Order Code RL31726
CRS Report for Congress
Received through the CRS Web
Latin America and the Caribbean:
Issues for the 108th Congress
Updated May 5, 2003
Mark P. Sullivan, Coordinator
Foreign Affairs, Defense, and Trade Division
J. F. Hornbeck, Nina M. Serafino,
K. Larry Storrs, and Maureen Taft-Morales
Foreign Affairs, Defense, and Trade Division
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 war in 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 has continued
to 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 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
ARI Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Killing and Capture of U.S. Citizens . . . . . . . . . . . . . . . . . . . . . . . 6
U.S.-Latin American Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
U.S.-Chile FTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
U.S.-Central American FTA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Free Trade Area of the Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Country Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Haiti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Peru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

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. 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. In Bolivia, about 30
people, including nine striking police officers, were killed in anti-austerity riots in
mid-February 2003.
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 Panorama of
Latin America, 2001-2002.”SEPAL 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, with a poor human rights record that has deteriorated significantly in 2003.
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. Congress has expressed repeated concerns over the capture
and killing of various U.S. citizens by the Revolutionary Armed Forces of Colombia
(FARC); the most recent case occurred on February 13, 2003. 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. Subsequent
U.S. statements on Guatemala have lauded the country’s commitment to improving
its counternarcotics operations.
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.

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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
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 an estimated $1.6 billion for FY2003; $1.6 billion has been requested for
FY2004.
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.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
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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approach toward Cuba, although the government’s human rights crackdown in 2003
will likely slow the momentum behind legislative proposals to ease Cuba sanctions.
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
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

CRS-5
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,
drug traffickers have also begun to cultivate opium poppies and transform them into
heroin in Colombia. 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
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 is continuing to scrutinize indicators of the ARI’s
effectiveness, and to debate the policy’s wisdom. According to Administration
officials, coca cultivation has dropped 15% in Colombia over the past year to almost
357,000 acres (with at least another 303,000 acres eradicated), marking the first
reduction in acreage devoted to coca cultivation in Colombia. However, according
to the Administration, during 2002, coca cultivation again picked up in Peru and
Bolivia, reversing a declining trend there. 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.

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ARI Funding. The 108th Congress’ first task regarding the ARI was to decide
on funding for the President’s FY2003 $979.8 million ARI request. In the omnibus
FY2003 appropriations bill (H.J.Res. 2/P.L. 108-7, signed into law February 20,
2003), covering the 11 unfunded FY2003 spending bills which includes foreign
operations appropriations, Congress provided most of the requested funding for the
key Andean Counterdrug Initiative (ACI) and the Foreign Military Financing (FMF)
accounts. The bill contains a variety of human rights and environmental conditions
on the funding.
As of late April 2003, FY2003 allocations for ARI accounts are $928.5 million,
some $51.3 million under the original request. Congress provided $695.5 million of
the requested $731 million for the ACI account and $93 million of the requested $98
million for the FMF account. (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 equip
a Colombian Army brigade to protect the Caño-Limón oil pipeline in Colombia.) Of
the requested $102.8 million for development aid, $97 million has been allocated.
For Colombia, Congress appropriated some $526.2 million in regular
appropriations for FY2003 (P.L. 108-7), and $105.1 million in the FY2003
supplemental appropriations (H.R. 1559, P.L. 108-11, signed into law April 16,
2003). Of this funding, in FY2003 annual appropriations, $433.2 million was ACI
funding and $93 million in FMF, as cited above. Of the supplemental appropriations,
$34 million was in ACI funding, $37.1 million in FMF funding (although $20 million
of this was earmarked as available for transfer to the ACI account), and $34 million
was Department of Defense funding. House floor action on the supplemental
appropriations bill appeared to indicate the increasingly contentious nature of funding
for Colombia, as an amendment offered by Representative Jim McGovern to cut $61
million from Colombia’s ACI funding lost by a close vote of 209-216.
For FY2004, the Bush Administration has requested $990.7 million for Andean
Regional Initiative countries in the accounts comprising ARI funding, including
military funding for Colombia that, for the first time since Plan Colombia was
adopted, is not requested for a very specific purpose. (For FY2004, the
Administration has not, as in previous years, labeled this amount as the “Andean
Regional Initiative.”) This includes some $731 million requested for the Andean
Counterdrug Initiative, of which $463 million is for Colombia, $116 million for Peru,
$91 million for Bolivia , $35 million for Ecuador, and the remaining $26 million for
Brazil, Panama, and Venezuela. It also includes $133.5 million in FMF, of which
$110 million is for Colombia, $15 million for Ecuador, with the remaining $8.5
million requested for Bolivia, Panama, and Peru. The Administration request states
that FMF for Colombia is intended “to support counter-terrorism operations and
protect key infrastructure such as the oil pipeline.” Other amounts, none of which
is requested for Colombia, are $47.8 million in Development Aid, $43.4 million in
Child Survival and Health programs, and $35 million in Economic Support funds.
The Killing and Capture of U.S. Citizens. Congress has expressed
repeated concerns over the capture and killing of various U.S. citizens by the FARC,
the most recent case occurred on February 13, 2003. On that morning, a Cessna 208
aircraft carrying four American contractors and a Colombian pilot crash landed in the

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Colombian province of Caquetá. The FARC claims that members of its Southern
Bloc shot the aircraft down, and asserts that they were working for the CIA (as did
Robert Novak in a column published in the Washington Post4); Bush Administration
officials state that the aircraft experienced a mechanical problem, and that the
Americans were Department of Defense (DOD) contractors. The Americans worked
for California Microwave Systems, a subsidiary of the Northrup Grumman
Corporation that provides surveillance systems for the U.S. military, according to a
news report.5 The pilot and one of the contractors were shot, the other three
contractors were captured by the FARC. In response, the Administration announced
that it had sent more U.S. military personnel to Colombia (first reports indicated 150,
but the DOD later denied that figure and would not give another) to assist 4,000
Colombians in a search and rescue operation. (Military personnel engaged in search
and rescue operations are not subject to the limit of 400 on the number of troops that
can be deployed to Colombia at one time, as the cap applies only to personnel
engaged in Plan Colombia operations. [P.L. 106-246, Section 3204(b)through(d) as
amended by P.L. 107-115])
Subsequently, in March 2003, three more American contractors were killed in
a plane crash as they were searching for the captured contractors. Both planes
involved in these crashes were Cessna 208s, which some contract employees
complained last year are not suitable for use in Colombia because they cannot
perform the steep climbs required by mountainous terrain. A fifth American was
killed in April 2003 when his T-65 air tractor crashed while spraying opium poppies.
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
4 Robert Novak, “America’s Forgotten War,” Washington Post, February 20, 2003, p. A39.
5 “Rebels: Americans May Die in a Rescue Try,” Associated Press, February 27, 2003.

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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 (the text may be found at [http://www.ustr.gov]). 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, 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. CAFTA critics
also note that Central America suffers from pervasive economic and social
inequality, which could be addressed in part in the labor and environment chapters,
and that the agreement could create adjustment issues for certain import competing
firms.

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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 eighth FTAA ministerial meeting
will convene in Miami, Florida on November 20-21, 2003, at which time the third
draft of the agreement is expected to be ready.
The most important recent negotiating milestone was the initiation of detailed
market access talks, which involve five separate groups. Initial market access offers
were due by February 15, 2003. The United States submitted its proposal on
February 11, 2003, making “differentiated offers” in which tariff phase outs would
be quicker for different parts of Latin America based on the development level of
each country. The Mercosur countries, and particularly Brazil, expressed deep
dissatisfaction with the U.S. proposal because it isolated their countries, offering
little trade barrier relief for their exports in the first five years of the agreement.
Brazil has also expressed unhappiness with the understanding reached in Quito that
the sensitive 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. A third issue of some concern has been raised by the smallest
developing countries, which are concerned about their capacities to meet specific
rules in the FTAA. 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 through the extensive consultation process outlined in TPA
legislation. In this respect, the 108th Congress will play an important role in
determining if the FTAA is to be brought to completion by 2005.

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CRS Products:
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 RL31870, The U.S.-Central America Free Trade Agreement (CAFTA):
Challenges for Sub-Regional Integration, 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. A meeting of the newly invigorated OAS Inter-American
Committee Against Terrorism took place in January 2003 in El Salvador to discuss
the scope of the Convention and the anti-terrorism approach for the hemisphere.
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.

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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 December 2003 term. Over the past year and a half,
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 (under
former President Carlos Menem), 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).
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. By the close of 2002, the economy had declined by 11%, leaving 60% of
the population below the poverty line and 18% unemployed.
By May 2003, Argentina’s political and economic life has begun to stabilize.
The International Monetary Fund (IMF) approved, with some reservations, a seven-
month “transitional” $6.6 billion stand-by arrangement on January 24, 2003. This
arrangement, however, only bought a little time for Argentina to conclude its
presidential elections and work out a longer-term agreement, which will be needed
for Argentina to make a $2.9 billion payment to the IMF due September 9, 2003.
Argentina has made strides in fixing its economy. In part because of court orders, the

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remaining dollar deposits have been unfrozen and the treasury is also mopping up
many of the regional bonds that have been used as currency over the past few years.
The government is issuing new bonds to pay for the related costs of both efforts.
These are major steps in returning the country’s financial system to a credible
position and should also help defuse some of the social tensions that sparked the
crisis. Economic growth, largely export driven, has returned, but long-term stability
is not guaranteed. Argentines went to the polls on April 27, 2003, choosing two
Peronist Party leaders to advance to a runoff election on May 18, with the
inauguration planned for May 25. Former President Menem and Governor Kirchner
won 24% and 22%, respectively, of the popular vote, which was split very closely
among the five top candidates. The runoff election may be close, but Kirchner has
a comfortable lead in the early polls. The winner, however, faces a daunting
challenge of having to make politically difficult decisions, if Argentina is to return
to economic health.
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). Since his election,
President Lula da Silva has sought to fashion support for his programs in Congress
by reaching out beyond the parties that supported him in the election to other centrist
parties, including the 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
and monetary policies associated with 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. During the first 100
days of his administration, President Lula da Silva has pursued cautious economic
policies and has met IMF targets, while stressing that one of his main priorities will
be the eradication of hunger in the country through a program called Zero Hunger.
As a result of his policies, the country has experienced lower inflation, a
strengthening of the currency, and a dramatic lowering of Brazil’s credit risk rating.

CRS-13
At the same time he has indicated that his legislative priorities include strengthening
the autonomy of the Central Bank, reforming the social security system to make it
self sustaining, and modifying the tax system to be more effective and fair.
In the foreign policy area, he 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 (FTAA) 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 relations with other
countries in the region, one of President Lula da Silva’s initiatives was the formation
of the six- nation Group of Friends of Venezuela that helped the OAS Secretary
General to facilitate an agreement in April 2003 between President Chavez and
oppositions groups in the country.
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
that has deteriorated significantly in 2003. 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.
In March 2003, the government began a massive crackdown that resulted in the
imprisonment of over 100 independent journalists and democracy activists, with
about 75 receiving sentences between 6 and 28 years. On April 11, 2003, the
government executed three men who had hijacked a ferry in an attempt to reach the
United States. The executions, conducted after a swift and secret trial, were
condemned around the world.

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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 since late 2001, Cuba has purchased more than $160 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.
There appears to be broad agreement on the overall objective of U.S. policy
toward Cuba — to help bring democracy and respect for human rights to the island.
But there are several schools of thought on how to achieve that objective. Some
advocate a policy of keeping maximum pressure on the Cuban government until
reforms are enacted, while continuing current U.S. efforts to support the Cuban
people. Others argue for an approach, sometimes referred to as constructive
engagement, that would lift some U.S. sanctions that 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.
Congress will likely continue its high level of interest in Cuba in the 108th
Congress, with a variety of legislative initiatives regarding sanctions, human rights,
drug interdiction cooperation, and broadcasting to Cuba. The final version of the
FY2003 omnibus appropriations measure, H.J.Res. 2 (P.L. 108-7), included funding
for Radio and TV Marti broadcasting to Cuba and democracy and human rights
projects for Cuba. However, the measure did not include funding for U.S.-Cuban
anti-drug cooperation or provisions that would have eased Cuba sanctions. The White
House had threatened to veto the omnibus bill if it contained provisions weakening
the embargo on Cuba. While policy debate in the 107th Congress focused on whether
to lift restrictions on travel and on financing for agricultural exports, Cuba’s human
rights crackdown in 2003 will likely slow momentum behind legislative proposals
to ease Cuba sanctions. In early April 2003, both houses approved resolutions,
S.Res. 97 and H.Res. 179, condemning the recent crackdown in Cuba and calling for
the release of political prisoners.

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CRS Products:
CRS Report RL31740, Cuba: Issues for the 108th Congress, by Mark P. Sullivan.
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
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. OAS Resolution 822, passed
in September 2002, called for elections to be held in 2003. A high-level
OAS/Caribbean Community (CARICOM) delegation said in April that the Haitian
government must take immediate steps to improve public security and that the
opposition must help form the Provisional Electoral Council, or the opportunity to
hold elections this year would be lost. 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. The OAS warned the opposition that it would not support efforts
to remove President Aristide through violence.
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
illegal migration. The 108th Congress passed the FY2003 consolidated
appropriations bill (P.L. 108-7/H.J.Res. 2, signed into law February 20, 2003) with

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three provisions regarding Haiti. The Foreign Operations bill (Division E, Sections
551 a) and b)) allows Haiti to purchase defense articles and services for the Haitian
Coast Guard, and provides for “not less than $52.5 million” from food assistance
funds to be allocated to Haiti. The legislation contains no other conditions on aid
to Haiti. The Commerce, Justice, State, and Judiciary appropriations bill (Division
B, Federal Prisons section) makes available an amount “not to exceed $20 million”
of Contract Confinement funds for the care and security in the United States of
Haitian (and Cuban) entrants.
Congress may have to decide whether to authorize additional FY2004 funding
to support the OAS Special Mission for Strengthening Democracy in Haiti. The
mission currently has pledges from 17 countries, including the United States, for less
than half of the $12 million it says is needed to fulfill its mandate. The mission was
created to support, monitor, and report on the Haitian government’s implementation
of commitments it made in OAS agreements to strengthen democratic institutions
and processes. This includes helping the government to improve security, investigate
political crimes, and prepare for elections.
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 is generally focusing 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 (NAFTA). 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
the two countries were especially warm during the visits of President Bush and
President Fox in 2001, when hopes were high for some sort of migration agreement.
Relations cooled to some extent when migration talks stalled following the
September 2001 terrorist attacks, and when Mexico took a position in the U.N.
Security Council in March 2003 that Iraq should be disarmed by peaceful means and
through multilateral mechanisms.
U.S. officials praised Mexico’s counter-narcotics efforts when President Bush
made drug certification determinations in late January 2003 and when the State
Department issued the International Narcotics Control Strategy Report in early March
2003. On April 22, 2003, President Fox, speaking to foreign reporters, argued that
the bilateral relationship remained strong and friendly. He noted that Secretary of
Homeland Security Tom Ridge would be meeting with Secretary of Government
Santiago Creel on April 23-24, 2003, to discuss progress on border and security

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issues, and he called for a new vision of NAFTA to be discussed at a June 2003
meeting of the NAFTA partners.
CRS Products:
CRS Report RL31876, Mexico-U.S. Relations: Issues for the 108th 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 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, President Toledo has been widely criticized as having weak leadership
skills, and his image has 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 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 over 4% expected for 2003, 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.
Peru is a major illicit drug-producing and transit country. According to the State
Department’s March 2003 international narcotics report, Peru made progress on

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many components of the U.S.-Peru counternarcotics program. 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, after enhanced safeguards and procedures
are in place to prevent the reoccurrence of such an incident. The FY2003 Andean
Counterdrug Initiative sets forth expanded health and safety guidelines for aerial
coca fumigation (FY2003 Consolidated Appropriations Resolution, Div. E, Foreign
Operations, P.L. 108-7(H.J.Res. 2) signed into law February 20, 2003). The United
States and Peru signed a five-year cooperative agreement in September 2002 that
links alternative development to coca eradication more directly than past programs
have. After weeks of unrest in which thousands of coca growers protested against
forced coca eradication, the government and growers signed an agreement calling for
the “gradual and fixed” reduction of coca leaf cultivation.
Several U.S. initiatives involving Peru currently exist. 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, and 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. In January
2003, the U.S. Embassy in Lima reportedly delivered classified documents to the
Truth Commission. The trial of Vladimiro Montesinos, Fujimori’s spy chief who
had ties to U.S. agencies, began in February, on the first of dozens of charges ranging
from influence peddling to directing a death squad.
The Peace Corps program was re-established in Peru in 2002, after a 27-year
absence. Under a debt-for-nature agreement, signed in June 2002, 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. The
case of Lori Berenson, an American jailed in Peru is an ongoing issue in bilateral
relations. 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. Peru’s highest court released a review of four Fujimori-era anti-
terrorism decrees in January 2003, rejecting one completely, and ruling parts of the
others unconstitutional. Several analysts said they did not believe Berenson’s case
would be affected, although many other retrials would probably occur.
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

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Venezuelan military on April 12, 2002, but was ultimately restored to power two
days later, again with the support of the military.
From early December 2002 until early February 2003, the opposition
orchestrated a general strike that severely curtailed Venezuela’s oil exports and
disrupted the economy, but was unsuccessful in getting President Chavez to agree to
a non-binding referendum on his rule or early elections. 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, which is in August 2003.
Chavez has agreed to hold such a referendum and believes that he would 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.
OAS Secretary General Cesar Gaviria has been involved since October 2002 in
facilitating negotiations between the government and the opposition in order to
resolve the crisis through democratic mechanisms under the Constitution. A
breakthrough was reached on April 11, 2003, when Gaviria announced that an
agreement had been reached for a possible recall referendum on Chavez’s rule after
the halfway point of his term, August 19, 2003. Subsequently, however, the Chavez
government has backed away from signing the April 11 accord, calling for more time
to study the agreement. OAS negotiators are working to salvage the accord.
The Bush Administration has expressed strong support for the work of the OAS
and helped establish a group of nations called the “Friends of Venezuela” (consisting
of the United States, Brazil, Chile, Mexico, Portugal, and Spain) to lend support to
the work of the Secretary General. U.S. officials have called for Chavez to sign the
April 11 agreement, but Venezuelan officials have dismissed any foreign pressure.
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 has
been 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.
CRS Products:
CRS Report RS20978, Venezuela: Political Conditions and U.S. Policy, by Mark P.
Sullivan.