy to phase out 
FSA assistance to Russia over the next several years. This strategy 
will seek to ensure a legacy of sustainable institutions in Russia that 
will continue support for democratic development and entrepreneurship. 
It should be stressed that assistance to address serious health 
threats, like HIV/AIDS, and to support civil society groups, including 
human rights monitors, may continue in Russia through other foreign 
assistance accounts even after the phase out of FSA assistance is 
completed. We want to implement this phase out carefully, without 
jeopardizing the gains of the past decade, and we would be happy to 
consult closely with the Committee as we proceed.
    In general, FSA programs in FY 2004 will increasingly emphasize 
three themes:

          1. Conflict prevention through community-level projects to 
        improve living conditions in volatile regions;

          2. Decentralization of power by strengthening NGOs, 
        independent media, local governments, and where relevant, the 
        judicial branch; and

          3. Anti-corruption efforts by promoting rule of law and 
        transparency and accountability in governance.

                        authorities/restrictions
    Finally, Mr. Chairman, in your invitation letter for this hearing, 
you asked if I believed that additional legislative authorities or a 
modification of restrictions currently in place were necessary to help 
us achieve our assistance goals. Rather than getting into specific 
provisions at this time, allow me to make two general comments on this 
subject. I will be glad to follow up at a later time, working through 
our Bureau for Legislative Affairs.
    First, many of our interests in Europe and Eurasia come together in 
our programs that work at borders--trying to stop harmful things from 
getting through, while also trying to facilitate helpful trade and 
commerce across them. A variety of anti-terrorism, security, law 
enforcement, and economic growth programs are all working on border-
related issues. The authorities that govern these programs may be 
preventing productive interaction among them. For example, under our 
Export Control and Related Border Security assistance programs, we can 
provide equipment, training, or infrastructure assistance to help 
secure borders to prevent weapons trafficking; but to combat drug 
trafficking at the same border site, we would have to provide the 
equipment or training under our International Narcotics and Law 
Enforcement assistance program. In each case, we are trying to train 
the same customs, border guards and immigration officials, and often 
the equipment is identical, but it must be provided under different 
funding sources and authorities. We will be reviewing these authorities 
within the Administration to see how to make their interaction more 
productive.
    Second, we believe that Congressionally-mandated reporting 
requirements are excessive; a reduction could actually enhance 
Executive-Legislative branch communication on important foreign policy 
issues. The Department spends a great deal of time and effort producing 
reports that spark little interest on the Hill or elsewhere and often 
have long outlived whatever usefulness they once had. We suggest that 
more frequent briefings and other contacts between representatives of 
the State Department and Committee members and staff would be a more 
productive use of time, and result in more useful give and take. Again, 
the Bureau for European and Eurasian Affairs, together with our 
Legislative Affairs colleagues, would be glad to follow up on this 
issue with more detail.
    In closing, Mr. Chairman, let me thank you and the other members of 
this Committee for your strong interest in our region, and for your 
renewed focus on foreign assistance. We look forward to more 
interaction between the Department and your Committee on these critical 
issues, and stand ready to work with you toward our common goal of 
advancing U.S. national interests in Europe and Eurasia.

    Senator Allen. Thank you, Mr. Ries.
    Mr. Hill.

STATEMENT OF HON. KENT R. HILL, ASSISTANT ADMINISTRATOR, BUREAU 
   FOR EUROPE AND EURASIAN AFFAIRS, UNITED STATES AGENCY FOR 
       INTERNATIONAL DEVELOPMENT [USAID], WASHINGTON, DC

    Mr. Hill. Mr. Chairman, thank you for this opportunity to 
discuss USAID's programs in Europe and Eurasia. And I am 
pleased to be here with my colleague from the State Department, 
Charles Ries.
    I would ask that my written testimony be inserted into the 
record.
    The assignment the administration and the Congress have 
given us through the years has been unprecedented in its scope 
and its importance, mainly to assist in the transition of 27 
non-democratic, centrally planned, formerly communist nations 
into democratic, free-market, prosperous, and peaceful members 
of the European family of nations. It has not been an easy 
task.
    During the 1990s, 13 significant conflicts, including two 
major Balkan wars, rekindled ethnic hatred and demonstrated the 
regional fragility of this post-Communist, post-cold-war era. 
The 1998 collapse of the Russian financial system had severe 
repercussions throughout Eurasia. Authoritarian rulers 
initially in southeast Europe, and still in many Eurasian 
countries, have impeded the growth of democracy and broad-based 
economic growth.
    Obviously, some countries have moved quickly toward 
democracy and market-oriented economies, others have moved 
unevenly, and a few much too slowly or not at all. Income 
levels in many countries have yet to return to levels that 
existed prior to the break-up of the Soviet Union. High 
unemployment, significant poverty, widespread corruption, HIV/
AIDS, and trafficking in persons are all serious problems.
    Though the challenges have been great, much progress has, 
in fact, been made. Fourteen years after the fall of the Berlin 
Wall, we find this part of the world to be a very different 
place than it was during the Communist era. Eight of the 27 
formerly Communist countries have graduated from being major 
recipients of U.S. foreign assistance. In 1990, the private-
sector share of gross domestic product in this region was about 
12 percent. By 2002, it had reached 62 percent. Freedom House 
now ranks 21 of these former Communist states as free or partly 
free. Sixteen of these 27 transitional countries have achieved 
full membership in the World Trade Organization. And after 
years of economic contraction, the region has recorded positive 
economic growth since 2000, an impressive development given the 
downturn in the global economy.
    Hungary, Poland, and the Czech Republic became members of 
the North Atlantic Treaty Organization in 1999. Bulgaria, 
Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia are 
poised to enter by 2004. And ten of our recipient countries are 
on track toward full European Union membership within several 
years.
    Without question, President Bush's national security 
strategy, which embraces the development of democracy and 
market economies as fundamental pillars of U.S. foreign policy, 
is bearing fruit in the Europe and Eurasia region. These 
nations are becoming America's allies. Indeed, 15 recipients of 
SEED or FSA funding in Europe and Eurasia are active supporters 
of Operation Iraqi Freedom.
    A particularly serious problem in the region is the 
fundamental misunderstanding of what capitalism and democracy 
are. Far too often, the transition countries have held the 
Marxist view that capitalism is simply unlimited greed. In 
fact, capitalism is best understood as a free economic system 
which exists within a framework of law and fair play.
    Similarly, democracy is too often misunderstood to mean 
simply elections rather than a complex system which must 
include minority rights--after all, there are things that 
majorities may not do--religious freedom, limited government, a 
vibrant civil society, rule of law, and an independent media. 
It is only in this context that elections fully accomplish what 
mature democracies expect from them.
    Both a free economy and democracy depend on the cultivation 
of common values without which the technical and legal 
structures of free economies and democracy will collapse. A 
major new initiative of the Bureau for Europe and Eurasia in 
the foreseeable future is to solicit innovative proposals to 
promote these values.
    As we look to the future, it is also critical that we 
understand that of the 19 major recipients of foreign 
assistance in the former Soviet Union and Eastern Europe, eight 
are historically Islamic, while several more have significant 
minorities with Islamic roots. If these populations are 
economically or politically marginalized during the post-
Communist transition, the stability of the region can and will 
be put at risk. Unemployed and disillusioned youth in 
historically Islamic areas may be particularly vulnerable to 
the rhetoric of Islamic political radicals, radicals who often 
come from outside the region. There is a direct connection 
between economic and political reform's success in our 
recipient countries and our country's broad national security 
strategy to minimize and eliminate the growth of terrorism.
    Our present task is to address the most urgent transition 
issues while consolidating assistance gains and planning over 
time, the appropriate decline and end of our assistance 
relationships. In both Europe and Eurasia, highest priority 
will be given to assuring as much as possible the 
irreversibility of the economic and democratic transition and 
helping control the HIV/AIDS explosion and the multi-drug-
resistant forms of tuberculosis.
    In conclusion, it is imperative that we understand that 
further assistance designed to stabilize the Balkans and 
Eurasia is intimately connected to the strategic interests of 
the United States to promote stability, nurture important 
allies, and reduce opportunities for the spread of terrorism 
where stability is not present. I would urge you and your 
committee to continue your support for vital programs in Europe 
and Eurasia.
    Thank you, Mr. Chairman. I welcome the opportunity to 
respond to your questions or those of other members of the 
committee.
    [The prepared statement of Mr. Hill follows:]

   Prepared Statement of Hon. Kent R. Hill, Assistant Administrator, 
 Bureau for Europe and Eurasian Affairs, U.S. Agency for International 
                              Development

                              introduction
    Chairman Lugar, Senator Biden, and other distinguished members of 
this Committee, I am delighted to have the opportunity to participate 
in your examination of U.S. Foreign Assistance Programs. I look forward 
to providing the USAID perspective on assistance to Europe and Eurasia.
    I want to begin by expressing my appreciation to Deputy Assistant 
Secretary of State for European and Eurasian Affairs Charles Ries, Tom 
Adams--State Department's Acting Coordinator for Assistance to Europe 
and Eurasia, and his team for their fine collaboration in the region 
with USAID. Together we have been able to accomplish much in this vital 
region of the world. I also want to acknowledge at the outset my 
profound respect for the personnel with whom I work at USAID, both in 
Washington and in the field, who effectively implement U.S. foreign 
policy objectives in an area of the world which is vitally important to 
our country's interests--the former Soviet Union and Eastern Europe.
    Most of today's testimony is focused on our assistance to the 
transition countries in the region, as authorized by the Support for 
East European Democracy (SEED) \1\ Act of 1989 and the Freedom for 
Russia and the Emerging Eurasian Democracies and Open Markets (FREEDOM) 
Support Act (FSA) of 1992. We also oversee economic support programs in 
Cyprus, Northern Ireland and the Republic of Ireland, and Turkey (see 
map, Annex 1).
---------------------------------------------------------------------------
    \1\ Appropriations made under this authority are also known as the 
Assistance for Eastern Europe and the Baltic States Act (AEEB).
---------------------------------------------------------------------------
    The September 2001 attacks on the World Trade Center and the 
subsequent war on terrorism have heightened the importance of U.S. 
foreign assistance. USAID programs are aligned with U.S. foreign policy 
goals and support U.S. national interests abroad. For this reason, it 
is important that the Europe and Eurasia (E&E) region continues to make 
headway in the transition to democratic freedom and economic 
opportunity. A peaceful and growing region expands possibilities for 
U.S. trade and investment and encourages the integration of these 
countries into regional organizations and global markets. The United 
States also looks to this region for cooperation on a range of critical 
national security issues, ranging from the war in Afghanistan and Iraq 
to the future make-up and viability of trans-Atlantic institutions.
    The purpose of this written statement is threefold: to provide an 
overview of USAID assistance to the E&E region, taking a look back to 
the inception of the program; to highlight the tremendous progress that 
has been achieved as well as some of the critical obstacles we still 
face in accomplishing our goals; and to discuss how we have shaped our 
program and budget for this year and next in order to respond to the 
changing world in which we are operating.
                                overview
    When Congress authorized the SEED and FSA programs, Europe and 
Eurasia (E&E) was a new frontier for U.S. assistance and the challenge 
was daunting: to assist in the transition of the formerly communist 
region into 27 democratic, independent states with market economies. In 
coordination with the U.S. Department of State and other U.S. 
Government entities, USAID quickly mounted a large program focused on 
the simultaneous transitions of economic, political, and social systems 
to market-based democracies. Through FY 2003, Congress has authorized a 
total of $15.9 billion for this transition, of which USAID has managed 
about 65%.
    It has always been our assumption that this assistance would last 
only as long as necessary to ensure that the transition to market-based 
democracies was solidly on track and not likely to be reversed. Indeed, 
eight of the 27 formerly communist countries have ``graduated'' from 
being major recipients of U.S. foreign assistance.\2\ But elsewhere in 
the region, events during the 1990s produced setbacks and obstacles. 
Thirteen significant conflicts--including two major wars in the 
Balkans--rekindled latent ethnic hatreds, demonstrating the fragility 
of stability in the post-Cold War era. The 1998 collapse of the Russian 
financial system had severe repercussions throughout Eurasia, 
underscoring the vulnerability of the economies in the region. 
Authoritarian rulers--initially in Southeast Europe and still in many 
Eurasian countries--have stalled the pace of democratic transition and 
broad-based economic growth.
---------------------------------------------------------------------------
    \2\ Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, 
Slovakia, and Slovenia.
---------------------------------------------------------------------------
    Despite these obstacles, tremendous progress has been made. 
Fourteen years later, we find this part of the world to be a very 
different place than it was during the communist era. From Poland and 
Slovenia in the west to the Russia Far East, the economic and political 
changes that have occurred since the fall of the Berlin Wall are truly 
profound. Where the state once controlled nearly every aspect of 
economic activity, free enterprise and entrepreneurship are 
flourishing. Where individuals were once afraid to assert their needs 
and beliefs, E&E citizens are finding their voices through multi-party 
elections, the independent media, and the actions of thousands of non-
governmental organizations (NGOs). Where power and decision-making were 
once almost exclusively concentrated in Moscow, municipal governments, 
small businesses, and NGOs are working together to resolve problems and 
improve the delivery of basic services in communities across the 
region.
    President Bush's National Security Strategy, which embraces the 
development of democracy and market economies as a fundamental pillar 
of U.S. foreign policy, is bearing fruit in the Europe and Eurasia 
region. These nations are becoming America's allies. In Europe, 
Hungary, Poland, and the Czech Republic became members of the North 
Atlantic Treaty Organization (NATO) in 1999. Bulgaria, Estonia, Latvia, 
Lithuania, Romania, Slovakia and Slovenia are poised to enter by 2004. 
Their backing in the international war on terrorism and of U.S. policy 
toward Iraq has been unwavering. So has been the support of the 
Caucasus countries (Armenia, Azerbaijan, and Georgia) and the Central 
Asian Republics (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and 
Uzbekistan). Indeed, sixteen of our recipient countries in Europe and 
Eurasia are active supporters of Operation Iraqi Freedom.
    With USAID assistance, the European countries are working toward 
meeting the requisite criteria for accession to the European Union 
(EU). Eight E&E countries that we have been assisting are scheduled to 
become EU members by 2004, with Romania and Bulgaria strong candidates 
for EU membership later in the decade. And, as noted by Assistant 
Secretary of State for European and Eurasian Affairs, Ambassador 
Elizabeth Jones, in her testimony before the subcommittee of the House 
International Relations Committee, the Eurasian countries will become 
Europe's ``new neighbors'' after EU enlargement.\3\ A prosperous and 
stable Eurasia will reinforce Russia's growing relationship to the 
Euro-Atlantic community and expand U.S. economic opportunity in that 
sub-region.
---------------------------------------------------------------------------
    \3\ Testimony of Assistant Secretary of State for European and 
Eurasian Affairs, Ambassador Elizabeth Jones, before the House 
International Relations Committee, Subcommittee on Europe, March 13, 
2003.
---------------------------------------------------------------------------
    While all these changes are impressive, they are complex, and 
issues remain. Some countries have moved quickly toward democracy and 
market-oriented economies, others have moved unevenly, and a few much 
too slowly. On the economic side, a number of problems persist, 
including high unemployment rates and sectors that cannot compete in 
global markets. On the democratic front, the region has a long way to 
go to provide for the many systems and checks and balances we take for 
granted in established democracies--including the consistent 
application of the rule of law, strong and independent media, and 
transparent and responsible governance at national and local levels. 
While we continue to press for broad-based reform, other problems have 
set in--particularly the deterioration of social conditions, the rapid 
spread of HIV/AIDS, and the significant growth in human trafficking.
    Our challenge, now, is to address the most urgent transition issues 
while consolidating assistance gains and planning, over time, an 
appropriate end of assistance. The experience we have acquired will 
guide our program choices and enable us to make prudent investments. I 
believe we have developed a budget and program for FY 2003 and FY 2004 
that address all aspects of this new challenge and promote the ideals 
embodied in President Bush's vision for global development: just rule, 
investment in people, and economic freedom.
                     usaid assistance in the region
    Peace, prosperity, and regional stability are the underlying 
principles of USAID engagement in this part of the world. E&E programs 
focus on three goal areas: economic restructuring and growth; democracy 
and governance; and social transition. In each of these areas, our 
strategy has been to target policy reform and institutional 
strengthening at national and local levels, and citizen involvement 
through grass-roots organizations. As needed, humanitarian assistance 
has been provided as a bridge from emergency relief to transition 
programs.
    Experience has shown that this broad, multi-sector approach 
produces important synergies. Democratic elections and growing civil 
societies strengthen the resolve and robustness of economic reforms; 
credible rule of law is essential to fighting corruption and fostering 
economic investment and growth; and fiscal reform is key to the 
sustainability of social services and protection systems. Through FY 
2002, USAID has allocated about 53% of its resources to economic 
programs, including energy and environment; 17% to democracy; 10% to 
the social sectors, including health; and 20% to humanitarian 
assistance.
    USAID has prepared a set of funding charts to illustrate the manner 
in which USAID resources have been used over time (see Annex 2). These 
graphs depict SEED and FSA appropriation levels since 1992, USAID's 
portion of these funds over time, recent shifts in funding levels by 
country, and resource allocations by sector.
                  a snapshot of progress and obstacles
    A few facts demonstrate the progress that has been made in the 
transition to democracies and market-oriented economies in the E&E 
region:

   In 1990, the private sector share of gross domestic product 
        (GDP) was 12%; in 2002 it accounted for 62% of GDP, region-
        wide;

   Freedom House ranks 21 of these former communist states as 
        free or partly free;

   Macroeconomic stability has been impressive--a majority of 
        countries have reduced inflation to single digit levels;

   Sixteen of the 27 transition countries have achieved full 
        membership in the World Trade Organization; \4\
---------------------------------------------------------------------------
    \4\ Albania, Armenia, Bulgaria, Croatia, Czech Republic, Estonia, 
Georgia, Hungary, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland, 
Romania, Slovakia and Slovenia have acceded to full WTO membership. 
Except for Turkmenistan, all other E&E transition countries have 
applied for WTO accession.

   Ten countries are on track toward full EU membership within 
        several years; \5\ and
---------------------------------------------------------------------------
    \5\ Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, 
the Slovak Republic, and Slovenia are set to join the EU in 2004. 
Bulgaria and Romania hope to accede by 2007.

   After years of economic contraction, the region has recorded 
        positive economic growth since 2000, despite a downturn in the 
---------------------------------------------------------------------------
        global economy.

    While region-wide trends are generally favorable, there are 
significant differences among the sub-regions.
    In Northern Tier Europe (the Czech Republic, Estonia, Hungary, 
Latvia, Lithuania, Poland, Slovakia, and Slovenia), countries have 
achieved democratic freedoms roughly on par with some Western 
democracies, but they have farther to go to meet EU economic reform 
standards. Due to the strength of their transitions, seven of the eight 
had graduated from USAID bilateral assistance by 2000 and USAID's 
office in Slovakia closed March 31st.
    In Southeast Europe (Albania, Bosnia and Herzegovina, Bulgaria, 
Croatia, Kosovo, Macedonia, Romania, Serbia and Montenegro), 
resettlement of war-torn areas is progressing rapidly following a 
decade of ethnic violence. Most of these countries now appear to be 
pulling ahead and following the transition path charted by the Northern 
Tier. However, stability is not yet a given, as demonstrated by the 
recent assassination of the Serbian Prime Minister, Zoran Djindjic. 
Other challenges include weak labor markets across the board, and poor 
human capital in select countries. Corruption remains an issue 
throughout the sub-region. We are also concerned that ethnic clashes 
could easily reemerge without mechanisms for inter-ethnic understanding 
and cooperation, particularly given the scheduled decline in donor 
assistance.
    The Eurasia picture is more complex (Armenia, Azerbaijan, Belarus, 
Georgia, Moldova, Russia, Ukraine, and the Central Asian Republics--
Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan). 
While progress in economic policy reform has been positive, income 
inequality is increasing and long-term growth does not yet appear 
sustainable. Eurasian economies are highly dependent on primary 
commodities, and Russia dominates the economic links within the sub-
region. Depletion in human capital is a major concern, given the 
decades-long deterioration of health and education systems. With 
widespread corruption and an incomplete reform process, public trust in 
government and private institutions continues to weaken.
    The slow pace of democratization in Eurasia reflects an ongoing 
struggle between proponents of broad-based participation and the 
tradition of autocratic leadership. Political leadership in Belarus 
steadfastly resists political and economic reform and Ukraine has yet 
to fully embrace democratic reform. The Central Asian and Caucasus 
countries struggle with a mindset more in keeping with Soviet times, 
rather than with a post-Soviet, fully democratic era, and Turkmenistan 
is particularly unreceptive to transition.



    As for the Central Asian Republics who have provided particularly 
strong support for Operation Iraqi Freedom, regional stability, 
particularly in the conflict-prone Ferghana Valley, is a particularly 
nettlesome issue that we are helping them address through employment-
generation programs, community development activities, and support for 
civil society development and advocacy. Other issues they face include 
harnessing their vast energy resources in a maimer that will produce 
benefits for their people and politically sensitive items such as human 
rights, conflict prevention, and the rule of law.
                         successes and lessons
    Since I joined USAID in 2001, I have traveled to nearly every 
country we assist in the region. I have seen first hand what USAID has 
accomplished with the resources appropriated by Congress. Our in-
country presence is most opportune, constituting an exceedingly 
valuable asset. It enables us to adapt to changing circumstances, 
design projects that work well, apply resources where it counts, and 
achieve results.
    Our ability to make small investments that reap multiple benefits 
has been proven repeatedly. For example, in Russia, USAID supports 
indigenous think tanks as an effective way to promote policy reform at 
the national level. One of these think tanks has played a pivotal role 
in helping a Presidential Commission develop a new concept for 
intergovernmental fiscal relations. Another has been a key advocate for 
a variety of laws that have opened the doors to the private ownership 
and sale of land, private mortgage lending, and the introduction of 
means-testing in the delivery of social services. Not only does this 
approach produce policies that are sensitive to the Russian context, it 
builds local institutional capacity that will continue to advocate for 
reform long after USAID departs from the country.
    Once many of the basic reforms are in place, USAID has found it 
important to ensure the benefits of transition reach beyond the capital 
into secondary cities, towns, and rural areas. In Bulgaria, USAID 
established the Partners in Local Economic Development and Government 
Effectiveness (PLEDGE) program to target opportunities in regions with 
the highest poverty and unemployment rates. PLEDGE brings together 
participants from the public, private, and NGO sectors to discuss 
business conditions, make economic choices, and build partnerships. 
Over four years, the program has reached some of the poorest 
communities in Bulgaria through 197 economic development projects that 
have produced 534 new partnerships, 88 new businesses, and 3,535 new 
jobs. In 2004, the PLEDGE system will be incorporated into the 
Bulgarian Ministry of Labor and Social Policy and its Social Investment 
Fund. The Bulgarian government plans to allocate $40 million over the 
next five years to continue this local economic development process.
    Where central governments lack the political will to implement 
reforms or deliver services to towns and villages, we focus our 
resources at the local level. In Azerbaijan and Georgia, community 
mobilization programs are inspiring hundreds of communities to 
collaborate on the design and implementation of local improvement 
projects, from rehabilitating schools to cleaning out irrigation 
systems vital to agriculture. Over time, these efforts are augmented 
with support for micro business and NGO development. As these 
organizations mature, they become part of a growing constituency for 
change. Similar approaches have been used in Bosnia and Herzegovina, 
Kosovo, Macedonia, Serbia and Montenegro, and the Central Asia 
Republics to rehabilitate communities and promote inter-ethnic 
cooperation after a period of conflict.
    In the last several years, USAID has advanced a highly 
participatory dialogue on the social aspects of transition. Because the 
impact of change on basic human welfare in Armenia has been so harsh, 
USAID initiated a comprehensive social transition program that coupled 
policy and systems reform with targeted direct assistance to the most 
vulnerable. Significant progress has been made in establishing the 
legal and regulatory framework needed for implementing fair and 
transparent social insurance and assistance systems. Pension reform 
also has met with considerable success in Bulgaria, Croatia, 
Kazakhstan, and Macedonia. In Croatia, for example, surveys among 
members of the workforce showed that acceptance and understanding of 
pension reform had increased from 30% to over 80%, following 
implementation of a USAID-supported public education program that 
provided details of this reform to the general populace. Workers are 
now signing up in large numbers to contribute 5% of their pensions to 
newly-created, private funds. USAID is continuing to support pension 
reform by working with the regulatory authority to ensure sound 
management of the private pension funds.
    We have had some impressive successes in the health arena. For 
example, we have helped introduce modern approaches to tuberculosis 
control in the former Soviet Union and contributed to a significant 
reduction in abortion rates through reproductive health programs. 
USAID's women and infant health initiative has helped Russia achieve a 
dramatic (23%) decline in infant mortality since 1996. In Ukraine, the 
government was so impressed with USAID's 12 model primary health care 
centers that the Ministry of Health has now replicated the model to 
over 260 centers. Also, a USAID pilot program in Ukraine has 
demonstrated a 50% reduction in mother-to-child transmission of HIV. 
Understanding that efficient health services and healthy populations 
are critical to successful democratic and free market transitions, we 
are committed to expanding and strengthening our programs in combating 
HIV/AIDS, tuberculosis, and other priority health challenges facing the 
region.
                             urgent issues
    In light of these many successes, however, we also face several 
large and growing problems--which, we believe, are causing backsliding 
in economic and democratic reform and could put the transition of some 
E&E countries at risk if they are left unattended. These issues are the 
rapid spread of HIV/AIDS, human trafficking, endemic corruption, latent 
conflict, and a need for greater attention to be focused on the 
fundamental values needed to create thriving democracies and market 
economies that will last far into the future.
    HIV/AIDS. Experts on the spread of HIV/AIDS are warning of acute 
dangers in the near future because of the sharp rise of cases of HIV/
AIDS in the region. Concerns are particularly focused on Russia and 
Ukraine, which have some of the highest HIV/AIDS rates of growth in the 
world. Although the disease is presently confined mainly to illicit 
drug use and prostitution, there is growing evidence that HIV/AIDS is 
moving into the general population. Access to illegal drugs, the 
coincidence of injecting drug use and prostitution, unprotected sexual 
relations, human trafficking, lack of blood security, and inadequate 
health systems, as well as unemployment and feelings of despair among 
youth are all contributing factors.
    Human Trafficking. Trafficking in persons is an explosive human 
rights abuse and a highly lucrative, illegal and dangerous global 
business. An estimated 175,000 persons are trafficked in and through 
the E&E region, representing about 25% of all persons trafficked around 
the world. Most of the countries in the region are source and transit 
countries and some are becoming destination countries.
    Corruption. Despite USAID efforts to address the issue of 
corruption across all sectors of its program, long-term gains have not 
yet been realized. Transparency International reports that corruption 
is perceived to be higher in Eurasia than any other region in the 
world. In Southeast Europe, it is roughly the same as found in Latin 
America. The cost of corruption is enormous. It deters private 
investment, debilitates the institutions intended to serve citizens' 
needs, and undermines basic codes of conduct, trust, and cooperative 
behavior between individuals and groups.
    Latent Conflict. While the outbreak of violence in E&E countries 
has diminished, the risk of conflict has not been eliminated. The lack 
of social cohesion, growing inequities in income and access to 
services, and a general distrust of government are all potential 
sources of conflict. The risk is particularly acute where democracy has 
stalled or declined, since the potential for conflict increases 
exponentially when groups within a country lack channels to voice their 
issues and petition for equal access and opportunity.
    The Issue of Values. There is a common issue that permeates many of 
the transition obstacles discussed above. It is a failure to understand 
the importance of cultivating values that make democracy and private 
enterprise work for the greater good in society. A particularly serious 
problem in the region is the fundamental misunderstanding of what 
capitalism and democracy are. Too often, capitalism is understood to be 
individual greed. In fact, in the West, capitalism in its essence is a 
system of economic freedom within the context of the rule of law, which 
rewards initiative, hard work, and creativity. Furthermore, the 
evolution of free markets in the West has included the broad concept of 
societies providing a ``social net'' of protection for those 
individuals and their families who, through no fault of their own, have 
significant needs. Philanthropy is an important component of Western, 
free market society.
    Democracy, also, is frequently misunderstood. Too often it is 
defined as ``majority rule.'' But, free and honest elections do not 
alone ensure democracy. Such a truncated definition of democracy can be 
indistinguishable from fascism. Just because the majority--even the 
overwhelming majority--votes to commit genocide against a minority, it 
does not make it right or democratic to commit such an act.
    Democracy must always be understood to consist of a whole series of 
elements: minority rights, religious freedom, separation and limitation 
of power, a vibrant civil society including an independent media, 
elections, rule of law, and a free economy. We must steadfastly affirm 
that the foundation for a full democracy, a free economy, and a 
healthy, compassionate society must be a bed-rock of values--values 
appealing to that within each human being which transcends narrow self 
interest.
    Democracy and the Islamic Context. Examining the issue of values 
also provides an opportunity to look at the apparently growing divide 
between much of the Muslim world and western democracies. Among E&E 
transition countries, eight are historically Islamic while several more 
have significant minorities with Islamic roots. If these populations 
are economically or politically marginalized during the post-communist 
transition, the stability of the region can be put at risk. Unemployed 
and disillusioned youth in historically Islamic areas may be 
particularly vulnerable to the rhetoric of Islamic political radicals--
radicals who often come from outside the region.
                  the fy 2003-2004 program and budget
Current Budget Trends
    After 10 years of high assistance levels to the region, the FY 2003 
budget and FY 2004 request reflect a realignment of priorities, 
including a significant decline in levels for key countries owing, in 
part, to progress made in reforms. The SEED appropriation for FY 2003 
is approximately $522 million, of which USAID manages $357 million 
(68%) of the total. For USAID, this represents a funding decline of 16% 
from FY 2002. In FY 2004, the SEED request totals $435 million, of 
which $296 million (68%) is proposed for USAID programs. USAID's 
allocation represents a funding decline of 17% from FY 2003.
    Reform progress in many of the Southeast Europe countries is 
permitting fairly dramatic budget reductions. Croatia and Bulgaria are 
now on a ``glide path'' towards graduation, with a final request for 
bilateral assistance funding coming in FY 2006, provided progress on 
reform continues. Pending further review, Romania may be put on a 
similar phase-out schedule. As the U.S. Government begins preparations 
to leave this sub-region, it will look increasingly to the Europeans to 
support the integration of Southeast Europe into regional institutions.
    The FSA appropriation for FY 2003 is $755 million, of which USAID 
manages $452 million (60%). This is only a slight decline from FY 2002 
levels, before two large budget supplementals related to the war on 
terrorism increased FY 2002 resources. The FSA request for FY 2004 
totals $576 million, of which $418 million (73%) is proposed for USAID 
programs. The proposed drop for USAID funding between FY 2003 and FY 
2004 is 7.5 percent. However, proposed changes in some country levels 
are even more telling.
    In FY 2004, proposed USAID funding drops significantly for Russia 
(by 33%) and Ukraine (10%) in comparison to the current FY 2003 budget. 
Levels for Russia are declining, as the U.S.-Russian partnership in 
global matters continues to mature and economic assistance becomes less 
central to this relationship. Ukraine's lower funding level reflects 
difficult budget choices that had to be made among competing 
priorities, including increasing funding for the front-line states of 
Central Asia. Finally, I would note that the lower funding levels for 
all FSA recipient countries reflect the shift of roughly $110 million 
in funding for professional and educational exchanges from the FSA to 
the Educational and Cultural Exchanges account in the Commerce, State, 
Justice appropriation.
    For their part, the Caucasus countries have been U.S. allies in the 
war on terror. They have much to accomplish in their transitions. They 
will, therefore, continue to receive significant resources. As for the 
Central Asian Republics, funding has increased significantly, starting 
in 2002, as a result of the heightened importance of this region since 
September 11. Country budget level trends for FY 2001-2004 are 
illustrated in Annex 2.5.
The Program
    USAID's challenge is to maximize and sustain the impact of 
assistance for both countries that will continue to need our help and 
those expected to graduate in the near to medium-term. To do this, 
USAID is adapting its assistance strategy by adjusting core program 
areas to reflect transition progress and urgent issues; planning 
strategically for the phase-out of USAID country programs; and 
emphasizing critical crosscutting themes, such as values cultivation, 
to help sustain the transition over the long run.
    Core programs. We are incorporating new ideas into our core program 
areas of economic, democratic, and social transition to reflect the 
advances and vulnerabilities in transition status. Two emerging themes 
in the economic growth area are building trade capacity and increasing 
competitiveness. These initiatives pragmatically ``marry'' 
macroeconomic reforms and microeconomic foundations for business growth 
and link these efforts to demand in the marketplace. We also continue 
to have a significant role to play in working with micro and small 
business, in providing business development services, and in building 
access to finance, together which will help reduce unemployment--a 
significant issue within the region.
    In the democracy area, we firmly believe that our overall 
accomplishments in transition cannot be accomplished without consistent 
improvements in civic and political freedoms, particularly in Eurasia. 
To this end, we are augmenting our traditional programs (NGO 
development, independent media, judicial and parliamentary 
strengthening, and local governance) with the intention to emphasize 
even more than in the past those universally recognized values that 
buttress a full understanding of democracy. These include majority rule 
and minority rights, good governance, freedom of speech and press, rule 
of law, religious freedom, human rights and civic participation. USAID 
is also including conflict prevention programs and modules into 
strategies for at-risk countries, such as Georgia, Macedonia, and the 
Central Asian Republics.
    In the social area, we will continue to develop awareness and 
targeted initiatives to broaden access to the benefits of reform, 
thereby sustaining support for the transition to democracy and free 
markets. We are redoubling efforts to fight the spread of HIV/AIDS, 
stem the growing tide of human trafficking, and mitigate the adverse 
impacts of transition, including such programs as public-private 
partnerships for social insurance and pension reform.
    Planning for program phase-out. In the face of lower resource 
levels, considerable adjustments to USAID's bilateral and regional 
transition programs are required. In keeping with the State 
Department's Balkans Assistance Policy, USA]D is using increasingly 
scarce monies to place greater emphasis on civil security, including 
the rule of law, independent media, and democratic reforms. An 
overriding theme in phase-out planning will be to find ways to decrease 
the region's vulnerability to conflict and ensure that political and 
economic instability do not provide a seedbed for terrorist activity 
and financial networks. In Eurasia, highest priority will be given to 
assuring, as much as possible, the irreversibility of the economic 
transition, to focusing on accelerating progress in democracy and 
governance, and to helping to control the spread of HIV/AIDS and 
multiple drug resistant tuberculosis (TB). These emphases are reflected 
in resource allocations across sectors (see Annex 2.4).
    Systematic planning for the eventual end of assistance enables 
USAID to ensure the sustainability of assistance gains in a number of 
ways. These include: focusing resources on the most critical 
vulnerabilities and gaps in a country's transition, determining areas 
that may need attention after USAID departs, and preparing for an 
orderly close-out of activities. Phasing-out a bilateral program is by 
no means the end of our connections. We have continued our close 
connections, including some modest funding, to the eight European 
Northern Tier countries, and we will do the same with those who 
``graduate'' in the next few years. These countries are our allies and 
friends, and we seek their partnership in addressing a range of 
development issues, such as trade and investment, infectious disease 
control across borders, and drugs and human trafficking.
    Building on our experience with the European Northern Tier 
graduates, USAID is exploring appropriate post-presence initiatives as 
a way to consolidate assistance gains and carry support for democracy 
and markets into the future, even after a local USAID mission is 
closed. Post-presence initiatives include wrap-up activities that 
complete work already underway, support to local organizations--such as 
NGOs--to sustain results already achieved, and legacy mechanisms and 
partnerships, which could be of a bilateral or regional nature.
    For example, one of the legacy mechanisms created as the European 
Northern Tier countries prepared for graduation was the Baltic American 
Partnership Fund, which continues to provide an environment for Baltic 
NGOs to be forces in sustaining the transition to market democracies. 
Another is the Polish-American Freedom Foundation (PAFF), which was 
established with earned proceeds of the USAID-supported Polish-American 
Enterprise Fund. PAFF is a private, nonprofit organization that uses 
income from investments to promote economic and democratic reform 
without requiring active USAID involvement. Recently, the newly-formed 
Balkan Trust for Democracy was set up jointly by USAID, the German 
Marshall Fund, and the Mott Foundation. This public-private partnership 
establishes a $25 million Trust that will provide continuity and 
grassroots support for democracy and good governance through a small 
grants program.
    This partnership with the German Marshall Fund and the Mott 
Foundation is but one example of USAID/E&E Bureau's commitment to 
developing private-public alliances under our Agency's Global 
Development Alliance (GDA) business model. In FY 2002, the Bureau 
obligated nearly $15 million that was matched by nearly $39 million 
from private sector partners, much of which was devoted to the 
Earthquake Zone Alliance in Armenia. With the support of USAID's GDA 
Secretariat, both Washington-based and field staffs are receiving 
training in the identification and development of public-private 
alliances. We expect each of our overseas missions to redesign past 
activities or design new ones to leverage additional funds from the 
private sector.
    Crosscutting themes. To augment and support the efforts of our 
Missions overseas, we are allocating part of the regional budget to 
fund interventions intended to incorporate values into core programs. 
Specifically, we will invite qualified partner organizations to propose 
innovative ideas that cultivate and strengthen universally recognized 
values in support of USAID's program goals in the economic, democratic, 
and social transition. USAID also is committed to promoting democracy 
and human rights in an Islamic context and to minimizing opportunities 
for violent extremism in historically Islamic areas.
    Corruption and conflict are also critical crosscutting issues and 
relate substantively to the E&E Bureau's new initiative on values. 
Overcoming corruption requires not only the strengthening of laws and 
institutions, but also cultivating the capacity for honesty and good 
will inherent in all societies. Reducing the risk of conflict within 
and between countries necessitates a respect for the dignity and worth 
of every human being, regardless of their religion, ethnicity, or 
worldview. To this end, we are helping our field Missions to 
systematically analyze current portfolios through corruption and 
conflict lenses and to incorporate these types of assessments into new 
program development. Our Washington headquarters office is also 
developing a system to track conflict-related trends to enable cross-
country analysis and better targeting of resources in this area. 
Finally, we are working in tandem with USAID's new pillar bureaus to 
address these issues. For instance, during the past year, the new 
Conflict Management and Mitigation Office with the Democracy, Conflict, 
and Humanitarian Assistance Bureau helped our Missions in Armenia, 
Georgia, and Kyrgyzstan to conduct conflict assessments as part of 
strategic planning preparations.
    In all our programs, we will continue to emphasize themes such as 
democratic and economic governance, host country ownership, 
performance, and accountability, themes that have assumed even more 
importance with the President's landmark Millennium Challenge Account 
(MCA) initiative. The issues of improved economic, democratic, and 
social governance--key themes of the MCA--traditionally have been at 
the heart of all the Bureau's transition work. We endorse strongly the 
MCA premise that economic development assistance in poor countries 
works best when sound policies are pursued that are conducive to 
growth. We also will redouble efforts to get other members of the donor 
community to focus on these themes, a key point made in the publication 
``Foreign Aid in the National Interest,'' a report promulgated by our 
Administrator--Andrew Natsios. In sound policy environments, every 
dollar of aid attracts two dollars of private capital.
            assistance from the foreign relations committee
    You asked in your invitation to us if there was any way that you 
could help us out. In general, we are most pleased with the authorities 
that you have accorded us. They provide us considerable flexibility and 
latitude in our programming. We especially appreciate ``notwithstanding 
authority.'' That has really helped us in program implementation and is 
one factor contributing to the impressive development results that we 
have been able to achieve in such a short time.
    We are also finding one tool to be excellent--Development Credit 
Authority, although we recognize that it has been appropriated but not 
authorized. It permits us to leverage significant support for our 
recipient countries at small budgetary cost to the U.S. government. We 
already are reaping considerable benefits from the use of this 
innovative tool, e.g., a $20 million housing facility for Croatia and a 
$6 million Ukraine agri-business program.
    We are reviewing other areas where legislative changes could 
provide flexibility to address the new challenges that the E&E region 
is facing, including HIV/AIDS, Muslim World Engagement, Trafficking in 
Persons, clean air emissions, and other pressing priorities. After we 
review the types of changes needed within the Administration, we look 
forward to discussing any needed changes with the Committee.
    cyprus, northern ireland and the republic of ireland, and turkey
    Outside the E&E transition countries, USAID is managing program 
resources in other areas. Traditionally, Congress provides Economic 
Support Funds (ESF) to Northern Ireland and the Republic of Ireland and 
Cyprus to promote reconciliation and conflict resolution through local, 
bi-communal initiatives. The FY 2003 appropriation for Cyprus is $15 
million and $25 million for Northern Ireland and the Republic of 
Ireland (excluding the Walsh Visa Program). The FY 2004 request 
proposes $7.5 million for Cyprus ($7.5 million reduction) and $8.5 
million for Northern Ireland and the Republic of Ireland (a $16.5 
million cut).
    The FY 2004 budget request also proposes $200 million in ESF funds 
to Turkey for debt servicing in support of its economic recovery.
                               conclusion
    USA]D remains committed to the important task of promoting 
democracy, free markets, and social stability in Eastern Europe and the 
former Soviet Union. We are proud of our successes, and yet we are very 
aware that there is much left to be done. The remaining work to further 
stabilize the Balkans and Eurasia is closely connected to U.S. 
strategic interests to promote stability, nurture important allies, and 
reduce opportunities for the spread of terrorism where stability is not 
present. As new priorities emerge in other parts of the world, I urge 
the distinguished members of the Senate Foreign Relations Committee to 
provide continued support to the program in Europe and Eurasia so that 
we can achieve the worthwhile and strategic foreign policy objectives 
which are so vital to U.S. and regional interests in this important 
part of the world.
    Thank you, Mr. Chairman. I would be most pleased to answer any 
questions you or the Committee may have.

                                Annexes

           annex 1: map, noting seed, fsa, and esf countries.


                 annex 2: seed and fsa funding trends.

                  E&E Budget Trends and Funding Levels

Appropriation Trends, FY 1992-FY 2004 (see Chart 2.1)
   Early SEED funding averaged about $400 million annually. 
        Following a peak of $497 million in 1996, resources for Europe 
        started to decline as the countries in northern tier Europe 
        approached graduation from bilateral assistance. Higher levels 
        after 1998 reflect additional support to Southeast Europe as a 
        result of the Kosovo crisis and the changing political 
        landscape in Croatia and Serbia. The drop in levels beginning 
        in 2003 reflects progress in Southeast Europe and planning for 
        graduation.

   FSA funding peaked in FY 1993 due to a supplemental 
        appropriation resulting from the Clinton-Yeltsin summit in 
        Vancouver, Canada. The funding level for 1995 also spiked as a 
        result of increased resources for Russia. Funding for Eurasia 
        has stabilized around $800 million annually between 1998 and 
        2001. Appropriations have contained substantial earmarks and 
        directives for Armenia, Georgia, and Ukraine, as well as 
        funding for the Clinton Administration's Expanded Threat 
        Reduction Initiative (ETRI). The drop in levels in FY 2003-2004 
        reflect a realignment of foreign policy priorities and a 
        separate appropriation for the Educational and Cultural 
        Exchanges Account in the Commerce, State, Justice 2004 
        appropriation.
Resources to USAID and Other USG Agencies (see Charts 2.2)
   U.S. assistance to Europe and Eurasia is overseen by a 
        legislatively-mandated State Department Coordinator and 
        implemented by various USG agencies. USAID has managed the 
        largest portion of assistance to the region, although 
        percentages have varied.

   The strong, multi-agency USG response to the Kosovo crisis 
        resulted in an increasing share of SEED funds transferred to 
        other agencies during 2000.

   The share of total FSA funding managed by USAID decreased 
        from 62% in 1999 to a low of 52% in 2000, as the administration 
        implemented ETRI. Since then, USAID's share has gradually 
        increased.
Budget Allocations by Sector (see Charts 2.3 and 2.4)
   SEED and FSA funding support the transition of the region to 
        market-oriented democracies. Resources are allocated to four 
        broad program areas: economic restructuring; democracy; social 
        transition; and humanitarian assistance.

   Cumulative obligations through FY 2002 (chart 2.3) show that 
        the economic restructuring area (including energy and 
        environment) has captured the lion's share of resources at 53%. 
        This percentage is gradually decreasing as an increased 
        proportion of SEED resources are allocated to democracy-
        building.

   Humanitarian assistance (about one-fifth of obligated 
        resources) has addressed the fallout from conflicts and natural 
        disasters, particularly in the Caucasus subregion, Tajikistan, 
        and the countries and provinces that comprised pre-1989 
        Yugoslavia. Humanitarian programs provide emergency relief and 
        lay the foundation for recovery through community-based, self-
        help projects.

   Social sector resources support improved health care and 
        provide for a social sector strategy that addresses the social 
        safety net issues related to transition.
Country Budget Levels, FY 2001-2004 (see charts 2.5)
   SEED and FSA budget trends for each country are shown.
FY 2003-2004 Budget Levels Compared (see charts 2.6)
   Current funding for Kosovo, Montenegro, and Serbia 
        constitutes 45% of the total SEED budget, reflecting the 
        priority attributed to the post-Kosovo situation. Bosnia and 
        Macedonia each capture 10% of SEED resources. Programs for 
        Albania, Bulgaria, Croatia and Romania each share between 5-6% 
        of resources. Regional funds include legislative earmarks for 
        the Baltics ($5.0 million). It is anticipated that the country 
        share of SEED resources will vary only slightly in FY 2004.

   In Eurasia, Russia and Ukraine capture the greatest 
        proportion of FY 2003 FSA resources (20 and 18%, respectively), 
        followed by Armenia and Georgia (12% and 11%). In the FY 2004 
        budget request, these proportions decline for Armenia, Russia, 
        and Ukraine.
        
        
        
        
        
        
        
        
        
        
        
        
        
        

    Senator Allen. Thank you, Mr. Hill and Secretary Ries, for 
both your statements and your outstanding leadership on behalf 
of our shared principles in these areas from Eurasia to 
northern and southeastern Europe.
    Before I ask some of these questions, I do want to preface 
my questions with what is on everyone's mind right now--in the 
countries in which you all are discussing and the focus of this 
hearing, in particular, in Europe and Eurasia.
    There are concerns with some of our allies, NATO allies, 
concerns with Russia, Turkey, France, Germany, Belgium. In this 
country--and you hear it, you read it, ``Gosh, why aren't they 
with us.'' It is my belief that we will prevail in Iraq with 
our willing allies. We will disarm Saddam and that regime and 
we will liberate the people of Iraq.
    The extent that some of these countries will want to assist 
in the rebuilding of Iraq remains to be seen. It will need to 
be done consistent with our principles in recognizing the right 
of the Iraqi people to have the assets of their oil as a 
national asset and the whole list of priorities and principles 
that will guide us, not just in the military action, but, more 
importantly, after the military action is successfully 
concluded.
    In the aftermath of the military action in Iraq, I think 
there probably has to be a new recognition that we are not 
always, or may not always, rely on people who, or countries 
that are normally our allies. We may not be able to rely on 
them all the time. That is a new reality, maybe a sad reality. 
You like to have your whole team and all your allies with you 
every time. Sometimes you do not. But taking the long view, 
while we have these concerns right now, I think it is very 
important that we do not unnecessarily make some of these 
countries adversaries, because there are many other endeavors--
whether it is in the Balkans, whether it is the war on 
terrorism, whether it is Afghanistan, and who knows what other 
crisis--we would want to have them shoulder-to-shoulder with us 
sharing that risk, sharing that burden.
    Now, let me pose this question insofar as foreign 
assistance to Turkey. It is my understanding that we are 
continuing to provide Turkey with significant foreign 
assistance. And let me just say, Turkey is vitally important to 
us for a variety of reasons, so that our real enemies do not 
use religion as a reason or a cause for their violent anti-
American interests or actions. Now, I know Secretary of State 
Powell has just left Turkey. I think it would be helpful for 
the committee and all Americans to give your perspective of the 
meeting with Turkey. There is significant aid in here for 
Turkey, and if you could go over the strategy of using foreign 
assistance with regard to Turkey, I think this committee and 
the American public, the taxpayers, would benefit from that 
perspective.
    Whichever one of you all wants to handle that. Probably you 
are the best, Mr. Ries.
    Mr. Ries. Thank you very much, Senator. I will start, and 
Kent may want to add something.
    First of all, Senator, I share your view of Turkey. I must 
say, personally, I spent a year of my life learning the Turkish 
language, served in Turkey, I have a great affection for the 
people in the country. I agree with you that it is in a key 
piece of real estate. It is the leading secular democracy in 
the Islamic world. It is proof that an Islamic country can have 
a market economy, can be democratic. And the Turks have been 
stalwart friends of the United States for many years.
    The conflict in Iraq came upon Turkey, a month into this 
new government, shortly after they took office. It is a party 
that has not been in power before. They were confronted not 
only with the hard choices and widespread public opposition 
about the war, proposed military action if the Iraqi regime did 
not comply with U.N. Security Council mandates, but they also 
faced very difficult choices in their relations with the 
European Union and the widespread interest, including our own 
interest, in seeing a permanent settlement to the divided 
island of Cyprus. All those things hit the government quickly 
on taking office, and the leader of the AK Party, Mr. Erdogan, 
in fact, did not even have an official governmental position.
    Many of these situations have been worked through. We had 
asked the Turks for very serious help in order for an infantry 
division to, if necessary, land assault on Iraq through their 
territory, and a variety of other kinds of assistance. The 
government swallowed hard and put that to the Parliament at the 
beginning of last month and lost. I think we have to respect 
the fact that they made a very serious effort to get this 
through. And we can go into the details of why they lost, but, 
nevertheless, they have lost.
    We have made a proposal in the supplemental for a 
significant sum of money to assist Turkey, nonetheless. A lot 
less than we would have if we had had full cooperation for our 
land forces.
    The Turks, for their part, have gone back to Parliament and 
gotten parliamentary approval for overflight by U.S. aircraft 
in the conflict in Iraq. And Secretary Powell has just been 
there, as you mentioned today, and had very good meetings with 
President Sezer, now Prime Minister Erdogan, Foreign Minister 
Gul, and the Chairman of the Turkish Joint Chiefs of Staff. And 
through those meetings, the Secretary got the Turkish 
commitment to allow us to supply our forces with food, fuel, 
and water across Turkish territory, to allow humanitarian 
assistance to pass over Turkish territory into the north, and 
reaffirmed their commitment to allow overflights. This is 
making a major contribution to the war effort for us.
    And we continue, of course, to be interested in Turkey's 
own economic development and success.
    Senator Allen. Before you go further, they are letting our 
troops get fuel, food, and----
    Mr. Ries. Food, fuel, and water across Turkish territory on 
land.
    Senator Allen. For our troops.
    Mr. Ries. And for the region, yes, and humanitarian 
assistance. The Secretary just had a press conference a couple 
of hours ago and discussed this.
    Senator Allen. We were in a top-secret briefing looking at 
the whole thing.
    Mr. Ries. Sometimes it is hard to tell in a top-secret 
briefing what is really important, because you can't watch CNN.
    Senator Allen. Go ahead. Well, that is some progress.
    Mr. Ries. That is considerable progress.
    Senator Allen. And I also understood that--and what was 
resolved as far as Turkish troops going into Northern Iraq if 
you are allowed to say that?
    Mr. Ries. We have an agreement with Turkey that they would 
not, absent some severe threat to their national interest, 
which I guess any country would add to the proposition, but 
they have agreed not to go in unilaterally. They have agreed to 
consult with us about the situation in the north and reaffirm 
that with the Secretary.
    Senator Allen. And do they recognize or agree that the 
refugee concern that they had of Kurds leaving Northern Iraq 
into Turkey--which did happen back in the 1991 war.
    Mr. Ries. It did happen. 30,000 in 1991.
    Senator Allen. But right now, from all information that I 
have received, and this is from State Department people, that 
there have been virtually no refugees leaving Northern Iraq 
going into Turkey.
    Mr. Ries. That is right, and they agree with us on that.
    Senator Allen. They agree with that. All right. Well, if 
you could go forward on our strategy again.
    Mr. Ries. Well, I think our strategy--Turkey has its own 
considerable economic challenges. You are aware, Senator, that 
the Turkish public and widespread sections of the business 
community believed that the conflict in 1991 led to a 
persistent period of economic weakness for the country. Their 
economists argued that on various points, but it is a political 
fact that they believe that the 1991 conflict harmed their 
economy and that the assistance that they received from the 
international community was inadequate. The Turkish economy 
now, even before our conflict, faced some very serious 
challenges. Interest rates are too high. They have problems in 
a variety of sectors and they have had a series of arrangements 
with the IMF.
    We have been very clear that we think that the Turkish 
Government ought to stay the course with the IMF in its own 
interests, and we have been supportive of the tough choices 
that they have needed to make in that process. Our assistance 
will help them meet their very serious macroeconomic challenges 
as well as help their military with its own re-equipping 
program, which is a contribution to NATO.
    Senator Allen. Mr. Hill.
    Mr. Hill. Just a couple of comments. It should be obvious, 
I am sure, that whatever amount is finally appropriated to 
Turkey will flow through this Bureau or through whatever 
mechanism is decided not in the traditional assistance way the 
programs often do. Whether it is cash transfers, or loan 
guarantees, or, as Mr. Ries pointed out, other ways that will 
help at a macro level, it is not typical development 
assistance.
    I do want to note something about what you said regarding 
your concerns about the relations with European allies, and 
here I have four quick points.
    It would seem to me that the lesson since World War II is 
that the remarkable strategy of the Marshall Plan, which said 
even countries that had been former enemies should be helped to 
establish democracy and restore their economies, paid wonderful 
benefits to us during the Communist era, during a very 
dangerous time. I think when the history of the 20th century is 
told about America, that is going to be one of the shining 
moments of American history.
    But there is a followup to this, and this is my second 
point. What we have done since 1989, again, with former 
enemies--whether it is the Warsaw Pact or the Soviet Union--the 
assistance, the billions of dollars that have flowed in this 
direction, have in fact, once again provided us with 
extraordinarily loyal allies. It is no coincidence that in 
Eastern Europe, about 11 countries, by my count at least, and 
four in the FSA account, are very supportive of U.S. policy--
tough policy with respect to Iraq. I do not think it is a 
coincidence. I do not think it is accidental.
    Or consider what we did in the 1990s with respect to the 
Balkans and Kosovo and Albania and the struggles that were 
there. Our defense of Muslim populations has gained us 
tremendous support in that part of the world. When I visit 
Albania, I do not think there is a country I visit in the 
region where I sense that there is more genuine love and 
respect for the United States than in that country, which is 
overwhelmingly Muslim.
    Third, with respect to Russia, I know that we are at a 
bumpy place in the road with respect to their attitude toward 
Iraq, but I think any sane political scientist or student of 
history would acknowledge that despite this rough place in the 
road, the relationship with Russia is fundamentally different 
from 15 years ago, and we will get through this era. There is 
so much common ground between Russia and the United States that 
that relationship, I do not believe, is going to be 
fundamentally or for a long time damaged by this disagreement 
over Iraq. And again, I think it is partly because of our 
assistance strategy, which has involved us there.
    Fourth, I would point out that as we think about ways to 
repair the relationships with some of our European allies, it 
is worth noting that there is already--going on now, goes on 
throughout this conflict and beyond--very good collaboration 
and coordination between U.S. foreign assistance, USAID, and 
European donors and the E.U. We invariably meet with these 
folks on our trips. We talk about who should be involved in 
what part of the development's pie, and that relationship will 
help us, I think, restore better relations even with some of 
the Western European allies that have been strained in recent 
days.
    And one final point with respect to Turkey, since you were 
mentioning the relationship with Turkey. I actually believe 
that Turkey is going to be of help to us in Europe and Eurasia 
with respect to those 8 out of 19 major recipient countries 
that have historically an Islamic population. When we are 
trying to make the case that you do not have to choose between 
being a serious Muslim and being a supporter of democracy and 
free markets, you need to have people within the Muslim world 
who have experimented with this. Turkey, of course, is a prime 
example of this. I would expect that we will use in our Bureau 
contacts with Turkey to allow the dialog that will go forward 
in Central Asia and Bosnia and Albania and Azerbaijan, et 
cetera. When there is a debate about whether it is compatible 
to be a supporter of democracy, religious freedom, and human 
rights and be a serious Muslim, our Turkish allies will be of 
help to us.
    Senator Allen. Thank you both for your comments. I agree 
with you. That is what I was alluding to insofar as Turkey as 
an example, and also, for those who try to say that our values 
are U.S. values and try to turn everything into religious 
differences, Turkey is very beneficial. And, in fact, when 
Turkey had some efforts in Afghanistan, that was very helpful 
to us insofar as stopping the arguments of those who like to 
divide people based on religious intolerance.
    And I agree with you on the lessons of World War II, the 
Marshall Plan as a prime example. We are proud at VMI and in 
Virginia, of the Marshall Plan. It is a shame that some of 
those countries do not remember recent history, or maybe 
appreciate it, whereas those who were formerly in the Warsaw 
Pact, Poland, the Czech Republic, Hungary, even the aspirant 
countries in the Baltics, Romania and others are very much 
appreciative and are enjoying the invigorating breeze of 
freedom through their lungs after being repressed for so long.
    And again, through this, we have to make sure, we do not 
unnecessarily create adversaries in this situation. And the 
focus so much on the few countries of Europe, particularly 
Western Europe, who are opposed to us, let us not forget that 
the vast majority of the countries of Europe are with us and 
are willing partners in this endeavor.
    As far as Turkey, you also mention their influence or 
ability to work with other Muslim countries. One issue that has 
come up has to do with oil and Azerbaijan. For the fiscal year 
2004, what is the aid that is envisioned for Azerbaijan as a 
result of the President's January 2003 exercise of the waiver 
to the Freedom Support Act, section 907, which limits aid to 
Azerbaijan. I would like to know what aid is being requested to 
support the building and the security of an oil pipeline for 
Azerbaijan to Jeyhan, which is a Mediterranean port of Turkey.
    Mr. Hill. You want to deal with security and I will deal 
with the rest?
    Mr. Ries. Yes. First of all, on our requests, we have 
requested basically $41 million for fiscal year 2004 for 
Azerbaijan. We are presently spending out of FSA funds, Freedom 
Support Act funds, $43 million a year, of which $4 million is 
security and law enforcement.
    The security funding is largely border security, as I was 
mentioning in my opening comments, expenditures for anti-
terrorism assistance, equipment and training, English language 
training for the border security forces. We are also helping 
them with anti-money-laundering and anti-terrorism legislation, 
data information systems management, and the judiciary rule of 
law, as well as other economic programs that Kent will cover.
    We are not, as far as I know, providing specific security 
assistance to provide security for the pipeline, which, after 
all, does not go just through Azerbaijan, it also transits 
Georgia on the way to Jeyhan and Turkey. I think that the 
governments are capable of providing that security, working 
with the owners of the pipeline.
    Mr. Hill. Several points. First, of all the countries of 
the former Soviet Union, despite the fact that the FSA levels 
in general are going down, if you look at the numbers for 
Azerbaijan, they are actually going up, which is indicative of 
the fact that we believe there is important cooperation and 
work that can go on there.
    The second thing, of course, that is important to remember 
about Azerbaijan is that with the 907 waiver, which allows 
USAID and other agencies of the government to work with the 
government directly, there are opportunities that we did not 
previously have. And so, for example, we are doing work with 
the Azeris and their government with respect to macroeconomic 
reforms. We are trying to create a climate--regulatory 
climate--that will be more open to small- and medium-enterprise 
development. But we have a whole portfolio of reforms in 
Azerbaijan which go beyond economics to civil society and 
social transition sorts of things.
    So we have more opportunities than we have had in recent 
years to have a fuller portfolio of programs there, and we all 
expect that within a few years, the assistance level will be 
able to drop dramatically because once the oil really begins to 
flow here, they should be able to take care of a lot of their 
needs. And that is why right now it is important to help them 
make some of the structural economic changes that will allow 
them to make use of that additional revenue and use it in a way 
that helps the population.
    Senator Allen. Thank you. Now on to Armenia. There is a 
concern that I have as well as my colleagues about the 
declining amount of foreign aid going to Armenia. While 
progress has been made in Armenia, there are those of us who 
feel that without a continued commitment of U.S. assistance, 
the country could revert back to previous policies.
    If you could share with me, with our committee, what is the 
benchmark, or what is the logic for reducing aid or the aid 
package for Armenia?
    Mr. Ries. Let me make a couple of general comments and then 
Kent, I am sure, can speak to the specifics.
    First of all, the decline in funding for Armenia is 
somewhat less than might appear because of the decision to move 
the exchange programs to the budget line for the Educational 
and Cultural Affairs Bureau as public diplomacy spending, which 
was sort of an administration-wide good housekeeping budget 
policy decision.
    For example, in fiscal year 2002, we spent $90 million in 
Armenia, of which $13 million was for exchanges. So the sort of 
net on economic development and other security and other 
related spending was $77 million or so. Some of the reason for 
the decline is the fact that the overall Freedom Support Act 
budget request has declined, and some of it reflects the 
success of previous programs.
    We have micro-credit programs, for example, in Armenia that 
have become self supporting. We have supported reforms to the 
electricity sector which have taken, and so forth.
    We continue to be committed to assistance for Armenia. We 
think Armenia is an important country, and the kinds of 
programs we are doing, the exchanges for example, have a long-
term horizon and we want to support the very good performance 
that we have seen in certain areas in Armenia over the last few 
years.
    Mr. Hill. First a little bit on the context. You are 
correct to note that Armenia really does have a steep mountain 
to climb in terms of dealing with its problems. When you 
consider the fact that during the Soviet period, Armenians felt 
protected by the Russians, they unlike some peoples of the 
former Soviet Union were more vulnerable when the Soviet Union 
broke up. Some of the subsidies and support they had 
disappeared.
    No. 2, you had the devastation of the 1988 earthquakes. I 
mean even within recent months, USAID assistance is still going 
to deal with some of those problems. You are talking about a 
very high level of poverty in Armenia, a land-locked country, 
and a tremendous outflow of population. So all of those factors 
keep the situation difficult.
    On the other side, it must be noted that of all the 
countries we give assistance to in Eastern Europe and the 
Balkans, the highest per capita rate of assistance goes to 
Armenia. And so, we have been very generous. The Congress has 
been very generous with trying to support the Armenians, and 
that reflects itself in that high per capita amount of 
assistance that goes to Armenia.
    There's another point that's probably worth noting and that 
is that typically, if you look at the funding patterns over the 
last few years, Congress has tended to raise by about 20 
percent over the request levels of the administration, the 
amounts for Armenia. I simply mention that to note that 
although it may be the judgment of the administration that in 
fact funding priorities might better be spent than another way 
in their judgment, the final dollar amount listed in the 
request may not end up being the final amount that gets 
appropriated in Armenia.
    And finally, I'd simply note that I think some of our most 
successful programs are in Armenia and it's partly because of 
the wonderful collaboration USAID has with Armenian diaspora 
groups and organizations who are unusually loyal and we are 
trying more and more to collaborate with them to leverage U.S. 
foreign assistance dollars so that whatever the amount is that 
we give, more private dollars and other sources are going in to 
help this beleaguered country.
    Senator Allen. Well, thank you for your comments, both 
gentlemen, I have a better understanding of and appreciation 
for your respect for the legislative branch in appropriations 
and also you did it in a very straight-faced way, recognizing 
budgetary horse trading as a part of the whole process. That's 
great to see. Senator Coleman, did you have any questions?
    Senator Coleman. I'll pass, Mr. Chairman.
    Senator Allen. OK. Let me ask one final question. It may 
also get into how you look at various aspects of funding in 
fiscal year 2003, the administration requested and received--
and this has to do with the International Fund for Ireland--
received $25 million. Now the funding request for 2004 has been 
reduced to $8.5 million. Now, does this reflect dissatisfaction 
with the International Fund for Ireland, or does it--does the 
improved economic situation in the Republic of Ireland and 
Northern Ireland over the last decade factor into this 
decision?
    Ireland, I will note, is probably the most vibrant and 
strong and competitive economies of all of Europe, and while 
the others have higher taxes, lower taxes in Ireland means more 
investment and more jobs. And one of the most technologically 
advanced countries. So I don't know if it's a function of their 
economic strength or whether it's a question of the 
International Fund of Ireland. If either of you or both 
gentlemen could address that, I'd appreciate it.
    Mr. Ries. I'll take a stab at it, sir. First of all, the 
administration's commitment to support the Good Friday Accords 
and the reconciliation that has taken place between both 
halves--Northern Ireland, part of the U.K., and the Republic of 
Ireland--is undiminished, and certainly very strong. I think 
that the request of $8 million was part of the hard choices 
that were made in putting together the overall request, and 
it's one more of those budget line items that reflects what 
Kent is talking about in terms of the outcomes are often 
different from the requests.
    Nevertheless, the administration does very much support the 
International Fund for Ireland. The International Fund for 
Ireland has done enormously good work, both in the north and 
the south, and in promoting economic development that promotes 
reconciliation between the two traditions of Ireland. I would 
say that the Republic of Ireland's economy has been one of the 
best reforming economies within the European Union over the 
last decade. However, they have come on some hard times. The 
collapse of the sort of dot-com bubble has hit them very hard. 
They have been disproportionately committed to information 
technology and computer industries and there actually is rising 
unemployment in the Republic, making the economic development 
activities of the International Fund all the more necessary and 
useful at this point.
    Mr. Hill. Just simply to reiterate, lest there be no 
misunderstanding, the reduced request level has nothing to do 
with performance. As I understand it, as Mr. Ries pointed out, 
the International Fund for Ireland has done very good work, 
very important work, and it's just a question of the hard 
decisions that have to be made with respect to the dollars 
available.
    Senator Allen. Thank you.
    Senator Nelson, did you have any questions of these 
panelists?
    Senator Nelson. Thank you, Mr. Chairman. Yes, I do. You're 
requesting $1 billion in aid for Turkey. Given the fact of the 
very unpleasant experience that we've had in the course of the 
last couple of weeks, why don't you justify that request?
    Mr. Ries. Yes, Senator, I'd be glad to. We talked about 
this a little bit earlier. The request for $1 billion is a 
very, very substantial reduction from the amount of money that 
we were talking about to the Turks staging land forces in 
Turkey. It represents a recognition that we have had 
nonetheless very important, strategically important support 
from Turkey in the present conflict, which has just been 
reiterated to Secretary Powell today in Ankara.
    The Turks went to their Parliament at the beginning of 
March to get Parliamentary approval for a series of memoranda 
of understanding that would have constituted full cooperation, 
and the Parliament narrowly defeated that proposition. Since 
then, the relatively new government led by Prime Minister Gul 
at the time went back to Parliament. We are talking about a 
society in which there is very widespread opposition to the 
war, and he nonetheless succeeded in getting permission for 
overflight of Turkish territory by U.S. military aircraft 
pursuing hostilities against Iraq, which was itself very 
difficult.
    We also got approval by the Turks for resupply of U.S. 
forces in Northern Iraq and for emergency landings by U.S. 
aircraft. We have to keep in mind that the Turks for 12 years 
have supported Operation Northern Watch, which allowed us to 
keep air cover over the North.
    Senator Nelson. Define the resupply.
    Mr. Ries. I'm sorry?
    Senator Nelson. Define the resupply, what you just said.
    Mr. Ries. The Turkish Government--Turkish Prime Minister--
told Secretary Powell today that that would involve land 
transport of food, fuel, and water, as well as humanitarian 
goods being supplied to the Iraqi people from Turkish ports 
overland into the North.
    Senator Nelson. Food, fuel, and water for U.S. troops in 
Iraq?
    Mr. Ries. U.S. troops and for the Iraqi people as well. And 
overflight permission to bring in anything we want to as well 
as to transit Turkish airspace by armed combatants.
    Senator Nelson. What about all of our military aircraft at 
Incirlik? They cannot launch from there and overfly for 
military operations?
    Mr. Ries. My understanding of the present situation is 
that's right. They cannot launch attacks with U.S. aircraft at 
Incirlik going into Iraq on sorties, no.
    Senator Nelson. At one point, the Turks were asking for $22 
billion in aid as the price for having us come overland. Tell 
me what you think about that.
    Mr. Ries. Well, I think that the Turks--the Turkish 
Government should speak for itself, but I do think that their 
request for assistance reflected their concern over the impact 
of a conflict on their economy. The Turkish public believes 
that the first gulf war in 1991 adversely impacted their 
economy. They estimate the lost gross national product in the 
area of $100 billion. It is certainly undeniably true that the 
prospect of conflict even now has had an impact immediately on 
the Turkish tourism and sort of travel business, which is a 
significant business for Turkey. And the transit of Turkey by 
Iraqi petroleum, for export, as the main export route under the 
Oil for Food program, that also has been slowing radically 
since hostilities began.
    Senator Nelson. Well, there are certainly good things that 
are happening. You've just enumerated them. What I can't 
understand is why we've had this wonderful relationship with 
Turkey for close to a half a century. Why is there so much 
anti-American feeling there now?
    Mr. Ries. That's a question that probably requires a long 
answer.
    Senator Nelson. Well, have at it.
    Mr. Ries. The Turkish people have become convinced that a 
war to enforce the U.N. Security Council resolutions to call 
for the disarmament of Iraq is a greater threat to their 
interest than to continue to live with the status quo. And 
their anxiety about that, I think, does not reflect a 
reevaluation of the overall position with respect to, as a 
member of the NATO alliance, as a friend to the United States, 
or as an aspirant to the European Union. It does not reflect a 
change, if you will, in the overall strategic position of where 
Turkey wants to be in the world.
    Turkey still sees itself, average Turks on the street see 
themselves, as a country that is a strong and self-sufficient 
country in a dangerous part of the world that needs to take 
tough action. I think that another part of the Turkish concern 
about conflict is the prospect of independence for the Kurdish 
regions of Northern Iraq. They took in some 30,000 refugees 
after the gulf war. They believe with some considerable reason 
that a number of these refugees contributed to an ongoing 
insurgency in the east of the country by Turks of Kurdish 
extraction, and that they spent the better part of a decade and 
lost several thousand lives in fighting.
    There is now a cease-fire within Turkey. The former head of 
the PKK, Mr. Ocalan, is in jail, and I think to the Turkish man 
in the streets, some of the talk of renewed conflict with Iraq 
raises renewed fears of problems on their southern border with 
people of Kurdish extraction.
    Senator Nelson. So, Mr. Chairman, is it worth $1 billion to 
us? Our relationship with Turkey has been a very good one and 
it's been a very important one. Turkey clearly wants to enter 
the European Union, and I think we want them to. They've got to 
get their financial house in order. That's clearly in our 
interest. It's clearly in their interest. But there is going to 
be American blood spilled because we do not have a pincer 
movement coming from the north to the south, on Baghdad.
    And that just sticks in my craw. And so the question is, is 
it worth it for us to try to repair the relationship? It 
probably is. But is it worth $1 billion? That's the question I 
raise.
    Senator Allen. Well, that will be one of those issues that 
we'll be debating. We're discussing in this committee today the 
relationship with all the countries. I will say to you, Senator 
Nelson, before you came in, I started on Iraq--excuse me, I 
started with Turkey, and we're finishing with Turkey. I found 
it also very interesting that trying to get a report on 
Secretary Powell's meeting--the key thing that you picked up on 
was the same thing I picked up on--food, fuel, and water for 
our troops. That is significant.
    I share your aggravation, recognizing what our original 
military plan was, to have based the mechanized units, the 
armored units, as well as the flights from Turkey. Thank 
goodness our special operations forces were able to get in 
there to assist and help organize the Kurds to keep that quiet. 
While efforts were made from the south, pilots flew longer 
flight missions, in their support of our troops, in preparing 
the battle ground. The mechanized units and all the 
redeployment of the ships has all been occasioned by Turkey's 
lack of assistance in allowing us to stage those troops and 
armaments in Turkey.
    It is frustrating. I agree with everything you've said. We 
will ultimately be successful, but by not having Turkey, it's 
made it much more difficult. And I suspect that you may be able 
to attribute the loss of life to that added difficulty. I'm not 
sure how we'll be able to do that, but I suspect that it is a 
logical estimate and assertion.
    Turkey, nevertheless, is a key ally for us. It is a Muslim 
democracy, and what was said earlier by these two gentlemen is 
true. It shows that one who is believing in one's faith, which 
is one's human right, but also being in a democracy--religious 
beliefs and democracy actually should go together, as opposed 
to being exclusionary to one another, which is unfortunately 
the case in much of the Muslim world.
    And your gritting of your teeth is the same as I'm doing 
with this. There's going to be some very difficult decisions we 
need to make, but I believe as we decide how much money, 
whether it's $1 billion or whether it's less, is something, as 
we make this decision, we need to take the long view, and 
what's in the best interest of the security of the United 
States, and making sure that those who are not with us in this 
particular important venture for our security and for the 
liberation of the people of Iraq, in the long run, we do not 
want to turn them into adversaries.
    It is a difficult vote that we're all going to have to 
cast, and that's the purpose of this hearing is to look at the 
larger context. I share your concerns. We're all going to have 
to examine this even further. But our time is up in this 
subcommittee.
    I thank you, Senator Nelson, for your questions. I 
particularly thank Secretary Ries and the Honorable Kent Hill 
for your testimony and your leadership for America. I will now 
conclude this part of the hearing and turn it over to Senator 
Coleman, who will chair the segment that has to do with the 
Western Hemisphere.

                HEARING SEGMENT III.--WESTERN HEMISPHERE

    Senator Coleman [presiding]. Thank you.
    We'll get this portion of the hearing going and let me 
start by saying what a pleasure it is to welcome the acting 
Assistant Secretary for Western Hemisphere Affairs, Curt 
Struble, and the Assistant Administrator for the Bureau for 
Latin America and the Caribbean at USAID, the Honorable Adolfo 
Franco.
    Gentlemen, on a personal note, thank you for taking the 
time to visit with me before this hearing to make yourselves 
available. It is much appreciated. And we do look forward to 
your testimony and our discussion today on the role of U.S. 
foreign assistance--that it can play in confronting the 
challenges in the Western Hemisphere. I would also like to say 
it's a pleasure and an honor for me to pick up the gavel at the 
Senate Foreign Relations Committee for the first time in my 
role as chairman of the Subcommittee on Western Hemisphere, 
Peace Corps and Narcotics Affairs ,and I look forward to 
working with Chairman Lugar and my colleagues on the 
subcommittee and the full committee as well as with each of the 
witnesses before us today.
    In the midst of the current war in Iraq, the continuing 
presence of U.S. forces in Afghanistan, the provocations of 
North Korea, the disagreements within NATO alliance, and the 
threat to our homeland that the nexus of terrorists and weapons 
of mass destruction poses, it's all too easy to lose sight of 
the challenges and also the opportunities that face the Western 
Hemisphere.
    Yet, because of the region's proximity and close cultural 
and economic ties, we cannot afford to let this region slip 
into the background. Let me first mention what I see as some of 
the bright lights, some of the achievements and the 
opportunities that we can build upon in fostering our policy 
goals of democracy, development and security in the region.
    With regard to war on terrorism, I understand that 31 
states in the region--nations in the region--have signed the 
Interamerican Convention Against Terrorism. U.S. security has 
been enhanced by signing and implementing bilateral board of 
partnership agreements with Mexico and Canada. Under President 
Bush's leadership last year, Congress passed trade promotion 
authority. With these fast track procedures in place, the 
prospects of passing the U.S.-Chile Free Trade Agreement and 
the U.S.-Central American Free Trade Agreement, or CAFTA, are 
much greater, and I look forward to those discussions.
    In addition, trade and investment discussions have been 
underway with Argentina, Brazil, and Uruguay, separately, and 
furthermore, talks to form a free trade area of the Americas, 
FTA, continue, and I think that's a good thing. In promoting 
the so-called second generation of democratic reforms, 28 
countries have ratified the Interamerican Convention Against 
Corruption, the first internationally binding convention to 
focus specifically on corruption.
    Increased U.S. support for the Government of Colombia has 
expanded U.S. assistance to the Government of Colombia's 
campaign against narcotrafficking. And recent indications seem 
to be that the policy is beginning to be effective in reducing 
the number of acres under cultivation in Colombia.
    In September 2001, the Organization of American States 
adopted the Interamerican Democratic Charter. This document 
gives the governments of the hemisphere a compass to guide 
their action when democracy is challenged. And over the past 
decade, many Latin American countries have made enormous 
strides in political development which certainly we support.
    These are the bright spots, and I commend the President and 
the administration for these achievements. Despite the bright 
spots, a number of areas of concern still remain in the region. 
Let me list a few of them. First, Colombia, with its problems 
of drug cultivation, violence, and political instability, 
remains high on the list of concerns, and I do hope that we 
send a very strong statement to President Uribe that we're 
supportive of his efforts.
    In addition, despite our strong relations with Mexico and 
Nicaragua, these countries continue to be major transit points 
for drugs into our country and our cities. Second, recent 
political developments in Venezuela, Bolivia, and Haiti and 
even in several Central American countries, threaten democratic 
development in these countries. Third, I was deeply concerned 
by the recent testimony of General Hill before the House Armed 
Services Committee that there appears to be or is Hezbollah or 
Hamas presence in the tri-border region of the South American 
Continent.
    Fourth, with regard to Cuba, I believe we may want to take 
a look at reevaluating our policies there, looking at those 
policies, and perhaps there are some alternatives we haven't 
previously considered that could serve to encourage a rapid 
transition to democracy, respect for human rights, and a better 
life for the people there. And I do want to note that I am 
deeply disturbed by the continued crackdown on human rights and 
democracy dissidence as well as a lack of press freedoms in 
Cuba and Senator Nelson has personally raised that concern with 
me, and I know that he is been on the forefront of that.
    Senator Nelson. As a matter of fact, it's my understanding 
that the committee will consider the resolution that I've 
filed, condemning those recent arrests, including independent 
journalists in Cuba. And it's my understanding we're going to 
take it up pretty quick, and I'm very grateful it's done in a 
bipartisan spirit, and I'm sensitive to it since of course I 
come from the State of Florida. So thank you for mentioning 
that, Mr. Chairman.
    Senator Coleman. I appreciate Senator Nelson raising the 
issue, requesting that we move on it very expeditiously. We 
will not have a hearing in this subcommittee, my understanding, 
it will go directly to full committee. Government oppression of 
oppositionists such as Oswaldo Paya, organizer of the Verel 
project, Bernardo Pedron, and others must stop, and Senator 
Nelson, I applaud you for raising the issue and being so 
outspoken, and we will have that discussion in committee.
    Finally, two countries in the region, Mexico and Chile, are 
currently members of the United Nations Security Council. 
Neither of these countries was willing to back a U.N. 
Resolution calling for the use of force against Iraq and 
implementing the 17 U.N. resolutions requiring Iraq to disarm. 
I plan to explore these concerns further after we hear the 
testimony of the witnesses.
    Senator Nelson, would you like to make some preliminary 
comments? If not, why don't we go directly to the witnesses.
    Mr. Struble.

 STATEMENT OF J. CURTIS STRUBLE, ACTING ASSISTANT SECRETARY OF 
  STATE, BUREAU OF WESTERN HEMISPHERE AFFAIRS, DEPARTMENT OF 
                     STATE, WASHINGTON, DC

    Mr. Struble. Mr. Chairman, thank you very much. Senator 
Nelson, thank you also. I appreciate this opportunity to 
testify in support of the President's fiscal year 2004 foreign 
assistance request for the countries of the Western Hemisphere. 
I have prepared a written statement that details the 
administration's policy objectives for the Western Hemisphere, 
and explains how our budget request will contribute to their 
achievement, and I respectfully request the committee's 
approval that it be entered into the record.
    Senator Coleman. Without objection.
    Mr. Struble. No region of the world is more important to 
the prosperity and security of the United States than the 
Western Hemisphere. Most of the petroleum we import comes from 
suppliers in our own neighborhood. Our largest export market is 
Canada, and we sell more of our products to Latin America and 
the Caribbean than we do to either the European Union or East 
Asia.
    The exchange of goods is accompanied by a large-scale 
movement of people. The U.S.-Mexico border, for example, sees 
more than 1 million legal crossings every day. This 
interdependence carries opportunities, but also carries risks. 
Ours is a region where failure to address the consequences of 
devastating natural disasters, failed economic policies, or 
political instability translates quickly into a surge of 
illegal migration into the United States.
    It's a region where our neighbors' success in treating 
communicable diseases has consequences for the health of our 
own citizens. And it's a region where weak governments can 
create space for transnational criminal organizations that 
threaten our well-being. We pursue three overriding objectives 
in the Hemisphere--deepening the institutions of democracy, 
encouraging economic development and expanded trade, and 
enhancing security against the depredations of transnational 
crime and terrorism.
    USAID Assistant Administrator for Latin America and the 
Caribbean, Adolfo Franco, will describe for you how our child 
survival and health programs and our development assistance 
support these policy objectives. My presentation will address 
the role played by Economic Support Funds, known as ESF, and 
Foreign Military Financing, as well as the Andean Counter Drug 
Initiative.
    Democracy has come a long way in the hemisphere in the last 
20 years. While free elections are the norm throughout most of 
the Americas, they are not enough in themselves. The people of 
the hemisphere are expressing discontent with the quality of 
their democracy and the perceived inability of their 
governments to deliver higher standards of living, safe 
streets, and good schools. They want, and we promote, second 
generation democratic reforms that enhance the honesty and 
efficiency of government institutions and encourage investments 
in people.
    The $86 million in ESF that the President has requested for 
the Western Hemisphere will support these efforts by, for 
example, providing technical assistance for the reform of 
judicial institutions, training legislative staffs so that the 
second branch of government can do a more efficient job in 
performing its role in the democracy, promoting citizen 
involvement in government institution-making, strengthening the 
ability of governments to fight official corruption, and 
helping municipal and regional governments improve the delivery 
of services.
    The $7 million in ESF will support our democratic outreach 
programs in the only remaining dictatorship in the Western 
Hemisphere, Cuba. This money will buy books, radios, and other 
informational material for Cuban dissidents, and help 
opposition leaders and human rights workers.
    USAID's Development Assistance account is our primary tool 
in supporting economic and human development. ESF does provide 
some technical assistance to help governments adopt sound 
macroeconomic policies. It also finances some microfinance 
projects that permit the poor to become more productive.
    USAID LAC works very closely with my Bureau to ensure that 
it's economic development program supports our policy 
priorities. I particularly wish to commend USAID for its 
efforts to ensure that the benefits of freer trade which we 
seek through CAFTA and FTAA, as mentioned by the chairman, will 
provide upward mobility to the poor.
    For this to be the case, governments must begin now to help 
the poor develop skills that they'll need in the workplace. The 
most pervasive threat to the security of Western Hemisphere 
countries is posed by transnational crime. The networks 
criminal organizations employ to move arms, narcotics, money 
and people into and out of the United States represent a 
pipeline that can be exploited by terrorists.
    In Colombia, crime, especially narcotics, finances the 
activities of three foreign terrorist organizations that are 
waging an increasingly cruel battle against the civilian 
population. One year ago, in connection with the 
administration's fiscal year 2002 supplemental request, we 
asked for and received expanded authorities to assist the 
Government of Colombia to combat the intertwined threats of 
narcotics trafficking and terrorism. And we ask that the 
Congress extend these authorities for the coming years.
    Three years ago, when the administration submitted the plan 
Colombia supplemental to the Congress, we set an important 
objective for ourselves, reversing the expansion of coca 
cultivation in Colombia in 2002. We met that goal last year 
when cultivation fell by 15 percent, reversing a decade-long 
trend. The Andean Counter-Drug Initiative, launched 2 years 
ago, recognized the need for a coordinated regional approach to 
fighting narcotics. The ACI seeks not just to eradicate coca 
and opium poppy, but to provide alternative development 
opportunities to poor farmers and to strengthen government 
institutions in the region.
    The administration's ACI request level of $778 million for 
fiscal year 2004 will allow us to continue this important work. 
And, Mr. Chairman, I want to take just a moment also to 
acknowledge that we have with us today Acting Assistant 
Secretary Paul Simon of the International Narcotics and Law 
Enforcement Bureau.
    Our fiscal year 2004 budget request also seeks $143 million 
in Foreign Military Financing for the region. And $110 million 
of this money is proposed for Colombia. About one-third of that 
will help train Colombian Army mobile units. I note in that 
regard that Colombian Army units trained by the United States 
have an excellent record of respect for human rights. The 
remaining moneys will improve the airlift capabilities of the 
Colombian Air Force, and support the marine and 
counternarcotics interdiction capability of the Colombian Navy.
    In regard to the latter, despite relatively modest 
assistance levels, the Colombian Navy interdicts more narcotics 
leaving that country than any other entity. We're seeking $15 
million in FMF to help Ecuador improve communication and 
mobility for the country's military units arrayed along its 
border with Colombia. And the balance of funds in this account 
will assist military and coast guard units in Central America 
and the Caribbean to protect their territorial waters from drug 
traffickers, to help regional militaries share the burden of 
international peacekeeping, and to assist efforts to respond to 
natural disasters.
    In closing, Mr. Chairman, I want to acknowledge and express 
my appreciation for the support of the Senate for the foreign 
assistance programs in the Western Hemisphere. And I welcome 
the opportunity to address your questions.
    [The prepared statement of Mr. Struble follows:]

Prepared Statement of J. Curtis Struble, Acting Assistant Secretary of 
    State, Bureau of Western Hemisphere Affairs, Department of State

    Mr. Chairman and Members of the Committee:
    Thank you for the opportunity to discuss the Administration's 
foreign assistance priorities for the Western Hemisphere. No region of 
the world is more important to our prosperity and security than the 
Western Hemisphere. In no other region do events have the capacity to 
so directly and so immediately affect our national interests and the 
well-being of the American people.
    We are at a critical juncture in the economic and political 
development of the Americas. The weaker and more vulnerable economies 
of Latin America have been badly hurt by the combination of a U.S. 
economic slowdown, a more risk-averse attitude among international 
investors, and the impact of September 11, 2001 on tourism and 
hemispheric trade. The ensuing financial crises have been contained for 
now, though there are no grounds for complacency. Even during the 
``good times,'' hemispheric growth was weak except for star performers 
like Chile, El Salvador, Mexico, and the Dominican Republic, which 
embraced reform and moved to open their economies. Too many of our 
hemisphere's citizens have begun to question whether the triumph of 
democracy--the crowning achievement of the hemisphere in the last 
twenty years--can better their lives.
    At the same time, there are encouraging signs that the framework 
for success has been built throughout the region: economic development 
in Mexico resulting from the North American Free Trade Agreement 
(NAFTA), Chile's strong economic performance, and the predominance of 
democracy, which has brought freedom to every nation in the hemisphere 
save one. Recent elections in the hemisphere have been celebrations of 
democracy, including peaceful transitions to new administrations. With 
the Inter-American Democratic Charter, we have recognized the 
hemispheric consensus for the freedoms we cherish and responsibilities 
we accept. Economic progress, though often tenuous, has been achieved 
through effort and sacrifice. Poverty has declined in countries 
embracing reform, such as Mexico, Chile, and El Salvador. We have 
created partnerships to advance common interests with Canada, Chile, 
Brazil, Argentina, and of course Mexico. In short, we have made great 
progress. U.S. assistance has been, and continues to be, a major factor 
in our success. That said, our work is far from over.
    We pursue three objectives in the hemisphere: deepening democracy, 
including increasing governmental integrity; encouraging both national 
and individual development, including expanding economies to strengthen 
trade; and enhancing security, including securing our hemisphere 
against the depredations of terrorism, increased personal security, and 
heightened regional stability.
    Our continued progress in achieving these aims in the hemisphere 
requires that we confront, in a systematic way, those problems that 
have seemed too large and entrenched to address directly. They include 
corruption, failures of governance, inadequate education systems, 
insufficient health care, and crime. We can no longer afford to dismiss 
these issues as endemic or to address transnational threats in a 
piecemeal fashion. The kind of progress we want--the kind that creates 
strong, resilient democracies and growing, modern economies--requires a 
broad commitment to address these issues.
                               democracy
    Democracy has come a long way in this hemisphere over the last 
twenty years. While free elections are now the norm throughout most of 
the Americas, free elections alone are not enough. The people of the 
hemisphere are expressing discontent with the quality of their 
democracy and the perceived inability of their governments to deliver 
higher standards of living, safe streets, and good schools. They want, 
and we promote, the second-generation democratic reforms of deepening 
democratic institutions and investing in people.
    To deepen and develop democracy, the member states of the 
Organization of American States (OAS) adopted the Inter-American 
Democratic Charter on September 11, 2001. At the very moment our nation 
confronted terrible tragedy, the free nations of the Western Hemisphere 
reaffirmed our commitment to the principles of democracy targeted by 
the terrorists. The Charter acknowledges collective responsibility to 
promote, protect, and advance democracy in this hemisphere and has been 
the basis for more active regional engagement in crises in the region.
    The President announced on May 20, 2002, an initiative to promote a 
transition to democracy in the only nation in the hemisphere that did 
not adopt the Charter--Cuba. In his landmark speech, President Bush 
made clear that a rapid, peaceful transition to democracy characterized 
by strong respect for human rights and open markets in Cuba remains one 
of the critical priorities of U.S. foreign policy. Through our 
democracy outreach program, we provide books, radios, and other 
informational material to Cuban dissidents, opposition leaders, and 
human rights workers. We seek to expand this program, and so request an 
increase in ESF for Cuba to $7 million in fiscal year (FY) 2004. 
Unfortunately, our efforts to encourage democratic reform and 
transition were answered by the regime's arrests of dozens of 
opposition leaders and representatives of independent civil society 
since March 19, in the most significant act of political repression in 
years.
    Democracy also remains at risk in Haiti. The Caribbean Community 
(CARICOM) worked closely with us on Resolution 822 of the OAS, which 
provides clear guidelines to restore a climate of security to Haiti and 
to enable a return to full democracy through free and fair elections. 
The United States was an integral part of a joint high-level OAS-
CARICOM delegation that visited Haiti March 19 and 20. The delegation 
delivered a strong message to the government about the crucial 
importance of meeting commitments under Resolution 822 and urged the 
opposition and civil society to participate in the electoral process 
once the government meets its commitments.
    The situation in Venezuela continues to deteriorate, undermining 
Venezuela's democracy and economy while threatening regional stability. 
We must help Venezuela find a solution to the current impasse to avoid 
further harm. The only politically viable solution is a peaceful, 
constitutional, democratic electoral process agreed upon by both the 
government and the opposition. The dialogue led by the OAS Secretary 
General remains the best hope for Venezuelans to reach such a solution. 
The proposals tabled January 21 by former President Carter--either a 
constitutional amendment to enable early elections or an August recall 
referendum--present viable options to break the impasse.
    Achieving fully the democratic objectives that our hemisphere's 
leaders have established requires responsible government stewardship. 
Secretary Powell has said, ``Promoting integrity in government and the 
marketplace improves the global governance climate, nurtures long-term 
growth, and extends the benefits of prosperity to all people.'' 
Corruption is the millstone the citizens of the hemisphere continue to 
drag as they strive toward modern economies and effective democracies. 
Corruption distorts markets and undermines faith in the institutions of 
government. It limits opportunity to only the elite and steals 
resources that should be used for health care, schools, and community 
police. Most of all, it creates disappointment and resentment that can 
destroy free and open systems.
    To improve governance, we offer enhanced help in the fight against 
corruption across the hemisphere. For example, we support the efforts 
of President Bolanos of Nicaragua to beat back impunity in his nation. 
A U.S. government-funded and trained anticorruption unit in the police 
force carried out initial investigations against tainted high-level 
figures. We have adopted a ``no safe haven'' approach to corruption. We 
will deny U.S. visas to corrupt officials as appropriate under existing 
law, we will monitor aid to ensure it is used transparently, and we 
will assist countries in recovering stolen funds. We have also 
developed a comprehensive program to combat corruption in the 
hemisphere, not just through bilateral and multilateral programs, but 
also through collaborative actions with our partners.
    Creating governments with integrity, where impunity is not 
tolerated and law applies to everyone, requires a major commitment of 
effort and resources, but virtually every U.S. national interest, from 
regional stability to trade, from democracy to combating transnational 
crime, requires government integrity and eradication of impunity. We 
work to build strong government institutions, broad-based and effective 
national political parties, independent labor unions, and a free and 
responsible press; enhance the rule of law and investigatory and 
prosecutorial capacity; and develop ethics education at the secondary 
and professional levels. We have supported the protection of workers' 
rights by insisting that the rule of law be observed and applied and 
that acts of violence against workers and their representatives be 
fully investigated and prosecuted. In FY 2002, we spent almost $75 
million in Economic Support Funds (ESF) on democracy and good 
governance in the region. These resources helped to support emerging 
democracies in Latin America and the Caribbean through training and 
technical assistance to municipalities, judiciaries and legislatures, 
and programs that support prosecutors in their battles against 
corruption, money laundering, and other criminal activities. Urgent 
global priorities will reduce that amount in FY 2003, but we look to 
Congress for support for our FY 2004 budget so that we can continue to 
consolidate the region's gains. Specifically, we seek full funding for 
our ESF request of $86 million, a significant portion of which will be 
devoted to democracy and governance activities.
    Our regional administration of justice program strengthens rule of 
law, with a special emphasis on police reform. The development of 
strong civilian police organizations is essential for citizen security 
in emerging democracies and also for international cooperation to 
combat the threat of transnational crime. For FY 2004, funding is 
needed to continue programs underway in El Salvador, Guatemala, 
Honduras, and Nicaragua that focus on the implementation of new 
criminal procedure codes and related anti-crime initiatives. Another 
ongoing activity funded from this account is the Justice Studies Center 
of the Americas, an initiative of the Summit of the Americas to provide 
a forum for comparative research and coordination of justice sector 
reform initiatives throughout the hemisphere. Political and legislative 
developments permitting, we may also initiate programs in Venezuela, 
the Dominican Republic, and the English-speaking Caribbean. We hope 
that you will fully fund our request for $7 million--which is part of 
our overall $86 million ESF request--to continue these efforts in FY 
2004.
                  development and expanding economies
    Economic uncertainty destabilizes nations and regions, just as 
economic advancement is inhibited by political strife. We have 
exercised leadership both bilaterally and within the international 
financial institutions to assist nations suffering from financial 
crises. Just last month, the United States accelerated the delivery of 
$10 million in ESF funds for Bolivia to help the democratically-elected 
government there stave off civil disturbances related to economic 
conditions. Last year, the United States provided Uruguay with a $1.5 
billion bridge loan that was repaid--with interest--in one week. 
Argentina has now stabilized its economy. With crucial help from the 
U.S., it reached a transitional accord with the IMF and has begun the 
long climb back to economic recovery. The U.S. has also assisted 
Brazil, Colombia, and Bolivia in their efforts to obtain significantly 
greater resources from the international financial institutions (IFIs). 
U.S. Government contributions constitute about one-sixth of IFI funds. 
Thus, U.S. money channeled through IFIs leverages much larger 
assistance packages. For FY 2004, almost 30 percent of our ESF funds 
for the region ($24.445 million) are budgeted for economic growth and 
trade capacity building, in addition to the development assistance 
funds with USAID to be spent on related activities. Half of those 
expenditures for economic growth and trade capacity building ($12.37 
million) are targeted at the Andean region. These funds reduce barriers 
to trade, support microfinance lending to the most needy, improve tax 
administration, and help the historically disadvantaged generate the 
incomes they need to lift themselves out of poverty.
    Recognizing that a strong Mexican economy is in the interest of 
both Mexico and the U.S., Presidents Bush and Fox launched the U.S.-
Mexico Partnership for Prosperity in September 2001 to promote 
development in the more remote areas of Mexico. This innovative public-
private initiative tackles the root cause of migration by fostering an 
environment in which no Mexican feels compelled to leave his or her 
home to find work. In its first seventeen months, the Partnership has 
reduced the cost of sending money home for thousands of Mexicans in the 
U.S., trained Mexican entrepreneurs in the use of electronic commerce, 
and launched a hundred million dollar fund to finance environmental 
projects. The partnership has also provided over a million dollars for 
feasibility studies for Mexican infrastructure projects and initiated a 
$50 million, seven-year scholarship program to enhance the capacity of 
Mexican institutions of higher education. We are seeking $12 million in 
ESF for Mexico in FY 2004 for a variety of activities in support of 
democratic and economic development, scholarships and security to 
promote stability and foster economic growth.
    The Third Border Initiative, unveiled by President Bush at the 2001 
Quebec Summit of the Americas, is a comprehensive framework of 
cooperation with the Caribbean region on issues that affect vital 
mutual interests such as security. It also provides funding and 
training for disaster preparedness, environmental management, and for 
the fight against HIV/AIDS. Our $9 million request for FY 2004 for this 
initiative will allow us to help this region while we help ourselves by 
improving stability and security in the Caribbean through increased 
training of local authorities and increased information sharing.
    President Bush believes in the transformative power of trade. The 
effect of the reduced tariffs from NAFTA and the Uruguay Round--
equivalent to a $1,300 tax cut for an American family of four--
demonstrates what trade can accomplish. That is why the conclusion of a 
Free Trade Area of the Americas (FTAA) Agreement in 2005, established 
as a target date by hemispheric leaders at the Quebec City Summit of 
the Americas in 2001, will be critical. Parallel to those negotiations, 
our discussions with the Central Americans on a free trade agreement, 
like the agreement signed with Chile, move us in the direction of a 
hemispheric market. Some nations of our hemisphere require our 
assistance to develop the capacity to take advantage of the agreements 
as fully as possible. My colleague, Adolfo Franco of USAID, will 
discuss in greater detail our efforts to build trade capacity 
throughout the hemisphere.
                                security
    For democracy and development to thrive, a nation must be secure. 
Promoting hemispheric security remains a key U.S. objective, as it is a 
precondition to every objective we share--stopping terrorism; ending 
the trafficking in arms, illicit narcotics, and people; strengthening 
the rule of law and respect for human rights; halting environmental 
degradation; ending lawlessness and criminality; and expanding 
economies. Foreign terrorist organizations and their supporters operate 
in the hemisphere, most notably in and on the borders of Colombia, in 
Peru, and in the tri-border region of Argentina, Paraguay, and Brazil.
    We are encouraged by the response of the Guatemalan government to 
our concerns about counternarcotics. The March 19 seizure of over a ton 
of cocaine was a vivid demonstration of Guatemala's commitment to 
improve counternarcotics operations. In the last several months, the 
old counternarcotics police force has been replaced, seizures have 
increased, and seized drugs have been destroyed. The government of 
Guatemala has also taken steps to improve and enhance cooperation on 
extraditions and maritime counternarcotics efforts. Illegal narcotics 
flows continue to pose a significant threat to Guatemala and the other 
Central American countries, and it is important that the United States 
and Guatemala continue to increase our cooperation.
    The State Department's Bureau of International Narcotics and Law 
Enforcement Affairs (INL)--bilaterally as well as multilaterally 
through the OAS--is supporting a wide variety of programs to address 
drugs, crime, and violence throughout the hemisphere. There is close 
coordination between INL and my bureau to ensure that International 
Narcotics Control and Law Enforcement (INCLE) and ESF-funded programs 
and activities are complementary. We are improving cooperation with our 
allies, strengthening the efforts of the Financial Action Task Force 
(FATF) and the two FATF-styled regional bodies that cover the Caribbean 
and South America to combat money laundering, and enhance border 
controls. We can only create a secure environment by working together 
and the Western Hemisphere has been notably active in this effort.
    Following the September 11, 2001 attacks, members of the hemisphere 
invoked the Rio Treaty, our collective security agreement for the 
region. The OAS, with strong U.S. leadership, also revitalized the 
Inter-American Committee Against Terrorism (CICTE) and endowed it with 
a comprehensive work plan. We are transforming CICTE into an effective 
body of counterterrorism experts that can take concrete action. In less 
than one year, the OAS drafted the Inter-American Convention Against 
Terrorism, a binding legal instrument that establishes mechanisms for 
coordinated action against terrorism, which has already been signed by 
thirty-three of the thirty-four member states. Recently, under the 
leadership of governments in the region, the U.S. has collaborated with 
Brazil, Paraguay, and Argentina to establish the ``Three Plus One'' 
counterterrorism cooperation mechanism to address activities relating 
to terrorism as well. U.S. officials, in the context of the Commerce 
Department's Transshipment Country Export Control Initiative (TECI) and 
State's Export Control and Border Security (EXBS) Program, also have 
begun discussions with Panamanian officials on strengthening their 
trade control and border security systems to prevent terrorists and 
other entities of concern from acquiring key goods and technologies 
associated with weapons of mass destruction.
    In December 2001, the U.S. and Canada signed the Smart Border 
Action Plan, creating a more secure and more efficient border. To the 
south, we enhanced our shared border security with Mexico by signing 
and implementing a similar Border Partnership Plan in March 2002. Over 
the past year, we have made significant progress toward our mutual goal 
of keeping North America safe from terrorism while sustaining trade and 
transportation flows crucial to our economies and citizens.
    We sought and obtained new legal authorities to better help 
Colombia in its battle against terrorism. With your support, since July 
2000, the U.S. has provided Colombia with almost $2 billion to combat 
the intertwined problems of drug trafficking and terrorism. These 
resources have strengthened Colombia's democratic institutions, 
protected human rights, fostered socioeconomic development, and 
mitigated the impact of the violence on civilians. We requested $37 
million in FMF and $34 million in ACI funds as part of the 2003 
supplemental to meet these goals.
    You also passed the Andean Trade Preference and Drug Eradication 
Act, creating new jobs and hope for Colombia's people. For FY 2004, we 
are requesting additional resources for Colombia and its neighbors, to 
build on these successes. Our request for funds for the Andean 
Counterdrug Initiative (ACI)--directed at Colombia, Bolivia, Brazil, 
Ecuador, Panama, Peru, and Venezuela--is $731 million for FY 2004.
    Another threat to stability in the hemisphere is the lingering 
obstacle of cross-border conflicts, especially a series of unresolved 
border disputes that can flare into small-scale confrontations. These 
disputes poison relations between neighbors and impede efforts toward 
cooperation and integration. To enhance hemispheric integration and 
guarantee the success of the FTAA, our neighbors must resolve these 
disputes equitably. Development efforts, such as those we have 
undertaken on the Peru/Ecuador border, can help cement cross-border 
economic cooperation and development in the disputed area and beyond. 
Our FY 2004 request includes $4.5 million for the Peru-Ecuador peace 
process, part of our pledge to assist in bringing peace to the area.
    We seek an increase in Foreign Military Financing (FMF) for the 
region. We share the concern of the U.S. Southern Command that a decade 
of reduced security assistance and local military budgets has left the 
region's militaries in need of modernization. These militaries, 
particularly in Central America and the Caribbean, are sorely pressed 
to protect national airspace and waters from transnational criminals 
who smuggle drugs, arms, and people. Hurricane Mitch in 1998 and the El 
Salvador earthquakes of 2001 showed that regional armed forces are a 
key element of Central America's ability to cope with large-scale 
national disasters. Our FMF request for $143 million in FY 2004 is well 
above the FY 2003 level and focuses on the Andes. The higher level of 
FMF is required to support the Colombian government's efforts to take 
back control and governance of those areas of Colombia currently 
dominated by terrorists and narcotics traffickers. FMF support is also 
critical for Colombia's neighbors to preclude narcotics and terrorism 
from spilling over Colombia's borders. FMF programs will focus on 
strengthening security forces in border areas and complement the ACI-
funded activities that I mentioned earlier.
    On the related topic of legal authorities for our work in this 
region, you have provided us with expanded authorities in Colombia. We 
ask that you extend these authorities for the coming years, to permit 
us to assist the Government of Colombia in combating the dual threats 
of narcotics and terrorism. We also ask that these authorities be free 
of restrictions that can cause unhelpful delays. In fact, we hope these 
authorities can be extended indefinitely, removing the need to seek 
their renewal each year, which injects uncertainties into the planning 
process.
    We would like to explore with the Committee's staff the prospect of 
reviewing and rationalizing current Colombian reporting requirements. 
Consolidation of these requirements would, in addition to increasing 
efficiency, provide you with a clearer picture of our efforts. We have 
identified several other areas where legislative changes may facilitate 
implementation of our policies. We are still reviewing these areas 
within the Administration and would like to engage with you and your 
staff on these at a later date. For example, there are now so many 
separate exceptions to the prohibitions on police assistance that it is 
hard to know what is allowed in any particular situation. This makes 
coherent planning difficult. There are also gaps between existing 
authorities that create unintended consequences. We look forward to 
discussing these issues with you.
    At State, we have identified several other areas in which we would 
like to engage with you and your staff on legislative changes that 
would facilitate implementation of our policies. For example, there are 
now so many separate exceptions to the prohibitions on police 
assistance that it is hard to know what is allowed in any particular 
situation. This makes coherent planning difficult. There are also gaps 
between existing authorities that create unintended consequences. We 
look forward to discussing these issues with you.
                               conclusion
    Although we are paying close attention to events elsewhere in the 
world these days, this does not mean we are neglecting our own 
hemisphere. We are deeply engaged--from negotiations for a historic 
hemisphere-wide free trade area, to significant contributions toward 
increasing regional security, to sustained work to improve the 
governance of our region. Public diplomacy plays a critical role in all 
our efforts. From broadening public outreach in Cuba to explaining our 
objectives in Colombia, from media campaigns in Haiti to deter 
immigration to support throughout the hemisphere for free elections, 
public diplomacy is ever-present. We work toward a public diplomacy 
strategy of broad, continuous engagement with all levels and age groups 
of American societies. While we have increased efforts to engage those 
who shape public opinion and make decisions through the American 
Fellows Program and programs like the Humphrey, Fuibright, and 
International Visitor programs, we also need to reach out to the 
average voter and the successor generation in ways that will deepen the 
understanding Latin Americans have of the United States on a personal 
level. This means more vigorous information outreach programs, creating 
opportunities for person-to-person interaction, and actively listening 
to what our neighbors are saying. These efforts must continue in 
parallel with the efforts I have described above.
    Admittedly, all is not rosy in the Western Hemisphere. Although we 
have come a long way, there has been backsliding, and growing 
democracies face threats from all sides. We are optimistic, however, 
because our problems are not intractable. We can overcome existing 
challenges together and bring a free, secure, and bright future to all 
the peoples of the hemisphere.
    President Bush believes that freedom is the key to unlocking 
potential. Freedom allows the creativity that is the essence of human 
nature to express itself and be realized. Freedom is the path of 
political, social, and economic progress. As President Bush said, this 
hemisphere of eight hundred million people strives for the dream of a 
better life, ``A dream of free markets and free people, in a hemisphere 
free from war and tyranny. That dream has sometimes been frustrated--
but it must never be abandoned.'' He knows there are millions of men 
and women in the Americas who share his vision of a free, prosperous 
and democratic hemisphere. Working together as partners, I am confident 
that we will achieve this goal.

    Senator Coleman. Thank you, Secretary Struble.
    Mr. Franco.

 STATEMENT OF HON. ADOLFO A. FRANCO, ASSISTANT ADMINISTRATOR, 
   BUREAU FOR LATIN AMERICA AND THE CARIBBEAN, UNITED STATES 
  AGENCY FOR INTERNATIONAL DEVELOPMENT [USAID], WASHINGTON, DC

    Mr. Franco. Thank you, Mr. Chairman. Mr. Chairman, Senator 
Nelson, it's a pleasure to appear before you today to discuss 
how USAID Bureau for Latin America and the Caribbean is 
promoting the President's vision for the Western Hemisphere.
    Assistant Secretary Struble has done an admirable job 
outlining the administration's policital priorities for the 
region. Assistant Secretary Struble and I work closely together 
and I fully share his views. I would like to focus my remarks 
on what the administration and USAID believe are the region's 
development challenges and priorities.
    Mr. Chairman, with your permission, I would like to make an 
oral statement which summarizes the testimony I have submitted 
for the record.
    Senator Coleman. Without objection.
    Mr. Franco. Thank you. In his letter of invitation to this 
hearing, Chairman Lugar refers to the most pressing challenges 
facing Latin America today. They are corruption, the narcotics 
trade, the need for trade capacity building, and threats to 
democracy and good governance.
    I cannot agree more with the chairman's concerns, and my 
testimony will focus on how USAID's efforts in these areas as 
well as the countries of particular concern to the U.S. 
Government, which are Venezuela, Colombia, Bolivia, Guatemala, 
and Haita, are being addressed. President Bush's national 
security strategy clearly states that the U.S. Government's 
objective is to make the world not just a safer place, but a 
better place, and recognizes the important role of development 
assistance.
    The Latin American/Caribbean region is facing development 
challenges, as you've noted Chairman Coleman, that threaten the 
national security and economy of the United States--
contracting, economic growth rates, extensive poverty, a 
thriving narcotics industry, and the risk of HIV/AIDS and drug-
resistant tuberculosis. On our borders undermine the ability of 
the region as a whole. Popular disillusionment, as Assistant 
Secretary Struble has noted, with governments that cannot 
reduce poverty, corruption, or crime, is growing in the region. 
For that reason, USAID support programs that combat corruption, 
improve governance, and strengthen civil society.
    Anti-corruption efforts emphasize prevention and citizen 
oversight and support groups which challenge weak governance, 
entrench political institutions and poor public sector 
management. President Bush, Secretary Powell, and Administrator 
Natsios have all said that trade and investment are the twin 
engines that are essential to economic growth and poverty 
reduction in the region. Therefore, to help countries in the 
region participate effectively in the global trading system, 
USAID has been working in partnership with these countries and 
the United States trade representative to build trade 
negotiation capacity for our neighbors to the south.
    Mr. Chairman, I would now like to focus on five countries 
of particular concern because I believe the problems of these 
countries typify those of the region as a whole. These five 
countries are Venezuela, Colombia, Bolivia, Guatemala, and 
Haiti. In Venezuela, political conflict over President Chavez's 
policies has severely shaken the Venezuelan economy. President 
Chavez has demonstrated increasing disregard for democratic 
institutions and intolerance for dissent. This is exemplified 
by actions of the Chavez government to move against strike 
leaders and dissidents in February. Through its Office of 
Transition Initiatives, USAID supports nonpartisan activities 
aimed at bringing the two sides together, lowering tensions, 
and bridging divisions.
    In Colombia, the scourge of narcotics threathens the fabric 
of that society. The lack of state presence in 40 percent of 
the country has allowed the illegal narcotics trade, guerrilla 
armies, and paramilitary forces to flourish. USAID is there for 
working in partnership with Colombia's strong reformist 
President Uribe to combat narcotrafficking and expand the reach 
of democracy and the rule of law throughout the country.
    USAID alternative development program gives small-scale 
farmers the means to abandon illicit crop production by 
increasing their options to licit income generation. This 
program has now benefited approximately 20,000 families and 
supported the cultivation of nearly 16,000 hectares of illicit 
crops and former coca and poppy growing areas.
    Mr. Chairman, when I assumed this position a little over a 
year ago, we were helping 4,000 families. We're now helping 
five times that number, and we were working on licit activities 
with 1,000 hectares, we're now working with 16,000 hectares.
    USAID-supported infrastructure projects in the affected 
areas also helped to provide access to markets, and improved 
the health and education of communities. In addition, USAID 
provides significant assistance to Colombia's growing number of 
internally displaced people.
    In Bolivia, poverty and social unrest are eroding Bolivia's 
democratic and economic stability. In response to unrest in 
Febrauary, USAID redirected $10 million to help stabilize the 
situation in Bolivia. Other donors have pledged new grant 
assistance totaling over $30 million, and the International 
Monetary Fund will soon render an opinion on the standby 
agreement for Bolivia. Despite the success, USAID's alternative 
development program in Bolivia is now under increasing pressure 
as economic woes strengthen the hand of an opposition party 
controlled by coca producers.
    Guatemala's cooperation with U.S. anti-narcotics efforts is 
of continuing concern to us. I recently traveled to Guatemala, 
and expressed my concern about this matter and the slow pace of 
reform to the Guatemalan Vice President and the Chief Justice 
of the Supreme Court. USAID projects in Guatemala continue to 
assist in reforming the judicial sector, to strengthen its 
ability to combat corruption. Additionally, USAID-supported 
civil society coalitions are actively promoting transparency, 
preventing crime, and improving legislative oversight.
    In Haiti, a decade of poor governance and economic 
mismanagement has brought the country to a near standstill, and 
illegal migration is on the rise. USAID concentrates on helping 
Haiti's civil society resist the Haitian Government's growing 
authoritarianism as well as meeting essential humanitarian 
needs and generating employment in a very difficult 
environment. The P.L. 480 Title 2 food program is a key element 
of USAID's humanitarian efforts in Haiti. In response to the 
current drought in that country, USAID is providing an 
additional $3.5 million in Title 2 emergency food for direct 
distribution to Haiti's poor.
    In conclusion, Mr. Chairman, as the President has said, 
this hemisphere of 800 million people strives for a dream of a 
better life. I quote what the President had to say: ``A dream 
of free markets and free people in a hemisphere free from war 
and tyranny--that dream has sometimes been frustrated, but it 
must never be abandoned.'' President Bush knows there are 
millions of men and women in the Americas who share his vision 
of a free, prosperous, and democratic hemisphere.
    In sum, at USAID, our programs strengthen democracy and 
governance, trade capacity building, healthcare systems, and 
education, and we are doing all we can to help our friends and 
the neighbors in the hemisphere to fulfill their aspirations.
    Mr. Chairman, this concludes my testimony. I will be 
pleased to answer any questions you or the other distinguished 
members of this committee may have for me.
    Thank you.
    [The prepared testimony of Mr. Franco follows:]

 Prepared Statement of Hon. Adolfo A. Franco, Assistant Administrator, 
      Bureau for Latin America and the Caribbean, U.S. Agency for 
                       International Development

    Mr. Chairman, Members of the Committee, it is a pleasure to appear 
before the Senate Committee on Foreign Relations to discuss with you 
how USAID's Bureau for Latin America and the Caribbean (LAC) is 
promoting the President's vision for the Western Hemisphere.
    The chairman refers in his letter of invitation to this hearing to 
the most pressing issues facing Latin America: democracy, good 
governance, anti-corruption, counternarcotics, and efforts to increase 
support for trade capacity building. I could not agree more. My 
testimony will focus on these areas as well as countries of particular 
concern in the region--Venezuela, Colombia, Bolivia, Guatemala, and 
Haiti.
    President Bush's National Security Strategy reflects the urgent 
needs of our country following the September 11 terrorist attacks and 
recognizes the important role of development assistance. It states 
clearly that the U.S. Government's aim is to help make the world not 
just a safer place, but a better place. The President has said the 
future of our Hemisphere depends ``on the strength of three 
commitments: democracy, security and market-based development.'' At 
USAID, we work closely with our colleagues in other agencies and 
departments, from the Department of State to the Office of the U.S. 
Trade Representative, to promote political and economic freedom for all 
nations, and particularly among our closest neighbors with whom we have 
such strong social and cultural ties.
                               management
    At USAID, we know that the way in which we do things is as 
important as what we do. During his tenure as USAID Administrator, 
Andrew Natsios has taken the President's challenge to heart and tried 
to make foreign assistance more effective and results-oriented, and I 
work toward this daily in my role as Assistant Administrator for Latin 
America and the Caribbean. With many pressing priorities and security 
concerns around the world, the Agency's costs of doing business have 
increased. I have initiated a substantial review of management 
practices in each of the 16 missions in my region with an eye to 
increasing efficiency and reducing duplication of effort. As a result, 
there are efforts underway to regionalize financial management and 
other support services. In addition, we hope there will be an 
opportunity for USAID and this committee to have serious discussion on 
the need to increase flexibility in the way we use administrative 
resources.
    USAID is proud of its contribution to the broader U.S. Government 
policy objectives in Latin America and the Caribbean. We have been 
working assiduously to remold our program to respond to the development 
challenges in the region and to promote the President's priorities for 
our Hemisphere.
                         continuing challenges
    Over the past several years, the Latin America and Caribbean region 
has faced increasing development challenges that threaten the national 
security and economy of the United States. Contracting economic growth 
rates, extensive poverty, unemployment, skewed income distribution, 
crime and lawlessness, a thriving narcotics industry and a 
deteriorating natural resource base continue to undermine the stability 
of the region. The risks of HIV/AIDS and drug-resistant tuberculosis on 
our borders also threaten the population of the United States. Civil 
unrest threatens countries in South America and the Caribbean, while 
political instability in Venezuela and Haiti continues. Increasingly, 
citizens' confidence in the ability of democratically elected 
governments to provide security and prosperity is waning. Bolivia's 
recent problems show the risks to democracy there as well.
    The region's GDP shrank by approximately 0.8% in 2002, the worst 
economic performance since 1983. Inflation has edged up after eight 
years of steady decline. Mediocre economic performance has caused per 
capita income in LAC countries to decline significantly since 1998, 
while poverty has increased. These woes have brought discontent and 
political turbulence, raised questions about the health of democracy in 
the region, about investment priorities, social sector policies, and 
the benefits of a decade of liberal reforms. The effects in the poorest 
countries, such as Haiti, and even regions within countries with 
generally solid economic performance, such as northeast Brazil, have 
been even more disheartening.
    Still, it is important not to portray the region in a single-minded 
negative light. LAC's economy overall is expected to recover slightly 
in 2003. The Argentine economy is expected to grow about 2% this year. 
Chile, Mexico, Peru, and the Dominican Republic are expected to top the 
growth league in 2003, with expansion of 3% or more, assuming that the 
slowdown in the United States abates and strong growth resumes. 
Countries that have adopted sound fiscal policies and oriented their 
economies toward foreign investment, and rules-based trade under the 
World Trade Organization (WTO), have tended to resist the recent 
downturn. The North American Free Trade Agreement (NAFTA) has resulted 
in phenomenal growth for all three partners. Since 1993, trade among 
NAFTA nations has climbed dramatically, and U.S. merchandise exports 
have nearly doubled.
    Another area of progress is commitment of LAC countries to good 
governance as represented by the signing of the Inter-American 
Democratic Charter and the InterAmerican Convention against Corruption 
of the Organization of American States (OAS). Nicaragua is striving to 
curb government corruption, and other countries, such as Mexico, have 
also made important commitments to reduce official corruption. Recent 
elections in Jamaica, Brazil, Colombia, Bolivia, and Ecuador were all 
judged to be free and fair.
                               priorities
    To address the myriad challenges in the LAC region, the United 
States is committed to helping build a hemisphere that lives in liberty 
and trades in freedom. In his landmark March 14, 2002 speech to the 
community of donor nations in Monterrey, Mexico, the President pledged 
to create a Millennium Challenge Account (MCA) which would make 
additional development assistance available to countries that show 
progress in ruling justly, promoting economic freedom and investing in 
people. Through programs that help governments to strengthen democratic 
processes, promote equitable economic growth, and improve health and 
education standards, USAID is helping countries in the region with the 
will to reform to move along a trajectory toward MCA eligibility. In 
addition, USAID programs foster cooperation on issues such as drug 
trafficking and crime, disaster mitigation, and humanitarian 
assistance. The LAC Bureau is committed to using our resources in the 
most catalytic way possible including consideration of government 
performance, particularly responsible governance and accountability, in 
our resource allocation decisions.
                     democracy and good governance
    While support for democracy remains solid in the LAC region, 
popular disillusionment with governments that cannot reduce poverty, 
corruption, or crime is growing. Although significant strides have been 
made, many countries' democracies remain fragile and they must make a 
concerted effort to reinforce the institutional building blocks of 
democracy. USAID is working with other donors to strengthen democracy 
in the LAC region through programs that include anti-corruption, rule 
of law, municipal governance, and civil society strengthening programs.
    Anti-corruption programs emphasize prevention, citizen oversight, 
and building the capacity of countries to attack weak governance, 
entrenched political institutions, and poor public sector management. 
USAID provides assistance to citizens groups and nongovernmental 
organizations to devise national and local anti-corruption plans and to 
monitor the dealings of public officials and government agencies. In 
addition, USAID supports local initiatives to establish special 
commissions and investigative units to expose and prosecute cases of 
corruption and fraud by public officials. In Ecuador, the Anti-
Corruption Commission has the investigative authority to uncover cases 
of corruption. In Nicaragua, USAID provides assistance to improve the 
capacity of the Attorney General's Office to tackle high-profile 
corruption cases against the former government. USAID is also helping 
the new Office of Public Ethics in the Nicaraguan Presidency, which 
will be responsible for setting standards for ethical conduct, training 
public employees, and monitoring government agencies' compliance with 
internal control systems.
    Increasing crime and violence is consistently ranked by citizens as 
one of their primary concerns. The endemic problems of impunity for 
violent crime, corruption, money laundering and narcotics crime, 
undercut social and economic growth in many LAC countries. USAID is 
responding in more than a dozen countries in the Hemisphere by 
providing direct assistance for modernization of their justice sectors.
    New Criminal Procedure Codes and other criminal justice system 
reforms, developed and enacted over the last decade with USAID support 
in Nicaragua, Honduras, Guatemala, El Salvador, Bolivia, Colombia, and 
the Dominican Republic, are introducing profound changes as countries 
move from written inquisitorial justice systems toward more oral 
adversarial systems. The new system of oral trials makes justice more 
accessible and transparent, whereas the previous system lent itself to 
corruption and delays and discouraged the average citizen from seeking 
judicial redress. In Colombia and Guatemala, USAID is expanding access 
to alternative dispute resolution and other legal services to millions 
of marginalized citizens through a growing network of community-based 
centers.
    As a key element of the justice system, it is essential that the 
police do their jobs responsibly and that there is trust between the 
police and the communities in which they work. Section 660 restrictions 
of the FAA limit our ability to work on critical security issues such 
as community policing, which is increasingly integral to development in 
many LAC countries. Specific legislative authorization has allowed 
USAID to initiate a community policing program in Jamaica and to 
continue a successful program in El Salvador. The program in El 
Salvador is part of a larger law enforcement institutional development 
program conducted in cooperation and collaboration with the Department 
of State and the International Criminal Investigative Training 
Assistance Program (ICITAP) of the Department of Justice.
    The primary justification for the program in Jamaica is summed up 
in the words of the 1993 National Task Force on Crime in Jamaica, which 
states, ``The inability of the police to control crime has largely been 
due to the breakdown of the relationship between the police and the 
citizen.'' The program in Jamaica is focused on moving the Jamaican 
Constabulary Force toward a proactive, decentralized model of community 
policing, reducing police fear of the inner-city communities in which 
they work, as well as the community's fear of the police, and engaging 
community stakeholders as a catalyst for change in community 
development and crime reduction.
    Similarly the community policing initiative in El Salvador has been 
a proactive, solution-based, and community driven activity involving 
extensive community outreach. Increased police presence in communities 
has improved response to criminal activity and has been key in 
establishing credibility with people. Reported crime and homicides have 
dropped by 25% and 30% overall in just one year in the program's target 
areas. Further, 70% of citizens believe the police force has improved 
its ability to decrease crime. Based on this early success, the U.S.-
supported program is now being replicated by the Government of El 
Salvador at the national level.
    USAID-supported training and technical assistance helps strengthen 
the capacity of national and local governments to demonstrate that 
responsible leaders can deliver benefits to communities. With the 
direct election of local mayors and the devolution of authority to 
municipalities, USAID is helping citizens and elected leaders devise 
community development plans that respond to local needs and generate 
growth. In fourteen countries, USAID is helping mayors hold public 
hearings about annual budgets and allow citizen involvement in public 
decision-making. Many mayors have established transparent accounting 
and financial management procedures with USAID assistance to create the 
framework for greater revenue generation at the local level for roads, 
schools, health centers, and job creation. In turn, citizens monitor 
the use of public funds and devise ``social audits'' in countries such 
as the Dominican Republic and Bolivia to track spending in accordance 
with local development plans in order to keep officials accountable to 
the public.
                            economic growth
    Sustained development depends on market-based economies, sound 
monetary and fiscal policies, and increased trade and investment. 
USAID's efforts in LAC are resulting in an improved enabling 
environment for positive and peaceful changes. We are mindful of the 
critical need to continue these efforts and build on our experiences in 
order to encourage further economic development. President Bush, 
Secretary Powell, and Administrator Natsios have all said trade and 
investment are essential to economic growth and poverty reduction. 
Without an increase in trade and investment, the region's substantial 
development gains will be put at risk, and hemispheric stability could 
falter.
    Through support for legal, policy, and regulatory reforms, USAID 
has been working with LAC countries to strengthen the enabling 
environment for trade and investment as the twin engines for economic 
growth and poverty reduction. USAID support for trade capacity building 
has increased substantially in the last several years. In FY 2001, the 
LAC Bureau invested $5 million in trade-related activities. This figure 
climbed to more than $23.5 million in FY 2002. USAID plans to increase 
support for trade capacity building even more substantially in future 
years.
    In August 2002, President Bush signed the Trade Act of 2002. On 
January 8, 2003, Acting Assistant Secretary Struble and I participated 
with U.S. Trade Representative Ambassador Robert Zoellick in launching 
negotiations for the U.S.-Central America Free Trade Agreement (CAFTA). 
Negotiations continue on track to establish a Free Trade Area of the 
Americas (FTAA) agreement by January 2005. In response to these 
opportunities, USAID has been working in partnership with the region's 
smaller economies to build their capacity to participate effectively in 
the global trading system by building trade negotiating capacity, 
developing markets, and providing assistance for business development. 
In response to requests from country governments, USAID will assist 
governments to comply with the ``rules of trade'' such as sanitary/
phytosanitary measures, customs reform, and intellectual property 
rights.
    Assistance will expand in the area of commercial and contract law 
and property rights. USAID will continue to promote rural economic 
diversification and competitiveness, including non-traditional 
agricultural exports and access to specialty coffee markets. Business 
development and marketing services will help small and medium farmers 
and rural enterprises improve competitiveness and tap new markets. Let 
me highlight some of USAID's trade capacity building programs in the 
region:
    In Central America and Mexico, USAID will continue the Opportunity 
Alliance, a presidential initiative that emphasizes trade-led rural 
competitiveness through and agricultural niche markets. The Alliance 
was initiated in FY 2002 in response to a protracted drought, collapse 
of coffee prices and resulting unemployment of seasonal agricultural 
workers. An estimated 52% of the population, more than 14 million 
people, is poor and chronically food-insecure in Guatemala, Nicaragua, 
El Salvador, and Honduras. USAID activities in FY 2003 and FY 2004 will 
continue to support democratic governance, trade and employment 
creation, agricultural production, and sound environmental management. 
USAID is assisting the Central American countries in their efforts to 
prepare for the FTAA as well as for negotiation and implementation of 
CAFTA. As part of this process, USAID worked closely with other 
institutions such as the Inter-American Development Bank, the 
Organization of American States, and the Economic Commission for Latin 
American and the Caribbean to assist each Central American country to 
prepare a national trade capacity building strategy in support of their 
participation in the CAFTA process.
    USAID has added a trade component to the President's Third Border 
Initiative (TBI) to strengthen trade capacity and competitiveness of 
Caribbean countries. It will build on modest trade activities underway 
for several years in a sub-region with many small island economies 
lacking diverse sources of income. When launched in 2002, TBI aimed to 
strengthen political, economic and security ties between the U.S. and 
the nations of the Caribbean. The majority of interventions and bulk of 
funding thus far have supported USAID's HIV/AIDS program. Working 
closely with the development assistance community, USAID is now moving 
quickly to mobilize trade capacity building support to respond to 
countries' priorities including technical training of government trade 
officials, developing trade-related databases, implementing trade 
agreement commitments in such areas as customs reforms and sanitary and 
phytosanitary measures, providing assistance for small business 
development, and fostering greater civil society outreach. USAID's 
Caribbean Regional Program is helping to strengthen Caribbean Community 
(CARICOM) countries' competitiveness in hemispheric and global trade, 
and assisting eight CARICOM countries to prepare national trade 
capacity building strategies under the FTAA Hemispheric Cooperation 
Program.
    In the Dominican Republic, USAID supported technical training on 
trade issues for government trade officials. The Dominican Republic has 
since offered better market access in recent rounds of negotiations. As 
a result of a USAID-supported program in Jamaica, which is led by the 
private sector and provides succinct information to private and public 
sector leaders on the benefits of free trade, the Jamaican private 
sector now better understands the potential benefits of free trade and 
has become a stronger advocate of the FTAA.
    USAID initiated trade capacity building activities in South America 
in FY 2002 and is expanding the program for trade within the sub-region 
in FY 2003. In Peru we have developed an Andean regional trade capacity 
building program to assist Andean Community countries in addressing 
``rules of trade'' and competitiveness issues, with initial emphasis on 
providing technical assistance in a variety of trade disciplines 
including customs reforms, sanitary and phytosanitary measures, and 
competition policy.
    At the hemispheric level, USAID has a new ``quick response 
mechanism'' to provide greater capacity to address technical assistance 
and training needs arising from trade negotiations. Through this 
mechanism, we are also working with FTAA countries, initially in 
Central America and Brazil, to provide government officials and civil 
society--including business leaders--with information on the benefits 
of free trade.
    An important aspect of building trade capacity is broadening the 
education base for a more productive workforce. USAID will support 
advancements in secondary education and workforce training to improve 
the quality of instruction, increase worker productivity, and help 
youths prepare to enter the workforce. For example, USAID's ESF-funded 
Trainirg, Internships, Exchanges, and Scholarships program in Mexico 
will enhance capacity of Mexican scholars and institutions to respond 
to the objectives and strategies of NAFTA and the U.S.-Mexico 
Partnership for Prosperity, which together define the emerging U.S.-
Mexico Common Development Agenda.
    Recognizing that remittances constitute a potentially large source 
of development finance, USAID will continue to support and implement 
mechanisms for remittance transfer with lower transaction costs.
                          investing in people
    The LAC Bureau has placed great emphasis on two of the President's 
other stated goals for our region--health and education. In health, 
there has been significant progress in raising vaccination coverage and 
in reducing or eliminating major childhood illnesses such as measles. 
Also, because of USAID assistance, affected countries are more willing 
to discuss the HIV/AIDS problem. This is particularly relevant in our 
region, as the Caribbean has the second highest rate of HIV/AIDS in the 
world, after sub-Saharan Africa. USAID programs have had some success 
in reducing the social stigma attached to the disease, and prevention 
campaigns, including those that promote abstinence, hold even greater 
promise for lowering transmission rates. While steady progress is being 
made in lowering maternal mortality and in applying proven cost-
effective protocols for combating malaria, tuberculosis and other 
infectious diseases, rates remain unacceptably high, and new strains of 
the causative organisms are increasingly resistant to treatment. 
Because diseases do not respect geographic boundaries, and due to the 
high numbers of legal as well as illegal immigrants traveling to the 
United States, I believe USAID assistance to the LAC countries in 
health care at the policy, institutional and technical levels is 
critical to the health and security of the United States.
    The quality and relevance of primary and secondary schooling in LAC 
countries continue to cause concern. Less than 30% of students in the 
region complete secondary school, and many of those who do finish lack 
adequate skills to compete in the workplace. USAID education and 
training programs aim to improve the poor state of public education 
systems where the majority of youth attend weak and under-funded 
schools and fail to acquire basic skills in mathematics, language, and 
science. USAID will continue to provide support for education reform, 
enhancing skills of teachers and administrators, and improving training 
for application in the workforce. USAID will also continue support to 
the newly launched Centers of Excellence for Teacher Training, an 
initiative announced by President Bush in April 2001. Three sub-
regional training networks established in Peru, Honduras, and Jamaica 
will improve the cadre of teachers in LAC countries by training 15,000 
teachers, benefiting 600,000 students, and advancing education policy 
reform.
                    five priority, fragile countries
    Many of the democracies in the Hemisphere are fragile, and USAID 
works in a variety of ways in concert with other U.S. government 
agencies to strengthen them. I would like to discuss Venezuela, 
Colombia, Bolivia, Guatemala, and Haiti because the problems in these 
countries are of particular concern.
    Venezuela--We are deeply concerned about the deteriorating 
situation in Venezuela. We are concerned about the independent media, 
and the severe disruptions to the Venezuelan economy, for decades one 
of the most prosperous nations in the hemisphere. I also know this 
situation has caused great pain and hardship to the people of 
Venezuela.
    The United States had urged all sides to reject violence and 
intimidation. We have also urged the Government of Venezuela to 
exercise its constitutional responsibility to respect individual rights 
and fundamental freedoms, and to adhere to the Inter-American 
Democratic Charter.
    Our policy is clear and consistent: We support OAS Secretary 
General Cesar Gaviria's efforts in Caracas to facilitate a dialogue 
between government officials and opposition representatives to help 
achieve a peaceful, democratic, constitutional and electoral solution 
to Venezuela's crisis, consist with OAS Permanent Council Resolution 
833. We are also actively working with the ``Friends'' group, which 
includes the United States, Brazil, Chile, Mexico Spain and Portugal, 
to help achieve these objectives.
    USAID supports non-partisan activities aimed at bringing the two 
sides together, lowering tensions, and bridging divisions among the 
population. USAID has expanded opportunities for government and 
opposition forces to meet at the bargaining table and helped them 
identify common interests. USAID is also providing training in conflict 
mediation and negotiation techniques to government and opposition 
representatives involved in the national dialogue.
    Colombia--In Colombia, the scourge of narcotics threatens the 
fabric of society, and poses a threat to the U.S. as well. The lack of 
state presence in large portions of the country has allowed both the 
illegal narcotics trade and armed, drug-dealing terrorist organizations 
to flourish. Events in Colombia affect the ertire region, and the 
threats to its security also threaten the security of its neighbors. 
Ecuador's northern border is vulnerable, and intensive eradication 
efforts by the Government of Colombia may create incentives for the 
narco-trafficking industry to move back into Peru and Bolivia.
    USAID is working in partnership with Colombia's strong reformist 
president, Alvaro Uribe Velez, an invaluable ally in facing down 
terrorism and the illicit drug trade. President Uribe is actively 
pursuing policies to fight narco-terrorism and expand the reach of 
democracy and rule of law in Colombia.
    In order to provide small farmers a means to abandon illicit crop 
production permanently, USAID's alternative development program in 
Colombia seeks to increase licit income opportunities for small 
producers of opium poppy and coca. The program is on track and 
progressing well. This program has now benefited approximately 20,000 
families and supported cultivation of nearly 16,000 hectares of licit 
crops such as rubber, cassava, specialty coffee, and cacao in former 
coca and poppy growing areas. Some of the coca growing areas currently 
are not suitable for sustainable agriculture for both economic and 
security reasons. USAID works to create permanent labor opportunities 
to absorb the pool of people following the coca harvest, thus 
undermining coca production. USAID also works with the Colombian 
private sector outside of the coca growing areas to increase licit 
income opportunities, making coca production unattractive. 
Infrastructure initiatives are an important component of the program as 
they provide short-term employment in construction as families make the 
transition to licit crops, and provide communities with physical access 
to markets necessary to sustain a viable, licit economy or develop the 
skills and acquire the funds to move to a more viable economic section 
of the country. As of mid-February, USAID has completed 208 social 
infrastructure projects including roads, bridges, schools, and water 
treatment facilities were completed in Colombia.
    USAID is successfully implementing a program to strengthen the 
Colombian criminal justice system, expand access to community-based 
legal services, promote alternative dispute resolution mechanisms, and 
strengthen the capacity of justice sector institutions to carry out 
their functions in a more timely, open, and fair manner. USAID has 
established 29 community-based centers for alternative dispute 
resolution and other legal services to increase access to justice for 
the urban and rural poor. Over the last seven years, the centers have 
handled 1.5 million cases, the majority of which are related to intra-
family violence. Women represent the highest percentage of 
beneficiaries under the program. As a first step in facilitating 
Colombia's transition to a modern accusatorial system of justice, USAID 
has helped establish 19 oral trial courtrooms and trained 6,000 
lawyers, judges, and public defenders in oral procedures designed to 
reduce impunity and quicken the judicial process.
    USAID is working to improve respect for human rights in Colombia 
through a three-tiered approach including: prevention of human rights 
violations by strengthening governmental and civil society human rights 
institutions; protection of human rights workers, community leaders, 
journalists, and local elected officials under threat; and the 
improvement of Government of Colombia response to human rights 
violations.
    USAID's transparency and accountability program seeks to harmonize 
accounting and internal control standards within the Government of 
Colombia and increase citizen awareness of available instruments to 
combat corruption. Last year, this program successfully completed a 
nationwide public awareness anti-corruption campaign that reached six 
million citizens through radio, newspaper and television messages, and 
standardized internal control units in five government entities.
    Colombia has the fourth largest population of internally displaced 
people (IDPs) in the world and the only IDP population in the western 
hemisphere. USAID's IDP program seeks to provide integrated services 
and assistance to Colombia's internal refugees after short-term 
emergency relief has expired. As of mid-February, the program has 
assisted 635,000 IDPs by providing health services, shelter, income 
generation opportunities, education, and community infrastructure. As 
most IDPs are women and children, aid has been targeted specifically 
towards female heads of household. USAID continues to develop 
significant partnerships with the private sector that either support 
IDP activities or offer to employ IDPs in their new communities. In 
addition, USAID assists demobilized child combatants by supporting 
psychological counseling, vocational training, and educational 
opportunities, with the goal of re-integrating them into society. More 
than 600 former child combatants and at-risk children have been aided 
through this program.
    Bolivia--In Bolivia, the twin poisons of illicit drugs and poverty 
are weakening democracy and undermining prosperity. Bolivia remains a 
strategic ally of the U.S. in Andean counter-drug efforts and played a 
leading role in South America in democratic reform and trade 
liberalization. Its current economic difficulties are largely a result 
of external factors.
    In February, President Sanchez de Lozada's introduction of 
budgetary austerity measures touched off weeks of protests, rioting and 
looting. Bilateral and multilateral donors were asked to contribute 
additional funds so that Sanchez de Lozada's government might 
reconfigure his budget and allow for more spending in the social 
sector. President Sanchez de Lozada requested immediate support from 
the U.S. and other donors. The IMF indicated it would consider a more 
flexible term for a standby arrangement, provided that additional donor 
funding became available immediately to meet the financing gap. In 
consultation with the inter-agency process and the Congress, USAID 
redirected $10 million in Economic Support Funds (ESF) to support the 
govenunent in a time of crisis. This assistance will be used by the 
Government of Bolivia for payment of multilateral development debt and 
will leverage additional bilateral and multilateral contributions. New 
grant assistance has been pledged by other bilateral donors. The IMF 
board will meet to make a decision regarding a standby arrangement on 
April 2.
    Due to the success of counternarcotics efforts, coca production 
declined 70% between 1998 and 2001 at a cost of $200 million to the 
Bolivian economy. The loss of this illicit income was felt most by the 
small-scale farmer. There is also concern that the country's economic 
problems, coupled with the intensive aerial eradication program in 
Colombia, will translate into pressure from the narcotics industry for 
new production in Bolivia. These concerns and the violence in early 
February have heightened the importance of and the need for USAID's 
alternative development program in Bolivia.
    Working in partnership with the Government of Bolivia, USAID's 
alternative development program is bringing the benefits of Bolivia's 
anti-narcotics strategy to communities. USAID is working to eliminate 
illegal and excess coca from Bolivia by: establishing sustainable, 
farm-level production capacity and market linkages for licit crops; 
increasing licit net household income; and improving municipal planning 
capacity, social infrastructure and public health in targeted 
communities. In the coca-producing Chapare and Yungas regions, 
assistance for high-priority projects such as road improvement and 
bridges, which are defined by the communities and contingent on coca 
reduction, are providing links to markets for licit crops. In the 
Yungas region, USAID is introducing improved agricultural technologies 
for selected products to improve competitiveness and encouraging 
adoption of low-cost forestry and agro-forestry practices to improve 
soil fertility and increase crop yields.
    USAID's support for criminal justice system reforms through 
implementation of the new Code of Criminal Procedures complements the 
alternative development program. The new Code makes justice more 
accessible and transparent through use of an oral system and citizen 
judges. The previous written, inquisitorial system lent itself to 
corruption and delays and discouraged the average citizen from seeking 
judicial redress. Improved court processes have reduced case processing 
time by two-thirds.
    Guatemala--As the members of this Committee are well aware, 
Guatemala is of continuing concern because of lack of cooperation with 
U.S. anti-narcotics efforts. I recently traveled to Guatemala and 
expressed my concern to the Guatemalan Vice President and Chief Justice 
of the Supreme Court. In addition, corruption, organized crime, weak 
enforcement of the rule of law, and lack of political will under the 
current administration have made it difficult to promote democracy 
effectively. Use of death threats and kidnapping to manipulate 
government officials, increasing human rights violations, continued 
growth in crime, and concerns about citizen security all suggest that 
progress toward democracy has stalled in Guatemala. Nonetheless, 
pressure from the international community and civil society has 
positively influenced the government to take some significant actions 
that lay the groundwork for greater inclusiveness and responsiveness in 
Guatemala's democratic system.
    USAID has been helping the judicial sector make institutional 
reforms to strengthen its ability to combat corruption. USAID also 
helped establish an autonomous, professional public defender service 
throughout the country. Today, 27 USAID-assisted ``justice centers'' 
help local communities, churches and governments connect with police, 
prosecutors, judges and public defenders to fight crime, ensure respect 
for human rights, and mediate disputes. Case file and information 
management system reforms are significantly improving efficiency while 
reducing the potential for corruption. The time to locate case files 
has dropped from hours to less than 15 minutes and cases are randomly 
assigned to judges. Due process has improved because information on 
time required for various stages of court procedure is now available. 
The Supreme Court is using statistics on workload, productivity, case 
intake, and bottlenecks to improve efficiency and identify problems. A 
major reform of Guatemala's principal law school has been completed and 
the new curriculum instituted for the first year. The complete 
revamping of the curriculum and admissions standards, an indigenous law 
program, and an expanding internship program will all improve the 
quality of personnel entering the justice system.
    After several months of intensive training and planning sponsored 
by USAID, eight civil society coalitions are now actively combating 
ethnic discrimination, promoting transparency and anticorruptiori, 
improving congressional oversight, and enhancing public security. Over 
the last few months, the Alliance for Transparency (a coalition of the 
Chamber of Commerce and two regional organizations) developed a model 
profile, selection criteria, and procedures to elect the new 
Comptroller General and focused public attention on this process for 
the first time. A coalition engaged in preventing crime is bringing 
together gang members, the media, citizens, and police in working to 
reduce crime in six target areas. A civil society group drafted new 
legislation to address domestic violence and promoted understanding and 
application of current laws. For the first time, local human rights 
organizations played an important role in the selection by the Congress 
of a new Human Rights Ombudsman.
    Hait--I would now like to shift to the continuing challenge 
presented by Haiti, where a decade of poor governance and economic 
mismanagement has brought the country to a near standstill, threatening 
another wave of illegal migration to the Dominican Republic, the 
Bahamas, and the United States. A pernicious drought in the country's 
Northwest and Central Plateau regions has made things even worse and 
placed additional strains on our humanitarian relief efforts in the 
country. We are responding with an additional $3.5 million in Title II 
emergency food for direct distribution to affected groups.
    The growing authoritarianism of President Aristide and his Fanmi 
Lavalas party frustrated USAID's efforts to bolster the Haitian 
judiciary and national police in the late 1990s. Consequently, we 
shifted our emphasis to helping civil society resist the growing 
authoritarianism of the Haitian government. Recently we have added 
activities to strengthen political parties and the independent media. 
The country's direction now depends on whether the government can 
establish a climate for free and fair elections in 2003 and secure the 
participation of Haiti's opposition parties, many of which boycotted 
the election of President Aristide in November 2000. We also keep in 
close contact with the Haitian human rights community and incorporate 
these groups whenever possible into our activities. Last but not least, 
we are actively engaged with the Haitian Diaspora, seeking ways to help 
them foster democracy in Haiti.
    In addition to our work with civil society, USAID's programs in 
Haiti are designed to meet essential humanitarian needs and generate 
employment in a difficult economic environment. The FY 2003 funding 
level for Haiti is $58.5 million (including $24.9 million in non-
emergency food aid). The P.L. 480 Title II food program is a key 
element of USAID's support for humanitarian needs in Haiti. Some food 
is distributed outright through school feeding programs but principally 
through maternal-child health care facilities in remote areas. This 
approach ensures that U.S. food aid is reaching the neediest and most 
vulnerable Haitians--rural children under five and nursing and/or 
pregnant mothers. The bulk of the Title II food commodities are sold to 
local millers and the proceeds used to finance projects in health care 
(including assistance to orphans), primary education, and food 
production.
                               alliances
    Private investments, civil society and faith-based contributions 
now far exceed Official Development Assistance levels. Linking our USG 
investments with private investments will assure a greater impact for 
both, as was articulated by the President at the Monterrey Conference 
last year. The Global Development Alliance (GDA) and the Development 
Credit Authority (DCA) are exciting business models where we have made 
the USG dollar and impact extend much farther by partnering with 
businesses, universities, and philanthropic groups.
    Several examples of GDA-type partnerships are just getting underway 
in the region. USAID's Central America Regional program plans to 
leverage significant private sector contributions for its quality 
coffee and regional diversification programs. Two recently-signed 
agreements exemplify the emphasis on alliance building and counterpart 
contributions: one with the Coffee Quality Institute to develop a 
volunteer-based technical assistance program, and one with Green 
Mountain Coffee Roasters designed to generate new resources. Of the 18 
partnerships between U.S. and Mexican colleges and universities 
recently approved for USAID's new educational exchange program in 
Mexico, 15 exhibit greater than one to one funding matches from higher 
education institutions and the private sector. The 18 agreements total 
about $10 million, with USAID providing approximately $4 million and 
non-USG public and private partners contributing $6 million.
    USAID's Development Credit Authority (DCA) offers an opportunity to 
mobilize local capital to fund development initiatives. Through DCA, 
USAID/Mexico provided guarantees to two Mexican microfinance 
institutions. The programs were designed to allow both institutions to 
leverage the guarantee by capturing savings, especially longer, fixed-
term savings, which are an important source of loan capital. Both 
programs have greatly exceeded expectations, with the banks increasing 
total deposits by $4.8 million and $5.7 million respectively. In 
Guatemala, investment efforts in market towns also exceeded 
expectations. The Non-Traditional Exporters Guild was directly 
responsible for promoting $4.25 million worth of new investments in the 
Peace Zone and the BANCAFE Development Credit Authority mechanism 
leveraged an additional $4.7 million for microlending.
                               conclusion
    Hemispheric commitment to democracy remains high with the creation 
of the Inter-American Democratic Charter and agreement to an ambitious 
democratic reform agenda--each time the Hemisphere's leaders meet. So 
far, democratic systems have persisted even in the face of severe 
economic crisis and, in some cases, either very weak or even virtually 
no effective governance. These political crises--all very different--
have not caused permanent ruptures in democratic practices. They 
nonetheless demonstrate the fragility of institutions and the need to 
strengthen the building blocks of democracy if the progress of the past 
two decades is not to be undone. As President Bush has said, this 
hemisphere of eight hundred million people strives for the dream of a 
better life, ``A dream of free markets and free people, in a hemisphere 
free from war and tyranny. That dream has sometimes been frustrated--
but it must never be abandoned.'' President Bush knows there are 
millions of men and women in the Americas who share his vision of a 
free, prosperous, and democratic hemisphere. At USAID, our programs in 
democracy and governance, trade capacity building, health, and 
education are helping our friends and neighbors in the Hemisphere 
fulfill their aspirations.

    Senator Coleman. Thank you, Mr. Franco.
    I certainly share that vision of a free, prosperous, and 
democratic hemisphere and believe that trade and investment 
ultimately are the key elements in the way to get there. But 
before you can get to trade and investment, or if you're going 
to do trade and investment, it has to be built on a firm 
foundation, and I have a lot of concerns. And I think, Mr. 
Franco, you laid them out specifically, focusing on specific 
countries, highlighting some of those concerns. You have to 
have national security. You have to have a firm foundation, in 
terms of some sense that democracy is going to work. You have 
got to deal with corruption. And then beyond that, there is the 
issue which we did not talk about, but we need to spend some 
time, some more time, on the issue of AIDS and the impact it is 
having in Haiti and other areas.
    I was going to begin my questions, but the distinguished 
ranking member is here. And, Senator Dodd, before I begin my 
questions, would you like to make a statement?
    Senator Dodd. I will make a brief statement here, but I 
apologize to my colleague. We have been involved in some 
markups in the Health Committee. So I apologize to our 
witnesses for not being here. So let me just share a few 
thoughts, Mr. Chairman, and thank you first of all for 
convening this hearing. We convene, as we all know, to discuss 
the Bush administration's, request for foreign aid. This is the 
second of two hearings the committee is holding, and I am 
pleased to have the opportunity to share some thoughts on it.
    In the coming year, our task, the task of the entire 
government of our country, will be to ensure that vital foreign 
assistance initiatives are properly funded and managed. And as 
a world leader, the United States has the responsibility to 
help promote peace and stability. That is why I am concerned 
about the limited amount of Federal dollars currently allocated 
to foreign aid projects. However, our endeavors in this area 
are vital not only to the success of the specific program or a 
set of programs; they are a central component of our ability to 
promote the vital interests of the United States globally. 
Therefore, I am hopeful that this shortfall is addressed in the 
Senate deliberations, funding levels for foreign aid 
initiatives for fiscal year 2004.
    Certainly, there are many regions of the world that need 
and deserve American assistance. Once our troops emerge 
victorious from the current military conflict in Iraq, as I am 
confident they will, we will be faced with the considerable 
responsibility of rebuilding that nation.
    Having said that, as we are under certain time constraints 
today, I would like to focus my attention on a request for 
programs in the Western Hemisphere. And my colleague from 
Florida, who is with us here, has a strong interest in this 
region of the world, as well, and we talk about at great 
length.
    As you know, Latin America has many significant problems. 
Throughout the past year, this important region, our closest 
neighbors, have been plagued by economic instability, political 
instability, and civic unrest. The illegal narcotics trade and 
the devastating impact that it has had on Latin America 
persist. Poverty rates remain extremely high, and access to 
education and health remain alarmingly limited. From the bottom 
of the South American Continent to the Caribbean, Argentina, 
Brazil, Colombia, Venezuela, Haiti, and others, have been 
struggling to create and ensure a safe and secure future for 
their people.
    While USAID, for the most part, does a good job with the 
resources allocated to them, the Western Hemisphere, as a 
region, is not provided with sufficient resources, in my view, 
and attention to address the myriad challenges that it is 
facing.
    I am also concerned that the administration seems to be 
unwilling to engage certain governments as part of their 
efforts in the region; most specifically, Haiti. Haiti is one 
of the most poverty-stricken nations in the Western Hemisphere; 
in fact, one of the most poverty-stricken in the world. It has 
an unemployment rate as high as 50 percent and is being 
devastated by the HIV/AIDS epidemic, with almost 5 percent of 
the population infected. How is the government of that nation 
going to be able to strengthen its governing capability and 
provide for its people if the administration refuses to work 
with them? In my view, supporting the people and economies of 
developing countries, especially those in our region, is not 
only sound policy, but also in keeping with our leadership in 
the world community. Helping impoverished nations foster 
democracy, feed their people, and protect their environment 
will reap great benefits for the United States. It is in our 
enlightened self-interest both with regard to our economic 
success and our national security needs. Therefore, I, again, 
urge my colleagues and the administration to consider the broad 
spectrum of responsibilities we have to the global community 
and, more specifically, to our neighbors in this hemisphere as 
we debate about the funding levels for foreign aid in the 
foreign aid initiatives as it unfolds.
    Again, Mr. Chairman, I thank you for doing this today, and 
I am hopeful that our discussions will be worthwhile, and 
again, with a particular emphasis in Latin America.
    I do not mean to exclude other points, but I want to 
particularly point to that area of concern I have.
    Senator Coleman. Thank you, Senator Dodd. And I share that 
concern and share the belief that we have to be engaged in 
doing those things that strengthen the foundation for democracy 
and stability. And I think we have great self interest in 
making sure that that is accomplished.
    If I may, let me just turn to Colombia, first. 
Specifically, there was discussion about aid to Colombia, in 
terms of its military, army, air force, et cetera. How would 
you assess President Uribe's efforts to strengthen security 
forces? And, in particular, I am interested in some of the 
anti-terrorism, anti-kidnaping issues that he is facing which 
are such a great threat to internal security.
    Mr. Struble. Thank you, Mr. Chairman.
    I was struck by a line in the Government of Colombia's 
recently published National Security Strategy, which said that 
of all of the inequities that afflict the poor in Colombia, 
there is no greater inequity than that of access to security. 
Security in Colombia is important to achieving all of our 
objectives there. USAID, for example, cannot fully attain its 
objectives, although they have been very creative in their ways 
of trying, in alternative development unless there is adequate 
security in the areas in which they are seeking to work.
    The United States, beginning last year, has an enhanced 
focus on providing security. The Congress was generous enough 
to appropriate, first in the fiscal year 2002 supplemental and 
then more recently in the fiscal year 2003 bill, a total of $98 
million for infrastructure protection in Arauca Province. I 
would like to note that the philosophy that undergirds this 
project is not that you protect a pipeline; you protect a 
province, you protect the people of the province, you bring in 
government institutions presently not active there, including 
prosecutors and police, and establish a thorough-going 
presence. That has been remarkably successful; even as we are 
at the beginning stages we have seen attacks against the 
pipeline fall from about 170 in 2001 to, if I recollect 
rightly, 42 last year.
    We also received funding from you in the supplemental 
process last year for training bomb squads. And, indeed, in the 
markups that were done yesterday in the Senate, there was, 
again, funding provided in the supplemental for training of 
bomb squads. Vitally important. The FARC has been turning to 
urban terrorism even before the breakdown of the peace process 
in February of last year. They have been targeting the people 
who deactivate mines; if I recollect rightly, six of these 
small number of experts were killed last year doing this work. 
As you know, the bombs have increasingly been targeted against 
civilians in Colombia, as shown by the El Nogal bombing 2 
months ago.
    We have also provided assistance, sir, for specialized 
anti-terrorist and anti-kidnaping units, and this assistance 
gives them equipment, such as bulletproof vests, secure 
communications, training in hostage negotiation, training in 
special tactics. It is directed both at police special units 
and military units, the police being more active in urban 
areas, the military with the forces that are turned to in rural 
areas.
    And then, finally, with the support that has been granted 
by the Congress, we have been able to assist the Government of 
Colombia to build hardened police stations in municipalities 
where there is no police presence at the present time. And we 
have also been able to provide training for a new type of force 
of the Colombian police, the carabineros.
    There is a space that opens up between the time when the 
military goes into an area where the government has not been 
present and begins to push out the FARC or the ELN and the AUC 
and the time that the region is sufficiently pacified that a 
regular police force can be in there. And the carabineros are a 
mobile, mostly horse-mounted police force that have been 
specially training, that emphasizes on being present in these 
broad areas in that period between when the military starts to 
clean it out and a regular police presence to help in that 
transition.
    Senator Coleman. I am hopeful that we will look kindly on 
the request, the budget request here. Is there something, 
Assistant Secretary Struble, that is not in here that Colombia 
really needs? If there was something that we should be doing to 
support President Uribe that perhaps we have not talked about, 
can you let me know what that would be?
    Mr. Struble. In point of fact, the supplemental that is 
moving very speedily through the Congress has provided that 
support. There was $34 million in additional funding for INL's 
INCLE account. That will help us to provide--I believe it's $5 
million more for the bomb experts, $7 million for hardened 
police stations, $7 million for the security of President Uribe 
and other vulnerable members of his cabinet. It has $37 million 
in Foreign Military Financing that helps especially the 
intelligence collection ability of the Colombia Armed Forces. 
And I think that we, in fact, have done very well with the 
Congress' support in backing up the political will that 
President Uribe has shown.
    Senator Coleman. Thank you, Assistant Secretary Struble.
    If I may, Mr. Franco, as we see success in Colombia, 
particularly dealing with the issue of eradicating and 
lessening the cultivation of the cocaine crops, coca 
production, my concern is that it is kind of like squeezing a 
balloon, and perhaps that it blows up a little bit more in 
Bolivia. And you noted in your presentation and talking about 
areas of concern of the instability that we are seeing in 
Bolivia. Can you talk to me a little bit about what our focus 
is there, what are our prospects of success, are there things 
that we need to be doing that we are not doing to try to find a 
little more stability in that area of the hemisphere?
    Mr. Franco. Thank you, Mr. Chairman.
    First, I would like to say that I share your concern about 
what we refer to sometimes as the ``balloon effect,'' which is 
as we apply pressure and even--I think showing significant 
progress in Colombia, and I attribute that to the excellent 
work that has been done through our INL Bureau and the 
coordination we have had with NAS on the ground in Colombia, 
and really the very focused, very effective interagency 
approach to dealing with the problem.
    As Assistant Secretary Grossman has said, this is a 
regional problem. This just underscores your concern. 
Colombia's problems are the region's problem. I think that he 
has tried, the Assistant Secretary has tried, very hard, and 
Assistant Secretary Struble, to stress that on our neighbors, 
and I think we have made progress in that area with Peru and 
Bolivia.
    On the Bolivia question, to answer your question specific 
to the issue, in both Bolivia and Peru we have made significant 
progress over the years on alternative development and 
reduction of coca production. And controlling, which, as you 
know, in Bolivia's case, particularly, its illicit crop for 
non-narcotic consumption, and we have worked with the Bolivian 
Government to control that, I think, effectively over the 
years. I will say this, that has been a process of 15 to 20 
years, as exemplified or illustrated by the GAO reports that 
have been conducted in the region. So this is a very long-term 
process, be it in Colombia or elsewhere.
    The balloon effect, to the extent that we approach this, as 
I think we do in the administration--that is why we call it the 
Andean Counter-Narcotics Initiative. It is a regional problem 
and issue I think is the way to address your concern.
    With respect to Bolivia, we have had conversations. We are 
engaging the new Government of Bolivia, the government of 
Sanchez de Lozada, President Lozada's government, on the need 
to make adjustments to our program in the Chapare and Yungas 
areas, where we have seen an up-tick in the production of coca. 
There are some, as I alluded to in my testimony, some issues 
regarding internal politics in Bolivia with an opposition party 
that has replaced the Cocalero Party. So we need to work some 
of those issues through.
    We would like to continue to build on the infrastructure 
and the ability for illicit crops in the Chapare and elsewhere. 
We believe that is the recipe, unfortunately, for success, and 
that is to provide an alternative. What has been the problem 
has been the disruption in the area recently, with strikes and 
things of that nature.
    So I think to the extent that we can provide assistance to 
stabilize the situation in Bolivia, we can address the 
development issues as that stability comes to pass, because as 
the Assistant Secretary noted, Assistant Secretary Struble 
noted, be it in Colombia or elsewhere, without security on the 
ground it is extraordinarily difficult to conduct development 
work. So our strategy is to work with the Government of Bolivia 
on those pressure points and provide the necessary assistance 
once the situation on the ground is stabilized.
    Senator Coleman. Thank you, Mr. Franco.
    I am going to turn to our colleague from Florida, Senator 
Nelson.
    Senator Nelson. I thank Senator Dodd, so that I can get on 
to an appointment. Just a couple of quick questions here about 
Haiti.
    It is, as you have said it is, Mr. Struble, in a world of 
hurt. It needs political and economic stability. We need 
political stability to emanate from the President. I have 
spoken directly to him. My wife has actually spoken to his wife 
about this. And we were down there with a delegation a couple 
of months ago. But it is almost like a vicious downward spiral. 
You need the political stability in order to have the economic 
stability. The world banking community needs to know that they 
are going to utilize the funds adequately in order for those 
bank loans to be made. Now, recently we have heard of the 
possibility of a bridge loan that is being worked on to pay the 
arrears so that more loans can flow. Why is not our 
administration involved in working on this arrears situation?
    Mr. Struble. Thank you, Senator.
    Our administration, has, in fact, been trying to help Haiti 
to access International Financial Institution lending. We 
changed our policy with the adoption of OAS Resolution 822 this 
past winter. It represented a hemispheric consensus that we 
should de-link international financial institution lending to 
Haiti from the resolution of Haiti's political crisis. They are 
both very important, but the position we adopted then was that 
the United States will support international financial 
institution lending to Haiti based upon Haitian compliance with 
the technical qualifications of those loans, and that includes 
very important transparency commitments.
    Just some 10 days ago, there was a delegation from the 
Organization of American States, which included a 
representative from the United States, Special Envoy Ambassador 
Otto Reich, that visited Haiti for conversations with President 
Aristide and the opposition about getting the 822 process back 
on track. Accompanying that delegation were some 
representatives from international financial institutions. 
There will be a Permanent Council meeting in the OAS tomorrow 
to review how the Government of Haiti is doing against some of 
the benchmarks that were provided by this delegation that 
visited Haiti.
    On the IFI side, the Inter-American Development Bank has 
talked about structuring a loan to Haiti that would allow the 
Government of Haiti to cancel its arrears to other 
international financial institutions. Naturally, it is 
important that Haiti first conclude a staff-monitored agreement 
with the IMF. Those discussions are underway. They have made 
progress. The Haitians have done some things. They have changed 
their pricing scheme on gasoline, for example. They have made 
some commitments on transparency. It is very important that 
they follow through on those.
    In the meantime, though, Senator, the United States remains 
the largest bilateral donor of assistance to Haiti. And in our 
request for fiscal year 2004, we are seeking $53 million for 
humanitarian assistance to Haiti.
    Senator Nelson. Well, that is encouraging, because when I 
was in Haiti a couple of months ago, it seemed like that the 
administration had this ideological rigidity about these loans. 
And there is certainly concern about that, because Haiti was 
not doing what they were supposed to be doing with the money. 
On the other hand, to do nothing and just say, ideologically, 
``We're not going to give you the loans until you can pay off 
the other arrears,'' and they cannot do that. And, of course, 
it is a downward spiral. It is clearly not in the interest of 
the United States for Haiti to go in a downward spiral. It is 
clearly not in the interest of the State of Florida, where we 
get a lot of the out-migration. So that is an encouraging 
report, and I want to encourage you to get in there and do that 
and work that thing out.
    It was so instructive to me. I went three times into Citi 
Soleil, the slum. And in the midst of all that slum, that open 
sewer and everything, there is a dignity of the people in 
Haiti. These little thatched, open-roof, stone huts, they would 
keep them just as neat as they could possibly in the midst of 
all of their poverty. A school for children, they got the 
children to go to the school and enforced it through their 
parents in this slum by getting the parents to come in and get 
instruction late in the day. And I saw those parents being 
instructed, and they were just so engaged. I mean, it was so 
encouraging to see that.
    You were very generous with your time, and I am going to 
exit. I would just say an issue in front of us on the emergency 
supplemental that is on the floor right now is the question of 
food aid. As you know, I was involved in it with regard to Food 
for Africa. And I do not want to see--and I think we are 
working in a bipartisan way to get some language into the bill 
that they are not going to be able to squirrel the money away 
on food famine aid for Africa over to Iraq that we had intended 
to go to Africa. And I would say the same thing with regard to 
the food aid for Haiti. Let us make sure that what is intended 
in the bill gets there and does not get squirreled away to 
other areas.
    Thank you.
    Senator Coleman. Thank you, Senator Nelson.
    Ranking Member Dodd.
    Senator Dodd. Thank you very much, Mr. Chairman. I thank 
Senator Nelson. There is an awful lot of ground to cover, and I 
am going to ask, Mr. Chairman, probably a consent to submit 
some questions because to cover the region would be difficult. 
And I do not want to get into a competitive war in a sense, but 
the fact that Western Hemisphere, as a region, receives the 
smallest amount of assistance in the world, about $830 
million--not insignificant dollars, and realize there are 
massive problems that exist elsewhere, so I do not want to 
suggest that ought to be the standard necessarily solely by 
which we judge the effectiveness of programs, but, nonetheless, 
when you consider the incredible problems that exist in this 
hemisphere in--we talked about Haiti a bit here, and I will 
raise that, as well. I already have in my opening statement.
    Central American countries are in desperate conditions. I 
mean, in the end, when you go back and know the millions we 
have spent, literally hundreds of millions spent back in the 
1980s as a result of the guerilla wars that were going on in El 
Salvador and Nicaragua, and then these countries being 
devastated once we resolved those conflicts down there, just 
countless, almost it seemed, natural disasters that plagued the 
region. You now have, according to one estimate, some 28 
million people literally living in utter poverty just in the 
Central American countries. And you start talking about the 
Andean nations and the problems that persist in Colombia that 
we have already addressed to some degree here, and I want to 
come back to that a little bit in terms of the aid function 
there, it is a country that is being just shredded, where 
literally a million people now displaced, hundreds of thousands 
are leaving the country. Many send their children to school in 
the United States and elsewhere just because of the violence 
that is gripping the nation.
    The problems in Bolivia are huge, and the problems in 
Brazil, which is, of course, the one country that if you do not 
get it right, everyone else gets affected immediately. The 
other countries can have problems and they do not necessarily 
affect everyone else, but the problems of Brazil--if Brazil 
gets a cough, everyone else gets pneumonia, is the often-used 
expression in--certainly in South America. The problems of 
Argentina, of course, have been well-reported in the media.
    And I am not suggesting that all of these are areas 
necessarily where some dollar amount is going to necessarily 
solve the problem. And I say this with all due respect, because 
I know there are people, including our witnesses here today and 
others, who really do care deeply about the region. But I would 
be remiss in a hearing like this, Mr. Chairman, if I did not 
express a deep sense of disappointment that exists, in spite of 
all these other problems we face--and, Lord knows, they should 
be a priority problem; certainly 9/11 demonstrated that, 
certainly the problems in the Persian Gulf--but there is a 
sense that in the midst of all of this, this region has been 
terribly neglected over the last couple of years. And I share 
that concern, not that this should have been the highest 
priority, but the failure to even sort of engage this region to 
some extent has been deeply, deeply disturbing.
    So let me raise, starting backward in a sense, just a 
general comment and maybe ask our witnesses, on the region 
generally, in terms of your assessment, generally speaking, 
about the region. Second, I would like to raise the issue, if I 
could, about the problems with the Millennium Challenge 
Account, if I could. The administration has proposed setting up 
an independent government corporation to provide a new spigot 
of assistance to poor countries who are committed to improving 
the lives of their citizens. USAID at the moment is excluded 
from the board of this new corporation. And I wonder how many 
countries in the Western Hemisphere will be eligible to receive 
resources from the Millennium Challenge Account. And so if you 
could respond to that, I would appreciate it.
    And I wonder if you would just--and I said that in the 
first question to you, but if you had to assess access to more 
resources, what would your priorities be? I would like to hear 
from you what your--if you could sit there--and I know there is 
a--just generally, where would you--how do you think, stepping 
back from this and looking at the region, how you would assess 
what your priorities for the region would be, if you could, Mr. 
Secretary.
    And then let me come back in, if I can, on a couple of 
questions, if time permits, Mr. Chairman, on the Haiti issue as 
well as the question of aid in Colombia. I would like to know 
what sort of levels of aid we are talking about there. In 
Brazil, obviously, again, will USAID provide any resources to 
the initiative of the Brazil Zero Hunger Effort there that 
President Lula de Silva has been talking about and whether or 
not we are going to participate in any way.
    I apologize. There are a lot of questions, but obviously 
the region has a lot of questions.
    Senator Coleman. And, Senator Dodd, I will note that, 
without objection, we will keep the record open for questions 
until the end of the week.
    Senator Dodd. Thank you.
    Senator Coleman. So we will get those in.
    Mr. Struble. Thank you, Senator. I will take up your 
invitation to provide a general assessment of the state of the 
hemisphere and talk a little bit about what our priorities are, 
and then my colleague, Adolfo Franco, who was just in Brazil 
looking at, among other things, the Zero Hunger Program, and I 
know he will want to comment for you on that, and Haiti and a 
few other areas, as well as the Millennium Challenge Account.
    On a general assessment, I had the opportunity to say in my 
oral statement and in my written remarks that of greatest 
concern to us is that while we have achieved the crowning 
success in the past 25 years of helping establish democratic 
governments in all but one country of this hemisphere, I am 
worried that citizens in the hemisphere are not satisfied with 
the quality of democratic governance. Corruption is much too 
high. If you look at Transparency International, they would 
rank a number of the countries in Central and South America 
toward the bottom of the worldwide scale. The World Bank study 
that is perhaps a bit more mid-term in its outlook puts them 
around the 50th percentile. But that is not acceptable for a 
hemisphere that puts such a priority on democracy and on 
responsive governments.
    There also are the difficulties that our governments have 
had in creating macroeconomic stability and sustained economic 
growth. Now, mind you, our own troubles in the United States 
have contributed a great deal to that. As you have said, like 
Brazil, if we get a cough, everyone else in the hemisphere gets 
pneumonia. The fact that countries like Mexico have seen their 
growth rate go from 7 percent in 2000 down to 1 percent or 3 
percent is illustrative of what an impact our economic downturn 
has had on countries that depend upon access to our market.
    The Caribbean has been badly hit by the turndown in 
international tourism since 9/11. Other countries have been 
impacted by a more risk-adverse investment climate in the 
hemisphere. Some of this will be cured as our own economy 
begins to pick up again. Some of this can be addressed on the 
policy side rather than the assistance side by moving smartly 
on programs like ATPDEA, CAFTA, and the FTAA.
    On the Millennium Challenge Account, without getting into 
some of the specifics, I want to note that in the first year, 
based upon per capita criteria only, there would be five 
countries in this hemisphere that would be eligible, that have 
per capita income below $1,435. In the second year, there would 
be 7; in the third year, there would be 14. And those 
countries, just to take the first year for example, include 
most of those that have been cited by members of the committee 
as of special concern to them--Bolivia, Haiti, El Salvador, 
Nicaragua.
    Now, of course, the criteria of the Millennium Challenge 
Account puts an emphasis in three different areas--political 
liberties, economic liberties, and investment in people. Most 
of our countries in the hemisphere do very well in political 
liberties. A country like Haiti would have more difficulty 
there. They are doing reasonably well on economic freedom, and 
they are doing better all the time in investment in people. But 
one of the things that would, in fact, be my priority is to 
ensure that countries in this hemisphere are in an advantageous 
position to compete for those additional resources in the 
Millennium Challenge Account. I do think, in fact, that 
combining good governance policies with assistance is a smart 
outcome, that it ensures that our assistance dollars will have 
much more effect there, and I particularly look forward to 
trying to help countries, the Central American countries, 
Bolivia, get access to this money.
    Senator Dodd. What was the reason why USAID was not 
included on the board? I do not understand that.
    Mr. Franco. If I could----
    Senator Dodd. Just a quick answer. I do not know the--do 
you know the answer why they were excluded?
    Mr. Franco. Well, Senator Dodd, I think the answer to that 
is the chairman of the board of--the proposed chairman of the 
board, as proposed to Congress, would be the Secretary of 
State. And as my boss, the Administrator, often says, ``He's my 
boss,'' and, therefore, there is a sense, very strong sense, 
more than a sense, an understanding that USAID will, certainly 
on the ground, be working very closely. So I think that is 
Administrator Natsios' position, and the Secretary of State is 
the boss.
    Senator Dodd. Sure.
    Mr. Franco. If I could just add, because--to your--I jotted 
down some notes--try to answer your questions and just add a 
bit to what Assistant Secretary Struble said, although he has 
done a superb job of outlining, I think, the administration's 
positions and concerns throughout the hemisphere. If I could 
just briefly comment on a few areas and concerns that you have 
expressed.
    You have asked what would we do if we had a perfect world, 
and I wanted to say that with regard to trade capacity 
building--and free trade is not the panacea, not the answer to 
all the development problems in the world. And I think 
Ambassador Zoellick would be the first to say that, and I 
certainly believe that. But I do think, in the case of Mexico 
and NAFTA, I think that the number of jobs that have been 
created in Mexico, the stability, and I frankly think, Senator 
Dodd, the openings in Mexico can, in large part, arguably be 
attributable to the free trade accords that we have with Mexico 
and NAFTA.
    So I believe that free trade--and we talk about trade 
capacity building--encompasses more than just what we want to 
do, which is open new markets for U.S. products and certainly 
have Latin Americans increase their exports and improve their 
competitiveness. It has the added benefit that when we are 
talking about an investment climate, we are talking about what 
Chairman Coleman has articulated, and that is questions of 
corruption, questions of crime. These are impediments to 
investments.
    And when governments recognize that the old way of doing 
business, what we now refer, as Chairman Coleman has said, the 
second generation of reforms is now necessary. We have 
celebrated for the last 20 years free elections, which are 
wonderful. We now take almost for granted the transition, the 
peaceful transition, of power in the region--we just had 
elections in Ecuador--from one election to the other. This 
second generation of reforms and under the rubric of free world 
trade capacity encompasses things like reforms of institutions, 
transparency in budgeting, accountability, and political party 
building.
    So I believe that if I had my druthers to say, and I think 
the President's vision, to push that agenda is to push a 
development agenda and a social and a political agenda as well 
as a trade agenda, as a general proposition. As the chairman 
has articulated, I think it is one of the--as you said, Mr. 
Chairman, at the beginning--one of the opportunities. 
Obviously, we face other challenges, but I believe that to be 
at the core of our foreign policy objectives for the region 
from USAID's perspective. And I know Assistant Secretary 
Struble and I have talked about that and he shares the need to 
promote this agenda.
    On a couple of the countries that you mentioned 
specifically, our aid to Colombia, we are planning, in terms of 
development assistance programs, $150 million for Colombia. 
Now, expenditures this year were $125 compared to $37 million I 
recall when I first took this job over a year ago. So we are 
ramping up our assistance programs significantly in Colombia in 
three broad areas, and I will not take a lot of time here, but 
they are our alternative development programs, which I 
discussed in my testimony, in the coca producing areas. They 
have to do with justice, political reform, corruption issues we 
talked about, to reform the judicial system in Colombia, to 
have human rights. They have an early warning system in 
Colombia to avoid massacres, to bring in police and authorities 
into vulnerable areas as quickly as possible and a very 
important internally displaced people's program. Colombia is 
the only country in the region that has internally displaced 
people. There are actually, Senator Dodd, over 2 million people 
who are internally displaced. We have assisted 600,000 of them 
in conjunction with the PMR Bureau at State.
    With respect to Haiti, I am sorry Senator Nelson has 
departed, we are planning this year, in fiscal year 2003, to 
spend $9.5 million above the congressional earmark for Haiti. 
So we are expending more than the Congress earmarked for the 
region. And we will--I want to be very clear for the record--we 
will fully fund Haiti's emergency food needs. We have a 
commitment from the Secretary of State and from the 
Administrator to do that.
    Last, with respect to Brazil, Assistant Secretary Struble 
said I was just in Brazil last week. I could not agree with you 
more, Senator Dodd. We need to engage Brazil. If we do not work 
with Brazil and we do not have a good relationship in 
partnership with the Brazilians, I think we are missing an 
enormous opportunity. And it is, as you said, in our 
enlightened self interest. We have a team that has just 
returned from Brazil on March 28, was in Brazil for 10 days, a 
USAID/USDA team working on Zero Hunger. I met with Minister 
Graziano personally in Brasilia to discuss how we can provide 
assistance in setting up a food-stamp-like program to reach 
Brazil's 53 million people who live on less than a dollar a 
day. Yesterday, I met with Ambassador Barbosa from Brazil to, 
again, offer our assistance in this regard. It's been very well 
received by the Brazilian Government. We expect a report next 
week.
    Senator Coleman. Just a quick issue on the--and I apologize 
for the jumping around--but on the alternative development 
issues in Colombia, and particularly in the Putumayo section, 
which is one of the largest drug-producing sections in the 
southwestern part of Colombia, there is the--I wonder how the 
program has changed since the report was--is it the Gersoni----
    Mr. Franco. Yes.
    Senator Coleman [continuing]. So-called Gersoni Report.
    Mr. Franco. Right.
    Senator Coleman. How has the alternative development 
program changed since that report has come out?
    Mr. Franco. Well, since that report came out, and I think 
it is a very valuable report, we have certainly invested a 
great deal more in infrastructure projects. Working with 
municipal governments--in fact, the Governor of Putumayo was up 
here in Washington this week, and I was hoping he would meet 
with as many members and staff as possible to discuss what we 
have done in the last year in infrastructure since the Gersoni 
Report, Senator, which has been work on bridges, work on road 
construction, work on community infrastructure and road-
building, which is something we were not doing a couple of 
years ago.
    I want to say this. This predates me, but I want to be as 
fair as I can to people at USAID. We were scheduled to close 
our Colombia program in 1999, so we have gone from closing the 
program to ramping it up to being our largest single program in 
Latin America. So we have done the best--they have done and we 
have done the best that we can on trying to focus in on program 
priorities working in conjunction with the Government of 
Colombia. But they are focused largely on infrastructure 
projects and then on licit agricultural activities for which 
there are markets in the area. Because, as you know, the 
proximity of Putumayo's other markets is one of the problems, 
and that is what we have done principally.
    Senator Dodd. Yes. I just want to underscore, as well, the 
points raised about Haiti, and there are a series of questions 
here. I go back--I recall--of course, the amount of effort, the 
amount of time--as some of you know, I was in the Peace Corps, 
of course, over on the western border of the Dominican 
Republic, back years ago now, but I spent a lot of time in 
Haiti over the last 40 years. And back in the early 1980s, of 
course, after--or not the early 1980s; the late 1980s after 
President Aristide, went back, there was a real effort down 
there to buildup--we spent a lot of money in the policing, 
building up a better police security force. I do not remember 
the exact numbers, but it was in the millions of dollars.
    And it has just been terribly disappointing that that has 
all sort of collapsed. Everyone said at the time this will have 
to be a sustained effort over many years in order to make this 
work. The idea you are going to come in and be able to sort of 
dump a lot of money onto a program, bring some people into an 
academy, and expect that you are going to change a culture was 
terribly unrealistic. In fact, even with the expenditure over a 
long period of time and commitments as hanging in there, the 
assumption was this was going to be a risky endeavor, as it 
was.
    But we sort of all of a sudden stopped in all of this. And 
it is like chicken and egg in a sense. It seems to me without 
some security it is very difficult to get people to invest, it 
is very difficult to expect the kind of things to improve 
economically. And so I am just--how realistic--do we expect the 
Haitian Government to improve its own security, in a sense, 
when they have so limited resources here? And I wonder if you 
have any quick comments on that.
    Mr. Struble. Thank you very much. In fact, one of the 
issues that the OAS Special Mission raised with President 
Aristide was the need, the fundamental need, for security in 
order to have free and fair elections in 2003. And they asked 
President Aristide to appoint a new director of the Haitian 
National Police who would be credible, who would be seen as not 
politically dependent upon some outside party. Regrettably, the 
acting director who has been named by President Aristide does 
not fit that bill. He is a person who is suspected of having 
participated in the murder of the leading member of the 
political opposition almost a decade ago and who has other 
stains on his character that are of concern.
    We did, indeed, make a sustained effort to help the 
Government of Haiti have an independent, apolitical, effective, 
competent police force. We are still struggling in that 
direction in the sense that we have urged in some of our 
special programs through the International Narcotics Affairs 
Bureau that they create special police units that are vetted 
and polygraphed and that can help them to advance in these 
areas. The size of the Haitian National Police has withered a 
great deal over the past few years. It is not been sustained 
financially by the Government of Haiti. As I mentioned before, 
there has been increased politicalization of it. And that, in 
the first instance, is something that needs to be addressed 
before the international community will be able to effectively 
assist the police force in performing its security mission.
    Senator Dodd. Last, I just raise the issue of--you 
mentioned the dollar amounts, in terms of assistance to Haiti. 
I think we are looking at here, $52.8 million, with almost half 
of that assistance in the form of food aid, $23.8 million. And 
this has hovered basically around this level now for a number 
of years. I would like to get just a quick assessment of how 
much of that assistance has gone to the Haitian Government 
organizations. The reason I raise that is because the concern 
has been raised by some U.S. public health officials about our 
absence of involvement with the health officials with the HIV/
AIDS issue and the spread of it and the growing concern, the 
fact that we have excluded our participation with any of these 
organizations has exacerbated some of these problems, 
particularly in the area of public health. And I wonder if you 
would comment.
    Senator Coleman. Senator Dodd, before--this may be the last 
question----
    Senator Dodd. Yes.
    Senator Coleman [continuing]. And I would actually like to 
add a piece to that so they can address these same--and that is 
the Economic Support Fund is an area in which there are zero 
dollars, as I understand it, to Haiti. And as you address 
Senator Dodd's question about these various funding levels, can 
you help me understand why no support for the Economic Support 
Fund?
    Senator Dodd. When I said ``excluded,'' it is not excluded, 
but limited involvement would be a better choice of words.
    Mr. Franco. Thank you. I will let Assistant Secretary 
Struble speak on the Economic Support Fund, since they are more 
of a State Department issue directly.
    With respect to levels in Haiti, we will be transferring 
additional funds, so our total expenditure for Haiti for this 
year will be $62 million. That is what we are going to plan for 
this year for fiscal year 2003, which is significantly higher 
than we have had in the past, Senator Dodd, in terms of 
percentages. It represents a significant increase.
    I want to reiterate our food program, humanitarian 
assistance, remains a priority, and we will fully fund Haiti's 
food needs. And I think that is very important for the 
committee to know. I know Senator DeWine and other Senators 
have also expressed concern to us on this matter.
    With respect to the health officials, we have engaged. I 
mean, we have had contact with health officials in Haiti. I was 
actually in Haiti about a year ago with Secretary Thompson. So 
there has been contact with the Government of Haiti. However, 
our work and our resources are channeled through non-
governmental organizations in Haiti. It is a high, intensive-
focus country for us on HIV/AIDS. We are able to work with non-
governmental organizations, I think, effectively in Haiti. I 
think Assistant Secretary Struble articulated some of the 
concerns we have with the Government of Haiti.
    I want to be very clear that our commitment is to do 
everything we can to reach the Haitian people. I understand 
your position or your concern regarding the institutions in the 
country, but we are able to carry out, I think, a very 
effective HIV/AIDS program in Haiti through the non-
governmental sector, which we support.
    Mr. Struble. And to add to what Assistant Administrator 
Franco said, I would first note that Haiti has also recently 
obtained access to some global funds, very significant ones. 
You recall that the President, in the State of the Union 
Address, announced a new $15 billion, 5-year initiative to 
fight HIV/AIDS in Africa and the Western Hemisphere. And $10 
billion of that will be new funding. And the two countries in 
the Western Hemisphere that are specifically found eligible for 
that are Haiti and Guyana. Some of the funds will also be 
distributed regionally. So I think it will have a very useful 
impact on it.
    The determination of Haiti's eligibility was based, in 
fact, upon the pervasive poverty rates, the widespread nature 
of HIV/AIDS infection, as well as our assessment of their 
ability to absorb this additional aid.
    On the question, Mr. Chairman, of ESF, as the Department 
was preparing its fiscal year 2003 budget request, the 
Department official who at that time was responsible for 
reviewing ESF levels, Under Secretary John Bolton, observed 
that virtually all of our programs in Haiti that were being 
funded by ESF were, in fact, classic Development Assistance 
programs that in other areas of the world were financed through 
the Development Assistance program of USAID. And therefore, the 
Department of State consulted with USAID and an agreement was 
reached that the ESF level would decline and the Development 
Assistance level would rise. However, there was a wash in terms 
of being able to continue most of these programs.
    Senator Coleman. Thank you, gentlemen. The ranking member 
has left. I would note that during my time as chairman, I hope 
to draw upon his experience and passion that he has for this 
area. I suspect that--we have spent a lot of time on Haiti; we 
could have spent on a whole range of areas, many of which, Mr. 
Franco, you listed as the fragile concerns of Bolivia, 
Guatemala, Colombia, Venezuela. So there is a lot of work to be 
done. There is certainly great interest, and we do appreciate 
your appearing before us today and the work that you do.
    Thank you, and this hearing is adjourned.
    [Whereupon, at 12:50 p.m., the committee adjourned, to 
reconvene subject to the call of the Chair.]
                              ----------                              


       Responses to Additional Questions Submitted for the Record


 Responses of J. Curtis Struble, Acting Assistant Secretary of State, 
  Western Hemisphere Affairs, to Additional Questions for the Record 
               Submitted by Senator Joseph R. Biden, Jr.

    Question 1 of 3. Last year, Congress provided authority for the 
first time to Colombia to use equipment provided by the United States 
for other than counter-narcotics purposes. Consequently, several dozen 
U.S. Army Special Forces soldiers recently arrived in northeastern 
Colombia to begin training Colombian soldiers to protect the 500-mile 
long oil pipeline near the Venezuelan border.

          1. Can you give us a report on this training, how it is 
        proceeding, and the force protection measures being taken for 
        our forces in that region?

          2. Is this training sufficient? Isn't one of the real 
        requirements for these Colombian forces the need to have more 
        mobility? What is the schedule for procuring additional 
        helicopters for these units under the funding provided in the 
        fiscal 2003 budget?

          3. How do you assess President Uribe's partnership in the 
        effort to train security and counternarcotics forces?

          This supplemental request for fiscal 2003 contains over $100 
        million for Colombia ($34 million in DOD funds, $34 million for 
        the Andean Counterdrug Initiative, and $37 million in Foreign 
        Military Financing).

          4. Can you elaborate on the purpose of this request and to 
        which programs it will be devoted?

    Answers:
    Answer 1. Since January 2003, about 60 U.S. Army Special Forces 
trainers have been in Arauca and Saravena to prepare the Colombian 
Army's 18th Brigade to implement the Infrastructure Security Strategy 
(ISS), which focuses on protecting the Cano Limon petroleum pipeline. 
The training aims to improve the Brigade's intelligence collection and 
operational planning skills. Assistance to the Brigade's Counter-
Guerrilla Battalion focuses on reconnaissance, quick reaction force 
operations, tactics and planning. Overall, training is proceeding well. 
We have trained two of the Battalion's four companies, which are now 
deployed to protect the pipeline.
    The program still faces challenges. Historically, the 18th Brigade 
has been passive and risk-averse; we continue to work with the 
Colombians to change this mindset and to instill greater discipline 
among regular soldiers, both key to improving the Brigade's operational 
results.
    U.S. Special Forces have undertaken major projects to enhance force 
protection for U.S. servicemen at the U.S. compound in Arauca. They 
installed cameras at the front gate and an infrared camera scans the 
compound's perimeter; soldiers cleared out underbrush, installed a back 
fence, introduced lighting, and built a berm to protect the rear of the 
main base. Sandbags fortify the U.S. compound; we will soon replace 
them with Hesco barriers (earth-filled bastions). The U.S. soldiers 
have a Battalion Surgeon on standby and rely on a Joint Intelligence 
Center for force protection, as well as for strategic and operational 
intelligence.

    Answer 2. Our assistance programs for Colombia take into account 
the need for greater Colombian Security Forces mobility so that they 
can re-establish government presence and carry out President Alvaro 
Uribe's joint campaign against terrorism and narcotics trafficking.
    We agree with your concern regarding air mobility. As we have 
previously briefed Congress, with the $93 million appropriated in the 
FY 03 Foreign Operations Appropriations Act (P.L. 108-7), the 
Department of State plans to provide additional helicopters to increase 
Colombian Army mobility in support of its pipeline protection mission, 
as required by the Act. We have also been exploring ways to respond to 
recent Colombian government requests for assistance in boosting the 
overall mobility of its forces. We are studying the feasibility of 
various options. We will, of course, consult with Congress as we 
develop our plans.

    Answer 3. Colombian President Alvaro Uribe has done more than any 
recent Colombian president to support training for his military and 
police forces and has publicly called on Colombians to make sacrifices 
for public security, receiving broad popular support for this position. 
He increased government spending on security to 5.8 percent of GDP--an 
unprecedented commitment. Much of this new funding goes to training and 
equipment, as well as operations against Colombia's Foreign Terrorist 
Organizations.

    Answer 4. We intend to use supplemental assistance to improve the 
training, mobility, and intelligence capabilities of Colombia's 
security forces so that they can more effectively confront the Western 
Hemisphere's most sophisticated and well-established terrorist groups.
    The 2003 Supplemental allocates $37.1 million in FMF and $34 
million for the Andean Counterdrug Initiative (ACI). Of the $37.1 
million in FMF, $20 million will provide the Colombian Army Counter 
Drug Brigade and Special Forces Brigade of the Rapid Deployment Force 
with aerial intelligence and command and control platforms, including 
crew training and operational and maintenance support. $12 million will 
provide additional aviation training and equipment to enhance current 
hostage search and rescue capabilities. The remaining $5.1 million will 
expand the number of mobile listening stations intercepting terrorist 
communications, giving Colombians more information on terrorist 
operations, while providing a valuable force protection asset for both 
the Embassy and our various activities around Colombia.
    The $34 million for ACI in the FY 2003 Supplemental package 
includes $5 million to provide bomb technicians with proper protective 
equipment, communications systems, remote controlled equipment and 
tools, and radio frequency blocking devices--enhancing Uribe's safety, 
particularly at his public appearances. These funds would also allow 
the Colombian government to hire more personnel to support an 
explosives repository database, critical to collecting and 
disseminating the latest information on terrorist bomber techniques. We 
intend to use $7 million of the ACI supplemental funds to continue 
helping Colombia establish a police presence in municipalities where 
the Colombian State currently has no security forces deployed, and to 
provide these new units with basic packages of arms, training and 
equipment.
    We plan to use $7 million of the ACI funds to act on the results of 
our Uribe Presidential Security Survey and expand upon the training and 
equipment we have already provided to help keep Uribe alive. This 
funding will provide needed physical and technical security upgrades to 
key presidential sites, advanced protection courses and crisis response 
training. It will also help the Government of Colombia to respond to 
threats against other key government officials, such as when we 
uncovered a specific threat against the Mayor of Bogota, whose office 
is two blocks from the Presidential Palace.
    The final $15 million will expand the drug eradication program, 
building on recent success in cutting the coca cultivation that 
finances Colombia's terrorist organizations. This funding will allow 
for continued use of three spray planes (pressed into service for 
search operations) that otherwise could not be operated due to funding 
limitations, and will purchase two additional aircraft. The funding 
will also allow for purchase of critical spare parts and components 
needed to maintain the readiness of the spray aircraft fleet and will 
provide pilot training, refueling equipment, additional imagery, fuel 
and coca herbicide.

    Question 2 of 3. As you know, there has been significant and 
legitimate concern in the Congress about the human rights situation in 
Colombia. Most of the violations are committed by the guerrillas and 
the paramilitaries. However, there continue to be serious and credible 
allegations of continued collaboration between the Colombian military 
and the paramilitaries; for example, the State Department's 2002 Human 
Rights report states that ``some members of the government security 
forces continue to commit serious abuses, including unlawful and 
extrajudicial killings . . . and collaborate with paramilitary groups 
that committed serious abuses.''

          1. Can you speak to these concerns?

          2. How do you assess the Colombian military's attitude 
        regarding respect for human rights and toward severing ties 
        with the paramilitaries? Do you detect any material 
        improvement?

          3. How serious is the Colombian government about prosecuting 
        the perpetrators of human rights abuses?

    Answers:

    Answer 1. Over the last several years, the Colombian Armed Forces 
have made significant progress in improving their human rights record. 
Elements of the Colombian Military (COLMIL) commit a small percentage 
of all human rights abuses in the country. Still, some military 
personnel continue to maintain ties to paramilitary units that are a 
major source of human rights violations. Impunity for both state and 
non-state actors is a core human rights problem. The civilian judiciary 
is hampered by resource constraints, competing demands, and threats and 
intimidation.
    The Uribe Administration has pledged to improve its record. 
Additionally, President Alvaro Uribe and Defense Minister Marta Lucia 
Ramirez have stated repeatedly that they will not tolerate 
collaboration between military personnel and paramilitary groups. We 
have confidence in their commitment.
    The Uribe Administration has already taken steps to improve the 
human rights situation in Colombia. Vice President Santos has 
reinvigorated the Presidential Human Rights Program creating a Special 
``Momentum'' Committee to promote judicial resolutions of high-priority 
human rights cases, and establishing regular dialogue with local human 
rights groups. The Colombia office of the United Nations High 
Commission for Human Rights (UNHCHR) was extended through 2006. To 
create an environment conducive to the protection and promotion of 
human rights, Uribe has instituted a Democratic Security plan designed 
to increase and consolidate state presence throughout the country, 
particularly in previously neglected areas where U.S.-designated 
Foreign Terrorist Organizations have traditionally had significant 
influence.
    We are committed to working with the GOC to continue to improve the 
Colombian military's human rights performance and will report to 
Congress accordingly.

    Answer 2. We believe the Colombian armed forces are taking 
effective action to sever links between military personnel and 
paramilitary units. We recognize that more needs to be done, but we 
note that arrests, combat operations, and intelligence activities by 
the Colombian Armed Forces against paramilitaries increased in 2002. As 
of November 30, 2002, 183 paramilitaries were killed (compared to 117 
in 2001) and 1,214 were captured (compared to 1,089 in 2001).
    On May 1, 2002, the Secretary of State, and on September 9, 2002, 
the Deputy Secretary of State determined and certified to the 
appropriate Congressional committees that the Colombian Armed Forces 
met all three conditions of the statutory criteria as required under 
section 567(a)(1) of the Kenneth M. Ludden Foreign Operations, Export 
Financing, and Related Programs Appropriations Act, 2002 (P.L. 107-
115). These conditions were the Colombian Armed Forces are suspending 
members credibly alleged to have committed gross violations of human 
rights and/or paramilitarism; are cooperating with civilian prosecutors 
and judicial authorities; and are taking effective measures to sever 
links with paramilitary groups.

    Answer 3. The Uribe Administration is committed to holding members 
of the Colombian Armed Forces accountable for their actions. As 
recently as March, the Prosecutor General's Office charged Lt. Col. 
Orlando Pulido Rojas with homicide and conspiracy for collaborating 
with paramilitaries in the murder of five alleged FARC collaborators in 
Casanare Department, and issued an arrest warrant for former General 
Jaime Humberto Uscategui for failing to prevent a paramilitary massacre 
in Meta Department in 1997.
    Other recent military success against paramilitaries include:

   February 18--arrest of three AUC members in Cartagena;
   February 16--AUC leader in Cesar Department arrested;
   February 9--troops killed 7 and wounded 3 AUC members in 
        clash in Valle de Cauca;
   January 30--arrest of two AUC members during Navy operation 
        against AUC in Gulf of Morrosquillo;
   January 30--11th Brigade arrested two ATJC members in La 
        Sierpe (Sucre);
   November 16--police and army arrest 16 ATJC members in 
        Barrancabermeja.

    We have advised the GOC on the new statutory certification 
requirements contained in Section 564 of the FY 2003 Omnibus 
Appropriations Act which sequesters 25% of funds for Colombia's 
security forces until the Secretary of State certifies that the GOC has 
made demonstrable progress on 5 conditions associated with severing 
military' paramilitary ties and ending human rights abuses. We are 
emphasizing to the GOC the importance of (1) suspending and prosecuting 
members of the Colombian Military (COLMIL) involved in human rights 
abuses or paramilitarism; (2) COLMIL cooperating with civilian 
prosecutors and judicial authorities in such cases; (3) COLMIL severing 
links with paramilitary organizations and executing orders for capture 
of paramilitary leaders.
    We will report on the GOC's progress for this year's first 
certification later this spring and then again after July 31, as 
required by certification legislation.

    Question 3 of 3. As you are well aware, unemployment and poverty in 
Haiti has worsened in the past two years. Currently, 80 percent of 
Haitians are unemployed; the average per capita income is $250 per 
year, less than one-tenth of the average in Latin America. Yet at the 
same time, the U.S. and multilateral institutions and donors are 
withholding direct aid to Haiti until President Aristide acts on a 
series of political, judicial and economic reforms.

          To what extent is the withholding of United States' and 
        multilateral assistance contributing to the poverty crisis in 
        the country?

          What steps is President Aristide taking to cooperate with the 
        reforms set by the United States and the international 
        community? To what degree is the implementation of the reforms 
        contingent on the government having the financial resources to 
        do so?

          Clearly, as the United States and the international community 
        continue to push for reforms, the Haitian people are suffering.

          What can we do to increase attention to the immediate and 
        critical needs of Haitians while the Haitian government's 
        political and judicial reforms are in process?

    Answers:

    The U.S. government has not withheld any aid from Haiti; indeed, it 
has been and remains Haiti's largest bilateral donor, disbursing 
assistance through NGOs. The Administration is increasing its aid this 
year precisely to address critical food needs. The U.S. disbursed more 
than $840 million in assistance to Haiti in FY 1995-2002. The Haitian 
government has taken some of the reform steps requested by the 
International Monetary Fund as conditions for an agreement, but these 
steps have generally come slowly and without the transparency and 
consultation that would maximize their benefit. The IMF is continuing 
its dialogue with the GOH in an effort to reach an agreement on a 
sustainable budget and macroeconomic framework.
    Historically, the high point of international donor assistance to 
Haiti was immediately following the return of elected government to 
Haiti. In FY 1995, Haiti received $611 million in total aid from the 
international community ($194 million from the U.S.), representing the 
disbursement of assistance allocations spanning over several years. 
Total aid declined to $427 million in FY 1996, and has steadily 
declined since, reaching $189 million in FY 2001 and $120 million in FY 
2002. The largest portion of assistance from FY 1995-FY 2001 went into 
governance, including U.S.-led efforts to dismantle the Haitian armed 
forces and set up a professional national police force. Those efforts 
concluded in FY 2001.
    Principal USG aid programs budgeted for FY 2004 include:

     Food Security ($23.8 million): P.L. 480 Title II (food 
assistance) improves the nutritional well-being and food security of 
Haiti's poorest populations, especially children under five and nursing 
mothers. An early warning system developed to anticipate and prepare 
for food emergencies in the Northwest region is now being replicated in 
other parts of the country.
     Health ($21.8 million): USAID uses a network of over 30 
local organizations to provide services to some 2.5 million Haitians, 
close to a third of the population. Child immunization rates in USAID-
assisted areas are nearly double the national average, as high as 85 
percent in some parts of the country. Child malnutrition rates in 
USAID-assisted areas fell from 32 percent to 22 percent in 1995-2000. 
The percentage of women nationwide seeking prenatal consultation has 
increased from 68 percent to 79 percent. The national contraceptive use 
rate has gone from 9 percent to over 15 percent, with even stronger 
gains in USAID targeted areas. This is part of our expanded AIDS 
prevention program. Haiti is also a beneficiary of the Global Fund 
against AIDS, Tuberculosis, and Malaria.
     Economic Growth ($1.75 million): Programs are aimed at 
sustainable increases in income for the poor. They expand availability 
of small business loans to urban micro-entrepreneurs; provide 
assistance to small farmers in marketing valuable export crops such as 
coffee, cacao, and mangos; and help Haitian artisans find niche export 
markets. Beneficiaries include small entrepreneurs (80% of whom are 
female), approximately 250,000 hillside farmers, and 2,000 artisans.
     Education ($2.5 million): Programs increase pass rates for 
third and fourth grade students through improved in-service training 
for 4,000 teachers and school directors, radio education in math and 
Creole, and the provision of books, teaching aids, and curriculum 
guides.
     Democracy ($2.9 million): Our democracy programs focus on 
increasing the professionalism of political parties, strengthening 
independent media and civil society organizations and promoting 
judicial reform and human rights. Training and other support is also 
provided for independent election observation groups. Our public 
diplomacy programs also bring Haitian government officials, 
journalists, and academics to the U.S. to observe and learn about U.S. 
public policies and programs.
    Through these programs, we aim to alleviate poverty, illiteracy, 
and malnutrition and to promote respect for human rights and the rule 
of law. Effectiveness of U.S. assistance has been shown in the 
improvement of social indicators in the areas of intervention, despite 
a deteriorating economy overall.


                                       USAID BILATERAL ASSISTANCE TO HAITI
                                            [INCLUDES P.L. 480 FOOD]
----------------------------------------------------------------------------------------------------------------
                                                             FY 2001       FY 2002       FY 2003       FY 2004
                         BUDGET                             Disbursed     Disbursed     Estimated     Budgeted
----------------------------------------------------------------------------------------------------------------
TOTAL in MILLIONS                                                 $72           $56           $50           $55
----------------------------------------------------------------------------------------------------------------


    The above figures do not include programs funded by the U.S. 
Departments of State and Defense for training! equipping units of the 
Haitian National Police with counter-narcotics responsibilities, Peace 
Corps, or U.S. contributions to Haiti through international 
organizations, such as the OAS, UNDP, and the International 
Organization for Migration (IOM).
    The U.S. can best draw attention to the immediate and critical 
needs of Haiti by continuing its efforts to settle the current 
political crisis. Political stability will enhance prospects for 
economic development. The potential for investment in Haiti is great--
in 2002 Haitians living overseas sent approximately $800 million in 
remittances back to Haiti.
    The U.S. has made a sustained effort to bring about a resolution of 
the political crisis. The U.S. actively participated in negotiations at 
the OAS that produced Resolution 822, under which the Haitian 
government committed itself to a series of actions aimed at creating an 
improved climate of security for elections in 2003. Resolution 822 
called for and supported normalization of Haiti's relationships with 
International Financial Institutions.
    Some of the Haitian government's commitments--such as holding free 
and fair elections and long-term strengthening of the Haitian National 
Police and democratic institutions--will depend in part on 
international assistance. But many others--notably first steps toward 
disarmament and the arrest and prosecution of those involved in 
political murders--are well within the financial resources of the 
Haitian government, which has simply failed to act. In failing to meet 
its commitments, the Haitian government has not shown the political 
will to achieve the political and judicial reforms needed for an 
improved climate of security.
    A high-level joint OAS/CARICOM delegation, on which the U.S. was 
represented by Special Presidential Envoy for Western Hemisphere 
Initiatives Otto J. Reich, visited Haiti March 18-20 to urge the 
Haitian government to meet its commitments, and to call on the 
opposition to respond constructively once the government did so.
    Primary responsibility for Haiti's poverty crisis rests with the 
Government of Haiti. Only it can adopt the policies that will attract 
domestic and foreign investment as well as increased levels of 
international donor support. These policies would not have significant 
financial cost to the government; in fact, they would tend to increase 
government revenues.

                                 ______
                                 

Responses of Hon. Adolfo A. Franco, Assistant Administrator, Bureau for 
Latin America and the Caribbean, USAID, to Additional Questions for the 
            Record Submitted by Senator Joseph R. Biden, Jr.

    Question 1 of 5. Early last month, the Administration reported that 
coca cultivation in Colombia had declined by 15 percent during the 
year. However, according to recent Central Intelligence Agency 
estimates, coca cultivation increased by 7.6 percent in Peru and 23 
percent in Bolivia, where it had been declining.
    I also understand that there is concern that some Colombian farmers 
have begun to plant a new variety of coca--called ``Tingo Maria''--that 
can yield more than twice as much cocaine as the predominant strain of 
coca now grown in Colombia.

    Question. How do you assess the progress of our alternative 
development efforts in Colombia, as well as the rest of the region? The 
eradication is clearly making progress, but have development efforts 
kept pace? How can they be improved?

    Answer. Colombia. Significant progress has been achieved in our 
alternative development programs in Colombia. As of March 31, 2001, 
support had been given to 24,549 hectares of licit crops and 247 
infrastructure projects had been completed, benefiting 22,829 families. 
All of these achievements surpassed cumulative program goals. The 
large-scale spraying of coca areas, especially in Putumayo, convinced 
farmers to abandon their illegal crops. Additionally, the continued 
fighting between armed groups contributed to farmers' growing distaste 
for illicit crop production in southern Colombia. These advances 
demonstrate that USAID is making significant progress in providing 
alternative agricultural options to illicit crop cultivators. 
Eradication has had a significant impact on farmers' willingness to 
participate in alternative development.
    However, considerable challenges remain to sustain this progress. 
The lack of security and government presence in rural areas continues 
to pose a real challenge to private sector investment. Farmers must 
also be willing to invest some of their own resources in longer term 
alternative development efforts to achieve a sustainable commitment to 
licit activities. Finally, sustainable alternative development, licit 
crops, and income generating options must take into account the agro-
climatic conditions and marketing opportunities.

    Peru: Since 1995 USAID/Peru's AD program has contributed to the 
reduction of coca cultivation from 115,000 to 34,000 hectares. The 
program was successful in improving licit income and living conditions 
in the five areas where most of Peru's coca is produced. The value of 
licit production for agriculture, livestock, and forestry sectors rose 
40%, from $27 million to almost $39 million and the population's access 
to basic social services increased almost 50%, from 40% to 59% through 
2002.
    Over the last two years, a convergence of factors has caused USAID 
to dramatically shift our strategy. Coca prices have risen, as has coca 
production, while the price of a key licit crop such as coffee has 
dropped precipitously. Coca paste and cocaine is now dispersed among 
smaller labs throughout the coca-growing region. The new Peruvian 
Administration has not effectively countered the growing coca farmer 
opposition to the eradication efforts.
    Under USAID/Peru's new strategy, AD benefits are linked to 
eradication targets, and USAID strategically chooses to enter those 
communities that offer some alternative economic opportunities so that 
the development investments can yield returns that, coupled with 
improved governance and social services, will increase the likelihood 
that farmers do not replant coca.
    Since the shift to the new strategy, the AD program is having a 
more direct impact on the eradication of coca. Judging by the rate of 
acceptance and the pace at which new communities were entering 
agreements for the new autoeradication program, results are 
encouraging. Judging by the growing opposition from the narco-
traffickers, USAID concludes that the program's initial success is 
threatening their business and is, therefore, effective.
    USAID must use its funds to leverage private investment in 
productive markets and infrastructure along with creating an 
environment where the State acts with authority and public services are 
provided. While USAID is moving quickly, these kinds of lasting 
developmental changes take time to achieve.

    Bolivia: Considerable progress has been achieved in reducing net 
coca cultivation in the last five years. Although, cultivation 
increased slightly last year, the potential for annual cocaine 
production has dramatically decreased by two-thirds from 240 MT in 1995 
to 60 MT in 2002.
    Alternative development programs significantly contribute to net 
coca reduction by conditioning assistance to farmers, thus avoiding 
coca replanting. More specifically, over the past two years 
approximately 60,000 Ha in the Yungas of La Paz received certification 
from the Government of Bolivia's coca eradication agency (DIRECO) as 
free of coca cultivation. In the Chapare, approximately 13,000 families 
have agreed, in exchange for alternative development benefits, to 
forego coca replanting. The rather large USG-funded alternative 
development investments over the past 15 years continues to enable 
forced eradication of some 10,000 Ha of coca each year in the Chapare.

    Question. What can you tell us about cultivation of the new variety 
of coca in Colombia?

    Answer. Tingo Maria's special characteristic is its high 
productivity. This coca variety responds well to higher levels of 
fertilization, higher plant density per hectare and good rainfall. For 
example, the plant density for regular coca ranges from 8,000 to 12,000 
plants per hectare; for Tingo Maria the average is at least 30,000 
plants per hectare. This variety is now found, to one degree or 
another, in all coca-producing areas of the country, but the department 
of Norte de Santander is where the highest productivity has been 
observed. The characteristics leading to its higher productivity also 
lead to a higher risk for farmers growing this variety. The costs and 
labor intensity are higher and the higher density and cultivation in 
open areas also make them more susceptible to identification and 
subsequent aerial spraying.

    Question. How concerned are you about coca cultivation appearing to 
move from Colombia to Bolivia and Peru? Please speak to this possible 
demonstration of the ``balloon effect.'' What new steps are being taken 
to help the governments of Bolivia and Peru control this new trend?

    Answer. The increased pressure on narco-traffickers by the Uribe 
government is resulting in increased production of illicit crops in 
Peru and Bolivia where the governments have a much less aggressive 
stance. While changes in AD strategy can somewhat mitigate this 
increased production, it is imperative that the USG press these 
governments to match Colombia in their strong stand against narco 
trafficking.

    Peru: Peruvians, from elected leaders to farmers, must be more 
aware of the dangers of increased production. As part of a new strategy 
that links AD benefits to eradication targets, USAID has solicited the 
political support of elected leaders in an effort to permanently 
eliminate illicit coca, as well as community participation in the 
decision to eradicate their coca. USAID added a ``communication for 
behavior change'' component to our new strategy which aims to convince 
citizens of the multitude of negative effects of coca--on health, on 
environment, on governance, on the economy, on development--as a means 
to achieving greater Peruvian ownership of the problem. This component 
includes a variety of measures targeting a change in public opinion. 
USAID has also added a new component that focuses on national policy 
issues aimed at better delineating legal from illegal coca, determining 
the actual domestic consumption of licit coca and the licit commercial 
use of coca, and strengthening of the Peruvian drug czar's institution, 
among others.

    Bolivia: The Mission believes that we and the GOB need to be very 
concerned. We know that demand will continue, so the supply will come 
from somewhere. The recent heightened violence in the Chapare and the 
slowness of the GOB response by rule of law institutions, demonstrating 
weakness, may attract more coca. With regards to the steps taken to 
control this trend, the USG must press the GOB to hold the line and not 
loosen up on current eradication policy.

    Question 2 of 5. As you well know, there is considerable public 
opposition in countries such as Bolivia and Peru to U.S. forced 
eradication efforts and a consequent request for increased alternative 
development programs.
    At the same time, in the President's budget request for Fiscal Year 
2004 for the Andean Counterdrug Initiative, the amount for interdiction 
programs in the region increased over Fiscal Year 2003, from $407.5 
million to $448 million, while funding for alternative development and 
institution building decreased, from $275.4 million to $257 million.

    Question. Can you give us an overview of how alternative 
development programs are working, or not, throughout the Andean region?

    Answer. Please see the response to Question 1.

    Question. What is the reason for the decrease in funding for 
alternative development programs?

    Answer. There are many important priorities and needs in the Andean 
countries and elsewhere in the region. The Deputy Secretary of State 
weighs these in determining the proportion of ``hard'' eradication and 
interdiction activity funding to ``soft'' alternative development 
funding.

    Question. What steps are we taking to support alternative 
development as the third leg of an effective counter-narcotics 
strategy? How do you recommend that we improve upon alternative 
development to work in coordination with eradication and interdiction 
programs?

    Answer. In Colombia, alternative development is a critical element 
of eradication and interdiction efforts. The importance of aerial 
spraying in Colombia is clear. Farmers surveyed in Putumayo ranked the 
risk of forced eradication along with a desire to get out of a violent 
social situation as their reasons for embracing alternative development 
programs. In areas where aerial spraying was not a threat, farmers were 
hesitant to participate in alternative development programs.
    Alternative development programs should not necessarily operate in 
all areas where interdiction, and especially eradication, is being 
carried out. Alternative development in the case of licit crops must be 
based on sound agro-climatic and marketing opportunities. Going after 
illicit crops with alternative development activities is not feasible 
in all areas where illicit crops are grown. Such a strategy would not 
be implementable with the current resources levels devoted to 
alternative development. Further, security and a government presence 
are needed to sustain the gains made through eradication. In areas 
where there are viable alternative development options, the 
consolidation of coca-free areas is critical to protect farmer and 
private sector investments in licit crops.

    Peru: The timing and sequencing of alternative development 
interventions is now strategically linked to eradication and 
interdiction. In developing the GOP 2003 eradication plan, USAID worked 
closely with DEA and NAS to develop a strategy and geographic focus 
where the three institutions work in an interdependent fashion. For 
example, in one particularly difficult valley of the coca-growing 
region, the strategy calls for DEA to support interdiction through 
roadblocks and seizures first while USAID begins a communication 
campaign aimed at the evils of coca. Then NAS begins a program to 
destroy processing labs. The intent is to disrupt coca prices long 
enough for USAID to enter and secure eradication agreements with the 
communities. The timing and sequencing of this strategy is critical for 
USAID to be successful in securing eradication agreements without 
social unrest thereby making the initial step in alternative 
development--the eradication--possible.

    Bolivia: In Bolivia, the USG is the largest, single donor 
supporting alternative development efforts. USAID continues to be 
engaged in policy dialogue with the Government of Bolivia's Vice 
Ministry of Alternative Development and key ministries to ensure coca 
eradication conditionality is consistent with Law 1008. In addition, 
the USAID Mission has been supporting the GOB in the development of a 
new alternative development strategy, which maintains eradication 
targets but expands social programs.

    Question 3 of 5. The Administration has set forth an ambitious 
agenda of rapidly completing negotiations for a Free Trade agreement 
with five Central American countries (CAFTA) which began in January 
2003 and establishing a Free Trade Area of the Americas (FTAA) by 2005.
    Question. What is the nature of foreign aid programs that are 
characterized as ``trade capacity building''? What do these programs 
do?

    Answer. ``Trade Capacity Building'' (TCB) programs seek to help the 
developing countries participate more fully in the evolving ``rules-
based'' global trading system under the World Trade Organization (WTO) 
as well as a growing number of ``free trade agreements'' (FTAs) in 
which these countries are signatories (or negotiating to become 
members).
    TCB programs provide technical assistance in three broad areas: (1) 
preparing for trade negotiations (e.g., technical training to 
understand the trade issues that are being negotiated); (2) 
implementing trade agreements (e.g., technical assistance to establish 
standards and practices consistent with obligations under a trade 
agreement); and (3) transitioning to free trade (e.g., helping 
countries to develop capacity to produce quality goods and services 
they can sell in the expanding global marketplace).
    TCB programs help developing countries strengthen their capacity to 
trade through a mix of assistance interventions, including training, 
technical assistance, technology transfer, research and studies, 
development of data bases, small business enterprise development 
assistance, and civil society outreach, among others.

    Question Where in Latin Anerica do we focus aid for these types of 
programs?

    Answer. USAID is providing TCB support throughout the LAC region, 
with a focus on the Central American countries of El Salvador, 
Nicaragua, Guatemala and Honduras, the Caribbean countries of Dominican 
Republic, Jamaica and the island nations of the Eastern Caribbean, and 
the South American countries of Brazil, Peru, Bolivia, Ecuador, and 
Colombia.
    TCB programs are implemented by:

   A growing number of our bilateral Missions which are 
        including TCB as the major focus of their economic growth 
        portfolios;
   Three sub-regional programs which are providing regional TCB 
        assistance in the Caribbean (J-CAR), Central America (G-CAP), 
        and the Andean Region (USAID/Peru); and
   AID/W which manages a ``rapid response'' mechanism that 
        provides quick and flexible assistance in response to TCB-
        related needs that arise in the context of the ongoing FTAA 
        negotiations.

    Question. While economic growth may be a means to alleviate 
poverty, trade analysts have expressed the concern that new regional 
trade agreements could roll back existing requirements to respect 
workers' rights which have been negotiated under unilateral preference 
programs, particularly for Central America (such as the Generalized 
System of Preferences and the Caribbean Basin Economic Recovery Act). 
Can you speak to this concern? What safeguards are we taking to ensure 
that labor, as well as environmental, protections that currently exist 
through unilateral preference programs, will not only be maintained, 
but strengthened through the establishment of the two regional free 
trade agreements? For which countries in Latin America is the 
strengthening of workers' rights and environmental standards the most 
crucial?

    Answer. USAID responds to TCB requests that countries make for 
assistance in a number of areas. However, since USTR takes the lead in 
negotiating the new trade agreements, these are issues on which the 
USTR would have a more informed basis for providing the requested 
information.

    Question 4 of 5. As you are well aware, a combination of extreme 
drops in export coffee prices, drought, and tropical storms have 
brought an intense increase in the level of severe malnutrition in 
several countries in Central America.
    About half of Nicaragua's five million people live in poverty, with 
17 percent living in extreme poverty. In Guatemala, about 83 percent of 
the people live in poverty, and almost 60 percent in extreme poverty. 
In Honduras, the per capita income level is $850 per year.
    Question. What are we doing to address this crisis in Central 
America?

    Answer. In order to respond to these development challenges, USAID 
provided over $200 million to Central American countries for 
development assistance, emergency relief, and earthquake reconstruction 
in FY 2001, followed by another $277 million in FY 2002.
    Since Hurricane Mitch, USAID has concentrated on more comprehensive 
disaster mitigation efforts, such as early warning systems, watershed 
protection, construction standards, and community planning. The new 
USAID Opportunity Alliance has an important vulnerability management 
component, scheduled to begin in FY 2003, to assist countries in 
managing climatic and environmental risks, including disaster 
preparedness and mitigation, watershed management, and forest fire 
control. As it did last year, USAID is closely monitoring weather 
conditions and crop production in Central American countries. USAID is 
using a new USDA database, which shows precipitation, ground water, and 
vegetation data on a 10-day basis, and is collaborating with NGOs and 
host governments to monitor the agricultural and nutritional situation 
at the local level. Moreover, USAID is developing a comprehensive early 
warning system for Central America, based on a model used successfully 
in Africa. Household consumption surveys and nutritional monitoring 
under feeding programs will add an important dimension to this 
information network.
    A glut in the coffee market has depressed prices dramatically. 
World coffee prices have declined by 75 percent in the last 24 months 
due largely to the oversupply created by new production from Southeast 
Asia and increasing production from Brazil. It is expected that 
production from Brazil will increase again this year, so the coffee 
prices for the upcoming year will likely remain low. The loss in income 
for Central American farmers was on the order of $1.5 billion in the 
2001-2002 production year alone. Falling prices at the farm gate 
(currently less than one half of normal prices) mean that many farmers, 
including small-scale producers, cannot earn enough to cover their 
production costs. Many hundreds of thousands of seasonal jobs and 
hundreds of thousands of permanent coffee farm jobs are being lost. The 
economic downturn in the United States has also had a devastating 
economic impact on Central American countries which send most of their 
exports to the U.S.
    Under the Opportunity Alliance, USAID is supporting trade capacity 
building and rural diversification. USAID is fostering public and 
private partnerships and trade-led growth. In the medium term the rural 
diversification component aims to stimulate agricultural 
diversification and off-farm employment among the region's poorest 
inhabitants. Demand-driven business development services will help 
small and medium farmers and rural enterprises improve competitiveness 
and tap new markets within the agriculture sector, including 
nontraditional exports, and specialty coffee, and into non-agricultural 
areas such as ecotourism, aquaculture, crafts, and services.
    Innovative finance activities will stimulate small-scale rural 
finance and venture capital and will promote linkages between 
remittances and microfinance institutions and credit unions. A regional 
activity to develop quality coffee has already been funded with $6 
million in FY 2002 funds and an intended additional $2 million in FY 
2003. It will increase competitiveness among selected Central American 
producers by assisting them to improve the quality of coffee and to 
access the expanding specialty and quality coffee markets. In FY 2003 
and beyond, funding under the rural diversification component will also 
help some farmers who cannot compete in coffee to diversify into 
agricultural or non-agricultural alternatives.
    To focus on the trade side, USAID will augment existing regional 
programs to build trade capacity to help prepare countries for the Free 
Trade Area of the Americas, the World Trade Organization Doha Round, 
and U.S.-Central America Free Trade Agreement negotiations, and to meet 
trade obligations, e.g., sanitary/phytosanitary measures, customs, and 
intellectual property rights. Under this effort, USAID will also target 
legal, policy, and regulatory reforms to improve the trade and 
investment climate.
    Over the past year, with hunger as the main concern, the 
distribution of most emergency food aid was through food-for-work 
projects aimed at improving long-term food security and rehabilitating 
community infrastructure; however, where warranted, mother-child 
feeding programs used free rations to target malnutrition in children 
under five. In addition to emergency and non-emergency food aid, USAID 
supported programs that provided seeds and other agricultural inputs to 
farmers in the affected regions. USAID continued to target food aid 
resources throughout the year, as poor households required help to cope 
with the effect of drought and loss of employment in the coffee sector.
    USAID support was extremely responsive to affected families after 
the 2001-2002 crop season. USAID collaborated actively with U.S. 
private voluntary organizations (PVOs) responsible for distributing PL 
480 Title II development food aid to transfer in-country Title II 
commodities to drought emergency zones. The USG was also the primary 
contributor of commodities to the World Food Program (WFP) to assist 
drought-affected farmers and unemployed coffee plantation workers in 
the region. Between September 2001 and August 2002, the USG contributed 
over $22 million to short-term emergency drought relief, which helped 
deal with localized food shortfalls, treatment of malnutrition problems 
stemming from the drought and the coffee crisis, and preparations for 
the next planting season. USAID and its PVO partners worked in close 
cooperation with the WFP, UNICEF, and local governments to coordinate 
all emergency operations. These efforts were essential in helping 
national governments mobilize their own and other donor resources to 
come to grips with the crisis in their own countries.

    Question. What are the governments of these Central American 
countries, if the capacity exists, doing to reduce malnutrition and 
hunger?

    Answer. The rural crisis is reducing government revenues, further 
weakening national financial systems and contributing to overall social 
and economic instability. The countries are heavily dependent on the 
coffee sector for rural employment, farm family income, and export 
earnings. Central American countries are collectively, but differently, 
going through a sorting out of their financial sectors. Each country 
has its own set of problems. Few have well regulated financial sectors 
despite many years of advice from the donor community and the 
international financial institutions. An example of some specific 
actions the Central American countries are taking to combat 
malnutrition follows.
    Front-page pictures in 2001 of severely malnourished Guatemalan 
children like two-year old Juan Jose, who was only the size of a six-
month old baby, shocked Guatemala and the world. The chronically poor 
nutrition situation in the Central American region reached crisis 
proportions in Guatemala due to the combined economic fallout from the 
coffee crisis and slowdown in the U.S. economy. The nutrition crisis 
exposed a big gap in the Guatemalan Ministry of Health's community 
programs. Community program norms like regular monthly weighing of 
children, counseling of mothers on better feeding practices and health 
care were not being adequately carried out. This realization, along 
with a high-level commitment to respond to the nutrition crisis, 
combined to become a unique opportunity to learn from a neighboring 
country and promote the sharing of best practices.
    For several years, Honduras has implemented a successful community 
nutrition program called Integrated Child Care (known by the Spanish 
acronym AIN) that detects growth faltering at an early stage and 
prevents malnutrition in young children through effective nutrition 
education for their caregivers. Authorities from the Guatemalan 
Ministry of Health, USAID, key health partners and U.S. nonprofit 
organizations working in food assistance were invited to Honduras to 
learn about this community nutrition program and observe it in the 
poorest communities. Despite the similar circumstances due to the 
coffee crisis and crushing poverty, Honduran villages with the 
community nutrition program successfully prevented severe cases of 
child malnutrition often seen in Guatemala. The Guatemalan Ministry of 
Health immediately made the adoption of the community nutrition program 
a top priority, formalizing its commitment in the ``Tegucigalpa 
Declaration''. The Guatemalan Ministry of Health decided to incorporate 
the best features of the community-based program into their existing 
integrated management of childhood illnesses program, which emphasizes 
diagnosis, treatment and counseling for common childhood illnesses at 
clinical level. The revamped program emphasizes prevention of maternal 
child health problems at the community level, with strong emphasis on 
early detection of growth faltering and prevention of malnutrition in 
children less than two years of age. After the trip, U.S. nonprofit 
organizations working in food assistance also began implementing the 
community nutrition program in their nutrition emergency food aid 
programs. As a result, within months the U.S. organizations cut the 
percentage of children not gaining adequate weight in half.
    What made this south-to-south exchange so successful was the win-
win fashion in which it was carried out. The Guatemalan Ministry of 
Health had an excellent, world-famous program of contracting out to 
local nonprofit health organizations to expand health care coverage 
that the Honduran Ministry of Health wanted to learn from. In return 
for organizing the visit to orient the Guatemalan delegation on its 
community nutrition program, a Honduran Ministry of Health delegation 
visited Guatemala to learn about how it contracts local nonprofit 
health organizations. Honduras then adapted the effective tools and 
systems that the Guatemalan Ministry of Health had perfected for its 
outstanding public-private partnership. Now both countries are 
contracting local community organizations to extend health care 
coverage to the rural poor that otherwise would have no access. The 
exchange of best practices between the two governments and USAID 
missions has proven very successful and cost-effective. These shared 
strategies have saved thousands of dollars and years of time by using 
proven approaches developed with previous USAID investments to jump-
start programs in both countries.

    Question. How does U.S. Agency for International Development 
coordinate with other federal agencies, or multilateral institutions 
such as the United Nations and the World Bank, to alleviate the 
increase in malnutrition and poverty in Central America?

    Answer. In each Central American country, USAID is working with 
international financial institutions, nongovernmental organizations 
(NGOs), host governments, and other donors to develop greater access to 
and responsiveness of national institutions. We meet regularly with our 
counterparts at the InterAmerican Development Bank and World Bank in 
Washington. In the field, USAID participates along with the Ambassador 
on ``group of friends'' donor organizations to ensure coordination and 
to maximize impact. Periodic 1DB chaired Consultative Group meetings 
bring together the donor community with the countries to discuss 
economic, political, social, and financial issues. On malnutrition and 
poverty issues, USAID supports the efforts of the World Food Program 
and others. We coordinate closely at the sectoral level with the United 
Nations, Organization of American States, and regional organizations.

    Question. Should the United States rejoin the International Coffee 
Organization as a means to alleviate the poverty caused by the collapse 
of the world coffee market? Why or why not?

    Answer. The ICO recently informed President Bush of an ICO October 
resolution inviting the United States to rejoin. Several Latin 
producers and the U.S. coffee industry support this move. Although the 
United States Government withdrew from the ICO in 1993, the Trade 
Policy Staff Committee (TPSC) is reviewing this position. USAID, 
together with State, USTR, and other members of the TPSC will complete 
consultations with Congress to determine whether the US will rejoin or 
not.
    In order to rejoin the ICO, the USG would need to accede to the 
2001 International Coffee Agreement, or if possible, to apply the 
Agreement provisionally. State Department lawyers are reviewing the 
requirements for accession to the Agreement. It is unclear at this 
point if there is a deadline under ICO procedures for participating 
countries to accede to the Agreement.

    Question 5 of 5. The State Department's 2002 Human Rights Report 
states that serious human rights abuses continue in Guatemala--and in 
some areas, respect for human rights has deteriorated. In 2002, 
Guatentalan security forces continued to commit extrajudicial killings 
and, in some cases, tortured, abused, and mistreated suspects and 
detainees. In addition, threats increased against journalist, labor 
organizers, and other activists.
    Question. What is your assessment of the current human rights 
situation in Guatemala? Is it getting better or worse?

    Answer. The situation has gotten worse over the past year, as these 
threats to prominent human rights workers have increased.

    Question. What steps has the Portillo Administration taken to 
investigate and prosecute human rights violations by Guatemalan 
security forces?

    Answer. The Portillo Administration recently agreed with civil 
society groups to create an international commission to investigate 
clandestine groups that appear to be the cause of the increased threats 
of violence against the human rights community. This commission is to 
be established by September 2003 and would be empowered to investigate 
the groups and bring cases to the justice system. On the other hand, it 
is alleged that these clandestine groups have ties to the Portillo 
government. The USG will contribute to the operation of this 
commission.
    Also recently, local human rights organizations played an important 
role in the selection by the Congress of a new Human Rights Ombudsman. 
With the support of USAID, a consortium of civil society organizations 
organized themselves as the National Movement for Human Rights and 
designed and implemented a successful lobbying strategy to influence 
the selection process. Their strategy successfully mobilized public 
opinion and key contacts to affect votes in the Guatemalan Congress.
    The first element of the strategy developed by the Movement was to 
identify and support persons that would meet their criteria as ideal 
candidates for the Ombudsman position. Some 74 organizations 
participated in the election of three pre-candidates for the Ombudsman 
position. These candidates traveled together in the interior as well as 
in the capital and spoke publicly of their vision for a future Office 
of the Human Rights Ombudsman.
    The high profile of the three pre-candidates helped create a 
political imperative in the Congressional Human Rights Commission to 
name one of them as part of the list of three candidates presented to 
the Congress for their plenary vote to select the Ombudsman. When Dr. 
Sergio Morales, head of the human rights center at San Carlos 
University and frequent collaborator with USAID, was named as one of 
the candidates, human rights organizations developed a lobbying 
strategy and held a forum for all the candidates to express their 
views. Their efforts contributed significantly to building support for 
Dr. Morales and his election to the post by the Congress.
    The election of a civil society candidate was remarkable since the 
government and Congress include many architects of the civil war's 
systematic violation of human rights. Credit should be given to the 
public relations efforts of Dr. Morales who approached recalcitrant 
sectors to lower their fears regarding his candidacy and to the human 
rights organizations which opted for a lower profile, non-
confrontational approach at the key moment of election. The election of 
Dr. Morales, with the backing of the human rights civil society sector, 
creates new opportunities for collaboration between civil society and 
the government in protecting human rights.

    Question. What are we doing to help strengthen the rule of law, 
democratic institutions, and administration of justice in Guatemala?

    Answer. USAID has been very active in promoting rule of law, 
democratic institutions, and administration of justice in Guatemala 
both through the Peace Program and through its democracy and governance 
effort. Pressure from the international community and civil society 
helped push the government to take some significant actions that lay 
the ground work for greater inclusiveness and responsiveness in 
Guatemala's nascent democratic system. Reforms in the Guatemala City 
Clerk of Court Office and in case file and information management 
systems in each Justice Center are significantly improving justice 
system efficiency while reducing the potential for corruption. The time 
to locate case files dropped from hours to less than 15 minutes for 95% 
of users; random assignment of cases prevents forum shopping; case 
loads are balanced; and due process is improved because information on 
time required for various stages of court procedure is now available. 
The Supreme Court is using statistics on workload, productivity, case 
intake, and bottlenecks to improve efficiency and identify problems 
that need attention and is now taking action to further standardize and 
institutionalize these efforts.
    The successful pilot effort to reduce the backlog of unresolved 
cases managed by the Public Ministry in Quetzaltenango (where 32,000 
backlogged cases were cleared up) has been expanded to Santa Cruz and 
Huehuetenango (where nearly 43,000 cases have already been reviewed). 
Public Ministry case intake units emphasizing customer service 
(reducing the time involved to file a criminal complaint from 4-5 hours 
to less than 15 minutes) are now in place in all Justice Centers as 
well as Guatemala City. Victims Attention Offices, supported by USAID 
in the capital and in Justice Centers, are also now expanding 
nationwide, providing over 8,000 victims of crime and their families 
with medical, psychological, and legal counseling.
    The major structural reform of the country's principal law school 
has been basically completed and the new curriculum has been instituted 
for the first year. The complete revamping of the curriculum, admission 
standards, an indigenous law program, and an expanding internship 
program will all contribute significantly to improving the quality of 
personnel entering the justice system.
    Efforts to promote broader more effective civil society 
participation in the policy process and oversight of the public 
institutions continued under a USAID program which began activities in 
September 2001. Eight civil society coalitions now focus on combating 
ethnic discrimination, transparency/anti-corruption, public security, 
and congressional oversight. These coalitions have successfully 
organized around the strengths of multi-sector actors to focus varied 
experiences and synergies on achieving concrete results. For example, 
an academic center, a war victim's organization and an organization 
fighting organized crime are working together to improve public 
security and professionalization of the National Civil Police. Over the 
last few months, the Alliance for Transparency (a coalition of the 
Chamber of Commerce and two regional organizations from Quetzaltenango) 
developed an ideal profile, selection criteria, and procedures to elect 
the new Comptroller General and focused public attention on this 
process for the first time. PAQ'UCH, a coalition focused on combating 
ethnic discrimination, negotiated successfully with government 
authorities to create the Presidential Commission Against Racism and 
Discrimination. The Crime Prevention Association (APREDE) is bringing 
together gang members, the media, citizens, and police in working to 
reduce crime in six target areas. Accion Ciudadana has helped establish 
the Citizen Observatory, a coalition composed of fifteen civil society 
organizations focused on promoting access to information and lobbying 
for a new Access to Information Law.

    Question. How does aid to Guatemala in the Fiscal 2004 Budget 
request compare to previous funding levels?

    Answer. Guatemala's level was reduced from $51.1 million in FY 03 
to $45 million in FY 04. Cuts were severe in the area of economic 
growth, trade, and agriculture. The democracy and governance program 
depends heavily on continuation of ESF funding.

                                 ______
                                 

Response of William A. Bellamy, Principal Deputy Assistant Secretary of 
   State, African Affairs, to an Additional Question for the Record 
                Submitted by Senator Russell D. Feingold

    Queston. What diplomatic steps can be taken to ensure that Cote 
d'Ivoire does not descend into the lawless violence that currently 
grips Liberia and once held sway in Sierra Leone? What kind of 
assistance can reinforce this effort?

    Answer. The United States Government recognized early the danger 
that prolonged conflict in Cote d'Ivoire could degenerate into the kind 
of senseless violence that has occurred in neighboring countries, and 
has closely worked with the leaders of the Economic Community of West 
African States (ECOWAS), the Government of France, the United Nations, 
the government of President Gbagbo and the Ivoirian parties to stop the 
conflict and assist in peace negotiations.
    As a result of these efforts, the Ivoirian parties to the conflict 
have achieved a cease fire and have begun to put into place an 
effective peace process. We have encouraged ECOWAS leaders to remain 
involved at the highest levels. They have responded by participating in 
numerous regional summits and by being present at key events such as 
the Paris conference following the Linas-Marcoussis agreement on 
January 25-26, the swearing in of the new Prime Minister, Seydou 
Diarra, and, most recently, at the April 3 meeting of the new Ivoirian 
Government of National Reconciliation in Yamoussoukro to ensure the 
attendance by the rebel ministers. The ECOWAS leaders have also made 
good on their pledge to deploy a peace observation force, numbering 
1288 men, to Cote d'Ivoire.
    The United States has pressed Liberia strongly to assert control of 
its borders to prevent the movement of Liberian fighters into Cote 
d'Ivoire. Additionally, we have made clear to other governments 
bordering Cote d'Ivoire that any actions that might contribute to 
exacerbating the conflict are unacceptable to the United States.
    The Department of State believes that the active and determined 
efforts of ECOWAS can contribute most effectively to the peace process. 
We will continue to support ECOWAS political and peacekeeping efforts. 
To date, we have dedicated $4.35 million for transportation, 
communications and logistical support to the ECOWAS military force in 
Cote d'Ivoire. We also have provided vehicles, communications 
equipment, and generators to the force from our depot in Freetown, 
Sierra Leone.
    At the same time, we have supported efforts in the United Nations 
that might contribute to the peaceful resolution of the conflict. We 
were firm supporters of Security Council Resolution 1464 of February 4, 
2003. We are presently working positively in the UNSC to craft a 
resolution that would reaffirm the international community's continued 
support for the Linas-Marcoussis process, and define the tasks that the 
UN can undertake, under the direction of the Special Representative of 
the Secretary General, Ambassador Teveodjre, to further assist in the 
peace process.
    The immediate and continuing thrust of our diplomatic efforts is to 
end the violence, focus the parties on a workable process that can 
achieve the restoration of peace and stability, and prevent outside 
interference that might destabilize the situation further. At the same 
time, we are also keenly aware that the conflict has exacerbated the 
human rights situation in the country. While it is the Government of 
Cote d'Ivoire's responsibility to hold those responsible accountable, 
we are also working to ensure that other governments collectively and 
individually make all Ivoirian parties aware that these actions are 
unacceptable and must be redressed.
    Finally, we have been working with international humanitarian and 
refugee organizations and regional governments to help ease the plight 
of those who have lost their homes and jobs as a result of this 
conflict. To date, we have provided $1.5 million to the Office of the 
United Nations High Commissioner for Refugees to help those who have 
fled the country; $50,000 to the International Committee of the Red 
Cross for emergency aid inside Cote d'Ivoire, and $383,113 to Merlin 
for emergency medical aid inside the country. This is a continuing 
situation that will require long-term attention.

                                 ______
                                 

  Responses of Hon. Constance Berry Newman, Assistant Administrator, 
   Bureau for Africa, USAID, to Additional Questions for the Record 
                Submitted by Senator Russell D. Feingold

                             aids in africa
    Question. The HIV/AIDS pandemic is a problem of such horrifying 
scope and scale in Africa that it demands a truly historic 
international response. I appreciated the President's commitment in his 
State of the Union Address, and I hope that we can all work together to 
make the U.S. commitment to prevention, care and treatment a reality. 
The President committed to spend new funds on AIDS rather than robbing 
existing foreign assistance accounts. But even before his announcement, 
it has been clear for some time that increasing our focus on HIV/AIDS 
sometimes means decreasing the resources available for other programs. 
I am looking for the silver lining to this zero-sum scenario. So tell 
me more about the positive spill-over effects of our ATDS programs. How 
are we empowering girls and women, and improving health infrastructure, 
through these targeted assistance efforts, and how are we maximizing 
that spill-over element?

    Answers:

    1. Empowering Women and Girls. Until the mid-1990s, the role of 
women in the AIDS crisis was little recognized. Now women account for 
more than half of all infections in Africa. In addition, it is 
increasingly recognized that women and girls bear a disproportionate 
share of the care and support burden at the household level. Therefore, 
USAID and others increasingly target programs and assistance at women. 
For instance, USAID:

   Works through and strengthens maternal and child health 
        centers;
   Helps women to reduce their risk of HIV/AIDS infection;
   Is increasing the number and quality of mother-to-child 
        transmission programs, and initiating antiretroviral treatment 
        programs in three countries: Ghana, Rwanda and Kenya;
   Educates women (including widows), who become household 
        heads because of the AIDS death of their spouse, about their 
        property and inheritance rights;
   Works with an increasing number of HIV/AIDS women's groups 
        to provide advocacy for AIDS and women's issues, to support to 
        women living with AIDS, etc.;
   Pays special attention to the needs and participation of 
        girls, including the provision of school and bursary fees and 
        targeted peer education materials so that girls can better 
        protect themselves against HIV/AIDS; and
   Involves men in discussion groups and outreach programs to 
        better support the health and welfare of women and girls.

    2. Improving the health infrastructure. Already overstretched 
health systems in developing countries, particularly in Africa, are 
having difficulty responding to the emergence of the HIV/AIDS crisis. 
The pandemic is increasing demand on health services, while at the same 
time health workers themselves are dying of HIV/AIDS in greater 
numbers. USAID remains the preeminent world leader in health systems 
research and development, including on HIV/AIDS. USAID is strengthening 
systems by:
   Developing protocols for health services that will reorient 
        health systems in light of HIV/AIDS;
   Developing drug supply mechanisms and systems to ensure the 
        most effective use of limited resources;
   Assisting in the analysis of health personnel requirements, 
        including training, to ensure that appropriate and sufficient 
        staff are available;
   Developing care and treatment guidelines, and supporting 
        countries to implement their new policies and practices; and
   Developing management systems that support prevention, care 
        and treatment, as well as developing a regulatory framework for 
        the introduction of antiretroviral treatments and the work of 
        the private sector in health care provision.

    3. Maximizing the spill-over effects:
   As part of its mother-to-child transmission, voluntary 
        testing and counseling and antiretroviral programs, USAID is 
        strengthening hospitals, clinics, and primary health care 
        centers, training health staff, and building better systems;
   As part of its orphans and vulnerable children programs, 
        USAID is training teachers in HIV/AIDS, strengthening 
        prevention through peer education, providing much needed 
        materials and supplies to impoverished schools for orphans and 
        vulnerable children, increasing the enrollment of girls, and 
        strengthening out of school programs through distance learning;
   At national levels, USAID is supporting health, education 
        and social welfare policy and legislation reviews; and
   In all countries, USAID HIV/AIDS programs work with faith-
        based or community-based organizations, which in turn 
        strengthen civil society.
                       basic education initiative
    Question. The Basic Education Initiative puts a heavy emphasis on 
providing textbooks to African students. In which languages will these 
textbooks be produced? I know that Historically Black Colleges and 
Universities in America will be involved, but what about African 
institutions and publishers? Doesn't it make sense to develop their 
capacity? Which actors in this initiative have experience in cost-
effective textbook development and distribution?

    Answer. The initial six countries for the textbook component of the 
Africa Education Initiative (Benin, Ethiopia, Guinea, Mali, Senegal, 
and South Africa) were chosen because they are currently engaged in 
programs that develop and produce textbooks and other learning 
materials. The language of the textbook component of the initiative 
will be the official language of learning in each country.
    Historically Black Colleges and Universities will work in 
partnership with in-country institutions including ministries of 
education, universities and teacher training colleges, and other 
appropriate institutions. The intent of the program is to develop the 
capacity of the African partners as well as strengthen the contribution 
of Historically Black Colleges and Universities to development in 
Africa.
    This program does in fact emphasize in-country commercial 
publishing capacity. It will generate employment and support economic 
growth by contracting locally with printing companies and, where 
feasible, support the upgrade of existing printing machinery to enable 
increased business activity. The program will help local companies to 
develop and produce quality, long-lasting learning materials. By 
working with the publishing sector to develop and produce textbooks and 
other material, this program will rekindle these African publishing 
capabilities and stimulate economic growth.
    Hampton University and Elizabeth City State University are the lead 
institutions in this program. Hampton University has over 100 years 
experience in developing, publishing and distributing educational 
materials.
                         anti-corruption funds
    Question. Corruption stands in the way of nearly every U.S. foreign 
policy goal in Africa. The President's own Millennium Challenge Account 
initiative acknowledges this, placing a high priority on addressing 
corruption in eligibility criteria. But I notice that in FY 2004, anti- 
corruption DA funds are requested at a $6 million level, a decrease 
from the $7.5 million in the F? 2003 request. Why is this? How do you 
plan to use these funds?

    Answer. The Africa Bureau has launched an Anti-Corruption 
Initiative that will promote; public access to information; citizen 
advocacy and participation in decision-making; transparent and 
accountable government procedures; effective government oversight 
institutions; and public-private dialogue. The initiative will also 
support African-led anti-corruption efforts, such as the good 
governance principles put forward under the New Partnership for 
Africa's Development (NEPAD) and the emergent anti-corruption agendas 
of various African institutions like the African Union and the Southern 
African Development Community.
    Most of the anti-corruption funds will be used to support bilateral 
programs in a limited number of missions and regional programs 
implemented by USAID's three regional missions in Africa. From among 
the twenty-two bilateral missions being invited to submit proposals, 
approximately six will receive funding.
    The intent of the initiative is to concentrate these additional 
resources in a limited number of countries where a dedicated anti-
corruption program can show results in a five-year period. Missions 
have been encouraged to consider carefully the local enabling 
environment for anti-corruption programming and the probability of 
achieving results. Budget levels for bilateral programs are expected to 
be between $250,000 and $750;000 per year in scope. Proposals are due 
in Washington on April 30, at which time they will be reviewed against 
specific selection criteria, and funds allotted. Regional missions have 
been asked to submit work plans that outline how they will provide 
technical support and work with regional institutions and organizations 
to adopt and implement anti-corruption protocols.
    The reduction of funding for the initiative in the FY 2004 request 
from the FY 2003 request level results from the need to prioritize 
programming choices among competing needs within an overall FY 2004 
request level that increases by only $41 million. The FY 2004 HIV/AIDS 
request increases by $75 million (30 percent) over the FY 2003 request 
level, and funding for Sudan triples in the FY 2004 request to $66 
million. Meeting these program build-ups, while also providing 
increased funding levels for Administration initiatives in trade, 
agriculture and basic education, required USAID to pare down funding 
for a number of other programs. These reductions include a 27 percent 
decrease in overall democracy and governance activities and a 20 
percent reduction in the Anti-Corruption Initiative.

                                 ______
                                 

 Responses of J. Curtis Struble, Acting Assistant Secretary of State, 
  Western Hemisphere Affairs, to Additional Questions for the Record 
                Submitted by Senator Russell D. Feingold

    Question 1. The latest coca crop survey showed that, while 
cultivation declined somewhat in Colombia, it rebounded in Bolivia and 
Peru. Yet the Administration's FY-2004 request calls for holding 
alternative development assistance to Bolivia steady while cutting it 
nearly 28 percent for Peru. Can you explain this inconsistency?

    Answer. The Administration formulated its FY-2004 budget request 
before survey information became available indicating 2002 coca crop 
increases in Bolivia and Peru.
    We held steady our alternative development-funding request for 
Bolivia in recognition of the Government of Bolivia's need to offer 
stronger alternative development incentives to restive coca growing 
communities that challenge local government stability in outlying 
areas.
    We reduced our FY-2004 alternative development request for Peru to 
reflect the lack of a well-defined Government of Peru strategy to tie 
alternative development benefits to progress on coca eradication and a 
slowdown in Peruvian alternative development activities due to vigorous 
opposition in some key coca growing areas.
    We will revisit these allocations in light of the 2002 coca crop 
increases, looking for opportunities to push ahead with alternative 
development programs in Bolivia and Peru.

    Question 2. The Administration has stated that alternative 
development programs cannot be developed for every community where 
illicit crops are found, yet it supports the Colombian policy 
subjecting all drug crops to aerial fumigation without condition. 
Colombia already has hundreds of thousands of rural unemployed and 
internally displaced people. What do we expect coca farmers to do after 
their crops are sprayed?

    Answer. Limited resources, security constraints, and low population 
densities make it extremely difficult to develop alternative 
development programs for every farmer or every community where illicit 
crops are found. Environmental fragility also renders some areas 
impractical for alternative development program interventions.
    Both USAID and Colombian government resources support alternative 
development in departments with illicit crops targeted for aerial 
eradication. The GOC announced in mid-2002 that all drug crops would be 
subject to spraying without condition and is proceeding to implement 
this policy with USG support.
    USAID-funded alternative development programs focus on communities 
willing to collaborate in sustained eradication efforts. The threat of 
aerial eradication of illicit crops is a compelling and key element in 
convincing farmers to voluntarily eradicate their drug crops, 
participate in alternative development programs and return to licit 
activities.
    USAID alternative development programs emphasize offering farming 
communities an alternative by improving market access and supporting 
licit income generating activities that will help reestablish a 
legitimate economy. As of December 31, 2002, 20,128 families had 
benefited from these programs and 15,742 hectares of licit crops had 
been established.
    USAID is also investing in cost-effective areas that are likely to 
attract migrant coca leaf pickers away from drug production and into 
licit occupations. By involving farmers and communities, USAID 
alternative development programs are reestablishing farmers' confidence 
and participation in sustainable medium and long-term alternative 
income generating possibilities.

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