[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                      ENHANCING BORDER SECURITY: ADDRESSING 
                            CORRUPTION IN CENTRAL AMERICA

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         OVERSIGHT, MANAGEMENT,
                           AND ACCOUNTABILITY

                                 OF THE

                     COMMITTEE ON HOMELAND SECURITY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 11, 2021

                               __________

                           Serial No. 117-17

                               __________

       Printed for the use of the Committee on Homeland Security
                                     

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 
                                     

        Available via the World Wide Web: http://www.govinfo.gov        
        
                               __________
                               

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-212 PDF                  WASHINGTON : 2021                     
          
--------------------------------------------------------------------------------------        
        

                      COMITTEE ON HOMELAND SECURITY

               Bennie G. Thompson, Mississippi, Chairman
Sheila Jackson Lee, Texas            John Katko, New York
James R. Langevin, Rhode Island      Michael T. McCaul, Texas
Donald M. Payne, Jr., New Jersey     Clay Higgins, Louisiana
J. Luis Correa, California           Michael Guest, Mississippi
Elissa Slotkin, Michigan             Dan Bishop, North Carolina
Emanuel Cleaver, Missouri            Jefferson Van Drew, New Jersey
Al Green, Texas                      Ralph Norman, South Carolina
Yvette D. Clarke, New York           Mariannette Miller-Meeks, Iowa
Eric Swalwell, California            Diana Harshbarger, Tennessee
Dina Titus, Nevada                   Andrew S. Clyde, Georgia
Bonnie Watson Coleman, New Jersey    Carlos A. Gimenez, Florida
Kathleen M. Rice, New York           Jake LaTurner, Kansas
Val Butler Demings, Florida          Peter Meijer, Michigan
Nanette Diaz Barragan, California    Kat Cammack, Florida
Josh Gottheimer, New Jersey          August Pfluger, Texas
Elaine G. Luria, Virginia            Andrew R. Garbarino, New York
Tom Malinowski, New Jersey
Ritchie Torres, New York
                       Hope Goins, Staff Director
                 Daniel Kroese, Minority Staff Director
                          Natalie Nixon, Clerk
                                 
                                 ------                                

       SUBCOMMITTEE ON OVERSIGHT, MANAGEMENT, AND ACCOUNTABILITY

                  J. Luis Correa, California, Chairman
Dina Titus, Nevada                   Peter Meijer, Michigan, Ranking 
Donald M. Payne, Jr., New Jersey         Member
Ritchie Torres, New York             Dan Bishop, North Carolina
Bennie G. Thompson, Mississippi (ex  Diana Harshbarger, Tennessee
    officio)                         John Katko, New York (ex officio)
                Lisa Canini, Subcommittee Staff Director
         Eric Heighberger, Minority Subcommittee Staff Director
                  Geremiah Lofton, Subcommittee Clerk
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               Statements

The Honorable J. Luis Correa, a Representative in Congress From 
  the State of California, and Chairman, Subcommittee on 
  Oversight, Management, and Accountability:
  Oral Statement.................................................     1
  Prepared Statement.............................................     2
The Honorable Peter Meijer, a Representative in Congress From the 
  State of Michigan, and Ranking Member, Subcommittee on 
  Oversight, Management, and Accountability:
  Oral Statement.................................................     3
  Prepared Statement.............................................     5
The Honorable Bennie G. Thompson, a Representative in Congress 
  From the State of Mississippi, and Chairman, Committee on 
  Homeland Security:
  Prepared Statement.............................................     7

                               Witnesses

Ms. Shannon O'Neil, Vice President, Deputy Director of Studies, 
  Nelson and David Rockefeller Senior Fellow for Latin America 
  Studies, Council on Foreign Relations:
  Oral Statement.................................................     8
  Prepared Statement.............................................     9
Mr. J. Welby Leaman, Senior Director, Global Government & 
  Multilateral Affairs, Walmart, Inc.:
  Oral Statement.................................................    12
  Prepared Statement.............................................    13
Ms. Claudia Umana Araujo, President, The Salvadoran Foundation 
  for Economic and Social Development (FUSADES):
  Oral Statement.................................................    23
  Prepared Statement.............................................    24
Mr. Matthew M. Rooney, Managing Director, Bush Institute-SMU 
  Economic Growth Institute, George W. Bush Institute:
  Oral Statement.................................................    29
  Prepared Statement.............................................    31

 
  ENHANCING BORDER SECURITY: ADDRESSING CORRUPTION IN CENTRAL AMERICA

                              ----------                              


                         Friday, June 11, 2021

             U.S. House of Representatives,
                    Committee on Homeland Security,
                    Subcommittee on Oversight, Management, 
                                        and Accountability,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m., via 
Webex, Hon. J. Luis Correa [Chairman of the subcommittee] 
presiding.
    Present: Representatives Correa, Meijer, and Bishop.
    Chairman Correa. The House Committee on Oversight, 
Management, and Accountability will come to order.
    Without objection, the Chair is authorized to declare the 
subcommittee in recess at any time.
    Let me begin by thanking everyone today for joining us. As 
you know, last month the subcommittee held a hearing to examine 
the issues that drive people in Central America to leave their 
homes and go north to the United States. Today I am pleased 
that we have the opportunity to dig into one of those push 
factors, corruption.
    This hearing will explore how weak governing systems are 
exploited by corrupt actors to stifle development and maintain 
the status quo. Corruption diverts aid money away from those 
that need it the most while obscuring the government's actions 
through layers of red tape and unclear policy. The effects are 
felt by everyone.
    Funding for social services like health care, education, 
and social assistance in Central America are among the lowest 
in the hemisphere. Last year about 20 percent of Guatemalans 
and Hondurans admitted to paying bribes in exchange for basic 
services. Of course, after being shaken by 2 devastating once-
in-a-lifetime hurricanes almost at the same time and COVID-19, 
the lack of government safety net, many are seeing migration to 
the United States is their only option to survive.
    Therefore, as we address migration, border security, we 
have to also focus our efforts to how we can best assist our 
southern neighbors in their efforts to bolster hope, 
opportunity, and the security in their own homes.
    Of course, key to this effort will be strengthening 
democratic institutions to prevent those in power from 
exploiting their vulnerable populations.
    Elections must be free and fair and judges and legislators 
must not suffer from undue influence and the government must be 
responsive and accountable to their people.
    In recent years anti-democratic actions in the Northern 
Triangle countries of Guatemala, Honduras, and El Salvador in 
particular have contributed to undermining public trust in 
government institutions. Although these 3 countries hold 
regular elections, recent leadership changes have led to an 
increase in authoritative practices and other concerning 
accusations.
    Of course, some political leaders recently have used COVID-
19 as an excuse for limiting government transparency, civil 
rights, and other protections while others have been accused of 
working directly with criminal organizations. Judicial systems 
suffer from a lack of independence and all too often those who 
dare to issue rulings against corrupt leaders are threatened or 
removed from their position. Anti-corruption commissions 
established in each country to investigate and prosecute 
corruption have been hamstrung or shut down altogether by these 
leaders in recent years.
    Without fixing these broken systems, they will continue to 
be exploited year after year by those who benefit from keeping 
the system unbalanced.
    So I am very pleased to hear that the Biden administration 
is moving ahead to combat corruption as a vital part of their 
plan to improve living conditions in the area. Just this week 
Vice President Harris traveled to Guatemala to discuss a 
partnership on addressing migration push factors like weak 
governance. Vice President Harris announced the creation of an 
anti-corruption task force which will include sending 
prosecutors from our Justice Department to help build 
corruption cases and strengthen the rule of law.
    Additionally, the Department of Homeland Security will 
continue to work closely with local officials in Central 
American countries to strengthen customs enforcement to prevent 
illegally obtained wealth from existing country and ending up 
hidden somewhere. There is only so much we, the U.S. 
Government, can do. We have to work closely with our partners 
in both private enterprise, in civil societies, to achieve 
lasting reform.
    Today I look forward to hearing from those of you today 
that can help us shed some light on these issues.
    Again, I thank all of you for joining us. Now, I would like 
to recognize the Ranking Member of the subcommittee, the 
gentleman from Michigan, Mr. Meijer, for an opening statement.
    Welcome, sir.
    [The statement of Chairman Correa follows:]
                  Statement of Chairman J. Luis Correa
                             June 11, 2021
    Last month this subcommittee held a hearing to examine the issues 
that drive people in Central America to leave their homes and migrate 
north to the United States. Today, I am pleased to have the opportunity 
to dig deeper into one of those push factors--corruption. This hearing 
will explore how weak governing systems are exploited by corrupt actors 
to stifle development and maintain the status quo.
    Corruption can divert aid money away from those that need it most, 
while obscuring the government's actions through layers of red tape and 
unclear policy. And the effects are felt by all but a select few. 
Funding for social services like health care, education, and social 
assistance in Central America is among the lowest in the hemisphere. 
Last year, approximately 20 percent of Guatemalans and Hondurans 
admitted to paying bribes in exchange for basic social services. And 
after being struck by the devastation of 2 once-in-a-lifetime 
hurricanes as well as COVID-19, the lack of a government safety net has 
forced many to see migration to the U.S. border as the only option.
    Therefore, as we seek to improve our own border security, we must 
also support the efforts of our Southern neighbors to bolster hope, 
opportunity, and security in their own countries. Key to this effort 
will be strengthening democratic institutions to prevent those in power 
from exploiting vulnerable populations. Elections must be free and 
fair, judges and legislators must not suffer from undue influence, and 
the government must be responsive and accountable to the people.
    In recent years, anti-democratic actions in the Northern Triangle 
countries of Guatemala, Honduras, and El Salvador in particular, have 
contributed to undermining public trust in government institutions. 
Although all 3 countries hold regular elections, recent leadership 
changes have led to an increase in authoritarian practices and 
concerning accusations. Some political leaders have used the COVID-19 
pandemic as an excuse for limiting government transparency and 
infringing on civil rights protections, while others have been accused 
of working directly with criminal organizations to undermine the rule 
of law.
    In all 3 countries, judicial systems suffer from a lack of 
independence and all too often those who dare to issue rulings against 
corrupt leaders are threatened or removed from their positions.
    And anti-corruption commissions established in each country to 
investigate and prosecute corruption have been hamstrung or shut down 
altogether by these leaders in recent years. Without meaningful 
investment in fixing these broken systems, they will continue to be 
exploited year after year by those who benefit from keeping the system 
unbalanced. So, I am pleased to hear that strengthening democratic 
institutions to combat corruption is a vital part of the 
administration's plan to improve living conditions in the region.
    Just this week, Vice President Harris traveled to Guatemala to 
discuss a partnership on addressing migration push factors like weak 
governance. She announced the creation of an Anticorruption Task Force, 
which will include sending prosecutors from the Justice Department to 
help build corruption cases and strengthen the rule of law. 
Additionally, the Department of Homeland Security will continue to work 
closely with local officials in Central American countries to 
strengthen customs enforcement and prevent illegally obtained wealth 
from exiting the country, a key way to combat government corruption. 
But there is only so much the U.S. Government can do, and we must work 
closely with partners in both private enterprise and civil society to 
achieve lasting reform.

    Mr. Meijer. Thank you, Mr. Chairman, and thank you for 
holding this hearing today, the second that his subcommittee 
has held on the push factors and migration to the United States 
from the Northern Triangle. I look forward to getting a little 
bit further in depth on the issue of corruption in these 
Northern Triangle countries and getting some insight into what 
opportunities for Congressional action to both improve long-
standing regional challenges and mitigate the current crisis on 
our border.
    In addition to poverty, extremely high rates of crime and 
violence, recent natural disasters, and COVID-19, this area of 
the world is facing some truly daunting challenges. According 
to a global survey of 180 countries conducted by Transparency 
International, El Salvador, Honduras, and Guatemala are among 
the most corrupt countries in the world. Specifically, these 
countries face systemic and entrenched corruption in their 
criminal justice systems, election finance networks, and public 
procurement processes, which are often abused for personal 
financial gain of government officials. This wide-spread 
corruption undermines civil society and makes everything from 
doing business to raising a family incredibly difficult. 
Businesses, families, and communities are constantly fighting 
this uphill battle just to provide for themselves and for their 
loved ones.
    Before coming to Congress I saw communities struggle with 
these kinds of crises and corruption around the world. I spent 
2 years in Afghanistan as a conflict analyst that led disaster 
response operations to help other communities that had been 
impacted by natural disasters. We worked to protect day 
workers, delivering vital assistance to those in need. 
Providing needed international assistance, especially to our 
regional partners, is crucial. But if we aren't thoughtful and 
deliberate in allocating this aid, opting instead to pour large 
sums of untargeted money into struggling countries, we risk, 
and will inevitably fuel even more corruption and have the 
opposite of the impact we intend to achieve.
    I saw this plenty of times in countries like Afghanistan, 
where despite our best efforts, the money that was being spent 
was only further fueling that conflict, dissatisfaction with 
the government, and their overall culture of corruption.
    It is up to us to ensure that this doesn't happen again in 
the Northern Triangle and we learn from what has occurred, 
while endeavoring to make it improved in the decades to come.
    Wide-spread corruption in any country not only takes a 
financial toll, but also undermines the basic roots of the 
civil society and destabilizes everything it touches. As I 
stated in the last hearing, however, this administration has 
compounded the problems we are currently facing by failing to 
dissuade those who seek to come across our borders. As a 
result, and although I do not fault those who seek a better 
life for families as a natural human impulse, we find ourselves 
in a border crisis where too many individuals and families have 
made that choice to enter the United States because they have 
been encouraged by the current administration's rhetoric. There 
are many reasons why people in the Northern Triangle choose to 
migrate, however, and this is why we are looking at both those 
pull and those push factors, which we also explored in detail 
in the last hearing. But it is clear that we need to make sure 
we improve upon the current crisis we see today.
    Earlier this week Vice President Harris did state that 
families should not travel illegally to our Southern Border, 
but at the same time shrugged off a question why she has not 
visited herself. As we know, this is no laughing matter. 
Efforts to address the problems at our border and efforts to 
address the problems in the Northern Triangle are by no means 
mutually exclusive. Acknowledging this is not difficult nor 
political. Vice President Harris herself has recognized that 
the circumstances in these Northern Triangle countries are 
driving individuals to make this perilous journey north and 
that these factors will not be altered overnight.
    Therefore, when we face with such a challenging set of 
circumstances as we are today, we should be willing to work 
together to simultaneously address both the causes and the 
effects. Unfortunately, the effects also cannot be ignored. The 
number of migrants illegally crossing the U.S.-Mexico border 
this fiscal year is already the most since 2006 and there are 
still 4 months left. This is as per preliminary data from 
Customs and Border Protection. The statistics we have seen and 
continue to see are startling. CBP is on track to encounter 
more than 2 million migrants crossing the U.S.-Mexico border or 
more than 4 times the number in fiscal year 2020, 10 percent of 
individuals leaving CBP custody and testing positive in the Rio 
Grande Valley sector for COVID-19. The migrant payments to the 
smuggler networks that are bringing them across averaging 
$4,000. You know, a larcenous sum from individuals who have so 
little and only fueling greater corruption and criminality.
    To address these issues the administration plans to provide 
over $300 million in funding for Northern Triangle countries, 
has proposed a $4 billion aid package to address instability 
and other issues in the region. Additionally, the Vice 
President has announced a new call to action to increase 
economic development in the region in an attempt to create 
greater incentives for the residents of the Northern Triangle 
to stay in their countries and be able to prosper where they 
live.
    Further, the administration announced that it will form a 
Justice Department and Department of Homeland Security task 
force to pursue prosecution and asset recoveries related to 
corruption and to train law enforcement officials.
    I fear, however, that this may not be enough. Without 
addressing the deeply entrenched systemic issues in Guatemala, 
El Salvador, and Honduras, no lasting improvements can be made. 
This means that any funding going to these efforts should have 
rigorous oversight, should be measured against real metrics to 
track progress, and should include close collaboration between 
different government agencies who are engaged throughout the 
region.
    Without these kinds of effective program management 
mechanisms in place, there is little reason to believe that 
more money will lead to more progress and outcomes. This kind 
of long-term engagement will take sustained effort and focused 
attention, something that we in Washington struggle to produce, 
but must endeavor to achieve.
    I am hopeful that we will use this opportunity today to 
engage on specific strategies and potential solutions that 
Congress and the administration can pursue together to address 
these challenges in a responsible and effective way.
    Mr. Chairman, thank you again for holding this hearing and 
I look forward to hearing from our witnesses.
    With that, I yield back.
    [The statement of Ranking Member Meijer follows:]
                Statement of Ranking Member Peter Meijer
    Mr. Chairman, thank you for holding this hearing today--the second 
that this subcommittee has held on push factors and migration to the 
United States. I am looking forward to discussing the issue of 
corruption in the Northern Triangle and hope to gain insight into 
opportunities for Congressional action to both improve long-standing 
regional challenges and mitigate the current crisis on our border.
    In addition to poverty, extremely high rates of crime and violence, 
recent natural disasters, and COVID, this area of the world is facing 
some truly daunting challenges. According to a global survey of 180 
countries conducted by Transparency International, El Salvador, 
Honduras, and Guatemala are among the most corrupt countries in the 
world. Specifically, these countries face systematic and entrenched 
corruption in their criminal justice systems, election finance 
networks, and public procurement processes, which are often abused for 
personal financial gain. This wide-spread corruption undermines civil 
society and makes everything from doing business to raising a family 
incredibly difficult. Businesses, families, and communities are 
constantly fighting an uphill battle to simply provide for themselves 
and their loved ones.
    Before coming to Congress, I saw communities struggle with these 
kinds of crises and corruption around the world. I spent 2 years in 
Afghanistan as a conflict analyst and led disaster response operations 
to help communities that had been impacted by natural disasters. We 
worked to protect aid workers delivering vital assistance to those in 
need. Providing needed international assistance, especially to our 
regional partners, is critical. But if we aren't thoughtful and 
deliberate in allocating this aid, opting instead to pour large sums of 
untargeted money into struggling countries, we will inevitably fuel 
even more corruption and have the opposite impact that we hope to 
achieve. We saw this at times in countries like Afghanistan. It is up 
to us to ensure this doesn't happen again in the Northern Triangle. 
Wide-spread corruption in any country not only takes a financial toll, 
but it undermines the basic roots of a civil society and destabilizes 
everything it touches.
    As I stated in the last hearing, however, this administration has 
compounded the problem by failing to dissuade those who want to 
illegally cross our borders. Although I do not fault those who seek a 
better life for their families, we now find ourselves in a border 
crisis where too many individuals and families have made the choice to 
enter the United States illegally because they have been encouraged and 
misled by this administration. There are many reasons why people in the 
Northern Triangle choose to migrate, and we explored those in detail at 
the last hearing, and so I will not go through all of them again. 
However, it is clear that many actions taken by this administration 
have resulted in the crisis we're seeing today.
    Earlier this week, Vice President Harris did state that families 
should not travel illegally to our Southern Border, but at the same 
time shrugged off a question about why she has not visited the border 
herself. As we all know, this is no laughing matter. Efforts to address 
the problems at our border and efforts to address the problems in the 
Northern Triangle are not mutually exclusive. Acknowledging this should 
not be difficult or political. Vice President Harris has recognized 
herself that the circumstances in the Northern Triangle that are 
driving people to make the perilous journey north will not be altered 
overnight. Therefore, when faced with a set of challenges as complex as 
this, we should all be willing to work together to simultaneously 
address both the causes and the effects.
    Unfortunately, the effects cannot be ignored. In fact, the number 
of migrants illegally crossing the U.S.-Mexico border this fiscal year 
is already the most since 2006--and there are still 4 months left, 
according to preliminary data from Customs and Border Protection (CBP).
    And the statistics we have seen, and continue to see, are truly 
startling and heartbreaking:
   CBP is on track to encounter more than 2 million migrants 
        crossing the U.S.-Mexico border by the end of this fiscal 
        year--more than 4 times the number encountered in fiscal year 
        2020.
   10 percent of individuals leaving CBP custody in the Rio 
        Grande Valley Sector are testing positive for COVID-19.
   And according to Border Patrol agents, migrants are paying 
        smugglers on average $4,000 to reach the Southern Border.
    To address these issues, the administration plans to provide over 
$300 million in funding for Northern Triangle countries and has 
proposed a $4 billion aid package to address instability and other 
issues in the region. Additionally, the Vice President has announced a 
new Call to Action to increase economic development in the region in an 
attempt to create greater incentives for the residents of the Northern 
Triangle to stay in their countries. Further, the administration 
announced that it will form a Justice Department and Department of 
Homeland Security task force to pursue prosecutions and asset 
recoveries relating to corruption and to train law enforcement 
officials.
    I fear, however, that this may not be enough. Without addressing 
the deeply entrenched, systemic issues in Guatemala, El Salvador, and 
Honduras, no lasting improvements can be made. This means that any 
funding going to these efforts should have rigorous oversight; they 
should be measured against real metrics to track progress, and they 
should include closer collaboration between all the different U.S. 
Government agencies engaged in the region. Without these kinds of 
effective program management mechanisms in place, there is little 
reason to believe that more money will lead to more progress on 
outcomes than it has in the past. This kind of long-term engagement 
will take sustained attention and focused effort, something we in 
Washington can struggle to produce but must endeavor to achieve.
    I am hopeful that we will use this opportunity today to engage on 
specific strategies and potential solutions that Congress and the 
administration can pursue together in order to address these challenges 
in a responsible and effective way.
    Mr. Chairman, thank you again for holding this hearing. I look 
forward to hearing from our witnesses.

    Chairman Correa. You are also reminded that the committee 
will operate in accordance to the guidelines laid out by the 
Chairman, Ranking Member in their February 3 colloquy regarding 
remote procedures.
    Without objection, Members not on the subcommittee shall be 
permitted to sit and question the witnesses. Member statements 
may also be submitted for the record.
    [The statement of Chairman Thompson follows:]
                Statement of Chairman Bennie G. Thompson
                             June 11, 2021
    Corruption adversely affects every aspect of society. It limits 
economic opportunities, fosters crime and violence, and erodes public 
trust. Such conditions have forced thousands of families and children 
to flee in search of better, safer lives. Combatting corruption in the 
region--particularly in the Northern Triangle--has long been a 
bipartisan goal. However, President Trump's rhetoric and inaction to 
hold political leaders accountable has made matters worse.
    In the past 2 years, the international-backed organizations 
responsible for investigating corruption in Honduras and Guatemala were 
disbanded. The recent vote by El Salvador's new Congress to remove its 
supreme court judges and attorney general is also concerning since an 
independent judiciary is essential to democracy. I commend the Biden 
administration for recognizing these actions for what they are--a 
threat to our National security.
    Strengthening governance in Central America will not only improve 
the quality of life for the region's residents, but also decrease the 
movement of illicit goods and wealth to the United States. This has 
several positive implications for border security and would allow the 
Department of Homeland Security to focus on other vital missions, such 
as addressing ever-evolving cyber threats. But the new administration 
cannot make progress alone. Building capacity to enhance transparency 
and the rule of law at all levels will be key.
    I applaud Vice President Harris for engaging with political leaders 
about corruption during her visit to Guatemala and Mexico earlier this 
week, and for establishing a Call to Action to encourage American 
businesses and nonprofits to invest in the Northern Triangle. These 
investments can create economic opportunities that offer mutual 
benefits, such as good jobs for residents and new markets for U.S. 
companies. Empowering civil society to hold the public and private 
sectors accountable can also create more just and equitable policies.

    Chairman Correa. Now I would like to welcome our panel of 
witnesses. First we have Ms. Shannon O'Neil. Ms. O'Neil is the 
vice president, deputy director of studies at the Nelson and 
David Rockefeller Senior Fellow for Latin American Studies at 
the Council on Foreign Relations. She is an expert on Latin 
America, global trade, U.S.-Mexico relations, corruption, 
democracy, and immigration.
    Our second witness is Mr. Welby Leaman, senior director for 
global government and multilateral affairs for Walmart. He 
serves as the company's lead for the Americas, that includes 
over 3,000 stores and 230,000 employees throughout Mexico and 
Central America. Mr. Leaman also chairs working groups focused 
on anti-corruption in the region for the American business 
dialog and the U.S. Chambers Association of American Chambers 
of Commerce in Latin America and the Caribbean.
    Our third witness, Ms. Claudia Umana Araujo, president of 
the Salvadorian Foundation for Economic and Social Development 
known as FUSADES, which is a nonprofit dedicated to improving 
all aspects of society in El Salvador. Prior to joining FUSADES 
Ms. Umana Araujo served almost 10 years as the director of 
trade and commercial policy for El Salvador's ministry of 
economy.
    Our final witness, Mr. Matthew Rooney, managing director of 
the Bush Institute-SMU Economic Growth Initiative at the George 
W. Bush Institute. In addition to analyzing the impact of NAFTA 
on economies of the United States, Canada, and Mexico, Mr. 
Rooney's work has focused on building a network of thought 
leaders in Central America committed to promoting economic 
policy reforms.
    Without objection, the witnesses' full statements will be 
inserted into the record.
    Now, I will ask each witness to summarize his or her 
statements for 5 minutes. I will begin with Ms. O'Neil.
    Welcome again.

STATEMENT OF SHANNON O'NEIL, VICE PRESIDENT, DEPUTY DIRECTOR OF 
 STUDIES, NELSON AND DAVID ROCKEFELLER SENIOR FELLOW FOR LATIN 
         AMERICA STUDIES, COUNCIL ON FOREIGN RELATIONS

    Ms. O'Neil. Great. Thank you very much, Chairman Correa, 
thank you Ranking Member Meijer, and thank you Members of the 
subcommittee.
    It is a real honor to be here testifying before you today. 
I am grateful to have this opportunity to discuss U.S. policy 
options to address corruption in Central America.
    Now, corruption in Central America, as we have already 
begun to talk about, it is pervasive, it is insidious, and it 
is systematic. These nations consistently rank at the bottom of 
Transparency International's corruption focused surveys as the 
Ranking Member has already highlighted. Polls reveal--as the 
Chairman has highlighted--polls reveal that significant 
percentages of Guatemalans, of Hondurans, of El Salvadorians, 
are asked for bribes or deal with graft as they go about their 
day-to-day lives.
    This corruption holds these nations back in many ways. Most 
directly there is just less money for basic public services or 
for bigger more ambitious economic development projects that 
could make a difference. The impunity that allows corruption 
also opens spaces for gangs, for criminal organizations, and 
for violence that destroys families, that destroys small 
businesses, and it tears apart communities. The blatant and 
repeated flouting of democratic norms and principles of 
fairness, it leaves so many without hope that things can get 
better at home. So corruption, as much as any other individual 
factor, spurs migration north.
    It is also one of the thorniest problems to address. As the 
money for programs that can lessen poverty or reduce violence, 
they can also fuel rather than diminish corruption, as we began 
to talk about already.
    Yet the pervasiveness of this challenge of corruption 
doesn't mean the United States can give up or should give up on 
Central America. If the United States truly wants to stem 
migration from this region, it will have to play a part in the 
region. So a deep-seated corruption does mean that the United 
States needs to take a more expansive approach to its 
involvement into the nature of the foreign assistance it 
provides to Central America.
    So I would like to propose 3 different categories or 3 
different ways that the United States can address the specific 
root cause of corruption. So the first is that when providing 
aid the United States can go around these somewhat corrupt 
governments. There are many economic development programs, 
violence prevention programs, youth-focused programs that have 
shown real promise in changing the livelihoods in Central 
America, as we talked about in the last hearing, and also 
changing the calculations of would-be migrants. So to make sure 
that the U.S. taxpayer money that goes to these types of 
programs is used most effectively, whenever possible these 
programs should be set up to work directly with NGO's, with 
civil society, with parts of the private sector, or other local 
entitles that will use this money in more transparent ways. 
Often this will not be the public sector.
    The second thing the United States should do is to address 
corruption head-on in Central America by funding programs that 
go after corruption explicitly. So this can mean 
internationally-funded anti-corruption investigatory bodies, as 
have existed in many of these countries before. This can mean 
requiring technical advisors or requiring the creation of 
inspector generals and ministries that receive U.S. funding. 
This means helping these governments, or encouraging, requiring 
these governments, to have this type of oversight.
    Then, third, the United States should use its justice 
system and its legal tools to take on corrupt actors in Central 
America unilaterally. Many of these ill-gotten gains end up 
flowing through the U.S. financial system or they are enjoyed 
on U.S. soil. They buy real estate, they support vacations, or 
they educate children and students here.
    There are tools that the State Department has. One of them 
is what is now called the Engel List. But this is to take visas 
away from those that are found to have trafficked in corruption 
or to sanction these corrupt individuals. The Treasury 
Department also has tools, and one of those that I think should 
be expanded is FinCEN, which should dedicate resources toward 
investigating Central American corruption, not just other types 
of counterterrorism or other types of corrupt and elicit 
financial flows.
    As has been mentioned already, the Department of Justice 
should continue and expand its work to build cases and to 
prosecute abusers and corrupt officials from Central America, 
whether they are using the Foreign Corrupt Practices Act, the 
Kleptocracy Initiative, or other legal tools that they have.
    Things will not get better in Central America without 
tackling this underlying issue of corruption. We all know that 
here. So I thank you for making that the focus of this hearing.
    Thank you.
    [The prepared statement of Ms. O'Neil follows:]
                Prepared Statement of Shannon K. O'Neil
            corruption endemic in central america and mexico
    The 2020 Transparency International Corruption Perceptions Index 
presents a damning picture of the pervasiveness of government graft and 
bribery in Central America's Northern Triangle countries and in Mexico, 
as well as the lack of ability or interest to combat such acts. None of 
these nations make it into the top (better-governed) 100 out of the 180 
surveyed: Honduras ranks 157, Guatemala 149, Mexico 124, and El 
Salvador 104. Citizen polls in these countries complement and bolster 
Transparency International's annual expert survey, substantial 
percentages of residents saying they were asked for bribes, for 
instance when trying to register for basic public services such as 
schooling, medical care, or receiving their national identification 
cards.
    The economic costs of this systemic corruption are significant. The 
IMF estimates corruption captures some 2 percent of Mexico's GDP, while 
other experts put the number even higher.\1\ Studies of Central 
American nations reveal even more elevated economy-wide damages from 
bribes and graft, shaving off 5 percent or more of GDP every year.\2\
---------------------------------------------------------------------------
    \1\ Morales, Yolanda. ``Sobornos Cuestan 2 percent Del PIB Mundial: 
Lagarde.'' El Economista, September 18, 2017. https://
www.eleconomista.com.mx/economia/Sobornos-cuestan-2-del-PIB-mundial-
Lagarde-20170918-0158.html.
    \2\ Cengic, Imelda. ``Report: Central America Is Losing US$13 
Billion to Corruption.'' Organized Crime and Corruption Reporting 
Project, October 31, 2019. https://www.occrp.org/en/daily/11028-report-
central-america-is-losing-us-13-billion-to-corruption.
    Morales Rodas, Sergio. ``La corrupcion le ha costado a Guatemala 
desarrollo, vidas y miles de millones de quetzales.'' Prensa Libre, 
October 25, 2019. https://www.prensalibre.com/guatemala/politica/la-
corrupcion-le-ha-costado-al-desarrollo-vidas-y-miles-de-millones-de-
quetzales/.
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    This corruption imposes direct and heavy costs on citizens in their 
day-to-day lives. With fewer resources to work with, governments are 
less able to provide everything from basic services to more ambitious 
infrastructure and economic development projects. Reduced public 
investment limits business and professional opportunities and slows the 
overall pace of economic growth.
    Corruption does more than just curtail money for public services. 
It enables and perpetuates violence, as weak governance opens spaces 
for organized crime and gangs. These entities prey upon individuals and 
extort businesses. And the public services they often provide pale in 
comparison to citizens' needs, human rights an afterthought.\3\
---------------------------------------------------------------------------
    \3\ Kennedy, Kelli. ``Corruption and Organized Crime in Central 
America's Countries.'' European Strategic Intelligence and Security 
Center, September 2, 2019. http://www.esisc.org/publications/briefings/
corruption-and-organized-crime-in-central-americas-countries.
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    By creating an unjust system of have and have-nots, corruption 
erodes the public trust that makes democracy and good governance 
possible. By limiting economic growth and opportunities, by cementing 
impunity, and by extinguishing any hope that hard work and merit might 
build better futures, it leaves too many without prospects that might 
lead them to stay.
    Corruption in Central America has become pervasive, insidious, and 
systematic. And, as much as any other factor, it spurs migration.
    The scale and size of the challenge doesn't mean the United States 
can or should ignore the problem, much less write off these nations. 
Given the decade-long increase in migration from the Northern Triangle, 
the United States can't afford to limit programs addressing the 
immediate and root causes that lead so many north. What it does mean is 
that the United States should take a more expansive approach to its 
involvement and foreign assistance in Central America.
    This means avoiding potentially corrupt distribution pathways U.S. 
and other international aid flowing into these countries. It means 
funding programs that tackle corruption head on. And it means using our 
own financial, investigatory, and legal tools to disrupt illicit 
financial flows and the use of ill-gotten gains here in the United 
States. The United States should never provide harbor to those stealing 
from their own people.
    Partner with non-governmental organizations, civil society, and 
private businesses in delivering U.S. aid. Evaluations of previous U.S. 
aid efforts show that a range of interventions and programs can change 
the situation on the ground and alter the calculations of would-be 
migrants, tipping the scales against leaving. Those showing promise 
include neighborhood and school-based programs that work to reduce gang 
violence through counseling, tutoring, and community service. Efforts 
to train young people in professional and life skills, and to connect 
them to their communities through local projects, cultural events, and 
economic opportunities have also proven effective in tying them to 
home.
    Programs to help farmers adjust to drought conditions, such as 
introducing irrigation systems or rust-resistant coffee seedlings, can 
improve their prospects and quality of life. Others designed to connect 
them directly to markets or to upgrade the profitability of the crops 
they grow can also ensure a more sustainable future at home. Seed money 
and training for entrepreneurs have succeeded in creating economic 
opportunities, improving people's prospects at home and shifting their 
mindset about moving.
    To ensure that this money gets to the projects detailed and to the 
people who need it, the U.S. Government should bypass less trustworthy 
governments and elites as much as possible. This means working directly 
with civil society, NGO's, and companies to ensure taxpayer dollars go 
to the designated programs. It is important also that the U.S. 
Government stand up and defend these civil society organizations in the 
face of local government criticism and harassment for the transparent 
and accountable work they are doing.
    The U.S. Government should design and fund programs to go directly 
after systemic corruption. Many Central American justice systems and 
government agencies are too weak or too complicit to take on corruption 
themselves. Reformers within these countries need outside support and 
resources if they are ever to gain traction. Again, we have models that 
have proven effective in uncovering and beginning to dismantle powerful 
illicit networks. These include internationally-funded independent 
investigatory bodies.
    For 12 years, the International Commission Against Impunity, or 
CICIG, in Guatemala conducted high-profile investigations into 
corruption, working with the Attorney General's office to prosecute and 
ultimately bring down current and former presidents, high-ranking 
officials, and dismantle multiple corruption rings stretching from 
prisons to the Presidential palace.\4\ CICIG was also integral in 
advising and supporting judicial reforms that have enhanced the legal 
tools--such as plea bargaining, wiretapping, and witness protection 
programs--available to investigators and prosecutors taking on 
organized crime and corruption.
---------------------------------------------------------------------------
    \4\ WOLA. ``Fact Sheet: The CICIG's Legacy in Fighting Corruption 
in Guatemala,'' August 27, 2019. https://www.wola.org/analysis/cicigs-
legacy-fighting-corruption-guatemala/.
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    Similar internationally-funded organizations including the 
International Commission Against Corruption and Impunity, CICIES, in El 
Salvador, and the Mission to Support the Fight against Corruption and 
Impunity in Honduras, MACCIH, made a difference in their years of 
operation before being shut down by their respective governments.
    Their track records in taking on complex cases and in helping 
bolster fragile justice systems means they should be restarted. While 
their successes in revealing corruption at the highest levels of power 
make it hard to imagine a Central American government accepting another 
such commission, the United States could and should push for the 
creation of a regional level investigatory body not dependent on any 
one government's approval. In addition, in exchange for any funding, 
the United States should push Central American governments to accept 
technical advisors in their ministries and create independent 
inspectors general to play watchdog roles.
    Go after the U.S.-bound flows of corrupt money. Much of the money 
illegally siphoned away from Central America and Mexico flows through 
U.S. financial channels. Hundreds of millions of dollars end up in U.S. 
real estate, shell companies, or are spent in the United States on 
travel and education. The United States can do a better job tracing and 
tracking ill-gotten gains from Central America and ensuring that the 
perpetrators find no harbor in the United States.
    To uncover these flows, the U.S. Government should expand the 
resources dedicated to tracking and intercepting illicit corruption-
based networks. Within the U.S. Treasury Department sits the Financial 
Crimes Enforcement Network, FinCen, an entity tasked with combating 
money laundering and other illegal use of the financial system. Today 
its budget is $126 million, supporting a staff of just 300 
investigators. The vast majority of these analysts focus on 
counterterrorism financing, leaving few to work on the Western 
Hemisphere. Given the recognized costs of heightened migration from the 
region to the United States as well as the threat to Americans' day-to-
day lives from drug cartels and associated corruption (in 2019 alone 
over 70,000 Americans died of drug overdoses), this allocation is 
misguided.\5\
---------------------------------------------------------------------------
    \5\ ``Charting a New Path Forward: Report of the Western Hemisphere 
Drug Policy Commission.'' Western Hemisphere Drug Policy Commission, 
December 2020. https://whdpc.org/images/report/
2021%2001.21%20WHDPC%20FINAL%20REPORT.pdf.
---------------------------------------------------------------------------
    The U.S. Congress should increase funding and resources to hire 
dozens of new investigatory agents to focus exclusively on illicit 
flows and corrupting money from within the Western Hemisphere.
    The United States should use its justice system and other 
governmental tools to unilaterally punish perpetrators of corruption. 
Corrupt public and private-sector elites should not be able to travel 
and enjoy the benefits of U.S. life and leisure. Congress should ensure 
that the Biden administration makes full use of the ``Engel List,'' 
denying corrupt actors entry to the United States. Recent sanctions 
against 17 senior officials from Guatemala, Honduras, and El Salvador--
including Salvadoran President Nayib Bukele's chief of staff--are an 
important start. It should be accelerated and expanded in the weeks and 
months to come. This is both important in principle as well as in 
demonstration, telling those who may be tempted to follow a corrupt 
path that they will be unwelcome here. U.S. Department of Justice tools 
and efforts should be leveraged as well, through Foreign Corrupt 
Practices Act, Kleptocracy Asset Recovery Initiative, and other 
mechanisms.
    None of this will be quick, easy, or linear. As our own history has 
shown us, struggles against endemic corruption are slow at best, taking 
a generation or more. U.S. efforts in Central America will undoubtedly 
hit setbacks, face challenges, and at times fail to change things on 
the ground. But that doesn't mean it isn't worth starting or trying. 
And if the United States truly wants to address the chronic factors 
spurring decades of migration from its southern neighbors, it can't 
afford to ignore this fundamental root cause.

    Chairman Correa. Our second witness, Mr. Leaman, to 
summarize your statements in 5 minutes.
    Welcome.

     STATEMENT OF J. WELBY LEAMAN, SENIOR DIRECTOR, GLOBAL 
        GOVERNMENT & MULTILATERAL AFFAIRS, WALMART, INC.

    Mr. Leaman. Thank you, Chairman, and Ranking Member, and 
each of the subcommittee Members for your leadership in this 
central challenge.
    Your subcommittee hearing on May 6 was outstanding in 
highlighting that it is really corruption and lack of economic 
opportunity that are the 2 biggest root causes of why way too 
many people in Central America can see hope for a better life 
only by leaving home.
    So here is my main point, corruption and lack of economic 
opportunity are not 2 separate challenges that can be addressed 
on separate tracks. They are 2 sides of the same coin. U.S. 
business can't adequately expand economic opportunity to those 
who most need it in Central America without better rule of law 
and the private sector is an irreplaceable partner in getting 
rule of law right.
    So here is the big opportunity that I would like to propose 
for your continued leadership and we are prepared to partner 
with you on it. Let us get the U.S. Government and the U.S. 
private sector to go big on a model of anti-corruption that is 
mostly missing or minor in past anti-corruption efforts. We 
have given it a name. The model is digital tools for rule of 
law and economic recovery because it targets both root causes 
where they intersect.
    So here is the opportunity, here is the model. It has 3 
characteristics targeting precisely where we think the anti-
corruption gears keep slipping in Central America, because a 
lot has been tried and little has been accomplished in the 
long-term.
    The 3 characteristics: No. 1, it has to be a cross-sectoral 
partnership giving the private sector an anti-corruption role 
that goes well beyond compliance alone. No. 2, it has to go 
upstream to the source of corruption, which is in key 
regulatory systems. No. 3, it needs to bring the best in class 
that we have, digital transparency tools, because the COVID era 
has shown us that these are both more possible and more urgent 
to accelerate than either the public or private sector had 
previously recognized.
    So let me just look at those very briefly. First, why 
collaborate with the private sector when in parts of Central 
America the private sector is so rife with informality and poor 
compliance and therefore distrusted? Well, first, it is because 
the expertise in order to have a right relationship between 2 
sectors has to come from those 2 sectors. Second, the 
incentives for those in both sectors to do the right thing when 
they don't want to needs to come in part from the benefits that 
they get by engaging with those who are seeking to do the right 
thing and are doing it at best-in-class levels.
    So that means that, for example, the goal is to maximize 
the ability of U.S. businesses to encourage Central American 
businesses to formalize and to improve their standards in order 
to be able to be integrated into our supply chains. That is one 
example.
    Second, what does it mean to go upstream? So the basic idea 
is that so much anti-corruption work is necessarily downstream 
with actors in the justice system, but it leaves out the fact 
that most of this comes--most of this corruption comes from 4 
regulatory systems that are critical to the success of U.S. 
business to be able to expand economic opportunity to 
underserved communities and integrate with those who are least 
included. We have to fix rule of law there first. So that means 
go big on regulatory systems and getting the rule of law right 
there. What are those regulatory system? Tax, customs, 
permitting, and public procurement. If you can fix those, just 
think of the ways in which U.S. business can expand economic 
opportunity through supply chains and investment in ways that 
will increase the incentives and therefore create a virtuous 
cycle that those that didn't really want to get with the new 
standards start doing so, because it benefits them.
    Digital tools are key. So imagine, for example, using the 
Mexican best practice, a mandatory electronic invoice. If we 
know that our suppliers or potential suppliers, including 
MSMEs, need to pay their taxes and will pay their taxes because 
they know that the tax authority gets a copy of the invoice 
electronically, then we are able to make a commitment to going 
much bigger in integration. Then that creates the virtuous 
cycle.
    The same thing happens in customs with single windows. We 
can get more into the TFA single windows. Also in licensing and 
permitting. We have huge investment plans potentially in 
underserved communities, but if those underserved communities 
happened to be the very ones that struggle to provide for non-
corrupt licensing and permitting systems, then U.S. business 
pulls away. Then we are in the vicious cycle instead of 
virtuous cycle.
    So let me just close by saying we need to go big on this. 
This is the moment, because COVID has shown that it is in 
everybody's interest, even those that don't really believe in 
compliance, to support digital for at least resiliency 
purposes. So let us take advantage of that. Go big on digital 
transparency for rule of law and for economic recovery. We need 
to do it in cross-sectoral partnership with you.
    [The prepared statement of Mr. Leaman follows:]
                 Prepared Statement of J. Welby Leaman
    Your subcommittee hearing on May 6 was outstanding in highlighting 
that corruption and lack of economic opportunity are the 2 biggest root 
causes of why way too many people in Central America can see hope for a 
better life only by leaving home.
    Corruption and lack of economic opportunity are not 2 separate 
challenges that can be addressed on separate tracks; they are 2 sides 
of the same coin.
   U.S. business cannot adequately expand economic opportunity 
        to those who most need it in Central America without better 
        rule-of-law, and
   The private sector is an irreplaceable partner in getting 
        rule-of-law right.
    To illustrate why and what we can do about it together, I want to 
show you on 1 slide an ambitious but very practical anti-corruption 
agenda that we have developed in 2 hemisphere-wide business 
associations--the Association of AmChams of Latin America, and the 
Americas Business Dialogue.
    We call this project Digital Tools for Rule of Law & Economic 
Recovery because it is a model for how to make more integrated progress 
in Central America on both root causes simultaneously, where they 
intersect.
    It has 3 key characteristics, which target 3 of the main reasons 
that the anticorruption gears keep slipping in Central America:
   It is a cross-sectoral partnership, giving the private 
        sector an anticorruption role that goes beyond compliance 
        alone;
   It goes upstream to the source of corruption, within key 
        regulatory systems; and
   It applies powerful digital transparency tools that the 
        COVID era has shown us are both more possible and more urgent 
        to accelerate than either sector had previously recognized.
    On that first point, why is collaboration with the private sector 
so important--especially when, in parts of Central America's private 
sector, informality and poor compliance are good reasons for distrust?
   First, corruption is a relationship gone bad between 2 
        sectors, so the expertise to redesign it right is held by both 
        those sectors.
   Second, one of the strongest incentives for businesses in 
        Central America to raise their standards is so they can have a 
        shot at being a supplier to U.S. businesses. But to harness 
        that requires working with U.S. business on systemic reforms 
        that build the trust they need to begin looking for more local 
        suppliers.
    That leads to the second row of the slide: Much anticorruption work 
focuses on downstream actors within the justice system, but we also 
need to go upstream more often, to the source of corruption, 
reengineering incentives in the 4 regulatory systems where weak rule of 
law most undermines businesses' ability to expand opportunity and hope 
to those who most need it.
    Those systems are tax, customs, permitting, and public procurement. 
Consider them twofers. The 2 biggest root causes intersect here:
   Take tax: If local businesses are high risks for not paying 
        their taxes, U.S. businesses will avoid on-boarding local 
        suppliers. This hits hardest those who most need hope: Small 
        suppliers, especially in regions of high informality.
   Or take permitting: U.S. businesses' best-laid investment 
        plans for underserved communities may not get to break ground 
        if permits are unpredictable.
    Digital transparency tools can get these incentives right.
   In tax, mandatory electronic invoicing incentivizes 
        compliance, since the tax authority sees the VAT paid on each 
        invoice. To ensure inclusion, we can help make these platforms 
        mobile data-friendly and integrate on-boarding tutorials for 
        small suppliers.
   In customs, much of the IT cost of single windows is already 
        covered, thanks to the WTO Trade Facilitation Agreement. Into 
        these platforms, we can now add rule-of-law enhancements, like 
        anonymous-tip buttons for any portal user to report corruption.
    Let me close with why this Digital Tools agenda is so promising 
right now:
   COVID-paralyzed paper- and person-based regulatory 
        processes, which cost Central America a lot of shovel-ready 
        private investment. But COVID also sped up digital adoption by 
        a decade in many sectors.
   As a result, we know we can accelerate transparency through 
        e-government much more quickly than previously thought. Even 
        those not committed to transparency will recognize the reforms 
        as at least critical to resilient growth, so resistance should 
        be lower than usual.
    The U.S. Government's commitment to addressing root causes of 
Central American emigration is an opportunity to jump start this 
upstream approach, using digital tools to improve both rule of law and 
economic opportunity. To get the details right requires cross-sectoral 
collaboration. You can count on us.
  APPENDIX A: DIGITAL TOOLS FOR RULE OF LAW & RECOVERY (DT4RR): A KEY 
 POLICY RESPONSE TO ADDRESS ROOT CAUSES OF MIGRATION CHALLENGES IN THE 
                           WESTERN HEMISPHERE
   Summary of DT4RR
   Relevance for U.S. Policymakers
   Relevance for Central America
   Beneficiaries
   How Incentives Can Work in in a Multi-Stakeholder Model of 
        Rule of Law
   The ``How''--The Co-Creation Process for Implementing DT4RR
   Broader Support for This Model
                            summary of dt4rr
    Weak rule of law perpetuates inequality, stifles development, and 
suppresses investment in the Western Hemisphere, driving joblessness 
and emigration. Past capacity-building initiatives have not met the 
scale of the challenge. Therefore, as our economies begin to emerge 
from the COVID-19 pandemic and economic crisis, government 
digitalization should be prioritized to help us to ``build back 
better'', ensuring the transparency and resilience of regulatory 
processes in an environment where remote and on-line work will persist.
    Digital tools are efficient and scalable solutions to address the 
root causes of corruption and to unlock inclusive and sustainable 
economic recovery and growth. Digital tools improve transparency and 
reduce opportunities for corruption, while ensuring more predictable 
government services and the resilience of regulatory processes given 
the persistence of digitalization, accelerated during the pandemic. The 
World Bank has noted that economies with cumbersome administrative 
procedures are associated with fewer legally-registered firms and a 
smaller tax base compared to economies with more efficient regulations, 
providing a fiscal incentive for reform.
    Implementing digital tools will also benefit workers across the 
Western Hemisphere, where corruption and economic pain are at the root 
of migration challenges. A collaborative and practical agenda is now 
needed to bring stakeholders together and shift cultural norms toward a 
new model of Rule of Law.
    Walmart is specially equipped to take on a partnership role, given 
our long history of investment in the region. As a leader in retail in 
Mexico and Central America (operating 3,400+ units), and a presence in 
vulnerable communities across the region, Walmart is well aware of the 
challenges faced by policy makers, businesses, and the public with 
regards to rule of law.
    The ``Digital Tools for Rule of Law & Recovery'' (DT4RR) agenda 
proposes working with governments, private sector, multilateral 
organizations, and civil society in the Americas to jointly plan, fund, 
and implement the introduction of key digital tools into government to 
enhance regulatory systems. The objective is to drive forward digital 
transparency and efficiency of enforcement through IT platforms, some 
of which already exist thanks to the WTO Trade Facilitation Agreement. 
Single windows have been established in some governments; now we need 
to work together to build-out additional functions into those single 
windows. This can be accomplished by ensuring digital certification for 
permitting processes, the inclusion of Micro, Small, and Medium-sized 
Enterprises (MSMEs) in supply chains.
    The top priorities are 4 key regulatory systems:
   Tax Administration
   Customs Administration
   Licensing & Permitting
   Public Sector Procurement.
    These 4 priorities were identified by the Association of American 
Chambers of Commerce in Latin America and the Caribbean (AACCLA) Rule 
of Law Task Force as the areas that both: (1) Have historically posed 
rule of law problems and (2) have broad relevance to the U.S. private 
sector's ability to increase investment in underserved Central American 
communities and integrate small and underrepresented Central American 
suppliers into U.S. companies' supply chains. Addressing rule of law 
weakness in these regulatory contexts, on both sides of the regulatory 
relationship, can drive simultaneous improvement on both of the top 
root causes of hopelessness in Central America: Corruption and lack of 
economic opportunity.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    For purposes of these comments, we will illustrate the model by 
discussing in detail 2 of these regulatory verticals: Tax 
administration and the granting of licenses and permits.
    (1) Tax Administration.--The DT4RR agenda entails tax system 
reforms that advance electronic invoicing systems in order to 
incentivize tax compliance. For governments, this enables increased tax 
collection, while for private sector, this promotes formalization and 
integration of MSMEs and others into global value chains. Specifically, 
DT4RR reforms should advance mandatory electronic invoicing, to 
maximize transparency; ensure VAT withholding within e-invoice systems; 
train MSMEs on compliance that ``speaks the language of MSMEs'' and 
highlights success stories to show the benefits of compliance; 
facilitate of digital signatures; and allow for on-line querying of tax 
authorities' blacklists.
    In Latin America, Mexico has experience with mandatory e-invoicing, 
and several best practices that can be adopted in other countries. 
Elsewhere, Walmart is working with USAID to provide training to 
suppliers on e-invoicing and docking digitally into tax compliance 
systems. All of these e-taxation measures can fortify trust among 
stakeholders, revolutionizing relationships in the supply chain and 
advancing economic inclusion.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    (2) Licensing & Permitting.--Over-reliance on paper-based and in-
person regulatory processes creates backlogs in license and permit 
approvals, generating opportunities for corruption. Digital licensing 
can reduce approval backlogs and corruption risk, while also 
stimulating the economy and increasing tax receipts. Much of private-
sector investment requires licenses and permits. Notably, the permit-
dependent construction sector represents 7 percent of world-wide 
employment, and it is estimated that for every 10 jobs directly related 
to a construction project, 8 jobs may be created in the local economy. 
Nevertheless, according to the World Bank, by May 2020 61 percent of 
the 190 economies that it tracks were no longer facilitating permit 
applications. In Latin America and the Caribbean, over 80 percent of 
processes were on lockdown.
    Evidence of the benefits or reform in licensing and permitting 
includes a 2019 study which examined the performance of an electronic 
system for business licensing and land usage in Guadalajara, and found 
that bribe requests by municipal agents fell by 74 percent after its 
introduction.
    The DT4RR agenda would introduce a set of digital best practices 
for licensing & permitting to reduce approval backlogs and corruption 
risk. Reforms should start with the certification of government 
agencies and public servants in best practices, namely: Placing rules 
on-line, allowing for on-line payment and renewal, facilitating single 
windows, disclosing required mitigation on-line, and training public 
servants. Such a certification is currently in development in 
collaboration with the Americas Business Dialogue and the Organization 
of American States.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                    relevance for u.s. policy makers
    This initiative addresses U.S. priorities vis-a-vis the Americas 
region and the world. Rule of law projects will advance inclusive 
economic development and help to stem economic migration (particularly 
from the Northern Triangle), while also supporting U.S. workers and 
businesses, who face an uneven competitive playing field and 
challenging investment climate due to high levels of corruption.
    In February President Biden introduced a $4 billion plan to address 
the root causes of migration from Central America, and has engaged 
Mexico to support this effort. On March 1, the White House released a 
U.S.-Mexico Joint Declaration in which President Biden and Mexican 
President Andres Manuel Lopez Obrador ``agreed to collaborate on a 
joint effort to address the root causes of regional migration'' and to 
this end expressed support for policies that ``promote equitable and 
sustainable economic development'' and ``combat corruption.'' During 
their April 7 call and June 8 meeting, Vice-President Kamala Harris and 
President Lopez Obrador reaffirmed the need for collaboration on 
addressing the root causes of migration from the Northern Triangle, 
``including poverty, violence, and lack of economic opportunity.''
    In May, the White House released launched a Call to Action to the 
Private Sector to Deepen Investment in the Northern Triangle. The Call 
to Action is an initiative for businesses and social enterprises to 
make new, significant commitments to help sustainably address the root 
causes of migration by promoting economic opportunity in the Northern 
Triangle region. Key activities to be advanced under this initiative 
include a ``Reform Agenda'': ``Commitments to support greater 
transparency, predictability, and stability in the business enabling 
environment by facilitating regional government efforts to adopt 
international best practices in licensing, permitting, procurement, 
regulation, and taxation.'' Our work is perfectly poised to act on 
these objectives.
    In addition to its impact on rule of law, the DT4RR agenda yields 
benefits including:
   Stimulating the economy and increasing tax receipts. The 
        World Bank has noted that economies with cumbersome 
        administrative procedures are associated with fewer legally 
        registered firms and a smaller tax base compared to economies 
        with more efficient regulations.
   Digitalization can increase Government uptake of internet-
        based services, which will in turn upskill public servants and 
        introduce the wider public to digital platforms.
                     relevance for central america
    COVID-19 has exacerbated already severe economic pain for families 
across the Americas, a root cause of the current waves of emigration. 
Efforts to advance an inclusive economic recovery in the region will 
run up against the same persistent challenges that existed pre-
pandemic, unless the rule of law challenges stifling the economy are 
addressed.
    Furthermore, governments in the LAC region want more of their 
domestic businesses, especially MSMEs, to be incorporated into wider 
supply chains, both domestically and globally. This integration is a 
valuable step toward formalization and social inclusion for 
populations. A key obstacle to building resilient supply chains in the 
region is a pervasive lack of trust--both between government and 
business, as well as between large companies and potential suppliers 
(many of which are MSMEs that have not yet entered the formal sector). 
Walmart's experiences as a long-term investor in the region have shown 
that above all, the key roadblocks are weak rule of law and high 
informality. These 2 issues create legal and reputational risks for the 
private sector, impeding the expansion of sourcing relationships in the 
region. The measures proposed in the DT4RR agenda, tackling tax, 
licensing & permitting, customs, and procurement, are at the root of 
much of the distrust that exists among stakeholders.
                             beneficiaries
    Subnational, national, and regional government agencies in Mexico 
and Central America, specifically those tasked with regulating tax, 
customs, licensing and permitting, and public procurement. The specific 
agencies, and the nature of their engagement, will depend on the 
specific needs identified when stakeholders convene to co-create 
programs.
  how incentives can work in a multi-stakeholder model of rule of law
    As discussed above, because DT4RR is a cross-sectoral partnership, 
it has the potential to drive practical improvements in rule of law by 
re-engineering the informal cultural norms that too often govern the 
relationship between the sectors in Central America. As Douglass 
North's Nobel Prize-winning economic development research demonstrated, 
institutional strengthening requires moving 3 levers: Formal legal 
norms, informal cultural norms, and enforcement practices. All 3 are 
necessary focuses in their own right, since none can adequately shape 
the other 2. Informal cultural norms are responsive to both positive 
and negative incentives, but it is essential to identify each 
stakeholder that is necessary for the success of the reform and then 
ensure that incentives are strong for each one.
    For DT4RR, critically important stakeholders include private 
individuals and businesses who interact with the 4 targeted regulatory 
systems; Central American governments' political leadership, which must 
invest the political will to commit to the digitalization reforms; 
public servants within Central American government agencies, who must 
perceive a benefit to implementing the reforms; and multilateral and 
international financial and technical assistance partners, such as the 
Inter-American Development Bank.
   focusing specifically on the public and private-sector incentives:
    Incentives for Private Sector to Partner on Rule of Law.--The 
Association of American Chambers of Commerce in Latin America and the 
Caribbean (AACCLA) has embraced DT4RR as a top-priority rule of law 
project, and specific AmChams in Central America support it strongly. 
This reflects both their high standard of commitment to rule of law and 
the benefits that the project provides, including a more predictable 
and transparent regulatory climate, as well as reduced compliance risks 
within supply chains and broader business ecosystems. As a result, they 
will be able to accelerate investment to underserved communities and 
integrate more small businesses and underrepresented suppliers into 
their supply chains. In turn, this improves incentives for other 
businesses in Central America to increase their commitment to rule of 
law, so that they are able to qualify for the benefits of integration 
into larger companies' supply chains. This begins to build a virtuous 
cycle that changes informal cultural norms, as other businesses in 
Central America see many other businesses participating in a cross-
sectoral partnership that advances rule of law. If done right, it will 
give rise to additional partnerships following a similar model.
    Incentives for Central American Governments to Commit to 
Digitalization Reforms.--We have found Central American governments to 
be very responsive to the fact that DT4RR would advance their goals of 
attracting investment and promoting supply chain integration, by 
addressing the related rule of law barriers. This is very motivating to 
the best political leaders. Availability of foreign assistance, both 
financial and technical, will also increase governments' incentives.
    Incentives for Public Servants to Implement the Reforms.--It is 
useful to recognize public servants as a unique set of stakeholders who 
have not only institutional but also individual incentives to implement 
the rule-of-law reforms that comprise DT4RR. These incentives include 
the personal and professional development opportunities that DT4RR 
provides through digital skills and training.
    We have also incorporated into the DT4RR design lessons learned 
from the success of the LEED certification for buildings and 
professionals. Because LEED-certified buildings can be designed only by 
LEED-certified architects, there is a virtuous cycle of incentives in 
which architects perceive value in getting their certification and, 
once they have it, have an incentive to propose LEED buildings. In like 
manner, the Americas Business Dialogue, in coordination with the 
Organization of American States, are working to roll out a 
certification in digital licensing and permitting best practices that 
can be earned both by government agencies and by individual public 
servants. Because agency certification will require trained and 
certified public servants, this certification promises to generate a 
virtuous cycle of incentives similar to in the LEED context.
      the ``how''--the co-creation process for implementing dt4rr
    There is a lot of work already under way to answer these questions, 
but most of the proposed solutions are highly stove-piped. They put 
business in one corner, and civil society and government in the other, 
when in fact all sectors should be actively co-creating rule of law 
solutions to our persistent challenges. That is how we will be able to 
bring more MSMEs into the supply chain and support more underserved 
communities. We propose the following steps to facilitate the co-
creation of projects aligned with DT4RR, in partnership with 
stakeholders across sectors.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                     broader support for this model
    Examples of broader support for the measures called for here 
include the following:
   In March 2021, President Biden and President Lopez Obrador 
        issued a joint U.S.-Mexico declaration which identified the 
        need for cross-sectoral partnership to tackle inclusive 
        economic opportunity and rule of law, both root causes of 
        migration challenges.
   In 2018 Heads of State of the Western Hemisphere included in 
        their joint declaration a call to simplify licensing and 
        permitting via digital and other tools.
   In 2020 the G20 Leaders endorsed a set of principles for 
        promoting public-sector integrity which included a call for 
        digital public services.
   G20 Labour & Employment Ministers included in its 
        declaration a commitment to ``Enhancing digitalization of work-
        related processes, such as licensing and permitting, to promote 
        safe and healthy working environments and speed the rebuilding 
        of our economies.''
   In 2018, President Trump and the other Heads of State of the 
        Western Hemisphere included in their joint declaration a call 
        for simplification of licensing and permitting via digital and 
        other tools, to strengthen both competitiveness and 
        anticorruption.
    This robust support already in place indicates that a strong U.S. 
Government and U.S. private sector commitment to this model will very 
likely be met with willingness on the part of some Central American 
governments and many international donors to move forward with this 
project.
    The below list contains a broader set of high-level instances of 
support for the measures called for in the DT4RR agenda.
   international support for digital tools for rule of law & recovery
B20 Recommendations of the Integrity & Compliance Task Force (2021; To 
        Be Published)
    Recommendation 1.1, ``The G20 should encourage investments in 
adequate training and selection of public officials engaged in 
procurement, licensing and permitting, and increase technical and 
managerial capacity to effectively define tenders in terms of project 
requirements, scoring models and participation criteria.''
B20 Recommendations of the Employment & Education Task Force (2021; To 
        Be Published)
    Recommendation 2.1, `` . . . The G20 should reduce administrative 
and legislative barriers that encumber the ability of businesses to 
establish, operate and grow; including investments in digital 
government tools and processes.''
B20 Recommendations of the Digital Transformation Task Force (2021; To 
        Be Published)
    Recommendation No. 4, ``Foster Governments' and companies' 
responsible development and deployment of digital technologies, by 
leveraging public and private cooperation in R&D, promoting investments 
and effective use cases sharing.''
U.S.-Mexico Joint Declaration (3/1/2021) [LINK]
    ``Both leaders . . . agreed to collaborate on a joint effort to 
address the root causes of regional migration, to improve migration 
management, and to develop legal pathways for migration . . . [and] 
directed the Secretariat of Foreign Relations and the Department of 
State to engage with the governments of neighboring countries, civil 
society, and private sectors through policies that promote equitable 
and sustainable economic development, combat corruption, and improve 
law enforcement cooperation.''
G20 High-Level Principles for Promoting Public Sector Integrity through 
        the Use of Information and Communications Technology (ICT) (10/
        22/2020) [LINK]
            ** These principles were endorsed in the G20 2020 Leaders' 
                    Declaration **
    Principle No. 1, Provide digital public services to improve 
efficiency and reduce opportunities for corruption: ``G20 countries 
should introduce or enhance the use of such technologies, where 
appropriate, to provide government services, such as . . . licensing, 
etc.''
G20 Labour & Employment Ministerial Declaration 2020 (9/10/2020) [LINK]
    Page 9, ``As our labor markets begin to recover, we will continue 
to take actions . . . these actions may include . . . Enhancing 
digitalization of work-related processes, such as licensing and 
permitting, to promote safe and healthy working environments and speed 
the rebuilding of our economies.''
G20 Digital Economy Ministerial Declaration (7/22/2020) [LINK]
    As our societies and the global economy digitalize, there are ever 
greater opportunities to advance standards of living . . . 
Digitalization is also increasing the importance of boosting job 
opportunities, increasing market access for Micro, Small, and Medium 
Enterprises (MSMEs) . . . We continue to support international 
cooperation and multi-stakeholder engagement to design and implement 
evidence-based digital policies to address these challenges.
B20 Special Report to the G20 on Recommendations for COVID-19 Recovery 
        (8/2020) [LINK]
    Recommendation 2.B--Minimize unemployment & increase employability, 
``Deploy digitalized government services to support social distancing 
and public health efforts without harming employment, such as licensing 
and permitting, so shopkeepers, entrepreneurs, and construction crews 
can maintain employment and quickly restart and rebuild economies.''
    Recommendation 6--Digitalize responsibly and inclusively, 
``Accelerate digital government efforts, including vital public 
services, [such as] digitized licensing and permitting, based on the 
principles of right to privacy and security of data for all users, and 
reduce opportunities for corruption while strengthening transparency 
and integrity''.
B20 Recommendations of the Digitization Task Force (10/2020) [LINK]
    Policy Action 4.1, ``The G20 should overcome the digital skills 
divide by supporting high quality educational programs for all, 
fostering access to the most affordable technology for all, promoting 
partnerships to create safe digital environments, and accelerating the 
digitization of government services including licensing, permitting, 
tax collection, and procurement''.
B20 Recommendations of the Integrity and Compliance Task Force (10/
        2020) [LINK]
    Introduction: `` . . . Existing technologies, such as digitized 
government services in licensing, permitting, procurement and taxation 
can help to reduce corruption during and after the pandemic . . . 
(emphasis added).
    Recommendation 2, ``The Saudi Arabia B20 Presidency aims to promote 
public and private sector integrity through the application of 
information and communication technologies in order to reduce 
opportunities for corruption, enhance effectiveness and efficiency in 
the public and private sector, strengthen transparency and increase 
public trust. Technologies that support the digitization of government 
services, including licensing, permitting, tax collection and 
procurement serve a crucial role''.
B20 Recommendations of the Future of Work & Education Task Force (10/
        2020) [LINK]
    Policy Action 1.3, ``Review, reduce and simplify tax, bureaucratic 
and other structures to encourage formal sector participation, 
including the digitization of relevant public services (e.g. licensing 
and permitting).''
Summit of the Americas Heads of State Joint Declaration (4/14/2018) 
        [LINK]
    Paragraph 32, ``[We commit to] Fostering coordinated, transparent 
practices in the issuance of government permits inter alia by the use 
of one-stop shops, including in the area of construction, as a measure 
to prevent corruption, promote competitiveness, and expedite the 
corresponding permits''.
Americas Business Dialogue/Inter-American Development Bank COVID-19 
        Recommendations (4/27/2020) [LINK]
    Paragraph B.8, ``Governments should accelerate their digital 
transformation to ensure that public administration may continue and to 
enable remote working and business operations, by removing reliance on 
paper and promoting the use of digital technologies for all 
transactions and procedures . . . Regulatory systems with a rapid 
investment facilitation impact, such as licensing and permitting, 
should be especially prioritized during the crisis''.
IMF Managing Director's Remarks to the U.S. Chamber of Commerce (6/2/
        2020) [LINK]
    ``We are going to see a rapid modernization in how we operate . . . 
and we will also see a tremendous expansion of e-commerce, e-learning, 
e-transfers, e-payments, and e-governance. E-governance is particularly 
important, and at the IMF we would like to see more transparency and 
accountability in governance as well as in the way the economy 
functions.''
APPENDIX B: The Role of the U.S. Chamber of Commerce in Advancing Rule 
                                 of Law
    Few factors rival the rule of law as a foundational criterion to 
predict a company's ability to do business profitably and to maintain a 
sustainable business model over time. The U.S. Chamber of Commerce's 
member companies have consistently identified weak rule of law as the 
No. 1 challenge to doing business in Central America, from criminal 
gangs disrupting distribution routes, to delays in trade and investment 
plans as a result of corruption and complex paper-based bureaucracies.
    The U.S. Chamber of Commerce's Coalition for the Rule of Law in 
Global Markets has been at the forefront of promoting adherence to rule 
of law and a culture of integrity as key to governments' ability to 
increase investment, participate in global trade, and drive sustainable 
economic growth. We have identified 5 elements that level the playing 
field for American companies and determine the ability of any business 
to make good operating and investment decisions. These elements are 
Transparency, Predictability, Stability, Accountability, and Due 
Process. The forthcoming fifth edition of the Global Business Rule of 
Law Dashboard (2021) demonstrates that the rule of law, as evaluated 
against these 5 elements, remains a significant challenge in the 
region, with all but Costa Rica (ranked 44 on the dashboard) and Panama 
(ranked 69) scoring below 50 percent; El Salvador (88), Nicaragua (98), 
Guatemala (102), Honduras (100) all were in the lowest quartile of the 
report, which profiled 113 markets.
    Accordingly, a focus on the rule of law should be viewed as the 
keystone of success for any new Central America strategy. The U.S. 
Government should reframe their work to better incorporate business 
considerations into the assistance and approaches deployed to combat 
corruption and promote the rule of law, specifically targeting factors 
that prevent companies from investing and/or expanding their investment 
in the Northern Triangle countries of Central America and the wider 
region.
    Strengthening the rule of law is also a priority for the Chamber's 
Association of American Chambers of Commerce in Latin America and the 
Caribbean (AACCLA), which launched a rule of law task force in 2019. 
Companies and the American Chambers of Commerce have identified the 
region's potential to make meaningful progress in improving the rule of 
law and combatting commercially-relevant corruption by taking practical 
steps to implement digitalization in 4 key areas of public-private 
sector interaction: Taxation, customs administration, licensing and 
permitting, and Government procurement. Digitalization of these 
functions would require significant resources, but would create a more 
efficient and accountable business environment, allowing foreign (and 
domestic) companies and investors to comply with local and 
international laws and regulations, while reducing corruption.
    APPENDIX C: 2018-2021 RECOMMENDATIONS OF THE AMERICAS BUSINESS 
                   DIALOGUE: TRANSPARENCY & INTEGRITY
    The Americas Business Dialogue (ABD) is a private sector-led 
initiative facilitated by the Inter-American Development Bank (IDB) 
aimed at fostering a high-level public-private policy dialog between 
business and government leaders of the Americas on the region's 
priorities, challenges, and opportunities for economic growth and 
development. In 2018, the ABD developed a set of policy recommendations 
which were submitted to the Heads of State of the Western Hemisphere at 
the Summit of the Americas (SoA) and published as Action for Growth. 
Recommendations No. 1-8 focus on Transparency & Integrity. 
Recommendation No. 8 directly aligns with DT4RR, and offers a role for 
the private sector to supporting implementation of paragraph 32 of the 
Lima Declaration, to which Western Hemisphere heads of state committed 
at the 2018 SoA (see Appendix A, Broader Support for This Model). With 
President Biden hosting the next Summit, we have an opportunity to 
spotlight cross-sectoral progress on digitally transparent licensing 
and permitting, as well as on other ABD recommendations, including No. 
7 below.
    Review the recommendations below and at https://tinyurl.com/abdrec.
    RECOMMENDATION NO. 1: Address ultimate beneficial owners in 
accordance with international standards.
    RECOMMENDATION NO. 2: Strengthen and modernize public procurement 
systems to ensure integrity, transparency, and competition along the 
different stages of the procurement process, as well as throughout the 
entire life cycle of the contractual relationship.
    RECOMMENDATION NO. 3: Implement mechanisms to ensure legitimate, 
transparent, and technically sound regulations, and adopt 
administrative simplification plans.
    RECOMMENDATION NO. 4: Strengthen the mechanisms of open government, 
including transparency, citizen participation and collaboration, and 
public integrity systems as a policy measure to increase trust in 
government and democracy.
    RECOMMENDATION NO. 5: Encourage the private sector to adopt 
comprehensive integrity mechanisms, including codes of corporate 
conduct, accompanied by effective implementation and periodic review of 
compliance plans.
    RECOMMENDATION NO. 6: Disclose corporate expenditures to the public 
sector, using leading practices in expenditure disclosure, such as 
those implemented by the extractive sector.
    RECOMMENDATION NO. 7: Develop a mechanism for private sector and 
inter-government coordination on regulatory cooperation projects that 
helps economies implement a shared set of Good Regulatory Practices 
(GRPs), to develop competitive economies and support participatory and 
transparent democracies.
    RECOMMENDATION NO. 8: Develop a certification in best practices for 
issuance of permits and make it available via a Massively Open On-line 
Course (MOOC) to any government and current or prospective public 
servant who wishes to qualify, coordinated by a public-private 
multilateral partnership.

    Chairman Correa. Thank you very much for your testimony, 
Mr. Leaman.
    Now I will call on our third witness. I would like to 
recognize Ms. Umana Araujo to summarize her statements as well 
in 5 minutes or so.
    Welcome.

 STATEMENT OF CLAUDIA UMANA ARAUJO, PRESIDENT, THE SALVADORAN 
    FOUNDATION FOR ECONOMIC AND SOCIAL DEVELOPMENT (FUSADES)

    Ms. Umana Araujo. Thank you, Mr. Chairman and Ranking 
Member for the opportunity to testify before this subcommittee.
    The aspect that I would like to convey is that Central 
American civil society is and will play an important role in 
promoting a long-term vision and the structural changes that 
need to be made to address the climate conditions that create 
the push factors.
    Today we need to stabilize and maintain our young 
democracies. On this front public corruption and weak rule of 
law are the most persistent and long-standing challenges for 
the strengthening of democratic institutions and sustaining 
inclusive social, economic, and environmental development in 
the region.
    We have been raising awareness on how corruption has eroded 
democratic norms, exacerbated poverty, widened social 
inequality, and contributed to the conditions that force 
migrants to leave their homes.
    I would like to address the elephant in the room. Wide 
corruption and migration are still a problem in countries where 
the U.S. taxpayers have contributed so much. Your collaboration 
has been a catalyst for good governance and you have been a 
strategic ally. The United States has invested around $1 
billion in my country between the first and the second 
Millennium Challenge Accounts, and donations to reinforce 
security, support economic growth, and institutional 
strengthening. For this we are very grateful.
    In terms of the fight against corruption, the cooperation 
has helped also unite the civil society through a just cause. I 
would like to share a benchmark of the U.S. cooperation, one 
that enabled the creation of a group of diverse civil society 
members that promoted the enactment of the Freedom of 
Information system and the fight against corruption in El 
Salvador.
    But putting it all together was not easy. It required years 
of advocacy to pass a Freedom of Information law, but when it 
did, it turned out to be the top 5 legislation of Sunshine Laws 
across the world. Civil society provided the social 
mobilization to promote merit-based appointments for key 
oversight officials, such as the supreme court justices, the 
attorney general, and the institute of access to public 
information to enable an ecosystem of transparency where laws 
governed the life of citizens. The contributions of the U.S. 
Government was a catalyst in all of these processes. It entails 
supporting a vibrant civil society that was willing to address 
the sensitive issues, engage political actors, and build 
bridges across sectors to reach a common ground in favor of 
good governance and prosperity.
    In this context, migration is just the peak of iceberg of a 
long list of structural deficits in a country like mine and we 
need to acknowledge that the problem is systemic and a long-
term commitment.
    So what went wrong? Well, also democratic fatigue. There is 
a backslide in most of the Central American countries 
democracies are fragile because they have not been able to 
deliver the prosperity that was expected of them. Good 
governance matters and we can never take democracy for granted.
    In the case of El Salvador, trust in the traditional 
parties eroded and the corruption cases enabled the coming into 
office of President Bukele that claimed he would combat 
corruption. But once in office and harnessing the potential of 
social media, he has exercised power by defying the checks and 
balances of the Republic. We need to keep rule of law and not 
enable rule of fear.
    So what is next? At this time I can assure you that civil 
society is still a very important ally for the United States in 
spite that every day the civic space is deteriorating and 
shrinking and the access to information, freedom of expression 
and association, are currently in danger. There is concern of 
the risk of political persecution against civil society 
organizations that they are advocating for accountability and 
the respect of rule of law. Breaking the vicious cycle of 
corruption in the region will require a holistic long-term 
approach that brings together governments, civil society, and 
businesses under an innovative and common anti-corruption 
agenda.
    Rule of law is a path to development and prosperity. That 
fight against corruption can only prosper correctly in a 
democratic system. We must be clear that transcending from 
under development to development and there are no shortcuts.
    Thank you.
    [The prepared statement of Ms. Umana Araujo follows:]
               Prepared Statement of Claudia Umana Araujo
                              June 9, 2021
    Thank you for the opportunity to testify today before the U.S. 
House of Representatives Committee on Homeland Security. My name 
Claudia Umana Araujo and I am the president of the Salvadoran 
Foundation for Economic and Social Development, FUSADES, a Salvadoran 
Think Tank, apolitical and non-profit organization that promotes 
economic and social progress for all Salvadorans through sustainable 
development and within a system of democracy and individual liberties.
    The aspect that I would like to convey this morning is, that 
Central American Civil Society is and will play an important role in 
promoting a long-term vision on the structural changes that need to be 
made in order to address the chronic conditions that create the push 
factors.
    Today the Northern Triangle needs to stabilize and maintain the 
institutionalization of our young democracies. On this front, public 
corruption and weak rule of law are the most persistent and long-
standing challenges for strengthening democratic institutions and 
sustaining inclusive economic development in the region. As Fusades we 
have been raising awareness in El Salvador on how corruption has eroded 
democratic norms, exacerbated poverty, widened social inequality, and 
contributed to the conditions that force migrants to leave their homes.
                           democratic fatigue
    According to the Economist Intelligence Unit's Democracy Index, 
there is a backslide in most of the Central American countries.\1\ 
Democracies are fragile because they have not been able to deliver the 
prosperity that was expected of them. The democratic institutions even 
though they were in general well-designed, their performance did not 
meet the level of expectations of a modern society,\2\ specially the 
younger generations. Good governance matters and we can never take 
democracy for granted. In El Salvador since the signing of the Peace 
Accords, we have had the opportunity to experience civil liberties and 
stability in relation to other countries in the region. But we have 
been battling with serious problems, like gang-related violence, 
corruption, inequality, lack of a good education and migration. On a 
positive note we had advanced in free elections, freedom of speech, 
access to information, apolitical armed forces and an independent 
constitutional court.
---------------------------------------------------------------------------
    \1\ ``The Economist Intelligence Unit's Democracy Index recorded a 
decline in their overall score, as country after country locked down to 
protect lives from a novel coronavirus. The global average score fell 
to its lowest level since the index began in 2006''. See The Economist 
Intelligence Unit, ``Democracy Index 2020: In sickness and in 
health?'', accessed June 7, 2021.
    \2\ FUSADES, ``Las Instituciones Democraticas en El Salvador: 
Valoracion de Rendimientos y Plan de Fortalecimiento'', accessed June 
7, 2021.
---------------------------------------------------------------------------
    But trust in the traditional parties eroded, President Bukele ran 
to office in 2019, claiming he would combat corruption and promised 
change while he capitalized on the corruption scandals. Harnessing the 
potential of social media, and using twitter as his government 
communication platform, he has exercised power beyond the 
constitutional limits and by defying the checks and balances mechanisms 
of the Republic.
    Bukele had gained control of the National Assembly when his party 
and allies obtained a supermajority in the legislative branch. With his 
charismatic leadership he won the Congress elections by a landslide. 
And has installed a logic of the ``winner takes it all''. On the first 
day of the new legislative session in May 2021, the Salvadoran 
legislature acted to remove unconstitutionally 5 supreme court justices 
and the general attorney--a worrisome trend by President Bukele and his 
party undermining the separation of powers. These movements allowed him 
to consolidate control over all 3 government branches.\3\
---------------------------------------------------------------------------
    \3\ FUSADES, ``Para no perder las libertades, debe restablecerse el 
orden constitucional'', accessed June 7, 2021.
---------------------------------------------------------------------------
    His rapid consolidation of power by using the tools of democracy to 
destroy democracy is a trend in an authoritarian path that can leave 
power unchecked and become very corrupt, ``Power tends to corrupt, and 
absolute power corrupts absolutely''.\4\ The USAID, international 
allies and international cooperation have been clear in reiterating 
that the respect for the separation of powers, a strong civil society, 
an independent judicial system and strong rule of law are pillars of 
any democracy.\5\
---------------------------------------------------------------------------
    \4\ Lord Acton, ``Letter to Archbishop Mandell Creighton'', 
accessed June 7, 2021.
    \5\ USAID, ``USAID redirects assistance for Salvadoran government 
institutions to civil society groups'', accessed June 7, 2021.
---------------------------------------------------------------------------
    We are no longer by the rule of law, and slowly moving to a rule of 
fear. Instead of having separation of powers, now we have a total 
concentration of power. Ricardo Zuniga in his visit to El Salvador met 
with President Bukele, and he asked to reverse the changes to the court 
and attorney general, but the president said this was not an option, 
that his decisions were irreversible. In the last weeks a raising 
tension between El Salvador and the United States has been 
noticeable.\6\ It is regrettable to see how in a matter of weeks a 
relationship has deteriorated with a strategic ally of El Salvador that 
provides a home to more than 2 million Salvadorans and sends 
remittances that constitute more than 20 percent of our GDP.\7\
---------------------------------------------------------------------------
    \6\ Alexander Pineda, ``Bukele se reune con cuerpo diplomatico para 
justificar destituciones de fiscal y Sala'', Diario El Mundo, accessed 
June 7, 2021.
    \7\ FUSADES, ``El Salvador. Ano Politico Junio 2020--Mayo 2021'', 
accessed June 7, 2021.
---------------------------------------------------------------------------
    According to the 2020 Corruption Perceptions Index from 
Transparency International, the Northern Triangle countries have a 
worse ranking than at least 103 of the 180 countries surveyed, with 
Honduras ranking at 157, Guatemala at 148, and El Salvador at 104. A 
confluence of internal and external forces in recent years--including 
the penetration of organized crime and narcotrafficking into local 
governance and national politics, and the fiscal measures that the 
COVID-19 pandemic and natural disasters have demanded--has opened new 
ground for corrupt practices and exacerbated old ones.
    The justice systems need reforms, capacity-building efforts, and 
resources that incentivize accountability and transparency over 
impunity and corruption. The 2014 Plan of the Alliance for the 
Prosperity in the Northern Triangle (A4P) provided an initial blueprint 
to update and expand upon for supporting national, regional, and 
international anti-corruption efforts, but efforts fell short of their 
intended objectives.
    In Guatemala, the emblematic United Nations (UN)-backed 
International Commission against Impunity (CICIG) and the attorney 
general directly led to the jailing of both then-President and then-
Vice President. In Honduras, in 2016, a case at the Honduran Social 
Security Institute--where an estimated $300 million in public funds 
were embezzled--provoked civil unrest and sparked the creation of the 
Organization of American States (OAS)-backed Mission Against Corruption 
and Impunity (MACCIH).\8\
---------------------------------------------------------------------------
    \8\ See Atlantic Council, ``Combating Corruption in the Northern 
Triangle, Prioritizing a whole-of-society approach'', accessed June 7, 
2021.
---------------------------------------------------------------------------
    Today, CICIG and MACCIH have ceased. CICIES will end operations by 
the end of the month in El Salvador. These decisions, among others that 
have undermined transparency and anticorruption mechanisms were widely 
criticized by the international community and civil society, and seen 
as a step backwards in the fight against corruption in these countries 
and a lack of commitment of the governments in sustainable mechanisms 
to pursue corruption.
               uniting civil society through a just cause
    According to a recent article of the New York Times about the 
questionable results of the U.S. cooperation in the Northern Triangle, 
and that I am part of the civil society space in El Salvador, that has 
been dedicated to build a well-governed and prosperous society over the 
past decades. I would like to adress the elephant in the room: Why 
corruption and migration are still a problem in a country where the 
U.S. taxpayers have contributed significantly with millions and 
billions of dollars.\9\
---------------------------------------------------------------------------
    \9\ Nathalie Kitroeff and Michael D. Shear. U.S. Aid to Central 
America Hasn't Slowed Migration. Can Kamala Harris? https://
www.nytimes.com/2021/06/06/world/americas/central-america-migration-
kamala-harris.html?action=click&module=Spotlight&pgtype=Homepage, 
accessed June 9, 2021.
---------------------------------------------------------------------------
    First, the fight against corruption had been showing great progress 
and concrete results until recently. For the first time in Salvadoran 
democratic history, a former president was indicted and then convicted 
for grand corruption. That showed to the people of El Salvador, and 
especially to their elected officials and public servants, that using 
public resources for their own benefit, in a country where almost 40 
percent of the population still lives in poverty, had severe 
consequences. But getting to that point was not easy at all: It 
required years of civil society advocacy to pass a Freedom of 
Information Law,\10\ which came into effect in 2011 and ended among the 
top 5 legislations of that kind across the world; a significant amount 
of money for the Institute for Access to Public Information (IAIP, by 
its acronym in Spanish), which started functioning in 2012,\11\ to 
enforce the new legal framework; hours of training to government 
employees from national and local entities to provide public 
information to citizens who requested it; and tons of resources, 
energy, time, and social mobilization to promote transparent and merit-
based appointments of the heads of key oversight officials, such as the 
Supreme Court justices, the Attorney General, and the Institute for 
Access to Public Information, to enable an ecosystem where laws, and 
not private interests, govern the life of millions of Salvadorans.\12\
---------------------------------------------------------------------------
    \10\ Ley de Acceso a la Informacion Publica.
    \11\ USAID was instrumental in the early phase of the IAIP, to pay 
their functioning.
    \12\ See FUSADES, ``Sistema Nacional de Transparencia y 
Anticorrupcion: Diagnostico y propuesta''.
---------------------------------------------------------------------------
    The contribution of the U.S. Government was critical in all the 
processes I just mentioned. It entailed not only supporting a vibrant 
civil society that was willing to address sensitive issues, including 
the organization I currently represent, but to engage with political 
actors and build bridges across different sectors to reach common 
ground in favor of good governance and prosperity. In other words, if 
you want to pick a benchmark of U.S. cooperation in the Northern 
Triangle, the enactment of the Freedom of Information System in El 
Salvador is definitely one.
    In this context, migration is just the peak of the iceberg of a 
long list of structural deficits in countries like mine. Good service 
delivery is a simple aspiration if citizens are not even able to 
understand where the money goes. Moreover, if citizens are not able to 
hold their government accountable, probably there won't be any public 
service at all, and their taxes will end up in corrupt hands. When we 
think about the roots of any issue, such as migration, we are 
acknowledging that the problem is systemic in the sense that there is 
more than one solution and that these are long-term.
    The lack of a robust open government is one of the main causes of 
the lack of opportunities that ends in massive irregular migration. But 
thanks to the Freedom of Information System that the government 
established together with civil society organizations, the private 
sector, media outlets, and international cooperation we started to see 
important outcomes. In 2015, the Institute for Access to Public 
Information confirmed that declarations of assets submitted by 
government officials had to be disclosed.\13\ This consequential 
decision triggered 3 important paths: (a) That the supreme court's 
probity unit, ordered the starting of the judicial process for illicit 
enrichment, (b) efforts within the investigative journalism community, 
which informed the public about mismanagement of public resources, (c) 
the Attorney General Office opened investigations regarding the abuse 
in the use of public funds and proceed to the indictment of big 
corruption cases, of 3 former presidents. That's how in 2016, former 
president Antonio Saca, who is now in prison, was arrested for 
mismanaging more than $300 million; and how in 2018, Mr. Saca was 
finally convicted. This is the only case that concluded. The other 2 
presidents, one died and the other one ran from justice.\14\
---------------------------------------------------------------------------
    \13\ FUSADES, ``Informe de Coyuntura Legal e Institucional segundo 
semestre de 2015'', accessed June 7, 2021.
    \14\ FUSADES, ``Informe de Coyuntura Legal e Institucional segundo 
semestre de 2018'', accessed June 7, 2021.
---------------------------------------------------------------------------
    By 2018, apprehensions of Salvadorans at the Southern Border had 
significantly decreased in comparison with the spike seen in 2014. Even 
in 2019, when a new spike took place, El Salvador kept much lower 
numbers compared to our neighbors.\15\
---------------------------------------------------------------------------
    \15\ Jonathan Hiskey, ``Decision Points: The Changing Dynamics of 
Emigration Intentions in Northern Central America'', accessed June 7, 
2021
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    However, since 2019, and particularly over the past 16 months, we 
have seen an accelerated deterioration of basic principles of 
transparency, democracy, and the rule of law; and what was built in the 
past decade to make sure Salvadorans had a government responsive to 
their needs and accountable for its actions, has been swept away in a 
few weeks.
    The crucial actions that eroded the transparency institutions were: 
(i) The appointments of the access of information authority with 
commissioners that lacked independence and technical knowledge they 
needed to perform their duties, (ii) the approval of the Law for the 
use of products for medical treatments in exceptional public health 
situations caused by the COVID-19 pandemic;\16\ it eventually benefits 
people who could have participated in acts of corruption due to the 
immunity established in said law,\17\ (iii) the government decision not 
to publish the First Descriptive Report on the Quality, Effectiveness, 
and Legitimacy of the use of Public Funds in response to the COVID-19 
pandemic. In said report, a series of irregularities with a criminal 
appearance are found that must be investigated,\18\ (iv) breaking the 
agreement of the International Commission against Impunity in El 
Salvador (CICIES), (v) the recurrent attitude of the government of 
trying to induce authorities to investigate actions of opposition 
politicians exclusively and using institutions as instruments of 
political persecution by the government.\19\
---------------------------------------------------------------------------
    \16\ OAS Promulgated by means of legislative decree No. 7 dated May 
5, 2011 and published in the Official Gazette. No. 85 Volume 431 of the 
same date May 5, 2021.
    \17\ Statement from the OAS General Secretariat on CICIES, accessed 
June 7, 2021.
    See ``Ley para el Uso de Productos para Tratamientos Medicos en 
Situaciones Excepcionales de Salud Publica ocasionadas por la Pandemia 
COVID-19'', accessed June 7, 2021.
    \18\ Statement from the OAS General Secretariat on CICIES, accessed 
June 7, 2021.
    \19\ Statement from the OAS General Secretariat on CICIES, accessed 
June 7, 2021.
---------------------------------------------------------------------------
    We cannot deny that there were structural factors that enabled the 
situation we're facing right now. Social and economic inequality, the 
lack of renovation within the political parties' leadership, and poor 
levels of political culture and collective memory of a society that 
suffered the bloodiest civil war in the continent in the past century 
are some of those structural factors.
    At this point, it is clear that at the domestic level only civil 
society and independent media can contain the path to an authoritarian 
regime. It is also clear that without the support of the international 
community in protecting human rights defenders, civil society, and 
journalists, the concentration of power will be even greater than it is 
right now. And also, without an international community that enforces 
multilateral agreements, from the Inter-American Democratic Charter to 
the conditions in development funds granted by cooperation agencies and 
international banks, the job will be almost impossible.
         the usa has been a strategic ally for good governance
    The United States has invested a total of $737 million in El 
Salvador through the Millennium Challenge Account I and II, which has 
been used to renovate schools, improve roads, agricultural projects, 
and empower women. It also supported the national civil police with 
equipment and the justice system with investment in technology and 
training, and more recently has donated $30 million to combat COVID-19. 
In addition, USAID has donated $96 million to reinforce security and 
support economic growth and institutional strengthening.\20\ For all of 
these as Salvadoran we are very grateful.
---------------------------------------------------------------------------
    \20\ See La Prensa Grafica, ``Llegada de Jean Manes, encargada de 
negocios de EUA en El Salvador'', accessed June 7, 2021.
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    Our countries have intertwined destinies, and the United States has 
proved to be a strategic ally because we've had a long-term 
relationship based on a common vision; prosperity and democracy are two 
fundamental pillars.
    An example of this shared view, is the Northern Triangle Prosperity 
Project, which pillars are still in place like fostering the productive 
sector, developing human capital, improving citizen security and access 
to justice, and strengthening institutions and improving transparency. 
Much of the capacity building for judges and the general attorney's 
office, during this time, the democratic institution framework of El 
Salvador was able to persecute the corruption cases that we have 
previously mentioned. Currently, there are other great initiatives for 
the region, like the creation of the Northern Triangle Anticorruption 
and Impunity Center (Centro contra la Corrupcion y la Impunidad en el 
Norte de Centroamerica)\21\ promoted by civil society organizations, 
and on the other hand the announcement of U.S. Vice President Harris, 
regarding the creation of the Anticorruption Regional Taskforce, both 
very promising tools to combat corruption.\22\
---------------------------------------------------------------------------
    \21\ Visit: www.ccinoc.org.
    \22\ Soudi Jimenez, ``En visita a Guatemala, la vicepresidenta 
Kamala Harris apunta que debemos cortar de raiz la corrupcion'', Los 
Angeles Times, accessed June 8, 2021.
---------------------------------------------------------------------------
    Breaking the vicious cycle of corruption in the region will require 
a holistic, long-term approach that brings together governments, civil 
society, and businesses under a common anti-corruption agenda with 
bold, innovative, and locally-driven policy solutions. It's important 
to placing a special emphasis on building capacities, strengthening 
existing cooperation with local partners, and finding new spaces for 
collaboration to combat corruption over the long term in Central 
America.\23\
---------------------------------------------------------------------------
    \23\ See Atlantic Council, ``Combating Corruption in the Nothern 
Triangle, Prioritizing a whole of society approach'', accessed June 7, 
2021.
---------------------------------------------------------------------------
    We appreciate the assistance that the United States has given the 
region during the past decade. But the challenge that we face is 
complex and long-term.
    At this time, I can assure that civil society is still a very 
important ally for the USA and that every day the civic space is 
deteriorating and shrinking, and we need to continue to work to 
strengthen democratic governance. Freedom of expression is threatened 
and there is harassment and attacks against the independent press. 
Freedom of information has been weakened due to the loss of autonomy of 
the Institute for Access to Public Information, and the government's 
refusal to release information. There are also big concerns regarding 
freedom of association, due to government intimidations and the risk of 
political persecution against civil society organizations that are 
advocating for accountability and the respect for the rule of law.
    USAID, along with cooperation agencies from European countries, can 
continue to work with civil society to promote increased transparency. 
A continuously-involved civil society and independent media will be 
important factors in promoting a long-term vision on the structural 
changes that need to be made.
    Due to the digital revolution,\24\ transparency and rule of law 
need to become part of the Northern Triangle Public Agenda and to be 
able to do so, there is a need to understand new ways to create 
specific messages targeting different audiences that would spark higher 
public interest.
---------------------------------------------------------------------------
    \24\ George W. Bush Presidential Center. Bush Insitute. A Digital 
Strategy for Competitiveness and Integration in the Northern Triangle. 
https://www.bushcenter.org/publications/resources-reports/reports/
digital-strategy-for-competitiveness-and-integration-in-the-northern-
triangle.html, accessed June 9, 2021.
---------------------------------------------------------------------------
                               conclusion
    There is no one answer for addressing the root causes of migration, 
being a multicausal humanitarian crisis. I firmly believe that civil 
society leaders can help focus on generating support for innovative 
policy solutions to some of the most pressing challenges in the 
Northern Triangle, which are similarly many of the root causes of 
migration in the region. Civil society in El Salvador has come together 
joined by democratic values and we will stand together to collaborate 
on this pursuit. Achieving lives with dignity and creating the dream of 
prosperity in our counties is our priority.
    Rule of law is necessary to a path to development and prosperity. 
We need people to believe in democracy and foster a culture of rule of 
law instead of impunity. We need to ensure that all the lost progress 
regarding corruption and impunity in Central America is regained. This 
means a cultural change where there is respect to human dignity, civic 
education in what it means to live in a prosperous society. We must be 
clear that in the path of transcending from underdevelopment to 
development, we cannot bypass the democratic process.
    We need to incorporate more voices and through diversity of visions 
build a better future where institutions are more in tune with 
citizens' needs. We need new standards on regards to transparency in 
the digital era, there are more tools like blockchain, and in general 
to walk together in the exploration of new and creative ways to tackle 
the push factors. Innovations and civil society in the region must be 
part of the equation.
    Cooperation and a long-term perspective are essential. But 
cooperation can't be a blank check, we need to create more sustainable 
mechanisms for oversight and tracking via comprehensive metrics. The 
continued support of the U.S. Congress on democratic promotion, the 
separation of powers, and the independence of the judiciary in the 
Northern Triangle should be maintained to foster reforms.

    Chairman Correa. Thank you very much, Ms. Umana Araujo. 
Thank you very much.
    Now, we will hear from our fourth witness, Mr. Rooney, who 
will summarize his statements in about 5 minutes as well.
    Welcome, sir.

    STATEMENT OF MATTHEW M. ROONEY, MANAGING DIRECTOR, BUSH 
    INSTITUTE-SMU ECONOMIC GROWTH INSTITUTE, GEORGE W. BUSH 
                           INSTITUTE

    Mr. Rooney. Thank you very much, Mr. Chairman, for the 
opportunity to be here today.
    Mr. Ranking Member, Members of the subcommittee, it is an 
honor in fact to be with you today to discuss the need for 
action to eliminate corruption in the nations of Central 
America, particular El Salvador, Guatemala, and Honduras.
    The George W. Bush Institute may not be well-known outside 
the Dallas beltway. They are a think and do tank located in 
Dallas, Texas founded by President and Mrs. George W. Bush when 
they left the White House in 2009 with an agenda that follows 
up on may of the areas of public policy that particularly 
motivated them, in particular free trade and freedom around the 
globe.
    Our program for Central America came into existence about 3 
years ago specifically to offer proposed reforms that could put 
the economies of those countries on the more rapid growth 
track.
    Mr. Chairman, Mr. Ranking Member, Members of the committee, 
the spike or the appearance of a crisis in numbers of Central 
Americans risking their lives to enter the United States has 
produced the usual calls for quick fixes to address the root 
causes of this migration. We all know that the real solution is 
more complicated, but the situation is not hopeless and it can 
be resolved if we are practical and patient. In fact today I 
would like to suggest that the George W. Bush Institute has 
piloted an approach which could be scaled and become part of a 
practical solution to the problem.
    Beginning in 2018 we launched our Central America 
Prosperity Project with the objective proposing and promoting 
policy reforms to put those economies on a more robust growth 
path. At the center of the CAPP approach, the C-A-P-P approach, 
is a working group that brings together about 30 thought 
leaders from the 3 nations of Guatemala, El Salvador, and 
Honduras. Half of the group are women, a third are under the 
age of 40. Participants include business, policy, politics, 
academia, journalism, and civil society, including human 
rights, environmental, business, and labor groups. In the 
interest of full disclosure, I should note that Claudia Umana, 
my friend and colleague, is a member of that group and I am 
grateful, Claudia, for your commitment to our program.
    We brought that working group together for a series of 
structured round tables to consider why the economies of the 
Northern Triangle don't grow and create jobs more rapidly. 
Obviously, as Mr. Leaman has already pointed out, lack of 
private-sector investment in job creation is one of the 
cornerstone reasons for that. But in digging deeper, the group 
agreed that the underlying cause of this faltering investment 
in job creation is, as Mr. Leaman has already pointed out, 
corruption, that is ubiquitous in the region.
    So working with private-sector colleagues in the United 
States and elsewhere and academic partners, we concluded that 
the wider use of digital technologies--here I am echoing Mr. 
Leaman again, my friend and colleague--the wider use of digital 
technologies for access to government services in particular 
would curtail opportunities for both petty and grand 
corruption, make government more transparent, and begin to 
restore public confidence.
    So in May 2019 we issued a call to the 3 governments to 
develop and implement [inaudible] that work to organize a 
series of workshops in the region to identify the policy 
impediments to mobile services and wider use of digital 
technologies and to develop national implementation plans. Just 
a year ago we published a proposed road map to implementation 
of a regional digitization strategy that starts with each 
country's baseline and offers a pathway to regionally 
integrated market for digital services.
    We believe the United States could encourage and shape 
these reforms by a very simple mechanism of offering to enter 
into an agreement with the region on digital trade.
    In late 2020 we carried out a simulated negotiation of such 
an agreement using the digital trade provisions of USMCA, the 
U.S.-Mexico-Canada Agreement, as a starting point. We assembled 
Guatemalan, Honduran, and Salvadorian negotiating delegations, 
made up of tech entrepreneurs, business association leaders, 
civil society representatives, and experienced trade 
negotiators. To play the United States in our simulation, we 
engaged 2 retired senior American trade negotiators. The 
outcome of the simulation, which we published earlier this 
year, suggests that the region has the necessary foundation, 
that the region's reforms are taking shape in ways that may or 
may not be consistent with U.S. practice, and that a formal 
agreement with the United States would both help shape the 
reforms to ensure that they are consistent with U.S. practice 
and lock those reforms in over the long term.
    We believe that this model can make a downpayment on the 
reforms needed to curtail corruption in the Northern Triangle, 
enabling those countries to attract the investment they need to 
put their economies on a more robust growth track.
    While strengthening the economies of these countries is 
only one piece of what is needed to stem the flow of migrants 
to our borders, it is a critical piece that if implemented 
effectively will address one of the primary reasons why Central 
Americans flee their countries.
    With that, Mr. Chairman, Mr. Ranking Member, I thank you 
again for the opportunity to be here today and look forward to 
your questions and comments.
    [The prepared statement of Mr. Rooney follows:]
                Prepared Statement of Matthew M. Rooney
                             June 11, 2021
                curtailing corruption in central america
    Mr. Chairman, Mr. Ranking Member, Members of the subcommittee, it 
is an honor to be with you today to discuss the need for action to 
eliminate corruption in the nations of Central America, particularly El 
Salvador, Guatemala, and Honduras.
    The George W. Bush Institute-SMU Economic Growth Initiative, which 
I lead, focuses on North American economic integration and 
competitiveness; immigration reform; the role of cities in growth; and 
the conditions for growth in Central America.
    Mr. Chairman, Mr. Ranking Member, Members of the Committee, the 
spike in numbers of Central Americans risking their lives to enter the 
United States has produced the usual calls for quick fixes to address 
the ``root causes'' of this migration.
    We know that the real solution is more complicated--but the 
situation is not hopeless and can be resolved, if we are practical and 
patient.
    In 2018, the George W. Bush Institute launched our Central America 
Prosperity Project (CAPP), as it has come to be called, with the 
objective of proposing and promoting policy reforms to put the region's 
economies on a more robust growth path. At the center of the CAPP 
approach is a working group that brings together 30 thought leaders 
from Guatemala, El Salvador, and Honduras. Half the group are women, 
and a third are under the age of 40. Participants represent business, 
policy, politics, academia, journalism, and civil society, including 
human rights, environmental, business, and labor groups.
    We brought our working group together for a series of structured 
roundtables to consider why the economies of the Northern Triangle 
don't grow and create jobs more rapidly. One immediate and obvious 
answer is lack of private-sector investment, but we encouraged our 
group to dig deeper. The group eventually agreed that the underlying 
cause of faltering investment and job creation is the corruption that 
is ubiquitous in the region.
    The region's corruption ranges from the petty graft of a low-level 
functionary who demands a cash payment to do their job, or a customs 
inspector or cop on the beat who extorts money to look the other way--
all the way to kickbacks for government contracts, and, ultimately, to 
government agencies that are so compromised by conflicts of interest 
that the public has lost all confidence in them.
    Working with private-sector colleagues in the United States and 
elsewhere, and academic partners, we came to the conclusion that wider 
use of digital technologies for access to government services would 
curtail opportunities for both petty and grand corruption, make 
government more transparent, and begin to restore public confidence.
    The Bush Institute in May 2019 urged the 3 countries to develop and 
implement a regional digital strategy. This proposal was welcomed 
across the region and our working group felt empowered by encouragement 
from the U.S. Government, many Members of Congress, and international 
institutions like the Inter-American Development Bank.
    During the ensuing year, we worked with our network to organize a 
series of workshops in the region to identify the policy impediments to 
mobile services and develop national implementation plans. In June 
2020, we published a proposed roadmap to implementation of a regional 
digitization strategy that starts with each country's baseline and 
offers a pathway to a regionally integrated market for digital 
services.
    We believe that the United States could encourage and shape these 
reforms simply by offering to enter into an agreement with the region 
on digital trade. In late 2020, we carried out a simulated negotiation 
of such an agreement, using the digital trade provisions of USMCA as a 
starting point. We assembled Guatemalan, Honduran, and Salvadoran 
negotiating ``delegations'' made up of tech entrepreneurs, business 
association leaders, civil society representatives and experienced 
trade negotiators. To ``play'' the United States, we engaged 2 retired 
senior trade negotiators.
    The outcome of this simulated negotiation, which we published 
earlier this year, suggests that the region has the necessary 
foundation, that the region's reforms are taking shape in ways that may 
or may not be consistent with U.S. practice, and that a formal 
agreement with the United States would both shape the reforms to be 
consistent with U.S. preferences and lock those reforms in over the 
long term.
    Of course, the region's challenges go well beyond digital 
services--COVID has proven that. The value of the proposed digital 
agenda is not that it addresses every challenge. But it represents a 
very powerful tool backed by the commitment by a broad network of 
Central American leaders to the hard political work of driving reforms 
that will strengthen the foundation for future prosperity.
    We believe that this model can make a down payment on reforms 
needed to curtail corruption in the Northern Triangle, enabling those 
countries to attract the investment needed to put them on a more robust 
and more inclusive growth trajectory.
    Mr. Chairman, Mr. Ranking Member, Members of the committee: Thank 
you again for the opportunity to be here today. I look forward to your 
questions and comments.

    Chairman Correa. Thank you, Mr. Rooney, for your testimony. 
I want to thank all our witnesses today for your testimonies.
    I will now remind the subcommittee that each one of us will 
have 5 minutes to ask questions of the panelists. Now I will 
recognize myself for 5 minutes of questions.
    I have a question--my first question is really for all the 
panelists. The United States has been providing foreign 
assistance to the Northern Triangle for the last 4 decades--not 
1, 4 decades. Congress has historically put conditions on the 
aid appropriated to the Northern Triangle. The Biden 
administration talks about $4 billion of additional aid to 
address the root causes of migration. This aid subject to 
similar conditions.
    What we do different this time?
    Please, Ms. O'Neil.
    Ms. O'Neil. I am sorry. Thank you. I will turn it over to 
my colleagues.
    You know, I do think one thing that we have not done in 
Central America is use U.S. tools unilaterally. That is 
something we can do. So whether that is Department of Justice, 
whether that is Treasury and investigations, whether that is 
some of the neutrals that the State Department has. We can't 
just expect Central America to come along. In the end we cannot 
solve this problem without willing partners in Central America. 
I think those are the people Claudia is talking about, civil 
society that Welby is talking about, business. All of those 
matter. But I think one thing that we have not done 
consistently or with much force prioritizing is to use the 
tools we have here in the United States.
    Chairman Correa. Thank you.
    Ms. Umana Araujo. Yes, Claudia.
    Ms. Umana Araujo. Thank you.
    I totally agree with Shannon. I think there are--we have 
very limited resources because the institutions are so weak. 
But this morning I heard very innovative ideas. Well, first it 
is--we have to use the--I mean use the tools but with a 
modernizing view, the digital agenda, and of course using the 
resources that you have in the region. I mean civil society can 
play a better role, more decentralized than only talking to 
governments.
    So I think that it is using the same tools, only the new 
ones that are modern and the actors in a different context.
    Chairman Correa. Thank you.
    Mr. Leaman.
    Mr. Leaman. I just focus on 3 differences from the past.
    No. 1, stop stovepiping. The idea of having economic 
inclusion or economic opportunity projects on one side and rule 
of law on the other put the private sector on the one side, 
civil society sector on the other doesn't work because of this 
leaky bucket problem. You are pouring a bunch of economic 
opportunity money into a bucket that has a rule of law hole at 
the bottom.
    So partner specifically with the private sector, including 
the AMCHAMs, as U.S. standard businesses on rule of law but in 
particular on rule of law that gives you a twofer. It is the 
part of rule of law that would really--if it improves will 
maximize economic opportunity effects. So that is why this 
digital tools for rule of law and recovery project focuses in 
on that.
    Chairman Correa. Mr. Rooney.
    Mr. Rooney. Thank you, Mr. Chairman.
    So I have a couple of observations. I agree with everything 
that others have said here today in response to your question. 
One thing I would note is that when we talk about the root 
causes, fundamentally the root cause of the region's 
instability and also in the migration from the region, is the 
fact that the region is in the middle of a demographic boom. 
Very youthful populations, thousands of young people entering 
the job market each year and finding a lack of opportunities. 
The United States and Mexico meanwhile are in a demographic 
stability or even contraction phase. So it is almost inevitable 
that there is going to be some movement of people from those 
countries to the United States simply because of the 
demographics.
    The other thing is I think we should be realistic about 
what we can actually accomplish. We can't solve these people's 
problems all by ourselves. We can't do this for them. So we 
are--with our foreign assistance we are not controlling the 
outcome and we are not driving the train all by ourselves. We 
are buying ourselves a seat at the table and enabling ourselves 
to engage constructively with those governments and civil 
societies to try to resolve these questions.
    I do think that ultimately you need a helpful partner. In 
many cases, under the current circumstances, that partner is 
going to be civil society and the private sector, but at some 
point you need a government that is committed to these 
objectives alongside you and committed to achieving them.
    That is what happened--that is why we finally succeeded in 
Colombia, that is why we have had any success we can claim in 
Mexico. As long as that condition isn't given, we are going to 
be struggling with this problem.
    Chairman Correa. Thank you very much.
    Now I would like to recognize the Ranking Member of our 
subcommittee, the gentleman from Michigan, Mr. Meijer, for 5 
minutes of questions.
    Sir, welcome.
    Mr. Meijer. Thank you, Mr. Chairman, and thank you to all 
of our witnesses here today for your testimony.
    I want to drill down on something that Ms. O'Neil said. You 
mentioned the focus on--or opportunity in answer to the 
Chairman's question, the opportunity to use more of our 
governmental tools and to not be afraid of taking some 
unilateral approaches. One thing that didn't come up in the 
testimony today, but is something that I have seen in other 
locales, and I fear may be the case in the Northern Triangle as 
well, is where differing parts of our government may have 
differing objectives. I am thinking, specifically in the case 
of the Northern Triangle, the tension between what could be 
State Department efforts to promote good governance or promote 
the civil society versus Drug Enforcement Agency efforts to 
counter narcotics trafficking or production.
    Could you speak a little at what the risks are or how we 
can better potentially align and frankly rank order the 
priority of U.S. efforts in the Northern Triangle. You know, 
our talk today here is focused on corruption, which naturally 
leads into governance, but we are engaged in a number of 
different missions throughout the region with different 
components of our U.S. Government.
    Ms. O'Neil. Great. Thank you. That is an important 
question.
    I would say 2 things. When we have seen the U.S. Government 
work better on priority issues, for instance, with Mexico in 
the past, it is when someone above some of the levels of the 
operating levels of the assistant secretary or the like brings 
those all together. So I think in this having Vice President 
Harris as the point person makes a big difference. Because you 
can bring everyone to the table and sort out some of those 
differences. I am not even sure in many of these cases it is 
that they have different agendas, I think it is just that they 
have particular agendas that are operating in parallel and not 
engaging in ways that would be constructive and useful.
    So I think that is--just on an interagency process having a 
principal that has influence and weight, and obviously the Vice 
President is the person to do that or one of the people to do 
that, I think that is important.
    The thing I would actually say with Central America is--or 
one of the challenges for our Government and for you all is 
that part of it not just--it is not different agendas, it is 
that some of this is not yet on people's agendas. I will just 
use FinCEN as an example here. This is an agency that is 
incredibly important for the United States, but it is an agency 
whose budget is somewhere in the range of $125 million and it 
has 300 investigators. These individuals are in charge of 
tracing all the money from every counterterrorism, you know, 
case around the world--ISIS and al-Qaeda and all kinds of other 
organizations that, you know, we rightly worry about. It is 
charged with all the narcotrafficking, all of these illicit 
flows that are, you know, hundreds of billions of dollars. You 
know, they receive over a million different, you know, kind-of 
trusted, you know, customer things from banks every day and 
they just can't wade through this. There is very few people 
that are designated just to the Western Hemisphere in general 
and the narcotrafficking--fewer than you would think--but 
almost none to Central America.
    So I think increasing that budget and having investigators 
directly on this issue would make a huge difference. So it is 
not that they are at cross-purposes, it is just that there is 
not a priority in the Treasury for these kinds of things.
    Mr. Meijer. Thank you, Ms. O'Neil, and thank you also for 
raising the attention of--you can't have corruption without 
having a place to put money, you can't take that bribe or you 
won't be engaged in that on a massive scale if you are not able 
to expatriate the funds or otherwise have access to 
international banking and financial networks in order to put 
those to use for your own benefit. So, you know, tamping down 
on that side at least--we have seen this against criminality 
and narcotics trafficking. Raising the cost of that and frankly 
trying to tip that incentive scale is important as well.
    I wanted to turn next to Mr. Rooney. You know, you started 
to go through some of the brief outlines of the Central 
American Prosperity Project. I wonder if there is anything 
additional you think you should share beyond what was offered 
in your testimony, sir.
    Mr. Rooney. Thank you for that opportunity, Mr. Meijer. I 
appreciate that.
    One of the objectives that we pursued in that project was 
to build a network among our Central American friends. It is 
frankly a bit of a payoff from that initiative that Ms. Umana 
is here with us today because we also wanted to bring our 
friends in contact with decision makers and political 
influencers inside the United States, and particularly in 
Washington. So the network that we have built actually 
represents a group of people who are committed to their 
countries, committed to trying to find resolution to their 
country's challenges, understanding that in some cases those 
challenges are greater than their countries can deal with all 
by themselves. But they are committed to their countries and 
they are committed to one another, they are committed to the 
network. We have found it possible to work through that network 
to explore questions of current events as they arise. There has 
been a lively discussion among that group about the bitcoin 
issue in El Salvador over the past number of days, for example. 
So I would just like to offer that group to this committee as 
an opportunity to ground truth your conversations, as Claudia 
has done for us here today, also to explore ideas that you 
might be thinking about in terms of policy initiatives that the 
United States might carry out in the region, programmatic 
initiatives that you might put forward to the administration. 
Our network puts you within 1 or 2 degrees of separation of an 
incredibly wide array of of Central American society.
    We are happy to coordinate conversations with the networks 
such that you can get a kind-of a first-hand sense for how the 
given programmatic [inaudible] program. I think we have 
accomplished it.
    So I hope there will be opportunities to work with this 
committee along those line in the future.
    Mr. Meijer. Thank you, Mr. Rooney.
    With that, Mr. Chairman, I yield back.
    Chairman Correa. Thank you, Mr. Meijer.
    Now the Chairman recognizes Mr. Bishop for 5 minutes of 
questions, sir.
    Welcome.
    Mr. Bishop. Thank you, Mr. Chairman.
    I was sitting here pondering and trying to think about what 
I might ask. I know, Mr. Chairman, your question--I have been 
doing this for years and years and years, what do we do 
different. I was listening to the witnesses' answers. If I 
could just sort-of recap.
    Ms. O'Neil, I think I heard you say use U.S. tools 
unilaterally. Ms. Araujo--excuse me, I am sorry about the 
pronunciation--you have emphasized that there are very few 
resources and we need modern tools. Mr. Leaman, you talked 
about stopping stovepiping and recapped your 3 ideas about 
economic opportunity and tying that to the rule of law. Mr. 
Rooney, frankly, you sounded a little fatalistic to me. That is 
to say you say we buy a seat the table and we stay engaged.
    I will tell you, all of that sounds not very encouraging to 
me. Mr. Leaman, maybe I will go directly to you. I thought you 
have a very polished note--concept, which sounds like a novel 
and interesting idea, but it is not proven out, is it? I mean 
and so--well, let me first ask you that. I mean there is no 
proof of case here. It is not like you have taken this out on a 
pilot basis and made it work, you are just brainstorming a new 
idea, aren't you?
    Mr. Leaman. Well, I would say--I really appreciate that 
because I do think like getting--the devil is in the details 
here and getting it right in practice is what matters.
    I do think that the COVID era is a just change in 
opportunity to another magnitude for a number of reasons.
    No. 1, I mean just the amazing paralysis of regulatory 
systems during the COVID era that were paper-based and person-
based means that a bunch of folks that as a general matter are 
seeking to undermine efforts like digital transparency when we 
try them in other contexts, now have an additional reason of 
their own, that is resiliency, to support digital transparency.
    So in some ways you get exactly what you want in a 
difficult situation like this in that you can potentially 
identify each of the stakeholders that are necessary for 
success and get them aligned based on----
    Mr. Bishop. Mr. Leaman, I don't want interrupt you, but I 
have only got a couple of minutes to ask questions. It just--I 
mean--am I right, though that it is--or we are sort-of talking 
pie in the sky? This is not something somebody has shown that 
it can work?
    Mr. Leaman. We have done it in pilots. What is necessary 
now is to sort-of do it at a large scale.
    So like the Inter-American Development Bank has worked with 
us in Mexico to roll out several pilots of digital licensing 
and permitting. What we find is public servants, politicians, 
businesses, they all say that this makes life better.
    Mr. Bishop. OK.
    Mr. Leaman. So there is an opportunity. But it has to go 
big----
    Mr. Bishop. All right. Mr. Rooney, let me just switch to 
you real quick because you were pretty candid and realistic.
    Two things, maybe, really quickly. No. 1 is the United 
States seems to have this paternalistic idea that we are going 
to go down and we are going to--because of our great expertise 
we are going to change their societies. Except for intervention 
and wars by foreign powers that helped us along in our colonial 
period, what happened here that can't happen by the indigenous 
efforts of those people in those countries? I respect them and 
I think that the notion we are going to nation build and use 
our tools unilaterally there seems like we are going to get 
more of the same that we have been having for 40-50 years.
    Now, what about that? Are there any pull factors of the 
United States that we can more effectively address with our 
money than send it down there for more of the same?
    Mr. Rooney. Great question, sir. I think my take is a 
little bit beyond your 5-minute limit. But let me just try.
    You called me a fatalist. I like to think of myself as a 
realist. Maybe the distinction isn't important.
    In any case, I do think that ultimately these problems are 
going to be resolved by the people and the governments of these 
countries themselves. The best we can do--the most we can do is 
push them in the right direction. I think if you look back over 
our history as a Nation, you see there were numerous periods 
when we made mistakes, we made policy mistakes. We fell victim 
to corruption. We addressed----
    Mr. Bishop. No doubt.
    Mr. Rooney. We addressed that by in some cases creating 
watchdog agencies to discipline it, in other cases by creating 
a kind-of a social expectation or a political norm that we 
wouldn't fall under those temptations. So I think, in answer to 
your specific question, what has happened here that couldn't 
happen there--nothing. I think it is an accumulation of 
experience and, you know, as we get governments that are 
committed to this fight and are willing to make political 
sacrifices to pursue this fight, I think you will see progress 
take place.
    I also think, just briefly, on the subject of fatalism, 
those 4 decades of American assistance have in fact contributed 
to a transformation of that region. Anybody who has been 
involved in that region over those 4 decades--my own personal 
experience with that region stretches back 20 years, and it is 
a vastly changed, and I would submit improved, situation in 
many ways.
    Obviously the problems that exist, exist. I am not denying 
that. I think they are in the interest of the United States to 
try to wrestle with. But I think the process of finding 
committed domestic partners, empowering those partners, making 
sure that they have the resources they need to succeed, that is 
the work of decades not years. It can succeed. We have done it 
in other contexts and I think we can do it in this context.
    Mr. Bishop. Thank you, Mr. Chairman, for your indulgence. I 
yield.
    Chairman Correa. Thank you very much, Mr. Rooney. What I 
would like to do is go for a second round, if that is OK with 
the Ranking Member, a second round of questions. I will start 
out with myself for 5 minutes.
    Ms. O'Neil, you said something very interesting, which is 
prioritizing our objectives--my words not yours--in Central 
America. Drugs, drug interdiction, corruption, economic 
development. Another one that hasn't been mentioned, communism. 
Translated Russian, Chinese influence in Central America. Is 
this something that is a major factor right now?
    Before you answer that question, I am thinking to myself, 
it is not communism but rather the influence of other emerging 
powers around the country in our own backyard.
    How does this fit into the equation?
    Ms. O'Neil. Well, thank you.
    You know, there has been--in Latin American there has been 
a--overall there has been significant influence and influx from 
both Russia and from China. Russia has been much more about 
disinformation and we have seen that in several cases, trying 
to disrupt elections or increase polarization in countries 
within the region. China has often been a much more heavy 
commercial hand. But we are seeing an increase in interest in 
the Chinese, in feeding into and controlling, for instance, 
when various countries put in 5G or other types of 
infrastructure systems, telecomms and the like and would have 
control of those.
    So those are bigger--within the region are bigger 
discussions to be had.
    Central America has not been a particular focus, or the 
priority for these 2 countries, but they are there as well. As 
we know, these are small countries and so a small amount of 
money from either of these 2 countries can be quite 
influential. So I do think that is a challenge.
    The other challenge we have is as you see some countries 
become more authoritarian, you see democratic backsliding--for 
instance, in El Salvador with the current president. The 
surveillance tools that often China or others provide can be 
very attractive to them, sort-of that model of control of your 
population and particularly the opposition.
    If you will just indulge me for 20 seconds, you know, one 
thing I do think about these countries is there are huge 
challenges in the government. But what I do see when I have 
visited these countries--or I lived in Guatemala 20+ years ago 
for a brief time, there are huge civil society reformers. There 
are all kinds of people who want change in their country. So it 
is not just the United States imposing from the outside our 
view of what we want, democratic values and human rights, and 
those sorts of things. There are huge populations there. So I 
see that more as we are helping actually majorities of these 
populations that care about corruption. When you look at polls, 
this is what people care about, they want to get rid of it. We 
are helping actually the majorities of these populations. We 
are not just going in and trying to change things. But some of 
these people are blocked by those that are in power.
    So I see this not as an imposition from the outside, but in 
trying to work with those--the majorities of the people in 
these countries that actually want the changes that we want as 
well.
    Chairman Correa. Claudia, any thoughts on this influence? 
Possible communism, China, Russia?
    Ms. Umana Araujo. Yes. Thank you, Mr. Chairman.
    We do perceive a renewed interest in our region from those 
countries. At least on the side of El Salvador it is becoming 
more evident. I would like to comment that what Shannon is 
saying, that you have great majorities of people that are 
interested in maintaining the principles that both of our 
countries--or the region and the United States share, because 
let us be truthful, what are the other countries offering--are 
economic, probably goods to these countries, but there is no 
principles behind them. The general--I mean the general 
population, they want these better conditions of living. We 
don't perceive as the other countries, China and Russia, 
dedicated to the well-being of the general majorities.
    So I believe that we can partner up because if not, the 
spaces that we currently have with civil society will close 
down and then we will be left, you know, only with the tools 
that you have unilaterally in the United States. I mean those 
are still going to be on the table, but our capacity to be part 
of the equation is becoming--it is eroding very fast in the 
region.
    Chairman Correa. Let me just say, Claudia, that I hear what 
you are saying and I am trying to in my mind very quickly make 
a distinction between the China, Russia economic geopolitical 
interest in Central America versus the United States. I would 
say this is our backyard. We have an interest in economic 
development, but also developing those civil democratic 
institutions because when things go wrong in Central America, 
we in the United States feel it. One way or the other, we are 
going to feel the implications. When things go wrong in Central 
America, China, and Russia are probably not going to feel it, 
but we are and we have a vested interest in making sure--you 
know, we are not an empire, we are trying to control outcomes, 
yet we don't want to be an empire. So we have a very 
interesting challenge before us to make sure that our backyard 
is well-maintained, so to speak. That we work on good 
democratic institution economic development because these are 
our neighbors.
    So, you know, that is what I am trying to figure out in my 
mind. As Ms. O'Neil said, all these competing interests, trying 
to figure out how to put them together to make sure we come up 
with some good public policy that is a win-win all the way 
around.
    I am out of time so I am going to call on our Ranking 
Member, Mr. Meijer, for another--for your set of questions, 
sir.
    Mr. Meijer. Thank you, Mr. Chairman, for going to this 
other round and thank you for your previous question as well.
    You know, I am in agreement and overall sympathetic with 
the point Mr. Bishop raised about the challenges with 
especially America's legacy of involvement in a region that has 
all too often not augered for the benefit of folks in those 
countries and that has not been promoting stability.
    At the same time, in the moment we are at, recognizing that 
the efforts to create sustainable stable modes of governance 
will support not only the benefit and the prosperity of the 
people, but also the prosperity of our shared continent and 
region and where we have seen all too often across the globe 
are Russian and Chinese interests. In Central and South America 
Chinese investments obviously are a far greater concern than 
Russian, but where those efforts have been aimed at 
destabilizing, aimed at creating conditions that can be 
exploited for a short-term geopolitical benefit rather than a 
broader sense of the rising tide, you know, helping out the 
entire region. We have tremendous opportunities to grow closer 
as a continent in ways that can not only shift our economic 
dependence on China and on Indo-Pacific trade, but also promote 
stability, promote the rule of law, and promote a prosperity 
that will then ease the pressure that we have seen on migrant 
flows.
    Now, again, I said this in my testimony, that is going to 
be a multi-year or a generational effort to better promote and 
integrate the Americas. But I certainly am appreciative that 
you are drawing light to that in your questions.
    I want to just raise one more that I mentioned in my first 
round of questioning, about how American governmental efforts 
have at times, if not been at cross-purposes, have not been 
necessarily as aligned as they could be, and gave the example 
of counter narcotics efforts. I know we have seen a pretty 
strong--and to which Ms. O'Neil mentioned, potentially greater 
funding for FinCEN at the Treasury Department in order to crack 
down on some of that off-shoring of corrupt assets.
    I know in the United States we have seen bolstering of Know 
Your Customer laws, obviously in our banking system and some of 
that has extended in a slightly more piecemeal basis around 
especially LLCs purchasing real estate. This has been something 
in Miami-Dade County, in the city of Miami, and we have seen 
this as well in New York State to try to drain some of those 
areas, or at least bring some transparency to areas where large 
currency flows may be being stolen from the people of a nation 
and used for the benefit of the few.
    Are there any additional ways in which current U.S. 
domestic policy may be inadvertently creating the conditions 
that aid corruption in the Northern Triangle countries? I will 
just open that to our set of witnesses.
    Mr. Leaman. I would be glad to just mention 2 ideas.
    One is the sort-of old tried-and-true, but it turns out 
tried-and-untrue, model of anti-corruption is one that 
inadequately factors in the chaos that can be caused in the 
process. You know, the J-curve chaos, where you are trying to 
make things better, but they actually become so dangerous and 
uncertain that basically all the key actors that want to do the 
right thing back up, they move away. So I think that is sort-of 
the core thing that can't be done. It is why partnership is so 
important, because if you are partnering with the folks that 
want to do the right thing and are trying to and who can 
improve incentives for others, then you will get those details 
right.
    So that is the generic thing. Then I would focus in on 
something that, you know, the broader committee I know really 
cares a lot about, the example of customs. Customs is actually 
a great place to get this sort-of thing right because customs 
is in part an enforcement function and it is in part a trade 
facilitation and therefore economic growth function. So if you 
look at, you know, what would it look like to get those 2 
working not across purposes but well together where you have 
got, you know, in international policy at CBP experts on this. 
You know, the project that I proposed is one example of this 
more constructive model. It is very well----
    Mr. Meijer. Thank you. Thank you. Thank you. I appreciate 
that.
    Mr. Leaman. Sorry.
    Mr. Meijer. I am running low on time, so just briefly 
wanted to say, obviously, the J-curve component is 
problematic----
    Chairman Correa. Please continue. Ignore the clock, go 
ahead and continue, Mr. Meijer.
    Mr. Meijer. You know, the J-curve component where the 
initial destabilization that may have can lead to some 
unintended negative consequences. We have seen that in other 
countries, specifically in the counterterrorism realm with 
them--if they can't fully know the customer so they shut off 
everything and it can potentially create more harm than good.
    Now also specifically I am curious--and if the Chairman 
will indulge it--I would love to ask this question of the 
group--if there are any concerns that efforts to tamp down on 
money laundering, especially if it is within a country--ways in 
which that could encourage investments that may otherwise, 
although illicitly, be going into the economy of that nation 
more broadly, potentially routing them through criminal 
networks because of the greater enforcement? Are there ways in 
which we may be in efforts--in our best efforts to achieve 
stability undermining it by pushing what is in a gray zone, but 
obviously corrupt, pushing that straight into a black market 
and greater criminality?
    Mr. Rooney. You know, if I may, Mr. Ranking Member, 2 
things come to mind in this conversation. One is you mentioned 
Know Your Customer. Know Your Customer is an important piece of 
banking regulation, particularly in the United States. It has 
the unintended effect in places like Central America of making 
it more difficult to get people who are not previously in the 
banking system into the banking system. Because we are talking 
about people with very modest means and they are very small 
accounts. Therefore the banking system finds the expense of 
properly administering Know Your Customer regulations to be 
prohibitive in terms of providing service to those people.
    So that is an unintended consequence of that regulation.
    Another set of concerns that occurs to me that hasn't been 
mentioned yet here today is there are a number of aspects of 
American trade policy which are driven by domestic internal 
U.S. sensitivities, industrial sensitivities, which curtail 
opportunities for our trading partners, even in our free trade 
agreements, like Central America. I am thinking in particular 
of the textile sector where a set of rules are in place to make 
it more difficult for apparel manufacturers in the region to 
source textiles and thread flexibly. So they are stuck with 
relatively high-cost mostly cotton and wool fabrics from the 
United States rather than the sort of performance fabrics and 
such things as you see in some of these athletic apparel that 
you see now. They can't really access those yarns without being 
stuck paying tariffs on their goods when they enter the United 
States.
    So that is an example of something I understand the 
domestic political sensitivities that that represents, but it 
is curtailing job opportunities and investment opportunities in 
Central America.
    You know, before 2000 Central America was a major exporter 
of textiles and apparel to the United States and China was a 
relatively minor exporter of textiles and apparel. After CAFTA, 
which was intended to open new opportunities for Central 
America in that space--simultaneously, however, we acceded to 
China entering the WTO and as a result China has swept away the 
textile sector from Central America and the lines continue to 
diverge with Central America now exporting a relatively modest 
fraction of what it used to export to the United States and has 
been more than supplanted by China.
    So if we are going to look at it that way, there are a 
couple of things we could do, which may be costly to you as 
Members of Congress, of course, because these are domestic 
sensitivities, but they are causing issues with respect to the 
fight for prosperity and transparency in Central America.
    Mr. Meijer. Thank you, Mr. Rooney, and thank you, Mr. 
Chairman, for that indulgence.
    I yield back.
    Chairman Correa. Mr. Bishop, you are recognized for 5 
minutes of questions or a little bit longer, as the case may 
be.
    Mr. Bishop. Thank you, Mr. Chairman. Mr. Chairman, I 
commend you and I appreciate your graceful way of having this 
conversation. I am glad there are few enough people where can 
have this candid conversation. Very interesting to me.
    I was mindful of some of the additional information just 
stated. It occurred to me, Mr. Rooney--and, Ms. O'Neil, I want 
to get to you because I didn't--I really felt like I didn't get 
a chance to get with some of the sort-of maybe jarring 
questions I had before. But they have a purpose. I think they 
help kind-of get the dialog moved along.
    But, Mr. Rooney, before I go to Ms. O'Neil, it was 
interesting, you made a point that this accommodation of trade 
policy toward China not only maybe destroyed the textile 
industry in North Carolina and maybe destroyed the textile 
industry on Central and South America, which is a fascinating 
perspective and one that always helps broaden perspective.
    As I think through that though, and one of the things that 
the nations there have difficulty perhaps moving forward, 
because the influence of the huge market to the north in the 
United States and the implications of that, but if we, for 
example, open the floodgates to immigration across our border 
in a way that provides the cartels a $1 billion of revenue a 
year, doesn't that then strengthen them and the countries south 
of our border so that it makes it yet harder for the forces of 
law and order to compete?
    Mr. Rooney. I think that is absolutely right. I do think 
that we--and the Bush Center has done a lot of work on 
immigration policy reform and border management. You may have 
seen President Bush's book of portraits of immigrants, with 
which he hoped to humanize the discussion of immigration at 
this moment in this country. One of the things that we have 
noticed in that whole complex of issues is that one of the 
reasons why we have these surges of people appearing at our 
Southwestern Border is because we have an economy that produces 
large numbers of job opportunities, a very thriving economy, 
and many of those job opportunities would go begging if it 
weren't for immigrants seeking to come in and do them.
    So we would have an interest, in our opinion, in providing 
legal pathways for people to enter this country to work under 
defined circumstances, in most cases temporarily, returning 
home as the result of seasonal work fluctuations or whatever it 
may be. That would actually reduce the incentive for people to 
try to enter this country in an illicit fashion.
    But I think when looked at that way, reform of the 
immigration law in ways that would make the process more 
transparent, make it clearer to potential immigrants outside 
this country under what circumstances they might be admitted to 
this country to work, that would actually go a long way toward 
stemming those kind of surges of people to the border.
    Earlier one of the Members asked about pull factors. That 
is a huge pull factor, those job opportunities. Your average 
Guatemalan or Salvadoran or Honduran campesino doesn't know 
anything about H1B or H2B or green cards or what any of those 
things mean. All they know is their uncle told them that if 
they could get to the United States they could get a job. So 
communicating to those people over time a consistent message 
about under what circumstances they might be able to enter this 
country to work, that is the key ultimately--or one of the keys 
to stemming those flows and securing the border.
    Mr. Bishop. Thank you, Mr. Rooney.
    I am going to reorient the question a little bit, Ms. 
O'Neil, and then give it to you.
    I imagine you and I have to see the world probably pretty 
differently, but I appreciate your input. So to the point I 
just made, if we have a massive opening to the sort of 
immigration we are seeing and then the cartels are getting $1 
billion or plus a year out of that, on top of that problem 
strengthening the cartels and their corrupt influence in those 
other nations, it seems we are also draining those nations of 
the law-abiding citizens that might be inclined to participate 
in the very difficult work of correcting the problems there 
that America has difficulty correcting as well.
    At the end when we talk about--I mean when the 
administration comes out and says we are going to spend $4 
billion down there, it is like a drop in the bucket compared to 
these other influences, it seems to me. Isn't it time that we 
stop being cruelly naive and let our hearts sort-of govern our 
head? When we need to have a much tougher-minded recognition of 
the problems that we are creating just by virtue of--well, now, 
I don't--they were created nefariously, but just by virtue of a 
huge market here. Maybe--and I am going to get way out on a 
limb--you know, issues of drug legalization and so forth in the 
United States that might reduce the draw, the pull of, you 
know, legal narcotics trafficking and the like. But I don't 
think we are ever going to--well, so let me just leave it to 
you there. When we talk about engagement and going down and 
having nice meetings with these governments and sending $4 
billion, aren't we fooling ourselves, wasting the American 
people's money? Worst of all, creating an intolerable and 
unimproving situation for those countries there. Don't we need 
to sort-of take another look at how we were led by our heart 
when we should be led by our head?
    Ms. O'Neil. No, well, thank you for--that was an expansive 
question, and a good one, one that we should always be asking. 
You know, I would start just in the last conversation, you 
know, we talk a lot about here in the United States the China 
shock and what it did to some of our industries and many of our 
workers. I would argue that the China shock on Mexico and 
Central America was much more acute and difficult for their 
economies than for ours because their workers are much more 
competitors with, you know, the billion Chinese that were 
coming in from the rural areas to the urban areas than most of 
our workers, because we--you know, on average the U.S. 
population is more of a middle-educated or higher-educated.
    So these countries over the last 20 years are struggling 
just as much with that shock, if not more than frankly we are 
here in the United States and with many fewer resources. So I 
think as we--before we throw up our hand and say oh, you know, 
there is nothing to be done there, I think we also need to 
recognize that they have had a shock that is now fading as 
China's demographics change and as their geopolitical focus and 
things change.
    So No. 1 is I do think that there is an opportunity right 
now that is very different than it was 20 years ago when they 
were facing this huge economic, you know, shock basically. No. 
2 is I don't think you can compare apples and apples. The fact 
that cartels earn $1 billion, the fact that we are talking 
about $4 billion worth of investment or aid or programs, those 
are very different things. The cartels aren't taking their 
money and putting it in ways to do anything there. Some of it, 
yes, goes to try to corrupt politicians and other sorts of 
things, but this is not a comparative prospect. I think one of 
the things--and maybe this is how I see the world--but when I 
have been there, there is a whole group of people across all 
different levels of society, from rural areas to urban areas, 
they are people who want a different place in Central America 
than the one that they exist in today. Many of the people who 
are leaving to the United States, they want to stay ultimately. 
They want to go back. Even if you go and talk to communities 
here--and I know many of you have communities in your 
districts, you know, they still--they are building a house back 
home because some day they hope to go back there, even if 
perhaps they never will go back.
    You know, one of the things that we have seen in the past, 
and there are a lot of good studies in terms U.S. migration is 
when there is the possibility of circular migration, when there 
is the possibility of a guest worker program where you can come 
and work her and then you and go back in a orderly and legal 
fashion and go back home, that you get a lot of--the 
circularity bring a lot of virtuous circles. You know, people 
come up here, they earn some money, they take it back home, 
they invest at home. People at home have different jobs because 
they have seed capital to create a small business or a taxi 
stand or whatever it is that they do. But there is a 
circularity there. There also is the bringing back of an 
experience, with an American experience and the values that are 
in the United States, the idea that you don't need to bribe the 
traffic cop, because that is not how it is done in the United 
States. You stop at the stop lights. There is sort-of an 
experience that is tied together too that brings back some of 
the things here. That doesn't take money, right. That takes 
experience and connections.
    So I think as we--this is a huge problem for these 
countries and, as we know, a huge issue today in the United 
States. So as we think about this, yes, money is part of it. Of 
course, right. We have laid out various programs. Focus and 
pressure and using some of the tools we have, that is another 
part of it. We have talked about different ways to do that. But 
I think this interpersonal connection and leveraging the El 
Salvadorians, Guatemalans, Hondurans that are here in the 
United States that want a better, you know, place at home for 
those who stay at home, leveraging the civil society 
organizations, the private sector that wants to follow the path 
that Welby is talking about, there are all these partner there. 
They don't necessarily need our money, but I do think they need 
someone to help them come together and leverage the resources 
they have, whether they are monetary or personnel or others, 
together. I think that is the role that some of the U.S. money, 
a smaller amount of money, right--we are not talking about 
fixing the whole economy. But that is what U.S. programs can 
help do, is give these people the resources to do the things 
that they would want to do anyway.
    So thank you.
    Mr. Bishop. Thank you, Chair Correa, for your very wise 
administration of this hearing.
    Chairman Correa. Anybody else want to add onto Mr. Bishop's 
question?
    Yes, ma'am, go ahead, Claudia.
    Ms. Umana Araujo. I would like to comment that there are so 
many things that can be done and I think that time is of the 
essence now. I really believe so. That the United States right 
now has this great opportunity also to--I mean in the fight 
against corruption, fighting narcotrafficking, it is a lot for 
our countries. We tend to go back to the United States looking 
for cooperation, but also to the World Bank, to the IDB. The 
IMF and the United States has also something to say about those 
multi-lateral organizations. I believe that we need to show 
more regarding the rule of law and transparency in the 
relationship with those international organizations.
    I would like to say that lately in El Salvador there has 
been this great discussion about bitcoin. I mean we are 
dollarized and then at the same time we are trying to get 
bitcoin mainstreamed. Imagine, when we don't have the literacy. 
So a lot of things--I mean we are little countries and somehow 
we get to be like the testing grounds of these big ideas. 
Sometimes they go really good and sometimes they can go really 
bad.
    So I think that we need always to be believing in 
institutions because we need to have this--not only, you know, 
only the good will of the people, but having institutions that 
live longer than our specific collaborations.
    So in that sense, I think that the task force that was 
announced this week by Vice President Harris is also a very 
interesting aspect that I have never heard before. So let us 
keep being very creative.
    Thank you so much, Mr. Chairman, for the opportunity.
    Chairman Correa. Anybody else want to add onto the question 
or answer to Mr. Bishop's question?
    Mr. Leaman. I am glad to just--one of my favorite memories 
in this space is in a development meeting a few years ago, a 
SOUTHCOM general said, look, you know, when I look at where at 
the communities where Walmart wants to put new stores, it looks 
to me like my SOUTHCOM heat map in Central America. So, you 
know, it is--we need--in that sense basically the partnership 
is the leverage, right. I mean $4 billion might be small, but 
if it is used to facilitate the activity that is going to make 
a difference, I think it can be highly leveraged. But, again, 
don't pour it into sort-of, you know, stovepiped economic 
projects--accomplished their supply chain integration and their 
investment plans, are these specific rule of law interferences 
with those spaces.
    So that is--that--we need to like have that partnership in 
a go narrow in order to go big basically.
    Mr. Meijer. Mr. Chairman, you may be on mute.
    Chairman Correa. Anybody else like to add anything on this 
one?
    Mr. Rooney. I am not--I do not know if that was directed at 
me, sir, but I appreciate it very much the discussion, but I 
thought Mr. Bishop's comments about the revenue that these 
different illicit movements of people and contraband into our 
country, the revenue streams that those represent to the 
cartels and that we ought to think about how our policy feeds 
those. I think that is an important insight.
    Chairman Correa. That being said, I thank the witnesses 
today and I really thank Mr. Bishop and Mr. Meijer for their 
insightful questions. I want to say that I walk away today with 
even more questions than I had 2 hours ago and with a different 
perspective on this. I thought I had a handle on it, and I do 
have a handle on much, much more.
    So I look forward to continue working with my colleagues on 
these issues and with the witnesses. As I said, this can't be 
just a one committee hearing, one statement, one event, but 
rather a continuum of discussions long-term to address the ills 
in our own hemisphere.
    Again, thank the witnesses for the testimony and the 
Members for their questions. Members of the committee may have 
additional questions and we ask the witnesses to respond when 
the Members do submit those questions in writing, ask you to 
respond to them.
    The Chair reminds the Members that the committee record 
will remain open for 10 business days.
    Without objection, this committee stands adjourned. Thank 
you very much. We will see you soon. Take care.
    [Whereupon, at 3:27 p.m., the subcommittee was adjourned.]

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