[Federal Register Volume 63, Number 50 (Monday, March 16, 1998)]
[Presidential Documents]
[Pages 12937-12964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-6584]



[[Page 12935]]

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Part IV





The President





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Presidential Determination No. 98-15 of February 26, 1998--
Certification for Major Illicit Drug Producing and Drug Transit 
Countries
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                         Presidential Documents 
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  Federal Register / Vol. 63, No. 50 / Monday, March 16, 1998 / 
Presidential Documents  

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 Title 3--
 The President

[[Page 12937]]

                Presidential Determination No. 98-15 of February 26, 
                1998

                
Certification for Major Illicit Drug Producing 
                and Drug Transit Countries

                Memorandum for the Secretary of State

                By virtue of the authority vested in me by section 
                490(b)(1)(A) of the Foreign Assistance Act of 1961, as 
                amended, (``the Act''), I hereby determine and certify 
                that the following major illicit drug producing and/or 
                major illicit drug transit countries/dependent 
                territories have cooperated fully with the United 
                States, or have taken adequate steps on their own, to 
                achieve full compliance with the goals and objectives 
                of the 1988 United Nations Convention Against Illicit 
                Traffic in Narcotic Drugs and Psychotropic Substances:

                    LAruba, The Bahamas, Belize, Bolivia, Brazil, 
                China, Dominican Republic, Ecuador, Guatemala, Haiti, 
                Hong Kong, India, Jamaica, Laos, Malaysia, Mexico, 
                Panama, Peru, Taiwan, Thailand, Venezuela, and Vietnam.

                By virtue of the authority vested in me by section 
                490(b)(1)(B) of the Act, I hereby determine that it is 
                in the vital national interests of the United States to 
                certify the following major illicit drug producing and/
                or major illicit drug transit countries:

                    Cambodia, Colombia, Pakistan, and Paraguay.

                Analysis of the relevant U.S. vital national interests, 
                as required under section 490(b)(3) of the Act, is 
                attached.

                I have determined that the following major illicit drug 
                producing and/or major illicit drug transit countries 
                do not meet the standards set forth in section 490(b) 
                for certification:

                    Afghanistan, Burma, Iran, and Nigeria.

                In making these determinations, I have considered the 
                factors set forth in section 490 of the Act, based on 
                the information contained in the International 
                Narcotics Control Strategy Report of 1998. Given that 
                the performance of each of these countries/dependent 
                territories has differed, I have attached an 
                explanatory statement for each of the countries/
                dependent territories subject to this determination.

                You are hereby authorized and directed to report this 
                determination to the Congress immediately and to 
                publish it in the Federal Register.

                    (Presidential Sig.)

                THE WHITE HOUSE,

                    Washington, February 26, 1998.

[[Page 12938]]

                STATEMENTS OF EXPLANATION

                Aruba

                    Aruba is a major trafficking and staging point for 
                international narcotics trafficking organizations which 
                transship cocaine and heroin from Colombia, Venezuela 
                and Suriname to the United States and Europe. Its key 
                position near the Venezuelan coast with air and sea 
                links to South America, Europe, Puerto Rico and other 
                Caribbean locations makes it a prime transshipment 
                point. Drug shipments are made primarily via 
                containerized cargo, but commercial airlines and cruise 
                ships are also used.
                    Money laundering organizations use legitimate 
                companies as fronts to invest in land development and 
                other construction projects. The Government of Aruba's 
                (GOA) Free Trade Zone (FTZ), casinos and resort 
                complexes are reported to be attractive venues for 
                money laundering and smuggling. Legislation recommended 
                by four joint Aruba-Dutch commissions to enhance 
                monitoring of the FTZ, casinos, import and export of 
                money, and legal entities is pending.
                    Although Aruba is a part of the Kingdom of the 
                Netherlands (GON), it has autonomy over its internal 
                affairs and has independent decision-making ability in 
                many drug policy areas. In 1997, the GOA passed and 
                implemented a new criminal procedural code which allows 
                for expanded investigative powers for local law 
                enforcement as well as for extradition of nationals 
                subject to service of sentences in Aruba. The change in 
                criminal procedure removed one of the last remaining 
                barriers to the GOA's full compliance with the 1988 UN 
                Drug Convention standards. The GOA has yet to ask the 
                Kingdom of the Netherlands (GON), a party to the 1988 
                UN Drug Convention, to extend it to Aruba.
                    The GOA, as part of a joint Netherlands-Netherlands 
                Antilles-Aruba Coast Guard, received two small fast 
                patrol boats to patrol the coastal waters and interdict 
                drug shipments. The GOA established money transaction 
                monitoring entities to review unusual transactions in 
                the banking sector. Aruban law enforcement officials 
                participated in USG-sponsored training courses for drug 
                enforcement during 1997.
                    Indications of corruption still hinder the 
                effectiveness of GOA efforts against international 
                narcotics traffickers and money launderers. The 
                withdrawal of the OLA party from the Eman coalition 
                government and the government's subsequent fall in late 
                1997 was linked in the press to the efforts of elements 
                within Aruban society and political circles who are 
                seeking to halt or reverse recent government actions, 
                including progress in trans-national crime, 
                counternarcotics and money laundering issues. Elections 
                in December returned no one party with a parliamentary 
                majority and efforts to form a new coalition government 
                have moved slowly. Progress in implementing anti-drug 
                measures approved in 1997 may be delayed as a result of 
                the political impasse.
                    Despite these problems, Aruba generally cooperated 
                in 1997 with the USG to meet the goals and objectives 
                of the 1988 UN Drug Convention.
                The Bahamas

                    The USG and the Government of the Commonwealth of 
                The Bahamas (GCOB) have enjoyed an excellent, 
                cooperative working relationship on counternarcotics 
                over the past decade. The GCOB places a high priority 
                on combating drug transshipments through its 
                archipelago, as demonstrated by the extensive resources 
                it devotes to this initiative. Nevertheless, 
                significant quantities of illicit drugs continue to 
                transit The Bahamas en route to the U.S., and The 
                Bahamas remains a major drug transit country. The GCOB 
                cooperates very closely with the USG on Operation 
                Bahamas and Turks and Caicos (OPBAT). U.S. and Bahamian 
                law enforcement agencies

[[Page 12939]]

                worked diligently together throughout the year to 
                respond to increases in air and maritime transshipment 
                incidents.
                    The first country to ratify the 1988 UN Drug 
                Convention, The Bahamas continues to take steps to 
                implement it. Following passage of anti-money 
                laundering legislation (March 1996) and implementing 
                regulations (December 1996), in November 1997 The 
                Bahamas submitted its strong anti-money laundering 
                regime to mutual evaluation by the Caribbean Financial 
                Action Task Force (CFATF).
                    During the year, the GCOB continued to strengthen 
                its judicial system, with assistance from the USG. 
                However, procedural delays continue to plague the court 
                system, leading to delays in drug cases. The Bahamas 
                needs to improve the effectiveness of its court system 
                in disposing of drug cases more expeditiously.
                    The GCOB should also put greater emphasis on 
                forfeiture of the proceeds of crime and trafficker 
                assets, including early disposal of commodities used in 
                trafficking before they lose value. The Bahamas has not 
                yet designated the U.S. under the Bahamian law 
                concerning execution of foreign forfeiture orders in 
                The Bahamas, despite repeated U.S. requests since 1993. 
                In past years, The Bahamas has prosecuted and convicted 
                some middle- and low-level officials on charges of 
                narcotics corruption.
                Belize

                    The Government of Belize (GOB) recognizes the 
                problem of drug transit through its territory and the 
                effect drug trafficking has on domestic crime. Anti-
                narcotics activities are centralized in a committee 
                consisting of various components of the Belize Police 
                Force (BPF) and the Belize Defense Force (BDF), with a 
                dedicated group of investigative police and a rapid 
                response force called the Dragon Unit. They are active 
                in the fight against drugs and work closely with the 
                USG. The GOB is party to the 1988 UN Drug Convention.
                    With USG help, the GOB continued to work to upgrade 
                the professionalism and equipment of the BPF to combat 
                violent crime and narcotics trafficking. A new two-
                officer money-laundering unit has recently completed 
                training with USG support. The GOB has continued its 
                support of cooperative efforts to reduce drug 
                trafficking through its borders and to combat the crime 
                associated with such trafficking. The GOB has also 
                maintained its support of regional and unilateral 
                counternarcotics efforts.
                    1997 was a record year for cocaine interdiction 
                with more than two metric tons seized. Indications are 
                that marijuana cultivation remained stable. The efforts 
                of the Belizean security forces to control narco-
                traffic have been hampered by the lack of manpower, 
                training and equipment, corruption within the ranks, 
                and the relatively large expanse of uninhabited 
                territory of the country.
                    This improved performance, however, was tempered by 
                the mixed record of convictions and sentencing, 
                including the dismissal of an important case involving 
                Colombian, Mexican, and Belizean defendants. The 
                Belizean judicial system remains weak, understaffed, 
                and underfunded. Although the GOB and the USG reached 
                tentative agreement on a new extradition treaty and a 
                MLAT in late 1996, the GOB subsequently raised new 
                concerns about certain aspects of these treaties and 
                negotiations were stalled during 1997. While the new 
                extradition treaty has not been completed, Belize 
                continues to extradite alleged criminals to the United 
                States under the 1972 US-UK extradition treaty.
                    The GOB needs to continue to fully cooperate with 
                the USG and take action to meet the goals and 
                objectives of the 1988 UN Drug Convention and other UN 
                drug conventions. Of particular importance, the GOB 
                should improve its prosecution of major drug cases, 
                provide more support for the judicial branch, and 
                conclude negotiations on mutual legal assistance and

[[Page 12940]]

                extradition treaties with the US. A renewed commitment 
                to confronting corruption is essential.
                Bolivia

                    Bolivia is the world's second leading producer of 
                cocaine hydrochloride, and has an illegal coca-cocaine 
                industry, including sophisticated operations to smuggle 
                essential chemicals, that is increasingly under the 
                control of Bolivians. The participation of foreigners 
                is more and more relegated to the refining of base into 
                cocaine hydrochloride and to transporting cocaine out 
                of Bolivia, however, this will diminish as Bolivian 
                traffickers improve their refining capabilities.
                    The former GOB never implemented an eradication 
                program in the Yungas, and quickly discontinued its 
                policy of arresting and prosecuting persons who plant 
                new coca. The new Banzer government has promised prompt 
                action on both issues. Additionally, although 
                eradication slowed in April and did not effectively 
                resume until early October, Bolivia exceeded its gross 
                eradication goal for 1997 of 7,000 hectares and 
                produced a net reduction in coca cultivation of 2 
                percent. This is an improvement over the one percent 
                net reduction in 1996 and was largely conducted after 
                the inauguration of the new Banzer government.
                    Bolivia's new government is building a consensus, 
                via a series of national dialogues, for the country's 
                first national counternarcotics strategy. Their five-
                year plan includes the goal of totally eliminating 
                illicit coca cultivation by the year 2002.
                    Total narcotics-related arrests increased 
                substantially in 1997, as did seizures of cocaine 
                products and essential chemicals. The Special 
                Investigative Units--vetted and trained in the U.S.--
                have returned to Bolivia and are actively engaged in 
                their own operations and in supporting the on-going 
                investigations of other Bolivian counternarcotics 
                units. The Bolivian Navy's Blue Devil Task Force has 
                been granted law enforcement authority, a change which 
                will almost certainly result in greatly improved 
                interdiction results on the country's waterways.
                    The legislature is considering critical judicial 
                reforms, including revisions to Law 1008, Bolivia's 
                basic counternarcotics law, which will, when enacted, 
                greatly improve the country's court system and result 
                in a fairer and more transparent judicial system.
                    Alternative development initiatives have been 
                highly successful in providing farmers viable, licit 
                alternatives and have helped solidify public opinion 
                against coca cultivation.
                    In 1998, the Bolivian government must act to 
                prevent new coca plantings and conduct eradication 
                efforts in a sustained and intensified manner. A net 
                reduction of 20 percent (or 7,000 hectares) of coca 
                plantings must be achieved in 1998 if the Bolivians are 
                to garner success for their 5-year plan to eliminate 
                illicit coca. They must eliminate individually 
                compensated eradication for controlling the cultivation 
                of new coca fields and prosecute those who plant them. 
                The Blue Devil Task Force must implement their new law 
                enforcement authority to effect seizures of narcotics 
                and chemicals, and arrests of narco-traffickers on 
                Bolivia's waterways. Enforcement of recently enacted 
                legislation criminalizing money laundering was delayed, 
                in 1997, pending clarification of lines of authority 
                and identification of funding sources. Bolivia must 
                move forward to vigorously implement these laws.

[[Page 12941]]

                Brazil

                    Brazil is a major transit country for cocaine 
                shipped by air, river, and maritime routes from 
                Bolivia, Peru, and Colombia to the U.S. and Europe. 
                Because of increased interdiction of trafficker 
                aircraft in Peru (along the Peru/Colombia air 
                corridor), traffickers have shifted illicit narcotics 
                flights into Brazilian air space. Brazil's vast and 
                sparsely populated Amazon region provides ample 
                opportunity for traffickers to transship drugs and 
                chemicals by air and riverine routes. A southern ``drug 
                route'' also exists along Brazil's borders with 
                Paraguay and Bolivia.
                    While not a significant cultivation country, Brazil 
                is a major producer of essential/precursor chemicals 
                and synthetic drugs. There is also a growing domestic 
                drug consumption and addiction problem, primarily among 
                young people. Several key pieces of counter-narcotics 
                legislation, including an anti-money laundering law, 
                are under review in the congress. Brazil's bank secrecy 
                laws and its highly developed financial networks make 
                it fertile ground for money laundering of drug profits.
                    Although police drug seizures in 1997 were only 
                slightly above those in 1996, anti-narcotics law 
                enforcement units stepped up interdiction activities in 
                the Amazon region and along the southern ``drug 
                route.'' The government implemented a new national 
                defense policy (since 1996) to allow the military to 
                assist police anti-drug operations in the Amazon. 
                During two major operations in that region, the police 
                put a majority of all clandestine airfields out of 
                operation. In cooperation with neighboring countries, 
                Brazilian police carried out investigations which 
                disrupted several major drug smuggling organizations. 
                Brazil also continues to cooperate in extradition cases 
                of non-Brazilian citizens.
                    To signal its continued resolve to deal with 
                narcotics trafficking problems, Brazil signed a new 
                Letter of Agreement (LOU) for bilateral cooperation in 
                narcotics control with the U.S. in 1997. Brazil has 
                bilateral narcotics control agreements with all its 
                South American neighbors as well as Germany and Italy. 
                During a visit by President Clinton in October, Brazil 
                signed a mutual legal assistance treaty (MLAT) with the 
                U.S. In another positive step, the government 
                incorporated anti-money laundering provisions in a 
                packet of emergency measures sent to Congress in 
                conjunction with a growing economic/fiscal crisis. This 
                packet has cleared the lower house of the legislature 
                and is still being considered by the Brazilian senate 
                with passage possible in early 1998. Senior government 
                officials made clear to U.S. interlocutors during 1997 
                that Brazil was fully committed to working with the 
                U.S. and other nations in reducing the traffic in 
                illicit drugs in South America.
                China

                    China both remains a major transit route for 
                Southeast Asian heroin destined for the U.S. and other 
                Western markets and has had increasingly to deal with 
                the phenomenon of itself becoming such a market. China 
                continues to take a strong stand to battle this trend. 
                In 1997, it further intensified its nation-wide efforts 
                to combat drugs by focusing special attention on anti-
                drug education. Narcotics seizures also increased, as 
                did the monitoring of precursor chemicals: there was a 
                four-fold increase over 1996 in the seizures of such 
                chemicals. China also moved to strengthen anti-drug 
                legislation and for the first time identified money 
                laundering as a crime. In 1997, China signed a Mutual 
                Legal Assistance Agreement with India which placed 
                special emphasis on narcotics trafficking. China is 
                also a party to all of the UN narcotics conventions.
                    USG-PRC cooperation on counternarcotics issues 
                improved in 1997. In October, as part of the Joint 
                Statement issued during the Summit between Presidents 
                Jiang and Clinton, China agreed to the opening of 
                reciprocal drug enforcement offices in Beijing and 
                Washington and to the establishment

[[Page 12942]]

                of a Joint Liaison Group on Law Enforcement which 
                specifically included narcotics trafficking as one of 
                the issues to be addressed. China hosted two Drug 
                Enforcement Administration seminars on chemical 
                control, sent officials to the United States to take 
                part in airport interdiction training and continued 
                working-level exchanges of information on international 
                drug trafficking cases with USG law enforcement 
                officials. A direct e-mail link with DEA to facilitate 
                information exchange on drug cases has been 
                established. In April, China transferred to the U.S. 
                for prosecution on drug trafficking charges a Burmese 
                national in its custody.
                    China continues to struggle with the corruption and 
                greed which have accompanied economic success and 
                prosperity. The Government has passed specific laws to 
                deal with officials guilty of the use, manufacture, or 
                delivery of narcotics. Penalties for such 
                transgressions include execution. There is no evidence 
                of high-level official involvement in the drug trade. 
                The juxtaposition, however, of low-paid law enforcement 
                and other officials with the lucrative drug business 
                creates the potential for corruption.
                    Chinese officials have noted that 90 percent of the 
                heroin flowing into China comes from Burma. China's 
                close trade and political relationship with Burma has 
                facilitated misuse of their shared 2,000-kilometer 
                border by drug traffickers. China has pledged 
                cooperation in helping the Burmese fight narcotics 
                production and has supported international programs to 
                wean Burmese farmers away from drug production. China's 
                success--or its failure--with regard to addressing the 
                problem of Burmese drug production has serious 
                implications for China, for the rest of Asia and for 
                the West.
                Dominican Republic

                    The Dominican Republic is an active transshipment 
                point for drugs destined for the United States and 
                Europe. Traffickers smuggle narcotics through Dominican 
                territory by air, sea, and along the country's porous 
                border with Haiti. A weak Dominican judicial system 
                continues to hamper efforts to combat the narcotics 
                trade, but a promising reform process began in 1997.
                    The Government of the Dominican Republic (GODR) 
                continued to cooperate with the United States 
                Government (USG) on counternarcotics objectives and 
                goals. The GODR is party to the 1988 United Nations 
                Drug Convention. It has enacted a money laundering and 
                asset forfeiture law that complies with the 
                Organization of American States (OAS)/Inter-American 
                Drug Abuse Control Commission (CICAD) model. The GODR 
                and the USG have a bilateral maritime agreement that 
                allows for consensual boarding of sea vessels by host 
                country authorities. Dominican authorities cooperate 
                closely on drug investigation matters with the USG. The 
                GODR had a mixed record of drug-related seizures and 
                arrests. There was a decrease in marijuana seizures and 
                arrests for drug-related offenses (1,481 arrests) in 
                1997, but an increase in heroin seizures (8.3 kgs). 
                Cocaine seizures rose slightly from 1996 to 1,354 kgs. 
                in 1997.
                    This cooperation has been marred by the 
                disappointing record of judicial and legislative 
                reforms. Dominican law prohibits the extradition of 
                Dominican nationals, creating a refuge in the Dominican 
                Republic for Dominican nationals who are believed to 
                have committed serious crimes in the U.S. Pursuant to 
                an extraordinary and rarely used Executive Order, the 
                GODR did extradite two Dominican nationals to the 
                United States in August 1997 to stand trial on charges 
                of narcotics trafficking and homicide. Dominican 
                judicial authorities have yet to act on more than two 
                dozen additional U.S. extradition requests. An absence 
                of effective government supervision of exchange houses 
                or remittance operations and the presence of large cash 
                flows, which could hide money laundering activity, 
                continue to make the Dominican Republic vulnerable to 
                further money laundering. Money laundering is not 
                likely to diminish until the GODR aggressively 
                implements the money laundering legislation.

[[Page 12943]]

                    Neither the GODR itself nor senior government 
                officials encourage, facilitate, or engage in drug 
                trafficking or money laundering as a matter of 
                government policy. No evidence exists that senior 
                government officials are involved in drug distribution 
                or money laundering. No senior government official has 
                been indicted for drug-related corruption in 1997.
                Ecuador

                    Ecuador continues to be a major transit country for 
                the shipment of cocaine from Colombia to the United 
                States and Europe. Ecuador is also used by traffickers 
                for money laundering of drug profits and to transit 
                essential/precursor chemicals destined for Colombian 
                drug labs. Cocaine is shipped primarily by road from 
                the Colombian border to major Ecuadorian ports where it 
                is concealed in bulk cargo transported in large ocean-
                going commercial vessels.
                    In 1997, Ecuador increased the number of 
                interdiction checkpoints along inland transit routes 
                leading to ports. With U.S. aid, Ecuador is 
                establishing a Joint Information Coordination Center 
                (JICC) in the major port city of Guayaquil. Ecuador 
                also hosted a U.S. Customs/U.S. Coast Guard team which 
                assessed port operations for top government officials. 
                The Ecuadorian Congress passed legislation authorizing 
                the forfeiture of drug assets and the use of forfeiture 
                funds in support of prevention, rehabilitation, and 
                police counter-narcotics activities. Police assigned 
                personnel for U.S.-sponsored training to form a 
                ``controlled chemical'' investigative unit. The 
                government submitted new legislation to help police 
                carry out money laundering investigations.
                    There is a long tradition of cooperation between 
                Ecuadorian National Police and U.S. law enforcement in 
                the area of narcotics control. Still, the police lack 
                many of the resources needed to deal effectively with a 
                narcotics trade directed by powerful criminal 
                organizations in its neighbor to the north, Colombia, 
                and, to a lesser extent, in Peru to the south. 
                Cooperation between the Ecuadorian and Peruvian 
                governments is complicated by an on-going, serious, and 
                occasionally violent border dispute.
                    Ecuador cooperated with the U.S. to eradicate most 
                of its coca crop in the 1980's and thus avoided the 
                production problems that currently plague its neighbors 
                Colombia and Peru. In 1997, Ecuador continued to 
                demonstrate its willingness to work closely with the 
                U.S. in dealing with other narcotics issues including 
                major vulnerabilities such as cocaine transshipments, 
                chemical diversions, money laundering, and judicial 
                corruption/inefficiency. The police's canine unit, for 
                instance, was created with U.S. assistance and had a 
                number of outstanding successes in interdicting cocaine 
                shipments in 1997. Ecuador has also signalled a 
                willingness to discuss and work out ways in the near 
                future to cooperate with the U.S. in maritime 
                interdiction.
                Guatemala

                    With peace a reality after thirty six-years of 
                internal conflict, President Arzu has made public 
                security a top priority and has shown special interest 
                in ensuring maximum cooperation with the United States 
                in combatting counternarcotics trafficking through 
                Guatemala and in the region.
                    Guatemala is located half way between the U.S. and 
                Colombia and continues to be a transshipment and 
                storage point for cocaine destined for the US via 
                Mexico. There has been a marked increase in the use of 
                truck and shipping containers. Guatemala has made major 
                improvements to a self-financed port security program 
                which expanded operations.
                    A major initiative resulted in the transition from 
                the old national and treasury police forces to the new 
                National Civilian Police (PNC) and the consolidation of 
                various paramilitary law enforcement agencies. The 
                Depart

[[Page 12944]]

                 ment of Anti-Narcotics Operations (DOAN), a specially 
                equipped civilian police command, was transferred to 
                the PNC after re-training and a major pay increase. 
                With USG assistance, the DOAN seized almost 6 metric 
                tons of cocaine in 1997. There was also steady progress 
                in the successful prosecution of narcotics-related 
                crimes with over 90 per cent of those accused being 
                convicted.
                    Guatemala works closely with USG organizations to 
                stem the flow of drugs through Guatemala, but has not 
                yet enacted necessary legislation to implement all the 
                provisions of the 1988 UN Convention on narco-
                trafficking. The Government of Guatemala (GOG) does not 
                encourage or facilitate illicit production or 
                distribution of narcotic or psychotropic drugs or 
                controlled substances.
                    Guatemalan studies show that drug use is on the 
                rise in most age groups with cocaine use increasing 
                rapidly. However, Guatemala has recently completed a 
                comprehensive national drug plan which is scheduled to 
                be implemented starting in January 1998 and which 
                includes an ambitious demand reduction program.
                Haiti

                    Already confronted by a wide array of issues that 
                compete for the attention of its limited professional 
                and managerial talent, the Government of Haiti (GOH) 
                and its criminal justice institutions are severely 
                strained by increased international narcotics 
                trafficking activities. Haiti's fledgling national 
                police force is hampered by a lack of manpower, 
                training, equipment, and experience. The poorest nation 
                in the Western Hemisphere, Haiti is particularly 
                vulnerable to the corrosive effects of narcotics-
                related corruption. Haiti's weak and ineffective 
                judicial system has a poor track record of narcotics 
                prosecutions. Haiti is a party to the 1988 UN Drug 
                Convention.
                    Because of a significant increase in the detected 
                activities of Colombian drug trafficking organizations 
                in Haiti in 1994, Haiti was added to the list of major 
                drug producing and transit countries in 1995. Due in 
                measure to effective USG interdiction efforts around 
                Puerto Rico and the Virgin Islands in 1997, traffickers 
                have increasingly targeted Haiti's long, undefended 
                coastline for narcotics deliveries intended for 
                transshipment (often throughthe Dominican Republic) to 
                the US. In response to this growing threat, the GOH, 
                within its existing capacity, cooperated fully with the 
                United States Government (USG) in counternarcotics 
                efforts in 1997. The GOH must build upon the positive 
                steps it has already taken to more aggressively seize 
                narcotics shipments, pursue and prosecute narcotics 
                traffickers, and investigate all allegations of 
                governmental corruption with a view to effective 
                prosecution.
                    The GOH is slowly but incrementally putting into 
                place the legal mechanisms and governmental policies to 
                counter organized trafficking elements. This effort has 
                been hampered overall by the ongoing political impasse 
                over a parliamentary quorum. In 1997, the GOH and the 
                USG signed a Maritime Counterdrug Agreement. In 1997, 
                the Haitian Coast Guard (HCG) and the U.S. Coast Guard 
                (USCG) cooperated in four separate maritime 
                interdictions that yielded over 2 metric tons of 
                cocaine and five tons of marijuana. With USG support, 
                the Counternarcotics Unit of the Haitian National 
                Police (CNU) was staffed, trained and partially 
                deployed in 1997. A fully-deployed CNU is scheduled to 
                move to a permanent headquarters facility at the Port 
                au Prince airport in 1998.
                    In response to allegations of drug-related 
                corruption within the Haitian government, the Haitian 
                National Police arrested 21 police and judicial 
                officials for suspected complicity in narcotics 
                trafficking in 1997. A Ministry of Justice (MOJ) 
                Special Advisor on Narcotics Matters drafted a national 
                narcotics strategic plan, completed draft legislation 
                on money laundering, and updated archaic Haitian 
                narcotics laws. That said, corruption remains

[[Page 12945]]

                an important USG concern, as does the need for 
                successful prosecutions of narcotics trafficking cases.
                    In 1997, the GOH continued to give USG officials 
                high-level assurances of its commitment to drug 
                control, and those assurances have been supported by 
                progress in establishing Haitian counter-drug 
                institutions. However, Haiti still has a number of 
                major goals to achieve before it will be able to take 
                significant, independent action in counternarcotics.
                    Once a new Prime Minister and a new government are 
                installed, the Maritime Counterdrug Agreement and the 
                MOJ's legislation can be submitted for Parliamentary 
                approval and a National Narcotics Plan approved at the 
                cabinet level. The USG will continue to work with the 
                GOH to achieve Parliamentary passage of pending and 
                planned legislation and its vigorous implementation, 
                continued training the CNU, and the institution of 
                anti-corruption steps within the ranks in further 
                compliance with the goals and objectives of the 1988 UN 
                Drug Convention and the terms of our bilateral 
                agreements and treaties.
                    The USG will remain engaged in increasing the 
                capacity of the HCG and CNU to meet the threat posed by 
                traffickers. The USG will also help improve the overall 
                security of the Port-au-Prince Airport to inhibit the 
                flow of drugs via air links to the U.S. Additional 
                counternarcotics objectives for Haiti include targeting 
                at least one major international narcotics organization 
                for significant interdiction efforts and enacting civil 
                and administrative asset forfeiture provisions to 
                facilitate targeting of trafficker assets and companion 
                legislation requiring use of the forfeited funds solely 
                for counternarcotics interdiction and enforcement 
                operations.
                Hong Kong Special Administrative Region

                    The Hong Kong Special Administrative Region remains 
                a target point for money launderers and drug 
                traffickers. USG officials believe that Hong Kong 
                traffickers control large portions of Southeast Asian 
                narcotics destined for the West, including the United 
                States. In 1997, however, there were no seizures of 
                heroin destined for the U.S. which could be tied to 
                Hong Kong itself. Hong Kong has strengthened money 
                laundering guidelines applicable to its financial 
                institutions, securities firms and the insurance 
                sector. It also enacted the 1997 Drug Trafficking 
                Order, which allows for the enforcement of confiscation 
                orders issued by countries that are signatories to the 
                1988 UN Drug Convention, thus enhancing Hong Kong's 
                ability to recover the proceeds of drug trafficking. 
                With Hong Kong's reversion to Chinese sovereignty in 
                July 1997, the 1988 UN Drug Convention has for the 
                first time been made applicable to Hong Kong. The U.S.-
                Hong Kong Extradition Agreement was ratified by the 
                U.S. in November 1997 and came into force in January of 
                this year. The new U.S.-Hong Kong Mutual Legal 
                Assistance Agreement awaits Senate action.
                    Close cooperation between Hong Kong law enforcement 
                agencies and the Public Security Bureau of Guangdong 
                Province resulted in increased seizures on the mainland 
                of heroin which would otherwise have entered Hong Kong. 
                In conformity with the 1988 UN Drug Convention, Hong 
                Kong amended Schedules 1 and 2 of its Control of 
                Chemicals Ordinance to place the salts of 17 chemicals 
                under licensing control. Hong Kong also issues pre-
                export notifications to destination countries of 
                precursor chemical shipments so as to prevent 
                diversions. As noted by the International Narcotics 
                Control Board, Hong Kong stopped three suspicious 
                chemical shipments in 1997. Hong Kong will face the 
                second review of its system by the Financial Action 
                Task Force in 1998 and has carefully reviewed its 
                existing body of narcotics-related legislation and 
                practices in preparation for that review.
                    There is no reported narcotics-related corruption 
                among senior government or law enforcement officials in 
                Hong Kong. Cooperation between the U.S. and Hong Kong 
                on counternarcotics matters remains both wide-ranging 
                and excellent. Hong Kong and USG personnel conducted 
                several joint narcotics

[[Page 12946]]

                investigations in 1997, resulting in a number of 
                arrests and drug seizures, as well as in financial 
                seizures. In August, U.S., Hong Kong and Mexican 
                officials also successfully coordinated a controlled 
                delivery to Mexico of 150 kilograms of pseudoephedrine 
                originating in China. Hong Kong Customs and Excise 
                authorities provided two instructors to assist DEA's 
                diversion training team in conducting two one-week 
                seminars in China. Locally posted DEA officers continue 
                to provide monthly briefings at the Hong Kong Police 
                Command School.
                India

                    India, an important producer both of licit and 
                illicit narcotics, is a crossroads for international 
                narcotics trafficking. It is the world's largest 
                producer of licit opiates for pharmaceutical use and 
                the only producer of licit gum opium. Some opium is 
                diverted from the country's legal production, although 
                it is difficult to ascertain the exact amount. The 
                Government of India estimates diversion at about 10 
                percent, although it may be as high as 30 per cent. 
                Illicit poppy cultivation declined significantly in the 
                past year, form 47 metric tons (mts) to 30 mts, 
                according to USG estimates. India's location between 
                the two main sources of illicitly grown opium, Burma 
                and Afghanistan, as well as its well-developed 
                transportation infrastructure, makes it an ideal 
                transit point but heroin transshipment is not as 
                significant as in neighboring Pakistan, Thailand and 
                China and there is no evidence that opiates 
                transshipped through India reach the U.S. in 
                significant amounts.
                    As a licit producer of opium, India must meet an 
                additional certification requirement. In accordance 
                with Section 490(c) of the Foreign Assistance Act, it 
                must maintain licit production and stockpiles at levels 
                no higher than those consistent with licit market 
                demand and take adequate steps to prevent significant 
                diversion of its licit cultivation and production into 
                illicit markets and to prevent illicit cultivation and 
                production.
                    Indian opium gum, the principal source of thebaine, 
                and alkaloid essential to certain pharmaceuticals, is 
                purchased by U.S. pharmaceutical firms. Between 1994 
                and 1996, India had difficulty meeting its production 
                goals and satisfying the world demand for this narcotic 
                raw material. Reduction in acreage, a severe drought 
                which limited crops and inaccurate physical inventories 
                over the last 20 years led to a depleted stockpile and 
                large discrepancies in inventory which were discovered 
                in 1994.
                    Starting in 1995, India took a number of steps to 
                increase licit opium productivity and the licit opium 
                stockpile. To increase future inventory accuracy, the 
                traditional method of storing liquid opium in large, 
                open vats, resulting in undetermined losses due to 
                evaporation, was changed to a system of sealed cans. To 
                ensure a more secure stockpile, the GOI increased the 
                opium crop by increasing each year the minimum 
                qualifying yield per hectare with which each farmer 
                must comply. Opium output grew each year, from 833 mts 
                in 1995 to 849 mts in 1996 to 1,341 mts in 1997. The 
                GOI also sharply increased its seizures of diverted 
                licit opium. Greater GOI attention to increasing licit 
                opium yields both increased the amount of narcotic raw 
                material available to purchasers and ensured a more 
                stable stockpile. Following years of an inadequate 
                supply, this year's increased production finally gives 
                India a licit stockpile consistent with market demand.
                    In 1997, India took five important steps to 
                increase licit opium production to meet market demand 
                while curtailing the diversion of licit opium. These 
                steps include: A) raising the minimum qualifying yield 
                (MQY) for relicensing to cultivate opium poppy from 48 
                to 52 kilograms per hectare; B) increasing GOI 
                vigilance of poppy farmers with direct farm visitation 
                by enforcement personnel to ensure all harvested opium 
                is turned in to government warehouses; C) seizing 11 
                mts of raw opium harvested by licit cultivators, but 
                not declared to the government in 1997 as opposed to 
                the 2 mts of diverted licit opium seized in 1996; D) 
                quickly averting the harmful effects of a

[[Page 12947]]

                cultivator strike by licensing new farmers to replace 
                the striking cultivators; and E) making offenses 
                relating to cultivation and embezzlement of opium by 
                licensing cultivators on par with other trafficking 
                offenses, resulting in long prison terms and heavy 
                fines upon conviction.
                    While these are adequate steps to curb diversion, 
                the USG believes even more could be done and will work 
                with the GOI to increase diversion controls. USG offers 
                to help the Government of India (GOI) with a survey of 
                the licit opium fields have not yet been acted upon. A 
                well-designed crop study would provide accurate data on 
                crop yields and would be an important step in 
                establishing practicable levels of minimum qualifying 
                yield. The data could also be used to extrapolate the 
                level of diversion. The USG hopes to work with the GOI 
                on a future joint opium crop yield survey. Scientists 
                from the U.S. Department of Agriculture and the GOI 
                have collaborated on the design of a poppy survey.
                    India also has illicit cultivation, primarily in 
                Jammu and Kashmir, where GOI control is challenged by 
                insurgent groups and in the remote hills of Uttar 
                Pradesh. USG surveys between 1994 and 1997 indicated 
                illicit cultivation of opium poppy decreased steadily, 
                with the estimated yield declining from 82 mts of opium 
                to 30 mts. The GOI locates and destroys illicit 
                cultivation with vigor, but in some areas, such as 
                Jammu and Kashmir, GOI control is challenged by 
                insurgencies. The USG supplies satellite data along 
                with coordinates of suspected areas of illicit poppy 
                cultivation and the GOI has carried out extensive field 
                surveys and some random aerial surveys, some with DEA 
                assistance.
                    The GOI has made significant progress in 
                controlling the production and export of precursor 
                chemicals. Trafficking in illegally produced 
                methaqualone (mandrax), a popular drug in Africa, is 
                still a major problem. The GOI has a cooperative 
                relationship with the DEA, which is appreciative of 
                Indian efforts to control trafficking in precursor 
                chemicals. However, authorities have had limited 
                success in prosecuting major narcotics offenders 
                because of the lack of enforcement funding and 
                weaknesses in the intelligence infrastructure.
                    India met formally several times in 1997 with 
                Pakistan to discuss narcotics matters and is committed 
                to continuing consultations in 1998. Although these 
                meetings have produced limited results, they are an 
                important step toward much-needed regional narcotics 
                cooperation. India has also met with Burmese officials 
                along the border.
                    India is party to the 1988 UN Drug Convention, but 
                has not yet enacted supporting legislation on asset 
                seizures or money laundering. The substantive steps 
                India has taken in controlling illicit narcotics growth 
                and in increasing the harvest of licit opium while at 
                the same time tightening controls on the licit crop to 
                prevent diversion qualify India for certification.
                Jamaica

                    Jamaica is a producer of marijuana and an 
                increasingly significant cocaine transshipment country. 
                The Government of Jamaica (GOJ) made some progress 
                during 1997 toward meeting the goals and objectives of 
                the 1988 UN Drug Convention, to which it became a party 
                in December 1995, and of our bilateral cooperation 
                agreements and treaties. Counterdrug cooperation 
                between DEA and the Jamaica Constabulary Force (JCF) 
                remained at high levels, and cannabis eradication 
                increased from 473 hectares in 1996 to 683 hectares in 
                1997, despite severe resource constraints. In October, 
                parliament passed a master national drug abuse 
                prevention and control plan which complies with the 
                OAS/CICAD model. Many important actions, however, still 
                remain to be taken by the GOJ to fully meet the 
                counterdrug goals and objectives.
                    During 1997, the GOJ extradited to the U.S. three 
                Jamaican national fugitives from U.S. justice, compared 
                to 1996, when the GOJ returned one

[[Page 12948]]

                Jamaican national under a waiver of extradition, one 
                U.S.-Jamaican dual national who returned voluntarily 
                and six U.S. national fugitives who returned 
                voluntarily or were deported to the U.S. One U.S. 
                national died in Jamaica in 1996 while extradition 
                proceedings were pending. The U.S. seeks early 
                resolution of the 26 active extradition cases currently 
                pending with Jamaica. Although both countries have 
                begun to utilize the bilateral Mutual Legal Assistance 
                Treaty (MLAT), Jamaica needs to speed up its execution 
                of U.S. mutual legal assistance requests.
                    By year's end, the GOJ had not yet tabled in 
                parliament any precursor and essential chemical control 
                legislation. In September 1997, however, the GOJ signed 
                with the USG a letter of agreement (LOA) which details 
                USG counternarcotics assistance to be provided and GOJ 
                actions to be taken. This agreement includes a GOJ 
                commitment to introduce into parliament a precursor 
                chemical control law by April 1998.
                    In November 1997, the GOJ amended its 1996 anti-
                money laundering law to mandate reporting of all cash 
                transactions of U.S. $10,000 equivalent or more. 
                Previously, the law incorporated a threshold reporting 
                requirement for all transaction types. Further 
                amendments are required to bring Jamaica into full 
                compliance with the recommendations of the Caribbean 
                Financial Action Task Force (CFATF). Although there are 
                four cases pending, to date there has been no 
                adjudication of money laundering cases. In February 
                1998, a Jamaican court granted the first forfeiture 
                order, under the 1994 law, of assets of a convicted 
                drug dealer; however, Jamaica has not provided for 
                earmarking of forfeited assets for counterdrug 
                purposes.
                    In the area of drug enforcement, GOJ drug arrests 
                and cocaine and hashish oil seizures increased in 1997 
                from 1996 levels, but marijuana seizures were down 
                substantially. A maritime law enforcement cooperation 
                agreement was signed by the GOJ and USG in May 1997; on 
                February 24, 1998, the GOJ notified the USG that it had 
                completed its constitutional requirements for the entry 
                into force of the agreement. A return notification from 
                the USG brings the agreement into force. The United 
                States hopes that, with the agreement in force, 
                maritime cooperation with Jamaica will improve. The GOJ 
                needs to reinvigorate the previously successful joint 
                Jamaica Constabulary Force (JCF)-DEA Operation Prop 
                Lock, which seized only one trafficker plane during 
                1997, and that had to be returned to its owner for lack 
                of probable cause.
                    Drugs in export shipments continued to threaten 
                Jamaica's legitimate commerce during 1997. At GOJ 
                invitation, U.S. agencies conducted an export security 
                assessment and recommended remedial actions to improve 
                security at air- and seaports. The GOJ needs to carry 
                out these recommendations. During 1997, there were 
                reports in the Jamaican media about drug-related 
                corruption of police and a resident magistrate, the 
                latter of whom was arrested on corruption charges. The 
                GOJ also needs to take strong steps to control drug-
                related public corruption. A wide-ranging bill dealing 
                with corruption of public officials was tabled in 
                parliament, with passage expected in early 1998.
                    Parliamentary passage of introduced and planned 
                legislation and its vigorous implementation will be 
                necessary for Jamaica to meet fully the goals and 
                objectives of the 1988 UN Drug Convention and the terms 
                of our bilateral agreements and treaties.
                Laos

                    Laos remains the world's third largest producer of 
                illicit opium. Despite concerted efforts by the 
                government, Laos' estimated potential production as a 
                result of the 1997 growing season was 210 metric tons, 
                up 5 percent from 1996. Cultivation increased by 12 
                percent, with most of the increase in the more isolated 
                northwest of the country. Opium production remained 
                low, however, within the USG-funded Houaphanh 
                alternative development project area. Laos' proximity 
                to important ports and trade routes also places

[[Page 12949]]

                it on the trafficking routes for drugs destined for the 
                West, including the U.S. Recognizing the phenomenon of 
                ``economic opportunism'' suggested by UNDCP experts as 
                contributing to increased opium production, Lao 
                authorities agreed in 1997 to a USG proposal to begin, 
                for the first time, an eradication program in areas 
                where alternative development projects are in place. 
                Lao law enforcement officials made their largest heroin 
                seizure ever (62.3 kilograms) in Luang Prabhang 
                Province in May, highlighting the increased 
                effectiveness of Laos' counternarcotics enforcement 
                efforts. Laos also ratified the 1971 UN Convention on 
                Psychotropic Substances and has indicated it may ratify 
                the 1988 UN Drug Convention in 1998, after passage of 
                required legislation.
                    In keeping with its plan to address all aspects of 
                the drug problem in Laos, the Government of Laos has 
                emerged as an increasingly active player in regional 
                and international counternarcotics efforts. In July, it 
                hosted a trilateral ministerial meeting with Burma and 
                Thailand to address problems of illicit drug production 
                and trafficking. Laos also signed bilateral 
                counternarcotics cooperation agreements with Burma and 
                the Philippines. It was selected to serve a four-year 
                term on the UN Commission on Narcotic Drugs, which 
                began this January.
                    USG-Lao counternarcotics cooperation remains a 
                center point of the overall relationship and continues 
                to be excellent. USG counternarcotics assistance to 
                Laos has increased as the Lao have moved toward a 
                counternarcotics policy which seeks to balance 
                alternative development, law enforcement, eradication 
                and demand reduction regimes. In order for Laos to 
                avoid the stigma attached to narco-societies, it must 
                control opium cultivation, production and trafficking 
                before modernization exacerbates those problems. It 
                will also have to deal with the problems posed by 
                corruption, including possible narcotics-related 
                corruption, among military and government officials. 
                The USG's commitment to Laos has been made both in 
                response to the determination thus far shown by the 
                Government of Laos and in recognition of Laos' need for 
                assistance in accomplishing its stated counternarcotics 
                goals.
                Malaysia

                    For geographic and historical reasons Malaysia 
                remains, and likely will remain for some time, a 
                significant transit country for U.S. and European-bound 
                heroin. Top Malaysian leaders, including the Prime 
                Minister, are deeply concerned by Malaysia's drug 
                problem and have made combating illicit drugs one of 
                Malaysia's top national priorities. Police, armed with 
                stiff anti-trafficking laws that provide for detention 
                without trial and, in some cases, mandatory death 
                sentences, prosecute drug crimes vigorously. The Anti-
                Narcotics Division of the police now enjoys department 
                status. Unlike some of its neighbors, Malaysia is 
                prepared to move against corruption. Several police 
                officers were arrested and prosecuted for drugs-related 
                corruption. Police also arrested several mid-level 
                police officers and other government officials 
                including a Malaysian diplomat, who was later acquitted 
                of drug smuggling charges. A newly amended anti-
                corruption act gave the police additional powers to 
                prosecute corruption in 1997.
                    The government has also devoted new resources to 
                drug rehabilitation. In 1997 Malaysian authorities 
                launched new initiatives aimed at combatting drug use 
                among the young, improving drug rehabilitation 
                techniques, and combatting the spread of psychotropic 
                pills. Cooperation with the USG on combatting drug 
                trafficking has been excellent. The U.S.-Malaysian 
                Extradition Treaty came into force in 1997. Positive 
                discussions on a Mutual Legal Assistance Treaty 
                continued. Malaysia is working on legislation governing 
                asset forfeiture and management of seized assets to 
                complement the MLAT. Malaysia is a party to the 1961 UN 
                Single Convention and its 1972 Protocol, the 1971 UN 
                Convention on Psychotropic Substances and the 1988 UN 
                Drug Convention.

[[Page 12950]]

                Mexico

                    The issue of illicit narcotics trafficking, and 
                related crimes, remains at the top of the bilateral 
                agenda between the U.S. and Mexico. These issues 
                figured prominently in meetings in which Presidents 
                Clinton and Zedillo approved documents which form the 
                basis of counternarcotics cooperation between the 
                United States and Mexico. In May, the two Presidents 
                issued the ``Declaration of the U.S.-Mexico Alliance 
                Against Drugs'' and released the Bi-National Drug 
                Threat Assessment. In November, the two Presidents 
                approved a summary of a binational drug strategy. Both 
                leaders have committed to strengthen their governments' 
                respective anti-drug efforts and to continue to work 
                toward closer and more effective bilateral anti-drug 
                cooperation.
                    The U.S./Mexico High-Level Contact Group on 
                Narcotics Control (HLCG) and the Senior Law Enforcement 
                Plenary continued to serve as the principal senior-
                level fora for expanding and enhancing bilateral 
                counter-drug cooperation. The HLCG met three times in 
                1997, the Plenary twice, and their technical working 
                groups, which cover issues ranging from chemical 
                control to demand reduction, met throughout the year. 
                The HLCG supervised the preparation of the bilateral 
                threat analysis and the United States/Mexico Binational 
                Drug Strategy, which was released on February 6, 1998.
                    During 1997, the Government of Mexico (GOM) took 
                steps to begin implementing the important legislative 
                reforms of 1996 to advance its national efforts against 
                drug trafficking and organized crime. It developed a 
                number of specialized investigative units, such as the 
                Organized Crime and Financial Intelligence Units, to 
                implement those laws. The Bilateral Border Task Forces, 
                created in 1996, had to be reconstituted in 1997, 
                however; Mexican personnel are assigned and working in 
                these units, but are cooperating with U.S. law 
                enforcement counterparts on a limited basis. Agents 
                assigned to the new Special Prosecutor's Office and to 
                the elite investigative units underwent more rigorous 
                screening and background checks than their predecessors 
                and the process is being expanded to all parts of the 
                Office of the Attorney General (PGR). The GOM improved 
                training for the new agents, and plans to improve 
                salaries and benefits as well. The U.S. provided 
                training, technical and material support.
                    The GOM published regulations needed to implement 
                anti-money laundering legislation passed in 1996 and 
                began to work with financial institutions to improve 
                the effectiveness of its national reporting system for 
                suspicious and large currency transactions. The Mexican 
                Congress began its review of new asset forfeiture 
                legislation. In December, the Mexican Congress passed a 
                comprehensive chemical control bill enabling the GOM to 
                regulate all aspects of commerce in precursor and 
                essential chemicals to prevent their diversion to 
                illicit drug production. The Chemical Experts Working 
                Group promotes bilateral cooperation and information 
                sharing.
                    The GOM wrestled with very serious corruption 
                issues in 1997, including an internal investigation 
                which implicated General Jesus Gutierrez Rebollo, the 
                head of its federal drug law enforcement agency. He and 
                a number of co-conspirators are being prosecuted, and 
                the agency he headed was replaced by a new institution. 
                Mexico is seeking both to uncover ongoing cases of 
                corruption as well as to strengthen justice sector 
                institutions to withstand corrupting influences and 
                pressures. President Zedillo has made this a national 
                priority, but acknowledged that lasting reform will 
                take time.
                    Drug seizures in 1997 generally increased over 1996 
                levels. Mexican authorities seized 34.9 MT of cocaine, 
                115 kgs of heroin, 343 kgs of opium gum, 1,038 MT of 
                marijuana, 39 kgs of methamphetamine, and destroyed 8 
                clandestine laboratories. The GOM's massive drug crop 
                eradication effort reduced net production of opium gum 
                from an estimated 54 MT in 1996 to 46 MT in 1997, and 
                of marijuana from 3,400 MT in 1996 to 2,500 MT in 1997. 
                Authorities arrested 10,742 suspects on drug-related 
                charges. At least eight individuals considered by U.S. 
                law enforcement authorities

[[Page 12951]]

                to be major traffickers were tried and sentenced to 
                prison terms of 9 to 40 years, including Joaquin Guzman 
                Loera (21 years), Hector Luis Palma Salazar (22 years), 
                Miguel Angel Felix Gallardo (12 years), Raul Valladares 
                del Angel (29 years). Unfortunately, Humberto Garcia 
                Abrego was released and Rafael Caro Quintero succeeded 
                in obtaining a reduction in his sentence.
                    In 1997, the U.S. and Mexico made further progress 
                in the return of fugitives. A new Protocol to the 
                Extradition Treaty, signed at the time of President 
                Zedillo's visit to Washington in November, will aid the 
                two governments in their efforts to combat 
                transnational crime by permitting ``temporary'' 
                extradition of fugitives sentenced in one country to 
                face criminal charges in the other. The GOM approved 
                the extradition of 27 fugitives from U.S. justice (12 
                for drug charges) although nine (all Mexican nationals, 
                five facing drug charges) are appealing the GOM's 
                extradition order, or face charges in Mexico. Thirteen 
                fugitives (seven on drug charges) were formally 
                extradited; ten other fugitives (eight U.S. citizens 
                and two third-country nationals) were expelled by the 
                GOM to the U.S. in lieu of extradition.

                    Mexico made progress in its anti-drug effort in 
                1997 and cooperated well with the United States. 
                Nevertheless, the problems that Mexico faces in 
                countering powerful criminal organizations, and the 
                persistent corrupting influence that they exert within 
                the justice sector, cannot be minimized. There are also 
                areas of bilateral cooperation which must be improved 
                for the two governments to achieve greater success in 
                attacking and dismantling the trans-border drug 
                trafficking organizations. The U.S. is convinced, 
                however, of the Zedillo Administration's firm intention 
                to persist in its campaign against the drug cartels and 
                its broad-sweeping reform effort. Through daily 
                interaction between agencies of the two governments, 
                formal discussions in the HLCG and other bilateral 
                groups, as well as collaboration in multilateral fora, 
                the two governments are finding increasingly productive 
                ways to work together against the common threats our 
                nations face.
                Panama

                    Panama is major transit point for Colombian cocaine 
                and heroin on its way to the United States. Cocaine 
                passes through Panamanian territorial waters concealed 
                in fishing boats or ``go-fast'' boats. Some of it is 
                off-loaded on the Panamanian coast and then transported 
                by truck up the Pan-American Highway into Costa Rica 
                where it is then bound for the US. It is also carried 
                by ``mules'' traveling by air to the US and Europe. 
                There is no evidence that any senior official of the 
                Government of Panama is involved in any drug scenarios 
                nor does government policy encourage or facilitate 
                drug-related criminal activity. However, the amount of 
                drugs seized by Costa Rican border officials from 
                tractor trailers entering from Panama is suggestive of 
                either inadequate inspections or corruption on the part 
                of Panamanian border officials. Corruption in the 
                Judiciary remains a concern, particularly because 
                judges are vulnerable to political influence and are 
                susceptible to threats.
                    Panama continued to cooperate with U.S. in 
                counternarcotics efforts in 1997. In 1997, they took 
                steps to implement its counternarcotics masterplan, 
                which was developed by the National Commission for the 
                Study and Prevention of Drug Related Crimes, a part of 
                their public ministry. The plan deals with prevention, 
                treatment, rehabilitation, and re-entry into the 
                workforce; control of supply; and illicit trafficking. 
                It encompasses state and non-governmental 
                organizations. Panama also hosted the ``First 
                Hemispheric Congress on the Prevention of Money 
                Laundering'' and became the first Latin American 
                country to be admitted to the Egmont Group, an alliance 
                of 30 nations with centralized financial analysis units 
                to combat money laundering. Panama is also an active 
                participant in the Commission Against Addiction and 
                Illicit Trafficking of Drugs (CICAD), the Caribbean 
                Financial Action Task Force (CFATF) and the Basel 
                Committee's Offshore Group of Bank Supervisors.

[[Page 12952]]

                    In 1997, Panamanian officials seized 21.62 metric 
                tons (MT) of illegal drugs, including 7 MT of cocaine. 
                Although Panama gives law enforcement a high priority, 
                this is not reflected by the scant resources and low 
                wages it provides some of its law enforcement agencies 
                which lack equipment, training and base facilities.
                    Panama needs to sign the maritime interdiction 
                treaty with the U.S. that was negotiated and approved 
                by the General Directorate of Consular and Maritime 
                Affairs earlier this year. They need to undertake a 
                fundamental and wide-ranging reform of the judicial 
                system to ensure it is protected from political 
                influence and corruption. Panama needs to sign the 
                agreement with the U.S. to establish a Multinational 
                Counternarcotics Center (MCC) at Howard Air Force Base. 
                Negotiations were essentially completed on this 
                agreement in late 1997, when the GOP raised new 
                concerns. The GOP also needs to enact bank reforms it 
                announced in 1997 and enact legislation to extend the 
                existing law against drug money laundering to include 
                the proceeds from all serious crimes.
                Peru

                    Following the 1996 reduction in coca cultivation, 
                Peruvian coca cultivation declined dramatically in 
                1997, from 115,300 hectares (with the potential to 
                produce 460 metric tons of cocaine) in 1995 to less 
                than 69,000 hectares (with the potential to produce 325 
                metric tons of cocaine) in 1997. The 1997 percentage 
                decrease in the total area under coca cultivation was 
                27 percent, following the 18 percent decline in 1996. A 
                strong commitment by the Government of Peru (GOP) to 
                forcibly eradicate illicit mature coca in national 
                parks and other areas by manual labor means resulted in 
                over 3,462 hectares destroyed in 1997, a 175 percent 
                increase over 1996.
                    This success was the offspring of a combined 
                Peruvian Air Force (FAP) and Peruvian National Police 
                Drug Directorate (DINANDRO) ``airbridge denial'' 
                interdiction program and increasingly effective 
                narcotics law enforcement. These two USG-supported 
                programs continued to deter traffickers from using 
                their preferred method of exporting large quantities of 
                cocaine base by air for further refining into cocaine 
                hydrochloride (HCl) in Colombia and elsewhere. 
                ``Airbridge denial'' success maintained a cocaine base 
                glut in the coca cultivation zones and below-
                production-cost farmgate coca prices. The collapse of 
                coca leaf prices spurred greater numbers of farmers to 
                accept the economic alternatives to coca offered by the 
                USG-Peru alternative development project, which 
                expanded in 1997.
                    The joint U.S.-GOP alternative development program 
                was successful in strengthening local governments, 
                providing access to basic health services and promoting 
                licit economic activities, thereby establishing the 
                social and economic basis for the permanent elimination 
                of coca. A total of 239 communities have signed coca 
                reduction agreements to reduce coca by approximately 
                16,300 hectares over the next five years.
                    Responding to traffickers developing new smuggling 
                methods on Peru's rivers, across land borders and via 
                maritime routes, Peruvian counternarcotics agencies, in 
                particular DINANDRO and the Peruvian Coast Guard, 
                established several riverine counternarcotics bases and 
                increased resources for riverine anti-drug operations. 
                Cooperating with USG law enforcement partners and 
                advisors, DINANDRO worked extensively with drug police 
                from Colombia and Brazil to share counternarcotics 
                intelligence and to participate in joint law 
                enforcement operations in the Amazonian tri-border 
                area.
                    In 1997, the Government of Peru (GOP) cooperated 
                fully with the USG in fulfilling the objectives of the 
                USG-Peruvian counternarcotics framework agreement and 
                of the 1988 UN Drug Convention, to which Peru is a 
                party. Counternarcotics activities remained a GOP 
                national priority, and Peru's 1997 ``National Plan for 
                Alternative Development, Drug Prevention and 
                Rehabilitation'' set goals of reducing illicit coca 
                production by approximately 50 percent within five 
                years.

[[Page 12953]]

                Taiwan

                    Given trafficking patterns in the region and 
                Taiwan's role as a shipping center, the U.S. believes 
                Taiwan remains a transit point for drugs significantly 
                affecting the U.S. While Taiwan authorities dispute 
                this assessment, there is no disagreement with regard 
                to the fact that individuals from Taiwan continue to be 
                involved in international narcotics trafficking. Some 
                67 percent of all drugs smuggled into Taiwan are 
                believed to come from China. Whatever their belief 
                about Taiwan's transit role, Taiwan authorities 
                continue to mount an aggressive counternarcotics 
                campaign that involves both social rehabilitation 
                programs and harsh sentences for narco-trafficking. 
                Although Taiwan is not a UN member and cannot be a 
                signatory to the 1988 UN Drug Convention, it tries to 
                meet Convention goals regarding precursor chemicals via 
                an active program to control the products of its large 
                chemical industry. In addition, Taiwan authorities have 
                come to recognize that money laundering is a growing 
                problem. In 1997, a Money Laundering Prevention Center 
                was established under the auspices of the Ministry of 
                Justice Investigation Bureau.
                    Cooperation between USG law enforcement agencies 
                (under the auspices of the American Institute in 
                Taiwan) and Taiwan law enforcement institutions 
                continued to expand in 1997. Drug Enforcement 
                Administration (DEA) and Financial Crimes Enforcement 
                Network officials have led training seminars for Taiwan 
                counterparts and have broadened their range of contacts 
                within Taiwan's law enforcement community. Taiwan 
                authorities have generally responded positively and 
                constructively to U.S. requests on counternarcotics 
                issues. With the opening of the Money Laundering 
                Prevention Center, authorities have started sharing 
                with USG law enforcement officials Taiwan-originated 
                information related to money laundering cases where the 
                flow of money leads to the U.S. In addition, Taiwan 
                Ministry of Justice investigation officers assisted DEA 
                agents with a case involving a shipment of drugs to 
                Guam.
                    Taiwan's counternarcotics enforcement activities 
                led to a 19.1 percent increase in drug convictions in 
                the first ten months of 1997 over all of 1996. Drug 
                seizures also increased. The Money Laundering 
                Prevention Center pursued investigations in all 360 
                cases of reported suspicious transactions. Taiwan also 
                continues to prosecute cases of public corruption. 
                There are, however, no known cases of official 
                involvement in narcotics trafficking.
                Thailand

                    Throughout 1997 Thailand continued its long 
                tradition of cooperation with the United States and the 
                international community in anti-drug programs. The 
                U.S.-Thai Mutual Legal Assistance Treaty has been in 
                effect since the middle of 1993, and USG requests for 
                assistance under the Treaty have been consistently 
                honored by the RTG. Cooperation between the USG and 
                Thailand in a number of areas, not specifically covered 
                by formal agreements, is long standing, close and 
                productive. DEA works closely with Thai drug 
                authorities in investigating major heroin trafficking 
                organizations, providing training and developing Thai 
                drug enforcement capabilities. The U.S. Customs Service 
                and Department of Defense have cooperated with various 
                agencies on anti-smuggling projects. DOD is also 
                supporting training initiatives with selected Border 
                Patrol and Narcotics Police units, and has assisted 
                development of the regional Drug Task Forces.
                    In another example of responsive drug enforcement 
                cooperation, after the illegal release on bail of a 
                major drug fugitive awaiting extradition to the United 
                States, Thai authorities moved quickly to secure his 
                return from Burma, expedited his extradition and 
                ultimately removed the judge responsible for granting 
                the bail. Thailand's continuing cooperation on 
                extraditions involved sending 17 individuals to the 
                U.S., all but one of whom

[[Page 12954]]

                were defendants in drug cases, and some of whom were 
                Thai nationals or claimed Thai citizenship.
                    USG experts estimated that Thai opium production in 
                the 1996-97 growing season declined seventeen percent 
                from the previous year's production, to 25 metric tons. 
                Control programs have resulted in a reduction of the 
                amount of poppy grown from an estimate of up to 200 
                metric tons in the 1970's, to an estimated 25 metric 
                tons in 1997.
                    Although Thailand has yet to become a party to the 
                1988 UN Drug Convention due to its lack of anti-money 
                laundering laws, progress was achieved with money 
                laundering legislation, previously approved in Cabinet, 
                introduced in Parliament and passed through the first 
                of three readings. Thai officials have committed to the 
                passage of the laws during upcoming parliamentary 
                sessions. Thailand is generally in compliance with the 
                1988 UN Drug Convention except for enacting anti-money 
                laundering statutes. It enforces laws against the 
                cultivation, production, distribution, sale, transport, 
                and financing of illicit drugs. Last year penalties for 
                possession of methamphetamines were increased. As of 
                October 1997, 282 cases opened under the asset seizure 
                and consipracy statutes amounted to over 17 million 
                dollars seized or frozen. Thai authorities do, however, 
                need to strengthen the conspiracy law and create 
                additional legal tools to make prosecutions of higher 
                level offenders possible. Thailand's level of 
                international and bilateral cooperation on drug control 
                is expected to remain high, with the Kingdom setting an 
                example regionally for effective drug control programs, 
                despite current economic difficulties.
                Venezuela

                    Venezuela continues to be a major transit country 
                for cocaine shipped from South America to the United 
                States and Europe. Law enforcement agencies estimate 
                that over 100 metric tons (mt) of cocaine transit 
                yearly. Venezuela is also a transit country for 
                chemicals used in the production of drugs in source 
                countries. Venezuela is not a significant producer of 
                illegal drugs, but small-scale opium poppy cultivation 
                occurs near the country's border with Colombia. In 
                recent years, Venezuela's relatively vulnerable 
                financial institutions have become targets for money 
                laundering of illegal drug profits.
                    In 1997, Venezuela took significant steps to 
                improve its counter-narcotics activity. A new drug czar 
                (appointed at the end of 1996) received ministerial 
                rank and a mandate to step up implementation of 
                Venezuela's comprehensive 1993 anti-drug law. Seizure 
                statistics increased more that 150 percent over those 
                in 1996. Venezuela's congress passed legislation to 
                control gambling casinos (a prime money laundering 
                target) and the government adopted new banking 
                regulations with strict reporting requirements. The 
                National Anti-Drug Commission (CNA, formerly CONACUID) 
                released a national anti-narcotics strategy containing 
                a comprehensive set of goals for the next four years. 
                These goals include judicial reform and a new organized 
                crime bill with conspiracy, asset forfeiture, and 
                additional anti-money laundering provisions.
                    Bilateral cooperation between Venezuela and the 
                U.S. received a boost during the October 1997 visit of 
                President Clinton to Caracas. The two countries signed 
                a joint declaration of ``Strategic Alliance Against 
                Drugs.'' The declaration addressed most of the areas of 
                the 1988 UN Convention (ratified by Venezuela in 1991) 
                and specific areas of bilateral concern raised in the 
                course of bilateral discussions during the year. During 
                this visit, the two countries also signed a mutual 
                legal assistance treaty (MLAT). 1997 also saw increased 
                cooperation between Venezuela and the U.S. in maritime 
                interdiction of illegal drug shipments.
                    Some problem areas remain. Narcotics-related 
                corruption in law enforcement, the judiciary, financial 
                institutions, and the prison system are continuing 
                concerns. The Government of Venezuela does not as a 
                matter of policy

[[Page 12955]]

                or practice encourage or facilitate drug trafficking or 
                money laundering, nor do its senior officials engage 
                in, encourage, or facilitate such activities. Port 
                control needs to be improved. The new anti-money 
                laundering legislation needs to be implemented with an 
                effective control regime and organized-crime/asset 
                forfeiture legislation should be given a high priority. 
                Venezuela continues to lack an effective air 
                interdiction strategy.
                    Nevertheless, Venezuela demonstrated a high-level 
                political commitment to combat narcotics trafficking 
                and related crime during 1997. The U.S. will support 
                Venezuela's stepped-up counternarcotics effort and will 
                work closely with Venezuela in areas of common concern 
                as money laundering and diversion of precursor/
                essential chemicals. The U.S. will also seek ways to 
                support judicial reform and to enhance cooperation in 
                maritime interdiction efforts.
                Vietnam

                    Drug trafficking through Vietnam and domestic drug 
                abuse continue to increase, particularly among young 
                people with rising incomes. At the same time, intense 
                media coverage of narcotics arrests and trials, 
                especially stiff sentences, including several 
                executions, highlighted a ``get tough'' approach with 
                traffickers and corrupt mid-and-lower level government 
                officials. Law enforcement authorities also increased 
                drug seizures, investigations, and prosecutions, 
                generally. The number of drug arrests increased by 25 
                percent in the first six months of 1997, compared with 
                the same period last year. This followed an even larger 
                increase (66 per cent) in 1996. Some 70 percent of the 
                cases involved heroin. A spot raid in Ho Chi Minh City 
                netted 96 youngsters (mostly age 15-16) who were 
                dealing in heroin. In another incident, a judge in Ky 
                Son District (the area of heaviest drug production and 
                transit) was arrested in March for trafficking in 
                opium, but he later escaped. A Haiphong Court also 
                imposed stiff sentences on several drug pushers said to 
                have lured teenagers into heroin use. Traffickers seem 
                to have modified their transit routes somewhat in 
                response to these stepped-up enforcement efforts.
                    The Socialist Republic of Vietnam (SRV) took two 
                major initiatives during 1997: it established an Anti-
                Narcotics Division (AND) of the People's Police and 
                reorganized and elevated responsibility for drug policy 
                coordination, which is now under a Deputy Prime 
                Minister. It also ratified the 1988 UN Drug Convention 
                in November. After considerable success reducing opium 
                poppy cultivation in the past few years, cultivation 
                may once again be increasing. Vietnam claims to have 
                reduced poppy cultivation from over 20,000 hectares in 
                the late 1980's and early 1990's to 2,885 hectares in 
                1995/96. USG experts, however, estimated an increase 
                from 3,150 hectares in 1996 to 6,150 hectares in 1997. 
                The United States and Vietnam are negotiating a 
                narcotics cooperation letter of agreement. During 1997, 
                the Vietnamese welcomed a visit by the Drug Enforcement 
                Administration's (DEA) Chief of International 
                Operations. There were also regular visits by DEA 
                officers based in Embassy Bangkok.
                VITAL NATIONAL INTERESTS JUSTIFICATIONS

                Cambodia

                    A transit point for Southeast Asian heroin as well 
                as a source country for marijuana, Cambodia experienced 
                violent internal conflict in early July 1997. This 
                conflict, and the high-level political infighting 
                leading up to it, disrupted USG counternarcotics 
                efforts aimed at helping to build a credible 
                counternarcotics and law enforcement infrastructure. 
                Indeed, all direct USG assistance to the government has 
                been suspended, although some humanitarian and 
                democracy-building programs continue.
                    In recent months, Cambodia appears to have begun to 
                try to refocus its counternarcotics efforts. 
                Counternarcotics agencies appear to be targeting

[[Page 12956]]

                trafficking organizations more aggressively, but their 
                staffs remain poorly trained and equipped. Military and 
                police personnel have been arrested for their 
                involvement in narcotics-related activities, suggesting 
                an effort at rooting out at least some drug corruption. 
                DEA, U.S. Customs and other USG agencies continue to 
                have access to Cambodian counterparts and generally 
                characterize cooperation as good, in that interlocutors 
                are willing to share information and to respond, to the 
                extent possible, to requests for assistance.
                    However, the continuing instability has politicized 
                the counternarcotics effort. Various Cambodian factions 
                have charged political opponents with engaging in 
                illegal narcotics activities, often with the objective 
                of drawing US personnel into appearing to support one 
                or another party or individual. Politicization of the 
                counternarcotics effort has undermined some of the 
                value of USG assistance and harmed cooperation. 
                Moreover, little has been done by the Royal Government 
                of Cambodia (RGC) to assuage international concerns 
                about allegations of high-level government corruption, 
                leaving Cambodia's commitment to counternarcotics 
                efforts in doubt at this time.
                    The US, jointly with ASEAN and the UN, is now 
                engaged in a diplomatic effort to urge the RGC to 
                restore the Paris Peace Accords' framework by 
                permitting free and fair elections this year. Should 
                this effort to promote accountable democratic 
                governance in Cambodia succeed, it will be vital to 
                maintain our ability to provide all types of 
                counternarcotics, as well as other assistance, if 
                appropriate, to strengthen independent judicial systems 
                and foster accountable institutions of civil society in 
                Cambodia. Assistance to support democratic development 
                and long-term economic stability in Cambodia is a key 
                element of our overall long-term commitment to 
                stability and openness in the Asia-Pacific region. 
                Cambodia figures in our own strategic interest in 
                ASEAN's long-term political and economic stability, 
                especially since Cambodia continues to have an interest 
                in becoming a member of ASEAN. Accordingly, while it is 
                not appropriate at this time to certify Cambodia as 
                either fully cooperating with the United States or 
                taking adequate steps on its own to combat drug 
                production and trafficking, the risks posed by 
                inadequate counternarcotics performance are outweighed 
                by the risks posed to US vital national interest if 
                assistance is not available.
                Colombia

                    As in previous years, Colombia remained the world's 
                leading producer and distributor of cocaine and an 
                important supplier of heroin and marijuana. 
                Notwithstanding significant eradication in the Guaviare 
                region, coca cultivation in southern Colombia grew 
                markedly, leading to an increase in coca cultivation 
                overall.
                    In November 1997, the Colombian Congress passed a 
                constitutional amendment reversing the 1991 
                Constitutional ban on the extradition of Colombian 
                citizens. This represents significant progress, and is 
                due in large part to effective lobbying of the 
                Government of Colombia (GOC) and the Colombian Congress 
                and Senate by the Colombian private sector. 
                Unfortunately, the final bill falls short because it 
                contains a ban on retroactive application. The 
                Government and members of the Colombian Congress have 
                filed challenges to this ban. However, if the ban is 
                upheld by Colombia's Constitutional Court, then the 
                Cali kingpins would be placed beyond the reach of U.S. 
                justice for crimes committed before December 1997. 
                Moreover, the constitutional bill may also require 
                implementing legislation, which the GOC has promised to 
                seek before President Samper leaves office in August 
                1998. This legislation could give opponents of 
                extradition another opportunity to weaken extradition.
                    In early 1997, Colombia passed excellent 
                legislation which stiffened sentences for narcotics 
                traffickers, strengthened regulations affecting money-
                laundering and permitted forfeiture of the assets of 
                narcotics traffickers.

[[Page 12957]]

                Implementation of these strong laws by the GOC has been 
                disappointingly slow and the GOC has yet to apply them 
                aggressively.
                    The GOC also took measures to improve prison 
                security in Colombia, giving the Colombian National 
                Police (CNP) responsibility for security in the maximum 
                security pavilions housing the major narcotics 
                traffickers, a great improvement. However, continued 
                attention has not been given to the problem. The U.S. 
                Embassy has heard fewer reports of traffickers carrying 
                out their illicit business activities with impunity 
                from their cells, but there are still indications that 
                the drug kingpins maintain some ability to operate 
                their criminal enterprises and exert influence from 
                prison.
                    The Colombian Government made only limited progress 
                in 1997 against narcotics-related corruption. Several 
                former congressmen and the mayor of Cali were sentenced 
                on corruption charges stemming from the ``Caso 8000'' 
                investigation. The GOC has demonstrated little 
                inclination to root out official corruption and to 
                strengthen democratic institutions from the corrupting 
                influence of narcotraffickers.
                    The Colombian National Police and selected units of 
                the military involved in counternarcotics activities 
                produced impressive results in 1997. Figures for both 
                eradication and seizures were up, despite significant 
                challenges from heavily-armed narcotics traffickers and 
                several elements of the guerrilla movements which 
                support them. The maritime agreement signed in early 
                1997 has been successfully implemented and resulted in 
                interdiction of several cocaine shipments.
                    Although the GOC has made important progress in 
                some areas this year, the USG cannot certify Colombia 
                as fully cooperating with the United States on drug 
                control, or as having taken adequate steps on its own 
                to meet the goals and objectives of the 1988 UN Drug 
                Convention. Poor government performance in the 
                extradition debate, lack of a concentrated effort to 
                combat official narcotics-related corruption and still 
                lagging enforcement of strong counternarcotics laws all 
                argue against certification.
                    However, the vital national interests of the United 
                States requires that U.S. assistance to Colombia be 
                provided. The continuing dominance of Colombian cartels 
                in the cocaine industry, their growing role in the 
                heroin trade and the growing role of the guerrillas in 
                shielding and protecting illicit drug production make 
                the challenges in Colombia greater than ever before. To 
                meet these challenges, we need to work even more 
                closely with the GOC to expand joint eradication 
                efforts in new coca growing areas in southern Colombia 
                and in opium cultivation zones, to enhance 
                interdiction, and to strengthen law enforcement. The 
                GOC would not likely approve such an expanded program 
                if denied certification for a third straight time. We 
                have a unique opportunity with significant US-supplied 
                assets deployed and the commitment of the CNP and 
                elements of the armed forces to strong efforts in these 
                areas. However, they will need increased resources and 
                training to perform these tasks adequately. Strong 
                leadership must come from the Colombian government to 
                reform and defend essential democratic institutions, 
                such as the country's judiciary. The coming elections 
                may provide opportunities for further cooperation.
                    Moreover, key elements of US assistance which could 
                help in this effort, such as potential foreign military 
                financing (FMF) and international military education 
                and training (IMET), could not be provided to our 
                allies for counternarcotics operations if Colombia were 
                denied certification again. Indeed, this year the 
                President deemed necessary the provision of FY97 IMET 
                and previous year FMF by means of a waiver under 
                Section 614(b) of the FAA.
                    U.S. economic engagement is also a critical element 
                in counterbalancing the influence of drug money in the 
                Colombian economy. After two years of denial of 
                certification, U.S. companies, without access to OPIC 
                and EXIM Bank financing, have lost significant business 
                to competitors. With a vital

[[Page 12958]]

                national interest certification, U.S. companies will be 
                able to compete on a level playing field for up to $10 
                billion in upcoming major contracts.
                    In making the decision to provide a vital national 
                interests certification to Colombia this year, we were 
                mindful of the deteriorating security and human rights 
                environment in Colombia, the threat to that country's 
                democracy, and the threat posed to Colombia's neighbors 
                and to regional stability. The cumulative effects of 
                Colombia's forty-year old insurgency, narco-corruption, 
                the rise of paramilitaries, the growing number of 
                internally displaced Colombians, growing incidents of 
                human rights abuses, and the potential threat that 
                Colombia's violence and instability pose to the region 
                all require a vital national interests certification. 
                Such a certification is necessary so that the USG can 
                provide assistance in order to broaden and deepen its 
                engagement with this and the next Colombian government 
                in an effort to effectively confront and eliminate 
                narcotrafficking. The threats to U.S. vital national 
                interests posed by a bar on assistance outweigh the 
                risks posed by Colombia's inadequate counternarcotics 
                performance.
                Pakistan

                    Pakistan is a major producer and an important 
                transit country for opiates and cannabis destined for 
                international markets. In 1997, Pakistan produced 
                approximately 85 metric tons (mts) of opium, an 
                estimated increase of 13.3% from 1996. Heroin and opium 
                seizures increased, but the overall record of law 
                enforcement action continued to be poor. Seizures of 
                precursor chemicals improved substantially. The Nawaz 
                Sharif government, which took office in February 1997, 
                voiced greater concern about Pakistan's narcotics 
                problems, although this has not yet manifested itself 
                in essential counternarcotics actions.
                    The 1997 counternarcotics efforts of the Government 
                of Pakistan (GOP) were seriously deficient. The two 
                major accomplishments were passage of the comprehensive 
                drug control legislation and destruction of heroin 
                processing laboratories in Pakistan's Northwest 
                Frontier Province. One major arrest requested by the 
                USG took place, but there were no known trials of 
                previously arrested drug kingpins and no extraditions 
                of the 23 individuals requested by the USG for 
                narcotics-related offenses. Opium and heroin seizures 
                increased and acetic anhydride seizures sharply 
                increased, but the GOP did not interdict any large 
                opiate smuggling caravans on the well-traveled 
                Baluchistan route from Afghanistan into Iran.
                    The GOP made no progress in crop eradication. Poppy 
                cultivation increased 21% and opium production 
                increased 13%, despite USG programs and USG-assisted 
                UNDCP programs which had made steady progress in 
                decreasing production and poppy cultivation in the past 
                five years. The increase was primarily due to the GOP's 
                failure to enforce the poppy ban in Dir District, the 
                site of highest opium poppy growth, despite warnings 
                from both UNDCP and the USG that the GOP must continue 
                to press tribal groups living in that district to 
                eradicate illicit opium poppy. The GOP also made no 
                progress in demand reduction. There were no new 
                programs designed to control Pakistan's addict 
                population, estimated to be between 3 and 5 million. 
                The GOP estimates the addict population growth at 7% a 
                year.
                    USG/GOP law enforcement cooperation was severely 
                strained by the arrest, torture, courtmartial and 
                conviction of a DEA employee involved in an operation 
                which identified Pakistani Air Force Officers involved 
                in drug smuggling to the U.S. These steps were taken by 
                elements of the GOP with the full involvement of the 
                country's Anti Narcotics Force (ANF). Recently, the GOP 
                reduced the DEA employee's prison sentence on appeal. 
                The Administration remains engaged with the GOP in 
                seeking the release of this employee from prison.
                    Pakistan is a party to the 1988 UN Drug Convention, 
                which it ratified in October 1991, but implementing 
                legislation on money laundering has

[[Page 12959]]

                not yet been drafted. While Pakistan's Control of 
                Narcotics Substances Act, passed in 1997, deals with 
                drug-related money laundering, Pakistan must still 
                criminalize money laundering from non-drug related 
                offenses.
                    The USG/GOP bilateral agreement provides funding 
                for law enforcement, roads and crop substitution in the 
                NWFP, and demand reduction activities. The GOP made 
                very little progress in meeting the goals of the 
                bilateral agreement and 1988 UN Drug Convention in 
                1997. The continued detention of the DEA employee, 
                despite repeated urgings at the highest levels for his 
                release, seriously complicates the counternarcotics 
                relationship. Because of this and because of the GOP's 
                poor counternarcotics law enforcement record and the 
                substantial upsurge in illicit poppy growth, Pakistan 
                cannot be judged to have cooperated fully with the USG 
                or taken adequate steps on its own to meet the 
                requirements of the 1988 U.N. Drug Convention.
                    However, vital U.S. national interests would be 
                damaged if Pakistan were to be denied certification. 
                Implementing sanctions would vitiate the broader U.S. 
                policy of high-level engagement, including strong 
                support for Prime Minister Sharif's commitment to hold 
                a dialogue with India as well as to strengthen 
                democracy and reform the economy.
                    Helping the GOP to strengthen its economy and to 
                move towards a more liberal, broader-based market 
                economy is one of the USG's major goals. Yet, a number 
                of new or potential initiatives would be halted or 
                thrown into question by denial of certification. This 
                could include such fundamental programs such as those 
                funded by OPIC and EX-IM, PL 480 projects involving 
                commodities other than food, and possibly the funding 
                of NGOs. Certification denial would also require the 
                U.S. to vote against Pakistan in multilateral 
                development banks (``MDBs'') at a time when Pakistan is 
                vulnerable to a financial crisis. The combination of 
                such negative votes and removal of possible assistance 
                could weaken Pakistan's investment climate, increase 
                its prospects for sliding into financial insolvency and 
                sharply inhibit our ability to help the GOP modernize 
                its economy.
                    In addition to this statutory basis for a vital 
                national interests certification, it should also be 
                recognized that denial of certification could 
                jeopardize broader interests between the U.S. and 
                Pakistan, including the ability to achieve meaningful 
                progress with the GOP on such important goals as 
                nonproliferation and Afghanistan.
                    Accordingly, while it is not appropriate at this 
                time to certify Pakistan as either fully cooperating 
                with the United States or taking adequate steps on its 
                own to combat drug production and trafficking, the 
                risks posed by inadequate counternarcotics performance 
                are outweighed by the risks posed to US vital national 
                interests if U.S. assistance was no longer available 
                and the U.S. was required to vote against loans to 
                Pakistan in MDBs, thus justifying a vital national 
                interests certification.
                Paraguay

                    A determination to decertify Paraguay would be 
                justified in view of its substantial lack of 
                achievement in meeting its counternarcotics goals in 
                1997. However, the vital national interests of the 
                United States require certification, so that the 
                assistance, withheld pursuant to provisions of the 
                Foreign Assistance Act of 1961, can be provided.
                    Paraguay is a transit country for cocaine, 
                primarily Bolivian, en route to Argentina, Brazil, the 
                United States, Europe and Africa, as well as a source 
                country for high-quality marijuana. Paraguay was fully 
                certified for 1996, after the Government of Paraguay 
                (GOP) adopted a national drug control strategy, 
                promulgated an anti-money laundering law, and increased 
                its counternarcotics cooperation with the United States 
                and regional countries. Paraguay's counternarcotics 
                goals for 1997 included investigating major cocaine 
                traffickers, making significant seizures and arrests, 
                preventing the escape of arrested drug traffickers, 
                implementing the money laundering law

[[Page 12960]]

                and provisions of the anti-drug law (Law 1340/88) aimed 
                at punishing and preventing official corruption, 
                enacting legislation authorizing controlled deliveries 
                and undercover operations, as well as criminalizing 
                drug-related conspiracy.
                    Unfortunately, Paraguay did not come close to 
                meeting any of these objectives. Responsibility for the 
                failure to do so is shared by all branches of the 
                Paraguayan government. There were no successful 
                investigations of significant traffickers. Although 
                cocaine seizures showed a minimal increase over 1996, 
                all involved minor traffickers. The largest seizure was 
                accompanied by the arrest of four suspects caught in 
                possession of over 21 kilos of cocaine. However, a 
                criminal court judge freed all four on what appear to 
                be spurious grounds; this judge received a minor 
                disciplinary sanction and continues to serve in office. 
                Judicial corruption was also suspected in connection 
                with Paraguay's refusal to extradite a suspected 
                narcotics trafficker to France. In that case, a lawyer 
                was recorded accepting an alleged bribe to pass on to 
                an appellate judge; the judge subsequently was removed 
                from office for his actions in yet another case.
                    Paraguay is a major money laundering center, but it 
                is unclear what portion is drug-related. The 
                promulgation of the 1996 money laundering law, and the 
                creation of an anti-money laundering secretariat 
                (SEPRELAV), in January 1997, now provides the GOP with 
                the legal tools necessary to move against this criminal 
                activity, but little has been done so far to apply the 
                law. SEPRELAV also has not been provided with a budget 
                to enable it to operate as an independent organization.
                    The Paraguayan Congress, controlled by the 
                opposition parties, made no progress on a major 
                revision of the anti-drug law, which was submitted by 
                the GOP in 1995. The GOP did not submit new legislation 
                to authorize controlled deliveries, undercover 
                operations or criminalize drug-related conspiracy. It 
                also failed to complete a precursor chemical monitoring 
                survey that was promised in 1996.
                    In part, these failures were due to the GOP's 
                allowing itself to become distracted by election-year 
                politics, particularly by its opposition to the 
                presidential candidacy of former Army Commander, and 
                unsuccessful 1996 coup plotter, Lino Oviedo. The GOP 
                and opposition parties also demonstrated reduced 
                political will to confront the politically influential 
                and economically powerful frontier commercial and 
                contraband interests during an election year.
                    The GOP, realizing its shortfalls on 
                counternarcotics cooperation and cognizant of the USG 
                decision on certification, recently has reaffirmed its 
                political will to prioritize counternarcotics efforts, 
                including taking law enforcement action against 
                significant narco-traffickers, agreeing to negotiate a 
                new bilateral extradition treaty with the USG, and 
                preparing a draft law to explicitly authorize 
                controlled deliveries. While positive steps, these 
                measures have yet to bear fruit; their possible 
                fulfillment will have a bearing on next year's 
                certification decision, not this year's.
                    Denial of certification would, however, cut off 
                assistance programs designed to meet the priority US 
                goal of strengthening Paraguay's democratic 
                institutions, at precisely the moment when those 
                institutions are being severely tested by the stress of 
                hotly-contested presidential, congressional and 
                gubernatorial election campaigns. Denial of 
                certification at this time could have an unintended 
                negative impact on the ongoing election campaign. 
                Denial of certification would also jeopardize ongoing 
                cooperation and assistance programs with the GOP 
                against other international crimes (smuggling, 
                intellectual property piracy, terrorism). Moreover, 
                vital national interests certification would help to 
                promote the political will and positive action against 
                narcotics trafficking that we will seek from the next 
                GOP.
                    The risks posed to all of these US interests 
                (promoting democracy, cooperation against other crimes 
                and continued counter-terrorism cooperation) by a 
                cutoff of bilateral assistance outweigh the risks posed 
                by Paraguay's failure

[[Page 12961]]

                to cooperate fully with the USG, or to take adequate 
                steps to combat narcotics on its own.
                STATEMENTS OF EXPLANATION

                Afghanistan

                    Afghanistan continued as the world's second largest 
                producer of opium poppy, according to USG estimates. 
                Land under poppy cultivation and opium production rose 
                3 percent in 1997 according to US satellite surveys. 
                Continued warfare, destruction of the economic 
                infrastructure and the absence of a recognized central 
                government with control over the entire country remain 
                obstacles to effective drug control.
                    The inaction and lack of political will of the 
                Taliban faction, which controls 96 per cent of 
                Afghanistan's opium-growing areas, as well as 
                substantial drug trade involvement on the part of some 
                local Taliban authorities impede meaningful 
                counternarcotics progress as well. The Taliban, formed 
                by religious students, began its military campaign in 
                Afghanistan in 1994 and assumed effective control over 
                two thirds of the country in fall 1996. There is no 
                evidence that the Taliban or any other faction 
                controlling Afghan territory took substantive law 
                enforcement or crop eradication action in 1997.
                    Although the Taliban condemned illicit drug 
                cultivation, production, trafficking and use in 1997, 
                there is no evidence that Taliban authorities took 
                action to decrease poppy cultivation, arrest and 
                prosecute major narcotics traffickers, interdict large 
                shipments of illicit drugs or precursor chemicals or to 
                eliminate opiate processing laboratories anywhere in 
                Afghanistan in 1997. Narcotics remain Afghanistan's 
                largest source of income, and some Taliban authorities 
                reportedly benefit financially from the trade and 
                provide protection to heroin laboratories. There are 
                numerous reports of drug traffickers operating in 
                Taliban territory with the consent or involvement of 
                some Taliban officials. Taliban authorities called for 
                international alternative development assistance as a 
                precondition to eradicating opium poppy cultivation. 
                Afghanistan is a party to the 1988 UN Drug Convention.
                    In November 1997, the Taliban responded to a UNDCP 
                initiative by agreeing to eliminate poppy cultivation 
                in districts where alternative development was 
                provided, to control poppy cultivation in areas where 
                poppy was not previously grown and to eliminate 
                morphine and heroin laboratories when these sites were 
                brought to their attention. To date, these commitments 
                have not been tested.
                    The USG strongly supports the UN Secretary 
                General's Special Envoy for Afghanistan, Ambassador 
                Lakhdar Brahimi, and the UN Special Mission to 
                Afghanistan in their efforts to promote a cease-fire, 
                followed by negotiations leading to a broad-based 
                government that can address the problems of narcotics, 
                terrorism and humanitarian concerns. We assist the 
                peoples of Afghanistan, subject to resource 
                availability, primarily through UN programs aimed at 
                humanitarian relief, reconstruction and 
                counternarcotics. In 1997, USG transferred $1.6 million 
                in FY-95 and FY-96 funds earmarked for UNDCP to help 
                finance UNDCP's capacity building project and poppy 
                reduction projects in Afghanistan. The USG also 
                provided an initial $269,202 of a $772,905 poppy 
                reduction/alternative development project being 
                implemented by an American non-governmental 
                organization (NGO), Mercy Corps International (MCI) in 
                Helmand Province.
                    Since U.S. legislation makes special allowance for 
                continuation of such assistance generally, 
                notwithstanding any other provision of law, denying 
                certification of Afghanistan would have minimal effect 
                in terms of implementation of this policy.
                    Continuation of large-scale opium cultivation and 
                trafficking in Afghanistan, plus the failure of the 
                authorities to initiative law enforcement actions, 
                preclude a determination that Afghanistan has taken 
                adequate steps on its

[[Page 12962]]

                own or that it has sufficiently cooperated with USG 
                counternarcotics efforts to meet the goals and 
                objectives of the UN 1988 Drug Convention, to which 
                Afghanistan is a party. Accordingly, denial of 
                certification is appropriate.
                Burma

                    Burma continues to be the world's largest source of 
                illicit opium and heroin. In 1997, production declined 
                slightly from the previous year's levels; estimates 
                indicated there were 155,150 hectares under 
                cultivation, which could yield a maximum of 2,365 
                metric tons of opium.
                    On the law enforcement front, the Government of 
                Burma (GOB) seized more opium and heroin, and raided 
                more laboratories than in the past. These were welcome 
                developments, but, given the extent of the problem, 
                they were insufficient to make noticeable inroads 
                against drug trafficking and production. Seizures of 
                amphetamines and the precursor chemical acetic 
                anhydride declined. There were no arrests of major 
                traffickers. Drug lord Chang Qifu (Khun Sa), who 
                ``surrendered'' to Burmese authorities in 1996, was not 
                brought to justice, and the GOB continued to refuse to 
                render him to the United States. The GOB did return a 
                U.S. fugitive to Thailand, which extradited him to the 
                United States.
                    Several ethnic groups declared that they would 
                establish opium free zones in their territories by the 
                year 2000, and the GOB undertook some eradication 
                efforts as well. Establishment of opium free zones 
                would require considerable time and investment of 
                resources. The Government of Burma approved a United 
                Nations Drug Control Program, a five-year alternative 
                development project in the ethnic Wa region; as the 
                year closed, UNDCP was making arrangements to initiate 
                work.
                    Money laundering and the return of narcotics 
                profits laundered elsewhere appear to be a significant 
                factor in the overall Burmese economy. An 
                underdeveloped banking system and lack of enforcement 
                against money laundering have created a business and 
                investment environment conducive to the use of drug-
                related proceeds in legitimate commerce. The GOB has 
                encouraged leading narcotics traffickers systematically 
                to invest in infrastructure and other domestic 
                projects.
                    USG counternarcotics cooperation with the Burmese 
                regime is restricted to basic law enforcement 
                operations and involves no bilateral material or 
                training assistance. The USG remains concerned over 
                Burma's commitment to effective counternarcotics 
                measures, human rights, and political reform. The USG 
                is prepared to consider resuming appropriate assistance 
                contingent upon the GOB's unambiguous demonstration of 
                a strong commitment to counternarcotics, the rule of 
                law, punishment of traffickers and major trafficking 
                organizations (including asset forfeiture and seizure), 
                anti-corruption, eradication of opium cultivation, 
                destruction of drug processing laboratories, and 
                enforcement of money laundering legislation.
                Iran

                    Iran has strengthened its counternarcotics 
                performance during the past year--particularly in the 
                area of interdiction--but direct information is limited 
                because the United States has no diplomatic presence in 
                the country.
                    Iran's interdiction efforts are apparently 
                vigorous, if partially effective. Costly physical 
                barriers and aggressive patrolling of its eastern 
                borders have led to Iranian claims of record narcotics 
                seizures of nearly 200 tons last year--and significant 
                Iranian casualties as well. But with an estimated 1,000 
                tons of opiates crossing the country each year, Iran 
                remains the major transit route for opiates from 
                Afghanistan and Pakistan to the West, although we do 
                not have recent data on the amount that may reach the 
                United States. Punishment of traffickers is harsh but 
                drug trafficking continues on a large scale.

[[Page 12963]]

                    Cultivation of opium poppies continues in Iran, but 
                the extent of cultivation is difficult to ascertain 
                conclusively. The 1993 United States Government survey 
                of opium cultivation in Iran estimated that 3,500 
                hectares were under cultivation. U.S. crop estimates 
                were a major factor in placing Iran on the majors' list 
                of drug producing and transit countries. Iran claims 
                complete eradication of the opium poppy crop. Recent 
                statements by the Dublin Group that opium cultivation 
                has markedly decreased give at least partial credence 
                to the Iranian claims, but a new crop survey would 
                help--and will be undertaken--to confirm such 
                eradication.
                    Iran has taken some steps to confront corruption 
                among customs, police and military personnel. Observers 
                have noted several convictions of corrupt officials but 
                the corruption of low-level officials continues; multi-
                ton shipments of opiates could not traverse Iran 
                without assistance from complicit law enforcement or 
                military personnel. There have been no recent, credible 
                reports concerning high-level complicity in narcotics 
                trafficking and high-ranking officials of the GOI have 
                clearly stated Iran's official aversion to narcotics 
                trafficking.
                    Iran has ratified the 1988 UN Drug Convention, but 
                the United States Government and other observers remain 
                unaware of implementing legislation to bring Iran into 
                full compliance with the Convention. A 1997 proposal 
                approved by the Expediency Council appears to allow for 
                stronger drug laws and demand reduction programs, but 
                the extent to which the proposal helps Iran to comply 
                with the Convention cannot be predicted before the 
                proposal is enacted as unforceable laws or regulations. 
                No bilateral narcotics agreement exists between Iran 
                and the United States.
                    Iran has recently stated, at the highest level, a 
                desire to cooperate in international counternarcotics 
                programs. With the exception of the Iran/Pakistan/UNDCP 
                border interdiction program and a UNDCP demand 
                reduction survey, however, Iran does not yet 
                participate in important cooperative counternarcotics 
                efforts. Such programs of international cooperation 
                would add significantly to external understanding of 
                Iran's narcotics problems and counter-narcotics 
                efforts.
                Nigeria

                    Nigeria is the hub of African narcotics trafficking 
                and the headquarters for global poly-crime 
                organizations. Nigerian narcotics traffickers operate 
                worldwide networks that transport heroin from Asia to 
                Africa, the NIS and the United States, and cocaine from 
                South America to Europe, Africa and East Asia. Nigerian 
                traffickers are responsible for a significant portion 
                of the heroin that is abused in the United States. 
                Marijuana is the only narcotic cultivated in Nigeria; 
                large quantities are exported to other African nations 
                and to Europe, but have little impact upon the United 
                States.
                    The need to repatriate their criminal gains has 
                motivated Nigerian traffickers to develop a 
                sophisticated and flexible money laundering system 
                capable of handling not only narcotics profits, but the 
                ill-gotten gains of Nigerian sponsored financial fraud 
                as well. The dislocations of Nigeria's economy have 
                helped to engender a vast informal commercial sector, 
                immune to most regulation and well suited to illegal 
                activities.
                    The record of Nigerian law enforcement against the 
                narcotics trade is, at best, mixed. The one force 
                capable of making headway against narcotics, the 
                Nigerian Drug Law Enforcement Agency (NDLEA), has been 
                handicapped by deficiencies in political and financial 
                support. The NDLEA arrests many couriers, but few 
                organization leaders. NDLEA efforts at Nigeria's 
                international airports have led to increased seizures 
                of narcotics, and may be a factor contributing to 
                traffickers's expansion into bulk shipments and across 
                borders into Nigeria's neighbors.
                    The Government of Nigeria has failed to react 
                responsibly to the ease with which criminals function 
                in Nigeria. Appropriate criminal narcotics

[[Page 12964]]

                and money-laundering legislation has been enacted, but 
                remains unenforced, with no evidence that prosecutions, 
                convictions or asset seizures have been made against 
                any major criminal figures. Nigeria failed to provide 
                consistent policy advice to its law enforcement organs, 
                lacked the political will to attack pervasive 
                corruption, and again neglected to provide sufficient 
                material support for even the most basic operations of 
                its law enforcement agencies.
                    Nigeria again failed to meet its obligations to the 
                United States and other nations with regard to 
                extraditions and other forms of counter-narcotics 
                cooperation. Even direct promises of action have 
                remained unredeemed. A December, 1996, United States 
                mission to Nigeria received the Government of Nigeria's 
                assurance that extraditions of criminals to the United 
                States could resume immediately. No action has been 
                taken on extraditions over one year later.

[FR Doc. 98-6584
Filed 3-13-98; 8:45 am]
Billing code 4710-10-M