[Senate Hearing 115-786]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 115-786
 
             EMERGING EXTERNAL INFLUENCES IN THE WESTERN 
                               HEMISPHERE

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

                                HEARING

                               BEFORE THE
                               
                        SUBCOMMITTEE ON WESTERN
                       HEMISPHERE, TRANSNATIONAL
                       CRIME, CIVILIAN SECURITY,
                        DEMOCRACY, HUMAN RIGHTS,
                       AND GLOBAL WOMEN'S ISSUES

                                 OF THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS


                             FIRST SESSION
                               __________

                              MAY 10, 2017
                               __________


       Printed for the use of the Committee on Foreign Relations
       
       
       
       
       
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                 COMMITTEE ON FOREIGN RELATIONS        

                BOB CORKER, Tennessee, Chairman        
JAMES E. RISCH, Idaho                BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida                 ROBERT MENENDEZ, New Jersey
RON JOHNSON, Wisconsin               JEANNE SHAHEEN, New Hampshire
JEFF FLAKE, Arizona                  CHRISTOPHER A. COONS, Delaware
CORY GARDNER, Colorado               TOM UDALL, New Mexico
TODD YOUNG, Indiana                  CHRISTOPHER MURPHY, Connecticut
JOHN BARRASSO, Wyoming               TIM KAINE, Virginia
JOHNNY ISAKSON, Georgia              EDWARD J. MARKEY, Massachusetts
ROB PORTMAN, Ohio                    JEFF MERKLEY, Oregon
RAND PAUL, Kentucky                  CORY A. BOOKER, New Jersey
                  Todd Womack, Staff Director        
            Jessica Lewis, Democratic Staff Director        
                    John Dutton, Chief Clerk        
                    



              SUBCOMMITTEE ON WESTERN HEMISPHERE,        
       TRANSNATIONAL CRIME, CIVILIAN SECURITY, DEMOCRACY,        
            HUMAN RIGHTS, AND GLOBAL WOMEN'S ISSUES        

                 MARCO RUBIO, Florida, Chairman        
RON JOHNSON, Wisconsin               ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona                  TOM UDALL, New Mexico
CORY GARDNER, Colorado               JEANNE SHAHEEN, New Hampshire
JOHNNY ISAKSON, Georgia              TIM KAINE, Virginia





                              (ii)        

  


                            C O N T E N T S

                              ----------                              
                                                                   Page

Rubio, Hon. Marco, U.S. Senator From Florida.....................     1


Menendez, Hon. Robert, U.S. Senator From New Jersey..............     3


Emanuele Ottolenghi, Ph.D., Senior Fellow, Foundation for Defense 
  of Democracies, Washington, DC.................................     5
    Prepared statement...........................................     7


Eric Farnsworth, Vice President, Council of the Americas, 
  Washington, DC.................................................    34
    Prepared statement...........................................    36


                              (iii)        
                             


     EMERGING EXTERNAL INFLUENCES IN THE WESTERN HEMISPHERE

                              ----------                              


                        WEDNESDAY, MAY 10, 2017

                               U.S. Senate,
 Subcommittee on Western Hemisphere, Transnational 
Crime, Civilian Security, Democracy, Human Rights, 
                         and Global Women's Issues,
                    Committee on Foreign Relations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:24 a.m., in 
room SD-419, Dirksen Senate Office Building, Hon. Marco Rubio, 
chairman of the subcommittee, presiding.
    Present: Senators Rubio [presiding], Gardner, and Menendez.

            OPENING STATEMENT OF HON. MARCO RUBIO, 
                   U.S. SENATOR FROM FLORIDA

    Senator Rubio. Good morning. This hearing of the 
Subcommittee on Western Hemisphere, Transnational Crime, 
Civilian Security, Democracy, Human Rights, and Global Women's 
Issues will come to order. The hearing today is entitled, 
``Emerging External Influences in the Western Hemisphere.''
    I apologize to the witnesses and to the members. It has 
been an interesting morning, and navigating the hallways was 
quite an adventure. But I appreciate your patience in being 
here.
    The panel today is going to feature Emanuele Ottolenghi, 
the senior fellow at the Foundation for Defense of Democracies, 
and, of course, Eric Farnsworth, the vice president of the 
Council of the Americas. I welcome the opportunity to have them 
testify here today.
    I also want to thank all of you here today in attendance at 
this hearing.
    It is my hope that we can examine external political and 
economic influences on our hemisphere from traditional state 
actors such as Russia, China, Iran, and North Korea.
    We will also consider the potential terrorist threat posed 
by external terrorist groups such as ISIL, who are potentially 
radicalizing susceptible individuals in small countries 
throughout the hemisphere and, in particular, the Caribbean. 
Some of these individuals are motivated to travel to join the 
fight in Syria and Iraq, and others may pose a risk for 
conducting attacks in their home countries, or even seeking to 
enter the United States to do the same.
    Countering radicalization online within a small factor of 
the Muslim community and corresponding threat of homegrown 
violent extremism is perhaps one of the greatest challenges 
that we face in protecting innocent Americans at home from 
lone-wolf terrorist attacks like those we have seen in Boston, 
San Bernardino, and Orlando.
    The fact that this terrorist threat is spreading to other 
nations in our hemisphere should concern us all. For instance, 
Trinidad and Tobago is a prime example of a small Caribbean 
nation currently struggling with the threat of radicalization.
    According to a New York Times article from 21 February of 
this year, the Trinidadian Government recently introduced a 
series of amendments that would criminalize membership in the 
Islamic State and other extremist organizations. That is an 
obvious legal reform that the United States must demand and 
hope to achieve from other countries in the hemisphere for the 
safety of their own citizens and our own. According to the New 
York Times, this new Trinidadian law would stipulate people who 
travel to certain regions would be presumed to be doing so for 
terrorism.
    Trinidad has a population of just 1.3 million, but it had 
130 of its citizens travel to Syria to fight for ISIL. The U.S. 
with 321 million people has seen 250 citizens travel to join 
ISIL, by comparison.
    I want to hear from our witnesses about what the United 
States can do to work with Trinidad and other nations in the 
region struggling with these challenges. In particular, I want 
to hear what roles should the Departments of State, Justice, 
Homeland Security, and the Southern Command and the Defense 
Department be playing to reduce and confront radicalization.
    This hearing is also an opportunity to consider the 
continued illicit financial activities of Hezbollah, Iran, and 
other actors enabled by some governments in the region with a 
history of antidemocratic postures. I also want to hear the 
current status of illicit financing and the financing of 
Hezbollah, in particular.
    What is its posture in Latin America today? How are 
activities of Hezbollah supported by travel from Iranian 
officials, particularly MOIS and the Quds Force?
    More broadly, it is important to examine how our 
adversaries in countries like Cuba, Venezuela, and Nicaragua 
through new diplomatic military and intelligence cooperation 
are affecting our standing in the region.
    We will also examine the links between external actors and 
the production of trafficking and selling of illegal drugs in 
the Western Hemisphere and the bankrolling of global terrorist 
activities. For instance, with the peace agreement in Colombia, 
how are Mexican transnational criminal organizations filling 
the void potentially left by the FARC?
    In 2014, I led in the Senate the Hezbollah International 
Financing Prevention Act of 2014 to prevent Hezbollah and 
associated entities from gaining access to international 
financial institutions, but there is more to be done, and I 
look forward to hearing from our witnesses.
    With that, I turn it over to the ranking member, Senator 
Menendez.

              STATEMENT OF HON. ROBERT MENENDEZ, 
                  U.S. SENATOR FROM NEW JERSEY

    Senator Menendez. Thank you, Mr. Chairman. I am glad we are 
keeping the subcommittee active, exploring the myriad pressing 
issues that we have in our own hemisphere even as we are 
challenged by events elsewhere in the world.
    Let me welcome our witnesses, Dr. Ottolenghi and Mr. Eric 
Farnsworth, the vice president of the Council of the Americas 
who has a great deal of expertise in the hemisphere that I have 
found valuable over time.
    As you and I both know, Mr. Chairman, this body and, 
indeed, most of the headlines out of the foreign policy 
community often overlook our own hemisphere and, by extension, 
our closest neighbors and some of our most important allies.
    Over the course of its history, the United States has 
certainly influenced our neighbors to the south. And I will 
acknowledge that this history, with some countries in 
particular, is complicated and imperfect. Looking inward, it is 
impossible to tell the history of the United States without the 
immense influence of immigrants and migrants from the rest of 
the hemisphere.
    In general, over the past few decades, we have witnessed 
relative stability between nations and the general trend toward 
embracing democratic values that protect fundamental rights, 
empower people, promote opportunity for citizens throughout the 
hemisphere.
    While we certainly cannot take full credit, the United 
States' active engagement in the region in support of 
governments transitioning from dictatorship to democracy, of 
partnerships, training, and shared responsibility for 
supporting democratic institutions, combating criminal 
networks, of economic development programs that help foster 
resilient communities, has served our national security 
interests in tandem with supporting a stable and prosperous 
hemisphere in general.
    To consider external influences on the whole hemisphere is, 
of course, ambitious in one subcommittee hearing, but there are 
trends we see throughout. The United States is a constant.
    So I hope we can use this hearing as an opportunity not 
just to hear from our esteemed witnesses on their particular 
expertise but to use this as an opportunity to highlight the 
importance of American and, in this subcommittee let me say, 
United States' leadership and engagement.
    There are, of course, a few notable exceptions to the 
trends I have spoken about. We have watched with horror and 
frustration as Nicolas Maduro continues to oppress the people 
of Venezuela, drag its economy and future further into the 
quagmire that the Chavez legacy created. Bolstered by shady 
bond purchases, Russia seems more than willing to help him in 
this effort.
    In Cuba, despite diplomatic efforts from the past 
administration, people are still jailed for expressing their 
opinions, still unable to earn meaningful incomes to improve 
their lives.
    As the Washington Post reported last month, Russia is 
increasing its presence in Nicaragua into the welcoming arms of 
Daniel Ortega. While I am not convinced we are living in a new 
Cold War, we certainly have not yet fully escaped Russia's 
influence here in the United States or in the hemisphere. It is 
no coincidence that these countries in which citizens are 
suffering, and whose fundamental human rights are oppressed, 
all share an affinity for a particular country and the failed 
ideology pushed in the middle part of last century.
    On the other side, China, whose foreign policy objectives 
in the region seem confined to trade deals, has also steadily 
increased its presence in the region. China, however, 
notoriously cares little for the rule of law, governance 
structure, or environmental and labor protections that 
ultimately secure long-term economic interests for a nation.
    As we build our own trade relationships, we must prioritize 
these components to best facilitate long-term mutually 
beneficial relationships. Bloviating about reneging on trade 
deals or throwing around threats of tariffs does nothing to 
improve the economic outlook of American business. In the worst 
case, it pushes our would-be partners toward other countries.
    I recognize there are those who would look to Chinese or 
Russian presence in our hemisphere and point out that the 
United States maintains an active presence well beyond our 
borders. Our interests, however, and intentions are clear. It 
is rooted in our principles and values, defensively supporting 
our allies in Europe, Asia, and the Middle East; seeking 
investment opportunities for American businesses overseas; 
supporting nations who actively seek that support; and building 
democratic institutions and governance structures.
    So I look forward to hearing from our witnesses their 
assessments of the intentions and motivations of some of the 
primary external actors in Latin America.
    Mr. Farnsworth, in your written testimony, you note that 
most of China's actions do not pose a direct ``threat'' per se 
to the United States, but influence in soft power can be very 
commanding tools.
    Mr. Ottolenghi, I am curious to hear your assessment about 
whether some of the actions you have studied are confined to 
country-specific goals or are in pursuit of broader regional 
ambitions.
    I will conclude by saying that, as with the rest of the 
world, American engagement, investment, and aid to the Western 
Hemisphere is in our own national interests. It is our economic 
interest to support the growth of vibrant middle classes around 
our hemisphere who are more eager to do business with the 
United States than they are with China. It is in the interests 
of our national security to support stable and resilient 
countries that share our democratic values and our sense of 
shared security against external threats.
    With that, I look forward to hearing from our witnesses. 
Thank you, Mr. Chairman.
    Senator Rubio. Thank you, Senator Menendez.
    Dr. Ottolenghi, we will begin with you. I would, just for 
the witnesses' purposes, and it is the pot calling the kettle 
black as a Senator about to say this, but if we could limit to 
about 5 minutes, because it gives us more time for questions. 
We have your written statements. I imagine all three of the 
Senators here and others who may not be in attendance have 
already read it. But it is important, as there may be other 
points you may want to raise throughout the testimony.
    But the question-and-answer part is the one where we really 
get to the heart of the matter. I know members have other 
engagements as well, and you are both veteran witnesses at 
these hearings.
    So, Doctor, we will begin with you. Thank you for being 
here.

        STATEMENT OF EMANUELE OTTOLENGHI, PH.D., SENIOR 
 FELLOW, FOUNDATION FOR DEFENSE OF DEMOCRACIES, WASHINGTON, DC

    Dr. Ottolenghi. Chairman Rubio and Ranking Member Menendez, 
members of the subcommittee, I thank you for this opportunity.
    The convergence of Iran-sponsored radical Islam with 
transnational organized crime in Latin America should be 
recognized as a serious threat to the national security of the 
United States and the integrity of its financial system.
    Congress and the executive branch have a panoply of tools 
at their disposal to address this threat. What has been missing 
is a coherent foreign policy that recognizes the importance of 
Latin America as a key arena of competition with Iran and puts 
in place the needed resources to blunt Iranian and Hezbollah 
threats.
    In his 2015 posture statement before Congress, General John 
Kelly lamented that, and I quote, ``Our limited intelligence 
capabilities make it difficult to fully assess the amount of 
terrorist financing generated in Latin America or understand 
the scope of possible criminal terrorist collaboration.''
    To date, there is still no accurate assessment of how much 
Hezbollah makes from illicit activities in Latin America, but 
this involvement is known and growing. That needs to change.
    Hezbollah's involvement in illicit trade is not just a law 
enforcement problem. Behind Hezbollah stands Iran, which seeks 
to leverage the group's networks to gain political influence 
while helping it expand its base of supporters and protect 
their illicit activities.
    Iran's and Hezbollah's operation in Latin America thus 
intersect and mutually reinforce one another. Both pursue goals 
that are not only diametrically opposed to U.S. interests but 
also clearly pose a direct threat to American national 
security.
    In my written testimony, I discuss specifically the case of 
four Hezbollah suspects recently arrested on drug trafficking 
charges in the tri-border area of Argentina, Brazil, and 
Paraguay, otherwise known as TBA. They may also have been 
involved in human trafficking, counterfeiting, and immigration 
fraud. This adds to the growing evidence of Hezbollah's 
involvement in multibillion-dollar illicit trade schemes that 
often generate from the TBA and whose revenue Hezbollah seeks 
to launder through the U.S. financial system.
    That should be a wake-up call to Congress to make the 
necessary means available for intelligence-gathering and 
assessment of what is a significant national security threat.
    The recent designation of Venezuela's Vice President Tareck 
El Aissami under the Kingpin Act is a stark reminder of our 
vulnerabilities. El Aissami was designated alongside 13 U.S. 
companies he allegedly used to run his fraudulent activities 
through the U.S.
    Authorities froze substantial assets in his name here. That 
move should worry our enemies, but it is also significant that 
a Latin American politician with reported links to Iran and 
Hezbollah and drug cartels felt confident enough to park his 
wealth in the U.S.
    Part of the problem with U.S. policies is that U.S. 
sanctions against Hezbollah operatives in the TBA, the hub of 
Hezbollah's illicit finance, are more than a decade old, and 
those targeted are still able to travel, transact, and conduct 
business as if there were no sanctions.
    It is important that the U.S. rectify this state of affairs 
for two reasons. Sanctioned operatives may continue to engage 
in nefarious activities, and lack of sanctions enforcement 
undermine their credibility in deterrence.
    Another problem the U.S. needs to address, in Latin 
America, Hezbollah has benefited from a permissive environment 
where corrupt local officials connive with Hezbollah's illicit 
finance for their own gain.
    A November 2017 $1.2 billion money laundering 
investigation, which a 2017 State Department report cites as 
evidence of corruption in Paraguay, offers proof of ongoing 
trade-based money laundering in the TBA and cover-up by local 
authorities. Local sources told me that the investigated 
companies were given 48-hour advanced notice about the search 
warrants against them.
    U.S. officials familiar with the case privately complained 
of subsequent obstructionism at the highest levels of power, 
preventing attempts by U.S. law enforcement agencies to gain 
access to files. U.S. offers to cooperate were politely but 
decisively rebuffed.
    In such a corrupt environment, Hezbollah thrives. The U.S. 
should demand that local governments put an end to this type of 
impunity or face consequences. These could include: one, impose 
designations under Section 311 of the Patriot Act on financial 
institutions known to be used by Hezbollah financiers to move 
the revenues; two, designate banking sectors of countries that 
facilitate Hezbollah's terror financing zones of primary money 
laundering concern; three, work with allies potentially through 
international forums like the Financial Action Task Force to 
blacklist government entities that cooperate with Hezbollah; 
revoke or deny visas from those implicated in Hezbollah 
activity, including local politicians who facilitate or fail to 
prevent Hezbollah's illicit finance in their own jurisdiction; 
engage Latin American governments to ensure they have adequate 
legislative tools to investigate terrorist activities and 
combat terror finance; and, finally, persuade allies in the 
region to list Hezbollah as a terrorist organization.
    I thank you for your attention, and I very much look 
forward to your questions.
    [The prepared statement of Mr. Ottolenghi follows:]

               Prepared Statement of Emanuele Ottolenghi 
               
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Senator Rubio. Thank you very much, with one second on the 
clock. Excellent.
    Just as a reminder to members, the minority, as is their 
right under our rules, has invoked the two-hour rule, so we 
will have to conclude this hearing at 11:30. So we are going to 
chop through it fairly quickly here, but I think we will have 
plenty of time.
    Mr. Farnsworth, thank you.

 STATEMENT OF ERIC FARNSWORTH, VICE PRESIDENT, COUNCIL OF THE 
                    AMERICAS, WASHINGTON, DC

    Mr. Farnsworth. Mr. Chairman, thank you, Mr. Ranking 
Member, thank you for the invitation to appear before you.
    Let me also upfront thank you for your leadership on 
addressing the most salient issues in the hemisphere, including 
Venezuela, which is a humanitarian crisis developing before our 
eyes. So thank you for your leadership in highlighting those 
issues.
    As requested, I will address the issue of China in the 
Americas.
    Let me give you, if I may, the bottom line first. China's 
entrance into the Americas has been one of the most significant 
developments of hemispheric affairs in this century. While 
there are other important developments such as populist 
governance, which may be on the way out, China's engagement is, 
if anything, intensifying.
    China's dramatic economic rise has necessitated new 
commercial and economic partners worldwide. This has broad 
implications particularly for the commodities-producing nations 
in South America. Nations such as Brazil, Chile, and Peru count 
China as their top trade partner. China's the second largest 
trade partner of Argentina, Colombia, and others.
    This has helped a number of nations to diversify their 
trade relations, proving beneficial, for example, during the 
global economic crisis of 2009. But because the Chinese 
approach to date has been overtly mercantilistic, it has also 
negatively impacted regional producers who now face 
supercharged competition in manufactured products while 
weighting the balance toward the production of primary goods 
just when Latin America is looking to move up the value chain.
    China's activities on the investment side are also having 
an impact, particularly in sectors including energy, mining, 
and agriculture, where China feels the need to lock in access 
to supplies which sustain its economy. Of particular interest 
is energy, where China is an active participant most recently 
in the deep water off the Gulf of Mexico but also from 
Argentina to Venezuela and virtually every regional energy 
producer in between.
    Increasingly, China is also looking to expand its regional 
investment portfolio with a heightened focus on infrastructure 
development.
    Mr. Ranking Member, as you mentioned, this is not 
necessarily a security threat per se to the United States, 
although it does change the competitive framework; and it does 
have broader implications for U.S. policy interests, 
particularly as China looks to dominate industries that will 
increasingly form the backbone of the global economy, including 
artificial intelligence, cloud computing, and clean energy.
    The Chinese investment model differs from others. To 
oversimplify, Chinese entities often pay a premium above market 
value for purchases in order to lock in assets. Once an 
investment is confirmed, Western investment values of job 
creation on the local economy, technology and management 
transfer, corporate governance, respect for labor rights, 
environmental protection, anticorruption, and corporate social 
responsibility are not necessarily priorities.
    There are larger implications as well. Progress in Latin 
America to solidify democratic governance has been uneven but 
generally positive. It is unquestionably in the U.S. interest 
to support these efforts. China's entry into the Americas has 
complicated this agenda.
    For example, efforts to promote labor and environmental 
reforms through sound business practices and formal trade 
agreements are undermined when nations sign agreements with 
China that do not include similar provisions, and Chinese 
businesses are not expected to operate necessarily under the 
same prevailing conditions.
    Multilateral lending agencies, like the World Bank, IMF, 
and Inter-American Development Bank that promote financial 
reforms and good governance, become less relevant if borrowing 
nations can receive funds from China or Chinese-led 
institutions without conditionality.
    China's huge purchases of commodities and the provision of 
credits on favorable terms allow regional leaders the 
flexibility to postpone necessary economic and policy reforms 
consistent with open market, democratic governance, or to take 
actions that even harm democracy itself. They can also embolden 
anti-American leaders.
    The best example, of course, is Venezuela, which today is 
in the midst of a humanitarian crisis. The so-called Bolivarian 
Revolution has been enabled at least in part and until recently 
by high oil prices as well as plentiful external financing from 
sources other than the United States and traditional 
international financial institutions. Financial support from 
China of well in excess of $50 billion, according to some 
estimates, has allowed the Venezuelan regime to accelerate its 
antidemocratic repressive course.
    At the same time, China's vision for the region is 
expanding. While engagement heretofore has primarily been 
economic and educational, such as language training through 
exchanges and its regional Confucius Institutes, there are 
indications that political and security considerations, 
especially on cyber issues, are also growing in importance.
    China issued its latest policy paper on Latin America and 
the Caribbean on November 24, 2016, which is a serious and 
ambitious effort to strengthen ties with the region from trade 
and economic development to space cooperation, to health care 
and global epidemics, and global governance.
    This means that the United States must do a better job 
contending for the region. We need a more strategic approach 
based on the values that we hold dear and that we share with 
the majority of citizens across the Americas.
    Let me put this as succinctly as I can: The street 
protesters in Venezuela who seek outside support to end 
repression and restore democracy do not write their banners in 
Chinese or Russian or Persian. Protesters against the Castro 
regime do not fly the Chinese or Russian or Iranian flags 
during May Day parades.
    The example of the United States remains powerful for the 
citizens of the Americas. That is, so long as we do not forget 
that the promotion of our traditional values supports rather 
than undermines U.S. national security efforts, and we work to 
promote them.
    In many cases, Latin Americans and others prefer the United 
States as a more natural partner than China. But as is often 
said, you cannot beat something with nothing. China is playing 
a multidimensional game. The United States should seek to 
compete on the playing field of greatest advantage to us, 
namely democratic governance and meeting the common aspirations 
of the people of the region.
    Meanwhile, we would also do well to reactivate an ambitious 
economic partnership agenda for the hemisphere focusing on, 
among other things, energy and agriculture, as well as the rule 
of law and anticorruption.
    We also need to reconsider the regional paradigm, frankly, 
that limits actions to the lowest common denominator as a means 
to achieve regional consensus on most issues, which has become 
essentially a straightjacket to U.S. policy implementation.
    Broadly speaking, a reenergized approach to the region, in 
my view, is required.
    Mr. Chairman, thank you again for the opportunity, and I 
look forward to your questions.
    [The prepared statement of Mr. Farnsworth follows:]

                 Prepared Statement of Eric Farnsworth

    Good morning, Chairman Rubio, Ranking Member Menendez, and Members 
of the Subcommittee. It is a privilege to appear before you again 
today. Let me also thank you, up front, for your strong, bipartisan 
leadership to promote hemispheric democracy and to address the 
worsening political, economic, and humanitarian crisis created by the 
Chavista regime in Venezuela.
    As you know, the Council of the Americas (``Council'') is a leading 
policy voice on Latin America, the Caribbean, and Canada. For over 50 
years, our mandate has been to promote democracy, open markets, and the 
rule of law throughout the Americas.
    Thank you for the invitation to appear before you to discuss the 
very important topic of emerging external influences in the Western 
Hemisphere. As requested, I will address the issue of China in the 
Americas.
china's presence in the americas is recent but already well established
    Mr. Chairman and Mr. Ranking Member, let me give you the bottom 
line first: China's entrance into the Americas has, in my view, been 
one of the most significant developments in hemispheric affairs this 
century. And, while other important developments such as the siren call 
of populist governance may be on the wane, China's engagement is, if 
anything, intensifying.
    China's dramatic economic rise has necessitated new commercial and 
economic partners worldwide, to procure the raw materials needed to 
fuel China's domestic growth while opening new markets abroad both to 
sell finished products and also to invest significant dollar and other 
international hard currency reserves. This has broad implications 
particularly for the commodities producing nations of South America, 
which have benefited from sales to China and other developing markets. 
Nations such as Brazil, Chile, and Peru count China as their top trade 
partner; China is the second largest trade partner of Argentina, 
Colombia, and others. This has helped a number of nations to diversify 
their trade relations, proving beneficial, for example, during the 
global economic crisis of 2009. But because the Chinese approach to 
date has been overtly mercantilistic, it has also negatively impacted 
regional producers who now face supercharged competition in 
manufactured products from China, while weighting the balance toward 
the production of primary goods just when Latin America is looking to 
advance upward along the value chain.
    China's activities in Latin America on the investment side are also 
having an impact. In the first instance, some of the promised 
investment has not yet materialized, leading to unmet expectations. 
Still, investment is flowing and it is increasing, particularly in 
those commodities sectors including energy, mining, and agriculture, 
where China feels the need to lock in access to supplies which sustain 
its economy. Of particular interest is energy, where China is an active 
participant, most recently in the deep water of the Gulf of Mexico, but 
also from Argentina to Venezuela and virtually every regional energy 
producer in between. China is also looking to expand its regional 
investment portfolio with an increasing focus on infrastructure 
development.
                   all investments are not made equal
    This is not at this point a security threat per se to the United 
States, although it does change the competitive framework for investors 
and it does have broader implications for U.S. policy interests 
particularly as China looks to dominate industries that will 
increasingly form the backbone of the global economy, including 
artificial intelligence, cloud computing, and clean energy.
    The Chinese investment model differs from others. To oversimplify, 
Chinese entities often pay a premium above market value for purchases, 
in order to lock in assets. Once an investment is confirmed, Western 
investment values of job creation on the local economy, technology and 
management transfer, corporate governance, respect for labor rights, 
environmental protection, anti-corruption, and corporate social 
responsibility are not necessarily priorities. This can unfairly put 
U.S. and other companies at a disadvantage by lowering the costs of 
Chinese production vis-a-vis the competition.
    But there are larger implications, as well. Since the end of the 
Cold War, Latin America has worked diligently to promote democratic 
governance. Progress has been uneven but generally positive; it is 
unquestionably in the U.S. interest to support these efforts. Open 
market democracies that broadly share values tend to make the best 
long-term partners of the United States in the promotion of shared 
interests. China's entry into the Americas has complicated this effort, 
not just in the conduct of business but also in the conduct of foreign 
policy.
            changing the calculus for policy implementation
    For example, efforts to promote labor and environmental reforms 
through sound business practices and formal trade agreements are 
undermined when nations sign agreements with China that do not include 
similar provisions, and Chinese businesses are not expected to operate 
under the same prevailing conditions. Multilateral lending agencies 
like the World Bank, IMF, and Inter-American Development Bank that 
promote financial reforms and good governance become less relevant if 
borrowing nations can receive funds from China or Chinese-led 
institutions without conditionality. China's huge purchases of 
commodities and the provision of credits on favorable terms allows 
regional leaders the flexibility to postpone necessary economic and 
policy reforms consistent with open market, democratic governance, or 
to take actions that harm democracy itself. It also emboldens anti-
American leaders to pursue policies at home and across the region 
contrary to U.S. interests.
    The best example is Venezuela, which today is in the midst of 
humanitarian crisis. While it is clearly the responsibility of Hugo 
Chavez and the course that he and his followers including Nicolas 
Maduro have set, nonetheless the so-called Bolivarian Revolution has 
been enabled, at least until recently, by high oil prices as well as 
plentiful external financing from sources other than the United States 
and traditional international financial institutions. Financial support 
from China of well over $50 billion, according to some estimates, has 
allowed the regime to accelerate its anti-democratic, repressive 
course.
    At the same time, China's vision for the region is expanding. The 
upcoming May 14-15 Belt and Road Initiative meeting is just the latest 
high level diplomatic initiative that will include Latin America; at 
the APEC meetings last November in Lima, Peru, which I attended, 
China's leader Xi Jinpeng went beyond the usual methodical courting of 
the region by publicly laying out a strategic approach to Latin America 
that, if fully realized, would position China as a new guarantor of 
open markets and international governance in the Asia-Pacific region. 
During the November visit, Xi strongly supported renewed progress 
toward the long-stalled Free Trade Area of the Asia Pacific, an 
initiative until recently subsumed by the now-shelved Trans-Pacific 
Partnership, he worked to build momentum toward the Beijing-led 
Regional Comprehensive Economic Partnership which is a roadmap for 
trade and economic linkage within Asia that excludes the United States, 
and he offered the Asian Infrastructure Investment Bank as a partner 
for infrastructure and other initiatives in Latin America, adding to 
pre-existing Brazilian membership in the BRICS Bank. In addition to his 
State Visit to Peru, he also declared Ecuador and Chile to be 
``comprehensive strategic partners'' of China. Soon after, on November 
24, 2016, China issued its latest Policy Paper on Latin America and the 
Caribbean, a serious and ambitious effort to strengthen ties with the 
region from trade and economic development to space cooperation to 
healthcare and global epidemics to global governance.
    a competitive commercial environment calls for a more strategic 
                                approach
    China's interest in the Americas will continue to develop rapidly, 
as it has since the beginning of the century. And, while China's 
engagement heretofore has primarily been economic and educational, such 
as Chinese language training through exchanges and also its regional 
Confucius Institutes, there are indications that political and security 
considerations, especially on cyber issues, are also growing in 
importance. This means that the United States must do a better job 
contending for the region. We need a more strategic approach based on 
the values that we hold dear and that we share with a majority of 
citizens across the Americas. Let me put this as succinctly as I can: 
the street protesters in Venezuela who seek outside support to end 
repression and restore democracy do not write their banners in Chinese 
or Russian or Persian. Protesters against the Castro regime do not fly 
the Chinese or Russian or Iranian flags during May Day parades. The 
example of the United States remains powerful for the citizens of 
oppressive regimes in the Americas. That is, so long as we do not 
forget that the promotion of our traditional values supports rather 
than undermines U.S. national security efforts and we work to promote 
them.
        the united states remains the preferred regional partner
    In many cases Latin Americans and others prefer the United States 
as a more natural partner than China, given history, economic 
opportunity, geography, culture, language, and values, but 
circumstances going forward will dictate policies and actions. As is 
often said, you can't beat something with nothing. The APEC meetings in 
Lima clearly showed that strategic economic and political re-evaluation 
if not realignment is underway. China is playing a multi-dimensional 
game. That is even more reason why we should seek to compete on the 
playing field of greatest advantage to us, namely, democratic 
governance and meeting the common aspirations of the people of the 
region. And we should not be shy about speaking out on principle when 
required, ideally with the coordination and support of regional allies 
and also the Organization of American States.
    Meanwhile, the United States would also do well to deepen further 
not alienate our economic relations with Canada and Mexico, nations 
that engage in common business practices with the United States and 
Europe, as partners in the promotion of a common agenda that share 
common values. More broadly, we also need to re-activate an ambitious 
economic partnership agenda for the hemisphere. Rethinking U.S. support 
for the Trans-Pacific Partnership gives us an opportunity now to re-
envision a strategic initiative for the Americas, not just Asia. 
Initiatives would include stronger emphasis on energy and agriculture 
partnership, as well as the rule of law and anti-corruption. We also 
need to reconsider the regional paradigm that limits actions to the 
lowest common denominator as a means to achieve regional consensus on 
any issue, a paradigm that has become more of a straightjacket to U.S. 
policy implementation. And, we need to build on previous bi-partisan 
successes, including movement toward full and lasting peace in 
Colombia, and also a more effective approach to addressing the deep 
security, economic, and social concerns in Central America while 
maintaining security commitments to Mexico and the Caribbean.
    The battle for the soul of Latin America continues. If anything, 
the United States is potentially better positioned than we have been 
for some time given recent changes in regional governance and the 
decreasing allure of populism. But China's entrance into the Americas 
has changed the game. The United States must engage in a positive, pro-
active manner to offer the region a vision for cooperation consistent 
with our values. A re-energized approach to the region is required.
    Mr. Chairman, thank you again for the opportunity to testify before 
you this afternoon. I look forward to your questions.

    Senator Rubio. Thank you, Mr. Farnsworth. You have shamed 
yourself here today. You went a minute over. The doctor was a 
second under. Of course, I am joking.
    Again, I thank you both for your testimony. I am going to 
defer to the ranking member.
    Let me just say I am glad that Senator Gardner is here. He 
has numerous responsibilities today. He has been a leader on 
the issues of the Asia-Pacific region. What is interesting is 
the interplay between the Asia-Pacific region and the Western 
Hemisphere, in particular with China. So I know he has another 
meeting he has to get to, but his presence here today shows how 
all these things are interlinked.
    The ranking member.
    Senator Menendez. Thank you, Mr. Chairman.
    Thank you both for your testimony. There are so many 
avenues here to pursue.
    I know that listening to you, Mr. Farnsworth, about China, 
it sounds like we are in a competition in economics. I get 
that, but in some respects, whether purposely or not, China's 
engagement in investments are more nefarious, in my mind. For 
example, they do not observe the Foreign Corrupt Practices Act, 
which American companies do. And in that reality, as well as in 
giving money without conditionality, it changes the dynamics of 
what we want to see countries do in the hemisphere, so that 
while I have always been an advocate for American business and 
investment in our hemisphere, in the interests of U.S. 
businesses and the jobs that are created from them and the 
profit that can be derived, I also have always viewed a 
corollary to that is the better business practices that U.S. 
businesses bring, the preserving of the Foreign Corrupt 
Practices Act, in essence, all of those elements of good 
governance, in a sense, that they contribute in the countries 
that they engage in. China does not really care about that.
    So when we are competing with the Chinese in the 
hemisphere, the challenge is not just, in my mind, an economic 
one, but it is the influence that they extend undermining the 
very essence of principles that we want to see countries build.
    Is that a fair concern?
    Mr. Farnsworth. Thank you for the question. I think that is 
a keen observation. I would say that is not the intent of 
Chinese investment into the Western Hemisphere. I mean, their 
intent is to, in some cases, deploy the massive reserves of 
foreign capital that they have and to put it to productive use, 
whether it is in Latin America or Africa or East Asia or what 
have you.
    That is legitimate, but the implications of that are, Mr. 
Ranking Member, as you implied. So what we are seeing across 
Latin America is, in countries with strong institutions, we see 
a recognition that sometimes the investment might look good on 
paper but the implications for some of the values of Latin 
Americans that we hold dear as well can be undermined. So you 
are seeing some pushback. You are seeing some legislation. You 
are seeing some recognition that all investment is not created 
equal.
    You are also seeing the Chinese, in my view, move up the 
learning curve. They recognize that Latin America is different 
from other parts of the world and that there are expectations 
along the lines that you are indicating. So it is an evolving 
process.
    Senator Menendez. It is challenging when you want to have 
the Inter-American Development Bank and the World Bank 
promoting some critical core values in governance and rule of 
law opportunities as well as economic development. If I have to 
live with the burden of this and I can have this without the 
burden, human nature is it is going to go to the least 
consequential response. I look at this, and I look at it in a 
combination of different ways.
    Why does China, and for that fact Russia, make huge 
investments in a country like Venezuela who clearly is on a 
huge downward spiral economically, as well as in terms of civil 
unrest and human rights and democracy of its people?
    Senator Rubio and I recently sent a letter to the Treasury 
Department about Russia's state-owned oil company Rosneft's 
stake in Venezuela's state-owned oil company, PDVSA. But China 
has also provided financial support to Venezuela, as you 
mentioned in your remarks.
    So when you see a country that is ultimately taking its 
most significant national asset, which is its oil, to PDVSA, 
sells nearly 50 percent of it, potentially, to Russia, to 
Rosneft, if it defaults, Rosneft will own 49.9 percent plus 
whatever they purchase on the open market, which very well 
could lead to a 50, 51 percent ownership. And they own Citgo in 
the United States of America, which has very significant oil 
infrastructure in our country. And then that is just the 
Russian side. Now the Chinese come in and invest a lot of 
money.
    Other than raw material, are there other concerns that we 
should have? I invite either one of you to make a comment about 
that.
    Mr. Farnsworth. Let me just make a brief comment, and then 
if my colleague would care to as well.
    I think the China and Russia situation is different.
    China, because of its own domestic issues, has been looking 
worldwide to find and procure guaranteed access to natural 
resources wherever they are, and Venezuela has the world's 
largest supply of oil. So, by definition, China is going to be 
interested in that and has been playing a long game in 
Venezuela.
    I do not think that China is particularly enamored with the 
leadership in Venezuela. In fact, I think that they would 
prefer something different, but they are not there for 
political purposes. They are there for natural resources, just 
like they are in other countries in Latin America for similar 
purposes.
    One of the things that we found is that the Chinese 
investors do not really care that much about the governments in 
the countries that they are operating in, so long as they are 
allowed to do business and so long as they are allowed to get 
the upside from that that they are looking for.
    From the perspective of, what does that mean? Well, it 
means they have invested a whole lot of money in the country 
that they may not get back but they have amortized that against 
future deliveries of oil.
    So from the Venezuelan regime, it makes a lot of sense, 
because they get the money up front. They spend it for their 
own political purposes. And then they give the bill to a later 
generation of Venezuelans, and it is all good for them. So it 
is a marriage of convenience.
    Senator Menendez. I worry about the continued--when the 
bill comes due----
    Mr. Farnsworth. Absolutely.
    Senator Menendez.--and Maduro is not in power anymore, what 
China will demand of the future governance of the country.
    Mr. Farnsworth. I think that is fair.
    Senator Menendez. I have more questions, but I will wait. 
Thank you.
    Senator Rubio. Senator Gardner?
    Senator Gardner. Thank you, Mr. Chairman.
    Senator Rubio and Senator Menendez have been leaders on 
this issue, and I thank you for the partnerships we have been 
able to forge as it relates to China and other activities 
around the globe.
    China has provided Venezuela with over $60 billion in 
financing over the past decade--you have talked about that--
most recently a $2.2 billion loan for oil development in 
November 2016. News events talk about involvement of fake news 
in Europe, elections, hacking, the United States, Russia's 
involvement in placing news stories in the United States.
    To what extent does the Chinese Government participate in 
those kinds of activities in South America, Venezuela in 
particular, providing either antidemocratic government 
assistance, any signs of that in what you see, and how the U.S. 
can play a role in pushing back?
    Mr. Farnsworth. I personally do not see that. China has a 
very robust global effort in terms of media and in terms of 
news. I personally have not seen an overt effort to promote, 
for example, the Maduro regime in Venezuela.
    Again, from my perspective, China's interests in the region 
have primarily been economic. In fact, what they have tried to 
do assiduously is to stay away from the politics of the region 
because they do not want to get wrapped up in it. That is not 
why they are there. They are there to do business and benefit 
themselves.
    At some point, that bleeds into politics. We have been 
talking about that a little bit, but that overt engagement is 
something that, from my perspective, they try to avoid.
    Dr. Ottolenghi. If I may add, sir, the actor that is 
perhaps most actively involved in Venezuela and also elsewhere 
in Latin America in promoting strident antidemocratic values 
and a very militant anti-American rhetoric and posture is the 
Islamic Republic of Iran. And for the Islamic Republic of Iran, 
Venezuela is perhaps the closest ally alongside Evo Morales of 
Bolivia in Latin America.
    It is Iran's forward operating base. It is the place where 
the Iranian missionary network really has begun building its 
own infrastructure. It is the place where the Iranian regime 
launched its Spanish-language propaganda network, Hispan TV, in 
2012. That network shares a considerable amount of human 
resources, starting from journalists and production material, 
with TeleSUR, which is the Venezuelan equivalent.
    Some of that propaganda spills over into other areas of the 
world. There is clear evidence of connections between the 
Spanish propaganda network for Latin America and its use in 
Spain, so that is a bridge into Europe.
    Therefore, I think from an ideological perspective, the 
focus of concern should really be Iran.
    Senator Gardner. Thank you. Admiral Kurt Tidd, the 
Commander of SOUTHCOM, stated in SOUTHCOM's 2017 posture 
statement to Congress that China, and I quote, ``cooperates 
with Latin America on space, potential nuclear power projects, 
and telecommunication networks, which could pose security 
concerns to the United States.''
    Could you talk a little bit about Admiral Tidd's comments?
    Mr. Farnsworth. He is accurate, and China is not shy about 
saying that. In their most recent policy paper toward Latin 
America, which was released late last year in November, space 
cooperation was clearly one of the aspects of priority.
    Latin America, in some ways, sees this as good for 
themselves. It transfers technology. It gives them the 
opportunity to participate in some of these issues.
    Again, I think we have to see what the real intent is 
there. The question of cooperation toward technology and toward 
space exploration is, on its face, potentially dual-use. But I 
think we have to recognize where that may or may not be going.
    So, yes, it is a very open part of their strategy. And if 
you look at what the Chinese have laid out very publicly, it is 
a comprehensive approach to Latin America.
    Now not all of the commitments that China has made over 
recent years have come to pass, particularly announcements of 
multibillion dollars of investment. You get the news reports 
and you get the media, but those investments do not always 
necessarily flow. So we have to see what actions follow these 
words.
    To the extent that it does become dual-use and becomes a 
threat to the United States, we certainly have to be aware of 
that.
    Senator Gardner. Dr. Ottolenghi, if you would like to 
comment?
    Dr. Ottolenghi. The only thing that I would like to add, 
again, in relation to Iran, is, of course, especially during 
the sanctions era and perhaps at the height of the Venezuelan-
Iran bilateral relation with the late Chavez and the former 
President Ahmadinejad of Iran in power, and their very close 
relationship, Venezuela was used by Iran not just for sanction 
evasion in the financial sector but also for joint projects in 
the missile program.
    These projects, as far as I am concerned and as far as I 
can tell, are still ongoing. Their relationship is not just 
economic and ideological. There is obviously a clear component 
of military and technological cooperation, which should 
continue to be monitored.
    Senator Gardner. Dr. Ottolenghi, in terms of the sanctions 
lifting under the Iran nuclear deal, what kind of uptick did 
you see in that activity in Venezuela?
    Dr. Ottolenghi. It is interesting to see that during the 
entire duration of the Rouhani presidency, while the 
negotiations were ongoing, you did not have the same level of 
bilateral visits and delegations from Venezuela to Iran and, 
more importantly, from Iran to Venezuela occurring at the same 
speed and seniority you saw during Ahmadinejad.
    That combined with the fact that the volume of trade 
between Iran and Latin American countries, and the fruition of 
a lot of the projects that were signed during that era did not 
happen, was interpreted as a sign that Iran's interest in the 
region may be waning or perhaps that the failure of all those 
ambitious projects to come to fruition indicated a 
disenchantment by Latin American leadership towards the 
Iranians.
    I see a very different picture. First of all, since the 
agreement was signed, you have seen important visits by 
President Rouhani, by Foreign Minister Zarif to the region. 
Beneath the surface, the amount of formal diplomatic relations 
and also what you could call nongovernmental relations that, in 
those countries are really sort of driven by the regime through 
nonofficial means, have continued at pace.
    We see a continuation of investment by Iran in the region. 
We see a continuation of dedication of resources by the Iranian 
regime in the ideological struggle, in the export of the 
revolution. They see a priority in the region to flip countries 
to their side. We see the transfer of funds and political 
support to anti-American movements in the region, and certainly 
the continued partnership with Bolivarian regimes and anti-
American regimes.
    So I think that the overall assessment is that the 
infrastructure the Iranians created during the sanctions era 
and the infrastructure that Hezbollah continues to develop, 
particularly its partnership with organized crime, are there 
and are being leveraged as need be.
    Senator Gardner. Thank you.
    Thank you, Mr. Chairman.
    Senator Rubio. Thank you.
    I have a quick meeting to attend to in the anteroom, so I 
know Senator Menendez, the ranking member, has a couple 
additional questions. I am going to turn it over to him, but I 
am not leaving. I will be back.
    Senator Menendez.
    Senator Menendez. Thank you, Mr. Chairman. I am not going 
to ask unanimous consent for anything.
    Senator Rubio. Objection.
    [Laughter.]
    Senator Menendez. I have a question. I know neither of you 
are Russia experts, but maybe you can shed light or thoughts.
    Russia's recent actions in Nicaragua, as reported in the 
Washington Post last month, the article cites a number of 
officials who think that this new ground tracking station 
ultimately is to be used to increase Russian influence or 
surveillance of Americans and/or the United States. Do you have 
any insights into that? Any perceptions?
    Mr. Farnsworth.
    Mr. Farnsworth. Thank you for the question. I also saw the 
report, and I suppose that is certainly a possibility. I do not 
have access to the intelligence, which I think would probably 
paint a clearer picture.
    From my perspective, the Russian engagement in Latin 
America, since the Cold War but until now, has essentially been 
tactical and it has been a way to promote, particularly in the 
arms industry, arms sales and the procurement of hard currency. 
A lot of what was sold to Venezuela was clearly not for 
Venezuelan military interests. They do not need any of that 
material except to impress their own citizens. But the Russians 
are very happy to sell it because it brings hard currency to 
industries that they want it to support.
    We have seen a lot of that. It did not seem to have much of 
a political component. To the extent that there is a benefit to 
the regime in Venezuela, okay, they probably are reasonably 
happy about that. But what we may be seeing a little bit more 
of now is a more robust presence of Russia into the region. It 
is hard to speculate on what the purpose of that may be.
    But from my perspective, I do not necessarily see it 
because they want to return to the Cold War or have Latin 
America as their chief allies, but rather, frankly, to annoy 
the United States and to keep track on some of the things we 
may be doing because of what they perceive us to be doing in 
some of the countries around them and in Europe. So it is a way 
to kind of play part of the global chess game with Latin 
America, again, as the playing field.
    Senator Menendez. That is interesting. I hope it is only 
that. An annoyance is an annoyance.
    By the same token, I wonder what Ortega is thinking about 
when he has an MCC agreement with the United States that has 
served Nicaragua well, to be inviting the Russians in for a 
monitoring and tracking station. I do not think it is for other 
neighbors in the hemisphere except for the United States.
    So it makes me wonder whether or not sometimes, whether it 
be China, whether it be Russia, whether it be Iran, that the 
way in which they seek to use their economic influence is far 
different than the way we seem to. We seem to be pretty up and 
up in the way in which we use our influence. But they seem not 
necessarily to care about those elements of using their 
influence.
    I sometimes get concerned that, in our desire to have good 
governance and rule of law, which I am a big supporter of, 
human rights, democracy, that we do not use, in pursuit of 
those goals, our economic levers sufficiently enough to engage 
countries, because I would be looking at Ortega, if there is a 
new compact to be reviewed or the conditions of this compact, 
and say, what are you doing?
    Would that be an unfair use of American power?
    Mr. Farnsworth. I do not think it is unfair at all. I think 
it is entirely within our rights to take a look at how we are 
spending our money, our taxpayer money.
    Senator Menendez. Dr. Ottolenghi, last question, do you see 
the concerns that you have raised as it relates to Iran, 
Hezbollah, and related entities as a foothold? Or do you see a 
greater regional ambition? And if you see a greater regional 
ambition, do you see the work being laid, the foundation being 
laid, to fulfill that greater regional ambition?
    Dr. Ottolenghi. Thank you for your question, which is a 
very important one. I do see both points playing out. The 
networks that Hezbollah is building, developing, expanding, 
enhancing in Latin America serve mainly the purpose of 
maintaining the loyalty of expatriate communities there on the 
one hand, and provide steady flows of financial support for its 
operations back home.
    So there is, of course, a political dimension there to 
ensure that the local powers that be will leave this operation 
in place, will not try to dismantle them, will not interfere 
with them.
    There is a concerted effort to use the money that these 
networks yield to buy political influence and to ensure 
impunity. That, of course, has an impact on the quality of 
governance in the specific countries.
    There is also a broader design when it comes to Iran. That 
is Iran views the entire region as a place where American 
influence can be pushed back and rolled over. They believe and 
they have always believed the operation that the Iranians 
mounted in Latin American began in the early days of the 
Iranian Revolution.
    The first envoy that was dispatched for this purpose came 
to Buenos Aires in 1982, and the idea was that Latin America is 
a fertile ground for the export of the revolution because there 
are both governments and movements which are wedded to a 
similar political agenda of diminishing U.S. influence in the 
region, of fighting Western imperialism, as they call it. The 
Iranians viewed that perhaps as the most promising area for the 
export of the revolution.
    At some point in the process, they also realized that they 
could somehow expand and export not just revolutionary values 
but their faith as a vector to fulfill the revolutionary ideals 
of Latin America.
    So in a way, they repackaged the Shia iconic founding 
figure of Hussain as an Islamic variant of Che Guevara and 
built a whole panoply of tools to promote this idea and to 
actually recruit people to their cause.
    This is a four-decade-long project that is ongoing. There 
is actually literature produced by the people involved that 
says Latin America is a continent that, 500 years ago, was 
conquered by the Catholic religion in less than a century 
through violence and conquest at times. We can do it too.
    So I think the design there, the project, is a lot broader. 
It is strategic. And the target is to push back American 
influence in the region and export the values of the Iranian 
Revolution.
    Senator Rubio. Thank you.
    So as a continuation here, unless any other members appear, 
we will spend the next 20 minutes pretty much off the clock 
back and forth here on a dialogue and go from there.
    Senator Menendez may need to go somewhere. But if he is 
here, I am more than happy for him to jump in.
    We have a lot of topics to cover. I want to start 
particularly with Venezuela. We talked a lot about outside 
actors. If you look at their financial situation, their debt 
service, which they have a real problem making, the financing, 
their ability to make those payments appears to be coming from 
three sources at this point. One is private banks, whether it 
is an investment bank or a broad multinational. The hope there 
is that we can make and send a very clear message to these 
banks that they are active participants in funding repression 
when they conduct that sort of financial transaction.
    But the other are state actors--Russia and China. I think 
both of these nations, despite their interests in creating a 
foothold in the hemisphere, also want to get paid. They want 
their money back. They do not view this as a gift. They view it 
as a loan that gives them influence, but they want their money 
back. Particularly in the case of Russia, they cannot afford to 
be making loans that do not get paid back. In the case of 
China, I have found that nothing offends them more than the 
loss of face, and to basically be making bad loans that do not 
get paid back is a face-losing embarrassment.
    How would you advise members of the Senate and the Congress 
about articulating that message, because here is the bottom 
line: China and Russia are lending the Maduro regime money that 
is never going to be paid back. They are never going to get 
that money back.
    I understand that the hope of shaming them into not funding 
a repressive regime, that standard is probably too high to meet 
in the case of Russia and China. But I do think they understand 
not getting paid back.
    So how would you best argue to them? Or what is the best 
strategy that you would advise us on moving forward to let both 
of those nations know that not only is this something that 
affects our bilateral relationship with them but they are not 
going to get paid? I mean, these guys simply do not have the 
funds and the resources to pay them, and they are going to 
eventually default one way or the other, and they are going to 
get stuck with this bill.
    Mr. Farnsworth. If I may, Mr. Chairman, I think this is a 
fundamental question that you have hit on. This is why I keep 
saying that China's fundamental or primary interest in the 
Western Hemisphere is pragmatic. They want what they need to 
fuel their own economy. They are not that interested in the 
politics of the country in which they are engaged, so long as 
they are able to do business. Part of doing business is getting 
paid, obviously, just as you have articulated.
    So from the perspective of an outside observer, I think, 
first of all, the United States--certainly the Senate but also 
the executive branch--should be in active dialogue right now 
with China, and I have been urging this for a long time, that 
China has a huge interest in Venezuela for precisely the 
purposes you have said, and to bring China into the discussion 
of not just debt repayment but what comes after the Maduro 
regime, because from my perspective, the best workout plan that 
you are going to be able to get for international creditors for 
Venezuela will be with an opposition that is in power, that is 
democratically elected, and that is sustainable and has the 
authority of the Venezuelan people to meet its debts.
    Now it is unclear whether they will be able to meet all 
their debts. There may be a haircut that is required. Who 
knows? That is down the road.
    But from my perspective, I would work with the Chinese to 
say, look, let's work this out together. But the current path 
is unsustainable. So the earlier that we have free and fair 
elections in Venezuela, the earlier that we have the political 
prisoners released, the earlier that there is a sustainable 
government in place, the better prospects we together have for 
getting paid.
    Now I think the Russian scenario is different, as we have 
discussed. I think they do have more of an interest in terms of 
the government in power, but they have also a different debt 
profile with reference to Venezuela, and it is less of the 
official loans and it is more direct engagement in the energy 
sector.
    But to me, the most viable outcome for economic gain of 
debtors is a viable, democratically-elected government in 
Venezuela, and we do not have that right now.
    Senator Rubio. Doctor.
    Dr. Ottolenghi. Thank you, Mr. Chairman. I do have an 
additional point to make with regard to Iran in Venezuela, 
rather.
    During the sanctions era, Iran used Venezuela as a money-
laundering place, as a place to evade sanctions. The entities 
that Iran created with Venezuela jointly for this purpose were 
delisted under the nuclear agreement. I think that gives us 
leverage because the Iranians do not have any desire to see 
entities relisted. That is something that could be used as a 
threat to diminish their involvement.
    The second point that I would make is that, of course, the 
Venezuelan regime has plundered its own natural resources in 
partnership with Iran and others by using these tools, and it 
is also getting revenues by increasingly becoming involved with 
drug cartels. The revenues from those illicit activities that 
we have seen in the case of Vice President El Aissami end up 
often in the financial system of the United States.
    So here you have additional leverage going after these 
assets, going after more individuals in the Venezuelan regime 
involved in this type of illicit activities on the side, going 
after entities that the Iranians have created, including joint 
ventures in the industrial sector as sanctionable activities 
that support the Maduro regime and are complicit in the 
repression inside the country.
    Senator Rubio. As an additional point on this topic, we are 
talking about external factors from outside the Western 
Hemisphere, but these are somehow interrelated also within the 
Western Hemisphere.
    In the case of Venezuela, one of the external actors within 
Venezuela is the Government of Cuba, which has both provided 
sort of expertise and personnel on the intelligence, passport, 
internal security side and also all sorts of logistical support 
on intelligence and the like. One of the phenomena that has 
emerged from that is the so-called colectivos, or these citizen 
militias, for lack of a better term, who, in many cases, are 
well-armed and sometimes actually undertaking much of the 
repression that is now going on.
    I think there is a broader conversation to have about what 
happens down the road even when those groups spin out of 
control. In essence, there will come a point when those groups 
establish, if they have not done so already, an independent 
character independent of state control so that Maduro cannot 
even control them anymore or tell them, even if he wanted to 
tell them to stop, he would not be able to. You could foresee a 
conflict between these groups and, for example, the national 
guard.
    But in the interim, when you have a bunch of well-armed 
individuals in the street, they also need to make a living. 
When the Venezuelan Government is no longer able to pay them to 
conduct repression, then what happens? Then these groups turn 
to illicit means. You now have well-armed individuals who 
perhaps initially entered this for purposes of money and/or 
ideology who now understand how to use weapons, how to conduct 
violence, and are looking forward a revenue source, and the 
experience of that in the hemisphere has been they turn to 
illicit activities such as drugs and trafficking and the like.
    Further complicating it is the possession of sophisticated 
weaponry. For example, there is a Miami Herald article from the 
24th of April this year. It talks about the Venezuelan 
Government's decision to arm civilians to defend the country's 
socialist revolution is rekindling fears of terrorist and 
criminal organizations acquiring part of the nation's arsenal, 
which includes a large stockpile of shoulder-fired surface-to-
air missiles.
    I would say that we may not view this as an external factor 
per se. It is something that an external actor, be it a 
transnational criminal group or an international terrorist 
organization looking to buy such weaponry, could take advantage 
of, and perhaps is a topic that is unfair because it is an 
emerging topic and one that neither one of you perhaps has 
spent a tremendous amount of time on. But your initial 
impressions about whether that is something that is speculative 
or the existence of a large amount of weaponry in the hands of 
individuals looking to make a buck, isn't that always a recipe 
for disaster in terms of whether it is an outside actor coming 
in and buying them or those groups using it to fund other 
activities, to conduct other sorts of activities within the 
region?
    Mr. Farnsworth. Mr. Chairman, I do not think that is an 
idle concern at all. I think that is a very real concern.
    In fact, it is precisely the phenomenon we saw in Central 
America coming out of the civil wars in the 1980s and early 
1990s.
    You had peace processes. You had peace accords. But you 
also had a number of generally young men with no marketable 
skills except the ability to pull a trigger and live on the 
local economy. Once they could not find jobs in 1995, 1996, 
1997, many of them began to turn to gangs and began to turn to 
crime to sustain themselves.
    As we know, Central America right now is wracked with some 
of the highest criminal rates certainly in the hemisphere but 
even worldwide. This is a real problem that we are all 
wrestling with now in terms of financial support and other 
things to try to help resolve that issue.
    That developed out of the peace accords that were not 
necessarily fully implemented but, nonetheless, even to the 
extent they were implemented, did not touch all of the 
combatants and provide a way to make a living in the legal 
economy. So that is not an idle concern at all.
    The other issue that I would mention, you brought Cuba into 
the conversation. I think that is precisely right. It is 
fascinating to me how many of the people who are so quick to 
condemn the possibility that the United States might do 
anything on Venezuela as interventionism then are precisely the 
same people who turn a blind eye to what Cuba has clearly been 
doing in Venezuela now since President Chavez was elected at 
the end of the last century. So that is a double standard that 
I wish did not exist, but I think you are right to point it 
out.
    Dr. Ottolenghi. If I may just add, Mr. Chairman, watching 
the dramatic images of repression that come through social 
media from Venezuela, I cannot help but see the similarity in 
the images with the repression we saw in 2009 right after the 
fraudulent elections in Iran that brought Ahmadinejad to his 
second term.
    The militias that you refer to do not only benefit from 
training by the Cubans, but they seem to follow the model of 
the Basij popular militias that Iran has created as a kind of 
passive defense, a popular defense army in the country, which 
is designed specifically to counter and put down civil 
opposition, organized civil opposition.
    In Iran, it worked very well, and part of the reason why 
the Iranians have advised the Chavez and then the Maduro 
regimes on this issue is that they know how to put down a 
revolution because they successfully produced one in their own 
time. I think that that highlights the problem of the external 
interference you have, but it should also invite some measures 
well short of the kind of interventionism that America often 
unfairly is accused of, namely to, again, use economic warfare 
against those in Iran and perhaps in other places closer to 
home such as Cuba that are dispatching military advisers that 
are providing the weaponry and the financial resources to make 
these militias operate.
    Senator Rubio. So we have about 9 minutes left before 
turning into pumpkins. So let me try to cover three quick 
topics. They are all important.
    The first is, when we speak about Iran, one of the things 
people do not realize is part of their statecraft is 
asymmetry--in essence, the asymmetrical ability to attack the 
United States. Both of you alluded to it in your testimony.
    What that means, for people who may not be aware of the 
terminology, is they are not going to try to build 10 aircraft 
carriers. What they are going to try to do is to have cells or 
groups, friendly and under their direction, throughout the 
world who, in the case of conflict with the United States or 
the West, could conduct attacks in the homeland. Obviously, the 
Iranian regular army or even the Quds Force cannot transplant 
10,000 fighters to come into somewhere in the United States and 
fight us, but they could potentially flip a switch and give the 
signal for groups they have implanted in the region and 
throughout the world to attack us.
    One of the places where we are concerned that would occur 
is here in the Western Hemisphere where individuals and/or 
cells and capacities, be it through safehouses or the like, 
have accumulated either weaponry or explosives or both, and 
personnel with the capacity that at a moment of conflict could 
conduct attacks against the United States and/or its interests 
in the region, potentially in the homeland benefiting from 
visa-free travel to attack us.
    That is something we do not talk about nearly enough, but 
that remains a threat that we should be vigilant of.
    Perhaps both of you could comment on that briefly, so in 
the 8 minutes we have left we can get to the other two.
    Dr. Ottolenghi. Thank you for your question. It is a very 
important point.
    Again, I would like to refer to a case I discussed more 
extensively in my written statement of a recent arrest in 
Paraguay of a suspect Hezbollah trafficker. The individual in 
question was arrested a month ago. He is in custody. In 
addition to being a drug trafficker, it turns out he was 
accredited by the local ministry of immigration as a mediator 
to facilitate applications for permanent residency and 
citizenship, which is fairly easy to obtain through a small 
investment to begin with.
    The rumor from sources down there is that this individual 
was involved in as little as 500 and possibly many more 
applications throughout the years by Lebanese men, mostly, 
coming from South Lebanon to reside permanently and to get 
involved in business locally along the frontier between 
Paraguay and Brazil, which is, of course, a hub for illicit 
funds for Hezbollah.
    So here is the concern. The concern is that the networks 
that are in place, which could help the Iranian asymmetric 
model you described, are actually bringing in people more and 
more through the lax immigration rules in South America. These 
people are in place. They are building infrastructure.
    Over time, they acquire citizenship, which makes it easier 
for them to apply for a visa and come into the United States. 
They are using the status they have gained already to develop 
money-laundering networks, sometimes building companies, 
establishing companies here in the United States and using the 
financial system here.
    But they are also there to provide the logistical 
infrastructure support when Iran decides that such terrorist 
actions are called for, to provide the local support network 
for cells that come from Iran or from Lebanon in order to carry 
out these attacks.
    So the danger is very much there, and it should require 
additional attention from the U.S.
    Senator Rubio. Just in the interest of time, because I have 
to limit it to one more topic, but it is one I talked about in 
my opening statement, and that is Trinidad, which by far has 
the largest per capita contribution to ISIS of foreign fighters 
of any Nation in the Western Hemisphere. It is actually a 
startling number--125 for a nation whose population is just a 
percentage, a small percentage of ours.
    In the United States, you have 240 times their population, 
and yet they have about half as many ISIS fighters. So it is 
just significant per capita, and you do not hear a lot of 
discussion about this.
    But the concern, of course, is that these individuals would 
return back to Trinidad and, at some point, are a 3-hour flight 
away from South Florida where I live in my home State, but also 
the mainland of the United States.
    So I know that the risk of radicalization in Trinidad is 
not new. In fact, I believe it was a radicalized group that led 
a coup there in the 1990s, if I am not mistaken, the early 
1990s. But how has that evolved? Is it getting enough attention 
beyond a couple articles? And is it your view that the Trinidad 
Government understands the threat posed by this and is prepared 
to work with us to confront it?
    Dr. Ottolenghi. I am not entirely familiar with the 
situation specific to Trinidad. I do see, however, the broader 
picture across the region where, on the one hand Iran, and on 
the other hand radical Sunni movements, both backed by states 
and otherwise, are actually conducting a very aggressive drive 
to radicalize, to convert, and to recruit.
    We see the presence of radical Sunni preachers from Mexico 
all the way down to the Southern Cone. Equally for that 
Iranians, they are probably competing for recruits. But the 
phenomenon is very much there and is underreported.
    And I think that governments in Latin America, perhaps for 
a lack of understanding, capacity, are not treating the problem 
seriously enough. There is plenty of open source evidence of 
radical preachers flying in from Qatar, from the Gulf, from 
Iran straight into Latin America. There are direct flights now 
from the Gulf into Latin America.
    They come. They preach. There is plenty of evidence of 
radicalization in local mosques. And they come back.
    I assume that Trinidad and Tobago, the problem is the same. 
And because it is such a small nation with limited resources 
for governance, their capacity to confront this problem, even 
if there is political will, is limited. So help building 
capacity I think is a key component of what U.S. policy should 
be.
    Mr. Farnsworth. Mr. Chairman, only two quick things, if I 
may.
    The first is to thank you again for your leadership on 
these issues. It is tremendously important, and it is noticed, 
and it is very much appreciated, so thank you.
    The second is, with that specific reference to Trinidad, 
this is an issue I think--there is an issue of cyber that, if 
we look forward in terms of emerging potential threats for the 
region, and we bring in Russia and other countries like that, 
to the extent that there are political interests that can be 
manipulated in the electoral process, et cetera, that is 
something I would encourage people to give increasing attention 
to because, as we go down the road, we have seen what has 
happened in Europe, et cetera. This is a potential for 
mischief-making in Latin America to the extent people are so 
inclined.
    Senator Rubio. That is an interesting point because many of 
these countries, unlike the United States, have centralized 
voting systems. People do not realize we have over 9,000 
separate jurisdictions that conduct elections at the county 
level primarily.
    In many countries around the world, and certainly in the 
Western Hemisphere, the elections are conducted by a central 
entity. The council votes for the whole country. So you do not 
need to hack 9,000 or the strategic parts of the 9,000 
infrastructure in terms of the United States. You can very much 
do it--and that is just on the hacking front not to mention the 
influence part.
    We appreciate both of your testimony. I apologize. There 
are probably other topics we could have touched on. We have 
this situation here today where the 2-hour rule has been 
invoked, so that would end our hearing here any moment now. I 
do not know what happens, but I guess if we get 1 minute past, 
I may go to jail or something. I do not know, at least Senate 
jail.
    But I appreciate both of your willingness to come here 
today and talk about this topic. I wish it got more attention. 
I hope it will get more attention. As I said yesterday, and you 
were there, Mr. Farnsworth, that I think in many ways the 
Western Hemisphere is an answer, not a problem.
    Today, we talked about some of the challenges in the 
region, but this committee spends a lot of time talking about 
the opportunities. I hope we will spend more time.
    The record for this hearing is going to remain open for 48 
hours. You may receive a written question from some of the 
members who were not able to attend. If you can, we ask you to 
answer so it can be part of our record for future 
consideration.
    Senator Rubio. With that, I thank you both, and the members 
who came, and this hearing is adjourned.
    [Whereupon, at 11:30 a.m., the hearing was adjourned.]