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FY 1997 Development Assistance: $15,250,000
Introduction.
Opening markets, expanding hemispheric economic integration, and promoting sustainable development have been enunciated as key areas of U.S. national interest in Central America. In 1994, Central American imports from the United States totaled $6.6 billion, and are estimated to have increased another 5%-8% in 1995. With continued growth and political stability, this region presents considerable untapped opportunities for U.S. business. At the December 1994 Summit of the Americas held in Miami, the Presidents of the Central American countries and the United States signed an agreement (CONCAUSA) commiting to joint efforts to increase trade and to make the Central American region a model of sustainable development. The USAID regional program provides the operational support for these Presidential commitments.
The Development Challenge.
The Central American region encompasses seven countries: Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama. With over 30 million inhabitants in 1993, the population of Central America is increasing at an annual rate of 2.43% and will reach 38 million by the year 2000. However, approximately half of all Central Americans live in rural areas and some 42% live below the poverty line. Socioeconomic conditions for the majority of the populationare worse now than they were 10 years ago, as reflected in the 1994 United Nations human development index which ranks Belize, Nicaragua, Guatemala, El Salvador and Honduras in the lowest third of all countries worldwide. Additionally, the countries of Central America are not prepared to face the cross-border spread of HIV/AIDS.
To effectively combat poverty and to promote sustainable development in Central America, higher economic growth rates are required on a sustained basis, that is, growth which is not at the cost of depletion or irreversible degradation of the natural resource base and which entails adequate investment in the human resources of the region. Central American commitment to action embodied in the CONCAUSA agreement is particularly focused on areas of environmental protection and natural resource management as vehicles to achieve sustainable development. However, the region's ability to move toward the objectives of more open markets, better protection of worker rights, and improved regional environmental management are limited by intra-regional trade barriers, limited technical capacity, weak and inconsistent legal frameworks, and rapid depletion of key natural resources in cross-border areas. Additionally, there is growing evidence that firms from Central America are moving to Mexico because of the lack of parity with the preferences accorded Mexico under the North America Free Trade Agreement.
Other Donors.
Data on official assistance flows to the region taken as a whole are not readily available. Other major donors providing support on a regional basis to Central America are the United Nations agencies, the Pan-American Health Organization, Canada, the European Economic Union, and the Inter-American Development Bank. USAID assistance implemented under the Central American regional program totaled $7.2 million in FY 1994 and $8.9 million in FY 1995.
FY 1997 Program.
Having recognized the critical development challenges facing the region, the Central Americans themselves established in 1994 a regional Alliance for Sustainable Development, to which the United States became a partner through the signing of the CONCAUSA agreement at the Miami Summit ofthe Americas. USAID's regional program focuses on implementation of the Miami Summit and CONCAUSA commitments in the areas of hemispheric free trade and environmentally sound natural resource management necessary for sustainable economic growth. USAID's program will help increase Central America's readiness to enter into free trade agreements through work in four major areas: strengthened intellectual property rights policies and enforcement; further trade liberalization by reducing non-tariff barriers; enhanced regional and national foreign investment regimes; and better protection of internationally recognized workers rights. USAID's efforts to achieve environmentally sound natural resource management and an improved regional policy framework contribute to Central America's preparedness for hemispheric free trade agreements, as well as establishing the basis for sustainable resource use required for long-term economic growth. In the environmental area, USAID's role in the region will continue to be catalytic in nature, supporting those activities having economies of scale and cross-border impacts.
In addition, the regional program includes a special objective aimed at enhancing Central American capacity to respond to the threat of HIV/AIDS. It aims to strengthen the capabilities of local Central American organizations to deliver services and information about the prevention of HIV/AIDS to those groups and individuals who are most at risk of HIV. The spread of HIV/AIDS is not contained by borders, so a regional strategy is appropriate to address the threat of HIV/AIDS in Central America.
If resources for USAID's regional program diminish, the social marketing activities planned under the HIV/AIDS special objective will be the first to be canceled, and regional environmental activities will then be cut.
Agency Goal: Encouraging Broad-based Economic Growth
Central America is advancing in its preparation for participation in hemispheric free trade agreements. In December 1994, the Central American Presidents signed the Summit of the Americas Declaration and Action Plan calling for the establishment of the Free Trade Area of the Americas (FTAA) by the year 2005. All Central American governments have either already acceded to, or are in the final stages of joining, the World Trade Organization (WTO). Most countries in the region are continuing their negotiations with the U.S. Government on bilateral investment treaties (BITs) and bilateral intellectual property rights agreements (BIPRAs). Further reductions in external tariff rates are being implemented by most countries. Central America also has advanced on its own process of subregional economic integration, abandoning its old model based on import substitution and high rates of external protection, and pursuing a more outward orientation consistent with WTO commitments. With USAID support, the Permanent Secretariat of the General Treaty of Central America Economic Integration (SIECA) has drafted model regional agreements on rules of origin, unfair trading practices, and dispute settlement procedures and the Secretariat is now facilitating efforts of the Central American governments to ratify these agreements. Once in effect, these measures will contribute both to greater economic integration and efficiency within the region and will enhance Central America's preparedness to enter into hemispheric free trade agreements. Based on the results of a USAID-funded study on intellectual property rights, SIECA is designing a medium-term program to strengthen IPR protection in the region which will greatly enhance Central America's ability to honor its commitments.
Regarding labor relations and workers rights, USAID has completed a study on how national labor laws across the region conform to international standards and on national enforcement capabilities. The results form the basis for a USAID-sponsored program to improve labor relations and to strengthen the protection of worker rights, conducted with the Central American labor ministers.
However, despite this progress, problems still remain. There is growing evidence that with the North America Free Trade Agreement (NAFTA) in effect, Central America is losing its relative competitiveness vis-á-vis Mexico. In particular, the region's assembly industry appears to be adversely affected by Mexico's improved access to the U.S. apparel market. Also, several countries continue to be on theGeneral System of Preferences (GSP) watch list because of allegations of failure to provide adequate protection of internationally recognized workers rights and charges of infringement of intellectual property rights. These problems threaten future equitable economic growth in the region.
USAID's regional environmental program for Central America promotes effective regional stewardship of the region's key natural resources through the establishment of "biological corridors" throughout the isthmus. Recent achievements in this area include the establishment and progress towards effective management of major national protected areas throughout the isthmus, the development of protected areas legislation, the adoption of appropriate natural resources management practices by target populations, and improved financial sustainability of environmental institutions. A new initiative designed to support the CONCAUSA agreement commenced in FY 1996 to develop and consolidate a Central American system of cross-border parks and protected areas, and to promote a strengthened regulatory and enforcement framework for environmental protection. The political momentum generated by CONCAUSA and the influence of NAFTA in the area of harmonization of environmental legislation are among the positive factors influencing performance. However, funding uncertainties have made planning difficult, and led to a delay and ultimately a reduction in the levels of support to key program activities. Additional funding cut-backs would result in significantly reduced overall program scope and impact.
Agency Goal: Stabilizing Population Growth and Protecting Human Health
The future political, economic and social development of Central America is threatened by the HIV/AIDS epidemic. The areas most likely to be affected by HIV/AIDS include work productivity, medical care costs, and the size and health of the labor force. To maintain economic, political and social stability in Central America, HIV/AIDS prevention activities will be initiated through a strategy that considers the specific sub-regional commonalities and cross-border transmission.
USAID's five-year, region-wide program will strengthen the capabilities of local Central American organizations to deliver services and information about the prevention of HIV to target groups. USAID will support activities on three different levels. On the broadest level, the activities are designed to improve the policy environment for the promotion of HIV programs. On an institutional level, USAID supports improved institutional capacity of NGOs and local universities to deliver HIV prevention programs and to conduct research. Finally, the activities will promote the individual behavioral changes that are required to prevent the spread of HIV/AIDS.
Because USAID's regional HIV program is in the first months of start-up, progress against the target has not yet been registered.
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Encouraging Economic Growth | Stabilizing Population Growth and Protecting Human Health | Protecting the Environment | Building Democracy | Providing Humanitarian Assistance | Total |
| USAID Strategic Objectives | ||||||
|
1. Increased Central American Participation in the Hemispheric Economy Dev. Assistance |
$2,500,000 |
$2,500,000 |
||||
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2. Effective Regional Stewardship of Key Natural Resources Dev. Assistance |
$6,000,000 |
$6,000,000 |
||||
| Special Strategic Objective | ||||||
|
Enhanced Central American Capacity to Respond to the HIV Crisis Dev. Assistance |
$6,750,000 |
$6,750,000 |
||||
|
Total Dev. Assistance |
$2,500,000 |
$6,750,000 |
$6,000,000 |
$15,250,000 |
USAID Mission Director: William Stacy Rhodes
PROGRAM: Central American Regional
TITLE AND NUMBER: Increased Central American Participation in the Hemispheric Economy, 596-SO01
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $2,500,000 DA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2000
Purpose: To increase Central America's preparedness to enter into free trade agreements and thereby accelerate the region's integration into hemispheric markets.
Background: To effectively combat poverty and promote sustainable development in Central America, substantially higher economic growth rates are required on a sustained basis. Real growth of 5-6% per year is needed to provide increased demand for the productive use of labor and thereby increase incomes for working families.
At the Summit of the Americas in December 1994, the heads of state of the hemisphere's 34 democracies united in pursuing greater hemispheric prosperity through open markets, hemispheric integration and sustainable development. They signed the Summit of the Americas Declaration of Principles and Action Plan, including a pledge to establish the Free Trade Area of the Americas (FTAA) by 2005. While fully supportive of Summit objectives, Central America's ability to participate in FTAA is severely limited by its lack of depth in technical expertise in areas related to implementing existing trade agreements and commitments, dismantling trade barriers and enhancing the region's competitiveness. Reflecting this, the Summit of the Americas Action plan pledged that "technical assistance will be provided to facilitate the integration of the smaller economies and increase their level of development." USAID's program is designed to support this commitment and consists of the project in Support of Central American Participation in Free Trade Agreements.
USAID Role and Achievements to Date: USAID has provided technical assistance, training and research in support of Central America's efforts to reform its regional trade regime. This assistance has contributed importantly to the adoption by Central America of a more outward-oriented regional integration model characterized by lower external tariffs, accelerated implementation of the General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) commitments, and reductions in both intra- and extra-regional nontariff trade barriers. Central America's trade performance continues to improve. In 1994, Central America's imports from the United States increased 11% to $6.6 billion, which supports 132,000 U.S. jobs. Imports from the U.S. are expected to have increased another 5%-8% in 1995.
Description: USAID is directly supporting Central American readiness for participation in hemispheric free trade agreements in four major areas:
(1) Intellectual Property Rights (IPR). USAID supports Central American efforts to strengthen IPR policies and to enhance enforcement capabilities through: (a) development of model Central American conventions on trademark, patent and copyright conventions; (b) increasing the public's awareness on the importance of adequate IPR protection to investment, technology transfer and sustainable development; (c) support for Central American efforts to build regional and national consensus on required IPR policy changes; and (d) technical training to patent, trademark and copyright registry officials.
(2) Further trade liberalization. USAID is supporting Central American measures to further liberalize both intra- and extra-regional trade. Activities focus on critical non-tariff barriers and emphasize making regional legislation consistent with standards. Technical experts also assist and enhance Central American participation in the Summit of the Americas FTAA working groups.
(3) Enhanced protection of regional and foreign investment. USAID support assists the region to improve dispute resolution procedures, eliminate policy constraints to increased regional and foreign investment, afford
national or most-favored-nation treatment to all investors, and establish international standards for expropriation which provide for prompt, adequate and effective compensation.
(4) Better protection of worker rights and improved labor relations. USAID contributes to strengthening the protection of internationally recognized workers rights through improving and simplifying labor legislation, as appropriate, and upgrading the region's enforcement capabilities. Regional workshops and national seminars emphasize: (a) the relationship between increased trade and better wages and the higher levels of competitiveness and productivity required to succeed in hemispheric markets; (b) workers rights and their relationship to trade preferences; and (c) models of labor-management cooperation that contribute to both increased productivity and higher wages.
Host Country and Other Donors: USAID is coordinating closely with the Inter-American Development Bank (IDB) which is planning activities to strengthen Central American regional trade institutions and support improved trade policies. As a result of this coordination, USAID is concentrating on areas such as intellectural property rights, labor rights and investment protection, in which the IDB does not plan major investments. USAID maintains close contact with the Central American Office of the United Nations' Economic Commission for Latin America (ECLA), which provides research and technical analysis on Central American economic integration issues.
Beneficiaries: Greater Central American integration to hemispheric markets will contribute to higher levels of production and increased employment. Beneficiaries will include those enjoying increased employment opportunities and higher incomes throughout the economy, but primarily in the export sector.
Principal Contractors, Grantees, or Agencies: USAID is working closely with the U.S. Trade Representative, the U.S. Patent and Trademark Office of the Department of Commerce, the U.S. Department of Labor, the U.S. Customs Service, and the Economic and Commercial Sections of U.S. Embassies in the region. The Permanent Secretariat for Central American Economic Integration (SIECA) is a grantee, and several contracts and grants with U.S. and local firms and NGOs are planned.
Major Results Indicators:
Baseline Target
Central American trade openness
(total merchandise trade as a percent of GDP) 45.2% (1994) 50% (2000)
Central American readiness to
enter into hemispheric free trade
agreements (composite index with maximum of 5) 2.7 (1992) 3.5 (2000)
PROGRAM: Central American Regional
TITLE AND NUMBER: Effective Regional Stewardship of Key Natural Resources, 596-SO02
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $6,000,000 DA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2000
Purpose: To 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.
Background: Central America's forests, farm lands and water provide most of the employment and income that is generated in the isthmus, and feed its rapidly expanding population. The region's terrestrial and marine ecosystems have long played a critical role in the flow of genetic material between the Northern and Southern Hemispheres. In recent decades, this flow has become threatened by extensive deforestation, urbanization, and environmental contamination. These destructive environmental trends, partially a result of the lack of community empowerment to manage its own resources, in turn bring increased risks to the social and economic development and well-being of the region's inhabitants. USAID's Central American Regional Environmental project embodies this objective.
USAID Role and Achievements to Date: The conservation of biological diversity and promotion of environmentally sound natural resources management practices have been a major focus of USAID assistance in Central America since 1989. USAID's role has been catalytic in nature, influencing processes to create change and addressing those activities having economies of scale and cross-border impacts. Through effective institutional strengthening and technology transfer, over 70,000 Central American extensionists, trainers, health practitioners, farmers and community leaders have been trained, and sound land-use practices adopted on a large scale. More than 100,000 farmers are planting multi-purpose, fast-growing trees, with as many as 25,000 hectares and 25 million trees planted to-date.
Description: USAID's strategy anticipates actions in four key areas. By supporting regional networking of environmental experts and workshops for legal professionals on environmental issues, and other information exchange activities, USAID expects to achieve regional consensus and coordinated actions to reduce levels of contamination by key pollutants. A USAID-funded small grants program will allow communities and Central American counterparts to explore and adopt best-use practices, to conduct policy analysis at the local level, and to increase community and local government participation in decision-making related to natural resources use and management. USAID also supports upward harmonization of environmental laws and regulations, principally through increased region-wide access to information on the laws and regulations of individual countries. The expectation is that with full information, the establishment of common or uniform standards will follow to ensure adequate environmental protection and to deter private investment from shifting to countries with more lax standards.
Host Country and Other Donors: USAID has been working with other international donors, including the Inter-American Development Bank, the Global Environmental Fund, the United Nations Development Program, the European Economic Community, and Germany, to leverage funding and to develop an integrated Central American environmental strategy.
Beneficiaries: Poor rural families living in protected areas and surrounding agricultural areas in selected sites throughout Central America, and poor urban and semi-urban families benefiting from expanded urban services and urban pollution abatement will benefit from these activities.
Principal Grantees, Contractors or Agencies: USAID will implement the program through four U.S. NGOs, a U.S. Contractor to be selected, U.S. Environmental Protection Agency, Central America Commission for Environment and Development, Federation of Municipalities in the Isthmus of Central America (FEMICA), and Central America Bank for Economic Integration (CABEI).
Major Results Indicators: 1/
Baseline Target
Increased number of protected areas under
improved management 5 (1996) 17 (2000)
Number of municipalities with pollution
mitigation systems in place 5 (1995) 40 (1998)
PROGRAM: Central American Regional
TITLE: Enhanced Central American Capacity to Respond to the HIV Crisis, 596-SOO3
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $6,750,000 DA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2000
Purpose: To strengthen the capabilities of local Central American organizations to deliver services and information about the prevention of HIV/AIDS to target groups. This program contributes to the goal of reducing the spread of HIV and sexually transmitted diseases (STDs), thus lessening the impact of AIDS on Central American individuals and societies.
Background: The future political, economic and social development of Central America is threatened by the HIV/AIDS epidemic. The areas most likely to be affected by HIV/AIDS include work productivity, medical care costs, and the size of the labor force. To maintain economic, political and social stability in Central America, HIV/AIDS prevention activities will be initiated through a strategy that considers the specific sub-regional commonalities and cross-border transmission.
USAID Role and Achievements to Date: The efforts of this program will complement the reproductive health activities (particularly in services and information) that USAID has been supporting in the seven Central American countries.
Description: USAID will support activities on three different levels. On the broadest level, the activities are designed to improve the policy environment for the promotion of HIV programs. On an intermediated level, USAID supports an improved institutional capacity of NGOs and local universities to deliver HIV prevention programs and to conduct research. Lastly, the activities will promote individual behavioral changes that are required to prevent the spread of HIV/AIDS.
The Central American HIV/AIDS program has three components. The policy development and public awareness component is the vehicle through which USAID will provide assistance in support of interventions that enhance the perceived urgency for, and the effectiveness of, HIV prevention programs at the local, national, and regional levels. The three major activities which willl be carried out under this component are regional policy research, leadership and policy development, and public awareness. Through the non-governmental organization (NGO) strengthening component, USAID will provide assistance to local NGOs to strengthen their capacity to provide sustainable, high-quality HIV prevention and other services. Major activities to be carried out under this component are technical assistance and training, networking and information exchange, and small grants. The condom social marketing component is in the design phase.
Host Countries and Other Donors: Most national governments are budgeting almost no resources to slow the epidemic, and the donor response has been mixed. The Pan-American Health Organization (PAHO) has assisted and provided essential budget support for the establishment of a National AIDS Control Program (NACP) in each country. The NACPs have little or no high level support and/or insufficient financial and human resources to be effective. Other donors in the region include the Commission of European Communities, Japan, the United Nations Children's Fund (UNICEF), the Dutch and Nordic countries. In 1996, the UNAIDS Project will begin activities; this effort will be headed in Central America by PAHO. USAID has consulted with PAHO regarding joint programming and co-sponsored activities.
Beneficiaries: The Central American HIV/AIDS program will strengthen the capacity of Central American organizations and leaders to deal with the HIV/AIDS crisis in Central America. The ultimate beneficiaries are those groups and individuals who are at risk of HIV.
Principal Contractors, Grantees or Agencies: USAID implements activities for the NGO strengthening and policy components through a consortium of three U.S. firms. An implementing agency for the social marketing component will be selected in FY 1996.
Major Results Indicators:2/ Four indicators have been selected to monitor the impact of the project: number of supportive policies enacted; number of policy barriers reduced; amount of regional resources allocated to HIV/AIDS/STD programs and number of NGOs that can independently deliver HIV prevention programs.
Major Results Indicators:
Baseline Target
Number of supportive policies enacted
Number of policy barriers reduced
Amount of regional resources allocated
to HIV/AIDS/STD programs
Number of NGOs that can independently
deliver HIV prevention programs