SECRETARY'S SPECIAL BRIEFING AND LUNCHEON U.S DEPARTMENT OF STATE MARCH 20, 1984 WASHINGTON, D.C.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00420R000701460001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 180
• Document Creation Date: December 22, 2016
• Document Release Date: September 15, 2009
• Sequence Number: 1
• Publication Date: March 20, 1984
• Content Type: REPORT

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SECRETARY'S
SPECIAL BRIEFING AND LUNCHEON
U. S. Department of State
. . March 20, 1984
Washington,
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OFFICE OF
THE SECRETARY OF STATE
WASHINGTON
Secretary's Special Briefing and Luncheon
ROOM: Secretary's Conference Room, Operations Center
PROGRAM:
9:45 a.m. Meeting Called
to Order -
Mr.
Gilbert
A.
Robinson, Special Advisor to the
Diplomacy
Secretary
for
Public
9:50 Remarks - The Honorable Lawrence S.
Eagleburger, Under Secretary of State for Political Affairs
10:00 - 11:00 Briefing - "Central America: An Overview
of the Problems Facing the Region and U.S. Policy," The
Honorable Langhorne A. Motley, Assistant Secretary of State
for Inter American Affairs
11:00 - 11:40 - Briefing - "Intelligence on Central
America," The Honorable William J. Casey, Director of the
Central Intelligence Agency
11:40 - 12:00 - Briefing - "An Inside View of the
Sandinista Revolution," Geraldine O'Leary de Macias, former
American Maryknoll Nun in Nicaragua
12:00 - 12:30 - Reception - John Quincy Adams Room
12:30 - 2:00 - Luncheon hosted by The Honorable George
P. Shultz, Secretary of State
Thomas Jefferson Room
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United States Department of State
Washington, D. C. 20520
INDEX
BRIEFING KIT.
Secretary's Special Briefing
for
Chief Executive Officers
March 20, 1984
I. Agenda.
II. List of Participants(CEOs and USG).
III. Briefing Book: Central America-Democracy, Peace, and
Development Initiative.
IV. CBI:New Opportunities for American Business.
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GUEST LIST
TUESDAY, MARCH 20, 1984
12:00-12:30 - John Quincy Adams Room
12:30-2:00 - Thomas Jefferson Room
Mr. Robert A. Beck, Chairman
Prudential Insurance Company of America
Mr. W. Michael Blumenthal, Chairman
Burroughs Corporation
Mr. William W. Boeschenstein, President
Owens-Corning Fiberglas Corporation
Mr. William H. Bricker, Chairman
Diamond Shamrock Corporation
Mr. Douglas D. Danforth, Chairman
Westinghouse Electric Corporation
Mr. Edwin D. Dodd, Chairman
Owens-Illinois, Inc.
Mr. John C. Duncan, Chairman (Ret'd)
St. Joe Minerals Corporation
Mr. Joseph P. Flannery, President
Uniroyal, Inc.
Mr. Joseph B. Flavin, Chairman
Singer Company
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Mr. John R. Hall, Chairman
Ashland Oil, Inc.
Mr. Peter D. Hannaford, Chairman
Hannaford Company, Inc.
Mr. Robert A. Hanson, Chairman
Deere & Company
Mr. William R. Haselton, Chairman
St. Regis Corporation
Mr. Robert Hellendale, Chairman
Great Northern Nekoosa Corporation
Mr. T. A. Holmes, Chairman
Ingersoll-Rand Company
Mr. Wesley J. Howe, Chairman
Becton Dickinson & Company
Mr. Edward G. Jefferson, Chairman
E.I. duPont de Nemours & Company
Mr. Donald P. Kelly, Chairman
Esmark, Inc.
Mr. David S. Lewis, Chairman
General Dynamics Corporation
Mr. F. W. Luerssen, Chairman
Inland Steel Company
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Mr. Seymour Milstein, Chairman
United Brands Company
Mr. George B. Munroe, Chairman
Phelps Dodge Corporation
Mr. William C. Norris, Chairman
Control Data Corporation
Mr. J. Allen Overton, Jr., President
American Mining Corporation.
Mr. Charles W. Parry, Chairman
Aluminum Company of America
Mr. Thomas L. Phillips, Chairman
Raytheon Company.
Mr. Robert A. Pritzker, President
The Marmon Group, Inc.
Mr. Orin R. Smith, Acting Chief Executive Officer
Engelhard Corporation
Mr. Roger B. Smith, Chairman
General Motors Corporation
Mr. Anthony Stout, Chairman
Government Research Corporation
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.U.S..Government Officials
SECRETARY SHULTZ HOST
Hon. William J. Casey, Director, Central Intelligence Agency
Hon. Faith Whittlesey, Assistant to the President for
Public Liaison
Hon. Kenneth W. Dam, Deputy Secretary, Department of State
Hon. Lawrence S. Eagleburger, Under Secretary for Political
Affairs, Department of State
Hon. J. William Middendorf, II, U.S. Permanent Representative
to the Organization of American States, Department of State
Hon. William Schneider, Jr., Under Secretary for Security
Assistance, Science and Technology, Department of State
Hon. Edward J. Derwinski, Counselor, Department of-State .
Hon. Selwa Roosevelt, Chief of Protocol, Department of State
Hon. Langhorne A. Motley, Assistant Secretary for Inter-
American Affairs, Department of State
Hon. W. Tapley Bennett, Jr., Assistant Secretary for
Legislative and Governmental Affairs, Department of State
Hon. Otto J. Reich, Coordinator of Public Diplomacy for Latin
America and the Caribbean, Department of State
Hon. Gilbert A. Robinson, Special Advisor to the Secretary for
Public Diplomacy, Department of State
Mr. Walter Raymond, Jr., Special Assistant to the President
for National Security Affairs, National Security Council
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Hon. Gerald B. Helman, Deputy to the Under Secretary for
Political Affairs and Director, Office of Public Diplomacy,
Department of State
Mr. John T. McCarthy, Deputy Assistant Secretary for Public
Affairs, Department of State
Mr. Robert Reilly, Associate Director, Office of Public Liaison,
The White House
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CARIBBEAN BASIN
CBI Begins To Help
Economies In Region
By Robert H. Bateman
U.S. exports to the countries of the
Caribbean (Central America, the
Caribbean islands, Suriname and
Guyana) held up surprisingly well in
1983, considering the serious economic
problems continuing to plague the
region.
A principal factor in this relative
trade stability was the steady, or in
some cases, increased dollar earnings
of Caribbean Basin exports to the
United States. This trend will be accen-
tuated in 1984, as most countries of the
Caribbean Basin region begin to boost
export earnings even more as a result
of duty-free access of most of their
products to the U.S. market, the prin-
cipal benefit of the Caribbean Basin
Initiative (CBI).
An analysis of 1983 U.S. trade data
for selected Caribbean Basin countries
shows increased non-petroleum im-
ports from the region generally. This
provided the wherewithal last year to
support a slight strengthening of U.S.
exports to these countries compared to
1982.
While all are relatively small in size,
Caribbean Basin economies are not
identical in character; there are unique
differences from one country to
another that must be taken into ac-
count. U.S. exports to Panama, for ex-
ample, fell from $825 million in 1982
to $748 million in 1983, primarily as a
result of a decline in Colon Free Zone
activity. This development, in turn,
can be attributed to a simultaneous
contraction in the South American
market and other markets to which
Colon Free Zone merchants tradition-
ally re-export.
President Reagan has already desig-
nated 20 countries beneficiaries of CBI
legislation. A duty-free access provi-
sion went into effect for the following
countries on Jan. 1, under interim
regulations issued by the U.S. Customs
Service: Antiqua, Barbados, Belize,
British Virgin Islands, Costa Rica,
Dominica, the Dominican Republic, El
Salvador, Grenada, Guatemala, Haiti,
Honduras, Jamaica, Monserrat, the
Netherlands Antilles, Panama, St.
Christopher-Nevis, St. Lucia, St.
Vincent and Trinidad & Tobago.
Seven countries remain eligible to be
designated as CBI beneficiaries. They
are Anguilla, Bahamas, Caymans,
Guyana, Nicaragua, and the Turks &
Caicos.
Although it is much too early to
identify concrete results of the CBI,
U.S. companies are becoming increas-
ingly interested in possible joint ven-
tures or direct sourcing in the region,
especially involving products that face
relatively high U.S. duties when
originating in non-CBI countries.
Many of these companies are consider-
ing moving closer to home their off-
shore operations now existing in the
Far East and elsewhere. Doing so
would permit savings on transporta-
tion time and costs and would allow
the companies to take advantage of
duty-free entry under the CBI.
CBE's indirect export effects
Some U.S. suppliers are beginning to
feel indirect export effects of the CBI
as well. One manufacturer of irrigation
equipment reports a sudden increase in
price-quote requests from the Carib-
bean Basin region in the weeks since
duty-free entry of virtually all
agricultural goods became a reality,
underscoring the importance of agro-
industries as a sector likely to grow in
response to CBI incentives.
Most Caribbean countries have
stepped up their efforts to attract
foreign investment, both through pro-
motion of such traditional advantages
as lower wage rates and tax holidays
and by removing long-standing disin-
centives to local investment in export
industries.
An attraction sometimes overlooked
by potential U.S. investors is the duty-
free access to European markets avail-
able in the case of products made in the
following Caribbean Basin countries:
Antiqua, Bahamas, Barbados, Belize,
Dominica, Grenada, Guyana, Jamai-
ca, St. Lucia, St. Vincent, Suriname,
and Trinidad & Tobago. The Lome
Convention, a treaty signed by these
countries with the ten member-states of
the European Community, provides
for this advantage. Thus a local joint
venture could supply both the United
States and Europe, once its production
meets the rules of origin and other re
quirements of both the CBI and the
Lome Convention. It should be noted
that for purposes of determining the
national origin of a product under the
CBI, value added in Puerto Rico and
the U.S. Virgin Islands is considered to
be of CBI beneficiary origin.
The second principal element of CBI
legislation is a convention tax benefit
that allows "North American treat-
ment" of reasonable expenses incurred
by U.S. firms and individuals attend-
ing business conventions in a CBI ben-
eficiary county. Implementation of this
benefit remains contingent on a tax .
information exchange agreement be-
tween that country and the United
States. The Dominican Republic, for
one, has already begun discussions
leading to such an agreement, and a
number of other Caribbean Basin
countries have expressed interest. This
benefit could increase U.S. business
travel in the region and stimulate up-
grading of local tourist and convention
facilities. The services and equipment
needed for such an upgrading are ex-
pected to come in large part from the
United States.
In the case of Central America, CBI
benefits would be complemented by
other economic measures recommend-
ed by the President's National Biparti-
san Commission on Central America.
The Commission proposed an emer-
gency stabilization program based
largely on a major increase in eco-
nomic assistance for Central America
from the United States and other coun-
tries. A number of other specific rec-
ommendations would build directly on
the CBI to enhance its effectiveness.
President Reagan has endorsed most of
the Commission's recommendations
and is expected to send draft legislation
to Congress shortly.
The CBI and other U.S. programs
will not solve the short-run economic
problems of the region. U.S. exporters
should expect some rough sledding in
1984 as individual countries step up
austerity programs, devalue their cur-
rency and impose further exchange re-
strictions. But those U.S. companies
taking a long-term view of doing busi-
ness with the Caribbean and Central
America are likely to ride out these dif-
ficulties and maintain, or even build,
market share.
Additional information can be ob-
tained from the Commerce Depart-
ment's Caribbean Division by
telephoning 202-377-2527.
Business America, February 20,1984 31
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March 13, 1984
MEMORANDUM FOR: Honorable William Casey
Director
Central Intelligence Agency
Subject: Your Participation in CEO Briefing - March 20
Following up on our brief telephone conversation of
yesterday, here is the way things stand for the CEO briefing:
PLACE: State Department Operations Center Conference Room,
7th Floor (as.you know, there is a podium for your
use plus three rear projection screens for slides
or film, should you want to use them)
TIME: Your portion of the briefing is from 11:00-11:40am.
9:45 - Under Secretary Eagleburger - Welcomes
10:00 - 11:00 - Ambassador Langhorne Motley briefs on
US policy in Central America and the
Caribbean, and may touch on Latin
America. Will have at least a 30-
minute Q&A session. As of now, he will
give a summation of where we stand with
the legislation (a difficult job!)
11:00 - 11:40 - William Casey
11:40 - 12:00 - Geraldine O'Leary de Macias, former
Maryknoll Nun from Nicaragua
A)
would be dramatic if you could give an estimate
I hope that you
will
spell out the Soviet and
Cuban threat in
the
area. (Tony Motley is de-
liberately not
going
to touch on this at all.)
If possible, my
own
personal opinion is that it
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of the refugee problem that the Gulf Coast States
would be faced with from boat people and others
by land should the region come under Communist
control.
In the mailgram of invitation, we state that the
briefing is off the record. I will be introducing
you and the others and I will repeat that clearly.
If there's anything in particular you'd like me to
highlight in your introduction, please let me know.
B) The 12:00-12:30 reception will give you time to
talk individually with those of your friends and
others who are here and want to meet you. Your
participation has evoked very nice interest.
C) Lunch - You will be hosting a table.
Please let me know on the attached list of approximately
30 acceptances to date if there's anyone in particular you'd
like seated next to you or on either side.
Gilbert A. Robinson
Special Advisor for
Public Diplomacy
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United States Department of State
Briefing Book
Central America Democracy,
Peace and Development Initiative
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United States Department of State
Briefing Book
Central America Democracy,
Peace and Development Initiative
Office of Public Diplomacy for
Latin America and the Caribbean
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TABLE OF CONTENTS
1. White House Fact Sheet
2. State Department Position
3. Issues Papers and Talking Points on NBCCA
Recommendations
4. Implementation of Recommendations
5. Summary Sheet of NBCCA Report
6. Testimony by Dr. Kissinger before House Foreign
Affairs Committee
7. President Reagan's Transmittal Letter and
Central American Democracy, Peace and
Development Initiative Bill
8. Section-by-Section Analysis of Bill
9. Economic Assistance Program Overview
10. Military Assistance Program Overview
11. U.S. Government Statements of Policy
Office of Public Diplomacy
for
Latin America and the Caribbean
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 Central America
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Belize
city
*Belmopan
Flores
BELIZE
uerto
f ios
Tuxtla
,Gutierrez
GUATEMALA
'Quezate g
*
Guatemala
Cayman lslandsPC-
Georgetown@~'tu.K.)
Montego
Bad
L- ~ AMAICA
Swan Islands
(Honduras)
Is/as de
Is Bahia
Cayos
Miskilos
05
EL SAL
Puerto
Cabezas
9alpa l ? Isla de
Matagalpa Mat' Providencia
y I-,- Ae ~ (Colombia)
Managua"
Canada,
North
Pacific
Ocean
NICARAGUA
Bluefields
Lagode;:
\Nicaragua
Islas
del Mai,
Caribbean Sea
I Isla de San Andres
(Colombia)
olfit
COSTA
*San Jos
RICA
~
Panam
A M A
Scale 1:9,500,000
0 100 200 Kilometers
0 100 200 Nautical Miles
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.Palm
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PRESIDENT'S CENTRAL AMERICA
DEMOCRACY, PEACE AND DEVELOPMENT INITIATIVE
OVERVIEW
0 The recommendations of the National Bipartisan
Commission on Central America come at a critical time
in the development of democracy, the restoration of
peace, and the improvement of living conditions in
Central America.
0 The twelve commissioners -- Democrats, independents
and Republicans -- concluded that "Central America is
both vital and vulnerable, and that whatever other
crises may arise to claim the nation's attention the
United States cannot afford to turn away from that
threatened region."
o The Commission and the Administration agree that the
acute crisis in Central America endangers fundamental
strategic and moral interests of the U.S.
0 Accordingly, the President, through legislation and
appropriate executive actions, will seek to implement
all the Commission's recommendations.
o The program emphasis recommended by the Commission,
and accepted by the Administration for
implementation, is on economic aid and policy reform
to get at root causes of poverty and political unrest.
o The crucial importance of social and economic factors
is reflected in our proposed budget figures. In FY
1985 alone, the proposed levels for economic
assistance are almost seven times the levels for
military aid. The total FY 1984 Supplemental/FY 1985
program for the region is 75% economic, as opposed to
25% military assistance.
o As the Commission recommends, U.S. policy must be and
is guided by the principles of democratic self-
determination, economic and social development that
fairly benefits all, respect for human rights, and
cooperation in meeting threats to the security of the
region.
o Bipartisan support in Congress is needed for an
increased commitment of resources to be provided
predictably, beginning immediately and extending over
the next five years, to support a balanced and
mutually reinforcing mix of economic, political,
diplomatic and security activities to be pursued
simultaneously.
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HIGHLIGHTS OF PROPOSED LEGISLATION
Economic Assistance
o Commission recommended $400 million in supplemental
economic assistance in FY 1984.
--Administration request is $400 million.
--Additional emergency transfers are needed to
reverse sharp declines in Gross Domestic Product
(GDP), per capita income, and employment.
--During last several years, per capita GDP has
fallen by 35% in El Salvador, 23% in Costa Rica, 14%
in Guatemala, and 12% in Honduras.
--Economic deterioration is a source of social and
political unrest.
--Supplemental request is primarily for emergency
stabilization needed to set the base for a long-term
comprehensive development plan.
o Commission recommended $8 billion economic aid for next
five years, FY 1985-89.
--The proposed implementation plan calls for $5.9
billion in appropriated funds and $2.0 billion in
insurance and guarantees, principally for trade
credits issued by the Export--Import Bank.
--For FY 1985, the request is $1,120.0 million in
appropriated funds and $600 million in insurance and
guarantees.
--Major beneficiaries of direct, bilateral aid in FY
1985 would be El Salvador ($341.1 million), Costa
Rica ($208.0 million), Honduras s regional ($139.ml,
Guatemala ($96.4 million), u programs
($198.6 million).
--Though El Salvador would be the largest single
recipient, its share would not be disproportionate --
two other countries will receive more on a per capita
basis as now planned.
o Commission recommended a comprehensive approach to
promote democratization, economic growth, human plan for
development and security. The Administration's p
the first year (FY 1985) of a five year initiative
includes the following:
--Providing $541 million as balance of payments
support to finance critical imports by the private
sector.
--Undertaking a $185 million program in labor funded
intensive infrastructure and housing projects,
by a combination of local currency generations ofhe
balance of payments assistance program, Development
Assistance, and guarantees.
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--Spending more than $100 million for education
(including literacy and teacher corps), training and
scholarships.
--Devoting $210 million to development of
agriculture, the backbone of Central American
economies, funded with local currency generations of
the balance of payments assistance program and
Development Assistance.
--Including special funding for the National
Endowment for Democracy, earmarked for Central
America.
--Providing $120 million in Public Law 480
agricultural commodities, with local currency
proceeds used to reinforce important programs in, for
example, the education and health sectors.
Military Assistance
o The restoration of peace in Central America is essential
to economic and humanitarian progress. Without enhanced
security, economic assistance and diplomatic efforts
would be undermined.
The Commission specifically recommends significantly
increased levels of military aid to El Salvador and warns
against providing "too little to wage the war
successfully."
o Military assistance requirements are as follows:
--For El Salvador: $178.7 million in FY 1984
supplemental assistance and $132.5 million for FY
1985. Added to the $64.8 million made available by
the FY 1984 Continuing. Resolution, the total FY
1984-85 program for El Salvador would be $376 million.
--The El Salvador program would be concentrated in FY
1984 in order to break the military stalemate and
provide an adequate security shield for democracy and
economic growth.
--For the rest of Central America, $80.3 million in
FY 1984 supplemental military assistance and $123.4
million in FY 1985 is proposed.
--From the FY 1984 supplemental, Honduras will
receive $37.5 million, and $25 million will be
provided to the Regional Military Training Center
(RMTC). In FY 1985, major recipients of military
assistance (besides El Salvador) will be Honduras
($62.5 million), Panama and the RMTC ($20 million
each).
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o The Commission recommends that military aid to El
Salvador should be made "contingent" through legislation
requiring periodic reports upon demonstrated progress in
reaching certain enumerated objectives such as free
elections and reduction of death squad activities.
o There is agreement within the Executive, the Congress and
the Commission that human rights progress is essential in
El Salvador to ensure a successful outcome of the war and
the protection of U.S. security and moral interests; U.S.
assistance should be conditioned on progress in this as
well as other priority objectives.
o The Administration proposes legislation, therefore, that
requires semi-annual assessments to Congress of the
Government of El Salvador's policies for achieving
political and economic development and conditions of
security. This report is to include an assessment of how
the policies are meeting U.S. objectives; among these
objectives are the goals outlined in the Commission's
report. Moreover, the legislation should call upon the
President to ensure that military assistance fosters
progress toward reaching overall U.S. objectives,
including human rights, and toward this end directs him
to impose conditions on military assistance in every
appropriate instance.
o The Administration and the Congress need to work closely
to ensure human rights progress while preserving the
President's ability to pursue an effective foreign policy.
Central American Development Organization (CADO)
o In line with the Commission's recommendation, the
legislation should provide guidance for the President to
work with the Central American countries and other donors
in establishing CADO.
o CADO should provide an effective forum for an open
dialogue on and continuous review of Central American
political, economic and social development.
o While ultimate control of aid funds should remain with
Congress and the President, disbursement of 25% of
economic assistance funds authorized under the
legislation and allocated directly for each Central
American country should be deferred until the U.S. and
CADO have both approved.
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PREPARED STATEC,IENT OF
THE HONORABLE LANGHORNE A . MOTLEY
ASS ;P `ANT , ?E.CRE.TARY OF STATE FOR INTER-AMERICAN AFFAIRS
BEFORE THE
SUBCOMMITTEE ON WESTERN HEMISPHERE AFFAIRS
,,HOUSE FOREIGN AFFAIRS COMMITTEE
FEBRUARY 21, 1984
Mr. Chairman, i am pleased to appear before you to testify
on the vitally important Central America Democracy, Peace and
Development Initiative Act of 1984.
The exhaustive study made by the National Bipartisan
Commission on Central America has enabled us to prepare a
comprehensive response to the many-sided crisis in Central
America.
The Administration and the Congress are now in a position
to forge a complete program of action that meets both immediate
operational needs and the requirements of a long-term
strategy,
The bill the President has just transmitted to the Congress
embodies those recommendations made by the Bipartisan
Commission which cannot be implemented without legislation. As
you know, the President will implement by Executive action
those Commission recommendations that do not require new
legislation. He urges prompt Congressional action and support
for this bill.
This legislative package will help to stabilize economies
and societies plagued by injustice and violence. At the same
time, it will enable us to take the offensive against poverty
and to foster democratic development, to increase respect for
human rights, and to help bring lasting peace to tnis troubled
region so close to the United States,
This prepared statement addresses:
the report of the Bipartisan Commission;
the major elements of the legislation; and
some questions of policy and implementation.
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'Bipaxti ara Commission
The Repo the
Perhaps the most striking aspect of the Commission's report
is its honesty its candor in facing up to the complexities
of Cc!It1a=1 TIiierica. The t 7ai4t I:I L.CJt ld OtAv(U focussed
I c,d. l t SSUeS" which, if
1 i C_ I Cll _y on one or l..w t
addressed a..u isolation, mi created the l-LLusion of a
broader Solution.
To =i."ice er"e-cii t, the COium? s .Lc.'i refused to oversimplify. It
1 (.Y c that Cent-a1 '~IIt: ,.( r_3 Problems are complex,
c t 7'c ?lac
ScVE-+c ;r1c1 deeply -ly I'iloteu, L)atI.V teat tI1ey add up to
.~`t C 1
a "welt C5.~; web" from which u-- quick fixes or shortcuts will
riterC Sts !'-rlvcJ ved, it poinLed out, are both
fl free i `ISi1c: UE~e
1110 I ii t?aicc~i 3 And :: y v tl-. _utened by human rights
} `} by economic' illi ser?y _.-. oe1.1. as by Cuban arid Soviet
i nterr. vl Ilt i en
I i] illl.i `s; laii s t r'e - collier enensive and
t na.-Lvs a 1t coulit Love [i lsi ecl on its mandate
- ~ t l l.c~'1 term IIi .S n'J Jr ided the. dif#ircUlt
c' ,_! I d r :]v(- sulfinizi izzed the pool icieS
il~f=' we -ice now.
] l:l p ursuec1 by _t1 ? Adl[I i1Lsrzaticorl and yiven us credit
tllcd i t coul d have simply praised
the or t.hc: right t u]
C ri] +---.._1. _iu[(,L- - caI1 countr los and the
ne, _ r -- 11_,o_rt.5 of he
t I 1.t-porLa rice of rio oti t ?.--n: {like those underway in the
LIS E;
t tI T=i- C'_oI[IIRission ua La i=ii. lti.=11111111 a cin(d unambiguous in
I 5 7_ "rti v-!1. , t b) e i-U-~.1 Les manageable if we
CE~iic t ' , !it the _CJI1C
i - : ( ?: 1. wit.ll e istilly r ii +l_1 rI(~r_ It ca.LICcl LC)r U.S.
i or regional e to t1.1 } c Coot. udura but said that the
1lr~tt~- >t~Ftc~~ also lia C-1 =J,Cc.,i,.l to coIltl:ibutu
I ,7-u l v to lire creation of u C( noltlic, security, and political
( . 3 0 I , iS U1 ed .:c3-c I i- concluded that we ii.[;e not
>I](%1-i arid l ( ci~IlllCic-. releCi thu c i_._ii, AdLl it lll_t tC 1tion and the
r'`Jia i-( c'(JtJ}zate t.(-) ran =iui-e !l:: i vie ptt1V7cue the resources we
( iiri: I (_ Z to work successfully
7sitter cull I.
ti C -rat r i
i ,t1 soti.icii ctrl democracy
I' -
-r i-{ k)i_11.t
-ttiCl
-iiid '3evc 1opIcreul_
'-"+Hi ~~+._'lil-..1 `-. 1-ountr t fL C ees and displaced
the DIJ L i ta+ y s? tuat 'on and que r .! la act- V
The President shall ens9ur?e tat. a S3 t tante ant
j .c [` f th -- Act 7 s provided to the
in _ ml- n_n?er which io-u ej
`C. he obje v of poll t cal i_ ~~el. %- PS en 1 econt`7m
? i ? . w
s:L
c s, .cei_ and secur t y- To Jb < s ?-flQ , .ti r
-~ P ~9
instance- shall upios?_ c' ,311th L .j [E e w1 Ff s -Ir 1~.` ~
e Go ~ rnme~l ~ R Saivadi~=? of Ems s an- e autn o 9.ze9
~`?-
?; II of al`s s ct in order to achieve these i
goals id E!''.5 t M b ' ion I j -R.?" Vii= s
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TITLE IV - MISCELLANEOUS PROVISIONS
DEFINITIONS
SEC. 401. For the purposes of this Act, including
amendments to the Foreign Assistance Act of 1961 made by this
Act, the term "Central American countries" shall be deemed to
include Belize, Costa Rica, El Salvador, Guatemala, Honduras,
Nicaragua, Panama and regional programs which benefit such
countries.
TRANSFER AUTHORITY
SEC. 402. Whenever the President determines it to be
necessary for the purposes of this Act, in each of the fiscal
years-1984 and 1985 not more than a total of $50,000,000 from
funds made available for provisions authorized by this Act may
be transferred to, and consolidated with, funds made available
for provisions authorized by Title II of this Act.
COORDINATION
SEC. 403. Under the direction of the President, the
Secretary of State shall be responsible for the continuous
supervision and general direction of programs undertaken to
carry out the purposes of this Act.
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SECTION-BY-SECTION ANALYSIS
OF THE PROPOSED
CENTRAL AMERICA DEMOCRACY, PEACE
AND DEVELOPMENT INITIATIVE ACT
OF 1984
J. INTRODUCTION
The proposed Central America Democracy, Peace and
Development Initiative Act of 1984 ("the Bill") establishes a
long-term framework to build democracy, restore peace, and
improve living conditions in Central America and authorizes
assistance for the fiscal years 1984 through 1989. The'Bill
contains freestanding provisions and amends the Foreign
Assistance Act of 1961 in order to carry out the
recommendations of the National Bipartisan Commission on
Central America.
The Bill is composed of four titles. Title I consists of a
statement of policy concerning Central America. Title II
consists of a statement of findings and authorizations for
programs for economic and human development. Title III
contains findings and authorizations for programs for military
assistance, sales and related programs under the Arms Export
Control Act and the Foreign Assistance Act of .1961. Title IV
consists of provisions concerning definitions, transfer of
funds, and coordination of policy.
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The amounts which wo?-
authorized by this Bill will be
available for use for Cezt.: tier ican countries, including
regional programs which be.6 - t esuch countries. Those amounts
authorized for the fiscal year 1984 in this Bill would be in
addition to amounts previously authorized, appropriated or
otherwise made available for Central American countries for the
current fiscal year. Those -mounts authorized for the fiscal
years 1985 through 1989 would be in addition to amounts
authorized, appropriated or otherwise made available for such
purposes for that fiscal yearn
Ili.. PROVISIONS OF THE BILL
SECTION 1. SHORT TITLE
s section provides that the Bill may be cited as the
"Central America Democracy, Peace and Development Initiative
Act of 1984"e
TITLE I ? STATEMENT OF POLICY
SECTION 101.
This section states the finding of Congress that the
building of democracy, the restoration of peace, and the
improvement of living conditions in Central America are
important to the interests of the United States and the -
community of American states? The section further states the
findings of Congress concerning the importance of effectively
dealing with interrelated social, humanitarian, economic,
political, diplomatic and security issues to assure a
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democratic and economically and politically secure Central
America. In this section, Congress further recognizes that,
although the achievement of democracy, human rights, peace, and
equitable economic growth depends primarily on the people and
governments of Central America, the United States can make a
significant contribution through a long-term policy which
includes a long-term commitment of both economic and military
assistance. In this section, Congress further defines the
goals which the policy of the United States should seek to
achieve and indicates that the purpose of the Act is tot
establish the statutory framework and authorize the funding
necessary to carry out this policy.
TITLE II - ECONOMIC AND HUMAN DEVELOPMENT
SECTION 201. FINDINGS
In this section, the Congress defines basic principles
which will guide furnishing of assistance for economic and
human development. The principles which shall guide the
development and implementation of programs of agricultural
development, education, health and population, housing, and
economic stabilization shall include growth-oriented economic
policies, increased participation of the private-sector,
development of energy resources, creation and improvement of
private and public sector institutions, and recognition that
basic human needs and economic stabilization must both occur if
equitable growth is to take place.
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SECTION 202. DEVELOPMENT ASSISTANCE
This section authorizes appropriations for development
assistance programs, for the fiscal years 1984 and 1985,
respectively, as follows:
Agriculture, rural development, and nutrition, $10,000,000
and $69,800,000;
Population, $5,000,000 and $15,000,000;
Health, $18,000,000 and $40,000,000;
Education and human resources development, $10,000,000 and
$64,000,000;
Selected development activities, $30,000,000 and
$84,00'0,000;
Housing guaranty reserve fund, $10,000,000 (for the fiscal
year 1985);
Operating expenses, Agency for International Development,
$2,489,000 and $6,016,000;
This section also provides that the amounts appropriated
pursuant to this section are authorized to remain available
until expended.
SECTION 203. ECONOMIC SUPPORT FUND
This section authorizes for -the Economic Support- Fund
$290,500,000 for the fiscal year 1984 and $640,600,000 for the
fiscal year 1985. This section also provides that the amounts
appropriated pursuant to this section are authorized to remain
available until expended.
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SECTION 204. PEACE CORPS
. This section authorizes for the Peace Corps $2,000,000 for
the fiscal year 1984 and $18,200,000 for the fiscal year 1985.
This section also provides that the amounts appropriated
pursuant to this section are authorized to remain available
until expended.
SECTION 205. UNITED STATES INFORMATION AGENCY
This section authorizes for the United States Information
Agency $7,000,000 for the fiscal year 1984 and $36,400,000 for
the fiscal year 1985. This section also provides that the
amounts appropriated pursuant to this section are authorized to
remain available until expended.
SECTION 206. MIGRATION AND REFUGEE ASSISTANCE
This section authorizes for migration and refugee
assistance $15,000,000 for the fiscal year 1985. This section
also provides that the amounts appropriated pursuant to this
section are authorized to remain available until expended.
SECTION 207. HOUSING GUARANTY PROGRAM
This section authorizes an increase in the limit on the
total principal amount of loans for which guarantees may be
issued under sections 221 and 222 of the Foreign Assistance Act
of 1961. This increase would be $40,000,000 for the fiscal
year 1985.
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6 -
SECTION 208. ADMINISTRATION OF JUSTICE
In accordance with the recommendations of the Bipartisan
Commission that the United States help strengthen Central
American judicial systems and that Congress consider
authorizing the training and support of law enforcement
agencies under carefully defined conditions, this section would
authorize in any fiscal year the furnishing of not more than
$20,000,000 of the funds appropriated for economic assistance
programs in order to strengthen the administration of justice
in Central American countries and the countries of the
Caribbean. These projects would include activities for
judges, prosecutors, and criminal investigation and law
enforcement (including corrections) agencies.
SECTION 209. TRADE CREDIT INSURANCE PROGRAM
This section authorizes Economic Support Fund monies to be
made available for payments by the Agency for International
Development to discharge liabilities under certain guarantees
and insurance issued by the Export-Import Bank. Such
guarantees and insurance shall cover the risk of loss or
non-payment under certain short-term trade credits used to
finance goods and services for use by the private sector in
Central American countries. These guarantees and insurance
will not constitute loans made by the United States government
to a foreign country.
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7 -
SECTION 210. LAND REFORM PROGRAMS
This section amends section 620(g) of the Foreign
Assistance Act of 1961 to authorize the President to make
available to governments assistance to compensate their
nationals in accordance with a land reform program, if the
President determines that monetary assistance for such land
reform program will further the national interests of the
United States.
SECTION 211. CENTRAL AMERICAN DEVELOPMENT ORGANIZATION
In furtherance of the recommendations of the Bipartisan
Commission, this section states the finding of Congress that
participation by Central American countries in an effective
forum for dialogue on and the continuous review and advancement
of Central America's political, economic and social development
would foster cooperation between the United States and Central
American countries in furthering the purposes of this Act.
This section further states the sense of Congress that the
President should enter into negotiations with representatives
of Central American countries receiving assistance under the
Act to establish a Central American Development organization,
based upon principles stated in the section. In addition, this
section authorizes the President to participate in such'an
organization (with the Administrator of the Agency for
International Development as chairman). -
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It is not the intention that this organization be
established as a bureaucratic entity in competition with
bilateral and multilateral donor organizations. The
organization should be composed of public and private sector
representatives from participating countries and should draw on
the experience of the International Labor organization with
representatives from both the business and labor communities.
The number of professional staff of the organization should be
kept to a minimum.
SECTION 212. ECONOMIC ASSISTANCE
This section authorizes $1,200,000,000 for each of the
fiscal years 1986 through 1989 for the purpose of furnishing
non-military assistance for Central American countries. The
President would be authorized to transfer the funds made
available pursuant to this section for obligation in accordance
with the authorities of part I of the Foreign Assistance Act of
1961 (including the Economic Support Fund), the Peace Corps
Act, the Migration and Refugee Assistance Act of 1962, the
United States Information and Educational Exchange Act of 1948,
the Mutual Educational and Cultural Exchange Act of 1961, the
National Endowment for Democracy Act, and the State Department
Basic Authorities Act of 1956. In addition, this section
authorizes an increase of $40,000,000 in the limit of the total
principal amount of loans for which housing guarantees may be
issued under sections 221 and 222 of the Foreign Assistance Act
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9 -
of 1961 for each of the fiscal years 1986 through 1989.
Finally, this section authorizes for the fiscal year 1986
$200,000,000 of loan principal for guarantees or insurance
under section 224 of the Foreign Assistance Act of 1961 for
Central American countries.
TITLE III - MILITARY ASSISTANCE, SALES AND RELATED PROGRAMS
SECTION 301. FINDINGS
This section states the finding of Congress that the
restoration of peace in Central America is essential to
economic and humanitarian progress in that region and that
restoring peace and stability will require a combination of
social and political reforms, economic advances, diplomatic
efforts, and measures to enhance security, in accordance with
certain principles identified in the section.
SECTION 302. MILITARY ASSISTANCE
This section authorizes for the Military Assistance program
$259,050,000 for the fiscal year 1984 and $222,000,000 for the
fiscal year 1985. This section also provides that the amounts
appropriated pursuant to this section are authorized to remain
available until expended.
SECTION 303. MILITARY EDUCATION-AND TRAINING
This section authorizes for the International Military
Education and Training program $3,900,000 for the fiscal year
1985. This section also provides that the amounts appropriated
pursuant to this section are authorized to remain available
until expended.
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10
SECTION 304. FOREIGN MILITARY SALES FINANCING
This section authorizes $30,000,000 for the fiscal year
1985 to carry out the purposes of section 23 of the Arms Export
Control Act. This section also provides that the amounts
,appropriated pursuant to this section are authorized to remain
available until expended.
SECTION 305. REPORTING REQUIREMENT
This section requires semiannual reports to Congress
describing the policies of the Government of El Salvador for
achieving political development, economic development and
conditions of security. In the report, the President is to
include a detailed assessment of the strengths and weaknesses
of such policies in meeting the objectives which United States
policy is designed to support, including the specific goals of
free elections, freedom of association, dialogue and
negotiations to achieve peace, the establishment of the rule of
law and an effective judicial system, the curtailment of
extremist violence by both the left and the right as well as
vigorous action to prosecute those guilty of crimes. The
report is also to review other factors contributing to the
political, economic and security situation in that country.
Finally, the President shall ensure that assistance authorized
by the Act for military programs is provided to the Government
of El Salvador in a manner which fosters progress of that
government towards the objectives of political development,
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economic development and security, in accordance with the
recommendations of the Bipartisan commission.
TITLE IV - MISCELLANEOUS PROVISIONS
SECTION 401. DEFINITIONS
This section states that the term "Central.A*erican
countries" shall be deemed to include, for the purposes of this
Act and the amendments this Act makes to the Foreign Assistance
Act of 1961, Belize, Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, Panama and regional programs which benefit
such countries, such as regional training programs.
SECTION 402. TRANSFER AUTHORITY
This section authorizes the President to transfer in each
of the fiscal years 1984 and 1985 up to a total of $50,000,000
from accounts authorized by this Act to non-military accounts
authorized by this Act, if he determines it to be necessary for
the purposes of this Act. This authority is in addition to
that available pursuant to sections 109 and 610 of the Foreign
Assistance Act of 1961.
SECTION 403. COORDINATION
This section states that, under the direction of the
President, the Secretary of State shall be responsible for the
continuous supervision and general direction of programs
undertaken to carry out the purposes of this Act.
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PROGRAM SUMMARY
(In thousands of dollars)
Agriculture,
Education
Fiscal
Total
Rural
Development
Population
Health
and Human
Resources
Selected
Development
Other
Programs
Year
Planning
and
Develop-
Activities
Nutrition
ment
ESF
Other
1983
Loans
264,247
75,000
--
25,000
--
15,697
148,550
--
Grants
270,560
19,445
6,660
2,195
5,636
12,079
224,450
95
534,807
94,445
6,660
27,195
5,636
27,776
373,000
95aL
Total
1984
Loans
148,681
49,000
--
9,655
2,000
12,026
76,000
Grants
198,190
21,337
4,819
3,820
4,565
9,649
154,000
--
Suppl
363,500
10,000
5,000
18,000
10,000
30,000
290,500
--
Total
710 371
80,337
9 819
31 475
16,565
51.675
520.500
1985
Loans
55,292
25,000
--
10,342
--
13,950
6,000
--
Grants
858,108
44,800
15,000
29,658
64,000
70,000
634,600
--
Total
913 400
69,800
15,000
40,000
64 000
_84,00
640.6
a. Disaster Assistance Funds
FY 1985
PROGRAM HIGHLIGHTS
- A.I.D.'s Central American program concentrates on four fundamental elements:
economic stabilization, creation of a basis for long-term growth, promotion
of equity, and strengthened democratic institutions and respect for human
rights.
- In FY 1985, the request consists of: $640.6 million of ESF, $272.8 million of
DA, $120 million in P.L. 480 commodities, $77 million of other agency pro-
grams and Operating Expenses, and $600 million in guaranty authority to sup-
port private lending to the region.
- In FY 1984, the supplemental request for
Central America
includes:
$290.5 million of ESF, $73 million of DA,
$25
million
of
P.L. 480 commoditie
and $12 million in other agency programs
and
increased
s
Operating Expenses.
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AN ECONOMIC ASSISTANCE PROGRAM FOR CENTRAL AMERICA
INTRODUCTION
Central America is in crisis. As the National Bipartisan Commission on
Central America has documented, the economic, political and social turmoil of
the region poses a serious threat to U.S. national interests. Immediate
action is essential. This request embodies an action program to attack the
fundamental economic, social and political problems of the region identified
by the Bipartisan Commission. A separate request has been prepared to address
the military and security issues facing the United States in the region. This
request proposes a four-pronged program of stabilization, growth, equity and
democratization measures to address the underlying problems identified by the
Bipartisan Commission. Because aid alone cannot produce development, the
assistance proposed here would be conditioned on demonstrations by the
governments of their commitment and ability to undertake fundamental economic
and social reforms.
THE REGION'S PROBLEMS
Economic and social development has been made most difficult by the presence
of military conflict within the Central American region. Even were this
conflict to disappear, however, the region would still face four severe,
long-term, and potentially intractable problems: economic instability, poor
economic growth, economic and social inequity, and weak political and legal
systems. Each is described briefly below.
Economic Instability. All countries of the region are reeling from the
economic and political shocks of the past several years. The combination of
the 1979-1980 oil price increases and the commodity price declines between
1980 and 1983 opened up a gap of $1.5 billion in the region's balance of
payments, to which most governments responded by excessive borrowing rather
than adjustment. The political turmoil resulting from the establishment of a
Marxist government in Nicaragua and from internal strife in El Salvador
exacerbated this economic problem, leading to cutoffs of commercial credit,
capital flight, and a dropoff in foreign investment. The financial
difficulties left the countries unable to make payments for their Central
American trade, resulting in a collapse of the intraregional payments system
and a sharp contraction of intraregional trade. In addition, regional
governments face difficult fiscal situations resulting from reduced revenue
due to lower production and trade and inadequate tax collection and to
increased spending arising from an expansion of government programs and of
military spending due to insurgency and threats from abroad.
Poor Growth Prospects. The economic problems facing Central America go beyond
the relatively recent instability mentioned above. Sustained economic growth
is the only mechanism over the long haul that can fundamentally change the
reality of widespread poverty in the region, yet prospects are poor for the
traditional agricultural sectors, such as coffee, sugar and bananas, which in
the past have fueled growth spurts. Opportunities for import substitution
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industries have been exhausted. Unless some dynamic growth can be generated
by structural change that allows diversification of production and exports,
productive employment opportunities for the region's rapidly growing labor
force will not be available, and the region will be unable to overcome its
economic backwardness.
Economic and Social Inequity. A third serious problem facing three of the
countries -- Guatemala, El Salvador and Nicaragua -- is the limited capacity
or willingness of government institutions to address the issues that are at
the core of the development process. Unless the governments of these
countries come to grips with basic equity, social justice and participation
issues in a manner that addresses the concerns of all sectors of their
societies, their political stability -- and therefore that of the entire
region -- will continue to be threatened. Honduras, the poorest country in
the region, has so far managed to avoid the divisive internal conflicts of the
three countries mentioned above, but rapid improvement in the quality of life
for all sectors of the population is an important requirement for preventing
the emergence of such a situation.
Weak Political and Legal Institutions. Related to the lack of equity in some
of the countries is the lack of strong legal systems, the existence of
unrepresentative political systems and an overall lack of concern for basic
human rights. Costa Rica demonstrates that democratic political systems are
indeed possible in the region and that they can play a crucial role in
maintaining political stability and promoting broad development goals.
Representative systems cannot be built overnight, nor can they be imposed from
outside. But outside assistance can support indigenous efforts in this area.
MULTIYEAR GOALS AND FUNDING REQUEST
The funding requested here includes two elements: authorization of $8.3
billion in economic. assistance and guarantees for Central America, to be
available over the next six years; and a supplemental appropriation of $400
million in FY 1984 and a request for a $1,120 million appropriation in FY
1985, representing the first phase of implementation of this program. In the
face of large federal deficits and urgent domestic priorities, such a request
requires compelling justification. We believe that the report of the
Bipartisan Commission provides this. The situation is so alarming, the
Commission concluded, that "whatever the short-term costs of acting now, they
are far less than the long-term costs of not acting now." If the proposed
assistance can capture the imagination and energies of the people of Central
America, we believe that it can support a dramatic turnaround in the
development situation of the region and eliminate a potentially serious threat
to U.S. national security.
Our major goals for the five-year program are the following:
-- an end to the downward spiral in production by 1985;
-- achievement of an economic growth rate of at least 6% per year in the
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region within six years, producing more than 250,000 jobs annually through
export-led growth;
-- agricultural production increasing by 4% per year by 1989, generating
80,000 jobs per year and increasing both food availability and
agroindustrial exports;
-- substantially greater participation of all sectors of the Central American
population in the benefits of economic growth, including:
-- an increase in primary school enrollments to 95% of the school-aged
population by 1989 from the current 84%;
-- a reduction in the rate of primary-level grade repeaters by 50% in
all countries, and an increase in the primary level completion rates
from 40% to 80% in Guatemala, Honduras and El Salvador, and from 80%
to 95% in Costa Rica, Panama and Belize by 1990;
-- a reduction in infant mortality from the current rate of 65 per
thousand to 55 per thousand by 1989;
-- provision of modern family planning services to almost 600,000
couples, increasing contraceptive usage by 50% by 1989 and reducing
birth rates by 1% each year;
-- an increase of 25% in the rate of construction of low-income housing;
and
-- a 25% increase in the coverage of water and sewerage services by 1989.
-- a strengthening of democratic institutions in countries where they already
exist, and achieving substantial progress toward participatory democracy
and legal systems that respect individual human rights in the others.
As proposed by the Bipartisan Commission, the assistance to Central America
would be provided as part of a multiyear and collaborative approach in which
our aid would be closely tied to commitments for economic and social reforms
by the recipient governments. Our procedures for implementation will reflect
a greater emphasis on more flexible instruments for assistance, greater
collaboration with governments and private groups in the region, and
streamlined administration. A Central American Development Organization
(CADO), consisting of highly experienced and respected representatives of
Central America and the United States, will monitor and assess country
performance against both economic and political goals. This approach follows
the conclusion by the Bipartisan Commission that an integrated program
attacking the four major problems of the area -- economic instability, poor
economic growth, poor equity performance, and weak political and legal systems
-- is essential to resolution of the region's problems.
We propose that the full amount necessary for this entire program be
authorized in FY 1984 to provide our friends with the assurance necessary to
take difficult actions to meet the crisis. The supplemental appropriation*
we are requesting in FY 1984 includes:
*This is in addition to the following being amounts financed for Central
America under the FY 1984 Continuing Resolution: $230 million in ESF; $117
million in DA; and $83 million under P.L. 480.
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-- $290 million of Economic Support Funds (ESF) ;
-- $73 million in Development Assistance (DA);
-- $25 million in P.L. 480 commodities; and
-- $12 million in other agency programs and increased operating expenses.
In FY 1985, we are seeking appropriation of:
-- $641 million of ESF;
-- $273 million in DA;
-- $120 million in P.L. 480 commodities;
- $77 million for other programs and operating expenses; and
-- $600 million in guaranty authority to support private lending to the
region.
In each case, we request that the ESF and DA appropriation be made available
until expended to allow more effective application of condi ti onali ty to these
programs .
Our Central Ameri can program strategy concentrates on four fundamental
elements: economic stabilization, creation of a basis for long-term growth,
promotion of equity, and strengthened democratic institutions and respect for
human rights.
The immediate priority will be to achieve economic stabilization by
eliminating unfinanced balance of payments and fiscal gaps. While all Central
American countries have reduced import levels, increased assistance will be
needed if further declines in imports -- and therefore in incomes -- are to be
avoided. We propose to provide large-scale balance-of-payments assistance,
conditioned on steps by governments to increase exports and conserve on
imports for consumption to restore external balance, and to correct fiscal
imbalances through increased taxes and spending controls. To assure this we
will seek to operate within the framework of International Monetary Fund (IMF)
stabilization programs. If an IMF program is not feasible in particular
circumstances, we shall establish our own performance targets for
macroeconomic variables.
Both the time period required for economic stabilization and the level of
resources required will depend significantly upon external events. At
present, we expect this phase to require three to five years and $3.1 billion
in U.S. Government assistance. This will include $2.5 billion in appropriated
ESF, $0.1 billion in P.L. 1180 commodities, and $0.5 billion in private trade
credits guaranteed by the U. S. Government. The bulk of the funds will be
provided bilaterally, but a portion will be channeled through Central American
regional institutions to promote restoration of intraregional trade. The
assistance will enable the region to increase imports of needed raw materials
and capital goods to increase production and employment over the near term.
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However, local-currency generations from this dollar assistance will be used
in most cases to support other A.I.D. economic assistance goals, e.g.,
production credit, labor-intensive construction of economic infrastructure and
the most pressing basic human needs in health, education and housing.
B. Laying the Basis for Long-Term Growth
The second element of our strategy -- distinct from the first, but pursued
concurrently with it -- is to lay the basis for self-sustaining growth d that
will provide productive employment for the people of the region. Rapid growth
in productive job opportunities is the key to promotion of self-sustaining
economic growth and to steadily rising incomes. Our program for growth
promotion through productive employment stresses four elements: reform of
government economic policies, promotion of industry and agriculture, and
creation of economic infrastructure.
We believe that our approach can restore relatively rapid economic growth to
the region (6% real growth per year) within five years. We propose funding of
$3.9 billion for this purpose, including $1.7 billion in appropriated funds
($0.9 billion ESF, $0.4 billion DA, and $0.4 billion P.L. 480), $0.8 billion
in local currency counterpart generations from economic stabilization
assistance, and up to $1.3 billion in guarantees and insurance. The lteerrnk
will include trade credits provided through A.I.D. and the Export-Import
and increased insurance coverage by the Overseas Private Investment
Corporation.
essential to
1. Policy reform. Increased employment opportunities
achievement of long-term growth and equity goals.
import-substitution policies have often discriminated against labor-using
activities by making machinery artificially cheap. Such practices include
interest rates that are negative in real terms, overvalued exchange rates, and
very high tariff walls that encourage production of capital-intensive
commodities. Eliminating such approaches would encourage more labor-intensive
production methods and stimulate increased exports of both traditional and new
products.
The experience in the developing countries over the past two decades suggests
that this policy approach offers the best prospect for creating the
large-scale employment needed by the region's rapidly growing labor force
while permitting steady growth in productivity and per capita incomes. In
turn, this rapid growth in incomes and exports should
prmitedndequallyvrapid
growth in the imports of raw materials and other products
the productive employment that can support a higher living standard for the
people of the region.
2. Industrial Employment. If the people of the region are to have the
employment opportunities needed to increase their incomes substantially the
industrial sector will need to play a major role. Over the medium term only
the export market is likely to provide the market potential needed to spur
rapid industrial growth. Exports of nontraditional products from the region
have in fact been growing rapidly over the past two decades (with annual
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growth of manufactured exports to the United States averaging about 30% per
year), but they are still a small share of total production or exports. The
implementation of the Caribbean Basin Initiative (CBI), providing duty-free
access to the U.S. market over the next 12 years, should provide a favorable
environment for such an export strategy.
U.S. assistance will directly assist in financing this effort through such
activities as providing credit for imports of machinery for industry and
technical assistance in investment promotion, product development and export
marketing, and improved production methods. Increased activity by the
International Executive Service Corps will be one vehicle for this. We expect
the private sector to be willing to undertake much of the necessary financing
itself where policies provide the proper incentives, while our assistance will
be aimed at encouraging such policies.
3. Agricultural Production. Half of the region's labor force still works in
agriculture. Experience indicates that small farmers are the most productive
users of land resources, yet they lack adequate access in several of the
countries of the region to credit, modern technology and marketing services
that would unleash this capacity. We believe that agricultural production can
be increasing by 4% per year by the end of the five-year period. This would
increase food availability internally and generate exports of nontraditional
agricultural and agroindustrial products, besides providing about 80,000 new
jobs per year. Our program includes credit for small farmers and
dissemination of improved technology both directly and through promotion of
private and public mechanisms, including cooperatives. Our policy dialogue
will focus on price and marketing reforms to provide better incentives to
farmers.
4. Economic Infrastructure. Our strategy also proposes substantial funding
for economic infrastructure. In the relatively less-developed countries of
the region, provision of basic economic infrastructure -- roads,
communications, urban services -- can be important in facilitating increased
production of manufactured and agroindustrial products. Moreover, financing
of such infrastructure is likely to increase economic activity and, by using
labor-intensive techniques, increase employment relatively quickly. Of
course, the multilateral banks will continue to be the main source of
financing for infrastructure projects.
C. Equity and Broad Participation in Development
The third element of the strategy -- to be pursued in those countries where
the restoration of satisfactory economic growth is not an adequate answer to
the development problem -- is a longer term development program aimed at
improving the quality of life of less advantaged groups. Access to employment
and other sources of productivity growth, such as modern agricultural
technology and improved inputs, have already been mentioned above because they
provide a means of achieving equity goals in a manner that also stimulates
rapid economic growth.
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Altogether, we propose a total of $3.1 billion in assistance in direct support
for our equity goals. This figure includes $1.7 billion in dollar funds
appropriated for this purpose (including $1.4 billion in DA, $0.1 billion in
P.L. 480 Title II commodities, and $0.2 billion in programs administered by
the Peace Corps and the State Department), $0.2 billion in Housing Guaranty
funds, and $1.2 billion in local currency counterpart funds from ESF and P.L.
480 assistance provided for balance-of-payments support. In addition, the
$3.9 billion provided to support long-term growth could be included in this
category because it supports the productive jobs and increased incomes that
are the most powerful vehicle in the long term for meeting basic needs.
The principal direct equity-oriented measures being supported include the
following:
1. Education. Illiteracy is still a serious problem in most of the countries
of the region, and limited access to primary education, particularly in rural
areas, is creating a new generation of illiterates. We propose a major
program of support for educational activities in the region, including primary
education, substantial expansion of skills training and vocational education,
and higher education in the United States. At the primary level, we propose
to expand access to the system to nearly 100% of the school-aged population
and to increase the relevance and quality of the education to reduce grade
repetition and dropouts. Major program elements will include school
construction, teacher training, and production and distribution of textbooks
and educational materials. The efforts in the literacy field will include
both support for indigenous public education institutions and for use of Peace
Corps volunteers to supplement their efforts.
We also propose to provide 10,000 scholarships over the next five years for
study in the United States. We have found that those Latin American
government officials who are most effective in promoting development in the
region and in promoting democratic values are quite often the product of past
U.S. Government-financed participant training. Moreover, scholarships to
communist-bloc countries are apparently available in much greater number than
those for U.S. study. In some countries, this had led to cadres of
bloc-trained professionals in government ministries. Our scholarship
assistance will address this challenge, in addition to augmenting the number
of high-level professionals necessary for the accelerated development effort
and to increasing the understanding by Central Americans of U. S. values. The
scholarship program will be administered by A.I.D. and the United States
Information Agency (U. S. I. A.) .
2. Health and Nutrition. We will support increased action to improve health
conditions, particularly in rural areas, where government programs are clearly
inadequate at present. Increased efforts to control malaria and other
vector-borne diseases, dissemination of oral rehydration therapy, and training
of nurses and other health workers will be major elements of our program. We
will address nutrition issues through an expansion of our technical assistance
and education efforts, as well as through an expansion of our food aid
programs. The Peace Corps will cooperate in implementing our health and
nutrition programs, and U.S.I.A. will help in translating and disseminating
educational materials.
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3. Family Planning. Despite a significant reduction in birth rates in
Central America over the past decade, the rate of population growth in Central
America remains around 3% per year. Such high growth rates strain countries'
capacities to provide adequate nutrition, education, health care, and
employment opportunities for their populations. In addition, increased
population pressures on limited natural resources have resulted in serious
soil erosion and other environmental degradation in many areas. Access to
contraceptives and to accurate family planning information is essential if
poorer people are to have the opportunity to limit family size. Studies have
shown that lack of information is an obstacle to increased contraceptive use,
and that young children in large poor families in the region tend also to
suffer from malnutrition. We will continue our programs in this area, with
particular emphasis on working with private institutions.
4. Access to Land. Improved access to land may be the most rapid way to
provide opportunity to poor groups in some of the countries of the region.
Colonization of new lands can provide part of the solution, but some form of
land reform may be a necessary element of a program in this sector. This
would be the case particularly in Guatemala where access to land in the
central highlands, where the bulk of the Indian population lives, is a severe
constraint to improved living standards. Our program will support efforts to
increase land availability for poor rural families through support for
colonization, through legal reforms needed to increase security of land
titles, and through long-term financing for land purchase.
5. Shelter. Much of the population of the isthmus lives in substandard
housing which lacks water, sewerage and electricity services. Although
remedying this problem will require both decades and massive financial
resources, we can make progress through support for institutional improvements
in housing finance mechanisms and by innovative programs such as "sites and
services" projects that can mobilize the labor resources of beneficiary
families at low cost. our Housing Guaranty program will be used to channel
private funds toward the solution of the severe shortage of low- and
moderate-income housing while it generates substantial employment.
6. Refugees and Displaced Persons. The tragedy of forced dislocation due to
political violence has exacerbated the poverty of many Central Americans. In
some cases this has led to the spillover of migrants to other countries,
including the United States. In El Salvador and Guatemala it has resulted in
the internal dislocation of hundreds of thousands of people now living in
deprived circumstances. We propose to expand our program of assistance for
displaced persons to meet their cash income, health, nutritional, and
educational needs in the near term and to assist in relocation or return to
their homes as conditions permit. The State Department will be responsible
for administering the refugee program, while A.I.D. will assist the displaced
persons.
D. Democratic Institutions and Human Rights
The ultimate purpose of economic development is increased human welfare. If
we succeed in generating economic growth in the region without broadening the
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respect for basic human values we not only will fail to achieve our purpose
but will be sowing the seeds of a future crisis when internal conflict becomes
violent revolution. It is important to realize, however, that we cannot
determine the path chosen by the people of the region. But we can provide our
moral and financial support to those countries which choose democratic
processes and which respect human rights. As a key element in providing the
economic assistance under this program, we propose to take into account the
situation in each country that responds to commitments regarding free
elections, independence of the judiciary system, and respect for individual
rights.
We also plan specific activities in several areas to support this element of
our strategy. First, we will support strengthening of the administration of
justice through technical assistance, training and material support for the
courts, criminal investigative agencies, public prosecutors and defenders,
justice ministries, law schools and bar associations. Second, we will provide
assistance to improve the administration of elections. Finally, as discussed
in the section dealing with education, broader understanding of democratic
values will be pursued through scholarships and educational materials on
democracy and democratic institutions provided by the U.S.I.A.
Since funding for each of the countries in the region will be affected by
performance with respect to democracy and respect for human rights, the entire
$8.3 billion we propose for the region will support our objectives in this
area. In specific projects, we propose $340 million in funding for democracy
and human rights initiatives.
IMPLEMENTATION CONSIDERATIONS
New Approaches. The emphasis on working closely with host governments to
assure that appropriate policies are adopted, both in the economic sphere and
with respect to political and human rights, requires that our assistance
program include two departures from past practices.
First, we intend to encourage the establishment of an organization
representing the public and private (including business and labor) sectors of
participating Central American countries to serve as a forum for a frank and
open dialogue on Central American political, economic and social development.
CADO would not, as we envision it, be a separate bureaucracy but would meet
periodically and contain a minimum number of staff necessary to achieve the
purposes set out below. CADO would be structured so as to have labor
representation, with the expectation that the experience with the Triparte
model of the International Labor Organization will be heavily drawn on. While
the specific makeup and functions of CADO will need to be developed in
consultation with the Central Americans, our current view is that it should:
-- establish goals and targets for economic, political and social
development;
--
recommend
country performance criteria;
ation
bili
--
evaluate
z
external assistance needs, and recommend resource mo
actions;
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-- measure country performance against goals and targets, and recommend
corrective action where countries fall short; and
-- be influential in affecting the level and structure of U.S. bilateral
assistance for Central America.
Second, we believe that greater flexibility is needed with respect to use of
the funds than has existed in the past. The requirement that all funds
appropriated in each fiscal year be obligated in the same year can require us
to make difficult choices between approving programs where a recipient
government has not yet taken needed steps or of losing the funds entirely.
The earmarking of funds by country has reduced our ability to encourage
governments to take necessary policy reforms. We therefore request that the
Congress provide two-year appropriations for this program and that
appropriations not be made with country-level earmarkings.
Third, we seek to increase the role played in the development process by
private voluntary organizations to the maximum extent feasible. In
implementing the CBI we have developed closer relationships with these
organizations than previously and have provided substantial funding to them.
We intend to continue this effort.
Absorptive Capacity. The large-scale program proposed raises a question of
the capacity of the region to absorb such an increase. We have concluded that
such capacity does indeed exist. First, the annual level of resources
provided under the program, at about 5Z of the total product of the region, is
lower than that provided by donors in a number of other cases. Second, the
countries of the region are now operating at very low levels of production,
and considerable excess capacity exists in the private sector. As our aid
helps restore production, we will be providing the institution-building help
and technical assistance that will prevent the emergence of bottlenecks in the
future. Third, most of our resources will flow through private-sector
agencies rather than governments.
Support Costs. The implementation of the proposed Central American program
will require an increase in support costs for A.I.D. This includes additional
direct-hire employees, plus increased operating expenses associated with the
program. We propose additional funding of $2.5 million in FY 1984 and $6
million in FY 1985 to support this program.
Descriptions of the proposed program for each of the Central American
countries are being provided separately. Briefly described below are the
major elements of those country strategies.
Belize.. For its per capita income level, Belize has high levels of education
and health standards and a democratic political system. The economy has a
good economic growth record and is relatively well-managed. The major
obstacle is lack of infrastructure, which is made more serious by the fact
that the country's small population base limits the economic returns to such
investment. Our strategy emphasizes stabilization assistance over the near
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term and support for investment in export-related agriculture and industry
over the longer term. The Government of Belize will need to control the size
of the public sector and to improve its efficiency. The main challenge,
however, will be to generate private-sector entrepreneurship and finances to
develop the country's considerable natural resource base. We propose
supplemental funding of $10 million for Belize for FY 1984 and a total request
of $10 million for FY 1985.
Costa Rica. The country has democratic institutions and high quality of life
in relation to its per capita income. It grew rapidly until the late 1970s
when the combination of failure to adjust to the oil price increase, rapid
growth of the public sector and extremely rapid growth of foreign debt created
an untenable economic situation. The major challenges facing Costa Rica at
present are how to shrink the size of the public sector and how to extricate
itself from its oppressive external debt. The latter can be expected to be a
major limiting factor in economic growth possibilities for at least the
remainder of the decade.
Our assistance strategy emphasizes government policies aimed at promoting
production for export to world markets. This will require the government to
maintain adequate incentives for exporters, particularly through the exchange
rate. In addition, shrinking the size of the public sector through divestment
and increased efficiency are high priorities. We propose supplemental funding
of $75 million in FY 1984 and total assistance of $208 million in FY 1985.
El Salvador. The development prospects in El Salvador are heavily dependent
upon progress being made against the insurgency. Assuming that the guerrilla
threat will gradually decline over the next several years, El Salvador should
be able to reverse some of the dramatic economic decline relatively quickly.
Nevertheless, reconstruction of economic infrastructure and establishment of
basic services for the reformed agricultural sector will take a number of
years. Given the relative abundance of low-cost labor in the country and its
relative success in generating industrial exports until the rise of the
insurgency, the country should be able to generate rapid growth in
manufacturing exports.
Actions to increase the effective exchange rate for exporters and to resolve
the uncertainty in the agricultural sector (by completion of the land reform
and making required payments to former landholders) are the two most important
steps that need to be addressed by the government at present. Over the longer
term, expanding economic opportunity, meeting basic needs, increasing respect
for human rights, and encouraging broad political participation are major
challenges. We propose additional assistance of $134 million for FY 1984 and
a total program of $341 million for FY 1985.
Guatemala. Over the past two decades, Guatemala has experienced a combination
of satisfactory economic growth, limited political development, and poor
performance on meeting basic needs, particularly for the indigenous groups of
the central highlands. With a tradition of conservative economic management,
the country's stabilization and debt problems are less severe than any of the
other countries of the region except Belize, but its political and social
problems may be the most intractable in the region.
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Our strategy for the country proposes high levels of assistance aimed at
addressing the basic social issues and providing substantial economic
infrastructure, but conditioned upon a demonstration of commitment by the
Guatemalan government to a resolution of the social and political conflicts
within that society. Assuming such a commitment, we propose a supplemental
request of $20 million for FY 1984 and total assistance of $96 million for FY
1985.
Honduras. Despite a considerable natural resource base, Honduras is the
poorest country in the region. The primary problems are the low level of
human resources and the weakness of government institutions. Political
institutions are relatively well-developed, however, and the country has not
experienced the social and political divisions that characterize El Salvador
and Guatemala. Our strategy includes substantial support for stabilization
efforts in the near term; heavy investment in economic infrastructure,
particularly in the agricultural sector, and long-term institution-building,
particularly in education. The government will need to increase substantially
its capacity to make decisions and to implement projects if Honduras is to
effectively utilize increased resources. We propose an increase in the
assistance level of $84.5 million in FY 1984 and a total funding level of $139
million for FY 1985.
Nicaragua. During the 1960s and 1970s, Nicaragua's economic performance and
its progress in spreading basic health and education were both about average
for the region. A failure to establish political alternatives to the Somoza
family, however, led to a polarization of society and to the Sandinista
takeover in 1979. The current government has emphasized government programs
in education and health. It has also dramatically increased the role of
government in the economy through both direct ownership and through
replacement of market forces by government decisions in many areas,
particularly prices and foreign trade. As a consequence, severe economic
distortions have been created that make sustained economic growth unlikely
without massive external assistance. Because of both the economic and
political factors, we have not programmed any assistance to Nicaragua. Should
government policies dramatically change, however, assistance to rebuild the
country's economy might be justified.
Panama. Panama has a history of relatively rapid economic growth combined
with a broad spread of the benefits of growth'. Its most serious economic
problem, urban unemployment, is due in significant part to government policies
that limit the flexibility of the private sector. The very large presence of
the U.S. Government in Panama through the Canal and U.S. military
installations has probably contributed to the unemployment problem by creating
a high-wage economy in the midst of a developing country. The current
government has undertaken major policy adjustments aimed at restoring
private-sector incentives and confidence. Our assistance would strengthen the
capacity of the government to carry out such reforms. It would be based on
continued progress in this area, including elimination of inappropriate
pricing policies in agriculture and reform of labor legislation. We propose
increased assistance of $34.2 million in FY 1984 and a request of $40 million
in FY 1985.
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Central American Regional Programs. In addition to bilateral programs in each
of the countries of the region, we propose to emphasize regional approaches in
several areas. First, we are encouraging regionwide discussion of goals and
performance. CADO will provide the mechanism for this. Under the umbrella of
CADO, we will support operation of a strong consultative group of the Central
American governments and all major donors to the region to provide a forum for
discussion of economic policy issues.
A second area of regional activity will be support for the strengthening of
regional institutions. As recommended by the Bipartisan Commission, we will
consider providing further financial support to the Central American Bank for
Economic Integration, which supports investment projects in the region. We
propose to carry out our activities to support democratization and respect for
human rights on a regionwide basis. We are also examining the feasibility of
a regional venture capital company to spur the capitalization of dynamic
indigenous firms. We also intend to provide trade credit guarantees on a
regional basis.
Third, we seek to reverse the decline of the Central American Common Market
(CACM). Restoration of trade can lead to a spurt in regional growth.
Moreover, because of the very small size of the individual countries,
increased regional specialization may increase the region's capacity to
produce for world markets. With limited U.S. resources trade can probably be
re-established without any direct support being provided to Nicaragua. Over
the longer term our strategy would seek to promote the reduction in the
external tariffs applied by the CACM countries to increase competitiveness in
world markets. We propose funding of $30.8 million for FY 1984 and $199
million for FY 1985 to support programs of a regional nature.
Attached are two tables presenting the total resources being requested for the
proposed program.
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 'fable I
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FINANCIAL SUMMARY
ECONOMIC ASSISTANCE TO CENTRAL AMERICA
(millions of dollars)
Supplemental
PUR POS E FY 1984
FY 1985
FY 1986-
FY 1989
TOTAL
Stabilization
ESF 272
541
1,644
2,457
P. L. 480 25
103
--
128
Guarantees --
470
--
470
Sub-total 297
1,114
1,644
3,055
Growth
ESF 10
80
789
879
DA 8
87
327
422
P. L. 480 --
--
410
410
Guarantees --
90
1,240
1,330
Counterpart* (100)
(220)
(520)
(840)
Sub-total 118
477
3,286
3,881
Equity
DA 66
196
1,096
1,361
P. L. 4 80, 11 --
17
70
87
Guarantees --
40
160
200
Counterpart* (100)
(220)
(880)
(1,200)
Peace Corps 2
18
94
114
State, Refugees --
15
78
93
Sub-total 168
506
2,381
3,055
Democracy
ES F
20
85
113
U. S. I. A.
36
179
222
CADO
1
4
5
Sub-total 15
57
268
340
Operating Expenses 2
6
26
34
TOTAL* 400 1 , 720
6,205
8,325
*Counterpart figures are local currency generations from ESF or P.L. 480
balance-of-payments financing for A.I.D.-supported activities in the region.
Since they are programmed for development purposes, they are included in
sector sub-totals but not in the overall total.
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ECONOMIC AND SOCIAL DATA
REGIONAL SUMMARY
ECONOMY
EDUCATION
POPULATION
HEALTH
DENSITY LABOR
INFANT
GNP
ANNUAL
(PERSONS / SQUARE MILE) FORCE
DEATHS
PER
LITERACY
GRCMTH
- ------------------- t IN IN
PEOPLE
LIFE
PER
COUNTRY
CAPITA
(DOLLARS)
RATE
1?ERCENTI
TOTAL
(THOUSANDS)
PATE
(PERCENT)
POP/AGR
LAND
POP/TOTAL URBAN AGRICULTURE
LAND AREAS (PERCENT)
PER
DOCTOR
EXPECTANCY
(YEARS)
1,000
BIRTHS
BELIZE
1,080
91
154
2..1
294
16 49 28
2',935
-
56
COSTA RICA
1,430
88
2,624
2.6
273
110 44 29
1,390
71.0
18
EL SALVADOR
650
62
4,685
2.6
865
543, 42 50
3,599
64.4
71
GUATEMALA
1,140
46
7,714
3.1
679
168 36 55
1,833
59.2
66
HONDURAS
600
57
4,276
3.4
179
82 37 63
3,294
59.2
78
PANAMA
1,910
85
2,058
2.1
268
60 56 27
1,223
71.0
23
ter`
DA SUMMARY
1,034
61
21,511
2.9
316
55 40 49
1,997
63.0
59
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ECONOMIC AND SOCIAL DATA
REGIONAL SUMMARY
ECONOMY EDUCATION POPULATION HEALTHY
---- - --- --------- - ---
DENSITY LABOR INFANT
GNP ANNUAL (PERSONS / SQUARE MILE) FORCE DEATHS
PFR LITERACY GROWTH ------------------- X IN IN PEOPLE LIFE PER
CAPITA RATE VITAL RATE POP/AGR POP/TOTAL URBAN AGRICULTURE PER EXPECTANCY 1,000
COUNTRY (DOLLARS) (DERCENT1 ITHOUSANnS) (PERCFNT) LAND LAND AREAS (PERCENT) DOCTOR (YEARS) BIRTHS
- - - --------------- --
ECONOMIC SUPPORT
FUND RECIPIENTS
BELIZE
1,080
91
154
2.1
294
16
49
28
2,935
-
56
COSTA RICA
1,430
88
2,624
2.6
273
110
44
29
1,390
71.0
18
EL SALVADOR
650
62
4,685
2.6
865
543
42
50
3,599
64.4
71
GUATEMALA
1,140
46
7,714
3.1
679
168
36
55
1,833
59.2
66
HONDURAS
600
57
4,276
3.4
179
82
37
63
3,294
59.2
78
PANAMA
1,910
85
2,058
2.1
268
56
27
1,223
71.0
23
-----------------------------------------------------------------------------------------------------------------------------------
ESF SUMMARY 1,034
61 21,511 2.9 316 55 40 49 1,997 63.0 59
-----------------------------------------------------------------------------------------------------------------------------------
REGION SUMMARY 1,034 61 21,511 2.9 316 55 40 49 1,997 63.0 59
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ECONOMIC ASSISTANCE TO CENTRAL AMERICA: FY 1983-85
Millions of Dollars)
FY83
Actual
FY84
Continuing
Resolution
FY84
Supplemental
Request
FY84
Total
FY 85
Request
Belize
DA
6.7
4.0
6.0
ESF
10.0
4.0
PL480
Costa Rica
DA
27.2
15.1
8.0
23.1
20.0
ESF
157.0
70.0
60.0
130.0
160.0
PL480
27.7
20.0
7.0
27.0
28.0
Total
211.9
105.1
75.0
180.1
208.0
El Salvador
DA
58.8
41.3
30.0
71.3
80.0
ESF
140.0
120.0
90.0
210.0
210.0
PL480
46.7
37.3
14.0
51.3
51.1
Total
245'.5
198.6
134.0
332.6
341.1
Guatemala.
DA
12.2
1.6
20.0
21.6
40.0-
ESF
10.0
35.0
PL480
5.3
12.0
21.4
Total
27.5
13.6
20.0
33.6
96.4
Honduras
DA
31.2
31.8
8.0
39.8
45.0
ESF
56.0
40.0
72.5
112.5
75.0
PL480
15.5
12.6
4.0
16.6
19.0
Total
102.7
84.4
84.5
168.9
139.0
Panama
DA
11.0
4.2
15.2
19.8
ESF
30.0
30.0
20.0
PL480
1.0
1.3
0.5
Total
7.2
12.3
34.2
46.5
40..3
Regional Programs
DA 19.4 12.1 -
2.8.
14.9
62.0
6
136
ESF
28.0
28.0
.
Total
19.4
12.1
30.8
42.9
'198.6
Sub-Totals
9
89
8
272
DA
161.7
116.9
73.0
1
.
.
ESF
373.0
230.0
290.5
520.5
640.6
PL480
96.2
83.2
25.0
108.2
120.0
Misc.l
11.5
11.5
8.6.6
GRAND TOTAL ?
630.9
430.1
400.0
830.1
1120.02
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Miscelleanous total includes:
FY84
Supplemental
Total
FY84
Request
FY 85
Request
.
Other Agencies,
9.0
9.0
70
6
Peace Corps
(2.0)
(2.0)
.
(18
2)
USIA
(7.0)
(7.0)
.
(36
4)
State/Refugees
State/ICC
.
(15.0)
(1
0)
AID Supplementary OE
2.5
2.5
.
6
0
HIG Reserve
.
10.0
21 Grand Total for requested funds in FY 1985 does not include the
following non-appropriated guarantees:.
Housing Investment (HIG).
Trade
Ex-Im Bank.
150.0
AI_D
300.0
Expanded OPIC Insurance
20.0
CCC
90.0
TOTAL
2/1/84: Wang 6205E
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K
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A MILITARY ASSISTANCE PROGRAM
FOR CENTRAL AMERICA
THE CRISIS IN CENTRAL AMERICA
Central America faces interlocking crises. They have been
described by the National Bipartisan Commission on Central
America; the implementing legislation proposes to untangle them
and provide the resources for solutions.
None of these crises can be solved independently of the
others. In terms of policy responses, however, they can be
considered under three headings
-- First, those problems stemming from indigenous causes.
The roots of Central America's troubles lie in social
inequity, unrepresentative politics, weak legal
institutions, disrespect for human rights, and the other
problems of societies in urgent need of reform.
Second, those problems resulting from the international
economic shocks of the past several years.
-- Third, the challenges produced by externally-supported
guerrilla insurgency. This, as the Bipartisan
Commission says, "differs as much from indigenous
revolts as it does from conventional wars."
The military assistance proposals described here address
primarily the third of these interrelated challenges; the first
two require separate and larger amounts of economic
assistance. It'must be stressed, however, that none of the
proposals for Central America stand on their own. Social and
economic problems cannot be solved by military means. But
neither can any society, faced with a concerted effort to
destroy its economy and its institutions, hope to prosper
through social and economic programs unprotected by an adequate
security force.
U.S. INTERESTS
The predominant interests of the United States in Central
America involve security and human rights. Our economic
interests are also of long standing but are not substantial.
Our security interests have loomed large for American leaders
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and public since the building of the Panama Canal early in this
century. The Bipartisan Commission concluded that Central
America "critically involves our security interests" because it
is a near neighbor. As the Cuban experience demonstrates, a
foothold by the Soviet Union in the Western Hemisphere would
become an armed camp and a springboard for subversion of
neighboring states. In a strategically vital region, a regime
controlled by elements hostile to the democratic system must be
of deep concern -- not only to that regime's neighbors, but
also to the United States.
"What gives the current situation its special urgency" --
writes the Bipartisan Commission -- "is the threat posed by the
Sandinista regime in Nicaragua which is supported by massive
Cuban military strength, backed by Soviet and other East Bloc
weapons, guidance, and diplomacy, and integrated into the Cuban
network of intelligence and subversion." The use of Nicaragua
as a conduit for Cuban and Soviet arms and training is the
factor that critically involves our own security interests. At
the moment, the externally-backed insurgency is most
threatening in El Salvador, but there is also an active
guerrilla war in Guatemala. The Sandinista regime has sent
Cuban-trained guerrillas into Honduras and sponsored terrorism
in Costa Rica.
Many of the Nicaraguans who overthrew Somoza wished to
establish democratic institutions. In 1979, the Sandinistas
pledged to the OAS that they would establish a democratic,
pluralistic, and non-aligned regime. The United States took a
leading role in international efforts to assist Nicaragua.
But Marxist-Leninists had a monopoly of the military power
in the new regime. The Carter Administration suspended its aid
only when it became clear that the Sandinistas were channeling
Cuban and Soviet assistance to the guerrillas in El Salvador.
Nicaragua's comandantes have publicly stated their intent
to consolidate Marxism-Leninism. They have built a military
establishment four times as large as Somoza's, disproportionate
to those of neighboring states, and far beyond their legitimate
defensive needs. There are at least 2,000 Cuban military
advisers in Nicaragua, as well as several hundred from the
Soviet Union, Eastern Europe, Libya, and the PLO. An estimated
15,000 tons of Soviet Bloc military equipment reached the
Sandinista army in 1983. This is the factor which has
internationalized the conflict.
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-3-
Our response has some elements common to our military
assistance programs in all six countries. These include (1) a
strong emphasis on training; (2) insistence on
counter-insurgency operations that respect human rights; (3)
stress on small-unit organization and tactics; (4) the need for
greater force mobility; and (5) the requirement for low-cost,
low-technology arms and equipment.
Training
We regard training as the key to our military assistance
strategy in the region. We recognize the need for more
.leadership training, particularly at the junior officer, cadet,
and NCO levels. At the same time, there is a continuing need
for technical training, as in the case of pilots, mechanics,
and technicians. Large-scale training of entire units is
required for some countries. The training is carried out at
military installations in the U.S., at the Panama Canal Area
Military Schools, at the Regional Military Training Center
(RMTC) in Honduras, and by U.S. Mobile Training Teams (MTTs)
in-country.
Human Rights
Our training emphasizes the importance of humane
counter-insurgency tactics and respect for human rights. As
the Bipartisan Commission points out, however, "The present
level of U.S. assistance to El Salvador is far too low to allow
the armed forces of El Salvador to use these modern methods of
counter-insurgency effectively." We have trained troops in the
use of tactics which are sound and humane, but which they lack
the resources to implement correctly.
Small-unit Organization and Tactics
In our training programs, particularly for countries faced
with active guerrilla movements, we stress the need for
small-unit organization and tactics as the most effective way
to counter insurgency. Historically, the armed forces in the
region have been grounded in the use of large-scale units more
suitable for conventional than guerrilla warfare. We emphasize
the need for highly-trained small units which can take the
battle to the guerrillas rather than remaining in a defensive
or static posture.
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Force Mobility
There is an obvious premium on the need for force mobility
to carry out a military strategy emphasizing small-unit
organization and tactics. Taking the military initiative to
seek out and engage guerrillas requires helicopters,-fixed-wing
aircraft, and vehicles, as well as the communications equipment
needed for the effective use of intelligence and the exercise
of command and control of dispersed forces.
Low-cost, Low Technology Arms and Equipment
We recognize that highly sophisticated, expensive arms and
equipment are inappropriate for countering guerrillas and
terrorists in unconventional warfare, and that we cannot burden
the budgets of the Central American countries (or our own
military assistance programs) with materiel which is too costly
to acquire, maintain, and operate. We therefore eschew such
materiel in favor of low-cost, low-technology arms and
equipment. By so doing we also restrain any tendency towards
intra-regional arms competion in sophisticated items -- while
at the same time giving due weight to the conventional military
threat posed by the Nicaraguan arms buildup.
FY 84 SUPPLEMENTAL/FY 85 REQUEST
Our proposed FY 84 Supplemental and FY 85 Military
Assistance programs for Central America contain enough
additional resources to break the existing stalemate between
governments troops and guerrillas in El Salvador. The programs
are, however, modest by global standards and in comparison to
our economic aid.
Grant assistance is clearly necessary in view of the
region-wide economic difficulties and the economic damage
wrought by guerrillas. We should not add to the debt burdens
of these countries by concentrating on cash purchases or
high-interest loans. Therefore the entire FY 84 Supplemental
and FY 85 programs are proposed on a concessional basis --
primarily as Military Assistance Program (MAP) and
International Military Education and Training (IMET) grants,
and secondarily as low-interest direct Foreign Military Sales
(FMS) loans.
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The FY 84 Supplemental military assistance request for
Central America totals $259.05 million and consists entirely of
MAP grants. The FY 85 request for the region totals $255.9
million, and consists of $222 million in MAP grants, $30
million in concessional FMS credit, and $3.9 million in grant
IMET funds. It is proposed that these funds be authorized to
be available until expended.
COUNTRY PROGRAMS
The common elements of military assistance for Central
America, described above, obviously apply in varying degrees to
each of the six countries for which assistance is proposed,
depending on the unique situation in each country. Briefly
described below are the main elements of the country strategy
and programs. Additional justifications and descriptions of
the programs will appear in the FY 85 Security Assistance
Congressional Presentation Document (CPD).
Democratic Belize remains a peaceful, stable corner of
Central America. Geographically, it is closer to Cuba than any
other country in the region. It seeks to develop its Defense
Force gradually in recognition of the eventual withdrawal of
the British military garrison: We propose to continue our
program at FY 84 Continuing Resolution levels, in the areas of
vehicles, personal equipment, medical supplies, small arms and
ammunition, and training. We propose an FY 85 program of $.6
million.
Costa Rica
We strongly support Costa Rica's dedication to the
preservation of its democratic traditions and the maintenance
of its territorial integrity. Costa Rica has no standing armed
forces per se, so the Public Security Forces, comprised of the
Rural Guard and the Civil Guard, are responsible for national
defense. These forces are now ill-equipped to control the
country's borders or deal with acts of terrorism. Funds are
required for the acquisition of small, fixed wing observation
aircraft, helicopters, communications equipment, vehicles,
patrol boats, light weapons, spare parts, and ammunition. We
propose an FY 84 Supplemental program of $7.85 million and an
FY 85 program of $10 million.
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El Salvador
Our support for democracy, progress in human rights, and
economic development must be buttressed by the security shield
which our military assistance provides. The emerging democracy
in El Salvador needs more help from us to break the stalemate
with the guerrillas. While the military stalemate continues,
economic recovery and social programs are severely handicapped
and the armed opposition, hoping for military victory, has
little incentive to participate in the democratic process.
U.S. security assistance is needed to bring about conditions in
which the economic well-being of the people can be improved and
peace can be achieved through broader particpation in
strengthened democratic processes.
The Bipartisan Commission concluded that there is "no
logical argument for giving some aid but not enough. The worst
possible policy for El Salvador is to provide just enough aid
to keep the war going, but too little to wage it successfully."
We concur with the Bipartisan Commission. There are
requirements which must be met if the Salvadoran armed forces
are to seize the initiative through the National Campaign
Plan: increased air and ground mobility, increased training,
higher force levels, greater stocks of equipment and supplies,
and improved conditions for the Salvadoran troops (including
the provision of a medevac capability). Our proposed
assistance is consistent with these requirements. The main
elements are helicopters (including medevac), fixed wing
aircraft, vehicles, patrol boats, engineer equipment, radar,
communications equipment, hospital equipment, artillery, light
infantry weapons, spare parts, and ammunition. We propose an
FY 84 Supplemental program of $178.7 million and an FY 85
program of $132.5 million.
Guatemala
Our primary objective in Guatemala is to foster the return
to a democratic government which will respect human rights,
deal effectively with the insurgency, and be responsive to the
economic and social needs of the people. Limited military
assistance, the implementation of which would be conditioned
upon progress in returning to democratic processes and improved
human rights performance, would enable us to build a better
relationship with the Guatemalan military and increase its
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sensitivity to the control of human rights abuses. This is
especially pertinent in the area of training; there has been no
IMET program for (and hence reduced contact with) the
Guatemalan military since FY 77. Besides training, our
assistance is proposed in the areas of engineer equipment,
communications equipment, patrol boats, and spare parts for
vehicles, helicopters, and fixed wing aircraft. We propose an
FY 85 program of $10.3 million.
Honduras
Honduras, which returned to democratic government early in
1982, plays a key role in resisting the spread of
Soviet/Cuban/Nicarguan influence in Central America. It would
be extremely difficult to defend U.S. interests in the region
without Honduran cooperation. Honduras is threatened by the
unprecedented Nicaraguan military buildup and
externally-supported subversion. The Bipartisan Commission
recommended increased military assistance to build a credible
deterrent. Our proposed assistance would fund training,
helicopters, fixed wing transport and reconnaissance aircraft,
naval equipment and patrol boats, vehicles, medical equipment,
radar, communications equipment, artillery, small arms
ammunition, and spare parts. Some of these items would be used
in equipping two new infantry battalions. We propose an FY 84
Supplemental program of $37.5 million and an FY 85 program of
$62.5 million.
Panama
The complex of U.S. national security and foreign policy
interests -- centered around the Panama Canal and our military
forces nearby -- is unique in the region and highly important
in global terms. Increased U.S. military assistance would
enable Panama to contribute more effectively to the combined
defense of the Canal. Such assistance would also serve as a
tangible indication of suport for the scheduled May 1984 return
to elected goverment. Our assistance to the newly reorganized
Panama Defense Force would be in the areas of training,
engineering equipment for civic action projects, communications
and coastal surveillance equipment, one helicopter, one patrol
boat, and maintenance equipment. Some of these items would be
used in equipping new infantry battalions. We propose an FY 84
Supplemental program of $10 million and an FY 85 program of $20
million.
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Regional Military Training Center (RMTC)
The RMTC was established in Honduras in 1983 on a
temporary, austere basis. It has proven to be extremely
valuable as a low-cost way to provide large-scale training to
Honduran and Salvadoran troops in a realistic environment. As
noted previously in this presentation, training is the most
important element in our military assistance programs in
Central America. RMTC training concentrates on the more
aggressive, highly mobile tactics needed for dealing
effectively with insurgent forces. Improvements are now needed
for administrative and operational efficiency. Besides
construction costs, funds are needed for operation and
maintenance, training materiel and supplies, and other training
costs. We propose an FY 84 Supplemental program of $25 million
and an FY 85 program of $20 million.
Attachment: Military Assistance to Central America: FY 1983-85
(#2187)
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MILITARY ASSISTANCE TO CENTRAL A11 RICAs FY 1983--85
Millions of Dollar w__~
FY'84 FY84
FY83 Continuing Supplemental FY84 F'85
Actual Resolution u~:st Total uest
Belize
MAP
-
.5
.S
.5
IM*:'T
.075
.1
.1
.1
Total
.075
.6
.6
.6
Costa Rica
MAP
2.5
2.0
7.85
9.85
9.8
IHET
.125
.15
15
.2
Total
2.625
2.15
7.85
10.0
10.0
El Salvador
MAP
33.5
45.0
178.7
223.7
116.0
FMSCR-T
46.5
18.5
-
18.5
-
FMSCR-C
-
-
?
-
15.0
IMET
1.3
1.3
-
1.3
1.5
Total
81.3
64.8
178.7
243.5
132.5
Guatemala
FMSCR-C
-
-
-
10.0
IMET
-
-
-
-
.3
Total.
-
-
-
-
10.3
Honduras
MAP
27.5
40.0
37.5
77.5
61.3
FMSCR-T
9.0
-
-
!MET
.8
1.0
1.0
1.2
Total
37.3
41.0
37.5
78.5
62.5
Panama
MAP
-
-
10.0
10.0
14.4'
FMSCR-T
5.0
5.0
-
5.0
-
FMSCR-C
-
-
-
-
5.0
IMET
.45
.5
-
.5
.6
Total
5.45
5.5
10.0
15.5
20.0
RMTC
MAP
25.0'
25.0
20.0
Grand Total
MAP
63.5
87.5
259.05
346.55
222.0
FMSCR-T
60.5
23.5
23.5
-
FMSCR-C
-
-
30.0
.
IMET
2.75
3.05
3.05
3.9
Total
126.75
114.05
259.05
373.1
255.9
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 Approved For Release 2009/09/15: CIA-RDP86B0042OR000701460001-3
Current
Policy No. 464
Following is an address by President
Reagan before the National Association
of Manufacturers, Washington, D.C.,
March 10, 1983.
We didn't come to Washington at an
ideal time, and we've certainly had our
share of problems. But the signs of
recovery are springing up all around us.
There's no mistaking the fact that, at
long last, America is on the mend, and
the courage and the vision of the people
and institutions represented here today
deserve a big share of the credit for this
hard-earned but inflation-free recovery.
So, on behalf of all your fellow citizens
who have been freed from the ravages
of runaway inflation and can look again
to a future of better times and then new
opportunity, I thank you.
America is meeting her challenge
here at home. But there are other
challenges, equally important, that we
must face. And today I'd like to talk to
you about one of them. Late last year, I
visited Central America. Just a few
weeks ago, our U.N. Ambassador, Jeane
Kirkpatrick, also toured the area. And
in the last few days, I have met with
leaders of the Congress to discuss recent
events in Central America and our
policies in that troubled part of the
world. So, today I'd like to report to you
on these consultations and why they are
important to us all.
The nations of Central America are
among our nearest neighbors. El Salva-
dor, for example, is nearer to Texas
than Texas is to Massachusetts. Central
America is simply too close, and the
strategic stakes are too high, for us to
President Reagan
Strategic Importance
of El Salvador and
Central America
March 10, 1983
United States Department of State
Bureau of Public Affairs
Washington, D.C.
ignore the danger of governments seiz-
ing power there with ideological and
military ties to the Soviet Union.
Let me show you just how important
Central America is. At the base of Cen-
tral America is the Panama Canal. Half
of all the foreign trade of the United
States passes through either the canal
or other Caribbean sealanes on its way
to or from our ports. And, of course, to
the north is Mexico, a country of enor-
mous human and material importance,
with which we share 1,800 miles of
peaceful frontier.
And between Mexico and the canal
lies Central America. As I speak to you
today, its countries are in the midst of
the gravest crisis in their history. Ac-
cumulated grievances and social and eco-
nomic change are challenging traditional
ways. New leaders with new aspirations
have emerged who want a new and bet-
ter deal for their peoples. That is good.
The problem is that an aggressive
minority has thrown in its lot with the
Communists, looking to the Soviets and
their own Cuban henchmen to help them
pursue political change through violence.
Nicaragua has become their base. These
extremists make no secret of their goal.
They preach the doctrine of a "revolu-
tion without frontiers." Their first target
is El Salvador.
Importance of El Salvador
Why is El Salvador important? Well, to
begin with, there is the sheer human
tragedy. Thousands of people have
already died, and, unless the conflict is
ended democratically, millions more
could be affected throughout the hemi-
sphere. The people of El Salvador have
proved they want democracy. But if
guerrilla violence succeeds, they won't
get it. El Salvador will join Cuba and
Nicaragua as a base for spreading fresh
violence to Guatemala, Honduras, Costa
Rica-probably the most democratic
country in the world today. The killing
will increase and so will the threat to
Panama, the canal, and ultimately Mex-
ico. In the process, vast numbers of
men, women, and children will lose their
homes, their countries, and their lives.
Make no mistake. We want the same
thing the people of Central America
want-an end to the killing. We want to
see freedom preserved where it now ex-
ists and its rebirth where it does not.
The Communist agenda, on the other
hand, is to exploit human suffering in
Central America to strike at the heart of
the Western Hemisphere. By preventing
reform and instilling their own brand of
totalitarianism, they can threaten free-
dom and peace and weaken our national
security.
I know a good many people wonder
why we should care about whether Com-
munist governments come into power in
Nicaragua, El Salvador, or such other
countries as Costa Rica, Honduras,
Guatemala, and the islands of the Carib-
bean. One columnist argued last week
that we shouldn't care because their
products are not that vital to our
economy. That's like the argument of
another so-called expert that we
shouldn't worry about Castro's control
over the island of Grenada-their only
important product is nutmeg.
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Well, let me just interject right here.
Grenada-that tiny, little island with
Cuba at the west end of the Caribbean,
Grenada at the east end-that tiny, little
island is building now, or having built
for it, on its soil and shores a naval
base, a superior air base, storage bases
and facilities for the storage of muni-
tions, barracks and training grounds for
the military. I'm sure all of that is simp-
ly to encourage the export of nutmeg.
People who make these arguments
haven't taken a good look at a map late-
ly or followed the extraordinary buildup
of Soviet and Cuban military power in
the region or read the Soviets' dis-
cussions about why the region is import-
ant to them and how they intend to use
it.
It isn't nutmeg that is at stake in the
Caribbean and Central America. It is the
U.S. national security. Soviet military
theorists want to destroy our capacity to
resupply Western Europe in case of an
emergency. They want to tie down our
attention and forces on our own
southern border and so limit our capaci-
ty to act in more distant places such as
Europe, the Persian Gulf, the Indian
Ocean, the Sea of Japan. Those Soviet
theorists noticed what we failed to
notice-that the Caribbean Sea and Cen-
tral America constitute this nation's
fourth border.
If we must defend ourselves against
a large hostile military presence on our
border, our freedom to act elsewhere, to
help others, and to protect strategically
vital sealanes and resources has been
drastically diminished.
They know this. They have written
about this. We have been slow to under-
stand that the defense of the Caribbean
and Central America against Marxist-
Leninist takeover is vital to our' national
security in ways we're not accustomed
to thinking about. For the past 3 years,
under two presidents, the United States
has been engaged in an effort to stop
the advance of communism in Central
America by doing what we do best-by
supporting democracy. For 3 years, our
goal has been to support fundamental
change in this region-to replace pover-
ty with development and dictatorship
with democracy.
These objectives are not easy to at-
tain, but we're on the right track. Costa
Rica continues to set a democratic exam-
ple, even in the midst of economic crisis
and Nicaraguan intimidation. Honduras
has gone from military rule to a freely
elected civilian government. Despite in-
credible obstacles, the democratic center
is holding in El Salvador, implementing
land reform and working to replace the
politics of death with the life of
democracy.
So the good news is that our new
policies have begun to work. Democracy,
with free elections, free labor unions,
freedom of religion, and respect for the
integrity of the individual, is the clear
choice of the overwhelming majority of
Central Americans. In fact, except for
Cuba and its followers, no government
and no significant sector of the public
anywhere in this hemisphere want to
see the guerrillas seize power in El
Salvador.
The bad news is that the struggle
for democracy is still far from over.
Despite their success in largely eliminat-
ing guerrilla political influence in popu-
lated areas, and despite some improve-
ments in military armaments and mobili-
ty, El Salvador's people remain under
strong pressure from armed guerrillas
controlled by extremists with Cuban-
Soviet support.
The military capability of these guer-
rillas-and I would like to stress military
capability, for these are not peasant ir-
regulars, they are trained military
forces-this has kept political and
economic progress from being turned in-
to the peace the Salvadoran people so
obviously want. Part of the trouble is in-
ternal to El Salvador. But an important
part is external: the availability of train-
ing, tactical guidance, and military sup-
plies coming into El Salvador from
Marxist Nicaragua.
I'm sure you've read about guerrillas
capturing rifles from government na-
tional guard units, and recently this has
happened. But much more critical to
guerrilla operations are the supplies and
munitions that are infiltrated into El
Salvador by land, sea, and air-by pack
mules, by small boats, and by small air-
craft. These pipelines fuel the guerrilla
offensives and keep alive the conviction
of their extremist leaders that power
will ultimately come from the barrels of
their guns.
Now, all this is happening in El
Salvador just as a constitution is being
written, as open presidential elections
are being prepared, and as a peace com-
mission named last week has begun to
work on amnesty and national reconcilia-
tion to bring all social and political
groups into the democratic process. It is
the guerrilla militants who have so far
refused to use democratic means, have
ignored the voice of the people of El
Salvador, and have resorted to terror,
sabotage, and bullets instead of the
ballot box.
Questions Concerning El Salvador
During the past week, we have dis-
cussed all of these issues and more with
leaders and Members of the Congress.
Their views have helped shape our own
thinking, and I believe that we've de-
veloped a common course to follow.
Here are some of the questions raised
most often.
First: How bad is the military
situation? It is not good. Salvadoran
soldiers have proved that when they are
well trained, led, and supplied, they can
protect the people from guerrilla at-
tacks. But so far, U.S. trainers have
been able to train only 1 soldier in 10.
There is a shortage of experienced of-
ficers; supplies are unsure. The guer-
rillas have taken advantage of these
shortcomings. For the moment, at least,
they have taken the tactical initiative
just when the sharply limited funding
Congress has so far approved is running
out.
A second vital question is: Are we
going to send American soldiers into
combat? And the answer to that is a flat
no.
A third question: Are we going to
Americanize the war with a lot of U.S.
combat advisers? And again the answer
is no. Only Salvadorans can fight this
war, just as only Salvadorans can decide
El Salvador's future. What we can do is
help to give them the skills and supplies
they need to do the job for themselves.
That mostly means training. Without
playing a combat role themselves and
without accompanying Salvadoran units
into combat, American specialists can
help the Salvadoran Army improve its
operations. Over the last year, despite
manifest needs for more training, we
have scrupulously kept our training ac-
tivities well below our self-imposed
numerical limit on numbers of trainers.
We are currently reviewing what we can
do to provide the most effective training
possible to determine the minimum level
of trainers needed and where the train-
ing should best take place. We think the
best way is to provide training outside
El Salvador, in the United States, or
elsewhere, but that costs a lot more. So
the number of U.S. trainers in El
Salvador will depend upon the resources
available.
Question four: Are we seeking a
political or a military solution? Despite
all I and others have said, some people
still seem to think that our concern for
security assistance means that all we
care about is a military solution. That's
nonsense. Bullets are no answer to eco-
nomic inequities, social tensions, or
political disagreements. Democracy is
what we want. And what we want is to
enable Salvadorans to stop the killing
and sabotage so that economic and
political reforms can take root. The real
solution can only be a political one.
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This reality leads directly to a
fifth question: Why not stop the kill-
ings and start talking? Why not
negotiate? Well, negotiations are
already a key part of our policy. We sup-
port negotiations among all the nations
of the region to strengthen democracy,
to halt subversion, to stop the flow of
arms, to respect borders, and to remove
all the foreign military advisers-the
Soviets, the Cubans, the East Germans,
the PLO [Palestine Liberation Organiza-
tion], as well as our own-from the
region. A regional peace initiative is now
emerging. We've been in close touch
with its sponsors and wish it well. And
we support negotiations within nations,
aimed at expanding participation in
democratic institutions-at getting all
parties to participate in free, nonviolent
elections.
What we oppose are negotiations
that would be used as a cynical device
for dividing up power behind the
people's back. We cannot support
negotiations which, instead of expanding
democracy, try to destroy it-negotia-
tions which would simply distribute
power among armed groups without the
consent of the people of El Salvador.
We made that mistake some years ago
in Laos when we pressed and pressured
the Laotian Government to form a
government, a co-op, with the Pathet
Lao-armed guerrillas who'd been doing
what the guerrillas are doing in El
Salvador. And once they had that tri-
partite government, they didn't rest un-
til those guerrillas, the Pathet Lao, had
seized total control of the government of
Laos.
The thousands upon thousands of
Salvadorans who risked their lives to
vote last year should not have their
ballots thrown into the trash heap this
year by letting a tiny minority on the
fringe of a wide and diverse political
spectrum shoot its way into power. No,
the only legitimate road to power, the
only road we can support, is through the
voting booth, so that the people can
choose for themselves-choose, as His
Holiness the Pope said Sunday, "far
from terror and in a climate of demo-
cratic conviviality." This is fundamental,
and it is a moral as well as a practical
belief that all free people of the
Americas share.
U.S. Policy Toward El Salvador
Having consulted with the Congress, let
me tell you where we are now and what
we will be doing in the days ahead. We'll
welcome all the help we can get. We will
be submitting a comprehensive, inte-
grated, economic and military assistance
plan for Central America.
First, we will bridge the existing
gap in military assistance. Our projec-
tions of the amount of military assist-
ance needed for El Salvador have re-
mained relatively stable over the past 2
years. However, the Continuing Resolu-
tion budget procedure in the Congress
last December led to a level of U.S.
security assistance for El Salvador in
1983 below what we'd requested, below
that provided in 1982, and below that re-
quested for 1984. I am proposing that
$60 million of the monies already ap-
propriated for our worldwide military
assistance programs be immediately re-
allocated to El Salvador.
Further, to build the kind of disci-
plined, skilled army that can take and
hold the initiative while respecting the
rights of its people, I will be amending
my supplemental that is currently before
the Congress, to reallocate $50 million
to El Salvador. These funds will be
sought without increasing the overall
amount of the supplemental that we
have already presented to Congress.
And, as I have said, the focus of this
assistance will remain the same: to train
Salvadorans so that they can defend
themselves. Because El Salvador's
security problems are not unique in the
region, I will also be asking for an addi-
tional $20 million for regional security
assistance. These funds will be used to
help neighboring states to maintain their
national security and will, of course, be
subject to full congressional review.
Second, we will work hard to sup-
port reform, human rights, and democ-
racy in El Salvador. Last Thursday, the
Salvadoran Government extended the
land reform program which has already
distributed 20% of all the arable land in
the country and transformed more than
65,000 farm workers into farm owners.
What they ask is our continued eco-
nomic support while the reform is com-
pleted. And we will provide it. With our
support, we expect that the steady prog-
ress toward more equitable distribution
of wealth and power in El Salvador will
continue.
Third, we will, I repeat, continue to
work for human rights. Progress in this
area has been slow, sometimes disap-
pointing. But human rights means work-
ing at problems, not walking away from
them. To make more progress, we must
continue our support, advice, and help to
El Salvador's people and democratic
leaders. Lawbreakers must be brought
to justice, and the rule of law must sup-
plant violence in settling disputes. The
key to ending violations of human rights
is to build a stable, working democracy.
Democracies are accountable to their
citizens. And when abuses occur in a
democracy, they cannot be covered up.
With our support, we expect the govern-
ment of El Salvador to be able to move
ahead in prosecuting the accused and in
building a criminal justice system appli-
cable to all and ultimately accountable to
the elected representatives of the peo-
ple.
Now, I hope you've noticed that I
was speaking in millions, not billions,
and that, after 2 years in Federal office,
is hard to do. In fact, there are some
areas of government where, I think,
they spill as much as I've talked about
here over a weekend.
Fourth, the El Salvador Govern-
ment proposes to solve its problems the
only way they can be solved fairly-by
having the people decide. President
Magana has just announced nationwide
elections moved up to this year, calling
on all to participate-adversaries as well
as friends. To help political adversaries
participate in the elections, he has ap-
pointed a peace commission, including a
Roman Catholic bishop and two inde-
pendents. And he has called on the
Organization of American States (OAS)
and the international community to help.
We were proud to participate, along
with representatives of other democratic
nations, as observers in last March's
Constituent Assembly elections. We
would be equally pleased to contribute
again to any international effort,
perhaps in conjunction with the OAS, to
help the government insure the broadest
possible participation in the upcoming
elections-with guarantees that all, in-
cluding critics and adversaries, can be
protected as they participate.
Let me just say a word about those
elections last March. A great worldwide
propaganda campaign had, for more
than a year, portrayed the guerrillas as
somehow representative of the people of
El Salvador. We were told over and
over again that the government was the
oppressor of the people.
Came the elections, and suddenly it
was the guerrilla force threatening
death to any who would attempt to vote.
More than 200 busses and trucks were
attacked and burned and bombed in an
effort to keep the people from going to
the polls. But they went to the polls,
they walked miles to do so and stood in
long lines for hours and hours. Our own
congressional observers came back and
reported one instance that they saw
themselves of a woman, who had been
shot by the guerrillas for trying to get
to the polls, standing in the line refusing
medical attention until she had had her
opportunity to go in and vote. More
than 80% of the electorate voted. I don't
believe here in our land, where voting is
so easy, we've had a turnout that great
in the last half century. They elected the
present government, and they voted for
order, peace, and democratic rule.
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Promoting Regional
Economic Progress
Finally, we must continue to help the
people of El Salvador and the rest of
Central America and the Caribbean to
make economic progress. More than
three-quarters of our assistance to this
region has been economic. Because of
the importance of economic development
to that region, I will ask the Congress
for $65 million in new monies and the
reprogramming of $103 million from
already appropriated worldwide funds
for a total of $168 million in increased
economic assistance for Central
America. And to make sure that this
assistance is as productive as possible,
I'll continue to work with the Congress
for the urgent enactment of the long-
term opportunities for trade and free in-
itiative that are contained in the Carib-
bean Basin initiative.
In El Salvador and in the rest of
Central America, there are today thous-
ands of small businessmen, farmers, and
workers who have kept up their produc-
tivity as well as their spirits in the face
of personal danger, guerrilla sabotage,
and adverse economic conditions. With
them stand countless national and local
officials, military and civic leaders, and
priests who have refused to give up on
democracy. Their struggle for a better
future deserves our help. We should be
proud to offer it, for, in the last
analysis, they are fighting for us, too.
The Need for U.S. Support
By acting responsibly and avoiding il-
lusory shortcuts, we can be both loyal to
our friends and true to our peaceful,
democratic principles. A nation's char-
acter is measured by the relations it has
with its neighbors. We need strong,
stable neighbors with whom we can
cooperate. And we will not let them
down.
Our neighbors are risking life and
limb to better their lives, to improve
their lands, and to build democracy. All
they ask is our help and understanding
as they face dangerous, armed enemies
of liberty, and that our help be as sus-
tained as their own commitment. None
of this will work if we tire or falter in
our support. I don't think that is what
the American people want or what our
traditions and faith require. Our neigh-
bors' struggle for a better future de-
serves our help, and we should be proud
to offer it.
We would, in truth, be opening a
two-way street. We have never, I
believe, fully realized the great potential
of this Western Hemisphere. Oh, yes, I
know in the past we have talked of
plans, we've gone down there every once
in a while with a great plan somehow
for our neighbors to the south, but it
was always a plan which we-the big
colossus of the north-would impose on
them. It was our idea.
On my trip to Central and South
America. I asked for their ideas. I
begun to tap the vast resources of these
continents.
Without sacrificing our national
sovereignties, our own individual
cultures or national pride, we could as
neighbors make this Western Hemi-
sphere-our hemisphere-a force for
good such as the Old World has never
seen. But it starts with the word neigh-
bor. And that is what I talked about
down there and sought their partner-
ship-their equal partnership-in we of
the Western Hemisphere coming
together to truly develop fully the poten-
tial this hemisphere has.
Last Sunday, His Holiness Pope
John Paul II prayed that the measures
announced by President Magana would
"contribute to orderly and peaceful prog-
ress" in El Salvador, progress "founded
on the respect for the rights of all, and
that all have the possibility to cooperate
in a climate of true democracy for the
promotion of the common good."
My fellow Americans, we in the
United States join in that prayer for
democracy and peace in El Salvador,
and we pledge our moral and material
support to help the Salvadoran people
achieve a more just and peaceful future.
And in doing so, we stand true to both
the highest values of our free society
and our own vital interests. ^
pointed out that we had a common heri-
tage. We'd all come as pioneers to these
two great continents. We worshipped
the same God, and we'd lived at peace
with each other longer than most people
in other parts of the world.
There are more than 600 million of
us calling ourselves Americans-North,
Central, and South. We haven't really
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United States Department of State
Washington, D.C. 20520
If address is incorrect
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Do not cover or destroy
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Published by the United States Department
of State ? Bureau of Public Affairs
Office of Public Communication ? Editorial
Division ? Washington, D.C. ? March 1983
Editor: Colleen Sussman ? This material is in
the public domain and may be reproduced
without permission; citation of this source is
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Current
Policy No. 477
Secretary Shultz
Caribbean Basin
Economic Recovery Act
April 13, 1983
United States Department of State
Bureau of Public Affairs
Washington, D.C.
Following is a statement by Secretary
Shultz before the Senate Finance Com-
mittee, April 13, 1983.
I welcome this opportunity to continue
our dialogue on the Caribbean region
and specifically the Caribbean Basin
Economic Recovery Act. The legislation
we have proposed is a far-sighted
response to a deepening economic and
social crisis troubling some of our closest
neighbors. It deserves to become law
this year-the sooner this year, the
better.
Our Vital Interests
Let me begin by reviewing our own vital
interests in the Caribbean Basin. The
Caribbean is an unfenced neighborhood
that we share with 27 island and coastal
nations. Their security and economic
well-being have a direct impact on our
own strategic and economic interests.
We do not have to go to Miami to
come in daily contact with people born
in the Caribbean region or to appreciate
the rapid impact of turmoil there on our
own society. In fact, our country has
become a safehaven for thousands upon
thousands of Caribbean citizens who pin
their hopes for a better life on a
dangerous, uncertain, and clandestine
migration to this country. As a result,
the basin area is now the second largest
source of illegal immigration to the
United States. This situation will not im-
prove until the nations of the Caribbean
Basin are better able to offer their peo-
ple opportunities to build secure, produc-
tive lives at home.
Economically, the Caribbean Basin
region is a vital strategic and commer-
cial artery for the United States. Nearly
half our trade, three-quarters of our im-
ported oil, and over half our imported
strategic minerals pass through the
Panama Canal or the Gulf of Mexico. If
this region should become prey to social
and economic upheaval, and dominated
by regimes hostile to us, the conse-
quences for our security would be im-
mediate and far reaching.
The health of the Caribbean econo-
mies also affects our economy. The area
is now a $7 billion market for U.S. ex-
ports. Thousands of American jobs were
lost when our exports to the region fell
$150 million last year as income in the
region declined. A large portion of the
debt of Caribbean countries is owed to
banks in this country. At the end of
1981, U.S. direct investment in the
region was approximately $8 billion.
The Caribbean Basin Economic Re-
covery Act is the cornerstone of our ef-
fort to come to grips with these issues.
This legislation recognizes the critical
relationship between economic develop-
ment and political stability. It is de-
signed to promote self-sustaining
economic growth; to enable countries in
the region to strengthen democratic in-
stitutions; and to implement political,
social, and economic reforms. Ultimate-
ly, its purpose is to help restore the
faith of people of the region in their
countries' ability to offer them hope for
a better future.
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Economic Problems
The societies of the Caribbean Basin
republics are undergoing inevitable
change that puts them under con-
siderable stress. Declining employment
in agriculture, high birth rates, and slow
creation of urban jobs have diminished
hopes for combating poverty and caused
appalling rates of unemployment,
especially among the young. Youth
unemployment in Jamaica, for example,
is estimated to be 50%. Without
dramatic increases in investment to im-
prove living standards and to create
jobs, rising crime and urban instability
will create a downward spiral of social
disintegration. And because the Carib-
bean economies are so small, new in-
vestment-domestic as well as
foreign-will not take place without
assured access to outside markets.
The diminutive size of individual
Caribbean markets-averaging just 1.5
million people, with 16 countries under
0.5 million-makes them uniquely de-
pendent on the outside world in ways we
can only dimly imagine. The national in-
comes of most Caribbean Basin coun-
tries are less than that of a U.S. metro-
politan area of 300,000 people, such as
Omaha, Nebraska, or Charlotte, North
Carolina. Dominica, for example, with a
population of only 80,000, is the least
developed country in the eastern Carib-
bean. It is also one of the most
democratic and pro-Western. If small,
vulnerable economies like Dominica are
to be at all viable, they must have access
to bigger markets. In Central America
where the economies tend to be a bit
larger, the disruptions in recent years of
the Central American Common Market
have made economies such as Costa Rica
much more dependent on markets out-
side its region. As long as they are
limited to production for their small and
poor domestic markets, the small econo-
mies of the Caribbean Basin cannot
diversify their economies. Nor can they
develop the expertise and efficiency
needed to become prosperous interna-
tional traders.
We recognize that the Caribbean
Basin economies will always be depend-
ent to some degree on markets outside
the region. But developments of the past
few years have had a devastating im-
pact. Prices of the non-oil commodities
the Caribbean republics export-sugar,
coffee, bananas, bauxite-have fallen
drastically. And this is at a time when
they are still struggling to cope with the
massive increases of the 1970s in the
price of their most basic import: oil.
Recession in the United States has
caused a steep drop in revenue from
tourism. Foreign debt has mounted to
increasingly burdensome levels. The
withering of government revenues has
stopped or delayed development proj-
ects. Real per capita incomes have
declined throughout most of the basin
region.
All this adds up to a massive prob-
lem: the governments of the Caribbean
republics must find ways to assure
sociopolitical stability and revive
economic growth while also accommo-
dating rapid internal change. Their suc-
cess or failure in meeting this challenge
will greatly affect the environment in
which we live.
The Challenge/The Alternatives
The United States thus has a vital stake
in helping its Caribbean neighbors pur-
sue their goals of open societies and
growing economies through productive
exchange with us and the rest of the
world. The Administration has ap-
proached this task with full recognition
that we have great assets and advan-
tages when it comes to supporting
democratic development.
This becomes most clear when we
look at the alternatives. One alternative
is the closed solution: the society which,
while not a viable economy, turns in on
itself and enforces by fiat the distribu-
tion of the limited economic benefits a
small economy can generate itself or
receive in aid. This is a recipe for
totalitarian force-because people will
not take it willingly-and economic
stagnation. It is the Cuban solution. It
poses continuing threats to our interests
in this hemisphere which we have had to
counter for the last 20 years.
A second alternative is decline of the
population to the level which a small
economy can support on its own. With
the young populations and high birth-
rates of these countries, this alternative
entails massive emigration from the
Caribbean Basin region. Our country is
inevitably the preferred destination. As
much as we welcome the rich contribu-
tion of the region's immigrants to our
own life, massive immigration is not
what we want. Nor is it what the coun-
tries of the region want. That is not at
issue. Nor is it the only reason we care.
The President's proposed legislation
supports a third alternative-democratic
development. This is the only alternative
that meets our vital self-interests and
our nation's long tradition as a source of
progress and hope in the world. Politi-
cally, the people of these societies have
shown they want a voice in their own
fate and that they reject totalitarian for-
mulas. Two-thirds of the governments of
the region have democratically elected
governments. Significant progress
toward democracy is occurring in others
as well, despite the obstacles. Democ-
racy represents a set of values that vir-
tually all the peoples of the region see as
sympathetic to their own aspirations.
The Cuban and now Nicaraguan models
stand as clear demonstrations of both
political repression and economic failure.
Economically we have the assets
that can be ultimately decisive in the
orientation of Caribbean development.
We represent a market economy that
works, a natural market for Caribbean
exports, the major source of private in-
vestment in the region, and the manage-
ment and technology that come with it.
The Caribbean initiative of the Ad-
ministration is an imaginative and com-
prehensive approach to bringing these
assets to bear on the problems of our
Caribbean neighbors. It is a forward-
looking effort to boost both development
and stability. Because it builds on
private resources and enterprise, it has
the potential to deal with their deep
economic plight in a fundamental way.
Because it can help to ease delicate
social and political transitions before
they create security problems of an in-
ternational dimension, it is a program to
get ahead of history, instead of just
countering its unwelcome effects.
Caribbean Basin Program
Our program is part of a major multilat-
eral effort. Other higher income coun-
tries of the region are also increasing
their efforts significantly. Canada has
embarked on a 5-year program for the
area providing over $500 million.
Canada currently provides duty-free
treatment or preferential access for 98%
of its imports from the Caribbean Basin.
Mexico and Venezuela, despite their own
financial difficulties, are continuing con-
cessional credits to the region through
their oil facility. Venezuelan financial
support has been over $2.5 billion in the
last 5 years. Colombia is initiating
technical assistance of up to $50 million,
new credit lines of $10 million per coun-
try, and additional balance-of-payments
financing and a trust fund for less
developed countries of the eastern
Caribbean. The collective efforts of
these democracies are a strong en-
couragement to open societies and
democratic development in the region.
But success would be imperiled without
us. Our full participation is vitally
needed.
The U.S. contribution integrates
three types of mutually reinforcing
economic measures-trade opportunities,
tax incentives, and aid. The program has
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been developed in continuing consulta- The U.S. Market
tion with the governments and the
private sectors of the regions. It reflects The key to new production and employ-
their own priorities and assessment of ment in the Caribbean is assured access
their needs. to its natural market in this country.
As you know, we were able to make Suppliers in the Caribbean need help to
a start on our Caribbean economic ini- get started in the competition with
tiatives last summer, when the Congress larger, more experienced, and estab-
approved an emergency supplemental lished producers elsewhere. That sug-
aid package of $350 million-a key ele- gests a bold solution that reinforces the
ment in the President's original Carib- natural pole of attraction of the U.S.
bean Basin program. Our aid requests market.
for both FY 1983 and FY 1984 reflect The President's proposal to grant
the new higher priority we have given to duty-free entry to Caribbean Basin prod-
the Caribbean Basin area in the alloca- ucts for a 12-year period is the center-
tion of our scarce economic assistance piece of the Caribbean Basin Initiative.
resources. As a percentage of our
overall economic assistance budget, as-
sistance to the Caribbean region will
double in FY 1983 and 1984, over FY
1980, from 6.6% authorized in 1980 to
13.6% proposed in FY 1984.
Most of the $350 million appro-
priated last year has been obligated for
use by the private sector in those coun-
tries with the most serious financial
problems. This assistance has helped
many established, productive private
firms continue to obtain needed raw
materials and equipment from the
United States. In addition, it has pro-
vided critical support for balance-of-
payments problems and infrastructure
projects in the small, least developed
countries.
We have also been able to use a por-
tion of these funds to support training
and scholarship opportunities for in-
dividuals from the Caribbean region
with leadership potential. These oppor-
tunities support our goal of transferring
knowledge and skills, enhancing eco-
nomic cooperation among nations of the
region and strengthening political ties
between recipient countries and the
United States. We are currently offering
1,300 scholarships each year. As new
money is available, the number of
scholarship recipients will continue to in-
crease. These programs have high devel-
opment, economic, and political impact
and are a key element in our assistance
to the Caribbean Basin region.
But as the President said when he
requested that emergency CBI [Carib-
bean Basin Initiative] appropriation,
financial assistance is only a short-term
remedy. Indeed, financial assistance and
development projects will be wasted if
the development process is not a broad-
based and integrated process. We
believe that such development can only
be achieved through a strategy which
encourages private initiative and invest-
ment.
It can provide a decisive boost to Carib-
bean development. The proposal is
dramatic and simple. It offers long-term
economic benefits of free trade and the
immediate impact of a major political
commitment to the region. By assuring
duty-free access to the vast U.S.
market, this measure will provide strong
and continuing incentives for invest-
ment, innovation, and risk taking in
Caribbean countries.
As I have pointed out, the domestic
economies of most Caribbean Basin na-
tions are simply too small to permit the
diversification essential for noninfla-
tionary growth. An opening of the U.S.
market to the nontraditional products of
these countries will provide important
opportunities to develop new production
and an incentive to produce more effi-
ciently. Increased and diversified pro-
duction will mean higher wages, a
strengthened middle class, more
resources available for education and
health-and more demand for raw
materials, equipment, and finished goods
from the United States.
I recognize that these are difficult
economic times in our own country.
Understandably, there is concern over
the impact this legislation will have on
workers in the United States. I am con-
vinced that the impact on our economy
will be positive. Because the Caribbean
countries are so closely linked to our
economy, our sales to them will grow
apace with their economies. Excluding
petroleum trade, we have a $2 billion
trade surplus with the Caribbean Basin
and are already the major trade partner
of most countries there. A stronger
Caribbean Basin will be an even better
and more reliable customer for U.S.
products. As countries in the region pro-
duce more, they will import more.
American workers will share in the
fruits of that growth.
The Caribbean Basin economies are
equal to only 2% of our GNP, and our
imports from the region are less than
4% of our total imports. Imports not
already entering duty-free are an even
smaller percentage. Therefore, even a
significant increase in Caribbean Basin
production and exports will not have a
significant negative impact on our
economy. And if American industries
are injured by Caribbean imports, they
have the remedy of seeking relief under
the safeguard provisions of the 1974
Trade Act.
The United States is the world's
most open major market. A large share
of the Caribbean Basin's exports to the
United States already enter duty free.
Petroleum accounts for almost 60% of
our imports from the region. In 1982,
70% of our nonpetroleum imports from
the Caribbean Basin entered duty free.
Sixteen percent of these nonpetroleum
imports entered under GSP [generalized
system of preferences]. But GSP is due
to expire next year. While the Ad-
ministration strongly supports the ex-
tension of GSP, it contains competitive
need restrictions and product exclusions
which limit its usefulness as a stimulus
to broad-based recovery by the small
Caribbean Basin countries. The products
that would be extended duty-free entry
as a result of the proposed CBI legisla-
tion comprised only one-quarter of 1% of
U.S. imports in 1982. Yet these products
represent an important area of potential
new production for the Caribbean Basin
countries.
I would like to mention briefly a sec-
tion of this bill that was not included
when I addressed this committee last
August on this legislation. I refer to the
convention tax deduction. This provision
recognizes the vital importance of
tourism and travel to the economies of
many Caribbean nations. I should em-
phasize that this provision would simply
grant Caribbean Basin conventions tax
status equal to that presently enjoyed by
Mexico, Canada, and Jamaica. In our
consultations with Caribbean Basin
business and government leaders, they
have frequently cited the disadvan-
tageous present tax treatment of Carib-
bean conventions as being an obstacle to
the recovery of their travel industries.
We should also keep in mind that many
American travel dollars spent in the
Caribbean come back via U.S.-owned
airlines, hotels, and recreation facilities.
Let me reiterate the important role
that Puerto Rico and the U.S. Virgin
Islands have in the Caribbean Basin Ini-
tiative. Since the earliest days of this
Administration, we have consulted close-
ly with the governments of Puerto Rico
and the U.S. Virgin Islands to fashion
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the initiative in a way that would foster
the development of the U.S. Caribbean.
The legislation reflects that in several
ways. It liberalizes duty-free imports
into the United States from insular
possessions. It explicitly permits in-
dustries in Puerto Rico and U.S. ter-
ritories to petition for relief under the
safeguard provisions of U.S. trade law.
It also modifies environmental restric-
tions on the U.S. Virgin Islands rum in-
dustry and constructs the rules-of-origin
requirements to encourage the use of
products of Puerto Rico and the U.S.
Virgin Islands. An important provision
would transfer excise taxes on all im-
ported rum to the treasuries of Puerto
Rico and the U.S. Virgin Islands. In
sum, the facilities, skills, and people of
Puerto Rico and the U.S. Virgin Islands
are a major component of our develop-
ment cooperation efforts elsewhere in
the Caribbean.
The Political Dimension
The political dimension of Caribbean
progress is of great and ultimate impor-
tance to us. We do not seek clients. Our
goal is a region of independent countries
in which people can choose their leaders
and their own path to economic and
social progress. We are confident that
will produce societies and regimes which
are not hostile to us. That same belief
underlies the strong commitment of the
other democracies in the region to the
Caribbean initiative. Together with Mex-
ico, Venezuela, Colombia, and the
region's other democratic governments,
we seek to encourage economic and
social reforms which address the real
grievances of various sectors of the
Bureau of Public Affairs
United States Department of State
Washington, D.C. 20520
If address is incorrect
please indicate change.
Do not cover or destroy
this address label.
population of Central America and
Caribbean countries.
Stability in societies based on free
association rather than coercion must
depend on addressing people's right to
own their own land. They must be able
to organize in cooperatives and unions to
promote their economic interests. And
they must be able to exercise their
political rights, free of intimidation.
That is the course we encourage through
our support in the Caribbean Basin
region. That is also the course which the
peoples of the region seek-as they have
shown repeatedly in their own political
life.
Conclusion
The Caribbean Basin Initiative is solidly
grounded in the tradition and values of
both this country and the Caribbean
region. It is a strong and multilateral ef-
fort in which the U.S. Government has
cooperated and consulted with the
Governments of Canada, Venezuela,
Mexico, and Colombia; with other donor
countries; and with the international
financial institutions. The proposals
before this committee are the result of
extensive discussions with business and
government leaders in the Caribbean
Basin region about the obstacles to their
economic revival. The focus of our ef-
forts is on the private sector, which
must be the engine of a lasting economic
growth.
The nations of the Caribbean Basin
are counting on us. It is now over a year
since President Reagan outlined his
Caribbean Basin Initiative proposals
before the Organization of American
States. Those proposals were warmly,
even enthusiastically, received by most
government, labor, and private sector
leaders in the region. For those in the
Caribbean Basin countries who believe
in cooperation with the United States, in
pluralistic democracy and private enter-
prise, the announcement of the initiative
demonstrated that the United States
realizes the importance of urgent and
far-reaching action to promote the
region's prosperity. They were bitterly
disappointed that this legislation did not
reach the Senate floor during the last
Congress. If we fail to act now, our in-
action will be interpreted as lack of in-
terest and a broken promise. It would
undercut moderate leaders in the region
who have geared their policies to
cooperation with the United States and
to serious efforts for economic develop-
ment and democracy. It would ex-
tinguish the hopes that have been raised
in the region that the United States is
willing to give significant help to foster
economic and social progress in the
Caribbean Basin.
I am confident that after careful ex-
amination, this committee and the
Senate will recognize that this legisla-
tion is important to the interests of the
United States and the Caribbean Basin
countries. I strongly urge favorable ac-
tion. ^
Published by the United States Department
of State - Bureau of Public Affairs
Office of Public Communication ? Editorial
Division ? Washington, D.C. ? April 1983
Editor: Colleen Sussman ? This material is in
the public domain and may be reproduced
without permission; citation of this source is
appreciated.
Postage and Fees Paid
Department of State
STA-501
usNUUL
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 Current
Policy No. 482
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President Reagan
Central America: Defending
Our Vital Interests
April 27, 1983
United States Department of State
Bureau of Public Affairs
Washington, D.C.
Following is an address by President
Reagan before a joint session of Con-
gress, April 27, 1983.
A number of times in past years,
Members of Congress and a President
have come together in meetings like this
to resolve a crisis. I have asked for this
meeting in the hope that we can prevent
one.
It would be hard to find many
Americans who are not aware of our
stake in the Middle East, the Persian
Gulf, or the NATO line dividing the free
world from the communist bloc. And the
same could be said for Asia.
But in spite of, or maybe because of,
a flurry of stories about places like
Nicaragua and El Salvador, and, yes,
some concerted propaganda, many of us
find it hard to believe we have a stake in
problems involving those countries. Too
many have thought of Central America
as just that place way down below Mex-
ico that can't possibly constitute a threat
to our well-being.
And that's why I have asked for this
session. Central America's problems do
directly affect the security and the well-
being of our own people. And Central
America is much closer to the United
States than many of the world trouble
spots that concern us. So as we work to
restore our own economy, we cannot af-
ford to lose sight of our neighbors to the
south.
El Salvador is nearer to Texas than
Texas is to Massachusetts. Nicaragua is
just as close to Miami, San Antonio, San
Diego, and Tucson as those cities are to
Washington where we're gathered
tonight. But nearness on the map
doesn't even begin to tell the strategic
importance of Central America, border-
ing as it does on the Caribbean-our
lifeline to the outside world. Two-thirds
of all our foreign trade and petroleum
pass through the Panama Canal and the
Caribbean. In a European crisis, at least
half of our supplies for NATO would go
through these areas by sea. It's well to
remember that in early 1942 a handful
of Hitler's submarines sank more ton-
nage there than in all of the Atlantic
Ocean. And they did this without a
single naval base anywhere in the area.
Today, the situation is different.
Cuba is host to a Soviet combat brigade,
a submarine base capable of servicing
Soviet-submarines, and mil-tart' air
bases visited regularly by Soviet military
aircraft.
Because of its importance, the Carib-
bean Basin is a magnet for adventurism.
We are all aware of the Libyan cargo
planes refueling in Brazil a few days ago
on their way to deliver medical supplies
to Nicaragua. Brazilian authorities dis-
covered the so-called medical supplies
were actually munitions and prevented
their delivery. You may remember that
last month, speaking on national tele-
vision, I showed an aerial photo of an
airfield being built on the island of
Grenada. Well, if that airfield had been
completed, those planes could have re-
fueled there and completed their
journey.
If the Nazis during World War II
and the Soviets today could recognize
the Caribbean and Central America as
vital to our interests, shouldn't we also?
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Struggle for Freedom
in El Salvador
For several years now, under two ad-
ministrations, the United States has
been increasing its defense of freedom in
the Caribbean Basin: And I can tell you
tonight, democracy is beginning to take
root in El Salvador which, until a short
time ago, knew only dictatorship. The
new government is now delivering on its
promises of democracy, reforms, and
free elections. It wasn't easy, and there
was resistance to many of the attempted
reforms with assassinations of some of
the reformers. Guerrilla bands and ur-
ban terrorists were portrayed in a
worldwide propaganda campaign as
freedom fighters representative of the
people. Ten days before I came into of-
fice, the guerrillas launched what they
called a "final offensive" to overthrow
the government. And their radio boasted
that our new Administration would be
too late to prevent their victory.
They learned democracy cannot be
so easily defeated. President Carter did
not hesitate. He authorized arms and
ammunition to El Salvador. The guer-
rilla offensive failed, but not America's
will. Every president since this country
assumed global responsibilities has
known that those responsibilities could
only be met if we pursued a bipartisan
foreign policy.
As I said a moment ago, the Govern-
ment of El Salvador has been keeping
its promises, like the land reform pro-
gram which is making thousands of farm
tenants, farm owners. In a little over 3
years, 20% of the arable land in El
Salvador has been redistributed to more
than 450,000 people. That's 1 in 10
Salvadorans who have benefited directly
from this program.
El Salvador has continued to strive
toward an orderly and democratic socie-
ty. The government promised free elec-
tions. On March 28th, little more than a
year ago, after months of campaigning
by a variety of candidates, the suffering
people of El Salvador were offered a
chance to vote-to choose the kind of
government they wanted. And suddenly
the so-called freedom fighters in the hills
were exposed for what they really are-
a small minority who want power for
themselves and their backers not democ-
racy for the people. The guerrillas
threatened death to anyone who voted.
They destroyed hundreds of buses and
trucks to keep the people from getting
to the polling places. Their slogan was
brutal: "Vote today, die tonight." But on
election day, an unprecedented 80% of
the electorate braved ambush and gun-
fire and trudged for miles, many of
them, to vote for freedom. And that's
truly fighting for freedom. We can
never turn our backs on that.
Members of this Congress who went
there as observers told me of a woman
who was wounded by rifle fire on the
way to the polls, who refused to leave
the line to have her wound treated until
after she had voted. Another woman
had been told by the guerrillas that she
would be killed when she returned from
the polls, and she told the guerrillas,
"You can kill me; you can kill my family;
you can kill my neighbors; you can't kill
us all." The real freedom fighters of El
Salvador turned out to be the people of
that country-the young, the old, the in
between-more than a million of them
out of a population of less than 5 million.
The world should respect this courage
and not allow it to be belittled or for-
gotten. And again, I say in good con-
science, we can never turn our backs on
that.
The democratic political parties and
factions in El Salvador are coming
together around the common goal of
seeking a political solution to their coun-
try's problems. New national elections
will be held this year and they will be
open to all political parties. The govern-
ment has invited the guerrillas to par-
ticipate in the election and is preparing
an amnesty law. The people of El
Salvador are earning their freedom, and
they deserve our moral and material
support to protect it.
Yes, there are still major problems
regarding human rights, the criminal
justice system, and violence against non-
combatants. And, like the rest of Cen-
tral America, El Salvador also faces
severe economic problems. But in addi-
tion to recession-depressed prices for
major agricultural exports, El Salvador's
economy is being deliberately sabotaged.
Tonight in El Salvador-because of ruth-
less guerrilla attacks-much of the fer-
tile land cannot be cultivated; less than
half the rolling stock of the railways. re-
mains operational; bridges, water
facilities, telephone and electric systems
have been destroyed and damaged. In
one 22-month period, there were 5,000
interruptions of electrical power; one
region was without electricity for a third
of a year.
I think Secretary of State Shultz put
it very well the other day. "Unable to
win the free loyalty of El Salvador's peo-
ple, the guerrillas," he said, "are
deliberately and systematically depriving
them of food, water, transportation,
light, sanitation, and jobs. And these are
the people who claim they want to help
the common people."
They don't want elections because
they know they would be defeated. But,
as the previous election showed, the
Salvadoran people's desire for
democracy will not be defeated. The
guerrillas are not embattled peasants
armed with muskets. They are profes-
sionals, sometimes with better training
and weaponry than the government's
soldiers. The Salvadoran battalions that
have received U.S. training have been
conducting themselves well on the
battlefield and with the civilian popula-
tion. But, so far, we've only provided
enough money to train 1 Salvadoran
soldier out of 10, fewer than the number
of guerrillas that are trained by
Nicaragua and Cuba.
Relations With Nicaragua
And let me set the record straight on
Nicaragua, a country next to El Salva-
dor. In 1979, when the new government
took over in Nicaragua, after a revolu-
tion which overthrew the authoritarian
rule of Somoza, everyone hoped for the
growth of democracy. We in the United
States did too. By January of 1981, our
emergency relief and recovery aid to
.Nicaragua totaled $118 million-more
than provided by' any other developed
country. In fact, in the first 2 years of
Sandinista rule, the United States
directly or indirectly sent five times
more aid to Nicaragua than it had in the
2 years prior to the revolution. Can any-
one doubt the generosity and good faith
of the American people?
These were hardly the actions of a
nation implacably hostile to Nicaragua.
Yet, the Government of Nicaragua has
treated us as an enemy. It has rejected
our repeated peace efforts. It has
broken its promises to us, to the
Organization of American States, and,
most important of all, to the people of
Nicaragua.
No sooner was victory achieved than
a small clique ousted others who had
been part of the revolution from having
any voice in government. Humberto
Ortega, the Minister of Defense,
declared Marxism-Leninism would be
their guide, and so it is. The Govern-
ment of Nicaragua has imposed a new
dictatorship; it has refused to hold the
elections it promised; it has seized con-
trol of most media and subjects all
media to heavy prior censorship; it
denied the bishops and priests of the
Roman Catholic Church the right to say
mass on radio during holy week; it in-
sulted and mocked the Pope; it has
driven the Miskito Indians from their
homelands-burning their villages,
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destroying their crops, and forcing them
into involuntary internment camps far
from home; it has moved against the
private sector and free labor unions; it
condoned mob action against
Nicaragua's independent human rights
commission and drove the director of
that commission into exile.
In short, after all these acts of
repression by the government, is it any
wonder that opposition has formed?
Contrary to propaganda, the opponents
of the Sandinistas are not die-hard sup-
porters of the previous Somoza regime.
In fact, many are anti-Somoza heroes
who fought beside the Sandinistas to
bring down the Somoza government.
Now they've been denied any part in the
new government because they truly
wanted democracy for Nicaragua, and
they still do. Others are Miskito Indians
fighting for their homes, their lands, and
their lives.
The Sandinista revolution in
Nicaragua turned out to be just an ex-
change of one set of autocratic rulers for
another, and the people still have no
freedom, no democratic rights, and more
poverty. Even worse than its
predecessor, it is helping Cuba and the
Soviets to destabilize our hemisphere.
Meanwhile, the Government of El
Salvador, making every effort to guar-
antee democracy, free labor unions, free-
dom of religion, and a free press, is
under attack by guerrillas dedicated to
the same philosophy that prevails in
Nicaragua, Cuba, and, yes, the Soviet
Union. Violence has been Nicaragua's
most important export to the world. It
is the ultimate in hypocrisy for the un-
elected Nicaraguan Government to
charge that we seek their overthrow
when they're doing everything they can
to bring down the elected Government
of El Salvador. The guerrilla attacks are
directed from a headquarters in
Managua, the capital of Nicaragua.
But let us be clear as to the
American attitude toward the Govern-
ment of Nicaragua. We do not seek its
overthrow. Our interest is to ensure that
it does not infect its neighbors through
the export of subversion and violence.
Our purpose, in conformity with Ameri-
can and international law, is to prevent
the flow of arms to El Salvador, Hon-
duras, Guatemala, and Costa Rica. We
have attempted to have a dialogue with
the Government of Nicaragua, but it
persists in its efforts to spread violence.
We should not-and we will not-
protect the Nicaraguan Government
from the anger of its own people. But
we should, through diplomacy, offer an
alternative. And, as Nicaragua ponders
its options, we can and will-with all the
resources of diplomacy-protect each
country of Central America from the
danger of war. Even Costa Rica, Cen-
tral America's oldest and strongest
democracy, a government so peaceful it
doesn't even have an army, is the object
of bullying and threats from Nicaragua's
dictators.
Nicaragua's neighbors know that
Sandinista promises of peace, nonalli-
ance, and nonintervention have not been
kept. Some 36 new military bases have
been built; there were only 13 during the
Somoza years. Nicaragua's new army
numbers 25,000 men supported by a
militia of 50,000. It is the largest army
in Central America supplemented by
2,000 Cuban military and security ad-
visers. It is equipped with the most
modern weapons, dozens of Soviet-made
tanks, 800 Soviet-bloc trucks, Soviet
152-MM howitzers, 100 antiaircraft
guns, plus planes and helicopters. There
are additional thousands of civilian ad-
visers from Cuba, the Soviet Union,
East Germany, Libya, and the PLO
[Palestine Liberation Organization]. And
we are attacked because we have 55
military trainers in El Salvador.
The goal of the professional guerrilla
movements in Central America is as
simple as it is sinister-to destabilize the
entire region from the Panama Canal to
Mexico. If you doubt me on this point,
just consider what Cayetano Carpio, the
now-deceased Salvadoran guerrilla
leader, said earlier this month. Carpio
said that after El Salvador falls, El
Salvador and Nicaragua would be "arm-
in-arm and struggling for the total
liberation of Central America."
Nicaragua's dictatorial junta, who
themselves made war and won power
operating from bases in Honduras and
Costa Rica, like to pretend they are to-
day being attacked by forces based in
Honduras. The fact is, it is Nicaragua's
Government that threatens Honduras,
not the reverse. It is Nicaragua who has
moved heavy tanks close to the border,
and Nicaragua who speaks of war. It
was Nicaraguan radio that announced on
April 8th the creation of a new, unified,
revolutionary coordinating board to push
forward the Marxist struggle in Hon-
duras. Nicaragua, supported by weapons
and military resources provided by the
communist bloc, represses its own peo-
ple, refuses to make peace, and sponsors
a guerrilla war against El Salvador.
The Need for U.S. Support
President Truman's words are as apt to-
day as they were in 1947, when he, too,
spoke before a joint session of the Con-
gress:
At the present moment in world history
nearly every nation must choose between
alternative ways of life. The choice is too
often not a free one.
One way of life is based upon the will of
the majority, and is distinguished by free in-
stitutions, representative government, free
elections, guarantees of individual liberty,
freedom of speech and religion, and freedom
from political oppression.
The second way of life is based upon the
will of a minority forcibly imposed upon the
majority. It relies upon terror and oppres-
sion, a controlled press and radio, fixed elec-
tions, and the suppression of personal
freedoms.
I believe that it must be the policy of the
United States to support free peoples who
are resisting attempted subjugation by armed
minorities or by outside pressures.
I believe that we must assist free peoples
to work out their own destinies in their own
way.
I believe that our help should be primar-
ily through economic and financial aid which
is essential to economic stability and orderly
political processes.
... Collapse of free institutions and loss
of independence would be disastrous not only
for them but for the world. Discouragement
and possibly failure would quickly be the lot
of neighboring peoples striving to maintain
their freedom and independence.
The countries of Central America
are smaller than the nations that
prompted President Truman's message.
But the political and strategic stakes are
the same. Will our response-economic,
social, military-be as appropriate and
successful as Mr. Truman's bold solu-
tions to the problems of postwar
Europe?
Some people have forgotten the suc-
cesses of those years and the decades of
peace, prosperity, and freedom they
secured. Some people talk as though the
United States were incapable of acting
effectively in international affairs
without risking war or damaging those
we seek to help.
Are democracies required to remain
passive while threats to their security
and prosperity accumulate?
Must we just accept the destabiliza-
tion of an entire region from the Pana-
ma Canal to Mexico on our southern
border?
Must we sit by while independent
nations of this hemisphere are in-
tegrated into the most aggressive em-
pire the modern world has seen?
Must we wait while Central
Americans are driven from their homes,
like the more than 4 million who have
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sought refuge out of Afghanistan or the Basic Goals
1.5 million who have fled Indochina or The Congress shares both the power and
the more than 1 million Cubans who
have fled Castro's Caribbean utopia? the responsibility for our foreign policy.
Must we, by default, leave the people of Tonight, I ask you, the Congress, to join
El Salvador no choice but to flee their me in a bold, generous approach to the
homes, creating another tragic human problems of peace and poverty,
exodus? democracy and dictatorship in the
I do not believe there is a majority region. Join me in a program that
in the Congress or the country that prevents communist victory in the short
counsels passivity, resignation, run but goes beyond to produce, for the
defeatism in the face of this challenge to deprived people of the area, and the the reality
freedom and security in our hemisphere. of present progress promise
I do not believe that a majority of more to come.
the Congress or the country is prepared Let us lay the foundation for a
to stand by passively while the people of bi p artisan approach
and fchedos faint coun-
tries in-
Central America are delivered es tries of Central America. We in the Ad-
totalitarianism and we ourselves are left
vulnerable to new dangers. ministration reach out to you in this
spirit.
last week an official of the .
Soviet Union reiterated Brezhnev's We will pursue four basic goals in
threat to station nuclear missiles in this Central America.
hemisphere-5 minutes from the United First. In response to decades of in-
States. Like an echo, Nicaragua's com- 4 equity and indifference, we will support
mandante, Daniel Ortega, confirmed
that, if asked, his country would con-
sider accepting those missiles. I under-
stand that today they may be having
second thoughts.
Now, before I go any further, let me
say to those who invoke the memory of
Vietnam: There is no thought of sending
American combat troops to Central
America; they are not needed-indeed,
they have not been requested there. All
our neighbors ask of us is assistance in
training and arms to protect themselves
while they build a better, freer life.
We must continue to encourage
peace among the nations of Central
America. We must support the regional
efforts now underway to promote solu-
tions to regional problems. We cannot
be certain that the Marxist-Leninist
bands who believe war is an instrument
of politics will be readily discouraged.
It's crucial that we not become dis-
couraged before they do. Otherwise the
region's freedom will be lost and our
security damaged in ways that can hard-
ly be calculated.
If Central America were to fall,
what would the consequences be for our
position in Asia, Europe, and for
alliances such as NATO? If the United
States cannot respond to a threat near
our own borders, why should Europeans
democracy, reform, and human freedom.
This means using our assistance, our
powers of persuasion, and our legitimate
"leverage" to bolster humane democratic
systems where they already exist and to
help countries on their way to that goal
complete the process as quickly as
human institutions can be changed. Elec-
tions-in El Salvador and also in
Nicaragua-must be open to all, fair and
safe. The international community must
help. We will work at human rights
problems, not walk away from them.
Second. In response to the challenge
of world recession and, in the case of El
Salvador, to the unrelenting campaign of
economic sabotage by the guerrillas, we
will support economic development. By a
margin of two-to-one, our aid is
economic now, not military. Seventy-
seven cents out of every dollar we will
spend in the area this year goes for
food, fertilizers, and other essentials for
economic growth and development. And
our economic program goes beyond
traditional aid: The Caribbean initiative
introduced in the House earlier today
will provide powerful trade and invest-
ment incentives to help these countries
achieve self-sustaining economic growth
without exporting U.S. jobs. Our goal
must be to focus our immense and grow-
or Asians believe that we are seriously agriculture, and industry and to ensure
concerned about threats to them? If the that we, who inhabit this interdependent
Soviets can assume that nothing short of region, come to know and understand
an actual attack on the United States each other better, retaining our diverse
will provoke an American response, identities, respecting our diverse tradi-
which ally, which friend will trust us tions and institutions.
then?
ing technology to enhance health care,
Third. In response to the military
challenge from Cuba and Nicaragua-to
their deliberate use of force to spread
tyranny-we will support the security of
the region's threatened nations. We do
not view security assistance as an end in
itself but as a shield for democratization,
economic development, and diplomacy.
No amount of reform will bring peace so
long as guerrillas believe they will win
by force. No amount of economic help
will suffice if guerrilla units can destroy
roads and bridges and power stations
and crops again and again with impuni-
ty. But, with better training and
material help, our neighbors can hold off
the guerrillas and give democratic
reform time to take root.
Fourth. We will support dialogue
and negotiations-both among the coun-
tries of the region and within each coun-
try. The terms and conditions of par-
ticipation in elections are negotiable.
Costa Rica is a shining example of
democracy. Honduras has made the
move from military rule to democratic
government. Guatemala is pledged to
the same course. The United States will
work toward a political solution in Cen-
tral America which will serve the in-
terests of the democratic process.
To support these diplomatic goals, I
offer these assurances:
? The United States will support
any agreement among Central American
countries for the withdrawal-under ful-
ly verifiable and reciprocal conditions-
of all foreign military and security ad-
visers and troops.
? We want to help opposition
groups join the political process in all
countries and compete by ballots instead
of bullets.
? We will support any verifiable,
reciprocal agreement among Central
American countries on the renunciation
of support for insurgencies on neighbors'
territory.
? And, finally, we desire to help
Central America end its costly arms
race and will support any verifiable,
reciprocal agreements on the nonimpor-
tation of offensive weapons.
To move us toward these goals more
rapidly, I am tonight announcing my in-
tention to name an ambassador at large
as my special envoy to Central America.
He or she will report to me through the
Secretary of State. The ambassador's
responsibilities will be to lend U.S. sup-
port to the efforts of regional govern-
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ments to bring peace to this troubled
area and to work closely with the Con-
gress to assure the fullest possible bipar-
tisan coordination of our policies toward
the region.
What I'm asking for is prompt con-
gressional approval for the full repro-
gramming of funds for key current
economic and security programs so that
the people of Central America can hold
the line against externally supported ag-
gression. In addition, I am asking for
prompt action on the supplemental re-
quest in these same areas to carry us
through the current fiscal year and for
early and favorable congressional action
on my requests for fiscal year 1984. And
finally, I am asking that the bipartisan
consensus, which last year acted on the
trade and tax provisions of the Carib-
bean Basin Initiative in the House, again
take the lead to move this vital proposal
to the floor of both chambers. And, as I
said before, the greatest share of these
requests is targeted toward economic
and humanitarian aid, not military.
What the Administration is asking
for on behalf of freedom in Central
America is so small, so minimal, con-
sidering what is at stake. The total
amount requested for aid to all of Cen-
tral America in 1984 is about $600
million; that's less than one-tenth of
what Americans will spend this year on
coin-operated video games.
In summation, I say to you that
tonight there can be no question: The
national security of all the Americas is
at stake in Central America. If we can-
not defend ourselves there, we cannot
expect to prevail elsewhere. Our
credibility would collapse, our alliances
would crumble, and the safety of our
homeland would be put at jeopardy.
We have a vital interest, a moral
duty, and a solemn responsiblity. This is
not a partisan issue. It is a question of
our meeting our moral responsibility to
ourselves, our friends, and our posterity.
It is a duty that falls on all of us-the
President, the Congress, and the people.
We must perform it together. Who
among us would wish to bear respon-
sibility for failing to meet our shared
obligation? ^
Published by the United States Department
of State ? Bureau of Public Affairs
Office of Public Communication ? Editorial
Division ? Washington, D.C. ? April 1983
Editor: Colleen Sussman ? This material is in
the public domain and may be reproduced
without permission; citation of this source is
appreciated.
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Current
Policy No. 539
Is Peace Possible
in Central America?
January 19, 1984
United States Department of State
Bureau of Public Affairs
Washington, D.C.
Following is an address by Langhorne
A. Motley, Assistant Secretary for
Inter-American Affairs, before the
Foreign Policy Association, New York,
January 19, 1984.
The Events of 1983
There's nothing easy about the situation
in Central America. The issues are so
complex and the situation changing so
rapidly that everyone keeps looking for
"signals" of what is happening-and
what will happen next.
The signals today, as usual, are
mixed. I want to talk very specifically
today about one kind of signal coming
up from Central America: the signals
which tell us on the one hand that peace
is possible there and the ones that say
the opposite. But before I even begin,
remember that nations, like people, are
capable of sending false signals-of mak-
ing paper commitments that have no
meaning.
With that in mind, let's look at some
interesting signals.
? In January 1983, Colombia, Mex-
ico, Panama, and Venezuela met on the
island of Contadora to consider ways to
prevent a widening conflict. After a slow
beginning for what is now known as the
Contadora process, all five Central
American nations agreed in September
to a document of objectives-21 in
all-to serve as a basis for a compre-
hensive regional peace treaty. Just 10
days ago-on January 8-these govern-
ments agreed on specific procedures to
guide negotiations to implement these
objectives.
? In El Salvador, meanwhile, the
fighting continued. But last year a large-
scale amnesty was approved by the Con-
stituent Assembly and effectively and
humanely implemented. More than 1,000
guerrillas and camp followers came in
from the cold. Two meetings took place
between the Peace Commission and the
guerrilla representatives. That dialogue
was interrupted when the guerrillas
refused even to discuss participating in
the direct popular elections for president
now set for March 25. But the Salva-
doran Government has carefully left the
door open to renewed contacts.
? In Nicaragua, the Sandinistas
gradually softened the tone of their
statements. They agreed formally to the
21 objectives of the Contadora process-
objectives that include democratization,
arms control, an end to support for
subversion, and gradual withdrawal of
foreign military and security advisers. In
November, the Sandinistas signaled they
were reducing their ties to Cuba and to
the Salvadoran guerrillas. They also
initiated a dialogue with some of their
internal opposition-although they have
not yet responded to a call from all ma-
jor anti-Sandinista forces to implement
their 1979 commitments to the
Organization of American States (OAS)
and allow all political elements to com-
pete for power in free and genuinely fair
elections.
What does all this mean? Is there
finally some reason to hope that Central
America is on a course toward peace" Or
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are all these signals examples of the
dashed hopes and propaganda that
plague Central America? What is the
evidence?
Where Does Nicaragua Really Stand?
Let me start by reviewing the record
with regard to Nicaragua. When in 1979
the Sandinistas formally pledged to the
OAS to establish a democratic, pluralis-
tic, and nonaligned regime, the United
States took a leading role in the interna-
tional effort to assist Nicaragua. In the
first 21 months after the fall of Somoza,
we authorized $117.2 million in economic
assistance. Despite many problems, the
Carter Administration suspended aid
disbursements only after it became clear
that the Sandinistas were supporting the
guerrillas in El Salvador.
In October 1980 under President
Carter, then again in August 1981 and
April 1982 under the Reagan Ad-
ministration, the United States sought
to persuade Nicaragua to renounce its
support of the guerrilla insurgency in El
Salvador. The Nicaraguans did not re-
spond to our concerns. In October 1982
in San Jose, Costa Rica, eight demo-
cratically elected governments made fair
and balanced proposals for a regional
peace. Nicaragua refused even to receive
the Costa Rican Foreign Minister as
emissary of this group.
The sources of Nicaragua's intran-
sigence were clear. Internally, the San-
dinista leaders had succeeded in remov-
ing from influence everyone who dis-
agreed with them. They had built an
army four times the size of Somoza's
notorious National Guard. And they had
developed close military ties to Cuba and
the Soviet Union, which included
thousands of advisers and a sophisti-
cated joint effort to destabilize El
Salvador and other neighboring govern-
ments.
The regime in Managua was so ar-
rogantly confident in its ability to im-
pose its will that it refused to listen to
either its internal opposition or its
neighbors. A former member of that
regime, Arturo Cruz, put Nicaragua's
situation in a nutshell in the summer
1983 issue of Foreign Affairs:
There is ... an element of self-
destruction in the present conduct of the
Revolution. Certain Sandinista revolutionary
leaders' rejection of pragmatism is puzzling.
The allegiance to an internationalist ideology
... at the expense of the basic interests of
the nation-state of Nicaragua, is unaccept-
able.
Then, last July, on the fourth an-
niversary of the Sandinista revolution,
Junta Coordinator Daniel Ortega offered
a six-point peace proposal. The proposal
was one sided. It would, for example,
have cut off all assistance to the Govern-
ment of El Salvador while leaving
Cuban and Soviet assistance to the
Government of Nicaragua wholly un-
encumbered. It said nothing about democ-
ratization, foreign military advisers, or
verification. But for the first time the
Sandinistas accepted a multilateral dia-
logue and hinted at a willingness to sus-
pend their support for the Salvadoran
guerrillas. That much was encouraging,
and we said so.
Costa Rica, El Salvador, Guatemala,
and Honduras quickly seized the initia-
tive. They put forward an eight-point
proposal-the "Bases for Peace." On
September 9, meeting in Panama under
Contadora auspices, Nicaragua joined
them in agreeing to the 21 objectives I
mentioned earlier. The "Document of
Objectives" called for the establishment
of democratic systems of government;
for the reduction of current inventories
of arms and military personnel; for the
proscription of foreign military bases;
for the reduction and eventual elimina-
tion of foreign military advisers and
troops; for an end to support for subver-
sion; and for adequate means of verifica-
tion and control. These were, and are,
objectives on which a single, comprehen-
sive, regional treaty could be based.
This agreement was important prog-
ress. But what was Nicaragua's next
step?
On October 20-that is, just weeks
after apparently accepting the 21 objec-
tives-Nicaragua presented four draft
treaties based on the July Ortega pro-
posals. These drafts:
? Disregarded the objective of re-
storing military balance among states of
the region;
? Sought again to delegitimize the
elected Government of El Salvador by
treating it as simply one of two
belligerent parties;
? Ignored the Contadora objective
to establish democratic institutions; and
? Made no serious proposal for
verification and control.
In reverting to its own partial agen-
da and presenting it at the United Na-
tions, Nicaragua undercut the 21 objec-
tives of Contadora, both procedurally
and substantively. Instead of acting to
build confidence that it was genuinely
seeking accommodation, Nicaragua
strengthened the arguments of those
who saw its proposals as a renewed
campaign of deception designed to avoid
real accommodation. I repeat: In the
guise of "negotiating," Nicaragua was
rejecting accommodation.
Then, in November, word began to
spread that Nicaragua was reducing the
Cuban presence; that it was asking the
Salvadoran FMLN/FDR [Farabundo
Marti National Liberation Front/Revo-
lutionary Democratic Front] to leave
Managua; and that a new dialogue with
the church and internal opposition was
beginning. In December, Nicaragua pro-
posed a freeze on arms imports and the
reciprocal withdrawal of foreign military
advisers.
These signals suggested that
Nicaragua recognized it would have to
respond to the concerns expressed by its
democratic opposition and by its neigh-
bors in Central America.
The United States welcomed these
signals. Secretary Shultz said so publicly
on December 5. And, you may be confi-
dent, we have been exploring them thor-
oughly in our private diplomacy.
But the Secretary also said that
what matters is the reality behind the
rhetoric. Look at the evidence:
? Nicaragua claimed it was reducing
the Cuban presence. But, as Interior
Minister Borge himself admitted public-
ly, only normal, year-end rotations of
teachers were involved. We have seen
no evidence that any of Cuba's 2,000
military and security advisers have left
Nicaragua. And while they, not
teachers, are the main source of con-
cern, we learned from Grenada that
even construction workers can beat their
shovels into AK-47s pretty quickly.
? Nicaragua had implied it was forc-
ing the Salvadoran FMLN/FDR out of
Managua. But although a few FDR
leaders did leave Nicaragua, the
FMLN's sophisticated command and
control headquarters and infrastructure
remain intact and operating in
Nicaragua.
? Nicaragua claimed it was offering
a generous amnesty to the Miskito In-
dians. Yet just before Christmas,
another 1,200 Miskito men, women, and
children chose to flee under hostile con-
ditions into Honduras rather than suffer
continued Sandinista repression.
Other Nicaraguan measures had a
little more substance. Censorship of La
Prensa has, at least temporarily, been
relaxed. And, after the extraordinary
crackdown on the church in October,
conversations with church leaders were
begun. But there has been no easing of
restrictions on independent radio sta-
tions and harassment of La Prensa's
advertisers, distributors, and journalists
continues.
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In short, despite the rhetoric, there
is still no euide-nce that the Sandinistas
are taking any of the essential measures
which, if actually implemented, could
help bring about among the states of the
region a viable and lasting peace.
What the United States Seeks
From Nicaragua
To remove any possible ambiguity, let
me say again what those measures are:
? The establishment of a genuinely
democratic regime;
? A definitive end to Nicaragua's
support for guerrilla insurgencies and
terrorism;
? Severance of Nicaraguan military
and security ties to Cuba and the Soviet
bloc; and
? Reductions in Nicaraguan military
strength to levels that would restore
military balance between Nicaragua and
its neighbors.
Let me comment on these points.
First, none of these measures would
be inconsistent with the goals that the
Sandinistas publicly set for themselves
in 1979. The Sandinistas at that time
committed themselves to a policy of non-
alignment, nonintervention, and demo-
cratic pluralism. We ask only that they
respect the principles they themselves
proclaimed.
Second, Nicaragua agreed to
negotiate a treaty that would implement
these goals when it signed the Conta-
dora "Document of Objectives" last
September. I repeat, we are only asking
Nicaragua to do what it has formally
and publicly committed itself to do.
Third, eight other states of the
region, including the United States, have
signed a public document-the San Jose
Declaration of October 4, 1982-making
clear that they and we are committed to
corresponding actions. As the President
told the joint session of Congress last
April, the United States will support a
balanced and comprehensive regional
agreement in Central America that is
fully verifiable and reciprocal.
Fourth, Nicaraguan implementation
of these four points, whether unilaterally
or through negotiations, would remove
the causes of the deterioration in
Nicaragua's relationship with the United
States. A prompt return to a coopera-
tive relationship, including economic
assistance and Clil [Caribbean Basin In-
itiative] beneficiary status, would then
be possible.
Fifth, the effect of such measures
would be profoundly beneficial to the
people of Central America:
? In the absence of the support it
receives through Nicaragua, the FMLN
in El Salvador would have to reconsider
its refusal to consider participating in
national elections. Democratic means of
internal reconciliation-as opposed to
power-sharing contrivances stemming
from the barrel of a gun-would thus be
powerfully advanced.
? With an end to regional conflicts
and the implementation in Nicaragua of
genuinely democratic processes, those
who have taken up arms against the
Sandinistas would have no further cause
for fighting.
? With the restoration of regional
military balance, countries that
desperately need to devote all available
resources to economic recovery would be
spared the dangerous and debilitating
burden of procuring arms. The Central
American Common Market and other in-
stitutions vital to regional integration
and development would receive an
important boost.
? Finally, with the end of the
Cuban/Soviet military presence, the
region would cease being a battlefield in
the East-West conflict, a role the region
neither wants nor can afford.
U.S. Support for a
Verifiable Agreement
Let me repeat: The Central American
states-Nicaragua included-are formal-
ly and officially committed to
negotiating a regional peace treaty to
implement these points. The reasons I
have just outlined make clear that it is
in our interest to help the Central
Americans achieve the 21 objectives of
Contadora. Our support for regional dia-
logue is thus based on the most funda-
mental of foreign policy considerations:
enlightened self-interest.
Senator Richard Stone, President
Reagan's special envoy to Central
America, has made U.S. support for
regional negotiations unambiguous. He
played a key role in getting the dialogue
between the Salvadoran Peace Commis-
sion and the FMLN/FDR started. His
diplomatic efforts have played a major
facilitating role in the Contadora
process.
Regional negotiations are now in an
intermediate stage. Under the Conta-
dora agreement of January 8, the five
Central American governments are
creating three working commissions on
security, political, and socioeconomic af-
fairs. Working with the Contadora Vice
Ministers of Foreign Affairs, each com-
mission will adopt a work plan to be
completed by the end of April.
The January 8 agreement also con-
tains norms to guide the work in each of
the three areas. The degree of specifici-
ty called for on security matters is en-
couraging. For example, they will
prepare a registry, or detailed inven-
tory, of military installations, weapons,
and troops from which to negotiate ceil-
ings to restore the military balance dis-
rupted by Nicaragua's military buildup
since 1979.
Our own experience in arms control
negotiations makes clear that such a
data exchange and registry are absolute-
ly necessary to a successfully negotiated
agreement. And our experience in
negotiation with communist govern-
ments underlines the need to carefully
verify the accuracy of such a registry,
using both technical means and tech-
nically qualified observation teams with
full authority to make on-site evalua-
tions.
Looking ahead, we believe it will
prove necessary to provide for verifica-
tion of compliance with the obligations
of an eventual treaty. Reliable means of
enforcement of treaty obligations are
equally necessary.
Another element, implicit in the
principles agreement of January 8, is
balanced implementation. Nicaragua's
October proposals deferred issues of in-
terest to the other Central American
states while calling for immediate imple-
mentation of commitments to benefit
Nicaragua. By adopting identical time-
tables for the three commissions, the
January 8 agreement rejects such par-
tiality in prioritizing the fundamental
issues.
The Hard Road Ahead
It is certainly too soon to conclude that
an effective regional agreement can be
achieved. The most difficult negotiations
lie ahead. Substantive balance and effec-
tive verification and enforcement will be
essential to move beyond a document of
exhortation and good intentions. But it
is encouraging that the Central Ameri-
cans are pursuing their dialogue with
persistence and realism.
As they move from conceptual to
practical problems, we will continue to
offer whatever assistance will facilitate
implementation of the 21 objectives.
That is the mission the President has
assigned to Senator Stone, a mission
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Dick Stone has worked tirelessly to
fulfill. It is also a mission that the Na-
tional Bipartisan Commission on Central
America has fully endorsed.
But no one should harbor any illu-
sions that a treaty alone will resolve the
crisis. Under the most optimistic of
scenarios, we are a long way from an
end to the crisis in Central America.
Nicaragua has disproportionate military
power controlled by a Marxist-Leninist
minority operating without democratic
checks.
Even if these issues were addressed,
there would still be a need to defend
against all those-on the right as well as
the left-who would exploit under-
development for antidemocratic ends.
There would still be a need to ensure
that political processes are opened to
wider and fairer participation. There
would still be a need for land and other
social and economic reforms. There
would still be a need to build effective
protection for human rights. There
would still be a need to strengthen
judicial processes against their ancient
enemies of corruption and intimidation.
Bureau of Public Affairs
United States Department of State
Washington, D.C. 20520
In short, there would still be a need
for political reconstruction and economic
recovery. The National Bipartisan Com-
mission report-a remarkable consen-
sus-concluded that the overall crisis is
even more acute than they had believed.
Dr. Kissinger [commission chairman]
and the other commission members
describe a crisis too profound to be sub-
ject to quick or paper "fixes."
? Economic resources are essen-
tial-in sizable amounts and reliably
sustained. And these resources must be
put to prudent use.
? Reforms must continue. The Cen-
tral Americans must continue to attack
the local socioeconomic and political
sources of the conflict. Abuses of human
rights by the violent right and the
violent left must stop.
? Security assistance is vital. Guer-
rilla forces cannot be allowed to spread
poverty and destruction or to win a
military victory. The United States has
both moral and strategic interests in
preventing a communist Central
America.
? Arid this help must he in sufficient
quantity to get the job done. The bi-
partisan cornrnission put it this way with
regard to El Salvador:
There might be an argument for doing
nothing to help the government of El
Salvador. There might he an argument for
doing a great deal more. There is, however,
no logical argument for giving some aid but
not enough. The worst possible policy for El
Salvador is to provide just enough aid to keep
the war going, but too little to wage it suc-
cessfully.
In concert with these measures, a
regional dialogue to implement the 21
objectives, and thereby reduce sources
of tension among states, can help to
bring a lasting and real peace to Central
America. But for that to happen, we
will, as Secretary Shultz said in
December, need to see actions to match
the signals. ^
Published by the United States Department
of State Bureau of Public Affairs
Office of Public Communication ? Editorial
Division Washington, D.C. ? January 1984
Editor: Colleen Sussman ? This material is in
the public domain and may be reproduced
without permission; citation of this source is
appreciated.
Postage and Fees Paid
Department of State
STA-501
If address is incorrect
please indicate change.
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WHITE HOUSE DIGEST
is a service provided by the
White House Office of Media Re
s and Plax
ing
July 6, 1983
This edition of the White House Digest focuses on Soviet
and Cuban activities in the Caribbean region. In three
parts, the information contained herein provides a brief
outline of the basic facts about the extent and nature of
that activity.
1. Soviet/Cuban Threat and Buildup in the Caribbean
Since 1978 we have seen an ever increasing Soviet presence in
the Caribbean Region. The USSR through its surrogate---Cuba--
has been able to establish a permanent presence in the Western
Hemisphere.
The Characteristics
of the Soviet/Cuban Buildup: Men, Money
- The Soviet Union maintains and reinforces its presence by:
Deploying its long range Bear reconnaisance and anti-submarine
warfare aircraft to the region on a regular basis.
Deploying its naval combatants for joint training exercises
with Cuba.
?- Providing a Soviet Brigade of approximately 3,000 men stationed
near Havana and an additional presence of 2,500 military advisors.
Providing Cuba with 8,000 civilian advisors.
Maintaining the largest intelligence monitoring/telecommunications
facility outside the USSR.
- In 1982, the Soviets and Cubans had 50 times as many military
advisors in Latin America as did the US. Last year the Soviets
increased their military advisors in Cuba by 500.
- The USSR has also provided a steady stream of military equipment
to Cuba. In 1981 alone, Moscow provided 66,000 metric tons in military
assistance valued at $600 million. Deliveries in 1982 exceeded 1981
by 2,000 metric tons and amounted to over $1 billion in military
assistance in the last two -,rears.
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- Cuban armed forces have grown to a size disproportionate for
defensive needs:
Cuba possesses an Army of over 225,000; a Navy of 11,000 and
air defense forces of 16,000, not including 500 thousand para-
military troops.
Cubans have well over 200 MIG fighter aircraft.
?-- Castro has about 65,000 Cubans serving overseas: 40,000
military (25.000 troops in Angola, about 12 , 001 in Ethiopia)
and 25,000 civilian technicians.
i? Cuba has 2.3% of its population in the regular armed forces,
one of every 20 Cubans participates in some security mission.
-- Moscow underwrites the activities of its Cuban surrogate at a cost
exceeding $4 billion annually (1/4 of Cuba's GNP) and supports efforts
to collect funds, arms, and supplies from the communist bloc for
guerrilla activities in Central America and the Caribbean.
- The number of Soviet Bloc academic grants offered annually to
Latin American students jumped from 400 in the 1960's to about
7,000 now. In 1979 Moscow admitted to sponsoring 7,000 Cubans
for studies in the Soviet Union. Last year 700 Nicaraguans were
reported studying there and an additional 300 scholarships were
being provided. Scholarships include free room, board, tuition,
transportation, medical care and a small stipend.
-- About 3,000 Latin American students, including 1,600 Nicaraguans,
are studying in Cuba. Cuba has constructed 17 schools for foreigners,
each costing about $2 million to build and about $600,000 to operate
annually.
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SOVIET MILITARY DELIVERIES TO CUBA
CUBAN MISSILE CRISIS
(JULY OCTOBER, 1962)
HEIGHT OF CUBAN
INVOLVEMENT IN BOLIVIA
POLICY RIFT
ARMS SC
CENTRAL AMERICA -11
IN ETHIOPIA
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II.. 5 readin _Soviet/Cuban Intervention Throughout The Region
- The implication of the Soviet/Cuban buildup is that it provides
a platform for spreading subversion and supporting guerrillas through-
out the region.
- It was Cuba that acted as the catalyst to organize and unify the
far-left groups in El Salvador, assisted in developing military
strategy, and encouraged the guerrillas to launch the ill-fated
"final" offensive in January 1981. Cuba continues to be vital in
training and supporting continuing offensives in El Salvador by
funneling weapons and supplies via Nicaragua to rebel forces in
El Salvador.
- Castro is actively engaged in converting Nicaragua into another
Cuba. There are approximately 5,500 Cuban civilian advisors and
about 1,750 Cuban military and security advisors in Nicaragua.
- The Sandinistas themselves have about 75,000 men under arms in
their active armed forces, reserves, militia, police and security
forces. At its present strength, the Sandinista Army represents the
largest military force in the history of Central America. The
Sandinistas have built 36 new military garrisons since Somoza's
downfall.
- Approximately 70 Nicaraguans were sent to Bulgaria for training
as pilots and mechanics. Existing landing strips in Nicaragua are
being lengthened and will be able to accommodate the most sophisticated
Soviet jet aircraft. MIGs could be flown in. quickly from Cuba.
- in Grenada, which has a strategic location in the eastern
Caribbean, we are concerned because the Soviets and Cubans are
constructing facilities, including an airfield, the eventual use
of which is unknown.
- In Suriname, the Cuban Ambassador is a senior intelligence officer
who was formerly Chief of the Caribbean Section of the Americas
Department of the Cuban Communist Party. The America department is
responsible for Cuban covert activities, and is much more important
in formulating Cuban policy toward Latin America than is the Cuban
Foreign Ministry. The Cuban-Ambassador maintains a very close
relationship with LTC Desire Bouterse, Suriname's military leader,
and has continuous access to key leaders.
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tRAGILIA ARID
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The Threat Posed b- Soviet Expansionism
- Such communist expansion could lead to an extensive and permanent
Soviet presence and an increased Soviet strategic capability in the
region. This would create significant military consequences for
the US:
-- It could place hostile forces and weapons systems within striking
distance of targets in the US.
-- It could provide baseh for use in covert operations against the
US and our neighbors.
-- It could provide for prepositioning of Soviet equipment, supplies
and ammunition in our hemisphere.
-- It could allow the Soviet Pacific and Atlantic fleets to
operate near our shores without having to return to the USSR
for maintenance.
-- It could threaten our Caribbean Sea Lines of Communication
through which a large volume of our goods pass; thus endangering
the economic well-being of our nation.
And finally, it could cause the US to divert scarce resources
in manpower and materiel from other areas of the world to protect
an area previously considered militarily secure.
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SECURITY ASSISTANCE TO LATIN AMERICA
I MILLIONS)
71 72
YEAR
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