Order Code RL32733
CRS Report for Congress
Received through the CRS Web
Latin America and the Caribbean:
Issues for the 109th Congress
Updated September 12, 2006
Mark P. Sullivan, Coordinator,
Colleen W. Cook, J.F. Hornbeck,
Clare M. Ribando, Maureen Taft-Morales,
Connie Veillette, and M. Angeles Villarreal
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Latin America and the Caribbean:
Issues for the 109th Congress
Summary
Over the past two decades, the Latin America and Caribbean region has made
enormous strides in terms of political and economic development. In 2006, elections
for head of government have already been held in seven countries in the region
(including the close election in Mexico), and for the balance of the year, elections
will take place in Brazil and Ecuador (October), Nicaragua (November), Venezuela
(December), and St. Lucia (by year’s end). Although the region overall experienced
an economic setback in 2002-2003, it has rebounded since 2004. Nevertheless,
several nations face considerable challenges that could threaten political stability,
including persistent poverty, violent guerrilla conflicts, autocratic leaders, drug
trafficking, increasing crime, and the rise of radical populism in several countries.
Legislative and oversight attention to Latin America and the Caribbean in the
109th Congress has focused on continued counternarcotics efforts; trade issues;
challenges to democracy, especially in Venezuela; efforts to bring political stability
and ameliorate poverty in Haiti; efforts to foster political change in Cuba; and
cooperation on migration and border security, especially with Mexico.
Since 2000, the Andean Counterdrug Initiative (ACI) has been the primary U.S.
program supporting the Colombian government’s efforts to combat drug trafficking
and terrorist activity perpetrated by guerrilla and paramilitary groups. In the first
session, the 109th Congress approved the Administration’s request to continue ACI
funding in FY2006 at approximately the same levels as in previous years, and the
second session is considering the FY2007 request of $721.5 million for ACI funding.
In the trade arena, Congress approved legislation in 2005 (P.L. 109-53)
implementing the Dominican Republic-Central America-United States Free Trade
Agreement (DR-CAFTA) that had been completed in 2004. Several additional FTAs
with countries in the region have either been completed or are being negotiated: an
FTA with Peru was signed in April 2006; in August 2006, President Bush notified
Congress of his intention to sign an FTA with Colombia; negotiations with Panama
have not yet been completed; and negotiations with Ecuador were suspended in May
2006 after Ecuador terminated the operating contract of a U.S. oil company.
With regard to democracy, Congress is providing continued support to Haiti, the
hemisphere’s poorest nation, under the new government of Rene Preval. Venezuela
has remained a congressional concern because of fears that President Hugo Chávez
is using his political power to push toward authoritarian rule. In Bolivia, the new
government of President Evo Morales has complicated U.S. relations in part because
of his stance toward U.S. counternarcotics policy. With regard to U.S. policy toward
Cuba, Congress has continued to debate whether loosening or tightening the U.S.
embargo will encourage political change.
This report, updated bimonthly, provides an overview of U.S. relations with
Latin America and the Caribbean, focusing on the role of Congress and congressional
concerns. For further information, see the CRS products listed after each topic.

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Contents
Conditions in the Region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Policy Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Regional Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Foreign Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Andean Counterdrug Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Free Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Dominican Republic-Central America-United States
Free Trade Agreement (DR-CAFTA) . . . . . . . . . . . . . . . . . . . . . . 9
U.S.-Panama Free Trade Agreement (FTA) . . . . . . . . . . . . . . . . . . . . 10
U.S.-Peru Trade Promotion Agreement . . . . . . . . . . . . . . . . . . . . . . . . 11
U.S.-Colombia Trade Promotion Agreement . . . . . . . . . . . . . . . . . . . 11
Free Trade Area of the Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Terrorism Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Gangs in Central America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
AIDS in the Caribbean and Central America . . . . . . . . . . . . . . . . . . . . . . . . 16
Afro-Latinos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Trafficking in Persons in Latin America and the Caribbean . . . . . . . . . . . . 19
Country Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Bolivia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Cuba . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dominican Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Ecuador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
El Salvador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Guatemala . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Haiti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Honduras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Nicaragua . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Panama . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Peru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Venezuela . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

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Latin America and the Caribbean:
Issues for the 109th Congress
Conditions in the Region

The Latin America and Caribbean region has made enormous strides over the
past two decades in political development, with all countries but Cuba having regular
free and fair elections for head of state. Despite this democratic progress, several
nations face considerable challenges that could threaten political stability, including
persistent poverty, violent guerrilla conflicts, autocratic leaders, drug trafficking,
increasing crime, and the rise of radical populism in several Latin American
countries. In some countries, weaknesses remain in the state’s ability to deliver
public services, ensure accountability and transparency, and advance the rule of law.
Already in 2006, presidential elections have been held in Chile, Costa Rica,
Haiti, Peru, Colombia, Mexico, and Guyana, and additional elections are scheduled
for Brazil and Ecuador in October, Nicaragua in November, and Venezuela in
December. In Mexico, the narrow official victory of conservative candidate Felipe
Calderón over leftist Andrés López Obrador elicited a dramatic response from López
Obrador who has vowed to continue protesting the electoral outcome. St. Lucia is
due to hold parliamentary elections by the end of the year, and the new Jamaican
government of Portia Simpson Miller, the country’s first woman prime minister,
might call elections this year.
While the region overall experienced a gross domestic product (GDP) decline
of 0.6% in 2002 and only a modest growth rate of 1.5% in 2003, the region
rebounded with an estimated growth rate of 5.9% in 2004, surpassing even the most
optimistic predictions. Every country in the region, with the exception of Haiti,
experienced positive economic growth, and even per capita income for the region as
a whole increased by more than 4% for the year. Countries that had suffered the
deepest recessions in recent years — Argentina, Uruguay, and Venezuela — all
experienced significant economic growth in 2004. Growth continued in 2005 at a
rate of 4.5%, with Argentina and Venezuela registering the strongest growth rates,
and a growth rate of 4.6% is projected for the region in 2006.1
The Andean region still faces considerable challenges, including the rise of a
radical form of populism in several countries. Colombia continues to be threatened
by drug trafficking organizations and by two left-wing guerrilla groups and a rightist
paramilitary group, all of which, combined, have been responsible for thousands of
deaths each year. Bolivia has experienced political unrest over the last few years,
1 U.N. Economic Commission for Latin America and the Caribbean (ECLAC), “Latin
America and the Caribbean, Projections 2006-2007,” April 2006.

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including the resignation of presidents in 2003 and 2005. The election of indigenous
leader Evo Morales as president in December 2005 has complicated U.S. relations
given Morales’ efforts to decriminalize coca growing. Ecuadorian President Lucio
Gutierrez was removed from office in April 2005 following weeks of popular
protests related to his replacement of judges. Current President Alfredo Palacio, a
political independent, has been faced with significant challenges in governing within
Ecuador’s politically fragmented and unstable political environment. The country is
scheduled to hold presidential and legislative elections on October 15, 2006, with a
second presidential round set for November 26, 2006. Venezuela under President
Hugo Chávez has been plagued by several years of political polarization, although
Chávez’s rule was strengthened after he survived a recall referendum in August 2004
and after his supporters swept legislative elections in December 2005 after the
opposition withdrew from the race. Windfall oil profits have bolstered his
government’s revenue and economic growth, and it appears likely that Chávez will
win another term in the presidential elections set for December 3, 2006. In Peru, the
presidential electoral victory in early June 2006 of former President Alan Garcia over
retired military officer Ollanta Humala, an admirer of Hugo Chávez, has eased U.S.
concerns about the future of democracy in the country and the future of U.S.-
Peruvian relations.
In Central America, countries such as El Salvador, Honduras, and Nicaragua
emerged from the turbulent 1980s and 1990s with democratic institutions more
firmly entrenched, yet violent crime is a major problem in all countries. Honduras
and Nicaragua are among the poorest countries in the hemisphere. While Guatemala
has made significant progress in improving the government’s human rights policy,
significant problems remain. In Nicaragua, tensions among current President Enrique
Bolaños, the Sandinista party, and allies of former President Arnoldo Aleman were
threatening the country’s political stability in 2005, but were eased by October of that
year. It is expected that Bolaños will fill out the remainder of his term until January
2007. National elections are scheduled for November 5, 2006, with former President
and Sandinista party leader Daniel Ortega currently leading polls.
In the Caribbean, Haiti — the hemisphere’s poorest nation — continues to be
plagued by political challenges. In the aftermath of President Aristide’s departure in
February 2004, Haiti’s interim government was supported by a U.N. Stabilization
Mission with the goals of ensuring a secure and stable environment and restoring the
rule of law. After several postponements, new elections were ultimately held
February 7, 2006. Former president Rene Preval was declared the winner after
several days of protests by his supporters when it appeared that a run-off election
would be necessary. Preval took office on May 14, 2006, marking the beginning a
new era in Haiti. His goals include building governmental institutions and
establishing conditions for foreign investment in order to create jobs. Cuba remains
a hardline communist state with a human rights situation that has deteriorated
significantly since 2003. In late July 2006, Cuban leader Fidel Castro’s
announcement that he was temporarily ceding political power to his brother for
several weeks in order to recover from surgery prompted widespread speculation
about the island’s political future after Fidel departs the political scene. Several
Caribbean nations, especially Grenada, Haiti, Jamaica, and Cuba, were hard hit by
several devastating storms in 2004 and 2005. The AIDS epidemic in the Caribbean,

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where infection rates are among the highest outside of sub-Saharan Africa, has also
been a major challenge for the region.
U.S. Policy Overview
Legislative and oversight attention to Latin America and the Caribbean in the
109th Congress has focused on continued counternarcotics efforts in the region; trade
issues, including the approval of implementing legislation for the Dominican
Republic-Central America-United States Free Trade Agreement (DR-CAFTA) and
potential consideration of other free trade agreements (FTAs) in the region;
challenges to democracy in the region, especially in Venezuela; efforts to bring
political stability and ameliorate poverty in Haiti; efforts to foster political change in
Cuba; and cooperation on migration, border security, and anti-terrorism measures,
especially with Mexico.
From FY2000-FY2006, the United States has provided around $5 billion for the
Andean Counterdrug Initiative (ACI), the primary U.S. program supporting the
Colombian government’s efforts to combat drug trafficking and terrorist activity
perpetrated by guerrilla and paramilitary groups. The ACI has also provided
interdiction and development support to six of Colombia’s neighbors: Bolivia, Peru,
Ecuador, Venezuela, Brazil, and Panama. The 109th Congress approved the
Administration’s request to continue ACI funding in FY2006 at approximately the
same levels as in previous years. This year, Congress is considering the
Administration’s FY2007 request for $721.5 million in ACI funding. Human rights
and the environmental consequences of aerial fumigation remain issues in the
congressional debate, and assistance to Bolivia has become an issue with the election
of a president who has strongly criticized U.S. counternarcotics policy toward the
region.
In the trade arena, Congress approved legislation in July 2005 (P.L. 109-53,
signed into law August 2, 2005) implementing the DR-CAFTA that had been
completed in 2004. The Bush Administration views the agreement as a way for the
region to help create jobs, attract foreign investment, and advance good governance.
As reflected in the narrow passage in the House, congressional consideration of the
DR-CAFTA was controversial, with opposition from labor advocates and some
industry groups. Several additional free trade agreements with countries in the region
either have been completed or are being negotiated. In January 2006, President Bush
notified Congress of his intention to enter into an FTA with Peru (negotiations were
completed in December 2005), and the agreement was signed in April 2006. In late
February 2006, Colombia and the United States completed FTA negotiations, and
President Bush notified Congress on August 24, 2006, of his intention to sign an
FTA with the country. The United States and Panama have had nine rounds of free
trade talks, with the latest round ending in January 2006, but the agreement has not
been completed pending resolution of a few contentious agricultural issues. U.S.
negotiations with Ecuador were suspended in May 2006 after Ecuador announced
that it was terminating the contract of Occidental Petroleum, a U.S. company, after
a long dispute.
With regard to democracy and political stability, Congress has focused on
continued support to Haiti, the hemisphere’s poorest nation, under the new

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government of Rene Preval. Venezuela — a major supplier of oil to the United
States — has remained a congressional concern because of fears that President
Hugo Chávez may be using his political power to push toward authoritarian rule and
to support leftist groups in other Latin American countries. In Bolivia, the new
government of President Evo Morales, a former leader of the coca growers union, has
complicated U.S. relations not only because of his criticism of U.S. counternarcotics
policy but also because of his leftist orientation and close relations with Venezuela’s
Hugo Chávez and Cuba’s Fidel Castro. With regard to U.S. policy toward
Communist Cuba, Congress has continued to focus on the poor human rights
situation and to debate whether loosening or tightening the U.S. embargo will
encourage political change. Fidel Castro’s announcement that he was ceding power
to his brother temporarily could foster a re-examination of U.S. policy.
Congress has maintained an active interest in neighboring Mexico, focusing
especially on border security and migration issues. In May 2005, Congress approved
legislation (as part of P.L. 109-13, the FY2005 Emergency Supplemental
Appropriations Act) that established identity card standards for the issuance of
drivers’ licenses, waived laws to facilitate the construction of a border fence, and
required a pilot test of ground surveillance technologies at the border. Both the
House and the Senate approved immigration reform measures in recent months: the
House measure would strengthen border and immigration controls and would make
unlawful presence in the United States a felony; the Senate measure also includes
enforcement measures (but would not make unlawful presence a felony) and a guest
worker program, and would allow most illegal immigrants to normalize their status
in the United States.
Congressional consideration of the annual foreign operations appropriations
legislation that funds foreign aid is an important way for Congress to influence U.S.
policy toward the region. U.S. foreign aid is 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, counternarcotics and alternative development, and HIV/AIDS
prevention and education. In addition, the United States provides food assistance,
anti-terrorism assistance, and security assistance. In the aftermath of several
devastating storms in 2004, the United States provided disaster and reconstruction
assistance to several Caribbean nations. Overall U.S. foreign aid to the Latin America
and Caribbean region amounted to about $1.82 billion in FY2005, and an estimated
$1.68 billion in FY2006. The FY2007 request for the region is for $1.63 billion. The
Millennium Challenge Account (MCA), could also significantly increase U.S. aid to
several Latin American nations. In May 2005, the Millennium Challenge Corporation
approved a five-year $215 million compact for Honduras, and in July 2005 it
approved a $175 million five-year compact with Nicaragua.

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CRS Products:
CRS Report RL32160, Caribbean Region: Issues in U.S. Relations, by Mark P.
Sullivan.
CRS Report RS22119, China’s Growing Interest in Latin America, by Kerry
Dumbaugh and Mark P. Sullivan.
CRS Report 98-684, Latin America and the Caribbean: Fact Sheet on Leaders and
Elections, by Mark P. Sullivan and Barbara Salazar Torreon.
CRS Report RS22095, Organization of American States: A Primer, by Clare Ribando.
CRS Report RS21700, Special Summit of the Americas — Monterrey, Mexico,
January 2004: Background, Objectives, and Results, by Clare Ribando.
CRS Report RL32487, U.S. Foreign Assistance to Latin America and the Caribbean,
coordinated by Connie Veillette.
Regional Issues
U.S. Foreign Assistance
The United States maintains a variety of foreign assistance programs in Latin
America and the Caribbean, including security assistance, counternarcotics,
economic development, and trade capacity building programs. Aid to the region
increased during the 1960s with the Alliance for Progress and during the 1980s with
aid to Central America. Since 2000, U.S. assistance has focused on counternarcotics
especially in the Andean region. Current aid levels to Latin America and the
Caribbean comprise about 11.8% of the worldwide FY2006 bilateral aid budget.
Amounts requested for FY2007 would reduce this ratio to 10.6%. Current aid levels
to the region could increase further as more countries are deemed eligible for
Millennium Challenge Account grants.
The annual Foreign Operations Appropriations bills have been the vehicles by
which Congress provides funding for, and sets conditions on foreign assistance
programs. For FY2006, U.S. assistance to Latin America and the Caribbean
amounted to an estimated $1.68 billion, the largest portion of which, $919 million,
was allocated to the Andean region. Mexico and Central America received $292
million, while the Caribbean received $307 million. Brazil and the Southern Cone
of South America received an estimated $36 million. The United States also
maintains programs of a regional nature that totaled an estimated $133 million in
FY2006.
The FY2007 request of $1.6 billion represents the lowest levels of U.S. foreign
assistance to the region in more than four decades, measured in constant dollars. The
FY2007 request is 3% lower than FY2006. The largest decrease occurs in the

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Development Assistance Account, which sustains a 28% reduction. The largest
increase is for Economic Support Funds (up 26%) and the Global HIV/AIDS
Initiative (up 35%). The increase in Economic Support Funds includes trade
assistance for DR-CAFTA countries. The Child Survival and Health Account would
be cut by 9%. These figures do not include Millennium Challenge Compacts signed
with Honduras ($215 million over five years) and Nicaragua ($175 million over five
years).
Aid programs are designed to achieve a variety of goals, from poverty reduction
to economic growth. Child Survival and Health (CSH) funds focus on combating
infectious diseases and promoting child and maternal health. Development
Assistance (DA) funds improvements in key areas — such as trade, agriculture,
education, the environment, and democracy — in order to foster sustainable
economic growth. Economic Support Funds (ESF) assist countries of strategic
importance to the United States and fund programs relating to justice sector reforms,
local governance, anti-corruption, and respect for human rights. P.L. 480 food
assistance is provided to countries facing emergency situations, such as natural
disasters. Counternarcotics programs seek to assist countries to reduce drug
production, to interdict trafficking, and to promote alternative crop development.
Foreign Military Financing (FMF) provides grants to nations for the purchase of U.S.
defense equipment, services, and training.
On June 9, 2006, the House passed H.R. 5522, the FY2007 Foreign Operations
Appropriations Act, cutting the President’s overall request for foreign assistance
worldwide by $2.4 billion, which could affect aid levels to Latin America. However,
the report accompanying the bill cautioned the Administration on providing levels
of assistance to Latin America in FY2007 that would be below that provided in
FY2006. The Senate Appropriations Committee marked up its bill on June 29; it has
not yet been scheduled for floor debate.
Some Latin American countries will be affected by a cutoff of U.S. assistance
as a result of not signing Article 98 agreements that exempt U.S. citizens from the
jurisdiction of the International Criminal Court. The American Service Members
Protection Act (Title II of P.L. 107-206) applies the aid cutoff to FMF and
International Military Education and Training (IMET) funds. The FY2005 and
FY2006 Foreign Operations Appropriations acts extends the prohibition to ESF.
Colombia, the major recipient of U.S. assistance in Latin America, has signed an
agreement. Others that have not, such as Bolivia, Brazil, Ecuador, Mexico,
Paraguay, Peru, and Venezuela, could see their assistance withheld.
The Millennium Challenge Account (MCA) is a new initiative that provides
sizable aid grants to a few low-income nations that have been determined, through
a competitive process, to have the strongest policy reform records and where new
investments are most likely to achieve their intended development results. In Latin
America, Bolivia, Honduras, and Nicaragua were deemed eligible to participate in
the first round; El Salvador became eligible for FY2006. In 2005, the Millennium
Challenge Corporation (MCC) approved five-year compacts with Honduras and
Nicaragua. In 2006, the MCC announced threshold assistance of $37 million for
Paraguay to assist the country to become eligible for an MCC compact. Other Latin
American or Caribbean nations could be eligible to receive assistance in future years.

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Although the Administration’s MCC request for FY2007 was $3 billion, the House
cut funding by $1 million and the Senate by $1.23 million.
U.S. support to counter the HIV/AIDS epidemic in the region is provided
through programs administered by several U.S. agencies, although the U.S. Agency
for International Development (USAID) is the lead agency in the international fight
against AIDS. The United States also provides contributions to multilateral efforts,
such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Both the House
and Senate foreign operations bills meet the Administration’s request for HIV/AIDS
programs, but the House reduces funding for malaria by $47 million.
CRS Products:
CRS Report RL32487, U.S. Foreign Assistance to Latin America and the Caribbean,
coordinated by Connie Veillette.
CRS Report RL33337, Article 98 Agreements and Sanctions on U.S. Foreign Aid to
Latin America, by Clare M. Ribando.
CRS Report RL33420, Foreign Operations (House)/State, Foreign Operations, and
Related Programs (Senate): FY2007 Appropriations, by Larry Nowels, Connie
Veillette, and Susan B. Epstein.
CRS Report RL32427, Millennium Challenge Account, by Curt Tarnoff.
Andean Counterdrug Initiative
The Andean Counterdrug Initiative (ACI) is the primary U.S. program that
addresses counternarcotics and alternative development in the Andean region of
South America. The ACI supports Plan Colombia, a six-year plan developed by the
Colombian government in 1999 to combat drug trafficking and related guerrilla
activity. The ACI program is regional in nature because organizations in countries
bordering Colombia also produce and traffic in narcotics and because it is affected
by other cross-border issues. The ACI began in 2000, when Congress passed
legislation providing $1.3 billion in interdiction and development assistance (P.L.
106-246) for Colombia and six regional neighbors: Bolivia, Peru, Ecuador,
Venezuela, Brazil, and Panama. Funding for ACI from FY2000 through FY2006
totals approximately $5 billion.
For FY2007, the Administration requested $721.5 million, of which $65.7
million was proposed for the Critical Flight Safety Program, to upgrade aging
aircraft. Funding for the Air Bridge Denial program, an air interdiction program in
operation over Colombia, was included in the request for Colombia. On June 9,
2006, the House passed H.R. 5522, the FY2007 Foreign Operations Appropriations
Act, that makes significant changes to the way foreign aid to Colombia is provided
but largely approves the Administration’s request with regard to funding levels. The
most significant change is to provide some funding for Colombia from traditional aid

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accounts rather than the Andean Counterdrug Initiative (ACI) and to create a new
account, the Trade Capacity Enhancement Fund, to which some ACI funds would be
transferred. The bill provides a total of $545.2 million for Colombia, an increase of
$80.4 million over the FY2006 level. Instead of funding alternative development and
institution building from the ACI account, the bill provides $135 million in
Economic Support Funds (ESF) for alternative development, a $10 million increase
from the request. In addition, the bill provides $26.2 million in International
Narcotics Control and Law Enforcement (INCLE) funds for rule of law programs,
equal to the request, that were previously provided from the ACI account. Funding
for drug interdiction programs at $313.9 million, equal to the request, is maintained
in the ACI account. The provision of some funds from non-ACI accounts is
characterized as beginning the process of treating Colombia as a strategic partner.
The bill also provides $70.2 million for the Critical Flight Safety Program, earmarked
for operations in Colombia. This is $4.5 million above the request.
The bill increases funding for Peru by $10.5 million over the request, providing
$46 million for alternative development and $63 million for interdiction programs.
These funds remain in the ACI account. The bill cuts ACI funding for Bolivia by
$15 million from the request, all of it in interdiction programs. Funding for
alternative development is set at $31 million, and $20 million for interdiction. The
cut was made in response to reports that Bolivia’s commitment to fighting drugs was
lessening. ACI funding for Brazil ($4 million), Ecuador ($17.3 million), and Panama
($4 million) is equal to the request. The $1 million requested for Venezuela was not
provided. The bill creates a new account, the Trade Capacity Enhancement Fund,
and a new position at USAID to oversee and coordinate trade assistance programs.
Although the total amount provided is $522 million, the bill transfers $62.5 million
of ACI funds to the new account for use in ACI countries. The House report notes
that this is the amount of ACI funds that would have been committed to trade
promotion activities.
The Senate Appropriations Committee reported its version of the foreign
operations bill on June 29; it has yet to be scheduled for floor consideration. The
Senate bill provides $699.4 million for ACI, a decrease of $22 million. A portion of
the decrease ($9.8 million) is transferred to a Democracy Fund for similar types of
programs as that provided by ACI. The remaining decrease is from interdiction
activities and the Critical Flight Safety Program, which was cut by $12.3 million.
Both the House and Senate bills maintain reporting requirements from previous
appropriations bills.
In the FY2006 Foreign Operations Appropriations Act (H.R. 3057, P.L. 109-
102) Congress provided the Administration’s request for $734.5 million, but reduced
the amounts for some of its components. The Critical Flight Safety Program would
receive $30 million instead of $40 million, and the Air Bridge denial program would
receive $14 million rather than $21 million. FY2006 funding for ACI is estimated at
$727.2 million (reflecting a 1% across-the-board rescission).
Supporters of U.S. policy argue that assistance to Colombia is necessary to help
a democratic government besieged by drug-supported leftist and rightist armed
groups. Assistance to Colombia’s neighbors, according to supporters, is merited
because of an increasing threat from the spillover of violence and drug production

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from Colombia. While some critics agree with this assessment, they argue that U.S.
assistance overemphasizes military and counter-drug assistance and provides
inadequate support for protecting human rights. Critics also assert that U.S.
assistance is disproportionately targeted to eradication of crops and military training
rather than to alternative development projects that could provide alternative
livelihoods for growers who voluntarily give up illicit crops.
For a broader discussion of Colombia beyond the ACI, see section on
“Colombia” below.
CRS Products:
CRS Report RL32774, Plan Colombia: A Progress Report, by Connie Veillette.
CRS Report RL33370, Andean Counterdrug Initiative (ACI) and Related Funding
Programs: FY2007 Assistance, by Connie Veillette.
CRS Report RL32250, Colombia: Issues for Congress, by Colleen Cook and Connie
Veillette.
CRS Report RL33163, Drug Crop Eradication and Alternative Development in the
Andes, by Connie Veillette and Caroline Navarette-Frias.
Free Trade Agreements
Dominican Republic-Central America-United States Free Trade
Agreement (DR-CAFTA). On August 5, 2004, the United States, Costa Rica, El
Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic signed the
DR-CAFTA. Nearly one year later, it faced a contentious debate and close vote in
both houses of the U.S. Congress. The Senate passed implementing legislation by
a vote of 54 to 45 on June 30, 2005. The House did the same on July 28, 2005, by
a vote of 217 to 215. President Bush signed the legislation into law on August 2,
2005 (P.L. 109-53, 119 Stat. 462). In addition to the United States, all countries
except Costa Rica have ratified the agreement. The DR-CAFTA was expected to
take effect on January 1, 2006, but none of the countries were able to make the
necessary legal and regulatory changes in time. Since then, all ratifying countries
except the Dominican Republic have implemented the agreement. The Dominican
Republic is expected to do so sometime in 2006. Costa Rica still faces a two-vote
ratification process in the National Assembly for the agreement itself and passage of
conforming legislation necessary to be in compliance with its commitments. All this
legislation is expected to be voted on by the National Assembly by this fall and, if
passed, will reportedly be supported by President Arias. The DR-CAFTA however,
still faces vocal opposition in Costa Rica, and the final outcome cannot be predicted
with certainty.
The DR-CAFTA is a regional agreement to reduce barriers to trade in which all
parties are subject to “the same set of obligations and commitments,” although each
country negotiated a separate market access schedule. It is a comprehensive and

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reciprocal trade agreement, which distinguishes it from, and will eventually replace,
U.S. commitments made under unilateral preferential trade arrangements — the
Caribbean Basin Initiative (CBI), the Caribbean Basin Trade Partnership Act
(CBTPA), and the Generalized System of Preferences (GSP). The DR-CAFTA
covers market access of goods, services trade, government procurement, intellectual
property, investment, labor, and environment, among other issues.
The DR-CAFTA was controversial. Supporters saw it as part of a policy
foundation that can enhance intraregional trade, as well as, long-term social, political,
and economic development in an area of strategic importance to the United States.
Opponents were especially concerned over some of the countries’ poor labor
standards, the perception of inadequate labor laws, and lax enforcement, arguing that
DR-CAFTA’s labor provisions should have included suspension of trade benefits
language similar to that found in the CBI and GSP. The investor-state and
pharmaceutical data protection sections were also repeatedly criticized as inadequate.
With added concerns from select import-sensitive industry groups (e.g. sugar and
textiles), the politics of DR-CAFTA led to the very narrow margin of approval.
U.S.-Panama Free Trade Agreement (FTA). On November 16, 2003,
President Bush formally notified Congress of his intention to negotiate a bilateral
FTA with Panama. Negotiations commenced in April 2004, with the ninth and most
recent round occurring in Washington, D.C. January 17-20, 2006. The agreement has
still not been completed, pending resolution of a few remaining contentious
agricultural issues. Currently, the Panamanian government is also focusing on a
national referendum scheduled for October 22, 2006, on expansion of the Panama
Canal. Because the government does not wish to focus the public’s attention on two
highly controversial issues at the same time, the U.S.-Panama FTA is not expected
to be concluded until after the referendum vote.
Panama is largely a services-based economy, which distinguishes it, and the
trade negotiations with the United States, from those of its Central American
neighbors. After nine rounds, nearly all issues have been resolved, including difficult
ones such as defining government procurement rules for the Panama Canal Authority
and market access for U.S. retailers. Unlike the DR-CAFTA, there is little textile and
apparel trade, and labor issues so far have been less controversial. The treatment of
sensitive agricultural products are the last issues to be concluded. In particular, the
United States and Panama have yet to finalize an agreement on a sanitary and
phytosanitary (SPS) issue. The United States has requested that Panama accept
USDA meat inspection standards as sufficient for immediate entry of U.S. exports.
This became, politically, a very sensitive issue (the Panamanian Agriculture Minister
resigned) because the SPS chapter had already been closed, Panama was concerned
about compromising its high inspection standards, and Panama did not want to look
as if it had suddenly capitulated to U.S. demands. Following a week-long review of
the U.S. meat inspection process in February 2006, a Panamanian delegation found
that it did not pose a threat to Panama’s national standards. Details remain to be
worked out over how this might translate into an immediate certification for entry
into Panama of U.S. meat products. Reportedly, all other agricultural market access
issues have been finalized with the exception of determining any change to Panama’s
portion of the U.S. sugar quota.

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U.S.-Peru Trade Promotion Agreement. On April 12, 2006, U.S. Trade
Representative Rob Portman and Peruvian Minister of Foreign Trade and Tourism
Alfredo Ferrero Diez Canseco signed the U.S.-Peru Trade Promotion Agreement
(PTPA). The PTPA negotiations began in May 2004, when the United States,
Colombia, Peru, and Ecuador participated in the first round of negotiations for a
U.S.-Andean free trade agreement (FTA).2 After negotiators failed to reach an
agreement, Peru continued negotiating with the United States on a bilateral basis.
The two countries concluded the agreement in December 2005. On January 6, 2006,
President Bush notified the Congress of his intention to enter into a free trade
agreement with Peru. Under current deadlines in the Trade Promotion Authority Act
(TPA), expedited legislative procedures apply to implementing bills for trade
agreements, if, among other requirements, the agreements are entered into by June
30, 2007. Press reports indicate that Congress is unlikely to vote on the PTPA until
early 2007.3 The labor provisions may be among the more controversial of the
agreement.
The United States is Peru’s leading trading partner. In 2005, 31% of Peru’s
exports went to the United States, and 18% of Peru’s imports were supplied by the
United States. Trade with Peru accounts for less than 1% of total U.S. trade. Peru
is the 43rd largest U.S. export market ($2.3 billion in 2005) and the 44th largest source
of U.S. imports ($5.1 billion in 2005). The United States currently extends duty-free
treatment to imports from Peru under a regional preference program, the Andean
Trade Promotion and Drug Eradication Act (ATPDEA), but that access is scheduled
to expire at the end of December 2006. In 2005, 44% of all U.S. imports from Peru
received preferential duty treatment. Of those, the leading imports were refined
copper and knit or crocheted sweaters. If ratified, the PTPA would likely have a have
a small net economic effect on the United States because of the relatively small size
of Peru’s economy in relation to the U.S. economy. In 2005, Peru had a GDP of $78
billion, approximately 0.6% of U.S. GDP of $12.5 trillion.
U.S.-Colombia Trade Promotion Agreement. On February 27, 2006,
U.S. Trade Representative Portman and Colombia’s Minister of Trade, Industry, and
Tourism, Jorge Humberto Botero, announced the conclusion of a U.S.-Colombia
bilateral free trade agreement. President Bush notified Congress on August 24, 2006,
of his intention to sign the U.S.-Colombia Trade Promotion Agreement (CTPA). A
free trade agreement with Colombia was originally intended to be part of a broader
U.S.-Andean free trade agreement FTA, but after negotiators failed to reach
agreement, Colombia continued negotiations with the United States on a bilateral
basis. Although the announcement of the CTPA took place in February, President
Bush and Colombian President Alvaro Uribe conceded on June 14 that the two sides
were still working on some outstanding issues. The two countries finalized the text
2 See CRS Report RL32770, Andean-U.S. Free-Trade Agreement Negotiations, by M.
Angeles Villarreal.
3 Brevetti, Rosella, International Trade Daily, “Kolbe Sees Peru Pact Delayed Until Next
Year,” September 8, 2006.

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of the agreement on July 8, 2006.4 The labor and sugar provisions may be among the
more controversial of the agreement. It appears unlikely that Congress would
consider implementing legislation for the CTPA before the end of 2006.
The United States is Colombia’s leading trading partner. In 2004, 42% of
Colombia’s exports went to the United States, and 29% of Colombia’s imports were
supplied by the United States. Colombia is the 28th largest U.S. export market ($5.41
billion in 2005) and the 31st largest source of U.S. imports ($8.85 billion in 2005).
Colombia accounts for less than 1% of total U.S. trade. The United States currently
extends duty-free treatment to selected imports from Colombia under the ATPDEA,
a regional trade preference program that expires in December 2006. In 2005, 51%
of all U.S. imports from Colombia received preferential duty treatment under this
program. Of those, the leading imports were certain subcategories of crude oil and
cut flowers. If ratified, the CTPA would likely have a have a small net economic
effect on the United States because of the relatively small size of Colombia’s
economy in relation to the U.S. economy.
Free Trade Area of the Americas. The proposed Free Trade Area of the
Americas (FTAA) was originally conceived 10 years ago as a regional (presumably
WTO-plus) trade agreement that would include 34 nations of the Western
Hemisphere. Since then, three drafts of an incomplete agreement have been released,
but the original January 2005 date for signing it has passed. At the center of the
delay are deep differences dividing the United States and Brazil, the co-chairs of the
Trade Negotiating Committee, which is charged with defining the framework under
which the FTAA negotiations can continue. In particular, Brazilian insistence on a
reduction of U.S. agricultural subsidies has been central to the debate. The United
States and Brazil agreed at the November 2003 Miami Ministerial to a two-tier
approach that would include a set of “common rights and obligations” to which all
countries would agree, augmented by optional plurilateral arrangements for countries
wishing to make deeper reciprocal commitments. To date, the United States and
Brazil have been unable to define how this two-tier concept would work, and the
United States has rebuffed Brazil’s offer to move ahead with the “4+1” market access
talks with the Mercosur (Southern Common Market) countries (Brazil, Argentina,
Uruguay, and Paraguay).
The breadth of an emerging resistence to the FTAA became clearer at the fourth
Summit of the Americas held on November 4-5, 2005, in Mar del Plata, Argentina.
Amidst dramatic and sometimes violent protests against President George W. Bush
and the FTAA, which was not scheduled as the major topic of this summit, it was
evident that Latin America was divided over how to proceed. A total of 29 countries
supported restarting negotiations, and the United States pushed to set a specific date
in 2006. The Mercosur countries rejected this idea, arguing that the conditions for
a balanced and equitable FTAA did not yet exist. Venezuela lobbied independently
to end any further effort on the FTAA and called for a unified resistence against U.S.
policies and presence in Latin America. On July 4, 2006, Venezuela formally joined
Mercosur as its first new full member since its inception in 1991. Although
4 Brevvi, Rosella, International Trade Daily, “President Notifies Congress of Intent to Sign
Colombia FTA,” August 25, 2006.

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Mercosur has resisted the FTAA, Venezuela is the only country in Latin America to
reject the idea unequivocally. With Venezuela’s new-found status as a voting
member of Mercosur, the United States may find it even more difficult to isolate its
unabashedly negative influence on the FTAA negotiations.
The Summit declaration called for a time to reflect on the problems of the
FTAA process while awaiting the outcome of the upcoming WTO Doha Round
ministerial, particularly with respect to agricultural issues. Given that the WTO talks
have also bogged down, it seems unlikely that the FTAA will find the support to
move ahead in the near future, particularly with Venezuela now influencing policy
in the Mercosur group. In the meantime, both Brazil and the United States are
meeting on an informal bilateral basis and continue to court other Latin American
countries to join them in subregional trade pacts, making the future of U.S. trade
policy in the region less certain.
CRS Products:
CRS Report RL32110, Agriculture in the U.S.-Dominican Republic-Central American
Free Trade Agreement, by Remy Jurenas.
CRS Report RL32770, Andean-U.S. Free-Trade Agreement Negotiations, by Angeles
Villarreal.
CRS Report RL33258, Brazilian Trade Policy and the United States, by J. F.
Hornbeck.
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the Free Trade Agreement (DR-CAFTA) with the United States, coordinated by
K. Larry Storrs.
CRS Report RL31870, The Dominican Republic-Central America-United States Free
Trade Agreement (DR-CAFTA), 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 RL33620, Mercosur: Evolution and Implications for U.S. Trade Policy,
by J. F. Hornbeck.
CRS Report RL32540, The Proposed U.S.-Panama Free Trade Agreement, by J. F.
Hornbeck.
CRS Report RS22419, U.S.-Colombia Trade Promotion Agreement, by Angeles
Villarreal.
CRS Report RS22391, U.S.-Peru Trade Promotion Agreement, by Angeles Villarreal.

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Terrorism Issues
In the aftermath of the September 2001 terrorist attacks on New York and
Washington, D.C., U.S. attention to terrorism in Latin America 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 in order to 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, and it was referred to the Senate Foreign Relations Committee
(Treaty Doc. 107-18). The committee held a hearing on the treaty on June 17, 2004,
and on July 28, 2005, the committee favorably reported the treaty (Senate Exec. Rept.
109-3). On October 7, 2005, the Senate agreed to the resolution of advice and
consent on the convention, and the United States deposited its instruments of
ratification for the convention on November 15, 2005.
In the aftermath of 9/11, the OAS also reinvigorated the Inter-American
Committee on Terrorism (CICTE), which was first established in 1999 to cooperate
in preventing, combating, and eliminating terrorist acts and activities. The CICTE has
programs on cyber security, port security, airport security, legislation against
terrorism, customs and border protection, terrorist financing, and terrorism policy
engagement exercises.
The State Department, in its annual report on worldwide terrorism (Country
Reports on Terrorism 2005, April 2006), highlights terrorist threats in Colombia,
Peru, and the tri-border area (TBA) of Argentina, Brazil, and Paraguay, which has
been a regional hub for Hizballah and Hamas fundraising activities. The report
asserted that terrorism in the Western Hemisphere was “primarily perpetrated by
narcoterrorist organizations based in Colombia and by the remnants of radical leftist
Andean groups.” According to the report, there is no corroborated information that
Islamic extremist groups have an operational presence in the TBA or elsewhere in
Latin America. The report also maintained that Cuba remained a state sponsor of
terrorism, while Venezuela “virtually ceased its cooperation in the global war on
terror, tolerating terrorists in its territory and seeking close relations with Cuba and
Iran, both state sponsors of terrorism.” In mid-May 2006, the Department of State,
pursuant to Section 40A of the Arms Export Control Act, prohibited the sale or
license of defense article and services to Venezuela because of its lack of cooperation
on antiterrorism efforts. Other countries on the Section 40A list include Cuba, Iran,
North Korea, and Syria, not to be confused with the “state sponsors of terrorism” list
under Section 6(j) of the Export Administration Act of 1979, which includes Cuba,
Iran, North Korea, Sudan, and Syria.
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, hostage
negotiations, bomb detection and deactivation, and countering terrorism financing.
ATA financing is provided through the annual foreign operations appropriations
measure under the Nonproliferation, Anti-terrorism, Demining, and Related
Programs (NADR) account. For FY2005, $7.9 million in ATA was provided for the

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Western Hemisphere, with $5.1 million for training anti-kidnapping units in
Colombia and $0.5 million for the tri-border area of Brazil, Paraguay, and Argentina.
For FY2006, an estimated $12.3 million in ATA will be provided for the Western
Hemisphere, with $5.3 million for Colombia and $1.5 million for the Bahamas. The
FY2007 Western Hemisphere request is $11.9 million, with $3.1 million for
Colombia, $2.8 million for Trinidad and Tobago, and $1.4 million for Jamaica.
In the second session of the 109th Congress, the House approved H.Con.Res.
388 on June 12, 2006, which expresses the sense of Congress regarding the activities
of Islamic terrorist organizations in the Western Hemisphere. The resolution
“recognizes the potential threat that sympathizers and financiers of Islamist terrorist
organizations that operate in the Western Hemisphere pose to the United States, our
allies, and interests.” The resolution also encourages the President to direct the U.S.
representative to the OAS to seek support for the creation of a special task force of
the CICTE to assist governments in investigating and combating the proliferation of
Islamist terrorist organizations in the region.
CRS Products:
CRS Report RS21049, Latin America: Terrorism Issues, by Mark P. Sullivan.
Gangs in Central America
In the past two years, there has been increasing attention by the press and
policymakers on the effects of crime and gang violence in Central America, and its
spillover effects on the United States. Since February 2005, some 1,096 members
of the violent Mara Salvatrucha (MS-13) have been arrested in cities across the
United States. These arrests have raised concerns about the transnational activities
of Central American gangs. Citizens in several Central American countries have
consistently identified crime and gang violence among the top issues of popular
concern. Governments throughout the region are struggling to find the right
combination of suppressive and preventive policies to effectively deal with the gang
problem as well as more effective ways to solve related issues such as police
corruption, overcrowded prisons, and weak judicial systems. Gang violence may
threaten political stability, inhibit social development, and discourage foreign
investment in Central America.
Many analysts predict that illicit gang activities may accelerate illegal
immigration, drug smuggling, and trafficking in persons and weapons to the United
States. Some analysts maintain that contact between gang members in both regions
is increasing, and that this tendency may serve to increase gang-related violent crime
in the United States. Others assert that unless the root causes of gang violence —
poverty, joblessness, ineffective judicial systems, easy access to arms, and the social
exclusion of at-risk youth — are addressed in a holistic manner, the problem will
continue to escalate.

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In the 109th Congress, legislation has been introduced — S. 853 (Lugar) and
H.R. 2672 (Harris), the North American Cooperative Security Act — that includes
provisions to increase cooperation among U.S., Mexican, and Central American
officials in the tracking of gang activity and in the handling of deported gang
members. Similar provisions have been included in both House and Senate versions
of broader immigration legislation, H.R. 4437 (Sensennbrenner) and S. 2611
(Specter). On June 7, 2005, the OAS passed a resolution to hold conferences and
workshops on the gang issue and to urge member states to support the creation of
holistic solutions to the gang problem. Within the U.S. government, the Department
of Justice has created an inter-agency task force to focus on dealing with international
gang activity through diplomacy, law enforcement, transnational legal mechanisms,
justice sector reform, increased information-sharing, and improved repatriation
procedures. Some observers maintain that efforts to deal with criminal gang activity
on the international front need to be coordinated with domestic policies aimed at
stiffening penalties for gang-related crime.
CRS Products:
CRS Report RS22141, Gangs in Central America, by Clare Ribando.
AIDS in the Caribbean and Central America
The AIDS epidemic in the Caribbean and Central America has begun to have
negative consequences for economic and social development, and continued
increases in infection rates threaten future development prospects. In contrast to
other parts of Latin America, the mode of transmission in several Caribbean and
Central American countries has been primarily through heterosexual contact, making
the disease difficult to contain because it affects the general population. The
Caribbean countries with the highest prevalence or infection rates are Haiti, with a
rate over 3%; the Bahamas, Guyana, and Trinidad and Tobago, with rates over 2%;
and Barbados, Belize, the Dominican Republic, Jamaica, and Suriname, with rates
over 1%. In Central America, Honduras has the highest prevalence rate of 1.8%,
while Guatemala has a rate over 1%.
The response to the AIDS epidemic in the Caribbean and Central America has
involved a mix of support by governments in the region, bilateral donors (such as the
United States, Canada, and European nations), regional and multilateral
organizations, and nongovernmental organizations (NGOs). Many countries in the
region have national AIDS programs that are supported through these efforts.
USAID has been the lead U.S. agency fighting the epidemic abroad since 1986.
USAID’s funding for HIV/AIDS in Central America and the Caribbean region rose
from $11.2 million in FY2000 to $33.8 million in FY2003. Because of the inclusion
of Guyana and Haiti as focus countries in the President’s Emergency Plan for AIDS
Relief (PEPFAR), funded through the Global HIV/AIDS Initiative (GHAI) account,
U.S. assistance to the Caribbean and Central America for HIV/AIDS increased to $47

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million in FY2004, $82.5 million in FY2005, and an estimated $92.7 million in
FY2006. For FY2007, the Administration requested $113 million. This included
$88 million in GHAI funding for Guyana ($25 million) and Haiti ($63 million), and
another $25 million for non-focus countries and programs in Central America and the
Caribbean through the Child Survival and Health account.
Some Members of Congress want to expand the list of focus countries to include
14 additional Caribbean countries. In the 109th Congress, S. 600, the Foreign Affairs
Authorization Act, FY2006 and FY2007, contains a provision (Section 2516) that
would add14 Caribbean countries to the list of focus countries targeted for increased
HIV/AIDS assistance. In other action, the 109th Congress approved H.R. 1409 (P.L.
109-95), which authorizes assistance for orphans and other vulnerable children in
developing countries, including in the Caribbean. Pending legislative initiatives in
the second session include H.R. 164, which would provide for the establishment of
pediatric centers in developing countries, including Guyana, to provide treatment and
care for children with HIV/AIDS; and S. 350 and H.R. 945, which would provide
assistance to combat infectious diseases in Haiti, including HIV/AIDS.
CRS Products:
CRS Report RL32001, AIDS in the Caribbean and Central America, by Mark P.
Sullivan.
CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria
Spending: FY2004-FY2007, by Tiaji Salaam-Blyther.
Afro-Latinos
In recent years, people of African descent in the Spanish- and Portuguese-
speaking nations of Latin America — also known as “Afro-Latinos” — have been
pushing for increased rights and representation. Afro-Latinos comprise some 150
million of the region’s 540 million total population, and, along with women and
indigenous populations, are among the poorest, most marginalized groups in the
region. Afro-Latinos have begun forming groups that, with the help of international
organizations, are seeking political representation, human rights protection, land
rights, and greater social and economic rights and benefits.
Improvement in the status of Afro-Latinos could be difficult and contentious,
however, depending on the size and circumstances of the Afro-descendant
populations in each country. Afro-Latinos are, generally, descendants of the millions
of West African slaves brought to the Americas by European traders during the
colonial period. Afro-Latinos tend to reside in coastal areas, although in many
countries they have migrated to large cities in search of employment. Afro-Latinos
comprise a majority of the population in Cuba and the Dominican Republic, while
in Brazil, Colombia, Panama, Venezuela, Ecuador, and Nicaragua, they form a
significant minority.

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Assisting Afro-Latinos has never been a primary U.S. foreign policy objective,
although a number of foreign aid programs exist that benefit Afro-Latino
populations. Those programs are funded through the U.S. Agency for International
Development (USAID), the Inter-American Foundation (IAF), the Peace Corps, and
the National Endowment for Democracy (NED). They include agricultural, micro-
credit, health, grassroots organizing, and bilingual education programs.
Some assert that the United States has an interest in improving the condition of
Afro-Latinos in Latin America. Assisting vulnerable peoples fits into larger U.S.
policy goals for the region: promoting democracy, encouraging economic growth and
poverty reduction, and protecting human rights. Others disagree, however, as to
whether U.S. foreign aid should be specifically targeted toward Afro-Latinos, or be
distributed broadly through efforts to support marginalized populations. Skeptics
question whether increasing assistance to Afro-Latinos is feasible in a time when
limited development assistance is being allocated to Latin America. Still others
caution that the United States should be careful when intervening in the sensitive
racial politics of other countries.
In the 109th Congress, the House passed H.Con.Res. 175, on July 18, 2005,
recognizing the injustices suffered by African descendants of the transatlantic slave
trade in all of the Americas and recommending that the United States and the
international community work to improve the situation of Afro-descendant
communities in Latin America and the Caribbean. A concurrent resolution,
S.Con.Res. 90, is under consideration in the Senate.
Some Members of Congress have also expressed concern about the situation of
Afro-Colombians affected by the ongoing armed conflict in Colombia. Legislation
has been introduced — H.R. 4886 (McGovern), the Colombian Temporary Protected
Status Act of 2006 — that would make Colombian nationals, including Afro-
Colombians affected by the country’s ongoing conflict, eligible for Temporary
Protected Status (TPS) under Section 244 of the Immigration and Nationality Act.
Another resolution, H.Res. 822 (McGovern), has been introduced that recognizes the
efforts of Afro-Colombian and other peace-building communities in Colombia and
urges the Secretary of State to monitor acts of violence committed against them. The
Senate Appropriations Committee report to the FY2007 Foreign Operations
appropriations bill (H.R. 5522, S.Rept. 109-277) would require the State Department
to certify that the Colombian military is not violating the land and property rights of
Afro-Colombians in order to continue to receive U.S. assistance.
CRS Products:
CRS Report RL32713, Afro-Latinos in Latin America and Considerations for U.S.
Policy, by Clare Ribando.

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Trafficking in Persons in Latin America and the Caribbean
Trafficking in persons for sexual exploitation or forced labor, both within a
country and across international borders, is a lucrative criminal activity that is of
major concern to the United States and the international community. Trafficking in
persons affects nearly every country and region in the world. While most trafficking
victims still appear to originate from South and Southeast Asia or the former Soviet
Union, human trafficking is a growing problem in Latin America and the Caribbean.
Countries in Latin America serve as source, transit, and destination countries for
trafficking victims. Latin America is also a primary source for the estimated 14,500
to 17,500 people that are trafficked to the United States each year.
In Latin America, trafficking in persons occurs both within countries and across
borders as children and adults are trafficked for prostitution, forced labor, and
domestic servitude. Traffickers take advantage of poor young people with minimal
education in countries with political instability, high unemployment, and corruption.
Trafficking is increasingly tied to organized criminal groups who exploit
undocumented migrants, especially in the U.S.- Mexico border region.
Congress has taken a leading role in fighting human trafficking by passing the
Victims of Trafficking and Violence Protection Act of 2000 (P.L. 106-386) and the
Trafficking Victims Protection Reauthorization Act of 2003 (P.L. 108-193). As a
result of that legislation, the State Department and other U.S. agencies provided more
than $94.7 million in anti-trafficking assistance to foreign governments in FY2005.
On June 5, 2006, the State Department released its sixth annual report on human
trafficking, Trafficking in Persons Report (TIP) dividing countries into four groups
according to the efforts they were making to combat trafficking. Tier 3 countries are
those that have not made an adequate effort to combat trafficking and are subject to
sanctions. Latin America had a higher percentage of Tier 3 countries in the 2004 and
2005 TIP reports than any other region. In 2005, Bolivia, Ecuador, Jamaica,
Venezuela, and Cuba were placed on Tier 3, but only Venezuela and Cuba were
subject to sanctions. In the 2006 TIP report, Belize, Cuba, and Venezuela are the
only countries identified as Tier 3 in the region, but six others — including Brazil
and Mexico — are on the Tier 2 Watch List and could fall into the Tier 3 category
by 2007.
In the first session of the 109th Congress, the Senate approved the ratification
of the United Nations Protocol to Prevent, Suppress, and Punish Trafficking in
Persons. The United States became a party to the Protocol on December 3, 2005.
Congress also passed the Trafficking Victims Reauthorization Act of 2005 (P.L. 109-
164). This law will provide some $361 million over the next two years to combat
trafficking in persons. Congress continues to monitor both U.S. and international
efforts to fight human trafficking, especially in regions such as Latin America, where
it is an emerging problem.

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CRS-20
CRS Products:
CRS Report RL33200, Trafficking in Persons in Latin America and the Caribbean, by
Clare Ribando.
CRS Report RL30545, Trafficking in Persons: The U.S. and the International
Response, by Francis Miko.
Country Issues
Argentina
Argentina’s restructuring of over $100 billion in defaulted bond debt in June
2005 demonstrated the country’s emergence from its economic crisis. Although the
country was under considerable economic stress in 2001 and 2002, the democratic
political system weathered the crisis. President Néstor Kirchner, elected in 2003, has
made bold policy moves in the areas of human rights, institutional reform, and
economic policy that have helped restore Argentines’ faith in democracy. The
October 2005 legislative elections demonstrated strong support for President
Kirchner. Economic growth has rebounded, from a decline of almost 11% in 2002
to 8.8% in 2003, 9% in 2004, 9.2% in 2005, and an estimate of 7.5% for 2006.5 In
January 2006, Argentina paid off its $9.5 billion debt to the International Monetary
Fund (IMF), a popular move, but one that critics have questioned for its economic
wisdom. The government faces such challenges as reducing poverty and continuing
to control inflation. In early August 2006, a former federal police official charged
with running a clandestine detention center during military rule was sentenced to 25
years in prison. This marked the first human rights trial since the Supreme Court’s
June 2005 overturning of two amnesty laws from the 1980s that had blocked
prosecution for killings under military rule. Issues of concern to the U.S. Congress
include continued cooperation with Argentina on counterterrorism issues and
progress in Argentina’s investigation of the 1994 Argentine-Israeli Mutual
Association (AMIA) bombing that killed 86 people.
CRS Products:
CRS Report RS21113, Argentina: Political Conditions and U.S. Relations, by Mark P.
Sullivan.

CRS Report RL32637, Argentina’s Sovereign Debt Restructuring, by J. F. Hornbeck.

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.
5 Economist Intelligence Unit, “Country Report: Argentina,” August 2006.

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CRS-21
Bolivia
In the past few years, Bolivia has experienced extreme political unrest resulting
in the country having six presidents since 2001. Evo Morales, an indigenous leader
of the leftist Movement Toward Socialism (MAS) party, won a convincing victory
in the December 18, 2005, presidential election with 54% of the votes. He was
inaugurated to a five-year term on January 22, 2006. The MAS won control of the
lower chamber of the Bolivian Congress, 12 of 27 seats in the Senate, and three of
the country’s nine governorships.
President Morales has moved to fulfill his campaign promises to decriminalize
coca cultivation and to nationalize the country’s natural gas industry. These policies
have pleased his supporters within Bolivia, but have complicated Bolivia’s relations
with some of its neighboring countries, foreign investors, and the United States. He
also secured passage of legislation convoking a special election for delegates to a
constituent assembly to reform the country’s constitution. The MAS performed
relatively well in those elections, capturing 137 of 255 seats, but will have to form
alliances in order to reach the two-thirds majority needed to pass constitutional
reforms. The assembly convened on August 6, 2006, and will deliberate for one year.
In a concurrent referendum, the four wealthy eastern provinces of Bolivia voted in
favor of increasing regional autonomy, while the other five provinces opposed the
measure. The issue of regional autonomy will be taken up in the constituent
assembly.
For some 20 years, U.S. interest in Bolivia has centered on its role as a coca
producer and its relationship to Colombia and Peru, the two other major coca- and
cocaine-producing countries in the Andes. U.S.-Bolivian relations have become
tense in 2006 in the wake of the Morales government’s questionable commitment to
combating illegal drugs, increasing ties with Venezuela and Cuba, and the
nationalization measure. In FY2006, Congress provided an estimated $116.6 million
in foreign assistance to Bolivia, including some $79.2 million in counternarcotics
funds. For FY2007, the Administration proposes spending $99.8 million on Bolivia,
including roughly $66 million in counternarcotics funds. Congress is soon likely to
consider whether to renew the Andean Trade Promotion and Drug Eradication Act
(ATPDEA), which provides duty-free access to some imports from Bolivia and other
Andean countries in exchange for counternarcotics cooperation. The ATPDEA
expires in December 2006, although legislation has been proposed, H.R. 5070
(Rangel), that would renew its benefits for another year.
CRS Products:
CRS Report RL32580, Bolivia: Political and Economic Developments and
Implications for U.S. Policy, by Clare Ribando and Connie Veillette.
CRS Report RL33163, Drug Crop Eradication and Alternative Development in the
Andes, by Connie Veillette and Caroline Navarette-Frias.
CRS Report RL32770, Andean-U.S. Free Trade Agreement Negotiations, by M.
Angeles Villarreal.

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CRS-22
Brazil
In January 2003, Luis Inácio “Lula” da Silva, of the leftist Workers’ Party (PT),
began a four-year term as President of Brazil. Despite winning on a leftist platform,
President Lula has maintained the orthodox economic policies associated with his
predecessor, even surpassing fiscal and monetary targets. Inflation and interest rates
have been on a downward trend, and Brazil’s credit rating has improved, but
economic growth remains modest (2.3% in 2005). In 2003, President Lula gained
congressional approval of social security and tax reforms, and in 2004, a new law to
increase private investment in public infrastructure projects. Despite these
achievements, legislative progress stalled in 2005, and President Lula has been
criticized for failing to develop effective social programs to address the perennial
problems of land redistribution, social inequality, and crime.
Brazilians will head to the polls to elect a new President and Vice President,
federal legislators (all Deputies and one third of the Senate), and governors on
October 1, 2006. The leading presidential candidates are President Lula and Geraldo
Alckmin, former governor of the state of São Paulo, of the Brazilian Social
Democratic Party (PSDB). In late 2005, a series of corruption scandals involving
senior PT officials, legislators, and cabinet officials weakened the Lula government.
President Lula has since recovered popular support, however, and has a commanding
lead in recent opinion polls. While most analysts predict that President Lula will be
easily re-elected, many predict that the PT will lose a significant number of
congressional seats and that the PSDB and other opposition parties will perform well
in the legislative, state, and local elections.
Relations with the United States have been generally positive, although
President Lula has made relations with neighboring countries in the Southern
Common Market (Mercosul) his first priority, and has sought to strengthen ties with
nontraditional partners, including India and China. Trade issues are central to the
bilateral U.S.-Brazilian relationship, with both countries heavily involved in
subregional, regional, and global trade talks in the Doha round of the World Trade
Organization (WTO) negotiations. The United States and Brazil have different
approaches to trade liberalization, which have put the two countries at odds over how
to proceed with the Free Trade Area of the Americas (FTAA) negotiations.
In addition to trade policy, U.S. interest in Brazil centers on its role as a
stabilizing force in Latin America, especially with respect to populist governments
in Venezuela and Bolivia. Brazil’s nuclear enrichment capabilities and its role as an
ethanol producer have generated growing interest in the United States. Brazil is also
a key U.S. ally whose cooperation is sought on issues that include counternarcotics
efforts; human rights concerns, such as race relations and trafficking in persons; the
environment, including protection of the Amazon; and HIV/AIDS prevention.

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CRS Products:
CRS Report RL33456, Brazil-U.S. Relations, by Clare M. Ribando
CRS Report RL33258, Brazilian Trade Policy and the United States, by J.F.
Hornbeck.
CRS Report RL32571, U.S..-Brazil WTO Cotton Subsidy Dispute, by Randy Schnepf.
CRS Report RS21905, The Agriculture Framework in the WTO Doha Round, by
Charles Hanrahan.
Colombia
Colombian President Alvaro Uribe was re-elected on May 28, 2006, with 62%
of the vote. Parties loyal to President Uribe also won a majority of both houses of
congress in the March 12 congressional elections. President Uribe has been a strong
ally of the United States and a supporter of U.S. counternarcotics efforts in the region
and, through the Andean Counterdrug Initiative (ACI), Colombia is the largest U.S.
foreign aid recipient in Latin America. Beyond ACI, congressional interest in
Colombia relates to human rights conditions; trade; the expansion of U.S. assistance
for counterterrorism and infrastructure protection; the health and environmental
consequences of aerial fumigation of drug crops; the progress of alternative
development to replace drug crops; the level of risk to U.S. personnel in Colombia,
including the continued captivity of three American hostages by the Revolutionary
Armed Forces of Colombia (FARC); and the current demobilization talks between
the Colombian government and paramilitaries. (Also see sections above on “Andean
Counterdrug Initiative” and “U.S.-Colombia Trade Promotion Agreement.”)
It is estimated that Colombia produces 70% of the world’s supply of cocaine and
50% of the heroin entering the United States. Illegally armed groups of both the left
and right are believed to participate in the drug trade. In March 2006, the United
States indicted fifty commanders of the FARC for drug trafficking.6 The United
States has also requested the extradition of 23 paramilitary leaders on drug trafficking
charges. In 2004, Congress raised the cap on military personnel allowed to be
deployed in Colombia in support of Plan Colombia from 400 to 800 for military
personnel and from 400 to 600 for civilian contractors (FY2005 Ronald W. Reagan
National Defense Authorization Act, P.L. 108-375). Since FY2002, Congress has
authorized support for a unified campaign against narcotics trafficking and activities
of organizations designated as terrorist organizations by the Department of State.
In 2006, the United Nations Office on Drugs and Crime reported a 50% decline
in opium poppy cultivation in Colombia in 2005 to 4,940 acres; or, 69% fewer acres
than in 2000. However, the United Nations also reported an 8% increase in acreage
6 Juan Forero, “U.S. Indicts 50 Leaders of Colombian Rebels in Cocaine Trafficking,” New
York Times, March 23, 2006.

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CRS-24
devoted to coca cultivation; the first such increase since 2000. At 212,510 acres, the
area of cultivation remains 47% less than in 2000 when 403,350 acres were under
cultivation. It is believed that the Plan Colombia spraying goals are ahead of
schedule. The Office of National Drug Control Policy (ONDCP) enlarged its area
of survey in 2005, which showed 355,680 acres under cultivation. This figure
represents a 26% increase over ONDCP data for 2004; however, when the survey
area was limited to the same area as in 2004, the ONDCP found an 8% reduction in
coca cultivation. Although the new survey area showed an increase in coca
cultivation, ONDCP argues that this new data can be used to better target future
eradication efforts the previous year because newly-planted crops are less productive.
In 2005, the State Department reports that 343,000 acres of coca and 4,000 acres of
opium poppy were sprayed. The spraying does not prevent, although it may
discourage, the replanting of illicit crops. In November 2005, the ONDCP announced
a slight increase in the street price of cocaine in 2004. The significance of this report
was challenged by critics of U.S. policy because 2003 prices were the lowest since
1981. Critics also maintained that short-term fluctuations in price do not necessarily
signal significant changes in supply.
On July 15, 2003, the Uribe Administration announced an agreement with
leaders of the paramilitary United Self-Defense Forces of Colombia (AUC) that was
to result in the demobilization of its members by the end of 2005. The office of
Colombia’s High Commissioner for Peace estimates that nearly 31,000 paramilitaries
demobilized as of July 2006. An estimated 2,000 paramilitaries remain outside of
the disarmament process. The demobilization process has posed a number of
controversial issues relating to ensuring accountability of militants while providing
a large enough incentive for fighters to lay down their arms. The outcome of such
a process could have effects on how Colombian citizens feel about the effectiveness
of the country’s judicial system, the rule of law, and the ability of the state to provide
for a general level of safety. There are also concerns that some fighters that operate
outside of the AUC umbrella will not demobilize and will continue to carry out their
operations in rural areas. Critics also note that paramilitaries demobilized under the
controversial Justice and Peace Law will receive reduced sentences of five to eight
years and may be protected from extradition to the United States. Critics also are
concerned that the demobilization process does not address the criminal enterprises,
such as narcotics trafficking, that financed the AUC’s political operations and that
the paramilitaries are re-organizing, not demobilizing. Further concern has focused
on the ability of the government to re-incorporate ex-fighters into law-abiding
civilian life and to provide some type of restitution to their victims.
The issue of drug trafficking is exacerbated by humanitarian conditions resulting
from more than 40 years of civil war between the Colombian government, the FARC,
National Liberation Army (ELN), and right-wing paramilitaries. Colombia has the
second largest population of internally displaced persons (IDPs) in the world, behind
Sudan. There are 3 million IDPs in Colombia, with an estimated 160,000 to 250,000
newly displaced in 2005. There are also nearly 258,000 Colombian refugees and
asylum seekers outside of Colombia. The United States began resettling refugees
from Colombia in 2002. Admissions peaked at 577 in FY2004 but declined to 323
in FY2005 due to provisions of the REAL ID Act of 2005 (included in P.L. 109-13),
which bars admission of persons who have provided material support to terrorist
groups. In 2005, the United Nations High Commissioner for Refugees (UNHCR)

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stopped referring Colombians for resettlement to the United States because of this
issue. The State Department anticipates only 50 Colombian refugees will be resettled
to the United States in FY2006. H.R. 5918, introduced on July 27, 2006, would
amend the Immigration and National Act so that persons who provided material
support to a terrorist organization under duress or coercion can be admitted to the
United States.
CRS Products:
CRS Report RL32250, Colombia: Issues for Congress, by Colleen Cook and Connie
Veillette.
CRS Report RL32774, Plan Colombia: A Progress Report, by Connie Veillette.
CRS Report RL33370, Andean Counterdrug Initiative (ACI) and Related Funding
Programs: FY2007 Assistance, by Connie Veillette.
CRS Report RL33163, Drug Crop Eradication and Alternative Development in the
Andes, by Connie Veillette and Caroline Navarette-Frias.
CRS Report RS22419, U.S.-Colombia Trade Promotion Agreement, by Angeles
Villarreal.
Cuba
Since the early 1960s, U.S. policy toward Cuba under Fidel Castro has consisted
largely of isolating the communist nation through comprehensive economic
sanctions, which have been significantly tightened by the Bush Administration.
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. While 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 — there are several schools of thought on how to
achieve that objective: some advocate maximum pressure on Cuba until reforms are
enacted; others argue for lifting some U.S. sanctions judged to be hurting the Cuban
people; and still others call for a swift normalization of U.S.-Cuban relations.
Fidel Castro’s July 31, 2006, announcement that he was ceding political power
to his brother Raúl temporarily in order to recover from surgery could foster a re-
examination of U.S. policy. In the new context of Fidel’s transfer of power, there are
two broad policy approaches to contend with political change in Cuba: a stay-the-
course or status-quo approach that would maintain the U.S. dual-track policy of
isolating the Cuban government while providing support to the Cuban people; and
an approach aimed at influencing the Cuban government and Cuban society through
increased contact and engagement.

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In the 109th Congress, legislative initiatives include six human rights
resolutions: House-passed H.Con.Res. 81, H.Res. 193, and H.Res. 388; Senate-
passed S.Res. 140 and S.Res. 469; and H.Con.Res. 165. In addition, P.L. 109-102
funds Cuba democracy projects in FY2006, H.R. 5522 would fund FY2007
democracy projects, House-passed H.R. 2601 would authorize $5 million for
scholarship and exchange programs, and S. 3769 would authorize assistance to
facilitate a peaceful transition in Cuba.
With regard to sanctions, both the House-passed and Senate Appropriations
Committee-reported versions of the FY2007 Treasury Department appropriations
bill, H.R. 5576, prohibit funds from being used to implement tightened restrictions
on financing for agricultural exports to Cuba; the President has threatened to veto the
bill if it weakens Cuba sanctions. Other initiatives include H.Con.Res. 206
(suspension of sanctions after Hurricane Dennis); H.R. 208 and H.R. 579 (overall
sanctions); S. 894 and H.R. 1814 (travel); H.R. 2617 (family visits); H.R. 3064
(educational travel); H.R. 1339 and S. 634 (cash in advance for U.S. agricultural
sales); and H.R. 719 and S. 328 (facilitation of agricultural sales). Other measures
have provisions on Cuba’s trademark registrations (H.R. 719, S. 328, H.R. 3372, S.
1604, H.R. 1689 and S. 69); Cuba broadcasting (P.L. 109-108, S. 600, H.R. 2601,
H.R. 5522, and H.R. 5672); anti-drug cooperation (H.R. 5522); U.S. fugitives in
Cuba (H.R. 2601, H.R. 332); sanctions related to Cuba’s offshore oil development
(H.R. 5292, S. 2682, S. 2795); authorization for participation in Cuba’s offshore oil
development (H.R. 5353, S. 2787); support for U.S. diplomats in Cuba (H.Con.Res.
428); repeal of the Cuban Adjustment Act (H.R. 5670); and travel related to the sale
of agricultural and medical goods to Cuba (H.R. 5384).

CRS Products:
CRS Report RL32730, Cuba: Issues for the 109th Congress, by Mark P. Sullivan.
CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Legislative Initiatives, by
Mark P. Sullivan.
CRS Report RL33622, Cuba after Fidel Castro: U.S. Policy Implications and
Approaches, by Mark P. Sullivan.
CRS Report RL32251, Cuba and the State Sponsors of Terrorism List, by Mark P.
Sullivan.
CRS Report RS20468, Cuban Migration Policy and Issues, by Ruth Ellen Wasem.
CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic
Sanctions: Status and Implementation, by Remy Jurenas.
CRS Report RS21764, Restricting Trademark Rights of Cubans: WTO Decision and
Congressional Response, by Margaret Mikyung Lee.

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CRS-27
Dominican Republic
President Leonel Fernández of the Dominican Liberation Party (PLD), who
served as president previously (1996-2000), took office on August 16, 2004.
President Fernández enjoys strong popular support and has restored some confidence
in the Dominican economy. His fiscal policy has been guided by a $648 million loan
agreement reached with the International Monetary Fund (IMF) in February 2005.
GDP growth in the Dominican Republic reached 9.3% in 2005, and inflation fell to
7.4%, but unemployment still stood at 17.5% in late 2005. The Fernández
administration has struggled to deal with corruption, crime, and an ongoing
electricity crisis. In 2005, his government was criticized for several massive
repatriations of undocumented Haitian migrants, but relations with Haiti have
improved since René Préval took office in May 2006. Fernández will face less
opposition to his legislative agenda during the last two years of his term as the PLD
captured a majority in both chambers of the Dominican Congress in the May 2006
legislative elections.
On September 6, 2005, the Dominican Republic approved the U.S.-Dominican
Republic-Central American Free Trade Agreement (DR-CAFTA). The Dominican
Republic was scheduled to implement the U.S.-Dominican Republic-Central
American Free Trade Agreement (DR-CAFTA) on July 1, 2006, but that date has
been postponed pending the adoption of legal and regulatory measures to conform
with the agreement.
CRS Products:
CRS Report RS21718, Dominican Republic: Political and Economic Conditions and
U.S. Relations, by Clare Ribando.
CRS Report RL31870, The Dominican Republic-Central America-United States Free
Trade Agreement (DR-CAFTA), by J. F. Hornbeck.
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the U.S.-Central America Free Trade Agreement (DR-CAFTA), coordinated by
K. Larry Storrs.
Ecuador
Alfredo Palacio, a political independent and former vice president, became
president in April 2005 after Lucio Gutierrez was removed from office by Ecuador’s
Congress following weeks of popular protests. Ecuadorians rejected Gutierrez’s
December 2004 replacement of the majority of the judges on the country’s three
highest courts with his political allies, a move that had been sharply criticized by the
international community. Ecuador’s economy is currently expanding because of high
oil prices, but its political institutions are extremely fragile. Palacio, the country’s
seventh president in nine years, will serve until January 2007. The Palacio
Administration has been weakened by frequent cabinet resignations, a failure to gain

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congressional support for a constituent assembly in 2005, and ongoing popular
protests. Presidential and legislative elections are scheduled for October 15, 2006,
with a second presidential round scheduled for November 26, 2006. There are
currently twelve candidates running for president and the vast majority of Ecuadorian
voters have yet to decide which candidate they will support.
Ecuador continues to work with the United States on counternarcotics matters,
but negotiations for a bilateral free trade agreement were suspended indefinitely in
May 2006 following Ecuador’s decision to expel a U.S. oil company, Occidental,
from the country without compensation for an alleged breach of contract. Citing
Ecuador’s failure to respect foreign investment as a reason for that suspension, U.S.
officials have also suggested that Ecuador’s trade benefits under the Andean Trade
Promotion and Drug Eradication Act (ATPDEA), which expires at the end of this
year, may not be extended.
CRS Products:
CRS Report RS21687, Ecuador: Political and Economic Situation and U.S. Relations,
by Clare Ribando.
CRS Report RL32770, Andean-U.S. Free Trade Agreement Negotiations, by M.
Angeles Villarreal.
El Salvador
Tony Saca, a businessman from the conservative National Republican Alliance
(ARENA) party, was inaugurated as president for a five-year term in June 2004.
President Saca is seeking to restart the country’s stagnating economy, pass
legislation in a polarized political environment, and combat gang violence. His
legislative agenda should face continuing opposition from the Farabundo Marti
National Liberation Front (FMLN), which in the March 12, 2006, legislative
elections recovered the seats it had lost due to defections in 2005. Although ARENA
also increased its representation in the legislature and is still the largest party in El
Salvador’s National Assembly, it lacks a majority and will continue to have to rely
on support from small parties to enact President Saca’s agenda. In 2005, despite its
tough anti-gang legislation, El Salvador posted a murder rate of 15 people per day,
the highest in the hemisphere. Although a majority of Salvadorans approve of
President Saca’s job performance, especially his handling of Tropical Storm Stan and
a volcanic eruption in October 2005, a majority also disapprove of his decision to
maintain Salvadoran soldiers in Iraq.
The United States is working with President Saca to combat narco-trafficking,
to resolve immigration issues, and to promote free trade, especially through the
Dominican Republic-Central America-United States Free Trade Agreement (DR-
CAFTA). In February 2006, the Bush Administration extended the Temporary
Protected Status (TPS) of eligible Salvadoran migrants living in the United States
until September 9, 2007. On March 1, 2006, El Salvador became the first country
in the region to implement the DR-CAFTA with the United States. In May 2006, El

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Salvador submitted a $441 million proposal to the Millennium Challenge
Corporation that focuses on development of its northern border region. The
Salvadoran government is also seeking further assistance from the Bush
Administration in dealing with the problem of criminal gangs.
CRS Products:
CRS Report RS21655, El Salvador: Political, Economic, and Social Conditions and
Relations with the United States, by Clare Ribando.
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the Free Trade Agreement (DR-CAFTA) with the United States, coordinated by
K. Larry Storrs.
CRS Report RL31870, The Dominican Republic-Central America-United States Free
Trade Agreement (DR-CAFTA), by J. F. Hornbeck.
Guatemala
Congressional concerns regarding Guatemala in the 109th Congress include how
to support its democratic process, reduction of poverty, respect for human rights,
further military reform, and the debate over prohibitions of U.S. military aid to
Guatemala. Guatemala has been consolidating its transition from mostly autocratic
rule toward democratic government since the 1980s, but its institutions remain
fragile. President Oscar Berger made fulfilling the 1996 Peace Accords, including
a profound restructuring of state institutions, a priority. Berger has attacked
corruption and enacted long-delayed military and economic reforms. Political
maneuvering for November 2007 presidential elections has led to defections from
Berger’s center-right alliance, the Gran Alianza Nacional (GANA), and a loss of a
working majority for GANA in the legislature.
In 2005, the Guatemalan legislature passed DR-CAFTA, the Dominican
Republic-Central America-United States Free Trade Agreement. Berger has proposed
compensation programs for sectors that prove to be hurt by the implementation of
DR-CAFTA, which went into effect with Guatemala on July 1, 2006. The Bush
Administration’s proposal for FY2007 funding includes rural development projects
it says will help in the adjustment to DR-CAFTA.
Extreme poverty and inequality persist in Guatemala. About 56% of the total
population, and 76% of the indigenous population, live in poverty. According to the
World Bank, Guatemala has one of the largest income distribution gaps in the world.
Guatemala’s social indicators continue to be among the worst in the hemisphere. Its
malnutrition rates are among the worst in the world; 44% of children under five years
of age have stunted growth. Guatemala’s illiteracy rate is extremely high. The
average level of schooling is 4.3 years, and among the poor, it is less than two years.

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Regarding respect for human rights, Guatemala has made enormous strides, but
significant problems remain. The U.N., the OAS, and the United States have all
expressed concern that human rights violations have increased in recent years, that
the Guatemalan government has taken insufficient steps to curb them, and that a lack
of investigation and punishment create impunity. According to the State
Department’s human rights report for 2005, the Guatemalan government “generally
respected the human rights of its citizens,” but “serious problems” remained,
including reported extrajudicial killings and kidnaping for ransom by security forces,
and social cleansing.
The Bush Administration proposed in its FY2006 budget to provide military aid
to Guatemala that had been prohibited since 1990 because of human rights concerns.
While applauding the reduction in forces and other reforms, some human rights
groups express concern about continued human rights abuses and impunity among
the military. Congress maintained the existing restrictions in FY2006 (P.L. 109-
102), allowing only expanded-International Military Education and Training in
military justice reform, respect for human rights, and for civilians in defense matters,
and prohibiting Foreign Military Financing (FMF) for Guatemala.
For FY2007, the House-passed foreign operations bill, H.R. 5522, would only
prohibit FMF. Although the Administration did not seek FMF for Guatemala in its
request, the Senate Appropriations Committee-reported version of the bill would
direct up to $500,000 in FMF be made available for the Guatemalan Air Force and
Navy, only for spare aircraft parts, and motors for boats patrolling a river frequented
by drug traffickers.
The Senate Committee-reported version of H.R. 5522 also would provide
Guatemala with IMET assistance “only to support efforts of the military to participate
in international peacekeeping operations and improve disaster response capabilities.”
It also would prohibit funds to security forces of a foreign country if there is “credible
evidence” that those forces have committed gross violations of human rights, unless
the Secretary of State reports to the Appropriations Committees that such a country’s
government “is taking effective measures to bring the responsible members of the
security forces unit to justice.” It would also provide that if funds were withheld
pursuant to this condition, the Secretary of State should inform the foreign
government of the basis for doing so, and assist that government in bringing the
responsible security force members to justice. The Senate also supported State
Department and U.N. efforts to encourage the Guatemalan government to carry out
human rights-related reforms, including establishing an international commission to
investigate, dismantle, and prosecute networks responsible for political violence; and
setting timetables for ending the role of the army in internal law enforcement and
rebuilding the National Civilian Police. The Administration says it will provide
Guatemala with non-lethal Excess Defense Articles on a limited case-by-case basis
in 2007.
Immigration is an area of contention in U.S.-Guatemalan relations in 2006. A
House-passed bill (H.R. 4437) would make unlawful presence in the United States
a criminal, rather than a civil offense and would increase border barriers. Guatemala
joined the Mexican and other Central American governments in criticizing U.S.
efforts to toughen border enforcement and demanded guest-worker programs. The

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countries said they were seeking integrated solutions, by which they would try to
decrease illegal emigration, and the United States would help create conditions to
lessen the need to migrate. A Senate-passed bill (S. 2611) would combine
enforcement with guest-worker provisions.
CRS Products:
CRS Report RL32124, Guatemala: Political Conditions, Elections, and Human
Rights, by Maureen Taft-Morales.
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the Free Trade Agreement (DR-CAFTA) with the United States, coordinated by
K. Larry Storrs.
CRS Report RL31870, The Dominican Republic-Central America-United States Free
Trade Agreement (DR-CAFTA), by J. F. Hornbeck.
Haiti
The main issue for U.S. policy during the second session of the 109th Congress
is how to promote greater stability and strengthen democratic processes in Haiti most
effectively. With an elected President and legislature in place, the U.S. focus has
shifted to assisting the new government. The Administration hopes that an elected
government will ease the development of a functioning infrastructure and a reduction
in violence, making it easier to pursue other U.S. goals in Haiti, such as promoting
democracy, encouraging respect for human rights, alleviating poverty, and decreasing
narcotics trafficking. A further Administration goal, of limiting illegal immigration,
has been challenged by some Members as not affording adequate protection for
Haitian asylum-seekers.
Presidential and legislative elections were held on February 7, 2006, and runoff
legislative elections on April 21, after being postponed several times since fall 2005
amidst technical and security concerns. Former President Rene Preval (1996-2000)
was declared the winner after a week of controversy over the tabulation of votes, and
inaugurated on May 14. Preval outlined the two main missions of his government
to be building institutions as provided for in the constitution, and creating conditions
for private investment in order to create jobs. He emphasized that these must be done
through dialogue among all sectors and creating a secure environment. To that end,
he has asked the United Nations Stabilization Mission in Haiti (MINUSTAH) to stay
and has also said he will promote a constitutional change to formalize the dissolution
of the Haitian army. Preval has placed the needs of Haitian children at the top of his
political agenda, and UNICEF has pledged to mobilize international assistance to
support those needs. Preval says he will cooperate fully with U.S. counternarcotics
efforts; he asked for U.S. support for public works projects and passage of legislation
to give Haiti trade preferences.
The House International Relations Committee is expected to mark up a bill on
September 13, 2006, that would support Haitian efforts to strengthen institutions. A

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manager’s amendment to H.R. 611, the Haiti Economic and Infrastructure
Reconstruction Act, would authorize $3 million annually from FY2006 to FY2022
for a USAID program to encourage U.S. professionals, especially Haitian-Americans,
to help reform Haitian education, judicial, and health care systems.
Supporters of special trade preferences for Haiti reintroduced the Haiti
Economic Recovery Opportunity Act (HERO, H.R. 4211/S. 1937) for consideration
in the fall of 2005. The bill would expand U.S. preferential trade for Haiti by
amending the Caribbean Basin Economic Recovery Act. Members have also worked
on a compromise bill, the Haitian Hemispheric Opportunity through Partnership
Encouragement Act (HOPE). The 2004 draft had more restrictive country of origin
rules for apparel components than HERO; it has also been discussed in the 109th
Congress but has never been introduced.
The Bush Administration is providing an estimated $194 million for Haiti for
FY2006 and requested $198 million for FY2007. Child survival and health,
development assistance, and counter narcotics assistance funds would be decreased.
HIV/AIDS Funding would be increased. Congress provided an additional $20
million for Haiti in an emergency supplemental bill (H.R. 4939, P.L. 109-234, signed
into law June 15, 2006). The bill includes $17.5 million in Economic Support Funds
and $5 million in Child Survival and Health funds for Haiti.
Former President Jean-Bertrand Aristide, who had maintained he was still
Haiti’s president since his departure in February 2004, acknowledged Preval as “my
President” and said he wants to return to Haiti from exile. Preval has been estranged
in recent years from Aristide, his former mentor. Publicly, Preval has said that
Aristide has the constitutional right to return, but has also suggested that Aristide
might want to consider that he will probably face corruption or other charges if he
were to return. Privately, he is said to agree with foreign diplomats that Aristide’s
return would be destabilizing.7 But Preval must tread carefully, as much of his
support came from Haiti’s poor, Aristide’s strongest supporters, many of whom now
expect Aristide to return.
In July 2006, international donors pledged $750 million to bridge Haiti’s budget
gap and fund economic, social, and democratic reconstruction projects from July
2006 through September 2007.
7 Joe Mozingo, “Haiti’s New Leader Fears Mentor’s Return,” Knight Ridder, San Jose
Mercury News, March 5, 2006.

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CRS Products:
CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current
Congressional Concerns, by Maureen Taft-Morales.
CRS Report RL33156, Haiti: International Assistance Strategy fro the Interim
Government and Congressional Concerns, by Maureen Taft-Morales.
CRS Report RS21349, U.S. Immigration Policy on Haitian Migrants, by Ruth Ellen
Wasem.
CRS Report RS21839, Haitian Textile Industry: Impact of Proposed Trade
Assistance, by Bernard A. Gelb.
Honduras
Honduras faces significant challenges in the areas of crime and human rights
and improving overall economic and living conditions in one of the hemisphere’s
poorest countries. In November 2005, Hondurans elected Manuel Zelaya of the
Liberal Party as president in a close race in which he defeated National Party
candidate Porfirio Lobo Sosa. Zelaya was inaugurated on January 27, 2006 to a four-
year term, succeeding President Ricardo Maduro of the National Party. Zelaya’s
Liberal Party failed to gain a majority in the National Congress, which could make
it more difficult in passing his legislative agenda. Fulfilling his campaign pledge,
Zelaya has moved to replace President Maduro’s zero-tolerance policy toward youth
gangs, or maras, and is using dialogue and other outreach techniques to convince
gang members to give up violence and re-integrate into society.
The United States has a close relationship with Honduras, characterized by
significant foreign assistance, an important trade partnership, a military presence in
the country, and cooperation on a range of transnational issues. Honduras is a party
to the Dominican Republic-Central America-United States Free Trade Agreement
(DR-CAFTA), which was approved by the Honduran Congress in March 2005 and
by the U.S. Congress in July 2005 (P.L. 109-53). The agreement entered into force
with Honduras on April 1, 2006. On February 23, 2006, the Department of
Homeland Security announced the extension of Temporary Protected Status (TPS)
for some 75,000 eligible Hondurans in the United States until July 5, 2007. TPS,
which had been scheduled to expire on July 5, 2006, initially was provided in the
aftermath of Hurricane Mitch in 1998 and has been extended several times. In late
March 2006, the Bush Administration announced that the Honduran port of Puerto
Cortes was now included in the U.S. Container Security Initiative (CSI).

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CRS Products:
CRS Report RS21103, Honduras: Political and Economic Situation and U.S.
Relations, by Mark P. Sullivan.
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the Free Trade Agreement (DR-CAFTA) with the United States, coordinated by
K. Larry Storrs.
CRS Report RL31870, The Dominican Republic-Central America-United States Free
Trade Agreement (DR-CAFTA), by J. F. Hornbeck.
Mexico
After a tight race and contested vote, conservative Felipe Calderón of the
National Action Party (PAN) was named president-elect on September 5, 2006. He
will replace outgoing President Vicente Fox (PAN) whose term ends December 1,
2006. Mexico’s constitution limits presidents to one term in office. President-elect
Calderón narrowly defeated leftist Andrés Manuel López Obrador of the Party of the
Democratic Revolution (PRD) in the July 2 election. The PRD candidate challenged
the July election results, alleging that there was fraud at the polling places and illegal
interference in the election by President Fox and conservative business groups.
Mexico’s Federal Electoral Tribunal (TEPJF), whose decisions cannot be appealed,
found that President Fox did not illegally interfere in the election. The Tribunal did
find that commercials paid for by business groups at the end of the campaign were
illegal but that the impact of the ads was insufficient to warrant the annulment of the
presidential election. López Obrador has led a campaign of civil disobedience since
the election, including the blockade of Mexico City’s principal avenue, Paseo de la
Reforma. He rejected the election tribunal’s September 5 ruling and has promised to
hold an assembly at the Zocalo, Mexico City’s main square, on September 16 at
which he will be named head of a parallel government. On September 1, 2006, PRD
members of congress prevented President Fox from delivering the state of the union
address at the Mexican Congress.

Congressional interest in Mexico generally focuses on migration, border affairs,
trade issues, and drug trafficking concerns. Both the House and Senate approved
immigration reform measures in recent months. The House measure, H.R. 4437
(Border Protection, Antiterrorism, and Illegal Immigration Control Act of 2005),
would strengthen border and immigration controls, including deployment of a fence
and surveillance equipment along the Mexico-U.S. border, and would make unlawful
presence in the United States a felony. The Senate measure, S. 2611 (Comprehensive
Immigration Reform Act of 2006), includes enforcement measures, though it does
not make unlawful presence a felony. The Senate bill also includes a guest worker
program and allows most illegal immigrants to normalize their status in the United
States. The House and Senate are to meet in conference to resolve the differences,
though conference dates had yet to be set in early September 2006. In May 2005,
Congress passed the FY2005 Emergency Supplemental Appropriations (H.R.
1268/P.L. 109-13), which included the REAL ID Act of 2005, with provisions that

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strengthened border control and established identity card standards for drivers’
licenses.8
On March 3, 2006, Homeland Security Secretary Michael Chertoff and
Mexico’s Secretary of Governance Carlos Abascal signed an action plan to combat
border violence that calls for increased cooperation of law enforcement agencies and
the establishment of communication protocols to facilitate such cooperation. A June
2005 report by Security and Prosperity Partnership (SPP) of North America working
groups outlined completed initiatives and proposed new initiatives to ensure common
security and prosperity. Completed initiatives include measures to facilitate trade,
such as the signing of a Framework of Common Principles for Electronic Commerce,
and border security through, among other measures, an agreement between the
United States and Mexico to create an Alien Smuggler Prosecution Program along
the common border. On November 2, 2005, Homeland Security Secretary Chertoff
launched the “Secure Border Initiative” to gain operational control of U.S. borders
and reduce illegal immigration, drawing upon increased funding approved by
Congress in early October 2005. In August 2006, U.S. and Mexican border
governors agreed to share crime data.
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), but there are various disputes between the countries. Mexico has
complained, for example, that the United States is still failing to grant Mexican
trucks access to U.S. highways, in part because of congressionally-imposed safety
requirements. The United States, for example, initiated WTO dispute settlement
proceedings in 2004 to dispute Mexico’s 20% tax on soft drinks made with high
fructose corn syrup (HFCS). The tax has had a devastating impact on HFCS sales.
In November 2005, the Mexican Senate extended the tax on HFCS products. In
March 2006, the WTO Appellate Body upheld the October 2005 decision in favor of
the United States. For FY2006, the United States set a new tariff-rate quota of
250,000 metric tons of raw or refined sugar from Mexico, in keeping with Mexican
claims under NAFTA, and Mexico followed suit by allowing up to 250,000 metric
tons of HFCS from the United States in the same period. Mexico and the United
States reached a sweetener agreement in August 2006. Under the agreement, Mexico
will be able to export 500,000 metric tons of sugar duty free to the United States
from October 1, 2006, to December 31, 2007. The United States can export the same
amount of HFCS to Mexico during that period.
On drug trafficking issues, Bush Administration officials have regularly praised
Mexico’s counternarcotics efforts under Fox, especially action against major
traffickers and efforts to improve the judicial system. The State Department reported
in March 2006, however, that Mexico remained the leading transit country for
cocaine and the leading foreign supplier of methamphetamine and marijuana.
Several bills (H.R. 3889, H.R. 2601) have been reported by committees to encourage
a reduction of smuggling of methamphetamine from Mexico. In May 2006, President
8 For more information see CRS Report RL33125, Immigration Legislation and Issues in
the 109th Congress, by Andorra Bruno, Ruth Ellen Wasem, Alison Siskin, and Blas Nunez-
Neto.

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Fox vetoed counternarcotics legislation, including a provision that some said
amounted to the decriminalization of small amounts of drugs for personal use. In his
veto, President Fox included a suggested amendment for the Mexican Congress to
consider. The U.S. Coast Guard captured Francisco Javier “El Tigrillo” Arellano
Felix, head of the Tijuana cartel, off the coast of Baja California.
In November 2005, the Mexican Supreme Court ruled that life imprisonment
without the possibility of parole does not constitute cruel and unusual punishment.
As a result of this decision, criminals facing life imprisonment may be extradited to
the United States. A January 2006 ruling that U.S. extradition requests only need to
meet the requirements of the 1978 bilateral treaty, not the general law on
international extradition, is likely to speed up the extradition of criminals wanted by
the United States. In 2005, Mexico extradited an all-time high of 41 fugitives to the
United States. The FY2006 Foreign Operations Appropriations Act (H.R. 3057/P.L.
109-102), enacted in November 2005, bars assistance to a country that refuses to
extradite individuals accused of killing U.S. law enforcement officers, unless the
Secretary of State certifies that application of the sanction is contrary to U.S. national
interests. Similarly, the House-passed version of the FY2007 Foreign Operations
appropriations bill, H.R. 5522, would prohibit provision of State Department funds
to countries that refuse to extradite a person indicted in the United States for killing
a law enforcement officer. The bill also would prohibit all State Department
assistance, except International Narcotics Control and Law Enforcement (INCLE)
funds, to countries that refuse to extradite persons who may face a sentence of life
imprisonment without the possibility of parole.
CRS Products:
CRS Report RL33125, Immigration Legislation and Issues in the 109th Congress,
coordinated by Andorra Bruno.
CRS Report RL32044, Immigration: Policy Considerations Related to Guest Worker
Programs, by Andorra Bruno.
CRS Report RL32724, Mexico-U.S. Relations: Issues for the 109th Congress, by
Colleen Cook.
CRS Report RS22462, Mexico’s 2006 Elections, by Colleen Cook.
CRS Report RL32669, Mexico’s Counter-Narcotics Efforts Under Fox, December
2000 to October 2004, by K. Larry Storrs.
CRS Report RS21737, NAFTA at Ten: Lessons from Recent Studies, by J.F.
Hornbeck.
CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and
Implications, by M. Angeles Villarreal.

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Nicaragua
After more than a year of political tensions among current President Enrique
Bolaños, the leftist Sandinista party (Sandinista National Liberation Front, FSLN),
and allies of rightist former President Arnoldo Alemán (1997-2002), attention in
Nicaragua has shifted to national elections scheduled for November 5, 2006.
Currently leading the presidential race, according to recent polls, is Sandinista leader
and former President Daniel Ortega (32.1%), whose administration (1985-1991) was
marked by a civil war with U.S.-backed “contras,” authoritarian tendencies, and
charges of corruption. Since then, Ortega, who lost the last three presidential
elections, has served as an opposition leader of the FSLN in the Nicaraguan
Assembly. In second place is Eduardo Montealegre (25%), a Harvard-educated
banker and former finance minister who split from the conservative Liberal party
dominated by Aleman; Montealegre advocates continued political reform. He is
regarded by many as the U.S.-favored candidate. In third place is Edmundo Jarquin
(19.9%), an economist who worked at the Inter-American Development Bank and
left the FSLN in opposition to Ortega and in favor of political reform. He became
the presidential candidate of the Sandinista Renewal Movement (MRS) when
nominee Herty Lewites died suddenly in July 2006. In fourth place is the PLC
candidate, José Rizo (13.7%), an ally of Alemán and critic of President Bolaños.
Under Nicaraguan electoral law, a presidential candidate must win either 40%
of valid votes, or 35% of the vote plus at least 5% more votes than the second-place
candidate in order to win in a first round. Failing that, a run-off vote between the top
two candidates is held. The 90-member National Assembly will also be elected. A
non-governmental group providing electoral support expressed concern that more
than a third of Nicaraguans could be disenfranchised in the November elections, a
number that could affect the outcome of the elections. An audit by a Nicaraguan
election observation group, Ethics and Transparency, revealed a high rate of errors
on voter registry lists, and only about 28% of voters participated in a drive to verify
and correct the lists. Other citizens are having trouble getting voter identification
cards needed to vote.9 As of May 11, 2006, U.S. Agency for International
Development (USAID) elections support for Nicaragua totaled $10.6 million. This
is expected to increase to at least $12 million to expand election support activities.
Critics have accused both U.S. officials and Venezuelan President Hugo Chávez of
trying to influence the election’s outcome: the U.S. embassy for making critical
remarks, such as alluding to Ortega and Rizo as “two corrupt bosses;” Chávez for
supporting Ortega by providing fertilizer and oil under favorable terms through
Sandinista-dominated groups. U.S. Ambassador Paul Trivelli, asserting his right to
express his opinion, rejected calls to stop commenting on the elections.10
During the height of tensions, President Bolaños invoked the OAS Inter-
American Democratic Charter, and the OAS sent several high-level delegations to
help negotiate a solution. Bolaños had been isolated by his anti-corruption efforts
against Alemán, who was sentenced to 20 years in prison in 2003 for fraud and
9 National Democratic Institute, “Field Report: Nicaragua,” June 1-30, 2006.
10 Filadelfo Aleman, “U.S. Official: Nicaraguan Voters Face Stark Choices in November
Election,” Associated Press, April 27, 2006.

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money-laundering. Aleman still controls the PLC, and has obtained a conditional
release. Ortega announced he was breaking the power-sharing pact between his party
and the PLC that had defined national politics since it was negotiated in 1998 and
hampered Bolaños’ ability to govern. Reforms such as the passage of the 2006
budget, the first-ever tax code, local government transfers, and financial
administration reforms then passed. Ortega and Bolaños then agreed to postpone the
implementation of constitutional amendments at the root of the tensions. These
amendments will transfer significant executive powers to the legislature in February
2007, under the newly elected government. The FSLN and PLC still control many
state institutions, however, including the electoral authority.
The National Assembly approved DR-CAFTA in October 2005 and passed
intellectual property and other reforms in March 2006. It went into effect on April
1, 2006. Nicaragua is the second poorest nation in the hemisphere, rating only above
Haiti. Nicaragua’s poverty is widespread and acute. More than two-thirds of the
rural population live in poverty. Some social indicators have shown little or no
improvement since 1993. DR-CAFTA supporters say the agreement will promote
economic growth, create jobs, and increase exports to the United States. In 2005, the
Administration signed a five-year, $175 million agreement with Nicaragua under the
Millennium Challenge Account program to promote rural development.
The Bush Administration suspended military assistance to Nicaragua in March
2005, resuming it in October when an agreement was worked out to destroy anti-
aircraft missiles the Administration says constitute a possible terrorist threat. The
National Assembly suddenly voted on a law authorizing the missiles’ destruction on
July 13. Sandinista legislators walked out in protest, but PLC and Nicaraguan Liberal
Alliance (ALN) legislators passed the bill 46 to 1. Nicaragua is to host a meeting of
hemispheric defense chiefs in October 2006.
Resolution of property claims by U.S. citizens and immigration are contentious
areas in U.S.-Nicaraguan relations. Nicaragua passed a law, now on hold until 2007,
creating a new Property Institute that could lead to the dismissal of property claim
lawsuits arising from expropriations carried out by the Sandinista government in the
1980s. A House-passed immigration bill (H.R. 4437) would make unlawful presence
in the United States a criminal, rather than a civil offense. A Senate-passed bill (S.
2611) would combine enforcement with guest-worker provisions. Nicaragua joined
the Mexican and other Central American governments in criticizing U.S. efforts to
increase border enforcement and demanded guest-worker programs. In February
2006, the Department of Homeland Security extended Temporary Protected Status
(TPS) for about 4,000 eligible Nicaraguans living in the United States until July 5,
2007. Other issues of concern to Congress include improving respect for human
rights, improving civilian control over defense policy, increasing Nicaragua’s
capacity to combat transnational crimes such as trafficking in people and narcotics,
reforming the judicial system and implementing good governance.

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CRS Products:
CRS Report RL32322, Central America and the Dominican Republic in the Context of
the Free Trade Agreement (DR-CAFTA) with the United States, coordinated by
K. Larry Storrs.
Panama
With four successive elected civilian governments, the Central American nation
of Panama has made notable political and economic progress since the 1989 U.S.
military intervention that ousted the regime of General Manuel Antonio Noriega from
power. The current President, Martín Torrijos of the Democratic Revolutionary Party
(PRD), was elected in May 2004 and inaugurated on September 1, 2004. Torrijos,
the son of former populist leader General Omar Torrijos, won a decisive electoral
victory with almost 48% of the vote in a four-man race. He succeeded President
Mireya Moscoso of the Arnulfist Party (PA), elected in 1999, whose administration
was tainted by several high-profile corruption scandals. Torrijos’ electoral alliance
also won a majority of seats in the unicameral Legislative Assembly.
The most significant challenges facing the Torrijos government have included
dealing with the funding deficits of the country’s social security fund; developing
plans for the expansion of the Panama Canal; and combating unemployment and
poverty. After protests and a protracted strike by construction workers, doctors, and
teachers in 2005, the Torrijos government was forced to modify its plans for
reforming the social security fund. In April 2006, the government unveiled its
ambitious $5.25 plan to build a third lane and new set of locks that will double the
Canal’s capacity and allow giant cargo container ships, known as post-Panamax
ships, to transit the Canal. Panama’s Cabinet approved the expansion plan on June
14, and the Legislative Assembly approved it on July 10, 2006. A referendum on the
expansion project is scheduled for October 22, 2006. A poll in early August showed
that 54% of Panamanians support the project, 17% oppose it, and almost 29% are
undecided.11
The United States has close relations with Panama, stemming in large part from
the extensive linkages developed when the Panama Canal was under U.S. control and
Panama hosted major U.S. military installations. The current bilateral relationship is
characterized by extensive cooperation on counternarcotics efforts, assistance to help
Panama assure the security of the Canal and its border with Colombia, and
negotiations for a bilateral free trade agreement. The United States provided Panama
with $19 million in total foreign aid in FY2005 and an estimated $14.4 million in
FY2006. The FY2007 request is for $11.7 million, with $4 million under the Andean
Counterdrug Initiative and $3.2 million in Development Assistance.
U.S.-Panamanian negotiations for a bilateral free trade agreement began in late
April 2004. A ninth round held in Washington ended in mid- January 2006, with
11 Economist Intelligence Unit, “Country Report Panama,” August 2006.

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disagreement on sanitary control systems for U.S. products and animals to enter the
Panamanian market. Conclusion of the agreement reportedly has been postponed
until January 2007 at the earliest because of the Torrijos government’s current
attention to the canal expansion referendum.12 Panama is seeking an FTA as a means
of increasing U.S. investment in the country, while the Bush Administration has
stressed that an FTA, in addition to enhancing trade, would further U.S. efforts to
strengthen support for democracy and the rule of law. Since Panama has a service-
based economy, it traditionally has imported much more than it exports to the United
States. (Also see “U.S.-Panama Free Trade Agreement (FTA)” above.)
CRS Products:
CRS Report RL30981, Panama: Political and Economic Conditions and U.S.
Relations, by Mark P. Sullivan.
CRS Report RL32540, The Proposed U.S.-Panama Free Trade Agreement, by J.F.
Hornbeck.
Peru
Former President Alan Garcia continued his political comeback by being
elected President on June 4, 2006, defeating populist Ollanta Humala. The left-of-
center Garcia was inaugurated on July 28. Municipal and regional elections will be
held on November 19, 2006. Garcia’s earlier presidency (1985-1990), characterized
by many observers as disastrous, was marked by hyper-inflation and a violent
guerrilla insurgency. But with conservative candidate Lourdes Flores edged out of
the race in the first round, many observers cast Garcia as “the lesser of two evils” in
the second round. Garcia also took advantage of a backlash of sentiment against
Venezuela’s President Hugo Chávez, who supported Humala. Chavez raised fears
among middle- and upper-class Peruvians of expropriations reminiscent of those that
occurred under a military dictator praised by both Chávez and Humala. Humala, a
retired army officer who led an uprising against then-President Fujimori, espoused
nationalist, anti-globalization policies. Many observers were concerned that Humala
had authoritarian tendencies. Humala was charged in August with murder in
connection to his military actions in the 1990s. His coalition is splintering, leaving
Garcia’s Apra party with the largest bloc of seats in the legislature.
Despite being barred from holding office until 2010 and being charged with
ordering murder and torture, former President Alberto Fujimori (1990-2000) tried to
return to Peru to run for president. The Chilean government arrested him in
November 2005, released him on bail in May 2006, and is processing Peru’s request
for his extradition. His alliance won 15 seats in the legislature.
The previous President, Alejandro Toledo, presided over one of the highest
economic growth rates in Latin America throughout his term. His popularity was
12 Ibid.

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extremely low, however, and he could not run for reelection because of term limits.
As Toledo’s successor, Garcia will be under enormous social pressure to reduce the
level of poverty in Peru and widen the distribution of economic growth. Poverty is
concentrated in rural and jungle areas, and among the indigenous population. The
wealthiest 20% of the population receive 53% of the country’s income, while the
poorest 20% receive only 3%.13
Issues in U.S.-Peruvian relations include trade, drugs, security, and democracy.
The United States completed negotiations for a free trade agreement with Peru in
December 2005, and an agreement was signed in April 2006. The Peruvian
legislature ratified the agreement in June. Some Members of the U.S. Congress have
expressed concern over unresolved trade disputes with Peru and whether
International Labor Organization standards should be included. Both the House and
Senate held mock mark-ups of the U.S.-Peru Trade Promotion Agreement in July
2006. Peru is a major illicit drug-producing and transit country. Its anti-narcotics
agency reported that coca planting outstripped eradication in 2004 and that the local
drug industry appears to be producing pure cocaine now rather than sending it to
Colombia to be processed. Garcia’s administration has already begun a dialogue
with coca growers and told the Bush administration that Peru would extradite
convicted drug traffickers to the United States. A cell of the Shining Path, the
extreme left guerrilla group active in the 1980s and early 1990s, rejected the 1992
cease-fire and carried out fatal attacks in coca growing areas. The Administration
requested $98.5 million in FY2007 Andean Counterdrug Initiative funds for Peru,
less than one-fourth of the funding Colombia receives. Democracy and human rights
initiatives include the provision of $50 million over five years to support
consolidating democratic reform.
Also see sections above on the “Andean Counterdrug Initiative” and on the
“U.S.-Peru Free Trade Agreement.”
CRS Products:
CRS Report RS22430, Peru: 2006 Relations and Issues for Congress, by Maureen
Taft-Morales.
CRS Report RS22391, U.S.-Peru Trade Promotion Agreement, by M. Angeles
Villarreal
CRS Report RL32770, Andean-U.S. Free-Trade Agreement Negotiations, by M.
Angeles Villarreal
CRS Report RS20536, Peruvian Elections in 2000: Congressional Concerns and
Policy Approaches, by Maureen Taft-Morales.
CRS Report RL32337, Andean Counterdrug Initiative (ACI) and Related Funding
Programs: FY2005 Assistance, by Connie Veillette.
13 World Bank, 2005 World Development Indicators, p. 73, March 2005, Washington, DC.

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Venezuela
Under the populist rule of President Hugo Chávez, first elected in 1998,
Venezuela has undergone enormous political changes, with a new constitution, a new
unicameral legislature, and even a new name for the country, the Bolivarian Republic
of Venezuela. U.S. officials and human rights organizations have expressed concerns
about the deterioration of democratic institutions and threats to freedom of speech
and press under the Chávez government. Chávez has survived several attempts to
oust him from power, including an April 2002 coup attempt and an August 2004
recall referendum, which Chávez survived by a vote of 59% to 41%. The country’s
next presidential elections are set for December 3, 2006, and there is a strong chance
that Chávez will win another six-year term. The government has benefitted from the
rise in world oil prices, which has sparked an economic boom. As a result, Chávez
has been able to increase government expenditures on anti-poverty and other social
programs associated with the populist agenda of his Bolivarian revolution.
The United States traditionally has had close relations with Venezuela, the
fourth major supplier of foreign oil to the United States, but there has been friction
in relations with the Chávez government. In 2005, relations deteriorated markedly,
with Venezuela’s cancellation of a bilateral military exchange program and its
suspension of cooperation with the Drug Enforcement Administration (DEA). U.S.
officials have expressed concerns about President Chávez’s plans for military arms
purchases, his relations with such countries as Cuba and Iran, and his efforts to
export his brand of populism to other Latin American countries. A dilemma for U.S.
policymakers has been how to press the Chávez government to adhere to democratic
principles without taking sides in Venezuela’s polarized political conflict.
In the 109th Congress, the FY2006 Foreign Operations appropriations measure
(P.L. 109-102) provided $2 million in FY2006 for Economic Support Funds for
democracy programs in Venezuela and $2.2 million in assistance under the Andean
Counterdrug Initiative (ACI). For FY2007, the Administration requested $1 million
in ACI funding, $1.5 million in ESF for democracy initiatives, and $45,000 for
International Military Education and Training. The House-passed FY2007 Foreign
Operations appropriation bill, H.R. 5522, would provide no ACI funding for
Venezuela, while the Senate Appropriations Committee report to the bill (S.Rept.
109-277) recommends full funding of the Administration’s ACI and ESF requests.
H.Con.Res. 400 (Burton), approved July 26, 2006, condemns Venezuela’s failures
to stem the flow of narcotics through its territory and calls for, among other
measures, steps to restore cooperation between Venezuela and the DEA. Additional
pending legislation in the 109th Congress includes the House-passed version of H.R.
2601, which would authorize $9 million for each of FY2006 and FY2007 for
democracy programs in Venezuela and authorize funds for U.S.-government
broadcasting to Venezuela; H.Con.Res. 224 (Fortuño), which calls on the Venezuelan
government to uphold human rights and civil liberties; H.Con.Res. 328 (Mack),
which condemns President Chávez’s “anti-democratic actions” and expresses strong
U.S. support for democratic forces in Venezuela; and S. 2435 (Lugar), the Energy
Diplomacy and Security Act of 2006, which would increase hemispheric cooperation
on energy issues.

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CRS-43
CRS Products:
CRS Report RL32488, Venezuela: Political Conditions and U.S. Policy, by Mark P.
Sullivan.

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