Order Code RL31726
Report for Congress
Received through the CRS Web
Latin America and the Caribbean:
Issues for the 108th Congress
January 30, 2003
Mark P. Sullivan, Coordinator
Foreign Affairs, Defense, and Trade Division
J. F. Hornbeck, Nina M. Serafino,
K. Larry Storrs, and Maureen Taft-Morales
Congressional Research Service ˜ The Library of Congress

Latin America and the Caribbean:
Issues for the 108th Congress
Summary
This report, which will be updated periodically, examines issues in U.S. policy
toward Latin America and the Caribbean, focusing especially on the role of Congress
and congressional concerns. For more details and discussion, see the listed CRS
products after each section.
The Latin American and Caribbean region has made enormous strides over the
past two decades in political development, with all countries but Cuba led by
democratically-elected heads of state. But several nations face considerable
challenges that threaten political stability, including economic decline and rising
poverty, violent guerrilla conflicts, drug trafficking, and increasing crime.
Bush Administration officials maintain that U.S. policy toward Latin America
has three overarching goals: strengthening security; promoting democracy and good
governance; and stimulating economic development. Some observers argue that the
Administration has not been paying enough attention to the region and to instability
in such countries as Argentina and Venezuela. They maintain that the United States,
faced with other pressing foreign policy problems like the confrontation with Iraq and
the global anti-terrorist campaign, has fallen back to a policy of benign neglect of the
region. In contrast, others maintain that the United States has an active policy toward
Latin America and point to the considerable assistance and support provided to
Colombia and its neighbors as they combat drug trafficking and terrorist groups.
They also point to the momentum toward free trade in the region through negotiation
of free trade agreements, and to increased bilateral and regional cooperation on
security issues.
Congressional attention to Latin America in the 108th Congress will likely focus
on counter-narcotics and counter-terrorism efforts in the Andean region, trade issues,
and potential threats to democracy and stability. U.S. counter-narcotics efforts will
focus on continuation of the Andean Regional Initiative supporting Colombia and its
neighbors in their struggle against drug trafficking and drug-financed terrorist groups.
With regard to trade, now that negotiations with Chile for a bilateral free trade
agreement are completed, Congress will likely consider implementing legislation for
the agreement under fast track procedures. Congressional oversight also may focus
on negotiations for a Free Trade Area of the Americas agreement, scheduled for
completion in January 2005, and on negotiations for a free trade agreement with
Central America. Congress may also pay increased attention to economic, social, and
political tensions in South America that could threaten democratic order, particularly
in Venezuela and Argentina. In the Caribbean, Congress will likely continue to
debate the appropriate U.S. policy approach to Cuba, the region’s only holdout to
democracy, as it has for the past several years, while Haiti’s persistent poverty and
political instability may also remain a congressional concern. Finally, Congress will
likely maintain an active interest in neighboring Mexico, with a myriad of trade,
migration, border and drug trafficking issues dominating U.S.-Mexico bilateral
relations.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Conditions in the Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Regional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Colombia and the Andean Regional Initiative . . . . . . . . . . . . . . . . . . . . . . . . 4
U.S.-Latin American Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S.-Chile FTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S.-Central American FTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Free Trade Area of the Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Country Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Haiti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Peru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Latin America and the Caribbean:
Issues for the 108th Congress
Introduction
Conditions in the Region
Latin America has made enormous strides over the past two decades in political
development, with all countries but Cuba led by democratically-elected heads of
state. But several nations face considerable challenges that threaten political
stability, including economic decline and rising poverty, violent guerrilla conflicts,
autocratic leaders, drug trafficking, and increasing crime.
The region as a whole experienced slower economic growth over the past two
years, and 2002 saw the worst economic performance in almost two decades.
According to the United Nations Economic Commission for Latin America and the
Caribbean (ECLAC), gross domestic product (GDP) declined by 0.5% in 2002,
while per capita income declined almost 2%. Argentina, Uruguay, and Venezuela
suffered the deepest recessions, skewing the regional data downward, while many
other countries had slow, but positive growth rates.1 Some 44% of the region’s
population live in poverty, according to ECLAC.2
In South America, the economic downturn has increased political pressure on
elected governments and led some in the region to question democracy and the
democratic free-market model of development. Argentina’s democratic political
system has been under considerable stress since social protests over the country’s
deteriorating economy led to the resignation of a democratically elected President in
December 2001. The current administration of President Eduardo Duhalde has
struggled with a difficult economic situation, which resulted in an agreement to hold
the next presidential election several months early, on April 27, 2003. There also has
been growing concern over the extent to which Argentina’s instability has spread to
neighboring Uruguay and Paraguay. The economic downturn also fueled the electoral
campaigns of populist candidates: in Brazil, former labor leader Luis Inácio Lula da
Silva was elected president in October 2002, and in Ecuador, former coup leader and
populist Lucio Gutierrez was elected president in November 2002.
1 U.N. Economic Commission for Latin America and the Caribbean. “Balance preliminar
de las economías de América Latina y el Caribe, 2002,” December 2002.
2 U.N. Economic Commission for Latin America and the Caribbean. “Social Panaorma of
Latin America, 2001-2002.”CEPAL News, November 2002.

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Colombia is facing challenges not only from a troubled economy and from drug
trafficking organizations, but also from two left-wing guerrilla groups and a rightist
paramilitary group, all of which, combined, are responsible for thousands of deaths
each year.
Political tensions in Venezuela (the third largest supplier of foreign oil to the
United States in 2001) remain high as opposition groups have been demanding a
referendum on the rule of President Hugo Chavez, who had been ousted briefly from
power in April 2002 after massive opposition protests. Chavez’s rule has been
marred by controversy as he has revamped Venezuela’s government institutions and
polarized the nation with his leftist rhetoric and programs.
In the Caribbean, the government of Jean-Bertrand Aristide in Haiti continues
to be plagued with disputes over the 2000 elections. Political turmoil has increased
in the country and both economic and human rights conditions have worsened.
Cuban President Fidel Castro retains tight control over the Communist government
of Cuba, which has a poor record on human rights.
U.S. Policy
Congressional attention to Latin America in the 108th Congress will likely focus
on counter-narcotics and counter-terrorism efforts in the Andean region, security
cooperation with Latin America, trade issues, and potential threats to democracy and
stability in the region. Congressional consideration of the annual foreign operations
appropriations legislation that funds foreign aid will remain an important way for
Congress to influence U.S. policy toward the region. Congress also will likely
maintain an active interest in neighboring Mexico, with a myriad of trade, migration,
border and drug trafficking issues dominating U.S.-Mexico bilateral relations.
U.S. counter-narcotics efforts in the region will likely focus on continuation of
the Administration’s Andean Regional Initiative supporting Colombia and its
neighbors with foreign assistance in their struggle against drug trafficking and drug-
financed terrorist groups. In addition to the Andean region, President Bush
determined on January 31, 2003 (pursuant to P.L. 107–228, Section 706), that
Guatemala and Haiti have “failed demonstrably” to take action over the past year to
counter international narcotics trafficking, but the President waived the suspension
of foreign assistance to both countries.
Security issues became a higher-profile aspect of U.S. relations with Latin
America in the aftermath of the September 11, 2001 terrorists attacks in the United
States. Bilateral and regional cooperation on anti-terrorism issues increased, and the
United States expanded its assistance to Colombia beyond a strictly counternarcotics
focus to also include counterterrorism support. In June 2002, the United States and
other members of the Organization of American States (OAS) signed an Inter-
American Convention Against Terrorism that would improve regional cooperation.
President Bush submitted the convention to the Senate for its advice and consent in
November 2002.
U.S. officials maintain that the most effective and rapid means to stimulate
economic development in Latin America is through trade, and have set the goal of

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strengthening trade linkages with the region. This includes establishing a Free Trade
Area of the Americas (FTAA) by 2005, a goal first agreed to by hemispheric nations
at the 1994 Summit of the Americas; signing the Chile free trade agreement (FTA)
that was completed in December 2002; and completing negotiations on the bilateral
agreement with Central America begun on January 27, 2003. Now that negotiations
with Chile for a bilateral FTA are completed, Congress will likely consider
implementing legislation for the agreement under fast track procedures. In addition,
congressional oversight may focus on negotiations for the FTAA and on negotiations
for an FTA with Central America.
In addition to trade policy, the United States supports development in the region
through foreign assistance programs largely administered by the U.S. Agency for
International Development (USAID). The agency supports such activities as
education, poverty reduction, health care, conservation, natural disaster mitigation
and reconstruction, counter-narcotics and alternative development, and HIV/AIDS
prevention and education. In addition, the United States provides food assistance,
anti-terrorism assistance, and security assistance. The Peace Corps is active in many
Latin American and Caribbean nations. Overall U.S. foreign aid to the Latin
America region amounted to about $862 million in FY2001, $1.4 billion in FY2002,
and $1.6 billion was requested for FY2003.
The Bush Administration has proposed a new foreign aid initiative, the
Millennium Challenge Account, that would significantly increase U.S. foreign
assistance worldwide to countries that have strong records of performance in the
areas of governance, economic policy and investment in people. If approved in the
108th Congress, the initiative could dramatically increase foreign assistance to several
Latin American countries beginning in FY2004.3
Congress will likely pay attention to potential threats to democracy and stability
in the region. As noted above, while Latin America has made significant progress
over the past two decades in strengthening institutions, several nations have
economic and political crises that may threaten democratic order, particularly
Argentina and Venezuela. Haiti’s persistent poverty and political instability will also
likely remain a concern for Congress. In September 2001, the United States
supported the OAS adoption of the Inter-American Democratic Charter, which made
democracy a defining characteristic of hemispheric states and called for collective
action whenever democracy is threatened. Since then, the charter has been used to
help deal with the political situations in both Haiti and Venezuela. As it has for the
past several years, Congress will likely continue to debate the appropriate U.S. policy
approach toward Cuba, the region’s only democratic holdout.
Some observers, including many from Latin America, maintain that the Bush
Administration has not been paying enough attention to the region and to the
problems of economic and political stability in countries such as Argentina and
Venezuela. U.S. policy is criticized for having returned to a policy of benign neglect
as the Administration has focused its attention on such pressing problems as the
3 For further information, see CRS Report RL31687, The Millennium Challenge Account:
Congressional Consideration of a New Foreign Aid Initiative
, by Larry Nowels.

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global anti-terrorism campaign, the confrontations with Iraq and North Korea, and
homeland security. They argue that the United States cannot afford to let the region
become unstable politically or economically, because it is an important market for
U.S. exports, and an important supplier of U.S. energy needs, and increased
instability could lead to increased illegal migration.
Others suggest that despite its attention to crises and issues worldwide, the
United States has maintained an active policy toward Latin America. They point to
the momentum for free trade in the region and to the assistance and support provided
to Colombia and its neighbors as they combat drug trafficking and terrorist groups
in the Andean region. Moreover, they maintain that the new U.S. focus on security
issues worldwide will only solidify U.S. ties to the region through increased bilateral
and regional cooperation such as the Inter-American Convention Against Terrorism.
CRS Products:
CRS Report 98-684, Latin America and the Caribbean: Fact Sheet on Leaders and
Elections, by Mark P. Sullivan,.
CRS Issue Brief IB95017, Trade and the Americas, by Raymond J. Ahearn.
CRS Report RL30971, Latin America and the Caribbean: Legislative Issues in 2001-
2002, Coordinated by K. Larry Storrs.
CRS Report RL31637, Spreading Financial Instability in South America, by J. F.
Hornbeck and Martin A. Weiss.
CRS Report RS21166, AIDS in the Caribbean and Central America, by Mark P.
Sullivan.
Regional Issues
Colombia and the Andean Regional Initiative
Congress is increasingly concerned about the thus far intractable problem of
illegal narcotics in the Andean Region and divided over an appropriate policy. For
over two decades, U.S. policy towards the Andean Region has focused almost
exclusively on counternarcotics efforts, i.e., curbing the cultivation of coca leaf and
its transformation into cocaine. Successes in controlling coca and coca base
production in Bolivia and Peru seemed to be offset in the mid-to-late 1990s by the
expansion of coca cultivation into uncontrolled areas of Colombia, which previously
had served only for the refinement of coca base into cocaine. In the last few years,
Colombia also became the site of the cultivation of opium poppies and their
transformation into heroin. In 2000, the 106th Congress approved expanded political,
economic, and military assistance to combat drug production and trafficking in
Colombia under the Clinton Administration’s “Plan Colombia” (P.L. 106-246). In
2002, it approved the Bush Administration’s Andean Regional Initiative (ARI), the
continuation of the Clinton policy in Colombia and a sizable expansion of assistance

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to six of Colombia’s neighbors: Brazil, Bolivia, Ecuador, Panama, Peru, and
Venezuela (P.L. 107-206 and P.L. 107-115). The 107th Congress also approved a
major shift in U.S. Andean policy, by authorizing for the first time in recent years the
use of U.S. assistance to help Colombia counter threats to its stability from illegal
armed groups of the left and right which substantially finance their operations
through the drug trade.
The 108th Congress will likely continue to scrutinize indicators of the ARI’s
effectiveness, and to debate the policy’s wisdom. Annual indicators of the amount
of coca under cultivation in each Andean country, usually released by early March,
will factor into the 108th Congress’ debate on the policy’s effectiveness. As the
overall cultivation in the Andean Region has appeared to have changed little over the
past several years, despite changes in individual countries, some policymakers have
argued that the “supply side” policy of stemming drug production at the source is
inevitably a losing battle. They argue that policy should focus on the “demand side”
because they view providing treatment for the users of illegal narcotics as the only
permanent solution.
The Bush Administration has, however, recast the debate, arguing that the
United States faces not only a threat from drug production and trafficking in the
Andean region, but also from increasing instability. To the Bush Administration and
its supporters, the assistance to Colombia is necessary to help shore up a democratic
government besieged by drug-supported leftist and rightist armed groups. Substantial
assistance to Colombia’s neighbors is warranted, they argue, because of an increasing
threat from the spillover of violence from Colombia, and the possible resurgence of
drug cultivation in some countries and its spread from Colombia to others. Although
some critics agree with this assessment, they argue that the Bush plan
overemphasizes military and counter-drug assistance and provides inadequate
support for protecting human rights and encouraging a peace process in Colombia.
In particular, they express concern that current military assistance is drawing the
United States into Colombia’s guerrilla conflict in support of armed forces which,
they charge, have substantial ties to rightist groups guilty of gross violations of
human rights. This concern grew with the August 2002 inauguration of President
Alvaro Uribe, who is viewed by some as tolerating, if not favoring, the actions of
rightist armed groups. Critics also voice skepticism that U.S.-funded alternative
development projects can provide adequate livelihoods to induce growers to
voluntarily give up coca cultivation, and view the lack of such alternatives as fueling
the growth in political power of opponents of U.S. policy in the region.
The 108th Congress’ first task regarding the ARI is to decide on funding for the
President’s FY2003 $980 million ARI request. In its amendment to H.J.Res. 2, a bill
making further continuing appropriations, the full Senate on January 23, 2003,
approved an omnibus appropriations bill covering the 11 unfunded FY2003 spending
bills which includes foreign operations appropriations. Although it is not clear how
much funding the Senate version of H.J.Res. 2 would provide for the total ARI, it
would provide $650 million for the key “Andean Counterdrug Initiative” (ACI)
account of the $731 million requested, and $88 million in Foreign Military Financing
(FMF) of the $98 million requested. (The ACI account funds, among other things,
support for the eradication of illegal crops and the destruction of laboratories, as well
as economic and social development. The FMF funding will be used to train and

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equip a Colombian Army brigade to protect the Cano-Limón oil pipeline in
Colombia.) These ACI and FMF amounts total some $14 million more than that
provided for Colombia and other Andean countries in the Senate Appropriations
Committee’s version of the FY2003 foreign operations appropriations in the 107th
Congress, S. 2779, which was never acted on by the full Senate. The version
approved by the House Appropriations Committee in the 107th Congress, H.R. 5410,
fully funded the President’s ARI request, but it was not acted on by the full House.
Both versions contain a variety of human rights and environmental conditions on the
funding. Further action on this funding will occur in early 2003 in the context of
conference action on H.J.Res. 2.
CRS Products:
CRS Report RL31383, Andean Regional Initiative (ARI): FY2002 Supplemental and
FY2003 Assistance for Colombia and Neighbors, by K. Larry Storrs and Nina M.
Serafino.
CRS Report RS21213, Colombia: Summary and Tables on U.S. Assistance, FY1989-
FY2003, by Nina M. Serafino.
CRS Report RL31016, Andean Regional Initiative (ARI): FY2002 Assistance for
Colombia and Neighbors, by K. Larry Storrs and Nina M. Serafino.
U.S.-Latin American Trade Relations
Since the North American Free Trade Agreement (NAFTA) took effect in
January 1994, its mixed reviews were one factor that caused the U.S. Congress to
adopt a more cautious attitude toward future trade negotiations. This outlook was
reflected in the spirited debate over Trade Promotion Authority (TPA), which
continued for eight years before legislation permitting “fast-track” approval of trade
agreements was passed in August 2002. In the meantime, select free trade
agreements have been pursued by the Executive Branch and currently there are three
potential FTAs with Latin American countries in different stages of development.
Since all will require passage of implementing legislation before they can take effect,
the 108th Congress will likely follow each closely.
U.S.-Chile FTA. Completed on December 11, 2002 after two years and 14
rounds of negotiations, this is the FTA likely to see the most immediate
congressional consideration. As required under the Trade Act of 2002 (P.L. 107-210),
President Bush formally notified the 108th Congress on January 30, 2003 of his
intention to sign the agreement. This initiated a legally required 90-day review
period prior to congressional consideration of implementing legislation, which is
expected later in the year. As proposed, the FTA would allow 85% of all consumer
and industrial goods to be traded duty free immediately. Also, 75% of tariffs on farm
goods and Chile’s luxury tax on automobiles would be eliminated within the first
four years, and tariffs on sensitive goods traded between the two countries would be
phased out over a period of up to 12 years. Chile’s rules governing investment,

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services trade, intellectual property rights, labor, environment, dispute resolution, and
other issues critical to the United States would also be clarified and made more
transparent. Importantly, there was no chapter on antidumping and countervailing
duties, a trade issue of chief concern for Chile and Latin America in general.
Because this is the first U.S. FTA with a Latin American country in nearly a decade
and also because it broached new ground in some areas, it will be an important
document in the context of other FTAs being considered, particularly the region-wide
Free Trade Area of the Americas.
U.S.-Central American FTA. On January 8, 2003, the Bush Administration
announced that the United States would begin negotiating an FTA with the five
Central American Common Market (CACM) nations – Costa Rica, El Salvador,
Guatemala, Honduras, and Nicaragua. The first of nine scheduled negotiation rounds
began January 27, 2003 in San Jose, Costa Rica and both sides have expressed
optimism that an agreement can be concluded by year end. The U.S.-Central
American Free Trade Agreement, or CAFTA, presents a complicated challenge to
bilateral negotiations because the five republics must agree among themselves to
bring unified positions to the negotiating table. Although the CAFTA countries
currently qualify as beneficiaries under the Caribbean Basin Initiative (CBI), an FTA
with the United States would potentially allow for further reduction in trade barriers,
make permanent benefits in CBI legislation that requires periodic reauthorization,
and provide a more conducive environment for U.S. foreign investment. In the
United States, proponents of the agreement see CAFTA as supporting U.S. exports
and providing less expensive imports, while also advancing the FTAA agenda and
solidifying regional political and economic reforms that strengthen democracy and
promote stability. Still, Central America accounts for only 1% of U.S. trade and so
CAFTA will have only a small effect on the U.S. economy overall, and may have
some negative repercussions on firms that compete directly with Central American
imports.
Free Trade Area of the Americas. The Free Trade Area of the Americas
is a regional trade proposal among 34 nations of the Western Hemisphere that would
promote economic integration by creating a comprehensive (WTO-plus) framework
for reducing tariff and nontariff barriers to trade and investment. Formal negotiations
commenced in 1998 and the first draft of the agreement was adopted at the Third
Summit of the Americas in Quebec, Canada in April 2001. The second draft text was
accepted on November 1, 2002 at the seventh trade ministerial in Quito, Ecuador.
The negotiating schedule calls for a final agreement to be adopted by January 2005,
with its entry into force to occur no later than year end.
Five major milestones were reached in the most recent trade ministerial in
Quito: 1) Brazil and the United States became co-chairs of the Trade Negotiations
Committee (TNC), which will guide the final phase of the overall negotiation
process; 2) a new Hemisphere Cooperation Program (HCP) was established to
develop resources to help small countries “strengthen their capacity to implement and
participate fully in the FTAA;” 3) the second draft of the FTAA agreement was
released; 4) a time line was established for the critical market access negotiations;
and 5) the final rotation of chairs for the various negotiating groups was completed.
The TNC will meet in April 2003 in Trinidad and Tobago and the eighth FTAA

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ministerial meeting will convene in Miami, Florida on November 20-21, 2003; the
ninth is scheduled for the following year in Brazil.
The most important recent negotiating milestone was the initiation of detailed
market access talks, which involve five separate groups. Initial market access offers
are due by February 15, 2003. Agriculture and the market access groups were given
instructions to coordinate their efforts and to have final revised offers completed by
July 15, 2003. As was recognized at Quito, the agricultural negotiations will have
to be done with an eye on parallel discussions being undertaken by the WTO, which
also have a completion deadline of January 2005. Much attention is also focused on
how Brazil and the United States (with the two largest economies) will undertake
their duties as co-chairs of the TNC given their significant differences of opinion on
many issues, including sensitive topics such as the treatment of steel and agricultural
products. Although the 108th Congress is not expected to deal with implementing
legislation on the FTAA, the relevant committees will oversee this last phase of the
negotiations. In this respect, the 108th Congress will play an important role in
determining if the FTAA is to be brought to completion by 2005.
CRS Products:
CRS Electronic Briefing Book, Trade “The U.S.-Central America Free Trade
Agreement,” by J. F. Hornbeck, available online at
[ http://www.congress.gov/brbk/html/ebtra132.html].
CRS Report RL31144, A U.S.-Chile Free Trade Agreement: Economic and Trade
Policy Issues, by J. F. Hornbeck.
CRS Report RS20864, A Free Trade Area of the Americas: Status of Negotiations and
Major Policy Issues, by J. F. Hornbeck.
CRS Report 98-840, U.S.-Latin American Trade: Recent Trends, by J. F. Hornbeck.
CRS Issue Brief IB95017, Trade and the Americas, by Raymond J. Ahearn.
Terrorism
In the aftermath of the September 2001 terrorist attacks on New York and
Washington D.C., U.S. attention to terrorism in Latin America has intensified, with
an increase in bilateral and regional cooperation. Latin American nations strongly
condemned the attacks, and took action through the Organization of American States
to strengthen hemispheric cooperation. In June 2002, OAS members signed an Inter-
American Convention Against Terrorism that would improve regional cooperation,
including a commitment by parties to deny safe haven to suspected terrorists.
President Bush submitted the convention to the Senate in mid-November 2002 for
its advice and consent. An OAS meeting to discuss the scope of the Convention and
the anti-terrorism approach for the hemisphere took place January 22-24, 2003, in El
Salvador.

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The State Department, in its annual report on worldwide terrorism (Patterns of
Global Terrorism), highlights terrorist threats in Colombia, Peru, and the tri-border
region of Argentina, Brazil, and Paraguay, and notes that allegations of Osama Bin
Laden or Al Qaeda support cells in the region remain uncorroborated. The State
Department also has designated four terrorist groups (three in Colombia and one in
Peru) as Foreign Terrorist Organizations, and Cuba has been listed as a state sponsor
of terrorism since 1982.
Through the State Department, the United States has provided Anti-Terrorism
Assistance (ATA) training and equipment to Latin American countries to help
improve their capabilities in such areas as airport security management and bomb
detection and deactivation. In December 2002, the State Department announced that
counter-terrorism finance training would be provided to the tri-border region of
Argentina, Brazil, and Paraguay because of concerns that illicit activities are funding
terrorism. In addition, the Bush Administration has expanded its assistance to
Colombia beyond a strictly counternarcotics focus to also include counter-terrorism
support. (See discussion above on “Colombia and the Andean Regional Initiative.”)
Finally, cooperation with Mexico on border security will be a key component on U.S.
homeland defense strategy.
For background information, see “The Americas’ Response to Terrorism,” on
the OAS web site at [http://www.oas.org/OASpage/crisis/crisis_en.htm].
CRS Products:
CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan.
CRS Report RL31549, Department of Homeland Security: Consolidation of Border
and Transportation Security Agencies, by William J. Krouse.
Country Issues
Argentina
On December 20, 2001, Argentina’s financial collapse and escalating social
unrest forced President Fernando de la Rua’s resignation from office. After several
interim presidents, on January 1, 2002, the Argentine Congress selected Eduardo
Duhalde to complete de la Rua’s term until December 2003. Over the past year,
Duhalde has struggled to find a credible response to deep-seated economic and
political problems. The seeds of Argentina’s financial and political crisis were
planted in 1991 with adoption of its currency board to fight hyperinflation, a plan that
rested on the guaranteed convertibility of peso currency to U.S. dollars at a one-to-
one fixed rate. Argentina, however, proved unable to enforce the economic policies
needed to support the convertibility plan and when it was beset by numerous external
shocks, it went from prolonged recession to default and financial crisis, despite
repeated financial assistance from the International Monetary Fund (IMF).

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President Duhalde’s economic program initially centered on abandoning the
currency board and the peso’s 1-to-1 peg with the dollar in favor of a dual exchange
rate system. This soon gave way to a floating exchange rate system, but included
bank deposits and loans being converted at different rates. A freeze on bank deposits
was also maintained. The mismatch in the conversion rate between bank loans
(assets) and deposits (liabilities) caused banks to become technically bankrupt despite
government assurances that it would provide assistance. This arrangement, among
other structural problems, proved to be an obstacle both to developing a credible plan
to rebuild the financial system and to working out a major new IMF assistance
package.
Argentina’s economy appears to have stabilized at the close of 2002. However,
GDP declined by 12% last year, and unemployment and poverty rates were at 18%
and 60% respectively. On January 17, 2003, the IMF reached a new “interim” $6.8
billion agreement. The arrangement was supported by the United States and other
Group of 7 countries as necessary to keep Argentina from defaulting on a $1 billion
payment due to the IMF the next day. The loan package has few new conditions
attached and provides sufficient financial resources only to “roll over” Argentina’s
current commitments to the IMF through August 2003. It was timed to support
Argentina during its presidential elections scheduled for April 27, 2003. The
program has been criticized by some as being economically questionable, allowing
Argentina to avoid the harsh consequences of defaulting to the IMF, without being
required to tackle difficult structural policy issues such as private and public sector
financial reform. Consequently, under these conditions it remains to be seen if
Argentina is on a true path to political and economic recovery, or merely biding time.
CRS Products:
CRS Report RS21072, The Financial Crisis in Argentina, by J. F. Hornbeck.
CRS Report RL31582, The Argentine Financial Crisis: A Chronology of Events, by J.
F. Hornbeck.
CRS Report RS21113, Argentina’s Political Upheaval, by Mark P. Sullivan.
Brazil
Luis Inácio Lula da Silva of the leftist Workers’ Party (PT) was inaugurated as
President of Brazil on January 1, 2003, pledging to bring fundamental change to the
country while maintaining sound economic policies. He won the October 2002
elections decisively, with twice as many votes as the runner-up in the first round
election, and with 61.3% in the second round election, with the support of leftist
parties and a variety of centrist elements. He defeated José Serra who was running
as the favored candidate of two-term President Fernando Henrique Cardoso (1995-
2002) with support from the center-left Brazilian Social Democratic Party (PSDB)
and the centrist Brazilian Democratic Movement Party (PMDB).
During the campaign, while advocating a change in policy and greater attention
to social issues, Lula da Silva promised on several occasions to maintain the fiscal

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and monetary policies associated Brazil’s most recent IMF loan. The $30 billion
IMF loan, announced in August 2002, was provided to guarantee that Brazil would
be able to continue to pay its considerable foreign debt. Since his election, he has
designated well respected and moderate individuals to his economic team, while
stressing that one of his main priorities will be the eradication of hunger through a
program called Zero Hunger.
In the foreign policy area, President Da Silva has indicated that he wants to
strengthen ties to Argentina and to revitalize the Southern Common Market
(Mercosur). He has softened his previous opposition to the Free Trade Area of the
Americas and has indicated that he wants constructive relations with the United
States. Beginning in November 2002, Brazil and the United States have
responsibility for co-chairing the FTAA Trade Negotiation Committee in the final
phase of negotiations that is scheduled to conclude by January 2005. In the past,
Brazil has taken the position that the FTAA must include measures to curtail
agricultural subsidies and to reduce the use of anti-dumping and countervailing duties
to be acceptable. Brazil complains that the United States has utilized these and other
protectionist measures, including the recent Farm Bill subsidies and the steel
safeguard tariffs, to erect barriers to Brazilian shoes, orange juice, steel, and other
products. In other regional action, Lula da Silva, while attending the inauguration of
Lúcio Gutierrez as President of Ecuador on January 15, 2003, pressed successfully
for the Brazilian initiative to create a group of nations known as the “Friends of
Venezuela” to facilitate dialogue between President Chavez of Venezuela and the
opposition that is demanding a referendum on his presidency.
CRS Products:
CRS Report RL30121, Brazil under Cardoso: Politics, Economics, and Relations with
the United States, by K. Larry Storrs.
CRS Report 98-987, Brazil’s Economic Reform and the Global Financial Crisis, by J.
F. Hornbeck.
CRS Report RL31637, Spreading Financial Instability in South America, by J. F.
Hornbeck and Martin A. Weiss.
Cuba
Cuba remains a hard-line Communist state, with a poor record on human rights.
Fidel Castro has ruled since he led the Cuban Revolution, ousting the corrupt
government of Fulgencio Batista in 1959. With the cutoff of assistance from the
former Soviet Union, Cuba experienced severe economic deterioration in the early
1990s, although there has been some improvement since 1994 as Cuba has
implemented limited reforms. Over the past two years, the economy has been hard
hit by the effects of Hurricane Michelle, the effect on the international tourism
industry of the September 11 2001 terrorist attacks in the United States, and a
cutback in Venezuela’s preferential oil exports.

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Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating
the island nation through economic sanctions, including a trade embargo, and the
Bush Administration has essentially continued this policy. The sanctions were made
stronger with the Cuban Democracy Act (CDA) of 1992 (P.L. 102-484, Title XVII)
and the Cuban Liberty and Democratic Solidarity Act of 1996 (P.L. 104-104) , often
referred to as the Helms/Burton legislation. The 106th Congress enacted legislation
allowing for commercial food and medical exports to Cuba (P.L. 106-387, Title IX),
and over the past year, Cuba has purchased over $100 million in U.S. agricultural
products. Another component of U.S. policy consists of support measures for the
Cuban people, including private humanitarian donations and U.S.-sponsored radio
and television broadcasting to Cuba. In May 2002, President Bush announced a new
initiative that includes several measures designed to reach out to the Cuban people.4
As in past years, the main issue for U.S. policy toward Cuba in the 108th
Congress will likely be how best to support political and economic change. In the
debate over U.S. policy, there have been different schools of thought about how to
achieve that objective. Some advocate keeping maximum pressure on the
Communist government of Fidel Castro by maintaining the current U.S. embargo
until reforms are enacted, while continuing efforts to support the Cuban people.
Others argue for an approach, sometimes referred to as constructive engagement, that
would lift some U.S. sanctions they believe are hurting the Cuban people, and move
toward engaging Cuba in dialogue. Still others call for a swift normalization of
U.S.-Cuban relations by lifting the U.S. embargo. Legislative initiatives over the past
few years have reflected these various approaches. Congress will likely continue its
high level of interest in Cuba in 2003, with a variety of legislative initiatives
regarding sanctions and human rights that will be of interest to various groups with
differing interests.
Policy debate in the 107th Congress focused on whether to lift restrictions on
travel to Cuba and on private financing for agricultural exports. In the second session,
the House approved three amendments to the FY2003 Treasury Department
appropriations bill (H.R. 5120) that would have eased restrictions on travel,
remittances, and commercial agricultural and medical sales to Cuba. The Senate
Appropriations Committee version of the bill, S. 2779, would have eased restrictions
on travel. Final action on the measure was not completed before Congress adjourned.
In the 108th Congress, the Senate version of the FY2003 omnibus appropriations
bill (H.J.Res. 2, as amended by S.Amdt. 1, approved January 23, 2003) does not
include the Senate Appropriations Committee provision from the 107th Congress that
would have eased travel restrictions. However, the Senate omnibus bill includes
several provisions affecting U.S. policy toward Cuba: 1) a provision would provide
$24.996 million for Radio and TV Marti broadcasting to Cuba (Division B,
Commerce, Justice, and State appropriations); 2) a provision would provide $3
million for international narcotics control and law enforcement assistance for
preliminary work to establish cooperation with Cuba on counter-narcotics matters
(Division E, Foreign Operations appropriations, Sec. 580); 3) a provision would
4 White House, Office of the Press Secretary, “President Bush Announces Initiative for a
New Cuba,” May 20, 2002.

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expedite action, within 90 days, by the Treasury Department’s Office of Foreign
Assets Control on license applications for travel (Division J, Treasury appropriations,
Section 124). In addition, while the bill does not earmark funding for human rights
and democracy projects for Cuba, the Administration’s FY2003 foreign aid request
included $6 million for such projects. Final action on these provisions is subject to
a House-Senate conference on H.J.Res. 2.
CRS Products:
CRS Report RL30806, Cuba: Issues for Congress, by Mark P. Sullivan and Maureen
Taft-Morales.
CRS Trade Briefing Book, Cuba Sanctions, by Mark P. Sullivan
[http://www.congress.gov/brbk/html/ebtra108.html].
CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Legislative Initiatives, by
Mark P. Sullivan.
CRS Issue Brief IB10061, Exempting Food and Agriculture Products from U.S.
Economic Sanctions: Status and Implementation, by Remy Jurenas.
Haiti
The main issues for U.S. policy toward Haiti during the 108th Congress will
likely continue to be how to promote democratic development, economic growth, and
political stability in hopes of alleviating poverty, limiting illegal immigration from
Haiti, and reducing drug trafficking through Haiti. Almost two years into President
Jean-Bertrand Aristide’s five-year term, election disputes from 2000 remain
unresolved, political turmoil has increased, the economy is in crisis, and human
rights conditions have worsened. Opposition parties and international observers said
the electoral council manipulated the results of the 2000 elections to give President
Aristide’s Lavalas party 10 more Senate seats in the first round than they had won.
Over domestic and international objections, the Lavalas government treated the
disputed results as final.
OAS members, including the United States, the Haitian government, and the
Haitian opposition have agreed that holding elections is key to resolving the 2000
election dispute and Haiti’s resulting political impasse. Aristide has said elections
will be held by June 2003. More than 180 civil society groups, comprising thousands
of members, say the conditions for safe, free, transparent, and credible elections have
not been established. Haitian bishops, labor unions, and student groups are among
those calling for President Aristide to carry out serious reforms quickly or resign.
Aristide says he will not step down before his term ends in February 2006.
Major donors, including the United States, have directed aid to Haiti through
non-governmental organizations, withholding direct aid to the government until
Aristide enacts promised political, judicial, and economic reforms. Critics argue that
withholding aid to the government is contributing to Haitian poverty, instability, and

CRS-14
illegal migration. In the 108th Congress, the Senate-approved FY2003 omnibus
appropriations bill, H.J.Res. 2 (Division E, Foreign Operations) approved on January
23, 2003, would prohibit assistance to Haiti except through regular notification
procedures, and would allow Haiti to purchase defense articles and services for the
Haitian Coast Guard. The 107th Congress did not complete action on the FY2003
Foreign Operations appropriations measure, but the House Appropriations
Committee’s version, H.R. 5410, would have not required notification procedures
except for the Coast Guard purchases, and would have provided for “not less than
$52.5 million” in food assistance programs to be allocated to Haiti.
CRS Products:
CRS Issue Brief IB96019, Haiti: Issues for Congress, by Maureen Taft-Morales.
CRS Report RS21349, U.S. Immigration Policy on Haitian Migrants, by Ruth Ellen
Wasem.
Mexico
Congressional interest in Mexico in the 108th Congress is likely to focus on
trade, migration, border, and drug trafficking issues. Mexico is the United States’
second most important trading partner, with two-way trade tripling since 1994 under
the North American Free Trade Agreement. Mexico shares a busy border with the
United States and it is the source of numerous undocumented migrants, and a major
transit point for the flow of illicit narcotics to the United States.
Relations between Mexico and the United States were especially warm during
the visits of President Bush and President Fox in 2001, when hopes were high for
some sort of migration agreement between the countries. Relations cooled to some
extent when migration talks stalled following the September 2001 terrorist attacks,
and this lack of action was reported to be one reason for the resignation of Foreign
Minister Jorge Castañeda in mid-January 2003. In cabinet-level bilateral meetings
in November 2002, both countries reaffirmed the intention to continue talks toward
a migration agreement; Mexico indicated concern about the impending reduction of
tariffs on sensitive agricultural products under NAFTA; and the United States
indicated concern about Mexico’s continuing failure to provide water in South Texas
as required by a 1944 treaty. In January 2003, Mexico brought a case against the
United States in the International Court of Justice in the Hague. Mexico argued that
the United States has violated the Vienna Convention on Consular Relations by
systematically failing to inform 54 Mexican nationals sentenced to death in the
United States of their right to consular assistance as required by the Convention.
President Fox had cancelled a scheduled meeting in August 2002 with President
Bush in Texas to protest the execution by Texas authorities of convicted police killer
Javier Suarez Medina despite Mexican claims that he was a Mexican citizen and was
never afforded Mexican consular assistance.

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During the 107th Congress, U.S. congressional action focused on strengthening
border security, and alien admission and tracking procedures through the USA Patriot
Act of 2001 (P.L. 107-56), and the Enhanced Border Security and Visa Entry Reform
Act of 2002 (P.L. 107-173). With a similar security focus, the Homeland Security
Act of 2002 (P.L. 107-296) incorporated the INS/Border Patrol, Customs, and other
agencies into the new Department of Homeland Security. In the Department of
Transportation Appropriations Act for FY2002 (P.L. 107-87), Congress required the
Administration to impose stringent safety inspections on Mexican trucks for
NAFTA-required access to U.S. highways. In the Foreign Relations Authorization
Act for FY2003 (P.L. 107-228) the Congress permanently modified the annual drug
certification requirements, a past irritant in the bilateral relationship, to require the
President to designate only those countries that have failed demonstrably to make
substantial counter-narcotics efforts, while leaving the President the discretion to
utilize the old procedures.
CRS Products:
CRS Issue Brief IB10070, Mexico-U.S. Relations: Issues for Congress, by K. Larry
Storrs.
CRS Report 98-174, Mexican Drug Certification Issues: U.S. Congressional Action,
1986-2002, by K. Larry Storrs.
CRS Report RL31412, Mexico’s Counter-Narcotics Efforts under Fox, December
2000 to April 2002, by K. Larry Storrs.
CRS Report RL30852, Immigration of Agricultural Guest Workers: Policy, Trends
and Legislative Issues, by Ruth Ellen Wasem and Geoffrey K. Collver.
CRS Electronic Briefing Book, Terrorism, “Border Security,” by Lisa Seghetti and
William Krouse. [http://www.congress.gov/brbk/html/ebter124.html]
CRS Electronic Briefing Book, Trade, “NAFTA,” by J. F. Hornbeck.
[http://www.congress.gov/brbk/html/ebtra42.html].
Peru
Peru maintained a remarkable level of stability as it navigated serious
constitutional and political crises in 2000-2001, and continued its transition back to
democratic processes in 2002. After 10-year President Alberto Fujimori fled the
country in the wake of scandals, an interim government began to restore public
confidence in democratic institutions, and President Alejandro Toledo, elected in
June 2001, followed suit. Peru has restored confidence in the electoral process,
reestablished a free press, increased transparency in governance, and is attacking
corruption. Nonetheless, Toledo has been widely criticized as having weak
leadership skills. His image has also been damaged by personal issues. In a major
setback for Toledo, his Peru Posible party was soundly defeated in elections for new
regional governments in November 2002 by left-leaning former Peruvian President

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Alan Garcia’s American Popular Revolutionary Alliance (APRA) and other
opposition parties.
Peru has been more stable economically than its neighbors. Under Toledo, Peru
has exhibited one of the highest growth rates in Latin America, with an increased
economic output of more than 3% expected for 2002, following four years of
stagnation under his predecessors. The public is impatient, however, for a rapid
improvement in its standard of living: 54% of the population lives in poverty, and
43% are underemployed. Public protests and opposition in Congress – where no
party holds a majority – may limit the President’s ability to push through his
economic reforms.
President Bush became the first U.S. President to visit Peru when he traveled
to Lima on March 23, 2002. Presidents Bush and Toledo pledged to fight terrorism
and narcotics trafficking jointly. Peru is a major illicit drug-producing and -transit
country. The Bush Administration hopes to resume a U.S.-Peruvian aerial drug
interdiction program in 2003, which was suspended following an accidental
shootdown in 2001, that killed a U.S. missionary woman and her infant daughter.
The Andean Counterdrug Initiative (P.L. 107-115, signed into law Jan.10, 2002)
prohibited funding of the program until the Secretary of State and Director of Central
Intelligence certified to Congress, 30 days before resuming such a program, that
enhanced safeguards and procedures were in place to prevent the reoccurrence of
such an incident. It also set forth health and safety guidelines for aerial coca
fumigation. For the FY2003 ACI, the Senate’s version of the FY2003 omnibus
appropriations bill, (H.J.Res. 2, as amended by S.Amdt. 1, Division E, Foreign
Operations) approved by the Senate on January 23, 2003, drops the aerial interdiction
prohibition, sets forth expanded fumigation guidelines.
Presidents Bush and Toledo discussed several U.S. initiatives involving Peru
during the Bush visit. These include the provision of $50 million over the next 5
years to support consolidating democratic reform, $3.5 million to support the Truth
and Reconciliation Commission in investigating past human rights abuses, the
continued declassification and delivery of State Department documents requested by
Peru’s Congress to support its investigation into corruption and abuses under the
Fujimori government, and the re-establishment, after a 27-year absence, of the Peace
Corps program in Peru. A debt-for-nature swap, which was agreed to at the meeting,
was signed on June 26, 2002. Under the agreement, part of Peru’s foreign debt was
cancelled in return for the Peruvian government’s commitment of resources to
conserve and maintain wildlife reserves and other protected areas. The Andean
Trade Preference Act, which President Toledo had pressed for, was reauthorized,
expanded, and signed into law (P.L. 107-210) on August 6, 2002. Bush and Toledo
also discussed the case of Lori Berenson, an American jailed in Peru. Berenson’s
1996 conviction by a secret military tribunal was overturned but she was convicted
again by a civilian court on charges of collaboration with terrorists. The Inter-
American Court of Human Rights agreed in September 2002 to consider her case.

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Venezuela
Since the election of Hugo Chavez as President in 1998, Venezuela has
undergone enormous political changes, with a new constitution and revamped
political institutions. Although Chavez remained widely popular until mid-2001, his
popularity has eroded significantly since then as a result of his inability to improve
living conditions and opponents’ fears that he is trying to impose a leftist agenda on
the country. Following massive protests, Chavez resigned under pressure from the
Venezuelan military on April 12, 2002, but was ultimately restored to power two
days later, again with the support of the military.
As of late January 2003, political tensions remained high, with increased
polarization between Chavez supporters and opponents. Since early December 2002,
the opposition, some 40 disparate groups united in a coalition known as the
Democratic Coordinator, has orchestrated a general strike that has severely curtailed
Venezuela’s oil exports. The opposition had been calling on Chavez to hold a
nonbinding referendum on his rule in early February 2003, in hopes that the results
would compel Chavez to resign, but on January 22, Venezuela’s Supreme Court
rejected such a referendum. The opposition is now calling for early elections to force
Chavez from office. President Chavez maintains that, according to the constitution
(Article 72), a binding referendum on his rule can take place no earlier than halfway
through his term, in August 2003. Chavez has agreed to hold such a referendum and
believes that he will win, since the Constitution requires that at least as many voters
who voted for him in the 2000 elections must vote against him in the referendum.
Since October 2002, Organization of American States Secretary General Cesar
Gaviria has been involved in facilitating negotiations to resolve the crisis through
democratic constitutional mechanisms. The Bush Administration has expressed
strong support for the work of the OAS, and helped establish a group of “Friends of
Venezuela” (consisting of the United States, Brazil, Chile, Mexico, Portugal, and
Spain) to lend support to the work of the Secretary General.
In addition to the preservation of democracy, key U.S. interests in Venezuela
include continued U.S. access to Venezuelan oil reserves, the largest outside of the
Middle East, and continued close anti-narcotics cooperation. Since Venezuela is a
major supplier of foreign oil to the United States (14.1% of total U.S. net oil imports
in 2001), a key U.S. interest is ensuring the continued flow of oil exports at a
reasonable and stable price. But the ongoing general strike has drastically cut
Venezuela’s overall oil exports. Potential U.S. military action against Iraq could be
more costly because without Venezuelan oil exports, oil prices could increase more
than they would otherwise.5
5 James Dao and Neela Banerjee, “Venezuela Crisis Complicates Iraq Situation, Experts
Say,” New York Times, January 11, 2003.

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CRS Products:
CRS Report RS20978, Venezuela: Political Conditions and U.S. Policy, by Mark P.
Sullivan.
CRS Issue Brief IB87050, Strategic Petroleum Reserve, by Robert Bamberger.