CARIBBEAN REGIONAL PROGRAMS

	FY 1998 Actuals	FY 1999 Estimate	FY 2000 Request
Development Assistance	---	$700,000	$1,200,000
Economic Support Funds	$2,000,000	$700,000	$7,000,000

Introduction

For the United States, the Caribbean constitutes our "third border." Its future will inevitably affect us. Its close proximity to the United States means that poverty, political instability, and environmental degradation in the Caribbean can directly affect U.S. well-being. The United States is also concerned about narcotics trafficking through the region. The continued cooperation of the governments of these small islands in drug interdiction efforts is a major U.S. foreign policy objective. That cooperation is affected not just by the perception of the U.S. as a helpful friend and neighbor, but also by the ability of the governments to sustain effective efforts in the face of economic hardships, loss of traditional sources of income, and lack of economic alternatives. Immigration is another area of continuing U.S. concern. Deterioration in economic, social or political conditions in these small countries will increase the likelihood of illegal immigration in search of a better life in their large neighbors to the north. For these reasons, the U.S. has a strong interest in promoting economic prosperity and political stability in the region.

USAID currently has bilateral programs in Haiti, the Dominican Republic, Jamaica, and Guyana which, in coordination with other donors, address their development constraints. Apart from small programs which support economic diversification, no USAID assistance is being provided to the Eastern Caribbean, which is presently experiencing severe economic difficulties due to the reduction/loss of banana preferences and economic restructuring. This program will assist in addressing development constraints of this sub-region.

The Development Challenge

The fundamental development problem facing the Caribbean is lagging economic growth, resulting from several causes, including trade policies that emphasize domestic production over production for the world market. These small countries have weak governmental institutions, as reflected in their shortage of qualified personnel with skills needed to carry out the policy analysis, negotiations and even routine paperwork necessary for governments to make and implement informed decisions and execute their mandates. Weak governmental institutions limit these countries' ability to take advantage of opportunities in the world market and resources offered by multilateral institutions. Weak institutions also limit their ability to protect the natural environment which is the foundation for the critically important tourism industry in the region. Weak judicial institutions and the lack of harmonization of commercial laws further undermine the investment climate. Slow growth restricts tax revenue generation which, in turn, weakens efforts to provide adequate health, education, and other social services.

The advent of the Free Trade Area of the Americas, along with the WTO, hold opportunities for the Caribbean. However, globalization represents particular risks for the Caribbean nations. The small size of these countries' economies makes them particularly vulnerable to economic shocks such as a loss of banana preferences. The governments in the islands of the Caribbean and those of the Guyana Shield fear social instability and violence from economic displacements as the Hemisphere moves toward implementation of the Free Trade Area of the Americas. The development challenge then is one of diversification and employment creation within a fragile ecosystem.

The region must position itself to take advantage of the economic opportunities that their human and natural resource endowment, geographic position, and the new global economy make possible. Diversification of the productive base and harmonization of outward-oriented trade and investment practices are essential for the Caribbean's future. Likewise, a shared vision of justice -- both civil and criminal -- is critical to assure that protection of the citizens and investors throughout the region does not dissuade investment or encourage criminal activity to the detriment of the region. The region’s natural resources must be managed for long-term sustainable development, and environmental policy also needs harmonization, particularly given the region's high dependence on tourism revenues. Regional cooperation and regional solutions which respect the individual nature of each country, are the most likely successful approaches to addressing the problems of the Caribbean region.

Other Donors

The other major donors providing support in the Caribbean region are the European Union (EU), the World Bank, the Inter-American Development Bank (IDB), including the Multilateral Investment Fund (MIF), and the Caribbean Development Bank. Canada and the U.K. are the major bilateral donors.

FY 2000 Program

In May 1997, the United States and Caribbean leaders met in Bridgetown, Barbados and pledged to strengthen cooperation in responding to the challenges of the coming millennium. They renewed a commitment to free trade, human rights, democracy, the rule of law, and the need to overcome poverty. This commitment forms the basis upon which USAID is developing its strategy of assistance to the Caribbean region. USAID plans to build on the Barbados "Caribbean/United States Summit Plan of Action" by helping the region prepare itself for the inevitable globalization and liberalization of its economies. USAID's Caribbean Regional Program will work with regional institutions that are part of the Caribbean integrated system and in partnership with nongovernmental organizations (NGOs) and the private sector to implement the Summit Plan of Action commitments in the areas of hemispheric free trade, economic growth and diversification, environmental sustainability, and justice improvement. The strategy will cover the Caribbean region but will place special emphasis on small states that are affected by the loss/reduction of banana preferences: St. Lucia, St. Vincent and the Grenadines, Grenada, Dominica, and Belize. More limited assistance is anticipated for Guyana and Suriname for Guyana Shield environment activities. The program will be complemented by current bilateral assistance programs in Jamaica, Haiti, the Dominican Republic, and Guyana. Their participation, however, will be limited to where value is added to the regional program.

The strategy for USAID's Caribbean Regional program for FY 2000-FY 2005 is now being prepared. The planned FY 2000 program will require a total of $7 million in Economic Support Funds (ESF) and $1.2 million in Development Assistance. Of that amount, $2 million in ESF will support administration of justice, $2.5 million in ESF will support economic growth and diversification; $1.2 million in DA and $2.5 million in ESF will support environmental sustainability. The new strategy proposes three strategic objectives: increased economic growth and diversification; improved environmental management; and increased effectiveness and efficiency of judicial/legal systems in the Caribbean. USAID will strive to integrate disaster assistance efforts in the region to improve regional disaster prevention, preparedness, mitigation and response. These funds will directly support Agency goals in economic growth, the environment, democracy, and humanitarian assistance.

CARIBBEAN REGIONAL PROGRAM

FY 2000 PROGRAM SUMMARY
(in thousands of dollars)

USAID Mission Director: Mosina H. Jordan

USAID Strategic and Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Developmnt	Humanitarian Assistance	TOTALS
S.O. 1 - Increased Economic growth and diversification - DA - ESF	--- 2,500	--- ---	--- ---	--- ---	--- ---	--- ---	--- 2,500
S.O. 2 - Improved environmental management in support of sustainable economic development - DA - ESF	--- ---	--- ---	1,200 2,500	--- ---	--- ---	--- ---	1,200 2,500
S.O. 3 - Increased effectiveness and efficiency of judicial/ legal systems in the Caribbean - DA - ESF	--- ---	--- ---	--- ---	--- 2,000	--- ---	--- ---	--- 2,000
Totals - DA - ESF	--- 2,500	--- ---	1,200 2,500	--- 2,000	--- ----	--- ---	1,200 7,000

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ACTIVITY DATA SHEET

PROGRAM: Caribbean Regional Program
TITLE AND NUMBER: Increased Economic Growth and Diversification, 538-SO01
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCES: $2,500,000 ESF
INITIAL OBLIGATION: FY 2000 ESTIMATED COMPLETION DATE: 2005

Summary: Many small Caribbean countries are facing severe economic and social stress due to the decline in banana production and the prospective loss or curtailment of existing European Union trade preferences. The most seriously affected countries include the Windward islands (Dominica, St. Vincent and the Grenadines, St. Lucia, and Grenada) and Belize. These nations also fear social instability and potential violence arising out of the economic displacement of small farmers and those employed in supporting infrastructure in the banana industry, which comprise some 50% of their workforce. In addition, economic growth in the Caribbean has lagged seriously behind the rest of the Latin America region during the 1990s. Although this lag is on the order of one percent per year, in another 5-10 years, this differential will produce significantly lower living standards for the Caribbean and lower levels of tax revenues with which to address critical social needs. In the small, open economies of the Caribbean, growth can only be achieved as their policies and products, both goods and services, become increasingly competitive in the global market. The purpose of this strategic objective (SO) is to improve economic and social conditions by creating employment opportunities and reducing poverty. The primary beneficiaries of achievement of this objective will be the people of the targeted Caribbean countries, with the greatest proportional benefits accruing to the individuals who are or would be displaced by economic restructuring. The program will cover the Caribbean region but will place special emphasis on small states that are affected by the loss/reduction of banana preferences. The program will be complemented by current bilateral programs in Jamaica, Haiti, the Dominican Republic, and Guyana. Their participation, however, will be limited to where value is added to the regional program.

Key Results: To increase employment and the Caribbean's competitive position, the SO will seek key intermediate results in trade and product diversification. The program will support activities designed to improve market access, business skills, the provision of technologies, resource flows and the policy and regulatory environment.

Performance and Prospects: This SO builds upon the experience of the ongoing USAID-financed Windward Islands Diversification project. It will enable USAID to continue to assist the region in mitigating the dislocations caused by economic restructuring. It will support increased small and microenterprise lending and strengthen selected lending institutions which provide assistance to these enterprises to become more effective and efficient. USAID will also work with training institutions in the region and with the private sector to identify short-term training that will be offered to those affected by restructuring. In addition, the SO will assist the governments in the region to access available multilateral and bilateral funds, and to develop and implement donor-funded projects.

USAID will also support trade liberalization and the region's ability to successfully participate in the global economy, in part, through participating in the Free Trade Area of the Americas (FTAA) process and honoring WTO obligations. The program will continue to build on USAID's Hemispheric Free Trade Expansion Project by directing resources towards an improved framework for trade and investment in the region, which will improve trade and investment regimes, policies, and practices that are necessary to attract the level of investment required for sustained growth and competitiveness.

Possible Adjustments to Plans: This is a new activity. There are no anticipated problems in its development.

Other Donor Programs: USAID's program will be implemented in coordination with host countries of the Caribbean. The program is complementary to programs funded by the Caribbean Development Bank, the Inter-American Development Bank, the World Bank, and the European Union, which assist the countries in economic diversification efforts.

Principal Contractors, Grantees or Agencies: USAID proposes to work with existing regional institutions such as the Caribbean Development Bank, the Organization of Eastern Caribbean States Secretariat, the CARICOM Secretariat, local and regional training institutions, community and non-governmental organizations, the private sector, and the University of the West Indies.

Selected Performance Measures: Preliminary indicators for the new strategic objective have been established, but baseline and targets have not been determined as activity design(s) will not be completed until mid-FY 1999.

Proposed Indicators:

• amount of new technology introduced
• number of projects approved and financed by MDBs
• investment/GDP ratio
• number of new jobs created in non-traditional activities
• number of new policies adopted
• amount of sales resulting from non-traditional activities

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ACTIVITY DATA SHEET

PROGRAM: Caribbean Regional
TITLE AND NUMBER: Improved Environmental Management of Fragile Ecosystems Development, 538-SO02
STATUS: Continuing and New
PROPOSED OBLIGATION & FUNDING SOURCE: $1,200,000 DA; $2,500,000 ESF
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2005

Summary: Caribbean economies are predominantly based on agriculture, tourism, fishing and mining. The ecosystems which support this economic foundation are under severe and increasing threat. The causes are direct (e.g., overfishing, deforestation of hillsides), indirect (e.g., raw sewage and pesticide/ fertilizer run-off transported to streams, beaches and coral reefs) and even global (warming of sea temperatures and sea level rise). Ultimately, the results of such environmentally unsound actions are manifested in the destruction of productive habitats (e.g. depleted soils, fishing grounds), loss of biodiversity, unmanageable waste disposal problems and deteriorating economies. The objective of USAID's regional environmental program is to reverse the loss of renewable natural resources and biological diversity and, thus, reduce threats to economic and social development. The program, currently under development, will draw from the experience of and lessons learned from USAID's Environmental and Coastal Resources Project to strengthen the capacity and the policy framework of the principal regional institutions in Dominica and St. Lucia. The program will cover the Caribbean region but will place special emphasis on small states that are affected the loss/reduction of banana preferences: St. Lucia, St. Vincent and the Grenadines, Grenada, Dominica, and Belize. More limited assistance will be provided to the Guyana Shield countries of Guyana and Suriname. Other Caribbean countries with bilateral USAID programs (Jamaica, Haiti, the Dominican Republic and Guyana) may also participate if it adds value to the regional program.

Key Results: Three key results were deemed necessary to achieve this objective: (1) implementation of improved environmental policies and regulations; (2) increased adoption of environmentally sound practices; and (3) mobilization of private stakeholder, lending institution and donor resources for environmental improvements.

Performance and Prospects: This program will support the action agenda and the environmental priorities defined by the 1997 Caribbean-United States Summit in Barbados. It will extend its activities to include the Guyana Shield. One key element of the program will be to support the harmonization of environmental law within the region, including an inventory and review of the status of implementation of environmental regulations. Another program component will provide packages of strategic interventions targeted to address the specific environmental challenges of selected areas which are, both, economically and environmentally significant. Anticipated activities include introduction of financially viable technologies for reducing productive ecosystem degradation; support for ecologically sound enterprise development and employment opportunities; disseminating best practices and experiences demonstrating private environmental management; support for promulgation and implementation of economically sound, market-based policies, laws and regulations favoring improved environmental practices; and identifying alternative income sources to replace environmentally destructive practices among vulnerable populations. To ensure long-term financing for environmental improvements, especially within the tourism industry, the program will explore joint private/public/community-based organization/donor initiatives which may include tourists' voluntary contribution programs; and grants from major international private stakeholders (e.g. airlines, cruise lines, American Express, etc.).

Possible Adjustments to Plans: This is a new activity. There are no anticipated problems in its development.

Other Donor Programs: The EU and the Canadian International Development Agency (CIDA) are the other principal bilateral donors, while the multilateral donors/lenders include the United Nations Environmental Program (UNEP), United Nations Development Program (UNDP), World Bank (WB) and Inter-American Development Bank (IDB). By activity areas, the EU, IDB and CIDA are the key supporters of activities in watershed management, forestry and agriculture; UNEP supports protected areas; UNEP, EU, IDB and CIDA have ongoing activities in coastal and marine resource management; the World Bank supports solid and liquid waste management; and all donor/lenders support institutional strengthening.

Principal Contractors, Grantees or Agencies: Potential grantees include the Organization of Eastern Caribbean States, the Caribbean Environmental Health Institute, community-based groups and local environmental NGOs. Other implementing partners may include international NGOs; technical assistance contractors, and university groups.

Selected Performance Measures:

• Number of environmental threats reduced
• Number of alternative, environmentally sound practices introduced and adopted
• Number of new policies targeted to improve the environment promulgated/implemented
• Value of funds mobilized by the private sector for environmental improvement activities

*Targets to be formulated during the activity design phase scheduled for Spring 1999.

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ACTIVITY DATA SHEET

PROGRAM: Caribbean Regional
TITLE AND NUMBER: Increased Effectiveness and Efficiency of Judicial/Legal Systems in the Caribbean, 538-SO03
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCES: $2,000,000 ESF
INITIAL OBLIGATION: FY 2000 ESTIMATED COMPLETION DATE: FY 2005

Summary: There is a long democratic tradition of applying the rule of law to resolve conflict among the peoples of the English-speaking Caribbean. Legal systems in the Caribbean have become antiquated, however, as the level of crime has increased and international trade and investment has spread into the region. Studies indicate that these systems are in need of modernization if they are to retain the confidence of regional populations and investors, both domestic and international. An effective legal system will also require reducing case loads.

Specific actions aimed at the effectiveness and efficiency of the legal systems of Caribbean countries include: (1) establishing alternative dispute resolution mechanisms; (2) developing electronic means for judges to transcribe criminal and civil court proceedings to significantly speed up actions and improve court efficiency; and (3) providing systematic training to judges and magistrates in specialized areas. Based on experience gained and lessons learned under the Caribbean Justice Improvement Project (CJIP), USAID will support efforts to address these and other areas of weakness in the legal system and pursue IFI loan disbursement for improvements in legal infrastructure. The program will cover the Caribbean region but will place special emphasis on small states that are affected by the loss/reduction of banana preferences; St. Lucia, St. Vincent and the Grenadines, Grenada, Dominica, and Belize. Caribbean countries with bilateral USAID programs (Guyana, Haiti, the Dominican Republic, and Jamaica) may also participate if it adds value to the regional program.

Key Results: Three results are deemed necessary to achieve this objective: reduced case load in criminal and civil cases; improved efficiency of the legal systems in beneficiary countries; and improved training of legal system personnel.

Performance and Prospects: The program to achieve this SO is currently being defined in anticipation of FY 2000 funding. Anticipated activities to improve the effectiveness and efficiency of the justice systems would include: strengthening technical capacity of the judicial system to draft and implement appropriate legislation, strengthening court reporting and recording systems and addressing constraints to IFI resource flows aimed at enhancing judicial infrastructure. Other potential regional activities include strengthening judicial and magistrates' capcity.

Other Donor Programs: The World Bank is supporting the improvement of court facilities while the IDB is considering support to its Caribbean member countries in the areas of judicial training and court registry operations and management. CIDA is currently studying administration of justice (AOJ) projects for Jamaica and the Organization of Eastern Caribbean States (OECS) countries.

Principal Contractors, Grantees, or Agencies: Implementing partners will be selected following activity design. Potential partners include CARICOM Secretariat, the University of the West Indies, Mona Campus, and the Eastern Caribbean Central Bank for activities to be implemented in the Eastern Caribbean States.

Selected Performance Measures:

• Increase in cases resolved annually by court system
• Improved court report system in place
• Confidence expressed by citizens in the legal system increased

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