Drug Control: Efforts to Develop Alternatives to Cultivating	 
Illicit Crops in Colombia Have Made Little Progress and Face	 
Serious Obstacles (08-FEB-02, GAO-02-291).			 
                                                                 
Since the early 1970's, the U.S. Agency for International	 
Development (USAID) has helped Bolivian and Peruvian growers of  
illicit crops find legal ways to earn a living. The experiences  
in Bolivia and Peru indicate that effective alternative 	 
development demands a strong host government commitment to a	 
comprehensive array of counternarcotics measures and years of	 
sustained U.S. assistance. Chief among the specific lessons for  
Colombia are that progress requires host government control of	 
drug-growing areas and a political will to interdict drug	 
trafficking and forcibly eradicate illicit crops as well as a	 
carefully coordinated approach to these efforts. USAID began	 
targeting Colombia's poppy-growing areas in 2000 and expanded its
program to include coca-growing areas in 2001, but most 	 
activities will not begin in earnest until 2002. The experiences 
in Bolivia and Peru suggest that alternative development in	 
Colombia will not be successful unless the Colombian government  
controls coca-growing areas, has the capacity to carry out	 
sustained interdiction operations, and the ability to effectively
coordinate eradication and alternative development activities.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-02-291 					        
    ACCNO:   A02705						        
  TITLE:     Drug Control: Efforts to Develop Alternatives to	      
Cultivating Illicit Crops in Colombia Have Made Little Progress  
and Face Serious Obstacles					 
     DATE:   02/08/2002 
  SUBJECT:   Drug trafficking					 
	     Drugs						 
	     Federal aid to foreign countries			 
	     Foreign governments				 
	     International agreements				 
	     Law enforcement					 
	     Narcotics						 
	     Program evaluation 				 
	     Best practices					 
	     Andean Counternarcotics Initiative 		 
	     Bolivia						 
	     Colombia						 
	     Peru						 
	     UN International Drug Control Program		 
	     Plan Colombia					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-02-291
     
United States General Accounting Office

                   GAO Report to Congressional Requesters

February 2002

DRUG CONTROL

Efforts to Develop Alternatives to Cultivating Illicit Crops in Colombia
Have Made Little Progress and Face Serious Obstacles

                                      a

GAO-02-291

Contents

Letter

Results in Brief
Background
Progress Requires Strong Host Government Commitment and

Sustained U.S. Assistance
USAID Alternative Development Program in Colombia Is at an
Early Stage
Alternative Development in Colombia Faces Significant Obstacles

to Success
Conclusions
Recommendation for Executive Action
Matter for Congressional Consideration
Agency Comments and Our Evaluation
Scope and Methodology

                                     1

                                    2 3

                                     5

                                     8

12 15 16 16 17 17

Appendix I USAID's Alternative Development Program in

Bolivia 20

Early Alternative Development Projects Had Limited
Accomplishments 21
Current Project Supports Bolivia's Forced and Voluntary
Eradication Policies 24
Alternative Development Lessons Learned in Bolivia 25

Appendix II USAID's Alternative Development Program in Peru 31

UHAD Project Accomplishments Were Limited 33
Strong Peruvian Government Support Increased Success of Second
Program 34
Alternative Development Lessons Learned in Peru 36

Appendix III Comments from the Department of State

Appendix IV Comments from the U.S. Agency for International
Development 46

                 Page i GAO-02-291 Alternative Development

Appendix V GAO Contact and Staff Acknowledgments 51

GAO Contact 51 Acknowledgments 51

Tables

Table 1: Net Hectares of Coca Under Cultivation in Bolivia,

Colombia, and Peru (Calendar Years 1996-2000) Table 2: Lessons Learned in
Bolivia and Peru Table 3: U.S. Support for Alternative Development Programs
in

Bolivia and Peru Table 4: Summary of USAID Projects in Colombia as of
September 30, 2001

                                    5 6

                                     8

                                     11

Figures

Figure 1: Illicit Drug Crop Areas in Bolivia, Colombia, and Peru 4 Figure 2:
Illicit  Drug-Growing Areas  in  Bolivia 21  Figure 3:  Illicit Drug-Growing
Areas in Peru 32

Abbreviations

ADP Alternative Development Program
GAO General Accounting Office
PEAH Special Project for the Alta (or Upper) Huallaga
PNDA Plan Nacional De Desarrollo Alternativo or the National

Plan for Alternative Development UHAD Upper Huallaga Area Development USAID
U.S. Agency for International Development

Page ii GAO-02-291 Alternative Development

United States General Accounting Office Washington, DC 20548

February 8, 2002

The Honorable Jesse A. Helms
Ranking Minority Member, Committee on Foreign Relations
The Honorable Charles E. Grassley
Co-Chairman, Caucus on International Narcotics Control
The Honorable Mike DeWine
United States Senate

The United States has been providing counternarcotics assistance to
countries in the Andean region since the early 1970s to help curb the
supply of illicit drugs-primarily cocaine-entering the United States. As
part of these efforts, the U.S. Agency for International Development
(USAID) has provided assistance to help Bolivian and Peruvian growers of
illicit crops find legal means of earning a living. In recent years, these
activities-termed alternative development1-together with U.S.-
supported interdiction and eradication programs have greatly reduced the
amount of coca2 grown in Bolivia and Peru. Meanwhile, coca cultivation
and cocaine production have increased substantially in Colombia, making
it the world's leader in both.

Recognizing the seriousness of illegal drug activities in Colombia, the
Colombian government, in October 1999, announced a $7.5 billion
counternarcotics plan known as Plan Colombia.3 Among other things, Plan
Colombia proposed to reduce the cultivation of coca and the processing
and distribution of narcotics by 50 percent over 6 years. To assist in this
effort, in July 2000, the United States committed to providing about
$1.3 billion to Colombia, other Andean countries, and U.S. agencies
involved in drug interdiction and law enforcement, part of which was

1Alternative development entails a broad range of development initiatives to
generate legal employment alternatives, alleviate poverty, and spur
investment and economic growth. Such efforts often involve substituting
licit crops for illicit ones. However, they may also entail creating other
employment opportunities, such as those provided by various types of
agro-industry. Complementary measures may include improving infrastructure,
providing social services, strengthening local governments, offering access
to credit, and giving marketing and distribution assistance.

2The leaves of the coca plant are used to produce cocaine.

3Colombia has pledged to provide $4 billion to support the plan and called
on the international community, including the United States, to provide the
remaining $3.5 billion.

Page 1 GAO-02-291 Alternative Development

intended for alternative development.4 More recently, in January 2002, the
Andean Counterdrug Initiative was passed, which provides $625 million for
counternarcotics programs, including alternative development, in Andean
countries.5

Although coca cultivation in Bolivia and Peru has been reduced in recent
years,6 you expressed concern about whether the alternative development
program in Colombia will achieve its objectives and contribute to reducing
the production of illicit drugs there. Specifically, you asked that we
determine (1) what lessons have been learned in providing alternative
development assistance to Bolivia and Peru, especially any that may apply to
Colombia; (2) what progress USAID has made with alternative development in
Colombia; and (3) what obstacles must be overcome to facilitate alternative
development in Colombia. To review the programs in Bolivia and Peru and the
status of efforts and challenges in Colombia, we analyzed program
documentation and met with cognizant U.S., host government, contractor, and
nongovernmental organization officials in Washington, D.C.; Bolivia;
Colombia; and Peru. To gain a firsthand view of program activities in
Bolivia and Peru, we visited selected project sites and met with project
beneficiaries in both countries.

                              Results in Brief

Taken together, the lessons learned in Bolivia and Peru indicate that
effective alternative development demands a strong host government
commitment to a comprehensive array of counternarcotics measures and years
of sustained U.S. assistance to support them. Chief among the specific
lessons for Colombia are that progress requires host government control of
drug-growing areas and an enduring political will to interdict drug
trafficking and forcibly eradicate illicit crops as well as a carefully
coordinated approach to executing these efforts. A lack of government
control of project sites hampers access to beneficiaries; prevents
monitoring for compliance with eradication agreements; and discourages
commercial activity, investment, and public support. Without effective

4Title III, chapter 2, of the Emergency Supplemental Act, fiscal year 2000,
as enacted in the Military Construction Appropriations Act (P.L. 106-246,
114 Stat. 571).

5Title II of the fiscal year 2002 Foreign Operations appropriation bill
(P.L. 107-115).

6According to the Department of State, between 1996 and 2000, the net
hectares (2.47 acres) under coca cultivation in Colombia increased by
69,000-from 67,200 hectares in 1996 to 136,200 hectares in 2000-while the
number of hectares under coca cultivation in Bolivia and Peru declined by
93,700-from 142,500 to 48,800-over the same period.

                 Page 2 GAO-02-291 Alternative Development

interdiction and eradication, illicit drug producers do not have the
incentive to engage in legal economic activities. Poor coordination of
alternative development, interdiction, and eradication activities limits the
mutually reinforcing benefits of these actions.

Alternative development efforts are at an early stage in Colombia. USAID
began targeting Colombia's poppy-growing areas in 2000 and expanded its
program to include coca-growing areas in 2001. Project activities in both
areas have been limited to date, and most will not begin in earnest until
2002. As of September 30, 2001, USAID had spent only $5.6 million on
alternative development programs in Colombia out of the $52.5 million
provided for this purpose through fiscal year 2001. By September 30, 2002,
USAID expects cumulative expenditures on alternative development activities
in Colombia to total about $31.8 million, or about 61 percent of the funds
currently available. Additional funds are provided for in the fiscal year
2002 Foreign Operations appropriation bill.

USAID faces serious obstacles to achieving progress in Colombia, and the
experiences in Bolivia and Peru strongly suggest that alternative
development in Colombia will not succeed unless the obstacles are overcome.
Among them, the Colombian government does not control many coca-growing
areas, it has limited capacity to carry out sustained interdiction
operations, and its ability to effectively coordinate eradication and
alternative development activities remains uncertain.

Because of these serious obstacles, we are recommending that the USAID
administrator update USAID's alternative development project plans and
spending proposals for Colombia to take into account extreme difficulty in
gaining access to the coca-growing regions. We also suggest that the
Congress consider requiring that USAID demonstrate measurable progress in
its current efforts to reduce coca cultivation in Colombia before any
additional funding is provided for alternative development.

In commenting on a draft of this report, USAID and State generally concurred
with the report's observations and conclusions regarding the obstacles
facing alternative development efforts in Colombia. USAID also generally
concurred with our recommendation to the administrator and noted that it has
initiated such a review.

Background Historically, Bolivia, Colombia, and Peru have been major
drug-producing countries. Together, they account for most of the coca
cultivated

Page 3 GAO-02-291 Alternative Development

worldwide and for the opium poppy used to produce most of the heroin seized
on the east coast of the United States. Figure 1 shows the areas in Bolivia,
Colombia, and Peru where illicit drug crops are grown.

Figure 1: Illicit Drug Crop Areas in Bolivia, Colombia, and Peru

Source: Latin American Narcotics Cultivation and Production Estimates 2000,
U.S. government, p. 4.

The United States has supported counternarcotics efforts in Bolivia and Peru
for nearly 30 years. USAID has implemented a series of alternative
development projects in the coca-producing regions of these countries,7

7Since 1997, USAID has financed its alternative development
programs-including those in Bolivia, Colombia, and Peru-with funds
transferred from State's Bureau for International Narcotics and Law
Enforcement. USAID previously funded its alternative development programs
from its own agency budget for economic support.

                 Page 4 GAO-02-291 Alternative Development

while the U.S. Drug Enforcement Administration and State's Bureau for
International Narcotics and Law Enforcement have supported interdiction and
voluntary and forced coca eradication programs. Due at least in part to
these efforts, substantial reductions in coca cultivation were achieved in
Bolivia and Peru during the mid-to-late 1990s. However, over the same
period, coca cultivation in Colombia increased substantially, offsetting
much of the decreases in Bolivia and Peru (see table 1).

  Table 1: Net Hectares of Coca Under Cultivation in Bolivia, Colombia, and
                      Peru (Calendar Years 1996-2000)

                      Country 1996 1997 1998 1999 2000

Percentage change

   Bolivia       48,100       45,800       38,000      21,800       14,600        (70%)
   Colombia      67,200       79,500      101,800      122,500      136,200        103%
     Peru        94,400       68,800       51,000      38,700       34,200        (64%)
    Total        209,700     194,100      190,800      183,000      185,000       (12%)

Progress Requires Strong Host Government Commitment and Sustained U.S.
Assistance

Source: Latin American Narcotics Cultivation and Production Estimates 2000,
U.S. government, p. 5.

Alternative development progress in Bolivia and Peru has required a lasting
host government commitment to a broader set of counternarcotics measures and
years of sustained U.S. assistance to support these efforts. More
specifically, our analysis of project documentation, site visits, and
discussions with U.S. and host government officials and project staff
indicated that government control of drug-growing areas and project sites is
essential for providing access to the targeted beneficiaries as well as
security for project-related trade, commercial activity, and investment. It
also enables the monitoring of compliance with voluntary eradication
agreements. To promote and sustain coca cultivation reductions, the host
government must have a strong commitment to carry out effective interdiction
and eradication policies.8 Without interdiction and eradication as
disincentives, growers are unlikely to abandon more lucrative and easily
cultivated coca crops in favor of less profitable and harder to grow licit
crops or to pursue legal employment. Further, alternative

8We have reported on the importance of host country support in interdicting
and eradicating illicit drugs and in exerting government control over
narcotics-producing regions. See Drug Policy and Agriculture: U.S. Trade
Impacts of Alternative Crops to Andean Coca (GAO/NSIAD-92-12, Oct. 28,
1991); Drug Control: U.S.-Supported Efforts in Colombia and Bolivia
(GAO/NSIAD-89-24, Nov. 1, 1988); Drug Control: U.S. International Narcotics
Control Activities (GAO/NSIAD-88-114, Mar. 1, 1988); and Drug Control:
International Narcotics Control Activities of the United States
(GAO/NSIAD-87-72BR, Jan. 30, 1987).

Page 5 GAO-02-291 Alternative Development

development, interdiction, and eradication efforts must be carefully
coordinated to achieve mutually reinforcing benefits.

Table 2 summarizes several of the key lessons learned in Bolivia and Peru.
Descriptions of the programs in Bolivia and Peru and more detailed
discussions of the lessons learned from them are in appendixes I and II,
respectively.

      Table 2: Lessons Learned in Bolivia and Peru Lesson Bolivia Peru

Government needs to control project sites.

USAID's Chapare Regional Development Project achieved little when the
Bolivian government lost control of the project area to narcotics
traffickers in 1983. After the government reestablished its presence in
1986, progress improved.

USAID's Upper Huallaga Area Development Project had very limited impact in
the mid-1980s because terrorist violence from groups such as the Shining
Path caused program staff and local residents to flee the project site.
Successful Peruvian government anti-insurgency efforts enabled project
activities to resume in the early 1990s.

Strong government commitment facilitates alternative development.

Coca producer participation in USAID's Counternarcotics Consolidation of
Alternative Development Efforts Project increased substantially as a result
of the Bolivian government's forced manual eradication of nearly all the
coca from Bolivia's Chapare region in 1998 and 1999.

Coca grower participation in USAID's Alternative Development Project greatly
increased in the mid-1990s due to the Peruvian government's policy of
shooting down airplanes thought to be involved in narcotics trafficking.

Alternative   development,  interdiction,   and   eradication  need   to  be
coordinated.

Poor coordination between U.S.-supported eradication efforts and USAID's
Counternarcotics Consolidation of Alternative Development Efforts Project in
1998 and 1999 created assistance gaps in Bolivia-the eradication outpaced
the assistance, leaving peasant farmers with bare fields and no immediate
source of income. In 2000, USAID accelerated its alternative development
activities to help close the gap and began making available emergency food
assistance to cushion the loss of income resulting from eradication.

Poor coordination between U.S.-supported eradication efforts and USAID's
Upper Huallaga Area Development Project led farmers to seek terrorists'
"protection." In 2000, poor coordination between eradication and USAID's
Alternative Development Project provoked farmers to resent the project,
which they associated with eradication. In 2000, USAID designed a "safety
net" assistance program and began closely coordinating with U.S. embassy
staff to ensure that emergency food and other assistance would be provided
to growers whose crops are eradicated.

   Monitoring compliance  Community self-policing of        In 2001, State's inspector
      with voluntary      compliance with                         general found
 eradication agreements iseradication agreements in the     that monitoring efforts in
        necessary.        Chapare                                 Peru were not
                            region was not effective. In   specific enough to adequately
                                     1999, the                         link
                          Bolivian government determined    investments in alternative
                          that 65                                  development
                          percent of the communities        with coca reductions. U.S.
                          participating in                           embassy
                             the voluntary eradication           officials are currently
                                    program had                   designing a system to
                            broken their agreements and    better monitor eradication in
                                       were                             specific areas.
                            disqualified from receiving
                                    assistance.

Page 6 GAO-02-291 Alternative Development

                            Lesson Bolivia Peru

Markets are needed. Since 1991, USAID's Cochabamba Regional Development and
Counternarcotics Consolidation of Alternative Development Efforts Project
helped expand export markets and cultivate an adequate volume of
export-quality produce, substantially increasing the volume and value of
legal crops produced in the Chapare.

Cultivating commercially viable crops under USAID's current Alternative
Development Project benefited Peruvian farmers after an early project failed
to fully consider marketability. Further diversification is intended to
improve food security for beneficiaries and stabilize their incomes, helping
offset historically low prices for project-supported crops in recent years.

Public support is helpful. U.S. and Bolivian public relations efforts
throughout the 1990s helped build a public consensus in Bolivia that the
production of coca and cocaine-once thought to be an American problem-was a
matter of Bolivian national and economic interest, facilitating public
support for forced eradication and alternative development efforts.

Terrorism and violence in Peru in the 1990s helped convince many Peruvians
that coca cultivation and narcotics trafficking were linked with the
violence, helping create public support for eradication, interdiction, and
alternative development efforts.

Source: GAO analysis.

Alternative development progress in Bolivia and Peru has required years of
sustained U.S. assistance. The United States has supported alternative
development projects in these countries for two decades. Together with
current and planned alternative projects in Bolivia and Peru, U.S.
contributions to these programs total about $455 million. Other U.S.
agencies have supported interdiction and eradication efforts in Bolivia and
Peru for an even longer period-nearly three decades. In combination, these
programs have helped achieve reductions in the amount of coca grown in these
countries. Nonetheless, the host government agencies involved in these
efforts continue to depend heavily on U.S. support. For example, according
to USAID officials, the United States currently finances and indirectly
oversees most of the Bolivian government's alternative development agencies
in the Chapare region because the Bolivian government does not have the
resources to do so on its own. Similarly, the United States provides 60 to
70 percent of the total funding for the Peruvian alternative development
agency, and USAID officials said that the Peruvian government would not be
able to fund the agency's activities without U.S. support. Table 3 shows
past and current U.S. funding for alternative development programs in
Bolivia and Peru.

                 Page 7 GAO-02-291 Alternative Development

  Table 3: U.S. Support for Alternative Development Programs in Bolivia and
                                    Peru

                            Dollars in millions

USAID Alternative
Development
Program in
Colombia Is at an
Early Stage

aPrior programs in Bolivia and Peru spanned 1983-98 and 1981-94,
respectively.

bThe current programs in Bolivia and Peru began in 1997 and 1995,
respectively.

cCurrent program figures are estimates.

Source: USAID.

Alternative development efforts in Colombia are still at an early stage, and
USAID will have difficulty spending all of the funds available for these
activities. Initial USAID efforts in Colombia began in 2000 by focusing on
promoting poppy eradication and strengthening the Colombian government's
alternative development institution (PNDA).9 USAID's current program
emphasizes alternative development efforts in the coca-growing regions of
southern Colombia to complement other U.S.-supported counternarcotics
activities there. Alternative development activities in both poppy-and
coca-growing areas are just beginning. As of September 30, 2001, USAID had
spent only about $5.6 million, or 11 percent, of the $52.5 million currently
available. By September 30, 2002, USAID expects its cumulative actual
expenditures to reach $31.8 million, or 61 percent, of the total available
in fiscal year 2001.

As part of its initial effort to support the eradication of 3,000 hectares
of poppy by the end of 2002,10 USAID awarded a $10 million contract to
Chemonics International, Inc., in June 2000. Chemonics' role was to assist
PNDA in implementing poppy-related alternative development activities by
promoting crop substitution, environmental improvements, and other

9PNDA is the Colombian government's acronym for Plan Nacional De Desarrollo
Alternativo or the National Plan for Alternative Development. It is also
referred to as PLANTE.

10Prior alternative development projects in Colombia were primarily in the
poppy-growing areas and administered in part by the United Nations Drug
Control Program.

                 Page 8 GAO-02-291 Alternative Development

development efforts in the poppy-growing regions of Cauca, Huila, Tolima,
and Narino.11

After funding for Plan Colombia was approved in July 2000, USAID began
planning for alternative development in Colombia's coca-growing areas. These
efforts were intended to complement the eradication and interdiction
components of Plan Colombia's first phase-the "push" into the Putumayo and
Caqueta departments of southern Colombia where coca cultivation is most
heavily concentrated. To quickly launch these efforts, USAID reallocated $1
million of the $10 million originally intended to support poppy eradication
to fund projects aimed at strengthening PNDA's capacity to expand its
activities in coca-growing areas. USAID's projects targeted PNDA's
information technology, financial accountability, telecommunications
systems, and public relations capabilities for improvement.

In April 2001, using Plan Colombia funds, USAID awarded an $87.5 million,12
5-year contract to Chemonics to oversee, administer, and carry out
alternative development activities in the coca-growing areas in the Putumayo
and Caqueta departments. To date, USAID has programmed $42.5 million of this
amount. Though it will work collaboratively in reviewing and approving
alternative development projects, USAID (through Chemonics) will fund some
projects and PNDA plans to fund others. In addition, USAID and Chemonics
continue to support poppy eradication and institutional strengthening of
PNDA.

The overall alternative development approach in Colombia entails reaching
agreements with communities to voluntarily eradicate illicit crops in
exchange for help finding other income-producing opportunities and other
assistance. The program is intended to provide incentives for small farmers
(with 3 hectares or less of coca) to voluntarily eradicate their coca
plants. In negotiating the community pacts, PNDA representatives met with
groups of small farmers to obtain their commitment to voluntarily eradicate
the illicit crops. After an eradication pact was signed, PNDA planned to
provide the farmers with food crop seeds and plants or other immediate
assistance. Once this assistance began, farmers were obliged to eradicate
their illicit crops within 1 year.

11USAID reported in August 2001 that a cumulative total of 680 hectares of
poppy had been eliminated.

12$11.2 million was set aside for USAID's operating expenses.

                 Page 9 GAO-02-291 Alternative Development

According to USAID officials, Colombian government officials recently stated
that most of the coca cultivation covered by the pacts already agreed to
should be voluntarily eradicated by the end of July 2002.

As eradication progresses, farmers are to receive more comprehensive
assistance from USAID. Initial efforts are focused on municipalities in the
Putumayo, where USAID plans to support crop substitution and other
income-generating activities by providing agricultural incentives, modern
production and processing expertise, and credit and marketing assistance.
USAID also plans to support environmental improvements through tree-growing
programs in remote indigenous and tropical areas and training in pest
control, forest management, and other areas. In addition, USAID plans to
improve the social infrastructure in project areas by enhancing access to
schools, health services, potable water, sewerage, and electricity.

In August 2001, USAID reported that its goal is the voluntary eradication of
11,500 hectares of coca grown on small farms by the end of 2002, with the
aim of eliminating a total of 30,000 hectares by 2005. USAID also reported
that approximately 33 community eradication pacts had been signed, which
covered more than 37,000 hectares of coca in the Putumayo department.13 In
its initial design plan, USAID also noted that sustainability will be
measured in terms of permanent eradication of coca and the number of farm
families permanently engaged in licit productive activities and not
returning to coca cultivation.14

USAID alternative development project activities have been limited to date,
and the pace is not expected to quicken significantly until 2002. As
illustrated in table 4, of the $10 million originally programmed to support
poppy eradication and institutional strengthening of PNDA, USAID's actual
expenditures were only about $1.3 million, or 13 percent, as of September
30, 2001. Of the $42.5 million programmed from Plan Colombia funding,
USAID's actual expenditures were only about $4.4 million, or 10 percent, as
of the same date. Combined, actual expenditures were about $5.6 million, or
about 11 percent, of the $52.5 million in total available program funds.
USAID officials told us that they expect project activity to accelerate in
2002. They estimate that cumulative actual expenditures in 2002 will total
about $31.8 million.

13USAID/Colombia Quarterly Report, Aug. 22, 2001. 14USAID/Colombia
Alternative Development Design Document, November 2000.

Page 10 GAO-02-291 Alternative Development

  Table 4: Summary of USAID Projects in Colombia as of September 30, 2001

Dollars in thousands

Projects planned Projects approved

Funds programmeda Number Value Number Value

Actual expendituresa, b

         Project emphasis Initial poppy program (pre-Plan Colombia)

Crop substitution and income generation

            $7,836 3 $430 3 $430 $521 Environmental improvements

873 0 000

Institutional

c

                               strengthening

1,291 2 1,454 2 1,454

Subtotal

(As a percentage of funds programmed)

                              $10,000 5 $1,884

(18.9%)

                                  5 $1,884

(18.9%)

                                   $1,270

                                  (12.7%)

              Expanded coca and poppy program (Plan Colombia)

Crop substitution and          $34,598    32     8,617      17       3,808
income generation
(Coca)                                   (13)   (3,099)    (13)    (3,099)
(Poppy)                                  (19)   (5,518)    (4)       (709)

                     $2,914 Environmental improvements

2,482 8 423 6 343

Institutional

c

                strengthening 2,825 20 2,032 15 1,376 1,161

Social infrastructure 2,595 1 69 1 69
development
Subtotal $42,500 61 $11,141 39 $5,596 $4,350
(As a percentage of
funds programmed) (26.5%) (13.3) (10.3%)

Total $52,500 66 $12,025 44 $7,480 $5,620

(As a percentage of funds
programmed) (22.9%) (12.3%) (10.7%)

aFigures include USAID management and contractor administrative costs.

bAccording to USAID officials, actual expenditures do not fully reflect
progress since some subgrantees have begun activities but have not presented
vouchers to USAID.

cTo date, most institutional strengthening projects have focused on PNDA;
however, these figures also include some institutional strengthening
projects aimed at local community organizations.

Source: USAID.

While USAID expects increased project activities in 2002, these activities
will continue to be limited when viewed in the context of the total funding
that is likely to be available for them. The administration had requested an
additional $60.5 million for such activities in fiscal year 2002, but the
Congress reduced the overall administration request for its Andean
Counternarcotics Initiative from $731 million to $625 million, a reduction

Page 11 GAO-02-291 Alternative Development

Alternative Development in Colombia Faces Significant Obstacles to Success

that will likely result in less funding for alternative development. As
noted, USAID officials expect cumulative actual expenditures for alternative
development activities in Colombia to total about $31.8 million by September
30, 2002-about 61 percent of the amount appropriated through fiscal year
2001.

USAID faces a number of serious challenges in implementing a successful
alternative development program in Colombia. USAID planning documents for
Colombia acknowledge specific lessons learned in Bolivia and Peru and note
that overcoming obstacles in Colombia will require long-term U.S. and
Colombian commitments. The experiences in Bolivia and Peru demonstrate the
need for

* host government control and security in project areas;

* effective interdiction operations; and

* careful coordination of eradication, interdiction, and alternative
development efforts.

However, the Colombian government does not control large parts of the
coca-growing areas, limiting its ability to carry out sustained interdiction
operations, and the Colombian government's ability to effectively coordinate
eradication and alternative development activities remains uncertain.

Apart from these challenges, Colombia faces additional obstacles in
implementing the alternative development program. Colombia has not devised a
means to verify or ensure compliance by farmers participating in voluntary
eradication programs, PNDA is weak and its funding for alternative
development projects is not ensured, and project sites are in remote
coca-growing areas where the soil quality and infrastructure are poor.

Experiences in Bolivia and Peru Point to Obstacles in Colombia

The experiences in Bolivia and Peru indicate that the most critical obstacle
Colombia faces is that the government does not control large parts of the
Putumayo and Caqueta departments in southern Colombia where much of the coca
is grown. This lack of security will seriously hamper PNDA's ability to
develop the region's infrastructure, establish viable and reliable markets
for licit products, and attract the private investment needed for long-term,
income-generating development. Without government control of project sites,
narcotics traffickers and guerrilla forces will continue to profit from
illicit drug operations and

                 Page 12 GAO-02-291 Alternative Development

impede legal economic activities generated by alternative development
programs.

USAID officials told us that armed groups have already intimidated some
farmers and municipal leaders cooperating with the Colombian government.
More recently, in September 2001, four employees of Colombian
nongovernmental organizations working with PNDA in the Putumayo were
kidnapped. According to USAID officials, two are confirmed murdered and the
other two were released. As a result of these incidents, a number of
nongovernmental organizations working with PNDA temporarily suspended their
activities in the Putumayo in October 2001.

While Colombia uses aerial spray operations to carry out an active
eradication program, the government's lack of control over many coca-growing
areas limits its ability to carry out sustained ground-based interdiction
operations-an essential component of the successful efforts in Bolivia and
Peru. Colombian military and law enforcement units destroy some cocaine
laboratories and seize narcotics and precursor chemicals during individual
counternarcotics operations; however, they lack sufficient forces to
maintain the permanent presence to sustain such operations on a day-to-day
basis. Further complicating the problem is that a large land area ceded to
one of the guerilla groups is off limits to U.S. and Colombian agencies, but
is reportedly an increasing source of coca and precursor supplies.15
Throughout these areas, insurgents and paramilitaries operate largely with
impunity. The experiences in Bolivia and Peru showed that sustained
interdiction operations are necessary to disrupt coca markets and thus
produce declines in the prices of coca. Without these declines, alternative
development efforts are not as effective.

The Colombian government's ability to effectively coordinate eradication and
alternative development activities remains uncertain. Careful coordination
of these efforts was critical to their effectiveness in Bolivia and Peru. In
December and February 2000, while conducting aerial eradication operations,
the Colombian National Police accidentally sprayed approximately 600 to 700
hectares of an area where communities

15In 1998, in an effort to promote peace negotiations, the Colombian
government granted a 16,200 square mile haven in southern Colombia to the
largest insurgency group in the country-the Revolutionary Armed Forces of
Colombia.

                 Page 13 GAO-02-291 Alternative Development

were negotiating pacts for participation in alternative development. Also,
PNDA officials told us that eradication authorities had sprayed most of the
Bolivar department, even though PNDA had targeted some communities in the
department for participation in the alternative development program. This
will likely complicate PNDA's relations with farmers in that region.
According to USAID officials, PNDA representatives currently coordinate with
the Colombian National Police by indicating on a map or from an airplane the
areas in the Putumayo and Caqueta departments that are in the alternative
development program and should not be sprayed.16

Colombia Faces Additional Obstacles

Among the additional obstacles facing Colombia is the difficulty of
verifying compliance with voluntary eradication pacts. The Colombian
government has not determined how it will do so, and thus the reliability of
the voluntary eradication pacts is uncertain. PNDA officials predict that it
will be problematic and expensive to monitor compliance-a task complicated
by the Colombian government's lack of control over project sites. Until a
means of verifying compliance is devised, compliance will depend upon peer
pressure within a given community to prevent individuals from breaking the
community's eradication agreement with the government.

Weak host-country institutions pose an additional problem in Colombia. USAID
originally intended to work through the Colombian International Cooperation
Agency as a host-country contracting agency for its alternative development
projects. However, USAID officials told us they did not have confidence that
the Colombian agency could account for the assistance in accordance with
USAID requirements. USAID chose instead to contract with Chemonics to manage
program resources, including procuring goods and services and awarding and
managing grants. Chemonics is working on a day-to-day basis with PNDA-the
institution

16The fiscal year 2002 Foreign Operations appropriation bill prohibits the
use of funds to procure chemicals for aerial fumigation programs after 6
months from the date of the enactment of the act, unless alternative
development programs have been developed in the departments in which aerial
coca fumigation is planned and alternative development programs are in place
in the departments in which aerial coca fumigation is being conducted. The
bill also requires the secretary of state, after consultation with the
administrator of the Environmental Protection Agency, the secretary of the
Department of Agriculture, and the director of the Centers for Disease
Control and Prevention, if appropriate, to make determinations and report to
the Congress on various aspects of the aerial fumigation program, including
the safety of the chemicals used in aerial fumigation operations.

                 Page 14 GAO-02-291 Alternative Development

established by the Colombian government in 1995 to deal specifically with
alternative development. As noted, USAID was required to focus its initial
efforts on strengthening PNDA because the organization is institutionally
weak. USAID officials said that PNDA may have difficulty effectively using
the additional funding that it is projected to receive for alternative
development projects.

While PNDA may have trouble absorbing this additional funding, the
institution will have difficulty carrying out its responsibilities without
it. Yet funding for important components of PNDA's alternative development
plans-from making infrastructure improvements to promoting licit crops and
livestock-is not ensured. PNDA is supposed to provide immediate, short-term
support to farmers cooperating in alternative development programs, bridging
the gap between the signing of voluntary eradication agreements and
receiving USAID assistance. Colombia developed these plans based on the
expectation that it would receive about $300 million from European donors.
However, little of that assistance has materialized to date. U.S. embassy
officials told us that European donors are reluctant to participate in the
program because, based on experiences in Bolivia and Peru, they associate it
with the U.S.-supported forced eradication effort in Colombia.

The poor quality of the soil and infrastructure and the remoteness of
project sites in coca-growing areas are further obstacles. Unlike the
poppy-growing areas in northern Colombia-which have richer soils and better
developed infrastructure and are closer to markets-much of the coca-growing
areas in southern Colombia have soils that are poorly suited for licit crops
and a lack of basic infrastructure. According to USAID officials, these
problems are more severe in the coca-growing areas of Colombia than they
were in counterpart areas of Bolivia and Peru. Even when suitable crops are
identified, the distances involved make it difficult to transport produce
for further processing or to potential markets. For instance, a palmito
(heart of palm) canning plant that the United Nations Drug Control Program
built in the Putumayo department in the mid-1990s sat dormant for a number
of years because the farmers growing the palm were too far away to transport
their produce to the plant before it spoiled. The plant recently opened for
test runs after finding farmers closer to the plant to grow the palm.

Conclusions Alternative development requires a long-term commitment and must
be implemented with strong host-government support for sustained
interdiction and eradication. The United States has provided alternative
development assistance to Bolivia and Peru for nearly two decades, but

Page 15 GAO-02-291 Alternative Development

little progress was made until the host government gained control of
drug-growing areas and project sites, demonstrated a strong commitment to
carry out effective interdiction and eradication policies, and carefully
coordinated these efforts to achieve mutually reinforcing benefits.

While each of these components is important, none is more so than government
control of the project areas. Experience in Bolivia and Peru strongly
suggests that voluntary coca eradication in Colombia is not likely to
achieve hoped for reductions in coca cultivation until, at a minimum, the
Colombian government can provide the security in the coca-growing regions
that is essential for carrying out sustained interdiction and eradication
operations, providing safe access to alternative development project sites,
and attracting the private investment needed for long-term income-generating
development.

Considering the serious obstacles in Colombia that have impeded meaningful
progress, USAID will have difficulty spending additional funds for
alternative development over the next few years. Through fiscal year 2001,
USAID has spent less than 11 percent of the $52.5 million available for
alternative development in Colombia and does not plan to complete
expenditure of these funds until at least fiscal year 2003. Nevertheless,
USAID's alternative development program documentation for Colombia still
calls for dramatic reductions in coca cultivation in fiscal year 2002
through widespread voluntary eradication of coca crops by farm families who
want to take advantage of alternative development assistance. Yet, few
projects have been undertaken by USAID in the coca-growing regions.

Because USAID faces serious obstacles to achieving widespread voluntary coca
eradication in Colombia, we recommend that the USAID administrator update
USAID's project plans and spending proposals for coca elimination in
Colombia to take into account the extreme difficulty in gaining access to
the coca-growing regions to ensure that funds are used as effectively as
possible.

Recommendation for Executive Action

Matter for Because of the serious obstacles impeding alternative development
in

Colombia, the Congress should consider requiring that USAID Congressional
demonstrate measurable progress in its current efforts to reduce coca
Consideration cultivation in Colombia before any additional funding is
provided for

alternative development.

                 Page 16 GAO-02-291 Alternative Development

Agency Comments
and Our Evaluation

USAID and State provided written comments on a draft of this report (see
apps. III and IV, respectively). Both generally concurred with the report's
observations and conclusions.

USAID noted that the report was thorough and accurate and emphasized that
alternative development can only be implemented in coordination with
complementary eradication and interdiction programs. USAID also generally
concurred with our recommendation to the administrator to update its
alternative development plans for Colombia and noted that it has already
begun such a review as part of its normal performance management process.

State said that the report was thoughtful and thorough and acknowledged the
majority of our conclusions regarding the obstacles facing alternative
development efforts in Colombia. State agreed with the report's overall
conclusion that careful coordination among alternative development,
interdiction, and eradication programs is essential. It also provided
further explanation of its aerial eradication program and the difficulties
it has encountered in Colombia, including additional information about the
accidental spraying of an alternative development project area. However,
State said that it believes it is appropriate and constructive for the
spraying of illicit coca to be conducted before alternative development
programs are initiated in an area and suggested that the report implies a
recommendation that aerial eradication and alternative development should
not be conducted in the same location.

We do not agree with State that the report implies such a recommendation. In
fact, we cite the need for coordinating alternative development with
interdiction and eradication efforts as one of the chief requirements for
success.

Scope and To determine the lessons learned in providing alternative
development assistance to Bolivia and Peru, we interviewed cognizant
officials and

Methodology analyzed program documentation. Specifically,

* In Washington, D.C., we interviewed officials in USAID's Office of South
American Affairs and State's Bureau for International Narcotics and Law
Enforcement. We also met with officials at the two major USAID contractors
that provided alternative development services in Bolivia and
Peru-Development Alternatives, Inc., and Winrock International, Inc. In
addition, we reviewed USAID project design and evaluation documents,

                 Page 17 GAO-02-291 Alternative Development

contractor performance reports, and program audits. From our analysis, we
determined key goals and accomplishments for the alternative development
programs in Bolivia and Peru.

* In Bolivia and Peru, we interviewed USAID mission, U.S. embassy,
host-government, and nongovernmental organization officials. We also made
site visits to selected project sites and met with project beneficiaries in
both countries. From our analysis, we identified critical elements that
facilitated or impeded the alternative development efforts in these
countries.

To determine the current status of USAID's alternative development efforts
in Colombia and the challenges faced there, we interviewed cognizant
officials and reviewed program planning and financial documents.
Specifically,

* In Washington, D.C., we interviewed officials in USAID's Office of South
American Affairs and State's Bureau for International Narcotics and Law
Enforcement and analyzed USAID program plans and expenditure data to
determine the progress of USAID's efforts in Colombia.

* In Colombia, we interviewed USAID mission, U.S. embassy, United Nations
Drug Control Program, and host-government officials, including the senior
officers of PNDA-the Colombian alternative development institution. We also
met with officials at Chemonics International, Inc.- the major USAID
contractor for alternative development services in Colombia. In addition, we
analyzed USAID, PNDA, and Chemonics project design documents and status
reports. We compared the factors that impeded or facilitated alternative
development in Bolivia and Peru with Colombia's situation to identify the
critical challenges faced there.

We performed our work from January through December 2001 in accordance with
generally accepted government auditing standards.

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days from
the date of this letter. At that time, we will send copies of this report to
interested congressional committees, the secretary of state, and the
administrator of USAID. Copies also will be made available to other
interested parties upon request.

Page 18 GAO-02-291 Alternative Development

If you or your staff have any questions concerning this report, please call
me at (202) 512-4268. An additional GAO contact and staff acknowledgments
are listed in appendix V.

Jess T. Ford, Director International Affairs and Trade

                 Page 19 GAO-02-291 Alternative Development

                       Appendix I: USAID's Alternative
                       Development Program in Bolivia

The United States has provided alternative development assistance to Bolivia
for nearly two decades, but little progress was made until the Bolivian
government controlled the project areas and demonstrated a strong commitment
to coupling alternative development with other counternarcotics measures.
The U.S. Agency for International Development (USAID) has funded four
alternative development projects in Bolivia since 1983. The first three
projects took place between 1983 and 1998 at a cost of about $117 million.
These projects sought to displace the coca-based economy in the
Chapare17-Bolivia's primary illicit coca-growing area (see fig. 2). However,
a lack of security and eradication in project areas hampered the program's
achievements. The U.S. government also supported an unsuccessful Bolivian
government program that paid farmers not to grow coca. USAID officials in
Bolivia estimate that the Bolivian government used about $100 million in
U.S. economic support funds to pay these compensation costs between 1987 and
1998.

In contrast, strong Bolivian government support for eradication since 1997
has resulted in greater success for USAID's fourth and current alternative
development project-the Counternarcotics Consolidation of Alternative
Development Efforts Project, currently estimated to cost $112 million.
However, Bolivia faces challenges in implementing alternative development
because the central government coalition is weakening, and as the national
elections scheduled for 2002 approach, its commitment to eradication has
become uncertain.

17Most of Bolivia's illegal coca has been grown in the Chapare, an area of
approximately 2.5 million hectares located in the eastern foothills of the
Andes in the department of Cochabamba. Responding to rising U.S. demand for
cocaine and the ready supply of coca leaf and labor in the Chapare,
Colombian cartels helped organize a large increase in coca production there.
As a result, the Chapare's population grew dramatically (Bolivian government
estimates suggest that the population may have peaked at 400,000 in 1981,
from an estimated 25,000 in 1968), and coca cultivation likewise increased,
peaking at about 40,000 hectares in 1989.

                 Page 20 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

Figure 2: Illicit Drug-Growing Areas in Bolivia

Source: Latin American Narcotics Cultivation and Production Estimates
2000,U.S. government, p. 8.

USAID officials have identified a number of lessons from its alternative
development program in Bolivia, many of which are relevant to USAID's
alternative development program in Colombia. For example, the success of its
efforts in Bolivia depended on government control of the project areas and a
secure environment, the political commitment of the Bolivian government to
eradicate illicit coca, and coordination between eradication and alternative
development efforts.

The three USAID projects implemented before 1997 sought to develop the
Chapare and displace the coca economy there. They aimed to promote coca
substitution and improve farmer productivity and land use; provide
infrastructure, including roads, electricity, and potable water systems; and
displace the coca economy by increasing farmer profitability, private
investment, market access for project-supported crops, and legal employment
opportunities. However, a lack of government control and eradication in the
project area limited the projects' results. Nevertheless,

Early Alternative Development Projects Had Limited Accomplishments

                 Page 21 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

according to USAID and Bolivian government officials, these projects helped
lay the groundwork for better results from USAID's current alternative
development project in Bolivia.

In addition, in the late 1980s, the Bolivian government used cash provided
by the United States to compensate farmers for not growing coca. Most
observers consider this program a failure.

                               Chapare Project

The Chapare Regional Development Project, implemented between 1983 and 1992
at a cost of $22.5 million, was USAID's first alternative development effort
in the Chapare. Project goals were to stimulate balanced economic growth and
improve living standards through public and private sector participation, a
diversified economic base, and more equitable income distribution. However,
because the Bolivian government lost control of the Chapare to narcotics
traffickers in 1983, USAID limited project objectives primarily to coca
substitution and redirected project resources to nearby valleys in an effort
to stem the tide of immigration to the Chapare.

                           Electrification Project

The Electrification for Sustainable Development Project was implemented
between 1991 and 1996 at a cost of about $15 million. The project aimed to
increase the number of people receiving electricity, expand the use of
electricity for rural industry and export-related activities that would
provide jobs and alleviate poverty, and improve the operational standards of
rural electric distribution.

The project erected power poles, laid power lines, and built an
infrastructure that served 26,700 newly established electrical
connections-about 78 percent over target-in the total project area, which
extended well beyond the Chapare. While these benefits may have facilitated
subsequent development activities, project design documents stated that the
project by itself would likely have little impact on shifting labor from
coca production to legal activities. Accordingly, USAID project evaluations
do not cite any coca reductions resulting from this project.

Cochabamba Project The Cochabamba Regional Development Project was
implemented between 1991 and 1997 at a cost of $79.5 million. Whereas the
Chapare project focused largely on crop substitution, the Cochabamba project
was an "economy substitution" project. The goal was to increase investment,
productivity, and employment in legal economic activities to help Bolivia

                 Page 22 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

transform its economy into a less coca-dependent one. A project evaluation
found that the project improved product quality and handling, provided
export incentives, and facilitated market identification and penetration.18
The project

* increased the area of legal crops under cultivation, crop yields, and crop
exports-for example, banana cultivation increased from about 10,800 hectares
in 1993 to more than 14,100 hectares in 1996, and annual banana yields were
estimated to have increased several times;

* achieved Bolivia's first exports of fresh produce-about 3,000 cartons of
bananas were exported to Argentina weekly-and total exports increased a
reported 564 percent; and

* reportedly increased annual family income derived from project-supported
crops from $280 in 1993 to $520 in 1996.

The project also increased the presence of nongovernmental organizations
working in the Chapare, provided training to farmers, further developed the
region's economic and social infrastructure, and encouraged private sector
investment.

Notwithstanding these efforts, the total hectares under coca cultivation in
Bolivia decreased by less than 5 percent during the life of this project. A
United Nations Drug Control Program official said that such projects did not
result in significant net reductions in coca cultivation because the
projects were not linked with a requirement to eradicate coca.

Cash Compensation Program

In addition to USAID's efforts, between 1987 and 1998, the U.S. embassy's
Narcotics Affairs Section funded a Bolivian program to pay individuals cash
for not growing coca. The Bolivian National Directorate for Agricultural
Reconversion paid $2,000 per hectare to peasant farmers who voluntarily
reduced their coca plantings. The directorate's operating costs and the
compensation paid to farmers came from U.S. cash transfers to Bolivia. U.S.
officials in Bolivia estimated that the Bolivian government spent the
equivalent of approximately $100 million.

U.S. officials told us the program was poorly implemented and failed to
produce net coca reductions. USAID officials told us that individuals were

18Chemonics International, Inc. Evaluation of the Marketing Component of the
Cochabamba Regional Development Project (October 1996).

Page 23  GAO-02-291 Alternative Development Appendix  I: USAID's Alternative
Development Program in Bolivia

Current Project Supports Bolivia's Forced and Voluntary Eradication Policies

paid to not grow coca in particular areas, but they continued to cultivate
coca in other areas, thus defeating the purpose of the program. In addition,
two U.S. audits by the USAID inspector general found several material
weaknesses in the program's management, including inadequate verification
procedures and ineligible beneficiaries.

USAID's current alternative development project in Bolivia focuses on the
Bolivian government's forced eradication policies and has had greater
success than its predecessors. However, future government policy is
uncertain and could pose a threat to the project's progress.

The Counternarcotics Consolidation of Alternative Development Efforts
Project, USAID's fourth and latest alternative development project in
Bolivia, started in 1998 as a 5-year effort, but USAID is planning to extend
the project until 2005. Project funding, currently planned at $112 million,
is expected to increase. USAID designed the project to support the Bolivian
government's goal of forcibly eradicating all illegal coca in Bolivia by the
end of 2002. Primarily, the project provides assistance to communities that
have signed and abided by voluntary eradication agreements with the Bolivian
government.

In 1998 and 1999, the Bolivian government undertook an aggressive coca
eradication campaign in the Chapare, which facilitated progress in
alternative development. The Bolivian government eradication program reduced
coca cultivation by 33 percent nationwide and reduced coca cultivation in
the Chapare more than 90 percent by the end of 2000.

The Bolivian government's forced eradication campaign has encouraged many
former coca growers to seek alternative economic opportunities through the
current USAID project. According to State reports, as of September 30, 2000,
the volume of licit alternative development production leaving the Chapare
totaled $67.3 million, a 15 percent increase above calendar year 1999's
total of $58.2 million. The number of domestic agribusinesses purchasing
Chapare crops or supplying agricultural inputs increased from 46 to 67.
During 2000, the project gave 6,500 families technical and marketing
assistance, up from 2,554 families in 1997. According to the March 2001
quarterly report on project performance, the aggregate market value of coca
leaf production in the Chapare was

                 Page 24 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

approximately $20 million, compared to the value of alternative crops, which
contributed approximately $85 million to the Bolivian economy.19

While achievements in the Chapare under USAID's current project have been
considerable, U.S. and Bolivian officials have expressed concern that
progress in alternative development may be threatened if the Bolivian
government does not support continued eradication of illicit coca. According
to State officials, the Bolivian government's governing coalition is now
politically weak, and the future of the government's eradication policy is
uncertain. Bolivia's vice president told us it would be politically
impossible for the administration to repeat the 1998-1999 forced eradication
campaign and that the government could be that aggressive only at the
beginning of its administration. Bolivia's vice minister for alternative
development told us that the weakening of the governing coalition and the
upcoming national elections have politicized eradication. Individual members
have moved to negotiate the government's eradication policy with coca
producers, which he said has caused serious damage to ongoing eradication
efforts. According to the vice minister, the alternative development program
will suffer if coca eradication is seen as negotiable and avoidable.

USAID officials have identified lessons from the agency's alternative
development program in Bolivia, many of which are relevant to USAID's
alternative development program in Colombia. For example, USAID learned that
program success depended on government control of, and security in, the
project area; commitment of the Bolivian government to eradicate illicit
coca; and coordination with interdiction and eradication efforts. In
addition, it learned that other factors, including a market-oriented
strategy, beneficiary attitudes, coordinated public relations campaigns, and
U.S. support for Bolivian government agencies have contributed to program
progress in Bolivia.

Alternative Development Lessons Learned in Bolivia

Government Needs to USAID's alternative development projects in Bolivia were
limited by the

Control Project Sites lack of government control of the project site and
insecurity from continued social strife. Early project documents describe
the Chapare as a high-risk atmosphere, noting that during much of the first
project (the

19 CONCADE  Quarterly Report,  January-March  2001 , Development  Associates
International.

Page 25  GAO-02-291 Alternative Development Appendix  I: USAID's Alternative
Development Program in Bolivia

Chapare Regional Development Program, 1983-1992), substantial areas of the
Chapare were not accessible to the Bolivian government or project personnel
for security reasons. The Bolivian government lost control of the project
area between 1983 and 1986, and as a result, USAID redirected its
alternative development efforts away from the Chapare for several years. A
1990 project evaluation reported that cocaine traffickers effectively ran
the Chapare as a free-trade, free-fire zone for several years. After the
Bolivian government regained control over the Chapare, USAID resumed
activities there.

However, in recent years, coca union members and other groups protesting
government policies have blockaded roads through the project site,
preventing alternative crops from reaching markets and jeopardizing
much-needed private sector investment. According to USAID, these
disturbances in the project area continue to adversely affect its
alternative development strategy. The coca producers' political party is
well organized, and coca union members have threatened alternative
development project staff and participants. During blockades of the main
Chapare access road in 2000, coca union members threatened to burn the
alternative crops of association members.

USAID's current Counternarcotics Consolidation of Alternative Development
Efforts Project remains vulnerable to such social strife. According to an
October 2000 cable from the USAID mission in Bolivia, social strife resulted
in losses to Chapare producers of about $3 million. Technical assistance was
suspended and licit crop planting was delayed. Market linkages with
Argentina and Chile, which had been difficult to establish, were damaged by
Chapare producers' inability to comply with delivery contracts. Financial
institutions considering investing or providing services in the Chapare
backed out. The mission reported that the conditions required to achieve
alternative development interim objectives had been seriously affected by
the road blockages and civil unrest. USAID officials told us that without
security and stability, it is unlikely that the Chapare can achieve any
degree of self-sustainability.

Strong Government Little progress was made in Bolivia until the host
government undertook Commitment Facilitates the aggressive eradication that
has facilitated USAID's current alternative Alternative Development
development project. According to State, by the end of 2000, only 600

hectares of land under illicit coca cultivation remained in the Chapare,
rendering the area a commercially insignificant source of illicit coca. As a
result of the 1998-1999 eradication campaigns, more former coca growers are
turning to alternative development activities to earn their living, and

                 Page 26 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

the value of licit  crops under cultivation has increased significantly. The
number  of currently  anticipated beneficiaries,  about 7,300, is  more than
double original estimates.

Alternative Development, Interdiction, and Eradication Need to Be
Coordinated

According to State, USAID, and other U.S. government officials in Bolivia,
alternative development, narcotics and precursor chemicals interdiction, and
illicit crop eradication are interdependent and mutually reinforcing
components of a successful counternarcotics strategy. Interdiction and
eradication are shorter term in nature; alternative development efforts take
longer to implement and show results, but they are important to sustaining
gains made by interdiction and eradication.

USAID's alternative development projects in Bolivia have been hindered by
poor coordination between the U.S.-supported eradication effort and USAID's
alternative development efforts. For example, a former USAID official told
us that State and Drug Enforcement Administration officials often did not
share information about the U.S.-supported counternarcotics operations with
USAID. A 1991 USAID study on coca production in the Chapare concluded that
there was too little coordination at both the policy and operations level
among agencies charged with interdiction and development.20 The director of
Bolivia's Alternative Development Regional Program, the USAID counterpart
for alternative development, told us that until the end of 1996, USAID and
Bolivian alternative development agencies worked almost entirely apart from
U.S. and Bolivian counternarcotics enforcement agencies.

More recently, the rapid pace of the Bolivian government's eradication
campaign has created gaps between eradication and alternative development
assistance that can leave peasant farmers without livelihoods. The Bolivian
plan has been to remove itself from the coca-cocaine business by 2002.
According to a U.S. embassy official in Bolivia, the schedule for the
eradication process was compressed because the current government wanted to
complete the effort before the 2002 presidential election. As a result,
coordination between eradication and alternative development became very
difficult. According to an embassy official, the Bolivian government was
eradicating 1,000 hectares a month

20Farmer Perspectives on the Economics and Sociology of Coca Production in
the Chapare, Institute for Development Anthropology Working Paper Number 77
(January 1991).

Page 27 GAO-02-291 Alternative Development Appendix I: USAID's Alternative
Development Program in Bolivia

at the peak of the 1998-1999 operation and there was no way alternative
development could quickly replace the eradicated coca with crops.
Accelerated eradication stressed the current project by dramatically
multiplying the anticipated beneficiaries-from 3,500 to 7,300 people. State
reported that the aggressive eradication program outpaced the alternative
development program by a wide margin and that the Bolivian government would
accelerate the alternative development project in the Chapare in an effort
to close the gap.

              Others Factors Affecting Alternative Development

Verification Is Necessary

Markets Are Needed

A combination of other factors have contributed to the recent successes in
Bolivia. These factors are less universal than those cited above, but
nevertheless USAID officials in Bolivia noted them as lessons learned for
future alternative development projects.

According to USAID officials in Bolivia, community self-policing, or "peer
pressure," has not been a reliable mechanism for enforcing voluntary
eradication agreements. After the Bolivian government's cash compensation
program was phased out, the government began providing infrastructure and
other in-kind compensation to communities that abandoned coca. However,
USAID officials question assumptions that legal producer associations can
prevent all of their members from producing coca. USAID officials disagree
with the basic peer-pressure premise of the program because there are no
long-standing, close-knit communities in the Chapare but rather loosely
associated settlements. In the summer of 1999, according to USAID officials,
65 percent of the communities participating in the government's voluntary
eradication program were found to have some members who violated their coca
eradication agreements, thus disqualifying the community from receiving
government assistance. Suspension of assistance to an entire community or
farmer group because a few members broke their compensation agreements has
been counterproductive, according to USAID, because it hinders
implementation of legal crop production and marketing activities and weakens
alternative producer associations.

USAID officials in Bolivia found that alternative development projects were
needed to incorporate market-oriented strategies and overcome numerous
business-related challenges to provide economic benefits for participants.
For example, although the success of the Chapare Regional Development
Project-USAID's first alternative development project in

                 Page 28 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

Bolivia-depended on the economic viability of alternative crops adopted by
farmers, a 1990 evaluation found that no studies of the markets for the
proposed crop substitutes had been conducted.21 The evaluation also found
that the Bolivian private sector was weak and cautious and did not fulfill
the role envisioned by USAID in the project design. Furthermore, constraints
on credit access were severe. The evaluation found that although coca
production in the Chapare produced a huge inflow of cash, small farmers did
not translate coca income into savings or productive assets. The subsequent
alternative development project in Cochabamba was more market focused, but
it also faced serious business challenges. For example, the most serious
challenge in establishing export markets for project-supported crops was the
inadequate volume and quality of the produce and difficulty shipping it
quickly and delivering it in good condition on a consistent basis.22

The Consolidation of Alternative Development Efforts Project, which started
in 1998 and is still under way, is almost entirely focused on leveraging the
market-oriented activities of predecessor projects and improving farmer
productivity, stimulating private sector investment, and facilitating market
access. It also faces numerous business challenges, such as extremely poor
road connections to domestic markets and markets in neighboring countries, a
lack of refrigerated cargo trucks, and poor access to credit for Chapare
farmers and entrepreneurs.

U.S. officials emphasized the importance of an effective public relations
campaign for counternarcotics programs and alternative development in
particular. In Bolivia, the U.S. embassy helped build a public consensus
that production of coca and cocaine was a matter of Bolivian national
interest, that the cocaine consumed by Bolivians came from the Chapare, and
that narcotics trafficking was retarding the country's economic development.
U.S. officials told us that public support was a necessary precondition for
the Bolivian government's campaign of accelerated, forced eradication. U.S.
embassy officials recently concluded, however, that U.S. support of the
Bolivian government's public relations effort has overemphasized the cities
and neglected the actual project area. To counter pro-coca and
antialternative development propaganda in the

                         Public Support Is Helpful

21Pragma Corporation, Evaluation of the Chapare Regional Development Project
(November 1990).

22 Evaluation  of  the   Marketing  Component  of  the  Cochabamba  Regional
Development Project (October 1996).

                 Page 29 GAO-02-291 Alternative Development

Appendix I: USAID's Alternative Development Program in Bolivia

Chapare,  the U.S.  embassy  public affairs  section has  begun  an outreach
effort to radio stations there.

                 Page 30 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

The United States has provided alternative development assistance to Peru
for nearly two decades, but little progress was made until the Peruvian
government controlled the project areas and demonstrated a strong commitment
to a broader set of counternarcotics measures. The U.S. Agency for
International Development (USAID) has funded two alternative development
projects in Peru since 1981. The first alternative development project-the
Upper Huallaga Area Development (UHAD) project-took place between 1981 and
1994 at a cost of about $31 million. This project was designed to increase
and diversify agricultural production in the coca-growing Upper Huallaga
River Valley through agricultural assistance for alternative legal crops and
improvements in roads and health and community services (see fig. 3).
However, severe security constraints and a lack of marketing assistance
limited its successes, and coca cultivation increased during the project's
lifetime.

In contrast, several factors-particularly a strong Peruvian government
commitment to counternarcotics and improvements in security and civil
governance-have contributed to better results for the Alternative
Development Program (ADP), USAID's second and current alternative
development project in Peru. This project, which began in 1995 and is
currently estimated to cost about $195 million, has contributed to a 70
percent decline in hectares under coca cultivation. However, political
uncertainty in Peru, as well as other issues, may affect future program
accomplishments and sustainability.

                 Page 31 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

Figure 3: Illicit Drug-Growing Areas in Peru

Source: Latin American Narcotics Cultivation and Production Estimates 2000,
U.S. government,

p. 14.

USAID officials have identified various lessons learned from the two
alternative development projects in Peru, many of which are relevant to
USAID's alternative development program in Colombia. For example, the
success of alternative development in Peru depended on security in

                 Page 32 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

program  areas, the  political  commitment of  the Peruvian  government, and
coordination with eradication and interdiction efforts.

UHAD Project Accomplishments Were Limited

USAID implemented the UHAD project between August 1981 and June 1994 at a
cost of approximately $31.2 million. The U.S. and Peruvian governments
developed the UHAD project as part of a joint counternarcotics strategy that
called for coordination among interdiction, eradication, and alternative
development efforts. The UHAD project was intended to support the government
of Peru's alternative development objectives in the Huallaga Valley by
strengthening local government and community participation in the
alternative development process, improving the physical and social
infrastructure, and promoting agricultural activities that would replace
illicit crops. USAID originally limited project operations to the Upper
Huallaga area, a high-jungle valley along the Huallaga River in the
north-central part of Peru, but later expanded the program to the Central
Huallaga Valley as well.

The Special Project for the Alta (or Upper) Huallaga (PEAH), an entity of
the Peruvian government, implemented the UHAD project with USAID support.
During much of the UHAD project, armed subversive organizations-the Shining
Path and the Tupac Amaru Revolutionary Movement-terrorized Peruvians and
attacked national and local government and civilian and military targets,
particularly in rural areas. Narcotics traffickers also contributed to the
violence. By 1986, PEAH had become the sole Peruvian government entity
remaining in the Upper Huallaga Valley because of the deteriorating security
situation. As a result, USAID severely reduced planned activities in the
project's agricultural production component, including agricultural
research, training, credit extension, and land titling. The project's focus
on crop substitution and a lack of technical and marketing assistance for
the alternative crops further limited the success of its agricultural
component.

USAID made some progress in the UHAD project's infrastructure component,
with PEAH upgrading 765 kilometers of highways and 582 kilometers of access
roads that helped reduce travel and transportation costs and connected
farmers to buyers of the area's agricultural products. However, terrorist
activities prevented USAID from completing a major highway that was intended
to connect project sites with Lima area markets as well as other
infrastructure projects. Furthermore, the terrorists generally controlled
the farmers' access roads.

                 Page 33 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

The community development component was, at times, the only functioning
element of the UHAD project. Activities fostering local participation in the
design and execution of small social infrastructure projects proved
successful by exposing communities to democratic principles and requiring
them to contribute financially to projects from which they benefited.
However, this component required the tacit approval of the terrorists. PEAH
was unable to develop good working relationships with the public agencies,
local governments, and community-based organizations involved, and security
problems resulted in the abrogation of many agreements between PEAH and
these entities.

In the end, evaluations of the UHAD project cited the lack of coordination
between the Peruvian government's alternative development and eradication
activities, as well as limited markets for the alternative crops that the
project promoted, as factors that limited the project's success. During the
early years of the project (1981 to 1986), hectares under coca cultivation
in the Upper Huallaga Valley increased fivefold from 12,000 hectares to
60,000 hectares. By 1990, these areas increased further to an estimated
70,000 to 90,000 hectares.

Using lessons learned from the UHAD project, USAID initiated the current ADP
in 1995. ADP is more comprehensive than the UHAD project in terms of
geographic coverage and program components. ADP seeks to improve employment
and income opportunities from legal economic activities, access to basic
social services, public participation in decision making, and public
awareness of the problems from drug use and production in five coca-growing
river valleys in Peru. The return of government control, security, and civil
governance in program areas, as well as the Peruvian government's strong
commitment to interdiction and eradication, have proved crucial in creating
an environment conducive to alternative development.

As of January 2001, USAID had spent $84.5 million for ADP; USAID estimates
that ADP funding through 2003 will reach $194.5 million.23 ADP has made
considerable progress in meeting its objectives and has contributed to
significant drops in coca cultivation in Peru. The project's strategy is
based on the hypothesis that the majority of residents in coca

Strong Peruvian Government Support Increased Success of Second Program

23USAID  has now extended ADP to 2006 and may  extend the program further to
2008. USAID  estimates that the ADP will  require $140 million during fiscal
years 2002-2006.

Page 34 GAO-02-291 Alternative  Development Appendix II: USAID's Alternative
Development Program in Peru

cultivation zones will voluntarily abandon coca if they are offered
alternative licit sources of income, along with improved living conditions
for their communities, and if narcotics trafficking is disrupted and laws
are enforced.

ADP emphasizes licit economic activities, local government strengthening,
and economic and social infrastructure. The component involving licit
economic activities offers assistance in the production, processing, and
marketing of alternative licit crops; credit programs; and land titling
programs. USAID has focused these activities on the rehabilitation of coffee
and cacao cultivation because of their established markets and farmer
familiarity with these crops. In its local government component, the project
promotes efforts to strengthen local governments, increase public
participation in decision making, raise social awareness of drug production
and use, and develop communities. Finally, ADP includes activities to
improve the economic infrastructure-for example, the rehabilitation and
maintenance of roads and bridges and the provision of social services in
program areas. Improved roads and bridges are intended to create a viable
transportation network for licit economic activities, while social
infrastructure components involve local communities in the selection,
design, financing, construction, and maintenance of small infrastructure
projects such as schools, potable water systems, health posts, and
minihydroelectric systems.

With the return of government control, security, and civil governance in
program areas in the early 1990s, as well as the Peruvian government's
strong commitment to interdiction and eradication, ADP has been able to
accomplish considerably more of its objectives than the earlier UHAD
project. In conjunction with eradication and interdiction efforts, ADP
contributed to a 70 percent net decrease in hectares under coca cultivation
in Peru from 1995 (115,300 hectares) through 2000 (34,200 hectares).
According to USAID, those areas receiving greater project investment
witnessed greater voluntary abandonment of coca cultivation, as well as
fewer plantings of new coca crops.

During 1995-2000, ADP provided production and marketing support to more than
15,000 farmers growing nearly 32,000 hectares of licit crops, particularly
coffee and cacao, according to USAID officials. During that period, more
than 236 metric tons of licit crops, with a gross value exceeding $46
million, were produced in program areas. The project established a $10
million rural credit system, provided training in governance skills, and
strengthened two municipal associations.

                 Page 35 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

Through its economic and social infrastructure component, ADP has
rehabilitated 1,000 kilometers of roads and 46 bridges, stone-paved 21
kilometers of roads, supported 136 engineering studies, piloted 1 regional
maintenance program, and provided 3 pools of heavy equipment. In addition,
the project has supported about 1,000 small social infrastructure projects
involving schools, potable water systems, health posts, minihydroelectric
systems, and other community improvements. As a result, the percentage of
households with access to basic services in program areas increased from 16
percent to 51 percent. Finally, according to USAID, the percentage of the
population recognizing drug production and consumption as damaging to
society reached 94 percent.

USAID officials identified various lessons learned from the UHAD project and
ADP, many of which may apply to USAID's alternative development program in
Colombia. For example, the success of its alternative development program in
Peru depended on government control over and security on the project sites,
the political commitment of the Peruvian government, and coordination with
interdiction and eradication efforts. Other factors that affected
alternative development in Peru included a system for verifying compliance
with eradication agreements, a market-oriented program design, national
consensus on the harm caused by drug production and consumption, and a
viable road network.

Alternative Development Lessons Learned in Peru

                             Government Needs to
                            Control Project Areas

Lack of government control and security severely limited program
implementation and accomplishments in the UHAD project by causing program
implementers-agricultural advisers, researchers, and financial
institutions-to withdraw and residents to flee from project areas.
Terrorists murdered several land surveyors, mayors, and residents, thereby
halting many of the project's activities. At one point, PEAH was the only
Peruvian government institution in the Upper Huallaga Valley, after other
government and private sector entities left due to the deteriorating
security situation.

In designing ADP, USAID officials acknowledged that ensuring security by
reducing the presence of subversive and narcotics trafficker elements was a
critical precondition for alternative development in program areas. Insecure
areas were excluded from the program. The Peruvian government's success in
combating terrorist groups and narcotics traffickers in the mid-1990s
created a more secure and amenable environment for alternative development.
The return of civil governance in program areas allowed USAID-supported
activities to resume.

                 Page 36 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

Strong Government Commitment Facilitates Alternative Development

As the UHAD project was ending in the early 1990s, prospects for the success
of alternative development in Peru were considered bleak, despite years of
U.S. assistance. Coca cultivation had increased significantly during the
1980s. However, this changed when the Peruvian government committed to a
strong counternarcotics agenda. In particular, the Peruvian Air Force
conducted an aggressive interdiction campaign in which it shot down
airplanes presumed to be involved in narcotics trafficking. This campaign
disrupted the coca market, thereby encouraging coca growers to turn to
alternative development programs. By targeting narcotics traffickers, rather
than coca growers, the Peruvian government also limited resentment from
farmers over the counternarcotics campaign, according to USAID and Peruvian
officials.

Recent political turmoil has created uncertainty about the future direction
of the Peruvian government's counternarcotics policies and may affect future
program accomplishments and sustainability. Peru's transitional government
(November 2000 to July 2001) invited leaders of coca-growing syndicates to
participate in formal roundtable policy discussions, raising concern among
USAID officials and some ADP implementers that this would impart legitimacy
to the syndicates and raise their political profile. In addition, Peru's
current administration, which came to office on July 28, 2001, is still
developing its national counternarcotics policy.

Alternative Development, Interdiction, and Eradication Need to Be
Coordinated

State and USAID officials in Peru emphasized that an effective
counternarcotics strategy requires sustained interdiction, eradication, and
alternative development. Interdiction and eradication disrupt the coca
market, thereby creating market uncertainty and lowering prices for coca
while encouraging coca farmers to consider alternative development programs.

The three efforts are also complementary, but alternative development
programs require longer timetables to achieve results than interdiction or
eradication efforts. The cultivation and commercialization of alternative
crops, development of community organizations, and improvement of social and
economic infrastructures can take years to accomplish, but they have
longer-lasting impacts on reducing coca cultivation. Department of State and
USAID officials in Peru emphasized that coordination between eradication and
alternative development is particularly important to ensure that eradication
efforts do not interfere with alternative development activities and that
families dependent on coca for their livelihood receive short-term emergency
assistance after an eradication campaign.

 Page 37 GAO-02-291 Alternative Development Appendix II: USAID's Alternative
                        Development Program in Peru

According to USAID officials, the Peruvian government has conducted some
coca eradication campaigns in the past without coordinating these actions
with USAID, thereby jeopardizing ADP activities. Such forced eradication
campaigns can cause problems for ADP by creating resentment among community
residents. In the earlier UHAD project, resentment against eradication
efforts worsened security concerns by alienating farmers, which encouraged
them to seek "protection" from terrorist groups.

              Others Factors Affecting Alternative Development

Verification Is Necessary

Markets Are Needed

As in Bolivia, a combination of other factors has affected progress in Peru.
The factors cited by USAID officials in Peru are similar, but not identical,
to those cited by officials in Bolivia and are useful as lessons learned for
future alternative development projects.

According to USAID and embassy officials in Peru, although the United States
has monitored overall trends in coca reduction in Peru, there is currently
no way to verify whether specific Peruvian communities participating in
voluntary eradication agreements are actually complying with the agreements.
In September 2001, State's inspector general found that monitoring efforts
were not specific enough to establish an adequate link between investments
in alternative development and coca reductions. Embassy officials, with
input from USAID, are developing a monitoring system that addresses this
concern. One component of the system the embassy is considering would
involve a requirement for the Peruvian government to provide proof of
compliance with eradication agreements before it could draw future
alternative development funds. The system would likely employ the Peruvian
Interior Ministry in plotting the relevant areas of farmland and monitoring
the corresponding eradication efforts there. The United States would then
verify the Peruvian government's monitoring efforts from the air.

Under the UHAD project, USAID emphasized agricultural production of certain
crops. However, USAID did not conduct analyses or develop program strategies
that fully considered the marketability of these particular crops. Without
markets for the alternative crops they grew under the UHAD project, farmers
derived little economic benefit from their efforts and investments. Based on
this experience, USAID included a stronger market focus in the follow-on
project. ADP originally focused on promoting the rehabilitation of key
crops-coffee and cacao-that had proven markets and that farmers
traditionally cultivated, but then abandoned, in program areas. However,
historically low market prices for these commodities have limited the
economic benefits to farm families.

                 Page 38 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

                         Public Support Is Helpful

ADP is now promoting economic diversification-the cultivation of multiple
crops and raising of small farm animals-to stabilize the financial income
and nutritional needs of farm families, while still promoting the
cultivation of traditional crops (for example, coffee and cacao) whose
prices are subject to market fluctuations. USAID also is emphasizing the
need to develop niche markets for alternative development products and to
involve the private sector under ADP. For example, USAID has successfully
marketed coffee and cacao grown under ADP to Seattle's Best Coffee and M&M
Mars Company.

U.S. and Peruvian officials acknowledged that, in the past, Peruvians
considered coca cultivation, drug production, and narcotics trafficking to
be U.S. rather than Peruvian problems. Consequently, the Peruvian public
demonstrated relatively limited support for U.S.-supported counternarcotics
efforts, including alternative development.

However, the Peruvian public attitude toward drug production and trafficking
changed as a result of the terrorism, violence, and social disruption caused
by subversive groups-who were supported by narcotics traffickers-during the
1980s and early 1990s. With public support, the Peruvian government mounted
aggressive counternarcotics and counterterrorist campaigns, while minimizing
public opposition and resentment against these efforts by targeting
narcotics traffickers rather than the coca farmers.

Public support at a community level has also helped. According to USAID
officials, the involvement of beneficiaries, local community groups, and
municipalities in its alternative development programs was necessary to
promote sustainability. Communities have a greater incentive to embrace and
sustain alternative development activities if they are involved in the
design, implementation, and funding of projects that raise the quality of
life in their communities. Both the UHAD project and ADP included social
infrastructure activities in which communities benefited from and
contributed to alternative development-supported schools, water systems, and
health posts.

ADP, in particular, has promoted the development and strengthening of
regional and local community groups such as municipal associations, producer
associations, and credit groups to encourage local communities to take
ownership of their projects and expose them to the democratic process.
According to USAID, strengthening local organizations is particularly
important in Peru because of the national government's highly centralized
decision making and resource allocation processes. Under

                 Page 39 GAO-02-291 Alternative Development

Appendix II: USAID's Alternative Development Program in Peru

Viable Roads

ADP, USAID requires local communities to prioritize their social service
needs and contribute both financial and labor resources to the projects they
choose. USAID also helped coffee and cacao farmers develop producer
associations to assist them in marketing their crops.

U.S. and Peruvian officials acknowledged that a viable rural road network is
a precondition that encourages farmers to consider alternative economic
activity and reduce their illicit crops voluntarily. Good roads allow
farmers to obtain higher prices for their alternative crops by linking them
to higher-paying nonlocal markets and by reducing transportation costs. In
contrast, farmers can market coca leaves without roads by carrying coca
leaves or coca paste out of their valleys or by having narcotics traffickers
pick up the products from farms by airplane.

Under the UHAD project, USAID had supported the completion of roads that
would have linked Upper Huallaga Valley farmers to lucrative markets in
Lima. However, a lack of security prevented their completion. Under ADP,
USAID is supporting the rehabilitation and upgrading of important secondary
rural roads and bridges in program areas. In some cases, USAID is supporting
cobblestone paving of dirt roads, which also generates local employment in
program areas. USAID is also supporting the formation of community-based
road maintenance microenterprises.

                 Page 40 GAO-02-291 Alternative Development

Appendix III: Comments from the Department of State

Appendix III: Comments from the Department of State

Appendix III: Comments from the Department of State

Appendix III: Comments from the Department of State

Appendix III: Comments from the Department of State

                     Appendix IV: Comments from the U.S.
                    Agency for International Development

Appendix IV: Comments from the U.S. Agency for International Development

Appendix IV: Comments from the U.S. Agency for International Development

Appendix IV: Comments from the U.S. Agency for International Development

Appendix IV: Comments from the U.S. Agency for International Development

Appendix V: GAO Contact and Staff Acknowledgments

GAO Contact Albert H. Huntington, III (202) 512-4140

Acknowledgments In addition to the individual named above, Dave Artadi, Mike
Courts, Christian Hougen, Jason Venner, and Janey Cohen made key
contributions to this report.

            (320016) Page 51 GAO-02-291 Alternative Development

GAO's Mission

Obtaining Copies of GAO Reports and Testimony

The General Accounting Office, the investigative arm of Congress, exists to
support Congress in meeting its constitutional responsibilities and to help
improve the performance and accountability of the federal government for the
American people. GAO examines the use of public funds; evaluates federal
programs and policies; and provides analyses, recommendations, and other
assistance to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents is through the
Internet. GAO's Web site (www.gao.gov) contains abstracts and full-text
files of current reports and testimony and an expanding archive of older
products. The Web site features a search engine to help you locate documents
using key words and phrases. You can print these documents in their
entirety, including charts and other graphics.

Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its Web
site daily. The list contains links to the full-text document files. To have
GAO e-mail this list to you every afternoon, go to www.gao.gov and select
"Subscribe to daily e-mail alert for newly released products" under the GAO
Reports heading.

Order by Mail or Phone The first copy of each printed report is free.
Additional copies are $2 each. A check or money order should be made out to
the Superintendent of Documents. GAO also accepts VISA and Mastercard.
Orders for 100 or more copies mailed to a single address are discounted 25
percent. Orders should be sent to:

U.S. General Accounting Office P.O. Box 37050 Washington, D.C. 20013

To order by Phone: Voice: (202) 512-6000 TDD: (202) 512-2537 Fax: (202)
512-6061

Visit GAO's Document GAO Building

Distribution  Center  Room 1100,  700 4th  Street, NW  (corner of 4th  and G
Streets, NW) Washington, D.C. 20013

To Report Fraud, Contact: Web site: www.gao.gov/fraudnet/fraudnet.htm,

Waste, and Abuse in E-mail: [email protected], or

Federal Programs 1-800-424-5454 or (202) 512-7470 (automated answering
system).

Jeff   Nelligan,  Managing   Director,   [email protected]   (202)  512-4800

Public Affairs U.S.  General Accounting Office, 441 G. Street NW, Room 7149,
Washington, D.C. 20548
*** End of document. ***