CENTRAL AMERICAN REGIONAL PROGRAMS

	FY 1998 Actuals	FY 1999 Estimate	FY 2000 Request
Development Assistance	$9,375,000	$8,249,000	$9,200,000
Child Survival & Disease Fund	$3,900,000	$2,700,000	$2,900,000

Introduction

The Central American Regional Programs have a uniquely sub-regional character to them designed to strengthen Central American institutions and to promote the integration of the five Central American common market countries of Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica as well as participation by Panama and Belize in dealing with regional cross-border economic, environmental, and health (HIV/AIDS) issues. The 1994 Central American leaders created the Alliance for Sustainable Development (ALIDES) to increase trade and improve management of the region's rich biodiversity. In December 1994, President Clinton signed the Conjunta Central America-USA Agreement (CONCAUSA), promising U.S. technical support for the implementation of the Alliance's Action Plan. The CONCAUSA framework provides the shared framework from which USAID has derived its regional trade and environment objectives for Central America, implemented under three sub-regional activities. The May 1997 United States-Central American President's Summit in San Jose, Costa Rica reconfirmed the commitments under CONCAUSA and the common objectives shared by the U.S. with it closest neighbors.

Key U.S. goals and interests in the Central American region include: (1) expanding economic growth and prosperity through greater economic integration and open markets; (2) promoting trade and investment; (3) improving labor conditions; (4) increasing sustainable development and sound environmental practices by stemming regional resource degradation and loss of biodiversity; and (5) reducing the incidence of communicable diseases, especially HIV/AIDS.

Hurricane Mitch in late 1998 severely affected Honduras and Nicaragua, the two poorest countries in Central America, and caused significant damage to Guatemala and El Salvador. Total regional damage is estimated by the UN Economic Commission for Latin America and the Caribbean at $7.4 billion and by others as high as $8.1 billion, but it may cost as much as $10 billion to restore to acceptable standards the lost infrastructure, housing, social service facilities, utilities, and agriculture according to the U.S. Army Corps of Engineers. Reconstruction represents both a challenge and an opportunity for the countries to reinforce their shared regional commitments to economic integration, sound environmental management, sustainable development, and now disaster preparedness and mitigation.

The Development Challenge

The Central American region encompasses seven small countries: Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama. The region's current population of over 34 million will reach 37 million by the year 2000 at the current 2.6% annual growth rate. Approximately half of all Central Americans live in rural areas and two-thirds live below the poverty line. The 1998 United Nations Human Development Index ranks Nicaragua, Guatemala, El Salvador and Honduras among the lowest countries falling into the "medium" human development category. Beyond the challenges of poverty reduction, the Central American countries also remain ill-equipped to face the cross-border spread of HIV/AIDS and other contagious diseases, as well as the continuing loss of biodiversity due to environmental degradation.

To combat poverty and promote sustainable development in Central America, higher economic growth rates are required. Growth must occur in an equitable manner that avoids the depletion of natural resources and must be accompanied by adequate investment in the human resources of the region, in order to be broadly-based and sustainable. The region's ability to achieve more open markets, better protection of workers rights, increased labor productivity, and improved regional environmental management are limited by intra-regional trade barriers, sparse technical capacity, weak and inconsistent legal frameworks, and rapid depletion of key natural resources in cross-border areas.

A key feature and success of the Central American program continues to be the direct involvement of Central American Ministers of Trade, Environment and Labor in supporting regional programs. The Central American Ministers of Trade are on track in implementing interim tariff reductions as they move toward a common, lower external tariff by 2000. USAID regional program support to modernize energy and telecommunications sector regulatory frameworks in Guatemala and El Salvador contributed to over $2.6 billion in private investments in the past two years. Additionally, USAID provides assistance to support the development of bilateral intellectual property rights (IPR) agreements. In June 1998, Nicaragua signed a bilateral IPR agreement with the United States. USAID has also helped establish a working group of the Ministers of Labor which is supporting efforts to modernize labor markets and initiate a program to combat child labor. Recognizing Central America's commitment to and leadership in sustainable development and the environment, the Administration selected the region in 1997 as a priority area for U.S. Global Climate Change assistance. The regional devastation in 1998 from tropical forest fires and Hurricane Mitch underscores the region's need to better manage its natural resource base and cope with future extreme climatic change-induced events. USAID support to the Central American Commission for Environment and Development (CCAD) is critical in coordinating national level resource management efforts at the regional level involving cross-border watershed/protected areas and cost-effective natural resource information analysis and use such as the recent information-sharing agreement between NASA and the CCAD.

While Hurricane Mitch reconstruction efforts will be primarily country-focused, USAID's Central American program can provide critical support to ensure that national efforts mesh, where appropriate, with regional integration and cross-border activities, especially in the areas of trade and environment. Pending approval of additional resources, the regional program would build on current integration efforts with regional institutions to plan and harmonize standards for regional connecting infrastructure such as roads and bridges necessary for expanded regional trade in the next century. The program would continue support for economic integration, opening of markets, energy and telecommunications privatization, and improved labor conditions to spur economic recovery and wider participation in economic growth. Increased regional/national program coordination on watershed management and land use planning particularly in cross-border areas and where there are economies of scale to better cope with future extreme climate change-induced events would also be expanded.

Other Donors

Data on official assistance flows for regional programs are not readily available. Besides USAID, major donors providing support on a regional basis to Central America are the United Nations agencies, the Pan American Health Organization, Canada, the European Union, the Nordic countries, and the Inter-American Development Bank (IDB).

FY 2000 Program

The regional program will help increase Central America's ability to participate in global markets by reforming trade and investment policies, improving protection of worker rights, protecting children from child labor, encouraging productivity-enhancing labor market policies, and increasing private investment in energy/telecommunications services. In the environment, the program will support activities with regional economies of scale and cross-border impacts to consolidate a Central American system of protected areas and to harmonize environmental policies. The regional special objective will help local Central American organizations deliver HIV/AIDS awareness and prevention services. The $9.2 million in Development Assistance and $2.9 million in Child Survival and other Disease Program Fund resources in FY 2000 will enable the United States to achieve its priority objectives in the region. As part of the U.S. response to Hurricane Mitch, additional resources are needed to coordinate watershed management and land-use planning in the region.

CENTRAL AMERICAN REGIONAL PROGRAMS

FY 2000 PROGRAM SUMMARY
(in thousands of dollars)

USAID Mission Director, George Carner

USAID Strategic and Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Developmnt	Humanitarian Assistance	TOTALS
S.O 1. Increased C.A. Participation in the Global Markets - DA	3,200	---	---	---	---	---	3,200
S.O. 2. Increased Effectiveness in Regional Stewardship of the Environ-mental & Natural Resources - DA	---	---	6,000	---	---	---	6,000
Sp.O. Enhanced C.A. Capacity to Respond to HIV/AIDS Crisis - CS	---	2,900	---	---	---	---	2,900
Totals - DA - CS	3,200 ---	--- 2,900	6,000 ---	--- ---	--- ---	--- ---	9,200 2,900

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ACTIVITY DATA SHEET

PROGRAM: Central American Regional
TITLE AND NUMBER: Increased Central American Participation in Global Markets, 596-S001
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $3,200,000 DA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2001

Summary: In the 1990s, Central American leaders adopted a more outward-oriented regional integration model. As a result of this, at the 1998 Summit of the Americas held in Santiago, Chile, Central American leaders expressed their full support for establishing the Free Trade Area of the Americas (FTAA) by 2005. FTAA establishment provides greater opportunities for Central America to expand exports to new markets and thereby increase output, productive employment, and real incomes to levels high enough to effectively combat poverty. However, Central America's ability to participate in the FTAA is severely limited by its shortage of technical expertise to implement existing trade agreements and commitments, eliminate trade barriers, and enhance the region's trade competitiveness. This strategic objective (SO) is to help increase the Central American region's ability to join and honor commitments made under free trade agreements, such as the FTAA and the North America Free Trade Association (NAFTA), and to accelerate regional integration into hemispheric and global markets. It is anticipated that by FY 2000 total Central American trade as a percent of gross domestic product (GDP) will increase from 45.4% (1994) to 50%.

Key Results: 1) Improved trade and investment policies by providing technical assistance and training to assist Central American countries in concluding, ratifying and implementing a series of regional agreements, as well as facilitating the establishment of policy frameworks and enforcement mechanisms required for accession to free trade agreements; 2) More equitable and better functioning markets by helping the Ministries of Labor modernize operational procedures particularly in the area of labor inspection, labor relations and union activity; and, 3) Greater private investment in energy and telecommunications by helping countries draft new legislation and regulations.

Performance and Prospects: Performance over the past year has met or exceeded 1998 planned targets. USAID's assistance has contributed to the adoption of a more outward-oriented regional integration model characterized by lower tariffs, faster implementation of World Trade Organization (WTO) commitments, and fewer non-tariff trade barriers. In 1998, total Central American trade as a percentage of GDP was 54.9% and intra-regional trade as a percentage of GDP was 8.55%: both exceeded respective targets of 48.5% and 7.85%. Notwithstanding persistent protectionist pressures, the region's governments have nearly completed their three year phased reduction of their common external tariff from a range of 5%-20% (five percent minimum tariff on capital goods and raw materials and 20% maximum tariff on final goods) to a range of 0-15%. Central America's trade performance continues to improve. The region scored 3.4 on the composite trade readiness index, putting it slightly ahead of its target; Chile and Mexico scored 4.4 and 3.0 respectively. Over the last five years imports from the United States have nearly doubled to almost $10 billion supporting 200,000 U.S. jobs. Central America has increased its participation in the FTAA process, chairing three of the 11 working groups during the FTAA preparatory phase, and now assuming leadership positions in four of the nine FTAA negotiating groups.

Additionally, USAID is assisting in the area of intellectual property rights protection. Technical assistance was provided in drafting Guatemala's and Nicaragua's new copyright laws and training was given to legislators in Nicaragua in order to facilitate approval of the new law. As a result of this, in 1998 confiscations of pirate materials took place in El Salvador, Nicaragua and Panama. The confiscation of $5 million in compact discs in Panama was the most important in the region.

While further improvement is needed, the region's overall performance in protecting workers rights has significantly improved over the last two years, based on information obtained from the July 1998 General Accounting Office report on labor rights in Central America, and the workers rights segments of the annual human rights reports from the U.S. embassies in the region. USAID and the Inter-American Development Bank (IDB) have initiated a joint program to build consensus on the steps required to modernize labor markets consistent with the region's social, economic and integration objectives. The program is contributing to better labor-management relations and stronger protection of core labor standards by improving labor legislation and increasing enforcement. USAID-financed regional workshops and national seminars stress the link between increased trade and better wages, models of labor-management cooperation that contribute to increased productivity and higher wages, the need for greater productivity and improved competitiveness to succeed in hemispheric markets, and workers rights and their relationship to trade preferences.

USAID support to modernize the regulatory framework for the electricity and telecommunications sectors in El Salvador and Guatemala has contributed to over $2.6 billion in private investment in the now privatized segments of those industries over the last two years, exceeding the $1.1 billion target. USAID, encouraging private sector participation, has helped regional governments develop more open and competitive telecommunication and energy regimes. New strategies for the private-public sector partnership have been defined; regulatory issues during sector restructuring have been identified; and key public sector institutions/commissions responsible for providing the direction, oversight, and regulations of the restructuring process have been strengthened.

Possible Adjustments to Plans: The activity, in response to new challenges presented by Hurricane Mitch will increase its focus on roads, energy, and telecommunication systems. Also, in response to the Presidential Summit Initiative on Child Labor, USAID and the region's labor ministers are designing a new activity to combat the more abusive forms of child labor.

Other Donor Programs: USAID and the IDB are designing a joint activity to help modernize labor markets. USAID maintains close contact with the United Nations Economic Commission for Latin America (ECLA)-Central American Office, which provides research and technical analysis on Central American economic integration issues.

Principal Contractors, Grantees or Agencies: USAID coordinates with the Office of the U.S. Trade Representative (USTR), the U.S. Patent and Trademark Office (USPTO), the U.S. Department of Labor, the U.S. Customs Service, and the Economic/Commercial Sections of U.S. Embassies in the region. The Permanent Secretariat for Central American Economic Integration (SIECA) is a grantee, as are several Central American governments. Contracts and grants have been awarded to U.S. and local firms including Hagler Bailly and Investment and Development Corporation (Guatemala). Through USAID support and encouragement, SIECA negotiated a Memorandum of Understanding with the USPTO to cooperate toward strengthening intellectual property rights protection.

Selected Performance Measures:

	Baseline	Target (2000)	Target (2001)
Trade openness (total trade as a percent of GDP)	45% (1994)	54%	55%
Readiness to enter FTAs (composite index with maximum of 5)	2.7 (1992)	3.5	3.6
Intra-regional trade as percent of GDP	7.2% (1994)	8.4%	8.5%
New private investment in energy and telecommunications (U.S. dollars)	0 (1997)	$4 billion	$5 billion

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ACTIVITY DATA SHEET

PROGRAM: Central American Regional
TITLE AND NUMBER: Increased Effectiveness in Regional Stewardship of the Environment and Natural Resources in Targeted Areas, 596-S0O2
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $6,000,000 DA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2000

Summary: The economies of the Central American region still depend heavily on agricultural production which is threatened by a deteriorating natural resource base. The sustainability of this productive base requires concerted action at all levels which recognize the vital connection between productive soils, forest resources, ample water quantity and quality, and maintaining the rich genetic pool for pharmaceuticals and other scientific uses. This SO will develop and consolidate a Central American system of protected areas by providing appropriate management models for terrestrial and coastal protected areas, and to promote a strengthened regional regulatory and enforcement framework for environmental management. The assistance provided under this SO supports the Central American Commission on Environment and Development (CCAD). The direct beneficiaries are those who are living within and around the Central American protected areas, which is approximately one fourth of the region's population. The indirect beneficiaries are all the people of Central American (34 million), especially those who depend on the natural resource base for their livelihood.

Key results: 1) Consolidate the Central American Protected Areas System (CAPAS) by increasing the number of protected and special management areas under improved management; 2) Increase local stewardship of the environment in target areas by helping local communities manage coastal and forest resources; and, 3) Harmonize and strengthen Central American environmental policy frameworks by supporting the drafting and introduction of national environmental laws and regulations to Central American national legislatures/executive branches.

Performance and Prospects: Performance over the past year has been good as all planned targets were achieved. USAID's partnership with CCAD supports the establishment of the Mesoamerican Biological Corridor. In 1998, the SO was on target with the implementation of six sustainable mechanisms to protect the environment. The most important of these mechanisms is the Tri-national Alliance of nongovernment organizations (NGOs) for the Gulf of Honduras (shared by Guatemala, Belize, and Honduras), which addresses regional environmental concerns and reduces transboundary threats to key natural resources. The Organization of American States has chosen it as a case study for transboundary public participation in resource management. The Tri-national Alliance's strategic plan includes a fisheries assessment and the development of a tri-national fisheries management plan.

During 1998 two additional protected areas (Port Honduras/Belize and Bahia de Chismuyo/Honduras) were brought under improved management, bringing the total number of protected areas to date to six (128,200 hectares). Six additional sites in the following countries: Guatemala, Belize, Honduras, Costa Rica, Nicaragua, and Panama have achieved an effective level of local governance. For example, in Guatemala, an environmental crisis committee in the community of Puerto Barrios carried out a port contingency plan that included an oil spill simulation exercise conducted by oil companies, the naval base, and communities.

As a result of USAID and CCAD training in environmental enforcement and compliance, fines have been levied in the following countries: Belize (on maritime companies for destruction of coral reefs); El Salvador (for illegal cutting of forests and mangroves); Guatemala (for illegal cutting of forests); and Honduras (for the improper granting of environmental permits). Additionally, USAID's technical assistance has helped Central American governments draft environmental laws and regulations, including: pollution control regulations in Costa Rica, El Salvador, Guatemala and Nicaragua; waste water regulations in El Salvador and Panama; and, a biodiversity law in Nicaragua.

Possible Adjustment to Plans: The CCAD Executive Secretariat has moved its headquarters from Guatemala to El Salvador in order to centralize the operation of the Secretariat for Central America Integration (SICA). USAID and SICA have established mutual responsibilities during the transition but long-term effects on the program are yet to be determined. The Mission will consider the design of a follow-on activity. The damage caused by Hurricane Mitch has affected implementation of community-level activities and pilot projects for waste management. Project communities will be requesting both a postponement of activities and a revision of priorities to address post-hurricane needs. A post-Mitch program is being developed to strengthen regional and bilateral land use management, strengthen disaster preparedness, and improve collection, analysis, and dissemination of information on areas at risk from environmental disasters.

Other Donors: International donor programs implemented under the auspices of the CCAD contribute to the establishment of the Mesoamerican Biological Corridor, and work collaboratively to establish and strengthen the national protected areas systems and surrounding buffer zones that constitute the backbone of the corridor. Complementary regional programs include: Global Environment Facility ($10 million) (GEF) which supports the Central American Sustainable Development Fund (FOCADES); German International Technical Assistance Agency ($2.8 million) (GTZ), and World Wildlife Fund (WWF) support for Corridor programs; the European Union supports the Sustainable Development in Agricultural Frontiers program; Danish Agency for International Development ($3 million) (DANIDA) supports the Gulf of Fonseca coastal resources management program; National Aeronautics Space Administration (NASA) supports satellite mapping; and, U.S. Environmental Protection Agency (EPA), Panamerican Health Organization (PAHO), International-Regional Organization for Agricultural-Livestock Health (OIRSA) and GTZ support the safe disposal of obsolete pesticides.

Principal Contractors, Grantees or Agencies: Key implementing organizations include: Central American Commission on Environment and Development (CCAD), the Nature Conservancy, World Wildlife Foundation, University of Rhode Island, International Resources Group, Cooperative Housing Foundation, and EPA.

Selected Performance Measures:

	Baseline (1995)	Target (2000)
Number of sustainable mechanisms implemented to protect regional environment	0	21
Number of USAID/G-CAP assisted transboundary sites where local threats to key natural resources and the environment have been reduced	0	10
Number of protected and special management areas under improved management with assistance from USAID	0	12 (339,560 has.)
Number of sites that have achieved an effective level of governance for stewardship of the environment and natural resources	0	20
National environmental laws and regulations that have been introduced to/approved by C.A. national legislatures/executives branches.	0	34

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ACTIVITY DATA SHEET

PROGRAM: Central American Regional
TITLE AND NUMBER: Enhanced Central American Capacity to Respond to the HIV/AIDS Crisis, 596-SPO1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $2,900,000 CSD
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2001

Summary: HIV/AIDS is a growing problem in Central America. The overall incidence of AIDS cases for the region in 1996 was 84 per million inhabitants. There is considerable variation across countries. For example, Honduras had double the regional rate with 168 cases per million inhabitants. The epidemic until about 1986 was predominant among homosexual and bisexual men. However, by mid 1998 over 56% of all reported cases were related specifically to heterosexual transmission. The HIV/AIDS epidemic continues to grow due to the sexual behavior of individuals with multiple sexual partners and the large level of sexually transmitted diseases (STDs). There continues to be an environment within Central America of denial, ignorance, and discrimination against people with HIV/AIDS .

The HIV/AIDS special objective's (SpO) purpose is to strengthen Central American organizations' capacities to deliver HIV/AIDS services and information. The SpO is organized under three different inter-related components: (1) promotion of policy dialogue/public awareness to improve HIV/STD policies and programs in Central America; (2) strengthening of nongovernment organizations (NGOs) capacity to deliver effective HIV prevention programs; and, (3) development of a condom social marketing (CSM) strategy that modifies risky sexual behavior in target populations. It is anticipated that by 2000 the policy environment, as measured by the AIDS Policy Environment Score (PES), will have significantly improved. Primary beneficiaries are Central Americans at risk of infection by HIV/STDs.

Key Results: 1) Improve regional policy environment by strengthening policy formulation through sound research and information dissemination, develop a cadre of public and private leaders who actively support effective policies and programs, and formulate public sector reforms responsive to the HIV/AIDS challenges; 2) Improved NGO capacity by developing their programmatic and management skills and structures, establishing effective linkages among NGOs providing HIV/AIDS prevention services, and promoting the implementation of supportive HIV/AIDS policies; and, 3) Safer sex practices by assisting in efforts to increase consistent and correct condoms use, especially among at risk groups, and by supporting strategies to make condoms more affordable and widely available.

Performance and Prospects: SpO performance in the past year has been better than expected, especially in regards to the policy and NGO strengthening activities. However, the condom social marketing component experienced problems meeting original sales targets because of delays in establishing marketing agreements in various countries.

Nine positive changes occurred (exceeding the target of four) in 1998 including a national AIDS policy in Honduras, a new health code in Guatemala that improves access to health care to people living with AIDS, and new blood bank regulations. The major focus of policy dialogue over the past year continues to be the development of national strategic HIV/AIDS plans. El Salvador, in close collaboration with USAID and the United Nations Joint Program on AIDS (UNAIDS), has completed a national HIV/AIDS plan; four other national plans are in progress. As a result of USAID's work in this sector, the Central American Parliament has drafted a memorandum of understanding to work with a USAID grantee, the Academy for Educational Development, on HIV prevention, legislation, and information dissemination at a regional level. This collaboration will provide further impetus to policy activities in the region.

USAID has provided technical assistance to 56 organizations in the region in sustainability, counseling, advocacy, networking, monitoring and evaluation, proposal development, data management, and strategic planning. As a result of this assistance, the percentage of NGOs that are providing improved HIV/AIDS services increased from 13% to 61%.

The condom social marketing component has not met its targets for sales. As of January 1, 1999 only five countries have initiated sales of project condoms. It is anticipated that safer sex and condom education activities will be initiated in Panama, Honduras, and Mexico by mid-1999.

Possible Adjustments to Plans: Recommendations from a mid-project review suggested a narrowing of the activity scope in order to ensure sustainability. The SpO will focus on fewer NGOs and work more directly with these organizations. Additionally, based on lessons learned, the condom social marketing component will realign its strategy to target HIV prevention more directly through behavior change in priority high-risk groups and less emphasis will be placed on general promotional campaigns and the development of cross-subsidy products for generating income.

Other Donor Programs: The demise of the World Health Organization (WHO) Global Program on AIDS (GPA) in 1996 left a funding and coordination gap in the region. UNAIDS has taken up much of the slack in the area of technical coordination. The Dutch, the only other truly regional donor, channel most of their support ($1.5 million a year) through a Costa Rican NGO. The Nordic Countries are providing approximately $3.6 million over three years to programs in Guatemala, Nicaragua, El Salvador, and Honduras. The German Technical Cooperation (GTZ) and Doctors without Borders have also been active in some countries. USAID is the leading contributor in this sector.

Principal Contractors, Grantees, or Agencies: Grantees are the Academy for Educational Development (Policy Dialogue and NGO Strengthening Activities) and Population Services International (PSI).

Selected Performance Measures:

	Baseline	Target (2000)	Target (2003)
AIDS Policy Environment Score	43.8 (1996)	54.3 1
Number of positive policy changes	0 (1996)	20
Percentage of NGOs that use a systematic approach to intervention	13% (1997)	80%
Safer Sex practices index (commercial sex workers) (men who have sex with men)	24.8% (1998) 44.9% (1998)	45% 50%	60% 70%
1 A follow-on activity is anticipated in 2001.

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