Priorities for US Assistance in the Western Hemisphere

I want to express my appreciation to the House Committee on Foreign Affairs for the opportunity to testify this morning on “Priorities for U.S. Assistance in the Western Hemisphere.” I want to commend the committee for addressing this issue when the executive and legislative branches of government are wrestling with questions of what is required for the federal government to meet the security requirements, national interests and humanitarian obligations of the United States.

This hearing offers an opportunity for the committee to identify assistance programs for Latin America and the Caribbean which should be protected from budget cutbacks. Why? Because they are vital to U.S. foreign policy goals—those that prevent conflict, strengthen democratic institutions—especially those related to the rule of law---and directly encourage economic growth that reduces poverty and inequality.

The International Crisis Group has been recognized as the leading independent, non-partisan, non-governmental source of field-based analysis, policy advice and advocacy to governments, the United Nations (UN), Organization of American States (OAS) and other multilateral organizations on the prevention and resolution of deadly conflict. Crisis Group publishes annually some 80 reports and briefing papers, and the monthly CrisisWatch bulletin.

Our staff is located on the ground in twelve regional offices and seventeen other locations, covering more than 60 countries.  We maintain advocacy offices in Brussels (the global headquarters), Washington, and New York, with liaison presences in Moscow and Beijing.

In Latin America, the Crisis Group regional program headquarters are in Bogota, and Colombia’s civil conflict has been the central focus of our Andean project. However, we  have also published reports on Venezuela, Ecuador and Bolivia, identifying the drivers of conflict in those countries. We have been in Haiti since 2004, and have just opened a project in Guatemala, given the rising threat to the state from organized crime, drug trafficking and corruption.

Before examining the critical challenges facing the region and the priorities for U.S. assistance, it is useful to step back and recognize that most of the countries in this hemisphere have  made  successful transitions from authoritarian military rule to civilian democratic government.  The hemisphere is also largely free of the ideological conflict in Central America that sparked decades of deadly violence and cost hundreds of thousands of lives. In Colombia, the last remaining insurgency has been weakened and splintered, but still persists. A once-powerful and equally brutal paramilitary has been largely demobilized, but a group known as BACRIM, a mix  of former paramilitary and organized crime mafias, now has an estimated 6-10,000 members. Cuba is the region’s last authoritarian regime, and serious distortions hamper democratic expression in a handful of other countries. Social exclusion and crime are the major threats to democratic stability in the region.

On the economic front , most countries adopted economic reforms that enabled the region to bounce back faster than any other—including the U.S.—from the global  financial crisis. The economies in the region have grown steadily during this century, averaging 5.5 percent annually until the 2008 financial crisis. However, this was far below Asia’s 9 percent growth, and too low to make a sustainable impact on poverty reduction. After declining by nearly 2 percent in overall gross domestic product (GDP) in 2009, the Economic Commission on Latin America and the Caribbean (ECLAC) now puts average growth last year at 6 percent, with Brazil leading the way at 7.7 percent.  Unfortunately, in 2011, GDP growth is likely to slow to 4 percent, again demonstrating the drag of continued inequality and poverty on the region’s prospects. Recent reports from ECLAC and the World Bank show countries with major commodities exports (essentially  South America) with  6 percent growth prospects in 2011, and those relying on remittances and manufactures (essentially Mexico and Central America) with expectations closer to 2 percent.

Innovative social policies—from conditional cash transfer programs such as bolsa familha in Brazil or oportunidades in Mexico, to widespread access to microcredit and village banking— began in Latin America and spread across the globe.  These policies, coupled with  growth, helped millions escape poverty for the first time, but still amounted to only 0.4 percent of regional GDP.

Serious challenges remain to the governments of the hemisphere, to regional, political and financial organizations, and to U.S. policy. They are: (1) confronting inequality and exclusion; (2) combating crime and drugs; and (3) strengthening democracy and combating corruption.

First, inequality and exclusion.

Despite economic growth, in 2010, more than 180 million people lived on less than $2 per day, and more than 72 million people lived on less than $1 per day. Many who climbed above the poverty line during the “boom” years slid back into poverty in 2009 and have yet to feel the impact of the recovery.

More destabilizing still is the fact that Latin America is home to 11 of the world’s 18 countries with the worst income inequality.  The United Nations Development Programme (UNDP) and ECLAC report that on average, the top 10 percent of the population receives 48 percent of national income, while the bottom 10 percent receives just 1.6 percent. These income disparity figures not only reflect lost opportunities for millions, but they could also make political extremes more attractive to a frustrated population with newfound access to the voting booth.  Combine that inequality with the corruption that people see daily and the threat of crime and violence in their neighborhoods, and the drift toward populist visions becomes more understandable.

Indigenous peoples and Afro-Latin-Americans still face discrimination on a daily basis—not dissimilar from the discrimination that has scarred this country.  A World Bank study found indigenous men earn 65 percent less than whites in the seven countries with the highest numbers of indigenous people. Indigenous women have the least access to potable water, education and employment in the hemisphere. In Bolivia, almost 500 years of exclusion and discrimination  barred its indigenous majority from meaningful participation in national life. Electing Evo Morales demonstrated the success of an expanding democratic franchise, although his administration has thus far failed to produce sustainable economic and social progress, and it abused due process in pursuing far-reaching constitutional changes. In Peru, recent election returns may also be showing that positive macro-economic growth is insufficient if the benefits do not reach the majority of the population.

Response

There are at least three ways the U.S. can use its foreign assistance programs and diplomatic tools to assist countries seeking to significantly reduce inequity and exclusion: (1) expand help for rural development and small farmers; (2) expand quality education; and (3) encourage tax reform. Re-examining and prioritizing U.S., Inter-American Development Bank (IDB) and World Bank assistance in these areas would contribute significantly to altering inequity and exclusion in the Americas.

Rural investment

It is in the rural areas that investing in physical infrastructure, land reform, income generating opportunities and social services can make the greatest direct impact on growth and poverty reduction. And there are well-proven ways to do so:

• Support ways to expand access for  the rural poor to land through land markets, land funds and what Brazil calls “land market-assisted land reform,” by expropriating unproductive land, or using a land tax mechanism that encourages making more land available to small farmers.
• Help provide secure title to the land that the poor own so they can acquire working capital for their farming and micro and small loans for off-farm activities.
• Invest substantially more in micro- and small-credit facilities. In 1999, United States Agency for International Development (USAID) was financing credit for close to 1 million microentrepreneurs, and the IDB, World Bank and others did the same for another 1 million. But 50 million needed such credit. Today the need is even greater. The way to do that is to convince private banking to adopt the same strategies and engage the poor as customers.
• Invest in human capital formation— schools, health, nutrition—and in social capital, cooperatives, joint ventures, and small and medium businesses to create formal sector employment and increase funding for labor rights enforcement.
• Invest in technology and rural infrastructure so that rural roads, electricity, water and sewers and information technology actually reach the rural poor.

As part of the “New Deal”, the U.S. made a massive investment in rural infrastructure. The same needs to happen in Latin America. Removing key agricultural trade barriers in the U.S.  would also help significantly. Let me quickly enumerate the reasons these actions are in the U.S. national interest:

• Much of the flow of illegal migration from Central America and Mexico originates in the poorest rural communities of those countries, not just in overcrowded urban areas. President Obama was correct when he said economic growth south of the border is the only long-term avenue to decrease illegal migration north of the border.
• Coca cultivation takes place in the poorest regions of the Andean ridge countries, yet the poor campesinos have no desire to work with or for drug cartels. They need at least the same help to grow legal crops as they receive to grow illicit crops.
• Those are the same regions where the Revolutionary Armed Forces of Colombia (FARC) and the illegal armed groups have found a home in the past—and today. They also are the regions where the indigenous live.

Quality education

Promoting access to quality education reduces inequality.  The USAID FY2011 $2 billion budget request for Latin America only included $55 million for basic education.  The FY2012 budget barely raises that to $59 m. Yet, education—especially girls’ education—remains one of the most cost effective investments in the region’s future.  More needs to be done.  The real question is how to partner with the IDB, World Bank and donors to press for some kind of matching increase in Latin American governments’ education spending, to build a better trained teacher corps, keep children in school longer and improve educational quality. There are proven ways to do that—as the work of the PREALC at the Inter-American Dialogue has spelled out for many years: Improve the quality of the teachers, support and value them, enhance accountability by providing parents and communities with more information on performance, support the school nutrition, health and cash transfer programs, as well as , and programs that give children access to 21st century computers and information technology. Reform also means reversing the current financial model   in which the richest fifth of the population receives more than the poorest fifth of every dollar spent on elementary education and many times the amount received by poor children --50 cents of every dollar—of what is spent on higher education.

Tax reform

A third option is to generate adequate tax revenues to fund these needs, and to do it in a way that promotes greater equity. Despite all of the commitments to increase tax revenues in the 1996 Guatemala peace accord, tax revenues still represent barely 10 percent of GDP. Not surprisingly, the state’s ability to offer education and health, or reach the rural population with basic infrastructure, is severely limited. In Colombia, tax revenues are not much higher, and inequality is rampant as well. And in both countries — and most of the region — the structure is hugely regressive, and depends heavily on indirect taxes that make little distinction between rich and poor. Tax evasion by the wealthy also is still extremely high.  The U.S. could also be a much better model. Reports that General Electric paid  no U.S. taxes last year, using loopholes like tax shelters and transfer prices-,sent the wrong message to Latin America.

A second challenge is combating crime and drugs

Organized crime and drug cartels directly assault state institutions and citizen security in the Andes, Central America, Haiti and Mexico. There is a war against the state going on just across our southern border in Mexico, which has become the final jumping off point to carry the bulk of Colombian cocaine into the U.S. Since 2006 the Government Accountability Office GAO) has estimated that some 35,000 Mexicans have been killed in the violence across the country.  Despite Mexican troops patrolling streets, mayors and governors have been kidnapped and killed, and entire regions live in fear. Mexico is a democracy under siege.

Mexico’s armed forces, which are not trained in civilian law enforcement, have been charged  with human rights abuses.. The use of the military was a last resort, and essentially confirmed the civilian police’s inability -- whether through lack of equipment, capacity or corruption -- to handle the cartels. It is also clear that while the response of the Mexican state, with U.S. support under Plan Merida, has blocked the cartels from acquiring full control over border regions, it has also pushed more of the drug flow to Central America, whose governments are far less equipped  to defend themselves.

Crisis Group has reported that for many years, Guatemala was the domain of the Sinaloa cartel. That era came to an end when the Gulf cartel arrived to challenge those territorial rights, bringing with it paid assassins, the “Zetas”, who have morphed into one of the major cartels. From 2004 to 2008, homicides rose by 50 percent according to the UN-sponsored International Commission against Impunity (CICIG). In 2009, the death toll climbed to more than 6,000, matching the toll in Mexico, a country with a population nearly 10 times larger. In 2010, the death toll was again among the highest in the world. Impunity is starkly evident when CICIG reported that fewer than 1 percent of serious crimes resulted in convictions.

Traffickers control municipalities and local authorities through money and coercion.  These same well-financed and well-armed networks of traffickers have also penetrated the high echelons of law enforcement institutions. In fact, CICIG has been one of the last bastions of the rule of law and has probably saved Guatemala’s justice system from itself.

In Colombia, Plan Colombia has strengthened the capacity of the Colombian state to defend itself against the FARC and the National Liberation Army (ELN), and encouraged paramilitary demobilization, However the rise of BACRIM and continued concerns regarding impunity and human rights violations tarnish those achievements. Declines in cocaine cultivation in parts of Colombia also have seen its extension, even at lower levels, to new regions, expanding violence along with it. There were 12 departments where coca was grown in 1999; and while it now appears in smaller plots of lands, coca is cultivated today in 22 of 34 departments.

The decline in Colombia also has seen an upswing in coca cultivation in Peru and Bolivia that underscores the patchwork progress of the counternarcotics programs. There appears to be little argument, according to the Inter-Agency Assessment of Cocaine Movement (IACM), that the amount of cocaine being moved north – not to mention east to Europe, much of it through Venezuela, then to the Caribbean, and West Africa -- continues at levels around 1,000 metric tons year in and year out.  Venezuela now is the main drug trafficking corridor from Colombia to Europe and allegations abound regarding involvement of high level officials.

One other noteworthy point is that the Colombia drug flow remains in the hands of the FARC, “un-demobilized paramilitary”, new illegal armed groups and “pure” drug traffickers.

Response

The Latin American Commission on Drugs and Democracy led by former Presidents Fernando Henrique Cardoso, Cesar Gaviria and Enrique Zedillo, argued for a fundamental re-thinking of counter drug programs which have failed to stop the northern drug flow  and have contributed to  rising violence throughout the region. Congressional legislation to create a similar high-level bi-partisan commission for the United States, which many on this committee championed last year, should be re-introduced and passed.

Organized criminal networks now reach from the Andes to the Caribbean, Central America and Mexico. Tackling drugs and crime will require fundamental changes in the counter-drug strategy. Demand reduction policies need to be considered a public health issue, and must move away from a one-size-fits-all approach to criminal incarceration. Limiting criminal treatment to the traffickers and treating chronic users through a public health prism would produce more effective policy, and perhaps allow law enforcement to do a better job at breaking up the trafficking combines. This will require a high-level review of current counterdrug policies by the Administration and Congress. The funding for demand reduction proposed in the FY2012 budget barely increased 2.1% from FY2010 to FY2012. That is too little. More resources should be concentrated on demand reduction here, and on strengthening relevant rule of law institutions throughout the Americas.

It also needs to include much more stringent measures to end arms trafficking from the U.S. to illegal groups in Latin America, and an equally strong effort to track money laundering that allows dirty drug money to line the pockets of organized crime.

In Colombia, President Santos has launched a welcome set of new initiatives on land restitution, eliminating a rogue intelligence agency, expanding victim rights, and recognizing the important role of an independent judiciary. The report Crisis Group produced last October,  Colombia: President Santos’s Conflict Resolution Opportunity, argued that now is the time for a more integrated and comprehensive conflict resolution strategy, focused not only on the military, but also on advancing justice reforms to protect human rights and end impunity, economic reforms to reduce inequalities, and political reforms. The roots of Colombia's conflict need to be addressed frontally. Land restitution to victims planned by the Santos administration is critical to that end but still lacks a clear strategy for protecting and assisting victims when they get the land. I was in Colombia and La Macarena consolidation zone in December, and it was evident that the national consolidation plan, positively aimed at extending state presence, needed more civilian government buy-in and more adequate response to the continued existence of both FARC and BACRIM. That also would engender greater trust between the population and security forces.

Respect for human rights needs to be more fully integrated into the fabric of Colombia's security forces, starting with pursuing the perpetrators of almost 2,300 extra-judicial executions. Those responsible should be prosecuted vigorously in civilian, not military, courts. The new attorney general needs additional support. The recent report of the plan to boost the number of labor rights attorneys should be paralleled by those working to bring to justice those responsible for  extra-judicial killings.

President Santos now has reportedly broadened the state’s focus beyond the FARC and ELN to include combating the BACRIM.  In particular, ties between illegal armed groups and some state security forces, which undermine government legitimacy, once again need to be severed. Crisis Group also is investigating links between those groups and political elites in the run-up to local elections in October. President Santos' political support is at a peak now, and that backing, coupled with the relative weakness of the FARC and ELN, gives him a real chance to put a permanent end to the country's armed insurgency. Concrete progress on those reforms could lay the groundwork for a negotiation with the guerrillas that ends Colombia’s insurgency once and for all, while respecting the rights of victims.

Guatemala and Central America, once the center of the Cold War conflict, are now at the epicenter of an equally deadly conflict.  President Obama’s recent pledge of some $200 m. for a Central American Citizen Security Initiative is welcome, if late. That level of support should have begun five years ago when the threat became apparent. The Central American Regional Security Initiative was just too limited. It should also be targeted at strengthening law enforcement institutions, perhaps with the help of regional mechanisms such as CICIG.  Finally, it should offer vulnerable youth alternatives to becoming foot soldiers of the cartels.

A third challenge is strengthening democracy and confronting corruption

We have seen the end—hopefully forever—of the era of military dictatorships, some of which this country supported in reacting to the Cold War. Democratic partners are the best guarantors of our values, our interests and our security. In most of the region there is a basic acceptance of the core values and institutions of governance — all underlined in the Inter-American Democratic Charter. Yet key elements of pluralism, checks and balances, and separation of powers are no longer considered essential in a few countries and those values need to be reasserted continually along with strengthening civil society and political parties.

Foreign policy and foreign assistance programs still pay insufficient attention to issues of governance. Despite the 1996 adoption of the Inter-American Convention Against Corruption and follow-up mechanisms, in 2005, the Latinobarómetro, a hemisphere-wide poll, found that more than 68 percent of respondents believed that their public officials were corrupt, ranging from 41 percent in Uruguay to 82 percent in Ecuador.  Last year the poll found most Latin American countries average at the bottom third of the Transparency International’s perception of corruption. Over the past 15 years in Latin America and the Caribbean, we have seen 15 elected presidents who did not finish their term of office, some removed with only minimal legal trimmings.

The twin to corruption is the impunity that enables the elites in their countries to evade paying taxes, fail to treat their employees with dignity, receive favored access to contracts and buy their way out of any brush with the law. The subsequent  popular belief that those with power operate with impunity undercuts the democratic ethos. It violates the social contract. A few years ago, a poll found that 66 percent of Latin Americans said they had little to no confidence in their judicial system.

Response

Strengthening the rule of law must be a top  priority for anyone interested in political stability, sustaining economic reform policies and strengthening social cohesion. It is also critical to addressing the underlying causes of conflict in many of the countries of the region. They need more competent police, an impartial judiciary and access to justice for the poor.

To date, the U.S. government has not been well-organized enough to provide that kind of integrated assistance in countries, either before or after conflict occurs.  Nor have the international financial institutions been brought on board fully when it comes to helping countries invest in police, criminal justice reform, prison construction and correctional services. Democracy, stability and economic development require a functioning, fair and independent criminal justice system. The U.S. needs to do more bilaterally as well as with institutions like the IDB, the UN, the World Bank and the OAS, the latter being specifically charged with the monitoring observation of the Inter-American Democratic Charter.

CICIG’s success in Guatemala has prompted both El Salvadoran and Honduran presidents to call for similar support. Finding a way to replicate the capacities of CICIG in other Central American countries while empowering local judicial systems should be high on everyone’s agenda.

In countries where the distance is greatest between the principles of democracy and national realities, it is essential that the U.S. work with other democracies to design new, more effective policies and programs that can close the gap as soon as possible. The Inter-American Commission and Court of Human Rights are valuable independent agencies that should be supported in promoting the full range of rights under the convention. The OAS itself should be supported to strengthen its own analytic capabilities with respect to identifying compliance failures under the Democratic Charter. Those failures also constitute warning signs of future conflict.

In a hemisphere where a third of the population is under the age of 15, new ways must be found to encourage young people to see the value in political participation and to offer more opportunities for youth to exercise their rights as citizens more fully.

Haiti

Mr. Chairman, Haiti would be the largest single recipient in the Western Hemisphere of U.S. assistance proposed in the FY2012 budget--$405 million. Given its absolutely critical condition of vulnerability, one has to hope that the budget cuts will not reduce that amount and that funds will be targeted to strengthen Haitian government capacity, economic and political decentralization that extends energy, infrastructure and services out beyond Port-au-Prince, and the rule of law. The recent general elections are in their final stretch. Results for presidential elections have not been appealed. Appeals to the legislative elections, now being heard, will conclude on 15 April and final results are to be published on April 16. It appears that Michel “Sweet Mickey” Martelly has won the Presidency, that the Inite platform supported by President Preval will have the largest share of national assembly delegates and at least half of the 30 member Senate. At the same time, the absence from government of the Lavalas party of former President Aristide, now back in the country, could add additional complications to stability. So too will any decision by the Martelly government to undermine the prosecution of former dictator Jean Claude Duvalier. U.S. assistance mechanisms and coordination with other donors and the United Nations Peacekeeping Mission (MINUSTAH) should be aimed at supporting efforts at national reconciliation and national consensus on a single strategy for the physical and institutional reconstruction of the country.

As to those elections, Crisis Group questioned the preparations prior to the first round last November amid a nationwide cholera epidemic that has resulted in 4500 deaths. We saw the chaos of that first round, and were pleased that many of our  recommendations were incorporated into the OAS/CARICOM report and adopted by Haiti before the second round. There was still low turnout due to voters not receiving their cards, mistakes in the voter list and quarantining of eight percent of the returns. Nevertheless, there was less confusion and less violence.

Haiti’s weak institutional  infrastructure even before last year’s earthquake, is reflected in the protracted makeshift status of the Provisional Electoral Council (CEP); a ramshackle political system featuring scores of parties unable to generate coherent policy choices for voters; an often corrupt judiciary and limited public security. All this lies at the root of a perpetual crisis of confidence in the electoral process that requires fundamental reform early in the coming government. The speaker of the senate, Dr. Kely Bastien, announced last week support for the passing of planned constitutional amendments that will ease the situation. This will be one of the first tasks of the 49th legislature expected to be sworn in on 20 April.

Today, one year after donors pledged $5.3 billion over 18 months to help Haiti start its recovery from a devastating earthquake, barely 37 per cent has materialized in Haiti. Some $300 million of the U.S. funds, after delays of several months following enactment, have been made available for disbursement yet the remainder of the $1.15 billion pledged last March apparently still is in the process of obligation. According to the Interim Haitian Recovery Commission (IHRC), led by former President Clinton and Prime Minister Bellerive, an even smaller amount has been transformed into completed projects that people can actually see and benefit from.

With all of Haiti’s complicated and seemingly herculean challenges, a few things remain clear:

• Some 680,000 Haitians should not be living in misery in tent cities without a firm idea of where or when their situation will change. The adoption of a firm resettlement policy with clear timelines is essential and blame has to be levied both at the international community and the Government of Haiti. The IHRC stated last week that there is a need for “policy clarity” on land titles, tenure and subsidies on housing reconstruction.
• Donors who have promised reconstruction help need to fulfill those promises.  More of the funds—with appropriate transparency and accountability provisions—should be channeled through Haitian public agencies and civil society organizations.
• The mandate for MINUSTAH will need to be extended in October and the Latin American led peacekeeping force remains essential to stability there.
• While the Haitian National Police are now more professional and robust, and have somewhat improved their operations and reporting, the vetting of the police needs to be completed and those found not to be meet standards or with past violations need to be jettisoned or prosecuted.
• The rule of law is not simply police. The courts do not have enough trained judges to hear the cases they bring in, and many case management records were destroyed by the earthquake. Partial reforms that would have permitted standard-setting and monitoring of judges need to be completed along with corrections system reforms.
• Equally serious is combating the violent crime taking place both inside and outside the camps. Local Women’s organizations like KOFAVIV (Komisyon Fanm Viktim pou Viktim) have reported high numbers of rapes in camps, and both the police and MINUSTAH have asserted that gang members who escaped from prison during the earthquake have infiltrated camps. Even the authorities are falling victim to violence. In the last eight weeks, some fourteen policemen have been killed, more than any number since the 2004 rebellion that forced President Aristide from power. Law enforcement is critical and US assistance should make this a priority.
• The kind of partnership that has allowed cell phones to be used for financial transactions and remittances with the private sector should also be expanded with funding support for rural development, small and micro enterprise financing for reconstruction and operations.
• And the next government’s reforms must include electoral reforms spanning the national identification of citizens, civil service and non-partisan elections management, a permanent electoral council and reducing the frequency of elections.
   

The Martelly government, the Parliament, opposition political parties, Haitian private sector and civil society need to come together to forge a path to governance reforms, the rule of law and an accelerated rebuilding of their country—and the U.S. should be a leader within the international community in helping to achieve those goals.