Mexico and Drug Certification in 1999: Consequences of Decertification

Mexico and Drug Certification in 1999: Consequences of Decertification

Order Code RL30080
CRS Report for Congress
Received through the CRS Web
Mexico and Drug Certification in 1999:
Consequences of Decertification
March 4, 1999
(name redacted)
Specialist in Latin American Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

ABSTRACT
This report summarizes the drug certification requirements mandated by Congress, and
indicates the types of U.S. assistance that could be suspended if Mexico were to be decertified.
It also indicates the types of assistance that could be exempted from suspension, or be
provided by the President anyway, using special authorities. It also indicates how the negative
votes of U.S. representatives would affect multilateral development bank lending to Mexico.
This report will not be updated regularly, but will be updated if conditions warrant. Related
CRS reports include Narcotics Certification of Drug Producing and Trafficking Nations:
Questions and Answers, CRS Report 98-159, by (name redacted), updated March 1, 1999;
Mexico-U.S. Relations: Issues for Congress, CRS Issue Brief 97028, by (name redacted),
updated March 1, 1999; and Mexican Drug Certification Issues: U.S. Congressional Action,
1986-1999, by (name redacted), updated March 4, 1999.

Mexico and Drug Certification in 1999:
Consequences of Decertification
SUMMARY
President Clinton certified, on February 26, 1999, that Mexico was fully
cooperative in counter-narcotics efforts with the United States, setting in motion a 30-
calendar-day period in which the Congress may review the President’s decision. In
recent years, congressional resolutions were advanced but not enacted to disapprove
the President’s certifications after President Clinton certified Mexico as a fully
cooperative country. This report summarizes the drug certification procedures and
indicates the types of U.S. assistance that would be suspended or exempted if Mexico
were to be decertified.
Under Sections 489-490 of the Foreign Assistance Act of 1961, as amended, the
President is required to certify that a country has fully cooperated with U.S. counter-
narcotics efforts to avoid sanctions, including the suspension of certain U.S.
assistance, and the requirement that U.S. representatives vote against loans for the
country in multilateral development banks. The sanctions would also apply if the
Congress, within 30 calendar days, passes a congressional resolution disapproving any
presidential certification. However, any such congressional resolution would have to
be presented to the President and would be subject to veto. Moreover, as indicated
below, some types of assistance are exempted from suspension, and the President has
special authorities to waive sanctions.
With regard to bilateral assistance, the Clinton Administration is planning to
provide $29.85 million in standard foreign assistance and Department of Defense
counter-drug assistance to Mexico in FY1999, including $15.9 million in anti-drug
assistance, and $13.95 million in economic assistance programs. Because of
exclusions for narcotics control assistance and certain economic assistance programs
(some of which require notification to Congress), from $13.50 million to $28.85
million of this assistance could be excluded from suspension if Mexico were
decertified. Mexico may also receive other types of U.S. military and export
assistance in FY1999, including Export-Import Bank financing, which is dependent
upon sales and agreements. Export-Import Bank financing of up to $2 billion per year
is the major category of all types of assistance which would be suspended in the event
of decertification. Since such assistance was developed to finance and guarantee the
sale of U.S. products, these suspensions would be harmful to U.S. exporters and
sellers as well as to Mexican buyers.
With regard to multilateral development bank lending, decertification would
require the United States to vote against pending World Bank and Inter-American
Development Bank loans for Mexico, amounting together to over $5 billion, but such
votes might not affect lending levels significantly because the United States share of
the vote is not sufficient to block approval of loans.

Contents
Summary of the Certification Requirements . . . . . . . . . . . . . . . . . . . . . . . . 1
Consequences of Decertification of Mexico on U.S. Bilateral Assistance . . 2
A. What Assistance Does the United States Provide to Mexico? . . . . 2
B. What Assistance to Mexico Could Be Excluded from Suspension
if Mexico Were Decertified? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. What Assistance Could Be Provided Despite Decertification of
Mexico If the President Exercised Special Waiver Authorities? . . 6
Consequences of Decertification of Mexico on Multilateral Development
Bank Lending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
A. What Amount of Loans Has Mexico Received from Relevant
Multilateral Development Banks (MDBs)? . . . . . . . . . . . . . . . . . 6
B. How Would Current MDB Loans to Mexico Be Affected
if Mexico Were Decertified? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. What Would Be the Impact of U.S. Representatives Voting
Against Multilateral Development Bank Loans to Mexico
if Mexico Were Decertified? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Could the President Waive the Requirement for U.S.
Representatives to Vote Against MDB Loans of Decertified
Countries Using Special Waiver Authorities? . . . . . . . . . . . . . . . 8
List of Tables
Table 1. U.S. Foreign Assistance to Mexico in FY1999 . . . . . . . . . . . . . . . . . . 2
Table 2. Other U.S. Military, Export, and Investment Assistance,
Most Recent Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 3. Multilateral Development Bank Lending to Mexico,
Most Recent Fiscal Years, and Pending Loans . . . . . . . . . . . . . . . . . . . . . . 7

Mexico and Drug Certification in 1999:
Consequences of Decertification1
For many years Congress has monitored presidential certifications of the extent
to which Mexico has cooperated with the United States on counter-narcotics efforts
under requirements that could result in aid and trade sanctions. After providing a
brief summary of the drug certification process, this report discusses the possible
consequences of decertification of Mexico on U.S. bilateral aid to Mexico and on
multilateral development bank lending to Mexico.
Summary of the Certification Requirements
With some modifications in procedure, since the mid-1980s, Congress has
required the President to designate the major illicit drug producing and drug-transit
countries by November 1 of each year. Congress has further required the President
st
to withhold 50% of certain U.S. assistance for the designated countries for that fiscal
year until he certifies by March 1 of each year that the countries have cooperate
st
d
fully with the United States in drug control efforts. In the event the President is
unable to certify that the country is fully cooperative or to determine that the country
should be given a certification in the national interest, non-exempted assistance to the
decertified country is suspended, and U.S. representatives are required to vote against
loans for the country in the multilateral development banks. These sanctions remain
in force until the country is certified.2
The sanctions would also apply if Congress, within 30 calendar days, passes a
congressional resolution disapproving any presidential certification and decertifies a
1This report draws from and updates Narcotics Certification and Mexico: Questions and
Answers, CRS Report 97-320, March 6, 1997, by (name redacted), Jonathan Sanford, and (n
a me redacted). An earlier version
of this report was prepared for the Senate Foreign Relations
Committee, and it is being released with the permission of the Committee.
2Congress required reports on drug producing and transit countries in 1981, and gave the
President the authority to suspend assistance to non-cooperative countries in 1984. With the
passage of the Drug Abuse Act of 1986, the Congress required the President to withhold 50%
of assistance to drug producing and transit countries until he could certify that they were
cooperating fully with U.S. counter-narcotics efforts, and it provided for congressional review
of presidential certifications. This legislation has been modified over the years and is now
found in Sections 489-490 of the Foreign Assistance Act of 1961, as amended. Acting
through the Drug Abuse Act of 1986, the Congress also added trade sanctions in Title VIII
(the Narcotics Control Trade Act) of the Trade Act of 1974, as amended. This Act gives the
President the discretion to apply certain trade sanctions to decertified countries, including
denial of preferential trade benefits, increases in tariff duties, curtailment of air transportation,
and withdrawal of U.S. personnel and resources from customs pre-clearance arrangements.
Some other sanctions were added subsequently.

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country. However, any such congressional resolution would be subject to presidential
veto, and some types of assistance are exempted from suspension. Moreover, the
President has specified authority to waive certain sanctions, and Section 614 of the
Foreign Assistance Act of 1961, as amended, gives the President broad authority to
continue to provide any assistance under the Act if he determines and notifies
Congress that to do so is important to the security interests of the United States.3

Consequences of Decertification of Mexico
on U.S. Bilateral Assistance
A. What Assistance Does the United States Provide to Mexico? Section
481(e)(4) of the Foreign Assistance Act of 1961, as amended, specifies that the
following types of assistance would be affected by a decertification: (a) any non-
exempted assistance under the Foreign Assistance Act; (b) sales, or financing on any
terms under the Arms Export Control Act; (c) provision of non-food agricultural
commodities under the Agricultural Trade Development and Assistance Act of 1954;
and (d) financing under the Export-Import Bank Act of 1945. Mexico is scheduled
to receive a variety of these types of assistance from the United States in fiscal year
1999, as indicated below in Tables 1 and 2, although much of the assistance may be
excluded from suspension, as explained in the next section.
Table 1. U.S. Foreign Assistance to Mexico in FY1999
(Millions of U.S. dollars)
Total Foreign Assistance Programmed for Mexico:
$29.850
Economic Assistance--Total
$13.950
Development Assistance (DA)
$11.450
Economic Support Funds (ESF)
$ 1.500
International Narcotics Assistance (INC)
$ 1.000
Public Law 480 Food Assistance (Titles I,II,III)
$ -0-
Peace Corps
$ -0-
International Narcotics Control (INC) Assistance
$ 7.000
Military Assistance--Total
$ 1.000
Foreign Military Financing
$ -0-
International Military Education Training (IMET)
$ 1.000
Department of Defense Counter-Drug Assistance
$ 7.900
3See Narcotics Certification of Drug Producing and Trafficking Nations: Questions and
Answers, CRS Report 98-159F, March 1, 1999, 1998, by (name redacted); and Consequences
of Inadequate Counternarcotics Performance, Memorandum by Jo Brooks of the Department
of State Bureau of Legal Affairs, February 23, 1995.

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Under standard foreign assistance and Department of Defense counter-drug
assistance programs the United States is planning to provide a total of $29.85 million
to Mexico in the FY1999 operational budget, including $8 million in State
Department-controlled international narcotics control assistance and training, $7.9
million in Department of Defense counter-drug assistance, $1 million in International
Military Education and Training (IMET), and $13.95 million in economic assistance
programs, including $1 million in AID-administered INC funding.4
Economic assistance funds support programs in the environment, health, and
democracy sectors. Assistance to the environment sector is by far the largest ($9
million, or 65% of economic assistance), and supports programs to conserve and
promote sustainable use of forests and marine ecosystems ($3.18 million), to reduce
greenhouse gas emissions and pollution ($2.82 million), and to prevent wildfires and
restore areas damaged in 1998 ($3 million). Assistance in the health sector ($1.7
million, or 12% of economic assistance) supports programs to curtail the spread of
HIV/AIDS ($1.2 million) and to control tuberculosis in poor and migrant populations
($500,000). Assistance in the democracy sector ($3.25 million, or 23% of economic
assistance) supports programs to modernize the judiciary and the legislature, and to
strengthen local government and citizen participation. Similar amounts have been
provided to Mexico in previous years, with many of the programs carrying over
several years. Similar funding has been requested for FY2000, and would be
suspended under a decertification until Mexico was fully certified under recertification
procedures, although much of the funding might also be exempted from suspension.
Assistance of the type indicated in Table 2 is not programmed in advance, but
is dependent upon the sales, agreements, or investments that are made during the
year. This category includes (1) drawdowns of U.S. military goods and services
under Section 506(a) of the Foreign Assistance Act of 1961, as amended; (2) transfers
of used and excess defense articles; (3) government-to-government foreign military
sales; (4) OPIC loans and guarantees for U.S. investments; and (5) Export-Import
Bank financing and guarantees for U.S. exports. By far the largest program in this
category is Export-Import Bank financing that ranged in the last two fiscal years from
$782 million in FY1997 to $1.58 billion in FY1998. During President Clinton’s visit
to Mexico on February 14-15, 1999, he announced that the United States would
provide up to $4 billion of Export-Import Bank financing in FY1999 and FY2000 to
support the sales of U.S. products in Mexico.
Other
4
types of assistance withheld from countries with inadequate counter-narcotics efforts
include sugar quotas, special debt relief, and sharing of forfeited assets. Suspension of the
first two are not triggered by decertification, Mexico is not eligible for special debt relief, and
Mexico is not presently sharing forfeited assets.

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Table 2. Other U.S. Military, Export, and Investment Assistance,
Most Recent Fiscal Years
(Millions of U.S. dollars)
DoD Section 506(a) Drawdowns:
$ 1.100 in FY1998
Excess Defense Articles:
$ 3.023 (grant) in current value in FY1997;
$ 0.232 (sale) in FY1998
Foreign Military Sales:
$ 27.663 in FY1997
$ 1.081 in FY1998
Export-Import Bank Financing:
$ 782.025 in loans and insurance in FY1997;
$ 1,576.490 in loans and insurance in FY1998
$ 2,000.000 in loans and insurance available for FY1999
Overseas Private Investment Corporation (OPIC) loans/guarantees:
-0- in FY1997 and FY1998; no program in Mexico
B. What Assistance to Mexico Could Be Excluded from Suspension if
Mexico Were Decertified? In accordance with provisions in the Foreign Assistance
Act and in Foreign Operations Appropriations Acts, some types of foreign assistance,
including narcotics control, disaster relief, child survival and disease, and conservation
assistance, are excluded from suspension when a country is decertified under the drug
certification requirements. Other types of assistance are excludable upon notification
to Congress. As indicated below, under these exclusions, from $13.50 million to
$28.85 million of standard foreign assistance would be excluded from suspension, and
drawdowns of military equipment and foreign military sales would be excluded as
well. Export-Import Bank financing would not be excluded and would be cut off.

Exclusion of Narcotics Control, Disaster Relief, Food and Medicine, and
Refugee Assistance. Section 481(e)(4) of the Foreign Assistance Act of 1961, as
amended, provides that the following types of assistance would not be suspended
upon a decertification: (a) narcotics control assistance, (b) narcotics control-related
assistance, (c) disaster relief assistance, (d) food or medicine, and (e) assistance for
refugees. In the case of Mexico, this means that $8 million of the State Department’s
International Narcotics Control (INC) Assistance would be excluded from suspension,
while the $7.9 million of the Department of Defense’s Counter-Drug assistance would
be excluded from suspension because it is not authorized by the Foreign Assistance
Act of 1961 and is for counter-narcotics purposes.
Exclusion of Child Survival and Disease Programs. Section 522 of the
Foreign Operations Appropriations Act for FY1999 provides that funds appropriated
by this Act that are made available for child survival activities or disease programs
including activities relating to research on, and the prevention, treatment and control

CRS-5
of, acquired immune deficiency syndrome may be made available notwithstanding any
provision of law that restricts assistance to foreign countries. In the case of Mexico,
this means that the $1.2 million for HIV/AIDS prevention would be excluded from
suspension.
Exclusion of Conservation Programs and Possible Exclusion of Energy
Programs to Reduce Greenhouse Gas Emissions following Congressional
Notification. Section 540(b) of the Foreign Operations Appropriations Act for
FY1999 provides, with some exceptions, that funds may be used, notwithstanding any
other provision of law, for supporting tropical forestry and biodiversity conservation
activities and, subject to congressional notification, for supporting energy programs
aimed at reducing greenhouse gas emissions. In the case of Mexico, this means that
some, if not all, of the $3.18 million conservation program would be excluded, and
that the $2.82 million program for reducing pollution and greenhouse gas emissions
would be excluded unless Congress put a hold on the program.
Possible Exclusion of Funds Directed to NGOs following Notification to
Congress. Section 543 of the Foreign Operations Appropriations Act for FY1999
provides that any foreign assistance restrictions shall not be construed to restrict
assistance supporting programs of Non-Governmental Organizations (NGOs),
provided the President decides the assistance is in the national interest and Congress
is notified under reprogramming procedures. In the case of Mexico, all of the
remaining economic assistance not excluded above ($6.750 million) might be
excluded if Congress did not object because all the assistance is channeled through
NGOs. However, some parts of the fire prevention/restoration program ($3 million)
and the democracy programs ($3.25 million) might be more doubtful because of the
fact that assistance provides services to the Ministry of Environment, the Judiciary,
and the Congress. Assuming that the assistance that provided services to
governmental agencies did not meet fully the NGO test, $2.15 million would be
excluded from suspension.
Summary of Non-Excludable Foreign Assistance. Taking into account the
exclusions mentioned above, as much as $28.85 million of standard foreign assistance
to Mexico might be excluded from suspension, including all economic assistance and
all narcotics assistance, leaving only $1 million in IMET assistance to be suspended.
Using a more restrictive view of the exclusion of assistance channeled through NGOs,
about $4.6 million in economic assistance and the $1 million in IMET assistance
would be non-excludable and would be cut off.
Other U.S. Military and Export Assistance. While Section 506 drawdowns
of military equipment and Foreign Military Sales would be excluded from suspension
because no obligations and expenditures are involved, Export-Import Bank financing
and transfers of Excess Defense Articles are not excludable, and would be suspended.
Because these programs are not programmed in advance, but depend on the demand
for such programs, it is difficult to judge the effect of a suspension if Mexico were
decertified. Based on the amount of assistance in recent years, the suspended
assistance could amount to a few million dollars in Excess Defense Articles, but could
amount to up to $2 billion in Export-Import Bank financing per year. Since Export-
Import Bank programs were developed to support the sales of U.S. products, these
suspensions would be harmful to U.S. exporters as well as to Mexican buyers.

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C. What Assistance Could Be Provided Despite Decertification of Mexico
If the President Exercised Special Waiver Authorities? Although the President
might be reluctant to exercise special waiver authorities, he has broad statutory
authority to waive restrictions and to provide foreign assistance. Section 614 of the
Foreign Assistance Act of 1961, as amended, provides that the President may
authorize the furnishing of assistance under the Foreign Assistance Act and the Arms
Export Control Act without regard to any provision of foreign assistance
authorization or appropriation acts when he determines and notifies Congress in
writing that to do so is important to the security interests of the United States.
Despite the decertification of Colombia in late February 1997, President Clinton
exercised the special authorities of Section 614 in August 1997 to provide $30 million
in Foreign Military Financing (FMF) and $600,000 in IMET assistance to Colombia.
Although the President’s authority under Section 614 is very broad, it does not extend
to all assistance. Since Export-Import Bank financing is not authorized by the
Foreign Assistance Act, the President’s special waiver authorities would not apply in
that case.
Consequences of Decertification of Mexico on Multilateral
Development Bank Lending
A. What Amount of Loans Has Mexico Received from Relevant
Multilateral Development Banks (MDBs)? Section 490(a)(2) of the Foreign
Assistance Act of 1961, as amended, requires the U.S. Executive Director of
multilateral development banks (MDBs) to vote against any loans or other utilizations
for any decertified country. The term “multilateral development bank” is defined in
the same section to mean the International Bank for Reconstruction and Development
(IBRD or World Bank), the Inter-American Development Bank (IDB), the Asian
Development Bank, the African Development Bank, and the European Bank for
Reconstruction and Development. While the International Monetary Fund (IMF) is
an international financial institution, it is not an MDB within the meaning of the drug
certification legislation. The only institutions that are relevant for Mexico in this case
are the World Bank and the Inter-American Development Bank. The amount of
lending that Mexico has received from these banks is indicated below in Table 3,
based on information from the two institutions.
Mexico has been a major borrower from the World Bank and the IDB, with most
of the loans being under the regular loan facilities at the banks’ unsubsidized, quasi-
market repayment rates (generally ½ percent more than the banks pay to borrow
money commercially on world markets). These loans have supported programs to
improve health care, reform the social security system, strengthen education,
modernize agriculture, promote energy efficiency, provide water and sanitation in
rural areas, and develop better roads. Pending and proposed loans are generally to
support the same types of activities. Pending World Bank loans would support
education programs, air quality improvement, and financial restructuring and support.
Proposed IDB loans would support improved distribution of electricity, strengthening
of state and municipal governments, protection of social expenditures, and
improvement of labor markets.

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Table 3. Multilateral Development Bank Lending to Mexico,
Most Recent Fiscal Years, and Pending Loans
(Millions of U.S. dollars)
World Bank
1997
$ 960
1998
$1,767
1999
$ 445 Agricultural Productivity Loan approved
Pending Loans
$3,005
IDB
1996
$1,315
1997
$ 294
1998
$ 313
Proposed Loans
$2,150
B. How Would Current MDB Loans to Mexico Be Affected if Mexico Were
Decertified? Multilateral Development Bank loans for Mexico that were approved
previously would not be affected at all by decertification. The drug certification
legislation provides only that the United States representative would oppose future
loans to any decertified country. This means that the still pending loans for Mexico
would be the most immediately effected by the drug certification requirements.
C. What Would Be the Impact of U.S. Representatives Voting Against
Multilateral Development Bank Loans to Mexico if Mexico Were Decertified?
In the event that Mexico were decertified under the drug certification requirements,
the U.S. Executive Directors of the World Bank and the Inter-American Development
Bank would be required to vote against any future loans for Mexico, including the
loans mentioned above as pending or proposed. It is unlikely that a negative vote by
the United States would determine the outcome of the loans, even though voting
rights are determined by contribution and the United States is the single largest
contributor to both banks. On the one hand, bank loans are generally approved by
majority vote, and the United States’ 17.15% share in the World Bank and its 31.10%
share in the Inter-American Development Bank would not be sufficient to block
approval, with various combinations of countries able to outvote the United States.
On the other hand, decisions on MDB loans are generally taken by consensus and
U.S. views might carry considerable weight in delaying or modifying loan proposals.
Some officials suggest that U.S. opposition to loans would carry greater weight if the
opposition was seen as objection to the purposes or terms of the loans, rather than as
compliance to a legislative requirement not directly related to the loans. It should be
noted that Colombia was decertified under the drug certification requirements in 1996
and 1997, but that Colombia received $139.7 million in loans from the World Bank
and at least $214.5 million in loans from the IDB in the two year period when the
U.S. representative voted against loans to Colombia. Comparing these loans to other
periods when the United States did not vote against loans for Colombia is difficult
because lending varies greatly by year.

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D. Could the President Waive the Requirement for U.S. Representatives
to Vote Against MDB Loans of Decertified Countries Using Special Waiver
Authorities? Officials at the General Counsel’s office at the Treasury Department
expressed the preliminary opinion that Section 614 special waiver authorities relating
to the provision of foreign assistance would not apply to the requirement that U.S.
representatives vote against proposed loans for decertified countries.

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