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This is an archived USAID document retained on this web site as a matter of public record.
Mr. Chairman and Members of the Subcommittee, I want to thank you for the opportunity to testify before you today.
At your request, I will direct my remarks to how foreign assistance programs managed by USAID are promoting the economic and social development of Latin America and the Caribbean and in particular, how these programs are alleviating poverty. I ask that my full written statement be included in the record.
The work that we do everyday takes place largely outside the headlines, but we strongly believe that our goals -- drawn from the Summit of the Americas -- will help achieve greater prosperity throughout the region.
As Ambassador Lino Gutierrez testified before this Committee earlier this month, "Perhaps the most important challenge to democracy in the hemisphere is poverty." He further noted, "while democracy is more widespread than ever, recent events remind us that democratic progress in the Americas is neither immutable nor uniform."
Despite these challenges, we remain optimistic with regard to the future of the Americas. Latin America is making progress and our U.S. foreign assistance programs are achieving significant results and thereby contributing to US national interests in the region.
In contrast to the "lost decade of the eighties", in which GDP per capita declined by nine percent, the economic reforms introduced in the early 1990s have brought about a resumption of growth and a decline in poverty in much of the region. This improvement in the region's economic fortunes followed a sustained reform effort by many countries aimed at enhancing the role of market forces and increasing the region's integration into the global economy.
It is important to note that the largest poverty reductions in the 1990s have occurred in the countries that adopted the reforms first. Chile, for example, almost halved the proportion of households in poverty. Other aggressively reforming countries also achieved major reductions. Other countries have made more modest progress, while still others, chiefly non-reforming countries, have seen the proportion of households in poverty actually increase.
Until all countries can show sustained progress in attacking poverty, democracy in the Hemisphere will neither be complete nor secure. Studies have shown a strong correlation between income concentration and support for democracy. In countries with the most equitable income distributions in Latin America, more than 80 percent of the population believe that democracy is the best form of government, while less than 50 percent are supportive in those countries with the greatest income disparities.
The region's democracies are finding that economic growth and the macroeconomic reforms that helped generate that growth, while essential, are not sufficient. In addition, there is heightened recognition that good governance and positive social outcomes are mutually reinforcing. Good governance creates a predictable environment for firms and households to invest and increase their productivity, and these improvements support both increases in income and improvements in social indicators such as literacy and mortality. Indeed, the countries that are succeeding today, having successfully implemented the "first generation" of macro-economic reforms, are now carrying out "second generation" reforms including rule of law, citizen participation and anti-corruption activities.
USAID's core program in the region is based on achieving the objectives established in the Summit of the Americas, including strengthening democratic institutions, fostering open markets and expanded trade, and reducing poverty in the Hemisphere.
USAID contributes to increasing the income of households living below the poverty line through targeted activities that increase their productivity. These activities do three things:
First, they increase access and reduce barriers to services that the poor need to achieve their full potential, such as financial services, education and health care, land title and property rights.
Second, they seek to improve governance, accountability and the enabling environment within which the poor work to assure that they have access to a level playing field, participate fully in the selection of governments and have effective national and local government institutions.
Third, they assist countries in crisis prevention and mitigation.
USAID combats poverty through improved access to credit, particularly micro-finance. We have learned that the chief obstacle to credit access is not risk, but the cost to the lender of administering small loans. In addition, the poor typically have few assets that can easily serve as collateral. USAID has long been a leader in funding innovative techniques to give the poor access to small loans on affordable terms that cover the full costs of the lending operation.
Over the past decade, we have seen progress toward adoption of policies governing property rights and access, which operate on market principles. Yet, today much property is still not formally registered. Modernized registration systems are essential to creating a basis for commerce, services and governance to reach down to the poor. More broadly, the same institutional reforms and systems that empower the poor to participate in markets to facilitate international investment.
USAID is working with the multilateral development banks and other partners to increase transparency, decrease transaction costs, expand access and improve the security of tenure.
The single most powerful tool for reducing poverty and improving equity in the long run is high quality primary and secondary education.
In most countries of the region, primary school enrollments now exceed 90 percent. But two serious problems remain. First, the quality of those schools is often deficient. Many schools which serve the poor lack textbooks and other basic instructional materials. Second, rural schoolteachers are often poorly trained. As a result, repetition and drop out rates are unacceptably high. Our response focuses on management, curriculum, and policy reform. Specifically our programs promote decentralization, increased availability of textbooks, improved teacher training, and better testing and evaluation systems.
Latin America has made notable progress in health in the last decade. Declines in total fertility rates have improved the health status of mothers and their children. Decreased family size increases the probability that children will remain in school and will have access to health care. In the last ten years, mortality rates for infants and children under five significantly declined in the region, even in the poorest countries.
USAID has helped countries improve water and sanitation, widen access to health services and raise rates of vaccination coverage. With USAID support through the Pan American Health Organization (PAHO), polio has been successfully eradicated in the Americas, the first region in the developing world to do so. Although HIV is still in an early phase in most of Latin America, the Caribbean region is the most severely affected with some of the highest prevalence rates outside Sub- Saharan Africa. USAID is working to reduce cross-border HIV/AIDS transmission and is placing renewed attention on countries in the Caribbean that are threatened by the HIV/AIDS epidemic.
Investments in governance have paid off significantly over the past ten years with the successful institutionalization of democratic processes, reductions in human rights violations, and peaceful transitions of power.
Over the past decade, USAID has expanded its support for rule of law. We have supported major Constitutional reforms to improve justice systems, to provide access to justice, and to protect basic human rights. High levels of crime and violence affect all and particularly the poor. Therefore USAID works with national and local governments, and other US government agencies, to develop the capacity to provide basic security and justice.
USAID is a leader in treating corruption as a significant development issue. Our Missions have supported a variety of initiatives. These include automated financial management systems to increase transparency, civil society groups that monitor elections, and technical assistance to controller general offices to improve their ability to audit the use of public funds and to investigate cases of fraud.
The emergence of elected local government is an important trend in the consolidation of democracy in the region. Elected officials now run municipal governments in 23 countries, up from six two decades ago. USAID is helping to strengthen the capacity of local government to respond to citizen needs.
Since economic crises and natural disasters have a disproportionate and long-lasting impact on the poor, USAID and other donors are devoting increased attention to crisis prevention and mitigation.
The impact of Hurricane Mitch on the poorest people in Central America underscores the importance of improved environmental management. Deforestation, unsound land use and inappropriate agricultural practices significantly increase the vulnerability of the poor to the impacts of disasters. USAID's environmental programs, including park protection, forest management, small farmer hillside agriculture, and watershed restoration, are helping countries reduce their vulnerability to natural disasters.
From 1988 until 1997 I served as USAID Mission Director in three countries, Costa Rica, Bolivia and El Salvador. Each of these countries established coherent and growth oriented polices, made a strong political commitment to change, and took advantage of USAID's targeted programs. Although no one would claim that foreign assistance is the determinant factor in their success, our programs in each country worked with governments and citizens alike to achieve significant results. In Costa Rica the stabilization and subsequent restructuring of the economy -- built on a foundation of long-term investments in education and health -- yielded economic growth with equity.
Bolivia experienced a dramatic recovery from the economic chaos and hyperinflation of the 1980s. USAID has played an important role in helping Bolivia to build institutions, strengthen popular participation, encourage licit crop production, and create alternative development opportunities.
For El Salvador, the 1990s saw the signing of the Peace Accords, and policy reforms, which ended conflict, achieved reconciliation, spurred strong economic growth, reduced poverty, and strengthened democratic institutions.
To continue these and other programs in the region, we will need the bipartisan support we have received for our programs. My written statement provides an overview of the FY2001 budget request. I also discuss priority areas including Plan Colombia and completion of the reconstruction program for Central America and the Caribbean.
In conclusion, for democracy to flourish in the region, we need to sustain efforts to expand access, improve governance, and confront crises. Because of our close geographic, economic and cultural ties, development and democracy in Latin America and the Caribbean matter greatly to the United States. USAID's field presence in 16 countries and our bilateral and regional programs are an integral part of US foreign policy.
The nations of the Hemisphere have set ambitious goals of greater prosperity, reduced poverty, and strengthened democracy. That will require an acceleration of growth and reduction in inequality. With sustained commitment, we know steady progress can be achieved. We look forward to working closely with the Subcommittee and Congress in the achievement of these shared goals.
This is an archived USAID document retained on this web site as a matter of public record.
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