1039-A
"BUHR STORAGE
S. HRG. 98-908
SECURITY AND DEVELOPMENT ASSISTANCE
B 1,122,801
HEARINGS
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
NINETY-EIGHTH CONGRESS
SECOND SESSION
ON
S. 2346
A BILL TO AMEND THE FOREIGN ASSISTANCE ACT OF 1961 AND THE
ARMS EXPORT CONTROL ACT TO AUTHORIZE DEVELOPMENT AND SE-
CURITY ASSISTANCE PROGRAMS FOR FISCAL YEARS 1984 AND 1985,
AND FOR OTHER PURPOSES
Y4. 76/2 :S.hrg. 98-908
S. 2347
A BILL TO ESTABLISH A LONG-TERM FRAMEWORK TO BUILD DEMOCRA-
CY, RESTORE PEACE, AND IMPROVE LIVING CONDITIONS IN CENTRAL
AMERICA, TO AUTHORIZE ASSISTANCE FOR THE FISCAL YEARS 1984
THROUGH 1989, AND FOR OTHER PURPOSES
S. 2321
A BILL TO FURTHER AMEND THE PEACE CORPS ACT
S. 2416
A BILL TO PROVIDE FOR INCREASED PARTICIPATION BY THE UNITED
STATES IN THE INTERNATIONAL DEVELOPMENT ASSOCIATION, AND
FOR PARTICIPATION BY THE UNITED STATES IN THE INTER-AMERI-
CAN INVESTMENT CORPORATION
FEBRUARY 22, 29, MARCH 7, 8, 20, 21, 22, AND 27, 1984
Printed for the use of the Committee on Foreign Relations
UNIV. of ICH.
LIBRARIES
OUT O 8 1987
PBUHR STORAGE
Documents Center
OCT 08 1984
DEPOSITED BY THE
TED STATES OF AL
S. HRG. 98-908
SECURITY AND DEVELOPMENT ASSISTANCE
HEARINGS
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
NINETY-EIGHTH CONGRESS
SECOND SESSION
ON
S. 2346
A BILL TO AMEND THE FOREIGN ASSISTANCE ACT OF 1961 AND THE
ARMS EXPORT CONTROL ACT TO AUTHORIZE DEVELOPMENT AND SE-
CURITY ASSISTANCE PROGRAMS FOR FISCAL YEARS 1984 AND 1985,
AND FOR OTHER PURPOSES
S. 2347
A BILL TO ESTABLISH A LONG-TERM FRAMEWORK TO BUILD DEMOCRA-
CY, RESTORE PEACE, AND IMPROVE LIVING CONDITIONS IN CENTRAL
AMERICA, TO AUTHORIZE ASSISTANCE FOR THE FISCAL YEARS 1984
THROUGH 1989, AND FOR OTHER PURPOSES
S. 2321
A BILL TO FURTHER AMEND THE PEACE CORPS ACT
S. 2416
A BILL TO PROVIDE FOR INCREASED PARTICIPATION BY THE UNITED
STATES IN THE INTERNATIONAL DEVELOPMENT ASSOCIATION, AND
FOR PARTICIPATION BY THE UNITED STATES IN THE INTER-AMERI-
CAN INVESTMENT CORPORATION
FEBRUARY 22, 29, MARCH 7, 8, 20, 21, 22, AND 27, 1984
es
Printed for the use of the Committee on Foreign Relations
U.S. GOVERNMENT PRINTING OFFICE
34-045 0
WASHINGTON : 1984
COMMITTEE ON FOREIGN RELATIONS
CHARLES H. PERCY, Illinois, Chairman
HOWARD H. BAKER, JR., Tennessee
CLAIBORNE PELL, Rhode Island
JESSE HELMS, North Carolina
JOSEPH R. BIDEN, JR., Delaware
RICHARD G. LUGAR, Indiana
JOHN GLENN, Ohio
CHARLES MCC. MATHIAS, JR., Maryland PAUL S. SARBANES, Maryland
NANCY L. KASSEBAUM, Kansas
EDWARD ZORINSKY, Nebraska
RUDY BOSCHWITZ, Minnesota
PAUL E. TSONGAS, Massachusetts
LARRY PRESSLER, South Dakota
ALAN CRANSTON, California
FRANK H. MURKOWSKI, Alaska
CHRISTOPHER J. DODD, Connecticut
PAULA HAWKINS, Florida
SCOTT COHEN, Staff Director
GERYLD B. CHRISTIANSON, Minority Staff Director
(II)
CONTENTS
Hearing days:
February 22, 1984.......
February 29, 1984.......
February 29, 1984
March 7, 1984.....
March 8, 1984.....
March 20, 1984.....
March 21, 1984 ......
March 22, 1984....
March 22, 1984
March 27, 1984......
March 27, 1984.......
Page
1
113
229
353
447
563
1053
1211
1323
1371
1521
63
FEBRUARY 22, 1984–SECURITY AND DEVELOPMENT ASSISTANCE
Statement of:
Shultz, Hon. George P., Secretary of State, accompanied by Hon. William
Schneider, Jr., Under Secretary of State for Security Assistance, Sci-
ence and Technology; Hon. M. Peter McPherson, Administrator,
Agency for International Development....
Insertions for the record:
Text of S. 2346, S. 2347, S. 2416 and S. 2321
Prepared statement of Hon. George P. Shultz..
Forced recruitment
Drug eradication ......
State Department's responses to additional questions submitted by Sena-
tors Boschwitz and Hawkins
3
69
104
107
110
114
138
172
165
FEBRUARY 29, 1984—IDA VII REPLENISHMENT
Statement of:
Danforth, Hon. John C., a U.S. Senator from Missouri.
Debs, Richard A., president, Morgan Stanley International, and manag-
ing director, Morgan Stanley & Co., on behalf of the Chamber of
Commerce of the United States, accompanied by Kathryn Young, direc-
tor, International Economic Development Policy, U.S. Chamber of
Commerce
Fried, Edward R., the Brookings Institution, Washington, D.C.
Lipscomb, Most Reverend Oscar H., Archbishop of Mobile, on behalf of
the U.S. Catholic Conference, Washington D.C...
Phillips, Hon. Christopher H., president, the National Council for United
States-China Trade, Washington, D.C....
Regan, Hon. Donald T., Secretary of the Treasury
Richards, John C., vice president, M. W. Kellogg Co., Washington, D.C.......
Sewell, John W., president, Overseas Development Council, Washington,
D.C.......
Strauss, Hon. Robert, Akin, Gump, Strauss, Hauer & Feld, Washington,
D.C........
Insertions for the record:
Prepared statement of Hon. John C. Danforth
Prepared statement of Donald T. Regan
Prepared statement of Richard A. Debs.
Prepared statement of Hon. Christopher H. Phillips.....
Prepared statement of John C. Richards....
Prepared statement of the Most Reverend Oscar H. Lipscomb
155
119
161
175
131
116
120
143
158
162
169
OC
(III)
Page
IV
180
Prepared statement of John W. Sewell....
Letter to Secretary Shultz from Senators Percy, Mathias, Glenn, and
Dodd, dated November 3, 1984, regarding the size of the seventh replen-
ishment of IDA...........
222
253
260
243
229
FEBRUARY 29, 1984—SECURITY AND DEVELOPMENT ASSISTANCE
Statement of:
Gast, Lt. Gen. Philip C., Director, Defense Security Assistance Agency,
Department of Defense...
Kirk, Hon. Roger, Senior Deputy Assistant Secretary, Bureau of Interna-
tional Organization Affairs, Department of State
McPherson, Hon. M. Peter, Acting Director and Administrator, Agency
for International Development....
Schneider, Hon. William, Jr., Under Secretary of State for Security As-
sistance, Science and Technology,
Insertions for the record:
Prepared statement of Hon. William Schneider, Jr
Prepared statement of Hon. M. Peter McPherson...
Prepared statement of Lt. Gen. Philip C. Gast......
Foreign assistance budget summary.
Economic need for concessional financing
Security assistance allocations-1983 to 1985.
Justification of U.S. naval bombardment.
Countries receiving ESF
Tax structure in Central America
State Department's responses to additional questions submitted by Sena-
tor Percy..........
AID's responses to additional questions submitted by Senator Percy
AID's responses to additional questions submitted by Senator Pell
AID's responses to additional questions submitted by Senator Kassebaum.
Defense Department's responses to additional questions submitted by
Senator Pell.
Defense Department's response to an additional question submitted for
the record ......
Appendix:
Executive summary--Report of the Commission on Security and Econom-
ic Assistance
Statement of Armistead I. Selden, president, American League for Ex-
ports and Security Assistance, Inc., Washington, D.C
Statement of Harry J. Shaw
President's budget-foreign assistance summary .......
MARCH 7, 1984–EUROPEAN AFFAIRS
233
247
256
264
265
272
282
286
295
...
297
206
317
324
326
327
329
332
337
342
354
429
425
Statement of:
Burt, Hon. Richard R., Assistant Secretary for European Affairs, Depart-
ment of State, accompanied by Richard Haass, Deputy for_Policy
(Bureau of European Affairs) and Special Cyprus Coordinator, Depart-
ment of State .......
Cardiges, Peter H., president, American Hellenic Educational Progressive
Association, Washington, D.C.
Hart, Hon. Parker T., former U.S. Ambassador to Turkey, former Assist-
ant Secretary of State for the Near East and South Asia.....
Lomis, Prof. Dean C., chairman, American Hellenic Institute Public Af-
fairs Committee, Inc., Washington, D.C., accompanied by Eugene T.
Rossides, Esq., special counsel..
Manatos, Andrew E., on behalf of the United Hellenic American Con-
gress and the American Hellenic Alliance, Washington, D.C....
Perle, Hon. Richard N., Assistant Secretary of Defense for International
Security Policy ......
Insertions for the record:
Prepared statement of Hon. Richard R. Burt......
Prepared statement of Richard N. Perle ....
Soviet noncompliance with arms control agreements.
U.S. military installations in Greece......
417
435
360
355
363
369
370
V
Page
Insertions for the record—Continued
Letter from the Helsinki Watch Committee, dated Feb. 24, 1984, regard-
ing human rights issues
Prepared statement of Prof. Dean C. Lomis
Prepared statement of Hon. Parker T. Hart
Prepared statement of Peter H. Cardiges....
Prepared statement of Andrew E. Manatos..
414
420
428
432
438
MARCH 8, 1984-NEAR EASTERN AND SOUTH ASIAN AFFAIRS
472
447
495
Statement of:
Langmaid, Bradshaw, Jr., Deputy Assistant Administrator for the Near
East, Agency for International Development
Murphy, Hon. Richard W., Assistant Secretary for the Near East and
South Asia, Department of State
Staples, Eugene S., Deputy Assistant Administrator for Asia, Agency for
International Development
Insertions for the record:
Prepared statement of Hon. Richard W. Murphy
Prepared statement of Bradshaw Langmaid, Jr
Prepared statement of Eugene S. Staples....
Deliveries of major weapons to the Near East and South Asia by the
major arms suppliers, 1980-83.
Arab development funds .....
Coptic Pope Shenouda III ....
State Department's responses to additional questions submitted for the
record .......
449
474
495
517
518
533
554
673
772
790
825
564
776
846
660
572
1008
MARCH 20, 1984—WESTERN HEMISPHERE AFFAIRS
Statement of:
Beckington, Hon. Herbert, Inspector General, Agency for International
Development..
Dagata, Martin, Mission Director in El Salvador, Agency for Internation-
al Development
Goodfellow, William C., deputy director, Center for International Policy,
Washington, D.C......
Hehir, Rev. J. Bryan, U.S. Catholic Conference, Washington, D.C.
Ikle, Hon. Fred C., Under Secretary for Policy, Department of Defense.
Kasun, Jacqueline R., Ph. D., professor of economics, Humboldt State
University, Arcata, Calif......
Leonard, Jerris, Esq., Washington, D.C....
Morris, Hon. Jay F., Deputy Administrator, Agency for International
Development...
Motley, Hon. Langhorne A., Assistant Secretary for Inter-American Af-
fairs, Department of State ......
Phillips, Howard, the Conservative Caucus, Vienna, Va
Plunket, John T., president, Association of American Chambers of Com-
merce in Latin America, Washington, D.C
Smith, Wayne S., senior associate, Carnegie Endowmnent for Internation-
al Peace, Washington, D.C...
Waters, Alan Rufus, professor of economics, Wake Forest University,
former chief economist, Agency for International Development, Win-
ston-Salem, N.C...
White, Hon. Robert, Warburg Professor of International Relations, Sim-
mons College, Boston, Mass....
Insertions for the record:
Prepared statement of Hon. Fred C. Ikle
Prepared statement of Hon. Langhorne A. Motley ...
Prepared statement of Hon. Jay F. Morris
Agrarian reform in El Salvador, a report from the Inspector General,
AID.....
El Salvador's reforms ......
El Salvador civilian deaths attributable to political violence
Guerrilla prisoner release policy.
Comparison of tonnage provided guerrillas and ESAF
Percentages of Salvadoran guerrillas ammunition infiltrated.
Prepared statement of Jacqueline R. Kasun
788
804
782
988
566
573
661
674
756
759
761
762
763
778
VI
Page
Insertions for the record_Continued
Prepared statement of Alan Rufus Waters ...
784
Prepared statement of William C. Goodfellow
793
Prepared statement of Wayne S. Smith
807
Prepared statement of Rev. J. Bryan Hehir
829
Prepared statement of Jerris Leonard together with attachments.
849
Prepared statement of Ambassador Robert White .....
992
State Department's responses to additional questions submitted by Sena-
tor Hawkins .......
1020
AID's responses to additional questions submitted by Senator Hawkins...... 1024
Ms. Kasun's responses to additional questions submitted by Senator
Helms......
1028
Appendix:
Statement of Henry L. Walther, executive vice president, U.S. Defense
Committee, Fairfax, VA ........
1037
Statement of William C. Doherty, Jr., executive director, American Insti-
tute for Free Labor Development...
1041
MARCH 21, 1984–INTERNATIONAL NARCOTICS CONTROL
Statement of:
DiCarlo, Hon. Dominick L., Assistant Secretary of State, Bureau of Inter-
national Narcotics Matters, accompanied by Clyde D. Taylor, Deputy
Assistant Secretary of State, Bureau of International Narcotics Mat-
ters; and James Van Wert, Executive Director, Bureau of International
Narcotics Matters...
1066
Kimball, Frank B., Counselor, Agency for International Development 1174
Korb, Hon. Lawrence J., Assistant Secretary of Defense for Manpower
Installations and Logistics
1095
Logan, William R., Director, Office of Investigations, U.S. Customs
Service
1114
Mullen, Hon. Francis M., Jr., Administrator, Drug Enforcement Adminis-
tration ......
1055
Yost, Rear Adm. Paul A., Jr., Chief of Staff, U.S. Coast Guard......
1103
Insertions for the record:
Prepared statement of Hon. Dominick L. DiCarlo.......
1071
Prepared statement of Hon. Lawrence J. Korb.....
1097
Prepared statement of Rear Adm. Paul A. Yost, Jr.....
1105
Prepared statement of William R. Logan.
1120
Prepared statement of Frank B. Kimball......
1175
Description of crop substitution project in Pakistan.
1183
DEA's responses to additional questions submitted by Senator Biden 1183
State Department's responses to additional questions submitted for the
record .......
1185
AID's responses to additional questions submitted for the record
1205
U.S. Customs Service's responses to additional questions submitted by
Senator Hawkins.
1207
1258
1304
1244
1212
MARCH 22, 1984–EAST ASIAN AND PACIFIC AFFAIRS
Statement of:
Greenleaf, Charles W., Jr., Assistant Administrator, Bureau for Asia,
Agency for International Development....
Kasun, Jacqueline R., professor of economics, Humboldt State University,
Arcata, Calif....
Kelly, Hon. James A., Deputy Assistant Secretary, Department of
Defense
Melcher, Hon. John, a U.S. Senator from Montana..
Wolfowitz, Hon. Paul D., Assistant Secretary for East Asia and Pacific
Affairs, Department of State......
Insertions for the record:
Letter from Senator John Melcher to Philippine President Ferdinand E.
Marcos, dated January 19, 1984, and President Marcos' response dated
February 11, 1984, regarding aid to the Philippines
China-Philippine agreement to enhance joint commitments
Prepared statement of Hon. Paul D. Wolfowitz
Prepared statement of Hon. James A. Kelly
Prepared statement of Charles W. Greenleaf, Jr
1221
1213
1217
1224
1246
1259
VII
Page
1300
1305
1308
..
Insertions for the record-Continued
Prepared statement of the Lawyers Committee for International Human
Rights, New York, N.Y..
Prepared statement of Jacqueline R. Kasun
Letter to Ambassador Jeane J. Kirkpatrick from Rafael M. Salas, Execu-
tive Director, U.N. Fund for Population Activities, dated April 2, 1984,
regarding Ms. Kasun's testimony...
Letter to Prof. Theodore W. Schultz from Rafael M. Salas, Secretary,
Committee for the U.N. Population Award, concerning Professor
Schultz' letter of July 18, 1983.......
State Department's responses to additional questions submitted for the
record ........
Appendix:
Statement of Werner Fornos, president of the Population Institute, Wash-
ington, D.C......
Statement of Kevin F. Owens, political affairs representative, Movement
for a Free Philippines....
1309
1311
1315
1317
MARCH 22, 1984–PEACE CORPS AUTHORIZATION
Statement of:
Ruppe, Hon. Loret M., Director, the Peace Corps, accompanied by
Thomas Wilson, Director, Office of Financial Management......
1341
Insertions for the record:
Prepared statement of Thomas J. McGrew, on behalf of the Committee of
Returned Peace Corps Volunteers
1325
Note with sorrow-a tribute to Senator Paul Tsongas
1341
Prepared statement of Hon. Loret M. Ruppe
1343
Peace Corps' responses to additional questions submitted for the record..... 1363
MARCH 27, 1984-IDA VII REPLENISHMENT
Statement of:
Bergsten, C. Fred, director, Institute for International Economics, Wash-
ington, D.C....
1408
McNamara, Hon. Robert S., former president, World Bank and Interna-
tional Development Association, Washington, D.C......
1372
Rich, Bruce M., on behalf of the International Project, Natural Resources
Defense Council, Inc., Washington, D.C........
......
1427
Insertions for the record:
Prepared statement of Hon. Robert S. McNamara...
1375
Letter from Mr. McNamara to Dr. Henry A. Kissinger, dated September
12, 1983, regarding assistance to Central America
1407
Prepared statement of C. Fred Bergsten
1414
Prepared statement of Bruce M. Rich..
1431
MARCH 27, 1984-SECURITY AND DEVELOPMENT ASSISTANCE
Statement of:
Tower, Hon. John, a U.S. Senator from Texas ..
1521
SECURITY AND DEVELOPMENT ASSISTANCE
WEDNESDAY, FEBRUARY 22, 1984
UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The committee met, pursuant to notice, at 10:07 a.m., in room
SD-419, Dirksen Senate Office Building, Hon. Charles H. Percy
(chairman of the committee) presiding.
Present: Senators Percy, Baker, Helms, Lugar, Mathias, Kasse-
baum, Boschwitz, Pressler, Hawkins, Pell, Biden, Zorinsky, and
Dodd.
The CHAIRMAN. Secretary Shultz, we welcome you this morning
as the committee's lead witness on the President's foreign assist-
ance request. And knowing that you have a regular meeting with
the President at 12:30 on Wednesdays, we will excuse you by 12:15
so that you can make that meeting.
This year the committee will consider several major bills. The
$8.4 billion Central America legislation, the fiscal year 1985 re-
quest, and the World Bank's IDA VII replenishment.
The proposal includes a $1.1 billion supplemental for fiscal year
1984, of which $860 million is in economic aid. The overall fiscal
year 1985 foreign aid request is $15.2 billion, of which $9.4 billion is
economic aid.
Let me say at the outset of the hearing that I am determined to
enact a foreign-aid authorization this year, and I believe that
Chairman Fascell feels the same way. We have not done that since
1981, and I have advised the administration that when this com-
mittee puts the number of hours that it does into preparing author-
ization bills, only not to have them enacted, it is just an unaccept-
able procedure.
The majority leader is very appreciative of our concern. He has
promised that we will have early scheduling for floor action, early
in April. We are aiming for April 2. We have 4 days of markup
scheduled: March 27, 28, 29, and 30. We plan to put the total pack-
age into one bill, an omnibus bill, to facilitate its passage.
Certainly, doing this means that we must
avoid developing legis-
lation which cannot meet the test on the Senate floor, because it
will all be in one package, and I urge my colleagues to keep this in
mind as we proceed with consideration of this legislation.
We must be prepared on those 4 days, March 27 through March
30, to work long hours because we have a time set for floor action
early in April as indicated by the majority leader.
Mr. Secretary, there are many important issues in this legisla-
tion which this morning we hope you can address. First, conditions
(1)
2
for aid to El Salvador. Conditionality has been a strong position of
this committee and certainly is of the Kissinger commission. I was
pleased to see that it was emphasized strongly there.
Second, proposed aid reductions in the administration's request
for Israel, Cyprus, Tunisia, the international organizations, and the
World Bank.
Third, a new foreign military sales (FMS) concessional loan pro-
gram.
Fourth, higher military aid request for Turkey, despite that
country's recognition of the Turkish Cyprus unilateral declaration
of independence.
Fifth, a new economic cash-grant proposal for Egypt.
Sixth, higher military aid levels for the Philippines.
Seventh, a new aid program for Micronesia.
And finally, a new and much needed development-assistance
effort to prevent starvation in Africa.
And despite the unpopularity of foreign aid programs with the
general electorate, as I went from one end of the State to the other
in Illinois over the recess, I have had nothing but sympathetic reac-
tions when the facts are presented on what is going on and what
would likely happen to Africa unless we stepped in and helped.
The humanitarian attitude of the American people does come
through in times of crisis, and this is such a time, I think.
I would like to note at the outset that this year's aid request
places the FMS financing program on budget. I have been asking
for this for 2 years. I could not be more gratified than to see the
suggestion adopted by the administration. I think we all believe in
it and it will be a good program.
[Text of S. 2346, S. 2347, S. 2321, and S. 2416 follow:
3
98TH CONGRESS
20 SESSION
S. 2346
To amend the Foreign Assistance Act of 1961 and the Arms Export Control Act
to authorize development and security assistance programs for fiscal years
1984 and 1985, and for other purposes.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 27, 1984
Mr. PERCY (by request) introduced the following bill; which was read twice and
referred to the Committee on Foreign Relations
A BILL
To amend the Foreign Assistance Act of 1961 and the Arms
Export Control Act to authorize development and security
assistance programs for fiscal years 1984 and 1985, and for
other purposes.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3
SHORT TITLE
4
SECTION. 1. This Act may be cited as the “Internation-
5 al Security and Development Cooperation Act of 1984".
4
2
1
TITLE I_MILITARY SALES AND RELATED
2
PROGRAMS
3
FOREIGN MILITARY SALES CREDITS AUTHORIZATION AND
4
AGGREGATE CEILINGS
5
SEC. 101. (a) Section 31(a) of the Arms Export Control
6 Act is amended by striking out “$800,000,000 for the fiscal
7 year 1982 and $800,000,000 for the fiscal year 1983” and
8 inserting in lieu thereof “$5,070,000,000 for the fiscal year
9 1985".
10
(b) Section 31(b)(1) of such Act is amended by striking
11 out “$800,000,000 for
the fiscal year
1982 and
12 $800,000,000 for the fiscal year 1983” and inserting in lieu
13 thereof “$5,070,000,000 for fiscal year 1985".
14
(c) Section 31(b)(3) of such Act is amended to read as
15 follows:
16
“(3) Of the aggregate total of credits (or participa-
17
tions in credits) extended under section 23 of this Act,
18
not less than $1,400,000,000 for the fiscal year 1985
19
shall be available only for Israel, and Israel shall be
20
released from its contractual liability to repay the
21
United States Government with respect to such credits
22
(and participations in credits).”.
23
(d) Section 31(b)(5) of such Act is amended to read as
24 follows:
5
3
1
“(5) The principal amount of financing provided
2
under section 23 at or above the current average inter-
3
est rate for United States Government obligations of
4.
comparable maturity, or under section 24(a), with re-
5
spect to Greece, Korea, the Philippines, Portugal, So-
6
malia, Sudan, and Turkey, shall (if and to the extent
each country so desires) be repaid in not more than
7
8
twenty years, following a grace period of ten years on
repayment of principal.”.
9
10
(e) Section 31(b)(6) of such Act is amended-
11
(1) by striking out “$465,000,000 for the fiscal
12
year
1984"
and
inserting
in
lieu
thereof
13
“$1,175,000,000 for the fiscal year 1985”; and
14
(2) by striking out the last sentence.
15
(f) Sections 31(b)(7) and 31(c) of such Act are repealed.
16
CHARGES FOR TRAINING
17 SEC. 102. (a) Section 21(a)(3) of the Arms Export Con-
18 trol Act is amended by striking out “sold to a purchaser who
19 is concurrently receiving assistance under chapter 5 of part
20 II of the Foreign Assistance Act of 1961".
21
(b) Section 21(g) of such Act is repealed.
ADMINISTRATIVE BURCHARGE
22 23
SEC. 103. Paragraph (1)A) of section 21(e) of the Arms
24 Export Control Act is amended by inserting “(excluding a
6
4
1 pro rata share of fixed base operation costs)" immediately
2 after “full estimated costs".
3
CATALOG DATA AND SERVICES
4
SEC. 104. Section 21(h) of the Arms Export Control
5 Act is amended
6
(a) by inserting “(1)” immediately after “(h)"';
7
(b) by striking out “(1) in connection with” and
8
inserting in lieu thereof “(A) in connection with”;
9
(c) by striking out “(2) in connection with” and
10
inserting in lieu thereof “(B) in connection with"; and
11
(d) by adding at the end thereof the following:
"(2) In carrying out the objectives of this section, the
12
13 President is authorized to provide (without charge) cataloging
14 data and cataloging services to the North Atlantic Treaty
15 Organization or to any member government thereof, if such
16 Organization or member government provides such data and
17 services in accordance with an agreement on a reciprocal
18 basis, without charge, to the United States Government.”.
19
SALES CREDITS
20
SEC. 105. Section 23 of the Arms Export Control Act
21 is amended to read as follows:
22
"SEC. 23. SALES CREDITS.-The President is author-
23 ized to finance procurement of defense articles, defense serv-
24 ices, and design and construction services by friendly foreign
25 countries and international organizations, on such terms and
7
5
1 conditions as he may determine. The President shall charge
2 interest at a rate he shall determine and shall require repay-
3 ment in United States dollars within a period not to exceed
4 twelve years after the loan agreement is signed on behalf of
5 the United States Government, unless a longer period is spe-
6 cifically authorized by statute for such country or interna-
7 tional organization.”.
8
REPORTING REQUIREMENT
9
SEC. 106. (a) Section 25(a) of the Arms Export Control
10 Act is amended in the text above paragraph (1) by inserting
11 “or, in the case of paragraph (4), no later than April 1 of
12 each year” immediately after “each year”.
13 (b) Section 25 of this Act is amended by striking out
14 subsection (a)(4) and inserting in lieu thereof the following:
15
“(4) an estimate of the sale and delivery of weap-
16
17
ons and weapons-related defense equipment by all
major arms suppliers to all major recipient countries in
the developing world during the preceding calendar
18
19
year;".
20
GUARANTY RESERVE FUND
21
SEC. 107. (a) Chapter 3 of the Arms Export Control
22 Act is amended by adding the following new section immedi-
23 ately after section 31:
24
"SBC. 31A. There are authorised to be appropriated to
25 the President for the fiscal year 1985 $274,000,000 to main-
8
6
1 tain adequate reserves in the Guaranty Reserve Fund against
2 defaults and rescheduling of outstanding loans guaranteed
3 pursuant to the provisions of section 24(a) of this Act.”.
4
(b) Section 24 of such Act is amended by striking out
5 the second sentence of subsection (c) and inserting in lieu
6 thereof "Funds made available pursuant to section 31A of
7 this Act shall be credited to such reserve, shall be merged
8 with the funds in such reserve, and shall be available for any
9 purpose for which funds in such reserve are available.”.
10
(c) Section 31(a) of such Act is amended by striking out
11 "this Act” in the first sentence and inserting in lieu thereof
12 “the provisions of section 23 of this Act”.
13
INCREASE IN CRIMINAL PENALTIES FOR CERTAIN
14
VIOLATIONS OF THE ARMS EXPORT CONTROL ACT
15
SEC. 108. (a) Section 38(c) of the Arms Export Control
16 Act is amended by striking out “not more than $100,000 or
17 imprisoned not more than two years, or both” and inserting
18 in lieu thereof "for each violation not more than $1,000,000
19 or imprisoned not more than ten years, or both”.
20
(b) Section 38(e) of such Act is amended by adding at
21 the end thereof the following: “Notwithstanding Section
22 11(c) of the Export Administration Act of 1979, as amended,
23 the civil penalty for each violation involving controls imposed
24 on the export of defense articles and defense services under
25 this section may not exceed $500,000.".
9
7
1
(c) The amendments made by this section apply with
2 respect to violations occurring after the effective date of this
3 section.
4
OFFICIAL RECEPTION AND REPRESENTATION EXPENSES
5
SEC. 109. Section 43 of the Arms Export Control Act
6 is amended
7
8
(a) in subsection (b) by inserting “and official re-
ception and representation expenses" immediately after
“administrative expenses”; and
9
:
10
(b) by adding at the end thereof the following new
11
subsection:
12
"(c) Not more than $72,500 of the funds derived from
13 charges for administrative services pursuant to section
14 21(e)(1)(A) of this Act may be used each fiscal year for offi-
15 cial reception and representation expenses.".
16
MILITARY ASSISTANCE
17
SEC. 110. Section 504(a)(1) of the Foreign Assistance
18 Act of 1961 is amended by striking out “not to exceed
19 $238,500,000 for the fiscal year 1982 and not to exceed
20 $238,500,000 for the fiscal year 1983" and inserting in lieu
21 thereof "not to exceed $652,500,000 for the fiscal year
22 1985".
23
WAIVER OF NET PROCEEDS OF SALE OF MAP ITEMS
24 SEC. 111. Section 505(f) of the Foreign Assistance Act
25 of 1961 is amended by adding at the end thereof the follow-
84-045 0-84-2
10
8
1 ing: “In the case of defense articles delivered more than five
2 years prior to the President's determination, the President
3 may waive the requirement that such net proceeds be paid to
4 the United States Government if he determines that to do so
5 is in the national interest of the United States.".
6
STOCKPILING OF DEFENSE ARTICLES FOR FOREIGN
7
COUNTRIES
8
SEC. 112. Section 514(b)(2) of the Foreign Assistance
9 Act of 1961 is amended by striking out “$130,000,000 for
10 the fiscal year 1982 and $125,000,000 for the fiscal year
11 1983” and inserting in lieu thereof “$248,000,000 for the
12 fiscal year 1985".
13
SECURITY ASSISTANCE ORGANIZATIONS
14
Sec. 113. Section 515(c)(1) of the Foreign Assistance
15 Act of 1961 is amended by striking out “For the fiscal year
16 1982 and the fiscal year 1983” and inserting in lieu thereof
17 “Pakistan, Tunisia, Yemen, Lebanon, Sudan, El Salvador,
18 Honduras, Venezuela".
19
INTERNATIONAL MILITARY EDUCATION AND TRAINING
20
SEC. 114. Section 542 of the Foreign Assistance Act of
21 1961 is amended by striking out "$42,000,000 for the fiscal
22 year 1982 and $42,000,000 for the fiscal year 1983” and
23 inserting in lieu thereof “$57,010,000 for the fiscal year
24 1985".
11
9
1
EXCHANGE TRAINING
2 SEC. 115. Chapter 5 of part II of the Foreign Assist-
3 ance Act of 1961 is amended by adding at the end thereof the
4 following new section:
5
"SEC. 544. EXCHANGE TRAINING.—In carrying out
6 this chapter, the President is authorized to provide for at-
7 tendance of foreign military personnel at professional military
8 education institutions in the United States (other than Sery-
9 ice academies without charge, and without charge to funds
10 available to carry out this chapter (notwithstanding section
11 632(d) of this Act), if such attendance is pursuant to an
12 agreement providing for the exchange of students on a one-
13 for-one, reciprocal basis each fiscal year between those
14 United States professional military education institutions and
15 comparable institutions of foreign countries and international
16 organizations.".
17
TRAINING IN MARITIME SKILLS
18
SEC. 116. (a) Chapter 5 of part II of the Foreign Assist-
19 ance Act of 1961 is further amended by inserting the follow-
20 ing new section:
21
“SEC. 545. TRAINING IN MARITIME SKILLS.— The
22 President is encouraged to allocate a portion of the funds
23 made available each fiscal year to carry out this chapter for
24 use in providing education and training in maritime search
25 and rescue, operation and maintenance of aids to navigation,
12
10
1 port security, at-sea law enforcement, international maritime
2 law, and general maritime skills."; and
3
(b) Section 660(b) of the Foreign Assistance Act of 1961
4 is amended
5
(1) by striking out "or" at the end of clause (1);
6
(2) by striking out the period at the end of clause
7
(2) and inserting “; or”; and
8
(3) by adding the following new clause:
9
“(3) with respect to assistance, including training, in
10 maritime law enforcement.”.
11
AUTHORIZATION FOR PEACEKEEPING OPERATIONS
12
SEC. 117. Section 552(a) of the Foreign Assistance Act
13 of 1961 is amended by striking out “$19,000,000 for the
14 fiscal year 1982 and $19,000,000 for the fiscal year 1983”
15 and inserting in lieu thereof “$49,000,000 for the fiscal year
16 1985".
17
PEACEKEEPING OPERATIONS EMERGENCIES
18
SEC. 118. (a) Section 552 of the Foreign Assistance Act
19 of 1961 is amended
20
(1) by inserting in subsection (c) the number "(1)"
21
immediately after “the President may’’;
22
(2) by inserting in subsection (c) immediately
23
before the period at the end of the subsection“; and
24
(2) in the event the President also determines that such
25
unforeseen emergency requires the immediate provision
--
13
11
1
of assistance under this chapter, direct the drawdown
2
of commodities and services from the inventory and re-
3
sources of any agency of the United States Govern-
4
ment of an aggregate value not to exceed $25,000,000
5
in
any fiscal year”; and
6
(3) by inserting at the end thereof the following
7
subsection:
8
“(d) There are authorized to be appropriated to the
9 President such sums as may be necessary to reimburse the
10 applicable appropriation, fund, or account for commodities
11 and services provided under subsection (c)(2) of this section.”.
12
(b) Section 652 of such Act is amended by inserting
13 ", 552(c)(2),” immediately after “under section 506(a)”.
14
TITLE I-ECONOMIC SUPPORT FUND
15
AUTHORIZATION OF APPROPRIATIONS
16
SEC. 201. (a) Section 531(b)(1) of the Foreign Assist-
17 ance
Act of
1961
is
amended by striking out
18 “$2,623,500,000
for
the
fiscal
year
1982
and
19 $2,723,500,000 for the fiscal year 1983” and inserting in
20 lieu thereof “$2,797,500,000 for the fiscal year 1985”.
21
(b) Section 535 of such Act is amended-
22
(1) by striking out “1982" and inserting in lieu
23
thereof “1985''; and
24
(2) by striking out “and up to $75,000,000 for
25
the fiscal year 1983".
S 2346 IS
14
12
1
TITLE HI-DEVELOPMENT ASSISTANCE
2
DEVELOPMENT ASSISTANCE POLICY
3 SEC. 301. Section 102(b) of the Foreign Assistance Act
4 of 1961 is amended by adding the following new paragraphs:
5 “(13) United States encouragement of policy reforms is
6 necessary if developing countries are to achieve economic
7 growth with equity.
8 “(14) Development assistance should promote private
9 sector activity in open and competitive markets in developing
10 countries as a cost effective way to achieve long-term eco-
11 nomic growth.
12
“(15) United States cooperation in development should
13 recognize as essential the need of developing countries to
14 have access to appropriate technology in order to improve
15 food and water, health and housing, education and employ-
16 ment, agriculture and industry.
17
"(16) United States assistance should focus on establish-
18 ing and upgrading the institutional capacities of developing
19 countries in order to promote long-term development. An im-
20 portant component of institution building involves training
21 not only to build physical infrastructure but to expand social
22 infrastructure.".
23
AGRICULTURE, RURAL DEVELOPMENT, AND NUTRITION
24
SEC. 302. Section 103(a)(2) of the Foreign Assistance
25 Act of 1961 is amended by striking out “$700,000,000 for
15
13
1 the fiscal year 1982 and $700,000,000 for the fiscal year
2 1983” and inserting in lieu thereof “$682,751,000 for the
3 fiscal year 1985”.
4
POPULATION AND HEALTH
5
SEC. 303. Section 104(g) of the Foreign Assistance Act
6 of 1961 is amended by striking out paragraphs (1) and (2) of
7 the first sentence and inserting in lieu thereof the following:
8
“(1) $235,002,000 for the fiscal year 1985 to
9
carry out subsection (b) of this section; and
10
"(2) $118,138,000 for the fiscal year 1985 to
11
carry out subsection (c) of this section.".
12
EDUCATION AND HUMAN RESOURCES DEVELOPMENT
13 SEC. 304. Section 105(a) of the Foreign Assistance Act
14 of 1961 is amended by striking out “$103,600,000 for the
15 fiscal year 1982 and $103,600,000 for the fiscal year 1983"
16 and inserting in lieu thereof $124,833,000 for the fiscal year
17 1985".
18
ENERGY, PRIVATE VOLUNTARY ORGANIZATIONS, AND
19
SELECTED DEVELOPMENT ACTIVITIES
20
SEC. 305. Section 106(e)(1) of the Foreign Assistance
21 Act of 1961 is amended by striking out “$147,200,000 for
22 the fiscal year 1982 and $147,200,000 for the fiscal year
23 1983” and inserting in lieu thereof “$152,175,000 for the
24 fiscal year 1985”.
16
14
1
PRIVATE SECTOR REVOLVING FUND
2
SEC. 306. Section 108(b) of the Foreign Assistance Act
3 of 1961 is amended by striking out “in fiscal year 1984, up
4 to $20,000,000” and inserting in lieu thereof “for each of
5 fiscal years 1984 and 1985, up to $20,000,000 per year”.
6
SAHEL DEVELOPMENT PROGRAM
7
SEC. 307. The third sentence of section 121(c) of the
8 Foreign Assistance Act of 1961 is amended by striking out
9 “$86,558,000 for the fiscal year 1982 and $86,558,000 for
10 the fiscal year 1983" and inserting in lieu thereof
11 “$97,500,000 for the fiscal year 1985”.
12
PRIVATE AND VOLUNTARY ORGANIZATIONS AND
13
COOPERATIVES IN OVERSEAS DEVELOPMENT
14
SEC. 308. Section 123(e) of the Foreign Assistance Act
15 of 1961 is amended-
16
(1) in the first sentence by inserting on which it
17
is determined” immediately after "prior to the date”.
18
(2) in the third sentence by striking out "such
19
date" wherever it occurs and inserting in lieu thereof
20
“a decision is made to continue such support”.
21
HOUSING GUARANTY PROGRAM
22
SEC. 309. (a) Section 221 of the Foreign Assistance Act
23 of 1961 is amended
17
15
1
(1) in the first sentence, by striking out "require-
2
ments are” and inserting in lieu thereof “, including
essential urban development services, is"; and
3
4
(2) in the rest of the section, by striking out
5
“housing" wherever it occurs (other than in the section
6
title) and inserting in lieu thereof “shelter".
7
(b) Section 222(a) of such Act is amended
8
(1) in the first sentence, by inserting “the Federal
Financing Bank and" immediately before the phrase
9
10
“eligible investors";
11
(2) in the second sentence, by striking out
12
"$1,718,000,000" and inserting in
lieu thereof
13
"$1,958,000,000";
14
(3) by adding the following new sentence immedi-
15
ately after the second sentence: “Commitments to
guarantee loans are authorized for any fiscal year only
16
17
to such extent or in such amounts as provided in ap-
18
propriation acts."; and
19
(4) in the third sentence, by striking out “1984”
20
and inserting in lieu thereof “1986".
21
(c) Section 222 of such Act is amended to add the fol-
22 lowing:
23
"(d) Prior to issuing any guaranties under this section,
24 the agency primarily responsible for administering this part
25 shall obtain the concurrence of the Secretary of the Treasury
18
16
1 with respect to the timing of issuance, interest rate, source of
2 financing, and substantial terms and conditions of the guaran-
3 teed obligation. The Secretary of the Treasury shall ensure
4 to the maximum extent feasible that the timing of issuance,
5 interest rate, source of financing, and substantive terms and
6 conditions of the guaranteed obligation will have the mini-
7 mum possible impact on the capital markets of the United
8 States, taking into account other Federal direct and indirect
9 securities activities.".
10 AGRICULTURAL AND PRODUCTIVE CREDIT AND SELF-HELP
11
COMMUNITY DEVELOPMENT PROGRAMS
12
SEC. 310. (a) Section 222A(c) of the Foreign Assistance
13 Act of 1961 is amended by adding the following new sen-
14 tence at the end thereof: "Commitments to guarantee loans
15 are authorized for any fiscal year only to such extent or in
16 such amounts as are provided in appropriations acts.”.
17
(b) Section 222A(h) of such Act is amended by striking
18 out "1983" and inserting "1985" in lieu thereof.
19
DISADVANTAGED CHILDREN IN ASLA
20 SEC. 311. Section 241(b) of the Foreign Assistance Act
21 of 1961 is amended by striking out “$2,000,000" and insert-
22 ing in lieu thereof “$3,000,000”.
19
17
1 TITLE IV-ECONOMIC POLICY INITIATIVE FOR
2
AFRICA
3
ECONOMIC POLICY INITIATIVE FOR AFRICA
4
SEC. 401. Part I of the Foreign Assistance Act of 1961
5 is amended by adding the following new chaptér:
6 "CHAPTER 4-ECONOMIC POLICY INITIATIVE FOR
7
AFRICA
8
“SEC. 401. POLICY AND GENERAL AUTHORITY. The
9 Congress finds that the problems of inadequate growth rates
10 in food production and agricultural exports, and widespread
11 poverty, hunger, illiteracy and disease in sub-Saharan Afri-
12 can countries threaten the region's economic stability. In rec-
13 ognition that sustained economic growth and development of
14 sub-Saharan African countries continues to be important to
15 the economic and security interests of the United States, and
16 that the economic policy framework of such countries is criti-
17 cal to maintain financial stability and to accelerate growth,
18 the President is authorized to furnish assistance, on such
19 terms and conditions as he may determine, in order to pro-
20 mote growth-oriented policy reforms in sub-Saharan Africa.
21 Assistance provided under this chapter shall be used to assist
22 countries that are pursuing or have shown a willingness to
23 pursue policy reform in such key sectors as food and agricul-
24 ture, education, health and family planning, as well as to
20
18
1 strengthen institutional and skilled manpower capacities to
2 implement such reforms.
3
“SEC. 402. AUTHORIZATION.- There are authorized to
4 be appropriated to the President for the purposes of this
5 chapter, in addition to funds otherwise available for such pur-
6 poses, $75,000,000 for the fiscal year 1985, which are au-
7thorized to remain available until expended.”.
8
TITLE V-MISCELLANEOUS PROVISIONS
9
AMERICAN SCHOOLS AND HOSPITALS ABROAD
10
SEÇ. 501. Section 214(c) of the Foreign Assistance Act
11 of 1961 is amended by striking out “$20,000,000 for the
12 fiscal year 1982 and "$20,000,000 for the fiscal year 1983”
13 and inserting in lieu thereof “$10,000,000 for the fiscal year
14 1985".
15
INTERNATIONAL ORGANIZATIONS AND PROGRAMS
16
SEC. 502. Section 302(a)(1) is amended by striking out
17"$218,600,000 for the fiscal year 1982 and $218,600,000
18 for the fiscal year 1983” and inserting in lieu thereof
19 “$191,800,000 for the fiscal year 1985”.
20
INTERNATIONAL NARCOTICS CONTROL
21 SEC. 503. Section 482(a) of the Foreign Assistance Act
22 of 1961 is amended by striking out “$37,700,000 for the
23 fiscal year 1982 and $37,700,000 for the fiscal year 1983”
24 and inserting in lieu thereof “$50,217,000 for the fiscal year
:
25 1985”.
21
19
1
NARCOTICS REPORTING REQUIREMENT
2
SEC. 504. Section 481(b) is amended to read as follows:
3 "(b) Not later than forty-five days after the date on
4 which each calendar quarter of each year ends, the President
5 shall transmit to the Speaker of the House of Representa-
6 tives, and to the Committee on Foreign Relations of the
7 Senate, a report summarizing the major financial activities
8 undertaken pursuant to this chapter, including new agree-
9 ments signed during the preceding quarter, and the program-
10 ing and obligation, on a calendar quarter basis, of funds under
11 this chapter prior to such date.”.
12
INTERNATIONAL DISASTER ASSISTANCE
13
Sec. 505. Section 492(a) of the Foreign Assistance Act
14 of 1961 is amended by striking out "$27,000,000 for the
15 fiscal year 1982 and $27,000,000 for the fiscal year 1983"
16 and inserting in lieu thereof “$25,000,000 for the fiscal year
17 1985".
18
ANTITERRORISM ASSISTANCE PROGRAM
19
SÉC. 506, Section 575 of the Foreign Assistance Act of
20 1961 is amended by striking out "$5,000,000 for the fiscal
21 year 1984” and inserting in lieu thereof “$5,000,000 for the
22 fiscal year 1985".
22
20
1
COMPLETION OF PLANS AND COST ESTIMATES
2
SEC. 507. (a) Section 611(a) of the Foreign Assistance
3 Act of 1961 is amended by striking out “$100,000” and in-
4 serting in lieu thereof “$500,000”.
5
(b) Section 611(b) of such Act is amended by striking
6 out the phrase “the procedures set forth in the Principles and
7 Standards for Planning Water and Related Land Resources,
8 dated October 25, 1973, with respect to such computations"
2
9 and inserting in lieu thereof “the principles, standards and
10 procedures established pursuant to the Water Resources
11 Planning Act (42 U.S.C. 1962, et seq.) or Acts amendatory
12 or supplementary thereto".
13
PROHIBITIONS AGAINST ASSISTANCE TO THE PEOPLE'S
14
REPUBLIC OF CHINA
15
SEC. 508. Section 620(f) of the Foreign Assistance Act
16 of 1961 is amended
17
(a) by striking out the period at the end of the
18
first sentence of the subsection and adding at the end
19
of that sentence "listed in this subsection.";
20
(b) by striking out in the third sentence of that
21
subsection the phrase ", but is not limited to,”; and
(c) by striking from the list of countries set forth
22
23
in that subsection the words "People's Republic of
24
China." and "Tibet.".
23
21
1
STREAMLINING OF REPROGRAMING REQUIREMENTS
2
SEC. 509. (a) Section 634A of the Foreign Assistance
3 Act of 1961 is amended
4
(1) by inserting “(a)” immediately before “None”;
5
(2) by inserting "or the Arms Export Control
Act” immediately after “disaster relief and rehabilita-
6
7
tion)" and immediately after “this Act” the second
8
place it appears;
9
(3) by inserting “, provided that such notification
10
shall be required for funds appropriated to carry out
11
the purposes of chapter 1 of part I only. if the obliga-
12
tion will be in excess of the amount justified by more
13
than 10 percent” immediately after “such obligation";
14
and
15
(4) by adding at the end of the section the follow-
16
ing new subsection:
17
“(b) The notification requirement of this section does not
18 apply to the reprograming of less than $25,000 for use under
19 chapter 8 of part I or for use under chapter 5 of part II, for a
20 country for which a program under that chapter for that
21 fiscal year was justified to the Congress.”.
22
(b) Section 653 of the Foreign Assistance Act is amend-
23 ed-
24
22
1
(1) by inserting in subsection (a) "or the Arms
2
Export Control Act" immediately after "sections 451
3
or 637)”;
4
(2) by striking out subsection (b); and
5
(3) by redesignating subsection (c) as subsection
6
(b).
7
(c) Section 36(a)(5) of the Arms Export Control Act is
8 amended by striking out the word "cash" and the phrase
9 ". credits to be extended under section 23, and guaranty
10 agreements to be made under section 24".
11
(d) Section 36(a)(6) of the Arms Export Control Act is
12 amended by striking out the word "cash" and the phrase
13 "and credits expected to be extended".
14
PROVISIONS ON USES OF FUNDS
15
SEC. 510. (a) Section 636(a)(14) of the Foreign Assist-
16 ance Act of 1961 is amended by striking out “the Foreign
17 Service Act of 1946, as amended (22 U.S.C. 801 et seq.)”
18 and inserting in lieu thereof “the Foreign Service Act of
19 1980 (22 U.S.C. 3901 et seq.)”.
20
(b) Section 636(c) of such Act is amended by striking
21 out “not to exceed $3,000,000 of the”.
22
(c) Section 636(d) of such Act is amended by striking
23 out "Not to exceed $2,500,000 of funds available for assist-
24 ance" and inserting in lieu thereof “Funds available".
25
23
1
(d) Section 636 of such Act is amended by inserting the
2 following at the end thereof:
3 “C)(1) Notwithstanding any other provision of law, no
4 earmark shall be required to be applied to any funds appro-
5 priated, or authority made available, to carry out the pur-
6 poses of this Act or the Arms Export Control Act by any law
7 making continuing appropriations, in excess of the amount
8 which is the lesser of:
9
"(A) the amount of the earmark, or
10
“(B) the amount representing that proportion of
11
the total funds appropriated to, or authority made
12
available for, an appropriation account, which the
amount of the earmark represents of the total amount
13
14
authorized, appropriated, or made available for the
15
same appropriation account in the law which estab-
16
lished such earmark.
“(2) For the purposes of this subsection, an earmark is a
17
18 statutory requirement that a minimum or definite amount of
19 the total funds appropriated to, or authority made available
20 for, an appropriation account be obligated, or used, only for a
21 specific country or purpose.".
22
TRADE AND DEVELOPMENT PROGRAM
23 SEC. 511. Section 661(b) of the Foreign Assistance Act
24 of 1961 is amended by striking out “$6,907,000 for the fiscal
25 year 1982 and $6,907,000 for the fiscal year 1983” and in-
84-045 0-84_3
26
24
1 serting in lieu thereof “$21,000,000 for the fiscal year
2 1985"
3
OPERATING EXPENSES
4
SEC. 512. Section 667(a)(1) of the Foreign Assistance
5 Act of 1961 is amended by striking out “$335,600,000 for
6 the fiscal year 1982 and $335,600,000 for the fiscal year
7 1983" and inserting in lieu thereof “$398,097,000 for the
8 fiscal year 1985”.
9
ILLEGAL EMIGRATION FROM HAITI
10
SEC. 513. Notwithstanding the limitation of section 660
11 of the Foreign Assistance Act of 1961, funds made available
12 under such Act may be used for programs with Haiti, which
13 shall be consistent with prevailing United States refugee poli-
14 cies, to assist in halting significant illegal emigration from
15 Haiti to the United States.
16
REPEAL OF PROVISIONS
17
SEC. 514. The Foreign Assistance Act of 1961 is
18 amended as follows:
19
(1) Section 106(b)(1) is amended by striking out
20
“(A)” and by striking out subparagraph (B).
(2) Section 110 is amended by striking out “(a)"
21
22
and by striking out subsection (b).
23
(3) Section 113(c) is repealed.
24
(4) Section 306 is amended by striking out “(a)"
and by striking out subsection (b).
25
27
25
1
(5) Section 496 is repealed.
2
(6) Section 497 is repealed.
3
TITLE VI-AMENDMENTS TO OTHER ACTS
4
PRESERVATION OF STATUS AND BENEFITS
5
SEC. 601. Section 2106(e)(2) of the Foreign Service Act
6 of 1980 is amended by inserting "or section 625(e) of the
7 Foreign Assistance Act of 1961" immediately after the "For-
8 eign Service Act of 1946".
9
PARTICIPANT TRAINEE GRANTS
10
SEC. 602. Section 1441(c) of the Internal Revenue
11 Code of 1954 is amended by striking out subsection (6) and
12 inserting in lieu thereof the following:
13
“(6) SCHOLARSHIPS, PER DIEM, ETC. OF CER-
14
TAIN ALIENS.-No deduction or withholding under
15
subsection (a) shall be required in the case of amounts
1
16
of scholarships or fellowship grants, or per diem for
subsistence paid by the United States Government (di-
17
18
rectly or by contract) to any nonresident alien individu-
19
al who is engaged in any program of training in the
20
United States under the Foreign Assistance Act of
21
1961, as amended.”.
28
26
1
TITLE VII—FISCAL YEAR 1984 SUPPLEMENTAL
2
AUTHORIZATION
3
INTERNATIONAL ORGANIZATIONS AND PROGRAMS
4
SEC. 701. In addition to amounts otherwise authorized
5 for the fiscal year 1984 to carry out chapter 3 of part I of the
6 Foreign Assistance Act of 1961, there is authorized to be
7 appropriated for the fiscal year 1984 $1,636,000 to carry out
8 such chapter, for payment to the International Atomic
9 Energy Agency.
10
STOCKPILING OF DEFENSE ARTICLES FOR FOREIGN
11
COUNTRIES
12
SEC. 702. The value of additions to stockpiles in foreign
13 countries shall not exceed $125,000,000 for the fiscal year
14 1984 for the purposes of section 514(b)(1) of the Foreign As-
15 sistance Act of 1961.
16
FOREIGN MILITARY SALES FINANCING
17 Sec. 703. Section 31(b)(5) of the Arms Export Control
18 Act is amended by inserting “Korea," immediately after
19 “Greece,”.
20
HOUSING GUARANTY BORROWING AUTHORITY
21
SEC. 704. Section 223(e) of the Foreign Assistance Act
22 of 1961 is amended-
23
(1) by inserting “(1)” immediately after “(e)”, and
24
(2) by adding at the end thereof the following new
25
paragraph:
29
27
1
“(2)(A) In order to meet obligations incurred for the
2 payment of claims pursuant to loan guaranties described in
3 subsection (d), the Administrator of the agency primarily re-
4 sponsible for administering part I may, to the extent that
5 reserve are not sufficient, borrow from time to time from the
6 Treasury such sums as may be necessary, provided that the
7 Administrator may exercise the authority to borrow under
8 this paragraph only to such extent or in such amounts as are
9 provided in appropriations acts.
10 "(B) Any such borrowing shall bear interest at a rate
11 determined by the Secretary of the Treasury, taking into ac-
12 count the current average market yield on outstanding mar-
13 ketable obligations of the United States of comparable matu-
14 rities. The Secretary of the Treasury shall make loans under
15 this paragraph and for such purpose may borrow on the
16 credit of the United States in accordance with subchapter I of
17 chapter 31 of title 31 of the United States Code.".
18
TITLE VII
19
AUTHORIZATION FOR THE FISCAL YEAR 1986
20 SEC. 801. There are authorized to be appropriated for
21 the fiscal year 1986 such sums as may be necessary to carry
22 out programs and activities for which appropriations for the
23 fiscal year 1985 are authorized by this Act.
30
28
1
EFFECTIVE DATE
2
SEC. 802. (a) Sections 102 and 108 of this Act shall
3 take effect upon enactment or October 1, 1984, whichever
4 date is later.
5
(b) Title VII of this Act shall take effect upon enact-
6 ment.
7
(c) All other sections of this Act shall take effect on
8 October 1, 1984.
31
98TH CONGRESS
2D SESSION
S. 2347
To establish a long-term framework to build democracy, restore peace, and
improve living conditions in Central America, to authorize assistance for the
fiscal years 1984 through 1989, and for other purposes.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 27, 1984
Mr. PERCY (by request) introduced the following bill; which was read twice and
referred to the Committee on Foreign Relations
A BILL
To establish a long-term framework to build democracy, restore
peace, and improve living conditions in Central America, to
authorize assistance for the fiscal years 1984 through 1989,
and for other purposes.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3
SHORT TITLE
4 SECTION 1. This Act may be cited as the “Central
5 America Democracy, Peace and Development Initiative Act
6 of 1984".
32
2
1
TITLE I_STATEMENT OF POLICY
2
SEC. 101. (a) The Congress finds that the building of
3 democracy, the restoration of peace, and the improvement of
4 living conditions in Central America are important to the in-
5 terests of the United States and the community of American
6 States. The Congress further finds that the interrelated issues
7 of social and human progress, economic growth, political
8 reform, and regional security must be effectively dealt with to
9 assure a democratic and economically and politically secure
10 Central America.
11
(b) The achievement of democracy, human rights, peace,
12 and equitable economic growth depends primarily on the co-
13 operation and the human and economic resources of the
14 people and governments of Central America. The Congress
15 recognizes that the United States can make a significant con-
16 tribution to such peaceful and democratic development
17 through a consistent and coherent policy which includes a
18 long-term commitment of both economic and military assist-
19 ance. This policy should be designed to support actively de-
20 mocracy, political reform and human rights; to promote equi-
21 table economic growth and development; to foster dialog and
22 negotiations to achieve peace based upon the objectives of
23 democratization, reduction of armament, an end to subver-
24 sion, and the withdrawal of foreign military forces and advis-
25 ers; and to provide a security shield against violence and
33
3
1 intimidation. It is the purpose of this Act to establish the
2 statutory framework and to authorize the appropriations and
3 financing necessary to carry out the policy described in this
4 section.
5
TITLE II-ECONOMIC AND HUMAN
6
DEVELOPMENT
7
FINDINGS
8
SEC. 201. (a) The Congress finds that lagging economic
9 growth and widespread poverty continue to plague most of
10 the nations of Central America, and that inadequate and de-
11 clining opportunities for economic betterment seriously un-
12 dermine the peace and security of the region. Although the
13 causes of the economic decline are several, the Congress be-
14 lieves that equitable economic growth can be achieved based
15 on the following principles, which shall guide the furnishing
16 of assistance under this title:
17
(1) development and implementation by the coun-
18
19
tries of Central America of appropriate, growth-
oriented, economic policies that foster increased pro-
duction, investment, trade, and regional cooperation;
20
21
(2) increased participation and promotion of the
22
private sector, including cooperatives, in development;
(3) creation and improvement of private and
23
24
public sector institutions in order to expand the access
34
4
1
of the people of the region to the knowledge and tools
2
for development; and
3
(4) recognition that the problems of hunger and
4
malnutrition, health deficiencies, infant and child mor-
5
tality, population growth, illiteracy and skill deficien-
6
cies, underemployment and unemployment, and finan-
cial instability are each related to the other, and each
7
8
must be addressed if equitable economic growth is to
9
occur.
10
(b) AGRICULTURAL DEVELOPMENT.—Increased devel-
11 opment of the region's agricultural sectors will be required in
12 order to expand employment opportunities, diversify and
13 expand agricultural production, and increase incomes in areas
14 which contain the majority of the region's poor. To achieve
15 these purposes, assistance is required for agricultural devel-
16 opment activities in Central America. Such activities may
17 include: The provision of credit to make possible the purchase
18 of land and necessary farm equipment and other inputs by
19 small farmers; the distribution of land through comprehensive
20 agrarian reform programs; the expansion of research and ex-
21 tension services; and promulgation of more production-
22 oriented agricultural pricing policies; agricultural export pro-
23 motion activities, and the expansion of roads, storage facili-
24 ties, rural electrification, and other rural infrastructure.
35
5
1 (c) EDUCATION.-Improvement in the availability and
2 quality of educational opportunities is necessary if the people
3 of the region are to acquire the technical skills and informa-
4 tion needed to increase productivity, solve health problems,
5 and integrate the poor into the development process. In order
6 to achieve these purposes, assistance is required for education
7 activities in Central America. Such activities may include:
8 Expanded programs of secondary level technical and voca-
9 tional education; primary education programs; training of
10 professionals in public administration, scholarship programs;
11 and university strengthening programs in Central America.
12
(d) HEALTH AND POPULATION.--Universal access to
13 primary health care, reduction of infant mortality, and popu-
14 lation growth rates are important aspects of economic devel-
15 opment in the Central America region. In this context, assist-
16 ance is required for health and population activities in Cen-
17 tral America. Such activities may include: Expansion of pro-
18 grams of oral rehydration and immunization; control of
19 vector-borne diseases; training of primary health care work-
20 ers, nurses, dental assistants and personnel in allied health
21 skills; and family planning programs, consistent with section
22 104(f) of the Foreign Assistance Act of 1961.
23
(e) HOUSING.-With urbanization throughout Central
24 America rapidly transforming the character of the region, na-
25 tional and local governments must be able to meet the social
36
6
1 and economic strains attendent to such significant movements
2 of people into urban areas. This trend has far outpaced the
3 growth of shelter and the ability of governments to provide
4 such basic services as water, sanitation, electricity, and
5 public transport. In order to meet these requirements, assist-
6 ance, or the provision of guarantees is required for infrastruc-
7 ture and housing activities in Central America. Such activi-
8 ties may include: Construction of urban housing and infra-
9 structure, support for housing banks and other financial asso-
10 ciations, and extension of housing guarantees.
11
(f) ECONOMIC STABILIZATION.—Reduced revenues due
12 to a combination of price declines for exports and oil price
13 increases (compounded by inadequate availability of indig-
14 enous energy resources), increased spending as a result of
15 rapid expansion of governmental programs and public-sector
16 enterprises, spiraling interest rates, and severe external debt
17 problems are several factors which have had serious detri-
18 mental effects on the economic and political stability of the
19 region. In order to assist the countries of the region to under-
20 take the economic adjustments necessitated by these condi-
21 tions, assistance is required for economic stabilization pro-
22 grams in Central America.
23
(g) HUMANITARIAN RELIEF.--Assistance is required to
24 provide humanitarian relief and rehabilitation assistance for
25 refugees and displaced persons in Central America.
37
7
1
(h) INVESTMENT INSURANCE.- Additional investment
2 is critical to improved economic conditions in Central Amer-
3 ica. The Overseas Private Investment Corporation, therefore,
4 consistent with its statutory mandate should make every
5 effort to support projects in the region.
6
DEVELOPMENT ASSISTANCE
7
SEC. 202. (a) In addition to amounts otherwise available
8 for such purposes, there are authorized to be appropriated to
9 the President for Central American countries-
10
(1) $10,000,000 for the fiscal year 1984 and
11
$69,800,000 for the fiscal year 1985 to carry out the
provisions of section 103 of the Foreign Assistance Act
12
13
of 1961;
14
(2) $5,000,000 for the fiscal year 1984 and
15
$15,000,000 for the fiscal year 1985 to carry out the
16
provisions of section 104(b) of the Foreign Assistance
17
Act of 1961;
18
(3) $18,000,000 for the fiscal year 1984 and
19
$40,000,000 for the fiscal year 1985 to carry out the
20
provisions of section 104(c) of the Foreign Assistance
21
Act of 1961;
22
(4) $10,000,000 for the fiscal year 1984 and
23
$64,000,000 for the fiscal year 1985 to carry out the
provisions of section 105 of the Foreign Assistance Act
24
25
of 1961;
38
8
1
(5) $30,000,000 for the fiscal year 1984 and
2
$84,000,000 for the fiscal year 1985 to carry out the
provisions of section 106 of the Foreign Assistance Act
3
4
of 1961;
5
(6) $10,000,000 for the fiscal year 1985 for pur-
6
poses of the fund established by section 223 of the
7
Foreign Assistance Act of 1961: Provided, That funds
8
made available for such purposes shall be available for
9
expenditure in discharge of guaranties extended prior
10
to enactment of this Act; and
11
(7) $2,489,000 for the fiscal year 1984 and
12
$6,016,000 for the fiscal year 1985 to carry out the
provisions of section 667 of the Foreign Assistance Act
13
14
of 1961.
15
(b) Amounts appropriated pursuant to this section are
16 authorized to remain available until expended.
17
ECONOMIC SUPPORT FUND
18
SEC. 203. (a) In addition to amounts otherwise available
19 for such purposes, $290,500,000 is authorized to be appro-
20 priated to the President for the fiscal year 1984 to carry out
21 the provisions of chapter 4 of part II of the Foreign Assist-
22 ance Act of 1961 for Central American countries.
23
(b) In addition to amounts otherwise available for such
24 purposes, $640,600,000 are authorized to be appropriated to
25 the President for the fiscal year 1985 to carry out the provi-
39
9
1 sions of chapter 4 of part II of the Foreign Assistance Act of
2 1961 for Central American countries.
3
(c) Amounts appropriated pursuant to this section are
4 authorized to remain available until expended.
5
PEACE CORPS
6
SEC. 204. (a) In addition to amounts otherwise available
7 for such purposes, $2,000,000 are authorized to be appropri-
8 ated for the fiscal year 1984 to carry out the purposes of the
9 Peace Corps Act for Central American countries.
10
(b) In addition to amounts otherwise available for such
11 purposes, $18,200,000 are authorized to be appropriated for
12 the fiscal year 1985 to carry out the purposes of the Peace
13 Corps Act for Central American countries.
14
(c) Amounts appropriated pursuant to this section are
15 authorized to remain available until expended.
16
UNITED STATES INFORMATION AGENCY
17
SEC. 205. (a) In addition to amounts otherwise available
18 for such purposes, $7,000,000 are authorized to be appropri-
19 ated for the fiscal year 1984 to carry out for Central Ameri-
20 can countries international information, educational, cultural,
21 and exchange programs under the United States Information
22 and Educational Exchange Act of 1948, the Mutual Educa-
23 tional and Cultural Exchange Act of 1961, and Reorganiza-
24 tion Plan Numbered 2 of 1977, and other purposes author-
25 ized by law.
.
40
10
1
(b) In addition to amounts otherwise available for such
2 purposes, $36,400,000 are authorized to be appropriated for
3 the fiscal year 1985 to carry out for Central American coun-
4 tries international information, educational, cultural, and ex-
5 change programs under the United States Information and
6 Educational Exchange Act of 1948, the Mutual Educational
7 and Cultural Exchange Act of 1961, and Reorganization
8 Plan Numbered 2 of 1977, and other purposes authorized by
9 law.
10
(c) Amounts appropriated pursuant to this section are
11 authorized to remain available until expended.
12
MIGRATION AND REFUGEE ASSISTANCE
13
SEC. 206. (a) In addition to amounts otherwise available
14 for such purposes, $15,000,000 are authorized to be appro-
15 priated for the fiscal year 1985 for the Department of State
16 to carry out for Central American countries the authorities,
17 functions, duties, and responsibilities in the conduct of the
18 foreign affairs of the United States and other purposes au-
19 thorized by law for “Migration and Refugee Assistance".
20
(b) Amounts appropriated pursuant to this section are
21 authorized to remain available until expended.
22
HOUSING GUARANTY PROGRAM
23
SEC. 207. In addition to amounts otherwise authorized
24 for such purposes, $40,000,000 of loan principal are author-
25 ized to be guaranteed under sections 221 and 222 of the
41
11
1 Foreign Assistance Act of 1961 for Central American coun-
2 tries for the fiscal year 1985.
3
ADMINISTRATION OF JUSTICE
4
SEC. 208. Chapter 1 of part I of the Foreign Assistance
5 Act of 1961 is amended by inserting after section 116 the
6 following new section:
7
"SEC. 117. ADMINISTRATION OF JUSTICE.-(a) Not-
8 withstanding section 660 of this Act, the President may fur-
9 nish assistance to countries and organizations, including na-
10 tional and regional institutions, in order to strengthen the
11 administration of justice in Central American countries and
!
12 the countries of the Caribbean. Assistance under this section
13 may include: Support for specialized professional training,
14 scholarships, and exchanges for continuing legal education;
15 programs to enhance judicial, prosecutorial, investigative and
16 enforcement capabilities, and to provide protection for par-
17 ticipants in judicial cases; strengthening professional organi-
18 zations, to promote services to members and the role of the
19 bar in judicial selection, enforcement of ethical standards, and
20 legal reform; increasing the availability of legal materials and
21 publications; seminars, conferences, training and educational
22 programs to improve the administration of justice and to
23 strengthen respect for the rule of law and human rights; and
24 revision and modernization of legal codes and procedures.
84-045 0-84-
4
42
12
1
“(b) Not more than $20,000,000 of the funds made
2 available to carry out this chapter and chapter 4 of part II
3 for any fiscal year shall be available to carry out this section,
4 in addition to amounts
to amounts otherwise available for such
5 purposes.”.
6
TRADE CREDIT INSURANCE PROGRAM
7
SEC. 209. Chapter 2 of part I of the Foreign Assistance
8 Act of 1961 is amended by adding at the end thereof the
9 following new section:
10
"SEC. 224. TRADE CREDIT INSURANCE PROGRAM.—
11 (a) Of the funds authorized to be appropriated for chapter 4 of
12 part II of the Foreign Assistance Act of 1961, there are
13 authorized to be made available such sums as may be neces-
14 sary for payments by the Agency for International Develop-
15 ment to discharge guarantees of liabilities incurred by the
16 Export-Import Bank of the United States under guarantees
17 and insurance approved under the Export-Import Bank Act
18 of 1945 (i) covering risks of loss or nonpayment under short-
19 term trade credits for the purpose of financing goods and
20 services for the use of the private sector in Central American
21 countries and (i) which do not in the judgment of the Board
>>
22 of Directors of the Export-Import Bank of the United States
23 offer reasonable assurance of repayment as required under
24 section 2(b)(1)(B) of the Export-Import Bank Act of 1945.
25 Such short-term credits shall be repayable within a period
;
43
13
1 not to exceed one year. Amounts appropriated under the au-
2 thority of this section shall not be used to discharge guaran-
3 tees of liabilities incurred by the Export-Import Bank of the
4 United States under guarantees and insurance approved
5 under the Export-Import Bank Act of 1945 after September
6 30, 1989. .
7
"(b) Commitments to guarantee or insure under subsec-
8 tion (a) of this section are authorized only to the extent and
9 in the amounts provided in appropriations Acts, not to exceed
10 $300,000,000 in the fiscal year 1985.
11
"(c) Recoveries, after deduction for expenses related
12 thereto, accruing under guarantees and insurance authorized
13 under subsection (a) of this section shall be deposited in the
14 Treasury as miscellaneous receipts.”.
15
LAND REFORM PROGRAMS
16
SEC. 210. Section 620(g) of the Foreign Assistance Act
17 of 1961 is amended by inserting the following sentence at the
18 end thereof: “This prohibition shall not apply to monetary
19 assistance made available for use by a government or politi-
20 cal subdivision or agency of such government to compensate
21 nationals of that country in accordance with a land reform
22 program, if the President determines that monetary assist-
23 ance for such land reform program will further the national
24 interests of the United States.”.
44
14
1
CENTRAL AMERICAN DEVELOPMENT ORGANIZATION
2
SEC. 211. (a) The Congress finds that participation by
3 Central American countries in an effective forum for dialog
4 on, and the continuous review and advancement of, Central
5 America's political, economic, and social development would
6 foster cooperation between the United States and Central
7 American countries in furthering the purposes of this Act.
8
(b) It is the sense of Congress that-
(1) the President enter into negotiations with
9
10
those countries receiving assistance authorized by this
11
Act in order to establish a Central American Develop-
12
ment Organization, and
13
(2) the establishment of the Central American De-
14
velopment Organization be based upon the following
15
principles:
(A) Participation in the organization be open
16
17
to the United States, other donors, and those
18
Central American countries that commit them-
19
selves to, among other things, progress on human
20
rights, building democracy, and encouraging equi-
table economic growth through policy reforms.
21
22
(B) The organization be structured to include
23
representatives from both the public and private
sectors, including representatives from the labor
24
25
and business communities.
45
15
1
(C) The organization meet periodically to
2
carry out the functions described in subparagraphs
3
D and E of this paragraph and should be support-
4.
ed by a limited professional secretariat.
(D) The organization make recommendations
5
6
affecting Central American countries on such mat-
7
ters as-
8
(i) political, economic, and social devel-
9
opment objectives, including the strengthen-
10
ing of democratic pluralism and the safe-
guarding of human rights;
11
12
(ii) mobilization of resources and exter-
13
nal assistance needs; and
14
(ii) reform of economic policies and
15
structures.
16
(E) The organization have the capacity for
monitoring country performance on the recom-
17
18
mendations issued in accordance with subpara-
19
graph D of this paragraph and for evaluating
20
progress toward meeting such country objectives.
21
(F) For each fiscal year after that in which
22
the President has completed negotiations and
23
agreed to participate in such organization, the dis-
24
bursement of 25 per centum of the economic
funds authorized by title I of this Act and allo-
25
*:
46
16
1
cated by the United States directly for each Cen-
2
tral American country be deferred until the
3
United States and the organization have both ap-
4
proved disbursement.
5
(G) The President encourage other donors
6
similarly to designate a percentage of their direct
7
economic assistance for Central American coun-
8
tries for joint approval with this organization.
9
(c) The President is authorized to participate in the
10 Central American Development Organization. The Adminis-
11 trator of the agency primarily responsible for administering
12 part I of the Foreign Assistance Act of 1961, or his designee,
13 shall be the chairman of the Central American Development
14 Organization. The Administrator shall carry out his functions
15 in that capacity under the continuous supervision and general
16 direction of the Secretary of State to the end that United
17 States participation in the Central American Development
18 Organization is fully integrated with the foreign policy of the
19 United States.
20
ECONOMIC ASSISTANCE
21
SEC. 212. (a) In addition to amounts otherwise available
22 for such purposes, there are authorized to be appropriated to
23 the President, for the purpose of furnishing nonmilitary as-
24 sistance for Central American countries, $1,200,000,000 for
25 each of the fiscal years 1986 through 1989, to remain availa-
47
17
1 ble until expended. The President is authorized to transfer
2 funds authorized by this section for obligation in accordance
3 with the authorities of part I of the Foreign Assistance Act of
4 1961 (including chapter 4 of part II of such Act), the Peace
5 Corps Act, the Migration and Refugee Assistance Act of
6 1962, the United States Information and Education Ex-
7 change Act of 1984, the Mutual Educational and Cultural
8 Exchange Act of 1961, the National Endowment for Democ-
9 racy Act, and the State Department Basic Authorities Act of
10 1956, as amended.
11
(b) In addition to amounts otherwise authorized for such
12 purposes, $40,000,000 of loan principal are authorized to be
13 guaranteed under sections 221 and 222 of the Foreign As-
14 sistance Act of 1961 for Central American countries for each
15 of the fiscal years 1986 through 1989.
16
(c) In addition to amounts otherwise authorized for such
17 purposes, $200,000,000 of loan principal are authorized to
18 be guaranteed or insured for Central American countries for
19 the fiscal year 1986 under section 224 of the Foreign Assist-
20 ance Act of 1961.
21
TITLE MI–MILITARY ASSISTANCE, SALES, AND
22
RELATED PROGRAMS
23
FINDINGS
24
SEC. 301. The Congress finds that the restoration of
25 peace in Central America is essential to economic and hu-
48
18
1 manitarian progress in that region. The Congress believes
2 that restoring peace and stability will require a combination
3 of social and political reforms, economic advances, diplomatic
4 efforts and measures to enhance security, based upon the fol-
5 lowing principles:
6
(1) military measures are needed to shield eco-
7
nomic and social programs and are an essential adjunct
8
to a diplomatic solution to conflict in the region;
9
(2) military measures will only aid in restoring
peace if they are complemented by political, economic,
10
11
and social programs and reforms;
12
(3) assistance for military purposes should be fur-
13
nished predictably, in amounts and over a period of
14
time adequate to carry out a humane and effective
15
antiguerrilla strategy;
16
(4) assistance for military purposes should be em-
17
ployed actively to foster human rights objectives, par-
ticularly the goals of free elections, freedom of associ-
18
19
ation, the establishment of the rule of law and an effec-
20
tive judicial system, and vigorous action against those
guilty of crimes and the prosecution of past offenders;
21
22
and
23
(5) a diplomatic solution must be found that will
24
stop the killing in the region and nourish freedom and
25
progress.
49
19
1
MILITARY ASSISTANCE
2
SEC. 302. (a) In addition to amounts otherwise available
3 for such purposes, $259,050,000 is authorized to be appro-
4 priated to the President for the fiscal year 1984 to carry out
5 for Central American countries the provisions of chapter 2 of
6 part II of the Foreign Assistance Act of 1961.
7
(b) In addition to amounts otherwise available for such
8 purposes, $222,000,000 are authorized to be appropriated to
9 the President to carry out for the fiscal year 1985 the provi-
10 sions of chapter 2 of part II of the Foreign Assistance Act of
11 1961 for Central American countries.
12
(c) Amounts appropriated pursuant to this section are
13 authorized to remain available until expended.
14
MILITARY EDUCATION AND TRAINING
15
SEC. 303. (a) In addition to amounts otherwise available
16 for such purposes, $3,900,000 are authorized to be appropri-
17 ated to the President for the fiscal year 1985 to carry out for
18 Central American countries the provisions of chapter 5 of
19 part II of the Foreign Assistance Act of 1961.
20
(b) Amounts appropriated pursuant to this section are
21 authorized to remain available until expended.
22
FOREIGN MILITARY SALES FINANCING
23
SEC. 304. (a) In addition to amounts otherwise available
24 for such purposes, $30,000,000 are authorized to be appro-
25 priated for the fiscal year 1985 to carry out for Central
-
50
20
1 American countries the purposes of section 23 of the Arms
2 Export Control Act.
3
(b) Amounts appropriated pursuant to this section are
4 authorized to remain available until expended.
5
REPORTING REQUIREMENT
6 SEC. 305. (a) Not later than July 31, 1984, and no later
7 than the end of each six-month period thereafter, the Presi-
8 dent shall submit to the Speaker of the House of Representa-
9 tives and the chairman of the Committee on Foreign Rela-
10 tions of the Senate a detailed report fully describing the poli-
11 cies of the Government of El Salvador for achieving political
12 development, economic development and conditions of secu-
13 rity. The report shall also include the President's detailed
14 assessment of the strengths and weaknesses of such policies
15 in meeting the objectives, described in section 101, which
16 United States policy is designed to support, including the
17 specific goals of human rights, free elections, freedom of asso-
18 ciation, dialog and negotiations to achieve peace, the estab-
19 lishment of the rule of law and an effective judicial system,
20 the curtailment of extremist violence by both the left and the
21 right as well as vigorous action to prosecute those guilty of
22 crimes and the prosecution to the extent possible of past of-
23 fenders. This report shall also review comprehensively the
24 factors contributing to the political, economic, and security
25 situation in that country, including such factors as human
51
21
1. rights, land reform, the economy of the country, refugees and
2 displaced persons, the military situation and guerrilla
3 activity.
4
(b) The President shall ensure that assistance authorized
5 by title III of this Act is provided to the Government of El
6 Salvador in a manner which fosters progress of that Govern-
7 ment toward the objectives of political development, econom-
8 ic development and security. To this end, the President in
9 every appropriate instance shall impose conditions on the fur-
10 nishing to the Government of El Salvador of assistance au-
11 thorized by title III of this Act in order to achieve these
12 objectives, including the goals identified in subsection (a) of
13 this section.
14
TITLE IV-MISCELLANEOUS PROVISIONS
15
DEFINITIONS
16 SEC. 401. For the purposes of this Act, including
17 amendments to the Foreign Assistance Act of 1961 made by
18 this Act, the term "Central American countries" shall be
19 deemed to include Belize, Costa Rica, El Salvador, Guate-
20 mala, Honduras, Nicaragua, Panama, and regional programs
21 which benefit such countries.
22
TRANSFER AUTHORITY
23
SEC. 402. Whenever the President determines it to be
24 necessary for the purposes of this Act, in each of the fiscal
25 years 1984 and 1985 not more than a total of $50,000,000
52
22
1 from funds made available for provisions authorized by this
2 Act may be transferred to, and consolidated with, funds made
3 available for provisions authorized by title II of this Act.
4
COORDINATION
5
SEC. 403. Under the direction of the President, the Sec-
6 retary of State shall be responsible for the continuous super-
7 vision and general direction of programs undertaken to carry
8 out the purposes of this Act.
53
98TH CONGRESS
2D SESSION
S. 2321
To further amend the Peace Corps Act.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 22 (legislative day, FEBRUARY 20), 1984
Mr. PERCY (by request) introduced the following bill; which was read twice and
referred to the Committee on Foreign Relations
A BILL
To further amend the Peace Corps Act.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That section 3(b) of the Peace Corps Act (hereinafter the
4 “Act”) is amended by amending the first sentence thereof to
5 read as follows: "There are authorized to be appropriated to
6 carry out the purposes of this Act not to exceed
7 $105,800,000 for the fiscal year 1985 and such sums as may
8 be necessary for the fiscal year 1986.". .
9
SEC. 2. Section 7(a)(2) of the Act is amended by amend-
10 ing that part of the first sentence thereof which precedes
11 clause (A) to read as follows: "The President may utilize
12 such authority contained in the Foreign Service Act of 1980
1
54
2
1 relating to members of the Foreign Service and other United
2 States Government officers and employees as the President
3 deems necessary to carry out functions under this Act, except
4 that, with respect to United States citizens".
5
SEC. 3. Section 15(a) of the Act is amended by adding,
6 at the end thereof, the following sentence: “Technical publi-
7 cations produced by the Peace Corps may be sold at cost in
8 furtherance of the purpose of this dil, invi
9 such sales may be credited to the currently applicable appro-
10 priation of the Peace Corps, notwithstanding subsection
11 3302(b) of title 31 of the United States Code.”.
55
II
98TH CONGRESS
2D SESSION
S. 2416
To provide for increased participation by the United States in the International
Development Association, and for participation by the United States in the
Inter-American Investment Corporation.
IN THE SENATE OF THE UNITED STATES
MARCH 13 (legislative day, MARCH 12), 1984
Mr. BAKER (for Mr. PERCY) (by request) introduced the following bill; which was
read twice and referred to the Committee on Foreign Relations
A BILL
To provide for increased participation by the United States in
the International Development Association, and for partici-
pation by the United States in the Inter-American Invest-
ment Corporation.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3
TITLE I-INTERNATIONAL DEVELOPMENT
4
ASSOCIATION ACT AMENDMENTS
5
SEC. 101. The International Development Association
6 Act, as amended (74 Stat. 293; 22 U.S.C. 284 et seq.), is
7 further amended by adding at the end thereof the following
8 new section:
56
2
1
"SEC. 18. (a) The United States Governor is hereby
2 authorized to agree on behalf of the United States to pay to
3 the Association $2,250,000,000 as the United States contri-
4 bution to the seventh replenishment of the resources of the
5 Association: Provided, however, That any commitment to
6 make such contributions shall be made subject to obtaining
7 the necessary appropriations.
8 “(b) In order to pay for the United States contribution
9 provided for in this section, there is hereby authorized to be
10 appropriated, without fiscal year limitation, $2,250,000,000
11 for payment by the Secretary of the Treasury.”.
12
TITLE II—INTER-AMERICAN INVESTMENT
13
CORPORATION ACT
14 SEC. 201. This title may be cited as the “Inter-Ameri-
15 can Investment Corporation Act”.
16
ACCEPTANCE OF MEMBERSHIP
17
SEC. 202. The President is hereby authorized to accept
18 membership for the United States in the Inter-American In-
19 vestment Corporation (hereinafter in this title referred to as
20 the “Corporation”) provided for by the agreement establish-
21 ing the Corporation (hereinafter in this title referred to as the
22 “agreement”) deposited in the archives of the Inter-Ameri-
23 can Development Bank.
57
3
1
GOVERNOR AND ALTERNATE GOVERNOR
2
SEC. 203. The Governor and Executive Director of the
3 Inter-American Development Bank, and the alternate for
4 each of them, appointed under section 3 of the Inter-Ameri-
5 can Development Bank Act, as amended (72 Stat. 299; 22
6 U.S.C. 283 et seq.), shall serve as Governor, Director, and
7 alternates, respectively, of the Corporation.
8' APPLICABILITY OF BRETTON WOODS AGREEMENTS ACT
9
SEC. 204. The provisions of section 4 of the Bretton
10 Woods Agreements Act, as amended (59 Stat. 512, 22
11 U.S.C. 286b), shall apply with respect to the Corporation to
12 the same extent as with respect to the International Bank for
13 Reconstruction and Development and the International Mon-
14 etary Fund. Reports with respect to the Corporation under
15 paragraphs (5) and (6) of subsection (b) of section 4 of that
16 Act shall be included in the first and subsequent reports made
4
17 thereunder after the United States accepts membership in the
18 Corporation.
19
RESTRICTIONS
20
SEC. 205. (a) Unless authorized by law, neither the
21 President nor any person or agency shall, on behalf of the
22 United States-
23
(1) subscribe to additional shares of stock of the
24
Corporation;
34-045 0-845
58
4
1
(2) vote for or agree to any amendment of the
agreement which increases the obligations of the
2
3
United States, or which changes the purpose or func-
4
tions of the Corporation; or
5
(3) make a loan or provide other financing to the
6
Corporation.
7
FEDERAL RESERVE BANKS AS DEPOSITORIES
8
SEC. 206. Any Federal Reserve bank which is request-
9 ed to do so by the Corporation shall act as its depository or
10 as its fiscal agent, and the Board of Governors of the Federal
11 Reserve System shall supervise and direct the carrying out of
12 these functions by the Federal Reserve banks.
13
SUBSCRIPTION OF STOCK
14
SEC. 207. (a) The Secretary of the Treasury is author-
15 ized to subscribe on behalf of the United States to five thou-
16 sand one hundred shares of the capital stock of the Corpora-
17 tion: Provided, however, That the subscription shall be effec-
18 tive only to such extent or in such amounts as are provided in
19 advance in appropriations Acts.
20
(b) There is authorized to be appropriated, without fiscal
21 year limitation, for payment by the Secretary of the Treasury
22 of the subscription of the United States for those shares,
23 $51,000,000.
59
5
1
(c) Any payment of dividends made to the United States
2 by the Corporation shall be deposited into the Treasury as a
3 miscellaneous receipt.
4
JURISDICTION OF UNITED STATES COURTS
5
SEC. 208. For the purposes of any civil action which
6 may be brought within the United States, its territories or
7 possessions, or the Commonwealth of Puerto Rico, by or
8 against the Corporation in accordance with the agreement,
9 the Corporation shall be deemed to be an inhabitant of the
10 Federal judicial district in which its principal office within the
11 United States or its agent appointed for the purpose of ac-
12 cepting service or notice of service is located, and any such
13 action to which the Corporation shall be a party shall be
14 deemed to arise under the laws of the United States, and the
15 district courts of the United States, including the courts enu-
16 merated in section 460 of title 28, United States Code, shall
17 have original jurisdiction of any such action. When the Cor-
18 poration is a defendant in any action in a State court, it may
19 at any time before the trial thereof remove the action into the
20 appropriate district court of the United States by following
21 the procedure for removal provided in section 1446 of title
22 28, United States Code.
23
EFFECTIVENESS OF AGREEMENT
24
SEC. 209. Article VI, section 4(c), and article VII, sec-
25 tions 2 to 9, both inclusive, of the agreement shall have full
60
6
1 force and effect in the United States, its territories and pos-
2 sessions, and the Commonwealth of Puerto Rico, upon ac-
3 ceptance of membership by the United States in the
4 Corporation.
5
SECURITIES ISSUED BY THE CORPORATION
6
SEC. 210. (a) Any securities issued by the Corporation
7 (including any guarantee by the Corporation, whether or not
8 limited in scope) in connection with the raising of funds for
9 inclusion in the Corporation's resources as defined in article
10 II, section 2 of the agreement, and any securities guaranteed
11 by the Corporation as to both principal and interest to which
12 the commitment in article II, section 2(e) of the agreement is
13 expressly applicable, shall be deemed to be exempted securi-
14 ties within the meaning of section 3(a)(2) of the Securities
15 Act of 1933 (15 U.S.C. 770) and section 3(a)(12) of the Secu-
16 rities Exchange Act of 1934 (15 U.S.C. 78c). The Corpora-
17 tion shall file with the Securities and Exchange Commission
18 such annual and other reports with regard to such securities
19 as the Commission shall determine to be appropriate in view
20 of the special character of the Corporation and its operations
21 as necessary in the public interest or for the protection of
22 investors.
23
(b) The Securities and Exchange Commission, acting in
24 consultation with such agency or officer as the President
25 shall designate, is authorized to suspend the provisions of
61
7
1 subsection (a) at any time as to any or all securities issued or
2 guaranteed by the Corporation during the period of such sus-
3 pension. The Commission shall include in its annual reports
4 to Congress such information as it shall deem advisable with
5 regard to the operations and effect of this section and in con-
6 nection therewith shall include any views submitted for such
7 purpose by any association of dealers registered with the
8 Commission.
9
TECHNICAL AMENDMENTS
10
SEC. 211. (a) The seventh sentence of paragraph 7 of
1
11 section 5136 of the Revised Statutes of the United States, as
12 amended (12 U.S.C. 24), is further amended by striking out
13 "or" after “the Asian Development Bank” and inserting in
14 lieu thereof a comma, and by inserting “or the Inter-Ameri-
15 can Investment Corporation,” after “the African Develop-
16 ment Bank”.
17
(b) Section 51 of Public Law 91-599, as amended (84
18 Stat. 1657; 22 U.S.C. 276c-2), is amended by striking out
19 “and” after “the African Development Fund," and inserting
20 "and the Inter-Aạerican Investment Corporation,” after
21 "the African Development Bank,".
62
The CHAIRMAN. Senator Pell.
Senator PELL. Thank you, Mr. Chairman.
I join in welcoming the Secretary and his colleagues here.
I congratulate you, too, on your efforts in getting FMS loans on
budget, which is a good step in the right direction.
You are right, in that the aid program is not a popular program.
Parts of it can be explained, as you have, in the Sahel or in other
areas of drought-stricken Africa. But in general, there is no pro-
gram in the Government, I think, that is more unpopular or more
difficult to sell than the aid program. As we move into this hear-
ing, I know we will get good arguments as to why it should be con-
tinued and increased, as the administration proposes, and also we
will hear some good reasons why it would be diminished or kept as
is.
This hearing occurs against the backdrop of continuing crisis in
Lebanon, and as we witness the departure of the British and Ital-
ians from Beirut, and as we see the American marine withdrawal
begin, the question arises in all of our minds-not just those of us
in this room, but across the length and breadth of our land—was
our sacrifice in vain?
After 17 months in Beirut and the tragic price of 264 American
military dead, what have we gained, what have we accomplished,
and, amidst the disintegration of the Lebanese Army that we
trained and the Gemayel Presidency that we supported, what can
we salvage. These are questions that are being asked not just here,
but across our country.
In Central America, where we still funnel millions of dollars to
the Salvadoran military, the estimates of guerrilla strength contin-
ue to climb. We pour millions of dollars worth of covert assistance
to the Nicaraguan Contras, or our terrorists, or our guerrillas, or
whatever you want to call them, seeking to overthrow the Sandi-
nista regime in Managua, while at the same time we expand our
military presence in neighboring Honduras far beyond that con-
templated by Congress.
In terms of aid, the administration is seeking an additional $2.5
billion for this next fiscal year as part of the $8.4 billion in mul-
tiyear aid recommended by the Kissinger commission. Like many
Americans concerned about our budget deficits, I wonder, will the
infusion of $8.5 billion in additional economic aid buy peace and
stability in that region?
Can we accomplish our objectives without deepening our own in-
volvement, and ultimately without the direct involvement and in-
troduction of American troops?
Finally, Mr. Secretary, you come here this morning to testify on
behalf of the administration's request, our President's request, for
a $15-billion aid program for fiscal year 1985. This represents an
increase above the current levels of funding and maintains a trend
of higher security assistance for most regions of the world.
If the fiscal year 1985 request is enacted, overall aid will have
grown 46 percent since the present administration took office, and
the military aid component will have doubled. And I want to em-
phasize this point. Many of us believe that economic aid should
63
perhaps increase, but not military aid, and the administration is
going in the opposite direction.
Two questions occur to this particular Senator when contemplat-
ing such increases: Can we afford them, and does it work? Here the
public has a certain healthy skepticism about the whole aid pro-
gram. That is what we see on the hustings. I know in my own State
of Rhode Island, as I said in the beginning of this statement, there
is no more unpopular program, and we need more ammunition
with which to sell it.
Thank you.
The CHAIRMAN. Thank you very much, Senator Pell.
Secretary Shultz, I have just received a note from Senator Helms
indicating that he is chairing a hearing of the Agriculture Commit-
tee. He will complete that just as quickly as he can. He apologizes
for not being here to greet you but will be here before you leave so
that he can ask a few questions and greet you.
Also, we will, with your understanding, whenever we have 10
Senators present, a live quorum, we will break in for just a
moment to have a rollcall vote on the nominations pending before
the committee. We could not get a live quorum yesterday at our
business meeting because too many Senators were not in Washing-
ton. It will just take a moment, I believe, to do that.
We would be happy to hear from you now.
STATEMENT OF HON. GEORGE P. SHULTZ, SECRETARY OF STATE,
ACCOMPANIED BY HON. WILLIAM SCHNEIDER, JR., UNDER
SECRETARY OF STATE FOR SECURITY ASSISTANCE, SCIENCE
AND TECHNOLOGY; HON. M. PETER MCPHERSON, ADMINISTRA-
TOR, AGENCY FOR INTERNATIONAL DEVELOPMENT
Secretary Shultz. Thank you, Mr. Chairman. I appreciate your
opening comments and the opening comments of Senator Pell.
They presage a lively hearing.
Last year when I appeared before this distinguished committee, I
addressed the important relationships between our foreign policy
objectives to promote growth and stability in the international
economy, to safeguard peace and security, and extend the benefits
of democracy and freedom.
Since then, two Commissions of citizens and Members of Con-
gress have examined our foreign assistance programs. I might say,
those Commissions were put forward in large part at the sugges-
tion of Members of Congress when questions very similar to those
raised by Senator Pell were very much in being.
The Commission on Security and Economic Assistance, headed
by Frank Carlucci, reviewed our overall program. The National Bi-
partisan Commission on Central America reviewed our national
goals and needs for assistance in Central America.
More than two dozen Members of Congress served with these two
Commissions in various capacities. We are indebted to these Mem-
bers and all Commission participants for their excellent work.
We are particularly gratified that these citizens-Republicans,
Democrats, liberals, conservative, businessmen, labor leaders, and
academics—reached a clear consensus on the importance of foreign
assistance. The Carlucci commission concluded: "On balance, it is
64
the judgment of the Commission that U.S. assistance programs
make an indispensable contribution to achieving foreign policy ob-
jectives.” In other words, these programs operate in the interest of
the United States and need to be judged by that standard, and that
is the standard by which the President has judged them.
Both Commissions concluded that economic and military assist-
ance are equally servants of our national interests. Economic
growth contributes to security. Security contributes to economic
growth.
I think one of the powerful lessons, if we did not know it already,
that has come from the Commissions and has been part and parcel
of the discussions that we have had in this committee many times
is that it is quite artificial to look on troubled areas solely in eco-
nomic terms, solely in political terms, solely in security terms. The
only sensible way to look at them is in terms of the complex of
remedies that are needed.
Both Commissions believe that current levels of foreign aid are
inadequate. The Carlucci Commission states: "To meet U.S. foreign
policy objectives, significant increases in real levels of assistance
will be required.” Of course, in the Commission report, as you
know, it traced out the fact that real levels of assistance have de-
clined substantially over the last 10 to 15 years.
Mr. Chairman, my full statement, which I would request be put
in the record-it is a lot longer than what I will read.
The CHAIRMAN. Your full statement will be incorporated in the
record.
Secretary SHULTZ. Thank you.
My full statement builds on the foundations laid by the Carlucci
and Bipartisan Commissions. It describes the U.S. security and eco-
nomic interests which our fiscal year 1985 program seeks to serve
in each region. I will not read the full text today, but I will in my
opening remarks describe briefly our overall request and then
focus on our proposals for Central America, Africa, and the Middle
East.
The foreign assistance program for fiscal year 1985 totals $15.8
billion, of which $1.5 billion is multilateral aid and $14.3 billion is
bilateral aid. This includes $9.4 billion in economic assistance and
$6.4 billion in military assistance.
For fiscal year 1984 we are seeking supplemental funds, as you
noted in your opening statement, of $1.1 billion.
Our economic aid in fiscal year 1985 will focus on increasing food
production and reducing hunger, improving health, especially re-
ducing infant and child mortality, reducing population growth,
spreading education and literacy, and improving host country fi-
nancial structures.
In military assistance, we have made a significant change so that
we can lower interest rates on loans to poor or debt-burdened coun-
tries. Over the past decade, military assistance has increasingly
been provided as off-budget loans with interest rates equivalent to
the cost of money to the Treasury.
As a result, as the Carlucci commission reports, 21 countries re-
ceiving substantial military and economic assistance in 1982 were
charged an effective rate of approximately 9 percent for military
assistance, against only 1 percent for economic assistance. This has
65
meant that in some countries military assistance repayments have
become a large fraction of these countries' debt service, consuming
foreign exchange needed for growth.
In response, we have moved all military assistance on-budget, a
step which Congress and you personally, Mr. Chairman, have long
urged and, I might say as a former budget director, which I totally
support. By so doing, we are able to provide military assistance
loans either at a concessional rate or at the cost of money to the
Treasury, depending on the condition of specific countries. This de-
cision is a key step toward more efficient and effective manage-
ment and integration of our military and economic assistance pro-
grams.
Mr. Chairman, I will now turn to Central America, the Caribbe-
an and South America. The National Bipartisan Commission con-
cluded its study-and I think this is a very important finding by
this bipartisan group, which started its work with a wide variety of
opinions about Central America. “Persuaded that Central America
is both vital and vulnerable, the United States cannot afford to
turn away from that threatened region."
Now, once you have inhaled that finding, and if you agree with
it, as the Bipartisan Commission did, consisting of Democrats, Re-
publicans, and people of a great variety of persuasions, then a
great deal follows from that. It does not mean that there are no
agruments left, but it does mean that the option of just walking
away is not there. We must pay attention to our neighborhood gen-
erally and this particular part of our neighborhood.
The Commission emphasized that Central America is in midpas-
sage from the predominantly authoritarian societies of the past to
what, with determination and help, can become predominantly plu-
ralistic and democratic societies in the future. That passage is
marked today by warfare, poverty, and political extremism
from
the left and right. It creates conditions which Cuba and the Soviet
Union seek to exploit for their own strategic and political purposes.
The United States has a profound interest in helping the people
of Central America move from these travails to a future of greater
economic and social justice. Our interests will be served by helping
to alleviate economic grievances in the region. We have a vital in-
terest in helping our friends block the Soviet Union from consoli-
dating a foothold in Central America. And, most basically, progress
in this hemisphere means the advancement of our fundamental
values: Democracy and the rule of law.
President Reagan earlier this month quoted Senator Henry Jack-
son's remarks when he recommended establishment of the Biparti-
san Commission: "Whatever policy options might be available to
us,” Scoop said, "ignoring threats to the stability of Central Amer-
ica and refusing to engage ourselves in the problems of the region
are not among them.”
The Commission recommended, and we concur, that our engage-
ment in the region should be comprehensive, a mix of developmen-
tal, political, diplomatic, and security measures. Our largest com-
mitment of resources will be for economic reconstruction and revi-
talization.
Of the supplemental funds we are requesting for Central Amer-
ica in fiscal year 1984, $400 million or 61 percent are for emergen-
66
cy economic assistance. In addition, we are proposing a 5-year, $8
million program for economic stabilization, reconstruction, and
long-term development.
These funds will support agricultural development, education,
health services, export promotion, land reform, housing, and hu-
manitarian relief, as well as trade credit insurance and aid for
small businesses.
The Commission also recognizes that economic aid and support
for demoractic reform are not by themselves sufficient. Therefore,
it recommends significantly increased military aid for El Salvador.
To see only indigenous social upheaval in that country, for exam-
ple, is as shortsighted as to recognize only the rule of Cuba and the
Soviet Union. Our aid supports the moderate center.
If we give inadequate help, it will be the moderates who will be
the victims. And I might say, it is the human rights of the citizens
of El Salvador that will be the victims. In the words of the report:
“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 endorse the Commission's proposal to establish a Central
American Development Organization (CADO], including represent-
atives from the Central American countries themselves. Its inde-
pendent recommendations will affect our determinations on the
level and structure of our economic assistance.
In the vital task of strengthening democracy, we are proposing
aid to democratic educational and cross-cultural institutions, as
well as increased funding for scholarships, leadership training, and
educational exchange.
Mr. Chairman, the President's program for Central America is
ambitious and comprehensive, consistent with the challenges we
face. We urge your support.
I turn now to Africa, which faces a much different, although per-
haps equally serious, crisis.
Drought is widespread. As some Members of Congress-most re-
cently Senator Danforth-have eloquently reported, starvation
stalks the continent. In response, the United States has committed
nearly 200,000 tons of food from our emergency title II reserve.
But requests from African governments for about 280,000 addi-
tional tons are either in hand or expected later this year. We are
therefore requesting Congress to approve an additional $90 million
in Public Law 480 title II for Africa for fiscal year 1984. When
people are dying, common decency compels us to respond.
Africa's difficulties have longstanding origins. Food production
per capita has fallen by over 20 percent since the 1960's. That is a
stunning number. Over the past decade, the national product of 15
African countries declined.
A primary cause of this decline is that many African countries
have followed policies which do not produce growth. Pervasive
state controls, bloated state enterprises and bureaucracies, overval-
ued currencies, and disincentives for agriculture all stifle the pri-
vate sector and individual initiative.
Because of these problems, a number of countries in Africa are
undertaking policy reforms. To encourage this process, the Presi-
dent is proposing, beginning in fiscal 1985, an economic policy initi-
ative for Africa. This effort has three components:
67
First, we are proposing a 5-year, $500 million program, beginning
with $75 million for 1985, as an additional fund specifically to
assist African countries establish and implement growth-oriented
economic policies. We will give particular attention to reforms
which increase food production. In other words, let the farmer get
a price that covers his cost, then he will produce food. It is really so
simple, but not observed.
Second, we are working with other donors, particularly the
World Bank, to coordinate donor aid efforts better and provide
more unified support for policy reform in Africa.
Third, we will continue to direct our ongoing development assist-
ance to helping build the skills and institutions needed to carry out
better policies effectively.
With more effective policies and continued investment by Afri-
cans, the United States and other donors, Africa can resume the
progress which marked its first 50 years of independence. A grow-
ing Africa will not only provide for the welfare of its citizens, but
also be a positive force in the whole world economy.
We now turn to the Middle East and surrounding regions, an
area where security has become the predominant concern. Parts of
this area are rife with threats to peace, not just regional but world
peace.
About half of our total fiscal year 1985 foreign assistance request
is directed to promoting our national interests in this area-inter-
ests which also can profoundly affect Western Europe, Japan, and
the rest of the free world.
Our highest priority continues to be a just and lasting peace in
the Middle East. Israel and Egypt, at peace now for almost 5 years,
have thus far been our principal partners. Our programs with
these states have three aims: Nourishing the economic growth
which underpins their security; sustaining their military forces;
and in the process, providing the confidence and security they need
to continue their support for the peace process.
We have made significant changes in military assistance for
Israel and Egypt. To reduce debt servicing burdens, the administra-
tion is recommending that all military assistance to these two
countries in fiscal year 1985 be grants. Because grants are more
valuable than loans and because of the cash flow requirements of
these programs, we have reduced our military assistance requests
for both countries below the levels made available in recent years.
We have discussed these proposals with Israel and Egypt, and
there is general agreement that these levels and terms support our
mutual goals.
The measures the President recently outlined reorient U.S. Polit-
ical and military resources in Lebanon to strengthen our ability to
sustain our efforts. The United States will remain fully engaged,
although obviously the situation there has been changing rapidly
and we have to adapt ourselves to it.
We will continue our efforts to bring all sides to the bargaining
table. We will continue to press the Lebanese Government and the
opposition alike to move toward political accommodation.
Consistent with our policy, we will focus on ways to strengthen
the Government's armed forces as a key element in a stable Leba-
68
non. The funds we have requested in the current budget are part of
that continuing program.
The oil-production states in Southwest Asia are vulnerable to
outside threats and internal subversion by externally supported
elements. I might say, the refrain of state-supported terrorism is a
refrain that we are going to hear more and more about in this com-
mittee as we discuss foreign policy problems and developments.
Some of their neighbors, such as Sudan and Somalia, face in ad-
dition the inherent instabilities which arise from poverty and
ethnic divisions. Our programs in these areas seek to alleviate
these instabilities. At the same time, we are supporting countries
that provide access to the facilities and cooperative security ar-
rangements which our forces would need in order to operate in the
area should that ever be necessary.
The Middle East and environs are a cauldron of instability. Vital
United States and Western political, strategic, and economic inter-
ests are at stake. Our security and economic assistance programs
in that region are a fraction of a fraction of what we spend for na-
tional security through the defense budget, but they are no less
critical to the security and welfare of each American citizen, and I
believe that is a statement with which the Secretary of Defense
fully concurs.
There are other important parts of our program which I describe
in my full statement.
We continue to support Turkey's recovery from its economic dif-
ficulties of the late 1970's. We propose funds to continue military
modernization in Turkey, Spain, Portugal, and Greece.
We continue to support Asia's healthy economic growth and
shore up the security of Thailand and Korea, as well as provide
support for our bases in the Philippines. Assisting Asia's rapid
growth has provided and will provide direct benefits for the United
States in terms of markets for exports and for investment.
We also continue strong support for the multilateral develop-
ment banks as a cost effective means of providing capital for
growth in developing countries.
Mr. Chairman, the Carlucci commission concluded that the for-
eign aid program is vital to our national interests. My brief re-
marks today and my full statement try to show why this is so
region by region.
A world of stability and progress cannot be built by the United
States alone. Therefore, strengthening our friends must be a cen-
tral component in our foreign policy in both the economic and secu-
rity dimensions.
There is always a temptation to cut corners here and there in
the foreign assistance budget. It is unwise to give in to this tempta-
tion. It is pennywise and pound foolish. Strengthening our friends
is generally an effective way to avoid major problems down the
road, problems that could end up costing us much more in re-
sources and sacrifice.
We urge Congress to endorse the work of both the Carlucci and
Bipartisan Commissions by supporting and passing the budget re-
quest which we have made.
Thank you, Mr. Chairman.
[Secretary Shultz' prepared statement follows:]
i
69
PREPARED STATEMENT OF HON. GEORGE P. SHULTZ
Last year when I appeared before this distinguished Committee, I addressed the
important relationship between our foreign policy objectives to promote growth and
stability in the international economy, to safeguard peace and security, and to
extend the benefits of democracy and freedom.
In the intervening months, two Commissions of citizens and Members of Congress
have examined our programs. The Commission on Security and Economic Assist-
ance, headed by Frank C. Carlucci, reviewed our total foreign assistance program.
The National Bipartisan Commission on Central America, headed by Henry A. Kis-
singer, reviewed our national goals and needs for assistance in Central America.
More than two dozen Members of Congress served with these two commissions as
members, ex-officio members, or senior counselors.
We are indebted to these Members and all commission participants for their ex-
cellent work.
We are particularly gratified that these citizens-Republicans, Democrats, liber-
als, conservatives, businessmen, labor leaders, and academics-reached a clear con-
sensus on the importance of foreign assistance.
The Carlucci Commission concluded: “The instrumentalities of foreign assistance
are potent and essential tools that advance our interests. ... On balance, it is the
judgment of the Commission that U.S. assistance programs make an indispensable
contribution to achieving foreign policy objectives.
Both Commissions concluded that economic and military assistance are equally
servants of our national interests. The Carlucci Commission notes that rising stand-
ards of living in the Third World are vital to internal stability and external defense.
Conversely, threats to stability impede development.
In a similar vein, the Bipartisan Commission characterizes the problems of Cen-
tral America as a "seamless web” which can't be defined solely in economic, politi-
cal, social or security terms.
Both Commissions believe that current levels of foreign aid are inadequate. Ac-
cording to the Carlucci Commission, “in real terms . U.S. assistance expenditures
over the last five years have averaged some 21 percent below those of a comparable
period ten years ago.” The Commission states: “To meet U.S. foreign policy objec-
tives, significant increases in real levels of assistance will be required.
The Bipartisan Commission, having focused on the problems of one region, also
concludes that significantly more resources are needed to meet our national inter-
ests there.
In my testimony today, I want to build on the foundations laid by these two Com-
missions.
Our foreign assistance program serves four U.S. interests:
Our interest in a growing world economy which enhances the well-being of citi-
zens in both the developing and the industrialized world.
Our interest in security-protecting our vital interests abroad, strengthening our
friends, contributing to regional stability, and backstopping our diplomatic efforts
for peaceful solutions to regional problems.
Our interests in building democracy, and promoting adherence to human rights
and the rule of law.
Our humanitarian interest in alleviating suffering and easing the immediate con-
sequences of catastrophe on the very poor.
A world of stability and progress cannot be built by the United States alone.
Therefore, strengthening our friends must be a central component of our foreign
policy in both the economic and security dimensions. There is always the temptation
to cut corners here and there in the aid budget; it is unwise to give in to this temp-
tation—it is penny wise and pound foolish.
Strengthening our friends is generally an effective way to avoid major problems
down the road-problems that could end up costing us much more in resources and
sacrifice.
1
I. OVERVIEW OF 1985 BUDGET AND 1984 SUPPLEMENTAL
The foreign assistance program for fiscal year 1985 totals $15.8 billion, of which
$1.5 billion is multilateral aid and $14.3 billion is bilateral aid. This includes $9.4
billion in economic assistance and $6.4 billion in military assistance. Chart A ap-
pended to this statement shows the relative proportions of economic and military
assistance in the foreign aid program since 1974.
For fiscal year 1984, we are seeking supplemental funds of $1.1 billion, including
$400 million for emergency economic assistance to Central America and $259 mil-
lion for military aid to the region.
70
Our economic aid in fiscal year 1985 will focus on increasing food production and
reducing hunger; improving health, especially reducing infant and child mortality;
slowing population growth rates; spreading education and literacy; and improving
host-country financial structures. Chart B shows how our economic assistance will
be distributed geographically in fiscal year 1985.
In military assistance, we have made a significant change so that we can lower
interest rates on military assistance loans to poor or debt-burdened countries. Over
the past decade military assistance has increasingly been provided as “off-budget”
loans with interest rates at cost of money to the Treasury. As a result, the Carlucci
Commission reports that the 21 countries receiving substantial military and eco-
nomic assistance in 1982 were charged an effective interest rate—including both
grants and loans--of approximately 9 percent for military assistance and 1 percent
for economic assistance. This discrepancy has meant that in some countries military
assistance repayments have become or threaten to become a large fraction of total
debt service. For others, repayment of military assistance loans takes up foreign ex-
change needed for economic growth.
In response, we have moved all military assistance “on budget”—a step which
Congress has long urged. By so doing, we are able to provide military assistance
loans either at a concessional rate or at the cost of money to the Treasury depend-
ing on the economic situation of individual countries. You will note on Chart Cap-
pended to my statement how we have increased the concessionality of military as-
sistance in fiscal year 1985 compared to previous years. This decision is a key step
toward one of our critical goals—the more effective management and integration of
our military and economic assistance.
II. CENTRAL AMERICA, THE CARIBBEAN, AND SOUTH AMERICA
Mr. Chairman, the National Bipartisan Commission concluded its study as fol-
lows: "persuaded that Central America is both vital and vulnerable and that what-
ever other crises may arise to claim the nation's attention, the United States cannot
afford to turn away from that threatened region. Central America's crisis is our
crisis."
The Commission emphasized that the countries of Central America, our neigh-
bors, are in mid-passage from the predominantly authoritarian societies of the past
to what-with determination and help can become predominantly pluralistic,
democratic societies in the future. That passage is marked today by warfare, pover-
ty, and political turmoil, which breed extremism and violence from the left and the
right. It creates conditions which Cuba and the Soviet Union seek to exploit for
their own strategic and political purposes.
The United States has a profound interest in helping the people of Central Amer-
ica move from these travails to a future of greater economic and social justice. Our
interests will be served by helping alleviate economic grievance in the region. We
have a vital interest in helping our friends block the Soviet Union from consolidat-
ing a foothold in Central America. And most basically, progress in this hemisphere
means the advancement of our most basic values: democracy and the rule of law.
This is the kind of world we want our children to inherit.
President Reagan earlier this month quoted Senator Henry Jackson's remark
when he recommended establishment of the Bipartisan Commission: “Whatever
policy options might be available to us, ignoring threats to the stability of Central
America and refusing to engage ourselves in the problems of the region are not
among them."
The Bipartisan Commission recommended, and we concur, that our engagement
in the region should be comprehensive: a mix of developmental, political, diplomat-
ic, and security measures. Because many of Central America's problems are rooted
in poverty, our largest commitment of resources will be for economic reconstruction
and revitalization.
Of the supplemental funds we are requesting for Central America in fiscal year
1984, $400 million-or 61 percent-are for emergency economic assistance. In addi-
tion, we are proposing a 5-year $8 billion program for economic stabilization, recon-
struction, and long-term development. This includes $6 billion in direct appropria-
tions and $2 billion in insurance and guarantee authority.
These funds will support agricultural development, education, health services,
export promotion, land reform, housing, and humanitarian relief, as well as trade
credit insurance, and aid for small businesses.
We endorse the Commission's proposal to establish a Central American Develop-
ment Organization (CADO] composed of representatives from the Central American
71
countries themselves. Its independent recommendations will affect our determina-
tions on the level and structure of our economic assistance.
We will also follow through vigorously on the Commission's conclusion that the
United States must support the strengthening of democracy in the region. We are
proposing aid to democratic, educational and cross-cultural institutions, as well as
increased funding for scholarships, leadership training, and educational exchange.
The Commission also recognizes that, in the case of El Salvador, economic aid and
support for democracy are not by themselves sufficient. It recommends significantly
increased military aid for El Salvador. To see only indigenous social upheaval in
that country, for example, is as short-sighted as to recognize only the role of Cuba
and the Soviet Union. Our aid supports the moderate center against extremists of
both the left and right.
If we give inadequate help, it is the moderates who will be the victims. In the
words of the Commission Report, "the worst possible policy for El Salvador is to pro-
vide just enough aid to keep the war going, but too little to wage it successfully.”
At the same time, the Commission concludes, and we agree, that without contin-
ued progress on human rights and democratic reform in El Salvador, as well as else-
where in Central America, our policies will not succeed. We agree that U.S. military
assistance should be conditioned on this progress. Salvadoran leaders have been
made aware of this fact repeatedly; we are submitting periodic reports to the Con-
gress on the human rights situation in that country. We also believe, however, that
any legislation which imposes absolute and inflexible restrictions on the President's
ability to protect national security interests would jeopardize our efforts to bring
about lasting improvement in the observance of human rights.
Finally, there is a consensus between the Commission and the Administration on
another integral part of our strategy in Central America: support for the efforts of
the Contadora countries to bring peace to the region. The Contadora objectives are
in Central America's interest and in ours.
Mr. Chairman, the President's program for Central America is ambitious and
comprehensive-consistent with the challenges we face. We urge your support.
I have talked at length today about Central America. But it would be truly wrong
to ignore the same kinds of interplay between economic growth, security, and de-
mocracy elsewhere in Latin America and the Caribbean.
What we found in Grenada, for example, demonstrates how indigenous grievances
can be misappropriated for strategic ends and turned against the people. Earlier
this month, I had the pleasure of joining the celebration of the tenth anniversary of
Grenada's independence. It was joyful-a rebirth of freedom and economic hope. It
underscored that freedom and economic progress depend on an environment of secu-
rity. The enemies of democracy and development are the violent extremes of the left
and right. The task of blunting these extremes takes not only efforts to strengthen
democracy and promote economic growth, but also requires professional security
forces and a system of collective security which can protect people and the rule of
law. Our security assistance—as our economic assistance-is vital to building a
hemisphere which is self-reliant and able to fulfill the aspirations of its people. Your
support for these programs serves the fundamental interests of all the citizens of
this hemisphere-our neighbors' and our own.
III. AFRICA
I turn now to Africa, which faces a much different, although perhaps equally seri-
ous, crisis.
Drought is widespread. As some Members of Congress—most recently Senator
Danforth—have eloquently reported, starvation stalks the continent. In response,
the United States has committed nearly 200,000 tons of food from our emergency
Title II reserve. But we now have requests from African Governments for an addi-
tional 150,000 tons, and expect further requests for 130,000 more tons this year. We
are, therefore, requesting Congress to approve an additional $90 million in P.L. 480
Title II for Africa for fiscal year 1984. When people are dying, common decency
compels us to respond.
Drought may be the immediate cause of the food crisis, but Africa's difficulties
have deeper origins. Food production per capita has fallen by over 20 percent since
the 1960's. Over the past decade, the national product of 15 African countries de-
clined. For much of Africa, export earnings are down, import prices are up; exces-
sive debt burdens many African countries.
There are many reasons for Africa's economic problems, but a primary cause lies
in Africa itself. Briefly put, many African countries have followed policies which
don't produce growth.
72
Pervasive state controls, bloated state enterprises and bureaucracies, over-valued
currencies, and disincentives for agriculture have all had the effect of stifling the
private sector and individual initiative.
The requisites for economic growth in Africa are many. But Africa needs to re-
place policies that won't work with those that will. There is increasing recognition
of this fact in Africa and a number of countries are undertaking policy reforms.
To encourage this process, the President is proposing, beginning in fiscal 1985, an
Economic Policy Initiative for Africa. This effort has three components:
First, we are proposing a 5-year, $500 million program, beginning with $75 million
for 1985, as a new program specifically to assist African countries establish and im-
plement growth-oriented economic policies. We will give particular attention to re-
forms which increase food production.
Second, we are working with other donors particularly the World Bank-to co-
ordinate donor aid efforts better and provide more unified support for policy reform
in Africa.
Third, we will continue to direct our ongoing development assistance to helping
build the skills and institutions needed to carry out better policies effectively.
Continued economic crisis in Africa can generate or amplify security problems.
Libya continues its efforts to subvert governments and install puppet regimes in
Chad and elsewhere. There are the continuing conflicts in southern Africa which we
and our allies are seeking to resolve through negotiations.
However, unlike Central America, the security problems in Africa to date require
only modest military assistance from the United States. The prime need there is to
reinvigorate economic growth. There is no reason to despair about the future. Sever-
al African countries have made progress. With more effective policies and continued
investment by Africans, the United States, and other donors, Africa can resume the
progress which marked its first years of independence.
IV. THE MIDDLE EAST AND SURROUNDING REGIONS; SOUTHERN EUROPE
We now turn our attention toward an area where security has become the pre-
dominant concern. A line on the map from Spain and Portugal in the West to Paki-
stan in the East passes through or near: the straits of Gibraltar, the Mediterranean,
Libya, the Suez Canal and Egypt, the State of Israel, the Persian Gulf oil fields, and
the southwestern border of the Soviet Union.
There is no area so pregnant with threats to peace-not just regional peace, but
world peace. Peace is not yet achieved between Israel and all its neighbors; Iran and
Iraq remain at war; the Soviet Union is occupying Afghanistan.
About half of our total fiscal year 1985 foreign assistance request is directed to
promoting our national interests in this area-interests which also can profoundly
affect Western Europe, Japan and the rest of the free world.
Our highest priority continues to be a just and lasting peace in the Middle East.
Israel and Egypt, at peace now for almost 5 years, have thus far been our principal
partners. Our programs with these two states have three aims: nourishing the eco-
nomic growth which underpins their security; sustaining the military forces they
need for defense; and in the process, providing the confidence and security they
need to continue their support for the peace process.
We have made significant changes in the military assistance programs for Israel
and Egypt this year. To reduce the debt service burden associated with heavy de
fense requirements, we are recommending that all military assistance to these two
countries be grants, not loans. Because grants are more valuable than loans and be-
cause of the cash flow requirements of these programs, we have reduced our mili-
tary assistance requests for both countries below the levels made available in recent
years.
We have discussed these proposals thoroughly with Israel and Egypt and there is
general agreement that these levels and terms support our mutual goals.
In Lebanon, as the President said, the bloodshed we have witnessed has demon-
strated the length to which the forces of violence and intimidation are prepared to
go to prevent a peaceful reconciliation process.
The measures the President has outlined reorient U.S. Political and military re-
sources in Lebanon to strengthen our ability and sustain our efforts. The United
States will remain fully engaged. We will continue our efforts to bring all sides to
the bargaining table. We will continue to press the Lebanese government and the
opposition alike to move toward political accommodation.
Consistent with our policy, we will focus on ways to strengthen the government's
armed forces as a key element in a stable Lebanon. The funds we have requested in
the current budget are part of that continuing program.
73
Our program for the Middle East focusses also on Jordan, whose role will be cru-
cial in taking the next major step toward peace. Most of the funds we propose for
Jordan in fiscal year 1985 will go for military assistance to help that country meet
its defense needs. The Kingdom of Jordan is a moderate Arab government that has
long been a friend of the United States. It now faces a severe challenge from Syria
and other radical forces, precisely because of its constructive policies.
The oil producing states in Southwest Asia are vulnerable to outside threats and
internal subversion by externally supported elements. Nearby in Africa, Sudan and
Somalia face also the threats of instability which arise from poverty and ethnic
grievances. Our programs in these areas seek to reduce these pressures and instabil-
ities. At the same time, we are supporting countries that provide access to the facili-
ties which our forces would need in order to operate in the area should that ever be
necessary.
There is no disputing the importance of Persian Gulf oil to Western economic and
strategic interests. The best way to protect these interests is to work with countries
in the region to help them build their economies and to support their efforts to pro-
vide for their own security.
Our NATO allies, Turkey, Greece, Spain, and Portugal, provide a shield both for
the Mediterranean and the southern flank of Europe, as well as a bridge to the
Middle East and Southwest Asia. U.S. security assistance is essential if these coun-
tries are to meet their Alliance responsibilities.
We propose in 1985 about $1.8 billion to support on-going military modernization
programs in Turkey, Spain, Portugal, and Greece. Greece, Turkey and Portugal lag
behind other NATO countries in military strength and urgently need moderniza-
tion. These countries all offer U.S. access to important facilities. There has been en-
couraging progress in Turkey which occupies a strategic position. The infusions of
aid from the United States and Europe in the past few years have helped Turkey
recover from its near bankruptcy in the late 1970's. The Ozal government has an-
nounced reforms to encourage market forces and competition to increase exports.
These should further enhance Turkey's prospects. Our interest lies in continuing to
support Turkey's growth, and we propose $175 million in ESF for fiscal year 1985.
We signed a new base agreement with Greece in 1985 providing for continued
United States use of the important facilities in that country. Security assistance is
an integral part of our defense cooperation in Greece.
Our principal objectives in the security assistance program for Portugal are to
support the continuing consolidation of its democratic institutions, to help Portugal
modernize its military, and to assist Portugal as it confronts continuing economic
problems. U.S. rights to use critical Portuguese facilities in the Azores were ex-
tended in December 1983. The Azores base is pivotal if the United States is to react
effectively to military challenges in Europe or to threats to Western security outside
the NATO area. Spain, a NATO ally since 1982, provides the United States access to
vital air and naval facilities which will be crucial in the event of a European con-
flict. By contributing to Spanish military modernization, U.S. assistance strengthens
the common defense and encourages an institutional role for the Spanish military
similar to that of the military in other Western democracies.
VI. ASIA
The pictures I have been painting in this rapid tour around the globe brighten
when we turn to Asia.
Despite skyrocketing oil prices and the weak economic performance of the indus-
trialized countries this past decade, the economies of non-Communist Southeast Asia
continued to display remarkable vitality. Thailand, the Philippines, and Indonesia
all experienced annual growth rates in the 6-7 percent range during the 1970's
.
For some 20 years, the East Asian countries have sustained higher growth rates
than any other part of the world.
South Asia, where the majority of the world's poor live, has also seen reasonable
improvement, particularly in agricultural production.
There are some dark spots. In recent years, the Philippines has increased its ex-
ternal debt and growth has lagged. Sri Lanka suffered a setback in 1983 following
communal violence. But, assuming continued inflows of capital, sound policies, and
a good "pull" from restored economic health in the West, economic growth will con-
tinue in Asia.
And what do we learn from this record of progress? We learn that growth im-
proves well-being for those at the low end of the income distribution spectrum. For
instance, according to a World Bank estimate, absolute poverty in Thailand has
dropped from 57 percent in the early 1960's to 30 percent in the mid-1970's. More
84-045 0-84-6
74
over, available evidence suggests that where economic growth is rapid, the lowest 40
percent of income earners have moderately increased their share of total income
over time.
The Asian experience provides lessons for countries in Africa and other parts of
the world.
We have found the benefits to lower-income groups from growth to be greatest
where the following conditions obtain: (1) growth is broadly based and agricultural
prices favor producers rather than consumers; (2) productive investment is labor-in-
tensive; (3) government interference in markets and prices is minimized; and (4)
population growth rates are low and educational attainment levels are better than
average.
And we have also learned how rapid growth in Third World countries benefits us
both as producers and consumers. The East Asian countries now account for about
one-sixth of world trade. U.S. investment in the region now exceed $26 billion and is
growing
The population of Asia (even excluding China) exceed that of Africa, the Near
East and Latin America combined. Continued growth there will be an enormous
contribution to world prosperity and stability. Our development aid programs in
Asia are concentrated in South Asia and Indonesia. They emphasize technical assist-
ance in fields such as agriculture research. Whether we speak of this aid as simply
an investment in the future or more pointedly as an investment in an immense
future market, we will reap great returns from continuing to assist growth in the
region.
Precisely because the stakes are so high both in economic and strategic terms,
and because serious threats remain, we continue to provide military assistance in
the region. Our aid to Thailand and Korea deters direct military threats to these
countries from, respectively, Vietnam, which now has the world's third largest
standing army, and North Korea, which spends over 20 percent of its GNP on its
military. In addition, the Soviet Union has greatly increased its military presence in
the region. Our assistance to the Philippines helps maintain the U.S. bases there
which undergird our strategic position in the Pacific and Indian Oceans. Our rela-
tionship with ASEAN is an important pillar of stability in Southeast Asia.
VII. THE MULTILATERAL DEVELOPMENT BANKS (MDBS)
In fiscal year 1983, lending by the World Bank and its regional counterparts to-
taled $20.4 billion, up from $16.8 billion in fiscal year 1982. That this lending pro-
gram was sustained with a paid-in contribution from the United States of $1.5 bil-
lion testifies to the advantages of using the multilateral development banks to share
the burden of providing aid. These institutions are also leaders in providing advice
on sound market-oriented economic policies.
We consider our participation in the multilateral development banks as a crucial
part of our assistance policy. I want to stress in particular the important role played
by the International Development Association in promoting development in the
poorest countries.
We have just completed negotiations for the seventh replenishment of IDA's re-
sources. In our judgment, this replenishment provides a basis for a strong IDA pro-
gram in Sub-Saharan Africa to work in conjunction with our Africa initiative. We
are requesting the final $150 million for IDA VI in our fiscal year 1984 supplemen-
tal proposal and $750 million for IDA VII in our fiscal year 1985 budget proposal.
Our pledge to IDA VII has been widely discussed in the Congress and should enjoy
broad support here.
VIII. CONCLUSION
Mr. Chairman, you and the other members of the Carlucci Commission concluded
that the foreign aid program is vital to our national interests. I have tried to show
why this is so region by region.
You also recommended improvements in the program, particularly more effective
integration of military and economic assistance and development of means to speak
to the Congress about the program as a whole rather than its individual parts. I
have reviewed all your recommendations and have asked for immediate follow-up
on most. Many were already on this Administration's agenda of improvements.
I did not agree with the Commission's recommendation for a new Mutual Devel-
opment and Security Administration because I felt that the Commission's main
aims-better integration of our assistance programs and a more unified voice in rep-
resenting these programs to the Congress-could be achieved within our existing
75
structure and without the disruptions of a major reorganization. I have asked the
appropriate offices to prepare a plan for doing this by early March.
The Carlucci Commission produced a bipartisan consensus as to the value of our
foreign assistance program. We will do our part to improve the program as recom-
mended. We hope Congress will respond in kind by supporting and passing the
budget requests which we have made.
1
I
!
1985
1
1
CHART A
Military
(Constanı Dollars)
1984
Military
(Current Dollars)
1983
Economic
(Current Dollars)
1982
Economic
(Constant Dollars)
U.S. Foreign Economic Assistance and Military Assistance
In Current and Constant Dollars
FY 1974-FY 1985
1980
Fiscal Year
1979
1
1978
1977
.
1976
1975
+
Billions of Dollars
10
1974
1
1
8
9
2
0
1
76
CHART B
A.I.D. Economic Assistance
By Aegion
FY 1985
Billions of Dollars
2.0
1.8 -
1.6
1
Via Development Assistance
BAW! Economic Support Fund
PL 480. Tiite 1
PL 480 Title II
1.4 -
1
-
1.2
1.0-
!
0.8
i
0.6 -
1
0.4
0.2 -
1
0
Africa
Asia
Latin American
& Caribbean
Near East
& Europe
Central
Programs
LL
CHART C
Military Assistance Concessionality
1981 Actual
1983 Actual
Other
Concessional
2.6%
Israel
16.0%
Other
Concessional
7.2%
Israel/Egypt
21.4%
Non-Concessional
81.4%
1985 Proposed
Non-Concessional
71.5%
Israel/Egypt
43.5%
Other
Concessional
23.0%
Non-Concessional
33.5%
78
The CHAIRMAN. Thank you very much, Mr. Secretary.
I presume when you leave at 12:30 that Peter McPherson and
Secretary Schneider can stay on if there are further questions from
the committee. We will direct our questions to you first, and keep
the record open so that you can expand any of those that you
would like to amplify on.
We will proceed with a 10-minute limit.
My first question pertains to economic aid levels for three coun-
tries for whom the Congress has clearly indicated to the adminis-
tration that increased economic assistance is justified, but for
whom the administration has sought reductions.
I mean Cyprus and Tunisia and Israel. All of them are under tre-
mendous pressure right now, economic pressure. Would you com-
ment in those three cases, please.
Secretary SHULTZ. First of all, let me speak about our aid to
Israel, and I will divide it basically into two components and then
add some points beyond that. We have talked at great length with
the Israelis about our military assistance program and have, as you
know, converted it from a loan to a cash grant program, and we
discussed the appropriate levels in great detail with Prime Minis-
ter Shamir and Defense Minister Arens when they were here last
December, recently
I think I can say that we came to agreement on what was an ap-
propriate level. We feel that what is requested will do the job, and
they have said to us that they feel that way as well.
Naturally, we are talking about a budget that starts next Octo-
ber and goes through the following year, so it is an unwise person
who thinks he can predict everything that is going to happen in
the Middle East in that period. But on the basis of what we know,
the best judgments of both of us, that was the number that we set-
tled on.
نمد
As far as economic assistance is concerned, I would just tell you
my personal view. We have a proposal in there for the Congress to
consider. We feel and the Israelis feel that there are lots of things
that need to be done to improve the performance and health of
their economy. They have a very high rate of inflation, their for-
eign exchange position is not good, and their growth rates have
been lagging.
There is no reason why, in such a dynamic country, this needs to
be so. So our stance is, we want to be helpful to Israel in getting its
economy onto a strong and the kind of healthy track that it should
be on. They are working at it very hard.
Basically what we have said is, here is an economic aid number,
and it is hard for us to discuss whether it is too high, too low, or
about right. We think it is about right. But what we would like to
see is what you think you want to do in your economy, and then
we need to fit our help into that.
We have had some discussions back and forth. We have had
visits from their economic team. We have constructed a Govern-
ment economic team here. We have also gotten four outstanding
private economists, which Israel has welcomed, to take part in this
examination. And as things unfold, it may be that we will make
some changes or want to suggest some changes.
79
But in the meantime, our basic stance is that we want to be help-
ful, but we need to see more of what it is that they want to under-
take before we can say ourselves precisely how to go about that.
Now, in the meantime there are some other steps. For example,
they have been very anxious to develop the concept of a free trade
area with Israel. We think that is an excellent idea, to have a free
trade area with the Common Market in Europe.
And so we are in the process of trying to negotiate that out.
Some hearings were held in the Finance Committee on that. We
have had I think two meetings, Ambassador Brock leading that.
There are some real difficulties, mainly having to do with subsi-
dies. But at any rate, I think this is something that could be very
healthy, and in that and other ways we are trying to be as con-
structive as we possibly can be.
Insofar as Tunisia is concerned-
The CHAIRMAN. Excuse me. Before you go on to that, I would just
like to comment that I have talked with the Finance Minister a
number of times about the free trade area. It is Israel's preference
and my strong preference that we do everything we can to expand
their trade efforts, rather than aid. It is far more lasting and per-
manent.
Second, I strongly support the efforts of the Israeli Government
to impose an economic austerity program. It is an exercise in self-
discipline that only they can impose upon themselves, and I com-
mend them for doing it.
Please continue.
Secretary SHULTZ. Thank you, sir.
With respect to Tunisia, we think that we are in a posture to be
helpful to the Tunisians. We responded to some urgent requests
here recently. The amounts involved are small, relatively speaking
to some other countries, but nevertheless we think adequate.
On the other hand, certainly, Mr. Chairman, we are most inter-
ested to hear the views of Members of Congress about the composi-
tion of this package. It seems sensible to us.
In the case of Cyprus, which you asked about, that is a subject of
great controversy and delicacy. We have opposed very strongly the
unilateral declaration seeking to establish a part of Cyprus as an
independent state, and at the same time we have been in close con-
tact with both sides of that and also with the Greek and Turkish
Governments directly.
We have our people in the Department working on that, and I
might say Ed Derwinski, whom many of you know personally and
who has many connections there, has been taking a leading hand
in trying to help move that in a constructive direction. We have
been basically supporting the efforts of the United Nations and the
Secretary General, a man who has had considerable experience in
the area personally, and we are in close touch with him.
So I think within that framework the proposals that we have
made are appropriate. We think that the programs proposed for
Turkey are extremely important, that they have an essential role
to play in the NATO picture, and that the modernization that is
contemplated in the assistance programs for Turkey are very much
needed, and that Turkey itself seems to be engaged in the kind of
economic reform effort that we like to see.
80
I might say also, Turkey has emerged in a more democratic di-
rection, and that also is very much to be encouraged.
The CHAIRMAN. I asked about Cyprus also. You used the phrase,
pennywise and pound foolish, which I think applies in the case of
Tunisia, considering the pressure that they are under from Qadaffi
these days. There is a big difference between the $3 million re-
quested by the administration and the $5 million Congress has sup-
ported in the past.
For Cyprus, $3 million is in the administration request; we have
Sup pwould ask that you expand your comments regarding those
countries, and also respond to this final question:
The administration's Central American bill says in effect that
the President should determine the conditions for aid to El Salva-
dor. What conditions would be placed on such assistance, and if
Congress chooses, as it has in the past and may likely again, to
expand its own role in setting conditions, what constructively can
we accomplish together?
Secretary SHULTZ. Well, I think that most of the important ques-
tions are agreed. We all agree, and I have testified in this very
committee on several occasions, that a diminution and end to death
squad activities, the construction of a judicial system that provides
an operating rule of law, those things are essential ingredients over
the long period to the sustenance of aid from the United States,
and it is just a matter of our own values and what we are ready to
support.
Clearly, it is important for us, as we work with the people of El
Salvador on their problems, to make that point and make it force-
fully. The only question is, what is the best method of doing so, and
I might say that the best method is not always the same at all
times.
It is the preference of the administration that we highlight this
issue, that we report regularly to the Congress about it, that we
undertake a strong program, as we are, to bring about reform, but
that we not set these periodic moments of time when an all or
nothing kind of cutoff is called for.
There are a number of reasons for that, and I think that beyond
the notion of your attitude toward a country's internal running of
their own affairs, the setting of a date like that itself produces
things. Sometimes it produces good things, and we would like to
think that over a period of time it has helped to produce the many
good things that have happened in El Salvador.
It can also produce bad things, in that the opposition can use
that date to cause turmoil and reactions to the turmoil in such a
way as to make the situation perverse in the time period before the
date.
We have had a period now in which the pressure for reform has
been strong, but there is not any congressionally imposed date.
And in that environment the Vice President, I, others, many Mem-
bers of Congress have gone and talked very strongly, and I think
we have seen some positive results from that. So it may be that
there are times when a congressionally imposed date is a good
thing, but maybe it is also wise occasionally to change the ap-
proach and do it a little differently.
81
But I would emphasize to you, Mr. Chairman, that this question
of assuring ourselves that we make the maximum effort to bring
about the kind of democratic and rule of law conditions that are in
accord with the sort of international values that we subscribe to,
that the strongest possible effort should be made to fulfill those
conditions. And we are prepared to work with the Congress and try
to work this problem out. We do not think that the arguments are
open and shut on either side of the question.
The CHAIRMAN. Thank you very much, Mr. Secretary.
Senator Pell.
Senator PELL. Thank you, Mr. Chairman.
Having you with us is a wonderful occasion, Mr. Secretary, be-
cause we can talk about policy with you and also with your col-
leagues and get into more details.
But when it comes to policy, what is our policy with regard to
the shelling of the portions of Lebanon controlled by Syria? One
branch of the administration said that that firing is not linked to
specific incoming fire against the Marines at the airport. On the
other hand, the White House said whatever we do is in support of
the Marines. Obviously, from a factual viewpoint some of the firing
is not in support of the Marines.
What is your understanding of our policy with regard to the
shelling of villages and targets in Syrian-controlled Lebanon?
Secretary SHULTZ. Our policy is simple. We are an invited pres-
ence, and when we are fired on, the local commanders have the au-
thority to defend themselves and fire back at the sources of the fire
on us. Now, there are many, I will say, tactical aspects of that, but
that is the basic concept.
I would say this as well. You mentioned the Marines. I do not
stand back to anybody in my admiration for the Marines, but they
are not the only American people in Lebanon. We have an ambas-
sador, we have a residence that is practically a headquarters, we
have an embassy, we have other people there.
They are also people whose safety deserves to be attended to, and
so our rules of engagement, so-called, within the concept that I
have mentioned go beyond the Marines at the airport to the other
people.
Senator PELL. I concur with everything you said and I think most
American citizens would agree. But then am I correct in saying it
is not our policy to shell the Syrian parts of Lebanon in support of
the Lebanese Armed Forces or the Lebanese Government solely?
Secretary SHULTZ. Our approach is as I said it. We do not have
the rules of engagement that say that independent of any threat to
our own personnel we have a military objective independent of
that that we are supporting. There are instances within the frame-
work of the concept I mentioned where we have fired in support of
the LAF
An example is Suq al Gharb, as a place that overlooks the air-
port and which it was determined that if that fell into hands that
were unfriendly to our Marines occupying the airport and others
that it would endanger their safety. So we fired at that area in sup-
port of the holding of it by the LAF.
Similarly, we have people who have been scattered in and
around Beirut. And so when there is shelling of Beirut, you cannot
82
wz
always say exactly who it is shelling at, but we have sought to try
to stop that as a safety matter for our Forces, for our people. So we
have undertaken that as well in our rules of engagement.
Senator PELL. Understood. But then, is it your understanding
that it is not our policy to shell targets unless it is in support of or
in the defense of our own people?
Secretary SHULTZ. That is our concept. There is no other concept,
I believe, that is consistent with the congressional resolution, and
that if we were to undertake support outside of that we would not
be consistent with the spirit of the congressional resolution.
Senator PELL. Thank you very much.
I have one further question. Do we have any idea or concept of
the civilian casualties that have resulted from our shelling? Do you
know the cost to the Lebanese?
Secretary SHULTZ. I do not have a number on that, but we have
been very careful about that, as careful as we could be. And we
have said that if we have fire coming from an area where there is
a heavy civilian population, we have preferred not to fire back at
that emplacement.
Now, to a certain extent that invites people to go there and use
the civilian population as a hostage, and under those circumstances
one can readily argue that if you have a unit belonging to a certain
group and it locates itself in a civilian area and fires, then you
ought to fire back at it at some place that is not in that civilian
populated area, so that you do respond, but you do it in a manner
that is as absolutely considered as you possibly can of the potential
civilian casualties.
I might say, the tactic of using civilians as a shield for a military
operation, and which you see done, is not a very admirable tactic, I
do not think.
Senator PELL. Thank you.
Now I would like to touch again on the question of Cyprus. De-
spite the fact that Turkey recognized the Turkish Cypriot unilater-
al declaration of independence, the administration again has re-
quested that the Congress increase military aid to Turkey, expand-
ing the concessional component of that aid while slashing economic
aid to Cyprus. Also, you propose to deviate from the 7-to-10 ratio in
aid to Greece and Turkey.
Does not this give an incorrect signal to the Turks that we are
not truly, as you put it, opposing very strongly their action in
Cyrpus?
Secretary SHULTZ. We oppose the action of the Turkish portion of
Cyprus and we certainly opposed any recognition of that. We have
not only opposed it ourselves, but we have been very active in our
diplomacy in going out to other countries and pointing out to them,
or at least letting them know our views and our reasoning for that.
Insofar as our aid to Turkey is concerned, we believe it should
stand on its feet as something that is important to our general
NATO commitment and the development of that key ally, whose
forces are very much in need of modernization. In the meantime,
we are, as I said, working on the Cyprus question.
The Secretary General of the United Nations we think properly
should take the lead on that. We do not want to interfere in any
manner with that, but we also have made it clear to the Secretary
no... winner
L! ...rden:
83
General, to all of the parties concerned, that we are active and that
we want to be helpful and that we have various things that we can
do. They know that, and I think on the whole we have been
helpful.
Senator PELL. Would you not concur that a sharper signal, not
simply a tap on the wrist or mere criticism of Turkey's action,
would be to maintain the present formula? When we change the
formula between Greece and Turkey to the advantage of Turkey, I
would think you would concur that that does give the wrong signal
to Turkey.
Secretary SHULTZ. We think the aid levels put up for Turkey and
Greece are good aid levels and are needed and justifiable in their
own terms, as distinct from signal sending. And we do not think
that it would be helpful in our efforts on the Cyprus problem, for
that matter, to use the aid levels at this point as some sort of at-
tempted lever. We think we are moving along reasonably effective-
ly the way we are and we would like to leave it this way.
Senator PELL. Thank you. I guess we will just have to agree to
disagree.
Let me go to Nicaragua for a moment, and let us say they have a
fair election, even with the franchise down to the age of 16, and the
present regime gets returned. Would we continue to seek the over-
throw of that regime by force, which is really what we are doing
now, or would we accept the results of that election?
Secretary SHULTZ. That regime is resisted because of the things
it is doing, because it betrayed the revolution and because of the
kind of government it is running. I hope it does hold a fair election.
We are very much in favor of fair elections.
I do not know of any country-and I do not claim to be an expert
on this, but I have never heard of anybody having a voting age of
16. That is an interesting little wrinkle. I wonder why they have
done that.
But beyond that, it is obviously so that a fair election reflects a
whole host of things that take place before the election is held, in-
cluding the opportunity for rival political groups to form them-
selves and to have access to people, to have the right of assembly,
to have access to the media, able to spread their views around, and
so on; and beyond that, of course, to have an election that is con-
ducted in a fair way.
I have a feeling there are going to be more observers in El Salva-
dor than there are voters. It is going to be swarming with people,
and that is OK. But I think we ought to have a good look at what
goes on in Nicaragua as well.
But I think an election, if it is properly conducted-and we have
very little information on the way the election is going to be con-
ducted, and it is something that is being called on very short
notice, really, under all the circumstances. It remains to be seen
what we would think of that.
But basically, the internal problem of Nicaragua is something
that they are producing themselves and not us.
Senator PELL. My time has expired, but as I understand it, your
answer to my question is what we might accept the results of an
election if we thought the conditions were fair.
84
1
She'...
Secretary SHULTZ. The election is one thing, of course. I think
there are many aspects of Nicaragua's behavior that are simply not
compatible with peace and stability in Central America, and their
efforts to upset regimes in neighboring countries by force of arms
are simply not compatible with the kind of world we would like to
see down there.
Senator PELL. Thank you. My time has expired.
The CHAIRMAN. Thank you very much.
Senator Lugar.
Senator LUGAR. Mr. Secretary, just for my own information, in
your testimony you mention that we moved all military assistance
to "on-budget," a step which Congress has long urged. Specifically
what does this mean? Where were the funds before? How was the
procedure changed in the so-called on-budget procedure?
Secretary SHULTZ. Well, the funds before, as I understand it,
were authorized. They were then borrowed, in effect borrowed by
the Treasury, or the full faith and credit of the United States stood
behind, in effect, a borrowing to finance military purchases in this
country. And the terms included a long, but variable, period of for-
giveness in which no repayments had to be made, but the rate of
interest was the borrowing cost of the Treasury, and it did not
show up on the books of the budget, as is the case with loan pro-
grams of that kind.
I suppose that is one of the reasons that people propose loan pro-
grams. It is a way of getting it off the budget and you can sort of
hide it. It is not good budget practice, and I do not think any
budget director really wants it. I know sometimes when I was
budget director that took place. It was not because I wanted it; it
was because that was the way it was done.
But I think on the whole this is a good move, just to get all the
money up front where you can see it.
In terms of impact on the U.S. economy, it does not make that
much difference, because one way or another what you are talking
about is a call on the resources of the U.S. economy. But it is put
on the budget, and from the standpoint of management of the
funds it gives us an opportunity-by “us” I mean you and the ad-
ministration together as we work out the programs—to tailor rates
of interest to the conditions that we see, rather than simply going
on the basis of the borrowing rate of the Treasury.
I might say that some of the credits that were given in past
years, when interest rates were much higher than they are now,
present quite a carrying burden as the time passes and the forgive-
ness period ends. So you see in many countries a debt repayment
schedule that they simply cannot carry.
Senator LUGAR. I appreciate that point. By so doing we are able
to provide military assistance loans either at a concessional rate or
at the cost of money to the Treasury.
The point that I want to make is that earlier you had pointed
out the Carlucci Commission findings that the effective interest
rates, including grants and loans, were approximately 9 percent for
military assistance and 1 percent for economic assistance. It sug-
gests that all of this is somewhat less than the prime rate of inter-
est in this country presently.
:
:
85
In another forum this morning, Peter Grace has been testifying,
and one of the striking figures in his testimony is that the Federal
Government is now owed $764.6 billion. He makes not only that
point, but that the Federal Government is not very good at collect-
ing the money
Now, there is a very real political problem domestically in this.
For example, with student loans and various other loan programs
recently, many students and many other citizens feel, as a matter
of fact, that these were as good as grants. They resent the fact that
there is any collection going on at all.
When it comes to foreign loans, clearly it has been the policy of
this country to lend money concessionally. But how are we to
weigh this? How do you weigh it? Given the cost of money to
people in this country for the normal purposes of life versus the
value in terms of our foreign policy of making loans at half of that
rate or 1 percent, or in providing grants, is there not a general pre-
sumption that we ought to be charging the same rate of interest to
everybody?
Secretary SHULTZ. Well, we have to ask ourselves, what is our ob-
jective; what are we trying to achieve? If we are trying to achieve
an additonal measure of security for ourselves by improving the ca-
pacity of some other country to secure itself or to provide us with
bases which we could not otherwise get, or in some other manner
to improve our security, that is an objective and we find that we
have to pay something for it.
Then the question is, What is the best way to go about that? And
some mixture of grant and loan money or concessional money is
the way to go about it. If you say, here is Israel, let us say, and it is
overburdened with debt right now, but yet we have some principle
that we should charge the prime rate on everything, and we think
that we should do the things necessary to help provide their securi-
ty, those two things are not going to fit together.
And so what we have said is, let us put this on budget and let us
look at these repayment conditions in terms of the problems that
we see and judge it that way.
Senator LUGAR. Why should we not just simply make grants, as
opposed to concessional loans? If there is a presumption the money
is going to be given, in terms of the budget, then should grants not
be the way we do it from the beginning, as opposed to loaning
money at 1 or 2 or 3 percent? Does this not misrepresent, in es-
sence, the cost to the American people of the aid that is being
given?
Secretary SHULTZ. Well, of course, the two numbers that are
mentioned in my testimony in the Carlucci commission, 9 percent
and 1 percent, are averages
. There are a lot of zeroes in there and
there are a lot of higher rates. One percent is not a typical
number, but again I think it is not necessarily so.
There are countries that say, we do not have the money in hand
pay for this, but we believe that our economic conditions are
such that we can generate it and we want to borrow the money
and will pay it back. So that is a very perfectly good approach, and
I think it is highly desirable. And countries prefer to stand on their
own feet that way in many cases. The same on economic matters.
86
Of course, as you moved toward a nonsubsidized rate, then, of
course, you are in the private market and government has nothing
to do with it. Do not forget, the Treasury borrowing rate is a subsi-
dized rate from the standpoint of most other countries and of any
private borrower, because the Treasury borrowing rate has the full
faith and credit of the U.S. Government behind it, so there is abso-
lute total risk-free security, assuming that Congress keeps passing
debt ceiling increases.
Senator LUGAR. Obviously, I appreciate the point you are making
and I do not want to be tedious about it. But we are getting into
two sorts of binds here. The first is that American businessmen are
coming to us and saying, Congress and the administration are
making concessionary loans for economic development and all sorts
of facilities and products now are being produced, and there is a
component of subsidy in this.
So then you are assailed, as is the Secretary of the Treasury and
the President, by the people who want tariffs or quotas, things that
damage our economy, on the basis of something we were doing,
albeit for very humanitarian, developmental purposes in foreign
aid. It seems to me we get caught betwixt and between, particular-
ly on the development side, on interest rates that have a differen-
tial from our own.
Second, even countries with full intent of repaying, may find
that this debt becomes a part of a very large debt that that country
is attempting to reschedule. Maybe we have done a favor, but I am
not certain.
In other words, conceivably bookkeepingwise we should have
made it a grant or not made it at all, as opposed to contributing to
a further crisis in international repayments.
Secretary SHULTZ. I think you have to separate out different cat-
egories. Security assistance needs to be separated from economic
assistance in this sense. Security is something that is an essential
thing for everybody to have. You cannot get along without it. And
borrowing for that purpose, if a country has a repayment prospect,
and some subsidy, I think there is no conceptual problem with
that. We are not competing with ourselves at all.
In fact, from the standpoint of U.S. suppliers, they are very anx-
ious to see this kind of program, because all this money comes back
into the United States in the form of purchases of U.S. equipment
in one form or another.
When it comes to economic assistance and project assistance to
one kind or another, you do run into certain anomalies. For exam-
ple, there is no doubt about the fact that there is an excess of steel
capacity around the world right now, and the result of that is great
tensions in the trading system. We all know about them.
It is ironic that there is also competition among countries where
there are firms that produce the equipment that goes into a new
steel mill to get those sales, and in order to get those sales they
turn to their government to get a subsidized rate of interest on a
loan. So there is that competition. The competition comes from the
companies that want to sell the equipment.
And we have gone around and tried to say to some of our friends:
Look, this does not make sense. Can we not get some sort of a mor-
atorium on this.
87
There are anomalies of the kind that you have mentioned, and
they have to be administered on a careful basis. On the whole,
when it comes to industrial-type development, my own private bias
is always against subsidies and let the market prevail.
But there are countries that are poor, that are trying to develop,
and then there are many categories of things that are essentially
not strictly in the commercial area. And if you looked at the list
that I read in my testimony of the things that we are trying to sup-
port, they go to such matters as health and so on that are of a dif-
ferent category.
Senator LUGAR. Thank you.
The CHAIRMAN. Senator Lugar and Senator Biden, if you
would
not mind yielding for just a moment, it might be appropriate, given
that George Shultz served as Director of the Budget, to report to
him on this problem which Senator Lugar cited from Peter Grace's
testimony. I was astounded when I learned of our inability to col-
lect our debts.
The best way, it seems to me, to be paying down our own debt is
to collect the debts that people owe the Government.
Secretary SHULTZ. Collect the debt and also collect the taxes. We
have huge amounts of taxes that-well, you do not have to change
the law at all. Just collect the taxes that are owed under the law.
The CHAIRMAN. Well, we did have deficiencies in the law with re-
spect to debt collection. We as a Government could not ask for a
social security number when someone applied for a' Government
loan; no bank would ever loan money without knowing the borrow-
er's social security number. We lost track of debtors and we could
not even use IRS to find them.
We could not garnish wages, even of Federal employees who had
never repaid their student loans; 65,000 Federal employees were in
default on Federal loans. And we could not report to a credit
bureau and we could not hire a private collector.
Secretary SHULTZ. But you know why all those things are so, do
you not? They are all in a law somewhere.
The CHAIRMAN. I sponsored remedial legislation, I think, with
the support of every Senator who is here. It has now been in law
for about a year. We have already collected $5 billion. Doctors from
prestigious institutions like Harvard Medical School who never
paid their debts back are now having to pay back their Govern-
ment loans. We have been able to seize their foreign-built cars and
garnish their wages and do whatever we can do.
Secretary SHULTZ. What medical school are you talking about?
The CHAIRMAN. Harvard.
Secretary SHULTZ. Harvard.
The CHAIRMAN. Harvard. It was one of the worst. They are now
down from 26 percent delinquent, I believe, to 5 percent.
So we have collected $5 billion since the bill became law.
Senator Biden.
Senator BIDEN. Thank you, Mr. Chairman.
For some reason we did not go after Chicago and I am not quite
sure why, Mr. Secretary. [Laughter.]
The CHAIRMAN. The University of Chicago had an excellent
record.
88
Senator BIDEN. That is right, they always do. And they have an
excellent representative here. [Laughter.]
One of my dearest friends in the Senate, who happens to be on
this committee, slipped me a note and it said on the front “Biden”,
and when opened up it says "no eruptions.” I am not sure what he
is referring to. I guess he knows the subject I am about to speak to
and that I would like to ask you about. And I just have some calm
questions about a portion of your testimony.
Secretary SHULTZ. I feel like I am being set up here. [Laughter.]
Senator BIDEN. Well, I am just going to try like hell to do that.
[Laughter.]
Because I think we have been set up on the portion of the for-
eign aid bill that relates to Turkey. As will come as no surprise to
you, I find myself in some disagreement with the administration's
proposals, and I would like to pursue a little further what already
has been discussed.
In answer to Senator Lugar's question about how you make your
judgments about whether it be concessional aid, a loan, or straight
FMS, or a grant or so on, you mentioned security as one of the con-
siderations, which I think is not only a reasonable but the only and
most appropriate answer that can be given.
Sometimes we have to pay for our security and sometimes we do
it in ways that end up in the eyes of the American public looking
like we are doing a favor for someone that we would not do for our
own citizenry. And in fact we are doing a favor, but I hope we are
hardheaded enough to do it out of our own naked self-interest,
which I would argue is the case for most of the aid program you
have put forward here, except I do not understand Turkey.
Let me be more specific. We are talking about a net change here
that is significant. In 1984, FMS [foreign military sales, loans were
$585 million and in 1985 they are $275 million. But then grant
MAP (military assistance programs] was $130 million in 1987 and
grant MAP in 1985 was $230 million. It is up $100 million.
And there is one additional feature, $250 million for FMS, which
essentially is taking the loan program from last year and making
half of it concessional, a little less than half. Then you go in ESF
[economic support funds] from $138 million to $175 million.
Now, when we were dissatisfied with Zimbabwe and how they
were voting in the U.N., now I may be mistaken, the administra-
tion chastised them and we cut aid. When we were more satisfied
with the conduct of Argentina, we increased it.
In my 11 years in the Senate, through three Republican and one
Democratic Presidents, we have tended to not only consider the se-
curity requirements but to consider the compatibility of the activi-
ty and actions of the country which was the recipient of the aid
with our overall foreign policy objectives.
The only country in the world to the best of my knowledge,
unless something happened in the last 2 days, that has recognized
an illegitimate government in Cyprus is Turkey. No one else has
done it. Turkey has had a history of being not the single most reli-
able ally in the NATO alliance.
If you go back for the past 50 years, Turkey is a worthy and I
think a useful ally. They are on that eastern flank of the NATO
alliance. But I would like you to tell me a little more about why
89
the security requirements of the United States are so clearly
served by what I consider to be a significant increase, in difficult
budgetary times, in the face of an irrational action on the part of
the Turkish Government of recognizing and being the de facto au-
thority for the illegal occupation and declaration in Cyprus. Is not
the bulk of the program new aircraft? If I am not mistaken, F-16's.
They are not going to be delivered until 1987 or beyond.
Why are we doing what we are doing, and why is Turkey so, not-
withstanding the fact they have gone in and out of a phase of mili-
tary dictatorships and democracies, and military dictatorships and
democracies, why are they such an incredibly important ally that
we would run upstream like this in light of their actions in the
recent past?
Secretary SHULTZ. I think to a certain extent, Senator, you have
answered your question in pointing out their location as a very
strategic place in the world. I think it is also the case that the
quality of equipment available to their armed forces has lagged,
and so they very much are in need of modernization, and the secu-
rity assistance part of the request is designed to bring that about
or help bring that about.
In terms of their economy, they are undertaking the kind of eco-
nomic reform that is in the general direction we think is likely to
work.
As far as their political system is concerned, they have been
moving in a democratic direction and we think that that is very
positive. So all these things together—the need for modernization,
the type of efforts they are making in their economic development,
and the political movement of things-are all positive.
We oppose their recognition of what we regard as the illegit-
imate declaration of independence on Cyprus, and we have said so
in no uncertain terms. And at the same time, we have been work-
ing with the Turks and the Greeks and the people on all sides on
Cyprus to try to help get that situation moving in a better direc-
tion.
Senator BIDEN. Do we have any indication from the Turks, in
light of your effort to work with them, that they appreciate the di-
lemma and are likely to do anything to ameliorate the situation on
Cyprus? Is there any hopeful sign you have?
Secretary SHULTZ. It depends upon what you consider hopeful.
But I think they have made some moves, such as the statement 2
or 3 weeks or so ago-my memory slips exactly when-particularly
on Verosha. And that was immediately rejected by the Greek side.
But on the other hand, it represents a development and I hope the
Secretary General can work with that. It is not by any means the
answer and not enough was put there, but it was a move.
And I think the way to get something going and settled is to try
to follow a step with a step. And we believe that the Secretary Gen-
eral, when he decides to move in there, is well positioned to work
with all parties. He is experienced, and we believe we can help
him, and we have said we would and we have made some very able
manpower available.
Senator BIDEN. What I do not understand, Mr. Secretary, is, it
was but 6 months ago, 8 months ago, that probably the single most
able negotiator that I have come across in any administration, who
34-045 0-84—-7
90
is now in Lebanon, was spending his time trying very hard to put
together a base agreement with Greece. And we found ourselves in
a very ticklish situation.
And some argued that then, because of prior actions and activi-
ties, and the recalcitrance of the Papandreou government, I might
add, we found ourselves in a spot where our interests in having
those facilities available to us were at least mildly in jeopardy be-
cause of events that were beyond the bilateral relationship between
Greece and the United States.
And now we have a civilian government back in Turkey, a civil-
ian government that I would argue is totally incapable, if it wants
to stay out of jail and/or in power, either one, of taking any step
that would move in the direction of ameliorating the situation in
Cyprus.
The one thing I would, were I a political adviser, which would be
presumptuous of me to suggest, but were I a political adviser to the
present Turkish Government, I would say the last thing you want
to say is you want to see some movement in Cyprus, other than
movement in the direction that makes it all Turkish. I mean, the
one thing short of that, that you better just be very quiet.
Now, it seems to me when we go forward with a significant aid
program—which no administration has ever agreed to, I acknowl-
edge-breaking the 7-to-10 ratio, and coming forward with a sub-
stantial increase, that we literally lock any democratically elected
government in Turkey into a position where we cannot do any.
thing. They cannot do anything on Cyprus.
The only thing they could do is argue that if we do not make
some movement, if we do not have to ameliorate the situation, we
have a problem with the Americans and we need their help, we
need their money, we need their facilities. And now it seems to me
we have taken that play away.
At any rate, you have answered the question. I want to warn
you—it will be no surprise to you-I, I assume among others, will
be trying very hard to prevent this aid to Turkey from going for-
ward.
Secretary SHULTZ. I can only say, Senator, that they did make a
move, perhaps not enough of a move, but a slight move.
Now, far be it for me to act optimistic about a settlement on
Cyprus. But I don't think the situation is without hope, just as it is
not without movement. It is something to be worked out.
Senator BIDEN. Well, if they moved one step forward on Verosha,
I would argue that they moved five steps backward by recognizing
the government.
Thank you very much, Mr. Secretary. We will have plenty of
time to argue about this again.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Senator Biden.
Senator Baker, we appreciate your coming to help us reach a
quorum. Do you have any comments or questions for the Secre-
tary?
Senator BAKER. That is usually all I am good for now, making a
quorum. [General laughter.]
91
No, Mr. Chairman, I am really delighted to be here and to see
the Secretary, and to participate in the deliberations of this com-
mittee.
It is one of my real regrets that the leadership of the Senate on
both sides, that is, both the majority and minority leaders, have
what is essentially an administrative job instead of a legislative
job. By this I mean that we are so busy trying to keep the Senate
running, to keep the agenda on track, that there is very little time
to attend committee meetings.
So, it is with real regret that I have so very little time to attend
the meetings of this committee or of the other committees of which
I am a member. But at the chairman's urging, I chose to remain on
this committee, and I am happy to make whatever minor contribu-
tion that I can.
I am glad to see Secretary Shultz here today. I think George
Shultz has been and will continue to be one of the truly historic
Secretaries of State we ever have had.
I had breakfast at his house the other day, on Sunday, when he
was on one television program and I was on another, and I had an
experience, Mr. Chairman, that I have never had before. I have
known a lot of Secretaries of State in my time, but I never have
had one serve me breakfast before. George Shultz, may I say, is not
only a great diplomat, but he is a pretty good waiter as well. [Gen-
eral laughter.]
I have a high regard and admiration for him and I am happy to
be here to participate in this occasion.
The CHAIRMAN. You will be interested in knowing, Senator
Baker, that Secretary Shultz will be in the most important area of
the world tonight, in the heartland of America, Peoria, which is a
suburb of Pekin, Ill.
Senator BAKER. Which was Everett Dirksen's hometown, a place
for which I have a great reverence.
The CHAIRMAN. I want to thank you for being here and continu-
ing to be a member of this committee.
At the beginning of this hearing I did announce that because of
your scheduling problems we are going to work on March 27, 28,
29, and 30 to mark up an omnibus foreign assistance package and
report it out so that we can take it up as you have scheduled on
April 2. We appreciate being scheduled that early.
Thank you very much, indeed.
We now have 10 members present and therefore have a quorum.
Mr. Secretary, if we could suspend this meeting for just a
moment, we will have a very brief business meeting.
[Whereupon, at 11:34 a.m., the committee recessed, to reconvene
immediately in a business meeting.)
[Whereupon, at 11:41 a.m., the committee resumed its hearing on
foreign assistance.]
The CHAIRMAN. Secretary Shultz, thank you for your patience
during our brief business meeting.
I believe we are in the midst of our questioning and I believe
Senator Mathias was next.
Senator Mathias.
Senator MATHIAS. We are not ready to let him go yet, Mr. Chair-
man. Thank you!
92
Mr. Secretary, the President's recommendation for fiscal year
1985 for the foreign assistance program calls for $1.5 billion for
multilateral aid and $14.3 billion for bilateral aid.
In light of the experience that multilateral aid leverages equal or
even greater sums from other sources, wouldn't we be better off to
devote a higher proportion of our resources to multilateral assist-
ance programs?
Secretary SHULTZ. I think it is a good question, and I personally
am a supporter of the multilateral lending institutions.
It seems to me that you have to keep the following consider-
ations in mind.
First of all, a substantial fraction of the total is security assist-
ance which, of course, has no role in the multilateral lending insti-
tutions.
Second, in our programing and use of our assistance, we see the
necessity for combining economic and security assistance and, for
that matter, combining it with our political objectives so that when
we have it on a bilateral basis, we are better able to do that.
So, I think that leads you to the kind of numbers that we have.
Now, finally, the biggest number, of course, is the proposed sub-
scription to IDA VII. That is at a level of $750 million per year.
It is the judgment of the administration that that is about the
right number, and I would say that it is also the judgment of the
administration that this is a sum that the Congress will support.
There has been a great deal of controversy over the years about
administrations going out and making pledges for these various
IDA subscriptions and then coming back and arguing with the Con-
gress that we have made a commitment on behalf of the United
States and now you have to endorse it.
President Reagan decided that he would go about it the other
way and would consult very closely with people in the Congress
and recommend a number that we feel will be supported widely,
and recommend a number that we can say in World Bank circles
we will deliver on this promise.
Now we are not going to make a promise on which we cannot
deliver. That happened, unfortunately, with IDA VI. It has been a
continuing struggle. I think, though, that to a certain extent it is
about what the traffic will bear.
Senator MATHIAS. But, of course, if you set a target which is
short of the goal and don't reach it, then whatever you put into it
is going to go down the drain.
We have a worldwide recession. We are fortunate in the United
States that we are ahead of the curve. But in many parts of the
world the recession is still underway.
I think it is a general feeling that this won't change until eco-
nomic growth resumes in various parts of the world.
IDA VII is pegged at $9 billion. IDA VI orginally was programed
for $12 billion. In light of the really serious economic conditions
that persist, is $9 billion going to be enough to stimulate a resump-
tion of economic growth?
Secretary SHULTZ. Let me answer that question but first precede
it by a comment.
I think that the IDA VI pledge, being an ambitious one, let us
say, but one on which the United States did not deliver its pledge,
93
caused a great deal of problems, because it made it impossible for
other countries to plan and when you can't plan and when the
bank can't plan, it is hard to administer the program in a reasona-
ble way
I do not think that subscribing to a number on which you do not
deliver in the name of ambition is a good approach in this case.
Insofar as the contribution to recovery from the recession is con-
cerned in that argument, there is merit in that argument. It is cer-
tainly true that many of the countries that would be recipients of
aid under IDA are, by definition, in very tough straits, and it
would be helpful to them.
But I don't think that this is even close to being what is the most
important thing in countering the world recession. It is, quite to
the contrary, the expansion in the United States, and, ironically,
while we don't like it because of the financial flows to the United
States, the dollar is very highly valued and the result of that is a
huge imbalance in our trade.
To put it in another way, we are shipping our expansionary ten-
dencies out all over the world, to the tune last year of some $70
billion and probably more this year. That is what will contribute
something to world recovery far beyond anything in IDA VII.
I am not arguing, in other words, that it is not important. But it
is dwarfed, absolutely dwarfed, by the impact of the expansion of
the U.S. economy, and particularly by-and, as I say, ironically,
and it can't last and it shouldn't-the huge trade imbalance that
we happen to have this year, in 1983, and probably, undoubtedly,
will have in 1984.
Senator MATHIAS. I agree with you absolutely about the impact
of a failure of the United States to meet commitments. I think that
would be disastrous.
I hope you are equally right about your outlook on the effect of
the U.S. influence on the world economy.
Let me shift now to the Middle East. In your prepared testimony
you say the we have made significant changes in the military as-
sistance programs for Israel and Egypt. To reduce the debt service
burden associated with heavy defense requirements, we are recom-
mending that all military assistance to these countries be grants
and not loans.
Now the same thing, of course, is true as far as economic assist-
ance is concerned, is that not so, that where we require significant
paybacks, it diminishes the value of the assistance?
Secretary SHULTZ. Of course, a grant is more valuable than a
loan.
Senator MATHIAS. Do you have at hand the amount of payback
that will be expected from Israel and Egypt during fiscal year 1985,
or could you supply it to the committee for the record?
Secretary SHULTZ. I am sure I can supply it. We may even have
it right here.
Senator MATHIAS. Those are very significant figures.
Secretary SHULTZ. Yes, sir, for both countries.
Senator MATHIAS. For instance, Egypt anticipates $750 million in
ESF.
Secretary SHULTZ. Excuse me, Senator?
94
1
Senator MATHIAS. Egypt expects about $750 million under this
budget in ESF, and that will be reduced by the amount of the pay-
backs, which will make it a fraction, really, of that figure. It is an
illusion. The same is true for Israel in terms of the impact on those
civilian economies.
I think it would be valuable to have the payback schedule so that
we can look at what is really the net economic assistance that
those two countries are going to receive.
Secretary SHULTZ. Yes, sir.
Of course, when you understand a loan, you undertake to pay
back the loan. That means that you have a repayment schedule
and the bills come due. So they are coming due in the case of the
FMS program. If you look at it currently, it is a very large number.
Secretary Schneider informs me that the payback schedule for
fiscal year 1985 for Egypt would be $540 million. You can place
that up against the ESF number.
Senator MATHIAS. That means the economic aid really will be
worth only about $200 million to them.
Secretary SHULTZ. Well, economic aid is worth its full amount.
However, there is a big debt repayment schedule, so they are going
to have to cope with that problem, and it does have the effect of
reducing it.
In the case of Israel, it is about $1 billion. It is this consideration,
among others, that led us to feel that the FMS program, which is
causing countries to incur huge debts, is moving in a direction in
many countries that simply is not sustainable. That is why we
have suggested to the Congress that we change it for fiscal year
1985. This result, you see, is the result of what has happened in the
past, just rolling around.
Senator MATHIAS. I agree completely that some change has to be
contemplated here, and I hope we can continue to discuss this as
we move through the legislative process.
Secretary SHULTZ. We will be glad to discuss it because it is a
terrific burden. It has been a matter of great concern to us, not
only with these countries but with some others.
On the other hand, there are countries that can pay and should
pay, and which want to pay, for that matter.
Senator MATHIAS. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you very much, Senator Mathias.
We have 24 minutes left and three Senators to go, and Secretary
Shultz must leave at 12:15.
Senator Helms.
Senator HELMs. Thank you, Mr. Chairman. I will try to be brief.
First of all, Mr. Chairman, I have a letter addressed to the Secre-
tary from the able Senator from Idaho, Mr. Symms, with some
questions which he would like to have you answer.
The CHAIRMAN. It will be entered into the record at this time.
Senator HELMS. Thank you, Mr. Chairman.
[The questions referred to follow:]
1
95
U.S. SENATE,
Washington, D.C., February 21, 1984.
Hon. GEORGE SHULTZ,
Secretary of State, Department of State,
Washington, D.C.
DEAR GEORGE: Thank you for the State Department response of January 4, 1984,
to my letter to the President of November 4, 1983, requesting an answer to some
questions on the Kennedy-Khrushchev Agreement of 1962. I appreciate the State
Department's careful attention to my speech and questions on the Kennedy-Khru-
shchev Agreement, but I would like to have specific answers to each of my original
questions.
In addition, I request answers to the following further questions:
(1) Have 3 more Soviet MIG-27 Flogger nuclear-delivery capable fighter-bombers
recently reported in the press been delivered to Cuba?
(2) How many Soviet MIG-27 Floggers are presently in Cuba?
(3) Are all Soviet Floggers deployed against NATO in the Warsaw Pact considered
nuclear delivery capable according to Page 63 of "Soviet Military Power” (Defense
Department, March 1983)?
(4) Are recent press reports of Soviets MIG-27 Flogger nuclear-delivery "toss-
bombing" maneuvers being practiced in Cuba accurate?
(5) Does this practice of maneuver, which is only used for nuclear delivery, indi-
cate the Soviet intention and capability to use Floggers for nuclear delivery?
(6) Are recent press reports of a Soviet nuclear-powered Victor III torpedo subma-
rine deployed at Cienfuegos accurate?
(7) Are recent press reports that the Victor III class is being equipped with the
nuclear warhead tipped SS-N-21 long-range cruise missile accurate?
(8) What are the implications of Soviet basing of Victor III class submarines with
SS-N-21 cruise missiles in Cuba?
I am thanking you in advance for you prompt answer to these original and fur-
ther questions, and look forward to your reply.
With warmest personal regards,
Sincerely,
STEVE SYMMS, U.S. Senator.
[The answers to the above stated questions are classified and are
being retained by Senator Symms.
Senator HELMS. Mr. Secretary, let me address myself to an ancil-
lary matter that may be important.
It is my understanding that when Roberto d'Aubuisson applied
for a visa a number of weeks ago to come to the United States, he
was refused that visa on the grounds that he was connected to so-
called "Right Wing Death Squads."
Is that correct?
Secretary SHULTZ. He was refused the visa, but we did not make
any statements about the reasons for doing that.
I might say that I had the opportunity to meet all of the candi-
dates for President of El Salvador at a luncheon a week or so ago
that President Magana gave. Mr. d'Aubuisson came to that lunch-
eon. We had a good conversation, both individually and in the
luncheon as a whole. I made the point there and publicly that the
United States is not neutral when it comes to the electoral process.
We want a fair, full, electoral process.
We are neutral as far as the result is concerned, and we will sup-
port the choice of the people of El Salvador.
Senator HELMS. Will you tell me why you declined the visa to
D'Aubuisson?
Secretary SHULTZ. I would prefer not to go into that. But I think,
on the whole, that it probably was a good decision at the time.
Senator HELMS. Are you saying to me that you don't want to do
it in open session?
96
Secretary SHULTZ. Yes, sir.
Senator HELMS. I don't know whether Mr. d'Aubuisson has par-
ticipated in anything down there, but I am a bit concerned about
the appearance of our participating in the tilting of the election
down there.
Now either you have evidence on Mr. d'Aubuisson or you don't.
Am I correct that all of the other candidates have been granted
visas?
Secretary SHULTZ. I couldn't tell you whether they literally have
been, but I would imagine that they have been.
Senator HELMS. I think my information is correct and, as a
matter of fact, I believe four of them already have come to this
country
Mr. Secretary, again I emphasize that I have no knowledge of
what Mr. d'Aubuisson has done or has not done. But I have
checked around, and my information, which I consider to be reli-
able from within your Department and other agencies, is that the
only thing presented against Mr: d'Aubuisson are the charges by
former Ambassador White, whose credibility I do not subscribe to
particularly myself.
Now I have repeatedly asked-in a formal sort of way-the State
Department and intelligence sources for this information, and I
have not been given one bit of evidence about Mr. d'Aubuisson. My
question to you is—and maybe you will want to answer this in a
closed session-don't you believe that the Congress ought to know
the visa to a candidate was denied?
Secretary SHULTZ. I personally have a great deal of trouble with
denying visas. I am a great believer in an open society and feel
that, as far as the United States is concerned, we can take all
comers.
We do have certain restrictions on people that I accept, but I am
always reluctant about turning down people for visas.
Senator HELMS. Your having said that emphasizes the point I am
trying to make because it is an extraordinary thing. Here you have
a candidate for president. Now I am not lobbying for him; I just
think that there ought to be fair play in terms of the impact it
could have on the political process down there.
You said that you talked with D’Aubuisson while you were there.
Did you achieve any degree of satisfaction one way or another
about the charges that Mr. White has made?
Secretary SHULTZ. My conversation with him was in a group at
the cocktail session, prior to the luncheon. He sat across the table
from me at luncheon and there was no opportunity to get into that
discussion
Senator HELMS. I see.
Secretary SHULTZ. The charges of Mr. White have been gone into.
The Department has responded on that subject, and that material
is available to you.
I don't really want to get into a discussion of it for the very
reason that you have propounded here, and I went out of my way
in El Salvador to make the statement which I think we must be-
lieve if we believe in the electoral process, that you abide by the
results of that process, assuming that it is a fair process.
Senator HELMS. Well, let me try another way, then.
97
You said that you did not like the business of denying visas-per-
sonally. That is your personal position, you said, across the board.
Secretary Shultz. Yes, but I have a problem because I am Secre-
tary of State and one of the things I am supposed to do is to deny
visas to people.
Senator HELMS. So it was not your recommendation?
Secretary SHULTZ. No, sir. I take responsibility for it.
Senator HELMS. I understand that.
I am trying to find out where the recommendation came from.
Secretary SHULTZ. Well, you have to start with me.
Senator HELMS. It started with you?
Secretary SHULTZ. It didn't start with me, but it came to me.
Senator HELMS. Now I understand the principle, Mr. Secretary,
of “the buck stops here.” It stops here in my office, as well. But
there is a contradiction in what you are saying.
You said on the one hand that you did not like the business of
denying visas. On the other hand you are saying that you take the
responsibility for it.
Somewhere in between is what I want to find out.
Mr. Chairman, I respectfully request that a closed meeting of
this committee be held so that I, for one, can understand why we
are singling out one candidate against whom there is no credible
evidence that I know about or have been able to learn about. If he
is guilty, then fine.
Secretary SHULTZ. I would appreciate the opportunity, Mr. Chair-
man, to visit with you about it and I will tell you everything I
know about it.
Senator HELMS. Very well.
The CHAIRMAN. Would you want to do that in closed session?
Secretary Shultz. I would just as soon come and call on the Sen-
ator and give him the information. You don't have to hold a hear-
ing about it.
Senator HELMS. That would be fine.
Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
Senator Kassebaum.
Senator KASSEBAUM. Thank you, Mr. Chairman.
Mr. Secretary, I think we would all agree with the basic thrust of
policy which you outlined so very well this morning. I heard you
say in the Budget Committee yesterday, as well as today, that we
should not be pennywise and pound foolish. I certainly would agree
with that. Many times I think we here may tend to be a bit penny-
wise and pound foolish.
We also have a responsibility to be poundwise, and I would point
out to you that on equal terms, counting FMS, "on-budget" as well
as "off,” the foreign aid budget has increased by 25 percent from
1981 through 1985.
I would grant you that, as a matter of fact, we have not kept up
with the administration's requests. But we have made some dra-
matic increases.
I think our responsibility here is to make sure we spend well.
I would like to start with Africa for a moment. I know that Mr.
McPherson has spent a great deal of time and emphasis on our Af-
98
rican aid. I am proud of the meager amounts that we get for Africa
because I think they have been used relatively well.
But I would say two things. I think we need the emergency sup-
plemental moneys for food immediately if it is to do any good. I
think we have to make sure that transportation and storage are
handled adequately as should be coordination with other donor
countries. Maybe Senator Boschwitz will go into that more.
Second, on the Economic Policy Initiative (EPI), which is a new
program funded in the 1985 budget for $75 million, this will be
under AID.
I think at the risk of not wanting to throw out the baby with the
bath water, we do have to ask some critical questions about our aid
programs, again, to make sure that the money is being wisely
spent. I particularly like your emphasis that we will be working
with other donor nations.
But what guidelines have been drawn up for the EPI program?
You mentioned that we want to make sure that we are working
with growth-oriented economic policies. Yet, one of the saddest
things occurring there, as you mentioned, is per capita agricultural
production is declining. This is a continent that should have great
agricultural wealth. Of course, the people have faced great drought
conditions.
I have been critical of some of our AID emphasis which, in the
past, have gone to big projects and have really not worked.
For instance, are we going to maintain that these countries have
to adhere to IMF guidelines? Have we developed any guidelines?
Secretary SHULTZ. Let me make a comment and then I will ask
Director McPherson to make a comment.
First, on the overall budget question, in our calculation, the
fiscal year 1985 request is about 10 percent above the CR level, and
it is 2.2 percent above the fiscal year 1984 level, including supple-
mental requests. So it is not quite as extravagant as it may look
just in the figures, as such.
You mentioned the Africa initiative. That is one reason. The
movement of funds from "off-budget" to "on-budget" is a reason.
The big push on Central America is a third reason that makes
these numbers go up.
Senator KASSEBAUM. Well, I was counting the "off" and "on"
budget on equal terms.
Secretary SHULTZ. Insofar as the aid to Africa is concerned, obvi-
ously what we want is for countries to adopt economic programs
that we think will give them productivity. That is what they are
lacking. In agriculture, there are many things, but certainly a
prime one is to allow a farmer to get a price for his product that is
larger than the cost of producing it.
Senator KASSEBAUM. Our own farmers would wish that, too, Mr.
Secretary.
Secretary SHULTZ. Right. It is a very simple thing. Chuck Percy
used to teach that at the University of Chicago in economics. It is
the first principle for getting production.
But yet, the dynamics of many countries is they feel they just
must hold those prices of food way down. What they do, ironically,
is reduce the supplies. And since these economies are very heavily
agricultural economies and their poor are in agriculture, the great
99
irony is that in the interest of the poor you hold down the prices
and the people that you thereby penalize are the poor.
It is a very bad set of policies.
Senator KASSEBAUM. I agree. But I wondered what specifically
we were going to do to try to change that tilt.
Mr. McPHERSON. Senator, we have a number of ideas that need
to go into the determinations as to what countries get money. We
are looking particularly at prices paid to farmers. We are looking
at the marketing boards which so often monopolize and tend to be
a blanket, on the whole, structure. We expect to have money to go
to approximately five countries, but no more than ten-closer to
five-a year.
We have not tried to quantify or set up exact guidelines because
I think it varies from country to country and situation to situation.
But clearly factors, such as IMF agreements, really sizable move-
ments on prices paid to farmers, moving toward market levels, et
cetera, are the kinds we would have in mind.
Now we also expect that these moneys, before disbursements
would be made, that there would be a consultation process with the
pertinent committees and that you simply would not be writing us
a blank check. There really is a need there. We think the guide-
lines set ahead would be too inhibiting, but at the same time, clear-
ly, Congress needs to have some ongoing involvement and role
here.
I can perhaps make my point by indicating countries that we
might give money to today if this fund were in existence. Madagas-
car has made some very sizable economic reforms. We have, really,
almost no program there. But yet, frankly, it is an interesting
place and is taking the kind of steps that we need to see.
Senator KASSEBAUM. And to think that they are doing it on their
own, without us.
Mr. McPHERSON. Yes; they are doing it on their own. That is the
best way.
The real part of this economic reform is it is not because of us
that they should be doing it. It is because of and for their own
people, their own progress.
Senator KASSEBAUM. I would like now to ask about the moneys
for El Salvador and Central America.
We have given approximately $1 billion to El Salvador since 1980
both in economic aid and military assistance. My question to Dr.
Kissinger when he was testifying was, Have we analyzed where
that money has really gone and why it hasn't seemingly been more
effective?
I have grave concerns about contributing $178 million, for in-
stance, in military assistance between now and September to El
Salvador if, indeed, we are really not sure that it can be effectively
used
I think if we are going to be successful there, we are going to
have to analyze better the programs that have already used the
money, why these Salvadoran Armed Forces have seemingly not
been able to prove that they are better able to have taken advan-
tage of the work that we have done with them.
100
It is not true, Mr. Secretary, that a large number of arms that
the Salvadoran guerrillas are using are from our own aid to the
government's forces?
Secretary SHULTZ. In broad terms, I think the answer to the
question is that the Government of El Salvador has faced a guerril-
la activity that has been well supplied from outside, and has man-
aged to cause a very large amount of destruction to the basic infra-
structure of the country, and that has brought its gross national
product way down, and has posed a very big
challenge to its mili-
tary capability.
Now, on the economic side, we have sought to just help in a
direct way and in a balance of payments way so that their economy
can keep going, and in the President's recommendations, in which
he is basically accepting the bipartisan commission and the Kissin-
ger commission's report, really, what you are talking about is
building that economy back up to where it was at the time that all
of this started.
Now, insofar as the military is concerned, I think that whatever
criticisms may be made of their military, and they have rear-
ranged, and certainly there are lots of things that you can say
about that, but we have managed to so structure the flow of securi-
ty assistance to them as to maximize the uncertainty in their
minds about what they can plan on.
It is very difficult to operate any kind of organization, let alone a
military organization, facing the uncertainties of all that, when
you do not know when your ammunition is going to run out or
your supply lines are going to run out. That is very much the case
right now, as the levels provided have contingencies on them that
are not going to be possible for fulfillment until May at the earli-
est, mean that the level of resources being provided is substantially
less, substantially less than the year before.
Now, how are you going to fight a war under those circum-
stances? That is their problem.
Senator KASSEBAUM. I have run out of time, and I have some-
thing else, if I might. Would you yield a minute to me, Rudy?
Senator BOSCHWITZ. Sure.
Senator KASSEBAUM. I guess I should ask Senator Dodd if he
would yield a minute of his time. I agree with what you are saying.
I am just hoping that if, indeed, we provide additional military as-
sistance, it is not going to end up in the hands of the guerrillas. We
continually see stories that have seemingly sound verification of
this fact.
Did I understand you to say regarding conditionality, that per-
haps a change in approach could be done, and you might look at it
a bit differently?
Now, as an original coauthor of the certification process, I have
come to believe that it is not working successfully. Are you open to
looking at some different changes and ways that we might deal
with that?
Secretary SHULTZ. We want to work out something that is going
to be satisfactory all along, and we think that just following the
same approach continuously is not necessarily the best way to go
about it. It may be that we got some mileage out of the certifica-
tion process. We think at this point that it may be better to go
101
1
about it a different way, and there is a certain amount of evidence
in the last couple of months with the impact that the Vice Presi-
dent in particular made there that perhaps it is more effective to
proceed with reports and with an effort, but without these direct
datelines that come into play.
But there is no argument whatever about the importance of the
subject. I do not think anybody has any doubt about that.
Senator KASSEBAUM. Well, I would agree with you, and would
suggest that maybe we might consider the possibility of Congress
doing the certification. The President could send forward his
report, and then we would have to vote up or down on the certifica-
tion.
Secretary SHULTZ. Oh, my.
Senator KASSEBAUM. I knew that would cause you heartburn.
Thank you, Mr. Secretary.
Secretary SHULTZ. Heartburn. It causes me mindburn as well.
[General laughter.]
Senator KASSEBAUM. But I think it is worthy of looking at differ-
ent approaches. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, Senator Kassebaum.
Secretary Shultz, I had said that you would be able to leave at
12:15 to meet with the President at 12:30. I will just leave it to you.
We have two Senators who have not asked questions yet.
Secretary SHULTZ. I will try to take their questions. I will try to
be brief, and will let people know there that I will be a little bit
delayed.
The CHAIRMAN. Fine. Thank you very much.
Senator Boschwitz.
Senator BOSCHWITZ. Mr. Secretary, is Senator Dodd before me?
Senator DODD. That is all right, Rudy, go ahead.
Senator BOSCHWITZ. Thank you.
Mr. Secretary, I want to ask you three quick questions, one about
the PLO and our apparent contacts with them, a summary on
Syria, then the moving of the Embassy to Jerusalem. I will not be
here at tomorrow's hearing on the subject.
I listened to my colleagues talk about the Caribbean and Central
America, I would hope that we would approach that in a more bi-
partisan spirit. The next question of Senator Dodd is going to be
one of the key factors in that, both he and his very able staff are
important in that regard. I hope I will play a role in that as well,
because I think that the chances of succeeding there will be much
heightened if we approach it on a bipartisan basis.
The problems in Lebanon certainly were exacerbated through
the lack of bipartisanship here on the committee and here on the
Hill, and I know there is enough blame in that regard to go around
for everybody. The problem, however, is basically with the Syrians,
their intimidating tactics and with their desire for hegemony in
the region. I think very frankly, Mr. Secretary, we may be some-
what clumsy in our withdrawal.
I wonder if you would comment briefly on what you see as the
next steps there, and what is our role in those next steps.
Secretary SHULTZ. Are you speaking about Lebanon?
Senator BOSCHWITZ. Yes.
102
Secretary SHULTZ. First of all, we will carry out the redeploy-
ment that the President has called for, and in the meantime we
will continue our efforts to urge a broader based government, to
urge a cease-fire, and to bring about the evacuation of foreign
forces from Lebanon. It seems like a long way away. However, we
will continue to work at it, and to exert as much diplomatic skill as
we possibly can in doing so.
Senator Boschwitz. The meetings with the PLO, Mr. Secretary,
certainly were surprising to me, especially the large number of
them. I would like to ask if they are going on today, and if you feel
they are consistent with our relationship with Israel. Do you be-
lieve that negotiations, even if desirable, with the PLO, would be
productive when they would not accept and would not bargain
during a period of relative strength from the standpoint of their or-
ganization. Is there a purpose to dealing with them now in any
event, now that they are in a much weakened position? Are those
contacts continuing today? Are they consistent with the relation-
ship with Israel? What is your judgment and opinion with respect
to that?
Secretary SHULTZ. Well, there is nothing, as has been described
in the papers, going on today. As I have looked at the record of
those meetings, what was talked about in private was identical
with what was talked about in public, and if it proved anything, it
was that the constant refrain we hear that if only we would sit
down with the PLO and talk with them, everything would start
falling into place is simply not the case.
Of course, there are numerous discussions. That is, practically
every Arab leader that comes to the United States or that you run
into has a message and wants to carry a message, and so on, and
the volunteers not only in this field but in every field of diplomacy,
we have thousands of volunteers who will conduct things, so the
problem is not with the communications system. There is lots of
communication. The problem is in the content, and I feel, before
any discussions with the PLO should take place, that content
should change as we have specified.
Senator BOSCHWITZ. Were the meetings of the type that took
place consistent with our expressed understanding with Israel?
Secretary SHULTZ. As I understand, the understandings that we
had with Israel about that, this was not inconsistent with it, al-
though no doubt it is surprising to everybody. I think, however,
that the episode is one that perhaps everyone can learn a little bit
from in terms of what was accomplished and what was not accom-
plished.
Senator BOSCHWITZ. The lack of accomplishment?
Secretary SHULTZ. The lack of accomplishment.
Senator BOSCHWITZ. Mr. Secretary, I believe tomorrow we will
have hearings on the Jerusalem issue and I do not know if you are
going to be here for them or not.
Secretary SHULTZ. I spend all my time in hearings. If I am not in
this committee, I am in some other committee.
Senator BOSCHWITZ. Perhaps in the Budget Committee. But I
knew I would see you here today. I would like to ask you about the
proposal to move our Embassy to Jerusalem.
103
Secretary SHULTZ. I believe Ambassador Eagleburger will be tes-
tifying about that.
Senator BOSCHWITZ. Do we have relations with any country other
than the State of Israel where that country has stated that its cap-
ital is this city and where we say, no, no, we cannot have our Em-
bassy there, but it must be in another city. Is there any other ex-
ample of that in the world?
Secretary SHULTZ. I do not believe there is. On the other hand,
this is a special case, and you are very familiar with it, I know.
Senator BOSCHWITZ. I am very familiar with it, but it seems to
me that one of the essential acts of sovereignty is not only protect-
ing one's own borders, but also choosing the site of a capital city. It
is not quite clear to me why we should not recognize the choice
that the Israelis have made-that this is their capital city, instead
of making a different choice for them, in effect.
What is the rationale? And are we going to continue to pursue
that rationale? Or will we recognize that the Israelis have a right
to make such a choice?
Secretary SHULTZ. I think the rationale is that Jerusalem is a
city that is occupied by Israel as a result of the war way back in
1967, and the U.S. position historically has been right from the
outset that the status of those territories should be determined by
negotiation, and therefore until there is a negotiation that settles
the matter, we prefer to have our Embassy where it is in Tel Aviv.
I might say that is the choice of most other countries as well.
Senator BOSCHWITZ. I understand that. On the other hand, the Is-
raelis might be very willing to negotiate, but they have no negoti-
ating partner. Are they therefore being held hostage, or are those
negotiations being perhaps even prevented by our saying that we
are waiting for the negotiations to occur, until after they occur?
What is the purpose of negotiating in that case?
Secretary SHULTZ. There are all sorts of reasons why we do not
have the kind of negotiations going on that we would like to see
going on. I have become all too familiar with those reasons. They
fundamentally have to do with the opposition of Syria to what we
think of as the peace process, and their ability to influence others,
and at the same time we do have one country that has negotiated a
peace treaty with Israel, Egypt.
We have another that negotiated an agreement, not a peace
treaty, with Israel; namely, Lebanon. And I believe that is an
agreement that we should stand by. If the parties wish to do some-
thing different with it, that is their business, but as far as we are
concerned, it is a worthy agreement, and we would like to see King
Hussein enter the peace process, and we, of course, have been
struggling hard to bring that about.
But Jerusalem, as we all know, is one of the most important and
most sensitive issues in any such negotiation. I might say that we
hold that there should be a unified Jerusalem, not a divided Jeru-
salem.
Senator BOSCHWITZ. Mr. Secretary, I know that you have time
constraints, and so I would yield to Senator Dodd.
The CHAIRMAN. Thank you very much.
I understand that Secretary Schneider and Mr. McPherson will
be able to stay on, Senator Dodd.
104
1
Senator Dodd. Thank you, Mr. Chairman. I apologize for running
late, but I assume most of my questions have already been covered
in earlier questioning. However, let me run over a couple in par-
ticular.
One has to do with the statistics we have been reading regarding
reenlistment rates in El Salvador's army. The statistics, at least as
they have been reported, are fairly low for reenlistment-particu-
larly among the troops that we have trained. They may be lower. I
do not know what has been happening. But apparently, of the sol-
diers we trained in 1981, only 15 percent remain today. And of
those trained in 1982, only 50 percent are still serving. Of the ones
we trained in 1983, the numbers are very unclear-in the neighbor-
hood of 10 to 15 percent are no longer serving. Are those numbers
accurate? I read them over and over again, but I would rather hear
from a government source whether they are correct or not.
Secretary SHULTZ. I would like to give you an answer for the
record. I do not have information on that right in my head. Obvi-
ously, reenlistment rates reflect a lot of things, including the rela-
tive rates of pay that people can get, and so on, but let me give you
an answer for the record if I may.
[The information referred to follows:)
DOD notes that the figures cited for 1981 are roughly accurate. But, to insure ac-
curacy in the response, DOD is carefully researching the statistics for all 3 years.
We will provide a detailed answer as soon as it is available.
Senator Dodd. There was also a report in the press a couple of
weeks ago that "Hundreds”-and I am quoting.--"Hundreds of
young people have been pressed into the Salvadoran army this
month after being stopped by military patrols in the northeastern
part of the country.” Is that a fact? Do you know?
Secretary SHULTZ. I could not hear you.
Senator Dodd. I am sorry. I have a terrible cold. This is the
story, the report: Patrols are literally going out and picking up
younger people, virtually pressing them into military service.
There were several press accounts of that going on in the north-
eastern part of the country. I wonder if that was also accurate.
Secretary SHULTZ. Not that I know of, but again I will check that
out carefully, and will give you a considered answer.
[The information referred to follows:)
FORCED RECRUITMENT
There have been a number of reports in the Salvadoran and international press
that the Salvadoran army and guerrilla groups are forcibly recruiting Salvadoran
youths.
As some of the press accounts have noted, the new constitution specifies that all
young men in El Salvador are subject to military service. In the absence of specific
legislation governing military conscription, it is our understanding that exemptions
are to be granted to those who are only sons, are the sole means of support for their
families, or are attending school. In the case of Army recruitment, local authorities
may have been overzealous in attempting to reach recruitment targets ahead of
schedule.
The Salvadoran Government and military have themselves expressed concern
over such actions and are seeking to improve the existing decentralized recruitment
procedures that apparently have allowed abuses to take place. I cannot address
what plans the guerrillas may have with regard to continued forced recruitment. I
do not have any specific information regarding the number of men who may have
been improperly recruited.
105
Senator DODD. Senator Moynihan, the ranking minority member
on the Intelligence Committee, was quoted the other day as saying
that a minimum, 30 percent of American military aid has landed
in hands of the insurgents. Is that correct?
Secretary SHULTZ. I think that is way high, from all that I have
seen.
Senator Dodd. Would you also give us your most up-to-date infor-
mation on that?
Secretary SHULTZ. I will dig into that.
[The information referred to follows:
Our best estimate is that this is an inflated figure. We will be pleased to develop
fuller, classified data and make it available as soon as ready.
Senator Dodd. My last question for you has to do with the Tyler
report on the death of the churchwomen. Are you familiar with the
Tyler report?
Secretary SHULTZ. Yes.
Senator DODD. It was the investigation, as you know, of the 1980
slaying of four American churchwomen. The report indicates, al-
luding to press accounts, that National Guard authorities endeav-
ored to cover up the murders, and that the present Minister of De-
fense, General Casanova, who was then the commander of the Na-
tional Guard, was aware of or-at least for a time-acquiesced in
the coverup
Now, Judge Tyler said he sees no reason why that report cannot
be made public, but there has been a decision, I gather, to classify
this report. In fact there is one press account that one member of
each of the churchwomen's families would be allowed to see the
report, provided they sign a document saying they would not dis-
cuss it with any other members of that particular family.
Can you enlighten us as to what is going on with this, and why
the report should be classified?
Secretary SHULTZ. Yes, I can. I know. Judge Tyler feels that it
could be released, and there are many attorneys who feel that way,
but there are other attorneys in El Salvador and elsewhere who
feel that if the report were released before the trial, it would have
a prejudicial effect, and might be a basis on which the defense
could get the trial set aside.
Now, all I can say as a nonlawyer is that I observe that lawyers
have a divided opinion on the subject. It has taken so long, and it
has been so difficult to get that case to its present state that I per-
sonally see no advantage whatever in releasing the report and
taking that chance. So it was my decision to say, let us keep it the
way it is.
Now, the families and attorneys wish to have access to the
report, and that presents problems of security clearances which we
are trying to solve. We are working at it so that they might have
access to the information. But there is a tremendous tangle of Gov-
ernment regulations involved here, and we are trying to find our
way through that thicket in a way that gives people who have a
special concern access to the information.
But I am responsible for the decision ultimately on classification,
and the reason is that I just do not see any reason to take one
!
34-045 0-84-48
106
more chance, to give one more device to those who have been very
successful in prolonging this process.
Senator Dodd. Could you give us some assurance that at the con-
clusion of the trial, the report would be released?
Secretary SHULTZ. Yes, sir.
Senator DODD. Fine.
Mr. Chairman, I know the Secretary has been here for a long
time. Again my apologies to you, Mr. Secretary, for arriving late
this morning. I do appreciate your willingness to provide us with
some responses to the questions on reenlistment. That will be help-
ful.
The CHAIRMAN. Thank you very much, Senator Dodd.
Senator Hawkins.
Senator HAWKINS. Mr. Secretary, no threat strikes America
more savagely and frequently than that of elicit drugs. Its deadly
impact is felt in every corner of our neighborhood, whether it is de-
fense, violent crime, education, et cetera. It is my belief that we
should tie foreign aid to the countries of origin who are producing
the elicit drugs—90 percent of all elicit drugs coming into the
United States come from foreign countries. In that belief, the
Senate passed, as you know, 96 to zero my amendment which
linked foreign aid to the eradication of elicit drugs at their source.
The President signed that bill November 22, 1983, and as I am
looking at this sheet given out dated February 9, 1984, I am struck
by the different countries, such as Jamaica. Jamaica produces 10
percent of the marihuana smuggled into the United States, and
during the past year increased their smuggling from 2,000 tons to
2,460 tons. Belize is listed on here as a recipient for aid. It is a
major drug transshipment and money laundering center, and
during the past year their marihuana production increased 300
percent.
Colombia, as we all know, is a sore spot on the total horizon. The
south Florida task force in south Florida alone last year interdicted
$12 billion of Colombian cocaine, marihuana, and quaaludes.
Now, my question to you is-We all know that Peru and Bolivia
together produce over 90 percent of all the elicit cocaine smuggled
into the United States, and we all know that their production in-
creased last year even with the threat of the linkage of eradication
with the amount of their foreign aid. What have any of these coun-
tries done to merit increased aid in light of the Hawkins amend-
ment?
Secertary SCHULTZ. First of all, I agree with you on the severity
of the problem. Second, I agree with you that it is very important
for us to be able to work with these countries to get as best we can
the production and distribution process under control and eliminat-
ed insofar as we possibly can. We do have a very active program. I
cannot tell you country by country off the top of my head, but I
will be glad to supply that information, what our programs are in
each one of these countries and others around the world. There are
many others.
The information referred to follows:)
107
DRUG ERADICATION
Peru began eradicating coca in April 1983, under an agreement through which
the Department supplies narcotics control assistance and AID supplies development
assistance. While the eradication component of this program was delayed by the Pe-
ruvians, they have changed project management and initiated the several steps re-
quired under our agreement. The projection is that 4,000 hectares will be eradicated
in 1984 and that the Upper Huallaga Valley coca cultivation will be eliminated by
1987. Meanwhile, the Guardia Civil has, despite terrorists attacks on its police sta-
tions, continued to improve its interdiction and enforcement efforts. There are
active discussions on the planning of additional projects in other growing areas of
Peru, including projects to be funded by the United Nations.
Program agreements were signed with Bolivia in August, 1983, with the objective
of eliminating illicit coca cultivation in that country by 1987. The first task under
these agreements is to assist the Bolivians in establishing law and order in the Cha-
pare growing region, an absolutely essential prerequisite to achieving control of nar-
cotics production. Troops have been recruited, trained and outfitted now for this
mission.
Progress in varying dimensions was made in numerous countries in 1983, as noted
in the International Narcotics Control Strategy Report which the Department has
just submitted to Congress. The Committee will have an opportunity to explore
these and related issues in more detail on March 21 when the Committee conducts
its hearing on international narcotics control.
We will continue to utilize the aggregate of our economic and political influence
on drug source countries to achieve progress in eliminating drug production and ex-
ports. However, it would not seem advisable to adopt, as a basic foreign policy, the
subordination of all U.S. national interests to one objective.
Secretary SHULTZ. The problem is compounded by the fact that
the drug trade is so profitable that it produces in effect often a gov-
ernment within a government that has a tremendous amount of
money to spend, has no scruples about murder, kidnapping, or any
other device of intimidation, and so it is not the easiest thing in the
world for a government to deal with.
So we want to work energetically and forcefully and do every-
thing we can. I think it has become more and more apparent to our
governments that this situation is as bad for them as it is for us,
because it produces within their own country something that goes
totally out of their control.
Now, having said all of that, I believe that the heart of the prob-
lem is in the consumption of drugs, and if you have something
that
is in very high demand, you are going to have one awfully hard
time getting control of the supply when it is not difficult to
produce these drugs. It can be done all over the world. It is rela-
tively easy.
So, working on the problem of consumers of drugs here in this
country, and I know we work very hard on it, is really at the heart
of the issue, but I do not say that to in any way diminish the im-
portance of the efforts that we must make internationally to try to
bring the production and distribution process under better control.
Senator HAWKINS. Well, there are countries that have cooperated
with us. Turkey is a great example, and they have stayed drug free
since President Nixon put the heat on them. In my mind, they de-
serve a lot of credit.
Secretary SHULTZ. I think most of the countries are quite cooper-
ative.
Senator HAWKINS. The statistics prove otherwise. I hope that you
do not rely on this report called International Narcotics Control
Strategy Report to this Committee on Foreign Relations, prepared
by the Bureau of International Narcotics Management, dated Feb-
108
1
ruary 1, 1984, because they dismiss it with one page for all of Latin
America, and I can prove to you that those are Alice in Wonder-
land numbers.
In your experience, have we ever used foreign aid in trying to
control the illicit drugs in a foreign country?
Secretary SHULTZ. We discuss it regularly. Maybe Mr. McPher-
son can add something more specific.
Senator HAWKINS. Have we actually ever executed that? Has any
assistance ever been withheld?
Mr. MCPHERSON. Yes, in Bolivia. In the case of Bolivia.
The CHAIRMAN. Senator Hawkins, would it be possible, so long as
Peter McPherson will stay over, to defer your question and to take
only those questions that require Secretary Shultz' presence?
Senator HAWKINS. Thank you. Maybe Mr. McPherson will supply
the answer also then.
Secretary SHULTZ. He is a good man, and he has lots of answers.
Senator HAWKINS. I have some other questions. I know Senator
Boschwitz and I are interested in the question of Stinger sales, and
Senator Percy, perhaps we can submit questions to the Secretary
in writing.
Secretary SHULTZ. I would be glad to have them.
Senator BOSCHWITZ. We would like to ask the Secretary about
the Stinger sales to Jordan and possibly to other countries, but we
will submit those in writing.
The CHAIRMAN. Senator Pressler.
Senator PRESSLER. Thank you.
Mr. Secretary, when I was home during the recess, I met with a
large group of church-related people who had been to Nicaragua,
some very sincere people. I do not know if they got bad informa-
tion, but there are large numbers of these people traveling down
there for 2 weeks. Maybe the church pays their way. I do not know
how they get there exactly. Maybe they pay their own way.
But they argued to me, and I was pretty much supporting the
administration's policy, that we are driving Nicaragua further into
the arms of the Soviets, and that we are really on the wrong side
there. They seemed like they were solid, middle-class people who
had gone down there. Are these people being brainwashed on these
trips? I mean, if you just go for 2 weeks, why, you can reach any
conclusion.
But I am not in any way trying to put you on the spot. I am just
telling you there were some ministers in the group, some of them
were businessmen, some of them were former Peace Corps people.
They seemed like solid, middle-class people who had gotten a com-
pletely opposite point of view. I was just wondering if they are on
the wrong track, or if Nicaragua is running tours that mislead
people, or what is happening.
Secretary SHULTZ. Of course, I cannot speak for those people and
what they did or saw, and so on. But as a general proposition, I
think you will find that Nicaragua's neighbors regard Nicaragua as
a threat to their security without exception. Now, it is also impres-
sive that the members of the bipartisan Kissinger Commission
came to that same conclusion. They investigated it rather thor-
oughly.
109
So, from the standpoint of the treatment of the church, since you
mentioned churchmen, I think that the treatment has been very
poor, so the information that I have and the evidence that I have
had suggests that Nicaragua is very much on the wrong track from
our standpoint.
Insofar as the business of us driving them into the hands of the
Soviets is concerned, as you know, we supported the Sandinista
revolution, and we supported the OAS resolution in 1979, I believe
it was, and what we find is that the Sandinista government has be-
trayed their own revolution, that the Contras basically have been
produced as a result of that fact, and that they are basically a
threat to the region.
Senator PRESSLER. I have some additional questions on Central
America, but I do have one other subject that I will ask you about
now, and if you have covered it already, please cut me off. I know
that Iran's and Syria's recent activities have increased the concern
about state-supported terrorism, and around the Capitol we are
very well aware of that.
Maybe you cannot say this in an open session, but is there evi-
dence that some of these countries are engaging in, supporting, or
encouraging terrorism in our country? Are there any new adminis-
tration legislative proposals regarding this whole subject?
Secretary SHULTZ. I believe the President will be submitting, as
he said in the state of the Union message, some additional legisla-
tion basically being managed by the Justice Department. We do
have some money in our budget, a small amount, for working with
other countries on antiterrorism matters.
Of course, in the Department and around our Government build-
ings, both here and abroad, we are examining every measure we
can take to look to their security, and it is not always the easiest
thing in the world to do, and of course Government buildings are
there to be used. They are not to be sealed off. So you have always
that compromise to make.
Beyond that, I think there is a great deal of evidence that there
really is such a thing as state-supported terrorism. It is like a
weapon. It is not like a rifle or a machine gun, but something a lot
more lethal than that. And it is used by countries, and we know
about training activities and things of that kind.
So, it is a phenomenon that is very important. I said earlier that
I think this is a subject we are going to wind up discussing in this
committee quite a great deal as time goes on.
Senator PRESSLER. I suppose a country such as ours is in a diffi-
cult position to retaliate, or does not want to retaliate because of
our traditions. Maybe we will have to give the FBI and CIA more
authority to look into some of these groups. Is the terrorism that
we are apparently protecting ourselves from around this building
and in the Capitol area largely inspired by foreign sources?
Secretary SHULTZ. I would not try to make any such definitive
statement as that. There are all kinds of groups that produce a ter-
rorist act. But I understood your earlier question to be, is there evi-
dence that there is such a thing as state-supported terrorism. The
answer to that question is yes.
Senator PRESSLER. That is all the questions I have.
The CHAIRMAN. Thank you, Senator Pressler.
110
Mr. Secretary, thank you. You are excused. If you would care to,
please come and exit through the back door here. It is less crowded.
Senator Pell, you will be recognized first.
Senator Hawkins, do you have some questions for the other two
witnesses?
Senator HAWKINS. I will submit my question to Mr. McPherson
at our followup hearing next week.
Pause.
The CHAIRMAN. Senator Pressler, do you have any further ques-
tions?
Senator PRESSLER. No, I do not.
The CHAIRMAN. Very well. Since there are no further questions,
we will adjourn this meeting.
[Additional questions and answers follow:]
STATE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATORS
BOSCHWITZ AND HAWKINS
Question 1. According to press reports, the Administration proposes to go ahead
with the sale of a large number of Stinger anti-aircraft missiles to Jordan. Do you
believe King Hussein, who was in Washington earlier this month, is likely to enter
the peace process soon?
Answer. Jordan, under King Hussein's leadership, has sought a path toward mod-
eration and conciliation. The timing of Jordanian entry into the peace process will
be affected by the King's perception that he will be able to count on the necessary
support, particularly from the moderate Arab states and the United States, to
counter opposition from Syria and other Arab rejectionists. We support his efforts to
find a way to begin negotiations with Israel.
Question 2. Some Administration officials contend that Jordan needs Stingers to
protect against possible attack from Syria if it enters the peace process. How many
years will it take before the Stingers are delivered?
Answer. As now written, the delivery of grip-stocks and first shipment of missiles
is scheduled for 29 months from the time the LOA is signed. However, excess manu-
facturing capacity exists. If the Syrian threat should intensify to the point where
Jordan would require Stingers more rapidly, arrangements could be made to deliver
the weapons in 6 months or perhaps less. In addition, 600 Stinger systems are sched-
uled to be delivered to the Special Defense Acquisition Fund (SDAF) supply during
the last quarter of 1985. Any time after that, an emergency delivery of Stingers to
Jordan could be made from the SDAF.
Question 3. Does the Administration also propose to sell the Stingers to Saudi
Arabia?
Is Iran considered the main potential threat? Is it true, as reported in the press,
that Iran has only a relative handful of jet fighters-perhaps 40 still operating?
Answer. Yes, the Administration intends to sell Stinger missiles to Saudi Arabia.
Iran is in fact the main potential threat at this time, although threats have come
from Iran and South Yemen in the past. However, the Iranians possess more than a
handful of high performance aircraft, perhaps as many as 85. The capability of
these aircraft, in combination with the Iranian naval and commando threat, does
pose a serious danger to Saudi Arabia, especially in view of the recent escalation of
fighting in the strategic Gulf area. Quite recently, in fact, we have received informa-
tion that the Iranians were planning to use light aircraft filled with explosives as
suicide bombers against Gulf shipping and Gulf state facilities. The provision of
Stinger to Saudi Arabia will serve to deter any further expansion of the scope of the
war and represents an excellent counter-weapon to suicide bombers.
Question 4. If Jordan and Saudi Arabia are so vulnerable to external attacks from
radical regimes, aren't they also vulnerable to pressures to use their weapons, or
make them available to others, in the event of a wider Arab-Israeli war?
Answer. We do not agree that vulnerability to attacks from the outside by radical
regimes implies a similar vulnerability to internal radical pressure. Since 1967
Jordan has not succumbed to radical pressure to use its weapons, or make them
available to others for use against Israel. In 1970, Jordan prevailed against a severe
radical threat. Jordan has also scrupulously maintained the security of its borders
with Israel.
111
The external danger posed by Syria, however, is troubling. Syria has a 9–1 mili-
tary superiority over Jordan and has publicly stated that it would not permit “an-
other Sadat” on its southern border. In 1980, Syria massed troops on Jordan's
border to intimidate the GOJ. Thus, Jordan requires our military assistance so as to
be able to approach the peace process, not enter a new war.
Saudi Arabia has also withstood internal radical pressures, but like Jordan, faces
an external threat—Iran. Saudi Arabia has had Redeye in its inventory for several
years and has always maintained proper security of the weapons. The Historical
record of the past 16 years does not, therefore, support the assertion that either
Saudi Arabia or Jordan can be pressured into using their weapons aggressively or
letting their weapons be used by others against Israel.
Question 5. What kind of meaningful assurances would we have that the weapons
would not be used in this manner or fall into terrorists' hands if the existing gov-
ernments are overthrown or infiltrated?
Answer. The record of Jordan and Saudi Arabia on keeping sensitive equipment,
such as Redeye missiles, secure and out of the hands of terrorists has been spotless.
Nonetheless, Jordan and Saudi Arabia (among other countries) have agreed to ex-
traordinary safeguards for the use and storage of Stingers in their possession. For
example, the safeguards now applied to Redeye, such as special requirements re-
garding construction facilities, guards, lighting and fencing, will also be applied to
Stinger. In addition, new safeguards have been developed for the Middle East region
and elsewhere to make theft by terrorists even more difficult. Chief among these
are separate storage of key components and random U.S. access to inventory the
missiles.
Question 6. We also read in the press that the Administration is reviving its ef-
forts to win funding for the so-called Jordanian Rapid Deployment Force. Does this,
in essence, involve giving military equipment to another country for possible use in
a third country? If so, does it not have foreign policy implications? In that case, why
is the Administration apparently not willing to discuss it openly with the Foreign
Relations Committee?
Answer. (Deleted.]
[Whereupon, at 12:45 p.m., the committee adjourned, subject to
call of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
(IDA VII REPLENISHMENT)
WEDNESDAY, FEBRUARY 29, 1984
UNITED STATES SENATE,
SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY
OT THE COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:02 a.m., in room
SD-419, Dirksen Senate Office Building, Hon. Charles McC. Ma-
thias (chairman of the subcommittee) presiding.
Present: Senators Mathias, Helms, and Biden.
Senator MATHIAS. The subcommittee will come to order.
The Subcommittee on International Economic Policy has been
exploring the theme of the stresses and strains of the international
financial system. In pursuit of that effort we held a number of
hearings during 1983.
It was certainly my personal conclusion—and I believe shared by
other members of the subcommittee that these hearings rein-
forced the case for congressional approval of the International
Monetary Fund [IMF] quota increase legislation, and I believe con-
tributed to a broader understanding throughout the Congress of
the need for additional fund resources and contributed to the final
passage of the legislation.
Today, we are looking at another aspect of the same general
theme. We are considering another multilateral institution which
is making a contribution to global economic recovery—the Interna-
tional Development Association (IDA).
Clearly the restoration of growth in the OECD [Organization for
Economic Cooperation and Development] countries and in the
United States in particular remains a prerequisite if we are to
have a global recovery. Although our economy is growing we have
omnious budget deficits. Moreover the global economy is closely
interrelated, so that recovery here may not be sustainable unless it
encompasses the developing as well as the developed world.
The world recession hit the developing countries with particular
force. Debt payments rose rapidly, commodity prices plunged down-
ward and hardest hit were those who were least able to cope.
The International Development Association has played and con-
tinues to play a vital role in assisting the world's poorest nations.
It provided 35 percent of all multilateral assistance dispersed in
1981, and its contributions to development have been significant.
Since it was founded in 1960, 27 countries have graduated from
(113)
114
IDA. The United States has a very proud record of support for
IDA's effort.
So at the outset I would state that I regret the position the
United States has taken in the seventh replenishment negotia-
tions—that IDA VII should be 25 percent lower than IDA VI, that
it should be $9 billion instead of $12 billion.
Now of course the rationale for this position was that Congress
would not accept a higher U.S. participation. I am not sure just
how this estimate of congressional sentiment was reached. Last
year I went on record with a number of other Members of the
Senate in calling for a higher figure.
I think we all know as a matter of experience that any form of
foreign assistance is a function not only of congressional preference
but of the degree of commitment and support that the executive
branch is prepared to give the request that it submits for both au-
thorization and appropriation. So I start these hearings with some
sense of regret that there is not a stronger degree of support for
this institution, which serves both our interests and the needs of
the very poorest nations of the world.
We are honored to have as our first witness the distinguished
Senator from Missouri, Mr. Danforth.
STATEMENT OF HON. JOHN C. DANFORTH, A U.S. SENATOR FROM
MISSOURI
Senator DANFORTH. Mr. Chairman, thank you very much. I am
delighted to be here. I have a prepared statement which I will not
read, if that is all right with you, but submit it for the record.
Senator MATHIAS. It will be inserted in the record.
Senator DANFORTH. I thank you.
My reason for being here, Mr. Chairman, is to suggest that the
Congress remove any doubt as to whether or not it is the villain in
this matter and that we take a position which would be, I think, a
heroic position.
I think what we should do-and I have some proposed language
to do it is to increase the authorization for U.S. participation in
IDA for the seventh replenishment from the present level that has
been suggested by the administration of $750 million a year to $1
billion a year, or $3 billion for the entire 3-year period of time.
Mr. Chairman, the situation is as follows. IDA VI, which
spanned that period from 1981 to 1983, is a $12 billion program.
The United States, by agreement with other participants in IDA,
contributes $1 for every $3 that the other contributing countries
put in. The result of this is that in IDA VI we were supposed to
contribute $3 billion over a 3-year period of time and the rest of
the countries were supposed to contribute $9 billion, for a total of
$12 billion.
In fact, what we did was welch on our commitment by spreading
the 3-year commitment over a 4-year period of time. But in any
event, IDA VI remained a $12 billion program due to the participa-
tion of other countries and it did provide great assistance to the de-
veloping world.
The American proposal for IDA VII is that we reduce our com-
mitment from the $3 billion we made for IDA VI to $2,250 million.
115
This would have the effect-because of the 3 for 1 match which
other donors make-of reducing the entire program from $12 bil-
lion, in 1981 to 1983, to only $9 billion from 1984 to 1986.
Now, Mr. Chairman, if we were to adjust the $12 billion commit-
ment for IDA VI for inflation, just to keep up with the same real
level of activity for IDA, the program for IDA VII would have to be
$15 billion. I do not know that anyone is suggesting that it be in-
creased to $15 billion, however, that is what it would have to be
just to keep even.
But it seems to me that the last thing we want to do is to reduce
IDA VII from $12 billion to $9 billion because a reduction to $9 bil-
lion in real terms is a 40-percent reduction in IDA.
I would just add a couple of other points, Mr. Chairman. I am
going to have the privilege of testifying before the African Subcom-
mittee of the Foreign Relations Committee tomorrow on my trip to
Africa which I made in January. I spent 2 weeks in Africa with a
particular focus on my trip, which is the problem of hunger on that
continent and it is clear to me that if people's lives are going to be
saved, the United States is going to have to have a continuing com-
mitment to emergency food aid.
But emergency food aid is simply a matter of keeping people
alive who are presently facing starvation. Emergency food aid does
nothing to solve the long-term problem. The long-term problem can
only be solved by putting Africa in a position where it can produce
more food for itself, and this cannot be done without developmental
assistance.
For example, I was in the Sahel in Senegal. They have not had
any rain for a year. They have not had much rain for the last 3
years. Agriculture requires rainfall. If rain is not falling from the
skies, the only other way to get water that I know of is to irrigate;
irrigation costs money.
Similarly, in Somalia, flying at a low level in a small aircraft
over the river valleys, it is apparent, at least to my untrained eye,
that there is considerable room for development of the river valleys
in Somalia. That cannot be done without developmental assistance.
That is what IDA is.
I would submit that IDA is the best form of developmental assist-
ance, first because every dollar that the United States contributes
leverages $3 from other contributors. That is a pretty good deal.
And, second, an international program, multinational program,
such as IDA, can do something that the United States by itself
cannot very well do, and that is it can condition its activities on
policy changes within the recipient country.
If the United States were to embark on a very heavy-handed
effort to try to change domestic policies within recipient countries,
we would be viewed as the ugly American. But when the interna-
tional community as a whole does so, then I think real changes can
be put into place, and that is what is needed in a lot of these coun-
tries.
Some of these countries in Africa need developmental assistance.
They also need, for example, to move from a state farm system,
which a lot of them got into when they got their independence, to a
greater effort on private agriculture.
116
1
I think that the IDA program could do a better job of bringing
about those changes than could any unilateral effort on the part of
the United States. So in short, Mr. Chairman, I think this is a very
important matter. I think that the position that has been taken of
reducing our commitment to only $750 million a year is shortsight-
ed and I would hope that this committee would begin the process of
increasing of least the authorization.
That does not mean that we are going to spend the money neces-
sarily. It just means that it will be there; Congress will have
spoken. It will have been authorized, and if it appears—I think it
will appear-that this is absolutely necessary, particularly for the
survival of Africa, then the administration would be in a position
to act.
[Senator Danforth's prepared statement follows:
PREPARED STATEMENT OF HON. JOHN C. DANFORTH
Mr. Chairman, I am grateful for the opportunity to appear before the Committee
to advocate a more forthcoming American position with respect to our commitment
to the International Development Association's seventh replenishment. Thirty-three
donor nations including the United States-contributed $12 billion for IDA's sixth
replenishment from 1981 to 1983. If the seventh replenishment simply were to keep
up with inflation it ought to be increased from $12 billion to about $15 billion. More-
over, the recent addition of the People's Republic of China as a recipient country
would require an upward adjustment to about $20 billion to maintain IDA funding
on a per capita basis. But the United States has steadfastly refused to go beyond an
initial offer of $750 million annually. Since the U.S. share of IDA is now 25 percent,
this would establish IDA VII at a 3-year level of $9 billion which--adjusted for infla-
tion-is a 40 percent reduction from IDA VI.
To say that this is a penny wise and pound foolish decision is an understatement
of grand proportions. Each dollar that the United States pledges to IDA is willingly
matched threefold by the remaining donors. Virtually every one of our Western
allies recognizes IDA as the single most important and effective source of develop-
ment assistance for the world's least developed countries.
IDA's success at leveraging policy reforms as a condition of assistance is a matter
of record. Donor countries freely concede that the World Bank is by far the best
equipped to secure difficult economic policy changes through conditional lending.
Under U.S. guidance, IDA has increased emphasis on promoting private sector ini-
tiatives and market-oriented policies in the Third World countries.
IDA projects consistently have shown an average rate of return of around 18 per-
cent, approximately the same as the average rate of return on World Bank loans.
This success can be credited in part to the high standards of project preparation,
appraisal, management, and review required by IDA.
Some 27 countries which formerly borrowed from IDA have developed sufficiently
that they have "graduated" from IDA and are now deemed credit-worthy to borrow
from the IBRD or other more conventional sources. This proven track record is why
all of the donor nations were astonished and angered at the decision of the United
States to reduce the seventh replenishment in real dollars by 40 percent. In effect,
we have isolated ourselves from our allies and from the 131 nations who are mem-
bers of IDA. We are abdicating the lead role that we always have played in the de-
velopment of the world's poorest nations. And we are doing so at a time when the
need is very great.
Mr. Chairman, I have just returned from sub-Saharan Africa. My purpose in
going there was to assess starvation on the continent and the extent of the area's
need for development assistance. My brief visit hardly qualifies me as an expert, but
I would like to state for the record that I found existing starvation facing hundreds
of thousands of people in Mozambique. Shocking as that fact is, even more shocking
is the fact that a starvation time bomb is ticking away throughout the Sahel and in
many of the countries in southern Africa. A catastrophe of the most unimaginable
proportions is about to happen.
The causes of this situation are no mystery. Drought is a part of it. But grinding
poverty is the greatest part of it. Emergency food aid may get us over the immedi-
ate crisis. Even so, literally millions of people will die. But the fact of the matter is
that we-the developed world-must begin the much longer process of pumping up
117
Africa's productive capacity. That is what IDA is all about. That is what America
ought to be about. And that is what our parsimony is about to put at dire risk.
Make no mistake, a reduction of IDA's resources in real terms by 40 percent during
the next 3 years will fall most heavily on the poorest nations of Africa. It will fall
on them at a time when the pending food crisis and post-colonial economic failures
have created a very favorable climate for policy reform. Without external develop-
ment assistance to leverage such reform we will miss a golden opportunity to in-
crease productivity, create freer markets, and reduce food subsidies. On January 1,
1984, IDA had 157 projects pending in sub-Saharan Africa involving investments of
$2.8 billion. A 40 percent real cutback jeopardizes this potential significantly. And
the United States, a prime mover in IDA's very creation, stands alone in its desire
to accomplish this result.
Mr. Chairman, I realize that too much water has flowed under the bridge to
expect a U.S. pledge or appropriation higher than $750 million to IDA VII this year.
I deeply regret this situation. However, I believe that--when all the evidence is in
regarding the adverse impact of cutting IDA back 40 percent in real terms—we will
change our decision next year. Virtually every religious group, every private volun-
tary organization, every donor country, and all of our allies are urging us to get the
IDA replenishment up at least to 1983 levels. The late Terence Cardinal Cooke
wrote the following to President Reagan several weeks before he died last Septem-
ber:
As a Nation known for its compassion, the United States has accomplished so
much through the years in advancing the cause of international justice and peace
through its programs of economic assistance to the less fortunate peoples of the
world ... I respectfully suggest that consideration be given this year to maintaining
and even increasing our Nation's support of IDA's effective work.
The entire free world is awaiting our return to leadership.
I would like to suggest an amendment to this Committee. It is a compromise, but
it does hold out the possibility that the United States might change its mind during
the 3 years that IDA VII will run. The amendment would allow this country to pro-
vide additional resources to the International Development Association which-I am
confident-would then be matched by other countries.
My amendment would authorize, in addition to the $2.25 billion, a further supple-
mental contribution to IDA of $750 million. However, this authorization would leave
the initiative with the Administration. It would come into force if, and only if, the
President should find, and report to Congress, that the seriousness of the economic
conditions in the recipient countries, particularly those in Africa, warrant such a
supplemental contribution. This compromise is eminently fair. It leaves intact the
Administration's proposal—while at the same time it offers a small glimmer of hope
to those who are in such great need.
The United States would thus have the freedom and the flexibility to act expedi-
tiously in the event that conditions in sub-Saharan Africa and elsewhere worsen. I
would like to believe that they will not, but my experience leads me to a more pessi-
mistic conclusion. I am sure of one thing, however, and that is that this great coun-
try of ours, given the flexibility to act, will do so. We have always been a leader in
responding to the needs of others; I hope we will continue to lead at a time when
our help is so desperately needed.
Senator MATHIAS. I, of course, welcome your testimony and I
agree with the points you make.
You mentioned leverage. Leverage is extremely important. You
testified that for every dollar we invest we leverage $3 from other
sources and that, it seems to me, is a critical principle that should
be recognized.
Now if you take our total foreign assistance program as it is re-
flected in the President's budget for the coming year, there is just
short of $16 billion requested, but of that sum only $1.5 billion is in
multilateral programs, and, therefore, the great preponderance of
what we are doing is on a bilateral basis where there is very little
opportunity to get any leverage.
think that your point here is extremely well made. It does not
only apply to IÑA but to other programs as well.
Senator DANFORTH. I would like to say this, too, Mr. Chairman.
On the question of leverage and the participation by other coun-
118
tries, if the United States starts cutting back on programs such as
IDA, how are we going to ask the rest of the world to participate?
I mean, they are going to say to us, look, first of all, the United
States has done a better job of recovering from the world recession
than we have. Second, you are maintaining by your policies the
high value of your dollar, which is negatively affecting our econom-
ic situation. We have urged you to act on that and you have not,
and now you have the gall to come to us and ask us to fill the
breach which you have opened up.
It seems to me that this approach of trying to cut back to $750
million from $1 billion annually is to take the position that, well,
the United States really is not interested in world leadership any
more. So I would think it is a matter of national pride and national
standing and leadership, as well as doing what is right.
Senator MATHIAS. I am glad you made the suggestion that you
have that we ought to increase that authorization above the re-
uested level. I do think we have to face squarely the fact that
some of our colleagues will say, what are you doing with our
money. You are throwing it down a well. IDA is not important.
Foreign assistance is just a giveaway.
And the facts, of course, are otherwise—that in the years since
World War II, when development programs began in a major way,
per capita incomes in the developing world have increased-not
enough, but they have gone up. Life expectancy has gone up.
Health standards have gone up. Educational standards, have risen.
The basic benchmarks of civilizations have reflected that the in-
vestment made by the industrial world and the developing world
has been a success. It seems to me that on that record you and I
have some reason to hope that we could achieve a higher authori-
zation.
Senator DANFORTH. I would also say this. Just from the stand-
point of national self-interest I spend a lot of my time on interna-
tional trade matters. I am the chairman of the International Trade
Subcommittee of the Finance Committee.
If America is going to do business in a world community, we
need a healthy world community in which to do business, just as
the private businessperson would not want to do business in an im-
poverished neighborhood if he can do business in a prosperous
neighborhood. The same is true with Americans doing business
abroad.
Senator MATHIAS. I think we have to admit very candidly as
well, that there is an element of self-interest here. One of the most
dramatic examples or illustrations of that was the fall off in Amer-
ican exports to Mexico when the Mexican economy got into trouble.
Americans lost jobs because the Mexican economy was in a decline.
American factories lost business.
And that is just one illustration of a general principle that oper-
ates around the world--that our customers are better customers if
they are in a position to buy.
I very much appreciate your being here and I do appreciate your
suggestions.
Senator DANFORTH. Thank you, Mr. Chairman.
Senator MATHIAS. Our next witness is the distinguished Secre-
tary of the Treasury, Mr. Donald T. Regan.
119
Mr. Secretary, you have the floor.
STATEMENT OF HON. DONALD T. REGAN, SECRETARY OF THE
TREASURY
Secretary REGAN. Thank you, Mr. Chairman. I am appearing
today in strong support of the administration's legislative proposals
for the multilateral development banks (MDB's].
This year the President has recommended participation in the
seventh replenishment of the International Development Associa-
tion, known as IDA VII, and U.S. membership in the Inter-Ameri-
can Investment Corporation (IIC).
These legislative proposals are consistent with the policy conclu-
sions contained in the administration's '1982 assessment of the
MDB's. The recommended programs will stress support for activi-
ties and policies which buttress sound economic growth in the de-
veloping countries while bearing in mind the budgetary constraints
which our government faces.
Now the International Development Association, the conces-
sional assistance affiliate of the World Bank, is the single most im-
portant development institution for the world's poorest countries-
those with a per capita income of $795 or less. It is the centerpiece
of our MDB legislative request this year.
At the very beginning of this administration we conducted a
thorough review of our participation in the multilateral financial
institutions in general and of IDA in particular. That review pro-
vided a basis for continued measured support for IDA, a position
which I wish to reaffirm here today. We are committed to an effec-
tive, high-quality, project-oriented IDA which can act as a catalyst
in the process of economic development.
In deciding on a recommended funding level of $2.25 billion for
IDA VII the administration undertook an extensive process of
formal and informal consultations. Our final recommendation re-
sults from three basic considerations: one, a funding level that is
adequate to maintain IDA as an effective instrument for the pro-
motion of economic development; two, a funding level that is realis-
tic in light of previous difficulties in obtaining IDA appropriations;
and, three, a funding level that is sensitive to our overall budget-
ary situation.
Our first concern was the desire to provide IDA the funds neces-
sary to maintain its effectiveness as a multilateral development in-
stitution. While the scale of its operations has grown dramatically
in recent years, it was not obvious to us that such growth rates
needed to be continued in order to maintain its effectiveness.
In many respects, the chief strength of IDA is not the financial
resources which it provides but the potential impact of its market-
oriented economic policy advice and of its institution building and
technical assistance efforts. Here is where multilateral assistance
can be most effective and here is where we have sought to direct
IDA's attention relatively successfully.
Economic development is overwhelmingly a question of mobiliz-
ing local human and financial resources. The objective is to find
the right policies which encourage individuals to work, save, and
invest. To the extent that IDA can help countries find and imple-
120
ment these policies, it has been and will continue to be successful,
and it is primarily on that basis that we support it.
Mr. Chairman, I am going to truncate a lot of my prepared re-
marks and jump for a few minutes to the IIC.
Senator MATHIAS. Your full statement will appear in the record.
Secretary REGAN. Thank you, Mr. Chairman.
As far as the Inter-American Investment Corporation is con-
cerned I have been impressed by the very substantial economic
progress in the Latin American and Caribbean region over the last
two decades. The Inter-American Development Bank [IADB] has
played a major role in this process.
The creation of the Inter-American Investment Corporation in
my view will fill an existing gap in the development activities of
the Inter-American Development Bank. The IIC is designed to
invest, through loans or equity participations, in private sector
firms.
In light of the potential requirements of the private sector in
Latin America and the Caribbean and given the limited resources
that will be available to the IIC, it was decided early in the discus-
sions among interested IDB member governments that the objec-
tive and intended beneficiaries would have to be well targeted.
In this regard, there has been a general consensus among
member governments that the IIC should concentrate its efforts on
small and medium-sized firms--those typically finding it difficult
to obtain capital.
The IIC will be limited to making loans and equity investments
in firms majority owned and controlled by the domestic private
sector. With a small staff experienced in doing business in Latin
America and the Caribbean, the IIC will also provide advisory serv-
ices to these firms in order to nurture a strongly self-reliant and
market-oriented approach to commerce, industry, and agrobusiness.
In conclusion, Mr. Chairman, the United States has joined with
almost 30 other countries in the hope that the IIC may play an im-
portant role in the region's economic development. The U.S. par-
ticipation is essential for that hope to be realized.
We appreciate your strong leadership, Mr. Chairman, and those
of other members of this committee in support of the U.S. partici-
pation in the multilateral development banks and I hope the com-
mittee will favorably and expeditiously report the administration's
proposed legislation and that by working together we will be able
to obtain early enactment.
Thank you, Mr. Chairman
[Secretary Regan's prepared statement follows:)
PREPARED STATEMENT OF HON. DONALD T. REGAN
Mr. Chairman, I am appearing before you today in strong support of the Adminis-
tration's legislative proposals for the multilateral development banks (MDBs). This
year, the President has recommended participation in the seventh replenishment of
the International Development Association (known as “IDA VII”) and U.S. member-
ship in the Inter-American Investment Corporation (or the "IIC”).
These legislative proposals are consistent with the policy conclusions contained in
the Administration's 1982 assessment of the MDBs. The recommended programs
will stress support for activities and policies which buttress sound economic growth
in the developing countries, while bearing in mind the budgetary constraints which
our government faces.
121
IDA VII will provide direct and vital assistance to the poorest countries in Sub-
Saharan Africa and South Asia. This program is important for our foreign economic
policy goals in these regions and deserves solid, bipartisan support.
The IIC will emphasize support for the private sector in Latin America and the
Caribbean-our neighbors and partners in development. We expect that the Annual
Meeting of the Board of Governors of the Inter-American Development Bank in late
March will adopt a resolution recommending establishment of the IIC. For the coun-
tries of the Hemisphere, I think it's the right program at the right time. I hope you
will agree.
INTERNATIONAL DEVELOPMENT ASSOCIATION-SEVENTH REPLENISHMENT
The International Development Association (IDA), which is the concessional as-
sistance affiliate of the World Bank, is the single most important development insti-
tution for the world's poorest countries, those with a per capita income of $795 or
less. It is the centerpiece of our MDB legislative request this year.
Through its policy advisory and institution building roles, IDA can make an im-
portant contribution to the process of economic development. Many of the poorest
countries have limited access to capital markets. In these countries, IDA, together
with other official flows, provides a significant portion of investment funds and an
important supplement to domestic savings.
Our legislative request is for a 3-year authorization totalling $2.25 billion for IDA
VII. IDA was founded in 1960, largely at the initiative of the United States, and we
remain by far the largest contributor to its resources. IDA disburses its funds in the
form of 50-year credits at a zero rate of interest (but with a 0.75 percent annual
service fee and with a 10-year grace period on repayment of principal).
For more than a decade, IDĂ has been the most controversial element of the U.S
foreign economic assistance effort, and the past several years have been no excep-
tion. In public discussions and within the U.S. Government there have been fre-
quent debates over the appropriate funding levels for IDA and over the direct and
indirect impact of its operations on recipient countries. Consequently, at the very
beginning of this Administration, we conducted a thorough review of our participa-
tion in the multilateral financial institutions, in general, and of IDA, in particular.
That review provided the basis for continued but measured support for IDA, a posi-
tion which I wish to reaffirm here today. We are committed to an effective, high-
quality, project-oriented IDA which can act as a cataylst in the process of economic
development.
In deciding on a recommended funding level of $2.25 billion for IDA VII, the Ad-
ministration undertook an extensive process of formal and informal consultations.
Our final recommendation results from three basic considerations: (1) a funding
level that is adequate to maintain IDA as an effective instrument for the promotion
of economic development, (2) a funding level that is realistic in light of previous dif-
ficulties in obtaining IDA appropriations, and (3) a funding level that is sensitive to
our overall budgetary situation.
Our first concern was the desire to provide IDA the funds necessary to maintain
its effectiveness as a multi-lateral development institution. While the scale of its op-
erations has grown dramatically in recent years, it was not obvious to us that such
growth rates needed to be continued in order to maintain its effectiveness. In many
respects, the chief strength of IDA is not the financial resources which it provides,
but the potential impact of its market-oriented economic policy advice and of its in-
stitution building and technical assistance efforts. Here is where multilateral assist-
ance can be most effective, and here is where we have sought to direct IDA's atten-
tion relatively successfully. Economic development is overwhelmingly a question of
mobilizing local human and financial resources. The objective is to find the right
policies which encourage individuals to work, save and invest. To the extent that
ĪDA can help countries find and implement these policies, it has been and will con-
tinue to be successful, and it is primarily on that basis that we support it.
Of course, a certain level of financial resources is an important complement to the
implementation of policies in a number of countries. Exactly what that number
should be, however, is not at all obvious. But we are satisfied that, given the poten-
tial large benefits from the pursuit of sound economic policies, a U.S. contribution of
$750 million a year for a 3-year period is adequate to achieve our objective of an
effective institution.
As a result of the IDA VII negotiations with other countries, a 3-year replenish-
ment totalling $9 billion was formally agreed to on January 13. In the absence of
any additional contributions by other donors, this implies that IDA should be able
to commit about $3 billion a year over the next 3 years. This would be about only 6
34-045 0-849
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percent less than IDA's actual yearly average commitments in dollars over the past
four years, and certainly belies the notion that IDA runs the risk of being "crip-
pled” by a shortage of funds.
Our second major consideration in deciding on an IDA VII funding recommenda-
tion was to select a level that was realistic in light of previous difficulties in obtain-
ing IDA appropriations. Such difficulties have not been unusual in the history of
IDA, but they came to a head with the sixth replenishment.
Although IDA VI negotiations were completed in early 1980, efforts to enact im-
plementing legislation in the Second Session of the Ninety-Sixth Congress were in
vain. Reintroduced in the First Session of the Ninety-Seventh Congress, the legisla-
tion might still have failed passage, if the Omnibus Budget Reconciliation Act in
August 1981 had not provided a relatively safe vehicle for enactment. The price we
paid, however, was high: IDA VI was stretched over a fourth year.
I worked hard over the last 3 years to obtain the IDA VI authorization legislation
and the associated annual appropriations. The President repeatedly lent a hand at
crucial times. When our fiscal year 1984 supplemental request for $150 million is
enacted, we will have fulfilled our commitments under IDA VI. But please make no
mistake; we do not want a repetition of IDA VI, nor do our fellow donors, nor do
IDA recipients.
As you well know, Mr. Chairman, many Members of Congress have supported
higher replenishment levels. Other Members have expressed significant doubts
about the emphasis placed on IDA as a primary vehicle to support development in
the poorest countries in view of its poor record in certain instances. Still other
Members have stressed that budgetary resources should be husbanded to meet other
pressing domestic and foreign policy needs or to contribute to a reduction in future
budget deficits.
The proposed funding level and our continuing initiatives on IDA policy issues try
to meet the concerns of as broad a cross-section of the Membership as possible. I
hope and believe that our proposal will obtain broad Congressional support. As I
have already stressed, U.S. credibility in the eyes of other IDA members would not
benefit from a repetition of the delays and frustrations experienced under the sixth
replenishment.
The third consideration, which I have already alluded to, and which is clearly on
the minds of every Member of Congress, is the magnitude of overall budget expendi-
tures, and the resulting deficit. When our fiscal year 1984 supplemental request for
IDA VI is enacted, the United States will have contributed $1,095 million to IDA in
the current fiscal year. Our proposal of $750 million a year for the next 3 fiscal
years reflects the budget constraints under which we are operating.
I would like to turn to several related issues involving IDA. The first of these is
burden-sharing with other donors. Controversy over sharing the costs of multilater-
al development bank funding has been persistent over the years. In accordance with
the Sense of Congress expressed in Public Law 95-481, the Administration success-
fully negotiated a reduction in the United States share to 25 percent of the seventh
replenishment. This provides a reduction of 2 percentage points compared to the
U.S. share of the sixth replenishment.
Other major donor countries have also reduced their share in the seventh replen-
ishment: the United Kingdom by 3.4 percentage points and Germany by 1 percent-
age point. On the the other hand, Japan has increased its share by 4.1 percentage
points, France by 1.2 percentage points, Italy by about one-half of a percentage
point and Canada by two-tenths of a percentage point.
Overall, the seven major industrialized countries will provide 77.3 percent of the
seventh replenishment compared to 77.8 percent of the sixth replenishment.
A second issue is the question of the overall balance between bilateral and multi-
lateral aid. Despite the widespread belief that there has been a shift toward some
what more bilateral economic aid in recent years, I think you will find that in terms
of program support there has really been very little change. The fact is that both
forms of assistance are indispensible elements in our foreign economic policy. In our
bilateral aid programs, particularly in Africa, we work closely with World Bank and
IDA staff in coordinating our activity and in working with recipient governments on
potentially helpful policy changes.
As a third issue, we frequently encounter the perception that the multilateral de-
velopment banks, including IDA, have a prominent role to play in coping with the
current debt servicing problems of some developing countries. I should like to em-
phasize that IDA is not-either by design or aptitude-a balance of payments
lender, but rather a project oriented, long term lender. IDA credits typically are dis-
bursed over an 8- to 10-year period, and thus have only a very marginal role to play
in short term balance of payments problems.
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Finally, we have been working vigorously, both in the replenishment negotiating
process as well as in policy and lending discussions at the IDA Board, on making
the use of IDA resources more effective. Our basic objective has been to increase the
developmental impact of every dollar of taxpayer resources that goes to IDA.
The process of economic development is exceedingly complex, and, over time, the
policies pursued at the microeconomic level can have a significant impact on growth
rates. To strengthen IDA lending policies, we have emphasized the importance of
lending to countries which are pursuing sound economic policies that can make the
best use of scarce concessional lending resources and the maximum use of individ-
ual incentive and market forces. We have been willing to back up our efforts with
"no" votes on credits when the situation warranted.
We have stressed the importance of concentrating lending on the poorest coun-
tries that lack the creditworthiness to borrow on harder terms, but which have rela-
tively effective economic policies in place. And here we are seeing some positive re-
sults.
When countries achieve the economic strength to establish improved creditworthi-
ness, we should witness a gradual but steady process of increasing reliance on lend-
ing from the hard window of the World Bank. Several countries, such as India and
Kenya, have relied on the IBRD for an increasing proportion of World Bank devel-
opment assistance. A number of countries, such as Cameroon and the Congo, have
matured to full reliance on the hard window in recent years. In addition, Guyana
and Papua New Guinea are not expected to receive credits beginning with IDA VII.
We welcome these evident indicators that IDA lending criteria are being refined
and look forward to the continued progress of other countries in the future.
Finally, on the issue of regional allocation of IDA resources, we have made our
position quite clear. Historically through mid-year 1983, IDA devoted 26 percent of
its lending program to the countries of Sub-Saharan Africa. In the seventh replen-
ishment, we have vigorously urged a greater share of IDA for this region in recogni-
tion that IDA is the single most important development institution in that part of
the world and that Sub-Saharan Africa contains the largest number of countries
lacking the creditworthiness to borrow on market-related terms. The proposal for
IDA VII now records a general agreement among donor countries that the highest
priority should be given to IDA flows to Sub-Saharan Africa.
INTER-AMERICAN INVESTMENT CORPORATION
In recent years, I have been impressed by the very substantial economic progress
in the Latin American and Caribbean region over the last two decades. The Inter-
American Development Bank has played a major role in this process. Substantial
investments in infrastructure and economic services are now in place and will
permit further growth in many countries. The population and natural resources
base in many countries of the region offers enormous possibilities for solid economic
progress.
The creation of the Inter-American Investment Corporation (or the “IIC”), in my
view, will fill an existing gap in the development activities of the Inter-American
Development Bank. The IIC is designed to invest, through loans or equity participa-
tions, in private sector firms.
It has become increasingly clear that the lack of long-term investment capital for
private enterprises has seriously constrained the region's development. Recent un-
stable economic conditions in Latin America have also seriously impeded the growth
of the private sector and placed domestic financial systems under a strain. The key
to future growth lies with the revitalization of the private sector, sound economic
policies, greater reliance on market forces and continued adjustment on both the
macroeconomic and microeconomic levels.
In a recent study, the IDB concluded that, with the exception of the largest firms,
private enterprises in Latin America and the Caribbean are chronically undercapi-
talized. The financial sector in most countries is not able to provide sufficient long-
term financing let alone risk capital—for private investment. Even in those finan-
cial intermediaries most inclined to make equity investments, there is a shortage of
managerial, advisory and technical services needed to help new ventures succeed.
In light of the potential requirements of the private sector in Latin America and
the Caribbean and given the limited resources that will be available to the IIC, it
was decided early in the discussions among interested IDB member governments
that the objectives and intended beneficiaries would have to be well targeted. In this
regard, there has been a general consensus among member governments that the
IIČ should concentrate its efforts on small and medium sized firms—those typically
finding it difficult to obtain capital.
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The IIC will be limited to making loans and equity investments in firms that are
majority owned and controlled by the domestic private sector. With a small staff
experienced in doing business in Latin America and the Caribbean, the IIC will also
provide advisory services to these firms in order to nurture a strongly self-reliant
and market oriented approach to commerce, industry and agro-business.
Balanced, non-inflationary economic growth with employment creation is one of
the most important objectives that the IDB should be pursuing. I believe the IIC-
directly through its project activities and indirectly through its spin-off effects on
IDB programs-can make a productive contribution to this objective.
Although an independent organization with its own articles of agreement, staff
and voting process, the IIC will be more like a "window" of the IDB than a totally
new institution. The IDB will provide administrative and logistical support and will
serve as a source of information on broad economic developments in member coun-
tries.
I would like to assure the Members of the Committee that we will review very
carefully the IIC's projects and programs. We will also make every effort to assure
that its resources are used in a catalytic fashion.
The initial concept for an independent, private sector oriented institution for the
IDB was put forward by Venezuela about three years ago. During negotiations over
the last twelve months, more than twenty Western Hemisphere members of the IDB
and eight industrialized countries from outside the region have indicated their in-
tention to be founding members of the institution.
The initial capitalization of $200 million will be fully subscribed by participating
countries. It is important to note that all contributions will be in freely convertible
currencies. The Latin American and Caribbean borrowing countries will provide
about $110 million, which is 55 percent of the capital shares and the eight nonre-
gional industrialized countries will subscribe to $39 million (or 19.5 percent of the
capital). After consultations with Members of Congress from both Houses, the Ad-
ministration has indicated its readiness to provide $51 million, thus giving us 25.5
percent of the capital shares.
The leg
tion which I will be submitting shortly will authorize U.S. membership
in the IIC and will accord the IIC the same status under U.S. law as other develop-
ment banks enjoy.
The Administration believes that the primary engine of regional economic devel-
opment will be the private sector. The IĪC will help meet the substantial long-term
capital needs of the region's small and medium sized enterprises. We believe that
IIC investments will encourage additional private investment flows from abroad and
act as a catalyst for equity flows.
The United States has joined with almost thirty other countries in the hope that
the IIC will play an important role in the region's economic development. United
States participation is essential for that hope to be realized.
CONCLUSION
I am certain you appreciate more than I that any Administration legislative pro-
posals for the development banks tend to be controversial and can be difficult to
enact. I want to assure you that this Administration strongly supports the institu-
tions and funding levels represented in this legislation, and will be working very
closely with this Committee to ensure enactment this year. We greatly appreciate
your strong leadership, Mr. Chairman, and those of the other Members of this Com-
mittee in support of United States participation in the multilateral development
banks.
Senator MATHIAS. Thank you, Mr. Secretary. We appreciate the
leadership that you have exercised in supporting the international
development programs.
I think there is a major element of self-interest in this because
for every foreign aid dollar that we contribute to these internation-
al multilateral institutions there is money spent in this country.
Many of the goods that are sent-farm machinery, for example,
sent to distant parts of the world to assist in the improvement in
agriculture—are purchased from American manufacturers. Many
of the technical services-engineering, health services, and other
services—that are required in these programs come from U.S.
sources.
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So we are not just squandering this money in the wind. It is
being invested in American goods and American services which
then go abroad to improve the quality of life in the developing
world.
One of the concerns that I have-and it was also reflected in the
testimony this morning of Senator Danforth-is whether or not we
are doing enough. If you apply an inflationary factor to the pro-
gram, comparing IDA VII with IDA VI, it would appear that in-
stead of $9 billion there ought to be a $15 billion program simply to
keep track with inflation.
And if you contemplate the addition of the People's Republic of
China as a participant there should be a further increase, so that
the $9 billion figure that is recommended for IDA VII is substan-
tially below what would be required if we were to stay even, if we
were to have a level program.
Secretary REGAN. Let me comment on that, Mr. Chairman, if I
might.
We gave this much consideration in the administration before
coming up here, both from a formal point of view and in informal
discussions with Members of Congress-both Houses and both par-
ties. We have had the experience of the last 3 years with IDA, com-
mitted as we were to the previous administration's commitment to
the just over $3 billion IDA VI replenishment share.
As you know, we suffered in 1981 and again in 1982 from stretch-
outs that damaged our credibility in these organizations, and it
threw off the schedules as far as the administration of IDA and on
the programs that IDA was contemplating. So as a result we deter-
mined this time that whatever we would agree to, we would have
to be reasonably well assured that the Congress would go along
with it. So we came up with the figure of $750 million.
Now in talking with the other nations of the world, they wanted
to come up with $12 billion. That seemed to be the figure they were
coalescing around instead of the $9 billion that we later ended up
with. But I would like to point out a few things on that, Mr. Chair-
man.
In spite of the fact that most nations wanted $12 billion, IDA has
not been fully subscribed to for the $9 billion. First of all, many of
the nations have said they were only going to contribute their na-
tional currency and they want to do it on a blended exchange rate
with the dollar, not the current value of their currency against the
dollar. Instead, they wanted to use an average of the exchange rate
over the last 6 months, which means they will be giving less than
if they were to take the current valuation of their currency vis-a-
vis the dollar.
Second, there are subscriptions open. About 3.5 percent of the
fund is not subscribed to and very few, if any, are rushing in to
pick that up. Now this is a clear indication to me that the $9 bil-
lion is about the maximum that the world, let alone the United
States, would be willing and can afford to put up at this particular
time, considering the budgetary restraints of all of the nations of
the world, including the industrialized ones.
Now, this is going to make it difficult on the administration of
IDA for the World Bank people. Our suggestion to them is that
many of the large recipients in bygone years be graduated to the
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hard-loan window, that they do not necessarily need a 50-year no-
interest loan, that they can afford to either borrow directly from
the World Bank or in the world markets.
And we think that by judiciously changing the mix of loans from
the previous years they can accomplish as much as they did with
the previous amount, even though it is a reduced amount.
Senator MATHIAS. First of all let me say that I have great respect
for your judgment and experience in the field of measuring the
level of congressional support. You and the President both threw
yourselves into the breach in the IMF quota fight and you did it
successfully.
It was not what I would call a landslide, but you got it passed,
and I know that was a very difficult fight. It took a lot of resistance
and a lot of just sheer hard work to maintain the commitment of
the United States to the IMF quota.
So, having that experience behind you I know has had a some-
what sobering effect on just how much the traffic will bear. At the
same time, there was some sentiment in this committee for a
higher level at IDA. So I am interested in what you have just told
us about what your feeling is on the level of participation that
could be expected from other countries.
In other words, you are saying that you think had we kept it at
the $12 billion figure, which was the level in IDA VI, that it might
not have been subscribed? That the leverage which we have tradi-
tionally enjoyed of about 3 to 1 on American investment would not
have been successful this time?
Secretary REGAN. I think it would have been very difficult to get
the $12 billion, even though many nations would deny that in ret-
rospect. Just based on the experience of trying to get the $9 billion
and falling short leads me to suspect that the $12 billion would
have been an even more difficult amount to achieve.
Senator MATHIAS. Well, let us assume for the moment that that
is correct. What are going to be the implications for the old custom-
ers? I had a cousin who used to be a salesman. He was a pretty
good salesman. He used to say, do not ever be so avid for new busi-
ness that you forget your old customers.
Secretary REGAN. But he was selling. He was not just giving
away his product. You have to remember that in IDA we are giving
away something, and to me the touchstone has to be which nations
are the ones that truly have been shut out from world borrowing
or find it very difficult to get money from any other source other
than IDA and on these very concessional terms.
Sub-Saharan Africa to us is the area where most of the emphasis
should be placed. We decided this early on in our review in 1982
and in 1983, looking ahead to the discussions we would be having
in 1983 with the rest of the world and how we would define where
we thought IDA was needed. Indeed, that is the recommendation to
the IDA Board, that they concentrate on sub-Saharan Africa. Now,
this means that the old countries, such as India, will probably be
disappointed.
Senator MATHIAS. What about new countries, such as the billion
people in the People's Republic of China?
Secretary REGAN. Again, in discussions with the People's Repub-
lic of China we have repeatedly told them that we did not think
127
they could come in for as much as they perhaps would wish to get
from IDA; that there would be plenty of money to borrow as far as
the hard window is concerned, plenty of money to borrow in the
open markets.
China has a surplus in its trade. China is building up reserves,
and I am talking about the People's Republic now. They are not
from that perspective an extremely poor country. Of course, on a
per capita basis, when you have 1 billion of anything you are going
to have a very low per capita income, and they do.
But I suspect that the majority of the projects that the People's
Republic would want to put into effect could be financed at the reg-
ular World Bank window or in the private sector.
Senator MATHIAS. Now, you mentioned India. The 1980 per
capita income in India was $240, which is not very much. Do you
suggest that India may be in a position to require less lending? If
you adjust that 1980 per capita income, it does not leave much
squeezing that is likely to be done.
Secretary REGAN. Well, the sub-Saharan African nations have
even less than that. In 1983, I believe India got 32 percent of all of
IDA's resources. If together India and the People's Republic were
to get 40 percent of IDA's funds, I would think that that would be
about the maximum that they could expect, because, again, they
could borrow and the sub-Saharan African nations cannot borrow
in the open market or in the hard window.
Senator MATHIAS. What you are really suggesting is that we
ought to graduate some of the old customers.
Secretary REGAN. And even some of the new customers, if they
are indeed not as impoverished as some of the other potential re-
cipients.
Senator MATHIAS. But then the question becomes, on what basis
do you graduate them? What kind of standard do you apply to say
that these are countries that now should move on?
Secretary REGAN. I think it is the general credit standing of a
nation who can borrow in the world markets, who can borrow from
the hard windows. What is the status of their balance of payments?
What is the situation regarding their own internal economy? What
is the extent of their external debt?
There are many questions that go into whether or not a country
is creditworthy or not. If it is creditworthy in some of the other
areas and does not have to be the recipient of aid, which indeed
IDA is, to the extent or that they would like, I would suggest that
these hard choices are going to have to be made by the executive
directors of IDA and by the board.
Senator MATHIAS. Well, I think they will be hard choices.
Secretary REGAN. Very hard. If you compare India and Bangla-
desh as examples, I do not think Bangladesh could borrow very
much. Therefore, a Bangladesh should have a little precedence
over an India.
Senator MATHIAS. But you have to be careful with those stand-
ards in applying them to see exactly what the result would be. As I
understand the suggestion you have made, Brazil would become eli-
gible as an IDA customer.
128
Secretary REGAN. No, because Brazil has just demonstrated it
can borrow in the open market. It has just borrowed an additional
$6 billion in the marketplace.
Senator MATHIAS. So that would become, as a part of your stand-
ard, a disqualification for the IDA window?
Secretary REGAN. Yes, I would look at whether or not a country
has other resources or other potential resources.
Senator MATHIAS. Well, in developing other resources do you
think IDA has played a role, let us call it a disciplinary role if you
like, comparable to that which the IMF has played in a different
sphere?
Secretary REGAN. To a great extent, IDA has been a very good
influence on nations as far as getting them to concentrate on what
are their better projects, ones which will offer the better rates of
return, and to make them think through their own priorities
within their country. I think IDA from that point of view has done
well
Obviously, IDA has had some failures. It has had some things
that could have been improved. That book that they put out on
IDA, “IDA in Retrospect,” indicates that they have had a lot of
success, but some failures.
But by and large, I would think that IDA has to be congratulated
as having been an organization that has bettered many nations as
a result of what it has done in encouraging their infrastructure
and project loans.
Senator MATHIAS. In your review of this general situation, I am
sure you have looked at the comparisons in operations between the
bilateral American programs and the multinational programs.
Have you observed any instances in which you felt that we were
working against ourselves or instances in which the bilateral pro-
grams counteract some of the multinational goals?
Secretary REGAN. Offhand, I cannot think of anywhere our bilat-
eral aid has impeded multilateral assistance or vice versa. I am
trying to think and I cannot think of any. Let me check with my
staff.
[Pause.]
Secretary REGAN. They say there is usually pretty good coordina-
tion among the programs of the regional banks, the World Bank,
and our bilateral programs.
Senator MATHIAS. If you were in a position to alter and amend
the practices and procedures of IDA, would you have any sugges-
tions?
Secretary REGAN. Of IDA?
Senator MATHIAS. Yes.
Secretary REGAN. I think one of the things that IDA very defi-
nitely will have to be very sensitive to—and it is a very neat bal.
ancing act; I will try to shorten this answer, but it is a complicated
question is this: Many of the developing nations want to start
projects that have repercussions on the industrialized nations,
either because they involve the same type of products that the in-
dustrialized nations have to sell or they would preclude the indus-
trialized nations from selling to those countries.
For example, in the metals area there are many nations that
have deposits of metals which they might like to exploit in order to
129
obtain foreign exchange. On the other hand, we know that many
metals are in surplus currently in the world. The question here is:
Should IDA try to help a nation, an impoverished nation, start a
metal extraction industry?
Should it try to encourage it to expand its textile industry, be-
cause again in these impoverished nations that is the obvious first
thing you start with, textiles. We did it ourselves when we were a
new nation, in New England and then later in the South with tex-
tiles. As we matured, we gradually reduced our concentration on
textiles.
Now, these other countries are going through that same revolu-
tion. Nevertheless, every industrialized country has a surfeit of tex-
tiles at this particular moment and most are setting up or have set
up protection against it. I think the executive directors of IDA
have quite a problem here in trying to figure out, what do you do
in these metals and textiles areas and the like over the next sever-
al years as to, (A) helping the beneficiary country and at the same
time, (B) not harming the donors.
Senator MATHIAS. I know that you can get into serious problems
of that sort. I remember many years ago when I first came to the
Congress the United States donated a modern meatpacking plant
to Argentina, many millions of dollars. It was the most modern
meatpacking plant in the world.
About the time the plant construction was nearing completion,
the U.S. beef industry heard about it, with the result that there
was very quickly an embargo placed on all beef from this plant. So
we give the Argentines, in that instance, a totally unusable, uneco-
nomic asset, which was just a white elephant sitting down there,
because nobody had really looked into the future as to what the
real factors were going to be in the use of this particular item of
aid. That does require some use of the crystal ball, as well as a lot
of good judgment.
Secretary REGAN. Well, we have it today in such things as copper
and steel. It is very sensitive, and it is something that IDA has to
think through. Now, obviously if a textile plant is to be funded
through IDA and is designed strictly for domestic consumption, so
be it. I mean, that to me would be a good thing to do.
But to pour more textiles into the industrialized world, that is
something else again.
Senator MATHIAS. To some degree, this hearing is anticipatory,
because we have not yet actually received the IDA legislation
which the administration will recommend. Can you give us any
idea of when that legislation might be expected on the Hill? And I
ask this question because, as you know, we have a rather short
working period in this election year and we will have our work cut
out to get it through.
Secretary REGAN. We will be forthcoming on the legislation. We
actually are preparing it now, but we have been held up because of
an internal problem with the World Bank as far as—and here I am
also being anticipatory—the relationship between the distribution
among donors to IDA and the distribution among donors to the se-
lective capital increase for the World Bank, which will be forth-
coming next year.
130
What has happened, Mr. Chairman, for the record is that a
nation such as Japan has agreed that it will step up its participa-
tion in IDA VII from a little over 14 percent to a little over 18 per-
cent, provided that when shares in the selective captial increase
are given out in the World Bank they are recognized as being
number two there, also.
At the same time, Japan is not acting like a number two nation
as far as its financial markets are concerned and the like, which is
very troublesome to us. So how these things are going to play out
we do not exactly know.
We were just discussing India and that country does not want to
be cut back on its participation in the selective capital increase.
Yet it would have to be, if Japan is going to be pushed up. Can a
compromise be arranged there? We think so. But until that is ar-
ranged and until a selective capital increase is more or less ce-
mented and we see what the Japanese are going to do, for example,
we are in no position to say, OK, this is the final document and we
are ready to sign.
We are urging them to do that quickly, and at the same time we
are up here on the Hill working with Members of Congress and
with the staffs trying to tell them what the selective capital in-
crease is all about, because we are going to have to come back with
that later on.
Senator MATHIAS. Well, I know I do not have to put you on
notice, because you are thoroughly familiar with the problem. But
for all those parties who may be less familiar with the American
political system and who want to see us meet our commitments in
1984, I think it is necessary that we get on with this because the
clock will run out very fast.
Secretary REGAN. I agree
Senator MATHIAS. Thank you very much for being here today.
Secretary REGAN. Thank you very much, Mr. Chairman.
Senator MATHIAS. Our next witnesses are: Ambassador Strauss;
Mr. Richard Debs, president of Morgan Stanley International; Jack
Richards, vice president of M. W. Kellogg Co.; and Christopher
Phillips, president of the National Council for United States-China
Trade.
[Pause.]
Senator MATHIAS. The Chair has been looking out over the audi-
ence and, seeing the members of this panel, with some fear and
trepidation, having some appreciation for the fact that the meter
was running on all of these highly compensated witnesses while
they were sitting mute, and feeling that this was a great waste of
talent, I am wondering, Senator Biden, if we should not start out
by asking Ambassador Strauss, who is reputed to be a Demo-
crat-
Senator BIDEN. He is a Democrat. He is a great Democrat.
Senator MATHIAS [continuing). If he wants to analyze the New
Hampshire primary.
Senator BIDEN. I can do that for him. Pat Caddell called this 21/2
months ago. He hit it right on the button. I have a 60-page memo
on my desk showing how it all happened.
But he might want to tell you that.
131
Ambassador STRAUSS. Well, I suspect that Pat Caddell, Mr.
Chairman and Senator Biden, did call it and I think he probably
had a good deal to do with it. I did not listen to him quite as care-
fully as I possibly should have, because he also told me 10 days
before the election in 1980 that it looked like the Democrats had it.
Senator BIDEN. Well, sometimes he is wrong. (Laughter.]
He is right on the important ones. He is right in New Hampshire
and wrong in 1980.
Ambassador STRAUSS. Well, my problem is I was with him at the
wrong time and against him at the wrong time.
Senator BIDEN. Welcome to the committee, by the way.
Ambassador STRAUSS. Thank you.
Senator MATHIAS. Senator Biden, do you want to make any state-
ment before we hear this panel?
Senator BIDEN. No, I do not. But I do have a couple of questions
when the appropriate time comes.
Senator MATHIAS. Well then, we will ask Ambassador Strauss to
lead off for the panel.
STATEMENT OF HON. ROBERT STRAUSS, AKIN, GUMP, STRAUSS,
HAUER, AND FELD, WASHINGTON, D.C.
Ambassador STRAUSS. Yes, Mr. Chairman, I will. And I may have
to leave a bit early. I hope you will forgive me. I do not know that I
will contribute a great deal to the discussion anyway, but I am.
pleased to be here.
Senator MATHIAS. We are very grateful to you for being here,
and we understand the time pressures you have.
Ambassador STRAUSS. I have had other commitments, as you
know, and I shifted them as much as I could, but there were some
that I could not change. I will stay for as long as I can.
I thought I might begin by saying that the story you told has a
flip side to it. In the exchange between you and the Secretary of
the Treasury, I am reminded also when I think of this funding of
another story. When I was growing up in west Texas in rather dif-
ficult times, we used to have a story there about the old farmer
who worked his horse. He needed his horse.
The problem was it was just too expensive, and he thought the
best thing he could do was train him not to eat and therefore he
would be able to get the use out of him and would not have the
expense, much as we think in terms of IDA. Now, it worked
almost. He damn near had the horse broken of the habit, so the
story goes, when he starved to death.
And that could be the same thing happening, it seems to me,
with respect to some of these countries. It just is not a one-way
street. Some could starve to death if we are not careful about pro-
viding the right funding.
I personally am pleased to have the opportunity to be here with
you for a few minutes to comment on this seventh replenishment
of IDA and specifically with respect to the appropriate level that
our country should contribute in this regard.
It would be foolish for me with either you or Senator Biden here
to try to travel under false colors. You know that I am not here as
an expert on IDA or on foreign aid generally, although I have fol-
132
lowed it in generality and with some considerable concern and in-
terest. So I guess I am here as a private citizen who is concerned
about international relationships.
Senator MATHIAS. But your experiences have given you an oppor-
tunity to see the interaction of trade and aid and development as-
sistance and what it does to trade patterns.
Ambassador STRAUSS. That is exactly why I came here and was
pleased to be here, Senator Mathias. I do believe that, and I believe
that those of us whọ then go into the private sector have a respon-
sibility to retain those interests, and whatever light we might pos-
sibly shed based on those experiences, that we should do so.
And I think that this does directly impact on our international
relationships, as well as our country's resources. Large as those re-
sources are, Í know that nonetheless they are limited, and I know
it and I know the difficult problems that the administration, and
specifically the Secretary of the Treasury has, as do the members
of this committee and others in the Senate. But it is important that
we see that those resources are utilized in the most appropriate
manner to preserve peace and enhance human wellbeing around
the world.
As you commented, I did serve as Special Trade Representative
in the Carter administration and later I was in the Middle East for
approximately a year. In those capacities, I came, I think, in a very
sensitive and I think in a very sensible and responsible way to ap-
preciate and understand the kind of contributions that this Nation
of ours can make in the very vital stake—we talk about our vital
interests but we have a very vital stake in improving the economic
conditions in other countries in whatever way we can.
You and I together just finished a little task on the Kissinger
Commission on Central America, and I suspect Senator Biden and
your other members who are not here today have some general fa-
miliarity with the work and the report of that Commission. For the
record, among those recommendations was a strong opinion on the
part of most, and I daresay probably all, of the Commission mem-
bers that the United States should significantly increase its bilater-
al foreign assistance to Central America.
I concurred in those recommendations and I think, as I recall,
that you did. However, I just do not believe that increasing our bi-
lateral foreign aid in areas such as this necessarily implies a reduc-
tion in our commitment to multilateral aid institutions such as
IDA. I keep reading from time to time that there seems to be some
conflict there, that they are mutually exclusive.
Now, I followed the renegotiation of IDA and the proposal that
this country supports funding at an annual level of $750 million.
Now, the interesting thing is, in the past it has been the executive
branch, as I recall, that has always favored increased commitments
to multilateral lending and it has been the Congress that has
dragged its feet. This time it seems to me that the tables have been
turned.
My judgment is—and you do not need any political advice from
me, but my judgment is therefore that we are in trouble trying to
increase this above the levels that the administration comes in
with, because it is the kind of program that needs administration
leadership and administration thrust. Based on the testimony
133
today and what I have previously heard, we are not going to get
that.
Senator MATHIAS. We saw that in the IMF situation.
Ambassador STRAUSS. Exactly.
Senator MATHIAS. If the President had not thrown himself into
that thing wholeheartedly, it would not have passed yet.
Ambassador STRAUSS. And let me say, Mr. Chairman, there are a
lot of us in the out party who threw ourselves wholeheartedly in
that and worked hard to help that out. I worked with the Treasury
Department on that.
Senator MATHIAS. There are a couple of Democratic Members of
the House that have warm personal letters from the President to
prove their participation.
Senator BIDEN. Which we are all going to read in this election
year, I can assure you. [Laughter.]
Ambassador STRAUSS. And I will read the warm letter that I re-
ceived, too, thanking me for my support. [Laughter.]
But in any case, politics aside, I suspect that the views that I rep-
resent and my judgment is that you represent based on your ques-
tioning today, Mr. Chairman, are not the majority view in the
Senate today and they are not going to be unless you get some
thrust at it, and they are probably not even the majority view in
the country.
Now, that does not mean they are wrong, but that means that
they need to be more effectively expressed. And that is why hear-
ings such as this I think are important and why I hope you will
have the same kind of dogged determination on this that you do on
other things that you feel strongly about.
I think, very simply, that this country ought to be very wary
about weakening its commitment to multilateral lending. I think it
is important that we are not just talking here, and the country has
to know, about these issues, about phrases like bailing out banks
and contributions to nations such as Brazil and others that you
mentioned. What we are talking about is aid, primarily in the form
of loans, for the purchase of really the barest necessities of life for
people.
By that I mean education, housing, fertilizer. And I think the re-
cipient countries we are talking about are the very poorest and
weakest nations of the world. Now, we can disagree in this country
about a lot of things, but I do not think we can disagree over the
need to help people on the brink of starvation.
Mention was made of sub-Saharan Africa or Chad or Bangladesh
or some of these other countries. Now, there are some reasons, and
we tried to contrive some other reasons, why this type of aid serves
our national interest. Some reasons are good and some, of course, I
suspect are not so valid.
But be they foreign policy objectives or national security con-
cerns, in my opinion overriding all else it comes down to this: We
must contribute to IDA because these countries are in the direst
straits of any countries of the world, and helping them is a moral
imperative and this Nation has never failed to assume its moral
imperatives.
134
Senator BIDEN. If I may interrupt to ask you a question at that
point, I would appreciate it. I know you will have to leave, and I
will have to leave in a moment.
Mr. Chairman, I just came from a Budget Committee hearing.
Chairman Volcker was up there talking to us. Now, I am not being
facetious when I say I know you probably understand better than
any witness we have or will have the political ramifications of
what I believe is an extremely meritorious case.
The problem is, we are going to have all we can do to keep for-
eign aid from being drastically cut beyond even what the President
is suggesting. This is viewed by the public as part of that foreign
aid. Now, the reason I ask you this question, Ambassador Strauss,
is that you are uniquely positioned to respond to it from not only a
position of having some expertise in both areas and having worked
in both, but also from a political perspective.
I have a feeling as a practical matter that we are going to get
down to having to make a priority judgment about whether or not
we are going to come up with $750 million to $1 billion
worth of aid that is essentially directed to the sub-Saharan region
and south Asia or we are going to be able to go to Latin America.
Now, perhaps we should do both, but I just do not see it in the
cards that that is going to happen. And I am going to ask you the
toughest of all questions and I will not blame you if you beg the
question. I know you want both, but given the choice of one or the
other, where do you see the greater moral and/or political and/or
strategic imperative? Where do you go?
Ambassador STRAUSS. Well, that is really a Hobson's choice.
Senator BIDEN. Oh, it is.
Ambassador STRAUSS. And I think it is a choice that you may
very well have to make. But I do not think that you ought to have
to make that choice, Senator Biden. But that gets into an altogeth-
er different subject for another day. It has to do with how you run
a nation. It has to do with not whether you are taxed too much or
too little or are you properly being taxed and how are you being
taxed. It has to do with spending strategies that go across a whole
spectrum here.
I guess I am a conservative Texan politically. I look more liberal
down there sometimes and sometimes maybe more conservative up
here. I do not know. But it has nothing to do with philosophy or
ideology in my judgment, is what I am trying to say. It gets into a
lot larger question.
I guess if I were going to talk about vital interests right now,
vital interests, I would think that I might have to look first at the
substantial part of the recommendations of the Kissinger Commis-
sion. Those things again would be subject to conditionality and
some other aspects of it that I have not even seen spelled out. Hell,
I would not spend any money down there if there were not strong-
er conditionality than the administration is going to call for in its
legislation, in its proposed legislation. I would strap those condi-
tions on them. You cannot answer your question with a simple
answer. That is the reason I just cannot answer that question.
Senator BIDEN. It is kind of an unfair question in the sense that
it does not lend itself to a single yes or no answer. But as a practi-
cal fact of life, it is the kind of question that Mac Mathias and the
135
Senator from North Carolina, Mr. Helms, and Mr. Biden are going
to have to vote on fairly soon.
I will not interrupt your testimony any more. You have an-
swered the question and that is something that we will have to
grapple with.
Mr. Chairman, I apologize. I am going to have to leave for 15
minutes. I will be back, hopefully in time to ask this panel some
questions, and if not the next panel.
But I thank you, Mr. Ambassador, for allowing the interruption.
Ambassador STRAUSS. Thank you.
I have no futher statement to make. I think I have covered ev-
erything I know and maybe a little bit more that I know very well.
Senator Helms, glad to see you today, sir.
Senator MATHIAS. Let me ask the other members of the panel if
they will object to our putting another two questions to Ambassa-
dor Strauss before they leave.
[No response.)
Senator MATHIAS. Do you have any questions?
Senator HELMs. No; not now. Thank
you.
Senator MATHIAS. You talked about the relationship between bi-
lateral and multilateral aid, and that is a critical factor right now.
The administration's general scheme for foreign assistance, as I
mentioned earlier to Secretary Regan, is just short of $16 billion,
which may be more than the traffic will bear in this election year,
and I think we have to face that very realistically.
Ambassador STRAUSS. That is the reason that I made the political
point that I did.
Senator MATHIAS. But that breaks down to $1.5 billion in multi-
lateral and almost $14.5 billion in bilateral. Is that tilted too far in
the bilateral direction?
Ambassador STRAUSS. I think it is. It would be in my judgment-
now, I said I am not an expert on this. But the administration does
not look with great favor on multilateral funding. You know that.
They like bilateral better.
Bilateral brings forth problems, and I would break it out, I sus-
pect, in different percentages, although maybe when you look at it
case by case—well, you just have to see what you are doing.
I was amazed to see those figures, that that was the way it broke
down. Has it done that in the past, been anywhere in that range?
Senator MATHIAS. I think this is probably a sharper delineation.
Ambassador STRAUSS. That is what I thought; yes, sir.
Senator MATHIAS. Of course, when you get down to the bottom
line of the political issue, it is going to depend to some extent on
our ability here to persuade our colleagues and through them the
people of this country that this is in fact an investment, that this is
not a giveaway, that it will affect our ability to trade; that if the
developing world is not developing, then they are not very good
customers.
Ambassador STRAUSS. There is no question about that. The great
tragedy, Mr. Chairman, is the number of people in this country
who believe--and this of course is in my judgment—that assistance
to certain of these developing countries are handouts.
They really do not understand how many jobs depend upon those
people being able first to eat, then to work, and in turn to buy
136
from us. And at a time when we are facing the problems we are
facing right now, it is a matter of serious concern. So I think this is
not a handout, although it has some aspects of charity in it and it
is certainly concessional.
But I think it comes back to us in many ways, including the very
indirect way which feeds into everything else, and that is this Na-
tion's role as a leader of the free world. We cannot ever get away
from that or we will lose the ability to spread democracy as we
should.
Senator MATHIAS. I am going to put into the record, unless the
point is made by other witnesses before the end of the hearing, an
analysis of just what the economic impact on the United States is
of a dollar spent in foreign assistance and through the multination-
al institutions, because I think politically that is an essential fact
to have in mind.
But let me yield for a question to the Senator from North Caroli-
na.
Senator HELMS. Thank you, Mr. Chairman. And Bob, good morn-
ing.
Ambassador STRAUSS. Good morning, sir.
Senator HELMS. You mentioned conditionality. Were you refer-
ring specifically to Central America, to El Salvador, or were you
talking in general?
Ambassador STRAUSS. I was answering his question in general
about that Central American aid, specifically about that.
Senator HELMS. Well, I have serious problems with the report of
the Kissinger Commission. For example, with respect to the advo-
cacy of the land reform and that being made a condition. The
Western Hemisphere Affairs Subcommittee of this committee has
studied this subject a great deal.
I think this land reform that we have thrust upon El Salvador
has caused a lot of the violence down there. I do not know how it is
in Texas, but in North Carolina, particularly eastern North Caroli-
na, if you move in there and say, we are going to take your land
here and give it to these folks there, you would have some bloody
altercations in North Carolina.
I think it depends on the conditions, and I just wondered if you
had any opinion on the land reform.
Ambassador STRAUSS. I learned a great deal about land reform
that I did not know. I used to think I knew a good deal about it
and found out that I knew very little about it, Senator Helms. I
learned it is not nearly as simple as I thought it would be to break
up the oligarchy of a handful of families who controlled all of the
land in the country and took advantage of all the rest of the popu-
lation.
Well, I learned it is not easy while reforming to feed a country,
to have products for exports. I learned how difficult it is to put a
program in effect and make it work, despite all of your good ef-
forts.
But I also learned one more thing, that unless we get some kind
of ownership in the hands of people
there we are really never going
to be able to stop this unrest and spread of Marxist-Leninist philos-
ophy. I really believe that is one way to stop it.
137
What I also learned is, when those folks get paid for that land
with money, they take what portion they get in money and they
ship it into Miami and they go and live over in Miami, and they
send money back over to fund death squads to go kill the poor
devils who have gotten the land, so that they are scared to work it
and the first thing you know it reverts back to them. There is no
one there to work it.
Now, that is a part of the problem, too. It is a very complex prob-
lem, and whatever side you come down on philosophically you do
not have all the answers.
Senator HELMS. You are wrong.
Ambassador STRAUSS. That is exactly right, you are just partially
wrong at the very best, and it is just that simple or that complex.
Senator HELMS. Well, they are not really paying for the land, so
there is not really shipping of money. They are giving them notes.
Ambassador STRAUSS. They are giving them notes and markers,
but they are giving them some money, and they are taking that
money.
Now, it is not my opinion, Senator Helms. It is an historical fact,
a provable fact, that money is exported from Central America,
from El Salvador and others, directly into Miami and goes and
feeds right back down there into those death squads. My judgment
is, since we are talking about this, is that the FBI will prove that,
now that they have gone to work on it.
Senator HELMS. The FBI?
Ambassador STRAUSS. Yes, sir, and others. And if they do that, if
they prove those cases, if they do the right kind of investigative ef-
forts—and I assume they will—they will make those cases and
then we will see just how bad that situation is.
Senator HELMS. Well, if that can be shown that would be some-
thing. What I am saying, Bob, in response to what you said, is that
the evidence has not yet been made available to me. Now, we have
inquired of the FBI, we have inquired of the CIA, and we have in-
quired of various agencies. What I want to know is the truth.
Today I followed up a conversation that I had with the President
on this very matter. I have suggested to him and urged him that
whatever the facts are to lay them out for the American people,
and let us not have all of this hearsay, because if this guy or that
guy is involved in death squads, forgive me, but to hell with him.
Ambassador STRAUSS. Yes, sir. I completely share your views, sir.
And let me say, there is a hell of a lot more heat than there is
light about what is going on down there. A lot of heat has been
generated. Senator Mathias, I think, shares my view.
Now, we heard evidence. We heard from people in whom I would
place confidence, and we heard it from everybody at all levels
there, from church people to labor leaders to business people to po-
litical leaders, that that is exactly what is taking place.
Now, there seems to be little question. Proving it, of course, is
another matter. I think we can do it.
Senator HELMs. I see the chairman has the gavel in hand and he
may want me to speed this up.
Senator MATHIAS. Well, I thought we ought to get back to multi-
national financial institutions.
34-045 0-84-10
138
Ambassador STRAUSS. Senator Helms asked the questions. I only
answered them, Mr. Chairman.
Senator MATHIAS. I did not want to interrupt in that important
dialog.
Ambassador STRAUSS. Thank you very much, and I am sorry that
I took so much time. Senator, it is very nice to see you.
Senator MATHIAS. Thank you.
Mr. Debs.
STATEMENT OF RICHARD A. DEBS, PRESIDENT, MORGAN STAN-
LEY INTERNATIONAL, AND MANAGING DIRECTOR, MORGAN
STANLEY AND CO., ON BEHALF OF THE CHAMBER OF COM-
MERCE OF THE UNITED STATES, ACCOMPANIED BY KATHRYN
YOUNG, DIRECTOR, INTERNATIONAL ECONOMIC DEVELOP-
MENT POLICY, U.S. CHAMBER OF COMMERCE
Mr. DEBS. Thank you, Mr. Chairman.
I might say I am appearing today on behalf of the U.S. Chamber
of Commerce. I am the Chairman of its Task Force on Internation-
al Economic Development, and I am accompanied by John Rich-
ards, sitting on our right, another member of the task force and
vice president of the M. W. Kellogg Co., and Kathryn Young of the
Chamber, who is sitting behind us.
We very much welcome this opportunity, Mr. Chairman, to testi-
fy in support of IDA. Over the years the Chamber has supported
sustained and adequate funding for IDA and we do so because of its
I might say, Mr. Chairman, that I have a written statement
which I would like to submit for the record. I will try to summarize
it.
Senator MATHIAS. It will be included in the record.
Mr. DEBS. Thank you.
As we heard, for the forthcoming seventh replenishment, the ad-
ministration has taken the position that the U.S. contribution
should be decreased from existing levels, which would have the
effect of reducing the overall worldwide IDA program substantial-
ly.
The chamber's position is that we would have preferred to see
the U.S. contribution maintained at existing levels. However, in
the circumstances we support the administration request of $750
million a year over the 3-year period as the minimum desirable
level to fund IDA programs.
We are not sure how this procedurally will work out. As you
pointed out this morning, the bill is not in yet and there are other
events that might happen. If, for example, during the course of this
replenishment a supplemental funding program for IDA is put into
place by the World Bank, the chamber would support participation
by the United States to the extent necessary to restore IDA to its
present levels.
It is our understanding--as I say, there are many questions up in
the air, but it is our understanding that a total of about $950 mil-
lion per year by the United States would enable IDA, assuming in-
creased shares by other donor countries, to restore its programs to
close to existing levels.
139
The chamber has long supported multilateral development insti-
tutions in which the United States is a participant. U.S. involve-
ment advances, we believe, our overall economic, political, security,
and humanitarian interests. This kind of assistance, we believe, is
in the long-term interest of the United States. It provides a stabiliz-
ing influence to help avoid political and social disruption and cre-
ates long-term foreign markets for U.S. goods, services, and invest-
ments.
A very important consideration when we look at multilateral in-
stitutions is the fact that we are the major shareholder in them.
Our controlling interest provides us with a very strong influence
over their policies and programs, and based on that position, as you
mentioned this morning, Mr. Chairman, it gives us very strong le-
verage in terms of our consideration.
It enables us to get much more effectiveness for every dollar we
put in. As you mentioned, for every dollar for IDA in particular,
the other countries contribute about $3. Being a banker, I think
this is a very good leverage position to be in. We certainly get a lot
of bang for our dollar.
I think, as the discussion came up earlier with Senator Biden
and Bob Strauss in terms of looking at the playoff between, say,
Central America and the IDA programs, one factor to keep in mind
is that under the IDA programs we will contribute $1 and the rest
of the world will contribute substantially more.
Senator MATHIAS. There is a supplementary statistic which is an
estimate of the economic activity generated in the United States by
every IDA dollar, and I wonder if you happen to have that figure.
Mr. DEBS. We do not have it in those forms, but we do have some
figures on various elements that would go into that. But I will
check. We certainly have a lot of data in here. I am not sure we
can produce it in that fashion, but we would be glad to submit it
for the record.
Senator MATHIAS. I think that is an important element of this
picture that should be before the Congress as it considers the IDA
replenishment.
Mr. DEBS. We would be happy to follow that up.
[As of the date of publication, the information referred to had
not been supplied.]
Mr. DEBS. In terms of U.S. policy interests and what we, through
these multilateral development institutions, are trying to achieve,
we are all familiar with the strategic importance and the social
and humanitarian considerations. I would like this morning to
focus a bit more specifically on the economic interests of the
United States and the impact on the U.S. business community.
There are several points, some of which have been made.
First of all, of course, IDA helps to expand United States and
world trade in general. As you know, the developing countries over
the past few years have been the United States' fastest-growing
export markets. In 1982 they accounted for close to 40 percent of
total U.S. exports, and in the period from 1970 to 1982, exports to
developing countries grew from about $11 billion to about $83 bil-
lion.
Although the current IDA recipient countries account for only
about 15 to 20 percent of total U.S. exports, they should be looked
140
to for their potential as well. As we know, a specific objective of the
IDA program, and one which has been met in many cases, is to
graduate these countries from IDA, to expand their economies suf-
ficiently so that they are no longer dependent on purely concession-
ary financing. I think one of the leading examples that demon-
strates the case very well is Korea. Korea is one of the IDA gradu-
ates. As we know, without sustained economic growth developing
countries would be unable to increase their imports which would
have a negative effect on U.S. jobs and the U.S. economy in gener-
al. Clearly, we have a direct interest in seeing that these countries
are able to feed themselves and beyond that to produce, and take
part in the world economy. This point has been eloquently covered
by Robert Strauss.
Second, a rather specific point that I think is important is the
way IDA has developed in recent years a focus on promoting the
private sector and free market economic initiatives. Current IDA
efforts are emphasizing their economic policy dialog with member
countries. The chamber is very pleased to see this kind of effort
being made on behalf of IDA
Both IDA and the World Bank, and in conjunction with the IMF
and its programs of conditionality, have worked and been success-
ful in opening the oil sector, for example, in India to foreign bid-
ding. They have convinced China to accept market pricing princi-
ples, helped reduce subsidies and price controls in many African
countries, liberalized import policies in India, Pakistan, and China
and several other countries where they have had high tariff bar-
riers.
And it is our understanding that many of these countries that
have accepted this kind of approach, especially India, have done so
on the assumption that these concessional flows will continue. It is
a part of a program that they see, and they rely on this kind of
flow for the future.
In these ways, IDA is helping to build free market economies
which offer potential future opportunities for U.S. investment,
something which the chamber and I think, in general, the Ameri-
can public is very much interested in seeing happen as a result of
our foreign aid programs.
Third and of very immediate impact is that the IDA program
does provide procurement opportunities for U.S. companies. These
are direct benefits that come out of it. Actually, as of last year,
very roughly speaking, U.S. companies received close to 14 percent
of total IDA procurement up until that point. That compares unfa-
vorably, actually, with what the U.S. contribution has been to IDA,
which at the present time is about a 25-precent portion of total
IDA contribution.
Other countries have done much better. That is, companies of
other countries in competing for IDA procurement have done
better. The chamber is concerned about this. As we look at it, we
think it is a disappointing showing. We are undergoing a study of
it and will be working on this to see how we could raise our U.S.
participation.
But this is a problem that goes quite beyond IDA. It really has to
do with U.S. export inducements, help by our Government, and so
forth. I might say that the United States does dominate procure-
!
141
ment in the energy and transportation sectors, and there are other
areas that U.S. companies have done well in. There are also coun-
tries where there are blended problems which combine IDA and
World Bank loans and where the opportunities for U.S. companies
are much better. We have statistics on those in the written state-
ment.
Basically, the idea again with this graduation program is to work
toward a level where these countries are at that stage and where
our U.S. procurement experience has been much better.
I might say, in a very general way I am echoing some of the
points made this morning by Senator Danforth in particular. The
replenishment, the whole program, is really based on compelling
immediate needs of these countries. Now is not the time to cut
back.
We are all emerging from a severe recession. A lot of it can be
laid on our doorstep in terms of the policies that we have had to
follow ourselves: The high dollar, high interest rates, and all,
which have a domestic justification, but nevertheless which have
had a real impact on the rest of the world. And whatever the cause
of the problem, the problem certainly has been there. And now to
cut back substantially on an IDA program we feel is neither wise
nor just.
In terms of impact on the budget, the U.S. Chamber, as I am
sure you know, Mr. Chairman, is deeply concerned about control-
ling U.S. Government expenditures, about the budget deficit in
general, and is very reluctant to recommend any actions that
would have an adverse impact. However, in the case of IDA, the
expenditures required are relatively modest within our overall aid
program, as discussed a few minutes ago, even as part of that mul-
tilateral aid program.
More importantly, these benefits that we see far outweigh the
costs. In addition, the impact of the cost of an IDA program is
much less than one might think at first glance. U.S. contributions
are not given out in a lump sum. Instead, they are stretched out
over a period of time. These funds have generally taken about 10
years to be disbursed. So the budgetary impact is definitely ex-
tended over a longer period of time.
Again, in terms of budgets and looking at the dollar, I think
myself that this leveraging impact is a very important factor. It
really gives us what we want to accomplish in terms of foreign
policy objectives in a much more cost-efficient way.
As I mentioned, there are some studies going on about the
impact of a lower program on the recipient countries. I understand
that the World Bank is working on the possibility of a supplemen-
tal fund. That may be one of the mechanisms that may be pursued
to increase the amount of the IDA program overall.
If there is a supplemental fund, we think that would be particu-
larly important to U.S. businessmen because there could be pro-
curement restrictions placed on this supplemental fund if the
United States does not contribute to it. And we have an experience
from the past where U.S. businessmen were restricted from bidding
on programs as a result of a supplemental fund in which the
United States did not participate.
142
As I say, we do not know how this will work out, but we clearly
do support as a minimum the administration request, and beyond
that we would also support the level of U.S. participation that
would maintain the overall IDA program at more or less existing
levels.
Thank you, Mr. Chairman.
[Mr. Debs' prepared statement follows:]
143
STATEMENT
on the
INTERNATIONAL DEVELOPMENT ASSOCIATION
before the
SENATE COMMITTEE ON FOREIGN RELATIONS
for the
CHAMBER OF COMMERCE OF THE UNITED STATES
by
Richard A. Debs
February 29, 1984
I am Richard A. Debs, President of the investment banking firm of
Morgan Stanley International, and Managing Director of Morgan Stanley and Co.
Prior to joining the firm in 1976 I was First Vice President and Chief
Administrative Officer of the Federal Reserve Bank of New York. I am chairman
of the task force on International Economic Development of the Chamber of
Commerce of the United States, on whose behalf I am appearing today.
Accompanying me is John C. Richards, Vice President, Government Affairs, The
M.W. Kellogg Company, and Kathryn Young, Director, International Economic
Development Policy at the U.S. Chamber Mr. Richards, who also serves on the
task force, represents a major construction and engineering company directly
involved in international development worldwide.
The Chamber welcomes the opportunity to testify in support of the
International Development Association (IDA), a member institution of the World
Bank group.
Over the years, the Chamber has supported sustained and adequate
funding for IDA because of its importance to U.S. interests.
For the forthcoming seventh IDA replenishment, the Treasury Department
has taken the position that the U.S. contribution should be decreased, which
would have the effect of reducing the overall worldwide program substantially.
Al though the other donor countries would have been prepared to maintain current
levels of IDA funding at about $12 billion over the three year replenishment
period, because of the U.S. position, the new agreement reduces the amount to
about $9 billion. The resulting V.S. contribution is approximately
$750 million a year for three years, as opposed to a U.S. contribution of
about $950 million which would have been sufficient to maintain funding at
existing level s. The Administration request represents a 30 percent reduction
(46 percent in real terms) in the U.S. contribution.
144
1
!
I
:
While the Chamber would have preferred to see the U.S. contribution
maintained at existing levels, we support the Administration request of
$750 million per year over a three year period as the minimum desirable level
to fund IDA programs and we urge prompt and favorable Congressional action on
the request. If during the course of this replenishment, a supplemental
funding program for IDA is put into place by the World Bank, the Chamber would
support participation by the United States to the extent necessary to restore
IDA to its present level. This would imply an additional U.S. contribution of
up to $200 million per year over a three year period.
The Chamber has long supported multilateral development institutions in
which the United States participates. U.S. involvement in these organizations
advances our overall economic, political, security and humanitarian interests
in an increasingly interdependent world. Such assistance is in the long-term
interests of the United States in promoting economic development, providing a
stabilizing influence to help avoid political and social disruption engendered
by economic hardship, and creating 1 ong-term foreign markets for U.S. goods,
services and investment.
An important consideration in supporting these institutions is the fact
that the United States is the major shareholder. Controlling interest by the
United States provides us with strong influence over the policies and programs
of these institutions, and, based on that position, enables us to leverage the
value of our contributions to obtain much greater effectiveness in achieving
our own policy goals. For example, in the case of IDA, for every $1 the
United States contributes, other countries contribute approximately $3.
The Chamber strongly endorses IDA's current efforts to engage in
economic policy dialogue with its member countries. In addition to IDA'S
project financing and technical assistance, this policy approach is timely and
practical, particularly when it assists countries in making difficult economic
adjustments and fosters pro-growth, market-oriented strategies.
145
IDA Replenishment - The Need
The Chamber's support for an adequate replenishment of IDA is based on
the compelling argument of immediate need for sustained concessional assistance
to the least developed countries as well as the fact that such assistance is
in the long-term interests of the United States. Now is the wrong time to cut
back capital flows to these countries, just when the world is emerging from
its worst recession in forty years, with economic development having been
brought virtually to a halt in the third world, and with international bank
lending curtailed significantly.
Faced with declining growth rates, deteriorating trade and rising
poverty levels, the near-term outlook for most of these developing countries
is bleak. The World Bank estimates that even with an optimistic 3.0 percent
growth rate, the number of people in traditional IDA recipient countries would
number 730 million in the year 2000. When China is added, this increases to
close to two billion people. For many of these countries we are looking at a
per capita GNP of less than $1 per day.
Most IDA countries have little choice in financing their development
alternate sources of funds simply are unavailable. Few of these countries are
attractive for commercial bank lending or private foreign investment at this
stage of their development. The terms attached to World Bank programs make 31
of IDA's recipients i neligible for World Bank 1 oans. Without a dequate and
sustained concessional assistance, these countries face close to insurmountable
odds in trying to accelerate their economic growth and alleviate conditions of
poverty.
Looking to the future, it is clear that much needs to be done to regain
development momentum in the third world. Countries must make the necessary
internal structural adjustments to generate growth, they must better manage
existing debt, attract foreign investment, expand foreign exchange earnings to
raise their debt-service capacity, and restore their creditworthiness. But
they cannot do it all on their own. The United States has a responsibility to
146
work to maintain a strong open global trading system and continue a sustained
flow of official concessional assistance to help them reverse course, recover
and grow.
The International Development Association
The International Development Association was created in 1960 as the
soft-1 oan affiliate of the World Bank. It makes highly concessional loans to
1 ow-income developing countries. More than 90 percent of IDA loans go to
countries with a per capita income of less than $410, with the remainder to
those with incomes between $411 and $731. Three principal criteria are used
to determine a country's eligibility for IDA funds: (1) poverty - measured by
per capita income, 2) creditworthiness - measured by ability to borrow from
conventional sources, and 3) economic performance - including ability to make
use of resources and the availability of suitable projects. Loans are for
50 years, with a grace period of 10 years. While there is no formal interest
rate associated with the loans, there is an annual service charge of
0.75 percent on the loan and 0.5 percent on the undisbursed portion of each
credit.
Approximately 90 percent of IDA monies comes from its contributing
members, seven percent from the World Bank's profits and the remainder from
repayments from IDA borrowers. Currently there are 131 IDA member countries,
33 of which are contributing members. Approximately 50 countries are at
present recipients of IDA assistance. Contributions are replenished on a
three year cycle.
Among the multilateral development agencies, IDA is by far the largest
provider of concessional assistance. Over time, its share of official
development assistance to developing countries has risen dramatically, from
3 percent in 1966, to 8 percent in 1970 to nearly 14 percent in 1981. In
1981, IDA flows represented 35 percent of total multilateral assistance.
Since its inception IDA has committed $29 billion to more than 1,300 projects
in 79 countries. The majority of its 1 oans have gone for agricultural and
rural development and basic infrastructure including transport, energy and
communication projects. IDA uses the same criteria as the World Bank in
selecting projects for its loans.
147
Recently IDA has become involved increasingly in economic policy
discussions with recipient countries. This "policy dialogue" has been
supported with related financing through sector loans and structural
adjustment lending. Unlike IDA's traditional lending, these loans do not
finance specific projects, but rather are disbursed as the country makes
necessary structural adjustments to reduce balance-of-payments problems.
Working in conjunction with the World Bank, the International Monetary Fund
(IMF), and other donor countries, this dialogue is important in engendering
the type of economic changes and long-term stability needed to attract other
private financial flows in the future.
IDA - Serving U.S. Interests
Support for IDA is important in meeting U.S. interests, both from a
long-term perspective and in achieving short-term objectives. It is essential
that we as a nation understand the important role of multilateral development
institutions such as IDA. Economic development is, by definition, long term,
requiring an ongoing commitment by both donor and recipient countries. It is
a complex and delicate process, not easily achieved even in well-established
or advanced industrial environments. In the more tenuous economic environment
of the developing countries, the resources and expertise of multilateral
development institutions such as IDA are essential to the process. United
States participation should be considered an investment in our future and in
the future of half the world's population having few other recourses to
development.
Specifically, IDA serves the following essential V.S. foreign policy
and U.S. business interests:
Ensuring Political/Strategic Objectives IDA lends to several key
countries which are of strategic importance to the United States.
These include: Somalia and Kenya in the horn of Africa; Sudan, which
borders Libya, Chad and Egypt; North Yemen in the Arab Peninsula;
Pakistan, which is now a front-line state in South Asia; Zimbabwe,
which is a key country in the Angola, Mozambique, South Africa mosaic;
and to Haiti and the Eastern Caribbean in the Western Hemisphere.
Together these countries account for nearly 15 - 20 percent of IDA
148
lending. All of these economies are very fragile. Further strains
could cause major political difficulties which could lead to the
destabilization of pro-Western governments and their possible
replacement by less sympathetic regimes. IDA has lent large amounts in
these countries for projects aimed at reducing rural and urban poverty,
meeting infrastructure needs, expanding industrial output, increasing
agricultural productivity, raising literacy rates and extending life
expectancy. The stabilizing influence provided by IDA and other
multilateral organizations is an important precondition to U.S.
business involvement in these countries.
Meeting Humanitarian Needs Sub-Saharan Africa and Bangladesh which
account for close to half of total IDA allocations - remain in a
precarious economic situation. As the case of Bangladesh demonstrates,
IDA can be invaluable in shoring up a country's economic foundations.
IDA played a crucial role in coordinating and organizing donor
assistance which has done much to ensure Bangladesh's survival.
Al though still very poor, Bangladesh has made considerable economic
strides in the last decade: GNP per capita has increased from $90 in
1981 to over $150 in 1983 (in 1980 dollars), literacy rates and life
expectancy have increased, agricultural output has grown steadily at a
rate of 3 percent annually and industry at over 10 percent annually
since 1970. Africa, however, is another story with sustained declines
in per capita income and increases in levels of population growth which
have negated any increases in output. Africa's infrastructure has
deteriorated and its dependency on food imports risen dramatically.
Without continued concessional aid, the prospects of reversing these
trends are discouraging.
Expanding U.S. and World Trade In recent years, the developing
countries have been the fastest growing export markets for the United
States. In 1982, they accounted for close to 40 percent of total U.S.
exports. From 1970 to 1982, exports to developing countries grew from
$10.8 billion to $82.7 billion.
149
Al though countries currently qualified as IDA recipients account for
only about 15-20 percent of total U.S. exports, these countries should
be looked to for their potential as future viable trading partners. A
specific objective of IDA's approach is to "graduate" countries from
IDA to help expand their economies sufficiently so that they are no
1 onger dependent on purely concessional assistance programs. Some of
our current major LDC trading partners, as in the case of Korea, have
"graduated" from needing IDA assistance.
Without sustained economic growth, developing countries will be unable
to increase their imports, with a resulting negative impact on U.S.
exports and the U.S. economy. Recent deteriorating economic and
financial problems throughout much of the developing world have had a
predictably adverse impact on our trade with these countries. In
recent years, U.S. exports to IDA countries declined steadily, from
$9.1 billion in 1980 to $7.9 billion in 1982. For the January
November 1983 period, U.S. exports to these countries slipped even
further to $6.6 billion, an 11 percent decline from the $7.4 billion
registered in the corresponding period in 1982. Cumulatively, this
$2.5 billion fall in V.S. exports has meant less U.S. production and
fewer new jobs.
If world trade is to expand and if the U.S. economy is to benefit, the
countries on the lower end of the development scale must continue to
grow. Our country has much at stake to ensure an economically advancing
developing world. Decline and stagnation there means an erosion in our
own economic recovery.
Promoting Private Sector and Free Market Economic Initiatives - The
Chamber is pleased to see IDA's increased emphasis on promoting private
sector initiatives and market-oriented policies in the countries where
it operates. For example, IDA and the World Bank, in conjunction with
the IMF, worked to open the oil sector in India to foreign bidding;
convinced China to accept market pricing principles, and helped reduce
150
elaborate subsidy and price control mechanisms in virtually all the
African countries in which IDA operates. Its policies in agricultural
development stress reliance on small private farms and on small
entrepreneurs in the industrial sector. IDA's policy efforts have been
successful in liberalizing import policies in India, Pakistan, China
and several other major countries which had high tariff walls and trade
barriers. It is our understanding that many of these countries,
especially India, have opened their economies on the assumption that
reasonable flows of concessional assistance would continue.
By laying the groundwork for sustained economic development, IDA is
helping to build free market economies which offer potential future
opportunities for U.S. investment and expanded areas for V.S. financial
and service activities. To the extent these countries can be integrated
as productive members of a stable world trading and financial system,
U.S. business and employment will benefit.
Providing Procurement Opportunities for U.S. Companies Of immediate
and direct benefit to V.S. companies are procurement opportunities
associated with IDA project contracts. As of June 30, 1983, U.S.
companies had secured a total of $1.5 billion in IDA contracts, which
is approximately 14 percent of total IDA procurement. Since the
inception of IDA the United States has contributed $9.6 billion, or
39 percent of total IDA funds. At the present time the U.S. share of
the total is about 25 percent. In either case, on a percentage basis
the procurement figure for V.S. business is not particularly noteworthy.
Japanese, German, U.K. and French companies all have fared better, with
procurement shares having exceeded commitment shares.
The United States does dominate procurement in the energy and
transportation sectors and U.S. consultants have been successful in
providing technical advice financed by IDA. In addition, IDA projects
often provide an entry for U.S. firms to explore non-IDA financed
opportunities in the recipient country.
151
In those countries where there are "blended" programs combining IDA
credits and World Bank 1 oans and in countries where only the World Bank
operates, procurement opportunities are greater. For example, in
FY 1983 (July 1, 1982 - June 30, 1983), U.S. companies benefited from
$174 million out of a total IDA procurement of $2.6 billion, while
receiving $699 million in World Bank contracts out of a total
procurement of $6.8 billion. It is therefore in the direct interest of
U.S. business to help the least developed countries served by IDA to
graduate, expand their economies, and move to procurement based on
non-concessionary financing.
Because the Chamber is concerned with the disappointing showing of U.S.
companies in obtaining IDA procurement in the past, we are undertaking
à thorough analysis of the reasons for the low figure and plan to
develop recommendations to improve the situation for our companies.
Next month in conjunction with the World Bank, we are coordinating a
major seminar in New York to inform V.S. companies about business
opportunities provided by the World Bank group and to advise them about
how best to take advantage of these opportunities. We are confident
that both these efforts will yield results for U.S. companies.
Effectiveness of IDA Programs
On the question of the overall effectiveness of IDA, in its 1982 review
of the role of the United States in multilateral development banks, the
Treasury Department concluded that, by and large, these banks have been
effective in contributing to U.S. global economic and financial objectives.
The report found that the soft-1 oan windows are particularly effective in
contributing to U.S. humanitarian objectives, by alleviating poverty and
improving material well-being in the poorest countries. In response to
outside criticism that multilateral banks provide loans which promote
irresponsible policies and that they sometimes discriminate against the
private sector, the Treasury study found instead that most of the projects are
economically sound and there is little evidence that the banks' loans
discriminate against the private sector. The Chamber is interested in the
extent of IDA's support for the indigenous private sector and we will be
1 ooking into this matter further.
152
One demonstration of the fact that IDA does work is the experience of
several countries which received large amounts of IDA assistance in the 1960s
and 1970s and have now graduated from IDA. Many of these "graduates" have
been of key political and economic interest to the United States. They
include: Korea, the Philippines, Indonesia, Thailand, Egypt, Morocco, Turkey,
Jordan, Honduras, El Salvador, Costa Rica, the Dominican Republic and Ecuador.
Al together, over 27 countries which formerly received IDA funds have now
graduated. In many of these cases, IDA was instrumental in ensuring their
economic survival and contributing to their eventual growth.
Budgetary Impact
The Chamber is deeply concerned about controlling U.S. government
expenditures and is reluctant to recommend actions that would have an adverse
impact on the U.S. budget deficit. However, in the case of IDA, the
expenditures required are relatively modest within the context of our overall
foreign assistance program. (Proposed expenditures on IDA are only five
percent of the Administration's FY 1985 request for foreign assistance. ) More
importantly, the benefits, both immediate and 1 ong term, far outweigh the
costs, In addition, the impact of the cost of IDA on the U.S. budget is much
less than might seem the case. U.S. contributions to IDA are not allocated to
the World Bank in a lump-sum, single payment, but instead are stretched out
over time, Payouts of IDA credits for individual projects generally are
extended over a ten year period. The Bank draws on the obligated funds from
the Treasury over the life of a project as need arises. This is usually
between one to two percent in the first year with the heaviest spending coming
in the fourth to seventh years.
We would note again that U.S. contributions to IDA are highly leveraged.
The leveraging means that our development dollars, when channeled through
multilateral organizations such as IDA, can be stretched further and accomplish
more, lessening the direct aid burden on the United States, while at the same
time, achieving our foreign policy objectives by virtue of our controlling
interest in these organizations.
153
Impact of Reduced Resources for IDA
The impact of the proposed reduction in resources available to IDA is
currently being evaluated by World Bank officials. At a minimum, the reduction
is likely to aggravate present economic difficulties experienced by many of
the IDA recipient countries. The entry of China into IDA further complicates
the competition for scarce funds. For illustrative purposes, the Bank has
prepared an analysis of the impact of reduced funding on India, a major IDA
recipient. It shows that even if all other factors were favorable, if IDA
allocations were cut proportionately across all beneficiaries, the growth rate
of India's GNP per capita would fall by more than 10 percent (from 2.6 percent
per annum to 2.3 percent). This scenerio would return India to the pattern of
slow growth that it has so long struggled to leave behind. Progress would
still be made in reducing poverty but the absolute poor would number
240 million in 1995 rather than the 180 million that would exist with a larger
IDA-VII allocation. Such a reversal of growth would be unfortunate.
..
Di sappointed by a $9 billion level rather than the hoped for
$12 billion replenishment, World Bank management is pursuing efforts to secure
supplemental resources for IDA. If such a supplemental can be put in place,
the Chamber would urge Congressional endorsement, to the extent that such
funds did not exceed $200 million per year over a three year period. Added to
the annual replenishment of $750 million, a total of $950 million per annum
would enable IDA, with increased shares by other donor countries, to restore
its programs to close to existing levels and permit it to meet the urgent
needs of its members.
U.S. participation in any supplemental fund is particularly important
to business because of the possibility of procurement restrictions on such
funds. In 1982, the World Bank found it necessary to create a $2 billion
supplemental fund to make up for a short-fall caused by the U.S. decision to
stretch its commitment to IDA-VI over four years, instead of the usual three
year period. A portion of that fund was restricted to procurement only to
donor country companies. Since the United States did not participate in the
supplemental, our companies were ineligible to bid on related projects. To
date, U.S. firms have been excluded from bidding on approximately $540,000
worth of contracts from this special fund.
34-045 0-84-11
154
Conclusion
As a minimum, we request that this committee approve the
Administration's request to support U.S. contributions to the seventh IDA
replenishment at the level of $750 million over a three year period. Economic
development is a long-term process, requiring a long-term and sustained
commitment. Maintaining an ongoing flow of concessional development assistance
is crucial to the low-income countries of the world to help secure development,
alleviate poverty, encourage economic adjustment and expand world trade. To
advance our own interests and those of the world economy, Congress should
continue to exercise responsible economic and political leadership by
maintaining an adequate level of support for IDA.
155
Senator MATHIAS. Thank you, Mr. Debs.
Ambassador Phillips, it is a great personal pleasure to welcome
you to this committee.
STATEMENT OF HON. CHRISTOPHER H. PHILLIPS, PRESIDENT,
THE NATIONAL COUNCIL FOR UNITED STATES-CHINA TRADE,
WASHINGTON, D.C.
Ambassador PHILLIPS. Thank you, Mr. Chairman. It is a great
pleasure to be here this morning to contribute what I can to these
important hearings.
Mr. Chairman, I have submitted a more complete statement to
the committee for the record and, recognizing that time is of the
essence, I will try to boil that down.
Senator MATHIAS. Your full statement will appear in the record.
Ambassador PHILLIPS. Thank you, Mr. Chairman.
I would like to say at the outset that I endorse the World Bank's
IDA program for China for two basic reasons: First, because of the
commercial opportunities that the program offers to American ex-
porters; and second, because I believe that this program serves our
broad national interests as they relate to China's orderly economic
development.
Now, the IDA program in China, of course, is only one part of a
comprehensive World Bank program for that country. For exam-
ple, through its teaching arm, the Economic Development Institute,
the bank has trained hundreds of Chinese planners, managers and
economists. It has also encouraged the Chinese to experiment with
completely new economic institutions, such as the China Invest-
ment Bank, which we feel should increase China's ability to allo-
cate economic resources more efficiently.
The World Bank program in China is, of course, not restricted to
IDA loans. Although China, contrary to some statements made ear-
lier in these hearings, is in fact a very poor country, the bank and
the Chinese have agreed that China should accept substantial loans
from the World Bank's normal loan window, where interest rates
are based on the World Bank's cost of money. This results in an
interest cost to borrowers of about 11 percent.
I am aware, of course, that there are those who criticize the IDA
program in China. Some say that China is not a poor country.
Others argue that China should not be eligible because of its large
foreign exchange. reserves. Finally, some are concerned that IDA is
making loans that would be more appropriate for commercial bank
lending.
I would like to comment very briefly on each of those three
issues. The IDA portion of the World Bank program is available for
countries whose per capita GNP is less than $790. The Chinese per
capita GNP of around $300 is clearly well below that amount.
Anybody who has traveled extensively in that huge and diverse
country also knows that many regions in China are significantly
poorer than others. The IDA program is primarily aimed at help-
ing those Chinese who live in China's poorest areas.
China currently holds foreign exchange reserves of at least $14
billion. This is exclusive of their gold reserves. But that is likely to
156
be a temporary situation. It is well to remember that other coun-
tries have had similar experience in the past.
India, for example, also a major IDA recipient, accumulated
large foreign exchange reserves in the late 1970's, but those de-
clined rapidly as India accelerated its development programs. Simi-
larly, China will clearly not be able to generate sufficient foreign
exchange to meet its capital needs during the next couple of dec-
ades.
Another key concern is that the IDA program is competing with
commerical bank lending to China. IDA credits already extended to
China or those planned for the future are allocated for very long-
term infrastructure projects which neither generate foreign ex-
change revenues nor provide immediate rates of return that would
interest private bankers. In fact, the World Bank program, by in-
troducing China to the benefits of private foreign capital, will have
the effect of stimulating commercial bank opportunities in that
country.
Now, Mr. Chairman, let me turn to the main reason for my
testi-
mony this morning: The commercial opportunities that IDA offers
to U.S. firms, which Mr. Debs has already touched upon briefly.
Under the recent agreement for the seventh replenishment of
IDA, we estimate that IDA will make future annual commitments
of some $600 million a year to China. In addition to IDA funding,
China is expected to borrow a similar amount each year from the
IBRD. Thus, the World Bank's total lending program to China
during the latter part of the 1980's is likely to be between $1.0 and
$1.5 billion a year.
This program therefore presents substantial opportunities for
American companies. The IDA and the IBRD programs are aimed
at upgrading China's basic economic infrastructure. These include
areas such as education and scientific research, large-scale com-
mercial agriculture and forestry, transportation projects, and
energy resource development. Significantly, those are areas in
which American firms are among the world's technological leaders
and they are competitive in price.
As a result, the IDA and the IBRD projects in China have stimu-
lated substantial interest among American companies. We estimate
that on the first four IDA projects more than 50 American compa-
nies have tendered bids. Many others have expressed their strong
interest to us in projects for which bids have not yet been invited.
So far, American companies have done very well in the bidding
for these projects. Overall, U.S. firms have won orders for about
$100 million, or roughly 50 percent of the total amount tendered to
date. Contracts were awarded to:34 American firms valued at $58
million, for such things as computers, scientific instruments, and
other laboratory equipment, under the two programs to modernize
China's educational system. In the statement I submitted to the
committee you will find, Mr. Chairman, a list of some of those com-
panies, as well as others, such as Deere and Caterpillar from the
agriculture and construction machinery industries, which have
won bids for projects in those sectors.
We believe that American companies will continue to do well in
IDA and other World Bank projects in China because most, as I
157
have said, are concentrated in those sectors in which the U.S. com-
petitive position is relatively strong.
Because of the success we have had to date in winning IDA con-
tracts, I am concerned, as others have been today, by the recent de-
cision of the administration not to support higher IDA funding
levels. As I understand the situation, nearly all the other donor
countries were prepared to allocate additional funds for an expand-
ed IDA program.
I think it is reasonable to assume that many of these countries
will simply redirect their economic assistance into their own bilat-
eral aid programs. The result will be fewer marketing oppotunities
for American companies, because, of course, it is much easier for
U.S. companies to win contracts through IDA than under foreign
assistance programs from other countries.
While economic assistance is generally not supposed to be tied to
the exports of the donor countries, it would be naive to believe that
there was not a close link between a country's economic assistance
program and its commercial goals. Certainly in the case of China,
our experience is that other countries are aggressively using their
foreign aid programs to promote their own commercial interests.
Senator MATHIAS. That is known as do well by doing good.
Ambassador PHILLIPS. Precisely, Mr. Chairman. The two con-
verge.
In my prepared statement, you will find examples of bilateral aid
programs which provide concessionary financing on sales to China.
For all practical purposes, these preclude bidding by U.S. compa-
nies. And, of course, the United States provides no concessionary
financing of its own to help our companies meet the competition
from other countries which do.
Mr. Chairman, my main theme this morning is that many U.S.
companies have concluded that the IDA projects do serve their own
commercial interests. But the World Bank's efforts in China also
indirectly benefit American firms in other important ways. They
do so by increasing China's involvement in the international eco-
nomic community. This is not only desirable from the point of view
of companies, but is also consistent with our more general foreign
policy objectives.
The World Bank advises China, as we at the National Council do,
that China will derive significant economic advantages from fur-
ther opening its economy to foreign trade and investment. The
bank believes, and we agree, that China would be wise to take
much greater advantage of international capital markets.
Use of foreign capital in any form has been a significant break
from China's previous policies. As little as 6 years ago, long-term
capital assistance of any kind was prohibited. Now the Chinese are
utilizing not only the World Bank's IDA no-interest loans, but
IBRD funds which, as I have mentioned, have a floating rate cur-
rently around 11 percent. Now, that is a very significant step
toward utilizing foreign capital on commercial terms for China.
Finally, the World Bank projects introduce the Chinese to new
ideas, institutions and techniques that not only will be helpful to
them, but will also provide commerical opportunities for American
firms.
158
These are not my ideas alone. The Chinese themselves have
reached similar conclusions. On the question of China's future cap-
ital needs, China's leaders have publicly stated that their current
large foreign exchange reserves is—and I quote a Chinese official
who made this statement—"a very temporary phenomenon.
They have told us that the development of China's energy re-
sources, its transport and communications systems and other prior-
ity sectors will require huge capital inflows during the late 1980's
and the 1990's. Inevitably, this will necessitate increasing reliance
on international capital markets. Only last month, Bu Ming, Presi-
dent of the Bank of China, announced plans to raise foreign ex-
change from commercial sources for the development of nuclear
power plants, open pit coal mines, and offshore oil exploration and
development.
And, on the more basic question of the role of the World Bank to
act as a bridge in bringing Western practices and institutions to
China, it is interesting to note that an official Chinese spokesman
recently stated: “The important thing is not the money alone in
working with the World Bank, but that China is also introduced to
trends and ideas in international economic cooperation and finan-
cial management.” I heartily endorse that observation.
To conclude, Mr. Chairman, I believe the World Bank IDA pro-
gram is important. It is providing American business with signifi-
cant additional commercial opportunities in a very difficult and a
very tough market.
But even more important in the long term is the impact that the
World Bank's total China program will have on encouraging the
Chinese to participate to an increasing extent in the international
economy. This is clearly in the interests of the Chinese, of the U.S.
Government, and of our own private companies.
Thank you, Mr. Chairman.
[Ambassador Phillips' prepared statement follows:]
PREPARED STATEMENT OF HON. CHRISTOPHER H. PHILLIPS
Mr. Chairman, I am pleased to be here this morning to participate in these hear-
in on the seventh replenishment for the International Development Associa n.
As suggested I will focus my remarks on the China dimension of the program.
I endorse the World Bank IDA program for China for two basic reasons: First,
because of the commercial opportunities IDA offers to American exporters and,
second, because I believe this program serves our broad national interests as they
relate to China's orderly economic development.
1. THE IDA PROGRAMS IN CHINA
The IDA program in China is, or course, only one aspect-although perhaps the
most critical part-of a comprehensive World Bank program for China. We should
remember that the World Bank program in China is based on the most comprehen-
sive economic study ever made of China. This study has identified important weak-
nesses in China's economic infrastructure and planning. In addition, the World
Bank through its teaching arm, the Economic Development Institute, has trained
hundreds of Chinese planners, managers, economists and other officials. The World
Bank has also encouraged the Chinese to experiment with completely new economic
institutions such as the China Investment Bank which should increase China's abili-
ty to allocate economic resources efficiently.
II. COMMERCIAL OPPORTUNITIES FOR U.S. FIRMS
At the present time, the World Bank has committed or is preparing about 30 loan
projects to China with a total value of $2.7 billion. Of this total we estimate that
159
roughly $1 billion are IDA loans. Under the recent agreements for the seventh re-
plenishment of IDA, we estimate that IDA will make annual commitments of $600
million per year to China. This would be roughly equivalent to one-half of the
World Bank's total lending program to China which is likely to be on the order of 1
to 1.5 billion per year.
This program therefore presents substantial opportunities for U.S. business. The
IDA and IBRD programs are aimed at upgrading China's basic economic infrastruc-
ture. The bulk of the loans will go to four key sectors: education and scientific re-
search, large scale commercial agriculture and forestry, transportation projects and
energy resource development. These programs fit China's current economic needs
and priorities perfectly. Significantly, these are areas in which U.S. firms are
among the world's technological leaders and are competitive in price.
As a result, the IDA and IBRD projects in China have stimulated substantial in-
terest among U.S. firms. We estimate that on the first four IDA projects (two in
education and two in agriculture), more than 50 U.S. companies have tendered bids.
Many others have expressed to us strong interest in projects for which bids have not
yet been invited.
But the World Bank program in China is not restricted to IDA loans. Although
China is an extremely poor country, the World Bank (IBRD) and the Chinese have
agreed that it is appropriate for China to accept substantial loans from the World
Bank's normal loan window. The interest rate for IBRD loans is based on the World
Bank's cost of money, and currently cost the borrower 11 percent per annum.
My testimony this morning will focus primarily on the IDA program in China but
we should not forget that the rest of the World Bank's program for China also bene-
fits U.S. exporters and U.S. interests generally.
I am aware, of course, there are those who criticize the IDA program in China.
Some say that China is not a poor country. Others argue that China should not be
eligible because of its large foreign exchange reserves. Finally, some are concerned
that IDA is making loans that would be more appropriate for commercial bank
lending. Let me deal with those issues right now.
The IDA portion of the World Bank Program is available for countries whose per
capita GNP is less than $790. The Chinese per capita GNP of around $300 is well
below this amount. Standard measures of economic development such as the
number of people in agriculture, the number of telephones per capita and the calor-
ic intake per day also rank China among the world's poorer countries.
Anyone who has traveled extensively in that huge and diverse country also knows
that many regions in China are significantly poorer than others. The IDA program
is aimed predominantly at helping those Chinese living in China's poorest areas.
China currently holds foreign exchange reserves of at least $14 billion. However,
this is a temporary situation. It is instructive to remember that other countries
have had similar short term situations. India, also a major IDA recipient, experi-
enced a similar surge in reserves in the late 1970's, but these declined as India ac-
celerated its development program. Similarly, China will in no way be able to gener-
ate sufficient foreign exchange to meet its capital needs in the next two decades.
Another key concern is that the IDA program is competing with commercial bank
lending to China. IDA credits already extended to China or planned for the future
are allocated to very long-term infrastructure projects which do not generate foreign
exchange revenues nor do they have immediate rates of return that would interest
private bankers. In fact, I will argue later that the World Bank program in China
will introduce China to the benefits of utilizing private foreign capital and, in the
long run, will stimulate commercial bank opportunities in China.
Now, let me turn to the main reason for my testimony this morning-the com-
mercial opportunities that IDA offers U.Ş. firms.
So far U.S. companies have done very well in the bidding on the first five IDA
projects. Overall, U.S. firms have won orders for about $100 million, or roughtly 50
percent of the total amount tendered to date. Thirty-four U.S. firms were awarded
contracts valued at $58 million for computers, scientific instruments and other labo
ratory equipment under the two programs to modernize China's educational system.
Among the winning companies were Honeywell, FMC, Gould Electronics, ÉG&G,
John Fluke, Jarrell-Ash, Digital Electronics, duPont, Bausch and Lomb, AMPEX,
American Hospital Supply, Hewlett Packard, Beckman, Nicolet, Crimenco, Perkin
Elmer, Varian
and Finnegan. As one would expect, competition from Japan, Germa-
ny and other European countries was intense.
U.S. producers of agricultural and construction machinery fared even better on a
project to introduce large scale commercial farming to China's Heilongjiang prov-
ince. The John Deere and Caterpillar Corporations won two-thirds of the awards for
equipment to be procured under this loan.
160
sources. But China is also short of the necessary investment funds to develop these
Although our companies have been very successful in winning contracts for the
IDA supported projects, they have experienced some difficulties with the detailed
procedures for finalizing and implementing their contracts. These are too detailed to
discuss in this forum and they do not alter companies' support for IDA's programs
in China. However, I do hope that the World Bank and the Chinese will carefully
consider the opinions of the participating companies with a view to improving the
future implementation of this program.
U.S. companies should continue to do well on IDA and on other World Bank
projects in China because most are concentrated in those sectors in which the U.S.
competitive position is relatively strong.
In view of our success to date in winning IDA contracts, I am concerned by the
recent decision of the administration not to support higher IDA funding levels. As I
understand the situation, nearly all other donor countries were prepared to allocate
additional funds for an expanded IDA program. I think it is reasonable to assume
that many of these countries will simply redirect their economic assistance into
their own bilateral aid programs. I believe that the result will be fewer marketing
opportunities for U.S. companies because it is far easier for U.S. companies to win
contracts through IDA than under foreign assistance programs from other coun-
tries.
While economic assistance is generally not supposed to be tied to the exports of
the donor countries, it would be naive to believe that there is not a close link be-
tween a country's economic assistance program and its commercial goals. Certainly
in the case of China, our experience is that other countries are aggressively using
their foreign aid programs to promote their own commercial interests.
Japan is the leader in bilaterial aid to China. In the past 5 years Japan has made
available through its Overseas Economic Cooperation Fund 1.3 billion US dollars at
3 percent over a 30-year period with 10-year grace periods. $910 million, or 70 per-
cent, of this, was in effect tied to Japanese export because bidding was limited to
companies from less developed countries and Japan. Japanese firms naturally won
most of the business since few less developed countries had the technology needed
for the aid projects. According to one official source, Japanese concessional financ-
ing to China will total an additional $4.7 billion through 1988.
The aid program to China of other countries are smaller but they are also closely
related to the commercial goals their private firms are pursuing. Denmark has
given millions of dollars in long term interest free loans which the Chinese have
used primarily to purchase Danish Dairy production equipment. Belgium provides
an annual interest free loan of 300 million francs (or $6 million) toward the pur-
chase of Belgian products. The economic aid programs of Australia and Norway are
actively supporting their companies efforts to win hydropower and cement projects.
III. THE WORLD BANK PROGRAM: A "BRIDGE" TO GREATER CHINESE INVOLVEMENT IN THE
INTERNATIONAL ECONOMIC COMMUNITY
Mr. Chairman, my main theme this morning is that many U.S. companies have
concluded that the IDA projects serve their own commercial interests. However, I
think that the World Bank's efforts in China will also indirectly benefit U.S. firms
in other important ways. These World Bank programs will generally increase
China's involvement in the international economic community, which is not only de-
sirable from the point of view of U.S. companies, but is also consistent with our
more general foreign policy objectives.
Improved ports will have a direct bearing on improving China's capacity to
expand foreign trade. The educational projects and the World Bank's training pro-
grams for Chinese enterprise managers, bankers, economists and planners will
strengthen China's decision making and ultimately make China more accessible and
predictable for our business people.
Second, the World Bank's advice to China is similar to our own. Namely, that
China will derive significant economic advantages from further opening its economy
to foreign trade and investment. The World Bank believes, and I agree, that China
would be wise to take much greater advantage of international capital markets.
China is a country with enormous energy potential, raw materials and human re
resources. Use of foreign capital in any form has been a significant break from
China's previous policies. As little as 6 years ago, long term capital assistance of any
kind was prohibited. Now the Chinese are utilizing not only the World Bank's IDĂ
no interest loans but IBRD funds which, as I have mentioned, have a floating rate
currently around 11.0 percent. This is a significant step towards utilizing foreign
capital on commercial terms.
161
Finally, the World Bank projects introduce the Chinese to new ideas, institutions
and techniques that not only will be helpful to them but will also provide commer-
cial opportunities for U.S. firms.
These are not just my ideas. There is evidence that the Chinese themselves have
reached similar conclusions. On the question of China's future capital needs, China's
leaders have publicly stated that their current large foreign exchange reserves is a
"temporary phenomena." They have emphasized that the development of China's
energy resources, transport and communications systems will necessitate significant
capital inflows during the late 1980's and 1990's. Just last month, Bu Ming, Presi-
dent of the Bank of China, announced plans to raise foreign exchange from commer-
cial sources for the development of a nuclear power plant, open pit coal mines and
offshore oil exploration and development. And, on the more basic question of the
role of the World Bank to act as a "bridge” in bringing Western practices and insti-
tutions to China, it is interesting to note that an official Chinese spokesman recent-
ly stated that "The important thing is not the money alone in working with the
World Bank, but that China is also introduced to trends and ideas in international
economic cooperation and financial management." I heartily endorse this observa-
tion.
CONCLUSION
Mr. Chairman, the World Bank's IDA program is important. It is providing U.S.
business with significant additional commercial opportunities in a very difficult
market.
But even more important in the long term is the impact that the World Bank's
total program of advice, institution building and infrastructure projects will have on
encouraging the Chinese to participate, to a greater and greater degree, in the inter-
national economy. This is in the interest of the Chinese, the U.S. Government and
our private companies.
Senator MATHIAS. Thank you very much, Ambassador Phillips.
Mr. Richards.
STATEMENT OF JOHN C. RICHARDS, VICE PRESIDENT, M. W.
KELLOGG CO., WASHINGTON, D.C.
Mr. RICHARDS. Mr. Chairman, I am Jack Richards with the M.
W. Kellogg Co., and I am always very quick to point out that we
are not the cornflakes company; we are an engineering construc-
tion company. But in that context, and following Chris Phillips of
the United States-China Trade Council, I might mention that in
China, where we have built 16 fertilizer plants since 1973, the
name Kellogg is synonymous with food because of the increased
production resulting from fertilizers.
Our company is well known in the oil and petrochemical indus-
try and has been internationally operative for many years going
back to the 1920's. I am here joining with Richard Debs of the
chamber of commerce urging strong support for IDA. We have had
a long and successful experience in working with IDA and other
MDB's and I would like to tell you briefly of our past and current
experience.
În the 1970's, in the early part, we were awarded a contract by
the Indonesian Government owned fertilizer company, PUSRI, for
a large ammonia plant to be erected in South Sumatra. This
project, known as PUSRI II, had a soft window financial support
from IDA and lines of credit from other MDB's and the AID.
In considering this project for financial support, we were im-
pressed by the thorough study made by the World Bank personnel
of the economic and technical feasibility of the project. In fact, we
learned that when the Bank places a seal of approval on a project
other MDB's come on board without hesitation.
162
On completion of the project, we also sensed the important
impact made on the Indonesian economy in increasing food grain
yields and in the approach to the achievement of country self-suffi-
ciency in fertilizer production. The project was so successful that
Kellogg was awarded PUSRI III and IV at the same site, resulting
in a urea fertilizer capacity increase from 300 to 4,900 metric tons
per day.
PUSRI II included IDA funds, as I have said, along with other
MDB funds, including ADB, and Japan's OECF, along with AID
funds. At the time of PUSRI III and IV, the Indonesian economy
had improved sufficiently to allow a graduation from IDA's soft
window funds to a joint funding by IDRB and the Saudi Arabian
Development Fund. In my opinion this graduation, along with that
of 20 other countries in the early 1970's, is at the very least a
measure of the beneficial effect of the IDA programs in fostering
economic growth and prosperity in developing countries.
In our experience, we also found that IDA-supported projects
produce a multiplier effect in creating ongoing business in the engi-
neering and construction industry. For example, our introduction
to Indonesia in 1971 with the PUSRI projects led later to the award
of two other fertilizer projects at Kalimantan and Java, as well as
a very large aromatics plant that we are working on in Sumatra.
It is important also to note that these large projects resulted in
increased exports of manufactured goods that comprise something
like 60 percent of the total project cost. When American contrac-
tors are successful in these projects, it is most likely that a large
proportion of the equipment selection will be from U.S. suppliers.
We have completed or are currently working on IDA-supported
fertilizer projects in Multan, Pakistan, and in the Bombay high gas
fields of India. We are today anxiously awaiting the results of an-
other IDA-funded ammonia urea project bidding competition in
Bangladesh. The future points to many other potential projects in
developing countries of Africa, Latin America and the Far East,
particularly in the PRC. In most of these countries, IDA and other
MDB support will be required.
To summarize, our industry is convinced of the effectiveness of
IDA in sustaining the long-term economic growth and improve-
ment of the lower income developing countries. The programs
expand world trade, leading to improved exports of U.S. goods and
services. Additionally, the IDA programs assume an important role
in fostering and furthering the strategic and foreign policy inter-
ests of the United States.
For these reasons, I am pleased to add my enthusiastic support
to the U.S. Chamber request that this committee provide early fa-
vorable endorsement of the U.S. contributions to the seventh re-
plenishment of IDA at the minimum level of $750 million over a 3-
year period.
I thank you for your attention.
[Mr. Richards' prepared statement follows:
PREPARED STATEMENT OF JOHN C. RICHARDS
I am Jack Richards, vice president of The M.W. Kellogg Company, a subsidiary of
The Signal Companies. For some of you who may think the name Kellogg is associ-
163
ated only with breakfast cereals, I must quickly identify us as the design, engineer-
ing and construction Kellogg.
Kellogg is known worldwide in the oil and petrochemical industry, and our major
engineering and construction activities are in oil refineries, in fertilizer plants,
where we have built more than half of the world's nitrogen capacity, and in build-
ing large liquefied natural and petroleum gas processing facilities. We have operat-
ed internationally since the late 1920's when we designed and erected the first oil
refinery units at Abadan in Iran for the old Anglo-Iranian Oil Company. Currently
more than half of our business is overseas with a large proportion being undertaken
in the developing world where we work extensively with leading agencies such as
the World Bank.
I welcome this opportunity to join with Richard Debs before this Committee in
urging strong support for IDA. My company has had a long and successful experi-
ence in working with IDA and other multilateral development banks' (MDB's) pro-
grams, and I would like to tell you briefly of both this past and current experience.
In the early 1970s, we were awarded a contract by the Indonesian government
owned fertilizer company, PUSRI, for a large ammonia plant to be erected at Pa-
lembang in South Sumatra. This project, PUSRI II, had 'IDA "soft loan” financial
support along with lines of credit from AID and other MDB's. In considering this
project for financial support, we were impressed by the thorough study made by
World Bank personnel of the economic and technical feasibility of the project. In
fact, we learned that when the World Bank places a seal of approval on a project,
other MDB's come on board without hesitation. On completion of the project, we
also sensed the important impact it made on the Indonesian economy in increasing
food grain yields, and in the approach to achievement of country self-sufficiency in
fertilizer production. The project was so successful that Kellogg was awarded PUSRI
III and IV at the same site resulting in a urea fertilizer capacity increase over five
to six years from 300 to 4900 metric tons per day.
PUSRI II included IDA funds along with funds from AID, ADB and Japan's
OECF. At the time of PUSRI III and IV, the Indonesian economy had improved suf-
ficiently to allow a "graduation" from ÍDA "soft window" funds to a joint funding
by IBRD and the Saudi Arabia Development Fund. I believe this "graduation" along
with that of more than twenty other countries in the 1960–70's is at the very least a
measure of the beneficial effect of the IDA programs in fostering economic growth
and prosperity in developing countries.
In our experience, we have found that IDA supported projects produce a “multi-
plier effect” in creating on-going business in the engineering and construction in-
dustry. For example, our introduction to Indonesia in 1971 with the PUSRI projects
led later to the award of other fertilizer projects at Kalimantan and Java and a
large aromatics plant in Sumatra. It is also important to note that these large
projects result in increased exports of manufactured goods that comprise up to sixty
percent of the total project cost. When American contractors are successful in these
projects, it is most likely that a large proportion of the equipment selection will be
directed to U.S. suppliers.
Kellogg has completed and is currently working on IDA supported fertilizer
projects in Multan, Pakistan and in the Bombay_high gas fields of India. We are
today anxiously awaiting the results of another IDA funded ammonia urea project
bidding competition in Bangladesh. The future points to many other potential
projects in developing countries of Africa, Latin America and the Far East, particu-
larly in the PRC. In most of these countries, IDA and other MDB support will be
required.
In summary, our industry is convinced of the effectiveness of IDA in sustaining
the long-term economic growth and improvement of the lower income developing
countries. The programs expand world trade leading to improved U.S. exports of
goods and services. Additionally, the IDA programs assume an important role in
furthering the strategic and foreign policy interests of the United States.
For these reasons, I am pleased to add my enthusiastic support to the U.S Cham-
ber request that this Committee provide early favorable endorsement of the U.S.
contributions to the seventh replenishment for IDA at a minimum level of $750 mil-
lion over a three year period.
Your kind attention to this Statement is appreciated.
Senator MATHIAS. Thank you, Mr. Richards
We could have a long discussion of this, but we have another
panel waiting in the wings and I do not want to hold them up too
much longer. Let me ask a few very brief questions.
164
Mr. Debs, we appreciate your being here and speaking on behalf
of the U.S. Chamber of Commerce, because I think that could be an
influential factor. And you have heard, sitting here, the doubts
that have been expressed as to whether or not we will be able to
carry even the reduced level of the seventh replenishment. So it is
going to take some hard work on everybody's part to make this
case.
I am wondering what the chamber is prepared to do in the way
of public education on this subject.
Mr. DEBS. Mr. Chairman, once we have made this decision, based
on our judgment of what is right, we are here in support of this
program and the chamber will be doing what it has done in the
past in supporting those positions which it thinks is right for the
country, and that involves a rather broad approach to our constitu-
ency and through that constituency to a rather broad segment of
the country.
Senator MATHIAS. The chamber has formidable lines of communi-
cation and educational facilities. This is a subject that really needs
that kind of support. I would hope that through the various televi-
sion shows and written communications that the chamber will be
able to lay out the facts. I think the facts will support the issue,
but the important thing is to get enough people to become well ac-
quainted with the facts.
Mr. DEBS. You are right, it is a very complex subject. The facts
do support it, but the facts need explaining. I might say, Mr. Chair-
man, that we would be delighted if we could have you join us on
the chamber's television network, which we use as a vehicle to get
the educational program out.
Senator MATHIAS. If I can acquire enough wisdom as a result of
these hearings to have something to say, I would be happy to do
that.
Mr. DEBS. We would be delighted, and we will do our best.
Senator MATHIAS. Ambassador Phillips, you have talked about
the needs of China and you have also heard the doubts that have
been expressed this morning about the limitations on the total
sums that are going to be available. What would you guess the Chi-
nese would hope to draw from IDA in the immediate future? Do
you have any kind of ballpark figure in mind?
Ambassador PHILLIPS. Mr. Chairman, I cannot speak for the Chi-
nese on this, obviously, but it has been assumed by knowledgeable
circles in the bank and elsewhere that, if the IDA VII replenish-
ment goes through as planned, that China would receive an aver-
age of $600 million a year for the duration of that replenishment
period, which I think is 4 years.
Senator MATHIAS. And in effect, that comes out of the hide of old
customers who then will not have as much?
Ambassador PHILLIPS. My understanding is that the intention of
the World Bank would not be to take it out of the hide of other
countries, particularly the poorest countries in Africa, but that
there would be some kind of division of the pie with India, that
therefore it would become a question of what proportion of the
total amount heretofore allocated for India would go to China.
Senator MATHIAS. The point I am making is, any illusions that
we are providing some sort of gilt-edged program should be dis-
165
pelled very quickly; that there are going to be very hard choices to
be made.
Ambassador PHILLIPS. This is the reason, Mr. Chairman, that we
in the National Council would have been very pleased to have the
administration come out with a somewhat larger U.S. contribution,
to enable a larger total program. The needs are perfectly obvious
You are quite correct in saying that this substantially reduced
program will create problems and will not be helpful from the
more limited point of view of our own commercial interests.
Senator MATHIAS. Mr. Richards, you have referred to the Kellogg
Co.'s long experience in this field. Do you have any records as to
the volume of business you do with multilateral financial institu-
tions or as a result of funding by multilateral financial institu-
tions?
Mr. RICHARDS. I do not have any at hand. I can certainly supply
these to you. I can say, for example, that the World Bank funded
projects that we have undertaken in Indonesia in combined serv-
ices, materials and equipment, which we were responsible for on
three fertilizer plants that I referred to, is on the order of $300 or
$400 million in 1970 to 1975 dollars.
Senator MATHIAS. Would you supply whatever documentation
you have, either on your own company or on American companies
in general? I think that would help to support the thesis that I
have maintained, that this is not totally an eleemosynary effort,
that there is a legitimate self-interest here, and that we are not
just throwing this money out.
Mr. RICHARDS. Absolutely. I would just like to make one other
point for the record, and that is that in China there is a tremen-
dous volume of future business for not only engineering construc-
tion but for suppliers, and we as engineering constructors generate
the business for U.S. equipment suppliers.
I am sure that there will be for China in addition to World Bank
and other MDB funds, Export-Import Bank funds from various
export banks such as Exim here, COFACE in France and Hermes
in Germany, and others. So there will be a stimulus by IDA and
IDRB and other banks to provide funding.
Senator MATHIAS. Gentlemen, I am very grateful to you for being
here today. Your testimony will be very helpful in making this
case. If you have further information that you want to add to the
record, we will be glad to have that. Thank you very much.
Our last panel this morning will consist of: John Sewell, Presi-
dent of the Overseas Development Council; Mr. Edward Fried of
the Brookings Institution; and the Most Reverend Oscar Lipscomb,
Archbishop of Mobile, U.S. Catholic Conference.
Gentlemen, we not only appreciate your being here but we ap-
preciate your patience in sticking with us for so long.
Archbishop, would you please lead off?
STATEMENT OF THE MOST REVEREND OSCAR H. LIPSCOMB,
ARCHBISHOP OF MOBILE, ON BEHALF OF THE U.S. CATHOLIC
CONFERENCE, WASHINGTON, D.C.
Archbishop LIPSCOMB. I would be happy to, Mr. Chairman. I
come on behalf of the U.S. Catholic Conference, the public policy
166
agency of the Catholic bishops of the United States, to address this
question, and I appreciate the opportunity to present testimony on
the foreign aid program and, specifically, on this item that deals
with the International Development Association, the soft-loan
window of the World Bank, which lends money to the poorest of
developing countries.
The U.S. Catholic Conference has consistently supported the
series of replenishments of IDA in the past. It does so, Mr. Chair-
man, again today.
You are familiar perhaps with the pastoral letter of the Catholic
bishops. I don't think anybody is unfamiliar with it, as we went
through that process entitled "The Challenge of Peace: God's Prom-
ise and Our Response." Most people zero in on the nuclear question
and weapons policies, but I would like to call your attention to an-
other section of the pastoral, entitled “Shaping a Peaceful World."
In that section the pastoral notes that “the political needs and
the moral challenge of our time require a positive conception of
peace, based on a vision of a just world order" and "the fundamen-
tal premise of world order in Catholic teaching is a theological
truth: The unity of the human family."
Quite obviously this is not unique to Catholic teaching. It is
rather widespread, I think, in the world today. In the letter we also
noted this "theological principle of unity has always affirmed a
human interdependence, but today this bond is complemented by
the growing political and economic interdependence of the world."
We live in an interdependent world in which one of the major
issues is the deepening chasm between the living standards of the
industrialized world and the standards of the developing world.
While Catholic teaching acknowledges internal causes of poverty in
the poor countries, it also concentrates on the way the larger inter-
national economic structures affect the poor nations.
The Catholic bishops stated in their pastoral letter of last May
that-
Papal teaching has, by word and deed, sought to promote multilateral forms of
cooperation toward the developing world. The United States capacity for leadership
in multilateral institutions is very great. We urge much more vigorous and creative
response to the needs of the developing countries by the United States in these insti-
tutions.
We need to build upon the spirit of generosity present in the United States public,
directing it toward a more systematic response to the major issues affecting the poor
of the world.
Obviously, Mr. Chairman, I am speaking from a rather different perspective than
those who have hitherto addressed the committee. At this point I would like to di-
gress from my text, and I will shorten some of it because much of what I have to
say obviously has been researched and said before.
But just on the question of public support and the concern on the part of the ad-
ministration and others, a real concern that we would not be able to even meet the
more modest proposal presented for the seventh replenishment, a statistic that is, I
think, rather significant today-released in mid-February by the United Way of
America-shows a startling rise of 9.5 percent in private philanthropy through
United Way in 1982. This was a very hard year; and yet the American public, sens-
ing the need, responded.
I think what the last panel and you yourself just said concerning information and
making the need a reality to our people will prompt a similar response in support of
this issue. I know it will not be popular. I recognize some of the political realities-
though not all of them but I think the facts are there, and that when the Ameri-
can people see starving people, they will respond to starving people. The always
have.
167
Obviously against such a background I will not take up your
time by developing the argument in the presentation that the
Catholic Conference does urge and speak for an amount of $1 bil-
lion over the next 3-year period—$1 billion a year-instead of the
current administration request for $750 million.
While it is good, we think it is inadequate. Secretary Regan
noted the administration rejected the figure $1 billion on the
grounds that $9 billion is all the world donors would subscribe and
that the Congress would not appropriate more than $750 million in
fiscal year 1985.
They did in the rather austere year of 1984 appropriate $945 mil-
lion, and perhaps the economy might be better in 1985. At any
rate, I think it is something we ought to try to challenge people to
do. It was very telling when one of your colleagues—I think Sena-
tor Danforth-said the money could at least be there, whether it is
used or not. That is important.
We believe it is tragic that the United States should be the
Nation chiefly responsible for reducing the funds available to the
poorest countries. IDA was established in the early 1960's largely
because of U.S. initiative to provide financial support on more gen-
erous terms to countries that had difficulty in borrowing commer-
cially.
At the beginning, the United States provided 42 percent of IDA's
total, a percentage that has been scaled down gradually to today's
25 percent.
As you know, IDA lends only to the poorest countries. More than
80 percent of its credits go on highly concessional terms to coun-
tries with per capita incomes of under $400 per annum. In 1983
more than one-third of these funds went to the sub-Saharan Afri-
can countries, and I will have a little bit more to say to that just
shortly.
We make our recommendation for the increased figure in the
light of previous testimony by representatives of the Catholic bish-
ops of the United States before many committees of the Congress.
It has consistently recognized the reality of an interdependent
world in which poverty is an international problem that requires a
multinational strategy to address it.
The fact of global interdependence evident in several dimensions
of international relations is open to moral analysis. It raises the
questions of what specific obligations exist among nations, as well
as among citizens of different nations, in the face of obvious pover-
ty and injustice.
Interdependence affects most directly U.S. relations with the de-
veloping countries—something we often call North-South relations.
In our view, the problem of poverty in the Third World poses an
issue of social justice. The teaching of the Catholic Church has con-
sistently called for fundamental reforms in international economic
relations between rich and poor countries.
Within the developing countries the life of the church has in-
volved it in ministries designed to address the internal structural
reforms necessary for authentic human development. In industrial-
ized countries, the church's ministry demands that it address the
internal and external policies that are required if we are to re-
spond to the needs of the world's poor.
168
In the United States, the church is uniquely challenged to ad-
dress these needs. The reasons are clear. First, the United States,
at least in aggregate terms, benefits in a major way from the
present international order. I did not realize until I heard some of
the preceding testimony just how much we benefit from this world
order
Second, the United States is the Nation most capable of influenc-
ing the operation of the present international economic order.
Senator MATHIAS. Excuse me, Archbishop. I do not know whether
we could say that was bread cast upon the waters.
Archbishop LIPSCOMB. I appreciate any way in which the bread
comes home, and it is a very good point-a remarkable, telling
point. But I, for one, had not been aware of the extent to which
this kind of, as you said, doing well by doing good, clearly helps us.
It is a point, obviously, that cannot be neglected in a process such
as we enjoy and in which we are engaged, hopefully with regard to
obtaining these funds.
Senator MATHIAS. We might wish that we did it all for the most
pure motives.
Archbishop LIPSCOMB. Oh, not at all. There is a legitimate bit of
human self-interest. That is not sin. [Laughter.]
We are certainly in a position as leaders in the world to help the
economic order in the direction of helping these developing nations.
We do not have a simple answer to injustice, misery, and poverty
in the world, but the church feels obliged to use all of the resources
of faith and reason and experience to bring every aspect of social
justice under examination.
When all is said and done, development is about people, about
each person's opportunity for full human growth in the human
faimly. The church is called to address these questions because mil-
lions of people, all of them created in the image and likeness of
God, are increasingly deprived of the chance for a full human life
because they lack the minimum material goods to transform a ma-
terially interdependent world into a morally interdependent com-
munity
In light of these basic principles we believe that concessionality
is most urgently needed for the 40 or so developing countries with
a combined population of 1.5 billion people I think this was obvi-
ously computed before China was added—where poverty is perva-
sive and growing. These are the countries that IDA helps. Over the
years, IDA has become a major and effective source of concessional
aid to these poorest of countries.
Moreover, under one aspect IDA is a bargain for the United
States. I have never met Senator Danforth, and I do not know him
personally, but I heard him speak on a talk program down in Ala-
bama recently, describing some of the effects of his visit to the sub-
Sahara region and the starvation he found there. It was startling.
It certainly got my attention. This food crisis has certainly caught
the attention of the entire world. But even if the immediate food
requirements are met by the international community-and we are
not sure that this can be done; possibly it will not-the longer term
problems of required structural change in those countries will need
attention.
169
The U.S. administration has asked Congress for $75 million in
fiscal year 1985 as the beginning of a 5-year, $500 million economic
policy initiative for the region. This is just in view of the present
problem. If the United States instead of proposing this bilateral
program had simply added the $75 million to IDA it would have
generated an additional $225 million in other donor contributions.
Of the total $300 million that would thus be generated for the
poorest countries there would be 38 percent—that is Africa's cur-
rent share of IDA allocations-or $114 million for sub-Saharan
Africa, plus another $186 million for other poor countries.
If this amount were slightly more than tripled—this is the rec-
ommended additional $250 million for IDA VII-the funds then
available for Africa alone would be increased by nearly $380 mil-
lion a year.
Let me repeat. Poverty today is an international problem that re-
quires a multinational strategy to address it. Although bilateral
programs are important, we believe that multilateral institutions,
and especially the World Bank and IDA, are particularly pertinent
and should serve as a channel for an increasing portion of our de-
velopment assistance.
In contrast to bilateral aid, assistance provided through the mul-
tilateral banks, including IDA, is more likely to be free from politi-
cal considerations and is at least equally effective in promoting eco-
nomic development.
Second, the size of the financial support from banks as well as
their multilateral character offers greater opportunity to affect in-
ternal policy decisions, especially in the poorer countries where
such funding often represents a substantial share of total invest-
ment.
Third, it results in a more equitable sharing of the costs of eco-
nomic assistance among donor countries. The U.S. share, as we
said, is only 25 percent, or roughly so. Fourth, the banks, including
IDA, have built up considerable expertise over the years in han-
dling the problems of the least developed countries.
While I do not wish to suggest that the U.S. Catholic Conference
is not interested in other aspects of the foreign aid program, I do
want to emphasize our strong support for ID, and urge that con-
sideration be given to increasing the share of the United States in
this seventh replenishment of IDA to $1 billion per year.
[Archbishop Lipscomb's prepared statement follows:)
PREPARED STATEMENT OF THE MOST REVEREND OSCAR H. LIPSCOMB
Mr. Chairman and Members of the Committee: I testify today on behalf of the
United States Catholic Conference (USCC), the public policy agency of the Catholic
bishops of the United States.
I appreciate this opportunity to present testimony on the United States foreign
aid program. While the Conference is interested in all aspects of the administration,
I intend to confine my remarks before this Committee to the subject of the Interna-
tional Development Association, the "soft-loan window" of the World Bank, which
lends money to the poorest developing countries. The United States Catholic Confer-
ence has consistently supported the series of replenishment of IDA in the past, and
it does so again today.
I know that you are familiar with the Pastoral Letter of the Catholic bishops of
the United States on war and peace which was issued last May, "The Challenge of
Peace: God's Promise and Our Response.” While public attention focused primarily
upon the sections of that letter dealing with nuclear weapons policies, I would like
34-045 0484--12
170
to call your attention to another section of that pastoral letter entitled “Shaping a
Peaceful World."
In that section of the pastoral letter, the bishops said that "the political needs and
the moral challenge of our time require a positive conception of peace, based on a
vision of a just world order," and the "fundamental premise of world order in
Catholic teaching is a theological truth: the unity of the human family.” As the
bishops noted, this “theological principle of unity has always affirmed a human
interdependence, but today this bond is complemented by the growing political and
economic interdependence of the world.”
We live in an interdependent world in which one of the major issues is the deep-
ening chasm between the living standards of the industrialized world and the stand-
ards of the developing world. While Catholic teaching acknowledge internal causes
of poverty in the poor countries, it also concentrates on the way the larger interna-
tional economic structures affect the poor nations.
The Catholic bishops stated in their pastoral letter of last May that “papal teach-
ing has, by word and deed, sought to promote multilateral forms of cooperation
toward the developing world. The U.S. capacity for leadership in multilateral insti-
tutions is very great. We urge much more vigorous and creative response to the
needs of the developing countries by the United States in these institutions." We
"need to build upon the spirit of generosity present in the U.S. public, directing it
toward a more systematic response to the major issues affecting the poor of the
world.”
Against this background, I feel somewhat ambivalent coming before you today to
support the administration's request for $750 million per year for 3 years for the
International Development Association. We do support this request, but we do not
believe that it is large enough. The U.S. contribution represents 25 percent of the
IDA total of $3 billion per year for 3 years. The total for this seventh replenishment
is therefore $9 billion. This is 25 percent less than the current (sixth) replenishment
of $12 billion, of which the U.S. share was 27 percent.
The administration's decision to hold its contribution to IDA-7 at $750 million per
year is an unfortunate one for millions of poor people in the developing countries of
the Third World. We understand that the World Bank and other donors, as well as
potential recipients, originally wanted this seventh replenishment to be $16 billion
for the 3-year period-an increase over IDA-6 roughly equivalent to the increase of
IDA-6 over IDA-5. The Bank, after “testing the market, then proposed (and every
country except the United States agreed to) a 3-year total of $12 billion, which
would have required a U.S. contribution of $1 billion per year for the 3 years. The
administration rejected this figure on the ground that the Congress would not ap-
propriate more than $750 million in FY 1985, and this despite the fact that for FY
1984 the Congress appropriated $945 million and is considering a supplemental re-
quest for $150 million to complete the U.S. pledge to IDA-6, 1 year late.
We believe that it is tragic that the United States should be the nation chiefly
responsible for reducing the funds available to the poorest countries. IDA was estab-
lished in the early 1960's, largely because of U.S. initiative, to provide financial sup-
port on more generous terms to countries that had difficulty borrowing on the com-
mercial market. At the beginning, the United States provided 42 percent of IDA's
total, a percentage that has been scaled down gradually to today's 25 percent.
As you well know, IDA lends only to the poorest countries. More than 80 percent
of its credits go, on highly concessional terms, to countries with per capita incomes
under $400 per annum. In 1983, more than one-third of these funds went to sub-
Saharan African countries, the poorest in the world, many of which are now suffer-
ing from the most serious hunger and malnutrition in their history.
On behalf of the United States Catholic Conference, I would urge that the Con-
gress approve a replenishment of IDA of $1 billion per year—the level agreed upon
by the other donor countries-rather than the $750 million proposed by the admin-
istration. In doing so, the Congress would be expressing its conviction that the role
of the United States in the international community warrants this higher contribu-
tion to the major multilateral program that focuses on the needs of the poorest
countries.
We make this recommendation in the light of previous testimony by representa-
tives of the Catholic bishops of the United States, before many committees of the
Congress, that has consistently recognized the reality of an interdependent world in
which poverty is an international problem that requires a multinational strategy to
address it. The fact of global interdependence, evident in several dimensions of
international relations, is open to moral analysis. It raises the questions of what
specific obligations exist among nations, as well as among citizens of different na-
tions in the face of obvious poverty and injustice.
171
Interdependence affects most directly U.S. relations with the developing coun-
tries, something we often call North-South relations. In our view, the problem of
poverty in the Third World poses an issue of social justice. The teaching of the
Catholic Church has consistently called for fundamental reforms in international
economic relations between rich and poor countries. Within the developing coun-
tries, the life of the Church has involved it in ministries designed to address the
internal structural reforms necessary for authentic human development. In indus-
trialized countries, the Church's ministry demands that it address the internal and
external policies that are required if we are to respond to the needs of the world's
poor.
In the United States, the Church is uniquely challenged to address these needs.
The reasons are clear: first, the United States, at least in aggregate terms, benefits
in a major way from the present international order, while many other nations do
not do so; second, the United States is the nation most capable of influencing the
operation of the present international economic order in the direction of justice for
the poor in the developing countries.
We do not have a simple answer to the injustice, misery, and poverty in the
world. But the Church feels obliged to use all the resources of faith and reason and
experience to bring every aspect of social justice under examination. When all is
said and done, development is about people, about each person's opportunity for full
human growth in the human family.
The Church is called to address these questions because millions of people, all of
them created in the image and likeness of God, are increasingly deprived of the
chance for a fully human life because they lack the minimum of material goods to
transform a materially interdependent world into a morally interdependent commu-
nity.
In the light of these basic principles, we believe that concessional aid is most ur-
gently needed for the 40 or so developing countries, with a combined population of a
billion and a half people, where poverty is pervasive and growing. These are the
countries that IDA helps. Over the years IDA has become a major and effective
source of concessional aid to the poorest countries. About 80 percent of IDA loans go
to countries with per capita incomes of under $400 dollars. IDA's credits account for
about one quarter of all industrialized-country aid to the poorest developing coun-
tries, and its loans are directed primarily to programs and projects intended to ben-
efit the very poor.
Moreover, IDA is a bargain for the United States. Let me illustrate this point
very specifically. The food crisis in Sub-Saharan Africa has caught the attention of
the world. But even if the immediate food requirements are met by the internation-
al community (and this is by no means a certainty), the longer-term problems of
required structural change in those countries will need attention. The U.S. adminis-
tration has asked the Congress for $75 million in fiscal year 1985 as the beginning
of a 5-year $500 million "economic policy initiative" for the region. If the United
States, instead of proposing this bilateral program, had simply added this $75 mil-
lion to IDA, it would have generated an additional $225 million in other donor con-
tributions. Of the total $300 million that would thus be generated for the poorest
countries, there would be 39 percent (Africa's current share of IDA allocations) or
$114 million for Sub-Saharan Africa, plus another $186 million for other poor coun-
tries. If this amount were slightly more than tripled (which the recommended addi-
tional $250 million for IDA-7 would do), the funds available for Africa alone would
be increased by nearly $380 million per year.
Poverty today is an international problem that requires a multinational strategy
to address it. Although bilateral programs are very important, we believe that mul-
tilateral institutions--and especially the World Bank and IDA-are particularly
pertinent and should serve as a channel for an increasing portion of our develop-
ment assistance. In contrast to bilateral aid, assistance provided through the multi-
lateral banks, including IDA, is more likely to be free from political considerations
and is at least equally effective in promoting economic development; second, the size
of the financial support from the banks, as well as their multilateral character,
offers greater opportunity to affect internal policy decisions (especially in the poorer
countries where such funding often represents a substantial share of total invest-
ment); third, it results in a more equitable sharing of the costs of economic assist-
ance among donor countries (the U.S. share, at roughly 25 percent, is considerably
less than a decade ago); fourth, the banks, including IDA, have built up considerable
expertise over the years in handling the problems of the least developed countries.
While I do not wish to suggest that the United States Catholic Conference is not
interested in other aspects of the foreign aid program, I do want to emphasize our
172
strong support for IDA and urge that consideration be given to increasing the share
of the United States in this seventh replenishment of IDA to $1 billion per year.
Senator MATHIAS. Thank you very much, archbishop, and let me
say to you and to Mr. Fried and Mr. Sewell that your full state-
ments will appear in the record, so if you summarize portions of
them, they will not be lost.
I appreciate very much your support, archbishop. I think you
bring a special focus to this problem and suggest that this is a way
to enjoy a modern version of the loaves and the fishes, that by
coming together through the multinational institutions, we can
find, if not plenty, at least adequacy in situations where there
would otherwise be hopelessness.
Archbishop LIPSCOMB. Mr. Chairman, I once heard the loaves and
fishes described as having your cake and eating it, too. I think IDA
sort of does that as well. [Laughter.]
Senator MATHIAS. That is the way it should be.
Mr. Fried.
STATEMENT OF EDWARD R. FRIED, THE BROOKINGS
INSTITUTION, WASHINGTON, D.C.
Mr. FRIED. Thank you, Mr. Chairman, for the invitation to par-
ticipate in this discussion. I think it is an important one, but in
view of the hour I will try to keep my comments brief.
I think the sad fact that we face is that the request your commit-
tee is considering means that IDA VII will be reduced in nominal
terms by 25 percent from what was negotiated in 1980 and perhaps
35 percent in real terms. This reduction, which came about solely
at U.S. insistence, in my view, represents a misalignment of U.S.
national priorities and is contrary to U.S. national interest.
I would like to tell you briefly of the factors that lead me to this
conclusion. First, to begin with-and as you point out in your open-
ing statement, Mr. Chairman-many of the world's poorest coun-
tries have been hard hit in the past few years by the deterioration
of the entire international economic environment, which can in no
sense be considered their fault.
The oil price shock of 1979 and the world recession that followed
meant that their terms of trade were depressed and their export
prospects that much more limited. Interestingly, China, India, and
Pakistan were less affected by these circumstances, partly because
of some special offsetting factors, and still managed to achieve
fairly good results.
Bangladesh and some other poor countries in South Asia, howev-
er, did very poorly, and sub-Saharan Africa suffered the most, ex-
periencing a decline over the past few years of 5 percent in per
capita income, an occurrence which has made the countries of this
region that much more vulnerable to chronic disease and to the
famine that is now in evidence.
This, therefore, has to be viewed as a most inopportune time to
cut back on IDA, which is the largest single source of concessional
assistance specifically directed toward helping the poorest coun-
tries turn their economies around.
Nor can the reduction in IDA VII be justified on the basis of
IDA's performance. To the contrary, I believe-and I can talk on
173
the basis of 3 years experience as U.S. Executive Director to the
World Bank and to IDA-that the organization has been an out-
standingly successful experiment in international economic coop-
eration.
IDA credits have helped to bring about virtual agricultural self-
sufficiency in India, and they have pioneered ways of improving
urban shelter and water supply and to expand health and primary
education. What it has done, in short, has been to expand physical
infrastructure and to improve human capital, without which sus-
tained improvement in the poorest countries would simply be im-
possible.
Now as a general matter, projects such as these are inherently
risky, and some of those that IDA financed have failed. Nonethe-
less, IDA's results, on average, have been excellent. The reason is
that despite their highly concessional terms, IDA credits are ex-
tended only if the projects they are to finance meet the same rigor-
ous standards as apply to the World Bank hard loans.
It is not surprising, therefore, that the economic returns they
have achieved or seem to have achieved on the basis of sample sur-
veys that have been made are about the same as the high results
achieved by Bank loans themselves-an average economic rate of
return of 18 percent a year.
Furthermore, IDA's influence in promoting economic efficiency
adds substantially to these returns. Mr. Debs dealt with some of
the factors leading to this earlier. But essentially what it means is
that IDA funds give the World Bank a great deal more leverage to
persuade governments to reform economic policies, to move toward
greater reliance on market incentives, to adopt technical innova-
tions, and to achieve improved economic efficiency generally.
These are objectives which the United States has consistently
supported. Hence, the multiplier effects achieved by the IDA pro-
gram. The reduction in IDA VII will necessarily weaken the Bank's
influence in these respects.
Then, third, Mr. Chairman, there is the question of how this re-
duction in the IDA program affects U.S. national interests and
values. To gain perspective here it is useful to look at how IDA
funds are invested geographically among the 51 countries eligible
for such assistance.
Roughly 40 percent, looking at the figures for 1983, go to India
and China together. Formerly, that proportion went to India alone.
These two countries contain 1.6 billion people, more than one-third
the world total. Their economies as well as their industrial base
are large, but they are still among the poorest countries in the
world, as you were told this morning.
Per capita income in India is estimated at about $250 per year,
and in China $300 per year. So, in effect, the IDA program in these
two countries represents an international commitment to partici-
pate-even in a comparatively small way-in the drive to alleviate
poverty in a very large portion of mankind.
Another third goes to the 32 countries in sub-Saharan Africa con-
taining almost 200 million people. And in some respects, I think
this is the heart of the problem we presently confront. These coun-
tries have experienced economic stagnation and worse for two dec-
ades.
174
On present trends, per capita income is likely to be no higher in
sub-Saharan Africa as a whole by the end of the century as it was
in 1970. This would be an almost certain prescription for economic
disaster and, in my view, for chronic political turmoil.
Senator MATHIAS. A very cruel outlook.
Mr. FRIED. Until now, IDA has been playing an increasingly im-
portant role in the attempt to revive these economies. It is itself a
substantial source of investment capital. It helps to mobilize for-
eign capital from private as well as governmental sources, and it is
becoming the major force, if it is not already the major force, on
the continent for institutional and policy reform. The cut in IDA
VII will adversely affect each of these contributions.
The final 25 percent of IDA money goes to some 17 countries
ranging from Bangladesh and Pakistan in South Asia to Haiti and
Dominica in the Caribbean. In each country, IDA's role is some-
times crucial, with a general emphasis on supporting agricultural
production and rural development and improving the quality of
economic management.
Thus, IDA is in no sense-in no sense-an international entitle-
ment program. Rather, in Tom Clausen's words, it is "a hard-
headed investment in international trade, economic growth, and
greater global stability and cohesion.” And as such, it is a highly
cost-effective means for advancing U.S. national interests-politi-
cal, economic, security, and humanitarian.
For this reason, the U.S.-imposed cut in IDA VII cannot be rec-
onciled with U.S. national priorities. Conceptually at least, Mr.
Chairman, budgetary authorizations should be of equal value to the
Nation at the margin. In the 1985 budget, $305 billion is requested
for national defense and $21 billion for international affairs.
The authorizations for international affairs specifically, and
those for national defense by implication, are designed to serve, in
the words of the President's budget-and I quote—"predominant
U.S. interest in promoting a world order that fosters peace, securi-
ty and prosperity, in which individuals may enjoy political and eco-
nomic freedom.
I submit that an increase of $250 million a year in the U.S. au-
thorization for IDA VII, which would result in an increase of three
times that amount from other countries, would have a far greater
value in achieving that kind of world order than would be lost
from a reduction of the same amount in virtually any other mili-
tary and international economic program now in the budget.
Nonetheless, we face the fact that the negotiations for IDA VII
have been concluded at the reduced level of $9 billion for the next
3 years rather than the $12 billion program that every donor coun-
try other than the United States supported. Could anything be
done now to restore the larger program?
First, I recommend quick approval of the present request for a
U.S. contribution of $750 million a year to IDĀ VII.
Second, I would urge passage of a sense of the Congress resolu-
tion calling for the United States to propose a supplementary con-
tribution to IDA VII of $3 billion for 1985-87, all of which would be
added to funds for sub-Saharan Africa. As in the present program,
the United States would contribute one-fourth of the supplemental
amount.
175
In negotiating IDA VII-again as you pointed out in your state-
ment-the administration argued that the Congress would not be
willing to appropriate more than $750 million a year for IDA. Per-
haps that is true. But it should be tested. Passage of such a resolu-
tion would remove that constraint.
The record of the negotiations also indicates that other donor
countries would support a supplementary appropriation of that
size, and concentrating the additional funds in sub-Saharan Africa
would offer the possibility at least of reversing the desperate future
that now faces that region.
Thank you, Mr. Chairman.
Senator MATHIAS. Thank you very much.
Mr. Sewell, you are a veteran of this committee. Please proceed.
STATEMENT OF JOHN W. SEWELL, PRESIDENT, OVERSEAS
DEVELOPMENT COUNCIL, WASHINGTON, D.C.
Mr. SEWELL. Thank you, Mr. Chairman. I have the added advan-
tage of being the cleanup hitter, I suppose, and therefore not
having to track over what have been a series of very excellent and
provocative presentations, among which, I must say, the degree of
unanimity seems to be quite striking, with the exception of your
second speaker.
Let me begin by stating my personal position. The current pro-
posal that our contribution to IDA VII be $2.25 billion over the 3
years, leading to the $9 billion seventh replenishment of IDA, does
not reflect either the very real needs of the developing countries or
the long-term economic and political interests of the United States.
Support for the World Bank at this level is an abdication of the
leadership that we have historically exercised in this particular
area.
.
Senator MATHIAS. Let me interrupt you just to ask, would you
agree with the analysis that I made, that this is about a 40-percent
reduction in the face of a substantial escalation in need?
Mr. SEWELL. Exactly, and therefore I recommend strongly that
the U.S. contribution be increased to at least $3 billion, thus, as
others have said, activating contributions by other donors that
would result in an IDA VII or $12 billion.
I think it is important to understand, as your speakers have said,
that the additional funds certainly are needed, both in our inter-
ests and those of the LDC's-less developed countries--and I would
argue in the course of my brief remarks that they could be ob-
tained by switching priorities within our current U.S. aid program,
because, as you know better than I do, Congress, as Senator Biden
said so eloquently, faces a series of very tough choices in terms of
the Federal budget.
I have laid out my testimony in a series of nine statements or
assertions, which I will not run through in great detail because
most of them parallel those of your other witnesses. But I want to
expand on one or two of them in terms of how I see the U.S. inter-
est in IDA.
First, it is clear that the prospects for development in the Third
World are not promising, and it is going to be very difficult to
regain the growth rates of the past. The Third World in general
176
has adopted a series of adjustment measures that have been very
tough, and that have caused a great deal of pain. They have adjust-
ed on their own about as much as they can, and asking them to
take additional steps alone would be costly to them and to the
international economy.
The prospects for the low-income countries, the primary users of
IDA, are even less favorable, and whether one looks at the esti-
mates of the World Bank or of other institutions, there is a una-
nimity that the low-income countries are in an even less favorable
position than the rest of the Third World.
The third proposition, as other speakers have said, is that among
the low-income countries the problems of sub-Saharan Africa
demand special attention. They started out further behind and
they have further to go.
They have had a two-decade record of very low economic growth,
and almost no per capita growth. They have been faced with a
series of disasters, most notably drought beginning in the late
1960's and continuing in the last several years in southern Africa,
which have put them even further behind. Given their prospects,
and those of other low-income countries in general, and adequate
level of resources for IDA VII is essential.
Nine billion dollars is much too low, $12 billion is barely ade-
quate. I would argue, as others did at the beginning of the discus-
sions for the replenishment, that a total of $15 to $16 billion is
probably what is needed. Obviously at this moment this higher
level is politically impossible.
The next assertion, which is consistent with Ed Fried's state-
ment, is that there is no question that IDA is an effective institu-
tion. It has undergone three evaluations in the past several years,
one by the U.S. Treasury at the beginning of the Reagan adminis-
tration; one by the World Bank, a massive internal study; and one
by my own organization, looking particularly at the poverty-orient-
ed programs of the Bank of the last 13 years.
The conclusion of all of them was that IDA is cost effective. Its
return on its projects was very good. It has learned a great deal
and was probably the most effective provider of development assist-
ance in the world.
The conclusion therefore is not that IDA cannot be improved. It
certainly can be improved. But when you are talking about much
less resources for the same programs, it is feckless to talk about
changes that might be made in the institution. It is a very efficient
institution.
What I would really like to do is turn to some of the questions
that have been raised in the course of this morning's discussion.
First, whether we can afford a higher IDA; and second, where do
our interests lie. Are they economic interests, political interests or
overall foreign policy interests?
There is no doubt, of course, that budgetary resources are going
to be very scarce in the period ahead, given the size of the project-
ed deficit and the competing demands on budgetary funds for do-
mestic and international programs. However, one has to look at the
overall aid program to see what we are using it for.
U.S. aid, of course, has grown considerably over the past several
years, even during the period of high domestic recession. In fiscal
177
year 1983 total foreign aid, according to the budget figure, was
about $9.3 billion. By 1985 it will be $15.2 billion.
But that growth has masked a great shift of priorities within the
aid program. First of all, there has been the shift from multilateral
aid to bilateral aid. My colleague on my right led the way with the
Peterson Commission report more than a decade ago, which em-
phasized the importance of multilateral aid to the United States.
That shift, which goes back to the Nixon administration, has been
reversed and we are now putting a much greater emphasis on bi-
lateral aid
I think even within the bilateral aid program it is very interest-
ing to look at the budgetary figures, which we took out of the pres-
entation to Congress which was just sent up. These numbers show
dramatically what emphasis we are putting on security-related aid.
According to the budget figures, what is known as international se-
curity assistance-ESF and military aid financing-jumps from
$4.6 billion in 1983 to over $10 billion in 1985. In the same period,
U.S. AID's bilateral development accounts, which as you know go
for health, education, agriculture population programs, go from
$1.9 billion to $2 billion.
Total economic and financial assistance is projected to go from
$4.7 billion to $4.9 billion, compared with the jump in international
security assistance, from $4.6 billion to $10 billion. That is a consid-
erable jump. That trend will continue in the future, particularly if
new programs for Central America come into operation.
Now, if our contribution to IDA was increased to $1 billion a
year for a total of $3 billion, that is a $750 million increase over
the 3-year period. This is a miniscule cost relative to the shifts that
have gone on in security aid. This increase of $750 million over 3
years would represent 0.00025 of our total Federal budget proposed
for fiscal year 1985. Now, no sum can be deemed insignificant given
the budgetary difficulties, but certainly over the longer run it
would well serve U.S. economic and security interests.
I would like to digress for just one second on the question of
public support. It is worth noting that in 1982—and I am doing
these off the top of my head-contributions by Americans, volun-
tary contributions by Americans to groups working overseas, both
secular and religious, were about $1.2 billion. That, according to
my quick figuring, is about two-thirds of what we are providing in
fiscal year 1983 through AID's bilateral development account.
So Americans are giving voluntarily, a considerable amount of
money compared to what we are giving on official accounts
through U.S. AID, and I think it does indicate that there is public
support for these kinds of programs that go to meeting human
needs.
I would argue very strongly that our economic interests in the
developing world would be adversely affected by the decision to
keep IDA at such a low level. As you well know, Senator, the
growth record of the Third World over the sixties and seventies
was remarkable, and as a result some of these countries are now
big markets for the United States. They are major participants in
the international financial system. They provide us with a whole
range of low-cost consumer goods and raw materials.
178
You can see the negative side of that, of the importance of the
Third World to us, in the results of the global recession. We have
the preliminary results of a study at my organization about what
the costs of the recession are to the United States.
One indication, for instance, is that probably over a million
actual or potential jobs have been lost in the United States due to
the recession in the Third World. That is about 12 percent of the 9
million •Americans currently unemployed. That is a considerable
impact on our own domestic well-being.
And I would argue, of course, that the developing countries in
general have the potential to be the future frontier of economic
growth in the world. We have reaped the benefit of increased trade
in the past with what are known as the middle-income countries
and the newly industrializing countries.
But under any reasonable assumptions of growth most of the
low-income countries can participate in the international economic
system, only with the help of the kind of long-term investment that
comes through IDA. This investment can move them into a posi-
tion where they can benefit themselves and the United States.
And I would argue strongly in economic terms, as other wit-
nesses have, that IDA and the World Bank have led the way in em-
phasizing use of market forces and economic efficiency. To pull
back funding at this time, after most of the developing world has
been persuaded to follow those prescriptions, would be a disaster, it
seems to me.
My next point is that the United States has a series of political
interests in the low-income countries that are not going to be fur-
thered by retrenching on IDA. Now, no one can come here and per-
suade you that development is going to be a peaceful process. We
all know that the process of development is going to give rise to a
series of instabilities and tensions. We are going to have to face the
fact that there is going to be a great deal of instability in the Third
World. The question is how to minimize it. And it seems to me that
any steps that decrease resources available to the Third World in
this situation is inevitably going to lead to further retrenchment by
those countries with, as Ed Fried said, a potential for increased
unrest.
It is very interesting. We looked at the IDA recipient countries
since 1979. In those countries there have been by our count 28 re-
ported coups or attempted coups since 1979, and I think a good part
of the problem can be traced to the economic situation that they
are facing.
Finally, I would argue that our leadership in the world is affect-
ed by our stance on IDA, as well as by the current U.S. attitude on
multilateral institutions in general. The United States needs to re-
alize that it cannot be a world leader and be a free rider.
In the first place, the Third World is coming to despair of our
leadership on a variety of issues, whether it is the Law of the Sea,
in the United Nations, an initially recalcitrant stance on the Inter-
national Monetary Fund, and now IDA. And this is becoming par-
ticularly true, I must say, when we are urging a greater reliance
on use of market forces, but are no longer willing to provide the
financial wherewithal to back up that commitment.
179
It is also worth pointing out that the U.S. attitude on IDA is just
one more irritant in the relations with our partners in the Atlantic
Alliance, an issue you spend a great deal of time on. Most of the
Europeans wanted IDA to be at a higher level because they see
those programs as being very much in their own economic and po-
litical interests. A stance such as the U.S. administration is now
taking, I would argue over the longer run, could well lead the Eu-
ropeans and others to make arrangements outside of IDA, such as
the kind of relationship that the Europeans have through the
Lome Agreements, a special fund within IDA or under the auspices
of the World Bank without U.S. participation.
All of which would lead to a kind of regionalism that I would
argue is not in the long-term interests of the United States and is a
variation from our historic foreign policy.
So for all of those reasons, Senator, I believe that the current
proposals to restrict the U.S. support of IDA to $750 million a year
are inadequate and contrary to our interests.
Now, there are many outside of Congress who maintain that
Congress will not support an adequate level of participation in
IDA. Frankly, I would be insulted by that assertion until they can
prove it.
I think the record indicates otherwise. Congress historically has
supported IDA and the other multilateral programs because it has
identified this country's long-term interests in the development of
the Third World. And I hope you will take action to reverse the
administration's stance and to increase the U.S. commitment to
insure an IDA VII of at least $12 billion.
Thank you very much.
[Mr. Sewell's prepared statement follows:
180
STATEMENT OF JOHN W. SEWELL
PRESIDENT, OVERSEAS DEVELOPMENT COUNCIL
before the
SENATE FOREIGN RELATIONS COMMITTEE
Washington, D.C.
Wednesday, February 29, 1984
MR. CHAIRMAN, I am very pleased to have been asked to testify with res-
pect to U.S. participation in the Seventh Replenishment of the World Bank's
International Development Association.
The subject is one of considerable
importance, both for the developing countries and the United States.
My testimony is in the form of nine statements with brief explana-
tions.
In addition, I have attached a copy of a chapter from U.S. Foreign
Policy and the Third World: Agenda 1983, the ninth in the Overseas Develop-
ment Council's annual assessments of American relations with the developing
countries.
The chapter, entitled "Bridging the Crisis:
The World Bank and
U.S. Interests in the 1980s," was written by ODC's Vice President Richard E.
Feinberg
The views expressed in this testimony are my own and do not
necessarily reflect those of my colleagues at the Overseas Development
Council or its Board of Directors.
Let me begin by clearly stating my personal position on the question
of U.S. participation in the World Bank's International Development Associa-
tion,
The current proposal that the U.S. contribution to IDA VII be
$2.25 billion over the next three years (thus leading to a Seventh Replen-
ishment which totals $9 billion) does not reflect either the very real needs
of the developing countries, or the long-term economic and political
interests of the United States.
Support for the World Bank at this level
is an abdication of the leadership that the United States has historically
181
exercised in regard to the development process.
I recommend strongly that
the U.S. contribution be increased to at least $3 billion, thus activating
contributions by other countries which would result in an IDA VII of $12
billion.
I realize, of course, that the large projected budget deficits
and the very tough decisions facing you in the Congress, between competing
programs will make it difficult to add additional funds above the Admin-
istration's request. However, I think it is important to understand that
additional funds are needed, both in the interests of the developing coun-
tries and of the United States, and that they could be obtained by switching
priorities with the current U.S. aid program.
I would like to illustrate that statement by making the following brief
points on which I will expand subsequently.
1.
The prospects for development are not promising.
In the
absence of changed policies by both rich and poor coun-
tries, the developing countries will not easily regain
their previous growth paths.
2.
The prospects for the low-income countries, which are
the primary users of IDA, are even less favorable.
3
.
Among the low-income countries, the problems of sub-Saharan
Africa demand special attention.
4.
Given the prospects for the low-income countries, an
adequate level of resources for IDA VII is essential.
The total of $9 billion now under discussion is much too
low; $12 billion, the level of IDA VI, is barely adequate;
probably a total of $15-$16 billion will be necessary to
address the pressing needs of the low-income countries.
182
The high figure, however, is probably out of the
question politically, but the middle figure is
essential.
5.
IDA has proven its role as an effective instrument for
meeting the needs of the low-income countries.
6.
The United States can "afford" a contribution to IDA
higher than the $750 million a year currently proposed.
There is no lack of resources, even in the current U.S.
aid program. However, these programs now are focused on
areas and programs thought to be of security interest.
7.
The United States has economic interests in the developing
world which will be adversely affected by the decision to
keep IDA at such a low level.
8.
The United States has political interests in the low-income
countries which also will not be furthered by retrenching
on IDA.
9.
U.S. leadership in the world is affected by our stance on
IDA as well as by the current U.S. attitides on multilateral
institutions.
The United States needs to realize that it
cannot be a world leader and a free rider.
C
183
1.
The prospects for development are not promising.
In the absence of
changed policies by both rich and poor countries, the developing countries
will not easily regain their previous growth paths.
a.
The concern over the global "debt problem" has
diminished somewhat as we understand its dimensions
better and have a better sense of how to deal with
those twenty-odd countries that account for most of
the world's debt. However, the international economic
system is far from out of danger.
It is generally
agreed that the developing countries have gone about
as far as possible in adjusting on their own.
They have
cut their imports and drastically reduced government ex-
penditures. They have very little room to make further
adjustments without paying several economic, social and
political costs.
b.
The current guarded optimism over the ability of govern-
ments to deal with the liquidity problems of the major
debtors should not be allowed to obscure the longer-
term nature of the development crisis now facing almost
all of the Third World. Having started at a lower level
of progress, the events since 1979 have not only led many
countries to a standstill, but have caused some to actual-
ly slide backward.
Latin America and sub-Saharan Africa,
184
for instance, suffered declines in per capita income;
and some countries are worse off now than they were in
the 1970s.
For the developing countries in general, the
average annual growth in GDP dropped from 6 percent in
1960-1973 to less than 2 percent in 1982, not enough to
keep even
with population growth.
C.
Prospects for the future are uncertain and there is no
agreement among the major organizations that forecast
economic developments in the developing countries. Many
are very pessimistic. The United Nations, for instance,
argues that "the outlook for the developing countries is
bleak."
Only the World Bank's projections seem moderately
optimistic. The 1983 World Development Report, for instance,
believes that the average growth for developing countries
will, under its most optimistic assumptions, return by
the end of the decade to the 6 percent annual increase
in GDP that marked the period 1960-1973.
Even under
relatively adverse circumstances, the Bank projects that
growth in the period 1985-1995 will return to the level
achieved during the 1970s.
d.
All predictions, however, are hazardous because there are
several unanswered questions that will be crucial in
determining the growth rates of the Third World in the
185
period ahead. These are (1)
These are (1) whether the cause of lower
growth rates is simply recession or structural changes
both within the industrial and the Third worlds; (2)
whether trade will continue to follow the historic
í
pattern and grow faster than output; (3) whether the
developing countries can continue to increase their
share of world trade; and (4) whether the developing
countries can finance debts that are much larger than
at any time in the past.
These prospects for the de-
veloping countries will depend very much on the answers
to these four crucial questions.
e.
These dry statistics should not obscure the human costs
of recession and low growth prospects in the Third World.
In Brazil income per person fell by 4 percent in 1981 and
2 percent in 1982; in Chile per capita income fell by 15
percent in 1981; and in Costa Rica real income may have
fallen by one-third.
The U.N.'s Food and Agriculture
Organization has analyzed the impact of global recession
on people in the Third World.
Their analysis indicates
that the proportion of the world's population living
without adequate food, water, health care, and education
will remain approximately the same throughout the end of
the century. However, the absolute number of malnourished
84-046 0-84-18
186
children will increase by 30 percent by the year 2000.
Thus, if current trends continue, there may be 650 million
malnourished people in the world by the turn of the cen-
tury--more than double the current population of the United
States.
2.
The prospects for the low-income countries, which are the primary users
of IDA, are even less favorable.
a.
These countries have historically grown at a slower rate
than the middle-income countries of the Third World. They
started farther behind and their progress has been slower.
b.
They generally do not participate in world trade to the
same degree as the more rapidly growing countries, and have
received only a small share of the benefits of trade over
the past decade.
In addition, they were not able to tap
private credit markets to the same extent as the middle-
income countries.
C.
Nevertheless, Some low-income countries also have serious
debt problems in relationship to their earning capacity.
For instance, Senegal, Sierra Leone, and Zambia have
debt/service ratios that are just almost serious as the
major debtor countries in Latin America.
187
d.
They receive an inadequate share, particularly of bi-
lateral development assistance, from the OECD countries.
According to the World Bank, 70 percent of the develop-
ment assistance provided by bilateral agencies goes to
the middle-income rather than low-income developing
countries.
e
e.
If their current slow growth continues, real per capita
income in the low-income countries could be only about
$10 higher in 1990 than 1980; while in the industrial
world per capital income could increase by nearly
$3,000.
f.
It is important, however, to realize that there are
differences within the low-income group.
India and
China have maintained somewhat higher growth rates,
even during the recession.
The reason for this better
record is probably because they depend less on the
international economy and therefore have been less
affected by recession in the industrial world.
3.
Among the low-income countries, the problems of sub-Saharan Africa
demand special attention.
a.
Twenty of the thirty least developed countries are in
Africa; by almost any indicator --per capita income,
188
life expectancy, infant mortality, or literacy--the
entire region is extremely poor.
b.
Africa's medium-term prospects for growth are worse
than any other region. Even under the World Bank's
most optimistic projections, low-income sub-Saharan
Africa will not regain its 1970 per capita income
by 1995.
C.
A variety of economic, environmental and policy con-
straints have caused food production in Africa to
grow at a slower rate than its population. By the
year 2000 Africa may need to import 35 million tons
of food as opposed to the 24 million tons imported
in 1981.
d.
Finally, the region remains even more dependent than
other low-income countries on concessional aid.
The
region depends on commodities which have slower growth
prospects, thus hampering Africa's ability to partici-
pate in world trade.
In addition, African countries
have limited creditworthiness.
189
4.
Given the prospects for the low-income countries, an adequate level of
resources for IDA VII is essential.
The total of $9 billion now under dis-
cussion is much too low; $12 billion, the level of IDA VI, is barely ade-
quate; probably a total of $15-$16 billion will be nececessary to address
the pressing needs of the low-income countries. The high figure, however,
is probably out of the question politically, but the middle figure is
essential.
a.
The low-income countries do not have the same recourse
as the middle-income countries for sources of finance
other than official development assistance. They are
limited in their ability to borrow from commercial
sources; they do not participate in the world trading
system to the same degree; and they are not attractive
locations by and large for private investors.
b.
The World Bank and the International Development Associa-
tion have a growing set of demands on their limited re-
sources.
They are deeply involved in adjustment lend-
ing; the needs for increased investment in energy will
grow; and particular attention needs to be focused on
sub-Saharan Africa and the Caribbean.
C.
The need for funds directed at poverty alleviation will
increase.
For Africa alone, the Bank's report indicates
190
that progress will depend upon doubling official develop-
ment assistance in the period ahead.
d.
China, the world's most populous poor country, is now a
member of the Bank and is a claimant on funds under IDA
VII. As India, the other large, populous IDA recipient,
has traditionally received about 39 percent of the funds,
China's entry will pose new demands on IDA's scarce re-
sources.
e.
The level of U.S. participation, which has led to a $9
billion IDA, was based on a certain set of assumptions
concerning financial flows to the developing countries.
These assumptions, spelled out in the Treasury Report
on the MDBs, are not likely to take place. Therefore,
the total of $750 million clearly is inadequate.
5.
IDA has proven its role as an effective instrument for meeting the needs
of the low-income countries.
a.
In the past several years, IDA has undergone three sep-
arate evaluations.
The first was conducted by the U.S.
Treasury (United States Participation in the Multi-
lateral Development Banks in the 1980s); the second
.
191
was done by the Bank itself (IDA in Retrospect); and
the third was done by the Overseas Development Council
(Banking on the Poor, by Robert Ayres).
b.
Each of these studies has concluded that IDA is cost-
effective; that it is an efficient deliverer of re-
sources; and (in the case of the ODC and Treasury
studies) that continued support of IDA is very much
in the interest of the United States.
c.
In evaluating the Bank's recent record, the ODC study
concluded:
"'The Bank did not throw overboard its tradi-
tional lending for projects of basic infra-
structure. Its poverty-oriented projects
were congruent with its longstanding em-
phasis on economic growth. The rates of
return on poverty-oriented projects were
generally satisfactory. The allocation
of Bank funds was, broadly speaking, in
both the economic and political interests
of American foreign policy. Market-oriented
systems tended to be encouraged and social-
ist-oriented ones urged to consider market
solutions. The Bank's macroeconomic policy
advice was still very much in the neoclas-
sical mode and dealt with poverty allevia-
tion in largely subsidiary fashion."
d.
IDA, of course, can be improved. However, the most
immediate need is for adequate resources.
In their
absence, discussions of change are irrelevant.
192
6.
The United States can "afford" a contribution to IDA higher than the
$ 750 million a year currently proposed. There is no lack of resources,
even in the current U.S. aid program. However, these programs now are
focused on areas and programs thought to be of security interest.
a.
There is no doubt that resources are scarce, particu-
larly given the projected size of the U.S. budget
deficit and the competing demands for resources.
Legislators, therefore, face choices in balancing
very real interests.
b.
However, U.S. aid has grown considerably over the
past several years, even during the recession.
In
FY 1983 total foreign aid was $9.3 billion; in FY
1985 it is estimated to be $15.2 billion.
C.
This overall growth has masked a considerable shift
in priorities within the U.S. aid program.
d.
Bilateral aid has been given preference over multi-
lateral programs, reversing a pattern which was
established at least as far back as the Nixon Admin-
istration.
1
193
e.
Within the bilateral program, emphasis is now given to
security-related aid.
International security assis-
tance (ESF and military aid financing) will jump from
$4.6 billion in 1983 to over $10 billion in 1985. In
the same period, the U.S. Agency for International
Development's bilateral development accounts (which go
for health, education, agriculture, and population)
will have grown from only $1.9 billion to $2 billion.
Total economic and financial assistance is projected
to grow from $4.7 billion to $4.9 billion.
This trend
is projected to continue into the future, particularly
as new programs now proposed for Central America come
into operation.
f.
If U.S. participation were to be increased from $750
million to $1 billion a year, our contribution would
trigger commitments by other donors which would make
IDA VII $12 billion. The additional cost would be
only $750 million over a three-year period. (An
amount equivalent to .00025 of the federal budget
proposed for FY 1985!) This may not be a small sum
in budget terms, but over the longer run U.S. economic
and security interests would be well served by increas-
ing U.S. participation to that level.
194
7.
The United States has economic interests in the developing world which
will be adversely affected by the decision to keep IDA at such a low level.
a.
The growth record of the developing countries in the
1960s and 1970s was remarkable. As a result, they be-
came major markets for U.S. exports, important suppliers
of low-cost consumer goods and raw materials, and im-
portant participants in the international financial
system.
b.
Their importance to the United States can be seen in the
costs to the United States of the current global recession.
Because most developing countries had to cut expenditures
and imports, U.S. exports dropped precipitiously. A forth-
coming ODC study indicates that over a million actual or
potential jobs were lost due to recession in the developing
countries. This total is about 12 percent of the 9 million
Americans currently unemployed. In addition, losses of
income from investments overseas were considerable.
C.
The developing countries have the potential to be the
future frontier of economic growth in the world. Cur-
rently, the major impact comes from the middle-income
countries.
(The 40-odd fastest-growing developing
countries accounted for about 25 percent of the growth
195
in world output from 1973-1979, equal to the con-
tribution of Germany and Japan combined.)
In the
future, the low-income countries should, under
reasonable assumptions of growth, become important
parts of a Third World engine of growth. However,
it will take long-term investment, such as that pro-
vided by IDA, to support that development.
d.
The United States benefits directly from procurement
from the World Bank and from IDA.
The Treasury Depart-
ment study reports that MDB procurement of U.S. merchan-
dise exports show a return of $1.10 for every U.S. dollar
actually paid into the banks.
e.
The United States has a considerable economic interest
in changed LDC policies emphasizing economic efficiency
and the use of market forces.
Under the urging of the
World Bank, among others, many developing countries are
making moves in this direction, but financial support
will be needed to make these difficult changes. Fewer
resources available from IDA will make that job more
difficult and could abort policy changes urgently needed.
196
8.
The United States has political interests in the low-income countries
which also will not be furthered by retrenching on IDA.
a.
Stability in the developing countries will be affected
by the decline in resources available from the World
Bank. Development inherently is an unstable process;
and it is necessary for the United States to learn to
live with that instability. But rapid and equitable de-
velopment will lessen incidences of instability, and
ultimately societies that are meeting the needs of their
peoples will be less prone to unrest and therefore will
provide fewer opportunities for outsiders to meddle.
b.
Given the current economic, social and politifal crises
in the low-income countries, any steps that decrease the
resources available to them will inevitably lead to further
retrenchment with a potential for increased unrest.
C.
The impact of the recession on the Third World can be seen
by the fact that in IDA-recipient countries alone there
have been 28 coups or attempted coups since the recession
began in 1979.
d.
The long-term interests of the United States will be more
secure when the governments of the developing countries
197
have the resources to meet the needs and aspirations of
their peoples.
9.
U.S. leadership in the world is affected by our stance on IDA as well
as by the current U.S. attitudes on multilateral institutions.
The United
States needs to realize that it cannot be a world leader and a free rider.
a.
The Third World is coming to despair of U.S. leadership.
Our general status of opposition to international organi-
zations--Law of the Seas, the United Nations, the Inter-
national Monetary Fund, and now IDA--has led to a growing
questioning of our intent and our political will.
This is
particularly true when we have urged greater reliance on
the use of market forces, but are no longer willing to
provide the financial wherewithal necessary to back up
that commitment.
It also comes at a time when most of the
Third World has come to see the U.S.S.R. as irrelevant to
their future.
b.
The United States' attitude on IDA also is now one more
irritant in our already troubled Atlantic Alliance.
Most
Europeans wanted IDA to be at a higher level because they
very much see IDA programs as being in their economic
and political interests.
The current U.S. attitude on IDA
198
could well lead to the Europeans and others making
arrangements outside of IDA, such as the so-called
"Special Fund" proposed in IDA VI, or to a strength-
ening of the already existing trends toward regional
relationships between Europe, let us say, and the
countries of Africa.
In the long run, this kind of
regionalism is not in the interest of the United States.
* *
* * * *
For all of the above reasons, I believe that the current proposals to
restrict U.S. support of IDA to $750 million a year are inadequate and con-
trary to the interest of the United States.
There are many outside Congress who maintain that Congress will not
support an adequate level of U.S. participation in IDA.
I believe the
record indicates otherwise.
Congress historically has supported IDA and
the other multilateral programs because it has identified this country's
long-term interests in the development of the developing countries.
I
hope you will take action to reverse the Administration's stance and
increase the U.S. commitment to ensure an IDA VII of at least $12 billion.
Thanks you very much for the opportunity to testify.
199
Reprinted with permission from John P. Lewis and
Valeriana Kallab, eds., U.S. Foreign Policy and
the Third World: Agenda 1983 (Published for the
Overseas Development Council by Praeger Publishers,
1983), pp. 139-61. Overseas Development Council.
с
CHAPTER 6
Bridging the Crisis:
The World Bank and
U.S. Interests in the 1980s
Richard E. Feinberg
The World Bank is experiencing the most turbulent period in its history. It is
under pressure from a host of sources to meet a widening variety of needs. The
poorest countries would like a significant increase in highly concessional re-
source flows to offset the deterioration in world commodity markets. The more
advanced developing countries want the World Bank to provide more loans so
that they will be less dependent upon commercial sources. The commercial
banks themselves would like the Bank to provide coverage against political risks.
The Reagan administration wants the Bank to influence countries to adopt more
market-oriented economic policies. These objectives are not necessarily con-
tradictory, but they do add up to a ballooning demand for Bank resources and
talent.
How has the World Bank been responding to these mounting demands? Can
the Bank adopt policies which will use resources more efficiently and enable it to
accomplish more of these objectives simultaneously? What decisions are pending
regarding future funding levels? And what is at stake for the United States?
Responses to the New International Environment
Throughout its history, the World Bank has continuously altered its programs in
response to changes in the international environment. In the years following its
establishment at the Bretton Woods Conference in 1944, the Bank concentrated
NOTE: Portions of this chapter draw upon a report draned by the author for the U.S. House of
Representatives, Committee on Banking. Finance, and Urban Amairs, Subcommittee on International
Development, institutions, and Finance, The Future of the Multilateral Development Banks (Washington,
D.C.: U.S. Government Printing Office, 1982).
139
200
its energies on contributing to the reconstruction of war-lom Europe-hence the
Bank's original name, the International Bank for Reconstruction and Develop-
ment (IBRD). In the 1950s, in keeping with the expressed needs of its clients in
Latin America and Asia, and with the then conventional theories of develop-
ment, the Bank built roads, hydroelectric power facilities, and ports. In 1961, the
soft-loan window- The International Development Association (IDA)
was
opened for the purpose of lending to poorer developing countries, especially
in South Asia, that could not afford the near-market interest rates charged by
the IBRD. In the 1970s, under the leadership of Robert McNamara, the Bank
recognized that the benefits of growth were not "trickling down to the poor
majority in many developing societies, and devoted a rising proportion of its
resources to projects aimed directly at poverty alleviation. The publications
of its large research staff became key reference materials in both the North
and the South, and the Bank earned the reputation of being the world's
preeminent development agency. Thus throughout its history the Bank has
succeeded in adjusting to new challenges as they arose. Never before, how.
ever, has il confronted so many challenges, in such rapid succession, as it
faces in the early 1980s.
In the 1970s and early 1980s, a series of shocks profoundly altered the
international economy, as Chapter I of this volume describes in some detail. The
oil price hikes, sharp movements in commodity prices, and increasingly sluggish
growth rates in the industrial countries resulted in large and chronic imbalances
in the current accounts of the oil-importing developing countries. For many
developing countries, adjustment was no longer a matter of correcting temporary
aberrations resulting from faulty fiscal policies or momentary swings in the
prices of one or two commodity exports, but a painful and at best gradual
alteration in basic economic structures. The adjustment process was made easier
for many countries by the sudden expansion of private capital markets as com-
mercial banks stepped in to finance a large portion of the collective developing-
country deficit. But the rate at which private lending expanded could not be
sustained, and oil-importing countries needed to invest heavily in their own
energy resources and to seek other means of adjusting to the new interational
environment. By the carly 1980s, the commercial capital markets--the savior of
the 1970s were themselves becoming a destabilizing element as interest rales
rose precipitously and commercial bank lending first soared and then retrenched
in individual countries and in the Third World as a whole. The dependency of the
development process on the availability of external finance was highlighted more
starkly than at any time since World War II.
'IBRD and IDA commitments to low-income countries incroased from 37 por cont of the total program
during the years before 1968 to 58 per cent in the current five-year londing cyclo (fiscal 1979-83). The
share of lending for projects more directly benefiting large numbers of poor people roso from 5 per cont in
1968 to 30 por cont in 1980 See World Bank, Annual Report, 1982 (Washington, D.C.: World Bank,
1982). p. 35 For a generally sympathetic analysis of these programs see Robert Ayros, Banking on
the Poor: The World Bank and World Poverty (Cambridge: The MIT Press. 1983); for an alternative
critical appraisal see Cheryl Payor. The World Bank: A Critical Analysis (New York: Monthly Roview
Press, 1983)
140
201
In response to this changed international economic setting, the World Bank
has been experimenting with several new programs. Departing from its tradition
of normally funding only specifically designated projects, the Bank inaugurated
in 1980 a 'structural adjustment lending" program providing general balance-
of-payments support. The institution concluded that the altered nature of the
adjustment process required that it cooperate more fully with its Bretton Woods
sister, the Iniemational Monetary Fund (IMF). In response to the heightened role
of private capital markets in funding development and to the instability of these
markets, the Bank has increasingly sought to “co-finance'' projects, melding
Bank resources with commercial loans. It also has increased ils lending to the
energy sector to assist countries in coping with the higher costs of fuels. And,
facing a new and less certain international financial environment, it has reviewed
its own financial practices. Taken together, these new directions may well aller
the Bank's behavior at least as dramatically as did the the previous decade's
cmphasis on poverty alleviation.
Structural Adjustment Lending. In the 1970s, the World Bank authorized
"global sector" loans to countries whose foreign exchange position was so tight
that export industries, lacking requisite imported inputs, were forced to work at
well below capacity. In Zaire and Jamaica, lines of credit were extended to
cnable export-oriented sectors to obtain the foreign exchange to purchase inter-
mediate parts. The balance-of-payments crises of Zaire and Jamaica had seemed
to be exceptionally severe. By 1980, however, it became clear that the growth
rates and export potentials of many developing countries would be constrained
by their balance-of-payments difficulties. In an increasing number of countries,
shortages of hard currency were forcing cutbacks in investment, including prior-
ity projects in which the World Bank was involved. With the second round of oil
price hikes in 1979, the fall of commodity prices, the rise in interest rates, and
the stagnation of export markets, the major constraint on developing country
development became the deterioration of their balances of payments.
The World Bank concluded that it should go beyond its traditional project
support in assisting countries to meet payments problems. In 1979, the Bank's
management decided to build on its experience with global sector or program"
loans and to institute "structural adjustment loans." These loans are meant to
help countries overcome current account deficits in three ways. First, the loans
provide immediate, quick-disbursing balance-of-payments support. Countries
can continue to impont essential items needed to maintain levels of production
and to finish investment projects. Second, structural adjustment loans enable
countries to expand exports by providing foreign exchange for inputs needed in
export-oriented industries. Finally, the loans require that a country outline a
broader adjustment program aimed at adapting the economy to the new inter-
national conditions.
The adjustment program negotiated between the World Bank and the bor-
rowing government aims at adapting the structure of production to recent chan-
ges in international prices. For example, measures are often required to conserve
84-045 0-84-14
141
202
3
imported fuel and increase the output from domestic energy sources. Raising
producer prices and expanding investment in agriculture are measures frequently
advocated to boost food production. But structural adjustment loans typically
have gone beyond the adjustment of energy and agricultural prices to inter-
national market conditions to embrace policies the World Bank has long ad-
vocated. The loans have encouraged reducing lariffs and other trade barriers,
strengthening the finances of public enterprises, rationalizing budget subsidies,
and allowing interest rates to rise to markel-oriented levels.?
Structural adjustment loan arrangements have encountered several difficull-
ies. By the end of the Bank's 1982 fiscal year, only thirteen of the Bank's some
seventy-five active borrowers had negotiated such a structural adjustment loan.
Structural adjustment represented 5.8 per cent of the Bank's total commitments
in FY 1981 and 8.2 per cent in FY 1982. Although the expansion of such
arrangements has been impressive given the program's short life span, the
number of countries in need of structural adjustment programs is much greater
than the thineen initiates. One constraint has been the decision of the Bank's
executive directors that structural adjustment loans not exceed 10 per cent of total
commitmenis. A second constraint has been the inability or unwillingness of
some govemments to prepare a comprehensive adjustment program. Some
reluctant governments may have feared that a loan for the purpose of adjustment
would substitute for project authorizations rather than result in additional re-
sources,
Bank economists and borrowing governments are just beginning to learn
how to design structural adjustment programs. It is not entirely clear what
"structures' need adjusting. As the term was originally used by Latin American
"structuralists" in the 1950s and 1960s, land tenure, dependence on imported
technology, and the concentration of expons in one or two unstable commodities
were deemed to be important structural obstacles to development. The World
Bank, however, has identified constraints on market mechanisms and prices as
the key structural obstacles to growth. The early “structuralists" had argued that
altering prices would often be insufficient to correct problems deeply embedded
in technology, industrial structure, or asset ownership.
In theory, structural adjustment loans were conceived to address a wide
range of constraints on development. As the first programs were designed,
however, they often seemed to be more a repackaging of traditional approaches
to development than a fresh mix of ideas appropriate to the problems of the
1980s. The Bank's researchers and country economists must grapple with the
complex, dynamic interaction between an unstable interational environment
and national economic management, between monetary variables and real
(supply-side) activity, and between price mechanisms and institutional struc-
apierro M Landell-Mills, "Structural Adjustment Londing: Earty Experience." Finance and Develop
moni, Docombor 1981. DO 17.21.
World Bank, Annual Report, 1982, op. cit., pp. 39-41.
*mond., p. 41.
142
203
tures. It is to be expected that time and experimentation as well as greatly
expanded resources— will be required if adjustment loans are to fulfill their
original promise.
Being medium-term adjustment programs designed to improve the overall
balance of payments of a country, structural adjustment loans overlap in purpose
with a new program of the International Monetary Fund-The Extended Fund
Facility. Traditional IMF adjustment programs, or standbys, lasted one year and
required countries to restore their external and intemal accounts to equilibrium in
relatively short order. But as the aggregate current account deficits of the oil-
importing developing countries grew large and chronic in the 1970s, it became
evident that many developing countries could not adjust their economies rapidly
to the new circumstances, at least not without great dislocations and loss of
production. The IMF concluded that since the deficits were neither temporary
nor simply due to excess demand, the traditional standby formulas were not
appropriate. Nor could economies easily erase their current account deficits
through a devaluation, since there were limits to their ability to reduce imports of
oil and other essentials, and since markets for exports frequently were not
sufficiently elastic. The IMF reasoned that adjustment would have to be gradual
and that attention would have to be paid to domestic supply, especially in energy
and agriculture. Investment in these sectors would not always be immediately
forthcoming, and in any case would require some years to bear fruit. IMF
financing therefore would be needed for an interim period. The Extended Fund
Facility (EFF) was established to provide funds over three years and in larger
amounts than had been available under earlier programs. The EFF would con-
tinue to focus on traditional demand matters and on avoiding restrictions in trade
and capital flows while also addressing investment policies in particular sectors.
The structural adjustment loans of the World Bank and the Extended Fund
Facility of the IMF should be mutually reinforcing. Increasingly they have been
undertaken in conjunction with each other-in Guyana, Jamaica, Kenya, Sen-
cgal, Turkey, and elsewhere. Indeed, the question arises as to whether the iwo
facilities might be partially merged. Each facility does have a somewhat dif-
ferent emphasis: an EFF retains the IMF's traditional emphasis on monetary and
fiscal management, while a structural adjustment loan concentrates on supply-
side investment. The repayment periods of the iwo types of loans diſſer radically,
and, therefore, if the adjustment assistance is intended to improve the borrower's
repayment capacity, the structural adjustment loans can facilitate more time-
consuming adjustments than can the EFF. But to the extent that both programs
are living up to their potential, they are both looking at supply and demand
factors, at macroeconomic and microeconomic variables, al immediate and
longer-term needs. Certainly the country teams that work on the EFF and adjust-
ment loans should consult closely to be certain that their programs are consistent.
Thus recommandation is included in North-South Roundable. "The OISO Declaration." Summary
Report of the Fourth Annual Session of the North-South Aoundtable, Tokyo/Oiso, Japan, October 22-24.
1982 (Washington, D.C.: North-South Roundtable, 1982). p. 7.
143
204
In fact, it has become increasingly common for World Bank missions to have an
IMF staff member present and for the World Bank staff to keep in touch with
their IMF counterparts. Such cooperation is desirable and can be deepened. In
designing and implementing medium-term adjustment programs, it makes sense
for the staff of the iwo institutions not only to be aware of their counterpans'
activities, but also to coordinate their policy recommendations.
Co-Financing. From its inception, the World Bank has considered the
stimulation of private foreign investment to be an important part of its mission.
Given the Bank's own limited resources, it has looked 10 private markets as a
senior partner in development. The International Finance Corporation (IFC) is
the World Bank affiliate that specializes in encouraging private investment by
placing its own equity in enterprises located in developing countries. Further-
more, many IBRD and IDA projects contribute indirectly to an environment
conducive to private investment. For example, physical infrastructure (roads,
ports, telecommunications) is a prerequisite for private investment in man-
ufacturing and commerce. Also, bank advisory missions can counsel member
countries on ways to create a more positive business climate.
Traditionally the World Bank had concentrated on stimulating equity invest-
ment. In the 1970s, however, commercial banks replaced direct investors as the
major avenue whereby privale capital was transferred from the North to the
South. Accordingly, the World Bank gave new attention to another method of
encouraging the flow of private capital to developing countries, co-financing.
The Bank had long been sharing the financing of projects with other
official lending agencies, including bilateral aid programs and export pro-
motion agencies such as the U.S. Export-Import Bank. In the mid-1970s, as
the ratio of private to official financial flows to developing countries rose
dramatically, the World Bank began to see commercial banks as another
potential font of cooperative finance. Only in 1980, however, did the Bank
begin to pursue private co-financing vigorously; the number of co-financed
projects jumped from thineen in 1979 to twenty in 1980, involving $1.8
billion in private co-financing (see Table 1).
When A. W. Clausen left the Bank of America to become president of the
World Bank in 1981, he brought with him a strong interest in co-financing
arrangements." He urged the World Bank staff to generate more "bankable"
projects and initiated an information campaign to make bankers in the United
Slales, Westem Europe, and Japan more aware of co-financing opportunities.
World Bank officials argued that co-financed projects offer commercial lenders
several advantages. The World Bank can locate, develop, and assess a project, as
For a discussion of the relationship bonwoon the World Bank and the Eximbank. soo Richard E.
Feinberg. Subsidizing Success The Export-Import Bank in the U.S Economy (Cambridge: University
Press, 1982). Chapter 3 Soe also Aogor S. Loods, co-financing for Development. Why Not More?.
Dovelopment Paper No. 29 (Washington, DC: Overseas Dovelopment Council, 1980).
'For example, see A. W Clauson, "The World Bank and Iniomalional Commercial Banks: Pannars
for Development." remarks before the international Monetary Conferenco, Vancouver, Canada, May 25,
1982.
144
205
Table 1. World Bank Co-Financing Operations with Privato Sources
(5 millions)
Number of
Projects
Amount from
Private Sources
Fiscal Year
1974
2.
84.7
1975
1
5
1976
1977
1978
55.0
272.5
549.9
9
162.2
8
13
1979
20
1980
1981
1982
513.9
1,772.9
1.806.2
2,752.7"
18
16
'Tontalive higuro excludes $500 million in private co-financing, for which spocific projects have yet to be
identified.
SOURCE: World Bank data.
well as provide the longer-term maturities that commercial lenders hesitate to
extend. Moreover, the presence of the World Bank reduces the likelihood that
the borrowing government-which guarantees all World Bank projects will
dare to default.
Despite these efforts to pursue co-financing, only sixteen World Bank
projects were coupled with private co-financing in FY 1982—four less than in
FY 1980. The volume of private co-financing in FY 1982 reached $2.8 billion,
or $1 billion more than in either of the two previous years, but most of the
increase was accounted for by a single project, a petroleum refinery in the Ivory
Coast. Private co-financing associated with the World Bank remains a small
fraction of total private bank credit extended to developing countries: under 2 per
cent of the $123 billion in new short-, medium-, and long-term credits dis-
bursed in 1981.* Moreover, World Bank-associated co-financing remained
small compared to the volume of private loans co-financed or guaranteed by
national expont promotion agencies. The U.S. Eximbank alone supported
projects with private co-financing of an estimated $2.8 billion in FY 1981 and
insured $7.4 billion in private trade credits.
The growth of World Bank co-financing was retarded by certain attitudes of
cach of the parties involved—the World Bank, the commercial banks, and the
"Calculated by Gary Huldavor. "Doos Private Colinancing Make a Difference?" The Future of the
Multilateral Development Banks, U.S. House of Representatives, Committee on Banking, Finance,
and Urban Altairs, Subcommittee on International Development, Institutions, and Finance (Washing.
lon, D.C.: U.S. Government Printing Office, 1982). pp. 219.34
'U.S. Export-Import Bank. Export-Import Bank Annual Repon, FY 1981 (Washington, DC.: Export-
Impon Bank, 1982). Prvate co-financing was estimated as being equal to 90 per cent of the export value
of projects supported by Eximbank loans, minus Eximbank loan authorizations.
145
206
borrowing countries. The World Bank sometimes argued for a reduction in
interest rate spread on co-financed loans, to the displeasure of the commercial
banks. World Bank officials argued that since there was less risk in a project that
had been carefully assessed and that enjoyed World Bank backing, the interest
charge should be lowered. The commercial banks responded that interest mar-
gins were already narrow enough and that the World Bank was neither directly
guaranteeing the private loan nor even willing to sign a mandatory cross-default
clause. The voluntary cross-default clauses left the World Bank with the discre-
tion not to call in its own loan if the borrower defaulted against the private
creditor. The World Bank feared that mandatory cross-default clauses would
compromise its independence, associate it too closely with its co-creditors, and
potentially drag it into reschedulings. The World Bank felt that its record of
never having rescheduled a loan was important for maintaining its superior bond
rating. Neither the World Bank nor the developing countries were very en-
thusiastic about direct guarantees, since the Bank's chaner requires that such
guarantees be fully charged against loan authority; thus guarantees would sub-
stitute for concessional loans.
The World Bank has also encountered problems in locating projects which
the private sector would not undertake on its own, but which with co-
financing—are “bankable." The commercial banks tend not to be interested in
projects in the poorer, less "creditworthy" developing countries, and they
complain that the World Bank takes too long to design and approve projects. For
their part, the developing countrics' enthusiasm for co-financing is sometimes
offset by the fear that private participation will simply replace the Bank's more
concessional lending instead of being additional. Finally, in 1982 another factor
dampened the immediate interest in project-related co-financing: the global
recession had created excess capacity in many developing country industries,
rendering investments in them less interesting to commercial bank lenders.
Believing that commercial banks continue to offer a large pool of potential
resources that can enable the World Bank to improve its effectiveness significan.
ily, the Bank in early 1983 announced several new instruments designed 10
attract more interest in co-financing. On an experimental basis, and in response
to the instability evidenced in private capital markets in 1981-82, the Bank will
guarantee the later maturities of co-financed loans, and will stabilize debe service
on commercial loans by offering a contingent commitment to compensate for
rises in market interest rates. The new program that has received the most
altention, however, is the so-called "B" loan scheme. The borrower would enter
into two separate loan agreements for the "A" and "B" loans. The "A" loan
would be a standard IBRD loan. The "B" loan would be a syndicated loan
including both IBRD and commercial financing. The IBRD share in the "B"
loan would be made at the same variable rate basis as the commercial co-lenders'
portion. The IBRD could, however, take the later maturities.
The "B" loan scheme involves several risks for the World Bank. By
entering into a syndication with other creditors, the Bank might lose its preferred
creditor status and find it more difficult to avoid participating in reschedulings. It
might find itself forced to 'declare a borrower in default and to accelerate pay.
146
207
ments of a loan-a practice the World Bank has eschewed. As it experiments
with the "B" loan scheme, the Bank presumably will try to safeguard itself as
securely as possible against such risks. At the same time, the Bank will want to
be as sure as it can be that further co-financing nicets the additionality" fest, so
that it does not simply substitute for lending that would have been extended in
any event, whether to the particular project or to another purpose in the same
country, or in another developing country. The objective of co-financing is to
increase the flow of resources from the banking community into the Third
World.
Devising a test to ensure additionality is a difficult exercise. As a U.S.
Treasury official candidly informed a congressional committee:
Additionality is a very hard thing to prove, among other things, because
some of the interested parties, ... depending upon the circumstances, say
that a multilateral development bank had nothing to do with (the arrange-
ment) or was totally responsible . . Al Treasury we are often skeptical
about certain projects ..
Clearly, there is some additionality, and I think probably we cannot do
much, at least with present information, (besides) examining the trends
over time and seeing that cofinancing is increasing proportionally and there
is clearly some additionality. But I think a lot more work needs to be done to
prove whether the cofinancing is, in fact, additional. "O
The World Bank and the U.S. Treasury have been working to devise more
systematic ways of ensuring a high degree of additionality. Suggested means
include: (1) increasing the number of banks participating in co-financing, (2)
stimulating banks to lend in the less creditworthy nations, where private lending
is not yet substantial or has recently been in retreat, and (3) bringing long-term
institutional investors (pension funds and insurance companies) into co-financing
in the more creditworthy countries."
Despite its difficulties, co-financing, like structural adjustment loans, is an
appropriate response to the problems of the 1980s. Indeed, events that have
occurred since the inception of both efforts have increased their importance. The
depth of the global recession has rendered the problems of adjustment even more
acule, just as the heightened nervousness of the financial markets has increased
the need-even as it has made the task more difficult--for the World Bank to
encourage private capital to invest in the Third World.
Energy. In 1978, in the wake of the sharply increased cost of energy, the
World Bank moved to expand assistance for energy development. As de-
veloping-country consumption of costly energy rose, energy imports became a
major constraint on growth. If developing countries are to be able to manage
their balances of payments and continue to grow, their energy investments must
Future of Multilateral Dovelopment Banks, op. cit., p. 309.
"Those suggestions were offered by Nicholas Roy and John Niehuss of Merrill Lynch White Word
Capital Markots Group, in Future of Multilateral Development Banks, op. cit., pp. 264-85.
147
208
more than double in real terms over the course of a decade to reach a level of
12
$40-$.50 billion per year.
The World Bank has traditionally financed electric power projects, but it
has now added the task of developing oil and gas resources. The Bank is
financing development project loans as well as pre-development programs."
including seismic surveys, exploratory drilling, and the hiring of consultants to
strengthen the institutional frameworks of state energy agencies. Lending for
oil, gas, and coal projects has jumped from negligible amounts to $766 million in
FY 1982, and, together with lending for electric power generation, accounted for
25.8 per cent of total Bank lending.")
The Bank believes that it could double the size of its energy program to
finance projects with justifiably high rates of retum. The executive directors,
however, are of the view that they cannot significantly increase energy lending
beyond current levels without unacceptable cuts in the lending 10 such other
high-priority sectors as agriculture and direct poverty alleviation." Accordingly.
in FY 1981, the joint World Bank-IMF Development Committee endorsed the
idea of establishing an energy affiliate that would enable the World Bank to
augment energy lending without subtracting from other programs.
The Reagan administration, however, has blocked this proposal, arguing
that existing World Bank energy programs "displace" private investment by
supporting national oil companies," thereby giving Third World governments
the means to avoid coming to terms with international oil companies financed by
private lending institutions. The Bank, on the other hand, has argued that its
energy projects, like many of its activities, are intended to act as catalysts rather
than as competitors in stimulating the private sector.
In energy development as in other programs, it sometimes is difficult to son
out just how much "additionality" Bank activities actually generate. One study
of World Bank activity in oil and gas confirmed the Bank's claim that it is
playing a catalytic role in energy developmeni." The Bank has financed in-
frastructure (as in Tunisia and Bangladesh), has provided an umbrella against
political risk by serving as an impartial mediator and consultant, and has reduced
tensions between host authorities and international oil companies (in Madagas-
car). The study did find, however, that the Bank has funded some state energy
agencies, notably in India, that could have sought financing from commercial
Sensitive to this criticism, and concerned with maximizing the impact
sources. 17
'World Bank data, as ciled in Edward A. Frod, "The Multilateral Development Banks and the World
Economy." teslimony before US. Congress, Joint Economic Committee, May 27, 1982.
"World Bank, Annual Report, 1982, op. ch., p. 38.
"Ibud.
"SUS. Treasury. An Examination of the World Bank Energy Londing Program Washington, D.C.:
U.S. Treasury. July 28, 1982); and Wall Street Journal, August 4, 1981.
16 Theodore Moran, "Does the World Bank Belong in the Oil and Gas Businoss?" Columbua Journal
of World Business, Vol. 17. No. 1 (Spring 1982). pp. 47-52.
"While valid in particular cases, this criticism cannot be applied without qualifications. It may be true
thal at a given moment in lime a single slale agency may have had access to commercial financing: Out
over a longer period of time, it all of a country's slalo agencies that were initially creditworthy repeatedly
conllacled private debi, individually and as a group (10., the country). they could bump up against lenders
credit coilings.
148
209
of its financial contribution, the Bank has indicated that it plans to continue to
shift toward a catalytic role by identifying "bankable" investment opportunities
through project preparation and appraisal, helping to develop financially sound
and technically capable national institutions, and assisting in mobilizing external
financing."
18
Poverty Alleviation. The World Bank's recent emphasis on structural ad-
justment, co-financing, and energy keep it on the cutting edge of the develop-
ment agenda. At the same time, questions arise as to whether these new direc-
tions will not jeopardize the Bank's ability to meet its commitment to poverty
alleviation.
The Bank's poverty focus could be diluted either by the changing allocation
of the Bank's own resources or by the growth and efficiency emphases of its
macroeconomic and sectoral adjustment programs. On the first point, the institu-
tion has decided to devote 25 per cent of its resources to energy and up to 10 per
cent to structural adjustment loans, neither program being directly oriented
toward the poor. Furthermore, projects co-financed with commercial lenders
must be "bankable”'; while poverty-oriented projects are sometimes profitable.
the private rate of retum, especially when weighed against the risk and the
lengthy payback period, often will be too low to attract private lenders, even if
the social rate of return promises to be high. Extensive private co-financing could
introduce a bias against at least some types of basic needs projects.
The resources that are being devoted to these new directions have been
capped so as not to overwhelm poverty-oriented programs. As a major Bank
study on IDA underscored, the Bank wants to continue to give priority to poverty
alleviation." Nevertheless, in FY 1982, the percentage of loans authorized by
the IBRD and IDA together for the main poverty-oriented sectors-agriculture,
education, urbanization, and water supply-all declined significantly from FY
1981 levels; the agricultural sector share fell from 30.6 per cent to 23.7 per cent
of total authorizations. For IDA alone, the percentage of loans authorized for
these four sectors dropped from 53.5 per cent to 40.4 per cent.
The second potential threat to the Bank's poverty focus comes from the
policy effects of its structural adjustment program. To the extent that the struc-
tural adjustment loans emphasize adjustment through market mechanisms, equity
may suffer. The impact on income and wealth distribution of removing govem-
ment controls will depend on which groups were previously benefiting from
them. Where upper and middle classes were the primary recipients of official
subsidies, removing subsidies may actually enhance equity. But to benefit fully
from more open markets, individuals need access to credit and information, and
the opportunity to acquire education and productive assets-advantages many
poor people lack.
Steps can be taken to minimize these potential threats to a poverty focus.
The Bank can maximize the share of resources available for direct attacks on
"World Bank. "The Financing of large scale Energy Projects in Latin America: The World Bank
Exponence," June 9, 1982 (mimoo).
"World Bank, IDAM Aotraspoct (New York: Oxford University Press, 1982).
149
210
poverty by improving the retum on its other programs: the design of structural
adjustment loans can be gradually refined; co-financed loans can generale a
higher ratio of additional funds; and energy projects can be catalytic. Funher-
more, even if projects directly oriented toward the poor receive a somewhat
lower percentage of Bank resources, Bank analysts can design “non-poverty"
projects in ways that provide indirect benefits to the poor, or at least avoid
damaging their interests. After all, not just projects that are labeled "poverty.
oriented" have an impact on poor people. Moreover, when it is considered
necessary to take measures that will adversely affect the poor-such as removing
certain subsidies on food or electricity-the Bank can recommend ways of
targeting the remaining subsidies toward the poor. In the 1970s, the Bank's
impressive research staff devoted considerable time to investigating the relation-
ship between various development programs and equity. In the future, it will be
important for the Bank to pay even more attention, in its research and operations,
to the distributional aspects of all of its programs. This extra effort will be
required if the Bank is to maintain its orientation toward poverty elimination
while taking on the additional challenges of the 1980s.
The Demand for Resources
The Bank's decision to use its resources to assist countries making structural
adjustments, to stimulate private capital flows, and to promote energy develop-
ment came at a time when Bank resources were subject to a seemingly endlessly
expanding set of demands. Different regions of the world were pressing the
World Bank for help. China, with its billion people, joined the Bank in 1980 and
announced its intentions to make full use of Bank resources. The Bank itself has
expressed alarm at the "dramatic indicators of economic trouble" facing the
majority of the population in Africa.20 At the urging of the United States, in the
late 1970s, the Bank began to devote more resources to the small states of the
Caribbean Basin, hard-hit by adverse movements in their terms of trade. Most
recently, the newly industrializing countries-suddenly facing tighter inter-
national capital markets-have turned to the World Bank for renewed support.
The demands on World Bank resources are mounting at a time when the
Reagan administration has called for a slowing of the expansion of the multi-
lateral development banks in general and the World Bank in particular.21 The
administration has advocated a lowering in real terms of the loan volume of IDA;
it has expressed suppon for continued expansion of the hard-loan IBRD, but at a
reduced level.
The administration agreed to honor the commitment it inherited to the sixth
replenishment of IDA, but at a slower disbursal rate. During the Carter ad-
World Bank, Accelerated Development in Sub-Saharan Alca: An Agonda tor Acbon (Washington,
D.C.: World Bank, 1981). p. 3.
"Soo Department of the Troasury. Unnod Slates Parucipation in the Multilateral Dovolopmont Banks
in the 1980s (Washington, D.C.: U.S. Govommont Pnnling OHICO, 1982) for the Reagan administration's
comprehensive policy statement.
21
150
211
ministration, the exccutive branch committed the United States, subject to con-
gressional approval, to appropriating $3.24 billion for IDA VI. The funds were
to be made available to the World Bank Juring FY 1981-83 in three annual
installments of $1.08 billion each. Instead, the Reagan administration proposed
graduated contributions, with payments in the first year to be only $540 million,
rising to $1.85 billion in the third year. Congress appropriated $500 million in
FY 1981 and $700 million in FY 1982. As might have been anticipated, Con-
gress balked at the high figure proposed for the third year, and finally ap-
propriated $700 million in a continuing resolution for FY 1983. Thus U.S.
contributions to IDA VI most probably will not be completed until FY 1985.
The failure of the United States to fulfill its pledge in a timely fashion
resulied in a sharp reduction in IDA lending levels. Whereas IDA authorized
$3.8 billion in credits in FY 1980, it could approve only $2.7 billion in FY 1982
(see Table 2). The decline would have been even sharper had some Bank
members not agreed to relax the pro-rata rule and release their installments as
originally envisaged. Other donors shared the U.S. sentiment that the growth
rates of multilateral lending should slow and that the ratio of multilateral to
bilateral lending had swung too far; IDA's commitment authority rose at about 8
per cent a year in real terms between 1965-80, and the share of official develop-
ment assistance from DAC members going through multilateral agencies climbed
from 12 per cent in the early 1960s to 34 per cent in 1980.22 The United States
Tablo 2. World Bank Londing Lovola
(5 billions)
Fiscal Year
IBRD Loan Amounts'
IDA Credit Amounts
1.4
1.1
1.6
1973
1974
1975
1976
1977
1978
1979
1.7
2.1
3.2
4.3
5.0
5.8
6.1
7.0
7.6
1.3
2.3
3.0
3.8
3.5
2.7
1980
1981
8.8
10.3
1982
'Excludos loans bo IFC of SAO million in FY 1973. $110 million in FY 1974, 550 million in FY 1975, $70
million in FY 1976. $20 million in FY 1977. $100 million m FY 1981, and $390 million in FY 1982. Inchidos
amounts i FY 1976 and FY 1977 bont on third window" torms
SOURCE: World Bank, Arua Aoport, 1982 (Washington, D.C.: World Bank, 1982). p. 10.
World Bank, IDA in Aotrospect, op. cit., p. 14.
151
212
was alone, however, in unilaterally undercutting the agreements reached during
the negotiations on the IDA VI replenishment.
The United States justified its position primarily on grounds of budgetary
stringency. Although U.S. contributions to the multilateral development banks
are a very small percentage of federal outlays, the U.S. Treasury emphasized
that: “Reductions in ſederal expenditures over this time period represent a vilal
pan of the President's program for economic recovery. Consequently, this ad-
ministration's commitment to budget stringency must be a factor in decisions on
funding levels for the MDBs (multilateral development banks)."23
The administration further warranted its budgetary preſerences on the
grounds that the World Bank could make better use of its existing resources by
more rigorously enforcing the principles of maturation and graduation, and by
leveraging its loans in behalf of policy reform. Besides, private capital markets
would continue to provide developing countries with substantial new nei Nows of
resources, and the World Bank could do more to promote such Nows.
These proposals were not new to the World Bank. Indeed, they were for the
most part already considered to be official policy. Al issue was the manner and
timing of their implementation and the degree to which these policies, even if
successfully implemented, could substitute for Bank resources.
Maturation and Graduation. Underdevelopment should be a transitional
state. As nations' economics progress, their dependency on concessional assis-
tance can decline. The World Bank has a long-standing policy of gradually
limiting recipient nations' access to concessional aid as they climb the develop
ment ladder. Highly concessional assistance from IDA is available to the poorest
countries. As countries grow, they are expected to "mature" gradually out of
complete dependence upon the sofi-loan windows and to receive a blend of soft
and hard loans. Eventually, they fully mature out of eligibility for the soft-loan
windows. Finally, a country "graduates" from its access to hard-loan windows
and must rely on investment capital generated intemally and on the private
capital markets.
Since 1961, IDA has phased out twenty-two countries entirely. It is now
maturing recipients with a per capita income above $500 from the status of
borrowing only highly concessional moncy; many of those governments will,
however, continue to receive a blend of IDA and IBRD monics. The Reagan
administration argued that IDA should take into account, in addition to per capila
income, such criteria as access to private capital markets, economic perform-
ance, and the country's natural resource base. 24 India by far the largest IDA
- was clearly at the top of the administration's list of countries which,
despite their very low per capita income, should nevertheless rely more on IBRD
and private Nows and less on near-grant IDA resources. India's share of the xth
IDA replenishment was cut to 27 per cent, down from 35-40 per cent.
user-
suntod Stalos Participanon in the Mutolateral Development Bantas, op. cit., p. M.
Yound., Chapter 5.
152
213
.25
According to World Bank guidelines, a country becomes a candidate for
graduation from IBRD lending when per capita GNP reaches $2.650. Seven
countries have graduated since the 1BRD formulated its policy in 1973. Ten
additional countries, however, have crossed the per capita income threshold
without yet having been graduated. The Reagan administration has argued that
the IBRD should implement its graduation policy more deliberately and sys-
lematically. The World Bank, while reiterating its adherence to the principle of
graduation, has responded that its implementation should be "both llexible and
fair, and sensitive to each country's individual circumstances.
The Reagan administration listed ten major IBRD borrowers as candidates
for graduation during the 1980s: Argentina, Romania, Portugal, Yugoslavia,
Algeria, Brazil, Chile, Korea, Malaysia, and Mexico. Candidates who have been
less demanding of IBRD resources include: the Bahamas, Barbados, Cyprus,
Oman, Trinidad and Tobago, Uruguay, Costa Rica, Fiji, and Panama. 26
Certainly the World Bank's resources and counsel are most needed in the
poorer developing countries. The principles of maturation and graduation are
therefore sound, and they are widely accepted. At issue is the question of timing.
Many developing countries are currently carrying a heavy debt service burden.
This is therefore a difficult time for them to forego foreign concessional assis-
lance. In the adverse international economic environment of the 1980s, many
countries are likely to stagnate or even fall backward. Already it appears that a
number of countries in Central America, as well as Egypt, Bolivia, and Cam-
croon, were prematurely deprived of access to IDA. Countries hard hit by
international factors beyond their control not only need World Bank resources
but also can bencfil greatly from the knowledge and advice of Bank experts as
they seek to adjust their economies to novel and complex global realities.
The administration argued that private capital markets could gradually
substitute for concessional flows as countries shift upward on the development
charts. As the Reagan administration was undertaking its intemal review of
World Bank policy, observers of the financial markets were warning that private
lenders were becoming more cautious in expanding their exposure in many
developing countries. They pointed to the large accumulation of foreign debt by
many developing countries, to the rising ratios of outstanding debt and debt
service to export earnings, the uncertain international economic environment, the
large existing exposure of many banks, and the banks' weakened capital posi-
tions. The administration nevertheless maintained an optimistic view of future
lending, concluding that the concern that major money-market banks had be-
come too highly leveraged and overexposed was "overstated." The administra-
tion argued:
Banks will continue placing funds in LDCs with less ideal creditworthiness,
given sufficient pecuniary incentives. The Euromarket will adjust by dif-
zWorld Bank, Annual Roport, 1982, op. cit., p. 35.
United Statos Participation in the Murulateral Development Banks. op. cit., p. 71.
153
214
ſerentiating terms, increasing margins and shortening maturities for certain
countries. Many banks are nearing internal limits on certain borrowers, but
these limits may prove quite flexible, and other LDC borrowers may be able
to achieve high rates of growth in borrowing from these banks. In addition,
new capital is continually being injected into the international banking
system via entry of new institutions. Second-lier banks are comparatively
"underlent" relative to their capital base, and new Arab banks are likely to
expand international lending to the LDCs. Thus, we project that inter-
national bank lending will continue to increase in real terms up through
1985, and the LDC share in international bank lending will not deteriorate. 31
Specifically, the administration predicted that net bank flows to the developing
countries would grow by about 10-11 per cent a year in nominal terms over the
period 1981-85, or 3-4 per cent in real terms.
By late 1982, it had become clear that these projections were much too
optimistic, at least for the near term. Especially erroneous was the prediction that
second-lier banks would increase their role in international lending; many of
them instead preferred to reduce their exposure. The larger banks were willing to
stay in countries where they were already deeply committed but hesitated to risk
much new exposure. Thus countries such as Brazil, Mexico, and Yugoslavia
lop candidates for graduation--suddenly faced growing difficulties in the private
markets and looked to the World Bank for a continuation and even an increase in
lending.
In current circumstances, World Bank lending, especially when coupled
with a structural adjustment program and possibly an IMF presence, can play an
enhanced role in encouraging private flows. Bank programs give private lenders
greater assurance that measures are being taken to attain sustainable extemal and
internal balances and that resources are being efficiently channeled toward pro-
ductive projects. Structural adjustment loans provide this assurance at the mac-
roeconomic and sectoral levels, while co-financing arrangements offer more
safety at the project level. Today, perhaps even more than in the past, far from
being substitutes for one another, World Bank and private financing can comple-
ment and reinforce cach other. Until more prosperous times arrive, the gradua-
tion of many countries ought to be postponed.
Conditionality. In its comprehensive study of the multilateral development
banks, the administration urges them to use their financial leverage to advance
particular economic policies in recipient countries. The 1982 Treasury report
recommends that “lending policies and programs should increasingly emphasize
attention to market signals and incentives, to private sector development, and to
greater financial participation by banks, private investors, and other sources of
private financing." 28 Countries that fail to meet these criteria should receive less
funding, and egregious violators are candidates for exclusion.
??101d., p. 146.
2 Houd., p. 7.
154
215
Certainly many governments could improve their economic management.
The question is, how much more can and should the World Bank do io foster
such improvements?
Critics of the World Bank have accused it of advancing centralized social-
ism in the Third World.29 While it is true that the Bank has been willing to
support public sector enterprises, it has been a persistent advocate of market
processes and decentralized modes of economic organization. The Bank has, for
example, long advised members to use a realistic exchange rale to promote
exports and allocate imports, to reward agricultural producers with market-
related prices, and to make public sector enterprises more self-financing. The
Bank also has been a strong supporter of private investment, both domestic and
foreign. The Bank cannot therefore suddenly increase the efficiency of Third
World economies by announcing a new doctrine. It can keep on promoting its
message as it has been doing, but change generally will continue to occur, if at
all, at the margin.
Another controversial issue has been how hard the World Bank ought to
press cenain ideas. World Bank membership includes several countries, notably
China and Romania, that sharply limit the role of the private sector. The World
Bank cannot be a truly global institution if it pushes preference for the private
sector too far. As a witness pointed out to a congressional committee:
Presumably we want these institutions to have a policy influence on all of
the economies of the world in a way that will promote on a global scale
noninflationary world economic growth. That I think requires an ability to
work with countries, regardless of the pattern of ownership of the means of
production. It is the efficiency of economic management and adherence to
the international economic rules of the game that seem to me to be the
important considerations in the giving of policy advice by these insti-
lutions. 30
The World Bank would risk its image as a truly global, multilateral institu-
tion if it were perceived as being a purveyor of a particular ideology. Moreover,
in any particular country, if it sought to penalize non-conforming behavior by
cutting off lending, it would risk losing all influence. A more pragmatic, techni-
cal approach that works for gradual improvements often will be more successful
than a confrontational, ideological one.
The Treasury report itself recognized that in some cases the market is not an
adequate distributor of resources. In the presence of “public goods," "ex-
ternalities," and other market failures," government intervention may well be
necessary if welfare is to be optimized."' It is often difficult to determine just
when these exceptions are present. Partly as a result, most economies are already
complex mixtures between private and public sectors, between market and
*For a reton 10 such criticisms, see Robert Ayres, "Breaking the Bank." Foreign Policy. No. 43
(Summer 1981).
20Statement by Cathorine Gww. Future of Mutilateral Development Banks, op cit, p. 197.
"United States Participation in the Mullateral Development Banks, op cil. pp 8-13
155
216
command structures. The particular mix is the outcome of historical processes
and political choices. No international institution can easily and fundamentally
alter the chosen mix; nor should ideological biases cause an institution to try.
Furthermore, candid development economists recognize that their branch of
the social sciences still poses more questions than it has answers. The new, more
difficult interational economic environment has advanced an additional series of
quandaries that require study. International institutions, like development econ-
omists, need to approach their tasks with the humility that comes from an honest
awareness of their own limitations.
In summary, the administration's emphases on maturation graduation, the
encouragement of private capital Nows, and fostering efficient economic man-
agement are a reaffirmation of widely accepted ideas. They are not new to the
World Bank, although the Bank might be able to implement them with greater
vigor in some instances. But each policy has its limitations, especially in the
current economic environment. Maturation and graduation is a policy more
appropriate for periods when countries are growing steadily. Increasing reliance
on private capital flows is more attractive when real interest rates are modest and
capital readily available. Efficient economic management is always equally
desirable and in short supply, and will be made more difficult by the complex,
adverse interational environment facing policy makers. In short, these policies
are not convincing substitutes for real resources.
Future Funding. To make up for the shonfalls triggered by the delay in
U.S. contributions to IDA VI, the World Bank accepted a French proposal to
establish a Special Fund to augment IDA resources during FY 1983 and FY
1984. The Special Fund, to which donations are voluntary, will be administered
by IDA, but procurement will be open only to contributing countries (as well as
borrowing members) and countries which have fulfilled their IDA VI obligations
in the original schedule. That is, the United States, which does not plan to
contribute, will not be able to bid for supplier contracts on projects financed by
the Special Fund. The Special Fund, if a necessary expedient, violates the basic
principles of negotiated burden-sharing and untied aid that are central to multi-
lateralism in foreign assistance.
The Bank also agreed to establish an interim account for FY 1984 to which
donors can contribute and which will be administered by normal IDA criteria.
Donors (other than the United States) are expected to contribute in sum between
one quarter and one third of their IDA VI contributions to the Special Fund and
the FY 1984 account. This will allow IDA to authorize about $3.3 billion in FY
1983 and between $2.9-$3.6 billion in FY 1984, while the seventh replenishment
is being negotiated. However, the Europeans wamed the United States that in the
future they will not be as willing to take extraordinary steps that abandon the
principles of burden-sharing and honoring negotiated replenishment arrange-
ments.
As the Bank struggles to complete IDA VI, negotiations have already begun
on IDA VII; the intention is to reach agreement in time for the Bank Fund annual
156
217
meetings in Fall 1983. Negotiations on the funding levels for IDA VII are likely
to be intense. For resource flows to be maintained in real terms during the IDA
VII triennal (FY 1985-87), the replenishment will have to amount 10 about $15
billion. Bank management would like to see some positive real increase in
resource transfers. The Reagan administration's position, as expressed in the
Treasury study, is for U.S. contributions to decline by 30-45 per cent in real
terms; even if countries are matured rapidly out of IDA, so that lending is
reserved for the poorest countries, concessional lending to IDA-only countries
would experience little or no growth in real terms.
Limitations on future IDA resources can be partially compensated for in two
ways. First, the tems of IDA lending can be allered. Loan conditions could be
differentiated among borrowers, with the more creditworthy borrowers accepting
shortened maturities and modest interest charges. (IDA credits currently are for
fifty years, with no interest and a ten-year grace period before repayments
begin.) The poorest borrowers might have their maturities shortened to twenty-
five to thirty-five years. While not significantly augmenting resources in the near
term, this reform would gradually increase the volume of reflows and allow for
higher authorization levels in future years.
The second way to offset IDA stringency is to speed up the next Generai
Capital Increase for the IBRD-not scheduled until FY 1987-lo allow for more
lending authority to be devoted to "blend countries" that receive both IDA and
IBRD loans. IBRD loans to countries with potential debt servicing problems
might include an interest subsidy. The advantage of a General Capital Increase
(GCI) is that the proportion of capital that donor governments have to actually
pay in is small-only 7.5 per cent for the last GCI. It is easier to extract
"callable" capital guarantees than immediate outlays from the U.S. Congress.
The IBRD could also increase its lending capacity by altering its gearing
ratio-the ratio of exposure outstanding to total capital, including callable and
paid-in capital. Currently, the IBRD's charter limits its exposure to an extremely
conservative 1:1 ratio lo total capital. Commercial banks may risk an exposure of
25:1 or more of their capital base. As the IBRD has gained in resources,
experience, and reputation, it can consider a more expansive policy. Raising the
gearing ratio would permit the IBRD 10 borrow more heavily in private markets
without having to ask donor governments for large budgetary appropriations or
fully offsetting callable capital guarantees.
An effort to alter the gearing ratio would face several obstacles. Holders of
existing bonds could file suit to enjoin the IBRD from issuing new bonds that
diluted the security of previous issues. More generally, it is uncertain how the
bond markets would receive securities no longer fully backed by callable capital.
However, the expansion of the gearing ratio could be gradual, rising slowly to a
still conservative 2:1.32 A final roadblock lies in the need to amend the IBRD's
"Tho Brandt Commission recommended a doubling of the gearing ratio. The Independent Com.
mussion on International Development Issues, North-South. A Program for Survival (Cambridge: The MIT
Press, 1980), p. 255.
84-045 0-84-15
157
218
charter, which would require action by member governments and, in the case of
the United States, by Congress. The amendment process could be time-
consuming, and could inadvertently expose other sections of the charter to
review. Despite these potential pitfalls, altering the gearing ratio offers an
attractive means for substantially expanding IBRD resources and should be
carefully considered.
The IBRD has already taken measures to improve its financial position. A
front-end fee of 1.5 per cent on new loan commitments was introduced in
January 1982, although it has since been reduced to 0.25 per cent. Most impor-
tant, the IBRD first raised its interest rates on the basis of a guideline that
provided for a spread of 0.5 per cent above the cost of borrowing and then
abandoned fixed-rate lending altogether. By moving to a variable-rate regime,
the IBRD protects its own financial position and gains the ability to issue
short-term instruments. Borrowing nations benefit from having the Bank on a
firmer financial footing, but will now have to bear the risk of future interest rate
fluctuations.
Many developing countries are more advanced than they were when the
IBRD and IDA first established their lending terms, so that movement toward
somewhat harder terms is justifiable. It is also justifiable from the Bank's
legitimate institutional perspective. Nevertheless, harder-lemm lending will ren-
der the development process that much more difficult. Moreover, the hardening
of terms comes at a time when large debt burdens, high interest rates, and other
adverse interational developments have dramatically increased the need for
concessional resources.
U.S. Interests and Policy
In its comprehensive assessment of the multilateral development banks, the
Reagan administration found that the banks, and most especially the World
Bank, had well served important U.S. economic, commercial, and political
objectives. The report stressed that the banks contribute to U.S. global economic
objectives by encouraging developing countries to participate more fully in an
interational system based on liberalized trade and capital Nows. The relatively
non-political character of the banks makes them more effective than bilateral
programs in encouraging goverments to use market mechanisms and to rely
more on intemational trade. U.S. commercial objectives are served, the report
found, by expanded opportunities for U.S. exports, investment, and finance.
U.S. political and strategic objectives are advanced by the banks' contribution to
steady economic growth, which reduces the likelihood of political instability.
Moreover, the country allocation of bank loans generally has been compatible
with U.S. forcign policy preferences. The administration's assessment also noted
that the United States has been able to accomplish these objectives at relatively
low cost through the banks hecause of their resource leveraging nature. In the
hard-loan windows, one dollar of U.S. direct budgetary outlays supports 40-60
limes that amount in resource transfers.
158
219
As noted above, the World Bank is being called upon to fulfill important
additional roles in the 1980s. Structural adjustinent, co-financing, energy, and
poverty alleviation will all draw upon Bank resources. Regions of the world that
are of economic and strategic interest to the United States from the Caribbean
to China will be seeking external finance. In the 1970s, the commercial banks
stepped in to provide the developing countries with extemal resources when
official agencies failed to respond rapidly enough to global shocks. The cominer-
cial banks will remain important in the 1980s, but they will be looking more to
official agencies—both to provide a higher percentage of resource flows and to
provide for a more stable environment within which to operate.
The Reagan administration initially argued that the International Monetary
Fund did not need a large and rapid infusion of funds: the debt crises of Mexico,
Argentina, and Brazil convinced the administration otherwise. It agreed that a
substantial expansion in IMF quotas should be effective by 1984. While the
short-term balance-of-payments crises demanded immediate attention, the
longer-term development problems of the Third World are no less real. As the
administration negotiates IDA VII and begins to ponder the next expansion of the
IBRD, it will want to reconsider whether U.S. interests in the 1980s are compati-
ble with a diminished World Bank.
The administration is correct to argue that the executive branch should not
promise more in replenishment negotiations than Congress will ultimately au-
thorize. It is also true that many members of Congress follow the administra-
tion's lead on foreign assistance, which is often of little direct concem to their
constituents. An administration willing to take the lead and devote some political
capital to passing World Bank legislation can have an important influence on
congressional opinion.
Most important, the United States should avoid allowing the World Bank to
become another area of friction in the Western alliance. Reaching a negotiated
agreement with our allies should itself be a priority objective in future World
Bank discussions. The establishment of the Special Fund was a lamentable
necessity that should not be repeated; it reflects deep divisions in NATO-country
attitudes, and it undermines several of the principles that have made the World
Bank such an important and successful multilateral institution.
If the World Bank has served U.S. interests in the past, its potential for
doing so is even greater in the future. The World Bank could play a significant
role in the 1980s in helping to stabilize the unsettled international economy and
to promote development in the Third World. It is in the U.S. interest for the Bank
to assist structural adjustment programs and to stimulate co-linancing and energy
investment. It is also in the U.S. interest for the Bank to remain active in the
newly industrializing countries, to maintain its concern with equily, and to
continue to serve as a communicator between the developed and the developing
countries. The United States should therefore encourage the Bank 10 pursue the
following policies:
• The Bank should devote both financial and human resources to improving
structural adjustment programs--rather than he discouraged by some of their
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220
early disappointing results--since conceptually these programs are the proper
response to the new international economic environment. The Bank should try to
persuade the IMF to make a greater eſſon to build concem for employment and
investment into its stabilization models.
Co-financing has taken on increased importance. Official agencies will have
to assume responsibility for assuring that commercial lenders do not suddenly
and sharply reduce their exposure in the Third World. As A.W. Clausen has
noted, "It is essential, both for the developing countries and for the stability of
the international financial system, that net levels of financing, both commercial
and official, be--at the very least-maintained in real terms. . . . This is a
moment for prudence by commercial banks, but certainly not for retreat."*33
World Bank activity can complement and stimulate private Nows. But the Bank
must intensify its search for systematic ways of ensuring a high degree of
additionality from co-financing programs.
• Despite the recent fall in oil prices, investment in energy resources will
remain a high priority for developing countries. The demand for energy will
continue to rise once growth resumes, and it will absorb a major share of
developing country savings. The World Bank can employ its resources effi.
ciently by playing a catalytic role in identifying. preparing, and co-financing
energy projects.
• While a sound idea in principle, graduation is out of sync with current
international economic trends, which have made World Bank activities more, not
less, critical for many upper-income developing countries. Graduation ceremo-
nies will have to wait until the advent of better times.
• While lending criteria cannot be totally neutral politically, loan conditions
should be as ideologically unbiased as possible. Otherwise, the Bank will lose
the good will it has built up in the Third World and will become less effective. As
The Economise warned, “If the developing countries feel the Bank has become a
Reaganite wolf in sheep's clothing, they will treat its advice with as much
indifference as they can. Policy advice that is offered quietly, sen-
sitively, and humbly is more likely to be well-received than preachy slogancer.
ing.
• All of the Bank's programs, but especially its structural adjustment loans,
need to be attentive to their impact on income distribution. In a constrictive,
chaotic economic environment, goverments find it increasingly difficult to
monitor the relationship of economic programs to equily objectives. Indeed, it is
often hard to predict what that impact will be. But if the World Bank, hard-
pressed with stability concems, fails to maintain an interest in equity, the poor in
many countries are likely to suffer.
Some of the World Bank's programs and directions could jeopardize the
positive image it gained in the Third World during the McNamara years. Closer
Aomarks bolore the Council on Foreign Ablalons, Now York City. September 23, 1982 (mimoo).
D. 7.
The Economist, September 4, 1982. p. 12.
160
221
relations with commercial banks and the IMF (identified more with developed-
country interests) could endanger the Bank's role as a financial and intellectual
bridge between North and South. The Bank can avoid this fate by working 10
make the IMF more responsive to developing country structural peculiaritics and
development objectives, and by not merely protecting commercial bank exposure
but instead helping to increase it. If the Bank is perceived to be playing an active
role in its new associations, it can continue to mediate potential conflicts in the
global economy
It is difficult to imagine how the Bank can adequately address all the above
requirements without a substantial increase in resources. The Bank needs to be
adaptive, innovative, and willing to take some risks—but it cannot be effective
without more funds. Al a time when capable institutions for coping with an
unbinged international economy are sorely lacking, it would be pure folly not to
take advantage of a dynamic institution already in place.
161
222
Senator MATHIAS. Thank you very much, Mr. Sewell. Your com-
ments and the comments of the panel recall to my mind the words
of Senator Henry Jackson at the time he and I introduced the reso-
lution that brought about the appointment of the Kissinger Com-
mission. President Reagan has very properly recognized Senator
Jackson's leadership in that effort and has given great weight to
Senator Jackson's position.
But I think it also has to be recalled that Senator Jackson said
at that time that any military effort would crumble, the military
shield would crumble, unless there were social and economic
progress. And if that is true for Central America, I think it is true
for other developing areas of the world.
And that is a situation, a critical situation with which the
United States must cope, and there is no assurances that other
parts of the world that are similarily situated will not face the
same kind of problems.
Mr. Fried, you suggested that we test the waters with the Con-
gress. I would like to insert in the record a letter dated November
3, 1983, addressed to the Secretary of State, signed by Senator
Percy, Senator Glenn, Senator Dodd, and me, in which we urged
that the waters be tested at that time, before the U.S. position was
frozen on the $9 billion mark for IDA VII. And I regret that that
was not done, or at least to my knowledge that kind of testing of
congressional opinion was not done at that time.
[The letter referred to follows:
U.S. SENATE
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C., November 3, 1983.
Hon. GEORGE P. SHULTZ,
Secretary of State,
Washington, D.C.
DEAR MR. SECRETARY: We are writing you with respect to negotiations currently
in progress concerning the size of the seventh replenishment of the International
Development Association (IDA VII) and specifically with respect to the appropriate
level of the U.S. share in this replenishment.
We understand that the Executive Branch representatives to the negotiations
have suggested to other potential IDA VII donors that the U.S. Congress will only
support funding at an annual level of $750 million. We respectfully disagree with
this judgment.
Support in the Congress for higher annual contributions to IDA VII exists provid-
ed the Executive Branch is prepared to exercise leadership in this area. We might
note that the Congress has in the past appropriated higher funding levels for IDA
than are now being contemplated for IDA VII. The world recession is greater now
than at those times, and we need to encourage recovery in those countries that di-
rectly benefit the United States.
We are persuaded that a majority of our colleagues, when fully informed of the
serious implications for the furtherance of our foreign policy and national security
interests of a sharply reduced IDA VII, would be ready to approve more adequate
U.S. participation in this replenishment.
We believe that U.S. economic and foreign policy objectives would not be met by
an annual U.S. contribution of $750 million.
We stand ready to assist in the determination of an appropriate level for U.S. con-
tributions to IDA VII and in insuring Congressional support for that level.
Sincerely,
CHARLES H. PERCY.
CHARLES McC. MATHIAS, JR.
JOHN GLENN.
CHRISTOPHER J. DODD.
223
Senator MATHIAS. Let me ask just one or two specific questions.
Archbishop, one of the reasons that has been given for not making
IDA VII larger is that, notwithstanding the desperate situation in
sub-Saharan Africa, that area has a limited absorptive capacity
and that simply to throw money at it would not relieve the prob-
lems of the area.
Do you have any comment, or does any member of the panel
have a comment, on the absorptive capacity theory?
Archbishop LIPSCOMB. Mr. Chairman, I would hesitate to speak
from personal knowledge, as I have never been to sub-Saharan
Africa and I well know that oftentimes money used just for the
sake of plowing it in to solve a problem will exacerbate the prob-
lem.
I cannot buy the assumption, though, that given the right param-
eters of making the funds available for the right reasons, that the
funds would not go a long way toward solving the problems that
presently confront sub-Saharan Africa.
I think it was Senator Danforth who mentioned the problems of
drought and irrigation. Now, it might be economically unfeasible to
dig a well where you might get some rainwater, but I cannot see
how, no matter how economically unfeasible it may be, digging a
well where you are otherwise not going to get any water at all rep-
resents a counterproductive measure; nor would I think just in that
one instance that nations would be loath to apply for that specific
kind of assistance.
But I am not that familiar with absorption in that area of the
world.
Senator MATHIAS. Mr. Fried.
Mr. FRIED. Let me reply on two levels. First, sub-Saharan Africa
relies for net investment to the tune of almost 50 percent on exter-
nal capital of one sort or another, of which IDA is an important
component. Now, this fact, it seems to me, reflects in the first in-
stance dire poverty. The margin between output and what is re-
quired at a minimum for current consumption is necessarily very
narrow and uncertain. It also implies bad economic policies. There
is a lot of waste. It seems to me that the possibilities of turning this
situation around depend on the ability both to influence policy so
as to improve it and to provide capital and technical resources that
can help carry out the job. That is what increased resources from
IDA could do.
A second way of answering your question is to cite assurances I
have had from World Bank people that there are a large number of
projects they consider to be cost-effective and to have high poten-
tial rates of return, which they will not be able to undertake be-
cause of the lack of funds. I am confident that doubling the amount
of IDA funds going to Africa would pose no absorptive problem.
Senator MATHIAS. Thank you.
Mr. Sewell.
Mr. SEWELL. Senator, Africa, of course, poses really the most dif-
ficult challenge, but I would argue very strongly that the question
of absorptive capacity in the first instance is governed by how you
provide aid. We have to look for new ways of how to provide aid, to
get local costs out of government that cannot affort it, and to pro-
mote investment in very long-term aspects such as training of
224
human capital to provide the infrastructure which is terribly im-
portant to Africa. There are just not enough trained people to run
the system
Second, the current environment in sub-Saharan Africa is ex-
tremely favorable for policy change. You have a had major report
by the Bank on sub-Saharan Africa. You have had the African gov-
ernments themselves generate a response in the Lagos plan of
action. There is more openness now to policy change than at any
time that I have seen in the past 10 years, and this is the time to
take advantage of that opportunity.
Third, you are faced with a situation of what costs are you pre-
pared to pay. I spent a week up in the Senegal River Basin, where
I think Senator Danforth was. This is an area where traditionally
agriculture is pursued after the flood. The river flood comes down,
and as the water goes down they plant and they plant very well
and grow a fair amount of crops.
There was no flood this year at all, just zero, and you can walk
across and see miles of dust flats, which I gather now are getting
worse since I have left as the winds come. To put irrigation in that
area is very expensive. What choice do you have, however? Are you
going to move the people off the land? Are you going to give up on
that part of the world, or are you going to treat it as the Imperial
Basin in California was treated? That is just an area you have to
irrigate. If the cost per hectare is very high, you have got to look at
that cost as to the social alternatives of moving people off the land
and giving up on the area.
And that is why it is important to treat the question of absorp-
tive capacity very carefully in sub-Saharan Africa, because when
you change your priorities or change the way you are doing things
you find you can use a lot more money.
Senator MATHIAS. Of course, another concern is that the situa-
tion may slip below the marginal point of being able to grab hold of
it. Simple things like the shortage of firewood, which has become
more and more critical. Fewer and fewer people have a cooked
meal on a regular basis because there is simply no source of energy
left.
All of these problems would tend, it seems to me, to cause us to
move in the direction of loading the system a little more than it
will bear, rather than to take the chance of not pushing it as far as
it can be pushed.
Does that panel have any view on how we are going to exercise
the wisdom of Solomon as between China and India? That probably
is what we will have to do or the managers of IDA will have to do.
To cut the baby in half, is that it?
Archbishop LIPSCOMB. No; I was not going to suggest that Solo-
mon-like decisions would always work in our century. Perhaps,
though, we could use a few.more.
Is that not, though, perhaps one of the advantages of having a
multilateral fund?
Senator MATHIAS. Absolutely.
Archbishop LIPSCOMB. That it does not rest on us to come up
with the Solomon-like decision, and that once we have done our
best in the world order to make these funds available and a true
community of nations exercises stewardship over them in such a
225
way that whatever results in the end is not the United States di-
recting it, but the community of nations saying to one or the other
that you can or can not have this much.
It certainly seems to me it would be both equitable and would
get us off the hook as having to be the arbiter of perhaps who
starves and who does not.
Mr. FRIED. I agree with the archbishop's point that it is not up to
us to decide and should not be, except insofar as the United States
has a voice in the decision as an important member of the institu-
tion.
I think it would be wrong to make the decision in allocating
funds as between China and India, to simply split it in half. I think
that you have to look at the circumstances that now prevail, and
those circumstances suggest that China is in a considerably more
favorable position to finance a large program at the present time,
even though it will probably run into difficulties later, than is
India. That factor should certainly be taken into account.
Senator MATHIAS. I think this panel already has addressed the
issue of the relative merits of bilateral and multilateral assistance,
and I take what you have said very much to heart on that. I only
wish that we had a greater ability to influence that in this year's
program, because it does seem to me that a multilateral foreign as-
sistance program of $1.5 billion and a bilateral program of $14.5
billion is substantially out of balance. But that is going to be diffi-
cult to alter in any substantial way this year.
Gentlemen, I am extremely grateful to you for being here and
for sticking with us to the end of the day. I think your testimony
will be material help in persuading our colleagues on the commit-
tee and our colleagues in the Congress to make this investment.
Thank you very much.
Mr. FRIED. I hope you renew that notion of testing the winds, Mr.
Chairman.
Senator MATHIAS. We certainly will do that, and I would think
from Senator Danforth's testimony this morning that he is pre-
pared to put his finger up in the wind.
Mr. FRIED. You have from the testimony this morning the sup-
port of two organizations, the chamber and the archbishop.
Senator MATHIAS. And I will lay on Archbishop Lispcomb the
same burden that I did on the U.S. Chamber, that after all the
Catholic Conference of Bishops has at its disposal formidable edu-
cational facilities, and I am sure that the bishops will make every
effort to make sure that the people of the United States under-
stand really what the facts are.
I do not think you have to persuade. I think just to educate is the
role.
Archbishop LIPSCOMB. If I might, Mr. Chairman, it seems to me
you have hit a very pivotal point, that if a citizen of the United
States sees someone starving, sees someone really in need, I think
all the questions of economics will be largely lost on him.
Excuse me for saying this, but we are talking about what we
would call the person in the pew. If they see people in need the
way Senator Danforth described them, they will certainly be
behind and increased replenishment. And I think we do a mistake,
I think the administration does a mistake not to challenge the Con-
226
gress. I think the Congress does a mistake not to challenge the
1 Nation.
We just finished in the Archdiocese of Mobile, if I could give a
little grassroots example, a remarkably successful annual giving
field drive for Catholic charities. In what was a very difficult year,
we had set a goal of $1.2 million.
We have only got 61,000 Catholics, so that is pretty substantial,
but we still hedge our bets. Last year we had $1,343,000 pledged, so
we were still under. We thought we might go to $1.4 million. We
went over $1.5 million, $1,542,000 in pledged effort.
Now, this represents to me kind of a grassroots realization from
people who have weathered the storm that they are willing to help
others weather it. And I think that that represents what is best in
this Nation, and I would at least like to see it tested, not only in
Congress, perhaps, but across the country.
Senator MATHIAS. I am sure that you were able to convey the
sense of need.
Archbishop LIPSCOMB. Yes.
Senator MATHIAS. And then you were able to convince the donors
that the Catholic Charities was an appropriate vehicle for meeting
the need. I think that is perhaps where we have the problem here.
The need exists. People see it on their television news shows, they
see it in the press.
But there is not the same confidence in the foreign assistance
program, or perhaps not the same acquaintance-maybe that is the
weakness-acquaintance with the foreign assistance programs and
the multinational institutions, that there is among your parishion-
ers with Catholic Charities. Now, that is the challenge that I guess
you have laid before us.
Archbishop LIPSCOMB. We have a 50-year track record of this in
Alabama. This is the 52d year of Catholic Charities. People can see
all around them what we are doing and where the money is going.
But as I said, this is an educational process for me, because I
have learned more about IDA and what the World Bank is doing
just in preparing for and listening to this testimony. And I think if
the people of the United States could get some sense of what is
being done-do you know what distresses people most when they
see starving people on the television? It is, what can I do about it?
And they are helpless because they cannot feel that they are doing
anything.
Here we find that not only this Nation, but other nations of the
world, have a sensitivity toward this and are involved in an effort.
I think you have a magnificent track record. The secret is to let it
be known somehow.
And we would do what we can in the Conference, through the
parishes and through the diocese, in this kind of an educational
effort.
Mr. SEWELL. May I say, Senator, that the Senate Foreign Rela-
tions Committee, with the Biden-Pell amendment to the Foreign
Assistance Act of a few years ago to enable the spending of money
through American organizations to educate Americans on the prob-
lem of hunger, took precisely the right kind of step.
That was the first time we were able to make Federal funds
available for those kinds of programs. I gather more is being re-
1
227
quested this year, and AID is taking a very active role. That kind
of support is going to multiply educational programs through a va-
riety of grassroots educational organizations that is certainly
needed
Senator MATHIAS. I think if we all bend our efforts in this direc-
tion we can perhaps make an impact.
We thank you all for being here. The committee will stand in
recess subject to the call of the Chair.
[Whereupon, at 12:52 p.m., the subcommittee adjourned, subject
to call of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
WEDNESDAY, FEBRUARY 29, 1984
UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The committee met, pursuant to notice, at 2:25 p.m., in room SD-
419, Dirksen Senate Office Building, Hon. Charles H. Percy (chair-
man of the committee) presiding.
Present: Senators Percy, Helms, Pell, and Sarbanes.
The CHAIRMAN. I want to apologize to our distinguished witnesses
today and to our audience for the delay in getting started. The
floor action necessitated this delay and we will now move our hear-
ing right along.
We are very happy to have before the Foreign Relations Commit-
tee this afternoon, witnesses who will continue our hearings on the
President's foreign aid request.
We have with us today the Honorable William Schneider, Jr.,
Under Secretary for Security Assistance, Science and Technology
of the Department of State; the Honorable Peter McPherson, Ad-
ministrator of the Agency for International Development; Lt. Gen.
Philip C. Gast, Director of the Defense Security Agency; and the
Honorable Roger Kirk, Senior Deputy Assistant Secretary of State,
Bureau of International Organization Affairs, Department of State.
We would be happy to have our witnesses make any opening
statements that they would care to make, and then we will go right
to questions.
.
STATEMENT OF HON. WILLIAM SCHNEIDER, JR., UNDER SECRE-
TARY OF STATE FOR SECURITY ASSISTANCE, SCIENCE AND
TECHNOLOGY
Mr. SCHNEIDER. Thank you, Mr. Chairman.
It is a privilege to appear before this committee once again.
I have the usual lengthy statement which, with your permission,
I would like to submit for the record, but I will read an abbreviated
version.
The CHAIRMAN. Your full statement will be incorporated in the
record.
Mr. SCHNEIDER. Thank you.
Secretary Shultz and others have described the overall balance
in our foreign assistance proposal. I am here today to discuss the
security assistance component of the foreign assistance budget.
There are three difficult, but vitally important, issues facing our
security assistance program this year.
(229)
230
..
i
The first is in our own hemisphere, where Soviet and Cuban
backed insurgents continue to exploit decades-old social and eco-
nomic tensions. Their efforts to undermine the governments of
Central America jeopardize the democratic and economic reforms
being made by every one of our aid partners in Central America.
The battle in El Salvador against outrageous acts by both the left
and right is far from over, but the trend is clearly toward pluralis-
tic and democratic institutions.
U.S. assistance is essential to the continuation of this trend, not
only in El Salvador, but elsewhere in Central America. The Nation-
al Bipartisan Commission on Central America has described the
strategic importance of this region and recommended significant
increases in both economic and security assistance. Both are essen-
tial if either is to succeed.
Second, recent events in the Middle East make it clear that the
tensions remain acute. Crisis in the region threatens United States
and Western interests.
While the costs to the United States already are high, we cannot
waiver in our efforts to promote a broader peace in the region. Our
decision to provide all military assistance for Israel and Egypt on a
grant basis in fiscal year 1985 reflects our determination that the
costs of military preparedness and vigilance in these countries not
come at the expense of their economic well-being.
Third, a less visible, but equally serious, crisis looms in the grow-
ing debt burdens of many developing countries.
The Commission on Security and Economic Assistance focused on
this problem. It noted that many countries borrowed heavily for de-
velopment during the 1970's, mistakenly assuming rising world
prices for their commodity exports. Thus, now they face dangerous-
ly high debt levels. The increased economic assistance that we are
proposing is not, on its own, sufficient.
Many of these countries, including such important security as-
sistance partners as Turkey, Sudan, Morocco, and Tunisia, face a
Hobson's choice: Either military preparedness at the cost of more
debt and economic insecurity or fiscal conservatism with its price
of heightened military vulnerability.
Either alternative threatens U.S. interests.
The Carlucci Commission recommended that more of our securi-
ty assistance be offered at concessional terms. The administration
proposal to place all FMS [foreign military sales] loans on-budget is
also a step recommended by many in Congress.
In previous years, the money for FMS loans was off-budget.
Treasury borrowed the required amounts and made the funds
available to the Federal Financing Bank (FFB] which made the
loans at market rates. These loans were then guaranteed by the
Department of Defense.
The impact on overall Federal military assistance activity and
the effect on the credit markets were the same as they would have
been if the loans had been financed on-budget.
Our proposal to place FMS loans on budget will thus bring into
the open what has heretofore been partially obscured by depending
on the off-budget FFB mechanism, and most importantly, will
allow us to offer lower, concessional rates of interest to selected
countries.
231
Because concessional loans are more "valuable" in an economic
sense than market rate loans, we have been able to reduce country
programs proposed in fiscal 1985, by approximately $500 million,
compared to the fiscal 1984 baseline.
The administration is requesting $15.8 billion for foreign assist-
ance, of which $9.8 billion is security assistance, both military and
economic.
Security assistance provides direct benefits to the United States.
First, the United States cannot afford to maintain a force struc-
ture and capabilities to defend the free world alone. We must
depend upon the allies to deter local and regional threats to our
common interests. At a minimum, this gives the United States
time to consider and prepare and appropriate alternative response
to aggression.
Second, we factor the capabilities of our allies into our planning
and procurement, resulting in economies for both our allies and for
us.
Third, because the military assistance programs [MAP] are man-
aged by the Department of Defense in conjunction with U.S. pro-
curement, both the United States and the foreign buyer reap the
benefits of consolidated planning and economies of production.
Fourth, since almost all military assistance is spent on U.S.-man-
ufactured items there is a direct benefit in jobs for American work-
ers.
Finally, security assistance also provides direct strategic benefits
to the United States. Some of our largest programs, such as Israel
and Egypt, help countries deter aggressive neighbors. Other large
programs go to countries, such as Portugal and the Philippines,
with which we have concluded vital base rights, transit, and access
agreements for our Armed Forces
Ninety-one percent of the military assistance recommended in
the fiscal 1985 budget is for countries in these categories.
The administration's emergency request for supplemental funds
for Central America for fiscal 1984 is $659.1 million.
As the Kissinger Commission noted, the roots of Central Ameri-
ca's troubles lie in social inequity, unrepresentative politics, weak
legal institutions, disrespect for human rights, and other problems
of societies in urgent need of reform. These problems have been
compounded by the international economic shocks of the past sev-
eral years.
Over 60 percent of the total supplemental assistance requested
for Central America is for economic assistance. ESF [economic sup-
port fund) assistance will be used to help reverse the sharp declines
in the gross domestic product (GDP), per capita consumption, and
employment, as well as financing crucial imports of raw materials
and spare parts.
Local currency generated by ESF will fund credit programs for
the private sector and projects in housing, health, education, and
agricultural development. Our nonproject assistance will be condi-
tioned on the implementation of reforms crucial to the effective-
ness of our assistance, and to the establishment of policies which
will insure sustainable economic growth.
The Commission warned that without enhanced security, eco-
nomic assistance and diplomatic efforts will be undermined; but
232
the Commission stressed that “the worst possible policy for El Sal-
vador is to provide just enough aid to keep the war going, but too
little to wage it successfully."
We, therefore, are requesting $250 million in supplemental mili-
tary assistance program funds for fiscal 1984.
Honduras also faces an incipient insurgency movement and is
rightly concerned about the massive military buildup in neighbor-
ing Nicaragua. We, therefore, are requesting that Honduras receive
$72.5 million in ESF assistance to complement its IMF agreement
and cushion the economic adjustments it is making, as well as for
$37.5 million in military assistance.
Twenty-five million dollars would be designated for the Regional
Military Training Center (RMTC) established in Honduras in 1983.
Training is one of the most important aspects of our Central Amer-
ica military assistance program. The RMTC is a valuable low cost
way to provide larger training to Honduran and Salvadoran troops,
and possibly other forces in the region in a realistic environment.
As the Bipartisan Commission noted, Central American problems
will not be overcome overnight, and in fiscal year 1985 we will
expand our economic effort in Central America. Military assistance
relative to economic assistance for that area will decline, assuming
the supplemental passes, and the ratio of economic to military aid
will be more than four to one.
FMS is the largest of the five security assistance programs for
which the administration is requesting $5.1 billion. Thirty-nine per-
cent, or $1.9 billion, would be provided at the Treasury rate of in-
terest to 10 countries. Another $538 million, or 11 percent, would
be provided to 16 countries at concessional rates of interest.
Economic need and the ability of a country to repay will be the
primary criteria in determining who receives concessional FMS in-
terest rates, just as it is in determining who receives grant military
assistance.
Countries that we are proposing for concessional rates include
Turkey, El Salvador, Jordan, the Philippines, and Morocco.
In fiscal 1985, all FMS financing for Israel and Egypt would be
forgiven. In both countries, debt payments, including especially
FMS repayments, are a major economic constraint. By shifting to
an all grant program, we slow the spiraling increase in FMS repay-
ments and can actually reduce the program size without affecting
its integrity.
The other large program is the ESF program, which comprises
approximately 35 percent, or $3.4 billion, of our total program for
fiscal 1985. In the face of tight credit markets, low commodity
prices and high debt service requirements, ESF promotes political
and economic stability in countries of special economic, political, or
security interest to the United States.
The military assistance program provides grant funding for pur-
chases of defense articles and services. We are requesting $925 mil-
lion for countries which would otherwise find it difficult to repay.
The international military education and training program
[IMET) provides grant funds for professional military training. At
$60.9 million, IMET represents less than 1 percent, only a small
fraction, of our fiscal 1985 request. Nevertheless, it is one of our
most cost-effective programs.
233
The small peacekeeping operation account provides support for
multilateral peacekeeping efforts in the Sinai, Cyprus, and Grena-
da. We are requesting $49 million for this purpose for fiscal 1985.
In addition to the programs in Central America and Israel and
Egypt that I already have discussed, there are a number of others
also important to our own defense preparedness and national secu-
rity objectives. I will not repeat Secretary Shultz' description of our
security objectives now, except to reiterate that our programs con-
tinue to be directed at promoting stability in the Middle East; to
countering Soviet encroachment through Afghanistan and Libyan
subversion in North Africa; to facilitating negotiation of military
access and transit rights for U.S. forces in Southwest Asia and base
rights agreements in Europe; to assisting military modernization
and economic stability in Europe; to protecting the frontline states
of Korea and Thailand from threats posed by North Korea, Viet-
nam, and the Soviet Union; to promoting negotiation and peaceful
resolution of conflict in Africa; and to helping the Caribbean coun-
tries to meet the challenge of independence at a time when they
face the worst economic recession the area has experienced since
the 1930's.
Also, for fiscal 1985, we are proposing a few new legislative pro-
posals, together with certain proposals not acted upon over the past
2 years. We have attempted to limit the number and scope of legis-
lative proposals to those most important to the effective operation
and administration of the programs. These proposals are impor-
tant. I appeal to the committee for their adoption.
In conclusion, today I have touched on the highlights of our
fiscal 1984 Central America supplemental and our fiscal 1985 secu-
rity assistance program.
Mr. Chairman, the administration has attempted to implement
the recommendations which you and other members of the Car-
lucci Commission made with regard to security assistance.
We believe that a better mix of economic and military assistance
has been achieved in the overall foreign aid program proposals for
this year.
The administration also has responded to the concerns of the
Kissinger Commission about security and economic needs in Cen-
tral America.
We hope that Congress will give both the fiscal 1984 supplemen-
tal and the proposed fiscal 1985 program full support.
That concludes my statement, Mr. Chairman.
[Mr. Schneider's prepared statement follows:]
PREPARED STATEMENT OF HON. WILLIAM SCHNEIDER, JR.
INTRODUCTION
Mr. Chairman, members of the committee, Secretary Shultz has provided an over-
view of the President's proposed fiscal year 1984 Supplemental Budget Request and
fiscal year 1985 Foreign Assistance Budget. He highlighted the balance we have
struck between security and economic assistance. Peter McPherson has provided de-
tails on the economic assistance portion of the foreign assistance budget. I am here
today to provide a more comprehensive description of the security assistance compo
nent.
There are three difficult, vitally important issues facing our security assistance
program this year:
84-045 0484--16
234
First, in our own hemisphere Soviet and Cuban-backed insurgents continue to ex-
ploit decades old social and economic tensions. Their efforts to undermine the gov-
ernments of Central America jeopardize the democratic and economic reforms being
made by every one of our aid partners in Central America. The battle in El Salva-
dor against outrageous acts by both the left and the extreme right is far from over,
but the trend is clearly toward pluralistic, democratic institutions. U.S. assistance is
critical to continuation of this trend, not only in El Salvador, but elsewhere in Cen-
tral American countries. The National Bipartisan Commission on Central America
has described the strategic importance of this region and recommended significant
increases of both economic and security assistance. Both are essential if either is to
succeed. The Administration concurs in the importance the Commission placed on
the region and in the Commission's recommendations. Even though appropriations
for other worldwide programs were cut below requested fiscal year 1984 request
levels, we are limiting our request for supplemental fiscal year 1984 security assist-
ance to Central America where the need is greatest and timeliness most critical. In
addition, we propose significant increases for Central America in fiscal year 1985,
particularly in economic assistance. The ratio of economic to military assistance for
Central America in fiscal year 1985 will be over 4 to 1.
Second, recent events in the Middle East, an area that has received the largest
proportion of our security assistance over much of the past decade, make clear that
tensions remain acute. The crisis in the region is a clear threat to United States and
Western interests. While the costs to the United States already are high, we cannot
waiver in our efforts to promote a broader peace in the region. It is far less costly to
continue to support our friends in their efforts to thwart terrorism and exported
revolution than to try to untangle the wreckage that comes with war. Our decision
to provide all military assistance for Israel and Egypt on a grant basis in fiscal year
1985 reflects our determination that the costs of military preparedness and vigi-
lance to these countries not come at the expense of their economic well-being.
Third, a less visible, but equally serious, crisis looms in the growing debt burdens
of many developing countries. The Commission on Security and Economic Assist-
ance focused on this problem. It noted that many countries borrowed heavily for de-
velopment. They assumed mistakenly rising world prices for their commodity ex-
ports in the 1970's. Thus, now they face dangerously high debt levels. The increased
economic assistance that we are proposing is not, on its own, sufficient. Many of
these countries, including such important security assistance partners as Turkey,
Sudan, Morocco and Tunisia, face a Hobson's choice: either military preparedness at
the cost of more debt and economic insecurity or fiscal conservatism with its price of
heightened military vulnerability. Either alternative threatens U.S. interests.
The Carlucci Commission recommended, therefore, that more of our security as-
sistance be offered at concessional terms. The Administration is proposing that all
FMS loans be placed on-budget in fiscal year 1985 which will allow us to offer
concessional terms when appropriate. This step is also one recommended by many
in Congress. It will enable us to tailor terms of assistance to the individual require-
ments of recipients. Because concessional loans are more "valuable” than market
rate loans, military assistance levels will actually decline by $177 million in fiscal
year 1985 from the fiscal year 1984 request. For many countries, particularly in
Africa and Central America, the economic need is so great that we propose all-grant
programs.
ܚ. ܢ
VALUE/PURPOSE OF SECURITY ASSISTANCE
The Administration is requesting $15.8 billion for foreign assistance of which $9.8
billion is security assistance, both military and economic.
Security Assistance provides direct benefits to the United States:
The United States cannot afford to maintain a force structure and capabilities to
defend the free world alone. We must depend upon allies to deter local and regional
threats to our common interests. At a minimum, this gives the United States time
to consider and prepare an appropriate response to aggression. It is important to
realize that our military programs only provide the equipment and training; eco-
nomic assistance often is needed to ensure the growth of stable domestic political
and economic institutions necessary to make this strength credible.
We factor the capabilities of our allies into our planning and procurement, result-
ing in economies for both our allies and for us. I estimated last year that it would
cost $60,000 to equip and maintain one U.S. soldier in Turkey, should that be neces-
sary; it costs only $9,000 for one Turkish soldier. Thus, security assistance is cost
effective in manpower terms. Because the military assistance programs are man-
aged by DOD in conjunction with U.S. procurement, both the United States and the
235
foreign buyer reap the benefits of consolidated planning and economies of produc-
tion-thus lowering U.S. defense costs.
Since almost all military assistance is spent on U.S. manufactured items, there is
a direct benefit in jobs for American workers.
Finally, security assistance also provides direct strategic benefits to the United
States. Some of our largest assistance programs help countries which have aggres-
sive neighbors to maintain a credible deterrent. Our security assistance programs to
Israel and Egypt are two good examples. Israel shares a common border with a hos-
tile, Soviet-supported regime in Syria, while Egypt must contend with, and defend
itself against, the expansionist designs of its Libyan neighbor. Other large programs
go to countries, such as Portugal and the Philippines, with which we have concluded
vital base rights, transit and access agreements for our own armed forces. These ar-
rangements are critical to our defense posture worldwide. Over 47 percent of the
military assistance requested in 1985 is for countries in these two categories.
FISCAL YEAR 1984 SUPPLEMENTAL
In the aggregate, the Continuing Resolution level is roughly comparable to the
Administration's fiscal year 1984 request. Nevertheless, because the Continuing Res-
olution added significant amounts above the original budget request for Israel and
Egypt, the cuts suffered in other areas of the world are obscured. Rather than seek
to restore these cuts, however, the Administration has decided to seek fiscal year
1984 supplemental security assistance only for Central America. This emergency re-
quest, totalling $659.1 million, is needed to begin implementing the recommenda-
tions of the Bipartisan Commission.
The Kissinger Commission report concluded that “Central America's present suf-
fering is to an important degree the product of internal conditions." The roots of
Central America's troubles lie in social inequity, unrepresentative politics, weak
legal institutions, disrespect for human rights, and other problems of societies in
urgent need of reform. These problems have been compounded by the international
economic shocks of the past several years.
As a result, over 60 percent of the total supplemental Central American assist-
ance request of $659.1 million is for economic assistance; $290.5 million of this is
Economic Support Fund (ESF) assistance. This amount will be used to help reverse
the sharp declines in GDP, per capita consumption, and employment, and to finance
crucial imports of raw materials and spare parts. Local currency generated by ESF
will fund credit programs for the private sector and projects in housing, health, edu-
cation and agricultural development. At the same time, I know there are concerns
about absorption and accountability. Our non-project assistance will be conditioned
on implementation of reforms crucial to the effectiveness of our assistance, and to
the establishment of policies which will ensure sustainable economic growth.
The 12 Democrats, independents and Republicans on the Bipartisan Commission
agreed that the acute crisis in Central America endangers fundamental security in-
terests of the United States. The Bipartisan Commission warned that without en-
hanced security, economic assistance and diplomatic efforts will be undermined. We
are therefore requesting $259 million in supplemental Military Assistance Program
(MAP) grants for fiscal year 1984.
Almost 69 percent, or $178 million, of this supplemental MAP is proposed for El
Salvador where leftist insurgents are attempting to prevent the emergence of demo-
cratic government and destroy the economic infrastructure. Urging increased levels
of military aid to El Salvador, the Bipartisan Commission stressed that "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.” Supplemental MAP grants would be used to
expand the size, proficiency and mobility of the Salvadoran Armed Forces. In order
to achieve this capability, these funds will be expended to purchase training and
such key equipment as artillery, patrol boats, and communication and radar equip-
ment, and ammunition. El Salvador also plans to acquire fixed wing and rotary air-
craft for observation and transport purposes. MAP grants will also provide a vitally
needed military medevac capability.
Neighboring Honduras suffers a deteriorating economy. To complement the IMF
agreement with Honduras, and to help cushion the economic adjustments Honduras
is making, we will be providing $72.5 million in ESF assistance. Honduras also faces
an incipient insurgency movement and is rightly concerned about the massive mili-
tary build-up in neighboring Nicaragua. We are requesting that Honduras receive
$37.5 million or about 14 percent of the MAP supplemental request to counter this
threat. These funds would provide needed training and equipment and allow for an
expansion of the Honduran ground force by one infantry battalion.
236
Twenty-five million dollars would be destined for the Regional Military Training
Center (KMTC), established in Honduras in 1983. One of the most important aspects
of our Central America military assistance programs is training. The RMTC is a
valuable low-cost way to provide larger-scale training to Honduran and Salvadoran
troops, and possibly other forces from the region, in a realistic environment. The
construction of more permanent facilities would improve the administrative and
operational efficiency of the training.
Lesser amounts of supplemental MAP would be provided to Costa Rica and
Panama.
These supplemental funds are critical to further the development of democracy,
restore peace, and improve living conditions in Central America.
FISCAL YEAR 1985 REQUEST
As the Bipartisan Commission noted, Central American problems will not be over-
come overnight, and in fiscal year 1985 we will expand our economic effort in Cen-
tral America. Military assistance relative to economic aid will decline, assuming the
supplemental passes, and the ratio of economic to military aid will be more than 4-1.
On-Budget Financing.-In addition to the importance of Central America in the
fiscal year 1985 request, a major new departure this year for the U.S. military as-
sistance program is our proposal to bring the entire Foreign Military Sales [FMS]
financing program on-budget.
The Carlucci Commission found that the external debt of several countries impor-
tant to U.S. interests has grown to the point where they are in danger of defaulting
on repayment of loans. The Commission also noted that, for a few countries, U.S.
foreign assistance loans represent a substantial portion of their foreign debts. In-
creasingly, developing countries in need of security assistance face legally mandated
cut-off of aid because of their payment arrearages. Congress has repeatedly ex-
pressed concern about the mounting debt problems of many developing countries.
Placing FMS on-budget will make concessional rate loans possible and allow us to
design a comprehensive security assistance program which reflects the reality of a
country's financial situation. Such a step is a logical outgrowth of our 3-year effort
to improve the complementarity of economic and military assistance.
It should be emphasized that the United States also derives substantial benefits
from placing FMS on-budget. On-budget financing, enables us to provide a program
of greater economic value to the recipient while at the same time reducing overall
military assistance levels in the U.S. budget. In fact, fiscal year 1985 country totals
are over $450 million less than those proposed in fiscal year 1984.
Economic need and the ability of a country to repay will be the primary criteria
in determining who receives concessional FMS interest rates just as it is in deter-
mining who receives grant military assistance. We now plan to provide these conces-
sional loans at a 5 percent interest rate, to be reviewed at the time funds are allo-
cated.
The Security Assistance Programs.-Military assistance in fiscal year 1985 totals
$6.359 billion. Budget authority and outlays obviously will rise from fiscal year
1984—due to the shift of FMS on-budget-but overall, military assistance will fall.
Our Economic Support Fund request totals $3.438 billion, a $250 million increase
over fiscal year 1984. This is almost entirely related to additional requirements for
Central America.
There are five security assistance programs for which the Administration is re-
questing funding in fiscal year 1985. The largest of the five programs is the FMS
financing program which facilitates the purchase of U.S. military equipment, spare
parts and training. The total FMS direct credit request for fiscal 1985 is $5.1 billion
for 26 countries. Thirty-nine percent, or $1.99 billion, would be provided at the
Treasury rate of interest to ten countries. Another $538.5 million or 11 percent,
would be provided to 16 countries at concessional interest rates. Those countries we
are proposing to receive concessional rates include Turkey, El Salvador, Jordan, the
Philippines and Morocco.
Another significant new element is that all FMS financing to Israel and Egypt
would be forgiven. Israel would receive 27 percent, or $1.4 billion, of the total FMS
financing request. Egypt, the second largest recipient after Israel, would receive 23
percent, $1.175 billion. (See Chart A.) For over a decade these two programs have
received the largest single share of our FMS financing program. The need is no less
great in fiscal year 1985. Yet in both countries debt payments are a major economic
constraint, consuming more than $0.35 of each $1.00 in export earnings. FMS fi-
nancing payments are a significant fraction of that sum. By shifting to all grant
--
237
programs, we slow the spiraling increase in FMS repayments and can actually
reduce program size without affecting its integrity.
Another major security assistance program is the Economic Support Fund (ESF)
which comprises approximately 35 percent, or $3.44 billion, of our total program for
fiscal year 1985. ESF provides loans or grants to promote political and economic sta-
bility in countries of special economic, political or security interest to the United
States.
Egypt/Israel
43.5%
+
OS
.
***
.
1441
Central America & Caribbean
4.6%
Military Assistance By Category
1985 Proposed
All Other
4.4%
Front Line/
Military Access
16.0%
Base Rights
31.5%
238
The Military Assistance Program (MAP) provides grant funding for purchases of
defense articles and services. We are requesting $924.5 million for countries which
are truly needy but would find it difficult to repay.
International Military Education and Training (IMET) provides grant funds for
professional military training. At $60.9 million IMET represents less than 1 percent
only a small fraction of our fiscal year 1985 request. Nevertheless, it is one of our
most cost-effective programs.
The small Peacekeeping Operation (PKO] account provides support for multilater-
al peacekeeping activities in the Sinai, Cyprus, and Grenada. We are requesting $49
million for the PKO for fiscal year 1985.
REGIONAL PROGRAMS
Chart B indicates that overall our military assistance is focussed primarily on
countries of major strategic importance to the United States such as Israel, Egypt
and Pakistan. It also centers, however, in countries with which we have security
agreements necessary to ensure our ability to move forces overseas when needed,
such as Korea and the Philippines. The following is a description, region by region,
of our security assistance objectives and the programs that we have proposed for
fiscal year 1985.
239
Military Assistance Concessionality
1981 Actual
1983 Actual
Other
Concessional
2,6%
Israel
16.0%
Con
Other
Concessional
7.2%
Israel/Egypt
21.4%
Non-Concessional
81.4%
1985 Proposed
Non-Concessional
71.5%
Israel/Egypt
43.5%
Other
Concessional
23.0%
Com 23.0%
1
Non-Concessional
33.5%
240
!
Central America. -As recommended by the Bipartisan Commission, an increased
level of resources for Central America needs to be provided predictably, beginning
immediately and extending over the next 5 years, to support a balanced and mutu-
ally reinforcing mix of economic, political, diplomatic and security activities to be
pursued simultaneously. We support this comprehensive approach to the promotion
of democratization, economic growth, human development and security in Central
America. We are therefore proposing a multi-year commitment for non-military as-
sistance programs beginning in fiscal year 1985 to build upon the proposed fiscal
year 1984 supplemental.
The provision of military assistance also needs to be predictable and responsive to
urgent needs. We are not requesting multi-year military assistance. Nevertheless, in
order to provide a shield to protect political, economic and social development in
Central America, the only major increase proposed for our world-wide security as-
sistance funding levels for fiscal year 1985 is for Central America.
Over 70 percent of proposed fiscal year 1985 security assistance for Central Amer-
ica is ESF assistance in order to address the severe economic crisis which I have
already out-lined and which has been so.cogently described by the Bipartisan Com-
mission. We plan to devote 25 percent, or $222 million, to MĂP grants to help sup-
port democratic forces in Central America. Another $30 million in FMS concessional
credits is planned along with $3.9 million in IMET.
Following the recommendations of the Kissinger Commission, the largest amount
of fiscal year 1985 Central American military assistance, or $132.5 million, is pro-
posed for El Salvador. In addition to IMET, MAP funds would be used to purchase
badly needed training and equipment. We propose $210 million in ESF to provide
the foreign exchange necessary for the importation of raw materials and intermedi-
ate goods by industry and business.
Honduras would receive 28 percent, or $61.3 million, of MAP funds proposed for
Central America in order to continue the implementation of the Honduran program
of selective modernization and expansion of its armed forces. $75 million in ESF
would provide fast-disbursing non-project assistance indispensable to the stabiliza-
tion of the economy and the resumption of economic growth.
Additionally, we propose $160 million in ESF for Costa Rica and $20 million for
Panama for balance of payments support. We are proposing lesser amounts of mili-
tary assistance for the Regional Military Training Center in Honduras, and for
Belize, Costa Rica and Panama. We also propose $10
million in FMS concessional
credits, $300,000 in IMET and $35 million in ESF for Guatemala. Disbursal of these
funds would be contingent on continued progress in returning to elected democratic
processes and improved human rights performance.
Near East.--One of our highest priorities continues to be the furtherance of the
Middle East Peace process. There are no quick and easy solutions for achieving
peace and stability in this volatile region.
Our security assistance funds play a crucial role in the quest for peace. Egypt and
the principal participants in the peace process, remain the two largest single
recipients of our proposed fiscal year 1985 security assistance. U.S. assistance is
aimed at ensuring their security and economic well-being as they continue to play
their respective roles in the pursuit of the goals foreseen at Camp David. Because
our proposal to forgive all FMS loans provides greater financial value than the mix
of past years, funding levels for Israel and Egypt can decrease without harming pro-
gram quality. There is general agreement that the new levels and terms will
achieve our common goals. Israel and Egypt would also receive $850 million and
$750 million respectively in ESF assistance to assist in strengthening their econo-
mies.
Clearly, peace in the Middle East cannot be achieved in the face of continuing
unresolved conflict in Lebanon. We have reached a critical point. We have been
training and equipping the Lebanese Army so that it can become an effective in-
strument in the Lebanese Government's struggle to regain sovereignty over its ter-
ritory and to restore stability. The future of our program there is unclear and our
modest fiscal year 1985 request is contingent on improvement in the situation. We
seek $15 million in FMS financing at Treasury rates, $20 million in ESF and
$800,000 in IMET.
Jordan is also an important factor for stability in the Middle East. Our proposed
fiscal year 1985 program is designed to help Jordan meet the threat from its poten-
tially aggressive neighbor, Syria. Syria's military strength has increased substantial-
ly as a result of infusions of Soviet military aid. The requested $117 million in secu-
rity assistance is intended to help modernize Jordan's armed forces, to bolster its
out-numbered and out-gunned air and ground forces, and to support economic devel-
opment activities. Of that total we are proposing $95 million in FMS financing at
241
both concessional and Treasury rates, $2 million in IMET and $20 million in ESF
assistance.
We are also requesting $35 million to help carry out the highly important Peace
Keeping Operations (PKO) of the Multinational Force and Observers in the Sinai.
North Africa/Indian Ocean.-The Persian Gulf constitutes a major source of
energy for the free world. This region is simultaneously threatened by Soviet En-
croachment through Afghanistan, Libyan subversion in Northern Africa, and by
radical forces from within. Through our security assistance, we help to improve the
security of these countries and to facilitate negotiation of military access and transit
rights for U.S. forces necessary to protect these crucial oil supplies in times of crisis.
Our security assistance program for Pakistan is a tangible demonstration of U.S.
support for Pakistan's firm stand as it faces the continuing Afghan crisis and Soviet
efforts to weaken Pakistan's resolve. Additional U.S. security assistance is directed
to Oman, strategically situated on the Gulf of Hormuz, to improve its defense forces,
and to the Yemen Arab Republic with its strategic location on the Bab El-Mandeb
Straits and the Southwest border of Saudi Arabia. Yemen is threatened by a Marx-
ist-led insurgency supported by South Yemen and Libya.
Kenya and Somalia, located along the Indian Ocean littoral, are important to U.S.
security interests on the Horn of Africa, but these two countries have large debt
burdens. Thus we propose all grant assistance designed to help them to develop de-
fense capabilities, while avoiding undue burdens to their fragile economies.
In the same region, Sudan on the Red Sea, and Morocco and Tunisia in North
Africa face threats of subversion or aggression derived from or supported by Libya's
Mu'ammar Qadhafi. U.S. security assistance helps these countries in their efforts to
maintain stability in the face of these threats. For several of these countries, grant
ESF is a major component in support of their IMF standby programs without which
the programs could not proceed.
Europe and NATO.-Europe's southern flank is a critical part of NATO, vital to
hopes for peace and security in neighboring regions. Greece and Turkey lag behind
other NATO countries in military strength and their armed forces are in urgent
need of modernization. A new agreement for continued use by the U.S. of military
facilities in Greece was signed last year. This agreement and our security assistance
provide the basis for maintenance of our bilateral defense cooperation with Greece
in support of NATO objectives.
Military assistance proposed for Turkey will help to upgrade defense capabilities,
and to meet security needs and NATO modernization and force goals. The proposed
level is critical to permit continuation of the effort to modernize major equipment
lines, in particular the F-16 fighter aircraft purchased last year. Turkish armed
forces continue to suffer from serious equipment obsolescense, and would have diffi-
culty confronting a Warsaw Pact threat. We are also proposing ESF assistance for
Turkey. Although Turkey's economy is continuing its recovery from near bankrupt-
cy, the speed of that recovery has slowed in the past year.
Portugal, a charter member of NATO, is a strategically important and reliable
ally. U.S. rights for the use of critical Portuguese facilities in the Azores were ex-
tended under a new Mutual Defense Agreement signed in December of 1983. The
objectives of the security assistance program for Portugal are to support the con-
tinuing consolidations of its democratic institutions, to help Portugal modernize its
military and to assist as it confronts continuing economic problems.
A NATO ally since July 1982, Spain provides the United States with access to
vital air and naval facilities. Our security assistance underlines our support for
Spain's progress in reinforcing democratic institutions and helps Spanish Armed
Forces meet NATO modernization standards.
In addition to ESF assistance to Cyprus to continue the scholarship program initi-
ated in fiscal year 1981, we are also proposing to continue our support of the United
Nations forces in Cyprus.
Asian Security.- Past investments in the economies and security of our East
Asian and Pacific friends have resulted in stability and economic growth in much of
the area. But the picture is not entirely bright and some countries of great strategic
importance to the United States, the Philippines for example, are suffering from a
slowing of economic growth and burdensome external debts. The vitality and
progress of others are threatened by the heavy military buildup of the Soviet Union,
North Korea and Vietnam.
Our security assistance helps to protect the front-line states of Korea and Thai-
land. It sustains our treaty relationships with Korea, the Philippines and Thailand.
Security assistance also facilitates continued use of military bases and facilities in
the Philippines.
..
242
For fiscal year 1985 we plan to allocate some 92 percent of our East Asia/Pacific
regional security assistance to Korea, the Philippines and Thailand to enhance the
strategic posture of the United States and threatened friends.
Africa. ---As in fiscal year 1984, the security assistance programs that we are pro-
posing for Africa are all grant. Much of Africa faces a continuing economic crisis,
compounded by drought. For this reason, we plan to devote $391.5 million in EFS to
15 programs in sub-Saharan Africa. The administration is also initiating in fiscal
year 1985 an Ecomomic Policy Initiative for Africa, which is a special, 5-year pro-
gram utilizing development assistance funds to provide special assistance to a few
African nations undertaking extensive economic reforms to promote production and
free market pricing.
The prolonged economic crisis in Africa can magnify or precipitate security prob-
lems. The Soviet Union and its proxies continue to exploit regional conflicts to ad-
vance their position in the area. Libya has twice invaded Chad. In Southern Africa,
there are continuing conflicts which we and our allies are attempting to resolve
through negotiations.
Other Security Interests. The Eastern Caribbean area is also of strategic impor-
tance to the United States. These islands are hard-pressed to meet the challenge of
independence at a time when they face the worst economic recession the area has
experienced since the 1930's. As illustrated by recent events in Grenada, these small
States confront both internal and external security challenges. The Cuban presence
on Grenada has been removed through the efforts of the Organization of Eastern
Caribbean States, Barbados, Jamaica and the United States. However, continued
peacekeeping operations assistance to the Caribbean Peace Force (CPF) is required.
Additional assistance, primarily economic, is needed throughout the Caribbean area
to assist in creating an environment of political and economic stability and growth.
We are requesting $5 million for CPF, as well as $20 million in ESF, $5 million in
MAP, and $300,000 in IMET for the Eastern Caribbean.
Other areas of the Caribbean and South America are also included in the fiscal
year 1985 request. Many of those countries have long-term economic problems and
as Hemispheric neighbors, are important to U.S. security interests. They need to up-
grade antiquated defense establishments to deal with real security concerns. The
major proposed recipients are the Dominican Republic and Jamaica.
FISCAL YEAR 1985 LEGISLATIVE PROPOSALS
For fiscal year 1985 we are proposing only a few new legislative proposals, togeth-
er with certain proposals not acted upon over the last 2 years. We have attempted
to limit the number and scope of legislative proposals to those most important to
the effective operation and administration of the programs. We believe that those
which we have proposed are significant and urge their adoption. I trust that the
Committee will consider favorably, as it did last year, those proposed changes that
seek to improve the management and execution of the security assistance program.
New Proposals. First, we have proposed a new Section 23 of the Arms Export
Control Act (AECA), which authorizes the provision of FMS direct credits. The
President's fiscal year 1985 budget proposes to shift the entire FMS financing pro-
gram on-budget and proposes that direct credits for selected countries be provided at
a concessional rate of interest. Both aspects of this proposal can be implemented
under current authorities once Congress appropriates the funding requested. The
suggested amendments, however, would adjust these authorities to reflect more
clearly and accurately the changed nature of the FMS direct program and allow the
program to be managed more efficiently.
We also propose to amend the AECA to encourage IMET training in maritime
search and rescue, the operation and maintenance of aids to navigation, port securi-
ty, at-sea law enforcement, international maritime law, and general maritime skills
and to exempt such training from the general prohibition on law enforcement train-
ing. This grows out of an initiative of the committee last year.
Another proposal would add Korea in fiscal years 1984 and 1985, and Portugal
and the Philippines in fiscal year 1985 to the countries which are now authorized
extended repayment terms of 10 years grace and 20 years repayment of principal on
FMS guaranteed loans. Countries would be authorized such terms only on direct
Treasury rate credits in fiscal year 1985, not on credits provided at a concessional
interest rate.
Proposals Resubmitted. We regard the proposal to eliminate the multi-tier price
structure on the sale of foreign military training to be particularly important. We
would substitute a single price for all FMS-sold training. Such action would reduce
confusion, be more equitable, and reduce over-all administrative costs.
243
Several other proposals which we are resubmitting this year would improve the
management of our security assistance. In the late 1970's a long overdue reduction
in the number of overseas military personnel took place, responding to lessened
needs. Now, however, many programs have grown in size and importance. We are
requesting specific statutory authorization to increase the number of overseas mili-
tary personnel by adding eight new countries to the 12 currently authorized by stat-
ute to have more than six uniformed U.S. personnel. These include Pakistan, Tuni-
sia, Yemen, Lebanon, Sudan, El Salvador, Honduras and Venezuela.
Current law requires that countries that sell or dispose of U.S. equipment granted
directly by the United States under the MAP program return the proceeds to the
United States. As a result, countries maintain obsolete equipment in their invento-
ry, spending scarce resources on costly repairs. We are proposing to add a waiver
authority that would allow the President, on a country-by-country basis, to permit
countries to keep the proceeds of sales when it is in the U.S. national interest to do
so. All applicable legal and policy controls on third country transfers would contin-
ue to apply to any sales of this equipment.
Other proposals we are once again requesting for fiscal year 1985 include:
Reciprocal provision, without charge, of catalog data and services to NATO.
Removal of certain prohibitions against assistance to China.
Streamlining of reprogramming requirements.
Proportional application of earmarks.
Permitting reciprocal no-cost exchange training on a one-to-one basis.
Other Provisions. -We are also requesting $274 million for fiscal year 1985 in
order to maintain adequate reserves in the Guaranty Reserve Fund against defaults
and rescheduling of outstanding loans guaranteed pursuant to AEČA provisions.
This will enable the fund to maintain fiscal integrity.
Another proposal seeks to amend the Foreign Assistance Act of 1961 to establish a
ceiling of $248 million in fiscal year 1985 on the aggregate value of additions made
in fiscal year 1985 to overseas stockpiles of defense articles. We are also requesting
a supplemental authorization to permit stockpile additions of $125 million in fiscal
year 1984. These defense articles are those other than in NATO countries which are
designated as war reserve stocks for allied or other foreign forces.
CONCLUSIONS
Today I have touched on the highlights of our fiscal year 1985 security assistance
program and related legislation that will permit the more effective and efficient
management of these programs. Mr. Chairman, the Administration has attempted
to implement recommendations which you and other members of the Carlucci Com-
mission made with regard to security assistance.
We believe that a better mix of economic and military assistance has been
achieved in the overall foreign aid program proposals for this year, while permitting
us to reduce the security assistance portion to a lower level than would have been
the case under previous practice. This has been facilitated by the decision to place
FMS financing on-budget and extend FMS concessional loans to needy countries.
The administration has also responded to the concerns of the Kissinger Commis-
sion about security and economic needs in Central America. We hope that Congress
will give both the 1984 supplemental and the proposed 1985 program full support.
The CHAIRMAN. Thank you very much, Secretary Schneider.
We are happy to welcome Senator Pell and Senator Sarbanes to
this hearing.
Our next witness is Administrator Peter McPherson.
Mr. McPherson.
1
STATEMENT OF HON. M. PETER MCPHERSON, ACTING DIRECTOR
AND ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVEL-
OPMENT
Mr. McPHERSON. It's nice to be here again, Senator.
Mr. Chairman, I have held this position of Administrator of AID
for almost 3 years now-I guess it's over 3 years-and have had
really a very productive relationship with the committee. It seems
to me that perhaps I might enter my full statement in the record
.
244
and give a few observations overall as to what has gone on in that
period of time and some of the things that I think we can work on.
The CHAIRMAN. The full statement will appear in the record.
I would just like to say that ours has been very much a partner-
ship for these 3 years. It has been one of the finest relationships
that this committee has had with an AID administrator.
Mr. McPHERSON. Thank you, sir.
In that period of time, I believe, Mr. Chairman, there have been
a number of things in which the committee has been interested
that I know we have pursued productively. For example, some
members of the committee have been very interested in AID get-
ting back into the area of crop substitution, in connection with
drug eradication.
Frankly, a few years ago, my Agency's position was really that
we should resist doing that to the extent that we could.
I think that position was wrong. I think narcotics are too much
of a problem in America, and, accordingly, we now have, to various
degrees of effectiveness, projects around the world in this area.
And, we intend to continue to really push and work hard on these.
Members of this committee have also been deeply interested, as
have I, in the drought situation in Africa. As I think all of you
know, we have a food aid supplemental for Africa before Congress
and are vigorously pursuing approaches to the drought problem on
many fronts.
This committee, as well, has been interested in family planning.
I think this is a program-being certain that we avoid abortion-re-
lated programs and very careful about how this program is admin-
istered-that continues to be strong; our request for fiscal 1985,
bears this out.
Mr. Chairman, you have been deeply interested in women in de-
velopment programs, and we have approached this differently than
has historically been the case. Essentially, we have tried to inte-
grate that program into all of AID's activities, instead of having it
segregated as its own program off to one side; and, I think, it is
having
much more of an impact. We appreciate your help on that.
The Biden-Pell provisions on education in connection with devel-
opment issues has been a program which has been steadily expand-
ed. I think it is an important program, and next year we propose a
$2.4 million funding level for the program.
Environmental issues have become a steadily greater focus of the
AID program, and I think very properly so. To give economic as-
sistance, on the one hand, and then take it away, long-term, with
environmental degradation just does not make economic sense.
The basic thrust of the economic assistance approach that we
have taken in the last few years has been to reconcile some of the
interpretations of basic human needs with a growth strategy. I
think that these two concepts are consistent, and I believe we
really have gone a long way toward reconciling them.
Incidentally, the Carlucci Commission, really without dissent,
thought that the approach that we have been taking, to achieve
basic human needs has been a proper approach. This approach em-
phasizes what we have called the "Four Pillars," of policy dialog,
science and technology, the private sector and institutional build-
ing
245
Let me make a few comments about each one of those pillars.
First is policy dialog. I suspect that the deepest and broadest
impact of changes that we have implemented in the last few years
has been in the policy dialog area.
It is absolutely clear that governments' policies, budgets and pro-
grams in developing countries are more important than outsiders
can realize. We have pursued and I think, done, a great deal with
that.
We think, for example, that in the Central America program
which Bill was just discussing, we simply have to have economic
policy changes or else, a large program will be of no real value.
We believe that this is important. In various countries of Central
America we have held firm against disbursing economic assistance
unless and until real progress was made on several fronts.
The Africa Economic Policy Initiative emphasizes the fact that
we have to have changes in agricultural production policies such as
paying farmers market price levels for their product. Otherwise,
governments are de facto discriminating in favor of urbanites, the
relatively better off people in many countries in Africa and against
the poorest people, namely, the farmers.
Donor coordination, in connection with policy dialog, is the area
with which I personally have spent a lot of time. We have to have
the donors—the French, Germans, English, us, and others-coordi-
nate efforts to have a better impact upon these policies. We have
pushed hard and, I believe, are making some real progress in
asking the World Bank to take a broader leadership role in this co-
ordination. They have the position, they have the money, they have
the political impartiality that is needed in many cases to take a
key leadership role.
We are proud of what we have done in this area.
As I emphasize again, a Central America program that does not
carry policy changes with it fundamentally will not achieve the
long-term basic human needs and economic aims that we have.
The science and technology area, then, is the second major pillar.
When we look at our own country, I think we can see that techno-
logical changes have been a key to real economic change and
growth. Accordingly, in developing countries it is desperately
needed.
I looked at the money that, several years ago, AID put into oral
rehydration-the simple solution of sugar, salt, and water that can
so effectively deal with dehydration and deaths related to it in chil-
dren. That money was a relatively small amount when compared
to the millions of children that we are now in the process of being
able to save.
The same thing is true of the malaria vaccine that we have put a
lot of money into in recent years. I think a successor Administrator
will probably say, "Goodness, what a smart investment that was.
This is because we are not that far away from innoculating against
at least some strains of malaria.
In the agricultural area, the “Green Revolution" of the late
1960's was fertilizer and water intensive. We now need to break the
same kind of ground in the areas of dryland and rainfed agricul-
ture.
246
We do not yet have the technology for the Sahel. We do not have
miracle millet and sorghum, the crops of the poor in that part of
the world. But we are working hard on creating higher yielding
varieties.
So this pillar, the science and technology emphasis, in my mind
is so much of a key, Mr. Chairman, to all that we are trying to do.
The next pillar is that of the private sector or market forces.
I have come to refine my views in this area quite a lot in the last
couple of years.
Initially, I tended to think of it in terms of making loans to pri-
vate businesses to do a variety of things. Now, I more and more
have come to think of it in terms of it being a means of utilizing
market forces to achieve the basic human needs that are referred
to in the Foreign Assistance Act.
For example, in family planning, the most effective way, in many
cases, to distribute contraceptives is not through government
health centers but, rather, through subsidized sales of contracep-
tives; subsidies which, incidentially, are reduced over time.
In Bangladesh, for example, we are distributing far more contra-
ceptives through such social marketing than we are through gov-
ernment outlets, and we are going to do more and more of that all
around the world.
In short, market forces, the private sector, is a key way to reach
many of these people.
If you go out into a typical LDC, outside of the major cities, there
are virtually few government services. Fundamentally, what you
have is the provision of some level of law and order and few rudi-
mentary services, such as some schools. But, what is lacking is a
governmental structure to deliver the services that we think about
in terms of AID programs.
Hence, I am pushing hard to move away from government-to-gov-
ernment programs and move toward government-to-nongovern-
ment activities, through PVO's-private voluntary organizations-
and market forces, and so forth.
The CHAIRMAN. Amen.
We certainly are supportive of that.
Mr. McPHERSON. I have just a few last points, Mr. Chairman.
We have legislation enacted this last year dealing with mixed
credits. Of course, we are pursuing the full range of that legisla-
tion.
As we think over mixed credits, those programs will use AID
money to, in effect, market U.S. goods by a type of interest sweet-
ener approach such as is used by the Eximbank.
Now, I think we have to be very careful in this area. I think we
need to advance U.S. interests in a variety of ways and we are
doing that, such as through an expanded trade development pro-
gram. But, frankly, Mr. Chairman, I think that mixed credits are
what I would call the tiger in our house, and not just in ours, but
in almost every donor's in the world. If we and other donors were
to essentially have second Eximbank kinds of programs, we'd run
the risk of losing the basic developmental thrust we pursue.
We should not, however, sit over here and play pure, totally.
What we basically have to do is develop a program where we get
other donors to be serious about this problem which I consider to
247
be a major one. Fundamentally, it is the most serious threat, in my
judgment, to the foreign aid program we have had historically.
Mr. Chairman, those are my comments today. As I said at the
beginning, it is a pleasure to be here again.
[Mr. McPherson's prepared statement follows:]
PREPARED STATEMENT OF HON. M. PETER MCPHERSON
Mr. Chairman, it is a pleasure to be here once again to present the Administra-
tion's annual proposal for foreign economic assistance. I want to express my appre-
ciation to the Committee for its past support of the foreign assistance program. I
look forward to our continued cooperation under your leadership.
Mr. Chairman, foreign assistance has been and continues to be in the best inter-
ests of the United States. For that reason, it has been supported by your Committee
and continues to be an important part of the Administrator's foreign policy.
The historical trend has been to broaden the statutory mandate for foreign assist-
ance, since its inception with the Marshall Plan. Successive accretions include post-
war reconstruction, food for peace, and basic human needs.
I have pursued an integrated approach to foreign assistance, combining growth
with equity as an operational goal. My philosophy is to help others to help them-
selves. Foreign assistance is a limited resource. There is no substitute in the long
run for development that is broadly-based and self-sustaining. Such development is
not simply economic. Development requires inter alia spreading knowledge and the
promotion of flourishing institutions as well as growing economies.
We have set forth four pillars or means to implement our programs. They are as
follows:
(1) Policy Dialogue and Reform.—This brings to the fore the notion that long-term
equitable growth depends clearly on the nature of policies followed by developing
countries. We seek to achieve agreement with host country governments on the
nature of key policy constraints to basic development and on practical changes that
can be addressed.
(2) Institutional Development.—We have come to recognize that faulty institution-
al frameworks can impede development and that increased centralization and bu-
reaucratization can be major obstacles to progress. Our approach, thus, has been
modified to include the idea that what is sometimes required is "building down" in-
stitutions, decentralizing and encouraging greater reliance on private and volun-
tary, rather than public institutions.
(3) Technology Transfer.-In this area, we are seeking dramatic breakthroughs in
such areas as biomedical research, agriculture and family planning. Our emphasis is
on finding solutions to age-old problems through inexpensive methods that can be
widely disseminated. AID intends to be a leader in supportive new technologies.
(4) Greater Use of the Private Sector.-We are also stressing the contributions that
the private sector can make to solving key development problems, based on the con-
viction that there are many things government cannot do, or cannot do well. For
example, we are testing pilot efforts for indigenous private sector involvement in
areas such as the distribution of agricultural inputs and the manufacture and mar-
keting of inputs for health and population programs.
The past 3 years have involved change as well as continuity in our foreign assist-
ance. And there is progress to report:
AID and the Department of State have worked closely to integrate our foreign
assistance and our foreign policy to relate our assistance efforts more directly to
foreign policy interests. This coordination is reflected not only in the details of our
budgetary requests but also in the reports of the Commission on Security and Eco-
nomic Assistance (Carlucci Commission) and the National Bipartisan Commission on
Central America. I shall say more about these reports in later pages of this state-
ment.
AID has followed through on the initiatives of President Reagan at the Cancun
Conference. Presidential Task Forces have been sent to several countries, and their
reports have helped guide ensuing policy dialogues. The Caribbean Basin Initiative
has been launched, and its importance for our relations with that strategic region is
now widely recognized.
Public Law 480 has been more fully integrated into our development program-
ming without diminishing its humanitarian character. Title II commodities, for ex-
ample, are being used to develop cooperatives in India, to promote agriculture in
Jamaica, and to help reforestation in Peru.
.
248
Congress has increased our flexibility in responding to crises and opportunities.
Particularly noteworthy is the new revolving fund which will allow AID to develop
new financing mechanisms and increase its support of private sector activities. We
have made a good start in this direction through the authority provided to us this
year.
AID's voluntary family planning programs are increasingly using private sector
marketing. The market reaches out to customers and localities which are not
reached by governmental programs. And the private sector also competes successful.
ly with governmental programs that are free-of-charge, for example, in Bangladesh.
The net effects are an increase in individual choice, a decrease in governmental sub-
sidies, and an improvement in program effectiveness.
AID has taken the lead in the dissemination of Oral Rehydration Therapy. This
simple therapy promises to reduce substantially the millions of deaths of infants
and small children. We recently sponsored an international conference on this ther-
apy, and we are introducing it in social marketing systems--private as well as
public-in several developing countries.
AID continues to support research on an anti-malarial vaccine. This pioneering
effort is increasingly successful. Clinical testing with human subjects is expected to
begin in 1985. And, if all goes well, distribution should begin in 1990.
We have recognized the extraordinary needs of sub-Saharan Africa and Central
America. New initiatives to meet those needs are outlined in later pages of this
statement. Those initiatives reflect the input of members of this Committee as well
as the Commission on Security and Economic Assistance and the National Biparti-
san Commission on Central America.
AID has broadened and deepened its relations with corporations as well as univer-
sities in the United States. Corporate expertise has proven to be particularly helpful
in recommending remedies for the environmental impact of some industries in de-
veloping countries. AID and universities are increasing their cooperation with the
new Memorandum of Understanding and Joint Career Corps. A major effort is now
underway to expand the involvement of historically black colleges and universities
in our programs.
AID has increased its training of students from developing countries in the
United States. We sponsored almost 8,000 students in fiscal year 1982, over 9,000 in
fiscal year 1983, and over 10,000 (projected) in fiscal year 1984. This reverses a trend
of the 1970's.
A strategic planning process was initiated two years ago, to give a sense of direc-
tion not only to our regional bureaus but also to the entire Agency. The preliminary
results of that planning process are reflected in later pages of this statement. The
final results are to be shared in the coming weeks with your Committee, Mr. Chair-
We are establishing an early warning system with the international development
banks, and we are pressing in a variety of fora for more coordination with other
donors. This effort recently bore fruit with the adoption of its first guidelines for
donor coordination by the Development Assistance Committee of the Organization
for Economic Cooperation and Development.
I am pleased to have been able to report progress in these areas, Mr. Chairman.
Let me now turn to a review of the current situation.
man.
WORLD ECONOMY
During the past year, there have been important developments which affect our
program for fiscal year 1985. First, the international economic picture is changing,
with both positive and less encouraging aspects. Second, two major commissions
have issued reports making important recommendations on certain aspects of our
foreign assistance effort. I would like to address each of these points briefly.
At the time of my appearance before this Cominittee last year, I testified that na-
tions around the world, particularly those in the Third World, were confronting se-
rious economic problems brought on by the global recession. They had experienced a
sharp decline in demand for their exports, compounded by high interest rates which
increased the cost of borrowing to meet their rapidly growing balance of payments
deficits. The result was rising levels of debt and debt servicing burdens and a de-
cline in the level of private lending. For many of these developing countries, prob-
lems were aggravated by their own inappropriate economic policies.
Today, the situation has begun to stabilize and some of these same countries are
showing hopeful signs of recovery. A number have undertaken adjustment pro
grams, often in conjunction with the IMF, aimed at achieving a sustainable balance
of payments position. For some, recovery is due in part to policy reforms which we
249
and other donors have helped to put in place through policy dialogue efforts in the
development arena.
Several recent events offer hope of sustained improvement in LDC economic per-
formance. First, the developing countries themselves are increasingly recognizing
the value of sound economic policies and the importance of adjustment programs to
their long term economic prospects. Second, economic recovery led by the United
States and other developed countries began to take hold during the latter part of
1983. We can expect it to continue and spread in 1984. Third, interest rates have
fallen significantly, world market oil prices have declined, and LDC commodity
prices have experienced some increases. As a result of these positive trends, aided
by a significant cutback in LDC imports, the balance of payments situation of the
developing countries as a whole improved last year. The LDC's total balance of pay-
ments deficit, though still significant, was about one-third less than a couple of
years ago.
The worldwide economic recovery, as it strengthens and spreads, will be impor-
tant to the economic prospects of the developing countries-particularly the middle
and higher income developing countries with a greater capacity to adjust and re-
spond to the economic opportunity provided by the recovery in the developed coun-
tries.
Even with the improvement in economic conditions, though, many developing
countries, particularly the poorest, will continue to face serious economic difficulties
and will continue to require substantial foreign assistance. For many of them, recov-
ery has yet to blossom. Even in those which have begun appropriate adjustments,
the first step has often required substantial reductions in domestic credit, in govern-
ment development expenditures and in imports needed for investment. All of this
constrains economic performance, particularly over the short run.
For the low income countries facing severe economic problems, with limited ca-
pacity to attract or service private flows, and with extremely limited human, physi-
cal and institutional infrastructure needed to address their basic development prob-
lems, development assistance will remain critically important. Economic assistance
will also be critical in helping countries avoid serious economic and political disrup-
tion while needed stabilization and adjustment programs are being undertaken.
Indeed the challenge we face is to assist the developing world to address its current
economic problems while at the same time assisting in laying the foundation for
long term sustainable development. In short, there is cause for hope, but the job is
far from over.
Assisting developing countries to confront these massive economic problems effec-
tively, with the limited resources available, requires a carefully thought-out foreign
assistance program, and greater support from the public than has been the case in
recent years. It was for that reason that Secretary Shultz last year called for cre-
ation of the Commission on Security and Economic Assistance. He charged it with
the task of reviewing the foreign assistance program and making recommendations
for improving its focus and administration, and for increasing its public support.
The Commission, on which you and members of your Committee served, Mr.
Chairman, has served a very useful purpose in focusing greater attention on the ne-
cessity for a strong foreign assistance program. I need not take time here to review
in detail the findings and recommendations of the Commission, since members of
this Commission played a very active part in their formulation. I would like to cite,
however, a few of the ways in which we are moving to implement those recommen-
dations.
The Commission called for increases in the foreign assistance budget to help meet
our foreign policy objectives. It also pointed out the need for carefully integrated
programs in sub-Saharan Africa, the Caribbean and Central America. In response to
these recommendations as well as those of the National Bipartisan Commission on
Central America, we are proposing new initiatives entailing significant increases in
funding for both of these regions. I will go into that in more detail in just a
moment.
Consistent with the Commission's affirmation of the importance of a total country
approach to program development, over the past 3 years we have developed and im-
proved upon an integrated budget process to allocate resources in each country so as
to ensure the best mix of overall assistance to meet foreign policy interests. And we
are following the recommendations of the Commission to increase emphasis on
policy reform, institutional development, technology transfer and involvement of
the private sector as means of fostering development.
We also are taking steps to respond to the Commission's call to increase the flexi-
bility of the Development Assistance program and to maintain that of the Economic
Support Fund. We have also sought to increase the use of Public Law 480 to meet
34-045 0-84-17
250
development objectives. And we are looking at other ways in which we can follow-up
on the Commission's recommendations.
SUB-SAHARAN AFRICA
Another major concern has been the tremendous challenge to stimulate strong
growth in Africa. Measured by almost any indicator of development-income, infant
mortality, literacy, malnutrition or life span—the situation in Africa is more serious
than elsewhere. During the past decade the economic performance of the region has
been particularly poor-15 countries recorded negative growth rates. And sub-Saha-
ran Africa is the only region in the world where per capita food production has de-
clined over the last 20 years. Moreover, the poor economic performance has been
exacerbated recently by severe drought, seriously affecting food production, causing
growing food shortages continent wide and widespread hunger and malnutrition.
The FAO has identified 24 countries which are most seriously affected and in need
of urgent emergency food aid.
To help respond to the worsening situation in Africa, we are taking several steps.
One, we are allocating a larger share of our current year program to African coun-
tries—to date we have provided 218,000 metric tons of Public Law 480 Title II food
aid valued at $85 million (including ocean freight costs) in response to emergency
requests. Two, because of the magnitude of the problem, we are requesting a fiscal
year 1984 Public Law 480 food aid supplemental of $90 million to augment current
allocations. These steps will respond positively to today's emergency.
But we also wish to address long term problems. Thus, as part of our fiscal year
1985 request for the Development Assistance program we are seeking Congressional
approval of a new Economic Policy Initiative for Africa. The Initiative is planned as
a 5-year, $500 million fund. For fiscal year 1985 we are requesting authorization and
appropriation of $75 million. The purpose of this new Initiative is to foster economic
policy reforms which are essential to any reversal of the current downward trend in
many African countries. The resources of this special fund will be used to bolster
those countries which are prepared and able to establish a comprehensive economic
policy framework conducive to growth and long-term development. Resources will
be used to support implementation of the reform package once promulgated. Assist-
ance from this fund will be tied to major policy reform measures and focused pre-
dominantly on the agricultural sector. We expect that such a fund will help signifi-
cantly to strengthen the policy dialogue between donors and recipients and to im-
prove coordination among donors.
CENTRAL AMERICA
Another major development has been the recent release of the much-awaited
report by the National Bipartisan Commission on Central America, chaired by
former Secretary of State Kissinger. By now, many of you are familiar, I am sure,
with the essentials of the Commission's findings, so I will touch on them only briefly
at this time. Confirming the widely held perception of a crisis of acute proportions
in a region of fundamental importance to the United States, the Commission calls
for a program to meet basic human needs, help achieve peace, and promote democ-
racy. It proposes a comprehensive approach to economic development in the region
and reinvigoration of the Central American Common Market, all tied to major
policy reforms. It has recommended mounting a large scale, long-term assistance
program to help stabilize the Central American economies, rebuild infrastructure,
provide trade credits and encourage rescheduling of multilateral debt. And the Com-
mission has proposed a new organizational structure to administer a portion of the
proposed program.
In response to the Commission's recommendations, we are requesting authoriza-
tion of a major new program of assistance to Central America. The program's strat-
egy concentrates on four fundamental elements: economic stabilization, creation of a
basis for long-term growth, promotion of equity, and strengthening democratic insti-
tutions and respect for human rights.
Accordingly, the program's major goals are, first, to end the downward spiral of
production in the region by next year. Second, over the course of the program we
want to help the countries of the region achieve an annual ecomomic growth rate of
at least 6 percent, creating more than 250,000 new jobs each year through export-led
growth. Third, we seek to foster an increase in agricultural production of 4 percent
per year by 1989, generating an additional 80,000 jobs and increasing food availabil-
ity and agro-industrial exports. Fourth, we want to see substantially greater bene-
fits of economic growth accrue to all sectors of the populace, to better meet their
basic human needs-increased primary school enrollment, reduced infant mortality,
251
greater availability of modern family planning services, increased low-income hous-
ing, and better access to clean water and sanitation facilities. And we want to foster
the strengthening of democratic institutions, and progress toward participatory de-
mocracy and legal systems which respect human rights.
To achieve these goals, we request authorization of an $8.3 billion program of eco-
nomic assistance and guarantees for Central America, to be made available over the
next six years.
For the first phase of its implementation, we are requesting a supplemental ap-
propriation of $400 million in fiscal year 1984, including $290 million in ESF, $73
million in Development Assistance, $25 million in Public Law 480 commodities, and
$12 million for other agencies and for increased AID operating expenses.
For fiscal year 1985 we are requesting an appropriation of $1.12 billion, consisting
of $641 million in ESF, $272.8 million in Development Assistance, $10 million for
Housing Guaranty reserves, $120 million in Public Law 480 commodities, and $77
million for other programs and AID operating expenses, plus $600 million in guar-
anty authority to support private lending to the region.
As the Bipartisan Commission recommended, the assistance would be provided on
a collaborative basis. Our program would be closely tied to commitments for eco-
nomic and social reforms by the recipient governments.
I know that there is a major question in the minds of some with respect to the
capacity of the Central American countries to absorb productively the level of assist-
ance which we are proposing. Let me assure the Committee that this is a matter
which we have considered carefully in our planning, and I would like to share with
you our thinking on it.
While our program is ambitious, I am convinced that it is both essential and feasi-
ble. I believe, in fact, that a more modest program might be undercut by the politi-
cal uncertainty, insurgency, low commodity prices and economic depression that
now characterize the region.
First, with respect to the overall size of the program, the assistance we are pro-
posing for fiscal year 1985 represents less than 5 percent of the region's GNP and is
less than the $1.5 billion shortfall in export earnings which have resulted from
lower coffee and sugar prices and higher costs for imported oil. We have provided
higher levels of aid relative to GNP in other parts of the world, like South Korea
and Taiwan, and much larger amounts during the Marshall Plan.
On the issue of the management capacity of the Central American government,
while we recognize that serious deficiences do exist, we are taking several steps to
prevent such programs from limiting our impact. For one thing, the largest part of
the assistance will go to the private sector rather than to government programs. For
another, as part of our effort we will provide substantial technical assistance and
training for government officials to streamline operations and increase efficiency.
Third, significant capacity for expansion is already in place since government in-
vestments and social programs have been dramatically cut back as a result of the
region's financial problems.
With regard to specific bottlenecks, we recognize that aid expansion has been hin-
dered in some areas by such problems as clogged ports or shortages of trucks to
move commodities. This is simply not the case in Central America, where produc-
tion has artifically shrunk as a result of economic depression. For the next several
years, considerable excess capacity will exist. Over the longer term, where we can
make plans to address potential bottlenecks before they arise, the need for invest-
ment is enormous. Physical infrastructure is undeveloped, health and education sys-
tems need expansion, and investment in productive capacity is essential to employ
the region's growing labor force. These all require resources.
Finally, I would note that our own past experience with assistance programs in
the region suggests that we can build up a larger program, given the kind of com-
mitment to economic, social and political reform that we will seek as a precondition
to such assistance. We have found that our programs have tended to be implement-
ed fairly quickly in Central America compared to other regions of the world. Less
than 20 percent of our pipeline of undisbursed funds was obligated more than 3
years ago and some of this was for projects where long lead time were foreseen in
project design.
I believe that the central determinant of absorptive capacity is government poli-
cies. Policy reforms are crucial to effective use of our funds, and those of host coun-
tries. The key is to avoid subsidizing inefficiency and to create opportunities and
incentives for private sector investment. In agriculture, adequate prices and access
to land with secure titles will stimulate investment and production by the people
who understand best how to do this--the individual farmers. In industry, good poli-
cies will mobilize individual entrepreneurs to make the right decisions concerning
252
increased employment and production. Our support for a Central American Devel-
opment Organization can be a vehicle for assuring that our assistance is indeed tied
to good performance on the whole range of policies--economic, social and political-
essential for the success of the Central America program.
The stakes are high in Central America, and the success of this effort is vital to
our foreign policy interests. For it to succeed, the proposed program will require
strong bipartisan Congressional support. We will welcome the opportunity to discuss
with the members of this committee and others in Congress the details of the pro-
gram as they are fleshed out, and to seek your guidance as to how it can best be
implemented.
Let me not turn to the overall AID program.
GENERAL STRATEGY
Our programs should be aimed at overcoming the basic problems of hunger, illit-
eracy and lack of training disease and premature death. We cannot, of course, assist
developing nations to achieve such standards through our programs alone. Indeed,
the principal impetus for surmounting these problems must come from the develop-
ing countries themselves. And the programs of other donors are a critical element
in achieving progress.
There are essentially six key development areas on which we are focusing AID
resources. These are: first, attacking hunger; second, addressing health problems, es-
pecially the high levels of infant and child mortality in the Third World; third, ad-
dressing high rates of population growth; fourth, increasing literacy, education and
training opportunities; fifth, reducing unemployment and underemployment; and
sixth, improving host country financial structures. Many of these are a continuation
of past efforts, but we are striving to give better focus to our efforts and to establish
a clearer vision of what this Agency is, and should be concerned with. Moreover, we
are emphasizing as basic means of implementation the four pillars of Agency policy:
policy reform, technology transfer, institutional development, and greater use of the
private sector.
Through policy dialogue, we seek to achieve agreement with host country govern-
ments on the nature of key policy constraints to basic development and on practical
changes that can be made. Right policies are essential to achieve development
progress.
Institutional development, through which we strive to help create and improve
the institutional capacities of the peoples of the developing countries, has been part
of AID's approach since its beginnings. Over time we have come to recognize that
faulty institutional frameworks can impede development and that increased central-
ization and bureaucratization can be major obstacles to progress. As a result, our
approach to institutional development has been modified to include the idea that
sometimes what is required is decentralizing institutions rather than centralizing
them, and encouraging greater reliance on private and voluntary--rather than
public-institutions. In this regard, we will continue to strengthen our partnership
with U.S. private and voluntary organizations and draw on their unique capacities
in such areas as small scale enterprise, health delivery systems and community de-
velopment.
We are also stressing the contribution that the private sector and the use of
market power can make to solving key development problems. We believe there are
many things that government cannot do, or cannot do well. In particular we plan to
test pilot efforts for private sector involvement in areas where government has
often been unsuccessful—such as distribution of agricultural inputs. And we will be
testing the capabilities of indigenous private sectors to manufacture and market
inputs for health and population programs.
In the area of technology transfer we hope to achieve dramatic breakthroughs in
such areas as biomedical research, agriculture and family planning. "New technol-
ogies” frequently connote complex, expensive applications to solve esoteric prob-
lems. But technology also may be used to find solutions to age-old problems through
inexpensive methods that can be disseminated to people everywhere. An example is
the breakthrough in oral rehydration therapy, which I mentioned earlier.
AID intends to be a leader in supporting the development and dissemination of
such new technologies. Sustained development requires an indigenous capacity to
adopt, create and apply a continuing stream of appropriate technologies to the prob-
lems of health, population growth, hunger, illiteracy, unemployment and labor pro-
ductivity. Moreover their dissemination and actual utilization requires that they be
economically and financially sound, capable of withstanding the test of the market.
253
Research thus takes on added importance and AID intends to give greater empha-
sis to it as a fulcrum of technological transfer. We have identified four critical re-
search areas that will receive major AID attention in the coming years: agriculture,
health, family planning, and fuelwood production and utilization.
The developments I have just outlined have had a major part in shaping our pro-
posed program for fiscal year 1985 and will influence the way in which that pro-
gram is carried out. Let me turn now to the details of the fiscal year 1985 request.
REQUEST
For fiscal year 1985 we are proposing a program of $8.9 billion for foreign econom-
ic assistance, including amounts we are requesting as part of our overall proposal
for Central America. In addition, to respond to several pressing requirements this
year, we are requesting several fiscal year 1984 supplemental appropriations. These
include an urgent Public Law 480 Title II food aid supplemental for Africa to re-
spond to the dire food shortage in that region, $320 million in supplementals for the
multilateral banks, and a $400 million supplemental for Central America.
The Central America supplemental consists of $290.5 million for ESF, most of
which is for urgently needed balance of payments support; $73 million for Function-
al Development Assistance and a total of $11.5 million for AID operating expenses,
the Peace Corps and U.S. Information Agency.
The fiscal year 1985 request for bilateral assistance includes $2.2 billion for Devel-
opment Assistance, $3.4 billion for the Economic Support Fund, $21 million for the
Trade and Development Program, and $1.3 billion in budget authority for the Public
Law 480 Food for Peace program.
Our Development Assistance request includes $1.6 billion for the Functional De-
velopment Assistance accounts. Of this amount, $20 million would be allocated to
the Private Enterprise Revolving Fund. The DA request also includes $97.5 million
for the Sahel Development Program, $75 million for the new Economic Policy Initia-
tive for Africa which I mentioned earlier, $10 million for support of American
Schools and Hospitals Abroad, $25 million for the International Disaster Assistance
program and $404 million for AID operating expenses. And it includes $34 million
for the Foreign Service Retirement Fund, for which funding is already authorized.
I would like to point out that, with respect to our Development Assistance re-
quest, we are proposing a reduction in the minimum loan level required for alloca-
tion within our Functional accounts. This will give us needed flexibility in the pro-
gramming of our resources and avoid the possibility of having a provide loans to
any of the least developed countries such as has been required this year in Bangla-
desh as a result of the current loan floor.
The Economic Support Fund, consistent with the program of the past several
years, has over half of its resources allocated to Israel and Egypt to continue our
support for the search for peace in the Middle East. The request also includes ex-
panded assistance to the Caribbean Basin countries to restore economic growth to
this troubled region, support for continuing efforts to stem the spread of economic
and political disruption in Africa, and to advance our security and development-ori-
ented programs in Pakistan and the Philippines.
For multilateral assistance in fiscal year 1985 we are requesting a total of $1.5
billion. This includes $1.2 billion for U.S. contributions to the multilateral develop-
ment banks. The request also includes $242 million for International Organizations
and Programs, of which $50 million is for support of the International Fund for Ag-
ricultural Development and $192 million is for voluntary contributions to U.N. de
velopment programs, including $120 million for the U.N. Development Program and
$27 million for the U.N. Children's Fund.
I look forward to working with the Committee in carrying out our proposals.
The CHAIRMAN. Thank you very much, Mr. McPherson.
General Gast, we are ready to receive your statement.
STATEMENT OF LT. GEN. PHILIP C. GAST, DIRECTOR, DEFENSE
SECURITY ASSISTANCE AGENCY, DEPARTMENT OF DEFENSE
General Gast. Thank you, Mr. Chairman.
I, too, have a statement for the record, that I would like to
submit, if I may, and summarize it.
The CHAIRMAN. It will be incorporated in full in the record.
General Gast. Thank you.
254
I first would like to subscribe to the comments of Secretary
Schneider and then expand on them in a few places, representing
the Secretary of Defense.
First, is the linkage between security assistance and national de-
fense. Our programs help us accomplish many strategic objectives
by maintaining foreign bases to improve power projection capabili-
ties, to gain and retain access to foreign air and port facilities
abroad, strengthen our coalition war fighting capability with
friends and allies, help friendly countries cope with Soviet or
Soviet-supported forces in nurturing foreign policy objectives, such
as the Middle East Peace progress.
Secretary Schneider described the President's request for the
fiscal year 1984 supplement for Central America and I only want to
add that these funds would continue the practice of concentrating
our efforts on economic assistance. The security assistance funds
for El Salvador are especially urgent. Without these funds, a stale-
mate of the conflict will continue and most likely will be perpetuat-
ed.
Our funding request in the supplemental and for fiscal year 1985
would provide most of the resources for implementation of the na-
tional campaign plan, which is designed to help the Salvadoran
armed forces take the offensive against the insurgents.
Now, for the 1985 request, a major initiative in the 1985 request
is to place all security assistance programs on-budget. We in DOD
very strongly support that initiative. Some countries would receive
Treasury market rates, some concessional interest rates, and Israel
and Egypt would receive grants or have credits forgiven.
A key reason for the on-budget proposal is to avoid compounding
the debt servicing burden of countries receiving market rate loans.
We will still have to come to grips, however, with the debt pay-
ment problem of countries who still must pay their past and
present FMS loans.
Moving to the legislative initiatives on which we received favor-
able ruling by your committee last year, in addition, I would like to
express appreciation for that and to discuss a few of them.
The first is the single price training under FMS. The proposal
seeks to standardize the price structure for FMS training. It would
substitute a single, uniform price for all FMS training for the cur-
rent multitiered price structure, remove some of the price inequi-
ties under the current pricing system, and charge countries only
the costs they incur by receiving the FMS purchased training and
nothing more.
It would correct what we believe have been excessive charges to
certain countries and restore the principle that countries should
only pay for the additional cost to the United States for providing
that training to them.
In regard to our security assistance organizations (SAO's), a
second proposal seeks to increase the number of those SAO's
abroad authorized more than six personnel to manage in-country
security assistance programs.
There are now 12 SAO's with this authority, a significant decline
from more than 30 with this authority in fiscal year 1977.
The countries and number of personnel have been revised be-
cause of our discussions with Congress last year. Worldwide we
255
would be increasing our 'total overseas management strength by
only 11-I repeat, 11-people, a fraction of 1 percent of the current
authorized worldwide strength.
In regard to professional military training, another initiative on
military exchanges seeks to improve military contacts with other
countries. This initiative would authorize reciprocal professional
military exchanges between military schools in the United States
and equivalent professional schools in other countries. Many coun-
tries cannot afford to purchase exchange training. The proposal
will expand our contracts abroad and convey to participating coun-
tries our willingness to engage in equal and reciprocal exchanges
with them.
We have submitted an initiative to resolve conflicting provisions
in sections 21 and 43 of the AECA [Arms Export Control Act] over
the appropriate cost to recover in sales of defense articles and serv-
ices. Language that was worked out last year was satisfactory, and
I accept that as it is.
The initiative I want to talk about from last year's package is
our request for authorization to use FMS administrative funds to
supplement MAP funds for the representational activities. We esti-
mate now that 30 to 40 percent of these representational funds are
borne by our personnel from their own pockets.
Hence, our proposal would not require any additional appropria-
tions over and above that which has been appropriated from the
MAP account in the future, but would add to it from the FMS sur-
charge.
In regard to extended payment period for Korea, Portugal, and
the Philippines, we would add those to the list of countries already
within the statute.
I would like to mention our request for additional obligational
authority for the Special Defense Acquisition Fund (SDF). We
were delighted that the fiscal year 1984 CRA included some $225
million in addition to obligational authority for the SDAF. This
brings the total authority to $475 million over the past 3 fiscal
years.
Most of the funds available in the past years have been placed on
contract, and many of the items procured under the SDAF will
soon be available for sale to foreign countries should that be neces-
sary.
We are asking for an additional $325 million in obligational au-
thority for fiscal year 1985.
None of these funds being requested comes from the pockets of
the taxpayer.
Finally, I want to mention our request to replenish the Guaran-
tee Reserve Fund (GRF] by some $274 million. This amount will
help insure that there are adequate reserves against defaults and
rescheduling of existing loans.
Our 1985 on-budget proposal for more grants and greater conces-
sional loans would help alleviate the growth of additional debt
servicing burdens among FMS loan recipients. But many countries
are still obliged to pay back loans signed in the past, particularly
at times especially when interest rates were so high. The amount
requested would help us through this difficult period by not allow-
ing the fund to fall to precariously low levels.
.
256
Mr. Chairman, that concludes my comments.
[General Gast's prepared statement follows:]
PREPARED STATEMENT OF LT. GEN. PHILIP C. GAST
INTRODUCTION
Thank you Mr. Chairman.
Secretary Schneider has just provided the committee a detailed and comprehen-
sive review of the President's request for a fiscal year 1984 supplemental for Central
America and the fiscal year 1985 program for security assistance. We, in the De-
fense Department, support these requests. I will concentrate my remarks on what
Defense believes are the major strategic objectives underlying the program recom-
mendations. Then, I will discuss, in some detail, some of the legislative initiatives
that are being proposed by the administration to improve the management of the
security assistance program.
Our position in DOD has always been that the security assistance and arms sales
programs represent the overseas counterparts of our own defense efforts and are no
less an investment in U.S. national security than the programs for the Department
of Defense. These programs reap high returns in security and good will, yet they are
not a drain on the U.S. taxpayer.
STRATEGIC RATIONALES
In order to better understand how we program country funds, let me review the
principal strategic rationales behind our request. I should mention first that our
programs are not based on some altruistic motive or made in a vacuum. Rather,
they are developed with careful consideration of country military requirements and
with U.S. strategic and foreign policy goals in mind.
To illustrate the point, our programs are designed to:
1. Provide assistance to those countries which have agreed to retain U.S. bases on
their territory. These agreements not only give the United States an ability to
project power far from our shores, they also enhance our ability to operate with the
armed forces of other countries.
Last year, we signed base agreements with Portugal, Spain, Greece, and Philip-
pines and we have an important agreement with Turkey that did not come up for
renewal. The mutual defense cooperation epitomized by these base agreements is re-
flected in the security assistance we provide to these countries.
2. We also have arrangements with a number of other countries to permit our
military use of their air or port facilities. These arrangements enable us to sustain
operations abroad and help improve our power projection capabilities. Arrange-
ments with Oman, Somalia and Kenya exemplify the benefits we derive from our
international assistance programs.
3. Our security assistance programs also are intended to assist friendly countries
threatened by Soviet, Warsaw Pact or Soviet-supported forces. Many of these coun-
tries have turned to the United States—or to other Western nations—to cope with
threats to their independence and sovereignty. Major recipients in this category in-
clude Pakistan, Korea, Turkey, El Salvador, Honduras and several others.
4. Our assistance, in general, helps countries make better use of their own re-
sources in deterring regional threats to their stability or coping with internal
threats that may be inspired or supported by outside forces. Typically, the threats
require efforts exceeding their ability or resources, especially as they attempt to
make parallel progress in economic growth and social development. Some of these
countries include Sudan, Morocco and the Caribbean nations.
5. In addition to these defense and security-related motives for security assistance,
our programs also support major foreign policy goals such as the pursuit of peace in
the Middle East. This objective is so important that we continue to recommend the
largest country assistance levels for Israel and Egypt.
Security assistance on its own, of course, cannot bring about peace or remove the
origins of regional instability or even hold back threats from Soviet or Soviet-sup-
ported forces. It can, however, shape conditions in such a way that diplomatic and
political efforts can take place.
6. Security assistance and arms sales also bring modest domestic benefits to the
U.S. economy. Though not a major reason for our overseas programs, these pro-
grams do add an indirect support to our total defense planning effort.
For example, we estimate that foreign military sales have saved the military serv-
ices some $3 billion between fiscal year 1978 and 1982, primarily from economies of
257
scale and various recoupments of sunk costs. We estimate that more than half a
million jobs are sustained by the FMS program alone and that over the past 3 years
the program has brought some $30 billion into the U.S. Treasury.
PROGRAM DEVELOPMENT
The proposals in the supplemental for Central America and the fiscal year 1985
annual request are the result of extensive preparation and careful thought. So, too,
are the legislative initiatives we are proposing. The annual security assistance rec-
ommendations take more than 9 months of sustained effort and involve several Gov-
ernment agencies both here in Washington and in the field. Our proposals for legis-
lative change result from years of experience in administering the program and
adapting to changes over time as circumstances shift. Hence, our country proposals
do not contain unnecessary extras and are tailored to known country requirements;
our legislative initiatives build upon our proposals from the past 2 years when we
did not get authorization bills.
The most important factor shaping the President's security assistance request is
our judgment on how best a specific program furthers U.S. foreign policy and securi-
ty interests. Contrary to some beliefs, most foreign leaders do not make exorbitant
requests or unreasonable demands on the United States. Most are sensitive to their
ability to absorb new equipments or defense articles and almost all are aware of
their abilities to repay the loans we provide. Some countries, though, have security
interests which are so paramount and national security issues so pressing, or have
choices that are so limited that they opt for the high interest loans and stiff repay-
ment terms we offer. Very few countries outside the developed nations and a few
affluent developing countries have sufficent resources of their own and must look to
us--or others--to assist them in meeting their military and security requirements.
THE FISCAL YEAR 1984 SUPPLEMENTAL FOR CENTRAL AMERICA
The President has submitted a supplemental request for Central America. This
request parallels closely the recommendations of the National Bipartisan Commis-
sion on Central America and we believe that additional resources are essential if
established governments are to develop their ability to counter terrorism, subver-
sion and aggression in the region.
The security assistance proposals represent a small portion of the overall request
since most of the funds being sought for Central America will be for economic as-
sistance. This would continue our practice in the past when our economic assistance
levels surpassed those for military assistance. Needless to say, security and econom-
ic development complement one another. The latter can best take place in an envi-
ronment free from violence, terror and turmoil. On the other hand, security without
real progress in economic, political or social development would be equally
unrewarding to the United States and to the people in Central America. In El Sal-
vador, we have made our concerns for human rights and political reforms very clear
and feel confident that the human rights record there will continue to improve. It is
not in our interest or in the interest of the people of the region to resolve their
issues at the point of a gun or to have totalitarian governments substitute for
reform already underway.
The fiscal year 1984 supplemental request includes military assistance program
(MAP) funds for El Salvador ($178.9M), Honduras ($37.5M) Costa Rica ($7.85M),
Panama ($10M) and the regional military training center ($25M) totaling $259.05
million. More than half the request is for El Salvador because the situation there is
most serious.
We agree with the Bipartisan Commission that the threat to the United States
from Central America is real and that we ought to act quickly and decisively to cope
with the crisis in the region. If we delay much longer, the morale of the Salvadoran
forces will be undermined, the delivery of critical ammunition and equipment will
be stretched out even further, the image of the fighting capacity of the armed forces
will be weakened and the stalemate in the civil war may well be perpetuated for
some time.
THE FISCAL YEAR 1985 REQUEST
I want to express my appreciation to the Congress for its support of the adminis-
tration's security assistance requests over the past years. I believe the United States
is far more secure because of these actions. Last November, the Congress approved
funding levels close to those requested by the President and left most of those funds
258
without earmarkings. This helped assure our friends abroad that they could count
on the United States to assist them.
The fiscal year 1985 security assistance request continues previous year progress
with no major country increases, apart from those we are requesting for Central
America. The major new initiative in this year's request is the proposal to shift
FMS credit financing from "off-budget” to “on-budget.” This would give us greater
flexibility in charging lower interest rates to countries beleaguered with U.S. debt
payments, while helping them to meet their military requirements. The on-budget
proposal would result in an FMS credit program composed of:
Credits let at Treasury market rates for some countries ($1,987M);
Low interest concessional loans ($539M); and
Grants or forgiven credits for Israel and Egypt ($2575M).
There are additional funds in the grant MAP ($925M) and IMET training ac-
counts ($61M)
The proposal, if enacted, would require a shift of some $4.3 billion in budget au-
thority over the fiscal year 1984 request; however, the estimated outlay impact in
fiscal year 1985 would be closer to $1.6 billion. The total military assistance request
for fiscal year 1985 equals $6.4 billion, if the request for peacekeeping organizations
($49M) and for replenishing the Guaranty Reserve Fund ($27M) are added in; with-
out the latter two, the fiscal year 1985 request is actually less than the fiscal year
1984 CRA total.
The on-budget initiative therefore provides us the needed flexibility to adjust secu-
rity assistance programs to the economic needs and abilities of recipient nations
through a mix of grants, concessional loans and near market rate financing. It is a
step in the direction of easing the debt-servicing requirements of countries which
will be repaying past and present FMS loans.
I should also note that the fiscal year 1985 foreign aid request would retain the
same 60:40 ratio of economic to military assistance as in the past few years. This
relative balance between economic ($9.4B) and military ($6.4B) assistance is appro
priate and we, in DOD, support this division in the overall foreign aid request.
Before discussing our package of legislative initiatives for fiscal year 1985, I want
to say a word about the special defense acquisition fund (SDAF) and the Guaranty
Reserve Fund (GRF).
Last year, the appropriations committees added some $225 million in obligational
authority to the SDAF, bringing the total authority through fiscal year 1984 to $475
million. The SDAF is now capitalized at about $600 million and the authorized ceil-
ing is at $900 million for fiscal year 1984. We are asking for an increment of $325
million in obligational authority. None of these funds come from the U.S. taxpayer;
they are made available to the SDAF account from receipts collected from prior
FMS sales. Previously obligated funds have been used to procure high demand items
and these items will soon be available for sale to foreign countries. These items
have been documented in both the annual procurement plans and annual report to
the Congress on the SDAF.
We have requested $274 million to replenish the Guaranty Reserve Fund which
has been drawn down to cover country reschedulings and late payments. This re-
quest is being submitted to ensure the Fund does not fall to an unacceptably low
level.
LEGISLATIVE INITIATIVES
Now, I'd like to discuss some of the changes in legislation being proposed in the
fiscal year 1985 bill. Most of the initiatives have been submitted in the past but,
because there were no bills, we failed to get final action. We have worked closely
with the Department of State on these initiatives and are submitting only those
changes we feel necessary for improving the conduct of security assistance.
I want to personally express my appreciation to this committee for its favorable
report on the set of initiatives submitted last year and hope that it will give an
equally favorable report this year. Let me mention a few of the initiatives being pro
posed.
One proposal seeks to eliminate the inequities in the variable pricing structure
for sales of foreign training. In place of the multi-tier pricing system which now
exists, this proposal would substitute a single price for all FMS training. Enactment
would mean we would have only two pricing systems for foreign training-one for
FMS and one for IMET. It would require all countries to pay the same FMS price
for identical training they purchase from the United States. It would correct what
we believe has been excessive charges to selected countries and restore the principle
259
that a purchasing country should pay only those additional costs to the United
States of providing services.
Another proposal would amend section 515 of the Foreign Assistance Act to in-
crease the number of security assistance organizations (SAO's) abroad that author-
ized more than six uniformed personnel. Based on discussions with the Congress last
year, we revised the list of countries and reduced the number of additional person-
nel we are requesting. Specifically, we are requesting this authority for eight coun-
tries: Tunisia, Lebanon, Yemen, Pakistan, Sudan, Honduras, El Salvador and Ven-
ezuela. There are now 12 countries under the statute where we have more than six
authorized military personnel in the SAO; in fiscal year 1977, there were 33 SAO's
with this authority. We are requesting this authority only for those countries with
the most urgent program management requirements. Program implementation
needs abroad have grown in each of these countries and this proposed change would
merely adjust overseas manpower levels to changing in-country program require-
ments. Worldwide, our overseas combined personnel strength--civilian, military and
local--would only increase by eleven, or a fraction of one percent.
We are also seeking authority for reciprocal one-for-one military exchanges be-
tween our senior and intermediate education schools and equivalent schools in other
countries. The benefits of the program are easy to cite. It increases the exchange of
United States and foreign military doctrine, strategy and tactics, broadens the types
of military contacts and augments the military experiences of our senior and inter-
mediate level officers. As it now stands, we can not reciprocate when other govern-
ments offer senior level training on a tuition-free basis. This proposal was reported
out favorably by both the House and Senate committees last year. It would add no
new costs to the U.S. Government.
There are other legislative proposals designed to improve the administration of
the security assistance program. One proposed change would resolve the many con-
flicting provisions in the Arms Export Control Act (AECA) on the calculation of the
administrative surcharge we add to foreign military sales to cover the cost to the
U.S. Government of managing the program. We believe we should recoup only those
costs incurred for the benefit of the foreign purchasing governments. This issue is
very important to the integrity of the FMŠ program and we believe that the admin-
istration's proposal for true cost recovery is sound and necessary.
Another legislative change seeks authority to authorize the use of FMS adminis-
trative funds for representational purposes. These funds, if approved, would aug-
ment MAP appropriated funds and would mean that our representatives overseas
would not have to use their own resources to meet the social obligations inherent in
their professional duties. We estimate that between 30 percent and 40 percent of the
costs of representational functions are paid from personal funds. This proposal
would not require any additional budget outlays since it would be funded from FMS
proceeds. Our representational funds have been declining in recent years while costs
have risen, requirements have increased and the visibility of our security assistance
programs have grown. It is unfair to require our overseas personnel to use their
own funds when representing the U.S. Government. Approval would be a big morale
booster to our representatives in the field and would signal that their services are
appreciated and valued.
One of the initiatives being submitted was proposed last year by Senator Pell. It
would exempt foreign training in maritime skills from the prohibitions against law
enforcement training in section 660 of the Foreign Assistance Act. It also would
permit the use of international military education and training (IMET) funds for
such training.
Finally, I want to draw your attention to one new initiative in the fiscal year 1985
package. This would extend the repayment terms for Portugal and Philippines for
loans offered to them at Treasury market rates. We are also resubmitting a similar
request from last year for Korea. We would add these three countries to the States
now authorized the 10-year grace, 20-year repayment of principal terms. Extended
terms would ease the burden of repaying future FMS loans in the near term and
defer them to a time when they will be better able to meet their obligations.
CONCLUSION
Mr. Chairman, let me conclude by saying that we derive many tangible and intan-
gible benefits from our security assistance
program. Secretary Schneider and I have
touched on a number of these. The major contribution of security assistance from a
defense perspective is that it enables other countries to cooperate with the United
States in developing working and viable collective security arrangements, in sharing
the collective burden of defense and in furthering our mutual security interests.
260
These programs are low cost investments in U.S. security and to a lesser degree, in
the U.S. economy. Short of stationing U.S. forces abroad, the security assistance pro-
grams provide the most visible assurance of continued U.S. readiness to stand by
our friends and allies.
I know that I reflect the views of the Secretary of Defense when I urge the com-
mittee to give favorable consideration to the administration's security assistance
proposals for fiscal year 1984 and fiscal year 1985. We have worked closely with the
Department of State in developing the supplemental request and in formulating the
fiscal year 1985 annual recommendations. This also includes the legislative propos-
als to improve program management.
This concludes my statement. I would be pleased to respond to any questions you
may have.
Thank you.
The CHAIRMAN. Thank you very much, General. We appreciate
your statement.
Senator PELL. Mr. Chairman.
The CHAIRMAN. Senator Pell.
Senator Pell. If you would permit me to interrupt, I have to
leave at this point. But I have eight specific questions which I hope
would be asked for the record and answered by the witnesses.
The CHAIRMAN. They will, and they will be inserted into the
record at the appropriate point.
We thank you very much for being with us. We are sorry that
you have to leave.
Senator PELL. Thank you.
The CHAIRMAN. Secretary Kirk, we are happy to have your testi-
mony.
STATEMENT OF HON. ROGER KIRK, SENIOR DEPUTY ASSISTANT
SECRETARY, BUREAU OF INTERNATIONAL ORGANIZATION AF.
FAIRS, DEPARTMENT OF STATE
Mr. KIRK. Thank you very much, Mr. Chairman.
In the interest of saving the committee's time, I will not have a
prepared statement for the relatively small portion of these funds
for international programs and organizations.
Let me simply state that our fiscal 1985 request to support these
voluntary funded organizations, excluding IFAD, is some $191.8
million. This is an increase of $1.8 million over the amount re-
quested last year.
These programs we feel play an important part in our multilat-
eral diplomacy, a part of our diplomacy which we think is extreme-
ly important and which is one part, albeit only a part, of our total
relationship with the rest of the world.
We feel that the amount that we have requested for these multi-
lateral programs represents a good compromise between the needs
for budgetary and fiscal restraint and the obligations and opportu-
nities presented by these multilateral organizations which we take
very seriously.
Thank you, Mr. Chairman.
The CHAIRMAN. Secretary Kirk, I have to step out of the room
for just a moment to take a quick phone call. I would appreciate
your going right ahead without me.
Senator Sarbanes, would you chair for just a moment, please.
Mr. KIRK. Thank you. That had concluded my statement.
Senator SARBANES (presiding]. You know, you missed your
chance. You should have done that just a few seconds sooner.
261
Let me ask if Secretary Newell is occupied today.
Mr. KIRK. Secretary Newell is out of the country. He is in Mexico
at the present time.
Senator SARBANES. You don't know how many times Secretary
Newell has been before the committee since he was confirmed, do
you?
Mr. KIRK. I do not, Senator. But I certainly can find out for you.
Senator SARBANES. Would you, and would you supply that to the
committee?
Mr. KIRK. I certainly will do that.
Senator SARBANES. Thank you.
[The information referred to follows:)
Mr. Newell attended hearings before the Senate Foreign Relations Committee on
both of the times he has been invited since his confirmation. The dates were Febru-
ary 25, 1983 (International Organizations and Programs) and March 9, 1983 (Depart-
ment of State Authorization).
Senator SARBANES. Secretary Schneider, I want to try to get
these figures into perspective, if I can.
What is the foreign assistance figure in the continuing resolution
for 1984? In other words, what is the figure you are working with?
Is it $13.8 billion?
Mr. SCHNEIDER. It is $13.78 billion, Senator.
Senator SARBANES. What is the figure you are seeking for next
year?
Mr. SCHNEIDER. Well, the two figures are not strictly comparable
because of the change in technique of budget presentation. But the
number that we are proposing in this fiscal year is $15.2 billion.
The reason they are not comparable is under the continuing resolu-
tion, we had the foreign military sales guarantee program carried
off-budget, that is, it was not displayed in the budget; whereas, in
fiscal 1985, it is counted as an on-budget figure.
Senator SARBANES. How much is that figure?
Mr. SCHNEIDER. FMS guarantees in fiscal 1985 are $5.1 billion,
compared to fiscal 1984 in the continuing resolution, where they
are $4.4 billion.
Senator SARBANES. But that suggests that they are carried in
both places.
Mr. SCHNEIDER. They are in the same appropriations bill. It is
just that the way in which they are presented is not strictly compa-
rable.
Senator SARBANES. Now I am going to get this moving target to
stop so that we know exactly what we are talking about.
The foreign aid figure this year in the continuing resolution is
$13.8 billion; is that correct?
Mr. SCHNEIDER. That's correct.
.
Senator SARBANES. What is the figure that you are requesting for
the next fiscal year?
Mr. SCHNEIDER. It is $15.2 billion.
Senator SARBANES. All right. So that is the comparable figure. It
is a 10-percent increase; is that correct?
Mr. SCHNEIDER. That's correct.
Senator SARBANES. Could you break those two figures out into
their component parts-ESF, MAP, FMS, and so on?
Mr. SCHNEIDER. Yes.
262
In fiscal 1985, the request for the military assistance program is
$924.5 million. The request for peacekeeping operations--
Senator SARBANES. What is that figure in the continuing resolu-
tion?
Mr. SCHNEIDER. In the continuing resolution, it is $510 million.
Senator SARBANES. So that is an increase of how much, about 80
percent?
Mr. SCHNEIDER. That's correct.
Senator SARBANES. All right.
Please continue.
Mr. SCHNEIDER. The peacekeeping operations are $49 million in
fiscal 1985, compared to $56.2 million in the fiscal 1984 continuing
resolution.
The international military education and training program is
$60.9 million in fiscal 1985, compared to $51.5 in the continuing
resolution in 1984.
In the foreign military sales credit program, it is $1.3 billion in
the continuing resolution, compared to $5.1 billion in fiscal 1985.
This reflects the difference in budget presentation, that particular
figure.
The FMS guarantee program in the continuing resolution is $4.4
billion, compared to zero in fiscal 1985, again reflecting that
change in budget presentation.
The guarantee reserve fund-we did not make a contribution for
that in fiscal 1984-but in fiscal 1985 we have proposed $274 mil-
lion.
Antiterrorism assistance is $2.5 million under the continuing res-
olution in fiscal 1984, and $5 million in the fiscal 1985 proposal.
Senator SARBANES. Now what lies behind the contribution of
$275 million to the reserve fund?
Mr. SCHNEIDER. The fund is intended to be kept at approximately
the $750 million level. As the fund gets drawn down or is in danger
of being drawn down, we are obliged, from time to time, to replen-
ish it.
General Gast, of the Defense Security Assistance Agency, who
manages the fund, can provide more detailed comments, sir.
Senator SARBANES. In other words, it is either a failure to pay
back or the need to reschedule the payment back of debts that has
made necessary a further contribution to the fund?
Mr. SCHNEIDER. That's correct.
General Gast. It is largely rescheduled debt payments up until
now. But it would be forecasts in the future. I mean multilateral
rescheduling.
Senator SARBANES. Now what about the economic side of these
comparisons?
Mr. SCHNEIDER. Taken as a total, the economic assistance propos-
al for fiscal 1985 is $8.9 billion net of receipts. That includes a
fairly long list of accounts. The multilateral development banks are
funded at the $1.2 billion level in fiscal 1985, compared to $1.3 bil-
lion in fiscal 1984.
The internationl organizations are funded at $241.8 million in
fiscal 1985, compared to $314 in fiscal 1984.
AID development assistance is funded at $2.2 billion in fiscal
1985, compared to $1.9 billion in fiscal 1984.
263
AID miscellaneous trust funds is $15 million in both years.
The trade and development program is $21 million in fiscal 1985,
and $16 million in fiscal 1984.
The Public Law 480 program and its various components is a
total of $1.3 billion in fiscal 1985, but was approximately $1 billion
in fiscal 1984.
The Peace Corps is $124 million in fiscal 1985, compared to $115
million in the continuing resolution.
Refugee assistance is $341 million in fiscal 1985, compared to
$337.6 million in fiscal 1984.
The Inter-American Foundation is approximately $12 million in
fiscal 1985, compared to $13 million in the continuing resolution.
The African Development Foundation is funded at $3 million in
both years.
International narcotics control is $50.2 million in fiscal 1985, and
$41.2 million in fiscal 1984.
A new program dealing with Micronesia, to fund the Microne-
sian Compact of Free Association, is $295 million in fiscal 1985.
There was no comparable program in fiscal 1984.
Senator SARBANES. Is the chart that you are reading from a part
of your longer prepared statement?
Mr. SCHNEIDER. No, this one is not in the longer statement. This
is part of my backup.
I can have the chart put into the record if you would find that
useful.
Senator SARBANES. Would you do that, please?
Mr. SCHNEIDER. Sure.
[The chart referred to follows:
264
POREIGN ASSISTANCE BUDGET SUMMARY
BUDGET AUTHORITY
(in thousands of dollars)
-FY 1984-
FY 1982
ACTUAL
FY 1983
ACTUAL
-FY 1985-
AMEND.
CON. RES.
SUPP.
REVISED
PRRS. BUD.
REVISED
ECONOMIC ASSISTANCE
Multilateral Development Banks
Interaational Organizations...
1,261,712
215, 438
1,537.024
269,502
1,324, 365
3.4.164
319,616 1,643,981
3,686
317,850
1,235,558
241,800
1,235,558
241,800
AID Dovolopment Assistance...
AID Miscellaneous Trust Funds.
Bcodonic Support Pund.
1,880, 496
15,000
2,919,300
1,831,604
15,000
2.962.250
1,902,942
15,000
2,903,250
87,874 1.990,816
15,000
290,500 3,193,750
2,075, 058
15,000
3,067,500
166,416 2.241,474
15,000
370,600 3,438,100
Trade & Development Progra...
6,907
10,500
16,250
16,250
21,000
21,000
PL 480 Title I (Program)
Titio I Receiptı.
832,144
-347,444
25,000
859,000
-481,000
872,000
-470,000
897,000
-470,000
985,000
-316,000
36,000 1,021,000
-316,000
Titl. I (BA).
Titl. II.
484, 700
$15,302
378,000
650,000
402,000
650,000
25,000
90,000
427,000
740,000
36,000
669,000
650,000
705,000
650,000
Total BA.
1,000,002
1,028,000
1,052,000
115,000 1,167,000
1,319,000
36,000 1,355,000
9.000
2,000
14,650
Peace Corps .
Refugee Assistance.
Intor-American Poundation....
African Development Foundation
Internat'l Narcotics Control..
Compact of Proc Association...
105,000
423,000
12,000
(2,000)
36,700
109,000
395,000
12,000
(2.000)
36,700
115,000
323,000
13,000
3,000
41,200
117,000
337,650
13,000
3,000
41,200
115,000
341.450
11,992
3,000
50,217
295,490
124,000
341,450
11,992
3,000
50,217
295,490
Subtotal.
Offsetting Receipts
7,875,555
-439,702
8, 206, 580
-533,589
8,023,171
-494,618
833, 326 8,856,497
-494,618
8,792,065
-495,751
582,016 9,374,081
-495,751
TOTAL ECONOMIC ASSISTANCE..
1,435,853
1,672,991
7,528,553
833,326 8.361,879
8,296,314
582,016
8.878,330
259,050
SECURITY ASSISTANCE
military Assistaace Program.
Peacekeeping Operations
Internat'1 mil. Ed. & Training
Poroigo Military Sales..
FMS Guarantees (off-budget)
Guarantee Reserve Pund.,
Anti-Torrorism.
178,512
145,700
42,000
800,000
3,269,500
383,325
31,100
46,000
1.175,000
3,931,500
510,000
56,200
51,532
1,315,000
4,401,250
769,050
56,200
51,532
1,315,000
4, 401, 250
800,000
49,000
60,910
5,115,000
124,500 924,500
49,000
60,910
-15,000 5,100,000
274,000
5,000
274,000
5,000
2,500
2.500
Subtotal.
off setting Roceipts (PMS).
4,435,712
-178,781
5,566,925
-136,732
6,336,482
-126,000
259,050 6,595,532
-126,000
6,303,910
-117,000
109,500 6,413,410
-111,000
TOTAL SECURITY ASSISTANCE.
4,256,931
5,430, 193
6,210,482
259,050 6,469,532
6, 186, 910
109,500 6,296,410
1
SESSE
255&#828
23:35
TOTAL BCONOMIC & SRCURITY ASSIST
11.692,784
13,103, 184
13,739,035 1,092,376 14.831,411
14,483,224
691,516 15,174,740
PPC/PB
3/5/84
#1742B
-
265
Senator SARBANES. The concessionality that you are proposing in
the military sales is on what terms?
Mr. SCHNEIDER. Five percent.
Senator SARBANES. And, without concessionality, what would the
terms be?
Mr. SCHNEIDER. Well, that is dependent on the cost of money to
the Treasury. It is now in the 11- to 12-percent range.
Senator SARBANES. How much are you proposing to offer at 5
percent?
Mr. SCHNEIDER. $538 million.
Senator SARBANES. Is there a chart in your testimony that indi-
cates where that will go?
Mr. SCHNEIDER. Yes, we have a list. There are 16 countries that
would be the recipients of that. Let me see if I can identify that for
you.
Basically, the theory of the distribution was that the poorest
countries would receive assistance on a grant basis; the richest
countries would receive money at the cost of money to the Treas-
ury. There is also a group of intermediate countries, those who can
afford to repay the loans, even though they cannot carry them at
the cost of money to the U.S. Treasury. This group of 16—I'll call
them middle income countries—are the recipients of the conces-
sional assistance.
Senator SARBANES. What is the standard by which you are defin-
ing these terms-poorest, intermediate, and richest?
Mr. SCHNEIDER. Economic criteria are used. The criteria involve
income per capita and the financial condition of the country re-
flecting its ability to repay.
Senator SARBANES. Are they spelled out somewhere?
Mr. SCHNEIDER. The criteria?
Senator SARBANES. Yes.
Mr. SCHNEIDER. Yes. We have a detailed description of the eco-
nomic criteria being applied.
Senator SARBANES. Where is that?
Mr. SCHNEIDER. That has been in our congressional presentation
document. We have, at various times, briefed on it and provided ad-
ditional details as individual members and staff were interested.
Senator SARBANES. In response to this question, would you
submit that particular material for the record?
Mr. SCHNEIDER. Yes, sir.
[The information referred to follows:]
ECONOMIC NEED FOR CONCESSIONAL FINANCING
There are a number of criteria which are used to determine the level of conces-
sionality we offer in making funds available to a country under our foreign assist-
ance programs. Criteria for concessionality in certain programs are set by law; in
other programs they have evolved from agency experience. The following is a review
by program of the criteria used to determine concessionality in aid terms.
DEVELOPMENT ASSISTANCE
Whether a country receives Development Assistance in the form of a loan or
grant depends upon a number of factors, chiefly the nature of the project financed
and the country's ability to repay.
For AID's Development Assistance programs, Congress has determined that not
less than 30 percent of the funds appropriated would be made available in the form
of loans (Section 134 of the second continuing resolution for fiscal year 1983, Public
34-045 0-84-18
266
Law 97-377, as made applicable to fiscal year 1984 by Public Law 98–151, the second
continuing resolution for fiscal year 1984.) Minimum interest rates for such loans
are set by FAA Section 122(b); the minimum interest rate on AID loans is 2 percent
during the grace period of not to exceed 10 years, and 3 percent during the repay-
ment period. Rates may be set higher, based on such factors as the recipient's abili-
ty to repay, the nature of the activity funded, etc. For example, in AID's new pri-
vate sector loan projects, interest rates closer to market rates are planned, along
with shorter grace periods.
The repayment period for Development Assistance loans is determined by the
GNP level of the recipient, based on cut-off levels set in the annual Foreign Assist-
ance Appropriations Act-most recently Section 134 of the fiscal year 1983 Second
Continuing Resolution (Public Law 97–377). The terms for the most concessional (40-
year) loans routinely have been tied to the World Bank's GNP cut-off for IDA eligi-
bility. The IDA cut-off normally is reset annually in July (although last year it was
delayed until October) in the Bank's internal “Per Capita Income Guidelines”
memorandum. The threshold for least concessional (20-year) loans routinely has
been based on a level set by AID each year roughly proportional to the increase in
the IDA cut-off.
The fiscal year 1984 Continuing Resolutions incorporate the “terms and condi-
tions” set in the fiscal year 1983 Act. Those terms are:
Per Capita GNP—$795 or below: 40-year loans; $796 to $1,284: 25-year loans;
$1,285 or above: 20-year loans.
PUBLIC LAW 480, FOOD FOR PEACE
Under Section 111 of the Agricultural Trade Development and Assistance Act of
1954 (Public Law 480) as amended, 75 percent of the food aid provided under Title I
in each fiscal year must be allocated to countries which meet the poverty criterion
established by the World Bank's soft-loan affiliate, the International Development
Association (IDA), unless the President certifies to Congress that the food is needed
elsewhere for humanitarian purposes, or that the full 75 percent cannot be used ef-
fectively in IDA eligible countries in a given year. Allocation of the remaining 25
percent is made case-by-case, based again on multiple criteria including: demon-
strated food need, existence of balance of payments problems that prevent a country
from importing needed food through commercial transactions, and per capita
income. Current law requires that at least 15 percent of Title I funds be made avail-
able in grant form in Food for Development Programs under Title III; eligibility re-
quirements for such grant aid are set by law (Section 302(b), Public Law 480 as
amended), and include eligibility for IDA loans as a poverty criterion.
Title II grant food assistance serves a number of purposes. Some of our Title II
programs, as required by Section 201 of Public Law 480, provides “famine or other
urgent or extraordinary relief requirements.” Other, development-oriented grant aid
programs, distributed by voluntary agencies, are designed to "promote economic and
community development in friendly developing areas," again in accordance with
Section 201 requirements. For the most part, both attempt to target food aid on the
poorest segments of a country's population, for people who cannot afford to buy
food. While we do not limit our operations under Title II to countries with the
lowest average per capita incomes-targetting, instead, the poorest wherever they
may be found-in general our programs are concentrated in ĪDA eligible countries.
ECONOMIC SUPPORT FUND
Here, too, criteria for concessionality are varied. Specific statutory requirements
often determine whether funds under a program are to be made available in grant
form. Absent such a provision, determinations as to whether a program will be
grant or loan, and if a loan, the terms of repayment, are made on a case-by-case
basis taking into consideration the economic situation of the recipient, as shown by:
per capita income; debt service as a percentage of earnings on export of goods and
services (current and projected); and current account deficit in relation to GNP. A
second factor used in determining program terms is the nature of the activity
funded, as is the case in determining Development Assistance program terms.
MILITARY ASSISTANCE PROGRAM/FOREIGN MILITARY SALES FINANCING
Decisions on whether we request grant military assistance, concessional financing
under FMS, or a mixture of the two are made on a country-by-country basis. The
primary considerations which go into the decision are economic, based on the recipi-
ent country's economic need and its ability to repay. To determine economic need,
267
each country is judged by a combination of economic criteria, the most important of
which are per capita income, debt service burden as a percentage of export earn-
ings, and the general direction of and prospects for economic growth. We are re-
questing MAP grants for countries which have particularly severe economic needs,
and/or for which the United States has pledged to undertake to make best efforts to
provide such assistance.
In the case of FMS programs, we plan to offer several kinds of terms: forgiven
loans for Israel and Egypt; loans to be repayed at either Treasury (market) rates
(plus one-eighth percent administrative charge); or loans which carry concessional
interest rates. Congress authorized that FMS loans granted to Egypt and Israel in
fiscal year 1983 and fiscal year 1984 be partially forgiven; the Administration has
requested that fiscal year 1985 FMS financing to these countries be provided entire-
ly as forgiven loans.
For all other country programs proposed to receive FMS financing in fiscal year
1985, we have proposed either Treasury rate financing, concessional rate financing
or a combination of the two based on the same economic considerations cited above.
We plan to provide all loans made at concessional rates at 5 percent interest, with 5
years grace on repayment of principal and with an additional 7 years to repay.
Terms for loans at Treasury rates will vary from country to country; in a few cases
as much as 10 years grace and an additional 20 years to repay will be granted. How-
ever, so-called “10/20" repayment terms require a specific by-country authorization
of eligibility by Congress. We do not intend to propose a loan agreement which com-
bines a concessional rate of interest with 10/20 terms.
In deciding which economic criteria to use to calculate a country's economic need
for concessional FMS financing, we examined the various criteria utilized by other
international lending organizations, such as the World Bank. While per capita
income is a salient and perhaps overall the most useful determinant, to rely upon it
exclusively would lead in certain cases to distortions in which we would be forced to
provide concessional assistance when it was not really justified. Thus while we give
great weight to per capita income in deciding who will get concessional FMS, we
balance that by looking at the other factors we have already mentioned above-as
we do in providing other kinds of assistance as previously noted-in order to
produce a complete picture of a country's needs and repayment ability.
Senator SARBANES. Where are the countries listed that receive
this concessional aid, and the amounts?
Mr. SCHNEIDER. The countries receiving concessional assistance
are Jordan, Turkey, the Dominican Republic, Morocco, Pakistan,
Tunisia, Indonesia, the Philippines, Botswana, Cameroon, Colom-
bia, Ecuador, and Peru.
Senator SARBANES. How much concessional FMS does Ecuador
get, for instance?
Mr. SCHNEIDER. Ecuador gets $2 million.
Senator SARBANES. Two million?
Mr. SCHNEIDER. Yes.
Senator SARBANES. And how much regular FMS does Ecuador
get?
Mr. SCHNEIDER. Two million dollars.
Senator SARBANES. Well, you have some pretty finely calibrated
economic criteria at work here, don't you?
Mr. SCHNEIDER. Yes.
The idea, Senator, is by having these three different instruments
of assistance--grant assistance, cost of money assistance, and
concessional assistance—we can arrive at a blend of assistance to
certain countries to provide an interest rate that is compatible
with their particular economic circumstances.
In the absence of having this instrument, we would be obliged, in
most cases, to provide the countries with the higher cost of money,
which is the cost of money loaned, which has been part of the eco-
nomic problem they have been obliged to face in the past several
years.
268
Senator SARBANES. I understand that.
You are telling me that the "blender” you have working is
geared to these economic criteria. It is almost like a recipe, is that
right, that a housewife would have in her kitchen when she was
using her blender. You are factoring in these economic criteria,
and on the basis of that, when you put your MAP and your conces-
sional and your regular FMS in there, it all comes out the same. Is
that correct?
Mr. SCHNEIDER. No, it does not come out the same in the sense
that the effective interest rate is altered, depending upon the mix
of these terms. To use the same metaphor, you will get a product
with a slightly different flavor as a consequence of the character of
the blend.
Senator SARBANES. I understand that. But if I take the economic
criteria and apply them to the blending that you are doing, do I
find it being done in an objective way in each instance, so that it
all comes out at the same point? Is that correct?
Mr. SCHNEIDER. I am not sure what you are referring to as the
same point. The effective interest rate will not be the same, as be-
tween countries.
It will not necessarily be the same.
Senator SARBANES. If you factor in the income per capita of the
country, then, in effect, it will be the same.
Mr. SCHNEIDER. Well, yes, to the extent that precision is possible
in this kind of calculation.
Senator SARBANES. And the exercise has been gone through with
respect to each country?
Mr. SCHNEIDER. Yes.
Senator SARBANES. Is there material that you can submit on that
which shows this process?
Mr. SCHNEIDER. We will provide descriptive material on how we
have arrived at these calculations. 1
Senator SARBANES. Now, the $538 million is that the total con-
cessionary?
Mr. SCHNEIDER. Yes, sir.
Senator SARBANES. Who are the largest recipients of that, and in
what amounts?
Mr. SCHNEIDER. Pakistan is $100 million; Tunisia is $25 million;
Jordan is $47.5 million. The largest recipient is Turkey, with $250
million. Also, Indonesia is $20 million. Those would be the largest
recipients. The Philippines is $30 million.
Senator SARBANES. On the MAP, which has gone from $510 mil-
lion to $925 million, do you have those countries?
Mr. SCHNEIDER. Yes.
I should make one point about the MAP, Senator. In addition to
the amount that we received under the continuing resolution as a
consequence of the recommendations by the Bipartisan Commission
on Central America, there is a supplemental proposal of approxi-
mately $250 million. So, the total request for fiscal 1984, adding the
continuing resolution to the supplemental request, would be about
$760 million or so.
See pages 272-274. .
269
In the MAP program itself, the major recipients are Portugal
and Turkey in the NATO area.
Senator SARBANES. How much for Portugal?
Mr. SCHNEIDER. Portugal is $70 million and Turkey is $230 mil-
lion.
Senator SARBANES. What did they get this year in the CR? .
Mr. SCHNEIDER. In the CR, Portugal got $60 million and Turkey
got $130 million.
Senator SARBANES. So you are increasing Portugal from $60 mil-
lion to $70 million in MAP, and Turkey from $130 million to $230
million?
Mr. SCHNEIDER. That is correct.
Senator SARBANES. What else is there?
Mr. SCHNEIDER. In Central America we have a number of small
programs in fiscal year 1985: the Dominican Republic, $3 million;
eastern Caribbean countries, $5 million; Jamaica, $5 million.
In Southwest Asia-Kenya, $23 million; Morocco, $40 million; So-
malia, $40 million; Sudan, $69 million; Tunisia, $15 million; and
North Yemen, $10 million.
In the Pacific and East Asian region: the Philippines, $25 mil-
lion; Thailand, $5 million.
And Africa: Zaire, $15 million; Botswana, $4 million; Malawi, $1
million.
In West Africa: Chad, $5 million; Guinea, $3 million; Liberia, $15
million; Niger, $5 million; Senegal, $3 million.
In Latin America--
Senator SARBANES. How many countries are we going to be
giving grant military assistance to in your proposal for next year?
Mr. SCHNEIDER. I would have to look at that.
(Pause.)
Mr. SCHNEIDER. Thirty-one countries, including the Regional
Military Training Center in Honduras.
Senator SARBANES. Thirty-one?
Mr. SCHNEIDER. Yes.
Senator SARBANES. How many did we give it to this year in the
continuing resolution?
Mr. SCHNEIDER. About 25.
Senator SARBANES. At one point we were phasing out the MAP
program. Do you recall at what point we reached the lowest figure
in terms of the number of countries receiving MAP, and how many
countries was that?
Mr. SCHNEIDER. In fiscal year 1981 it was down to about four
countries.
Senator SARBANES. Four countries?
Mr. SCHNEIDER. Yes. This was before the debt problem was a con-
spicuous one.
Senator SARBANES. So in fiscal year 1981 we were giving four
countries MAP, and now you are proposing for fiscal year 1985 to
give grant military assistance to 31 countries?
Mr. SCHNEIDER. Yes, sir.
Senator SARBANES. How many countries are receiving FMS, non-
concessional FMS?
Mr. SCHNEIDER. Seventeen countries.
270
Senator SARBANES. And how many of them are receiving conces-
sional FMS?
Mr. SCHNEIDER. Nine.
Senator SARBANES. Pardon?
Mr. SCHNEIDER. Nine. These are countries that are receiving both
the concessional and nonconcessional.
Senator SARBANES. Let me put the question in a different way.
How many countries in terms of military aid are receiving only
nonconcessional FMS, or receive FMS but do not receive conces-
sional FMS in your proposal, or do not recieve grant MAP?
Mr. SCHNEIDER. It would be a small number. It looks like about
six or eight. In Europe, for example, Spain and Greece receive only
nonconcessional FMS. I do not believe they receive MAP or conces-
sional terms in fiscal year 1985. Korea and Malaysia also.
[Pause.]
Mr. SCHNEIDER. It looks like that is about all. I will refine those
figures for the record.
[The following information was supplied for the record:
There are six countries receiving, in military aid, only market rate FMS in our
proposed FY 1985 security assistance budget. They are Korea, Malaysia, Lebanon,
Oman, Greece and Spain.
Senator SARBANES. Just those four?
Mr. SCHNEIDER. Those are all I can identify for the moment.
Senator SARBANES. All right. How many countries in total re-
ceive military assistance of one sort or another, either MAP,
concessional FMS, or straight term FMS?
Mr. SCHNEIDER. I presume you want to exclude ESF from this
calculation? Just MAP?
Senator SARBANES. ESF is the next area I might want to ask
questions about.
I guess we are giving it to so many countries it is hard to come
up with a quick answer to the question. Is that correct?
Mr. SCHNEIDER. No, that is not correct. This is in the interest of
getting an accurate count.
The number is around 40; 47, including the Regional Military
Center in Honduras. We are just trying to be more accurate.
Senator SARBANES. Forty-seven or 48 countries receive military ·
assistance in some form or other?
General GAST. Setting aside IMET.
Senator SARBANES. Would you say that a country that was not
receiving military assistance from us could question how friendly
we were toward them?
Mr. SCHNEIDER. No. The notion for providing military assistance
relates to a security interest in that particular country. There are
many countries in many areas of the world in which we do not
have a security interest or, alternatively, countries that are able to
cope with their own security problems without financial assistance
from the United States.
Security assistance in that sense is an exceptional tool for specif-
ic diplomatic purposes.
Senator SARBANES. Could you .provide us a table that shows all
the countries that receive some form of military assistance, and the
military assistance that you have requested for fiscal year 1985,
271
and the amounts that you are seeking, and compare that with the
amounts, if any, that they are receiving under the continuing reso-
lution in fiscal year 1984.
Mr. SCHNEIDER. Sure. We will include the supplemental request
also, so that you will get a full display of our 1984 numbers for
comparsion.
Senator SARBANES. Well, as long as the supplemental is put in a
separate column and is not lumped in, so it is separated out.
Mr. SCHNEIDER. I understand.
[The material referred to follows:)
+
07-Mar-83
SECURITY ASSISTANCE ALLOCATIONS--1983 TO 1985
FY 1983 FINAL
FY 1984 REQUEST
FY 1984 CR
FY 1984 SUPPLEMENTAL
FY 1984 TOTAL
FY 1985 REQUEST
ESF
MAP
FMS
ESF
MAP
FMS
ESF
КАР
FMS
ESF
MAP
FMS
ESF
MAP
FMS
ESF
MAP
FNS-T
FMS-C
FMS-TOT
EAST ASIA
25.0
185.0
Indonesia
Korea
Malaysia
Philippines
Thailand
S. Pacific
0.0
0.0
0.0
50.0
10.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
50.0
5.0
0.0
0.0
0.0
0.0
0.0
5.0
0.0
50.0
230.0
12.5
50.0
94.0
0.0
50.0
76.0
0.0
0.0
0.0
0.0
50.0
5.0
1.1
0.0
0.0
0.06
0.0
5.0
0.0
45.0
230.0
10.0
50.0
94.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
50.0
5.0
1.1
0.0
0.0
0.0
0.0
5.0
0.0
45.0
230.0
10.0
50.0
94.0
0.0
0.0
0.0
0.0
95.0
5.0
1.0
0.0
0.0
0.0
25.0
5.0
0.0
20.0
230.0
10.0
30.0
98.0
0.0
20.0
0.0
0.0
30.0
0.0
0.0
40.0
230.0
10.0
60.0
98.0
0.0
0.0
REGIONAL TOTAL
: 00.0
14.0
340.0
55.0
5.0
436.5
56.1
5.0
429.0
0.0
0.0
0.0
56.1
5.0
429.0
101.0
30.0
388.0
50.0
438.0
NEAR EAST
Egypt
Israel
Jordan
Lebanon
Morocco
Daan
Pakistan
Sri Lanka
Tunisia
Teren
M. E. Regional
750.0
785.0
20.0
150.0
0.0
15.0
200.0
0.0
5.0
0.0
12.5
0.0
0.0
0.0
0.0
25.0
0.0
0.0
0.0
13.8
1.0
0.0
1325.0
1700.0
51.5
100.0
75.0
30.0
260.0
0.0
87.0
750.0
785.0
20.0
0.0
7.0
15.0
225.0
0.0
0.1
0.0
0.0
0.0
30.0
0.0
0.0
0.0
50.0
15.0
0.0
1300.0
1700.0
115.0
15.0
60.0
15.0
300.0
0.0
90.0
0.0
0.0
750.0
910.0
20.0
0.0
7.0
15.0
225.0
0.0
1.5
0.0
14.0
0.0
0.0
0.0
0.0
30.0
0.0
0.0
0.0
18.0
4.0
0.0
1365.0
1700.0
115. U
15.0
26.8
40.0
300.0
0.0
87.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
750.0
910.0
20.0
0.0
7.0
15.0
225.0
0.0
1.5
0.0
14.0
0.0
0.0
0.0
0.0
30.0
0.0
0.0
0.0
18.0
1365.0
1700.0
115.0
15.0
26.8
40.0
300.0
0.0
87.0
0.0
0.0
750.0
850.0
20.0
20.0
15.0
20.0
200.0
0.0
3.0
0.0
15.0
0.0
0.0
0.0
0.0
40.0
0.0
0.0
0.0
15.0
10.0
0.0
0.0
0.0
47.5
15.0
0.0
45.0
225.0
0.0
25.0
0.0
0.0
1175.0
1400.0
47.5
0.0
10.0
0.0
100.0
0.0
25.0
0.0
0.0
1175.0
1400.0
95.0
15.0
10.0
45.0
325.0
0.0
50.0
0.0
0.0
272
0.0
15.0
0.0
REGIONAL TOTAL
1937.5
39.8
3632.5
1817.0
95.0
3625.0
1942.5
52.0
3648.8
0.0
0.0
0.0
1942.5
52.0
3648.8
1893.0
65.0
357.5
2757.5
3115.0
EUROPE
15.0
0.0
15.0
0.0
Cyprus
Greece
Poland
Portugal
Spain
Turkey
0.0
20.0
12.0
295.0
0.0
0.0
0.0
37.5
0.0
110.0
0.0
280.0
0.0
52.5
400.0
290.0
3.0
0.0
0.0
40.0
12.0
175.0
0.0
0.0
60.0
0.0
230.0
0.0
500.0
0.0
45.0
400.0
525.0
U. V
500.0
0.0
45.0
400.0
585.0
0.0
0.0
60.0
0.0
130.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
15.0
0.0
0.0
40.0
12.0
138.5
0.0
0.0
0.0
50.0
0.0
130.0
0.0
500.0
0.0
45.0
400.0
585.0
3.0
0.0
0.0
80.0
12.0
175.0
40.0
12.0
138.5
0.0
0.0
0.0
70.0
0.0
230.0
0.0
500.0
0.0
55.0
400.0
275.0
0.0
0.0
0.0
0.0
0.0
250.0
0.0
500.0
0.0
55.0
400.0
525.0
REGIONAL TOTAL
332.0
147.5
1022.5
230.0
290.0
1170.0
205.5
190.0
1530.0
0.0
0.0
0.0
205.5
190.0
1530.0
270.0
300.0
1230.0
250.0
1480.0
AFRICA
10.0
5.0
2.5
0.0
0.0
Botswana
Cameroon
Chad
Civic Action
Djibouti
Gibon
Guinea
Kenya
Liberia
2.0
0.0
0.0
10.0
0.0
0.0
0.0
3.0
0.0
0.0
0.0
0.0
1.5
0.0
0.0
8.5
9.0
5.0
0.0
0.0
0.0
3.0
0.0
12.0
0.0
0.0
0.0
2.0
0.0
0.0
30.0
32.0
2.0
0.0
0.0
3.0
0.0
3.0
0.0
0.0
40.0
34.2
2.0
0.0
2.0
0.0
2.0
0.0
1.5
12.0
12.0
1.0
5.0
0.0
0.0
0.0
3.0
0.0
10.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
3.0
0.0
3.0
0.0
0.0
40.0
34.2
2.0
0.0
2.0
0.0
2.0
0.0
1.5
12.0
12.0
7.0
5.0
0.0
0.0
0.0
3.0
0.0
10.0
0.0
10.0
0.0
10.0
0.0
3.5
0.0
0.0
55.0
45.0
4.0
0.0
5.0
5.0
2.5
0.0
3.0
23.0
15.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
5.0
5.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
5.0
5.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.0
0.0
10.U
0.0
42.0
35.0
2.0
23.0
13.0
0.0
0.0
0.0
0.0
0.0
0.0
273
07-Mar-83
SECURITY ASSISTANCE ALLOCATIONS--1983 TO. 1985
2
FY 1983 FINAL
FY 1984 REQUEST
FY 1984 CR
FY 1984 SUPPLEMENTAL
FY 1984 TOTAL
FY 1985 REQUEST
ESF
MAP
FRS
ESF
MAP
FMS
ESF
MAP
FMS
ESF
КАР
FMS
ESF
MAP
FNS
ESF
MAP
FMS-T
FNS-C
FNS-TOT
0.0
0.0
2.0
5.0
0.0
0.0
0.0
0.0
0.0
0.0
2.0
Madagascar
Malawi
Mauritius
Niger
Ruanda
Senegal
Seychelles
Somalia
Sudaa
laire
laabia
lababve
S. Africa Reg.
0.0
0.0
2.0
5.0
0.0
5.0
2.0
21.0
82.3
5.0
15.5
60.0
14.5
0.0
0.0
0.0
1.0
0.0
0.0
0.0
15.0
43.0
4.5
0.0
0.0
0.0
0.0
0.0
0.0
1.2
0.0
0.0
0.0
10.0
0.0
2.0
0.0
0.0
0.0
0.0
3.0
0.0
40.0
60.0
10.0
0.0
10.0
2.0
35.0
120.0
10.0
20.0
75.0
40.0
0.0
0.0
0.0
3.0
1.5
0.0
0.0
0.0
0.0
0.0
0.0
3.0
0.0
0.0
0.0
2.0
5.0
0.0
10.0
2.0
35.Ů
120.0
8.0
20.0
40.0
16.0
0.0
0.0
0.0
2.0
0.0
2.0
0.0
32.0
45.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
2.0
1.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
*0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2.0
5.0
0.0
10.0
2.0
35.0
120.0
8.0
20.0
40.0
16.0
0.0
0.0
0.0
2.0
1.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2.0
0.0
32.0
45.0
1.0
0.0
0.0
0.0
0.0
0.0
2.0
7.0
0.0
15.0
2.0
35.0
120.0
15.0
20.0
15.0
37.0
0.0
1.0
0.0
5.0
0.0
3.0
0.0
40.0
69.0
15.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
REGIONAL TOTAL
286,2
79.5
37.7
409.0
156.0
36.5
338.2
119.5
28.5
0.0
0.0
0.0
338.2
119.5
28.5
391.5
190.5
0.0
10.0
10.0
AMERICAN REPUBLICS
0.0
0.0
0.0
0.0
0.0
0.0
0.0
82.0
8.0
11.0
0.0
140.0
0.0
0.0
0.0
2.5
0.0
2.1
0.0
0.0
0.0
0.0
5.0
0.0
0.5
0.0
0.0
2.0
5.0
3.0
0.0
55.0
10.0
0.0
0.0
60.0
0.0
0.0
0.0
90.0
0.0
Belize
Bolivia
Coloabia
Costa Rica
Domainican Rep.
E. Caribbean
Ecuador
El Salvador
Guatemala
Guyana
Haiti
Honduras
Jaaaica
Panana
Peru
RATC
kocap
Surinare
L.A. Reg.
33.5
7.0
0.0
2.5
0.0
6.0
18.5
0.0
0.0
0.0
0.0
0.0
0.0
70.0
40.0
25.0
0.0
120.0
40.0
0.0
5.0
40.0
55.0
0.0
0.0
0.0
0.0
1.0
2.0
0.0
0.0
53.0
57.4
0.0
0.0
0.0
0.0
0.0
0.0
0.3
40.0
0.0
0.0
12.0
0.0
0.0
0.0
6.0
30.0
10.0
0.0
0.0
0.0
0.0
5.0
25.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
27.5
2.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
70.0
34.0
25.0
0.0
120.0
0.0
0.0
5.0
40.0
55.0
0.0
0.0
0.0
0.0
0.0
2.0
0.5
0.0
0.0
9.9
2.5
7.0
0.0
223.7
0.0
0.0
0.3
77.5
16.5
0.0
0.0
0.3
9.0
0.0
5.0
4.0
0.0
0.0
0.0
0.0
0.5
0.0
0.0
2.0
2.5
7.0
0.0
45.0
0.0
0.0
0.3
40.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
7.9
0.0
0.0
0.0
178.7
0.0
0.0
0.0
37.5
0.0
10.0
0.0
25.0
0.0
0.0
0.0
0.5
3.0
0.0
9.8
3.0
5.0
0.0
116.0
0.0
0.0
0.3
61.3
5.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
10.0
0.0
0.0
130.0
34.0
25.0
0.0
210.0
0.0
0.0
5.0
112.5
55.0
30.0
0.0
0.0
28.0
0.0
2.0
0.0
0.0
7.0
0.0
2.5
0.0
6.0
18.5
0.0
0.0
0.0
0.0
0.0
5.0
10.0
0.0
0.0
0.0
0.0
4.0
0.0
0.0
160.0
45.0
20.0
0.0
210.0
35.0
0.0
5.0
75.0
70.0
20.0
0.0
0.0
136.6
0.0
2.0
0.0
0.0
0.0
2.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
5.0
0.0
0.0
0.0
0.0
0.0
5.0
0.0
2.0
15.0
10.0
0.0
0.0
0.0
0.0
5.0
5.0
0.0
0.0
0.0
8.0
0.0
5.0
0.0
4.0
15.0
10.0
0.0
0.0
0.0
0.0
5.0
10.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
72.5
0.0
30.0
0.0
0.0
28.0
0.0
0.0
0.0
0.0
5.0
10.0
0.0
10.0
0.0
25.0
0.0
0.0
0.0
0.0
20.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
REGIONAL TOTAL
351.4
67.9
73.8
398.0
109.0
98.0
351.0
101.3
49.0
290.5
259.1
0.0
641.5
360.4
49.0
782.6
238.3
11.0
46.0
57.0
MAF COSTS
General Costs
506 tai rei burse.
Finance Adj.
U.U
0.0
0.0
39.8
2.5
-7.5
0.0
0.0
0.0
0.0
0.0
46.0
50.0
-4.8
0.0
0.0
0.0
0.0
0.0
0.0
47.7
0.0.
-5.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
41.7
0.0
-5.5
0.0
0.0
0.0
0.0
0.0
0.0
56.6
S0.0
-5.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Iransfer to PRO
Democracy Initiative
Vaallocated
0.0
0.2
0.0
0.0
0.0
0.0
0.0
40.0
0.0
0.0
0.0
0.0
0.0
0.0
10.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
31.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
10.0
0.0
0.0
0.0
0.0
0.0
0.0
31.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
274
SECURITY ASSISTAKCE ALLOCATIONS--1983 TO 1985
3
07-Mar-03
FY 1983 FWYAL
FY 1904 REQUEST
FY 1985 REQUEST
FY 1984 CR
FY 1984 SUPPLEMENTAL
FY 1984 TOTAL
НАР
FMS-TOT
FNS-C
ESF
FMS
ESF
FMS
ESF
FMS-T
MAP
ESF
HAP
FMS
FMS
КАР
FHS
MAP
ESF
MAP
ESF
383.3
290.5
3438.1
1986.5
3113.5
2967,3
5106.5
2949.0
747.0
2903.3
5716.3
259.1
0.0
5716.3
924.5
5100.0
S656.0
510.0
3193.8
769.1
TOTAL
(NOTE: Egypt and Israel FMS numbers include loans as well as forgiven credits in FY 1983 and FY 1984.)
275
Senator SARBANES. The supplemental is in what amount?
Mr. SCHNEIDER. The total supplemental is about $1 billion, but
most of its is economic assistance.
Senator SARBANES. How much of it is economic?
Mr. SCHNEIDER. About the only military assistance in the supple-
mental is the Central America request.
Senator SARBANES. So that is $260 million in MAP?
Mr. SCHNEIDER. $259 million.
Senator SARBANES. And $290 million in ESF?
Mr. SCHNEIDER. Yes, $290 million in ESF.
Senator SARBANES. What is the balance of it?
Mr. SCHNEIDER. It is in the multilateral development banks,
which is $319 million. Then we have smaller amounts in Public
Law 480, title II, in the African food initiative, in AID operating
expenses, in small supplemental requests, for the International
Atomic Energy Agency of $3.6 million, and the foreign service re-
tirement fund.
Those are relatively small amounts. They are dominated by the
Central America request and the MDB's.
Senator SARBANES. And the military supplemental goes where?
Mr. SCHNEIDER. To Central America.
Senator SARBANES. In what amounts?
Mr. SCHNEIDER. $259 million, of which $178.7 million is for El
Salvador, $7.8 million is for Costa Rica, $37.5 million is for Hondu-
ras, $10 million for Panama, and $25 million for the regional mili-
tary training center.
Senator SARBANES. Which is where?
Mr. SCHNEIDER. Honduras.
Senator SARBANES. What is the appropriation this year for the
regional military training center?
General GAST. There were none specifically for that. That came
from the accounts of the assistance given to El Salvador and Hon-
duras last year.
Senator SARBANES. How much did that amount to?
General GAST. It amounted to around $5 million, I believe, that
has been spent for June to December 1983, primarily from fiscal
year 1983 security assistance funding. But about $149,000 came
from fiscal year 1981 Honduran FMS credit.
Senator SARBANES. $5 million?
General Gast. Yes, sir; for last year.
Senator SARBANES. And you are now seeking $25 million in sup-
plemental?
Mr. SCHNEIDER. Yes.
Senator SARBANES. What is that for, this regional military train-
ing center in Honduras?
General GAST. Due to the interest, the very valid interest, shown
by Congress last year on the various kinds of things that we were
requesting for Central America, and because of the importance of
training outside of El Salvador, we elected to group the funds ac-
cording to what they were. We had in the regional military train-
ing center training for El Salvadorans and Hondurans.
But it has been a very poor arrangement, in the sense that we
have tents out there. Well, it is quite all right for the people being
trained in those conditions, but we need a bit more of a permanent
276
structure in there for the trainers. For example, the tents continue
to rot out, so we need structures which are more permanent.
Right now we are replacing tents only after a couple of classes.
What we are trying to do is put up plain wooden structures with
covers over them and screened sides. We also need a better firing
range and so forth.
For the ease of the Congress in keeping track of the expenditures
associated with RMTC, we decided to wrap it up into one account.
Senator SARBANES. But that would provide us, as it were, with a
permanent training facility in Honduras.
General Gast. Not for us so much as for the El Salvadorans,
Hondurans, or whomever else from the region that might want to
come to train there. It would belong to them. It would not be ours,
but theirs.
Senator SARBANES. Where is that going to be located in Hondu-
ras?
General GAST. Where the current one is located at Puerto Cas-
tillo.
Senator SARBANES. So the training center that is there, it is the
intention now to make it a permanent training facility?
General Gast. To permanentize it in the sense that we need addi-
tional construction on the firing range and so forth. The instruc-
tors there will not be ours. Exclusively. It will not be our equip-
ment; it will be those of the various countries in the region that
might train there.
Senator SARBANES. But I see that you are asking for $25 million
in the supplemental for the purposes of this permanent training fa-
cility.
General Gast. That also would include the cost of its operations,
yes, sir.
Senator SARBANES. And then $20 million in next year's budget, is
that right?
General Gast. Yes, sir. That is for completion of the construction
and the cost of operating it.
Senator SARBANES. You would expect that figure, then, to be an
ongoing procedure in subsequent budgets?
General GAST. We would hope that it would be reduced in the
outyears, as we would for all of the program, if we received our re-
quest for both 1984 and 1985.
Senator SARBANES. As I understand it, it is to become a perma-
nent training facility at about the level of $20 million or $25 mil-
lion a year, is that correct?
General GAST. Yes, sir; it will be a permanent facility, but we
expect to have only operational and maintenance costs in future
years. A lot of that would be costs associated with training and
equipping the people that are trained there as well.
The CHAIRMAN (presiding). Thank you very much, Senator Sar-
banes. I appreciate your stepping in, but inasmuch as the floor may
call me back-my amendment is being debated there right now-I
will proceed as quickly as I can.
Senator Kassebaum had wanted to be here at this hearing to ask
you her questions directly, but she is not able to appear, and we
will submit those to you for the record and keep the record open
for your responses.
277
Secretary Schneider, I have seen reports that the administration
may provide emergency military aid to El Salvador within the next
few weeks. Is this so? If so, how much, and what authority is being
used to provide such assistance?
Are you concerned that it may have some adverse effect, if the
amounts are substantial, on the deliberations and approval that we
get from this committee for a delicately balanced package?
Mr. SCHNEIDER. Mr. Chairman, we are monitoring the situation
in El Salvador. You may recall that when the continuing resolution
was passed last November, there was an expectation that the Kis-
singer Commission report would be made in January and a supple-
mental request would be submitted soon thereafter, which is what
has been done.
But it appears that congressional action will be delayed, probably
until July or August, on the supplemental. Unfortunately, the con-
tinuing resolution provided only about 50 percent of our fiscal year
1984 request, on the reasonable expectation that there would be a
fiscal year 1984 supplemental.
Because the supplemental will be long delayed in terms of con-
gressional action, it creates a potential problem of the supply of
combat consumables in El Salvador. We are monitoring the situa-
tion, but no decision has been made about whether funding should
be requested, and if so what vehicles should be used to make such a
request.
Existing law does have authority in it for emergency use under
some circumstances, and those are at least legally feasible routes
for providing funding, but they are not the only means, and we are
looking into the entire situation, trying to establish what the re-
quirement is, when it would emerge. And all of this would be done,
if it is done at all, in the context of full consultation with the Con-
gress.
The CHAIRMAN. Inasmuch as no decision has been made, could
we have your assurance, as you approach the time that a decision
may be made, that there could be consultation with this committee
so that we could advise you of the consequences it may have here
on an ongoing very important program?
Mr. SCHNEIDER. Yes, you can be sure we will have full consulta-
tion.
The CHAIRMAN. We appreciate that very much.
General Gast, I wonder if you could give us the military situation
and what may warrant or justify such emergency military assist-
ance that exists right now.
General Gast. Yes, Mr. Chairman. The problem that we have
today in El Salvador is one of countering the insurgents, which if
anything, are gaining strength, by assisting the El Salvadoran
Armed Forces with a major realinement of command and control.
We are attempting to do this, by bringing leadership in retraining.
This means we must take people out of the field if not out of the
country in order to train them to be more effective.
Obtaining the funds to meet the high costs, the reasonably high
costs of retraining and equipping newly created units, is one of
great concern to us; and with the upcoming elections there is a psy-
chological effect, of course, of being able to demonstrate to the
278
GOES that they will receive ammunition and training in a depend-
able and timely fashion.
As a result of this realignment, restaffing, selection of new com-
manders, and general decentralization of control, the Salvadorans
are making considerable progress in improving their ability to re-
spond. I think this has resulted in increased effectiveness and con-
fidence on their part, although they continue to have setbacks.
The financing that we have been able to provide over the last
year or two has given them a modest capability. The question now,
as a result of the work that they have done, is whether we will be
able, working with Congress and others, to insure these resources
continue.
I think that their test is going to come in the March time period
and immediately afterward. In order to assure the security of the
elections they are going to be forced to divert a lot of their assets.
The CHAIRMAN. Thank you very much.
Mr. McPherson, I do not know of anything that would under-
mine American support faster and erode it for economic assistance
for Central America than the kind of reports that have been
coming out now about waste, duplication, corruption, siphoning off
of funds, and so forth.
We went through a period of remarkable American support,
public support for the Marshall plan. I am sure there was some
waste in the program someplace, but it was for the most quite effi-
ciently and effectively utilized. It was not a matter of headlines day
after day as it was used. It was put to good use.
I trust that the countries of Latin America, particularly El Sal-
vador, will get a strong signal from us that they are really betray-
ing the trust, not only of the American people and their own
people, but the possibility of continuing these programs, unless
they clean up their act and do something about it.
And we have to focus much more attention on it, I am afraid. In
the view of many experts, controls over the U.S. cash transfers in
Central America have been very weak. What is going to be re-
quired of us and the recipient govenments by way of institutions
and trained manpower to insure that the $3.1 billion planned for
economic stabilization in Central America will not be mismanaged,
misused, or diverted?
Mr. McPHERSON. Mr. Chairman, I think those reporters who
have in recent times gone into some of these matters have funda-
mentally misunderstood the situation. For many years, the U.S.
Government has provided balance of payments support to countries
such as Israel, Jamaica, Liberia, and many others. For some 15
countries right now, in fact, we provide balance of payments of one
type or another.
What the reports have suggested is that when you have a bal-
ance of payments program you should know precisely what goods
the moneys that you provide to a country purchase. It would be as
if we would suggest that the IMF in their structural readjustment
programs—when they supply moneys for such an effort-would
know exactly where those moneys go.
It really astonished me, frankly, that various people, some of
whom are reasonably sophisticated, tried to characterize this as a
situation of not knowing where the money goes. It is just the
279
nature of the tool—the balance of payments program-not to at-
tempt to require a precise record of what is purchased. To do so
would move in the direction of a projectized or commodity pur-
chase effort, and that would make the money much more slowly
disbursing
Frankly, it almost seems as if those who first got involved in
looking at this situation wished almost to find problems. I think in
the last 2 weeks, however, that we have broadly persuaded people
that to do as was first suggested would be to eliminate a very im-
portant tool of U.S. foreign policy and economic development. It
would be almost as if we were going to try to limit the type of ap-
proach used by the IMF altogether.
Now, having said that, there obviously in an ongoing effort to
strengthen these programs in the countries where we have them.
We need to make sure, for example, that the price-checking unit in
the El Salvador Central Bank is a strong one. The bank there
asked the Arthur Young firm-and we paid for it-to make a study
of how to strengthen that bank. Their recommendations are to do
several things and the bank is in the process of doing them. We are
working with them and we think that needs to be completed.
We will address some of the concerns, some of the really legiti-
mate concerns involved here. Other reports have been done on pro-
grams in Honduras, Costa Rica, and so forth. In every case, the re-
ports were provided by the Inspector General of AID at the request
of the mission and the government; it included going in and look-
ing at programs and making recommendations. We then follow up
on those recommendations and close them upon completion.
In short, I believe that this program is largely one that is doing
what it is supposed to, but there is always room for improvement
and strengthening and we are doing that accordingly.
The CHAIRMAN. Thank you.
Secretary Kirk, the administration wants to increase conces-
sional military assistance at a time when it proposes reductions for
programs such as the U.N. Development Program and the U.N.
Children's Fund and the World Bank. Why are those programs pro-
posed for a reduction?
Mr. KIRK. Our requests for those programs, Senator, are largely
the same as our request for those programs last year, albeit a re-
duction from the amount that was appropriated for them for this
year. It is our feeling that the amounts we have requested, given
our overall problems of need for fiscal and budgetary restraint, are
sufficient to enable us to maintain a position of leadership in those
organizations and in the multinational field.
We feel that our requests, in a very tight budgetary and fiscal
situation, are sufficient to do the minimum that needs to be done
by those organizations.
The CHAIRMAN. Mr. McPherson, you mentioned your strong sup-
port for the private voluntary organizations and the channeling of
funds through them for the most effective expenditure of those
funds. Could you discuss the measures which have been taken by
AID to implement the Pell-Percy amendment requiring a minimum
of 12 percent and a target of 16-percent, of AID's budget to be
channeled through PVO's?
280
Mr. McPHERSON. In fiscal year 1983, Mr. Chairman, we have pro-
vided some 13 percent of our assistance through PVO's. In fiscal
year 1984, it will be some 14 percent. In fiscal year 1985 we project
roughly 14.3 percent. We continue to work at this and, among
other things, we are exploring the possibility of broadening the use
of PVO's in the family planning area.
When you take away the loan money, and of course you do not
make any loans through PVO's, you have some 18 percent of the
grant money that is, in fact, going through PVO's. That is not what
the amendment refers to, so I am not suggesting that we have
reached the 16-percent goal of the statute. But, pursuant to your
wishes and the law, we continue to work at this.
The CHAIRMAN. Secretary Schneider, the Greek Government be-
lieves that the administration promised them concessional military
aid as a part of the base agreement. Let me just read from the U.S.
letter associated with the agreement, which states that it is the in-
tention of the United States "to make available such financing on
terms particularly favorable to Greece."
What is your interpretation of that promise that we have made
to Greece?
Mr. SCHNEIDER. The promise that we made to Greece was to pro-
vide the most favorable terms that were made available to other
security assistance recipients, but not those that were offered to
the poorer countries. What we have provided in the increase in the
security assistance program for Greece, which went from $280 mil-
lion to $500 million annually, is that.
We offered the terms extended on a basis of 10 and 20. That is, a
10-year grace period with 20 years to repay. That is the most favor-
able credit term that we offer apart from those that are offered on
purely economic criteria to poor countries.
The CHAIRMAN. General Gast, I wonder if you could assess for us
the strategic importance of Greece and of Turkey to the NATO alli-
ance and to U.S. interests in the Middle East.
General Gast. I would like to address each independently, be-
cause I think one should look at it independently. Of course, the
importance of each of them is in the strategic location, on the
southern flank of NATO. We have important strategic interests,
not only in shoring up that particular region against a Soviet
threat, but also in maintaining the security of our sea lines of com-
munication in the Mediterranean, for just to the south lies that
vast land mass, with its people and resources that are critical to
our national interests. Much of their resources must come through
the Mediterranean to reach us.
In looking at the situation in Greece, we have acknowledged in
the context of our recently concluded base rights agreement that
there is considerable modernization required. We look upon them
to carry out their role in the southern flank of NATO through the
acquisition of modern aircraft for their air force and improvements
in their navy as well as their army.
The Greeks are now considering the purchase of tanks for their
army. They are looking at their navy to see what they might do to
upgrade them, and they are making some progress, but as of yet
have not made a determination, as you know, as to the type and
281
number of aircraft they wish to procure, and how many, if any,
from the United States.
We feel that the level of $500 million plus whatever national
funds that they might wish to contribute themselves is certainly
well justified for defense of their northern border and for partici-
pating in the NATO arena. They are a country that has mountain-
ous terrain and a good bit is required to defend from the north.
When one looks at Turkey, one sees similarities in the sense that
Turkey has a very important role in NATO. There are some 1,500
miles from its far eastern border with the Soviet Union right on up
through Bulgaria, if one includes the Black Sea, which of course is
accessible to the Soviet Union. And of course there are extensive
mileages on its south where it has not too friendly neighbors today,
but where it has reached an accommodation, at least for the time
being.
We looked upon Turkey's location not only from the NATO
aspect, but, if one looks at the map, as a potential land passage for
a Soviet thrust toward the Persian Gulf or the Arabian Gulf. De-
pending upon your approach to things, Turkey could play an im-
portant role as a deterrent to such action or as a blocking force
should deterrence fail.
No one can speak for Turkey as to what they might do in that
regard, but obviously a strong Turkey serves not only our interest
as a deterrent in NATO, but also as a deterrent against any mis-
chief or adventurism that the Soviets might be contemplating in
the Persian Gulf.
Neither the size nor the terrain of either of the countries can
really be compared, nor can their mission, except to say that both
of them are very important to us, and both are very important to
NATO. We believe that the funds that are in the legislation before
you and the need for those funds are well justified.
The CHAIRMAN. Thank you very much.
I am very pleased that Senator Helms is here and can stay on.
That would enable me to complete my questions and go back to the
Senator floor to work on my amendment. You can concisely answer
these and we will leave the record open for you to expand upon
any points that you would like to.
With respect to the Middle East, Mr. McPherson, could you com-
ment on Egypt's request for cash grant economic aid? Is it feasible
to earmark a portion of economic aid to Egypt for a targeted cash
grant in which the Egyptian Government would agree in advance
to use the U.S. dollars for particular development purposes?
Mr. McPHERSON. We have before Congress a reprograming re-
quest, a deobligation/reobligation request, for some $103 million.
That came largely because of the political relationship between
Egypt and the United States and stems from a visit by President
Mubarak here several months ago. In this case, it might be feasible
to agree to a general area or a general type of activity that the
money might be used for.
Several committees of Congress, including this one, have ex-
pressed some concerns. I would like to emphasize that the $103 mil-
lion reprograming-reobligation, to use the technical term-is not
being requested because of economic reforms that the Egyptians
34-045 0484—19
282
had undertaken but, rather, because of the political relationship
between our two countries, stemming from Camp David.
Now, as to a portion of the fiscal year 1985 funds becoming a
kind of cash transfer, we would really be against that because we
think that, to the extent possible, we need to have economic reform
in Egypt. During the 3 years that I have had this job, I have seen a
marked change in attitude by the Egyptian leadership as to the im-
portance of economic reform. And, the first small steps have been
taken, but no really large economic reforms have yet been under-
taken. We have argued from the beginning with Egypt that, if
those programs seriously begin, then we could begin to move into
faster disbursing types of assistance.
I think, however, that your question is largely directed at the
$103 million proposal before Congress at this time. In this case, it
might well be possible to structure it so that we essentially knew
what the money was going to be going for, but the assistance re-
mained in the form of cash. We are anxious to work with the Con-
gress and with the Egyptian Government to do something of
mutual satisfaction.
The CHAIRMAN. Thank you.
General Gast, could you concisely give us what you believe to be
the U.S. naval bombardment/security assistance role in Lebanon
today, given the rapid change in the political situation?
General Gast. Mr. Chairman, I will really have to plead igno-
rance on that. I am not updated on that particular aspect, and I
would like to provide that for the record if I may. I do not see a
relationship between security assistance and what we have provid-
ed, and I am just unable to comment on that. I regret that very
much.
The CHAIRMAN. What I am trying better to understand, since we
just pulled out our own forces there, the justification of yesterday's
naval bombardment in Lebanon.
General Gast. I am sorry, I cannot answer that.
Mr. SCHNEIDER. I am sorry, Mr. Chairman. I do not have any-
thing to add to that. We will get an answer for you during the day.
I will call you with it if necessary.
The CHAIRMAN. I would appreciate it.
The material referred to follows:)
JUSTIFICATION FOR U.S. NAVAL BOMBARDMENT
As the President has made clear, the United States continues to be a member of
the Multinational Force in Lebanon. Even though the redeployments announced by
the President on February 7 have been completed, various U.S. personnel remain in
the Beirut area and on ships offshore. They need to be protected.
U.S. reconnaissance flights assist in ensuring the safety of these personnel, as
well as that of our naval units stationed off Lebanon. These flights have been fired
on in recent days. Moreover, long-range artillery shelling of Beirut from Syrian-con-
trolled areas of Lebanon obviously endangers those U.S. personnel who live and are
stationed in various parts of the city, as well as our diplomatic facilities, whether or
not they are the specific targets of an attack. Our Ambassador's residence has been
shelled and taken direct hits.
The President's directive authorizes the commander in the area to make an in-
formed judgment as to when responsive fire is necessary to meet these threats. We
believe this is consistent with Congress' intent and essential to ensure the welfare of
our people in Beirut.
283
The CHAIRMAN. Mr. McPherson, let me go back to the subject of
development programs just once more. The administration has not
specifically identified the recipients of its economic policy initia-
tives for Africa. We have discussed that somewhat. What will be
the criteria for countries receiving this aid and how will this pro-
gram be used to complement short-term efforts to stop starvation
in Africa?
Mr. McPHERSON. The starvation in Africa today has as its imme-
diate cause the drought. But it is noteworthy that those countries
which have pursued weak economic policies are perhaps particular-
ly vulnerable to the drought. So, you cannot really look at the
short term without realizing that there is also a long-term need.
Fundamentally, what is involved is that countries need to allow
their farmers to get market rates, or at least near-market rates, for
the goods they produce. So what this economic initiative does--and
frankly, I think it is especially exciting, and it is being well re-
ceived by our allies, the other donors, the World Bank, et cetera-
is to say we will give money programed or not in various ways, to
countries that make major policy changes, at least primarily in ag-
riculture. Policy problems will probably focus around two areas:
Prices paid to farmers and government marketing boards that mo-
nopolize and smother farm production and marketing.
We do not have a set criteria, just because the situation is not
such that you can really decide that criteria carefully in advance.
But, we expect to consult with Congress as the program goes for-
ward.
The CHAIRMAN. We have a vote on the floor. We are just going to
try to figure out in what order we will go over to vote.
[Pause.]
The CHAIRMAN. Senator Helms will go over to cast his vote, and
by the time he returns I will be finished here. So this way we will
not lose any of your time. Thank you very much. Senator Helms.
Secretary Schneider, on arms transfer policy, the President's
1981 conventional arms transfer policy states that we will not en-
courage allied and friendly nations “to assume burdens for which
their economies are ill prepared.” What we are finding, however, is
that military debt is becoming an increasing problem for our allies,
and we all know that. We are all deeply concerned about the grow-
ing size of that debt. Part of the problem is that advanced fighter
aircraft is very expensive and often has a greater capacity than
friendly countries need
What is in mind? How do you assess the future of the FX, the F-
20, and the F-16/79?
Mr. SCHNEIDER. Mr. Chairman, the first part of your question,
about the impact of military debt, this is indeed something we are
very concerned with as well, and it was this concern that animated
the budget proposals that we have made to you this year.
The Department of State did an internal study of trying to get a
good understanding of the current shape of the foreign debt prob-
lem in the countries with whom we have a security assistance rela-
tionship. The short summary of that effort showed that there are
only two countries for whom military debt is a predominant compo-
nent of their international debt, that is, Israel and Egypt.
284
There are other countries that have very serious debt problems,
in some cases overwhelming debt problems, but it is not the conse-
quence to a major extent of their military debt. Nevertheless, we
are concerned about even adding in small ways to the debt burden,
and this is why we have gone, or at least in part why we have
gone, to this proposal of moving the off-budget loans on-budget, so
that we could provide some concessional assistance.
With respect to the fighter aircraft policy, in the first instance
we have a policy of offering for sale abroad U.S. military equip-
ment that supports U.S. foreign policy. These sales are made not
for commercial purposes, although if we were doing so for commer-
cial purposes our sales could be much greater than is currently the
case.
We have policies in the world that are directed to supplying
friendly countries with the aircraft that is appropriate to their
ability to absorb it, their economic ability to cope not only with the
acquisition of it but the operating cost as well, and to be compati-
ble with the threat in the region. And the sales of the advanced
aircraft that we have made to date I think reflect that policy.
The CHAIRMAN. Secretary Schneider, we were debating over on
the floor a little earlier the perceived problems that we have in the
Philippines now. Do you think that the U.S. aid program to the
Philippines is perceived as U.S. support for President Marcos,
rather than the Philippine people?
What should be done to encourage President Marcos to ensure
that the upcoming elections are actually or are at least perceived
to be free, fair, and open?
Mr. SCHNEIDER. In the first instance, our assistance program to
the Philippines is mainly tied to a matter of crucial national im-
portance to us, namely access to the facilities in the Philippines for
our armed forces, Subic Bay and Clark Field. These are principally
what has animated our assistance program to the Philippines.
We provide a variety of types of assistance, including economic
assistance as well as assistance to the Philippine armed forces. We
think that the longstanding association we have had with the Phil-
ippines and our encouragement of the diplomatic processes, and
indeed our participation in efforts to achieve that end, are well un-
derstood by the Philippine people, and we expect this perception to
be continued.
The CHAIRMAN. I will have to recess this hearing for just a few
minutes, until Senator Helms returns.
Senator SABARNES. Mr. Chairman, may I ask a couple of ques-
tions?
The CHAIRMAN. Have you voted already?
Senator SARBANES. No.
The CHAIRMAN. Why do you not go right ahead, then, and vote?
Senator Helms is coming right back. I have to go and protect my
side of the floor on Dixon's and my amendment right now.
Thank you very much. I will submit the balance of my questions
to you for answering in the record. Thank you.
Senator SARBANES (presiding]. Secretary Schneider, would you
agree that once we give a country ESF or MAP, or any assistance,
it is extremely difficult to lower that amount or to eliminate it, be-
cause that is always taken as a signal; and that it is hard to do
285
that related to objective factors, because it is always taken as a
signal of diminishing U.S. friendship or commitment or support?
Would you not say that is generally the perception?
Mr. SCHNEIDER. That is frequently the case, but we can cite cases
in our own budget requests, say for Turkey, where we have dimin-
ished our ESF request over time because of the ability of Turkey to
cope with its economic assistance.
Senator SARBANES. Actually you are asking for an increase there
over what is currently being provided.
Mr. SCHNEIDER. But a decrease from the request that we had
made. That is the benchmark against which the recipient govern-
ments tend to calibrate American foreign policy.
Senator SARBANES. Recognizing that, I am looking here at Dji-
bouti. You went from $3 million to $3.5 million in ESF. What is the
rationale for that?
Mr. SCHNEIDER. First, we have a security interest in Djibouti
owing to its location on the Red Sea and as a consequence astride
an important sea line of communication.
Second, the economic circumstances that Djibouti faced in the
past couple of years owing to the worldwide recession has made it
desirable, in order to support our security assistance there, that we
provide a modest increase in assistance to their local economy.
Senator SARBANES. So we have just ratcheted in another million
for them, half a million in ESF and half a million in MAP right?
Mr. SCHNEIDER. Yes.
Senator SARBANES. What about Niger? You are taking them from
$5 million to $7 million in ESF and $2 million to $5 million on
MAP. So we are ratcheting another $5 million for Niger, is that
right?
Mr. SCHNEIDER. The autopilot analogy that you seem to be using,
as you call it the ratcheting in, I think tends to overlook the securi-
ty interest that has arisen in this area. As you recall, last year the
Libyan forces invaded Chad and have posed a direct threat to
neighboring countries.
Rather than face the circumstance that we faced in Chad, with
the subsequent military and political turmoil associated with the
Libyan invasion, the prospects of a modest amount of economic and
military assistance that we have proposed providing in fiscal year
1985 may tend to suppress that.
Senator SARBANES. What about the $2 million, then, that the
Seychelles are getting?
Mr. SCHNEIDER. In the case of the Seychelles, there are a couple
of issues there. First, it is an area where the Soviets have shown
considerable interest and in fact have deployed naval vessels from
time to time.
Second, we have the benefit of a potentially useful relationship
with the government in power there. The possibility that the Sovi-
ets might exploit opportunities to win a high order of influence
that could be used as a base to link up through the coupling of
maritime, air, and submarine presence in that region of the world
could pose a grave threat to the sea lines of communication from
the Persian Gulf southward through the Indian Ocean to Western
Europe.
286
Senator SARBANES. Do you know how many countries are receiv-
ing ESF?
Mr. SCHNEIDER. I would have to check.
Senator SARBANES. I have to go and vote, and I cannot wait for
you to do the count again, as we did before for the 47 or 48 getting
military. But if you could let us have that for the record, I would
appreciate it.
The material referred to follows:
COUNTRIES RECEIVING ESF
Chad ..
In fiscal year 1985, 37 countries will receive ESF. We also propose to provide ESF
to six regional programs. The attached table lists the countries which will receive
ESF assistance in fiscal year 1985.
Economic Support Fund-fiscal year 1985 (in thousands of dollars)
Region/country
Proposed
Africa:
Botswana
10,000
10,000
Djibouti ...
3,500
Kenya .......
55,000
Liberia.......
45,000
Mauritius....
2,000
Niger
7,000
Senegal.........
15,000
Seychelles ......
2,000
Somalia
35,000
Sudan
120,000
Zaire ......
15,000
Zambia
20,000
Zimbabwe
15,000
Southern Africa regional ....
37,000
Subtotal.....
391,500
Asia:
Pakistan.......
Philippines
Thailand ...
Subtotal ...
200,000
95,000
5,000
300,000
Latin America and Caribbean:
Belize.......
Costa Rica.......
Dominican Republic ......
El Salvador...
Guatemala........
Haiti ......
Honduras..
Jamaica.....
Panama.
Caribbean regional
LAC regional
Central America regional (ROCAP)
4,000
160,000
45,000
210,000
35,000
5,000
75,000
70,000
20,000
20,000
2,000
136,600
Subtotal........
782,600
Near East:
Cyprus..
Egypt..
Israel
Jordan
Lebanon
Morocco..
3,000
750,000
850,000
20,000
20,000
15,000
287
Oman.....
Portugal
Spain
Tunisia .....
Turkey
Middle East regional
20,000
80,000
12,000
3,000
175,000
15,000
Subtotal...
1,963,000
Other: Oceanographic research
1,000
Subtotal.........
1,000
Total ....
3,438,100
Senator SARBANES. I would just close with this observation. I
think you are the closest thing we have in our Government to
Father Christmas. How does it feel being able to sit there and dis-
pense these moneys in military and economic aid and military
grant, concessional or straight terms? There must be well in excess
of 50 countries.
Mr. SCHNEIDER. Actually it is depressing, because Mr. McPherson
in AID is able to dispense assistance to 61 countries and I have
about half that number in the security assistance arena or two-
thirds that number.
The fact is, the United States has worldwide interests, and the
notion of employing various instruments of foreign policy, includ-
ing foreign assistance, to help advance those interests is the reason
why we seek a consensus with the Congress about the level of re-
sources that we should extend.
Senator SARBANES. I understand all that. But the thing I do not
see reflected here is any effort to exercise restraint. I do not see
any judgments being made to move things in some instances up
and in other instances down. They only seem to go in one direction,
and that is up.
You have a 10-percent increase in the overall budget, an 80-per-
cent increase in military grant, a 20-percent increase in ESF, at a
time when we are confronting other budgetary fights in the Con-
gress involving our own people where we are told, well, they
cannot be any increase or in fact there is going to be a cut, or you
are going to get a 2-percent increase and you ought to be thankful
for that. I do not see any of that attitude reflected here.
I will put the committee in recess until Senator Helms returns.
[Recess.]
Senator HELMS [presiding.] The committee will come to order,
such as it is. Hello again, gentlemen. It is good to see you. We will
conclude this hearing as rapidly as possible.
Mr. McPherson, what is the amount called for for Zimbabwe? Is
it $15 million?
Mr. McPHERSON. It is $30 million-$15 million ESF and $15 mil-
lion DA.
Senator HELMS. It is $15 million for ESF.
Mr. McPHERSON. Yes, sir.
Senator HELMS. I believe it was $40 million in 1984.
Mr. McPHERSON. That is correct.
Senator HELMS. What was it in 1983?
Mr. McPHERSON. $75 million.
288
Senator HELMS. $75 million?
Mr. McPHERSON. You will remember that we asked Congress for
$75 million in 1984. Congress gave us something less than the total
budget we had requested, and Zimbabwe was an adjustment to that
budget. There were a number of factors, as you recall from various
accounts, that entered into the consideration of that adjustment.
Senator HELMS. Now our Ambassador, Mr. Keely, according to
information provided me by staff, was quoted in the African press
not long ago to the effect that the recent cuts in aid to Zimbabwe
were not the result of any dissatisfaction with the situation in Zim-
babwe but, as he put it, were due entirely to fiscal restraints in the
United States. I think I am quoting him exactly.
In all seriousness, Mr. McPherson, are we satisfied with the situ-
ation in Zimbabwe?
Mr. McPHERSON. In terms of the level of assistance, I believe the
Secretary of State has commented that we have an overall relation-
ship with the Zimbabwe Government and, in that relationship, we
have had concerns about votes at the United Nations and other
fora, and those were taken into consideration as we moved forward
in our relationship.
I do not remember exactly what the Ambassador said, but I do
recall that the Secretary of State made comments along the lines
that I just reviewed. There are both some positive things and some
things that we are interested in improving in Zimbabwe.
Some things are positive in the sense that, for example, elemen-
tary education is doubling almost every year and agricultural pro-
duction is being worked on in a number of ways. In some ways ag-
ricultural policies, the types of price policies that I was talking
about earlier, are better in Zimbabwe than thay are in a number of
other countries.
But we are concerned about some other matters as well. We have
some concern about human rights. We have concerns about the
democratic process. These are issues that we talk about with the
Zimbabwe Government, and as does the British Government, I
might add.
Senator HELMS. Let us pinpoint things a little bit there. There
are at least four prominent political leaders in Zimbabwe in addi-
tion to Mugabe. Mr. Mugabe has declared that he wants a one-
party state. Are we satisfied with that?
Mr. McPHERSON. We think that a pluralistic political system is
the route the government should pursue.
Senator HELMS. Now one of the four, Mr. Nkomo, was forced into
exile at a time when thousands of his people were being killed by
Mugabe's security forces. I am surely not satisfied about that.
Mr. Sithole is now in exile in London, unless he has gone home
in the last 24 hours. He has not gone home because he knows what
will happen when he gets home. And Mr. Smith, who was here in
Washington about 1 year ago was harassed and searched and
placed under house arrest when he returned.
A very fine gentleman whom I know personally-a Methodist
bishop who was converted to Christianity by a lady who is now re-
tired in North Carolina and who was taught English by this lady,
former Prime Minister Muzorewa, has been under arrest without
charges for months.
289
Now in all seriousness do these actions by the Mugabe govern-
ment fall into line in the spirit of the Lancaster House Agree-
ments?
Mr. McPHERSON. I think it is important for me, as a non-State
Department person, not to get too far into commenting upon some
of these issues. But, just let me say again that we see some positive
things in Zimbabwe. I mentioned some of them.
We see some roles in Zimbabwe in terms of the whole southern
African political situation. At the same time, we clearly have some
concerns and I know we continue to pursue those concerns, and
you certainly have put your finger on a number of issues that
America should and must be concerned about.
Senator HELMS. The point is this—and I do not mean to cut you
off-Mugabe is an acknowledged Marxist. Now I have been sitting
here trying to imagine what the reaction of the U.S. press and
radio, and television would be if these conditions were to exist in
an anti-Communist country-for example, El Salvador.
I could just see the headlines in the New York Times and the
Washington Post and all the rest, and CBS would be crying croco-
dile tears and so forth, but nobody is worried about these guys. I
think it is a fair question to ask why we are sending any money at
all over there until they get their act straight.
I probably feel personally about it because I know Muzorewa,
and I think he was treated unconscionably by this government. He
was elected and look what happened to him.
Let me move now to our own hemisphere. In the report of the
Kissinger Commission the theme of the private sector development
is repeatedly invoked, and this theme has been rather constant in
the rhetoric of the administration. I want to address its role in AID
programs in Central America.
According to information available to me in country after coun-
try, Central America AID officers, including those responsible for
economic development in the private sector, profess profound unfa-
miliarity with economists who espouse the free market approach to
development.
I read a report the other day that indicated that many of the
AID people will say they never even heard of Milton Friedman.
Some of them say they have read about him, but they never read
any of his works nor are they familiar with the works of Peter
Bauer, Melvin Krauss, Michael Novak, who was right here before
this committee not long ago, nor George Gilder.
Without being adversarial, how do you go about teaching your
people about the spirit of the free market system that the Presi-
dent of the United States is identified with?
Mr. McPHERSON. Mr. Chairman, my people in Washington and
the field, I suppose, are not so much economic philosophers as they
are practical practitioner types. And I believe, as we work through
our programs, that the concepts of many of those men that you
have just mentioned are in fact in practice.
I happened to have Peter Bauer in to talk to my senior staff a
few months ago to make sure, in that case, that they were exposed
to some of Dr. Bauer's thinking. But I would point to the private
enterprise policy papers-actually there have been two of them-
290
that have been drawn up by AID in the last couple of years and
distributed as guidelines, as policies for our program to follow.
I think that we just recently are in the final process of going
through putting together our regional strategy paper for each part
of the world, including Latin America, and that policy paper for
Central America rests very substantially upon private enterprise.
I think it is fair to say that AID provided much of the analysis
and the backup for the economic side of the Kissinger Commission
report and, as you have just suggested, our thoughts and ideas are
reflected there, where again and again they talk about private en-
terprise. We think that this emphasis in the Caribbean Basin Initi-
ative (CBI) essentially means you satisfy basic human needs by
giving people an opportunity for income, by providing jobs, real
jobs, as a critical component of progress in Central America.
A substantial portion of the money going to the Central America
Initiative, in fact, will go for balance of payments, which will be
used for imports for businesses, whether it be fertilizer, machinery
parts, or whatever. I think, Senator, that in fact our efforts in Hon-
duras, Costa Rica, and El Salvador have a very, very private sector
orientation to them.
Take Honduras. Now, we say to Honduras they have to reform
their exchange rate before we can disburse. They have to come to
an agreement, more or less, with the IMF before we can disburse
the remainder of our 1983 moneys. That exchange rate is a critical
component of exports and growth.
I honestly think, Senator, that your staff—which I know has
been very interested in this is not fully informed about the in-
depth private sector orientation in which our programs are operat-
ing. My people may not always use exactly the right terms, but the
substance of those programs is that we have to export, and exports
are done by the private sector.
We also have to pay farmers more. As a result, market prices,
market forces, will bring about economic growth in Central Amer-
ica.
Senator HELMS. Now you are saying that, Mr. McPherson, but
what do your people on the ground say? Do they ever do any mis-
sionary work about the land reform program? I know that this
Government is thrusting upon El Salvador a so-called land reform
program that if it were implemented in North Carolina, Texas, or
Virginia or any other State, blood would run in the streets in those
States as well.
I know jolly well in eastern North Carolina if you start taking
one man's land and giving it to somebody else you will have vio-
lence. Now maybe my staff assistance has not been up to par, as
you suggest it has not, but the best way to prove that a stick is
crooked is to lay a straight one beside it.
I would just like for you to tell me what your people are doing as
missionaries for the free enterprise system which Ronald Reagan
represents and which he was elected on.
Mr. McPHERSON. Well, we can talk about the region as a whole
and, as I was suggesting a moment ago, the thrust of what we are
trying to do is to create private enterprise jobs. That is the center-
piece of our proposal for economic growth in Central America.
291
We suggest that there are 250,000 new jobs that are necessary
every year in Central America, and there is no way to get those
but by utilizing programs such as the CBI and getting jobs going.
You have to have exchange rate reform and you have to make a
number of other moves which will at least make exporting neutral
and not impose a tax on it.
If you talk to my mission directors one by one in Honduras,
Costa Rica and so forth, I know that you will find that that is what
they believe. Curt Winsor, a man known to you, for example, the
Ambassador to Costa Rica, was in to see me yesterday, telling me
what an outstanding mission director we had there, that he was
promoting private enterprise and how strongly he felt about it.
And your people might want to talk to Curt, because I know he
is a man known to you.
Let us talk about land reform in El Salvador. I have seen land
reform-and I realize that we have not always seen it in exactly
the same way, and I certainly respect that view—but we have seen
land reform as a means, as a fundamental tool, to combat the in-
surgent movement in El Salvador. And, in fact it has been a very
critical tool for addressing some 500,000 people and 20 percent of
the land, and it has effectively worked for that purpose.
Now I would ask you, Senator, to think carefully about what I
am now arguing. I would suggest that land reform has come along
far enough so that it is time to look at some efforts to strengthen
it. At first, in some ways, it was almost a political movement or
force, but, as I suggested to the President of El Salvador a few
months ago and as we are continuing to discuss with the El Sal-
vador Government-there are some things that need to be looked
at.
I think that over a period of time you have to be able to sell
land. The peasant has to be able to sell land to another peasant
without holding it for 30 years, as the current rule would require. I
would suggest that the cooperatives need to have title to their land,
instead of being effectively owned by the government. And, when
cooperatives begin to be owned by the peasants, history shows that
there begins to be all kinds of things that happen, there is much
more of a private sector kind of structure. Right now if a peasant
dies who holds title III land, it can be inherited by his heirs; but,
sale of the land cannot take place until the mortgage is paid off.
Senator HELMS. It is a farce.
Mr. McPHERSON. Senator, I do not think it is a farce. I think the
central theme of changing the social and economic structure of El
Salvador has been substantially achieved and these improvements,
these strengthenings, are necessary and I believe the El Salvador
Government will move toward them.
I think what we want to do is strengthen a structure that has
been very important in the history of that country, and very impor-
tant, Senator, as a deterrent against the insurgents. I would sug-
gest that if we had not had land reform that we would be in much
deeper trouble.
The land reform, almost more than anything we have done in El
Salvador, has been the spokesman for an American foreign policy
that is perceived as truly wanting reform, in the minds of the El
292
Salvadoran people. I think that that has been a very important
purpose.
Senator HELMS. Well, you are doing the best you can with what
you have in terms of your argument. Almost thou persuades me,
but not quite..
Aside from that, let us look at the arithmetic of it. Is agriculture
production up or down in El Salvador?
Mr. McPHERSON. Are you talking about in the land reform
areas?
Senator HELMS. Yes. Is it down, is it not?
Mr. McPHERSON. It is down, but it is down in all areas. It is down
in both land reform areas and other areas. It is down because,
frankly, there is a lot of combat, particularly in the East. Whole
areas of the East are not being cultivated.
There is a suggestion—the Checci consulting firm's report, which
has been thought to have done a good job by a lot of people that
production, except for cotton and in some places sugar, on an acre-
by-acre basis where cultivation was taking place under title I land,
it was a bit higher than it was pre-reform.
Now I am not going to try to say that that is absolutely the case,
but I think that production has not fallen, that it has more or less
stayed stable-unlike, for example, in Bolivia in the 1950's, where
there was a land reform and a massive fall in production.
In this case, we went in with credit and agricultural extension
help that has improved production so that it has been better than
what the historical precedent was. I think, Senator, that you and I
would basically see things in a similar fashion.
We need to take advantage of individual initiative, individual
motivation, to strengthen agricultural production. I grew up on a
farm. I know what it means to own your own land and be able to
obtain gains by working hard and I also know that we have not yet
fully released, under the current structure in El Salvador, the
forces of motivation.
Senator HELMS. What if your father had died and somebody had
taken away your land and given it to somebody down the road?
Mr. McPHERSON. Oh, my people hold their land dear; there is no
question.
Senator HELMS. The nationalization of the export system, is that
good? Is that what we want to advocate? Is that what AID thinks is
a good thing to sell in terms of the free enterprise system?
Mr. McPHERSON. Senator, the expropriation of the coffee market-
ing board and the banking system were done before we got there.
Senator HELMS. I understand that.
Mr. McPHERSON. We have never endorsed that.
Senator HELMS. OK.
Mr. McPHERSON. We have never endorsed that. In fact, Senator,
earlier you perhaps heard me comment on the Africa policy initia-
tive, and I said that one of the principal things we need to do in
Africa is help these countries dismantle their State marketing sys-
tems.
I think, Senator, that probably the key change that I have made
in AID since I have been here is to say that the policies, programs
and budgets of recipient countries are more important than the
293
level of assistance. That is what Krauss argues, for example. That
is what a lot of people argue.
The facts are that we are putting emphasis upon policy changes
in these countries as has never been done before at AID. You will
not agree with everything we have done, but I would like very
much an opportunity to talk to you country-by-country.
For example, we think Tanzania is a good country and that they
play an important role in that part of the world; but the facts are
that they are not making the policy changes we feel are necessary
and, therefore, see a very modest program in Tanzania.
Senator HELMS. All right. We have been up and down this road
personally and privately a number of times.
Mr. MCPHERSON. I would like to do it again, Senator, because I
think I have a good picture to show you.
Senator HELMS. Well, I think you perceive the point that I am
trying to make, which is now we have talked about the confiscation
of land and that is what it is. We have talked about the national-
ization of the exports, and you say well, we have not had anything
to do with that. We have talked about the nationalization of banks.
Do you think the sitting President of the United States favors
this kind of governmental action as a matter of philosophy?
Mr. McPHERSON. I think the President of the United States
thinks that it is very important to stop the foreign-armed insurgen-
cy in El Salvador, and I think that he sees land reform as an im-
portant tool in that effort. Now I am sure that if he had the oppor-
tunity and the time to look at it carefully in the depth that I know
you have that he would have some concerns.
Senator HELMS. Precisely the point I was going to make.
Mr. McPHERSON. He would have concerns about being able to
sell land, land inherited by your children. He would have concerns
of a nature that I was expressing to you earlier and that I, in fact,
have expressed to the President of El Salvador.
Senator HELMS. Now here is the point I was going to make, Pete.
How can we expect a President, any President-Democrat or Re-
publican-to make a responsible judgment if the people on the
ground doling out the money do not say to the President look, here
is what is going on and this is, in the case of Ronald Reagan, for-
eign to everything that you have ever stood for.
And my understanding is-and correct me if I am wrong-that
there has never been one scintilla of a suggestion by any of your
people through you or by you in that regard.
Now, of course, if he gets the pablum that we believe in this and
we believe in that and land reform is working—which it isn't
then those ships pass in the night because he has 10,000 things to
worry about. But what I am asking you is do you not feel some re-
sponsibility to have a fire drill among your people and say look,
this is the policy of the President of the United States and we
ought to adhere to it in our advocacy, both there and here?
You do not feel any obligation in that regard?
Mr. McPHERSON. Senator, you know I do. You know that, in fact,
what I am really saying is that I think the President's program
and policy in El Salvador is to prevent and work against the insur-
gency that has formed, and I think-and I believe a lot of people
think-that land reform has been an important part of that.
294
Now the question is how do we strengthen land reform. I do not
mean turn it upside down; I mean strengthen it so as to take ad-
vantage of the motivation that every man and woman has when
they can gain something of their own.
As I suggest, that is the kind of thing that I have talked to the
President of El Salvador about, and I think if you had been sitting
in that room when I argued the case about how we have to look at
how long a peasant should hold land before he can sell or mortgage
it, et cetera, you would believe what I am saying now, and what I
did say then.
I think, in short, that the policy of the President of the United
States, as I best can interpret it and as I understand it-and, as
you know, I was working with the President for 21/2 years before he
was elected-I believe that he would be comfortable with what we
are doing.
Incidentally, Senator, there is a key component in this land
reform program--and this is probably not the time and place to go
into it in depth-that needs to be considered carefully, and that is
the compensation issue.
Now, frankly, I do not think that before compensation legislation
came up here that you were as personally involved in some of
those discussions as you should have been. But I would argue that,
just as you suggest my father would not want his land taken away
without compensation, it is important to figure out what the politi-
cal stability and the equity of the people involved calls for-how to
move in the direction of some kind of compensation.
And I hope that since you have been so deeply interested in this
issue that we can discuss further how we might look at that cur-
rent situation.
Senator HELMS. Do you know what I think the problem is? I
think this is just a flyspeck on the wall in terms of the awareness
of the people in this city, and in terms of the media's understand-
ing of it. We had a witness this morning who was talking about the
enormous amounts of money that were collected by the people
whose land was taken and shipped into Miami and then shipped
back to do thus and so.
Now in the first place this is a very responsible man and I like
him. He is erudite. He is more knowledgeable than most, but he
has this fiction in his mind that there has been an enormous trans-
action when there has been none at all.
Mr. McPHERSON. Do you mean moving money out of El Salvador
to Miami?
Senator HELMS. I am talking about payment for the land. There
has not been any payment.
Mr. McPHERSON. Well, there has been some. It has been very
modest, but there has been some payment for phase III, but it is a
modest part of the total requirement.
Senator HELMs. Now I am not criticizing Bob Strauss. He is a
friend of mine and I like him, but he has that fiction in mind and
he so stated it for the record this morning. I said to him you have
it mixed up, but I did not press him because he has read it some-
where or heard it somewhere and it was coupled in with some
other stuff about El Salvador.
295
Well, I will not keep you here any longer on that subject. Henry
Kissinger was very candid the day he was here about his study of
the economies of the countries of Central America. He said that
the Commission had not taken the time to analyze in any depth
whatsoever the internal structures affecting economic growth in
any of the countries affected by the plan. That is almost a direct
quote.
Has AID taken the time to do this?
Mr. McPHERSON. Senator, we have spent an enormous amount of
time looking at these economies. The Commission had a very senior
economist with a bank in Chicago who did a lot of their work, but
over the last couple of years we have spent a lot of time on it.
We think that these economies can absorb a large foreign aid
program. Such a program is only about 5 percent of GNP for the
period of years covered. There was a much larger program, as a
portion of GNP, for Korea and Taiwan when those programs were
building and working.
We have looked at our pipeline. We have looked at a number of
other issues and think that the way we are structuring-namely
building and anticipating major policy changes-we have to have
those exchange rate changes. We have to have those economies
move toward market economies, and if they do we think that this
foreign aid program can do the job.
Senator HELMS. Now nobody can disagree with what you are
saying in the broad sense. But what I am talking about specifically
is this: Have your people suggested to these governments that they
change their tax structures, for example—these structures that pu-
nitively impose taxes on exports needed for foreign exchange?
Mr. McPHERSON. Absolutely. I think that taxes on exports is one
of the worst things that countries can have and, incidentially, a
bad exchange rate system is in effect a tax on exports.
Senator HELMS. How about having somebody drop me a note and
tell me precisely what are some examples? You know, I may be
way behind you on this.
Mr. McPHERSON. I would like to do that, Senator, and we will do
that. Let me point out probably the best current example. We have
not disbursed all of the ESF to Honduras, a close friend and ally,
for fiscal year 1983, because Honduras has not yet worked out its
arrangement with the IMF and one of the key things they have not
worked out is their exchange rate, which currently is, in effect, a
tax on exports.
Senator HELMS. Yes, and they are artificial and they invite cor-
ruption, bribery, and all that sort of stuff.
Mr. McPHERSON. We would like to get that to you.
What I am saying, of course, Senator, is that this is a real test of
our dedication.
[The information referred to follows:
TAX STRUCTURE IN CENTRAL AMERICA
AID has been successful in encouraging Central American governments to make
several policy reforms in the areas of export taxes and access to foreign exchange.
This policy dialogue is conducted in various ways, ranging from the provision of
technical assistance for actual drafting of new legislation (e.g. the new Export In-
centives Law in Honduras) to conditioning disbursements under our ESF programs
to specific reforms or the successful negotiation of agreements with the IMF. Specif-
296
ic examples of policy reforms which have resulted from this on-going dialogue are as
follows:
HONDURAS
An Export Incentives Law, prepared with the assistance of AID-financed consult-
ants, was recently approved by the Honduran Congress. This law provides for GOH
issuance of a tax certificate for up to 15 percent of the value of non-traditional ex-
ports, which is the approximate amount of indirect taxes paid in the production
process.
In addition to passage of the Export Incentives Law, the GOH has approved the
establishment of a one-stop center for government approvals in order to expedite
private investment and exports. The Ministry of Economy, with short term assist-
ance from AID, has reduced the steps and time needed for approval of investment,
and investment incentives. AID-financed assistance is now being provided on devel-
opment of a new Industrial Incentives Law, which should be ready for GOH review
later this month.
EL SALVADOR
In accordance with its strategy for promoting progressively greater use of the par-
allel foreign exchange market, AID has encouraged the Government of El Salvador
to transfer cotton transactions (the second largest foreign exchange earner) to the
parallel market. For the 1983 cotton crop that has just been harvested for export in
1984, the Central Bank has agreed to permit the liquidation in the parallel market
of $10 million, or 30 percent of the total estimated cotton exports for the year. Based
on recent negotiations, the GOES has agreed to measures which will permit ap-
proximately 50 percent of the 1984/1985 cotton export crop to be liquidated at the
parallel market rate.
The GOES reduced the export/production ratio required of non-traditional pro-
ducers for entry into the parallel market from 25 percent to 10 percent. This ratio
refers to the proportion that the value of a firm's exports to outside the Central
American Common Market bears to the total value of its production in order for the
firm to be allowed to dispose of its export proceeds at the parallel market rate. AID
feels that this reduction of the percentage will help encourage the entrance of more
small businesses into the non-traditional export market and we intend to keep
pressing on this subject as part of our overall strategy for exchange rate unification.
COSTA RICA
Fiscal year 1983 ESF assistance to Costa Rica was conditioned on compliance with
an IMF Standby program, which was successfully concluded on December 19, 1983.
Largely as a result of this approach, and the successful renegotiation of foreign
debt, Costa Rica's multiple exchange rates were unified and the exchange rate stabi-
lized in addition to other improvements in the overall economic outlook.
Disbursement of fiscal year 1984 ESF funds, while also conditioned to a formal
agreement with the IMF for calendar year 1984, will be subject to monthly reports
submitted by the Costa Rican Central Bank on its rationale for adjusting or not ad-
justing the exchange rate, which in the past has served as a de facto export tax.
This requirement will serve to maintain a policy dialogue and to permit AID to
react when it seems indicated.
AID was instrumental in the creation of the Ministry for Export and Investments
and continues to provide it with budgetary support for a number of activities, in-
cluding: the development of an Export Contract (which would simplify and guaranty
adequate ground rules) and the creation of a One Stop Export and Investment Pro-
motion Center.
On January 30, 1984 the Costa Rican Legislative assembly passed a modification
to the existing Free Zone Law, which has been submitted for consideration by the
Ministry of Investment and Exports. The revised legislation both permits designa-
tion of existing industrial installations as free zones and permits establishment of a
free zone area in the meseta central where basic infrastructure is concentrated.
Senator HELMS. All right. I know that you feel that I am badger-
ing you
Mr. McPHERSON. Oh, no. I enjoy it, frankly. It is good to be here.
Senator HELMS. Let me give you a very modest proposal. I will
give you an offer that you cannot refuse, and that is for AID to in-
297
struct its officers on the ground in each Central American country
to do a study of the internal economies there and to submit those
reports to Congress-in our case, it would come to my subcommit-
tee-and have that as a prelude to consideration hereafter on in-
creased amounts of aid.
Mr. McPHERSON. Senator, we are prepared to do that right now,
and we certainly have no problem doing it in the future.
Senator HELMs. All right. Then you have yourself a deal and I
will get off your back.
Mr. McPHERSON. As a matter of fact, I think it is a real mistake
to have a substantial foreign aid program in Central America
unless we insist—and I am not saying by legislation-but unless
the administration insists that those economic policy changes
occur.
I am very afraid that unless we are quite careful we are going to
move into having an economic assistance program for Central
America without requiring those market-oriented changes. And I,
for one, intend to do my best to make sure that the kind of thing
you are talking about occurs in connection with our program.
Senator HELMS. Well, we certainly would not inhibit what you
say you are trying to do, and I am pleased that you would agree.
Now as you know we are scheduling some oversight hearings and
I suppose I will be chairing them later on this month in the second
or third week for the AID package for Central America. A key
target of that package is the AID mission in El Salvador and the
director of that mission is Mr. Martin Degata.
Could I ask your cooperation in arranging for him to appear per-
sonally to testify and help us on this?
Mr. McPHERSON. Of course.
Senator HELMS. Thank you. We will be in touch with you on
that. That is all that I have to say.
Do you have anything else?
Mr. McPHERSON. Nice to be here, Senator.
Senator. HELMS. All right, then, I guess it is time for us all to
sing a hymn and depart. Thank you very much, all of you, for your
patience. We stand adjourned.
[Additional questions and answers follow:]
STATE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR
PERCY
The Administration's requests for several programs in the International Organiza-
tions and Programs account are significantly lower than levels that have been sup-
ported by Congress in recent years.
Question 1. Please explain the reductions requested for the U.N. Development
Program, UNICEF, and the U.N. Environmental Program.
Answer. The Administration's fiscal year 1985 request levels for voluntary contri-
butions to the U.N. Development Program (UNDP), the U.N. Children's Fund
(UNICEF), and the U.N. Environment Program (UNEP) are identical to the fiscal
year 1984 requests. While below the fiscal year 1984 Continuing Resolution funding
level, the fiscal year 1985 request should be sufficient to assure our continued inter-
ests and leadership in UNDP, UNICEF, and UNEP councils. The overall Interna-
tional Organizations and Programs (IO and P) account request reflects our effort to
strike a balance between the need for budgetary restraint in the face of rising defi-
cits and advancement of our interests in these multilateral fora.
Question 2. Do these reductions reflect policy decisions by the Administration
with regard to the merits of these programs?
34-045 0-84-20
298
Answer. The fact that our request levels for UNDP, UNICEF, and UNEP are
below levels appropriated last year does not reflect any dissatisfaction resulting
from evaluations of these programs. We remain staunch supporters of them. Our
belief is as firm as ever that the programs sponsored by these organizations serve
important U.S. political, economic and humanitarian interests in the developing
world. However, we feel the request levels are the most appropriate, given the need
for budgetary restraint in the face of rising deficits.
Question 3. Why is no funding requested for the Food and Agriculture Organiza-
tion/World Food Program?
Answer. Ninety-eight percent of U.S. contributions to UN/FAQ/WFP are made in
terms of commodities, and of money to finance at least 50 percent or more of the
costs of shipping these commodities, which, by law, must be in U.S. bottoms. The
United States additional cash contribution under the IO&P account has been made
to cover a further portion of the shipping costs for United States donated commod-
ities. During the last few years, cash provided by other donors, along with miscella-
neous earnings, have resulted in a relatively favorable WFP cash position. The re-
duced need for United States cash, coupled with the need to control U.S. budgetary
expenditures, led us to decide not to request a cash contribution under the account.
Question 4. Combined with the U.S. notification to withdraw from UNESCO, and
a reduced level of contribution to the next replenishment of the World Bank's Inter-
national Development Association (IDA), do these reductions indicate a general ero-
sion of U.S. support for multilateral programs?
Answer. No. The Administration continues strongly to support multilateral pro-
grams. The overall International Organizations and Programs account request re-
flects our effort to strike a balance between advancement of our interests in these
multilateral fora and the need for budgetary restraint in the face of rising deficits.
Question 5. If Congress approves the fiscal year 1984 supplemental and fiscal year
1985 aid requests in full, El Salvador will have received a total of $1.85 billion since
fiscal 1980. What specific results can you point to, after the infusioin of such large
amounts of U.S. aid?
Answer. The provision of economic and military aid to El Salvador is designed to
shield and nurture the development of a friendly, stable democracy which is not sus-
ceptible to the influence of the Soviet Union or any Soviet surrogate. The military
assistance which we have provided El Salvador over the past three years has provid-
ed a shield for the country's emerging democratic process. Since 1980 we have seen
remarkable political development in El Salvador. This ongoing democratic process,
endorsed by 80 percent of the Salvadoran electorate in the 1982 elections, has seen
the selection of a multi-party Constituent (now Legislative) Assembly, the drafting
of a new Constitution, and impending elections for a constitutional President. Fur-
thermore, U.S. assistance was instrumental in enabling the Salvadorans to turn
back a guerrilla assault intended to prevent the 1982 elections from taking place, an
assault which may be repeated this year. More importantly, our assistance to El
Salvador has thwarted the continuing guerrilla attempt to seize power via armed
revolution and to impose upon the Salvadoran people a government and system not
of their choosing.
American aid also has served to heighten the capabilities and professionalism of
the Salvadoran armed forces. U.S. training and equipment continues to allow the
Salvadoran military to match the capabilities of a sophisticated, and externally
well-supported guerrilla movement. Those Salvadoran troops who have received
U.S. training (perhaps 20 percent of the army's total strength), conduct themselves
in combat with a professionalism and effectiveness unknown three years ago. More-
over, our training, particularly counter-insurgency doctrine and rules of engage-
ment, has been beneficial in improving the conduct of Salvadoran troops, thereby
reducing the incidence of human rights abuses on the part of the military.
Our economic assistance program is intended to reverse the economic decline
caused by the dislocations of internal conflict and external economic conditions, to
realize economic stabilization and, in the longer term, to achieve economic growth.
Economic recovery in El Salvador has been difficult to achieve. Much of our effort
since 1980 has been aimed at ameliorating the economic decline, which has amount-
ed to about a 20-25 percent drop in economic activity during the period. Prelimi-
nary reporting for 1983 suggests that El Salvador experienced a small measure of
economic growth after 4 years of decline. Our balance of payments support in par-
ticular has been vital in helping to maintain essential imports for productive activi-
ties in the face of insurgent destruction of infrastructure, declining private invest-
ment and private capital inflows, and shortage of foreign exchange. It was also in-
strumental in allowing the Salvadorans to reach an agreement with the Interna-
tional Monetary Fund. Both balance of payments and project assistance have helped
299
the Salvadoran government maintain essential public services and deal with the in-
creasingly severe humanitarian problems produced by the continuing conflict. More-
over, without our economic assistance it is doubtful that the Salvadoran government
would have had the capacity to devote resources to maintaining the agrarian reform
program.
Question 6. This year's aid requests include a significant increase in military aid
for Turkey, doubling the concessional component of that aid, and a substantial re-
duction in economic aid to Cyprus. In light of Turkey's sole recognition of the illegal
unilateral declaration of independence by the Turkish Cypriots don't these aid deci-
sions send the wrong signal at the wrong time?
Answer. Our request for Turkey is keyed to that country's security assistance
needs within its NATO role. The terms of the assistance reflect economic realities in
Turkey-a society beginning to work its way back to democracy and economic sol-
vency. The question of “signals” would not seem to arise as both sides have reiterat-
ed their goal of an eventual federal solution.
As for assistance to Cyprus, the Administration is requesting the same amount as
requested last year. We consider $3 million adequate to keep the popular Cyprus
America Scholarship Program thriving. In no way should the relatively modest
amount of assistance for Cyprus be interpreted as an indication of our interest in
promoting diplomatic progress; rather, the level testifies to the robust state of the
Cypriot economy.
Question 7. In recent months there have been published reports concerning the
growing U.S. military presence in Honduras, on a permanent basis-including the
stationing of several hundred U.S. military personnel, the construction or expansion
of airfields near the Nicaraguan border, and the possible construction of a naval
base in Puerto Castillo. What has been the nature of your considerations with Con-
gress on this expanded U.S. military role in Honduras?
Answer. In the first place it should be stressed as the Administration has stated
before--that the United States has no plans to establish permanent U.S. military
facilities in Honduras. Similarly, we have no intention of stationing U.S. military
personnel there permanently, other than those already assigned to security assist-
ance management and U.S. Embassy duties. Our expanded military role in Hondu-
ras has centered around exercises. Facilities constructed to support these exercises
have been intended for temporary use in that context. We are interested in continu-
ing to review Honduran facilities, including Puerto Castillo, with a view toward ac-
quiring access as needed. No decision to seek additional access has been made. As to
Congressional consultations, officials of the Departments of State and Defense have
periodically briefed members on aspects of our military activities in Honduras. Most
recently senior officials of both departments circulated to several members our
plans for the post-Ahaus Tara II phase of activities beginning in February.
Question 8. Could you assess for us the damage that would be done if the United
States loses access to Clark Air Force Base and Subic Bay in the Philippines?
Answer. Most operations currently undertaken in the Philippines could be trans-
ferred to other locations, but it would take considerable time and money, and in the
end we would have less capability for more money than we have now.
One alternative would be to develop new facilities at Palau. While this represents
the best option, it is far from satisfactory. Palau lacks the infrastructure and the
labor force to support anything more than a small installation. We face the same
problems at Guam and Tinian, although to a lesser extent. Guam and Tinian, how-
ever, are far removed from the central strategic location enjoyed by the Philippines.
Several years would be needed from the time a decision was made to move else-
where in the Pacific in order to reconstruct the facilities required by U.S. forces.
About $2-3 billion would be required to construct facilities at alternate locations.
However, in order to maintain military operations in the western Pacific and the
Indian Ocean at the current level, and at the same time not increase the tempo of
operations for the individual units, we would probably be required to procure addi-
tional ships and aircraft. Some additional air refueling and strategic lift assets
would also be required. In addition, if the ship repair work carried out at Subic
were done in Japan or Guam, it would cost considerably more. Finally, the reloca-
tion of forces now in the Philippines to other locations in the Pacific would aggra-
vate problems already faced at these bases, such as overcrowding, tours without
families, and urban encroachment. In addition, the political aspects of such a move
must be considered.
It has also been suggested that consideration should be given to dispersing the
various jobs now done in the Philippines throughout the western Pacific. While this
approach is feasible, it overlooks one of the major assets of our current facilities;
they complement each other and taken together provide an integrated system un-
300
surpassed in the region and perhaps anywhere overseas. Now, when a carrier ar-
rives at Subic to undergo maintenance and repair at the ship repair facility, its air-
craft pilots can train at the sophisticated Crow Valley weapons range at Clark.
Overall, geographic separation of the functions would lessen the readiness and flexi-
bility of U.S forces and cost more.
Although the Pacific Command could continue to perform its mission in the Pacif-
ic and Indian Ocean areas without the use of Philippine facilities, all of the prob-
lems cited above-time, distance, training, money, and less capacity--would result
in a general degradation of U.S. military capabilities. Relocation of the functions
performed by these facilities would seriously restrict operational readiness of
combat and support units and greatly reduce U.S. force flexibility. In particular, the
U.S. capability to employ forces in the Indian Ocean and southwest Pacific would be
significantly impaired. In addition, our capability to fulfill our obligations under
various mutual security arrangements without allies in the region, including the
Philippines, would be seriously reduced. Logistic support for contingency operations
in the Middle East would be austere, and some capabilities which are geographically
sensitive, such as communications, would be severely degraded.
Finally, the political impact of our Pacific friends, allies, and our potential adver-
saries of the removal of the U.S. military presence in the Philippines would be very
significant. The installations constitute the only major U.S. presence in southeast
Asia and represent an effective, visible American contribution to peace and stability
in the region.
Question 9. The Administration is requesting an increase of some 65 percent in
bilateral assistance programs for the Philippines, from $151 million in fiscal year
1984 to nearly $231 million in fiscal year 1985.
How is such a large increase justified?
How was the balance between economic and security assistance determined?
Answer. The fiscal year 1985 proposed security assistance level of $180 million
consists of: $95 million in Economic Support Fund (ESF); $25 million in Military As-
sistance (MAP); and $60 million in Foreign Military Sales Credits (FMS).
This amount corresponds to the first year segment of a total security assistance
package of $900 million over 5 years discussed with the Philippines at the time of
review of our Military Bases Agreement in 1983. At the conclusion of the review,
President Reagan transmitted a letter to President Marcos conveying the pledge of
the Executive Branch to make its best efforts to provide $900 million in security
assistance during the five fiscal years beginning October 1, 1984. The figure of $900
million was reached after consideration of the Philippine Government's economic
development needs, its defense modernization goals, our current assistance efforts in
the Philippines, and the decline in the real purchasing power of our assistance
levels since the Military Bases Agreement was last amended in 1979. Subject to the
authorization and appropriation of funds by the Congress, the intention of the Exec-
utive Branch is to provide more than half of the $180 million for fiscal year 1985 in
Economic Support Funds. We are meeting with the Philippine Government to devel-
op new ESF projects and programs. We expect that some of the funds will be used to
improve the social and economic conditions of areas adjacent to the bases, while
most of the funds will be used on a nationwide basis in support of Philippine eco-
nomic development priorities.
The other security assistance components for fiscal year 1985 are military:
$25,000,000 in MAP and $60,000,000 in Foreign Military Sales credit guarantees.
This assistance would enable the Philippine military to address seriously its mod-
ernization efforts, which this year have been affected adversely by Philippine Gov-
ernment budgetary constraints, specifically the reduction of the budget by approxi-
mately 36 percent in real monetary value, if currency devaluation is considered. We
are committed to seek from the Congress FMS credits having a 10-year grace period,
and repayment over 20 years.
In addition to security assistance, the fiscal year 1985 request includes $39.0 mil-
lion in development assistance, which is roughly the same amount authorized in
fiscal year 1984. The $10 million in Public Law 480, Title II assistance requested
represents a decrease as compared to the previous year. IMET would increase from
$1.3 million to $2.0 million.
Question 10. The administration has pointed out that the aid package for the Phil-
ippines has been carefully designed to help the country cope more effectively with
its difficult economic and security problems.
Could you describe in greater detail some of the programs and explain how they
will benefit the Filipino people?
Answer. The U.S. assistance program is directed at generating more productive
rural employment in especially poor regions of the country. The program empha-
301
sizes increasing agricultural productivity in rainfed areas, encouraging private en-
terprise development in rural areas, improving local control over resource mobiliza-
tion and allocation, and reducing fertility and infant mortality.
Rainfed resources activities address problems of poor upland farmers and coastal
fishermen through the development of farming systems and technologies which will
increase their income. Efforts to generate off-farm employment focus on improving
small and medium enterprise access to important inputs such as management, tech-
nology, credit, and marketing resources. We continue to provide financial support
for the Philippines' family planning program. Health activities aim to reduce the
costs of adequate primary health care by promoting greater efficiencies in service
delivery.
ESF-funded activities emphasize improving the social and economic conditions of
the areas contiguous to the U.S. military facilities as well as supporting selected de-
velopment activities throughout the country. Projects seek to: (a) support municipal
infrastructure and revenue-generating activities in towns adjacent to the Clark and
Subic military facilities; (b) improve market operations and construct and rehabili-
tate local market facilities; (c) fund high priority infrastructure activities in prov-
inces adjacent to the military facilities; (d) support non-conventional energy activi-
ties based on the production of fast growing fuel wood; and (e) strenghten ongoing
rural development projects of the World Bank and Asian Development Bank.
Question 11. What has the administration done to persuade President Marcos that
the perception of the Philippines would be greatly enhanced if the upcoming elec-
tion were free, open, and fair?
Answer. As early as June 1983, a ranking State Department official pointed out
during a Congressional hearing the importance of a fair election in moving the Phil-
ippines toward a more open political system. We have since gone on record repeat-
edly to the effect that a free and fair electoral process in which Filipinos can place
their confidence is the key to resolution of the political problems left in the wake of
the Aquino assassination. In private conversations and in public statements in
Manila and Washington, we have called upon President Marcos and other responsi-
ble Philippine leaders from the government, the opposition, and the private sector
to make the extra effort needed to turn this election into a genuine milestone in the
political normalization process. We have stressed that it is up to the Filipinos them-
selves to make the hard decisions necessary to restore confidence at home and
· abroad, to resolve the current problems, and to enable economic growth to continue.
This message, which parallels similar views expressed variously by the Philippine
and international business community, the church, opposition groups, concerned
citizens, and within the Marcos government by Philippine Government officials, has
been heard in the Philippines, and there has been significant forward movement.
Question 12. How would you judge the prospects for the election?
Answer. We are hopeful about the prospects for a fair election as a result of vari-
ous changes in electoral and related procedures that have taken place in recent
months. The changes, though not meeting all the demands for reform raised by the
opposition and various citizens' groups, have apparently been sufficient to cause sev-
eral important opposition parties to announce their intention to field a full slate of
candidates in the election. Both Cardinal Sin and Mrs. Corazon Aquino, the former
Senator's widow, have come out for participation.
A new Philippine election law passed on February 27 incorporates virtually all of
the safeguards for the integrity of the voting process in the forthcoming May 1984
parliamentary elections lobbied for by citizens groups and opposition political par-
ties. The law provides for the representation of various political parties in the citi-
zens election committees which run the elections at the local level and for official
inspectors from registered political parties and civic organizations. It bars military
and police formations from the vicinity of polling stations and from the counting
and safeguarding of ballots and preparation and reporting of returns. Designated op-
position parties will be given the key to one of three padlocks securing each ballot
box and will be present at every stage. Political parties are able to form coalitions
and present common candidates. They may nominate candidates not belonging to a
party. Changing of party affiliation is permitted. The law further confirms that
presidential detention orders without warrant may not be issued for alleged elec-
tion-related offenses. Reasonable bail is to be set in cases of arrests with warrants
from a civil court.
The improvements effected by the new law supplement actions taken earlier by
the Marcos Government in response to demands from opposition and civic leaders,
including an improved presidential succession arrangement and a new countrywide
voter registration, scheduled for March. Of those opposition demands directly relat-
ed to the election that remain unfulfilled, the most significant include unimpeded
302
access to the media and the selection of several new members of the Commission on
Election acceptable to interested civic and opposition groups. These issues continue
to be the subject of discussion.
As a result of these improvements in the election process, several important
oppo-
sition parties, including UNIDO, PDP-LABAN, and the Social Democratic Party,
have now announced their intention to campaign in the election with a national
slate of candidates. Public interest in the elections appears to be high, and a lively
contest is anticipated, with the opposition providing stiff competition in various
parts of the country.
Nevertheless, other groups, which earlier had laid down as a condition for their
participation in the May election changes related to unqualified political normaliza-
tion and the termination of the marital law powers retained constitutionally by the
President after the lifting of martial law in 1981, continue to advocate boycott of the
elections. Although President Marcos has indicated informally that some of these
issues might be legitimate subjects for consideration by the new parliament after
the election, he shows no inclination to concede on these demands now. The extent
to which the boycott movement is likely to appeal to the electorate and thereby to
lessen opposition hopes to make substantial inroads upon the Government's current
overwhelming majority is still not clear.
Question 13. The administration has asked for softer terms for FMS loans to
Korea.
Why did the administration agree that such terms are necessary for Korea?
Answer. ROK need for funding continues: We have seen no evidence that North
Korea has discontinued its massive buildup of arms, which began in the early-
1970's. The indigenous military balance between the two Koreas clearly favors the
North-the North has more men under arms (including an 80,000–100,000 man com-
mando force) and twice as much armor and artillery, much of it positioned near the
DMZ. Their brutal attack in Rangoon indicates that North Korea has not aban-
doned force in its confrontation with the South.
Korea spends some 6 percent of its GNP on defense, and I do not believe it could
spend a much greater percentage without jeopardizing the development of its civil-
ian economy. These defense expenditures absorb money that could be used else-
where to further the development of Korea's economy. In addition, FIP II will re-
quire an expenditure of $9.1 billion over the next 5 years (almost half this amount
will be spent in the United States). I think that FMS credits, while constituting only
a small part of Korea's defense outlays, provide a margin that will greatly assist the
ROKG in fulfilling its Force improvement goals, thereby narrowing the military im-
balance with the North, while maintaining a healthy economy.
Korea, in fiscal year 1984 spent more money on repayment of principal and inter-
est on past FMS loans than it received in new credits. The net outflows from re-
serves through payment of principal and interest on past loans also contribute to
balance of payments pressures on Korea. The more generous terms will ease some
of these pressures during a time when, as I have indicated earlier, there is a press-
ing need to devote all available resources to upgrading and enhancing ROK defense
abilities. For these reasons, I believe that 10 years grace, 20 years repayment terms
for Korea are amply justified.
Question 14. Thailand has expressed an interest in purchasing the F-16 from the
United States.
What would be the impact upon other ASEAN countries of selling the F-16/100
to Thailand? What other ASEAN countries have shown interest in purchasing the
F-16A?
Answer. An F-16/100 sale to Thailand would strengthen the interest of other
ASEAN states in pursuing purchase of the same plane. Indonesia and the Philip-
pines have already stated interest in the F-16/100. Singapore, which has asked to
buy F-16/79's, is also likely to be encouraged by a decision to sell F-16/100's to
Thailand.
Question 15. Does Thailand need the F-16 to counter the threat facing it?
Answer. Thailand faces a sophisticated, military threat, posed by a well experi-
enced, well-equipped superior force on its eastern border. The totality of Vietnam's
military capability is impressive. The addition of the F-16/100 to Thailand's air
force would give Thailand a significant deterrent to further Vietnamese aggression.
Thailand is looking only for a deterrent; it is not seeking to match Vietnam, plane
for plane or gun for gun.
Question 16. Has the United States made a decision as to whether to sell the air-
craft to Thailand?
Answer. The United States has not yet decided to concur in the sale of F-16/100's
to Thailand. The Thai request is under review.
303
Question 17. Would such an expensive purchase detract from Thailand's ability to
meet its other military needs?
Answer. Purchase of the F-16/100 would impact significantly upon Thailand's de-
fense budget, but Thai leaders have assured us that an F-16/100 purchase would
not starve other budgetary needs.
Question 18. Is Thailand seeking the F-16/100 or F-16/79 one of the approved-for-
export advanced fighters?
Answer. Thailand is seeking to buy only the F-16/100, not one of the FX fighters.
Question 19. The “Carlucci Commission made a number of recommendations de-
signed to improve on the effectiveness of U.S. foreign aid programs. Does the Ad-
ministration plan to act on the recommendation to fold AID's functions into a new
Mutual Development and Security Administration?
Answer. The Administration is very pleased with the work done by the Carlucci
Commission and with its thoughtful and insightful recommendations. In particular,
the Administration supports the concept and spirit of the Commission's recommen-
dations on the establishment of the MDSA, especially its aim of providing a unified
voice before Congress for the U.S. foreign assistance program.
The Secretary of State has asked AID State/T and State/SP, as well as other in-
terested agencies, to examine ways to meet the Commission's main aim of more
closely integrating our assistance programs and budget requests. This examination,
however, will take place within the context of existing organizational structures.
This decision by the Secretary accepts the rationale of the MDSA recommendation,
but puts the specific organizations suggestion aside. This decision, incidentally, also
allows time to take into account decisions on the Kissinger Commission's recommen-
dation for the establishment of a Central American Development Organization
(CADO).
It is important to remember that AID, State and DOD already meet to produce an
integrated foreign affairs budget submission to the Congress. As a result of the Car-
lucci Commission recommendation, however, we will be exploring ways in which to
increase and improve the level of integration of this budget and the programs it
supports.
Question 20. How do you think our anti-terrorism laws should be improved to help
fight state-sponsored terrorism?
Answer. There are two international conventions on terrorism which the Senate
has approved but which the United States has not implemented: the Montreal Con-
vention on aircraft sabotage and the New York Convention on hostage-taking. Nei-
ther is directly related to the state-terrorism problem, but both are related to our
credibility when we talk to other countries and seek their cooperation on dealing
with state supported terrorism. For various reasons, implementing legislation sub-
mitted by the previous Administration on the Montreal Convention has not been
approved. The Senate approved the New York Convention in 1981. This Administra-
tion intends to submit implementing legislation for both Conventions during the
current session.
We could also contribute to an overall effort to curb state supported terrorism,
e.g. by making it illegal for American persons and entities to assist states that
engage in terrorism by providing training and equipment for these states to use to
conduct terrorist activity. The Administration intends to submit legislation that will
help U.S. law enforcement agencies prohibit such assistance.
As a general matter, the control of state terrorism will require a vigorous and
concerted effort by the international community. The United States can make a
contribution by supporting the international community on measures it has pro-
posed to control terrorism generally, and by taking steps to control better the activi-
ties of persons in the United States who assist terrorism abroad.
Question 21. There have been repeated reports that the Salvadoran Army is doing
poorly in the field. In view of this assessment, it seems that the Administration is
seeking to substitute U.S. money for Salvadoran will and capability on the battle-
front.
How do you respond to charges—that the Salvadoran Army is doing poorly on the
battlefield?
What are the Salvadoran Army's principal weaknesses at present?
Answer. The Armed Forces of El Salvador have gone through monumental
changes since 1979. Since then, they have tripled in strength and had to fight an
increasingly well trained and equipped guerrilla force. The armed forces began with
little experience or training, and the increase in size has not been matched by an
increase in the size of the officer corps.
Nevertheless, the military has come a long way. Of particular note were the com-
mand and organizational changes of late last year. At that time, the guerrillas ap-
304
peared to have the military initiative. I think if you look at the situation today, you
will see that the military has taken the initiative back through continued, aggres-
sive operations. There have been no devastating defeats for the guerrillas, but they
are certainly unable to take advantage of the nine-to-five attitude that once pre-
vailed among the military. The military's operations have been virtually non-stop
since the beginning of the year, and there has been little rest for the guerrillas. In
fact, there are an increasing number of cases of guerrillas' entering villages to loot
them for food. Guerrillas have also been turning themselves in, with their weapons.
The preliminary signs are that the government's continuous operations have been
effective in wearing the guerrillas down and denying them the opportunity for rest
and resupply. At the same time, the military's newly-found aggressiveness appears
to have had a very good effect on morale within it.
But while these signs are positive, the military is not yet in a position to deny the
guerrillas the ability to attack selected, underdefended targets at will. In order to
strengthen the military further, our continued assistance is necessary. Of most im-
mediate concern, aggressive operations are causing the military to run out of am-
munition. Without resupply, and at the current level of operation, they would de-
plete their ammunition stocks as early as April. This probably will not happen;
rather than deplete stocks, the military would more likely plan around this and
assume a strictly defensive posture in order to conserve resources. This hands the
initiative right back to the guerrillas. In the longer run, the military needs contin-
ued training, both of soldiers and of a larger professional officer corps. This is the
best way to ensure discipline, effectiveness and respect for the rights of noncombat-
ants. The military is in very bad shape in terms of transportation and tactical com-
munications. If a patrol is ambushed, it is lucky to have a radio to call for help;
luckier still if there is some way to send reinforcements. Because there is virtually
no medevac capability, one soldier dies out of every three wounded in battle. In
Vietnam, the ratio was one out of ten. Aside from the obvious problems, these fac-
tors also bear on troop morale. These resource and training problems reflect the
principal weaknesses of the military. They are also the focus of our proposed mili-
tary assistance.
Question 22. Recently the intelligence community increased its assessment of the
number of guerrillas in the field from 5,000-7,000 to 10,000-12,000. The Salvadoran
Army (excluding Treasury Police and National Guard) is presently 27,500 strong.
How can the army possibly win against the guerrillas if the guerrillas strength is
increasing at such a dramatic rate?
Answer. Any figures offered by the intelligence community are based on the best
information we have available at the time. The total number of guerrillas and sup-
porters has not increased. Rather the guerrillas' part-time militia forces and camp
followers are now better trained and armed-and integrated into the guerrillas
fighting units. Therefore, we have revised our estimate of the number of guerrillas
who are able to engage in combat.
The Salvadoran Armed Forces can indeed defeat the guerrillas if they have the
training, weapons, ammunition, and mobility to do the job.
Question 23. There have been allegations in the press that up to 30 percent of U.S.
military assistance finds its way to guerrilla organizations. Is this figure accurate,
and if not, what portion of U.S. equipment has been lost to the guerrillas? Is there
any truth to the allegations that the guerrillas acquire U.S. equipment through
trading on an active black market in El Salvador? Who supports this blackmarket?
Are any members of the Salvadoran Armed Forces involved in blackmarketing
weapons and/or ammunition?
Answer. Part of the guerrillas' current propaganda initiative in the United States
and Europe is that the Salvadoran Armed Forces (ESAF) are near collapse, that
there are wholesale defections from the government ranks, and that Salvadoran sol-
diers are selling their own weapons to the guerrillas. This is simply not the case.
While the guerrillas have captured weapons from the ESAF, the figure of 30 per-
cent of U.S. assistance finding its way to the guerrillas is way out of line of what we
believe to be the case.
Some of the guerrillas' weapons are purchased on the international blackmarket.
We do not believe that there is a significant blackmarket in El Salvador which is
selling U.S. military equipment to the guerrillas.
While we cannot state categorically that no Salvadoran soldiers are selling weap-
ons or ammunition on the blackmarket, we have no evidence that any significant
amount of equipment is being sold on the blackmarket.
We will be glad to arrange a classified briefing for you on this topic.
Question 24. Tunisia recently suffered severe bread riots and shows other signs of
economic and internal problems. Yet the Administration repeatedly brushed aside
305
Congressional efforts to provide ESF funds in recent years. This year you are pro-
posing only $1.5 million. Was that figure originally proposed in the budget process
before the recent difficulties? Why did the Administration strongly object to Con-
gress' past efforts to provide ESF for Tunisia?
Answer. Tunisia is a moderate Arab nation with a long history of friendship with
the United States, and we want to do what we can to assist that country. We provid-
ed $10 million in Public Law 480 Title I in fiscal year 1982 and fiscal year 1983 and
$15 million in fiscal year 1984. (After the bread riots, we raised the fiscal year 1984
Title I allocation by $5 million to a total of $15 million.) Our decision initially not to
request ESF for Tunisia in fiscal year 1984 was based on the severe reduction in
overall budget levels for ESF and because it was felt that Public Law 480 is also a
very useful means of providing economic assistance to Tunisia. However, after a
review of our policies toward Tunisia in preparation for the Secretary's travel there
in early December (several weeks before the disturbances), and taking into consider-
ation Congressional interest, we allocated $1.5 million ESF to Tunisia. For fiscal
year 1985, the Administration is proposing $3 million ESF.
Question 25. According to press reports, the Administration proposes to go ahead
with the sale of a large number of Stinger anti-aircraft missiles to Jordan. Do you
believe King Hussein,
who was in Washington earlier this month, is likely to enter
the peace process soon?
Answer. We believe King Hussein's statements that he wants to enter the peace
process and that he is working to achieve the necessary support from Arabs and
Palestinians to do so. We encourage his efforts, and we urge all parties to support
him. We do not know if the necessary conditions can be achieved in the very near
future. We hope they can. In addition to having the necessary support for his nego-
tiating on the future of the occupied territories and their inhabitants, however, Hus-
sein must have the ability to withstand pressure and threats from radical elements
and rejectionist states. Jordan's security is rightly a top priority for Hussein, and
for the United States. That is true with or without progress on the peace process.
Our commitment to Jordan's security, our shared concerns for the stability of the
strategic Gulf region, and our shared interest in the stability of the longest frontier
with Israel, make the security enhancement of our longstanding friendship with
Jordan a sensible foreign policy and defense goal of the United States.
Question 26. Some Administration officials contend that Jordan needs Stingers to
protect against possible attack from Syria if it enters the peace process. How many
years will it take before the Stingers are delivered?
Answer. As now written, the delivery of gripstocks and first shipment of missiles
is scheduled for 29 months from the time the LOA is signed. If the Syrian threat
should intensify to the point where Jordan would require Stingers more rapidly,
there are basically two options: Diversion from current Stinger production destined
for U.S. forces or withdrawal from U.S. forces' stockpiles. However, 600 Stinger sys-
tems are scheduled to be delivered to the special defense acquisition fund (SDAF)
supply during the last quarter of 1985. Any time after that, an emergency delivery
of Stingers to Jordan might be possible from the SDAF-if they have not already
gone to another claimant.
Question 27. We also read in the press that the Administration is reviving its ef-
forts to win funding for the so-called Jordanian Rapid Deployment Force. Does this,
in essence, involve giving military equipment to another country for possible use in
a third country? If so, does it not have foreign policy implications? In that case, why
is the Administration apparently not willing to discuss it openly with the Foreign
Relations Committee?
Answer. We are prepared to discuss fully the United States-Jordan Joint Logistics
Planning (JLP) program with any interested members or committees of the Con-
gress. Since this program remains classified, however, we are obliged to restrict our
discussions of this important and cost-effective proposal to closed sessions. If the pro-
gram is subsequently declassified, we will be able to discuss it fully in open sessions.
Question 28. What role does U.S. assistance to our NATO allies Greece and
Turkey play in the ability of each of these countries to fulfill their NATO missions?
Answer. U.S. assistance is indispensible if Greece and Turkey are to fulfill their
important NATO commitments. Both countries play critical roles in defense of the
Alliance's southeastern flank, controlling Soviet access to the Mediterranean Sea,
and must be able to defend against antagonists well-armed with the most modern
weapons. Bordering on Bulgaria, Greece would block any Warsaw Pact thrust south-
ward toward the Mediterranean through Thrace, and would join Turkey in resisting
any Soviet effort to seize control of the Turkish Straits. Anchoring the Southeastern
flank of the Alliance, Turkey shares borders with the Soviet Union, Bulgaria, as
well as Syria, Iran and Iraq, and must defend the Anatolian land mass as well as
306
the Straits. The Eastern Mediterranean also serves as a bridge across Europe link-
ing the Atlantic to the Middle East and Southwest Asia. Both countries control im-
portant air and sea lanes in the Eastern Mediterranean, and Turkey abuts key inva-
sion routes into the Middle East and Southwest Asia.
U.S. assistance, then, is an important strategic investment for the United States,
directly contributing to our security and that of NATO by enhancing the efforts
Greece and Turkey are making to meet these important responsibilities. Turkey suf-
fers from serious obsolescence in its major lines of military equipment, and U.S. as-
sistance will assist it in modernizing its forces in order to defend successfully
against well-equipped Warsaw Pact forces. Greece has significant programs under-
way to improve its forces, with the most critical needs focused on advanced fighter
aircraft, communications and radar equipment, maritime patrol aircraft and heli-
copters, and upgrading of land combat forces.
Aside from contributing to these modernization efforts, U.S. security assistance
also helps Greece and Turkey to achieve NATO force goals and to enhance rational-
ization, standardization and interoperability (RST) within NATO. Our assistance ef-
forts with these two allies also encourages continued procurement of U.S. equip-
ment, and provides incentives to join coproduction programs with other NATO
countries.
Question 29. Is there realistic hope of progress now on the Cyprus issue, or is the
Turkish Cypriot secession a fait accompli?
Answer. Both sides in the Cyprus question have expressed their desire to see a
solution found which would create a unified country in which the rights of all Cyp-
riots are respected. The declaration of statehood by the Turkish Cypriot community
does not rule out such a solution. We are encouraged by Mr. Denktash's January 2
"goodwill measures” and by President Kyprianou's January 11 “framework for a
comprehensive settlement" proposals. The U.N. Secretary General is presently
working with these two packages in an attempt to find common ground for progress.
In that effort we fully support Mr. Perez de Cuellar. We continue to urge both sides
to respond positively to the proposals of the other and to cooperate with the SYG.
AID's RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR PERCY
Question 1. AID's Bureau for Private Enterprise (PRE) has been operational for
three years now. Could you discuss the Bureau's chief accomplishments since its in-
ception? How many new private sector projects have been generated through the
efforts of PRE?
Answer. During a period somewhat less than 3 years, PRE has acted as a catalytic
element of AID's private sector initiative. While all of AID is directed to use a pri-
vate sector approach where appropriate, PRE has, despite its small budget, made a
particularly important contribution to the initiative.
The Committee is fully familiar with the operations of two of the offices which
are included in PRE: The Office of Housing and the Office of Small and Disadvan-
taged Business/Minority Resource Center. As I believe your question goes to PRE's
newer activities, I will direct my answer to those matters.
PRE has attempted to draw on lessons learned from Third World "success sto-
ries.” It has also attempted to do an effective job within its limited resources (less
than $30 million for fiscal year 1984). PRE's four-part strategy includes: (a) the re-
moval of constraints to the development of private enterprise in host countries; (b)
the provision of credit to intermediate institutions; (c) support for the development
of agribusiness and health; and (d) support to USAID Missions in carrying out their
own private sector activities.
PRE's successes have been both tangible and intangible. To date, PRE has made
11 loans in a total amount of approximately $20 million. All attempt to achieve sig-
nificant development goals. These loans are unique in AID because most are to pri-
vate borrowers, for medium-time periods and are at near-market rates of interest.
In addition, PRE has retained a group of prominent U.S. businessmen to provide
counsel on its loan program. We believe it is a success that PRE is dealing with
business on a businesslike basis, providing for economic development and achieving
a good return for the U.S. taxpayer. (The new Revolving Fund will assist in this
process.) The Siam Commercial Bank and Kenya Commercial Bank projects are the
farthest advanced of PRE's loan projects and have been particularly successful.
Some of PRE's grants have been in support of loan projects (generally less than
$200,000). Others are to important U.S. organizations which are quite well suited to
AID's private sector activities. These include the International Executive Service
Corps and the Joint Agricultural Consultative Corporation. We believe that both of
307
these are significant successes as they demonstrate ways in which AID can obtain
dynamic U.S. business participation in economic development in the Third World
and provide direct benefits to U.S. business as well. PRE's feasibility study program
has also been a successful enterprise to date.
PRE has also attempted to institutionalize the private sector approach in AID.
The establishment of a “Private Sector Liaison Council” of top AID management
has been one success in this regard. Work with USAID Missions has also in-
creased—from five Missions helped in fiscal year 1982 to 20 Missions in fiscal year
1983. In general, we find that AID's receptivity to a private sector approach has in-
creased and is evidenced by new private sector projects and we believe that PRE can
take some credit for this success. PRE, moreover, has taken the lead on privatiza-
tion of government-owned business, capital market development and certain tech-
nology transfer matters, in addition to providing assistance in local currency pro-
gramming
These are some of PRE's successes. We believe, however, that as the initiative of
the private sector approach builds, PRE's successes will grow as well.
Question 2. How do you address the charge of critics who say that AID's private
sector emphasis ignores the basic human needs thrust of our development assistance
legislation?
Answer. AID believes that the Private Enterprise initiative is fully consistent
with the BHN mandate of the Foreign Assistance Act.
The Private Enterprise approach is neither "trickle down" development nor mere
resource transfers. Rather, it relies on market forces to achieve sustainable econom-
ic development.
The Congress took note of the compatibility between Private Enterprise and BHN
in its amendments to last year's authorizing legislation for the Revolving Fund. AID
fully intends to comply with those amendments.
Other AID Private Enterprise projects are also directed toward assisting the poor
majority through increased employment and income. This is true for regional
bureau projects, not just those of the Private Enterprise Bureau. A particularly ef-
fective activity is the revised Productive Credit Guaranty Program undertaken by
PRE (which expired on September 30, 1983, for lack of legislative extension).
Finally, AID sees the development and use of the indigenous private sector in
LDC's to provide employment and services in agriculture, health and family plan-
ning as one of the four pillars of our program. As such, private enterprise is an ap-
proach that is implemented in a large number of AID's projects and will continue to
be emphasized.
Question 3. How much of PRE's work is involved in developing markets for U.S.
business and how much is involved in developing the indigenous private sector in
developing countries?
Answer. The focus of PRE's efforts is “to provide support for the establishment
and growth of indigenous private enterprises in less-developed countries.” (Fiscal
year 1985 Congressional Presentation, Annex V, p. 134). All of PRE's projects are
directed toward that objective.
PRE nevertheless believes that U.S. business can be a substantial contributing
force in that effort, and PRE therefore works closely with U.S. business. PRE's
grants have been to both U.S. business and LDC entities; the largest single grant is
to the International Executive Service Corps. PRE has been working with USAID
Missions to assist them in their private sector programs, including their coordina-
tion with U.S. business. PRE's eleven loans to date total approximately $20 million.
Of these, two loans directly assist U.S. business investment; all permit U.S. business
participation through exports.
PRE strongly believes that U.S. business can make a major contribution to pri-
vate sector development in the Third World and it intends to continue to draw on
that resource in a productive partnership.
Question 4. Please discuss what is being accomplished through the Private Sector
Revolving Fund.
Answer. The Revolving Fund was enacted through the current Continuing Resolu-
tion in November 1983. The Bureau for Private Enterprise is working to conclude
administrative arrangements to make the Revolving Fund operational and, to that
end, has been utilizing the services of Price Waterhouse.
The first two Revolving Fund projects are virtually complete and ready for obliga-
tion. One is for an export trading program for the Dominican Republic ($2.0 mil-
lion), and the second is for a meat processing facility for Thailand ($2.5 million).
Both will provide employment and foreign exchange for those two countries and will
include the transfer of U.S. technology.
308
there has been no economic improvement in the Sahel and no progress toward the
Pending projects under consideration for fiscal year 1984 include health activities
for Indonesia and Sudan, a shrimp activity for Pakistan, several agribusiness activi-
ties in Costa Rica and Honduras as well as other activities. AID intends to obligate
approximately $15
million for Revolving Fund projects in fiscal year 1984.
The Revolving Fund mechanism is already strengthening and tightening PRE's
project review and project management procedures, and it will clearly revise the
way in which AID conducts some of its activities.
Question 5. How much of an effort is made to reach out to private businessmen in
this country who are interested in investing in developing countries?
Answer. AID has communicated its private enterprise initiative to the American
business community through a variety of media-including newspapers, magazines,
joint AID/OPIC conferences and AID speeches. AID, including the Bureau for Pri-
vate Enterprise (PRE), is committed to working closely with American private busi-
ness, keeping in mind the lead role of OPIC in working with U.S. business investors
in developing countries.
While the focus of PRE efforts is "to provide support for the establishment and
growth of indigenous private enterprises in less-developed countries” (fiscal year
1985 Congressional Presentation, Annex V, p. 134), PRE believes that U.S. business
investors have a role to play in that effort. To date, two American business invest-
ments have resulted directly from the first 11 PRE loans. U.S. business investments
have also directly and indirectly benefited from PRE's initial grants. We anticipate
that future PRE loans under the Revolving Fund will include projects cofinanced by
U.S. business investors.
PRE currently has joint programs with Business International, the International
Executive Service Corps, the Joint Agricultural Consultative Corporation and the
Young Presidents
Organization.
Question 6. AID's strategy for women-in-development efforts has been to move
them from programs which specifically benefit women to those which fully integrate
women into AID's mainstream programs. Would you provide us with some examples
of what you have been doing?
Answer. The Agency's current strategy for the implementation of Section 113 of
the Foreign Assistance Act emphasizes programs and activities which address
women's economic roles and contributions in AID's larger integrated field projects.
Recent accomplishments by the Agency's Women in Development Office toward im-
plementing this strategy include:
Providing technical assistance to 12 missions and funding placement of 20 techni-
cal assistants (i.e., economists and social scientists) for major AID projects in Africa,
Asia, Latin America and the Caribbean;
Participating in CDSS reviews on Bolivia, Dominican Republic, Ecuador, Haiti,
Jamaica, Peru, Philippines, India, Sri Lanka, Bangladesh, Nepal, Kenya, Zaire and
Morocco. At the end of the CDSS cycle, the WID Office will assess the extent to
which women in development concerns have been integrated to recommend mecha-
nisms to ensure integration in the next round;
Instituting cost sharing mechanisms with various missions and AID/W bureaus
for the inclusion of women in development issues in field projects ongoing in Peru,
Ecuador, Haiti and Jordan, among others:
Awarding a grant to the Harvard Institute for International Development (HIID)
to produce 10 case studies of AID-funded projects to provide training to senior level
AID personnel. These workshops have and will continue to provide Agency staff
with the conceptual and analytical skills necessary to implement the Agency's
women in developnient strategy.
Question 7. The House is considering a bill which would provide $10 million and
some local currency to build a Clement J. Zablocki Memorial Outpatient Facility at
the American Children's Hospital in Krakow, Poland.
Does the Administration support this effort?
Answer. We are supportive of the House in its efforts to establish a memorial to
the late Chairman Zablocki. The American Children's Hospital is the best medical
facility open to the public in Poland and has provided vital treatment to countless
Polish children. As a demonstration of American concern for the Polish people, a
new facility at this hospital would be a fitting memorial to the late Committee
Chairman. However, any additional ESF funding for this project would exceed our
budgetary ceiling for the year. For this reason, we cannot support the bill if the
source of proposed funding is Economic Support Funds.
Question 8. What is AID's reaction to the recent Club du Sahel report finding that
goal of food self-sufficiency since the mid-1970's?
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Answer. Having been one of the leading proponents of the Club's taking an objec-
tive assessment of the status of the Sahel, AID quite naturally supports the Club's
report, adding, however, that without the infusion of AID and other donor assist-
ance the Sahel would have been in a more serious plight than is now the case. Nev-
ertheless, the goal of regional self-sufficiency has been most certainly stymied due
largely to:
A recurring regional drought the magnitude of which equals or in some countries
surpasses that of the early 1970's;
Many Sahelian countries having phased down agriculture extension efforts in
order to comply with IMF conditions governing levels of public service workforce;
The non-viability of dryland agricultural technical packages upon which much of
the expected improvement in Sahelian agricultural productivity had been predicat-
ed;
Increasing population growth which continues to outpace increased food produc-
tion.
In view of the above, AID will:
Increasingly support irrigated agriculture activities which offer the only added
hope to overcoming future adverse climatic patterns in the region:
Encourage Sahelian countries to focus agricultural extension efforts principally
upon target groups, areas and technology which are respectively: (1) more respon-
sive to innovation/risk; (2) are accessible and have significant production potential;
and (3) for which the technical packages have been proven viable;
Redouble our efforts in dryland agricultural research to develop primarily new
varieties which have greater yield potential and pest resistance;
Pursue the introduction of family planning activities in conjunction with its pri-
mary health care projects.
It is noteworthy that during the previous six years the Sahel did not have the
benefit of governmental policies favorable to farm production. Through program as-
sistance we have just begun to stimulate policy reform which will shortly provide an
environment more conducive to expanded farm production. AID also expects to en-
courage increased policy reform through the regular program, Public Law 480 and,
in selected cases, through the Economic Policy Initiative.
Question 9. Although a growing number of aid recipients are moving from the
status of LDC to "middle income country” the developmental needs of these coun-
tries continue. What policies and strategies has AID developed to address the devel-
opmental needs of middle income countries?
Answer. At the heart of AID's approach to the middle income countries is the rec-
ognition that AID assistance and programs should be geared to the economic situa-
tion and constraints faced by the individual developing country. Since the develop-
ment problems faced by each individual developing country are in some respects
unique and the mechanisms for AID to address specific development constraints are
determined by a variety of country specific factors including AID's comparative ad-
vantage in specific activities or sectors, the role of other donors, the size of our pro-
gram, etc., there is no standard middle income program or approach applicable to
all middle income countries.
Nonetheless, the middle income countries as a group do have different economic
characteristics from those of most low income countries and this fact is taken into
account in the development of AID programs in these countries. For example, in
most middle income countries the human, physical and institutional infrastructure
is more developed; there is a higher degree of urbanization and manufacturing plays
a far larger role in total economic activity. Thus, while AID's program in most
middle income countries remains focused on rural poverty and agriculture and on
human resource development, in individual country circumstances, we may place in-
creased emphasis on addressing specific problems of urban poverty, rural employ-
ment generation and non-farm production, and on science and technology relation-
ships. This last item is viewed as particularly important in establishing long term
institutional relationships which can continue even as the country develops and
AID's role is reduced.
Question 10. How do the programs and projects developed for the "middle income”
countries meet the goals outlined in the “Targeted Aid” amendment to the Foreign
Assistance Act?
Answer. The basic objective of U.S. economic assistance, whether provided to low
or middle income countries, remains to increase the economic well-being and earn-
ing capacity of the poor. While economically more developed with a larger economic
base and more developed physical, economic and human infrastrucutre, the middle
income countries continue to face significant poverty problems. While specific AID
programs and projects in the middle income countries need to address the specific
310
problems of the country and may at times differ from those in low income countries,
they continue to be intended and structured to assist these countries in increasing
the economic potential of the poor.
The overall incidence of poverty in these countries is usually lower than in low
income countries where poverty is more of an economy-wide phenomenon. Further-
more, the urban poor are more likely to represent a larger part of the poverty prob-
lem in middle income countries and their problems may in some cases be more in-
tractable. Given the generally smaller relative size and different characteristics of
the poor in the middle income countries a basic tenent of our economic assistance
efforts in these countries is to carefully target the assistance to ensure that it im-
pacts on the poor.
Question 11. In developing its foreign assistance strategy, how does the United
States take into account the large external debt and recurring balance-of-payments
problems experienced by many developing countries?
Answer. We do not believe that the debt and balance of payments problems that
some developing countries are now experiencing can be viewed in isolation. Instead
we believe they should be viewed within the context of the process of adjustment to
disinflation that the world is undergoing. The economic recovery which is under-
way, the existing arrangements for dealing with debt problems, and the recent in-
crease in the usable resources of the International Monetary Fund provide the basic
elements of the international community's effort to address the debt problem. We
thus believe that our present approach which tailors our assistance to the specific
circumstances of respective LDCs is appropriate.
While our emphasis in using our DA resources is on addressing the basic develop-
ment constraints faced in the developing world, including the removal of bottle-
necks to efficiency and productive capacity, our approach does provide for balance-
of-payments assistance in the form of ESF in situations where countries face serious
liquidity problems and where at the same time the United States has strong politi-
cal and security interests. This support is often undertaken in conjunction with an
IMF program aimed at addressing the underlying economic problems. Thus, through
our development projects and our support of the implementation of appropriate eco-
nomic policies, we endeavor to strengthen the operation of market forces and in this
manner address the need to restrain demand while at the same time contributing to
an expanding aggregate domestic supply. We believe that this approach not only
will enhance prospects of LDCs meeting their debt service payments, but as well to
attaining self sustaining growth.
Question 12. Can you give examples of particular aspects of our foreign policy that
is a result of debt considerations?
Answer. Where developing countries have faced severe balance of payments and
debt problems we have in specific cases provided quick disbursing balance of pay-
ments assistance through our ESF program. In addition, food aid provided through
the U.S. Public Law 480 program can provide quick disbursing balance of payments
help. Where the United States provides ESF balance of payments assistance in re-
sponse to severe balance of payments problems the country is also typically involved
in an IMF stabilization program and frequently an IBRD structural adjustment as
well. These programs are aimed at removing some of the fundamental policy distor-
tions and reestablishing a sustainable balance of payments position. The United
States in providing ESF balance of payments assistance seeks to assure that our as-
sistance is not inconsistent with the programs and efforts of the IMF and IBRD and
in some cases U.S. assistance has been specifically conditional on the developing
country negotiating and staying in compliance with an IMF stabilization agreement.
The fundamental thrust of our assistance program has not been changed by the
debt situation. We believe that our mission remains one of assisting the LDCs to
address their basic development constraints thereby improving efficiency and diver-
sifying the production structures of their economies. The debt experience of LDCs
over the past few years has however served to reinforce our belief that we must
strengthen our efforts to influence LDC economic policies. One of our major ele-
ments has been to encourage LDC governments to remove the disincentives and dis-
tortions under which the private sector is forced to operate in a number of coun-
tries. The tight budget situation in these countries in recent years has also provided
increased opportunities for us to encourage action on state owned enterprises that,
through their inefficient operations, drain away resources needed for development
priorities.
Question 13. Despite loan rescheduling and some lowering of interest changes,
LDC's paid back $21 billion more than the banks had loaned them in 1983. The
World Bank has warned that such a negative flow of funds could impede long-term
311
economic growth in the Third World. How has AID taken this situation into account
in structuring its development assistance program.
Answer. AID on a case by case basis attempts to tailor its assistance to the needs
of countries experiencing balance-of-payment problems. We believe that the most
important step that LDCs can take to bring about an increase in the net flow of
resources from private banks is that of adapting and implementing adequate adjust-
ment programs, and through these programs enhance the perception of their credit-
worthiness. As a result, an important element of our overall assistance effort is to
engage in a policy dialogue with the developing country and to encourage the devel-
oping countries to undertake needed policy reform which will affect not only their
capacity to address their immediate balance of payments problems but also increase
their longer term development prospects.
We look to the IMF as the principal source of balance-of-payments support and
expect it to play a critical role in bringing about the adoption of appropriate eco-
nomic policies by LDCs. Increasingly in recent years we have used our ESF re-
sources to support, reinforce or complement the IMF stabilization and World Bank
structural adjustment programs for those countries with severe economic problems.
This reflects our view that the adjustment process by LDCs is likely to require both
an expanding aggregate domestic supply and a restraining of demand. Thus through
our development projects, that make use of our DA resources, and our support of
the implementation of appropriate economic policies, we endeavor to address the
need to restrain demand while at the same time contributing to an expanding ag-
gregate domestic supply. As a development organization AID's emphasis has been
and essentially remains on efforts to increase an LDC's productive capacity.
Question 14. The Administration contemplates $500 million over 5 years to sup-
port sub-Saharan African countries willing to adopt economic policy reforms, but
authorization for only the first year ($75 million) is being sought. Recipients have
not been identified. Why isn't a multi-year authorization being requested for the
proposed Economic Policy Initiative for Africa as it is for the Administration's new
program for Central America?
Answer. The concept of the Economic Policy Initiative is to provide a catalytic
approach to leverage other donors to join in an effort to provide increased assistance
to African governments who are willing to undetake policy reforms which foster eq-
uitable development opportunities.
Since the approach is a pilot effort to test the receptivity of donors and host gov-
ernments, our initial effort is limited to an annual authorization and appropriation
of funds on a no-year basis.
Depending on the initial reception, we may seek a multi-year approach in the
future.
Question 15. With only a l-year authorization what kind of assurance of a longer-
term U.S. commitment can we give African countries which are adopting often diffi-
cult policy changes?
Answer. That no-year funding aspect of the EPI will allow us to set aside funds
for future support of a reform process. Thus, in a 2-year reform package to which
we might anticipate contributing $20 million, the initial $10 million could be obli-
gated and disbursed at an early stage of the process, with the remaining $10 million
made available as the process continues into the second year.
In general recipient countries understand the nature of the foreign assistance
budgetary process whereby we incrementally fund activities. The 1-year authoriza-
tion will not pose an impediment to encouraging reform.
Question 16. What makes the goals of the proposed EPI different from those of
our regular economic assistance programs in Africa?
Answer. The broad goals of the EPI do not differ from those of our regular eco-
nomic assistance program. The difference is in the type of constraint attached. The
EPI differs in that it focuses directly on and highlights the policy constraints to eq-
uitable development. Some part of the regular economic assistance programs also
focuses on policy issues but is more generally concerned with the longer run human
resources, institutional and technical constraint hindering development.
Question 17. Since the recipients are not known, can you tell us what specific po-
litical and economic criteria will be used in selecting them? Which countries, if any,
are unlikely to receive funding, and why?
Answer. In considering how to proceed in implementing the Economic Policy Initi-
ative, the selection process for determining which countries best qualify for assist-
ance is of primary importance. There are 45 countries in Africa from which a much
smaller set must be selected. While we have no rigid number of countries in mind,
we believe that in the first year participation by four to six countries would be
optimal
312
The following is a tentative set of criteria to be used in the selection process:
(1) It is unlikely that largest recipients of U.S. assistance would be selected. These
are countries where the policy dialogue is already well advanced and additional EPI
monies would be marginal. These are Sudan, Kenya, Somalia and Liberia.
(2) It is also unlikely in the first year of the EPI that we would select countries
where we have no aid program or only a very small one. AID management capacity
is therefore, an important criteria.
(3) The country must be undertaking sound macroeconomic policies. This may be
in the context of an IMF program but does not have to be if the situation has not
warranted it.
(4) A generally sound and practical investment/development program. This is
more easily demonstrated where the IBRD has approved the program in a Consulta-
tive Group (CG) context. But again, there will be countries with sound programs
where no formal World Bank approval has taken place.
(5) Within this overall framework, the country will have made basic decisions on
principal sectoral policies and structure conducive to growth and to a widespread
distribution of benefits. Emphasis will be on policies which create incentives to in-
crease production-primarily via greater use of market mechanisms. Increasing pro-
duction and incomes of small farmers and tradespeople will improve equity and
help meet basic human needs requirements. The agriculture sector is particularly
important, but the education, health and other sectors can also be considered.
(6) There should be an indication of political leadership's commitment to these
policies. Evidence would include personal high-level leadership in approving policies
and in mobilizing political support for them, actions to implement policies overrid-
ing vested interests when necessary, appointment of competent persons in key eco-
nomic and development posts, etc.
(7) Substantial international support for the country, and substantial consensus
among donors that the country is meeting criteria 3 to 6 above. Evidence would in-
clude a CG mechanism, or other donor coordination at least in key sectors.
(8) An indication that policy improvements will lead to economic improvements.
In some countries technical or other nonpolicy constraints may be so overwhelming,
that policy changes, while necessary in the long run, may make only a marginal
difference, in the near term.
(9) An indication that additional resources would make a difference. Evidence
could include the inability to reform or decentralize parastatals or development in-
stitutions because of transition costs and the need for technical assistance for insti-
tutional changes or an inability to import basic necessities, such as fertilizer or
spare parts, for sectoral programs. There should also be political/psychological bene-
fits from the additional assistance from EPI; e.g. as the capstone for making a CG
effective, backing the country leadership in explaining and selling difficult reforms,
or in mobilizing additional donor support.
Question 18. Although AID has established and publicized the importance of
policy reform in sub-Saharan Africa, a 1983 GAO report found that at the country
mission level there is often no ongoing effective program in place which recognizes
the inherent difficulties in realizing policy reform and the potential long term effort
involved.
What actions has AID taken to insure that its mission in Africa are undertaking
effective policy reform programs? What has AID done to insure that its missions
have the capability to undertake such programs?
Answer. It is unrealistic to expect that AID will undertake policy reform pro-
grams in all or even a majority of African countries. Of the 44 countries in Africa
that receive some form of U.S. assistance only 17 have AID missions with staffs that
are of a sufficient size to become heavily involved in policy reform programs. In a
few others the size of the AID staff may allow substantial policy reform analysis.
Given this caveat, AID has initiated several major actions to expand our policy
reform agenda. (1) Policy reform has been accorded highest priority in the Africa
Bureau's
overall strategy. This alerts Missions to the importance to be given policy.
(2) The Economic Policy Initiative for Africa directly addresses agricultural policy
issues. (3) The Africa Bureau is supporting at least 15 projects in Africa which di-
rectly address one or more aspects of agricultural policy reform and in at least 10
cases program assistance (mostly Public Law 480) is aimed clearly at reform. More
importantly for the longer term the Bureau is supporting 25 ongoing projects in 13
countries that are primarily concerned with agricultural planning and policy analy-
sis and an additional six projects are in the design stage. (4) The Bureau is in the
process of establishing Indefinite Quantity Contracts (1QCs) with outside organiza-
tions to provide additional policy analysis capability on short notice. (5) In Sudan,
Kenya and Somalia, our three largest programs, several million dollars of ESF have
313
been set aside for policy analysis. (6) New agricultural sector assessments will be
done in Senegal and Somalia this year. (7) The Africa Bureau has approved a $3
million strategic studies project which will investigate such Africa-wide policy relat-
ed issues as food supply and demand by the end of the decade and the importance of
economic returns to agriculture at the farm family level, and (8) the Africa Bureau
has increased its number of economist positions to improve its policy analysis capa-
bility. Those positions will all be filled within the next 4 months.
Question 19. The GAO report noted that many missions are not coordinating their
efforts with the major bilateral and multilateral African aid donors. Please com-
ment.
Answer. Donor coordination and communication with host governments on policy
reform as well as project development matters has improved substantially over the
past few years. This has occurred at headquarters as well as at field levels.
An important element of AID's efforts to improve multilateral coordination is the
Early Project Notification System that we implement with the World Bank. Under
this system, U.S. field missions have an opportunity to comment on IBRD projects
at early stages of development and raise important policy as well as technical
issues. Both missions and headquarters work together to insure full discussion of
these issues.
The United States is also very active in Cooperation for Development in Africa
(CDA), an organization of the seven major Western donors active in Africa, whose
purpose is to improve coordination at the sectoral level in terms of actual project
development and implementation. Among other activities, CDA is assisting selected
countries to develop forestry sector plans based on a coherent analysis of country
needs and designed to address crucial policy questions.
Recently, as a follow-up to the policy meeting of the OECD's Development Assist-
ance Committee, where the need for improved policy coordination was a major topic
of discussion, I directed the principal African missions to contact their OECD coun-
terparts in order (a) to initiate joint discussions on important policy issues if this
were not already being done and (b) to raise the key policy issues with host govern-
ment officials as appropriate. It is important to recognize that some host govern-
ments are wary of such donor activities, which they sometimes view as "ganging
up.”
The Club du Sahel, U.N.-led donor Roundtables, and Consultative Groups are es-
tablished mechanisms which can lend themselves to policy discussions. The United
States has intervened with the World Bank to argue for the Bank's sponsorship of
an increased number of Consultative Groups, where policy discussions are often the
most successful.
Innovative developments in donor coordination include the formation, in several
countries, of ongoing donor committees whose general purpose is to continue discus-
sion of major development issues in between formal meetings. A Joint Monitoring
Committee charged with tracking the progress of the economic recovery investment
plan is in operation in Sudan. Groups have been created in Kenya and Zaire subse-
quent to CG meetings for those countries. In Senegal, we are encouraged by the
progress made to-date in our ongoing meetings with France and the World Bank,
where we have been able to engage in broad based discussions of sectoral policy
issues.
In Mali, donor efforts have been instrumental in assisting in a restructuring of
cereals price policy.
Furthermore, since the announcement of the Economic Policy Initiative, a
number of donors including the EEC, the U.K., Canada, and Germany have contact-
ed us to express interest in cooperating with the United States in this program.
To sum up, AID's involvement in coordination of policy and project initiatives in
Africa is substantial. There is a lot of room for improvement, and each country
must be treated on a case-by-case basis: some governments are more receptive to
joint donor activities than others and the level of donor representation also varies
by country. Given limited resources and staffing in many cases, AID is encouraging
African missions to respond to the recognized need for improved donor coordination
by the most appropriate means at their disposal.
Question 20. What steps has AID taken to promote better integration of the views
of the Departments of Agriculture, State and Treasury into its policy reform pro-
grams?
Answer. AID, jointly with the State Department, created an interagency working
group on the economic crisis in Africa. Better known as the “Wheeler Group" its
purpose is to bring together all concerned U.S.G. agencies to exchange views and
information on the current economic situation in selected African countries. Among
34-045 0484-21
314
the agencies represented are, AID, State, Treasury, Agriculture, National Security
Council and the U.S. Executive Directors to the IMF and IBRD.
The Wheeler Group is currently concerned with Sudan, Kenya, Somalia, Zaire,
Zambia, Senegal, Liberia and Nigeria. We believe that the Wheeler Group has
served to provide a more coordinated U.S. approach to these countries' problems.
For example, AID benefits from other views as it prepares for an IBRD sponsored
Consultative Group as we believe Treasury does as it prepares for debt rescheduling
meeting.
Question 21. I have been very supportive of the Administration's initiative with
regard to the food emergency in Africa. What steps are you taking to assure that
not only are the required amounts of food aid being provided to Africa, but that this
food aid will be of the proper type and will be properly managed? In particular, I
hope that we can make the best possible use of bagged fortified and processed prod-
ucts so that we do not have a repeat of the situation 10 years ago when we appar-
ently had large amounts of whole grain piled up on open docks and in inadequate
warehouses.
Answer. AID Missions work with other members of the donor community to ana-
lyze host government requests for food aid and to determine the type and quantity
of food each donor can provide. An affected country might sometimes need more
food aid than it can adequately store, transport and deliver. Large amounts of emer-
gency assistance might also contribute to disincentives on production and marketing
of domestically grown food. In these cases, the AID Mission requests less food aid
than it would under optimum conditions.
Through discussions among private and voluntary agencies, AID Missions, host
governments, and AID/Washington, the elements necessary for the proper manage-
ment of food programs are analyzed and reinforced if called for. Before the Develop-
ment Coordinating Committee (DCC) approves an emergency program, it must be
assured that proper accountability systems are in place and that personnel are ca-
pable of adequately implementing and monitoring the programs. As the program is
implemented, Missions survey storage facilities and monitor other donor shipments
to avoid congestion. Food monitors are hired when appropriate to verify that food is
being distributed as planned.
The type of food provided as food aid reflects the kind of programs it will be used
in. Maternal child health programs and on-site feeding programs, focussing on vul-
nerable groups such as children under five years of age, benefit more from high-cost
fortified and processed commodities than do general free distribution programs or
monetization programs. Whole grains and oil are more appropriate for the latter
programs.
In developing their proposals, Missions and voluntary agencies recommend the
form of commodity packaging. The type of port and transport facilities available are
a major factor in determining whether bagged or bulk commodities are more appro-
priate.
Question 22. What is being done to assure proper management and logistic sup
port, including hiring logistic specialists or contractors? With regard to our food aid
programs generally, are we making the best use possible of the various processed
products that we have here in the United States? As I understand it, on occasion,
we may be shipping products that require further processing and packaging abroad
before they can actually reach those in need. Are we taking every opportunity to
ship processed, fortified and bagged products in our food aid programs?
Answer. Before approving food programs our overriding concern is assessing the
capability of the cooperating organization to provide food aid to the intended recipi-
ents. This is done both in the field and in Washington. Resources are available from
development assistance funded Outreach and Program Support & Management ac-
tivities in the FFP program to assist PVOs to develop their logistical capabilities,
improve their management and extend their outreach efforts.
Fortified and blended foods are particularly valuable in child nutrition programs;
in Maternal/Child Health programs run by voluntary agencies, and in food-for-work
programs. Voluntary agencies work closely with AID Missions and FFP/Washington
to determine the most appropriate commodities for their programs. PVOs are en-
couraged to include fortified and blended foods in their commodity ration.
We are making a major effort to have all processed foods packaged in the United
States before shipment overseas. Bulk shipments of cereals are largely confined to
emergency programs and those where significant cost savings can be realized for the
program.
Question 23. I understand that over 85 percent of our Public Law 480 Title I pro-
grams worldwide are in wheat and rice. I also know that products such as soybean
315
oil are badly needed. Are we doing everything possible to assure a balanced mix of
commodities in these programs?
Answer. In fiscal year 1983, the commodities financed for Title I (including Title
III) were as follows:
(Dollars in millions]
Commodity
Amount
Percent
Wheat ........
Flour.....
(Wheat and flour)
Rice........
(Wheat, flour, and rice)...
Vegetable oil ..........
Feedgrains.......
Cotton ....
Beans...
$414.8
107.5
(522.3)
121.1
643.4
101.8
38.5
10.2
2.1
52.1
13.5
(65.6)
15.2
(80.8)
12.8
4.8
1.3
0.3
Total .......
796.0
100.0
Very careful attention is given to getting a balanced mix of commodities in these
programs, both from the overall point of view of the U.S. agricultural situation, and
of the U.S. agricultural market development, humanitarian, economic development,
and foreign policy interests in each country with which a Title I or Title III agree-
ment is negotiated. The Washington agencies charged with administering the Title I
program and our field missions overseas work together to get a balanced commodity
mix that will promote all the objectives of the program.
Question 24. Going back to the issue of proper management of our emergency and
other programs, I certainly hope that some of these funds for these programs will be
applied to direct management and logistic control of the resources that we are
making available. I think the last thing we want is to authorize large shipments of
food and then see that they cannot be moved or effectively handled once they
arrive. Is additional management assistance of this type being contemplated?
Answer. In programming the Public Law 480 emergency reserve, we meet logistic
and management costs with funds from the Office of Foreign Disaster Assistance
(OFDA), the Refugee Program, voluntary agencies, the World Food Program and
host governments as well as by monetizing Public Law 480 commodities in selected
cases. In addition to these funding sources, we are exploring whether additional re-
sources might be-required to fund inland transport of Public Law 480 commodities
in conjunction with the proposed supplemental appropriation. OFDA will send mis-
sions to evaluate the logistical and management requirements of proposed emergen-
cy food aid programs in the early stages of developing an appropriate response to
emergency requests.
Question 25. Have we made it any easier for U.S. firms interested in joint venture
arrangements or some type of private sector involvement in Africa to assist in infra-
structure development in areas such as food storage and handling, inland transpor-
tation, port facilities, etc.?
Answer. This administration has undertaken a number of specific efforts directed
at encouraging broader participation of U.S. firms in Africa. For example, one of
the first decisions made by Peter McPherson after being named Administrator of
the Agency for International Development was the creation of a bureau for Private
Enterprise (PRE). The direct mandate of this bureau is to seek out and encourage
opportunities for U.S. firms in those countries where AID is active.
The Africa Bureau established a new Office of Private Enterprise Development in
December, 1983 which will work with AID missions in Africa to promote new invest-
ments and joint ventures with U.S. companies. The priority areas will be agricul-
ture and agribusiness including food marketing, storage and handling. This office
also represents AID in a new InterAgency Group on Private Sector Activities in
Africa whose current task is the review of country strategies aimed at facilitating
U.S. private investments in Africa.
In addition, renewed emphasis has been given to the activities carried out by our
Trade and Development Program, which with OPIC works to help U.S. companies
find and develop investment opportunities overseas. OPIC and PRE have organized
and led investment missions to a number of African countries. The financing of fea-
316
sibility studies when such investment opportunities appear promising is also
possible.
AID has helped to organize trade fairs overseas where U.S. companies are invited
to explore export markets and seek out opportunities for joint ventures and co-fi-
nancing. Recent trade fairs in Africa have been held in Zimbabwe and Somalia.
Question 26. What has AID done with the Section 416 program since it received
management authority 6 months ago for this activity from the Department of Agri-
culture? How many projects have you approved and where are they? In addition, do
you think it would be a good idea to expand Section 416 authority to other products
that are in CCC inventory? We certainly have a number of products in U.S. Govern-
ment storage beyond just dairy products. Would it be useful to be able to make
those products available for various purposes? Do you favor some limited resale of
416 commodities?
Answer. Since the transfer of Section 416 authority to AID in August 1983, 14 pro-
grams have been approved, involving 113,750 MT of commodities. Then additional
programs, that will need another 25,188 MT, are in stages preceding approval. Coun-
tries where one or more programs have been approved are Poland, Brazil, Chile,
Haiti, Mexico, Peru, Mauritania, Mozambique, Tanzania and Sri Lanka.
Expansion of Section 416 authority to include other commodities in CCC invento-
ry would be beneficial in that a more nutritional and complete food package could
be provided to needy recipients. Offering a selection of surplus cereal products that
enjoy world wide acceptability and are easier to store than dairy products would
make the program more attractive. Then addition of other commodities also would
make 416 more effective for emergency feeding.
We believe the sale of 416 commodities in recipient countries, i.e., "monetization”,
would make sense in certain situations, and would help achieve the law's objective.
The most basic need for monetization comes from recipient countries which, in many
instances, do not have the resources to fund distribution to the needy. If a portion of
the 416 commodities could be processed and sold the proceeds would serve to allevi-
ate this problem.
Question 27. I understand we donate about $250 million in commodities and serv-
ices to the World Food Program every 2 years. How much of this is in the processed
and fortified products I referred to earlier? What steps does the United States take
to encourage the World Food Program to use these products in their project activi-
ties?
Answer. In fiscal year 1983, 35 percent of the commodities donated under the reg-
ular pledge to WFP were blended and processed foods.
Fiscal year 1983 actual shipments to WFP (140,425 MT)
Percent
Blended foods-Corn/soy milk, instant corn/soy milk, corn/soy blend,
wheat/soy blend and wheat/soy milk
5
Soy fortified foods—Flour, bulgur, oats, sorghum, grits and cornmeal.....
1
Other processed—Wheat flour, bulgur and cornmeal..........
19
Vegetable oil .....
3
Nonfat dry milk
7
The USG reviews WFP projects to assure that the donation of commodities will be
appropriate for the maximum nutritional supplement. Regular discussions are car-
ried on with WFP officials in Rome on how USG blended foods can enhance the
nutritional balance of project food baskets. AID field mission staff collaborates with
the WFP country representative in developing program proposals. FFP/WFP offi-
cials also meet periodically with representatives of the blended and processed food
industries to discuss how these products can best be utilized, especially in the
Mother/Child Health and at-risk group projects.
Question 28. Do we provide only food to the World Food Program? What about
providing funds to assist them in proper management of these foods when they
arrive in the recipient country? Is providing just commodities enough, or should we
be concerned about assisting them also with funds for in-country management and
logistic support?
Answer. The USG pledge to the World Food Program for the 1983–1984 biennium
is broken down as follows: $250 million pledged; $188 million in commodities; $59
million for freight; and $3 million for WFP Administration.
In addition an average of 125,000 MT/year of commodities are donated to WFP
under the International Emergency Food Reserve.
In order to improve food management in recipient countries WFP meets 50 per-
cent of in country commodity transport costs from their own cash resources. Recent-
317
ly WFP has been able to improve the management of field programs by expanding
their field staff with funding from increases in their administrative budget.
In special cases such as the refugee program in Somalia and the Food for Work
program in Bangladesh the USG has also contributed to the costs of internal trans-
port.
The USG's support of the WFP consists principally of food commodities. We are
the major supplier of commodities to WFP. For other donors who are not major food
exporters, we urge that they contribute cash to the WFP to help finance manage-
ment and logistical support.
Question 29. This year is the 30th anniversary of Public Law 480. What is AID
doing to make the public and others aware of this event and its importance to our-
selves both domestically and internationally? Are you working with any private or-
ganizations or foundations to coordinate and commemorate this event? If so, I would
be very interested in learning more about who these groups are, what their plans
are, and the schedule of events. It would seem to me that some of the groups that
would be particularly interested in commemorating this event would be those here
in the United States that have benefitted from this program such as our commodity
and agribusiness organizations, labor organizations that are involved in various in-
dustries such as the food processing industry, and the transport industry, and
others. Are you developing any plans to coordinate the various interests of these
groups in this major program which has meant so much to us and people through-
out the world?
Answer. The Agency for International Development in collaboration with the U.S.
Department of Agriculture (USDA), private voluntary organizations and the private
sector will commemorate the 30th anniversary of the Food for Peace program with
a series of events beginning in the summer of 1984. The program will be conducted
at national, state and local levels and will be designed to build and strengthen
awareness among leaders at all three levels of the problem of world hunger and the
role that Food for Peace and other development activities have played in reducing
hunger.
The events will include conferences, workshops, televents, and a variety of cere-
monial events.
In planning these events AID will work very closely with several PVOs and foun-
dations. Grant proposals have been received and are under review at this time.
AID will also work closely with groups such as commodity and agribusiness orga-
nizations, labor organizations, food processors and the transport industry. As indi-
cated in your statement, these groups have benefitted from the programs. Several
firms have been contacted and they have already expressed interest in participating
fully in a number of events.
AID believes that a world without hunger would be a more stable world. The 30th
anniversary of Food for Peace is an appropriate time to educate the public about
world hunger and explore ways that both the private and public sectors can work to
eliminate it.
AID's RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR PELL
Question 1. Current law requires AID to channel a fixed percentage of its program
level budget through private voluntary organizations (PVO’s). How well is AID com-
plying with that provision of law, and what plans do you have for enhancing the
AID/PVO relationship in the fiscal 1985 program?
Answer. For fiscal year 1985, we estimate AID support for PVO's at 14.3 percent.
This figure is consistent with assistance levels from fiscal year 1984 and is nearly a
full percent higher than fiscal year 1983.
Past experience shows that additional PVO activities funded in the operational
year could raise this percentage by 1-2 percentage points. Many PVO proposals are
received too late to be included in the annual budget planning cycle, which is 18
months in advance for the Operational Year Budget (OYB). For example, in the
fiscal year 1984 CP we projected 13.1 percent for PVO activities; the current fiscal
year 1984 estimate is 14.4 percent.
Over the coming year, we will continue to explore ways in which the AID/PVO
partnership can be strengthened. This will include encouraging PVO participation
in AID's country programming process to help target programs on country-specific
development needs and priorities; increasing the emphasis on cost-sharing in PVO
grant relationships to protect their independent and voluntary nature; establishing
a centralized information coordination and dissemination capability to ensure AID
awareness of PVO strenghts and characteristics and PVO knowledge of AID sectoral
318
and country priorities; and continuing consultation with the Advisory Committee on
Voluntary Foreign Aid on issues of mutual concern.
In the last decade, AID support for PVO administered development programs has
increased more than fourfold from less than $50 million in fiscal year 1973 to over
$244 million projected in fiscal year 1985.
Question 2. The President's fiscal 1985 AID request includes an expanded budget
for the Biden-Pell development education grant program. How well has that pro-
gram gone in the past 3 years, and what have these grants accomplished, in your
view?
Answer. Approximately 20 grantees funded, over the past 2 years are now provid-
ing a wide range of development education activities for population groups in towns
and cities throughout the United States. Information from project progress reports
indicates that initial activities have been quite successful.
In terms of accomplishments over the past 3 years, we are:
Providing funds to PVO's through a competitive, cost-shared grant program which
supports their efforts to increase public awareness of issues relating to hunger and
poverty. We are currently in our 3rd cycle of grant awards and expect to complete
our fiscal year 1984 selection process by July.
.
Introducing curricular material into the U.S. school system and encouraging the
leadership of national educational associations to recognize the value and signifi-
cance of global issues for public school curricula. We intend to continue our support
of the production and dissemination of curricular materials through 1985.
Encouraging increased coverage through Media roundtables designed to increase
the quality and quantity of media attention to issues pertaining to world hunger
and development. We are also exploring innovative ways to use media to educate a
TV viewing audience. A series of "Televents," blending entertainment and factual
data on development, is being tested in five U.S. cities. We expect to continue our
support of this initiative through fiscal year 1985.
We recently commissioned the services of an independent evaluator to undertake
a more in-depth review of the program. The review will: (1) determine how effective
the Program has been in carrying out the objectives of the Biden-Pell Amendment;
(2) get a sense of the Program's actual and potential impact on individuals, institu-
tions and communities across the United States; (3) clarify criteria for assessing the
Program's current and future effectiveness and impact; and (4) develop evaluation
objectives, guidelines, and concerns that can be incorporated into the evaluation
strategies for all grants.
The analysis of the data from this preliminary study will generate two reports;
Effectiveness and Impact of Development Education Project Grants, and Evaluation
Guidelines for Development Education Project Grants. Both these reports will be
available later this year.
Question 3. The Foreign Assistance Act contains various provisions governing the
environmental impact of U.S. AID projects in the developing countries.
(1) What are AID's planned and current efforts in the environmental field, and (2)
how many country-level environmental profiles have been prepared by AID?
Answer. (1) The following table contains information on the current and planned
funding levels for Agency activities in Forestry, Environment and Natural Re-
sources which was provided to Congress in the 1985 CP. As we explained in that
document, these figures are the result of the development of a new and improved
reporting system which includes all projects that deal substantively with the sound
management of productive renewable natural resources such as agricultural land,
forests, water and rangelands. It does not include traditional production oriented ag.
ricultural projects.
thousands of dollars]
Fiscal years—
Type of activity
1983
1984
1985
Agency total .........
$145,020
$125,643
$108,889
......
Forest management.........
Integrated land and multiple resource management.
Soils management......
Rangeland management
Water resources management.
34,281
47,997
40
15,774
33,487
15,319
66,791
911
875
17,121
23,365
6,170
750
1,100
12,510
to
319
Fiscal years-
Type of activity
1983
1984
1985
Pollution control ............
Other environmental
262
13,199
15,000
9,626
4,994
In addition, for the first time, a "water quality improvement” category invest-
ment by the Near East Bureau on construction and rehabilitation of water and sew-
erage systems. The totals for this category are:
[In thousands of dollars]
Fiscal year —
Type of activity
1983
1984
1985
Water quality improvement
$119,456
$47,619
$3,504
(2) The Agency is very actively assisting host governments in the planning and
preparation of country-level environmental profiles or other similar analytical and
policy-oriented documents such as National Conservation Strategies or Natural Re-
source Sector Assessments. The table below shows the countries where such studies
are completed or underway as well as those where we have active plans to prepare
them.
Region/country
Type of
study
Completed/
underway
Planned
Tbd.........
Х
DisPro ......
X ...........
X
X
Х
Tbd..........
Tbd...........
Tbd..........
CEP ............
NRSA .......
NRSA
CEP .........
X .........
X
X
X .......
CEP .........
NCS...........
NCS........
NCS........
X X X
X .....
Africa:
Cameroon.........
Kenya
Niger
Rwanda ........
Senegal........
Somalia.......
Sudan
Upper Volta
Zaire .........
Asia:
Indonesia ........
Nepal.......
Philippines
Sri Lanka .......
Latin America and Caribbean:
Belize .......
Bolivia
Costa Rica ........
Dominican Republic
Ecuador
El Salvador .......
Guatemala
Haiti
Honduras
Panama
Paraguay ...
Peru.......
Central American Regional.
Near East:
Egypt........
Turkey
....... CEP .........
CEP .........
CEP .....
CEP ......
CEP .......
CEP
CEP .......
..... CEP ........
CEP .......
CEP....
CEP .....
CEP ......
Tbd.........
X .......
х
X
X
Х
X
X
Х
Х
X
X
X .....
X
X
CEP
CEP P......
Х
All (number)
18
10
1 Tod=to be determined; DisPro=District Profiles; NRSA=Natural Resource Sector Assessments; CEP=Country-Level Environmental Profiles;
NCS=National Conservation Strategies.
320
Question 4. Senator Dodd, Bingham and I sent you a letter two weeks ago con-
cerning published reports of the misuse of Public Law 480 Title II food donations in
El Salvador. What is the status of your investigation into these allegations, and
have you asked the AID Inspector General to undertake a full review of the uses,
and possible misuses of our bilateral aid to El Salvador?
Answer. I replied to your question in a letter dated February 28. Copies were sent
to Senators Dodd and Bingham. A copy of that letter is attached for your informa-
tion.
U.S. INTERNATIONAL DEVELOPMENT COOPERATION AGENCY,
AGENCY FOR INTERNATIONAL DEVELOPMENT,
Washington, D.C., February 28, 1984.
Hon. CLAIBORNE PELL,
U.S. Senate,
Washington, D.C.
DEAR SENATOR PELL: Thank you for your letter of February 3, 1984 conc
ncerning the
alleged sale of Public Law 480, Title II food on the local market in various depart-
ments of El Salvador.
I can assure you of our continued concern on this matter and report the following
developments.
Immediately following the January 31 article in the New York Times, I sent
Charles Gladson, our Deputy Assistant Administrator of the Bureau for Food for
Peace and Voluntary Assistance, and a senior Food for Peace officer to El Salvador
to do a survey of the Title II distribution areas mentioned in the article.
Their visit, closely coordinated by our Mission in San Salvador, was comprehen-
sive and included visits to San Vicente and Cojutepeque, two cities referred to in the
Times' article. Additional visits were made to the key distribution localities of Son-
sonate, Santa Tecla, San Miguel and Usulutan. Assisted by Government of El Salva-
dor (GOES) officials, the team conducted indepth interviews with distribution work-
ers, civil leaders, military commanders and, in the case of San Vicente, four women
arrested and held with Title II commodities which they had been selling. Visits to
the displaced persons encampment there included verification of receipts, recipient
cards, as well as discussions with numerous Title II food recipients.
Conferences were held with high level GOES officials, among them Minister of
Interior Manuel Sermeno, the Directors of Conades and Dideco, the two Govern-
ment of El Salvador distributing agencies, the Governor of San Vicente, the military
commanders of San Vicente and the province of Cuscatlan, and the Inspector Gener-
al of the GOES armed forces Colonel Louis Amaya. Also participating in the field
visits and meetings were the directors of the World Food Program, Acting Directors
of Catholic Relief Services (CRS) and the Red Cross. These organizations have oper-
ational programs in these localities.
A close review was also made of the displaced persons program food control
system from arrival at port to distribution points, as well as existing controls on the
borrowing of Title II commodities among ongoing programs. Finally, a close study
was made in San Vicente of the CRS and Conades distribution mechanisms at the
local level.
In summary,
the assessment of the survey team was that the reported diversions
and misuse of Title II food were minor in scope, minimum in quantity, and originat-
ed from a small number of individual displaced persons. Furthermore, the sales oc-
curred on a small scale at specific market stalls and were confined to several one-
gallon cans of vegetable oil and a few bags of bulgur. Numerous U.S. Title II sacks
filled with grain were seen behind small individual sales stalls, but were found to
have been refilled with local and legitimate products. The sacks had been obtained
gratis and empty, and had simply been re-used. The bags also were utilized for a
number of other purposes, as sand bags at protective points guarding the GOES
military headquarters.
Field visits to six other market places throughout the country were completed
Friday, February 10. They uncovered no recurrence or pattern of petty sales, as had
been recorded in San Vicente and Cojutepeque.
These observations were confirmed independently by the leading commercial dis-
tributor of salad oil in El Salvador. Consultations with the company's regional sales
managers confirmed to the team that instances of market sales of one-gallon cans of
Title II vegetable oil had been seen in only two localities-San Vicente and Sensun-
tepeque, and in very small quantities. The Mission visited Sensuntepeque and found
no further trace of Title II misuse.
321
These findings are preliminary and the review is being continued. However, the
team is convinced that the existing distribution program is basically sound and that
no suspension or reallocation of ongoing distribution is advisable or necessary. The
team feels, however, that the intensified program of supervision and monitoring at
the local end use level, initiated in August 1983 by Conades in 6 departments,
should be expanded. The team reviewed with the Mission the plan for a comprehen-
sive audit which had been arranged in consultation with the Inspector General/
Washington staff. The team also discussed the creation of a cadre of training field
inspectors to review the Title II programs and report to USAID. GOES officials
appear amendable to the concept, and it is to be further developed in the near
future.
At this time, we feel that the prompt and vigorous action taken by civic and mili-
tary officials and its ample publicity will serve to reinforce the adequate controls
now in place.
The AID Inspector General has communicated with the El Salvador Mission Di-
rector concerning the authorization of a local audit of the Title II program, which
will be undertaken shortly.
I appreciate very much your concern and will keep you informed of further devel-
opments. If I can provide you with further information, please let me know.
Sincerely,
M. PETER MCPHERSON.
U.S. SENATE,
Washington, D.C., February 3, 1984.
Mr. M. PETER MCPHERSON,
Administrator, Agency for International Development,
Washington, D.C.
DEAR MR. McPHERSON: We are deeply concerned about reports that food provided
on a grant basis by the United States under Public Law 480, Title II is being sold in
local markets in various Departments in El Salvador. According to an article in the
New York Times of January 31, vendors are selling wheat, corn, rice, and cooking
oil from bags and containers stamped “Not to be sold or exchanged.” According to
sources cited in the article, donated foodstuffs have been sold in the market in San
Vicente and in the Department of Usulutan.
We are especially concerned with this situation in light of AID's participation in
the Salvadoran Government's recently initiated National Plan, designed to "win the
hearts and minds” of the people of the Departments of San Vicente and Usulutan.
The sale of American food, originally intended as an important demonstration of
United States desire to help the beleaguered people of El Salvador, raises serious
questions regarding United States economic assistance in that country. We are par-
ticularly disturbed by this development because it tends to further erode public con-
fidence in our foreign assistance program. Furthermore, we believe that this kind of
illegal diversion of our aid resources raises doubts about the ability of USAID, and
the Salvadoran government to properly monitor and implement an expanded aid
program there.
As Members of the Senate with important responsibilities for helping determine
U.S. policy in Central America, we request that the AID Inspector General under-
take an immediate, and comprehensive review of this, and similar problems of di-
version or misuse of our economic assistance to El Salvador. We are also considering
a request the GAO review this issue. We hope that you agree that any adequate
review of the President's fiscal 1984 and 1985 request for aid to Central America
must first concern itself with how well we are managing existing aid resources.
Sincerely,
CLAIBORNE PELL.
CHRISTOPHER J. DODD.
JEFF BINGAMAN.
Question 5. In fiscal year 1982, the Congress provided $350 million in what was
then described as a one time only emergency infusion of economic aid to the coun-
tries of the Caribbean Basin. Now, in the fiscal year 1985 request, we are presented
with a 5-year $8.4 billion economic plan designed to improve the stagnating econo-
mies of the region. What concrete economic gains were realized by the CBI emer-
gency aid?
Answer. The fiscal year 1982 funds provided as part of the original CBI legislation
were emergency funding for an immediate problem in the Caribbean Basin. It was
aimed at helping to restore confidence and stability in the face of a precipitous drop
322
in essential export earnings from sugar, bananas, bauxite, tourism and the like.
These funds were disbursed as rapidly as possible, subject to policy conditions, and
largely achieved their purpose of preventing economic collapse and buying time for
countries to adjust to the severe economic problems they were facing.
The $8.4 billion economic package proposed for Central America by the Bipartisan
Commission on Central America seeks a comprehensive solution to a set of serious
and deep rooted problems. It addresses the very broad objectives of peace, stability,
long-term economic growth and democracy. These are extremely ambitious goals,
given the political turmoil and social unrest in the region. As the Bipartisan Com-
mission indicates in its report, solution of these problems will require a massive
effort by the Central Americans themselves, and the proposed assistance can only
play a supporting role. If the goals can be achieved, however, the money will have
been well spent.
Question 6. Has AID done a preliminary analysis of the impact of the CBI on the
beneficiaries of the program?
Answer. AID is participating in an interagency CBI Committee that is now ana-
lyzing this issue. That report is not yet completed, but contains AID's preliminary
analysis of its CBI activities to date, including the uses of the CBI Supplemental
Appropriation. We will be happy to provide a copy of the report when it is available.
Question 7. The President's fiscal 1985 request would, if adopted, reduce economic
aid to Israel by $60 million from the levels approved by the Congress last November.
What was the rationale for this reduction in aid to Israel?
Answer. The Administration's request level for economic assistance to Israel is
$850 million, $65 million more than the fiscal year 1984 request. Moreover, because
of the shift to grant FMS, the interest saved on FMS loans brings the net value of
this year's proposal very close to last year's Congressional appropriation. As in
fiscal year 1984, $785 million would be a cash transfer for balance of payments sup-
port. The remaining $65 million would provide one-time endowments for four
United States-Israeli foundations. The level and terms of our assistance proposal
were determined after careful and thorough review. As in the past, the level of pro-
posed assistance was influenced by our own tight budgetary ceiling and the need to
assure that the level of assistance to Israel within the ceiling does not force reduc-
tions in other programs vital to U.S. security and cause misperceptions among our
other friends and allies.
I would also note that Israel's economic problems can only be resolved if the Is-
raeli Government and people are willing to undertake a far reaching economic sta-
bilization program and implement it consistently over an extended period of time.
Additional ESF assistance-whatever the level-will not get at the basic problems
that beset the economy.
Question 8. To what extent were factors such as Israel's 200 percent inflation rate,
or its heavy debt burden to the United States taken into consideration when making
the decision to reduce aid?
Answer. In determining the proposed terms of our ESF and FMS programs we
took Israel's debt service burden into account. Our economic assistance to Israel
helps it to finance its non-defense balance of payments deficit without relying
unduly on high cost commercial borrowing or drawing down foreign exchange re-
serves. We considered all components of the balance of payments, including debt
service, in the process of deciding upon an appropriate ESF level to propose. Israel's
high inflation rate is a serious problem, but not one which is amenable to solution
by increasing the aid level.
Question 9. Although economic aid to Israel was reduced in the President's
budget, ESF to Egypt was not. What factors influenced the decision to maintain
Egyptian economic aid while reducing Israel's?
Answer. As indicated previously, the Administration's request for economic assist-
ance to Israel is $65 million higher in fiscal year 1985 than it was in fiscal year
1984, not lower.
Question 10. Last autumn the AID Administrator (Mr. McPherson) sent Congress
a program change notification to reobligate $103 million in project funds as a cash
grant transfer to assist Egypt with its balance of payments problem. What is the
current status of that request?
Answer. AID continues to believe that the $103 million deobligated from previous
year programs should be reobligated as a cash transfer. We propose doing a cash
transfer to indicate our support for the important political relationship between the
Government of Egypt and the United States. We feel that this use of the deobligated
funds will enable us to test the effectiveness of a cash transfer without setting a
precedent for how we program our annual ESF program.
323
We have received word from our Mission in Cairo that a letter has been received
from the Government of Egypt requesting that approximately $1.1 million be de-
linked from the $103 million and reobligated as an amendment to the CIP. This
amount must be either reobligated by the end of the month or returned to the U.S.
Treasury. Based on this request, we plan to notify Congress of our intent to reobli-
gate the approximately $1.1 million as a Commodity Import Program.
We continue to support the reobligation of the remainder as a cash transfer.
Question 11. Since that request was made, the Egyptian Government has asked
that $200 million of the annual $750 million ESF program for Egypt be made as a
cash grant transfer. What is the administration's position on this issue?
Do you believe that an IMF agreement should be in place before the United
States makes this kind of change in its aid program?
Answer. The Administration has not proposed that a $200 million cash grant be
part of the annual $750 million ESF program for Egypt. We are ready to consider
cash transfers to Egypt, as we do elsewhere, in the context of demonstrable need
and significant efforts by the Government of Egypt to deal with its economic diffi-
culties. The magnitude and timing of such transfers can only be determined in this
context.
The Administration does not expect an IMF agreement to be in place prior to a
cash transfer program. To the extent that the availability of AID resources assists a
country conclude an IMF agreement, if needed, we are prepared to consider a cash
transfer as part of an overall package. However, the key factor in AID's determina-
tion to the appropriateness of a cash transfer is the seriousness and pace of the re-
cipient government's own structural reform efforts.
Question 12. What progress has been made in reducing the large Egyptian aid
pipeline which had reached $2.7 billion last year?
Answer. I am pleased to say that program implementation improved dramatically
in fiscal year 1983 over prior years' performance.
Expenditures exceeded new obligations for the first time since the resumption of
U.S. assistance in 1974. Whereas fiscal year 1983 obligations were $750 million in
ESF and $266.8 million in public law 480, ESF expenditures in fiscal year 1983 to-
talled $856 million and total expenditures, including public law 480, were over $1
billion.
For the first time, therefore, growth of the pipeline was reversed. From a peak of
nearly $2.7 billion at the end of fiscal year 1982, it dropped to a little under $2.5
billion at the end of FY 1983.
We expect the program momentum to continue, reflecting a project portfolio
under full-scale implementation and increased attention to project management.
Question 13. In several cases, notably Zimbabwe and Pakistan, the fiscal 1985 re-
quest has shifted economic aid from all ESF to a Development Assistance/ESF divi-
sion. What was the rationale for providing some of our economic aid as develop-
ment, rather than ESF, assistance?
Answer. Zimbabwe. For fiscal year 1985, $15 million each in ESF and DA is re-
quested. The $15 million DA is requested to support the ongoing Basic Education
and Skills Training project and to provide the final tranche of funding for the Child
Spacing and Fertility project, which is assisting the Government of Zimbabwe in ad-
dressing their population problem. DA funding is appropriate for these ongoing
human resources and population activities. We believe the program in Zimbabwe
can now begin moving to development assistance. The $15 million ESF will provide
final funding of $11.3 million for the Agriculture Sector Assistance program, as well
as $3.7 million for the ongoing Basic Education and Skills Training project.
Pakistan. When assistance to Pakistan was resumed in 1981, there was consider-
able discussion whether to use ESF or DA. Favoring ESF, we were supporting a
country which, since the Soviet invasion of Afghanistan, had become important to
U.S. security interests. On the other hand, some of the types of projects we dis-
cussed with the Pakistan Government were strongly developmental in character,
similar to DA projects elsewhere. At the time we resumed a program in Pakistan,
Congress determined that assistance should be provided as all-ESF. There are valid
reasons for returning to a portion of DA funding in fiscal year 1985—as your com-
mittee encouraged us to do so. The primary reason is that many of these projects
qualify for DA funding, in terms of substance, and it is our wish to recognize this
the way the program is funded.
324
AID'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR KASSEBAUM
Question 1. Please provide a list of those countries likely to encounter difficulty in
meeting their debt obligations to the U.S. Government and to U.S. commercial insti-
tutions this year to the extent that rescheduling is seriously contemplated. What
AID and State programs contained in this year's request are intended to directly
address this issue? What are the projections of the impact of these programs? To
what extent will additional U.S. loans to these countries add to the seriousness of
this problem?
Answer. The following countries have made a request to the Paris Club, the inter-
national mechanism for the renegotiation of official and officially guaranteed debt,
for rescheduling of their debt services payments:
(1) Dominican Republic; (2) Ivory Coast; (3) Madagascar; (4) Nigeria; (5) Philip-
pines; (6) Poland; (7) Sudan; (8) Uganda; (9) Yugoslavia; (10) Cuba; and (11) Argenti-
na.
We anticipate that the following countries will make a similar request over the
next few months.
(1) Togo; (2) Zambia; (3) Jamaica; (4) Costa Rica; (5) Mozambique; (6) Bolivia; and
(7) Guyana
Of these 11 countries that have already, requested Paris Club rescheduling of their
debt service payments, 6 (Ivory Coast, Nigeria, Poland, Yugoslavia, Cuba, and Ar-
gentina) are not currently AID recipients. The 5 remaining countries have or are in
the process of negotiating a stabilization agreement with the IMF. In the case of the
Dominican Republic, Philippines, and Sudan the AID program request for fiscal
year 1985 calls for ESF allocations of $45 million, $95 million, and $120 million, re-
spectively, in direct balance of payments assistance. In addition, development assist-
ance totaling almost $101 million is planned for these 5 countries to support projects
designed to address basic development constraints and production bottlenecks in
their economies. These assistance efforts should enhance the prospects of their at-
taining a sustainable balance of payments position over the medium term and
longer term.
Of the seven countries that are expected to request Paris Club rescheduling of
their debt service payments, two are not currently AID recipients. (Mozambique and
Guyana). Three of the five remaining countries, Zambia, Jamaica, and Costa Rica,
would receive balance of payments support in the form of allocations of ESF in the
amounts of $20 million, $70 million, and $160 million, respectively. The five coun-
tries together would receive $83 million in development assistance.
The international community, including the IMF and the IBRD, through their
stabilization and structural adjustment programs, can play a key role in increasing
the developing countries' ability to reduce debt arrears and resume the servicing of
their debt obligations in an orderly and timely manner. Much will depend, however,
on continued adequate financing in support of their adjustment programs and sus-
tained world economic recovery.
We do not believe the additional loans we plan to extend to these countries in FY
1985 and over the years ahead will add to the debt problems. It should be noted that
five of the countries experiencing debt problems—Madagascar, Sudan, Uganda,
Togo, Zambia-are programmed to receive AID assistance only in the form of
grants. The other five countries will receive about two-fifths of their assistance
($498.4 million in total) from AID in the form of loans. The most stringent loan
terms will carry a 20-year maturity, including a 10-year grace period, with interest
at 2 percent during grace period and 3 percent during amortization. Given this mix
between loans and
grants, and the concessional element and grace period of loans it
is unlikely that additional prudent lending to these countries will contribute to
their debt problems.
Question 2. Is it correct that an AID contract for South Africa black student schol-
arships to American institutions provides for $550,000 in overhead to administer
only $400,000 worth of student grants? Is this a typical situation? Can you cite a
privately funded scholarship program that allows $1.38 in overhead for each $1.00
in scholarship awards?
Answer. In June 1983 AID entered into a contract with the Small Business Ad-
ministration for the services of a minority business firm to provide AID with techni-
cal and advisory services to place and support approximately 20 South African stu-
dents in U.S. colleges and universities. The contract budget provided $435,290 for
scholarships, $521,307 for administrative costs, and $43,141 for the fixed fee, for a
total of $999,728. Included in the amount for administrative costs was $187,031 for
overhead, at the provisional rate of 101.94 percent of direct labor costs ($183,472).
325
Thus, the overhead cost was 43 percent of the scholarship costs, while the total of
the administrative costs plus the fixed fee was 130 percent of the scholarship costs.
The amount of scholarships excludes tuition, in the expectation that most of the
training institutions would waive the tuition. If tuition were added to the scholar-
ship costs, the ratio for administrative costs would be reduced somewhat. Further,
the overhead rate has been reduced to 51 percent, reducing further the ratio for ad-
ministrative costs.
Question 3. What portion of the dollar value of AID contracts is awarded on the
basis of lowest price bidder?
Answer. For the last 3 fiscal years, an average of 5 percent; 3 percent in fiscal
year 1981, 4 percent in fiscal year 1982, and 8 percent in fiscal year 1983.
Question 4. Do you have plans to increase that portion?
Answer. No.
Question 5. If not, why not?
Answer. Awards solely on the basis of lowest price bid are for formally advertised,
fixed-price contracts. Such contracts are suitable when the work to be performed
can be precisely defined, and is of such a nature that a fixed-price can reasonably be
established-a minimum of variables and unknown's and maximum specificity as to
time and requirements. This is most often the case when items of hardware are
being purchased. AID contracts are mostly for technical services for which cost-re-
imbursement contracts are more appropriate. Cost-reimbursement contracts are
suitable when the work to be performed cannot be precisely defined, and the cost of
the work cannot reasonably be fixed. In awarding cost-reimbursement contracts, the
proposed cost should not be the controlling factor, since such advance estimates may
not accurately reflect final, actual costs.
To award cost-reimbursement contracts primarily on the basis of lowest estimated
cost might encourage submission of unrealistically low estimates, and increase cost
overruns. However, cost-reimbursement contract awards are analyzed to ensure that
the costs are fair and reasonable. The majority of AID's technical assistance pro-
grams for developing nations require use of cost-reimbursement contracts, based on
Government-wide regulations governing selection of contract type (41 CFR 1-3.405
and 48 CFR 16.3). AID follows Government-wide standards for evaluating and
awarding cost-reimbursement contracts (41 CFR 1-3.805 and 48 CFR 15.6).
Question 6. Why, for instance, does not AID award contracts to land grant univer-
sities that submit the lowest bid rather than to those with very high overhead
rates?
Answer. Our contracts with land grant universities are cost-reimbursement con-
tracts for research or technical services. As discussed above, such contracts are not
awarded on a low-bid basis. Further, most of the universities with which AID does
business are tax-supported public non-profit institutions. They have indicated that
they do not believe price bidding contests are necessary or proper when procuring
professional services from among them. Accordingly, competition among them is
based on professional capabilities rather than price. Finally, overhead rates are only
one among many elements making up a cost estimate. University overhead rates
are normally negotiated for Government-wide use in accordance with OMB Circular
A-88, by a representative team of U.S. Government contract specialists and audi-
tors, who determine a reasonable rate for the specific university in accordance with
Government-wide cost principles (OMB Circular A-21).
Question 7. Your budget presentation requests $404 million for AID operating ex-
penses in 1985, an increase of 22 percent over 1982 actual expenses. What is the
cause for this increase? Why have you not been able to hold your administrative
costs down?
Answer. Most of the $73.1 million increase between 1982 and 1985 falls in the
areas of U.S. Direct Hire salaries and benefits and the cost of operating our overseas
missions.
As a result of general pay increases, lifting the ceiling on Federal salaries two
times, increasing the cap on post differential pay and benefit changes resulting from
the FAA, the cost of U.S. Direct Hire salaries and benefits has increased about $28.1
million. These are costs over which the Agency has no control if we are to maintain
an adequate workforce level.
During the past several years, prices overseas have been increasing at an average
rate of 11 percent per year, which would equate to an increase of about 37 percent
from 1982 to 1985. Through our various cost saving efforts, including efforts to in-
crease local currency contributions from host governments, we have been able to
hold the increase in appropriated funds for overseas missions to $25.3 million, an
increase of only 23 percent.
326
The impact of overseas inflation is also the primary reason for the increase in the
cost of Foreign Affairs Administrative Support provided by the Department of State,
which will be $6.2 million higher in 1985 than in 1982.
The other primary areas of increased costs during the past 3 years are rental
charges for office space in Washington, with an increase of $2.8 million; staff train-
ing costs, primarily to improve the language capabilities and implementation skills
of our employees, at $2.1 million; costs associated with providing improved physical
security for our overseas employees, which shows a $1.6 million increase; and in-
creased costs for data and word processing equipment of about $3.6 million, which is
required if we are to properly manage our resources with our reduced staff levels. I
would like to add that $1.5 million of this later increase is to upgrade our central
computer facility, which was last upgraded in 1977. This leaves about $3.4 million
for all other costs, such as expansion of IG audit coverage, general housekeeping
costs in Washington, support of dependent education, construction and purchase of
overseas property, Washington travel etc.
We have made efforts in the past to control costs, and will continue these efforts
in the future. Our success can be seen in the fact that Washington costs, even in-
cluding salaries, benefits, and office rents, has increased only 16 percent over the 3-
year period, less than the U.S. inflation rate over the same period.
Some of the cost control efforts overseas include office consolidations and the pur-
chase of property for residential and office space, a very cost effective program. The
impact of these two activities in combination over the period in question can be seen
in the fact that residential and office rental costs have only increased 13.5 percent
over the 3-year period from 1982 to 1985, much less than the effective price increase
of 37 percent during the period.
Question 8. Does AID supplement its operation expenses with funds from counter-
part currencies generated by ESF Commodity Import Program or Public Law 480
commodity sales? If so, please provide us with the full value of AID operating ex-
penses provided under these programs or others of a similar nature.
Answer. Yes, as authorized by Sections 625(h) and 636(h) of the FAA we do supple-
ment our operating requirements with Trust Funds provided by cooperating coun-
tries. In 1982 host country governments contributed $9.1 million in local currencies
to offset a portion of the operating expense costs of our overseas missions. In 1983
contributions were $12.4 million.
We are encouraging our overseas units to negotiate agreements with host country
governments to increase current contributions or begin contributions in those coun-
tries not now contributing. Since a number of Trust Fund arrangements are in the
process of negotiation, we do not know the exact amounts which will be made avail-
able during fiscal years 1984 and 1985. However, we do expect that the contribu-
tions will increase by about 25 percent per year.
DEFENSE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY
SENATOR PELL
Question 1. Many knowledgeable people returning from visits to Honduras are
raising questions that the U.S. military activity is establishing a permanent pres-
ence
that the exercises will continue for some time to come and that many of the
facilities being constructed, ostensibly for the joint maneuvers, will remain in Hon-
duras permanently.
(a) What is the rationale for this military activity in Honduras?
(b) How do you respond to those who fear that this activity will deepen a U.S.
military commitment and role in Central America?
Answer. (a) The purpose of the military exercises in Honduras is twofold. First
they provide valuable, realistic training to U.S. military personnel and units.
During the Ahuas Tara II Exercise, which terminated on February 8, many units
were able to practice for the first time the missions they would be called upon to
perform during an actual conflict. Second, the exercise underscores our commitment
to the democratic nations of the region. We are assisting the military forces of
friendly nations to develop the capability to defend themselves from external
threats as well as from internal insurgencies.
(b) Our recent military exercises in the region have been at the request of the
host nations reflecting their concern for their own defense from the threat posed by
the military buildup in Nicaragua and the externally supported insurgencies. Our
increased military activity is part of the security shield described by President
Reagan during his April 1983 address to Congress. This shield is designed to provide
327
the atmosphere in which progress in development and democratization can take
place.
Question 2. What plans exist for the expansion and modernization of the air and
port facilities at Puerto Castilla. What is the purpose of such a facility? Has the
U.S. negotiated a base access agreement with the Honduran government?
Answer. The Department of Defense currently has no plans to construct any fa-
cilities at Puerto Castilla. The Honduran government, however, is making major
port improvements at that location. We presently have an access agreement with
the Government of Honduras for use of selected facilities. This agreement is an
annex (May 6, 1982) to the 1954 Bilateral Military Assistance Agreement between
the Government of Honduras and the Government of the United States.
Question 3. Are there plans to make the Regional Military Training Center at
Puerto Castilla a permanent training facility? Is this destined to eventually replace
the School and other facilities in Panama?
Answer. We have requested security assistance funds in the fiscal year 1984 sup-
plemental and in fiscal year 1985 budget to assist the Hondurans in constructing
permanent facilities at the Honduran Regional Military Training Center. This is a
Honduran facility which will serve as their primary training center. Third country
personnel can be trained at this center only if invited by the Hondurans. The Gov-
ernment of Honduras has opened the center to third country personnel, and we sup-
port the regional nature of the center. The RMTC is not designed to replace other
facilities in Panama.
DEFENSE DEPARTMENT'S RESPONSE TO AN ADDITIONAL QUESTION SUBMITTED FOR THE
RECORD
Fiscal year:
Question. Why is the Department of Defense asking for almost twice as much
WRSA transfer authority in fiscal year 1985 ($248M) as for fiscal year 1984 ($125M)?
Answer. The amount of transfer authority requested annually by DOD is based on
Service estimates of the stocks they have or will have available to apply against the
outstanding WRSA deficiencies. Most stocks become available due to U.S. modern-
ization programs which make some existing stocks excess to U.S. requirements. The
history of the program reflects the large differences which often exist between
transfer authority requests from year to year.
Millions
1976/7 ......
$96.75
1977 .....
125.00
1978...
270.00
1979
90.00
1980 ....
95.00
1981 ....
85.00
1982 ....
130.00
1983
125.00
1984 proposed
125.00
1985 proposed
248.00
[Whereupon, at 4:50 p.m., the committee adjourned, subject to call
of the Chair.]
APPENDIX
EXECUTIVE SUMMARY-REPORT OF THE COMMISSION ON SECURITY AND ECONOMIC
ASSISTANCE
In supporting the economic and security capabilities of friendly countries, the
United States seeks to further free, humane and open societies in a secure, prosper-
ous world. Our efforts are directed to assuring our national security, promoting the
democratic rights and ideas upon which our society is based and fostering our eco-
nomic and commercial interests.
BACKGROUND
Concerned with the lack of popular and legislative support for foreign assistance,
declining real resource levels and widespread skepticism regarding program effec-
tiveness, the Secretary of State created the Commission on Security and Economic
Assistance. Noting that international political, economic and security concerns are
increasing in number and complexity, he charged the Commission with examining
all aspects of U.S. foreign assistance programs and proposing ways these programs
can make a greater contribution to meeting national objectives in the 1980s.
The Commission members were drawn from both the Congress and the public,
and represent a broad bipartisan cross-section of views. Functional task forces were
organized to examine specific objectives and programs. Testimony was heard from
specialists and generalists, from both within and outside the government.
The major findings and recommendations of the Commission follow:
FINDINGS
Support for foreign assistance has broken down and polarized, as greater numbers
of advocates for military or economic programs oppose rather than support each
other. This friction has been exacerbated by budgetary limitations, which have
forced difficult trade-offs among domestic and international programs. As a result of
widespread misunderstanding regarding the nature and objectives of specific mutual
assistance programs, the general public no longer perceives these efforts as coher-
ently serving valid national interests.
Moreover, because of a decline in confidence between the executive and legislative
branches over the conduct of foreign policy, program management authority over
foreign assistance has become increasingly encumbered by legislative requirements.
Recent efforts to integrate security and economic assistance policy and programs,
while representing progress, still fall short of the mark.
It is the judgment of the Commission, however, that the instrumentalities of for-
eign assistance are potent and essential tools that advance our interests. Combined
in well-integrated mutually reinforcing programs, they can achieve great success;
witness the Marshall Plan, Korea and Taiwan.
Evaluation of the effectiveness of specific programs is conceptually difficult, par-
ticularly since these programs serve multiple objectives. Moreover, because the
weighing of objectives is necessarily subjective, differences in values among observ-
ers will generate differences in conclusions. That is unavoidable.
The keystone to our recommendations is the conclusion that economic and mili-
tary assistance must be closely integrated. Economic growth and rising standards of
living are vital to internal stability and external defense. Threats to stability
impede economic development and prosperity. The current fragmentation of pro-
gram policy, design, implementation and evaluation is detrimental to both effective-
ness and public support. The future effectiveness of the mutual assistance program
rests on the concept that security and growth are mutually reinforcing and that
both are fundamental to the advancement of U.S. interests. This truth is best illus-
trated by two regions that loom large in our future: the Caribbean Basin-including
Central America-and Africa. The first is an immediate security challenge with an
34-045 0-84-22
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330
important economic dimension, while the second is a situation of economic crisis
that may well heighten security concerns.
On balance, it is the judgment of the Commission that U.S. assistance programs
make an indispensable contribution to achieving foreign policy objectives.
On a global level, threats to security and prosperity are increasing. The military
power of the Soviet Union and its surrogates has been expanding rapidly. The world
faces severe economic problems, including huge debts in some countries, intractable
development problems in others and serious problems of poverty and hunger.
U.S. foreign assistance as a whole has been declining. In real terms (when adjust-
ed for inflation) U.S. assistance expenditures over the last five years have averaged
some 21 percent below those of a comparable period ten years ago. Military assist-
ance, at least in terms of its "grant element,” has fallen disproportionately. In 1975,
the proportion of concessional economic and military assistance was roughly equal.
By 1983, five dollars of economic assistance was given on concessional terms for
every dollar of grant military assistance. Aside from support to Israel and Egypt,
most of our military assistance is now provided at the cost of money to the U.S.
Treasury, yet there are friendly countries with legitimate security needs that simply
cannot afford to borrow for necessary military equipment and services on these
terms.
The Commission recognizes that the balance between economic and security as-
sistance continues to be one of the most divisive issues affecting the foreign assist-
ance program. The debate has become sterile and unproductive at best and damag-
ing to U.S. interests at worst. The Commission returned repeatedly to the conclu-
sion that the optimum mix of programs could only be reached on a country-by-coun-
try basis where local conditions and U.S. interests would determine requirements.
While Economic Support Fund programs have grown-largely to Israel and
Egypt-both Development Assistance and Public Law 480 have declined in real
terms as has our overall economic program. Furthermore, while ESF is highly flexi-
ble and is being used in a variety of ways meeting both U.S. and recipient needs,
legal and administrative rigidities hamper the effectiveness of Development Assist-
ance. These result, in part, from legislative “barnacles” and a defensive posture by
foreign assistance administrators.
Many other donor country assistance programs promote exports by combining
commercial and subsidized credits and projects that support their domestic industri-
al interests. These programs are effective; our commercial interests are suffering
significant losses. We have attempted for seven years, without success,
to negotiate
an agreement to limit these practices, but they continue to increase. The Commis-
sion concludes that defense of legitimate U.S. commercial interests with a similar
program is inevitable if diplomatic efforts to reverse this trend are not successful.
The countries of the world are highly interdependent and continue to become
more so. In this setting, we cannot escape the importance of international lending,
trade relations, collective security and mutual assistance. Charting a course for U.S.
leadership is fraught with more dangers than ever before. Because our mutual as-
sistance efforts must respond to a changing environment that threatens American
security and prosperity in every part of the world, we offer the following recommen-
dations.
ESTABLISH BIPARTISAN LEADERSHIP SUPPORT
The Commission urges that the Congressional leadership and the President issue
a joint statement endorsing the conclusion that foreign security and economic coop-
eration programs are mutually supportive and interrelated, and together constitute
an essential and integral part of the foreign policy of the United States.
PROMOTE A CITIZENS' NETWORK
To assure that the public is adequately informed, the Commission recommends
the creation of a citizens' network. To foster its development, the Commission sug-
gests that the President, with the support of bipartisan leadership, call for a White
House conference on the subject of United States security and economic assistance.
CONTINUE SUPPORT FOR DEVELOPMENT EDUCATION
The Commission recommends that the Administration and Congress continue and
broaden their efforts to inform the American public on development issues and in-
clude all elements of our mutual assistance programs.
331
INCREASE ASSISTANCE LEVELS
To meet U.S. foreign policy objectives significant increases in real levels of assist-
ance will be required. Any new initiatives will necessitate further budget increases.
ADOPT A COUNTRY APPROACH TO PROGRAM DEVELOPMENT
Foreign assistance programs should contain an overall mix of security and eco-
nomic assistance resources that best serves U.S. national interests. That is best de-
termined through development of an integrated program for each recipient country.
The Commission believes that this principle should be the primary policy guiding
the development of the overall program.
ENSURE CAREFULLY INTEGRATED PROGRAMS FOR SUB-SAHARAN AFRICA AND THE
CARIBBEAN REGION INCLUDING CENTRAL AMERICA
Special challenges face the United States in the foreseeable future in sub-Saharan
Africa and the Caribbean region, including Central America, where there are seri-
ous economic and security conditions. The Commission recommends particular at-
tention be given to careful construction of integrated security and economic assist-
ance programs. recognizing that increased resources may be needed.
SUPPORT POLICY REFORMS
The Commission recommends that programs contribute to the evaluation of poli-
cies that will result in open, self-sustaining and democratic societies. To achieve re-
cipient country policies that are conducive to growth and development, the pro-
grams and policies of the several contributors must be properly coordinated. Given
its prominence and experience, the World Bank should take a leading role in pro-
moting policy reform and better coordination among all participants. It would be
desirable for the World Bank's executive board to hold regular review meetings to
focus on the recipient country's policies and program coordination relative to bank
assistance. Not only would such discussions facilitate coordination, they would be
useful in their own right.
EXPAND HUMAN RESOURCE DEVELOPMENT AND INSTITUTION BUILDING
The Commission endorses greater program emphasis on human resource develop-
ment and institution building. These are essential to development and security. U.S.
knowledge and experience can contribute substantially to meeting the needs of de-
veloping countries, as can training and education programs, both civilian and mili-
tary.
INCREASE PROGRAM EMPHASIS ON SCIENCE AND TECHNOLOGY
The Commission recommends greater programming emphasis be given to science
and technology-related development assistance that would also be available, on a
mutually cooperative basis, to middle-income and newly industrialized countries.
PROMOTE THE PRIVATE SECTOR
The Commission endorses the use of our bilateral and multilateral cooperation
programs to promote and encourage the growth of indigenous private sectors and
U.S. private sector contributions to the development process. The strengthening of
free trade unions and the promotion of employment-oriented development strategies
in an environment conducive to free enterprise, are integral to sound long-term
growth and security. Both bilateral and multilateral programs should be used to
achieve appropriate policy reforms and to support these objectives wherever feasi-
ble.
IMPROVE EVALUATION
We recommend the development of a comprehensive evaluative mechanism that
assesses the secondary as well as primary impacts of U.S. mutual assistance efforts,
interrelates the projects and expresses a judgment on their effectiveness. Such com-
prehensive evaluative capacity is needed to improve planning efforts and more ade-
quately inform the public.
332
MAINTAIN ECONOMIC SUPPORT FUND FLEXIBILITY
The Commission believes that the flexibility of the ESF program must not be im-
paired by imposing specific goals or requirements on it. However, where possible,
ESF should be programmed to further economic development and U.S. commercial
objectives.
INCREASE FLEXIBILITY IN THE DEVELOPMENT ASSISTANCE ACCOUNT
The Commission urges greater flexibility in the administration of the Develop-
ment Assistance account to ensure that long-term development needs are met in
ways consistent with the short-term economic and financial constraints that are
facing many developing countries, particularly in Africa.
SUPPORT DEVELOPMENT OBJECTIVES OF PUBLIC LAW 480
Requirements for Public Law 480 assistance will continue, particularly in Africa.
The Commission recommends that special attention be given to those needs. When-
ever possible, Public Law 480 resources should be used in connection with other
forms of economic assistance to maximize development impact.
INCREASE CONCESSIONALITY IN MILITARY ASSISTANCE
The Commission believes that the U.S. Government should consider the same eco-
nomic factors in determining the concessionality of military assistance as it consid-
ers in determining the concessionality of economic assistance and provide the level
appropriate to conditions in each recipient country.
ESTABLISH A MUTUAL DEVELOPMENT AND SECURITY ADMINISTRATION
The Commission concludes that the most effective means to achieve program inte-
gration, a country approach to program development, an improved evaluative
system and increased public support is to consolidate certain aspects of current pro-
grams under a new agency, reporting to the Secretary of State. This organization
would be responsible for the integration of economic and security assistance and
direct control over economic assistance and ESF program operations.
ESTABLISH A NEW CONSULTATIVE GROUP
The Commission believes that executive-legislative consultation through existing
channels should be strengthened, and an additional mechanism should be estab-
lished for consultation between the branches that will afford greater cohesion and
effectiveness in the decisionmaking process.
STATEMENT OF ARMISTEAD I. SELDEN, PRESIDENT, AMERICAN LEAGUE FOR EXPORTS
AND SECURITY ASSISTANCE, INC., WASHINGTON, D.C.
Mr. Chairman, Members of the Committee, on behalf of the American League for
Exports and Security Assistance, or ALESA, I would like to express our apprecia-
tion for this opportunity to present our views on the proposed security assistance
program for FY 1985. Most of the year our attention tends to be caught up in day to
day crises in Third World countries. The hearings on international assistance in
general, and security assistance in particular, encourage us to step back and look at
our longer range objectives and experience with respect to helping developing coun-
tries with their social, economic, and security concerns.
At the outset, let me briefly state for the record that ALESA is a labor-manage-
ment organization currently consisting of five national and international unions,
and thirty-three U.S. corporations employing hundreds of thousands of workers. A
list of our membership is attached to our formal statement. ALESA's principal goal
is to encourage the export of American goods and services in consonance with the
security and economic goals of the United States.
ROLE OF SECURITY ASSISTANCE
Since World War II, each Administration and each Congress has recognized the
increasingly important economic and security interests of the United States in the
developing countries. Our development and security assistance programs have been
one response to those interests. I would like to focus my attention today on the secu-
rity aspects of those programs.
333
Developing countries suffer from both external threats to their security, and from
internal political instability. These problems can often become entwined, as we see
in Central America today, when regional and non-regional countries take sides in
the internal struggle for power within a country. External economic shocks over
which a country has no control, such as increases in oil prices or recession in the
industrial countries, can also increase the strain on political systems. U.S. security
assistance is intended to assist friendly countries provide for their own defense
against hostile neighbors, and to deal with externally supported internal strife.
Through the ESF program, it can also provide short term financial assistance to
help reduce the impact of needed adjustment to changing economic circumstances.
Such assistance can have several benefits for the United States. First and fore-
most, it can reduce the overall need for U.S. expenditures and manpower. Particu-
larly in countries around the rim of the Soviet Empire, strong local military estab-
lishments should decrease the probability of Soviet or Soviet sponsored aggression,
or in a worst case, allow a country which is subjected to such aggression to tie down
large numbers of invading troops. Such local forces are far less costly to equip and
maintain than equivalent numbers of American troops. Thus modest expenditures
on security assistance programs should help offset the need for considerably larger
expenditures on U.S. forces. Furthermore, well trained local forces, which have the
general backing of their own populace, are far more effective in meeting external
and internal threats than any outside force can be.
Second, security assistance programs can build tangible and intangible assets for
use by U.S. armed forces if that should become necessary. In some cases, security
assistance is provided in exchange for the actual use of bases in a developing coun-
try or the expansion of local facilities as a contingency base for U.S. forces in the
case of specific emergencies in the region. The contacts between U.S. uniformed and
non-uniformed personnel and their counterparts in developing countries which take
place as a byproduct of administering programs and providing training can enhance
mutual understanding and establish human contacts that have important long term
benefits. These relationships over time can be very important in helping us under-
stand and influence political and economic decisions in a country. For that reason
such security relationships with Third World countries are avidly sought by both
our allies and our adversaries.
Finally, the United States can also benefit economically from security assistance
programs. Most such assistance is used to purchase U.S. equipment and services. In
the short run, this provides immediate employment in the United States, and over
the longer run helps establish long term markets for additional U.S. equipment and
parts. In the case of military hardware, purchases by foreign countries of equipment
also used by the U.S. military can result in lower unit costs and hence reduce the
budget requirements for our own defense needs.
Given these factors, it would seem to us that there is some tradeoff between secu-
rity assistance and the expenditures made on our own armed forces. For fiscal year
1985 the Administration has requested budget authority of roughly $5.9 billion in
military assistance and an additional $3.1 billion in ESF. It is also requesting $313
billion in expenditures for U.S. defense. One might well ask how much larger that
$313 billion figure might be if the Turkish and Greek military contribution to
NATO were reduced, if the Korean armed forces were weaker, if we were unable to
maintain bases in certain countries in Southeast Asia and Africa, and if the only
options in Central America were insertion of U.S. troops or the collapse of friendly
governments to unfriendly forces. The bottom line is that the security assistance
program is not simply a give-away program sponsored by the United States for
purely philanthropic reasons. It is a hardheaded investment in our own security-a
cost effective way to avoid risking American lives and material, a means of increas-
ing American influence, and a useful stimulus to our own economy.
SECURITY ASSISTANCE VERSUS DEVELOPMENT ASSISTANCE
The critical question about security assistance is not so much whether it has a
legitimate role to play in the spectrum of U.S. foreign policy instruments, but
rather how much is enough and how it should be balanced against development as-
sistance. To take the latter question first, security assistance and development as-
sistance should not be seen as competing instruments, but rather as complimentary
mechanisms aimed at accomplishing the same long term goals—the encouragement
of democratic governments and the stimulation of economic growth which benefit
the entire population.
The relationship between economic growth, political stability, and expenditures
on defense is certainly complex. We have examples of countries such as Korea and
334
Taiwan, which devote a large share of their GNP to defense expenditures, which
also have enjoyed among the highest rates of sustained economic growth in history.
We also know that a number of Sub Saharan African countries have historically
had very low military budgets, but have also suffered from negative economic
growth rates in recent years. Of course there are also examples of countries with
large defense expenditures and stagnant economies. There simply do not seem to be
any facile generalizations that can be made respecting expenditures on security and
economic growth.
Similarily, if any conclusion can be drawn about the relationship between eco-
nomic assistance and security assistance, it is that it must be determined on a case-
by-case basis. Some countries need neither, some need both. Likewise, aggregate
levels of security assistance and economic assistance for the entire U.S. program
will shift relative to each other from year to year.
Nonetheless, there has been some criticism that the FY 1985 budget proposal gen-
erally puts too much emphasis on security assistance as opposed to development as-
sistance. There are at least three cautionary notes that should be made about any
such generalization. First, as already noted, totals reflect a summation of specific
country programs, each of which meets very different requirements. If we look at
only military assistance for example, and calculate U.S. military assistance on a per
capita basis for each recipient country, we get an idea of just how wide a variation
there is between one country and another. For example, for fiscal 1984, the United
States will provide around $1 of military assistance for each Kenyan and Philippino,
$3 per Pakistani, $13 per El Salvadoran, $15 per Turk, $30 per Egyptian, $51 per
Greek and $415 per Israeli. To put these numbers in perspective, the fiscal year
1984 appropriation for U.S. Defense Department procurement works out to $373 per
American.
Obviously per capita assistance is only one way to measure assistance levels, and
all kinds of reservations can be made about such a measure. But it does highlight
the wide variation in our military support. I might also note that the highest levels
per capita in fiscal year 1984 went precisely to those countries which received close
Congressional scrutiny and, in most cases, specific earmarkings. The lowest num-
bers are often not the result of country by country analysis, but rather the result of
what happens when additions are made to specific country programs while cuts are
made from the total amounts.
The second problem with using the notion of a ratio between security assistance
and development assistance is the growing role played by the Economic Support
Fund. While this program is included under the rubric of security assistance, it is
used in practice for economic development and adjustment purposes. Such purposes
include specific development projects supervised by AID or voluntary organizations,
program loans to help a country develop a specific aspect of its economy such as
agriculture or transportation, and commodity import programs, which allow a coun-
try to import U.S. made goods which have a high development priority. As you are
aware, the latter program cannot be used to pay for military goods. Finally, ESF
can be used as general balance of payments support for countries facing extreme
economic difficulties. Excluding the $850 million Israeli program from the total,
which is all used for balance of payments assistance, we find that of the rest of the
program planned for fiscal year 1985 less than 30 percent is intended for balance of
payments programs; all the rest is intended for activities directly related to develop-
ment.
Third, the country programs for Israel and Egypt, which have grown rapidly in
recent years to support the Camp David Peace Initiative and meet the major eco-
nomic and security requirements of these countries, account for 28 percent of the
entire fiscal year 1985 foreign assistance request, and economically distort any aver-
ages. For example, security assistance (military assistance plus ESF) accounts for
about 60 percent of the fiscal year 1985 request; if Israel and Egypt are excluded
from the numbers, the percent drops to 47 percent. Military assistance is about 40
percent of the total package, but excluding Egypt and Israel, the percentage drops
to 33 percent. By contrast with the total foreign assistance programs of previous ad-
ministrations, 33 percent represents one of the lower percentages dedicated to mili-
tary assistance.
FOREIGN ASSISTANCE LEVELS
The question which should give us all greater pause is that of the overall level of
our foreign assistance program. We have an anomalous situation in which as the
importance of the Third World to the United States has steadily increased over the
past three decades, the resources devoted by the United States to affecting the eco-
335
nomic, political and security climate in those countries have steadily decreased. In
real terms our aid programs are about half the size they were in the fifties, and as a
percentage of GNP and of the federal budget, about one-quarter that of the fifties. It
is interesting to note that the Soviet Union currently provides more resources in
subsidies to Cuba than the Administration is requesting for economic and military
assistance for the whole of Latin America and Sub-Saharan Africa in FY 1985.
The sharply increased levels of debt which most developing countries have
amassed in the past few years, combined with the drop in demand and price for
their exports, have made it very difficult for many developing countries to service
their current debt. This would seem to argue that they need to be most cautious
about undertaking additional debt, whether private or official. Thus where the
United States identifies real security problems, it would seem at this point that ad-
ditional grant or concessional assistance would make more sense than increased
lending at near commercial rates. We, therefore, strongly support the Administra-
tion's request for a concessional FMS lending program. This is also consistent with
the findings of the Carlucci Commission on Security and Economic Assistance.
USES OF FOREIGN MILITARY SALES CREDITS
While we certainly support the idea of providing FMS loans at concessional rates
of interest, there is one concern which I would like to bring to the Committee's at-
tention. Recently Presidential and Congressional actions have allowed FMS credits
to be used for such unconventional purposes as payment for research and develop-
ment of foreign weapons systems and for procurement of goods and services pro-
duced offshore. There have also been increased pressures to include offset arrange-
ments in contracts financed by FMS credits.
ALESA is concerned that such uses of FMS credits can lead to: an inefficient use
of limited resources; the transfer of American jobs overseas; the establishment with
taxpayers' dollars of foreign defense industries which will compete with American
products in third country markets; a decrease in commonality of weapons systems
among our allies; an inducement for other FMS recipients to ask for similar treat-
ment, and a loss of political support for out security programs.
Therefore, ALESA strongly urges that the Congress and the Executive Branch
consider the following policy suggestions:
FMS credits should be limited to the purchase of U.S. military end items and
services.
Any exceptions to this policy should be extremely rare and relate to specifically
defined U.S. security requirements or to clear cost reductions.
The U.S. Government should not accede to demands for offsets related to sales of
defense equipment that are financed by grants or forgiven loans.
In principle, any use of U.S. financial assistance to develop, produce, or purchase
foreign weapons systems should be conditioned on the beneficiary country agreeing
not to compete against U.S. producers with that system in third country markets.
The U.S. Government should refuse to license third country transfers of any U.S.
technology or components involved in such systems under the above circumstances.
EFFECTIVENESS
Finally, we need to take a look at the effectiveness of our foreign assistance pro-
grams. This is not an easy task, as results tend to be long term in nature, and there
is little agreement as to precisely what constitutes a success. What perhaps can be
said is that the overall record of United States efforts in the Third World is reason-
ably good. In the fifties we concentrated much of our assistance in East Asia, which
today contains some of the fastest growing economies in the world in countries
which are generally quite firmly wedded to the Western world. In the sixties we
turned our efforts to the larger Latin America countries through the Alliance for
Progress and our security assistance programs. Because we took this initiative, Cas-
tro's efforts to spread revolution throughout Latin America during this period were
thwarted. As Chairman of the House Subcommittee on Inter-American Affairs
during most of the 1960's, I was deeply involved in that successful effort. Today we
have swung our efforts to Africa, the Caribbean, and Southwest Asia. The Soviets by
contrast over the same period suffered enormous reverses in Indonesia, China,
Egypt, South Korea, and Chile. Their only advances, other than Cuba and Nicara-
gua, have been in countries which are among the poorest dozen countries in the
world-Vietnam, Cambodia, Loas, Ethiopia, and now Afghanistan.
This experience should tell us several things. First, the United States can be suc-
cessful in the Third World, and the Soviets can fail. Second, we need to take a much
longer view than we do in designing our programs. We have, for example, historical-
336
ly ignored Latin America until some catastrophic event captured our attention.
Kennedy's Alliance for Progress, coupled with increased security assistance, came
after the rise to power of Castro and the failure of the Bay of Pigs. And it has taken
the Sandinistas and El Salvadorian rebels and death squads to remind us that Cen-
tral America is a region with deep social and economic problems that is vital to the
security of the United States. Finally, when one takes a short run view, the costs
tend to be much higher in the end. Had we committed the resources in Central
America in the seventies that we are now talking about for single fiscal years in the
eighties, we might well have avoided the problems we are now facing.
In sum, Mr. Chairman, we believe that the Congress needs to scrutinize the Ad-
ministration's request for fiscal year 1985 on a country-by-country basis, looking at
the economic, humanitarian and security requirements of each, as well as at our
interests in helping each country. We believe the result of such an examination is
likely to be a program, in both the development and security assistance areas,
which is larger, rather than smaller than the Administration's request. But we
must also ask ourselves what the long term costs to our country will be, both in
money and in lives, if we do not help meet these problems now.
American League for Exports and
Security Assistance, Inc.
ARMISTEAD I. SELDEN
PRESIDENT AND GENERAL MANAGER
475 L'ENFANT PLAZA, S.W.
SUITE 4400
WASHINGTON, D.C. 20024
PHONE
(202) 554-1107
(202) 554.1 108
GEORGE C. AXTELL
VICE PRESIDENT, SECURITY AFFAIRS
JOEL L. JOHNSON
VICE PRESIDENT, ECONOMIC AFFAIRS
WILLIAM H. HULSE
CHAIRMAN
JAMES B. BOOE
VICE CHAIRMAN
ALESA MEMBERSHIP
COMPANIES
Aerojet General Corporation
American Hoist and Derrick Company
Avco Corporation
Beech Aircraft Corporation
The Boeing Company
Ducommun Incorporated
EDO Corporation
Elexco International, Inc.
Emerson Electric Company
FMC Corporation
Frost and Sullivan, Inc.
Garrett Corporation
Gould Inc.
Harsco Corporation
Hughes Aircraft Company
Hughes Helicopters
Lear Siegler, Inc.
Lockheed Corporation
LTV Aerospace and Defense Company
AM General Division
Sierra Research Division
Vought Aero Products Division
Vought Missiles and
Advanced Programs Division
Martin Marietta Aerospace
The Mead Corporation
Napco Industries, Inc.
Northrop Corporation
Pneumo Corporation
Raytheon Company
Rockwell International
Rohr Industries, Inc.
Sears World Trade, Inc.
The Singer Company
Teledyne, Inc.
United Technologies Corporation
UTL Corporation
Westinghouse Electric Corporation
UNIONS
Communications Workers of America, AFL-CIO
International Brotherhood of Teamsters, Chauffeurs, Warehousemen
and Helpers
International Union, United Automobile, Aerospace and Agricultural
Implement Workers of America
Marine Engineers Beneficial Association, AFL-CIO
United Brotherhood of Carpenters and Joiners of America, AFL-CIO
337
STATEMENT OF HARRY J. SHAW
Mr. Chairman, Members of the Committee on Foreign Relations, I welcome this
opportunity to share with you again insights gained over 16 years of intensive in-
volvement in the executive branch with security assistance policies and programs.
This involvement spanned for years from my participation in a 1965 reappraisal of
the military assistance program for Secretary McNamara to my retirement in 1980
from the Office of Management and Budget where I had been Chief of the Interna-
tional Security Affairs Branch (earlier the Military Assistance Branch) for thirteen
years. In the course of my duties in Defense and OMB, I visited some 26 different
countries receiving security assistance around the world, many of them on several
occasions. During the last months of the Carter Administration, I was a consultant
to the Deputy Secretary of State on an integrated review of all the foreign affairs
budgets.
During the last 3 years of teaching foreign affairs at the University of Virginia I
have been a somewhat more detached but no less interested observer of our security
assistance program. My basic views, consistent with those expressed before this sub-
committee three years ago, were set forth in an article in the Spring 1983 issue of
Foreign Policy. In the interest of brevity I will not repeat the arguments set forth in
my article except as they seem to be especially important to the issues posed by the
Reagan Administration's security assistance proposals for 1985.
Again, I appear before you as a private citizen, representing no agency of the gov-
ernment, no think tank, no special interest group. As many citizens are, I am pro-
foundly concerned about what seems to be an overly-militarized foreign policy and
the role that security-related foreign aid plays in that foreign policy. Moreover-and
this is only partly a consequence of my budget background—I am equally disturbed
about the enormous increases in the federal budget deficits of these last three years.
If there were but one point I could make to you, it would be that budget control-
reduction of the deficit-begins at home! By that I mean that if the Congress is to
do its part in eliminating these horrendous deficits then each committee must do its
part by ruthlessly eliminating all but the most critical elements of the programs for
which it is responsible. You have before you a request for nearly $10 billion in secu-
rity assistance. A reduction of $1 billion would constitute one two-hundredth of the
likely deficit for 1985. Two hundred such tough decisions would eliminate the defi-
cit. There is no other way to get there.
I cannot but believe that the administration's proposed $10 billion security assist-
ance program could be cut by as much as $1 billion without serious harm to the
security of the United States or to its foreign relations. I have watched with dismay
and disbelief as this program has grown over the last 3 years from $5.5 billion in
1981 to the $10 billion level in 1984 and 1985. What indeed has changed in the world
to justify increases of this magnitude? No wonder our budget is out of control.
While security assistance has grown by 80 percent since 1981, development aid
has increased only modestly from $4.5 billion in 1981 to $5.4 billion in 1985 as pro-
posed by the Administration, a 20 percent increase. This undoubtedly understates
the actual development assistance contribution since the Economic Support Fund
(ESF) is used where possible for development purposes. Nevertheless, the bias
toward security-related foreign aid in this Administration cannot be denied.
There are, in my judgment, three principal reasons for the excessive growth of
the security assistance program. First, is that the largest element and the one that
accounts for most of the growth, Foreign Military Sales Financing, has been off-
budget. This program surely would not have been increased from $2.9 billion in 1981
to $5.7 billion in 1984 if it had been on-budget where its budget authority and out-
lays had to be counted in budget totals.
The second cause for increased security assistance lies in the growth of the quid
pro quos offered to allies for military base agreements. All of the base agreements
negotiated by this administration--for Spain, Turkey, Greece, Philippines, Portu-
gal-have entailed large increases over assistance levels agreed to in previous
rounds of base negotiations. Having been involved in the intense interagency de-
bates over assistance levels to be offered for bases during my years in OMB, I am
well aware of how difficult it is to keep these offers within bounds. Only a strong
OMB willing and able to do battle with State, Defense and the NSC staff, and acting
in advance with the President's backing can keep base quid pro quos under control.
Moreover, it is essential that the prevailing sense in the executive branch be that
Congress will not underwrite major increases in overall program levels. Under these
conditions there will be strong countervailing pressures elsewhere in the foreign aid
community to resist parochial arguments for increasing particular country pro-
grams lest these commitments preempt limited future funding levels.
338
The Reagan Administration let this matter of base agreement commitments get
out of hand. Once one country sees another country get a substantial increase over
the last time, it will demand equal treatment when its own base agreement comes
up for renegotiation, and the problem snowballs. The Reagan Administration, unfor-
tunately, scrapped the new commitments procedures adopted by Presidents Ford
and Carter which grew out of procedures reaching back to the NSC 1550 directive of
the Eisenhower Administration. The Ford and Carter directives, signed by the Presi-
dent, required their personal approval in advance of any future commitments
beyond approved budgets, that approval to be obtained through the Director of
OMB.
As I have suggested, the Congress has played an essential though indirect role in
restraining these multi-year commitments which preempt whatever funds are avail-
able in future years and increase pressures for increasing overall program levels.
When the Congress is perceived as likely to go along with increased commitments,
as I believe it has been rightly perceived in this administration, overall security as-
sistance levels are bound to be levered up. I urge the committee to consider ways in
which it can prevent the executive from preempting the Congress and future budg.
ets in this manner.
The third reason for the excessive growth of security assistance since 1981 is that
the Congress has not exercised the restraint it formerly imposed on security assist-
ance. Unless you have worked in the executive branch you may not realize the criti-
cal role such restraint plays in executive branch programming and budgeting. The
pressures for more aid to grease the wheels of diplomacy, to encourage the sale of
American arms abroad, to fill in pressing gaps in client states' foreign exchange re-
sources, and to serve a host of other purposes, both worthy and unworthy, are inces-
sant. From experience I can assure you that without some sense that a stern and
skeptical Congress will challenge every dollar requested, OMB and the few allies it
may find in resisting pressures for more security assistance will be overwhelmed.
As for specific areas in which security assistance should be cut, the grant military
assistance program (MAP) would be first on my list. MAP, the oldest and for a long
time the principal element of security assistance, was virtually eliminated by the
end of the Carter Administration in a phased reduction as directed by the Congress.
However, the program has since been resurrected, initially by the Congress as an
offset to the high costs of FFB financing rather than providing more direct (on-
budget) FMS credits. Now the program has gained a new lease on life as a means of
providing weapons and equipment on a grant basis quite separate from the question
of FMS terms. From four country programs in 1981, which was to be their last year,
and a funding level of $170 million, MAP will grow to $775 million for 30 countries
in 1984 if the Administration's supplemental is approved and to $930 million in
1985. If approved, this would be the highest level of grant MAP since 1966.
I urge the committee to cut back severely on MAP funding and not let it once
again become a major element of the security assistance program. It may be neces-
sary for countries engaged in active hostilities or temporarily in severe economic
straits, but MAP can too easily become a crutch and take on a life of its own. I
believe over the long run most countries should be expected to pay for their own
defense, at least with only concessional loans. MAP encourages them to maintain
larger forces that they can support over the long haul and skews their internal deci-
sion processes in favor of their military establishments. In many of these countries
the principal threats are internal-economic, social, political-rather than of an ex-
ternal military nature. Their security from larger and potentially threatening
neighbors cannot be provided by their own forces, and we do them no favor encour-
aging them to try to do so with MAP.
The proposed FMS financing program of $5.1 billion as the largest of the security
assistance programs offers the best opportunities for cuts. However, I urge that any
cuts be real and not be achieved by converting elements of the program to off-
budget FFB financing. Here, I heartily endorse the Administration's proposal to put
the entire FMS credit program on budget. This is the most significant reform put
forward for security assistance programs in some years. I will not repeat all the rea-
sons for my support today as they are amply set out in my Foreign Policy article.
I could not urge you more strongly to support this proposal to put the FMS fi-
nancing program on a sound straight-forward basis where it will have to compete
openly with the other foreign aid programs and where the dollars going into FMS
can be seen by the public. If you reject this reform you will not be saving the public
a nickel. Rather you will be hiding the true cost of FMS and perpetuating a system
that encourages uncontrolled growth of security assistance and the accompanying
dangerous increases in the debt burdens of the recipient countries.
339
The Administration's prime motivation in putting FMS financing on budget is to
achieve greater flexibility in the interest rates charged than is possible for loans fi-
nanced by the Federal Financial Bank. I support the request for more flexibility in
FMS credit terms, but, like most good things, the availability of concessional credits
must be limited. The Administration's professed policy is to base its determination
of the need for concessional credits on economic grounds. But, unless there is a tight
ce ng on such loans, there will be great pressure to allocate concessional credit on
political grounds.
As for the amount of concessional financing to be provided, that can only be de-
termined on the basis of country-by-country analysis. The proposal for $500 million
in addition to the $2,575 million of forgiven credit for Israel and Egypt seems rea-
sonable. The amounts for Israel and Egypt, though somewhat reduced, actually rep-
resent increases over recent levels as the entire amount is to be forgiven-in short,
a grant. For the reasons set forth in my article, I believe the levels of security as-
sistance to Israel and Egypt are excessive and that we have created two client states
with no plan, no hope that their dependency can be ended in the foreseeable future.
The degree of concessionality to be offered in FMS credits is defined by the inter-
est rate charged. The Administration proposes a single rate of 5 percent rather than
a sliding rate that might go even lower. Given the current cost of money to the
Treasury, 5 percent seems concessional enough and I would not go lower. I recom-
mend that both the amount of concessional credit and the minimum interest rate be
either prescribed in legislation or at least established in the legislative record.
The Congress should also consider limiting the repayment period for FMS financ-
ing. As a general rule countries should not be allowed to stretch out repayments for
extended periods of 20 to 30 years that greatly exceed the life of the weapons and
equipment bought with the loans. Such extended repayments encourage countries to
make current purchases without adequate regard for the future debt service bur-
dens they are building. As we are learning, there comes a day of reckoning for those
who live on credit.
Finally, with regard to the Administration's security assistance proposals, I find it
difficult to divine the logic of the relationship between grant MAP and concessional
FMS financing. MAP grants are, of course, the ultimate in concessionality. Why, for
example, should Portugal receive $70 million in grant MAP and $55 million in non-
concessional FMS credit. Turkey would receive a mix of all three: $230 million
MAP, $275 million in non-concessional FMS, and $250 million concessional FMS,
not to mention $175 million in ESF, also a mix of grants and loans. Otto Passman
used to rail against the various foreign aid "spigots.” Surely this administration has
turned on all spigots.
CARLUCCI COMMISSION
Next, I should like to turn to the report of the Commission on Security and Eco-
nomic Assistance--the Carlucci Commission. On the whole, the Report is disappoint-
ingly vague and unconvincing. I recognize that the purpose of the exercise was es-
sentially to bolster the public case for more foreign aid and that, accordingly, the
Commission was not likely to dig very deeply into the questionable aspects of for-
eign aid.
The Commission's report is the quintessential American response to a problem.
Instead of dealing with deep-seated deficiencies of the product, it is declared to be
good, it is asserted that more should be bought, and the recommended solution is to
gear up a public relations campaign and reorganize. I don't think this will sell. I
certainly wouldn't buy it.
I believe the Administration and the members of the Congress who participated
have missed an opportunity to take a fresh look at what we are doing with foreign
aid. Even the Commission report admits it could not go into the specifics of country
programs, in short into the essence of the problem. I don't mean to suggest that
either the chairman or the many members of the Commission who are genuinely
concerned about the direction of our foreign aid program were unaware of the limi-
tations of their effort. The whole climate in which the Commission worked was not
conducive to a critical appraisal. The staff was largely made up of advocates and
lacked the breadth-perhaps even the mandate to confront honest criticisms of our
foreign aid. The report, consequently, has to be taken largely on faith.
The one major proposal of the Commission—to create a Mutual Development and
Security Administration-is constructive in its intended purpose of bringing about
greater integration of various foreign aid programs. I strongly support this objective,
especially as I had some role in efforts in past administrations to bring about great-
er program integration. Unfortunately, based on that experience, I believe creation
340
of the MDSA as conceived by the Commission would be a step in exactly the wrong
direction.
The basic flaw in the proposed MDSA is that it would combine in one person, the
director, the functions of (1) providing policy direction and budget control over the
various components of mutual assistance (development assistance, Economic Sup-
port Fund, military assistance, Pub. Law 480, and transfers a multilateral develop-
ment banks) and (2) operational control over the economic aid programs (DA and
ESF). If I understand the proposal correctly, MDSA would subsume the functions
now assigned to AID and the essentially defunct IDCA, the Under Secretary of State
for Security Assistance, Science and Technology (those functions related to security
assistance), and the Politico-Military Bureau (for security assistance). I submit that
this arrangement would not work and would be a step backward.
My assessment is based in part on what happened in the 1960s when the Director
of AID had delegated to him the functions assigned by the Foreign Assistance Act to
the Secretary of State to provide continuous policy direction and control over mili-
tary assistance and to determine whether military aid should be provided to a par-
ticular country and the amount thereof. The AID Director could not be the principal
spokesman for and manager of economic aid, on one hand, and the Secretary of
State's man to ride herd on military aid, on the other. Because these roles were not
compatible, the AID Director had to give primary attention to his economic aid role
and effective policy direction over military aid passed to the Secretary of Defense
during the period. It was only with the revocation of that delegation in 1968 and
reassignment of the Secretary's responsibilities for military aid to the Politico-Mili-
tary Bureau that State began to carry out its central policy direction function for
military aid effectively. I believe the proposed MDSA would founder on the same
rock.
My belief that the proposed MDSA is a step in the wrong direction is also rein-
forced by experience with the integrated review of all foreign affairs programs con-
ducted by the Secretary of State in the last year of the Carter Administration. This
Foreign Affairs Budget Review (FABR) came about when OMB, with the President's
blessing, requested that the Secretary of State review all the separate foreign affairs
program budget requests and provide to the President, through OMB, his recom-
mendations as to how these disparate programs should be funded within an overall
aggregate foreign affairs budget ceiling. The Secretary's recommendations were to
be submitted with decision packages-program increments-placed in priority order
above and below the aggregate ceiling. The individual agency and program budget
requests were not cut off by this extra review by the Secretary of State; they were
transmitted to OMB and reviewed and defended there in the normal manner. How-
ever, the final reviews and appeals were conducted within the FABR framework
and the Secretary's recommendations were given great weight.
Several aspects of the FABR process are instructive. First, the approach taken
might be described as "trickle down." The Secretary was given both responsibility
and requisite authority to conduct the review by the President and OMB with the
cooperation of the NSC staff. The consequences of these steps were then allowed to
flow down through the community. No new agencies or large staffs were required.
The small FABR staff created in State and reporting to the Deputy Secretary con-
sisted of four professionals, one of them available only part-time.
The process allowed for full play by the advocates of the various agencies and by
the bureaus of State. But because the FABR staff worked for the Deputy Secretary,
who
gave them his firm support, they could not be bypassed within State and with
OMB, NSC, and the President in firm support, there was no way to get around the
Secretary, although agency head appeals were allowed as is normal.
The most important aspect of the FABR exercise was that it involved all the re-
sponsible policy officials—the state country directors, heads of state bureaus, other
agency heads, the undersecretaries of state, and finally the deputy and the secre-
tary. Most fundamentally, the integrated review recognized that in the final analy-
sis all of these programs-economic aid, military aid, ICA (USIA), Export-Import
Bank, State's own budget, contributions to international organizations, Peace
Corps-serve political, that is, foreign policy purposes. The underlying premise was
that the official short of the President best qualified to establish priorities among
these programs is the Secretary of State.
I do not believe a detailed description of the FABR exercise is necessary here but
would be glad to submit a more comprehensive report if the committee would like to
know more about it.
Now, you may ask, just what does the 1980 integrated budget review have to do
with the Carlucci Commission's recommendation to create a new Mutual Develop-
ment and Security Administration. The Commission's concept proceeds from the
C
341
premise that to achieve better integration of the several foreign aid programs the
integration function should be performed by a senior official who heads a new semi-
autonomous agency. This is the exact opposite of the premise of the FABR exercise
that the review must be performed by the senior officials who are responsible for
the conduct of our foreign policy. I believe the head of MDSA would soon find him-
self isolated much as the head of IDCA did.
Behind the MDSA and IDCA concepts probably lies the notion that if these pro-
grams can be isolated from the corrupting influence of political considerations they
can be purified, integrated, and rationalized. But, if these programs are ultimately
political in their purposes, should not the officials charged with directing foreign
policy bear the principal responsibility for ensuring that the several foreign affairs
programs are properly integrated in the service of the foreign policy? I certainly
would not claim that State officials have adequately met these responsibilities over
the years. But moving the responsibility away from them is not going to make
things better, it will only create more bureaucratic conflict and delay the time when
State faces up to its responsibilities.
In sum, with respect to the Commission's organizational recommendation, I would
continue the Agency for International Development as the agency responsible for
operational control over the economic assistance programs (development and eco-
nomic support) with its head expected to be a strong advocate for development aid
as in the past. The International Development Coordination Agency (IDCA) should
be eliminated as recommended by the Commission. Consideration should be given to
more closely integrating Washington level AID staffs with the State Bureaus.
Maybe there is no need for a separate AID, but the advantages and disadvantages of
complete integration with State should be more thoroughly analyzed.
The function of providing policy direction and budgetary control over security as-
sistance must continue to be performed by a senior State official who interacts close-
ly with both AID, as the operating agency for economic supporting assistance, and
Defense, as the operating agency for military aid. I question that it is advisable for
the same official who performs these functions for State to also have responsibility
for integrating and providing overall policy direction to both development and secu-
rity assistance. This responsibility probably should reside in the Deputy Secretary
who is also in the best position to integrate the foreign aid programs with the other
foreign affairs programs along the lines of the FABR exercise. However, further
study of these options is required.
I do support the Commission's call for greater attention to the longer run aspects
of foreign aid, for a multi-year planning framework, and for an integrated country
approach. However, these desirable characteristics of program planning and budget-
ing have long been advocated and are not likely to be achieved by mere organiza-
tional changes. A deeper study of the difficulties and the reasons for past failures to
remedy these problems needs to be undertaken before we can adopt specific reforms
with confidence.
If the Commission's report does not offer any ready answers to our foreign aid
problems, it at least may help by identifying those problems and thus serve to pro-
vide an agenda for further study by both the executive branch and the Congress.
And the coming budget crunch under the impact of $200 billion annual deficits may
provide the impetus to some serious reform. Often we can only overcome the inertia
of old ways when disaster threatens.
342
TABLE 1.-PRESIDENT'S BUDGET-FOREIGN ASSISTANCE SUMMARY
(Budget authority in thousands of dollars]
Fiscal year 1984
Fiscal year 1985
Continuing resolution
Supplements
Revised
Presidents budget
Amendment
Revised
319,616
3,686
108,874
166,416
1,324,365
314,164
1,902,942
15,000
2,893,250
16,250
Economic assistance:
Multilateral Development Banks
International organizations
AID development assistance
AID miscellaneous trust funds.
Economic support fund
Trade and development program
Public Law 480 Title program.
Title I receipts.
Title I budget authority.
Title 11
1,643,981
317,850
2,011,816
15,000
3,187,750
16,250
294,500
1,235,558
241,800
2,075,058
15,000
3,067,500
21,000
-
985,000
- 316,000
1,235,558
241,800
2,241,474
15,000
3,448,100
21,000
380,600
25,000
36,000
...
872,000
-470,000
897,000
- 470,000
1,021,000
- 316,000
36,000
402,000
650,000
25,000
90,000
427,000
740,000
669,000
650,000
705,000
650,000
Total budget authority
1,052,000
115,000
1,167,000
1,319,000
36,000
1,355,000
9,000
3,000
14,650
Peace Corps
Refugee assistance.
Inter-American Foundation.
African Development Foundation
International Narcotics Control
Compact of Free Association.
115,000
323,000
13,000
3,000
41,200
118,000
337,650
13,000
3,000
41,200
115,000
341,450
11,992
3,000
50,217
295,490
124,000
341,450
11,992
3,000
50,217
295,490
Total
8,011,171
859,326
8,872,497
8,792,065
592,016
9,384,081
259,050
124,500
.......
Military assistance:
Military assistance program
Peacekeeping operations
International military education and training
Foreign military sales credit.
FMS guarantees
Guarantee reserve fund
Anti-terrorism assistance
510,000
56,200
51,532
1,315,000
4,401,250
769,050
56,200
151,532
1,315,000
4,401,250
800,000
49,000
60,910
5,115,000
924,500
49,000
60,910
5,100,000
- 15,000
274,000
5,000
274,000
5,000
2,500
2,500
343
TABLE 1.-PRESIDENT'S BUDGET-FOREIGN ASSISTANCE SUMMARY-Continued
(Budget authority in thousands of dollars]
Fiscal year 1984
Fiscal year 1985
Continuing resolution
Supplements
Revised
Presidents budget
Amendment
Revised
Total
6,336,482
259,050
6,595,532
6,303,910
109,500
6,413,410
1,118,376
701,516
Gross economic and security assistance
Offsetting receipts (AID DA)
(FMS).
Total economic and security assistance
14,349,653
- 460,489
— 126,000
15,468,029
- 460,489
- 126,000
15,095,975
- 463,143
- 117,000
15,797,491
–463,143
-- 117,000
13,763,164
1,118,376
14,881,540
14,515,832
701,516
15,217,348
TABLE 2.-FISCAL YEAR 1985 SECURITY ASSISTANCE PROGRAMS 1 BUDGET AUTHORITY
[Dollars in thousands]
FMS financing
Economic support fund
MAP (grants)
IMETP
(grants)
Peacekeeping
operations
Total
Treasury rate
Concession
Grants
Loans
East Asia and Pacific:
Brunei.
Burma
Fiji
Indonesia
Korea.
Malaysia
Papua-New Guinea
Philippines
Singapore
Solomon Islands
Thailand
Tonga
0
0
0
20,000
230,000
10,000
0
30,000
0
0
98,000
0
0
0
0
20,000
0
0
0
30,000
0
0
0
0
0
0
0
0
0
0
0
95,000
0
0
5,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
25,000
0
0
5,000
0
30
300
80
2,700
2,000
1,000
50
2,000
50
30
2,400
30
0
0
0
0
0
0
0
0
0
0
0
30
300
80
42,700
232,000
11,000
50
182,000
50
30
110,400
30
Regional total
388,000
50,000
100,000
0
30,000
10,670
0
578,670
344
Ooo
OOO
OOO
Near East and South Asia:
Algeria...
Bangladesh
Egypt.
India
Israel
Jordan
Lebanon
Maldives
Morocco
Nepal.
Oman
Pakistan
Sri Lanka
Tunisia
0
0
0
0 2 1,175,000
0
0
0 2 1,400,000
47,500 47,500
15,000
0
0
0 10,000
0
0
45,000
0
225,000 100,000
0
0
25,000 25,000
0
0
0
0
0
0
0
750,000
0
850,000
13,000
20,000
0
15,000
0
5,000
160,300
0
3,000
0
15,000
0
0
0
7,000
0
0
0
0
15,000
39,700
0
0
0
0
0
0
0
0
0
0
40,000
0
0
0
0
15,000
10,000
0
0
50
250
2,000
300
0
2,000
800
25
1,700
100
100
1,000
150
1,700
1,500
0
0
0
0
0
0
0
0
0
0
0
0
0.
0
0
0
0
35,000
50
250
1,927,000
300
2,250,000
117,000
35,800
25
66,700
100
65,100
526,000
150
69,700
11,500
15,000
35,000
Yemen......
Middle East regional
.
Multinational Force and observers
Regional total
357,500
2,757,500
1,831,300
61,700
65,000
11,675
35,000
5,119,675
*************************
*************
> O
Europe:
Austria
Cyprus
Finland
Greece
Iceland
Portugal
Spain
Turkey
Yugoslavia.
U.N. forces in Cyprus.
0
0
0
500,000
0
55,000
400,000
275,000
0
0
0
0
0
0
250,000
0
0
0
3,000
0
0
0
80,000
12,000
90,000
0
0
0
0
0
0
0
0
85,000
0
0
0
0
0
0
70,000
0
230,000
0
0
60
0
60
1,700
25
3,000
3,000
4,000
150
0
0
0
0
0
0
0
0
0
9,000
60
3,000
60
501,700
25
208,000
415,000
934,000
150
9,000
0
Regional total
1,230,000
250,000
185,000
85,000
300,000
11,995
9,000
2,070,995
Africa:
Benin
Botswana
Burundi
Cameroon
Cape Verde.
OOO OO
0
5,000
0
5,000
0
0
10,000
0
0
0
OOOO
0
4,000
0
0
0
50
300
90
200
60
OOOOO
50
19,300
90
5,200
60
345
TABLE 2.----FISCAL YEAR 1985 SECURITY ASSISTANCE PROGRAMS 1 BUDGET AUTHORITY - Continued
[Dollars in thousands]
FMS financing
Economic support fund
MAP (grants)
IMETP
(grants)
Peacekeeping
operations
Total
Treasury rate
Concession
Grants
Loans
34-045 0-84--23
0
Africa-continued
Central African Republic.
Chad...
Congo
Djibouti
Equatorial Guinea
Gabon
Gambia.
Ghana.
0
0
0
0
0
0
0
OOOO
0
10,000
0
3,500
0
0
0
0
O O OOO
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Guinea.......
Guinea-Bissau.....
0
0
0
0
0
0
0
0
0
0
Oo
0
0
0
0
Ivory Coast.
Kenya
Liberia
Madagascar
Malawi
Mali.
Mauritania.
Mauritius
Niger
Rwanda
Senegal
Seychelles.
Sierra Leone
Somalia
0
5,000
0
2,500
0
0
0
0
3,000
0
0
23,000
15,000
0
1,000
0
0
0
5,000
0
3,000
0
0
40,000
69,000
0
0
0
55,000
45,000
0
0
0
0
2,000
7,000
0
15,000
2,000
0
35,000
120,000
0
0
OOOO
OOOOOOOOOOOOOOOOOOOOOOOO
100
150
50
100
60
100
60
325
100
75
75
1,800
1,200
50
200
125
50
0
200
60
500
50
50
1,250
1,700
50
75
75
100
150
1,400
0
100
15,150
50
6,100
60
100
60
325
3,100
75
75
79,800
61,200
50
1,200
125
50
2,000
12,200
60
18,500
2,050
50
76,250
190,700
50
75
75
100
150
31,400
20,000
0
0
0
0
0
Sudan...
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Swaziland
Tanzania.
0
0
0
0
0
0
0
oc
Togo.
Uganda.
Upper Volta
Zaire.
Zambia
0
0
15,000
20,000
O O OO
0
0
0
15,000
0
OOOOOO
346
.
Africa-continued
Zimbabwe
Civic Action
South African regional
OOO
0
0
0
15,000
0
37,000
0
0
0
5,000
0
150
0
0
0
0
15,150
5,000
37,000
Regional total
0
10,000
391,500
0
190,500
11,130
0
603,130
0
0
0
0
0
50
0
50
0
0
4,000
0
0
4,000
0
0
0
0
0
0
3,000
0
0
100
50
0
0
0
3,100
50
8,900
900
0
0
2,000
5,000
0
2,000
0
20,000
0
45,000
0
0
3,000
5,000
0
750
300
700
0
0
0
53,750
25,300
4,700
American Republics:
Bahamas
Belize 1
Bolivia
Brazil
Colombia
Costa Rica 1
Dominican Republic
Eastern Caribbean
Ecuador
El Salvador 1
Guatemala 1
Guyana
Haiti.
Honduras 1
Jamaica
Mexico.
Panama 1
Paraguay
Peru
Suriname.
Trinidad-Tobago
Uruguay
Venezuela
PACAMS
Caribbean peacekeeping
LAC regional.
0
0
0
0
0
5,000
0
0
0
300
50
450
0
0
50
5,750
0
0
0
0
5,000
0
65,000
0
5,000
0
250
250
0
0
75,250
250
0
5,000
0
0
0
0
0
5,000
0
0
0
0
0
0
0
0
0
0
0
0
2,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
50
850
80
50
60
50
6,000
0
0
0
0
0
0
0
0
0
5,000
0
50
10,850
80
50
60
50
6,000
5,000
2,000
o
0
0
0
0
0
Regional total
11,000
16,000
32,000
110,000
16,300
10,990
5,000 1 201,290
49,000 18,573,760
Total country programs
1,966,500
3,083,500
2,539,800
256,700
601,800
56,460
*******
Nonregional:
General costs
Oceanographic research
0
0
0
0
0
1,000
0
0
ó
50,700
0
550
0
0
0
51,250
1,000
1
TABLE 2.---FISCAL YEAR 1985 SECURITY ASSISTANCE PROGRAMS 1 BUDGET AUTHORITY—Continued
[Dollars in thousands)
FMS financing
Economic support fund
MAP (grants)
IMETP
(grants)
Peacekeeping
operations
Total
Treasury rate
Concession
Grants
Loans
0
0
0
0
50,000
0
0
50,000
Section 506(a) reimbursement.
Total nonregional
0
0
1,000
0
100,700
550
0
102,250
Total budget authority
1,986,500
3,083,500
2,540,800
256,700
702,500
57,010
49,000 8,676,010
1 This interim document does not contain the allocations for six Central American countries—Costa Rica, Belize, El Salvador, Guatemala, Honduras and Panama-nor do aggregate totals for the security assistance programs reflect these allocations.
The final version of this document will include these allocations when decisions on levels are made.
2 Payment waived.
TABLE 3.-ECONOMIC AND MILITARY ASSISTANCE TO CENTRAL AMERICA: FISCAL YEARS 1983-85
(By fiscal year in millions of dollars)
347
1983 actual
1984 continuing
resolution
1984 supplemental
request
1984 total
1985 request
Belize:
Economic
Military.
10.0
16.7
.075
4.0
0.6
14.0
0.6
10.0
0.6
Total
16.775
4.6
10.0
14.6
10.6
*****
Costa Rica:
Economic
Military.
211.9
2.625
105.1
2.15
75.0
7.85
180.1
10.0
208.0
10.0
Total
214.525
107.25
82.85
190.1
218.0
********
El Salvador:
Economic
Military
245.5
81.3
198.6
64.8
134.0
178.7
332.6
243.5
341.1
132.5
Total
326.8
263.4
312.7
576.1
473.6
348
Guatemala:
Economic
Military
27.5
13.6
20.0
33.6
96.4
10.3
27.5
Total
13.6
33.6
20.0
106.7
Honduras:
Economic
Military
102.7
37.3
84.4
41.0
84.5
37.5
168.9
78.5
139.0
62.5
140.0
125.4
Total
122.0
247.4
201.5
Panama:
Economic
Military.
7.2
5.45
12.3
5.5
34.2
10.0
46.5
15.5
40.3
20.0
12.65
17.8
44.2
62.0
Total
60.3
19.4
12.1
Regional programs:
Economic.
Military (RMTC)
Total
30.8
25.0
42.9
25.0
198.6
20.0
19.4
12.1
55.8
67.9
218.6
11.5
11.5
Miscellaneous: Economic
86.6
Total:
Economic.
Military
630.9
126.75
430.1
114.05
400.0
259.05
830.1
373.1
1,120.0
255.9
757.65
Total
544.15
659.05
1,203.2
1,375.9
349
TABLE 4.-AGENCY FOR INTERNATIONAL DEVELOPMENT BUDGET AUTHORITY TRENDS: FISCAL YEARS 1982-85
[By fiscal years in thousands of dollars)
1984
1985
1982 actual
1983 actual
Continuing
resolution
Supplemental 1
Revised
President's Budget
Amendment
Revised
700,000
211,000
133,405
103,550
705,000
211,000
133,405
103,550
715,107
240,000
125,000
116,477
10,000
5,000
18,000
10,000
725,107
245,000
143,000
126,477
738,871
245,032
135,558
130,743
13,680
4,970
22,580
58,090
752,551
250,002
158,138
188,833
30,000
57,480
137,200
10,000
140,288
10,000
140,288
10,000
170,288
10,000
178,695
(2)
236,175
(2)
73,000
156,800
Functional development assistance:
Agriculture, rural development and nutrition
Population planning
Health
Education and human resources development
Energy, private voluntary organizations and selected develop-
ment activities
Science and technology
Subtotal, functional accounts 3
Sahel development program
Economic policy initiative for Africa
Private enterprise revolving fund 4
American schools and hospitals abroad
Housing guaranty reserve
International disaster assistance.
Operating expenses
Foreign Service Retirement Fund 6
Total, AID development assistance
Economic support fund ?
1,295,155
93,758
1,303,243
93,757
1,346,872
103,000
1,419,872
103,000
1,428,899
97,500
75,000
(20,000)
10,000
(20,000)
30,000
(20,000)
30,000
20,000
20,000
1,585,699
97,500
75,000
(20,000)
10,000
10,000
25,000
404,113
34,162
10,000
5
107,000
331,000
33,583
25,000
344,938
36,537
25,000
361,533
36,537
10,979
3,895
25,000
372,512
40,432
25,000
398,097
40,562
6,016
-6,400
1,880,496
2,919,300
1,823,475
2,962,250
1,902,942
2,903,250
87,874
290,500
1,990,816
3,193,750
2,075,058
3,067,500
166,416
370,600
2,241,474
3,438,100
Total, Agency for International Development
4,799,796
4,785,725
4,806,192
378,374
5,184,566
5,142,558
537,016
5,679,574
Includes proposed supplemental for Central America and pay supplemental for operating expenses and Foreign Service Retirement Fund.
2 Included within selected development activities account.
3 Includes $10 million for cargo preference in fiscal year 1985, and comparable levels in prior years.
* Funded from functional development assistance.
8 Excludes $8.1 million in functional account funds made available for operating expenses.
8 Fiscal year 1985 budget amendment proposed for later transmittal.
? Fiscal year 1984 continuing resolution level includes $10 million transferred to peacekeeping operations.
350
TABLE 5.-DISTRIBUTION OF AID FUNDS
1984
1985
Change
DA estimate
ESF estimate
Public Law
480-1
estimate
Public Law
480-11
estimate
Total
DA proposed
ESF proposed
Public Law
480-1
proposed
Public Law
480-11
proposed
Total
Asia.
AID program levels:
Africa
.
Latin America and Caribbean
Near East and Europe
Central program
Functional accounts.
SAHEL countries.
349,479
384,502
372,889
50,255
386,242
1,436,748
106,619
338,950
284,200
640,500
2,191,440
11,100
3,448,190
18,000
132,500
170,000
173,000
293,000
128,500
123,367
194,709
62,206
57,896
301,822
944,296
1,033,411
1,248,595
2,592,591
827,664
4,884,938
124,619
355,199
447,000
460,300
52,000
368,700
1,585,699
97,500
391,500
300,000
792,600
1,963,000
1,000
3,416,100
32,000
148,500
191,000
210,000
275,000
196,500
83,187
177,428
56,726
34,149
298,510
978,386
1,115,428
1,519,626
2,324,149
864,710
5,001,799
129,500
34,000
82,017
271,031
(268,442)
37,046
116,861
4,881
1,543,367
3,466,190
Total allocation
897,000
740,000
6,646,557
1,683,199
3,448,100
1,021,000
650,000
6,802,299
155,742
Program total
1,543,367
3,466,190
897,000
740,000
6,646,557
1,683,199
3,448,100
1,021,000
650,000
0
0
0
0
0
0
0
126,474
274
0
126,474
274
0
25,000
....I
Unallocated.
Disaster assistance.
Miscellaneous prior year accounts.....
Lebanon supplemental
Italian relief and rehabilitation
African Initiative.
HIG Reserve Fund
ASHA
FSR & DF
Operating expenses
AID Total
TDP
OPIC
(101,474)
(274)
0
0
75,000
25,000
0
0
0
75,000
10,000
10,000
34,162
407,763
0
0
10,000
30,000
40,432
376,127
10,000
30,000
40,432
376,127
75,000
10,000
10,000
34,162
407,763
(20,000)
(6,270)
31,636
3,466,190
897,000
740,000
3,448,100
1,021,000
650,000
7,364,224
134,360
2,126,674
16,250
7,229,864
16,250
0
2,245,124
21,000
Grand total
2,142,924
3,466,190
897,000
740,000
7,246,114
2,266,124
3,448,100
1,021,000
650,000
351
TABLE 6.-MULTILATERAL DEVELOPMENT BANKS AND INTERNATIONAL ORGANIZATIONS AND
PROGRAMS
[Budget authority in thousands of dollars]
1983 actual
1984 request
1984
continuing
resolution
1984
supplemen-
tal
1985 CP
126,042
945,000
62,423
221,677
109,721
1,095,000
58,001
113,623
79,721
945,000
38,001
80,423
30,000
150,000
20,000
72,500
109,721
750,000
58,001
72,500
20,000
MDB's:
IBRD........
IDA.........
IDB
FSO .......
FSO/IIC ........
IFC ............
Asian Development Bank
Asian Development Fund.
Asian Development Fund 11
African Development Bank ......
African Development Fund
248
131,634
13,233
147,116
13,233
100,000
47,116
13,233
14,116
130,000
17,987
50,000
17,987
50,000
17,987
50,000
50,000
Total: MDB's .........
1,537,024
1,604,681
1,324,365
319,616 1,235,558
(33,760)
(25,000)
(38,000)
(26,000)
3,686
140,000
42,500
14,500
15,500
7,850
2,300
2,000
2,000
120,000
27,000
18,500
15,500
3,000
2,300
2,000
120,000
27,000
20,500
15,500
3,000
2,000
2,000
DI!!!!!
UNFPA...........
International organizations and programs:
UNDP .........
UNICEF......
IAEA............
OAS/DAP....
UNEP
WMO/VC program..
U.N. Cap. Dev. Fund
FAO/WFP
U.N. Dec for Women..
U.N. E&TS Africa ........
CITES
U.N. Namibia
UNTF S. Africa
U.N. Fellows.......
UNITAR
UNIDO.........
JPO/AED.....
IDD ........
PAHO ............
IFAD.........
160,000
52,500
14,814
15,500
10,000
2,300
2,000
2,000
500
1,000
150
500
343
449
422
500
1,000
150
500
1,000
200
1,000
138
500
343
449
422
100
1,686
50,000
40,000
50,000
50,000
Total: 10&P.......
269,502
239,950
314,164
3,686
241,800
Total ...........
1,806,526
1,844,631
1,638,529
323,302 1,477,358
SECURITY AND DEVELOPMENT ASSISTANCE
(EUROPEAN AFFAIRS)
WEDNESDAY, MARCH 7, 1984
UNITED STATES SENATE,
SUBCOMMITTEE ON EUROPEAN AFFAIRS OF THE
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
c.
The subcommittee met, pursuant to notice, at 2:22 p.m., in room
SD-419, Dirksen Senate Office Building, Hon. Richard Lugar
(chairman of the subcommittee) presiding.
Present: Senators Lugar, Helms, Pell, Biden, Sarbanes, and Tson-
gas.
Senator LUGAR. This hearing of the European Affairs Subcom-
mittee of the Foreign Relations Committee is now called to order.
This afternoon we will be discussing fiscal year 1985 foreign assist-
ance levels proposed by the administration for southern Europe.
The Chair would observe that increases have been requested for
southern Europe in general and for several of the countries in par-
ticular that we will examine this afternoon. Clearly, we want to ex-
amine the rationale for foreign assistance to those countries.
Budget constraints abound in this area, as they do everywhere. We
need to look carefully at these requests to make sure that they are
consonant with American national interests.
We will hear initially from two witnesses from the administra-
tion: Mr. Richard Burt, Assistant Secretary of State for European
Affairs, who is accompanied by Mr. Richard Haass, the Special
Cyprus Coordinator; and Mr. Richard Perle, Assistant Secretary of
Defense for International Security Policy. Then, following the testi-
mony of this panel, we will hear from a panel of public witnesses
that I will introduce in due course.
Mr. Burt has time constraints. We are grateful for his presence,
and I will call upon him first; then upon Mr. Perle, and we will
then proceed with questions from committee members.
But first I would like to call upon the distinguished ranking
member of the committee, Senator Claiborne Pell of Rhode Island,
for his opening statement.
Senator PELL. Thank you, I have no statement. Let us get on
with the hearing.
Senator LUGAR. Do any other Senators have opening comments
or statements?
[No response.]
Senator LUGAR. If not, we will proceed to you, Mr. Burt, and we
appreciate your coming.
(353)
354
STATEMENT OF HON. RICHARD R. BURT, ASSISTANT SECRETARY
FOR EUROPEAN AFFAIRS, DEPARTMENT OF STATE, ACCOMPA-
NIED BY RICHARD HAASS, DEPUTY FOR POLICY (BUREAU OF
EUROPEAN AFFAIRS) AND SPECIAL CYPRUS COORDINATOR,
DEPARTMENT OF STATE
Mr. Burt. Thank you, Mr. Chairman. I will make just a few brief
opening remarks. Then I know that Richard Perle, Richard Haass,
and of course I will be happy to answer your questions.
Despite some very important recent accomplishments within the
NATO alliance, particularly our successful implementation of the
December 1979 decision on intermediate range nuclear force de-
ployment in the face of a severe Soviet challenge, the NATO alli-
ance does face major challenges in the years ahead, and in some
cases our allies will require U.S. assistance to meet those challeng-
es.
There are four very important allies on the northern shore of the
Mediterranean which in particular will need U.S. help in the years
ahead: Portugal, Spain, Greece and Turkey. These four countries
constitute the bulk of NATO's so-called southern flank. They form
an integral part of our strategy for European defense and the de-
fense of the central front in Europe.
But they also constitute a bridge linking the Atlantic through
Europe to Southwest Asia and the Middle East, which as you know
is a region of increasing centrality to United States and Western
security. We think that the story of these four countries on the
northern shore of the Mediterranean constitutes an impressive suc-
cess story for U.S. foreign policy over the last decade.
In Spain, we have seen movement from the Franco regime and
isolation to democracy, Spain's membership within NATO, a new
base agreement, and growing economic vitality.
In Portugal we also see a movement away from an old regime,
colonial practices, a flirtation in the middle seventies with Euro-
communism, to a firm democracy, again a new base agreement re-
cently concluded late last year, and signs of economic improve-
ment.
In Greece we see movement from a military rule again to democ-
racy, full integration into NATO's military system, and the first
base agreement that we have signed with Greece since the 1950's.
And finally Turkey, which is perhaps the most impressive suc-
cess story: Movement from near-chaos and then military rule, eco-
nomic bankruptcy, and strained ties with the United States, to
movement toward resurrecting democracy and civilian rule, im-
pressive economic improvements, and an expanded closer bilateral
relationship that we in the Reagan administration have worked
very hard to establish.
A key element in these four success stories has been U.S. securi-
ty assistance, both to assist military modernization and economic
performance, and to underline the important relationship between
these countries and the United States. We believe that we must
continue security assistance to all four of these countries or see the
successful record that we have accomplished over the last decade-
and it is a bipartisan record-jeopardized.
355
You have the details of our proposals. In the cases of Greece,
Spain, and Turkey, we are requesting overall levels the same as
last year. For Turkey, we are easing the economic impact of our
assistance, and for Portugal we are slightly raising military aid
and similarly easing the financial terms of that aid. More specifi-
cally:
For Spain we are asking for $400 million in foreign military sales
[FMS], $12 million in economic support funds (ESF), and $3 million
in international military education and training (IMET);
For Portugal, $80 million in ESF, that would be for grant; $55
million in FMS; $70 million for military assistance programs
[MAP], and $3 million again for IMET;
Greece is $500 million FMS, $1.7 million IMET;
And for Turkey, $175 million ESF, approximately half grant, half
concessional loan, $230 million MAP, $525 million in FMS, $250
million of which is concessional, and $4 million in IMET.
Thus, in all four cases we have proposed assistance programs
which go toward meeting military needs on terms consistent with
the economic means of the recipient.
Finally, Mr. Chairman, we have asked for $3 million in ESF for
Cyprus. We believe this promotes educational opportunity and con-
stitutes an important symbol of U.S. interest in this country's wel-
fare. At the same time, the key element of the United States-
Cyprus relationship is not security assistance, but efforts that the
U.S. Government undertakes, along with other parties, to promote
a settlement on that island.
My prepared statement will go into considerable detail on the
current diplomatic state of play on Cyprus. I would just add this:
We are concerned about the situation in Cyprus. Our diplomacy on
Cyprus has been very active in recent weeks.
As you know, the State Department counselor Edward Derwinski
has visited that region recently. Our Special Cyprus Coordinator
Richard Haass has also paid a visit to that region and talked to the
leaders in Cyprus, as well as in Greece and Turkey. I have been
dealing on an almost daily basis with the Greek and Turkish Am-
bassadors here in Washington on that question.
I was able during a recent trip to Eastern Europe to meet with
Perez de Cuellar, the Secretary General of the United Nations, to
discuss the Cyprus problem. As you know, he has a mandate to
deal with this problem. We are hopeful that we will make progress
on the Cyprus question, and we are working very hard in discus-
sions with the various parties involved to make progress.
We believe that actions taken by the Congress can help facilitate
a settlement. We also believe that actions taken by the Congress
can make a settlement more difficult.
With that, Mr. Chairman, I want to thank you very much, and I
will be happy to take your questions.
[Mr. Burt's prepared statement follows:)
PREPARED STATEMENT OF HON. RICHARD R. BURT
It is a pleasure to have this opportunity to speak to you today on behalf of securi-
ty assistance requirements for the European region in fiscal year 1985. Although
the countries of the Atlantic Alliance weathered in 1983 a major challenge to their
unity, we must accept the fact that 1984 and future years will bring additional chal-
356
ficulties in the midst of a stringent austerity program set up by agreement with the
lenges. Fortunately, the vast majority of our European friends and allies possess the
capacity to fulfill their responsibilities and help us meet these challenges without
any direct U.S. assistance; a few, however, cannot, and need our help if they are to
be able to do their share in safeguarding United States and Western interests.
The four allies who do require special assistance are to be found along the north-
ern edge of the Mediterranean. These four allies-Spain, Portugal, Greece and
Turkey-constitute much of NATO's southern flank. This region is critical for the
defense of the central front and Europe more generally. At the same time, the
southern flank is uniquely important for another reason-as a bridge across Europe
linking the Atlantic to the Middle East and Southwest Asia. As NATO foreign and
defense ministers regularly note, Western interests outside the formal treaty area
can and do affect the well-being of every Alliance member. The countries of the
southern flank, by virtue of their location along major East-West air and sea routes,
have the potential to make a special contribution to this increasingly important di-
mension of Western security. It is U.S. assistance programs which can turn this po-
tential into reality.
But in speaking of the future, we ought not overlook the accomplishments of the
recent past. Over the past decade, each of these four countries has made a difficult
but crucial transition toward democracy. Each has strengthened its association with
the values and institutions of the West. Each has negotiated a major base agree-
ment with the United States. And in each and every case, I believe that U.S. securi-
ty assistance programs have constituted an integral part of this evolution. Our eco-
nomic and military assistance programs have proven to be an essential foreign
policy instrument.
Let me address each of the proposed security assistance programs in turn. I would
then like to say a few words about our policy toward Cyprus, after which all of us--
Richard Perle, Richard Haass, and myself—would be willing to answer any of your
questions.
A charter member of NATO, Portugal is a long-time, steadfast and reliable ally of
the United States. The Portuguese Government actively supports Western policies
in international fora, most notably on Iran, Afghanistan and Poland. Portugal holds
a strategic position of great importance for NATO reinforcement/resupply and
other, including, non-NATO contingencies. The Lajes air base is critical to these
missions. Although concerned that expanded United States use of their facilities for
non-NATO purposes could expose Portugal to increased military and economic risks,
Portugal has been highy cooperative in allowing use of its bases, provided that their
relatively modest military and economic needs can be taken into account. A new
mutual defense agreement signed in December 1983 provides the United States con-
tinued access to the critical Lajes facilities and reaffirms the strength and vitality of
our security relationship.
Portugal has come a long way in establishing a working democracy since the 1974
revolution. Portuguese political parties, both in government and in opposition (with
the exception of the Communists) are pro-Western and agree that Portugal should
make a more substantial, active military contribution to NATO. The country's Sta-
linist Communist Party, meanwhile, has been thoroughly discredited and, while con-
trolling almost 20 percent of the electorate, has no chance of participating in the
government. We support Portugal's increased participation in NATO along with
other Alliance partners, and want to help in the long-range Portuguese military
modernization effort.
Military modernization has a long way to go, however, since until the 1974 revolu-
tion the Portuguese armed forces were largely a colonial force, heavy on foot-sol-
diers and light arms. The army has been re-structured to more modern proportions,
and the process of acquiring modern equipment has begun, in accordance with
NATO force goals. It is nevertheless clear that Portugal will not be able to bear the
burden alone. In recognition of this, we and other NATO partners are cooperating
in an ad hoc committee of NATO to coordinate assistance efforts.
Portugal is one of the poorest NATO members, experiencing serious economic dif-
PORTUGAL
IMF. In addition, the country is facing a major adjustment as it prepares to enter
the EC. It is in our best interest to provide increased levels of ESF grants to support
the Azores and the mainland economies, and sufficient amounts of MAP grant as-
sistance to help Portugal achieve NATO readiness and fulfill its obligations in
Europe and the Atlantic.
357
For FY 1985 we have requested an ESF grant of $80 million, a MAP grant of $70
million, and FMS credits of $55 million along with $3 million IMET funds. This
level would help Portugal to obtain U.S. equipment for three ASW frigates (partial-
ly fulfilling our commitment to help modernize the Portuguese navy), provide funds
to complete the acquisition of a second squadron of A-7P aircraft, vital electronic
warfare equipment for the NATO-dedicated brigade, and military personnel train-
ing. The ESF is intended to provide vital budget support for the economically
pressed Azores as well as economic assistance to the mainland. In addition, it will
help finance the establishment of a Luso-American Development Foundation, in-
tended to be a clearing house for technical assistance to Portugal after the phase
out of current AID operations.
SPAIN
Since the death of Franco in 1975, Spain has successfully established a fully func-
tioning democracy, while working to integrate more fully with the West, including
membership in NATO and the EC. In conjunction with a democratic Portugal,
Spain's remarkable progress in establishing a free society and in reducing the Com-
munists to only a marginal political force has helped to secure NATO's southern
flank and enhanced Alliance strength.
The United States-Spanish bilateral security relationship dates back to 1953 and
has been confirmed through a series of agreements regarding the United States use
of Spanish military facilities and U.S. assistance for Spanish military moderniza-
tion. Since Spain's entry into NATO and its peaceful transition to democracy, it has
also become an important Alliance partner. The basis for our security cooperation
has thus been broadened. Modernization of the Spanish military forces, which
strengthens the common defense as well as encourages an institutional role for the
military similar to that played by the military in other Western democracies, has
gained new importance. Our security assistance relationship has thus become even
more significant.
Following national elections in Spain in 1982, the newly elected Socialist govern-
ment, in the face of considerable popular sentiment against NATO, “froze” the proc-
ess of military integration into the Alliance pending a popular referendum. No date
for a referendum has been set, but the authorities are now evaluating membership
and military integration partly in terms of what benefits they offer the Spanish
military's modernization effort. While we consider the ultimate decision to be a
matter for Spain alone to decide, it is important that our assistance effort make
clear the value of NATO participation.
Under the 1983 Agreement on Friendship, Defense, and Cooperation, Spain pro-
vides the United States continued access to vital air and naval facilities which will
be crucial in the event of a European conflict. The agreement also establishes an
institutional framework-the United States-Spanish Council and the various com-
mittees which operate under its aegis--for the development and implementation of
our broad political, economic, cultural, and scientific cooperation with Spain. We, in
turn, are pledged to “best efforts" in assisting Spain to upgrade its military equip-
ment, modernize its forces, and bring them up to NATO standards.
At a minium, it is vital that we maintain our current “best efforts” commitment
for FY 1985, which would be to continue at FY 1984 assistance levels of $400 million
in FMS credits, and $12 million in ESF grants, and to seek $3 million in IMET. The
ESF grant would fund scientific/cultural exchanges and programs designed to coun-
terbalance the large military component of our relations. The IMET program is
aimed at the professional development of the Spanish military. FMS guaranteed
credits are scheduled to fund air defense and missile systems, continued funding for
purchase of F-18 fighter aircraft, cargo/transport helicopters, Harpoon missiles,
ship construction, and other weapons systems.
GREECE
The strategic importance of Greece is well-recognized. Bordering on the Warsaw
Pact, Greece would block any Pact thrust southward toward the Mediterranean
through Thrace and would join with Turkey in resisting any Soviet effort to seize
control of the Dardanelles. At the same time Greece is in a position to control the
sea and air lanes of the Eastern Mediterranean, and is one of the several countries
controlling access to the Middle East. Greece is thus a key ally on the southern
flank of NATO.
In addition to these strategic interests, our defense relationship with Greece must
be placed in the broader context of a traditional friendship which is very important
to the United States. It is our intention to work to deepen the understanding be
358
tween our two countries. While at times we have significant differences with
Greece, these must be considered in the larger context of relations between two
democratic allies whose perspectives can differ but also coincide.
The most important development in our defense relationship last year was the
conclusion of the new Defense and Economic Cooperation Agreement. The Agree-
ment was formally signed September 8 and entered into force December 20 follow-
ing Greek parliamentary approval. The Congress helped make this Agreement possi-
ble by indicating its willingness to increase our security assistance program to
Greece in the context of a defense relationship reaffirmed by conclusion of a satis-
factory agreement. This accord provides for the continuation of the activities previ-
ously conducted in Greece on a mutually agreeable basis. The Agreement will be
valid until terminated by written notice by either side, which can be given at the
end of 5 years or thereafter. This arrangement is comparable to agreements we
have with other allies. We believe this Agreement strengthens NATO, as well as
benefitting the United States and Greece.
The security assistance we are requesting for Greece is an integral part of a close
defense relationship which includes our common membership in NATO as well as
United States use of military facilities in Greece. U.S. assistance is needed to im-
prove capability to carry out its assigned tasks under NATO. Greece has made con-
siderable progress in recent years, utilizing its own foreign exchange resources as
well as U.S. loan guarantees. The Greek percent of GNP devoted to military expend-
itures is among the highest in NATO. However, U.S. assistance continues to be
needed. Like other European allies, Greece is suffering from inflation, unemploy-
ment, and a balance of payments problem. The repayment terms for our military
assistance loans to Greece are the best available to any nation under our non-
concessional FMS program.
For Greece, we propose to maintain the level of FMS funds at $500 million as was
allocated for FY 1984 to permit the purchase of military equipment, ammunition
and spare parts including aircraft, communications and radar equipment, and mis-
siles. We also propose $1.7 million for international military education training
(IMET) which is important to the Greek armed forces at both the professional and
technical levels.
TURKEY
Our assistance program for Turkey remains one of the largest in the world, re-
flecting both that country's importance and its potential. We are proposing a pro-
gram for Turkey identical in size to last year's proposal, but doing so recognizing
that it will leave significant shortcomings, both in terms of Turkish needs and what
we would like to see occur there. Nonetheless, it is a program which will permit us
to continue to assist the Turks with major military modernization programs and
provide an important element of assistance to their imaginative economic reforms.
Although Turkey's strategic importance has been reiterated many times to this
Committee, I would like to mention it once again briefly. Turkey, with both land
and sea frontiers with the U.S.S.R. and Bulgaria and holding the key to Soviet
access to the Mediterranean, is the anchor of the Southeast flank of NATO. In addi-
tion, Turkey shares borders with Iran, Iraq and Syria and is exploring a new, more
active role in Islamic affairs. Given the impact of all three countries on current
unrest in the Middle East, Turkey's potential role takes on added significance. Our
dialogue and cooperation with Turkey on Middle East issues has increased signifi-
cantly, based on the good and productive bilateral relationship we have developed.
Security assistance remains an important basis of that relationship.
Turkey's political system is undergoing a positive transformation toward full par-
liamentary democracy. The government elected in November 1983 is actively devel-
oping and carrying out new and innovative policies. Municipal elections scheduled
for March 25 will include all legal political parties, a further indication that move-
ment toward full democracy remains on schedule. Having supported Turkey during
the past few difficult years, as it struggled to overcome political chaos and economic
bankruptcy, it is important that we continue to strongly support the new govern-
ment and the return to full democracy.
Turkey's economic recovery in recent years is justly lauded as an example of how
international cooperation and a committed country can overcome staggering finan-
cial problems. At the same time, the economy remains fragile and requires outside
support for the next year or two. This year will be especially important. Repayment
of previously rescheduled debt will add significantly to short-term debt service; and
the important economic reforms announced by the new government, which ulti-
mately should increase the economy's productivity and competitiveness, will also
359
put short-term pressure on the balance of payments. Our economic support funds
assistance to Turkey has decreased dramatically in recent years, but it is very im-
portant that we not decrease it further at this critical juncture.
For Turkey, our request is for $755 million in military assistance ($230 in MAP,
$250 in concessional FMS loans and $275 in FMS guarantees), $175 million in eco-
nomic support funds and $4 million in international military education and training
funds. Some of our military assistance will continue to provide maintenance and
support of aging equipment which cannot yet be replaced. The greater portion will
be used for modernization of Turkish armed forces' equipment. Major programs in-
clude M-48 tank upgrade, helicopter acquisition, naval weapon procurement and
continuation of the important F-16 program begun in FY 1984. These are key pro-
grams which will make major strides in helping Turkey meet NATO commitments
which, in turn, contribute directly to U.S. national defense. They fall far short, how-
ever, of enabling Turkey to overcome all of its equipment shortcomings in a reason-
able timeframe.
CYPRUS
The United States enjoys a cordial and mutually beneficial relationship with the
people and Government of Cyprus. However, the de facto partition of the island be-
tween Greek and Turkish communities represents a continuing threat to that good
· relationship and to relations between Greece and Turkey, two important NATO
allies. This Administration thus places a high priority on achieving progress toward
a just and lasting Cyprus settlement. We are fully committed to that goal, for as
long as Cyprus is divided and its status uncertain, it constitutes not only a humani-
tarian concern but remains a barrier to stability in the Eastern Mediterranean.
In this context, we have strongly supported efforts involving the two Cypriot com-
munities designed to promote a fair and final settlement. We have also worked to
prevent steps which would make a diplomatic settlement more distant. We thus con-
demned the November 15 declaration of statehood by the Turkish Cypriots and sup-
ported United Nations Security Council Resolution 541, passed November 18, which
called for reversal of the Turkish Cypriot action. In January, we welcomed new pro-
posals by both the Turkish Cypriots and by the Government of Cyprus. We viewed
elements of Turkish Cypriot leader Denktash's group of goodwill measures as con-
structive, as we did the Government of Turkey's announcement of the removal of
1,500 troops from Cyprus. We responded favorably as well to President Kyprianou's
proposed framework for a comprehensive settlement, noting that it contained posi-
tive elements.
The Administration is now actively encouraging both parties to react to the
other's proposals in a way which can stimulate progress toward a solution to out-
standing issues. During this period, the President, the Vice President, Secretary
Shultz, and other senior Administration officials have personally worked with the
parties, urging progress toward a solution. Counselor Derwinski has visited the
region, most recently in early February, for high level discussions, and Deputy for
Policy and Special Cyprus Coordinator Richard Haass has just completed discussions
with senior officials in Ankara, Athens and Cyprus during his February 15–23 visit
to the region. We are in close contact with the U.N. Secretary General, who we be-
lieve must continue to play a key role in seeking a solution. He has greatly stepped
up the pace of his consultations, meeting in recent weeks with Cypriot President
Kyprianou, Turkish President Evren, and Turkish Cypriot community leader Denk-
tash, using his good offices in an attempt to bring the parties closer to a settlement.
The $3 million requested for Cyprus would be applied to the existing Cyprus
America Scholarship Program (CASP) which provides American university educa-
tions to young Cypriots of both communities. Cyprus is without universities of its
own and CASP provides a very popular alternative to Soviet bloc study. We believe
this to be a modest but significant demonstration of continuing American interest in
the welfare of the people of Cyprus; as such, it constitutes a worthy complement to
our diplomatic endeavors.
Senator LUGAR. Mr. Perle, would you proceed at this point, and
then we will have questions for both the administration witnesses.
360
STATEMENT OF HON. RICHARD N. PERLE, ASSISTANT SECRE-
TARY OF DEFENSE FOR INTERNATIONAL SECURITY POLICY
Mr. PERLE. Thank you very much, Mr. Chairman. Like my col-
league, I will submit my prepared remarks for the record and will
summarize just a few points.
There are increases proposed this year, as you know. I would
only call attention to one of the reasons why we have felt that nec-
essary, despite difficult economic circumstances even at home, and
that is most, indeed all, of the purchases made by the recipients of
this assistance are made in dollar terms. And in the last couple of
years there has been a steady strengthening of the dollar, which
has meant that for practical purposes the aid we make available
will purchase some 25 to 27 percent less equipment than would
have been the case under the previously prevailing exchange rates.
Second, I would point out that there are critical military mis-
sions performed by each of the allies we are discussing in the
NATO context, missions that cannot be performed by U.S. forces
alone. We do not have the capacity to bring those forces to bear
effectively and in a timely fashion.
It is therefore a singularly efficient method of meeting the
NATO defense plan to assist those allies in the southern region to
mount a credible defense in pursuant of their NATO missions.
I will not repeat the points that Rick Burt has made with respect
to the two countries on the Iberian peninsula, because I think they
are largely noncontroversial. But let me say a little bit about the
aid we are requesting for Greece and Turkey, which is a good deal
more controversial.
We have concluded, as you know, a base agreement with Greece.
Greece has an important requirement to modernize its forces. They
are in the process now of deciding how to modernize their air force
in particular, and the $500 million of credits that we have proposed
will be necessary to a successful modernization program for Greece.
The benefits of American-Greek security cooperation adhere to
both parties, to NATO, and to the stability in the Aegean, and we
think this aid program is important and important to the most crit-
ical part of the southern region of NATO.
Finally, let me say a little bit about Turkey. Turkey is well on
the path to democratic rule. It is a remarkable achievement, and
those of you who have been in Turkey recently I am sure share the
impression of many of us in the executive branch who have had an
opportunity to visit Turkey that a really quite extraordinary politi-
cal transformation is underway.
It is something that the United States has been urging. It was
the subject, as I recall, of discussion on this same occasion last
year, when the absence of democratic institutions in Turkey was
referred to as one of the reasons why we ought to be skeptical
about aid to Turkey.
Those democratic institutions are now well in the process of res-
toration, and it seems to me that if we are to be even minimally
consistent with the view that was expressed last year, that progress
ought to be recognized and indeed rewarded.
Militarily, Turkey anchors the critical southeastern flank of
NATO. The Turkish forces, as I have had occasion to say previous-
361
ly, perform what is probably the single most critical military mis-
sion for the southern region, and that is preventing the egress of
the Soviet Black Sea fleet into the Mediterranean.
If we are unable to hold these straits, if we are unable to keep
that massive maritime capability bottled up in the Black Sea, the
balance of power in the eastern Mediterranean in a conventional
war could and almost certainly would shift against the United
States and its allies, with catastrophic consequences for us and for
friends in the region, including, most obviously, our friends in
Israel and among the moderate Arab States.
The overwhelming majority of the aid that we provide to Turkey
is intended to enable them to carry out that mission. Moreover, the
Soviets have massive forces deployed in the trans-Caucasus and
these pose a constant threat of intimidation and potential aggres-
sion in a vital area. Those are the forces that almost certainly
would be moved south to exploit chaos in the upper gulf.
And if there is anything that we can be sure about, it is that
there is now and will likely continue to be chaos in the upper gulf,
and the current offensive under way between Iran and Iraq should
remind us all of the importance of being sure that the Soviets do
not have an easy method of exploitation of that instability in order
to strike a blow against vital American and European interests.
Turkey is making a valiant effort to keep equipment operational
that in any other military service would have been dropped long
ago. Almost all of her major items of equipment are obsolete or
nearing obsolescence. This includes weapons systems such as tanks,
ships, and aircraft, as well as communications and support equip-
ment.
In the army, almost all of the tanks are 90 millimeter tanks with
limited effectiveness, and are gas-powered with short range. Only 3
percent of critical antitank weapons are modern weapons, the rest
dating back to World War II and the Korean war. Eighty-nine per-
cent of Turkish short-range air defense weapons are 1940 vintage
or earlier, and 93 percent of their military communications radios,
FM radios, are no longer supportable.
In the navy, all destroyers are ex-U.S. World War II ships, and
75 percent of their submarines are over 35 years old and well
beyond the end of their useful operational life.
In the air force, 75 percent of their fighter aircraft are pre-1970
vintage. There is no modern ground air defense for bases. Obsolete
equipment not only reduces combat effectiveness, but also imposes
an enormous operational and maintenance burden on what is al-
ready a severely strapped force.
I am happy to report that with the funds that were approved last
year, although they were not all that we asked for, we have begun
the important process of assisting Turkey to modernize its forces.
We have concluded an agreement with Turkey that will begin the
process of acquisition and some coproduction of F-16 aircraft. This
provides the basis for the long-range modernization of the Turkish
Air Force.
In the army, we have moved forward with the tank upgrade pro
gram, in which M-48 tanks are being fitted with a 105-millimeter
gun, diesel engines, and improved fire control systems. In the navy,
34-045 0-844-24
362
we are continuing to assist in the fitting out of German-designed
and German-supplied frigates.
These programs, important as they are, are capable only partial-
ly of addressing Turkey's urgent requirements. If we are to meet
even the most urgent of them, we require every bit of the assist-
ance that has been requested by the administration, and indeed
that level, which reflects economic realities, is insufficient to do the
task.
In this regard, the FMS credits that we are seeking at conces-
sional rates are of special importance. Let me say unmistakably
that this program has been designed and developed with a number
of considerations that I know are important to this committee in
mind, including perhaps most importantly the stability in the
Aegean. And the analyses that are available to us and I believe to
the committee as well indicate that in the Aegean area there is, if
anything, a balance that favors the forces of Greece rather than
the forces of Turkey.
We are attempting to assist Turkey in implementing agreed
NATO force goals and thus to enhance its ability to perform its
NATO missions. Moreover, a strengthened Turkey would be an ex-
traordinarily effective deterrent to possible Soviet expansion into
areas that are of vital interest to us and our allies.
Senator BIDEN. Excuse me. Would you repeat that last part,
please?
Mr. PERLE. It would be an important deterrent to the use of
Soviet forces in a manner threatening to us and our allies.
Senator BIDEN. In a manner threatening to us and our allies?
Mr. PERLE. I do not know if those were my exact words, but that
was was my point.
Senator BIDEN. I am sorry. I just could not hear you.
Mr. PERLE. I am sorry. I do have a bit of a cold.
I would like to conclude with a quote from a June 1982 report
prepared by the staff of the Foreign Relations Committee. As an
old staffer, I think these things ought to be recognized in public
every once in a while. Chapter 7 of that report dealt with Greek-
Turkish issues and implications for the United States and NATO.
It reads as follows:
Given its longstanding ties to both Greece and Turkey, the United States contin-
ues to find itself in a difficult position politically in any effort to reconcile outstand-
ing bilateral differences between and two countries. The United States believes that
Greece and Turkey each have important roles to play in NATO and in furthering
the interests of peace and stability in the eastern Mediterranean.
At this juncture, it is critical that the United States be patient, judicious, and
evenhanded in its efforts to maintain good relations with both of our allies. It would
be a mistake to presume that current differences in perspectives between Greece
and Turkey cannot be worked out through creative diplomacy.
In the end, it is in the best interest of Greece, Turkey, the United States and
NATO to approach all issues discussed above with an open mind. Through this ap-
proach, the prospects for resolving the longstanding questions at dispute are most
likely to be advanced.
I believe that this assessment continues to be a correct one and
that any notion of taking punitive action in the field of security as-
sistance against Turkey or, for that matter, Greece with respect to
their bilateral differences would be at best counterproductive,
against the interests of the United States, NATO, and most clearly
363
a setback to the prospects for a peaceful negotiated resolution to
the Cyprus dispute.
We have a long history of punitive action and it has not worked
very effectively. We have at the moment an opportunity to try the
other approach, which is to meet urgent and justified requirements
and to encourage diplomacy in a positive and not a negative spirit.
The programs we are proposing will not solve all of the security
problems we face on NATO's southern flank, but they will, howev-
er, assist these strategically situated allies to acquire the essential
equipment and training that will lessen some of their more urgent
deficiencies and contributes to the stability of the area.
Thank you, Mr. Chairman.
[Mr. Perle's prepared statement follows:
PREPARED STATEMENT OF HON. RICHARD N. PERLE
Mr. Chairman, I am pleased to appear before the subcommittee once again this
year to discuss security assistance for four of our allies on NATO's southern flank-
Turkey, Greece, Spain, and Portugal. The fundamental reasons why we continue to
place such importance on security assistance remain unchanged. The recovery from
the world economic recession, the volatile situation in the Middle East and the con-
tinuing Soviet military buildup and adventurism underscore the importance of U.S.
security assistance to NATO's southern flank. Each of these countries have specific
needs and NATO missions and differing capabilities of fulfilling these missions. Ade-
quate fulfillment of these responsibilities cannot be financed through national re-
sources alone. These allies look to the United States for assistance to augment their
own contributions to Western security. The ability of the United States to provide
needed and additional support to enhance the military capabilities of these coun-
tries to meet their NATO assigned missions is directly tied in the minds of their
officials and people to the validity of their participation in the alliance. At the same
time the United States is limited in its ability to allocate resources and we are en-
couraging greater efforts on the part of our allies. Security assistance is among the
most prudent-and most efficient-form of national defense expenditures. It con-
tributes substantially to U.S. national security interests and to world peace.
Security assistance is often loosely termed "foreign aid,” which implies a give-
away. Security assistance is seldom recognized for the invaluable strategic invest-
ment that it is. Much of the security assistance we provide is in the form of guaran-
tees for loans at market rates of interest. This year we are also recommending loans
at concessional rates of interest. In both instances, these dollars are spent to buy
goods and services from U.S. firms. These goods and services are priced in dollars;
therein lies another difficulty for our allies. Over the past year alone the average
value of southern European currencies (Portuguese, Spanish, Greek, Turkish) has
declined an aveage of 27 percent against the dollar, further reducing each country's
capability to modernize its armed forces.
In return for our assistance we receive multiple benefits. Certain missions that we
consider important to the security of the United States can be performed more effi-
ciently and less expensively by an ally. Obtaining the strategic cooperation of our
allies is another vital benefit of our security assistance. In the past several years we
have concluded some form of base agreement with each of the nations we will dis-
cuss here today. Each of these agreements is different and has a different objective.
What they all have in common is that they all produce a valuable addition to the
capabilities of U.S. forces and were forged in the context of security assistance.
There are few other programs that return as much for each dollar invested as
security assistance. Funds allocated for international military education and train-
ing (IMET) are an excellent example. For a relatively modest cost, we have the op-
portunity to expose the military elite of our friends and allies to U.S. military
values and traditions, systems and procedures. Experience has shown that this rela-
tively low-cost program provides enormous benefits for the future as the foreign
military trainees mature and assume leadership positions in their respective mili-
tary services. This aspect of security assistance deserves much greater attention and
funding. As many members of this committee have so importantly pointed out in
their advocacy of exchange programs—there can be no greater investment in future
relations and understanding between peoples than such exchanges. This is the case
364
with the IMET program, which brings Greek, Turkish, Spanish, Portuguese and
other allied military officers to the United States.
I would like to turn now to the specific proposals to assist our southern flank
NATO allies.
The administration is proposing $400 million in credits for Spain, the same
amount authorized for Spain for fiscal year 1984. These credits, which will help our
Spanish allies take steps to modernize their armed forces, are important in the over-
all United States-Spanish security relationship, of which the July 1982 U.S. base
rights agreement is also part. In the course of arranging for our use of several valu-
able bases in Spain, the United States Government pledged its best efforts to help
Spain obtain credits needed to purchase U.S. military goods and services. Through
the present proposal, we aim to continue to fulfill that pledge. In this coming fiscal
year, Spain will use these funds for F-18 fighter attack aircraft and ship board
equipment for FFG-7 frigates.
For Greece, the administration is requesting $500 million in military assistance,
the same amount we requested in fiscal year 1984. Last year, we concluded a de-
fense and economic cooperation agreement with the Papandreou government. Imple-
mentation of that agreement is proceeding and Greece continues to need timely
help to modernize her forces. This administration prizes our country's deeply-rooted
amity and long history of cooperation with Greece. The benefits of United States-
Greek security cooperation to both parties, to NATO, and for stability in the Aegean
are large and evident. We need now to build upon our success in negotiating the
defense and economic cooperation agreement. This year's military assistance is an
important step.
Our military aid request for Portugal is $125 million for fiscal year 1985. As the
subcommittee knows, we have just concluded the renewal of the Azores base agree-
ment after more than a year of talks. We are now assured of conducting essential
military missions from the Azores, including rapid long-range airlift from the
United States to Europe and beyond. Included in the agreement is a commitment
from Portugal to let us establish a satellite tracking site on the mainland of Portu-
gal.
Portugal's balance of payments has fallen into serious deficit in recent years, and
as a result, the government has taken tough austerity measures. We believe it is
essential that we maintain a very positive and helpful posture toward Portugal, as
we have since the 1974 revolution. Grant assistance must continue to constitute the
bulk of our assistance. The level for fiscal year 1984 was $60 million and for fiscal
year 1985 we are proposing $70 million, a modest increase. FMS credits have only
recently begun to be used by the Portuguese and their critical balance of payments
situation poses an additional obstacle to our intentions of moving the Portuguese
toward greater use of credit. In order to make the use of credits more attractive for
the Portuguese, we propose a $10 million increase in FMS credits for fiscal year
1985 to $55 million. We are seeking your support for legislation on repayment terms
similar to the terms in effect for Egypt and Israel (10 years grace, 20 years repay-
ment). The specific high priority projects that U.S. security assistance will help Por-
tugal with are acquisition of (i) a second squadron of A-7 aircraft, (2) U.S. equip-
ment to be installed on three new frigates, and (3) equipment for an air-transporta-
tion light infantry brigade.
Lastly, I would like to discuss Turkey. Turkey, which has recently returned to ci-
vilian democratic rule with the election of Prime Minister Turgut Ozal occupies a
unique geostrategically important area and clearly continues to have great need of
our help. Turkey anchors the critical mission of preventing the egress of the Soviet
Black Sea fleet, which, if left unimpeded, could tip the military balance in the Medi-
terranean. Turkey also abuts potential lines of Soviet advance through northeastern
Iran toward the Persian Gulf. The volatility of this region is well understood. What is
not adequately understood is the assistance that Turkey will and could provide for
important U.S. objectives. The recently signed Transit Terminal Agreement for sup-
port of the U.S. contingent of the multinational force in Lebanon is an example.
The Soviets have massive forces deployed in the Transcaucasus, posing a threat of
intimidation or aggression in the area. The steady modernization of the Warsaw
Pact forces facing turkey, which I noted in my testimony last year, continues una-
bated. Our help and that of our allies remain crucially important to correcting this
dangerous situation. In this regard, we are pleased to call attention once again to
the efforts of the Federal Republic of Germany in assisting the modernization of
Turkish armed forces. Needs for modernization should be considered in light of Tur-
key's outstanding record in bearing the burden of defense. Turkey has maintained
one of the highest rates of real increase in defense spending over the last 10 years of
any NATO nation (109 percent).
365
Turkey is making a valiant effort to keep equipment operational. Almost all
major items are obsolete or nearing obsolescence. This includes weapons systems
such as tanks, ships and aircraft as well as communications and support equipment.
In the army almost all tanks are 90MM with limited effectiveness and gas-powered
with short range. Only 3 percent of critical anti-tank weapons are modern; 89 per-
cent of short-range air defense weapons are 1940 vintage or earlier and 93 percent
of FM radios are unsupportable. In the navy all destroyers are ex-U.S. World War II
ships and 75 percent of submarines are over 35 years old and at the end of their
operational usefulness. In the air force 75 percent of fighter aircraft are pre-1970
vintage. There is no modern ground air defense for bases. Obsolete equipment not
only reduces combat effectiveness but also increases operations and maintenance
costs.
I am happy to report that with the urgently needed increase in security assistance
that Congress approved for fiscal year 1984, we have started the meaningful mod-
ernization of Turkish forces. We have concluded an agreement with Turkey for co-
production of the F-16 aircraft. This provides a basis for the long range moderniza-
tion of the Turkish air force. In the army we have moved forward with the tank
upgrade program in which Turkish M-48 tanks are fitted with a 105MM gun, diesel
engines and improved fire control systems. In the navy we are continuing to assist
in the fitting out of four German designed frigates. These important programs are
only partially addressing Turkey's requirements. If we are to meet even the most
urgent of these requirements we must have the full administration security assist-
ance request for Turkey. The FMS credits we are seeking at concessional rates are
of great importance in this regard. Our proposed program was devised with many
considerations in mind, including the importance of stability in the Aegean. It will
accomplish several things which are of direct benefit to the United States. We will
assist Turkey in implementing agreed NATO force goals and thus enhance Turkey's
ability to perform its NATO missions. A strengthened Turkey would be an increased
deterrent to possible Soviet expansion into the Middle East and Southwest Asia. In
concluding my remarks about Turkey I would like to quote from a June 1982 report
by the bipartisan staff of the Senate Foreign Relations Committee entitled “NATO
Today: The Alliance in Evolution.” Chapter 7 "Greek-Turkish Issues: Implications
for the United States and NATO”. The quote reads as follows:
“Given its long-standing ties to both Greece and Turkey, the United States contin-
ues to find itself in a difficult position politically in any effort to reconcile outstand-
ing bilateral differences between the two countries. The United States believes that
Greece and Turkey each have important roles to play in NATO and in furthering
the interests of peace and stability in the eastern Mediterranean. At this juncture,
it is critical that the United States be patient, judicious, and even-handed in its ef-
forts to maintain good relations with both of our allies. It would be a mistake to
presume that current differences in perspectives between Greece and Turkey cannot
be worked out through creative diplomacy. In the end, it is in the best interests of
Greece, Turkey, the United States, and NATO to approach all issues discussed
above with an open mind. Through this approach, the prospects for resolving the
long-standing questions at dispute are most likely to be advanced.”
I believe that this assessment continues to be a correct one and that any notion of
trying to take punitive action in the field of security assistance against Turkey or
Greece with respect to their bilateral differences would be at best counter-produc-
tive, against the interest of the United States, NATO, and a setback to any pros-
pects for a peaceful negotiated resolution to the Cyprus dispute.
The programs we are proposing will not solve all the security problems on
NATO's southern flank. Our program will, however, assist these strategically situat-
ed allies to acquire the equipment and training that will help lessen some of their
more urgent and serious deficiencies and contribute to the stability of the area.
Senator LUGAR. Thank you very much, Mr. Perle.
If I may have the unanimous consent of my colleagues, we will
proceed on a 10-minute rule for the first round of questioning. If
there are additional questions from Senators, we will have 10 min-
utes on the second round, until of course all questions have been
asked.
I will call now upon my colleague, the Senator from North Caro-
lina, Senator Helms, to commence the questioning. I have no ques-
tions at this time.
366
Senator HELMS. Mr. Chairman, thank you very much, I welcome
all three of our witnesses. We do not get to see much of you around
here since you became a bureaucrat, but we particularly enjoy your
work.
Mr. PERLE. You have that in common with my family, Senator.
Senator HELMS. Mr. Burt, let me enlarge the focus of what we
are all interested in. I would like to know if you, the Secretary of
State, the Soviet Union and others are involved in any sort of in-
terim arms control treaty discussions and discussions about the
possibility of a Reagan-Chernenko summit.
Senator BIDEN. In Cyprus? (Laughter.] I am sorry, Jesse.
Mr. BURT. Senator, we maintain diplomatic contacts with the
Soviet Union, but I am not personally aware of any discussion of a
so-called interim treaty.
Senator HELMS. You do not know anything about any such situa-
tion?
Mr. BURT. No; I do not. I do not know of any such negotiation.
Senator HELMS. Joe, I think this is relevant.
Senator BIDEN. I apologize, Jesse.
Senator HELMs. Oh, that is all right. I have been putting up with
you for 10 years.
Senator BIDEN. And hopefully it will be another six.
Senator HELMs. Both ways. [Laughter.]
Please understand that I just want your answers for the record.
On January 13, 1984, did you make a statement in a press back-
ground briefing-and let me quote what is attributed to you:
I might say that in one particular area the Soviets made clear that they did not
feel obliged to adhere to the SALT II Treaty, and that was on the obligation to
reduce down to 2,250 strategic nuclear delivery vehicles.
Is that a statement approximately what you said?
Mr. BURT. I think it is. I think it is actually public knowledge
that that is their position, that when the Carter administration an-
nounced that it was not going to seek the ratification of the SALT
II Treaty, but that it was going to continue to adhere to those
terms, that the Soviet Union announced that it did not feel bound
to undertake the reductions down to the SALT II levels of 2,250.
Senator HELMS. Would you pull your microphone a little closer
to you, please.
Did the United States ever agree that the Soviets were not re-
quired to reduce their forces under SALT II?
Mr. BURT. I am not aware of having agreed to anything along
those lines. As I said in my previous answer, I think this was a
statement that the Soviets made to the Carter administration, and
this is not an issue that at least I personally have addressed.
Senator HELMS. I want to ask you if it is correct that the Soviets
have over 2,700 delivery vehicles, compared to what, about 1,950
for the United States? Is that your understanding?
Mr. BURT. I would not know; 2,700? It would depend on counting
rules, I assume.
Senator HELMS. I would ask Mr. Perle if he knows.
Mr. PERLE. That sounds approximately correct, Senator.
Senator HELMS. Let me ask both of you, is that consistent with
the Jackson amendment to SALT I?
367
Mr. PERLE. The Jackson amendment required-or urged that in
any future treaty between the United States and the Soviet Union,
the United States not be limited to a level of strategic interconti-
nental nuclear forces inferior to the level provided the Soviet
Union. I believe those are the exact words of the resolution.
Senator HELMS. So the answer then is it is not consistent with
the Jackson amendment?
Mr. PERLE. Well, the balance as it now exists is certainly not.
Senator HELMS. Mr. Burt, Dr. Kissinger on a number of occa-
sions, and on one occasion in particular as I recall, said the possi-
bility always exists that the Soviets will treat the Moscow agree-
ments—and he is talking about SALT I-as they have sometimes
treated earlier ones, as just another tactical opportunity in the pro-
tracted conflict. If this happens, the United States will have to re-
spond. If this agreement were being circumvented, obviously we
would have to take compensatory steps in the strategic field.
Can we agree that the Soviets, since SALT I, have circumvented
and violated just about all of the most important provisions of not
only SALT I, but SALT II, by which we are voluntarily abiding?
Now, I wonder what happened to that pledge by Mr. Kissinger.
Was that just a pledge that he made or was it one on behalf of this
Government? How does the administration feel about it now?
Mr. BURT. I do not know. In fact, I am vaguely aware of the
statement that you just mentioned, but I could not answer for Dr.
Kissinger.
We are certainly sensitive to both the violations which have oc-
curred under the agreements you mentioned, as well as the circum-
ventions that have occurred, and I think we are willing to take
whatever steps are necessary in the military field and other fields
that are necessary to maintain our interests and to protect the
strategic balance.
Senator HELMS. We are willing to take?
Mr. BURT. Sorry?
Senator HELMS. That we are willing to take, you say?
Mr. BURT. Yes.
Senator HELMS. Let me tell you why I got into this line of ques-
tioning. I was almost on that KAL 007 plane. It just so happened
that because of another commitment I caught another plane out of
Los Angeles.
I have been in contact with the grandmother of two little girls
who were on that plane and whom I met in Anchorage. In a letter
that she wrote to me, she raised the question what happens when
this Government, our Government, does nothing?
Now you may say she is overreacting, but anybody who will say
that she is overreacting has never been a grandfather or a grand-
mother. I do not believe I could handle it if it had been my grand-
children. I think she has done extremely well.
But she raised a question: If there are no penalties, if there is no
reaction, will not the Soviets continue to violate arms control trea-
ties? You tell me what to say to her.
Mr. BURT. I think that that is a wise question.
Senator HELMS. That is the reason I wanted to raise this line of
questioning with you, because I have the feeling, as I read the arti-
cles from the Washington Post, the New York Times, and all the
เ
368
rest, that we must not do anything to rock the boat. And yet, there
are people out there who remember what has been said in the past,
who have some vague awareness, if not specific awareness, of com-
mitments made or pledges made vis-a-vis the Kissinger statement
that I read to you, and they are wondering what is going on.
I kind of apologize to you for bringing this up, and I apologize to
Joe Biden. But I think it is relevant, and I want to get some dialog
going between this committee and the State Department and the
administration to find out the answer to the question that the
grandmother of two little girls who went down on that plane in a
deliberately calculated murder of 269 people, asked.
Now, I wish you would think about it. I am not going to put you
on the spot and ask any further questions. But I would like for you
to think about it and drop me a memorandum and advise me of
what I should do and what I should say when people raise ques-
tions like this, because all I hear about is peace, peace. There was a
patriot who said, there is no peace.
I want to know what we are doing to protect the American
people, before we give it all away through negotiations or through
apathy or through doing nothing.
Mr. Chairman, thank you. I have no further questions.
Senator TSONGAS. Would it be possible for the rest of us to get a
copy of that memorandum when you do it?
Mr. BURT. Certainly. And if I could be permited, Mr. Chairman,
to make just a brief statement to the Senator, I think that on the
questions of both arms control compliance and the KAL tragedy,
that neither the State Department nor the administration has any.
thing to be ashamed about.
I think that on the KAL tragedy, the President of the United
States, the Secretary of State, and other officials spoke out on that
issue, and led the international response to that problem. We cer-
tainly have not forgotten about it, and it has told us a great deal
about the problems of doing business with the Soviet Union.
We certainly cannot be accused of sweeping that issue under the
rug.
Senator HELMS. I did not say you had.
Mr. BURT. On the question of arms control compliance, this is the
first administration that has raised the issue publicly, has done a
thoughtful study of the problem, has reported to the Congress, and
has addressed the issue publicly.
Senator HELMS. I did not say you had anything to be ashamed of.
If you will recall my question--and I can have the stenographer
read it back to you I want you to tell me what to say to the lady.
Mr. BURT. That is what you want as the subject of this memo?
Senator HELMS. Yes. You can say that we spoke out, and you did.
But the administration also opposed seven specific proposals, all of
which were realistic, and the Senate rejected them because the ad-
ministration opposed them, in response to the KAL tragedy.
But that is another subject for another day. I do not say you
have anything to be ashamed of, but I do want to know what you
are proud of.
[The following information was subsequently received for the
record:)
369
Soviet NONCOMPLIANCE WITH ARMS CONTROL AGREEMENTS
As the President stated in his letter transmitting to the Congress the Administra-
tion's report on Soviet Noncompliance with Arms Control Agreements:
“The United States will continue to press its compliance concerns with the Soviet
Union through diplomatic channels, and insist upon explanations, clarifications, and
corrective actions. At the same time, the United States is continuing to carry out its
own obligations and commitments under relevant agreements. For the future the
United States is seeking to negotiate new arms control agreements that reduce the
risk of war, enhance the security of the United States and its Allies, and contain
effective verification and compliance provisions.'
The United States is committed to policies which enhance the prospects for peace
and reduce the risks of war. The U.S. believes that equitable arms reductions agree-
ments with effective verification and compliance provisions will, if complied with,
enhance security at substantially reduced, equal levels of forces on both sides. In
this way, such agreements can make a major contribution to international security
and stability. Such agreements can be designed to help deter future violations.
We should recognize, however, that enforcing compliance with arms control agree-
ments is a central problem in arms control which has not yet been solved. Better
verification and treaty drafting will help, most fundamentally, the Soviets must
take a responsive attitude toward resolving compliance concerns.
Senator LUGAR. Thank you very much, Senator Helms.
Before I call upon Senator Pell, without objection, so that the
committee might have as complete a record as possible, I would
insert in the record at this point a copy of a study by the Congres-
sional Research Service of the Library of Congress entitled "United
States Military Installations in Greece." This study reviews the
status and nature of military installations in Greece utilized by the
United States, the United States-Greek defense relationship, and
the defense agreements that govern United States use of Greek
military installations. This study is one of a series of reports on
U.S. military installations in NATO's southern region. Forthcom-
ing are reports on U.S. installations in Turkey, Spain, and Portu-
gal.
[The material referred to follows:]
370
Report No. 84-24 F
UNITED STATES MILITARY INSTALLATIONS IN GREECE
Richard F. Grimmett
Specialist in National Defense
Foreign Affairs and National Defense Division
1
February 16, 1984
UG 400 C
CONGRESSIONAL
RESEARCH
SERVICE
THE LIBRARY
OF CONGRESS
371
ABSTRACT
This paper reviews the status and nature of military installations in
Greece utilized by the United States, the U.S.--Greek defense relationship,
and the defense agreements that govern U.S. use of Greek military installations.
(This study is one of a series of reports on U.S. military installations in
NATO's Southern region.
The report on installations in Italy has already
appeared as Report No. 84-12F.
Forthcoming are reports on installations in
Spain, Turkey and Portugal.)
372
U.S.--Greek Defense Relationship:
The Political Military Context
The United States developed a close political-military relationship
with Greece during the years following the Second World War.
The U.S. pro-
vided military and economic aid to Greece through a special assistance program
beginning in 1947. Subsequently, in 1952, Greece joined the North Atlantic
Treaty Organization.
Over the years, Greece has provided various military
installations and facilities for use by the United States and NATO.
In the
past decade, however, Greek-U.s, political-military relations have been
strained.
One source of this strain has been the belief among many Greeks
that the United States was at least complicit in the April 1967 coup that
installed a military junta in Athens, and that it tacitly supported the
junta during its years in power.
A further source of strain has been Greek-Turkish animosity, aggravated
by the Cyprus problem.
When Turkey intervened militarily in Cyprus in the
summer of 1974, resulting in partition of the island, Greece held the United
States and NATO principally responsible for not preventing the Turkish action.
Although Congress imposed an arms transfer embargo on Turkey from 1975-1978
for its intervention on Cyprus, there is a strong belief among Greeks that
the United States has a bias toward Turkey in the area of defense cooperation,
and that as a result the U.S. will not seriously pressure Turkey on issues
related to Cyprus. Many Greeks also believe that Turkey poses a serious
security threat to it
one more serious than that posed by the Warsaw Pact
or the Soviet Union.
This perception is not shared by the United States.
But because of it, American efforts to upgrade Turkey's military forces
through sales and grants of new equipment are viewed with serious concern in
Athens.
373
CRS-2
The underlying suspicions about the United States among many Greeks were
effectively exploited in the 1981 Greek general election by Andreas Papandreou,
the charismatic leader of the nationalistic Panhellenic Socialist Movement
(PASOK). During the 1981 campaign, Papandreou and PASOK
through the party
platform
called for the removal of U.S. military bases from Greece and for
Greek withdrawal from NATO.
After his election on October 18, 1981, however,
Prime Minister Papandreou moved slowly in dealing with the issue of the U.S.
bases in Greece.
Finally on October 27, 1982, the first round of discussions on a revised
U.S.-Greek base agreement was held in Athens.
After months of arduous negoti-
ations a new five-year Defense and Economic Cooperation Agreement was concluded
on July 15, 1983.
This agreement was formally signed on September 8, 1983 and
was ratified by the Greek Parliament on November 8, 1983.
For the near term,
the conclusion of the Greek base agreement has resolved a particularly conten-
tious issue affecting the U.S.-Greek defense relationship.
Details of this base
agreement will be discussed below.
Greece and NATO
Relations between Greece and NATO over the last decade have also been
troubled.
A major source of the difficulties has been the bitterness engendered
in Greece by the successful military intervention of Turkey in the Cyprus crisis
of 1974.
The 1974 Cyprus conflict brought down the Greek military junta and led
to the return of civilian leadership under Constantine Caramanlis.
Because of
the anger in Greece that NATO members seemed to have done nothing to prevent or
end the Turkish military intervention in Cyprus, Prime Minister Caramanlis di-
rected the removal of Greek Armed Forces from the NATO integrated military struc-
ture.
Greece remained in the political wing of the alliance, but did not parti-
cipate in the NATO Defense Planning Committee or assign troops to NATO commands.
374
CRS-3
Eventually, Greece worked out a special relationship with NATO whereby
Greek military forces remained under national command and control but would
be deployed in support of NATO in certain situations.
The major obstacle to
full military reintegration into NATO remained the question of command and
control over defense of the Aegean airspace.
Before Greece withdrew its
military from NATO in 1974, defense of the Aegean was the responsibility of the
commander of the 6th Allied Tactical Air Force (SIXATAF)--an American based at
Izmir, Turkey.
He had three subordinates, one Greek and two Turks.
The Greek
officer had operational control of the ai rspace from the Greek western coast
to the Athens-Istanbul FIR (Flight Information Region) demarcation line, which
roughly follows the outer edge of the Turkish territorial sea.
Consequently,
prior to the summer of 1974, Greece was responsible for controlling air defense
over most of the Aegean. Turkey never fully agreed to the 1964 NATO decision
that established the NATO air defense line coincident with the Athens-Istanbul
FIR.
But that is where matters stood when the Cyprus crisis broke in 1974. 1/
In July 1978, after the Greek withdrawal from the NATO military command,
the position of commander of SIXATAF was given to a Turkish general.
This
action further complicated Greek reintegration problems as the Greeks were
unwilling to accept control by a Turkish commander over Greek national
forces
especially in light of the heightened state of tension between the
two countries.
Various formulas were advanced by NATO's Supreme Allied
Commanders from the late 1970s onward to resolve the Aegean command and control
issue.
These efforts proved to no avail as either the Greek or Turkish side
1/ U.S. Congress. Senate. Committee on Foreign Relations. Turkey,
Greece, and NATO: The Strai ned Alliance. Committee Print, 96th Cong. 20
sess. Washington, U.S. Govt. Print. Off.,
1980.
pp. 57-61.
375
CRS-4
found fault with a key element of the proposals.
Finally, on October 22, 1980,
Greece returned to NATO's integrated military command structure under a
proposal advanced by NATO Supreme Allied Commander, General Bernard Rogers.
This arrangement left the question of NATO command and control for the Aegean
to be resolved between the military authorities concerned at a later date.
At the same time, Greece rejoined the military wing of NATO. 2/
Although Greece is once again participating in the NATO military scheme,
despite the continuing disagreement over the Aegean command, this participation
has not mitigated long-standing disputes between Greece and Turkey. Indeed,
with the rise to power of Prime Minister Papandreou and PASOK in Greece, content-
iousness may well have increased. This is due in part to the more vigorous
foreign policy rhetoric of Papandreou.
He has argued that Turkey poses a
greater threat to Greece than does the Warsaw Pact or the Soviet Union.
During
the December 1981 NATO Defense Planning Committee (DPC) meeting, Papandreou
called for a NATO security guarantee of Greece's eastern borders with Turkey.
This led to a bitter dispute between Greece and Turkey at the conference
with the result that for the first time in NATO history a communi que was not
issued after a DPC meeting.
The United States and other NATO states contend
that a guarantee such as that sought by Papandreou 18 unwarranted, and that
granting one formally to Greece would be interpreted as an inappropriate
affront to Turkey. 3/
In late September 1983, the continuing dispute over Aegean airspace and
security issues with Turkey led Greece to withdraw from participation in
NATO military exercises in the Aegean. The principal concern stated by Greece
2/ Ibid. U.S. Congress. Senate. Committee on Foreign Relations.
NATO Today: The Alliance In Evolution. Committee Print, Apr. 1982, 97th
Cong., 2d sess. Washington, U.S. Govt. Print. Off., 1982.
p. 88.
3i Senate Foreign Ric?ions Committee, NATO Today, p. 88.
376
CRS-5
in justifying its non-participation was the failure to include the Greek
island of Lemnos in the exercises.
Turkey had objected in the past to including
the island in NATO exercises because of a Greek-Turkish dispute over Greek
rights to militarize the island.
Historically, NATO had avoided exercises in-
volving Lemnos so as not to be drawn into the bilateral dispute. But, in 1983,
the initial plan was to include the island in the exercises.
When Greece re-
acted by characterizing the decision as a diplomatic victory over Turkey, NATO
cancelled the planned Lemnos exercise after a strong Turkish protest. 41
Prime Minister Papandreou has also taken the position that the existing
American bases in Greece do not serve NATO interests, but only those of the
United States.
The new bilateral Defense and Economic Cooperation Agreement
(DECA) between Greece and the United States, signed on Sept. 8, 1983, is notable
for its lack of specific reference to NATO in its preamble of purpose.
Nearly
all mu tual security arrangements with other NATO states make direct reference to
the fact that they are in implementation of the purposes of the North Atlantic
Treaty. 5/
The independent stance within NATO of Greece under Papandreou is further
evidenced by the Prime Minister's strong opposition to the deployment of American
Pershing II and cruise missiles as part of NATO'S INF (Intermediate Nuclear
Force) modernization program.
Papandreou has argued that the deployment will
further exacerbate the arms race and has called for more negotiations with
4/ Washington Post, Sept. 29, 1983, p. A29.; GREECE, The Week in Review,
Embassy of Greece, Oct. 3, 1983. p. 1-2; FBIS,
Western Europe, Oct. 3, 1983.
p. 52-55.
5/ New York Times, Jan. 25, 1983. p. A12; FBIS Western Europe, Feb. 7,
1983. p. 52-54; GREECE, The Week in Review, Embassy of Greece, Sept. 12,
1983. p. 3; Agreement on Defense and Cooperation, Sept. 8, 1983. text
released by U.S. Department of State.
377
CRS-6
the Soviets before deployment.
He has continued to press this line of approach
even though deployments have begun and his view is clearly in the minority
within NATO. 6
The relationship of Greece to NATO is still evolving. Papandreou's
independent stances within NATO meetings have appealed to nationalist senti-
ment within Greece.
At the same time, they have annoyed other members of
the alliance who feel that NATO is not the proper place to air bilateral
grievances that exist between allied nations.
For the near term, it appears
that Greece will remain in NATO, despite Papandreou and PASOK's election
statements in 1981.
NATO membership provides a major international forum
for Papandreou's foreign policy views and a vehicle for restraining Turkey's
influence within the alliance.
Were Greece to withdraw from NATO, Alliance
leaders could well decide to expand Turkey's role in NATO to compensate for
the military assets lost in Greece.
Western Europe.
Dec. 5,
New York Times, Oct. 23, 1983, Sect. IV.
p. 2; FBIS.
1983.
New York Times, Dec. 10, 1983.
po
4.
P. Si.
34-045 0484-25
378
CRS-7
MAJOR MILITARY INSTALLATIONS IN GREECE
Because of its location in the eastern Mediterranean, Greece is able
to provide military facilities, on the Greek mainland and on the island of
Crete, that strengthen the capabilities of the United States and NATO forces
that operate in the area.
Greek facilities help guard the Aegean Sea approach
to the Mediterranean, provide important communication links between U.S. and
NATO military forces, provide staging centers and supply depots for United
States and NATO air and naval forces, and permit surveillance and monitoring
of activities of the Soviet Union's military forces in the eastern Mediterranean
area.
The major military installations utilized by the United States in Greece
are Hellenikon Air Base near Athens; Nea Makri Communications Station on the
Greek mainland near Marathon Bay; and Iraklion Air Station and the Souda Bay
complex on the island of Crete.
Other U.S. communications facilities, various
U.S. and NATO support sites, and nine NATO NADGE (NATO Air Defense Ground
Environment) stations are spread throughout Greece. //
71. U.S. Congress. Senate. Committee on Foreign Relations. Subcommittee
on United States Security Agreements and Commitments Abroad. United States
Security Agreements and Commi tments Abroad: Greece and Turkey. Hearings 91st
Cong., 2d se88., Part 7, June 9 and 11, 1970. p. 1781, 1803-1804.
Ibid.,
United States Security Agreements and Commitments Abroad: United States
Forces in Europe. Hearings, 91st Cong., 2d sess., Part 10. p. 2029, 2291-2292;
U.S. Air Force. Inventory of Air Force Military Real Property Overseas.
U.S.A.F. Headquarters, Sept. 30, 1982; U.S. Navy. Navy Facilities Engineering
Command. Inventory of Military Real Property, Navy, vol. 2. NAVFAC. P-77.
U.S. Navy, Sept. 30, 1982; Communications data on DCS sites provided by Defense
Communications Agency, Department of Defense. NADGE data provided by U.S.
Department of Defense. Office of Assistant Secretary of Defense, Manpower,
Reserve Affairs and Logistics. Official Correspondence, Sept. 27, 1983;
Air Force Magazine, v. 59, May 1976. p. 82-83; Air Force Magazine, v. 63,
May 1980.
p. 78, 79, 173; Lewis, Jesse W., Jr. The Strategic Balance in
the Mediterranean. Washington, American Enterprise Institute for Public
(continued)
379
CRS-8
Major military missions served by installations in Greece
Foremost among the major Greek facilities is the Souda Bay complex
located on the Northwest side of the island of Crete near Canea (Khania).
Souda Bay is an important support center in the eastern Mediterranean.
It
houses POL (petroleum, oil, lubricants) used by the U.S. Navy's 6th Fleet,
and stores ammunition for NATO wartime purposes.
Souda has a fine naturally
protected anchorage, with good holding ground, which is nearly large enough
to accommodate the entire U.S. 6th fleet.
The port itself has one long pier
capable of handling supply ships or small combatants.
It lacks, however,
indigenous ship repair facilities. 8/
The Souda Bay complex has associated with it an excellent airfield which
is used for maritime patrol operations and general support purposes by U.S.
forces.
Souda's ai rfield can accommodate any U.S. Navy or Air Force tactical
aircraft as well as Air Force C-141 cargo planes. Also associated with the
(continued) Policy Research, 1976. p. 23, 24, 28; U.S. Congre88. House.
Committee on Foreign Affairs. Special Subcommittee on Investigations.
Greece and Turkey: Some Military Implications Related to NATO and the Middle
East. Committee Print, 94 th Cong., 18t sess. Washington, U.S. Govt. Print.
Off., 1975, passim; U.S. Congress. Senate. Committee on Foreign Relations.
Turkey, Greece and NATO: the Strained Alliance. Committee Print, 96th
Cong., 2d sess. Washington, U.S. Govt. Print. Off., 1980.
p. 7, 9.
U.S.
Congress. Senate.
The Alliance
Committee on Foreign Relations.
NATO Today:
In Evolution. Committee Print, Apr. 1982, 97th Cong., 2d sess. Washington,
U.S. Govt. Print. Off., 1982. 88-89. Air Force Magazine, v. 66, May
1983. P. 88–89, 113, 187. U.S. Department of State Press Release, Sept.
8, 1983. Agreement on Defense and Economic Cooperation between the Govern-
ment of the Hellenic Republic and the Government of the United States of
America.
p.
8/ Ibid.
380
CRS-9
Souda Bay complex is the NATO Air Missile Firing Installation (NAMFI) where
military training and testing exercises are conducted by U.S. forces and
those of other NATO member states. 9/
Iraklion Air Station is located on the north central coast of Crete.
Iraklion's primary mission 18 electronic surveillance.
A sophisticated
passive collecting station located near Iraklion at Gournes is responsible for
monitoring military activities of the Soviet Union in the eastern Mediterranean,
and other activities of interest to U.S. military planners. 10
Hellenikon Air Base, located at Athens, is used as a headquarters and
support installation for other United States Air Force, Europe, (USAFE)
facilities in Greece.
This base serves as an important staging point for air
transport operations of USAFE and as a support installation for U.S. Military
Airlift Command (MAC).
It has limited but important maintenance facilities to
service transient ai rcraft.
Electronic reconnaissance missions are also
conducted by U.S. aircraft deployed from the air base. 11/
A major military communications complex is centered at Nea Makri Communica-
tions Station, situated near Marathon Bay, 27 miles northeast of Athens.
Nea
Makri is the largest of several communications sites in Greece and is very
important in 6th Fleet communications.
Nea Makri and associated communica-
tions facilities such as those at nearby Kato Souli are part of the global U.S.
9/ Ibid.
10/ Ibid.
11/
Ibid.
381
CRS-10
Defense Communications system (DCS).
Use of Nea Makri and Kato Souli makes
it possible for U.S. military forces to communicate with other DCS stations
in Italy, in Spain, throughout Greece, as well as U.S. forces afloat. 12/
Defense agreements affecting the use of Greek installations by the United States
After Greece entered NATO in 1952, it concluded a military facilities
agreement with the United States on October 12, 1953 (TIAS 2868).
This agree
ment authorized the construction, development, use, and operation of "military
and supporting facilities" in Greece in "implementation of, or in furtherance
of, approved NATO plans." United States military activities at Greek facilities
were subsequently governed by "technical" implementing arrangments reached bet-
ween the Greek and United States Governments.
Nearly all of these "technical"
agreements or arrangements are classified.
In the period following the Cyprus crisis in 1974,
the Greek Government
made it known to the United States that it wished to re-negotiate the 1953
military facilities agreement.
Negotiations regarding this new base-use agree-
ment continued from 1976 until 1983, with the question of American bases in
Greece becoming a significant political issue in that country during this
period.
A new base agreement, formally called the "Agreement on Defense and
Economic Cooperation" (DECA), was finally signed by Greece and the United States
on September 8, 1983 in Athens.
This agreement was ratified by the Greek
Parliament on November 8, 1983.
No Congressional action on the matter was
necessary because it was concluded as an executive agreement.
12/
Ibid.
382
CRS-11
Under the terms of the 1983 DECA, the United States is authorized by
Greece to
"maintain and operate military and supporting facilities" within
Greece and to engage in missions and activities at these installations "for
defense purposes" in accordance with the provisions of the agreement (Article
II).
Article I states that the intent of the agreement is to "restructure"
defense and economic cooperation between Greece and the U.S. based on "existing
bilateral arrangements and multilateral agreements.
There is no statement
that the agreement is intended to implement defense cooperation pursuant to
the North Atlantic Treaty.
The agreement provides for a Joint Commission to handle and attempt to
resolve questions that might arise concerning the "interpretation and imple-
mentation" of the agreement.
Issues that cannot be resolved by this commission
are to be dealt with by higher levels of the U.S. and Greek Governments (Article
VI). Article VII states that nothing in this agreement shall be "in derogation"
of the inherent right of Greece to take all "appropriate restrictive measures
to safeguard its vital national security interests in an emergency."
Should
Greece decide that such an emergency exists, the "appropriate Greek and
United States au thorities" are to "immediately enter into communication
concerning such measures."
Article XI of the DECA provides that all "terms and conditions" relating
to use of the Greek facilities under arrangements that existed when the DECA
entered into force will "continue in force until modified or terminated by
agreement.
This is true to the extent that such existing agreements are
consistent with the new DECA and its Annex.
Article XI also provides for a
review of "previous bilateral arrangements" related to the new agreement by
383
CRS-12
the Joint Commission at the initiative of either government.
Such review 18
to be completed within one year after September 8, 1983, although if the two
governments wish, the review period may be extended.
In Article VIII, the United States indicates that "consistent with its
constitutional procedures" it shall aid in the "modernization and maintenance"
of Greece's defense capabilities "through the provision of defense support.
This U.S. assistance is to be "guided by the principle" in United States law
calling for preservation of the "balance of military strength in the region."
In a letter associated with the DECA, the United States refers to Article VIII
and to section 620 c(b)(4) of the Foreign Assistance Act of 1961, as amended,
as the context for requesting $500 million in Foreign Military Sales (FMS)
financing for Greece for fiscal year 1984.
The duration of the 1983 Greek-U.S. DECA is addressed in Article XII.
The English text states that after the agreement "enters into force" (which
occurred on December 20, 1983), it "18 termi nable after five years upon
written notice by either Party...."
This notice 18 to be given five months
prior to the date the termination is to take effect.
If the agreement is
ended through this process, the United States is given a period of seven-
teen months to complete the withdrawal of its property, personnel and equip-
ment from Greece.
During this withdrawal period, the "terms and conditions"
of the agreement remain in force.
It is necessary to note that there are important differences between the
United States and Greece on certain provisions in the 1983 agreement.
The 1983
Greek-U.S. DECA states that the duplicate texts of the agreement (one in Greek,
the other in English) are "equally authentic.
This is a standard element of
such bilateral agreements.
However, in the case of this agreement, the English
and Greek texts clearly diverge in the use of language in Article XII relating
nam
384
CRS-13
to the duration of the agreement.
Both governments signed the agreement knowing
this language difference existed.
While the English text states that the agree-
ment "is terminable" after five years, the Greek text translates into English
as the agreement terminates after five years (emphasis added).
The U.S.
language could permit continuation of the existing agreement after five years
without renegotiation while the Greek language would not.
In both versions
any termination requires the five months written prior notice.
While the specific wording of the DECA regarding duration of U.S. base
rights is an important objective difference in the agreement, there are other
interpretive differences of articles where the translations are the same.
Two
of these are worthy of mention because they highlight the political side of
the agreement, and how it reflects the attitudes of the Papandreou government
toward Greek-U.S. defense cooperation.
After the 1983 DECA was initialed in July, Prime Minister Papandreou pub-
licly asserted that "for the first time" in an agreement, the U.S. recognized
that aid to Greece should be "enough to maintain the balance of military power
in the area.
He further stated that the United States now had a "contractual
obligation to preserve the balance of military power" in the region and because
of this contract Greece had the "right to abrogate the agreement if in (the
Greek Government's) judgment, there is an attempt to upset the balance in
favor of Turkey." Finally, he stated that the United States had committed
itself "to maintain the 7 to 10 ratio" of military assistance to Greece and
Turkey respectively.
These statements were reasserted by the Greek Government
in September 1983 after the DECA was formally signed. 13/
13/ FBIS. Western Europe. July 18, 1983. p. Sl-S3; GREECE Information,
Embassy of Greece, July 15, 1983, FBIS. Western Europe. September 12, 1983.
p. 56-57; GREECE, The Week In Review, Embassy of Greece, September 12, 1983.
385
CRS-14
The Reagan Administration has consistently rejected the Greek interpre-
tation of the DECA regarding a "contractual obligation" to provide aid at a
specific level or face the legal penalty of the agreement's abrogation.
A
careful review of the DECA's Article VIII language makes it clear that it
contains no clause permitting abrogation of the agreement if a specific amount
of military aid to Greece is not provided or a 7 to 10 ratio between Greek and
Turkish assistance levels is not maintained.
The DECA's letter from the United
States, which specifically refers to Section 620 C(b)(4) of the Foreign Assistance
Act of 1961, does not support the Greek Government's contention regarding assis-
tance levels.
This section of U.S. law reads as follows:
The United States will furnish security assistance for
Greece and Turkey only when furnishing that assistance is
intended solely for defensive purposes, including when
necessary to enable the recipient country to fulfill its
responsibilities as a member of the North Atlantic Treaty
Organization, and shall be designed to ensure that the
present balance of military strength among countries of the
region, including between Greece and Turkey, is preserved.
Nothing in this paragraph shall be construed to prohibit
the transfer of defense articles to Greece or Turkey for
legitimate self defense or to enable Greece or Turkey to
fulfill their North Atlantic Treaty Organization obligations.
The above language gives policy guidance that assistance to Greece and Turkey
shall be designed "to ensure that the present balance of military strength...in-
cluding between Greece and Turkey, is preserved.'
The judgment as to how to do
this is left to American policymakers in the executive and legislative branches.
Significantly, the last sentence of Section 620 C(b)(4) stipulates that "Nothing
in this paragraph shall be construed to prohibit the transfer of defense articles
to Greece or Turkey... to enable Greece or Turkey to fulfill their North Atlantic
Treaty Organization obligations" (emphasis added).
386
CRS-15
This sentence leaves the ultimate decision to the United States Government as
to how to structure security assistance to Greece or Turkey if its purpose is
to help either nation fulfill its NATO obligations.
On a second but related question, Prime Minister Papandreou stated in
July 1983 that the DECA had been "completely dissociated from the concept that
the bases serve the NATO interests, that they are NATO bases, or that they
serve the mutual defense interests of the two countries.
He argued that the
"idea that the bases served NATO purposes" had weakened Greek claims for aid
from the United States.
There had been, heretofore, "no direct link between
the bases and defense aid," Papandreou said.
The United States, however, has
continued to view the bases in Greece as supportive of NATO interests, and of
Greek and U.S. bilateral defense interests.
In the State Department announcement
on September 8, 1983 that the DECA had been signed, the United States asserted
that the agreement would continue the U.S.-Greek "bilateral defense relationship
on mutually acceptable and beneficial terms, and will contribute to the strength
of NATO...." 14/
Moreover, the United States, while not linking the agreement with the
provision of aid to Greece under any mechanistic formula, has historically
related the aid it has given to the contributions that aid can make to Greece's
security, the security of NATO, and that of the United States.
The Greek
Government evidently sees an important and continuing need to cooperate with
the United States on defense issues.
However, in light of campaign statements
141 Ibid. · U.S. Department of State. Press release, Sept. 8, 1983, on
Defense and Economic Cooperation Agreement with Greece.
387
CRS-16
by Papandreou about the American bases, this cooperation, as represented in the
DECA, must be rationalized to elements of the Greek electorate critical of
it. 15) The divergence between American and Greek interpretations of the DECA
could become sources of conflict during the lifetime of the agreement.
Use of Greek installations by the United States for missions outside the
NATO area
Because of the emphasis placed by the Papandreou government on limiting
U.S. use of Greek military installations to operations noted in the 1983 DECA,
it is unlikely that the United States could expect permission to be granted
by Greece to conduct missions beyond those presently authorized.
This is a
position consistent with general Greek policy toward use of the bases.
In
1973, Greece remained neutral in the Arab-Israeli war and made it clear that
its bases were not available to facilitate the U.S. effort to resupply Israel.
More recently, the Greek Government denied American requests to use Greek
installations to resupply both U.S. forces serving in the Multinational Force
in Lebanon as well as those of the Lebanese Government.
The Greek Government
noted that its action reflected its desire to avoid involvement, however indi rect,
in a Lebanese civil war because to do so would "upset its friendly relations
with the countries in the region.
Greece, in recent years, has placed
15/ See testimony of Assistant Secretary of State Richard R. Burt in U.S.
Congress. House. Committee on Foreign Affairs.. Subcommittee on Europe and the
Middle East. Developments in Europe, August 1983. Hearing. Aug. 1, 1983, 98th
Congress, 1st sess. Washington, U.S. Gov't. Print. Off., 1983. p. 25-31.
388
CRS-17
a priority on maintaining good relations with the Arab world in part because
of its dependence on Arab oil.
Thus, future U.S. requests to use Greek bases
for missions involving Israel would almost certainly be denied. 16/
16/ U.S. Congress.
House. Committee on Foreign Affairs. Subcommittees
on Europe and the Near East and South Asia, United States-European Relations
and the 1973 Middle East War, Hearings, Nov. 1, 1973 and Feb. 19, 1974, 93d
Cong., 2d sess. p. 31-32, 36-44, 47-54, 56-59; U.S. Department of State
Bulletin, vol LXX, "The Impact of the Middle East Crisis on the Atlantic
Alliance,
Mar. 18, 1974. p. 279-283; U.S. General Accounting Office, Airlift
Operations of the Military Airlift Command During the 1973 Middle East War
(LCD-75-204), Apr. 16, 1975, p. 9; Baltimore Sun, Sept. 21, 1983,
Washington Post, Sept. 22, 1983. p. 25; Washington Times, Sept. 28, 1983.
p. 2;
p. 6.
389
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REECE
MAJOR UNITED STATES
MILITARY INSTALLATIONS IN GREECE
PASOS
20
24
28
BULGARIA
Black
Sea
YUGOSLAVIA
Istanbul
e
Sea of
Marmara
ALBANIA
40
40
LEMNOS
G
TURKEY
LESBOS
EUBOEA
Aegean Sea
Izmir
Nea Makri
Athens
Corinth
Hellenikcha
SAMOS
Piraeus
ao
f
CYCLADES
Ionian
NO
DODECANESE
Sea
3
wa
8
Rhodes
36-
-36
RHODES
Souda Bay (Crete) to
Sigonella (Sicily)(458 nm by air)
Sea of Crete
+
Souda
Bay
Khania
Iraklion
CRETE
KARPATHOS
Mediterranean Sea
28
Airfield
Naval facility
32
32
Intelligence facility
Communications complex
City
LIBYA
25
50
75 Miles
EGYPT
50
75 Kilometers
Locations of symbols are approximate.
20
Boundary representation is
not necesswily authoritative.
24
390
GREEN
CRS-19
SELECTED MAJOR UNITED STATES MILITARY
COMMUNICATIONS FACILITIES IN GREECE
20
24
28
BULGARIA
Black
Sea
YUGOSLAVIA
Istanbul
СЕ
Sea of
Marmara
ALBANIA
THASOS
Mt. Hortiatis
40
40
LEMNOS
TO ITAL
TURKEY
LESBOS
Levkas
EUBOEA
Kata
Souli
Aegean Sea
3
Izmir
Mt. Parnis
Nea Makri
Corinth
CAthens
MA
Patoris
SAMOS
cych
CYCLADES
Ionian
POE
DODECANESE
Sea
ays
2
Rhodes
36
-36
RHODES
M
Sea of Crete
Souda
Bay
Mt. Ehedri
Iraklion
CRETE
Khania
KARPATHOS
A
Mediterranean Sea
28
Terminal
32
City
32
LIBYA
76 Miles
EGYPT
25
75 Kilometers
Locations of symbols are approximare.
20
24
391
CRS-20
NATO NADGE EARLY
WARNING SITES IN GREECE
20
24
28
BULGARIA
Black
Sea
YUGOSLAVIA
Xanthi
Komotini
Ismaros
СЕ
E
Istanbul
e
Sea of
Marmara
Florina
ALBANIA
Thessaloniki
Vitsi
ASOS
DOS
THASOS
M. Hortiatis
40
RE
40
GR
LEMNOS
Larissa
Pilion
TURKEY
LESBOS
Levkas
EUBOEA
Aegean Sea
Izmir
Mt. Parnis
Athens
SAMOS
Corinth
vo
CYCLADES
Ionian
D
votes
DODECANESE
Sea
OD
8
8 8
Rhodes
36
-36
RHODES
Sea of Crete
Souda
Bay
2
Khania
KARPATHOS
Moustakos
fraklion
CRETE
Ziros
Mediterranean Sea
28
NATO NADGE early
warning site
32
32
City
LIBYA
EGYPT
0
25
50
75 Mitos
EGYPT
0
Boundary representation is
not necessarily authortative.
25 50 75 Kilometers
Locations of synibols are approximate.
20
24
392
Senator LUGAR. Now I would like to call upon Senator Pell of
Rhode Island for questions.
Senator PELL. Thank you very much, Mr. Chairman.
Following up on the study that you just put into the record about
Greece, I am wondering if, one, the administration had left the 7-
to-10 ratio, which to my mind was a pretty good ratio, which pro-
vided for a degree of balance in that part of the world; and also,
along the same line, are any efforts being made to continue to
punish or to admonish Turkey for the fact that they are using
American weapons in the occupation of Cyprus?
This is a question that has bothered me. I realize that there was
an embargo, which has been lifted. But do we just accept this viola-
tion of the agreement they made in taking those weapons and
accept the fact that American weapons are being used to occupy
another friendly nation and ally?
Mr. BURT. Senator, first of all, it is my understanding that no
major U.S. weapons systems supplied since 1978 are used by the
Turkish military on Cyprus.
More broadly, you asked a question about our opposition to the 7-
to-10 ratio. I will try to be brief, and I would ask Mr. Perle to also
address this. But I think there are two or three major reasons.
I think the first is, obviously, we use and view security assistance
as a tool of U.S. national security policy, and a mechanical ratio
that sets a relationship between two different countries, with dif-
ferent requirements, and remembering that requirements can
change over the years based on differing circumstances, is not in
our view a way to spend taxpayers' money in an efficient nd
thoughtful way.
We do not think that ratios, particularly in security assistance,
reflect the overall military situation between the two sides-one
country may have the capacity to buy weapons on the open
market; the other country may be more strapped for resources and
be forced to depend for most of its military modernization on secu-
rity assistance. That is in fact the case with Greece and Turkey,
given Greece's larger per capita income and its financial capabili-
ties contrasted to those of Turkey. A 7-to-10 ratio does not, after
all, necessarily lead to a military balance.
We support the concept of a military balance and, as Mr. Perle
stated in his opening testimony, if anything, the current balance
tends to favor Greece, not Turkey. But in addition we must recog-
nize that there are a number of variables that go into calculations
of the military balance—the fact, for instance, that Turkey borders
on the Soviet Union and has to face military threats emanating
from there; the fact on another border, Iraq, there is a war under
way with a neighboring state; the fact on another border, in Syria,
you have a growing Soviet military presence.
Obviously, military requirements change, and the same ratio ap-
plied in a mechanical fashion year after year is not in our view the
way to make policy.
I would just make one final point. Locking in U.S. security assist-
ance in a mechancial ratio denies the United States and, by the
way, denies you the capacity to influence policies. If countries
know that, regardless of what happens, they are going to be as-
sured a certain level of assistance just by virture of the fact that
393
there is such a ratio, then we lose the capacity to have some influ-
ence on that country, to use it as a tool of American policy.
And after all, that is what security assistance is. It is like a por-
tion of the defense budget, if you will. It is a way in which U.S.
national security interests are protected, and obviously those inter-
ests change over time, and we need the flexibility to change our
assessments on a year to year basis.
Senator Pell. Thank you.
Mr. Perle, did you wish to comment on that subject?
Mr. PERLE. I think Rick has adequately covered it. It just makes
no military sense whatever to distribute security assistance by an
arbitrary formula, whether it be 7 to 10 or some other level.
The fact is, Senator, that our security-yours, mine, and that of
our allies--depends vitally on the ability of critical allies in the
southern region to perform their NATO missions, and nowhere is it
written that those missions can be performed only at a ratio of 7 to
10 in security assistance expenditures with respect to Greece and
Turkey. It is military nonsense.
Senator LUGAR. Let me just mention that Mr. Burt does need to
leave. We appreciate your testimony, Mr. Burt, and your coming
today. We understand that you have other assignments that call
you at this point.
Senator BIDEN. I will get you later.
Senator SARBANES. Mr. Chairman, is Mr. Burt going to come
back?
Senator LUGAR. No; Mr. Burt will not be returning.
Senator SARBANES. Today?
Senator LUGAR. No.
Senator SARBANES. How about on a subsequent day?
Mr. BURT. I will be happy to.
Senator LUGAR. If there is a need for another hearing, Mr. Burt
will be invited and will be available.
Senator SARBANES. Well, I assume there are some questions re-
lating to diplomatic developments, to which he alluded and Mr.
Perle did not, with which he is familar and Mr. Perle is not. Would
that be a fair assumption?
Mr. BURT. See, you have me back already.
Senator SARBANES. That is all right. We will bring you back an-
other day.
Mr. Burt. Senator, I will be happy to return to discuss the diplo-
matic side. I would just point out that Mr. Haass, who is our Spe-
cial Cyprus Coordinator, is more than able to deal with questions
concerning the diplomacy. But again, I am at your service. I regret
the fact that I have to go downtown for a very important meeting.
Senator SARBANES. We understand those demands. We experi-
ence them ourselves. So I am not making an issue of that. I only
wanted some assurance that if we felt it necessary we could have
you back
Mr. BURT. Absolutely.
Senator SARBANES. Good. Thank you.
Mr. BURT. Thank you, Mr. Chairman.
Senator LUGAR. Please proceed, and this will not come out of
Senator Pell's time. We will reverse the clock back to where we
were.
34-045 0-84-26
394
Senator PELL. Thank you very much.
To follow up a little bit about Cyprus, where I know Mr. Haass
has been and on which he is well informed, I notice the administra-
tion is requesting $3 million to continue the scholarship program
that I initiated in 1981. As you know, as a rule we have overruled
you and voted for $15 million. But I would be interested in hearing
once again the reasons for knocking down the $15 million that we
would usually prefer to $3 million.
And I would also like to know, how is the scholarship program
proceeding which I did initiate?
Mr. Haass. Senator, we are aware of the pattern in recent years
where the administration, not simply this one, has come in with a
$3 million request and on more than one occasion the Congress has
come back with a $15 million authorization and appropriation.
The reason is our assessment: First, of the specific needs of
Cyprus, in this case the scholarship program, as well as our assess-
ment of the refugee situation; and second, our perspective not
simply of Cyprus per se, but Cyprus in a global context.
We came to the conclusion-and by "we" I mean not simply the
State Department, but also working with OMB and Treasury—that
$3 million was a fair and reasonable sum to request fo the Govern-
ment of Cyprus. Let me just add a point that Mr. Burt made in his
testimony: That in no way should the sum of money under the se-
curity assistance account for Cyprus in any way be equated with
the level of this administration's interest in seeing a settlement on
Cyprus. There is no relationship between the two.
On the substance of the scholarship program, I understand that
it is being conducted fairly and well. As you know, it is one of the
tragedies of Cyprus that there is no university on the island where
Greek Cypriots or Turkish Cypriots can get an education. The idea
that many of them, for example, are forced to go to universities in
Eastern Europe, I for one find a rather unfortunate circumstance.
So the idea that money would be used toward that end I think is a
very, very good investment for us and for them.
Senator PELL. The $3 million will provide how many scholar-
ships, roughly?
Mr. HAASS. I am sorry, Senator, I cannot give you a specific
figure, but if you like I can get you that number.
[The material referred to follows:)
Based on past years' experience, I estimate the $3 million will buy us 40 to 50 full
scholarships plus some technical training and partial grants.
Senator PELL. I think it may be around 100. How does that divide
between Greeks and Turks?
Mr. HAASS. I understand that there is a committee with repre-
sentatives of the Greek community and the Turkish community,
and that it is divided-well, I couldn't give you a specific ratio, but
there is a ratio on which it is divided that roughly corresponds to
population.
Senator PELL. Thank you, and I would appreciate getting that
figure from you, too.
Let me move to Portugal for a moment. In the new mutual de-
fense agreement regarding our use of those facilities, I think it was
in December of 1983—for how long is that agreement and what
395
portion of the fiscal year 1985 request will be allocated to the
Azores?
Mr. PERLE. I believe the agreement, Senator, runs for something
like 7 years. I would be glad to check the exact date for you.
Senator PELL. That would be better than previous ones, longer
than previous ones.
Mr. PERLE. With respect to the percentage used for the Azores,
that is a matter for the Portuguese to decide. The money does not
go to the Azores as such. The funds are used for equipment pur-
chases in the United States.
Senator PELL. But is there not an understanding that some por-
tion of that will be spent in the Azores, helping in their recovery
from the earthquake?
Mr. PERLE. We will be spending money in the Azores with re-
spect to the improvement of facilities, which has a beneficial
impact on the economy of the Azores. With respect to the ESF that
may go for the Azores, I would want to leave that to my State De-
partment colleagues. But I may have the figures with me, in which
case I will give them to you when I have looked them up.
[Pause.]
Mr. PERLE. We can supply those for the record.
[The material referred to follows:)
The Administration is requesting $80 million in ESF for Portugal in fiscal year
1985. Although it is the Portuguese Government which allocates the funds, we
expect about $40 million to go to the Azores.
Senator PELL. My final question reverts to Greece. Papandreou
came into office campaigning against every American position that
we had, practically: no bases, no this, no that. And yet, apparently
his bark was a good deal worse than his bite.
How do you see our relations with Greece and particularly with
the Papandreou government proceeding?
Mr. Haass. I think, as you yourself pointed out, there has been
from our point of view a fortunate difference between some of the
possibilities that might have occurred and what has actually hap-
pened. This is the first base agreement, for example, that we have
had with Greece in over 30 years, which I think is a cardinal ac-
complishment. At the same time, Greece continues to function as a
full-fledged member of the Atlantic Alliance, and again that is ter-
ribly important.
At the same time, I would be less than honest if I did not point
out that we have had our differences, whether, for example, on the
INF question in Europe, on the nature of the Western response to
the Korean airliner tragedy that was discussed before, and so forth.
We have also had in the past certain differences in the manage-
ment of the base relationship.
I think on balance it is a relationship that serves both our inter-
ests, and in my recent talks with senior Greek officials they made
very clear to me their interest in improving the relationship, which
of course I reciprocated. So on balance, I think the relationship has
worked out fairly well, and I for one am optimistic that it could
actually begin to work out even better in the future.
Senator PELL. Thank you very much. I have no further questions.
Senator LUGAR. Thank you, Senator Pell.
396
The Chair will now recognize Senator Joseph Biden of Delaware.
Senator BIDEN. Thank you very much, Mr. Chairman.
Mr. Perle, I will resist my inclination to pursue in detail the line
of questioning that Senator Helms did, except I do have one ques-
tion along those lines, because I would like to clear the record.
Given the assessment of the Soviet treaty compliance made by
the administration, have the Joint Chiefs of Staff recommended
any weapons programs which would constitute a U.S. violation of
the provisions of arms control agreements because we feel they are
necessary?
Mr. PERLE. I am unaware of any, Senator.
Senator BIDEN. So am I. I do not know of any. I just wanted that
on the record.
To put it another way, is there anything that, in terms of weap-
ons systems, that you will want that SALT II, even though it has
not been ratified, but is being complied with, is preventing you
from being able to acquire? Is there anything out there that you
would like?
Mr. PERLE. Not in the period covered by the treaty.
Senator BIDEN. Thank you.
Now, let me go to Greece, Turkey, and other questions. Mr.
Perle, you said at the portion of your statement that I asked you to
repeat, which you were kind enough to repeat, about Turkey's mili-
tary capability helping inhibit Soviet ambition. I am not sure that
was the word. I thought it was. Soviet aggression or something
along those lines.
Were you meaning that in the context of NATO or also unilater-
ally? In other words, are the Soviets inhibited moving into Iran be-
cause of a strong Turkey, which is not within the purview of
NATO?
Mr. PERLE. Senator, the weakness of the Turkish forces, in east-
ern Turkey in particular, means that we are not obtaining the po-
tential deterrent value of a stronger position in eastern Turkey
that we believe would result from a strengthening of those forces.
Senator BIDEN. What would that value be?
Mr. PERLE. Well, if you were a Soviet commander
Senator BIDEN. And thank God, I am not.
Mr. PERLE (continuing]. And were placed in charge of a campaign
to drive to the gulf, and you faced the vacuum that is presently
faced in eastern Turkey, you could plan on moving those forces rel-
atively unencumbered.
If we are successful cooperatively with Turkey in strengthening
the Turkish position in eastern Turkey and in developing, as we
propose to do and have begun to do, air bases in eastern Turkey
that would be colocated operating bases-that is, available for the
use of the United States and potentially other NATO allies in a
NATO contingency-a Soviet commander with the same mission
would have to think twice about freely moving those forces south-
ward to the gulf.
So it is a major element of our policy, worked out in close col-
laboration with Turkey, to try to strengthen Turkey in its eastern
region.
397
Senator BIDEN. So a strong Turkey in the eastern region could be
the difference between the Soviets deciding to move to the gulf or
not more to the gulf militarily?
Mr. PERLE. It would significantly increase the risks associated
with such a Soviet move and therefore, we hope, would add to the
deterrence of such a move.
Senator BIDEN. And you are confident we have an absolute com-
mitment from Turkey that if the Soviets wished to do that they
would in fact engage the Soviet Union, not in the context of NATO,
because it would not be?
Mr. PERLE. No, we do not have an absolute commitment from
Turkey, or from anyone else, that they would engage Soviet forces
in any contingency. What we do have is an agreement with Turkey
according to which bases are being established in eastern Turkey
that would be available to the United States in the NATO context.
Senator BIDEN. In the NATO context?
Mr. PERLE. In the NATO context.
Senator BIDEN. Would this fall within the NATO context?
Mr. PERLE. That would be a matter for NATO to determine at
the time.
Senator BIDEN. They have pretty well determined that it would
not, have they not?
Mr. PERLE. I believe, Senator, that wartime will turn out to be
quite different than peacetime, and that in the event of a major or
even a conventional war, Senator, in the event of a major Soviet
thrust in the gulf, with all that would portend for the security of
the alliance, the alliance may well decide that those countries in a
position to respond should do so with an alliance blessing
Senator BIDEN. Is Turkey, though, clearly signing on to a bilater-
al attempt to prevent the Soviet Union from moving to the gulf if
they were so inclined?
Mr. PERLE. No. What Turkey has agreed to do is establish two
bases in eastern Turkey that would be colocated operating bases,
and has further agreed to assign its own operational aircraft to
those bases. We in turn have designated U.S. Air Force units that
would be dispatched to those bases under circumstances where
they might add to the deterrent capability of the alliance as a
whole. We think that is a step forward.
Senator BIDEN. Do they have a veto right? Let us assume they
did not want to go and we did. Could they prevent us? I mean, we
found that occurrence with other of our NATO allies relating to
matters outside the purview of NATO, like the Middle East.
I guess they would not be able to veto us? We would have abso-
lute access there?
Mr. PERLE. No. As I am sure you understand, none of our allies,
even our most trusted and reliable--and I would put Turkey in
that category-is going to give the United States a blank check to
operate from its territory in circumstances that cannot be defined.
Senator BIDEN. But we do have specific treaty language with
those other allies as to how we will jointly move. Now, what you
are telling me with regard to Turkey is that we have no treaty cov-
ering the contingency you are protecting against.
Mr. PERLE. No. The only treaty commitment of the kind that I
think you have in mind, to which our allies have subscribed, our
398
European allies, is the commitment that an attack against any one
ally would be an attack against all.
Šenator BIDEN. Yes. That is a big one, a very fundamental one.
Mr. PERLE. That is very fundamental commitment and one to my
knowledge that has been violated only once, and that was by the
United States.
Senator BIDEN. I am not arguing with you. Now, you are telling
me that we do not have that kind of commitment.
Mr. PERLE. Yes; Turkey subscribes to that same commitment,
along with all our other allies.
Senator BIDEN. But if they are going through Turkish space or
around Turkish space in Iran, Turkey has not signed on to do any-
thing about that.
And if you want to talk about record, the Turkish record is not
one which you would call exemplary when it comes to standing up
for the West and U.S. interests over the past five decades.
I do not think it makes sense to talk about previous wars and
whose side they were on and things like that, but the fact of the
matter is you have no treaty agreement that would either allow us
access even if they did not want to play, and you have no alliance
agreement that would cover Turkey being required to be involved
in an effort to prevent Soviet troops moving toward the gulf in Ira-
nian space along the Turkish border, do you?
Mr. PERLE. None of our allies has given us that kind of assur-
ance.
Senator BIDEN. That is right, as it relates to moving to the gulf.
Mr. PERLE. That is correct.
Senator BIDEN. Right. So you are suggesting that you still be-
lieve, or I assume you do, because you would not be asking for all
this money, that you believe that Turkey would in fact respond, be-
cause you obviously said that we need this to inhibit Soviet action
and activity. And you gave me the example of the Soviet command-
er who might be emboldened to move but for us proceeding along
the lines you are suggesting.
I find that, based on historical record, past performance or stabil-
ity or lack thereof of Turkish governments in the recent past, a
very, very unlikely occurrence. Now, if all of our NATO allies sign
on, and you know-you and I both know, because I have heard you
speak of it—that the way in which that is likely to occur is not the
Soviets saying, here we go, folks, we are on our way to the gulf.
The way it is likely to occur—and I heard you; you are brilliant
in the way you present it-is the way it will be done, incrementally
if it is done, and that is that there will be some excuse to move into
northern Iran, and that excuse will be taken advantage of-and
the yellow light is about to save us both-and they will move on
down.
Now, I cannot fathom Turkey-and I will come back to this in
the second round-whatever pretext the Soviets use to move into
northern Iran, if they were to do it, saying: Count on us, United
States. We are with you. You have really built us up here. Come
use the air bases. We will help you stop them.
I think that is preposterous, to believe that that will happen. But
I will get back to that. And therefore, I think your proposal is one
that should not be bought.
399
Now, I do not want to stop you from commenting on that, but I
will be back with more questions later.
Mr. PERLE. I would like to comment, if I might, and then we can
come back to it in the other round.
I am afraid I have to disagree with you in your assessment of
Turkey as a reliable ally. It is pointless to refer to the last World
War unless one wants to reflect adversely on some of our most reli-
able allies today, some of whom were on the other side in the last
war.
If one looks at the period in which Turkey has been a NATO
ally, given the fact that it is far more exposed to an immediate
threat than the United States, or indeed virtually any of our other
NATO allies, I think Turkey has behaved with great courage and
great consistency and reliability in sending forces to Korea who
fought extraordinarily well, and in backing and supporting the
United States on virtually every occasion, despite the immediate
jeopardy in which Turkey always exists, given its location.
So I have great confidence.
Senator BIDEN. For the record, I am not suggesting that Turkey
is not a reliable ally. What I am suggesting is that Turkey, because
of its proximity, is not likely, absent a specific requirement to do
so, to do something that the rest of NATO or the world would be
uninclined to do, merely because the United States has increased
their eastern military capability.
That is what I am suggesting, not that they are an unreliable
ally. You have no treaty requirement with them. They would not
be violating any alliance if the Soviets moved into northern Iran
and they did nothing. They would be violating nothing. They would
be a totally reliable ally to say: Sorry, United States, it has hap-
pened on your watch.
Mr. PERLE. I assume, Senator, that Turkey in a wartime situa-
tion will, like all countries, act in its own interest.
Senator BIDEN. But that is not a wartime situation necessarily, is
it?
Mr. PERLE. If one believes that the war only begins when hostile
and threatening forces are on one's own territory, then in that
sense it is not a wartime situation.
Senator BIDEN. I believe that
Mr. PERLE. But the threat to Turkey-
Senator BIDEN (continuing). It's wartime in United States-Soviet
relations. But do you subsume that automatically? Are you telling
me, if chaos erupts in Iran and the Soviets for whatever reason
move, even incrementally, into Iran that all of NATO would be
prepared to declare on the Soviets?
Mr. PERLE. No; I certainly do not believe that, and there are a
number of NATO allies who would not go anywhere near it.
But Turkey would be far more immediately threatened by any
imminent Soviet move into the gulf than any of our other allies,
and I think the likelihood that they would share our concern is far
greater than that of any of our other allies.
Senator BIDEN. Fair enough.
Thank you, Mr. Chairman.
Senator LUGAR. Thank you, Senator Biden.
400
The Chair would recognize now Senator Paul Sarbanes of Mary-
land.
Senator SARBANES. Secretary Perle, has Turkey been permitting
Soviet overflights in order to rearm Soviet-allied countries in the
Middle East?
Mr. PERLE. Senator, there have been overflights by Soviet air-
craft overflying Turkish airspace. Under normal circumstances,
Turkey does not impose restrictions on the crossing of its airspace
by noncombatants.
Senator SARBANES. And those flights have involved the rearming,
for instance, of Syria, is that correct?
Mr. PERLE. I would have to look at the cargo manifests, Senator,
but it would not surprise me if Turkey has refrained from shooting
down Soviet aircraft resupplying Syria.
Senator SARBANES. You make a point in your written statement
of the Soviet forces deployed in the trans-Caucasus as posing a
threat of intimidation or aggression in the area. Is it not correct
that the Turkish forces are very heavily deployed in western
Turkey?
Mr. PERLE. They are indeed.
Senator SARBANES. Would you say that some of them, as you look
at them, are in fact deployed against Greece?
Mr. PERLE. No; I do not believe they are deployed against Greece.
Senator SARBANES. What about the ships in the Izmir area?
What is you view of that?
Mr. PERLE. I am not sure that I understand your question.
Senator SARBANES. Well, the landing craft, for one thing, the
heavy concentration of landing craft in Izmir. What is their pur-
pose?
Mr. PERLE. I have heard the issue of the Turkish landing craft
discussed before and so I took advantage of a recent visit to Turkey
to look into this question of Turkish landing craft, and have dis-
cussed it in NATO as well. I believe, Senator, that the Turkish
landing craft are not only consistent with, but are called for by, the
operational plan that SAC/EUR has developed in conjunction with
Turkey and other NATO members for the defense of the straits.
I do not believe that Turkey possesses landing capability greater
than that required for defense of the straits, and in fact I believe
they are deficient in this category.
Senator SARBANES. You are making that representation with re-
spect to the Turkish landing craft located in Izmir, in the Izmir
area?
Mr. PERLE. I think that the total Turkish landing craft capability
is consistent with, but inadequate-
Senator SARBANES. That is not my question, Mr. Secretary. The
question is the location of the landing craft in the Izmir area.
Mr. PERLE. The location of a ship of any kind at any moment in
time is not particularly revealing about its mission, and I do not
think there is a heavy concentration there.
Senator SARBANES. I can see you do not intend to answer the
question, so I will press on.
I take it from your previous statement that you regard the 7-to-
10 ratio as—I think the term you used was ridiculous?
Mr. PERLE. I think I said military nonsense.
401
Senator SARBANES. Mr. Haass, Secretary Burt said with respect
to the approval by Greece of the Defense and Economic Coopera-
tion Agreement-and this is at the top of page 358 of his state-
ment—that the Congress helped to make this agreement possible,
you will note.
Last year in the report of this committee on the International
Security and Development Cooperation Act of 1983 the committee
said:
The committee believes that it should be the policy of the United States that the
current military balance between Greece and Turkey should be retained through
the 7 to 10 military assistance ratio for Greece and Turkey, and that similar steps
should be taken to maintain the qualitative military balance between the two coun-
tries. The committee therefore intends that the military assistance levels for the
two countries be distributed as follows for fiscal year 1983 and fiscal year 1984.
And then there is a table setting out that distribution, which I
know you are familiar with. The committee then went on to say:
In providing increased amounts for these countries, the committee is proceeding
on the expectation that each country will provide the United States with continued
and adequate access to military facilities in each country. The committee antici-
pates that, should this expectation not be fulfilled, the administration will, in con-
sultation with the Congress, re-examine the aid levels to determine appropriate
levels.
Do you regard that language of the committee as having been
helpful in helping to bring about this agreement?
Mr. HAASS. I think it was helpful to the extent that in the case of
Greece, the Greek Government felt confident that security assist-
ance would be forthcoming. Now, obviously it is impossible to sepa-
rate the availability of security assistance from the willingness of a
country such as Greece, or for that matter any other country, to
enter into a base agreement with us.
Senator SARBANES. Mr. Perle, do you regard the conclusion of a
defense and economic cooperation agreement between the United
States and Greece as an important contribution to American secu-
rity interests?
Mr. PERLE. I do indeed, Senator, and I worked hard to see that it
came about.
Senator SARBANES. Well, you seem by some of your previous an-
swers now to be placing that arrangement in some jeopardy.
Mr. PERLE. I do not believe I have said anything that would do
that. I think it is possible, in short, to be both pro-Greek and pro-
Turkish in the interests of the alliance that we share membership
in.
Senator SARBANES. Well, in a balanced fashion, which you have
just, of course, labeled as nonsense.
Mr. PERLE. I do not think the notion of balance is nonsense. I
think the notion that balance is achieved by imposing a 7-to-10
ratio on military assistance to those two countries is military non-
sense.
Senator SARBANES. That was not the premise of that statement
which Mr. Haass has said was helpful in bringing those negotia-
tions to a successful conclusion to those negotiations, which I think
did represent an instance of some fairly effective cooperation be-
tween the executive and the legislative branches.
402
You talked about military aid, assistance to Turkey, and in your
statement on page 365 you detailed a lot of military needs. The F-
16's are just coming along, is that correct?
Mr. PERLE. They have just been contracted for. The first deliv-
eries will not take place for some time yet.
Senator SARBANES. And that is in the amount of how much?
Mr. PERLE. Are you asking for a dollar amount or the number of
aircraft?
Senator SARBANES. The dollar amount.
I do not think any of the aircraft have actually been reported to
the Congress. It is just training and parts, is it not, some $4 billion?
Mr. PERLE. The total program over many years for the purchase
of 160 aircraft will involve something on the order of $4 billion.
Senator SARBANES. How much are those aircraft per copy?
Mr. PERLE. I would have to give you a precise figure for the
record, but they are somewhere in the vicinity of $18 million or $20
million a copy.
Senator SARBANES. In view of the fact that that is now beginning,
and in view of the fact of the needs that you set out on page 365,
what do you think the request for military aid to Turkey will be
next year and the year after, and the following year?
Mr. PERLE. Taking the whole of the modernization program into
account-and we have worked very closely with the Turkish Gener-
al Staff to examine their requirements and to make our own judg-
ments about them we would expect assistance on the order of a
billion dollars a year.
Senator SARBANES. How much?
Mr. PERLE. On the order of a billion dollars a year.
Senator SARBANES. A billion dollars. So your projected program
would be to jump the $750 million figure provided this year to over
a billion dollars?
Mr. PERLE. When one looks at the whole of the modernization, it
will take about a billion dollars a year in assistance to accomplish
that modernization.
Senator SARBANES. Over how many years?
Mr. PERLE. Over several years, the better part of the remainder
of this decade.
Senator SARBANES. In other words, over a 5-year period?
Mr. PERLE. In fact, into the next decade. But it is very difficult to
make judgments about the outyears.
Senator SARBANES. Well now, in the plan that has been laid out,
I assume in consultation with the Turkish military, what is it that
you project there?
Mr. PERLE. Senator, as you know, we have been unable to give
the Turkish Government any long-term commitment because of the
nature of our constitutional processes. When I say a billion dollars
a year, that is our estimate of what a sensible modernization pro-
gram would cost.
Senator SARBANES. And that would be each and every year into
the next decade?
Mr. PERLE. That is correct.
Senator SARBANES. Mr. Chairman, we are going to have another
round, I assume?
Senator LUGAR Yes; thank you, Senator Sarbanes.
403
The Chair would like to recognize Senator Paul Tsongas of Mas-
sachusetts.
Senator TSONGAS. We have a very formal introduction, Mr.
Chairman. And the Senator from Massachusetts thanks Senator
Richard Lugar from Indiana for recognization, and he thanks the
Senator from Maryland, Senator Paul Sarbanes, for the suggestion
of thanking the chairman. [Laughter.]
Now that my time is half over and I have not asked any ques-
tions, I had better get going
Let us deal with the issue of Turkey as a reliable ally. I think
the term used was "military nonsense." You said to Senator Sar-
banes that the term you used was not "ridiculous,” but was “mili-
tary nonsense.
Mr. PERLE. That is correct.
Senator TSONGAS. Well, I happen to agree with you at least in
that particular case.
When we had the bombing of the Marine barracks in Lebanon,
did the United States request the use of Turkish landing facilities
to bring our wounded there for treatment?
Mr. PERLE. Senator, I do not know whether we did in that specif-
ic instance. I do not think so, because I think the decision was
made to evacuate those wounded to hospitals elsewhere in Europe.
Senator TSONGAS. So there was no request made of Turkey at
that time for any assistance as far as you know?
Mr. PERLE. I have no direct knowledge of it.
Senator TSONGAS. Mr. Haass, do you know?
Mr. HAASS. No, sir, I do not know, nor do I have any direct
knowledge of that. My understanding is the decision was made by
the Department of Defense to refer all casualties to hospitals large-
ly in West Germany.
Senator TSONGAS. Can you check into that and report back to the
committee?
Mr. HAASs. Yes, sir.
[The material referred to follows:)
made only one request of Turkey in the aftermath of the Beirut bombings.
That request was for clearance for a medevac aircraft already in Turkey on other
business to continue on to Beirut to assist in the rescue effort. The Turkish Govern-
ment granted that request promptly.
The small USAF hospital at Incirlik Installation is inadequate to deal with the
number and kind of trauma injuries involved in that incident. We did not call on
the Turks for use of hospitals or other assistance basically because no nearby Turk-
ish facilities were appropriate. The logical decision was made, therefore, to send ma-
rines to civilian facilities in Cyprus or U.S. military hospitals in Germany,
Focusing on Turkey's positive contribution to our policy in Lebanon, the Turkish
Government has agreed to permit use of a military facility to transship personnel
and materiel destined for the U.S. contingent of the multilateral force in Lebanon.
That facility is intended to supplement the current, very effective support of the
MNF we now carry out through Larnaca.
Senator TSONGAS. Going back to the time when we were trying to
get our hostages out of Iran, what requests were made to Turkey at
that time and what were the responses by Turkey?
Mr. PERLE. I cannot answer that, Senator. I was not involved at
the time.
Senator TSONGAS. Mr. Haass, you have a strong background in
the region specifically. Do you know the answer to that?
404
Mr. Haass. I am flattered by your confidence in me, but I will
have to get back to you.
[The material referred to follows:]
Turkey was among those countries of which we asked assistance during the period
we were trying to get our hostages out of Iran. The Turkish Government was most
helpful in providing us with timely, accurate information on events in Iran at that
time. Turkey did not, however, engage in an embargo on trade with Iran during
that period. We believe that the Turkish Government was in communication with
the Algerian Government during the latter's successful negotiation for the release
of the hostages. The Turkish Government granted the necessary overflight and
landing permission for refueling the Algerian aircraft carrying the hostages in
Ankara en route from Tehran to Germany. In the event, it was not necessary to
refuel.
Senator TSONGAS. Well, you think that Turkey is such a great
ally. I would think you would know what the answer to these ques-
tions would be.
Turkey refused to allow us to use these bases last year to supply
our people in Lebanon and the Lebanese Army; is that correct?
Mr. PERLE. We now have, Senator Tsongas, an agreement with
the Government of Turkey according to which some Turkish facili-
ties are available to us in support of the peacekeeping.
.
Mr. PERLE. I believe that from time to time, in the absence of
agreements covering the use that we might wish to make of Turk-
ish facilities, there have indeed been denials. And the remedy to
that problem was to establish an agreement under which it is now
permitted.
Senator TSONGAS. “From time to time" means those times we
asked?
Mr. PERLE. No; we have not always been turned down. I think if
you look at the record, wherever possible the Turks have been ac-
commodating. There is a difference between being an ally and
being an extension of the United States.
Senator TSONGAS. I could not agree more.
Do you know whether the Turkish Government ever condemned
the Ayatollah for holding our hostages?
Mr. PERLE. I do not.
Senator TSONGAS. Could you give us that one, too.
[The material referred to follows:]
Because of the many attacks against its diplomats, the Government of Turkey ac-
tively denounces terrorism in any form. During the hostage crisis, Turkey strongly
denounced the action of the Government of Iran.
Senator TSONGAS. Do you know whether the United States ever
requested that Voice of America and Radio Free Europe antennas
be allowed to operate in Turkey to counter Soviet jamming of
broadcasts?
Mr. PERLE. I believe that we have made such a request and it is
under consideration by the Turkish Government.
Senator TSONGAS. Has that request recently been made?
Mr. PERLE. Quite recently.
Senator TSONGAS. In exchange for all of this money, is that such
an undue request in your mind?
Mr. PERLE. The money, Senator, is the most effective way we
know to protect the United States of America by bottling up the
Soviet fleet in the Black Sea.
405
Senator TSONGAS. I guess the concern is, if Turkey will not take
on Soviet airwaves, whether they would take on the Soviet Air
Force.
Mr. PERLE. I think the question of whether to grant the United
States permission to build a facility is really quite independent on
how Turkey would see its defense requirements in wartime.
I believe, by the way, Senator, that we are having some consider-
able difficulty at the moment retaining our present facilities for
broadcasting from Greece, and I would not regard that as an indi-
cation that Greece would be an unreliable ally in wartime.
Senator TSONGAS. Well, it seems to me that, given what has hap-
pened with the United States buildup of Turkey, I can understand
why Greece is as sensitive as it is.
In the 1973 Middle East war, did Turkey refuse American over-
flights and allow Soviet overflights? Was that the issue that you
raised, Senator Biden, or were you talking about the recent resup-
ply?
Well, no matter. Take us back to 1973. What happened at that
point?
Mr. PERLE. This is a bit of history into which I have inquired,
and I have been unable to get a clear answer, despite a correspond-
ence with then Secretary of State Henry Kissinger on the matter. I
believe there may have been some denials of overflight rights.
And I feel bound to say, if I may, that so long as Turkey is as
exposed and vulnerable as it is, and as long as the reliability of the
United States as Turkey's ally is subject to question, we cannot
expect the Turks to take significant risks with their own security.
Senator TSONGAS. Well, let us take a significant risk. When the
Soviets downed the Korean civilian airliner about which you had
conversation earlier with Senator Helms, virtually the entire world
condemned that. What did Turkey do?
Mr. PERLE. I am unaware of what statements were made by
Turkish officials.
Mr. HAASS. Turkey joined with us in ICAO [International Civil
Aeronautics Organization), and joined in condemning the Soviet
action.
Senator TSONGAS. Turkey did condemn the Soviet action?
Mr. HaAss. In the context of ICAO, it did, Senator.
Senator TSONGAS. How long after the incident was that?
Mr. HaAss. I do not have a date with me of the ICAO vote, but it
was probably within 1 or 2 months of the event.
Senator TSONGAS. So they waited.
Mr. HAASS. Well, it was decided by many states, as well as indi-
viduals, that this was the appropriate forum for an international
response. It was also the appropriate forum through which to look
for various remedial actions.
Senator TSONGAS. That was not what we decided to do. We spoke
up immediately, did we not?
Mr. Haass. Pardon me?
Senator TSONGAS. We spoke out immediately against the act.
Mr. HAASS. The United States did condemn the attack. The
United States then did focus the bulk of its diplomatic efforts, after
an initial period in the United Nations Security Council, into
ICAO.
406
Senator TSONGAS. Let us talk about strategic probabilities for the
moment. Mr. Haass, you served, I believe, in Turkey, if I remember
corectly, or Greece. Did you not serve in one of those two?
Mr. HAAss. I am afraid I have not.
Senator TsonGAS. Well then, that may make it easier for you to
answer my question. Do you think it is more probable that Turkey
will have a conflict with Greece or with the Soviet Union?
Mr. HAAss. I would like to think that the probabilities for con-
flict with either are fairly small, Senator. To weigh those kinds of
imponderables I find somewhat impossible.
Senator TSONGAS. Let me ask you this: Is it not true that most
people in Greece and most people in Turkey feel that if they are
going to be at war it will be against each other, rather than against
the Soviets?
Mr. Haass. I think that because of more than 500 years of a
rather bitter history, there is an awful lot of—to use an informal
word, baggage in both those countries—an awful lot of mistrust
and at times bitterness, at times because of personal experience
and at times simply because of historical reading.
That is one of the interesting things I noted in my recent trip to
the region; that is, particularly in Turkey, there was rather less of
a preoccupation with events to the west and, quite understandably,
a rather increased preoccupation with events to the south and east.
Senator TSONGAS. If you were a Turkish official who had en-
dorsed the UDI on Cyprus, which the United States condemned,
and in the next budget that comes out the United States not only
increases the aid to Turkey, but breaks the 7-to-10 ratio and in-
creases the concessionary terms of that aid, would you not conclude
that, despite the rhetoric, the United States has endorsed the Turk-
ish endorsement of the UDI?
Mr. HAAss. I think the Turkish Government is under no illusions
of our opposition to what happened on November 15, through our
condemnation, both by ourselves as well as in the Security Council,
and through our efforts to try to convince other states not to recog-
nize this new political entity.
I think that they are also watching what is going on in the Con-
gress and therefore understand full well the implications of their
recognition, but more important the events of November 15 them-
selves, for the United States-Turkish relationship. I think at the
same time they look at the relationship and they realize that the
United States-Turkish relationship benefits the United States as
well as Turkey, and they would see the security assistance program
as reflecting that.
Senator TSONGAS. If I had a staff person who was not performing
and called him in to say, “I just do not like what you are doing.
You are doing a very poor job.” On the way out I said, “By the
way, here is a 15-percent raise.” Do you think that staff person
would really believe that I was upset about his or her perform-
ance?
Mr. PERLE. Senator, a more appropriate analogy, if I may suggest
it, would be to say to the staffer with whose performance you are
unhappy that you are going to remove his typewriter and his chair,
and ask that he deliver his speeches on time in the future.
407
We are talking about providing Turkey not with goods and equip-
ment for the benefit of Turkey as such, but in order to enable them
to carry out our NATO missions and to protect our security. And
your whole line of questioning reflects the sense that military as-
sistance to Turkey is somehow a gift to Turkey. It is not that at all.
Senator TSONGAS. Well, if your Soviet commander, who is going
to think twice about coming south because of Turkey, gives it three
thoughts as opposed to two he is going to be removed from office
because of incompetence. [Laughter.]
Thank you, Mr. Chairman.
Senator LUGAR. Senator Sarbanes.
Senator SARBANES. Mr. Chairman, I would like to review the
amounts and terms of the aid packages that you are proposing in
the eastern Mediterranean. I take it, at least as far as the military
component and maybe even the economic component as well, that
emanates out of your shop; is that right?
Mr. PERLE. The alchemy by which these figures are arrived at,
Senator, is probably as mysterious to me as it is to you. There are
protracted discussions between the Departments. The principal
effort in this regard originates with the Defense Security Assist-
ance Agency, which does a great deal of work costing the various
programs that we have previously concluded are in our mutual in-
terest.
There are then deliberations with the Office of Management and
Budget and the Department of State, at the end of which a number
that may or may not approximate our real requirements emerges
Senator SARBANES. Well, now, what is being provided in this
fiscal year in terms of military assistance to Turkey and to Greece,
under the action of the Congress last year?
Mr. PERLE. The figure for Greece was $500 million in credits
which will be expended depending on decisions the Greeks have
not yet made for the acquisition of equipment of American manu-
facture. In the case of Turkey, the final figure, I believe, was $715
million.
Senator SARBANES. So it is $715 million for Turkey and $500 mil-
lion for Greece on the military side. Now, what were the terms of
that assistance?
Mr. PERLE. If you mean the repayment terms, there was a grace
period of I believe 7 years, followed by a 20-year repayment at
market rates of interest.
Senator SARBANES. What would those be, market rates of inter-
est?
Mr. PERLE. I think last year it was about 11 percent. I would like
the opportunity to correct any of these numbers for the record if I
have it wrong.
Senator SARBANES. Now, that is the $500 million to Greece?
Mr. PERLE. That applied both to Turkey and to Greece, I believe,
the terms.
Senator SARBANES. Well, that is not my recollection. Is that cor-
rect?
Mr. PERLE. I could be wrong.
[Pause.]
Mr. PERLE. Excuse me. It was 10 years, not 7.
408
Senator SARBANES. And that applied to the $715 million going to
Turkey?
Mr. PERLE. No, not to all of the $715 million. To that portion--
Senator SARBANES. Let us take the $500 million to Greece. What
are the terms of that $500 million this fiscal year?
Mr. PERLE. Do you mean the previously appropriated funds?
Senator SARBANES. Yes.
Mr. PERLE. I believe they are, as I have described them, with a
10-year grace period followed by a 20-year repayment.
Senator SARBANES. Twenty-year repayment at 11 percent inter-
est?
Mr. PERLE. I believe 11 percent interest.
Senator SARBANES. Now, the $715 million going to Turkey?
Mr. PERLE. That was broken down into some military credits on
the same terms that I have just described.
Senator SARBANES. And how much of the $715 million was on
those terms, 10-year grace, 20-year repayment, market rates of in-
terest which are 11 percent?
Mr. PERLE. If I recall correctly, it was on the order of $255 mil-
lion.
For fiscal year 1984, I will run down the figures if you like. The
credits were $585 million, the MAP program or grant aid, which
was radically cut back by the Congress in the end, was $130 mil-
lion.
Senator SARBANES. So of the $715 million, $130 million was a
grant?
Mr. PERLE. That is correct.
Senator SARBANES. And $585 million of it was on the same terms
as the $500 million we have just been discussing for Greece?
Mr. PERLE. That is correct.
Senator SARBANES. What is your proposal for this year on mili-
tary?
Mr. PERLE. For what?
Senator SARBANES. For both countries.
Mr. PERLE. $500 million again for Greece.
Senator SARBANES. In other words, for Greece it is the same
figure as last year?
Mr. PERLE. Correct.
Senator SARBANES. On what terms?
Mr. PERLE. The same terms as last year.
Senator SARBANES. Ten-year grace, 20-year repayment?
Mr. PERLE. Correct.
Senator SARBANES. And market rates of interest, is that still at
11 percent?
Mr. PERLE. I am not sure, Senator. I think there is a problem as
to the date on which the credits are actually exercised.
Senator SARBANES. But I assume it would be roughly in that
area.
Now, on Turkey?
Mr. PERLE. On Turkey the request for this year is $500 million in
credits, on the same terms as the $500 million for Greece; $255 mil-
lion in MAP or direct grant.
Senator SARBANES. But those figures do not sound right to me,
Mr. Secretary. I think you have another piece of paper coming.
409
[Pause.]
Mr. PERLE. I am sorry. It is $230 million in MAP
Senator SARBANES. First of all, what is the total?
Mr. PERLE. $755 million.
Senator SARBANES. So you are going from $715 million up to $755
million, is that correct?
Mr. PERLE. That is correct, although I believe last year we re-
quested $755 million and it was reduced to $715 million.
Senator SARBANES. Now, how is that $755 million going with re-
spect to its terms?
Mr. PERLE. That is broken down into $275 million on the same
terms as Greece, $250 million on concessional terms. The conces-
sional term is a 5-year grace period rather than a 10-year grace
period, and 7-year repayment period rather than a 20-year repay-
ment period. Then the advantage that the concessional terms have
over the nonconcessional is that the rate of interest is 5 percent
rather than the market rate.
Senator SARBANES. That is a pretty big advantage.
Mr. PERLE. Depending upon whether your problem is a cash flow
problem or a foreign settlements problem, it may or may not be ad-
vantageous.
Senator SARBANES. If you had your pick, which one would you
take?
Mr. PERLE. It would depend on whether I was concerned about
repaying the principal within 7 years or whether I needed the 30
years. It is not by any means obvious that these concessional terms
are in every case the preferable terms. They may or may not be.
Senator SARBANES. And the balance of it?
Mr. PERLE. The balance, which is $230 million, is in MAP.
Senator SARBANES. So you are taking the amount of Turkish
military assistance up from $715 to $755 million, the amount of
grant from $130 to $230 million?
Mr. PERLE. To $230 million, that is correct.
Senator SARBANES. And providing concessional of $250 million at
5-percent interest, and then $275 million at market rates?
Mr. PERLE. That is correct.
Senator SARBANES. Mr. Chairman, Senator Biden has to go and I
will defer to him.
Senator BIDEN. I would like to ask one question, if I may. I have
to leave for an appointment and hopefully will be able to come
back. Thank you, Paul.
Mr. Perle, you talked earlier about being able to bottle up the
Soviet fleet. I thought there was a treaty agreement that precluded
Soviet aircraft carriers from coming out into the Mediterranean,
and I was under the impression that the Turks were sort of the
guardians of that.
Have there been any Soviet aircraft carriers that have traversed
the straits to threaten our 6th Fleet in the Mediterranean?
Mr. PERLE. There is a dispute over what constitutes the carrier
under the convention in question, but I believe there have been air-
craft carriers, as we have defined them, that have traversed the
straits.
Senator SARBANES. And the Turks have a different point of view
than we have? They have allowed it to occur?
!
+
34-045 0-84-27
410
!
Mr. PERLE. I think the Turks have discovered, Senator, that trea-
ties are not always enforceable when one is weak.
Senator BIDEN. I see. Thank you.
And thank you, Paul.
Senator SARBANES. Now, on the economic side of this assistance,
because there is a proposal to send $755 million in military assist-
ance with this tripartite arrangement on terms-grant, at 5-per-
cent interest, and at market interest—what is being provided to
Turkey and Greece with respect to economic support funds?
Mr. HAASs. The only request for economic support funding in
fiscal year 1985 would be $175 million for Turkey.
Senator SARBANES. $175 million for Turkey and nothing for
Greece?
Mr. HAASS. No, sir.
Senator SARBANES. What was provided this year pursuant to con-
gressional action for Turkey?
Mr. HAASS. I believe the final outcome was $138.5 million for
Turkey.
Senator SARBANES. $138.5 million, So you are proposing to raise
that by about $36.5 million?
Mr. HaAss. Well, again, the differential is not due to a changed
administration request. The differential is due to congressional
action.
Senator SARBANES. Yes; that is what they are getting this year.
We are working off the reality. Is that correct, it would be a $36.5
million increase?
Mr. HAASS. Right.
Senator SARBANES. What are the terms of that?
Mr. Haass. The terms of the $175 million that we have proposed
would be $90 million in grant and the remaining $85 million in
loans, the terms of which are 5 percent interest, 5-year grace, 20-
year repayment.
Senator SARBANES. Five-year grace, 20-year repayment, at 5 per-
cent interest?
Mr. HAASS. Yes, sir.
Senator SARBANES. And $90 million of it on a straight grant?
Mr. HAASS. Yes, sir.
Senator SARBANES. What are the terms of the $138.5 million that
is being received this year?
Mr. HAASS. I am not sure I have the specific financial terms of
that with me, but I can get that for you. I do not have the figures
with me of whether the fiscal year 1984 moneys were grant or loan.
Senator SARBANES. Was any of it grant that you recollect?
Mr. Haass. I am sorry, Senator. I do not want to mislead you. I
would rather get that for you.
[The material referred to follows:]
The terms of the $138.5 million in ESF for FY 1984 are $75 million in grant, and
$63.5 million in loans at 5 percent interest, with 5-year grace on principal and 20-
year repayment.
Senator SARBANES. Mr. Haass, you all issued a very strong state-
ment on the UDI declaration and the Turkish recognition of it.
You have already been asked some questions along that line and
you said in effect, that the action enormously complicates the ef-
411
forts to resolve some of the pressing situations in that area of the
world. Yet in the end, despite the rhetoric, the United States has
significantly increased this package in absolute amounts and also
in its terms.
I do not quite understand how you can then assert that there are
no illusions about it and that it is fully understood what the impli-
cations of that UDI and the subsequent action would be on United
States-Turkish relationships.
Mr. HAASS. Senator, let me just make a few points if I may. The
terms of our assistance are not meant to send a politicial or politi-
cio-military signal of any kind. The terms of U.S. security assist-
ance are based almost exlusively on economic criteria, on per
capita income and so forth. So the fact that the terms of security
assistance for Turkey have been improved is simply an economic
judgment on the administration's part.
Senator SARBANES. Has the economic situation in Turkey wors-
ened this year over last year?
Mr. Haass. The economic situation over the last year has basical-
ly stayed the same. The pattern of improvement over the last few
years leveled off. The new government of Mr. Ozal has instituted a
host of political and economic reforms, intended basically to liberal-
ize the economy, and it is too soon to really see what effect they
will have.
Senator SARBANES. You do not have a worsened economic situa-
tion this year compared with last year, yet you do have a signifi-
cant improvement in the amount and in the terms of the assist-
ance. I mean, to respond to the point---
Mr. HaAss. If I may clarify, one aspect of the economic situation
which has gotten worse is the degree of Turkey's debt. Over the
last 12 months, as I understand it-although again I would have to
get the specific figures for you-that the degree of Turkish indebt-
edness, foreign debt that is, has gone up, which is one of the par-
ticular concerns and was one of the things which motivates the bal-
ance of support payments that we are giving through the ESF pro-
gram.
Senator LUGAR. Senator Sarbanes, Senator Pell has one question.
Senator PELL. Why do you not take your time.
Senator SARBANES. No; you go ahead. I will come back to this.
Senator Pell. Thank you.
I would like to return for a moment to the Montreaux Conven-
tion. My recollection is that it says that warships are permitted to
go through. Is that not the reason we send our own warships into
the Black Sea every so often to show the flag?
Mr. PERLE. I believe that is correct. There are requirements for
prior notification.
Senator PELL. That is right, but with notification it does not
matter if it is an aircraft carrier or a submarine or a surface
vessel?
Mr. PERLE. I believe there are limitations, Senator Pell, on the
movement of aircraft carriers.
Senator PELL. I am just curious, because when was the Mon-
treaux Convention signed? In the early twenties, and we did not
have aircraft carriers then.
412
Mr. PERLE. I think it is not under the Montreaux Convention,
but under subsequent international agreement.
Senator PELL. Between who and who?
Mr. PERLE. How multilateral that agreement is I am not certain,
but I would be glad to supply that for the record.
Senator PELL. Because under the Montreaux Convention, it pro-
vided, I thought, for innocent passage, although not for fleet pas-
sage, which as you know means when the submarine is submerged.
Mr. PERLE. I believe that is correct, submarines must transit the
straits on the surface. For that, there must be prior notification.
The Soviets have recently adopted a pattern of making advance
notification which is not always then followed up by the transit of
the ships in question.
Senator PELL. When did we last send one of our destroyers or
vessels in there to show the flag?
Mr. PERLE. I would have to supply that for the record.
[The material referred to follows:]
The U.S. Navy destroyer Radford conducted operations in the Black Sea from 30
August to 6 September 1983.
Senator PELL. Thank you very much.
Senator LUGAR. Mr. Perle, as a part of the questioning that has
been proceeding, I have been adding up the figures that Senator
Sarbanes has been reviewing. It would appear that Turkey is going
to receive in grants under the administration proposal $230 million
plus $90 million in ESF. Now, information that I have indicates
that Turkey must repay in fiscal year 1985 the U.S. Government in
principal and interest on previous ESF, FMS, and Public Law 480
loans some $381 million. I just want to know if the administration
took that into consideration in making this proposal.
It would appear that if in fact the Turkish financial condition
has worsened substantially, then under the program that we are
proposing it is going to worsen somewhat more, because, although
there are some grants proposed, the requirements for repayment
are substantially more severe than the cash flow in.
Mr. PERLE. That is correct. That is why I tried to make the point
earlier that the concessional terms are not necessarily advanta-
geous, and if one faces a near-term repayment problem then the
longer repayment period associated with nonconcessional loans
may in fact be preferable.
But it is in recognition of Turkey's heavy obligations, not only to
the United States but to other countries, that we arrive at these
figures.
Senator LUGAR. Senator Sarbanes.
Senator SARBANES. Is the MAP available for repayment pur-
poses?
Mr. PERLE. No; it is not. The MAP is for new acquisitions.
Senator SARBANES. So the increase in the MAP does not contrib-
ute in any way to the problem that Senator Lugar has just had ref-
erence to?
Mr. PERLE. The increase in the MAP contributes to the modern-
ization of the Turkish Armed Forces.
Senator SARBANES. But not to the repayment?
Mr. PERLE. That is correct.
413
Senator SARBANES. Now let me ask this question. How much in
the future does that repayment figure increase in subsequent
years, the $381 million figure that was just cited?
Mr. PERLE. I think my colleague has the figures.
Senator SARBANES. What are the Turkish repayment figures in
subsequent years?
Mr. Haass. Senator, based on our estimates—and these are
rough, because obviously it would depend upon what type of aid
programs we actually have in the future-we are estimating that
in fiscal year 1986 the repayment would be just over $300 million,
and by the end of the decade, if the proposed kinds of terms, the
combination of MAP and other forms of grant and concessionality,
are enacted, that the repayment requirements will fall to some-
thing like $240 million a year.
That, by the way, is one of the purposes of MAP.
Senator SARBANES. Mr. Perle, I was not intending to bring the
subject up, but in view of some of the statements you made it
seems to me we have to do it for the sake of a clear record. You
spoke in very, very positive terms--not just positive terms, which I
think would have had some warrant-about the movement in
Turkey toward democracy and the recognition of important human
rights questions and so forth.
Are you familiar with the report and the statement of the Hel-
sinki Watch group which has been monitoring compliance with the
human rights provisions of the Helsinki Final Act?
Mr. PERLE. I am not sure, Senator. There is more than one Hel-
sinki Watch Committee and they have made many reports.
Senator SARBANES. Well, they have written all of the Members of
the Senate expressing real concern about human rights in Turkey:
“I would like to request your serious attention to the human rights
violations by the Government of Turkey,” the letter begins and
then makes reference to political prisoners, to torture, and prison
conditions, denial of access to the International Red Cross.
Are you familiar with those questions?
Mr. PERLE. I am aware that from time to time there are indica-
tions from a number of sources that the Turkish record on human
rights is not everything one would desire it to be. I believe the im-
provement, and in particular the recent improvement, in the Turk-
ish record is really quite striking, and the extraordinary restora-
tion of movement in a direction that I think we would agree is the
right direction.
Senator SARBANES. Let me just read a paragraph from here. And
Mr. Chairman, I would ask that the Helsinki Watch letter be in-
cluded in the record.
Senator LUGAR. Without objection, it is so ordered.
[The letter referred to follows:]
414
:
HELSINKI WATCH,
New York, N. Y., February 24, 1984.
DEAR SENATOR: The Helsinki Watch is a citizens organization which monitors
compliance with the human rights provisions of the Helsinki Final Act. I would like
to request your serious attention to the issue of human rights violations by the Gov-
ernment of Turkey as you consider U.S. foreign assistance in the coming weeks.
Helsinki Watch has closely monitored human rights in Turkey following our mis-
sion there in September 1983. Since that time, the Turkish people voted in the first
civilian parliamentary elections since the military coup of 1980. (All major political
parties, office holders and politicians from the pre-coup period were excluded from
participation.) Martial law remains in place, which includes severe restrictions on
political participation, press censorship, arbitrary arrests and preventive detention,
and the use of military courts for violations of martial law decrees.
The Helsinki Watch is particularly concerned about the following human rights
issues:
1. Political prisoners. --According to figures released by the Government of Turkey
in July 1983, there are 21,121 political prisoners in Turkey, though unofficial esti-
mates the Helsinki Watch received during our mission there ranged from 40,000 to
100,000 political prisoners. According to the State Department Report on Human
Rights Practices for 1983, “Of the total of 21,121 persons sentenced, charged, or
under investigative detention 2,332 were identified by the Government as "right-
ists,” 11,508 as “leftists,” 4,273 as "separatists” (mainly Kurds), and 3,108 of “uncer-
tain political orientation.”
The Helsinki Watch has no way of knowing how many of those currently incar-
cerated are serving legitimate sentences for acts of violence and how many are
being detained because of their political beliefs. Among those imprisoned because of
their political views are 23 members of the Turkish Peace Association who were
sentenced on November 14th, 1983. The Turkish Peace Association, like the U.S.
Helsinki Watch Committee, was founded in response to the 1983 Helsinki Accords.
Those receiving 5 and 8 year sentences include the president of the Turkish Medical
Association, a diplomat, university professors, 3 former members of Parliament,
journalists, the wife of the former mayor of Istanbul, the Dean of the University of
Istanbul Political Science faculty, a medical doctor and professor of medicine, and
several engineers and artists. Among those currently undergoing trial are 85 mem-
bers of the Turkish Labor Confederation (DISK). 72 of the defendants face the death
penalty if sentenced.
2. Torture. According to the State Department Country Reports on Human
Rights Practices for 1983, "Complaints of torture, especially in cases concerning po-
litical prisoners, continue to be filed. Both Amnesty International, in a report issued
in April 1983, and foreign newspaper correspondents have reported numerous state-
ments made in court by prisoners that they had been beaten or tortured by security
officials in attempts to obtain confessions or other information." On February 15th,
1984, Amnesty International called upon the head of the Turkish armed forces to
account publicly for 7 prisoners reported to have died in Diyarbakir Military Prison
in January of this year. During our mission to Turkey in September 1983, Helsinki
Watch representatives met with several recent victims of torture who bore marks of
bruises from beatings, and described sexual abuse, electric shock, and deprivation of
food, sleep, sanitation, and medical care.
3. Prison conditions.-In addition to torture and abuse of prisoners while in prison
or police stations, conditions of detention are notoriously poor. Last summer, several
thousand prisoners went on hunger strike to protest torture and poor prison condi-
tions. In particular, they protested the denial of visiting privileges and the humiliat-
ing and unnecessary practice of strip searches of prisoners before and after visits,
even though the prisoners were separated from their visitors during interviews.
Prisoners at Diyarbakir Military Prison have begun their second hunger strike in 6
months to protest the alleged resumption of torture in the prison and the withdraw-
al of concessions granted during a previous hunger strike.
4. Denial of access to International Red Cross.—The International Committee of
the Red Cross (ICRC) has repeatedly offered its services to the Government of
Turkey to visit political prisoners and has been repeatedly refused. In November of
1983, the ICRC met with officials at the U.S. Department of State to request U.S.
assistance in encouraging the Turkish Government to allow the ICRC to visit politi-
cal prisoners. To date, the Red Cross has not received permission to visit the prisons
or police stations. (This information was provided to Helsinki Watch by the ICRC on
February 21, 1984.)
I respectfully urge you to include a strong expresssion of Congressional concern
about continuing human rights problems in Turkey in this year's foreign aid legisla-
415
tion. The Turkish Government needs to be aware that the Congress' legitimate con-
cern about Turkish security does not mean that the above-described human rights
violations are acceptable. With the advent of a new civilian government, albeit with
limited powers, there is a possibility that martial law may be lifted and some politi-
cal prisoners released. Active monitoring of human rights in Turkey and frequent
representation on behalf of tortured, jailed or silenced Turkish citizens can
strengthen those within the Turkish Government who wish to improve human
rights conditions. I hope that such representation in the language of the foreign aid
bill will be a priority during legislative mark up next week.
Thank you for your consideration.
Sincerely,
HOLLY BURKHALTER,
Washington Representative.
Senator SARBANES. The Helsinki Watch has no way of knowing
how many of those currently incarcerated are serving legitimate
sentences for acts of violence and how many are being detained be-
cause of their political beliefs. Among those imprisoned because of
their political views are 23 members of the Turkish Peace Associa-
tion, who were sentenced on November 14, 1983. The Turkish
Peace Association, like the U.S. Helsinki Watch Committee, was
founded in response to the Helsinki accords.
Those receiving 5- and 8-year sentences include the president of
the Turkish Medical Association, a diplomat, university professors,
three former members of parliament, journalists, the wife of a
former mayor of Istanbul, the dean of the University of Istanbul
political science faculty, a medical doctor and professor of medi-
cine, and several engineers and artists.
Now, second, Amnesty International has just within the last 2 or
21/2 weeks called on the head of the Turkish Armed Forces to ac-
count publicly for seven prisoners reported to have died in a mili-
tary prison in eastern Turkey in January. Are you familiar with
this situation?
Mr. PERLE. I am not familiar with the latter situation; no.
Perhaps it would be useful to say, Senator, that I have no inde-
pendent capacity as I sit here now to judge the report of the Hel-
sinki Watch Committee. Neither I nor the U.S. Government would
for a moment condone the holding of individuals in incarceration
for their political beliefs.
Senator SARBANES. This exchange was only prompted by the ex-
travagant language that you used to describe developments in
Turkey. I think some movement in a positive direction has oc-
curred, but to describe it in the extravagant terms which you did,
in light of assertions of this sort and the fact that they have not
fully restored democracy—they are under some sharp attacks in
the Council of Europe and so forth-seemed to me an overstate-
ment and I thought the record ought to reflect that.
Mr. PERLE. I do not mean to overstate it. As I said, I cannot
evaluate whether the Turkish Peace Association members who
were referred to were guilty under Turkish law and under the
norms of Western standards of human rights or not. I am simply
not in a position to do that.
Senator SARBANES. I am reminded of an exchange that we had at
an earlier hearing in which I contrasted Secretary Weinberger's
visit to Turkey-in the period of full-scale military dictatorship,
with a whole range of things taking place and his comments after
visiting there, with those made by the German Foreign Minister,
416
Mr. Genscher, who visited there within 2 or 3 weeks after Secre-
tary Weinberger.
Neither of them, of course, undercut the relationship that they
perceived as being important. Mr. Genscher had certain concerns
about some human rights questions and the people who were being
jailed, and so forth and so on. It seems to me we need to keep those
in mind.
Mr. PERLE. I think we share those concerns where violations of
human rights occur.
If my language was extravagant, it was perhaps in recognition of
the contrast between the situation one observes in Turkey today
and the tribulations of that country as it went through a period of
uncontrolled terrorism, in which 20 to 30 people a day were dying
as a result of more than half a million individuals possessing and
using firearms fairly freely, which presented an obvious and funda-
mental threat to the most basic of human rights.
They have managed to cope with that situation and to restore
constitutional rule to the point where, much to the surprise of a lot
of people, the recent elections produced a government that was not
to the liking of the Turkish general staff, who it was presumed
would control that election.
Senator SARBANES. Some of those people in prison may some day
be important people in the government, and it seems to me we
ought not to forget that.
There are some of us in the Congress who were very sharply crit-
ical of the colonels' junta in Greece at a time when democracy was
snuffed out there, and hoped for the day when it would be restored.
It seems to me some of that support that came from the United
States to the antijunta people stood us in good stead subsequently.
Mr. PERLE. I believe that the patience of Congress in that period
of Greek history was well justified, and I believe that patience in
the evolution of Turkish democracy is equally well justified.
Senator SARBANES. Mr. Haass, you were in the area from the
15th to the 23d of February?
Mr. HAASS. Approximately those dates.
Senator SARBANES. What do you have to report on that?
Mr. HAASS. What in particular would you like me to report on,
Senator?
Senator SARBANES. Well what are the prospects? You have said
that there were some prospects. Now, we have been hearing some
pessimistic reports, and I see that Denktash, on the 27th of Febru-
ary, said, I will go to New York to warn de Cuellar, but not to give
up Varosha.
Mr. HAASS. What I found in all three capitals and in the case of
Nicosia on both sides of the green line was not surprising: that in
principle everybody wanted to move ahead on progress toward
Cyprus. Obviously, as is often the case, the devil was in the details.
Everybody had very much their own idea about why more progress
had not been realize to date, and everyone had their own idea
about how we ought to move from here on.
I think, though, there was general agreement that in the near
term the most promising avenue probably would involve moving
ahead on the so-called Varosha track, whereby Mr. Denktash's
offer of January 2, in which he offered to return part of the city of
417
Varosha to U.N. auspices under U.N. administration, would take
place. It is hoped then that that would lead to resettlement.
Senator SARBANES. Well, who is talking to whom?
Mr. Haass. Over the last 6 weeks or 2 months, virtually everyone
has been talking to everyone, but not necessarily directly.
Senator SARBANES. Is Denktash talking to de Cuellar?
Mr. Haass. Mr. Denktash within the last 10 days or 2 weeks said
that he would like to meet with the Secretary General. The Secre-
tary General has repsonded that he would indeed like to have that
meeting, and it is my understanding that the meeting could take
place as soon as next week in New York.
Senator SARBANES. I see.
Thank you, Mr. Chairman.
Senator LUGAR. Thank you very much, Senator Sarbanes.
And thank you, Mr. Perle and Mr. Haass, for your testimony
today. You are dismissed and we will proceed now to the public
panel.
Mr. PERLE. Thank you, Mr. Chairman.
Mr. HaAss. Thank you, sir.
Senator LUGAR. Our next panel will consist of: Professor Dean
Lomis, chairman of the American Hellenic Institute Public Affairs
Committee, Inc.; former Ambassador Parker Hart, our former U.S.
Ambassador to Turkey and former Assistant Secretary of State;
Mr. Peter Cardiges, president, American Hellenic Educational Pro-
gressive Association; and Mr. Andrew Manatos, representing the
United Hellenic American Congress and American Hellenic Alli-
ance.
Gentlemen, would you come to the witness table, please.
[Pause.]
Senator LUGAR. Gentlemen, we very much appreciate your
coming here today and we appreciate your patience with this ex-
tensive hearing. We look forward to your comments. You have
each prepared statements, which will be made a part of the record
in full.
I would ask you to proceed in the order that you were intro-
duced, namely Professor Lomis first, then Ambassador Hart, Mr.
Cardiges, and Mr. Manatos, and to the extent that it is possible to
summarize your comments, please do so. If that is not possible,
please feel free to give the full argument.
But at this point we will proceed, and then, after each of you has
been heard, questions will come to you from the committee.
Professor Lomis.
STATEMENT OF PROF. DEAN C. LOMIS, CHAIRMAN, AMERICAN
HELLENIC INSTITUTE PUBLIC AFFAIRS COMMITTEE, INC.,
WASHINGTON, D.C., ACCOMPANIED BY EUGENE T. ROSSIDES,
ESQ., SPECIAL COUNSEL
Mr. LOMIS. Thank you, Mr. Chairman and members of the sub-
committee. I appreciate the opportunity of being with you today
and to present views before the subcommittee on behalf of the
American Hellenic Institute Public Affairs Committee on the for-
eign aid authorization legislation for fiscal year 1985 affecting
418
Turkey, Greece, and Cyprus. Accompanying me is Eugene Rossides,
special counsel to our committee.
The administration proposed $934 million in military and eco-
nomic aid for Turkey, in terms we have already heard of, $500 mil-
lion for Greece for military sales, and $3 million for aid for Cyprus.
We oppose as contrary to the best interests of the United States
the amounts and type of aid for Turkey and the lack of conditions
precedent to that aid, particularly the removal of all Turkish occu-
pation troops and colonists from Cyprus. We oppose grant and
concessional aid to Turkey.
Whatever value Turkey is to the United States and Western in-
terests is minimized as long as the Cyprus problem remains unset-
tled: 1984 marks the 10th year of Turkey's invasion and occupation
of northern Cyprus.
Fundamental to the settlement of the Cyprus problem is the re-
moval of all Turkish occupational troops, estimated at over 25,000,
and colonists from Cyprus. The continued failure to put these con-
ditions precedent on aid to Turkey_has sent the wrong signals to
Turkey and made Turkey and the Turkish Cypriots more intransi-
gent.
The illegal unilateral declaration of independence by the Turkish
Cypriots on November 15, 1983, just hours after President Reagan
signed the 1984 foreign aid bill into law, and Turkey's immediate
recognition of that illegal act are just the latest examples of Tur-
key's and the Turkish Cypriots' disdain of the Congress and lack of
good faith in negotiating a settlement of the Cyprus problem in ac-
cordance with normally accepted democratic principles.
As we interpret the 1978 Foreign Assistance Act, aid should
cease because of the Turkish Cypriot and Turkish actions. These
events make it clear that conditions precedent to aid to Turkey
must be based on objective, verifiable criteria. We support fully the
Feighan bill, H.R. 4505, and urge enactment of a similar bill in the
U.S. Senate, and that it be strengthened to include conditions on
economic aid as well as military aid to Turkey, and the removal of
all Turkish colonists as well as all Turkish occupation forces, esti-
mated at over 25,000 troops. We urge full incorporation of these
provisions as an amendment to the foreign aid amendment of 1985.
We note the 7-to-10 ratio debates of recent years. Any true 7-to-
10 ratio should provide that the terms be identical and that eco-
nomic aid be part of that equation.
We believe it is preferable that aid to Turkey and Greece be on
at least a 1-to-1 basis, including military and economic. To achieve
this ratio, we call for the reduction of the administration's $930
million proposal to $500 million and that the terms be identical.
In view of our budget deficit, we call for a further reduction of
$350 million in aid to Turkey to a maximum of $150 million, as we
do not believe Turkey is of much significant value strategically
and, based on her historical record, Turkey is of doubtful reliabil-
ity.
Mr. Chairman, the policy of this and previous administrations re-
garding aid to Turkey has not worked and has cost the American
taxpayer billions of dollars and added substantially to our annual
debt service costs. We urge all those who have supported that
policy to review their previous position and support meaningful
419
and objective conditions precedent on aid to Turkey as in the best
interests of our Nation.
Mr. Richard Perle, Assistant Secretary of Defense for Interna-
tional Security Affairs, has stated to a Turkish newspaper that
Congress will not impose any meaningful conditions on Turkey.
Prove him wrong, gentlemen, for his comments are counterproduc-
tive.
We believe that a full reevaluation of United States-Turkey rela-
tions is long overdue. Turkey's flagrant violation of the rule of law,
human rights, international treaties, bilateral agreements, and the
United Nations Charter is a matter of record. Yet, the executive
branch's policy of attempting to appease Turkey through large
amounts of military and economic aid has failed. The more Turkey
demands, the more we give. The more we give, the more Turkey
demands.
The Turkish Government has repeatedly declared that it will not
abide by any decision enacted by Congress. Such tactics by Turkey
against American good will and tolerance for nearly a decade now
must be treated in the same manner as the American reply to the
XYZ similar blackmail affair of nearly two centuries ago, but in
up-to-date figures. Billions for defense, but not a cent for tribute.
History has proved that we cannot buy friendship. In the case of
Turkey, we have invested billions of dollars, every penny of it as
shaky as the Turkish lira on the international market.
The past three administrations, including the present, have re-
peatedly referred to Turkey as "our faithful ally.” It is high time
that we lay this myth-and a myth it is—to rest.
Turkey's long history of oppression against Armenians, Greeks,
Jews, Kurds, Turks themselves, and now Cypriots is well docu-
mented in the annals of history. I have documented for your review
five pre-World War II heinous international crimes and abrogated
treaties by Turkey and another 20 since 1973. Due to the limitation
of time, I leave this to your own reading.
However, I wish to say a few words about Cyprus, a country
under Turkish occupation for nearly a decade now, a country
which has provided unlimited and unrestricted access to the
United States in our Middle East interests. During the terrorist
attack against our marines in Beirut, it was Cyprus and only
Cyprus that opened its airfields and its hospitals, although the
latter were not used, to assist in the evacuation of the dead, the
dying, and the wounded from the carnage of that unfortunate city.
Cyprus continues to this day to offer unrestricted use of its free
territory to the United States for the evacuation of Americans and
other nationals from the ruins of Beirut. Yet, the Turkish daily
Cumhuriyet in its February 12, 1984, issue quotes Rauf Denktash
criticizing that the Greek Cypriots were openly cooperating with
the United States by opening their ports to U.S. ships and their
airport to U.S. planes. He alleged that the Greek Cypriots were
providing fuel and logistic facilities to the United States.
He said: "The Americans use the Greek Cypriot sector as one
uses a base.” He added: "Our suspicion is that the Greek Cypriots
might have concluded secret agreements to provide many facilities
to the United States and others in return for their support on the
Cyprus problem."
420
President Reagan's January 24, 1984, bimonthly report on
Cyprus should be declared null and void. Rather, President Reagan
should be instructed to practice the rule of law in accordance with
his January 23, 1984, state of the Union address: “Responsible
members of the world community do not threaten nor invade their
neighbors, and they restrain their allies."
The policies of the past three administrations, the present includ-
ed, disregarding the rule of law and our policy against aggression
have resulted in a weakened U.S. security posture in the eastern
Mediterranean. The Turkish occupation of Cyprus, now in its 10th
year, achieved with U.S.-furnished aid, has exacerbated historic an-
tagonisms between Turkey and Greece and alienated Greece from
her longstanding traditional friendship with the United States. We
can no longer afford to waste billions of American taxpayers' dol-
lars without commitments to collective security and to the rule of
law.
Accordingly, the Congress of the United States, the conscience
and the voice of our Nation, must enact and fully support legisla-
tion which calls that no assistance be provided, no credits be ex-
tended, and no guarantees be issued to Turkey under the Arms
Export Control Act, until:
One, the Government of Turkey has withdrawn its recognition of
the so-called Turkish Republic of Northern Cyprus;
Two, the Government of Turkey has taken all necessary steps to
reverse the illegal declaration of an independent state in Northern
Cyprus;
Three, the negotiations under United Nations auspices for resolv-
ing the Cyprus conflict have resumed and significant progress has
been made in settling that conflict based on internationally recog-
nized democratic principles of majority rule and full minority
rights;
And four, all Turkish military forces in excess of those permitted
by the 1959 Treaty of Alliance are withdrawn from Cyprus.
In addition, suspension of economic aid must be added to suspen-
sion of military aid until Turkey complies with the rule of law.
Before closing, I would like to refute the testimony provided by
Mr. Haass regarding the action of Turks in the shooting down of
the Korean airliner. According to the Washington Post of Septem-
ber 13, 1983, the Turks responded by saying: "We are tied by the
Montreaux Convention, by bilateral agreements with the Soviet
Union that prevent our participation in retaliation against the su-
perpower.”
Gentlemen, the eyes of the world are upon the United States. Let
us exercise a moral foreign policy expected of America, and Cyprus
is a good place to begin.
Thank you, Mr. Chairman, and members of the subcommittee.
[Professor Lomis' prepared statement follows:)
PREPARED STATEMENT OF PROF. DEAN C. LOMIS
Mr. Chairman and members of the subcommittee, I appreciate the opportunity to
appear before the Subcommittee on behalf of the American Hellenic Institute Public
Affairs Committee, Inc., and present views on the foreign aid authorization legisla-
tion for fiscal year 1985 affecting Turkey, Greece and Cyprus. Accompanying me is
Eugene T. Rossides, Esq., Special Counsel to our Committee.
421
The Administration proposed $934 million in military and economic aid for
Turkey ($759 million military composed of $230 million MAP military grant, $250
million FMS military sales with concessionary terms, $275 million FMS military
sales with conventional terms, $4 million military training, and $175 million ESF
economic grants and loans); and for Greece, $500 million FMS military sales with
conventional terms and $1.7 million military training; and $3 million for Cyprus.
We oppose as contrary to the interests of the United States the amounts and type
of aid for Turkey and the lack of conditions precedent to the aid, particularly the
removal of all Turkish occupation troops and colonists from Cyprus. We oppose
grant and concessional aid to Turkey.
Whatever value Turkey is to the United States and Western interests is mini-
mized as long as the Cyprus problem remains unsettled. 1984 marks the tenth year
of Turkey's invasion and occupation of northern Cyprus. Fundamental to the settle-
ment of the Cyprus problem is the removal of all Turkish occupation troops, esti-
mated at over 25,000 and colonists from Cyprus. The continued failure to put these
conditions precedent on aid to Turkey has sent the wrong signals to Turkey and
made Turkey and the Turkish Cypriots more intransigent.
The illegal unilateral declaration of independence by the Turkish Cypriots on No-
vember 15, 1983, just hours after President Reagan signed the 1984 foreign aid bill
into law, and Turkey's immediate recognition of that illegal act, are just the latest
examples of Turkey's and the Turkish Cypriots' disdain of the Congress and lack of
good faith in negotiating a settlement of the Cyprus problem in accordance with
normally accepted democratic principles.
As we interpret the 1978 Foreign Assistance Act, aid should cease because of the
Turkish Cypriot and Turkish actions. Unfortunately, on the recommendation of the
State and Defense Departments, President Reagan certified progress in his January
24, 1984, report, thus allowing aid to continue to Turkey despite the illegal actions
of the Turkish Cypriots.
These events make it clear that conditions precedent to aid to Turkey must be
based on objective, verifiable criteria. We support fully the Feighan bill H.R. 4505
and urge enactment of a similar bill in the U.S. Senate and that it be strengthened
to include conditions on economic aid as well as military aid to Turkey, and the re-
moval of all Turkish colonists as well as all Turkish occupation forces, estimated at
over 25,000 troops. We urge full incorporation of these provisions as an amendment
to the foreign aid bill of 1985.
We note the 7 to 10 ratio debates of recent years. Any true 7 to 10 ratio should
provide that the terms be identical and that economic aid be part of the equation.
We believe it is preferable that aid to Turkey and Greece be on at least a one to
one basis including military and economic. To achieve this ratio we call for the re-
duction of the Administration's $930 million proposal to $500 million and that the
terms be identical.
In view of our budget deficit, we call for a further reduction of $350 million in aid
to Turkey to a maximum of $150 million as we do not believe Turkey is of signifi-
cant value strategically and, based on the historical record, Turkey is of doubtful
reliability.
Mr. Chairman, the policy of this and previous Administrations regarding aid to
Turkey has not worked and has cost the American taxpayer billions of dollars and
added substantially to our annual debt service costs. We urge all those who have
supported that policy review their previous position and support meaningful and ob-
jective conditions precedent on aid to Turkey as in the best interest of our Nation.
Mr. Richard Perle, Assistant Secretary of Defense for International Security Af-
fairs, has stated to a Turkish newspaper that Congress will not impose any mean-
ingful conditions on Turkey. Prove him wrong! His comments are counterproduc-
We believe that a full reevaluation of United States-Turkey relations is long over-
due. Turkey's flagrant violation of “the rule of law,” human rights, international
treaties, bilateral agreements, and the United Nations Charter is a matter of record.
Yet, the Executive Branch's policy of attempting to appease Turkey through large
amounts of military and economic aid has failed. The more Turkey demands, the
more we give; the more we give, the more Turkey demands. The “sick man of
Europe” has become the “extortionist of the Middle East.”
The Turkish government has repeatedly declared that it will not abide by any de-
cision enacted by Congress. Such tactics by Turkey against American goodwill and
tolerance for nearly a decade now must be treated in the same manner as the
American reply to the XYZ similar blackmail affair of nearly two centuries ago, but
in up-to-date figures: "Billions for defense but not a cent for tribute.”
tive.
422
History has proved that we cannot buy friendship. In the case of Turkey we have
invested billions of dollars, every penny of it as shaky as the Turkish lira on the
international market.
The past three Administrations, including the present, have repeatedly referred
to Turkey as "our faithful ally.” It is high time that we lay this myth-and a myth
it is—to rest.
Turkey's long history of oppression against Armenians, Greeks, Jews, Kurds,
Turks themselves, and now Cypriots is well documented in the annals of history.
Turkey is guilty of having committed the first heinous international crime in this
century, the first “holocaust,” with their genocidal annihilation of nearly 2,000,000
Armenians. When in 1936, at the beginning of Hitler's "solution to the Jewish prob-
lem," he was asked what would the world say about the extermination of Jews, Hit-
ler's reply was: “What did the world say when the Turks exterminated Armenians!”
During World War I, Turkey joined and fought with Central Powers against the
Allies and, therefore, against the United States.
Hours before the German attack on Greece in World War II, Turkey broke a de-
fensive alliance with Greece, declaring neutrality, leaving Greece to fight alone.
This was a repeat performance by Turkey to its earlier abrogation of a similar
treaty with France. Greece's very significant role as an important ally is clearly de-
scribed in "Background Notes," Greece, Department of State Publication 8198.
In 1942, the United States initiated a "lend-lease" program to Turkey which re-
mained in effect for the duration of the war. As it is reported in the Twenty-Third
Report to Congress on Lend-Lease Operations, Turkey received $27 million. At the
same time, however, Turkey provided Nazi Germany with abundant supplies of
chromium, the important alloy needed to make steel to produce bombs, thus pro-
longing the war, bringing death to millions of people and to thousands of American
soldiers. It was not until 1944 under direct American and British pressure "to stop
the country's entire export of chrome and other materials to Germany" that Turkey
finally complied.
I submit to you now Turkey's modern track record toward the United States
which shows no improvement:
1. In 1973, during the Middle East war, Turkey permitted the Soviets to overfly
her territory and permitted overland convoys to supply the Arab countries at war
against Israel whose security the United States had vowed to support. Turkey re-
fused the U.S. overflight rights.
2. In like manner, Turkey permitted Soviet overflights to support Ethiopian insur-
gents, who eventually took over that country and established a pro-Soviet regime.
3. In July and August of 1974, against the United States-Turkish bilateral agree-
ment of July 1, 1947, the London-Zurich Agreement of 1959, the Foreign Military
Assistance Act of 1961, the Foreign Military Sales Act of 1961, the United Nations
Charter, international laws and treaties, Turkey illegally used American-supplied
arms and equipment to invade and conquer 40 percent of the independent island-
nation of Cyprus. Since then, Turkey has disregarded the "rule of law” by refusing
to adhere to all these, and to the subsequent United Nations resolutions repeatedly
calling for the removal of Turkish troops from the island in respect to the country's
independence, territorial integrity, and international recognition. In the process of
that invasion, the Turks moved into and took over the NATO military base in
Adana, Turkey, from where they staged their air attacks on Cyprus and refueling
and re-arming of their-aircraft for follow-up attacks.
4. As it is documented by then-Prime Minister Sir Harold Wilson, in his 1979
book: "Final Term, the Labour Government 1974-1976," on the evening of July 24,
1974, 2 days after a cease-fire was arranged to provide for representatives of Britain,
Greece and Turkey to meet in Geneva to repair the damage, the Turks informed the
British that they were about to break the cease-fire by bombing the Nicosia airport,
manned by United Nations Forces. A strong protest from the British, first resisted
by then-Prime Minister Bulent Ecevit which would have caused the British to "not
hesitate to order our fighters to shoot down his aircraft," prevented what Sir Wilson
considered, "the nearest that Britain came to war with another nation since 1945."
Henry Kissinger's repeated failure to take part in the Geneva negotiations was
harshly criticized by Sir Wilson as: “Once again the intervention of the United
States was missed.”
5. During the early years of the Carter Administration, when a SALT treaty
seemed within reach, Turkey refused to agree to permit American use of Turkish
territory for verification of Soviet conduct, unless, as Turkey bluntly told us, "the
Soviets did not object.” So much, therefore, for Turkish loyalty.
6. In 1978, contrary to the Montreaux Convention of 1936, Turkey permitted the
Soviet aircraft carrier KIEV to sail through the Dardanelles and into the Mediterra-
423
nean Sea. The Montreaux Convention excludes "aircraft carriers from transitting
the straits, though such ships may enter at the invitation of Turkey." How accom-
modating America's “faithful ally Turkey” is to our chief adversary, the Soviet
Union!
7. In 1980, Turkey refused to permit the United States to use the NATO base at
Diyabarkir in eastern Turkey for about 450 mile helicopter flights to Tehran to free
the American hostages, compelling our government to attempt a suicidal mission
from over 900 miles away.
8. The January 20, 1981, New York Times wrote that the Turks were not in favor
of “the United States using Turkish bases for conflicts not affecting Turkey.” This
was substantiated two years later when in the Spring, 1983 issue of Foreign Policy
magazine Harry Shaw pointed out that Turkey is unlikely to become involved, or
allow U.S. forces to use Turkish territory in a Middle East war that does not threat-
en her territory directly. This was further substantiated by Ali Karaosmanoglu of
the Turkish Foriegn Policy Institute in Ankara in his article, “Turkey's Security in
the Middle East," in the Fall, 1983 issue of Foreign Affairs magazine. On page 168,
he writes, on several occasions Turkish officials, have declared that Turkey
has no intention of taking part in the RDF” (Rapid Deployment Force). He adds em-
phatically that: “Turkey will make no formal strategic commitments outside the
NATO framework."
9. During the time of the holding of the American hostages in Tehran, the Wash-
ington Post reported that Turkey was “attempting to maintain a rapport with
America's (at that time) most bitter enemy, the revolutionary theocracy of Ayatolla
Rudollah Khomeini.”
10. It was during that same period that Morton Kondracke wrote in the New Re-
public, “There is no one to give a Turkish defense, if there is one. Given their
record, it is very hard to love the Turks."
11. Recently, the Turks refused an American request to install antennas in
Turkey for eleven transmitters whose broadcasts would have been beamed primarily
to the Soviet Union and to the East European countries. As reported in the July 22,
1983, issue of Newsweek, the initiative by the U.S. State Department sought to im-
prove reception of programs broadcast by Radio Free Europe, Radio Liberty, and the
Voice of America, now constantly jammed by the Soviet Union. With the installa-
tion of these antennas, the Soviet jamming activities would have been greatly over-
come. So much, therefore, for Turkish efforts for collective security.
12. On June 23, 1978, Turkey signed pacts of “non-aggression and expanded
trade” with the Soviet Union in exchange for $1.6 billion for the next year, thereby
threatening to change the East-West balance of power in the Middle East, unless
the United States ended its arms ban on Turkey,' as reported in the 1981 Readers
Digest Almanac.
13. Turkish disrespect for human rights is a sore spot in the eyes of the free world
and an embarrassment to the United States. Recently, an organization of Turkish
workers in Germany rejected efforts to be repatriated back to Turkey on the
grounds that they would face "lack of human rights and security in Turkey." Yet,
our Administration believes that Turkey will return to real democracy.
14. During the Session on Human Rights at the State Department Foreign Policy
Conference on April 6 and 7, 1983, the officer lecturing from "background notes
stated, “What do we do with Turkey to return that government to democractic rule,
given the fact that Turkey's bad history on human rights is well known?” Turkey's
abominable human rights record, even against her own minorities of Greeks, Arme-
nians, Kurds, Jews, and political adversaries is well documented and condemned in
the most recent Amnesty International Report, 1982 and clearly documented with
calls of concern in the October 1982 United States Congress Staff Report on the
HUMAN RIGHTS SITUATION IN TURKEY
15. On May 16, 1983, the Turks permitted the Soviet aircraft carier NOVORO-
SIISK to sail through the Dardanelles and into the Mediterranean Sea. This was the
second time in five years that the Turks breached the Montreaux Convention which
forbids such penetration of the Straits. The presence of this carrier in the Mediter-
ranean, with its 25 fighter-bomber aircraft and its 16 helicopters, and with speed of
30 knots, poses a formidable threat to the U.S. Mediterranean Sixth Fleet.
16. Contrary to international law, Turkey has been colonizing northern Cyprus
with colonists from the Turkish mainland, taking away properties belonging to
Greek Cypriots, thus creating what Christopher Hitchens, Washington correspond-
ent of The Nation has so-correctly termed: "an unprecedented development in the
424
last quarter of the 20th Century, the creation of a colony by a country” which calls
itself “European.
17. Turkey is the fifth largest recipient of U.S. foreign aid since the end of World
War II, during which she remained a pro-Nazi neutral. Currently Turkey is the
third largest recipient of U.S. foreign aid. Yet Turkey, which has not fought a war
in over 60 years, is constantly “broke” and begging and getting. Our country is now
called upon to give Turkey $1 billion in aid per year for the next ten years. Why
should the American taxpayers be burdened for Turkey's irresponsible fiscal poli-
cies, compounded further by her illegal occupation of 40 percent of Cyprus? The
"sick man of Europe” is now the "beggar of the Middle East.'
18. Turkey is receiving American foreign aid as a NATO Member for defensive
purposes to guard its common border with the Soviet Union. Yet, the Turks have
created the "Aegean Army" of some 130,000 troops, with landing craft, opposite the
Greek Islands on the Aegean Sea. This has forced the Greeks to place a substantial
number of their forces on their islands. In addition, there are between 25,000 and
30,000 Turkish troops stationed as occupying forces in Cyprus against “the rule of
law.” Why, then, should the United States be spending over $1.5 billion to Greece
and Turkey for nearly 200,000 troops facing each other or occupying another coun-
try and not be stationed on the borders which they are financed to guard?
19. Also, Turkey, that "faithful ally" of ours, is the largest recipient of Soviet aid
outside the Soviet bloc, having accepted from the Soviet in the past twenty years
about $4 billion-a sum larger than such countries as Syria, Iraq, Egypt, and India.
Where do Turkey's commitments lie? How can our nation place any credibility upon
Turkish promises?
20. Last (but only due to time limitation) a few words about Cyprus, the country
under Turkish occupation for nearly a decade now, the country which has provided
unlimited and unrestricted access to the United States in our Middle East interests.
During the recent terrorist attack against our marines in Beirut it was Cyprus, and
only Cyprus, that opened its airfields--and its hospitals, although the latter were
not used-to assist in the evacuation of the dead, the dying and the wounded from
the carnage of that unfortunate city. Cyprus continues to this day to offer unre-
stricted used of this free territory to the United States for the evacuation of Ameri-
can and other nationals from the ruins of Beirut. Yet, the Turkish daily Cumhur-
iyet, in its February 12, 1984, issue quotes Rauf Denktash that the Greek Cypriots
were openly cooperating with the United States by opening their ports to U.S. ships
and their airport to U.S. planes. He alleged that the Greek Cypriots were providing
fuel and logistic facilities to the United States. He said: “The Americans use the
Greek Cypriot sector as one uses a base.” Denktash added: "Our suspicion is that
the Greek Cypriots might have concluded secret agreements to provide any facilities
to the United States and others in return for their support on the Cyprus problem.”
Asked if he were referring to the U.S. press reports last year about the United
States-Cyprus Government agreement on use of the Cyprus ports for troop move-
ment to Lebanon, Denktash replied, that there was more to the actual agreement
than those reports.
President Reagan's January 24, 1984, bimonthly report on Cyprus should be de-
clared null and void. In accordance with Public Law 95-384 enacted under pressure
from the Carter Administration, the President is to report “progress” in his bi-
monthly reports. The unilateral declaration of independence by the Turkish Cypri-
ots and the immediate acceptance of that globally-declared illegal act which has
made mockery of our policies by being proclaimed only hours after President
Reagan signed the nearly $1 billion aid to Turkey, regresses the situation on Cyprus
and, if anything, under the law, should automatically reinstate the embargo on
Turkey, i.e. no aid until Turkey is in compliance with our laws and that there has
been substantial progress towards a Cyprus settlement. President Reagan should be
instructed to practice “the rule of law” in accordance with his January 23, 1984,
State of the Union Address: “Responsible members of the world community do not
threaten or invade their neighbors and they restrain their allies.”
The policies of the past three administrations, the present included, disregarding
the rule of law and our policy against aggression,
have resulted in a weakened U.S.
security posture in the Eastern Mediterranean. The Turkish occupation of Cyprus
now in its tenth year, achieved with U.S. furnished aid, has exacerbated history an-
tagonisms between Turkey and Greece, and alienated Greece from her long-standing
traditional friendship with the United States. We can no longer afford to waste bil-
lions of American taxpayers' dollars without commitments to collective security and
to the rule of law. Accordingly, the Congress of the United States, the conscience
and the voice of our nation, must enact and fully support legislation which calls
that no assistance be provided, no credits be extended, and no guarantees be issued
425
to Turkey under the Arms Export Control Act until: (1) the Government of Turkey
has withdrawn its recognition of the so-called “Turkish Republic of Northern
Cyprus”; (2) the Government of Turkey has taken all necessary steps to reverse the
illegal declaration of an independent state in northern Cyprus; (3) the negotiations
under United Nations auspices for resolving the Cyprus conflict have resumed, and
significant progress has been made in settling that conflict based on internationally
recognized democratic principles of majority rule with full minority rights; and, (4)
all Turkish military forces in excess of those permitted by the 1959 Treaty of Alli-
ance, are withdrawn from Cyprus. In addition, suspension of economic aid must be
added to suspension of military aid until Turkey complies with “the rule of law.”
The United States should call on the NATO Alliance to "guarantee" the borders
of all its members from any force stemming from outside or within the Alliance. In
this manner, the Turkish "fear"-unwarranted as it is—that "Cyprus is a dagger to
the side of Turkey,” expressed by the recently installed new Prime Minister of
Turkey, will be eliminated. For the guarantee to be effective, however, the Turks
will have to evacuate their forces from Cyprus and return that country to its legal
and internationally-recognized elected government.
The eyes of the world are upon the United States. Let us exercise a moral foreign
policy expected of America, and Cyprus is a good place to begin.
Thank you Mr. Chairman and Members of the Subcommittee.
Senator LUGAR. Thank you very much, Professor Lomis, for your
statement and likewise for your summary of the remarks. As I
mentioned earlier, all of them will be made a part of our record.
The Chair would like to recognize now Ambassador Parker Hart,
retired, former U.S. Ambassador to Turkey. Ambassador Hart.
STATEMENT OF HON. PARKER HART, FORMER U.S. AMBASSADOR
TO TURKEY, FORMER ASSISTANT SECRETARY OF STATE FOR
THE NEAR EAST AND SOUTH ASIA
Ambassador Hart. Thank you, Mr. Chairman. I appreciate the
courtesy of this subcommittee in having me testify before it again.
My interest in appearing here today stems from many years in
the U.S. Foreign Service. I do not come here representing anybody.
I have specialized in the Middle East and in working on U.S. stra-
tegic problems in that area over many years. This experience cul-
minated in my posting as Ambassador to Turkey in 1965 to 1968
and my brief period as Assistant Secretary of State for Near East
and South Asia from 1968 to 1969.
Since my retirement from Government in 1969 and my close af-
filiation with our National Defense University at Fort McNair, I
have followed with great concern the problems of the southeast
wing of NATO. These have been deeply affected by episodic ten-
sions between our allies Greece and Turkey over Cyprus and over
bilateral issues in the Aegean seabed and in the air above it.
Our security problems were deeply aggravated by the action of
our Congress in 1975 when it placed an embargo on arms to
Turkey, against the publicly expressed judgment of President Ford.
That action dealt a severe blow to the capability of Turkey to per-
form its role designated by the Supreme Allied Commander,
Europe. That role is crucial to the defense of NATO's southeast
region.
To me and to many other close observers of the region, that was
a most irresponsible action, and I come here today to urge that it
not be repeated. I further urge that the administration's request
for military assistance to Turkey not be cut or diluted.
In fact, I strongly recommend that, as in the case of Egypt and
Israel, the military aid be entirely grant. Unlike these two coun-
34-045 0-84.
28
426
tries, Turkey has a direct exposure to the Warsaw Pact of well over
1,000 miles of land and closed-sea frontier.
Turkey's table of organization and equipment is far below the
degree of modernization and readiness which is absolutely essential
to deter and to tie up in time of crisis the massive superiority of
ground, air and sea forces which face NATO's flank from the Čau-
casus, the Black Sea, and Bulgaria.
When I was Ambassador to Ankara, Bulgaria alone had as many
standing divisions as Turkey, roughly 13 with considerable mecha-
nization and air cover. The U.S.S.R. had several times that
strength in the Caucasus, not to mention the Ukraine.
The Warsaw Pact is estimated to have 75 divisions, with huge air
and sea power, which could be directed at once against Turkey and
the straits from many angles. Even with the help of a NATO quick
reaction force from Europe, it has been clear that Turkey would at
once be engaged in a desperate struggle by its 740,000-man stand-
ing army, second largest in NATO, to keep its footing and to close
the straits.
Turkey's mission is to bottle up the enemy so as to protect
NATO-South from a massive Soviet submarine and missile-bearing
surface presence in the eastern and central Mediterranean. It still
relies on the M-47 and M-48 tank of Korean war vintage. Its F-5
aircraft, delivered while I was there in 1966, are obsolescent and
must be replaced by the F-16, already delivered by us to Egypt and
Israel. It will be co-produced in Turkey, but deliveries for use by
the Turkish Air Force will not occur before 1987.
Turkey's pilots are excellent, as is the quality of its service per-
sonnel generally, Turkey's resources, however, are stretched very
thin. Its GNP, while improving dramatically since my service time
in Ankara, is still the lowest in NATO; yet the 5.8 percent of GNP
it spends on defense is the highest in the alliance.
Even that 5.8 percent does not represent the full cost, as Turkish
soldiers get pocket money only. Their families must send funds.
You have heard that our Government estimates that it would cost
$60,000 to outfit and place one American soldier in Turkey. It costs
the Turks $9,000.
I need not emphasize to this body what it would do to NATO's
central front if the Warsaw Pact, already preponderant on the
ground and in the air, were able to polish off quickly Turkey's de-
fense capability.
There is a converse to all of this. The embargo of 1975 did abso-
lutely nothing to solve the Cyprus problem, but it did lasting
damage to NATO interests and also to the foundation of trust
which underpins United States-Turkish relations. The Turkish
Government of the day, an elected one, had to react and it shut
down our listening posts directed toward the U.S.S.R.
They were reopened after the embargo was repealed, just in time
for us to witness the permanent loss of those we had built and used
in Iran. A renewed closure of the posts in Turkey is not something
we and NATO can afford. The Turkish-American relationship
cannot endure a third body blow after the Lyndon Johnson letter
on Cyprus of 1964 and the embargo of 1975.
Mr. Chairman, a fair and impartial solution to the Cyprus prob-
lem is very much in our interest, and it will not be easy to attain,
427
as the tortured history of intercommunal talks, begun in 1968,
clearly shows. I have followed this quarrel for 26 years. Neither
side has demonstrated much virtue or statesmanship.
Both have simply shown that they can no longer live comingled,
as they did for 82 years under British rule and earlier for 400 years
under the Ottoman Empire. A settlement would make unnecessary
any large Turkish military presence on the island, but it would not
restore Greek Cypriot rule over Turks.
But, Mr. Chairman, Cyprus.of itself by no stretch of the imagina-
tion can compare with Turkey or Greece as a NATO, and therefore
a United States, security imperative. Cyprus is at best a nonalined
state with a population about the size of that of the District of Co-
lumbia.
Its Nicosia government is dependent on an alliance with AKEL,
the strongest Moscow-dominated party in the eastern Mediterrane-
an. The policy of AKEL is to remove the British sovereignty bases
and to attack any semblance of military use of Cyprus soil by the
United States. Not a day goes by without an AKEL press attack on
the United States and NATO and without praise for the U.S.S.R.
Mr. Chairman, we cannot afford to mortgage NATO again to this
very parochial quarrel. It is likely to go on for quite a while, at
least until we leave it alone and let Peres de Cuellar handle it.
Punishing Turkey will not advance a Cyprus settlement one iota.
Demanding that Turkey withdraw its troops before protection of
the security and of the right to group equality of the Turk Cypriot
community is assured is to ask the impossible. No Turkish Govern-
ment is going to abandon that community to a repeat of the treat-
ment it suffered from EOKA extremists from the period 1963 to
1974.
Whether we find it logical or not, Turkish Cypriots will not
accept minority status under Greek Cypriot rule. Any federation or
confederation agreed upon will have to provide full local autonomy
and the capacity for local defense.
Cooperation between Turkey and Greece in NATO is essential to
United States security. There is no American or Western European
substitute for this on-the-ground manpower, equipment and train-
ing. Together they share guardianship of the straits and its ap-
proaches. For either to be seriously weakened is to impose an im-
possible defense burden on the other and, as has been pointed out
by Mr. Averoff, former Defense Minister of Greece, Turkey is es-
sential to the security of Europe, including that of Greece.
I might add that Turkey is also the principal rock of stability in
a very uncertain Middle East and since its return to elected gov-
ernment it sets an example favorable to our interests in the region
as a whole. It is the only parliamentary government functioning
successfully in the Islamic world. In my view, its diplomacy in the
Middle East has been far more sophisticated and effective than our
own in recent years.
I therefore appeal to the subcommittee to place the higher
United States and NATO interests in first priority as it reviews the
military aid program proposed by our administration for Turkey
and for Greece, and not to bind ourselves by ratios such as 10 to 7,
by unacceptable conditions, or by outright cuts responsive to the
wishes of certain domestic pressure groups in this country.
428
[Ambassador Hart's prepared statement follows:
PREPARED STATEMENT OF AMBASSADOR PARKER T. HART
Mr. Chairman, my interest in appearing here today stems from many years in the
U.S. Foreign Service, specializing in the Middle East and in working on U.S. strate-
gic problems of that area. This experience culminated in my posting as Ambassador
to Turkey, 1965-68, and my brief period as Assistant Secretary of State, 1968–69.
Since my retirement from Government in 1969 and my close affiliation with our Na-
tional Defense University at Ft. McNair, I have followed with great concern the
problems of the Southeast Wing of NATO. These have been deeply affected by epi-
sodic tensions between our allies Greece and Turkey over Cyprus and over bilateral
issues in the Aegean seabed and in the air above it.
Our security problems were deeply aggravated by the action of our Congress in
1975 when it placed an embargo on arms to Turkey against the publicly expressed
judgment of President Ford. That action dealt a severe blow to the capability of
Turkey to perform its role designated by the Supreme Allied Commander, Europe.
That role is crucial to the defense of NATO's Southeast region. To me and to many
other close observers of the region that was a most irresponsible action and I come
here today to urge that it not be repeated. I further urge that the Administration's
request for military assistance to Turkey not be cut or diluted. In fact, I strongly
recommend that, as in the case of Egypt and Israel, the military aid be entirely
grant. Unlike those two countries, Turkey has a direct exposure to the Warsaw Pact
of well over 1,000 miles of land and closed-sea frontier.
Turkey's table of organization and equipment is far below the degree of modern-
ization and readiness which is absolutely essential to deter--and to tie up in time of
crisis—the massive superiority of ground, air and sea forces which face NATO's
flank from the Caucasus, the Black Sea and Bulgaria.
When I was Ambassador in Ankara, Bulgaria alone had as many standing divi-
sions as Turkey, roughly 13, with considerable mechanization and air cover. The
U.S.S.R. had several times that strength in the Caucasus, not to mention the
Ukraine. The Warsaw Pact is estimated to have 75 divisions with huge air and sea
powers which could be directed at once against Turkey and the Straits from many
angles. Even with the help of a NATO quick reaction force from Europe it has been
clear that Turkey would at once be engaged in a desperate struggle by its 740,000-
man standing army, second largest in NATO, to keep its footing and to close the
Straits.
Turkey's mission is to bottle up the enemy so as to protect NATO-South from a
massive Soviet submarine and missile-bearing surface presence in the Eastern and
Central Mediterranean. It still relies on the M-47. and M-48 tank of Korean war.
vintage. Its F-5 aircraft, delivered while I was there in 1966, are obsolescent and
must be replaced by the F-16, already delivered by us to Egypt and Israel. It will be
co-produced in Turkey, but deliveries for use by the Turkish Air Force will not
occur before 1987. Turkey's pilots are excellent as is the quality of its service per-
sonnel generally. Turkey's resources are stretched very thin, however. Its GNP,
while improving dramatically since my service time in Ankara, is still the lowest in
NATO; yet the 5.8 percent of GNP it spends on defense is the highest in the alli-
ance. Even that 5.8 percent does not represent the full cost, as Turkish soldiers get
pocket-money only. Their families must send funds. You have heard that our Gov-
ernment estimates it would cost $60,000 to outfit and place one American soldier in
Turkey. It costs the Turks $9,000.
I need not emphasize to this body what it would do to NATO's Central Front if
the Warsaw Pact, already preponderant on the ground and in the air, were able to
polish off quickly Turkey's defense capacity.
There is a converse side to all of this. The embargo of 1975 did absolutely nothing
to solve the Cyprus question, but it did lasting damage to NATO interests and also
to the foundation of trust which underpins United States-Turkish relations. The
Turkish Government of the day, an elected one, has to react and it shut down our
listening posts directed toward the U.S.S.R. They were reopened after the embargo
was repealed just in time for us to witness the permanent loss of those we had built
and used in Iran. A renewed closure of the posts in Turkey is not something we and
NAPO can afford. The Turkish-American relationship cannot endure a third body-
blow after the Lyndon Johnson letter on Cyprus of 1964 and the embargo of 1975.
Mr. Chairman, a fair and impartial solution to the Cyprus problem is very much
in our interest and will not be easy to attain, as the tortured history of intercom-
munal talks, begun in 1968, clearly shows. I have followed this quarrel for 26 years.
Neither side has demonstrated much virtue or statesmanship. Both have simply
429
shown that they can no longer live co-mingled, as they did for 82 years under Brit-
ish rule and earlier for 400 years under the Ottoman Empire. A settlement would
make unnecessary any large Turkish military presence on the Island, but it would
not restore Greek-Cypriot rule over Turks.
But, Mr. Chairman, Cyprus of itself by no stretch of imagination can compare
with Turkey or Greece as a NATO and therefore a U.S. security imperative. Cyprus
is at best a non-aligned state with a population about the size of that of the District
of Columbia. Its Nicosia government is dependent on an alliance with AKEL, the
strongest Moscow-dominated party in the Eastern Mediterranean. The policy of
AKEL is to remove the British Sovereignty bases and to attack any semblance of
military use of Cyprus soil by the United States. Not a day goes by without an
AKEL press attack of the United States and NATO and without praise for the
U.S.S.R.
Mr. Chairman, we cannot afford to mortgage NATO again to this very parochial
quarrel. It is likely to go on for quite a while, at least until we leave it alone and let
Peres de Cuellar handle it. Punishing Turkey will not advance a Cyprus settlement
one iota. Demanding that Turkey withdraw its troops before protection of the secu-
rity and of the right of group equality of the Turk-Cypriot community is assured, is
to ask the impossible. No Turkish Government is going to abandon that community
to a repeat of the treatment it suffered from EOKA extremists of the period 1963 to
1974. Whether we find it logical or not, Turk-Cypriots will not accept minority
status under Greek-Cypriot rule. Any federation or confederation agreed upon will
have to provide full local autonomy and the capacity for local defense.
Cooperation between Turkey and Greece in NATO is essential to U.S. security.
There is no American or Western European substitute for this on-the-ground man-
power, equipment and training. Together they share guardianship of the Straits and
its approaches. For either to be seriously weakened is to impose an impossible de-
fense burden on the other; and, as has been pointed out by Averoff, former Defense
Minister of Greece, Turkey is essential to the security of Europe, including that of
Greece. I may add that Turkey is also the principal rock of stability in a very uncer-
tain Middle East and since its return to elected government, it sets an example fa-
vorable to our interests in that region as a whole. It is the only parliamentary gov-
ernment functioning successfully in the Islamic world. In my view, its diplomacy in
the Middle East has been far more sophisticated and effective than our own in
recent years.
I therefore appeal to this Subcommittee to place the higher United States and
NATO interests in first priority as it reviews the military aid program proposed by
our Administration for Turkey and for Greece and not bind ourselves by ratios such
as 10-7, by inacceptable conditions or by outright cuts responsive to the wishes of
certain domestic pressure-groups in this country.
Senator LUGAR. Thank you very much, Ambassador Hart.
The Chair will next recognize Mr. Peter Cardiges, president,
American Hellenic Educational Progressive Association. Please
proceed.
STATEMENT OF PETER H. CARDIGES, PRESIDENT, AMERICAN
HELLENIC EDUCATIONAL PROGRESSIVE ASSOCIATION, WASH-
INGTON, D.C.
Mr. CARDIGES. Thank you, Mr. Chairman and members of the
subcommittee. I have submitted my statement and would like to
summarize my remarks.
I appreciate this opportunity to present the views of the Ameri-
can Hellenic Educational Progressive Association (AHEPA], an
American organization whose membership is composed primarily
of Americans of Hellenic descent.
In presenting the administration's foreign aid proposals for fiscal
year 1985, Assistant Secretary of State Richard Burt has testified
that the Mediterranean is a success story for U.S. policy and that
our foreign assistance is a key element of that success. As evidence,
he points to the fact that each of these four allies—Turkey, Greece,
430
Spain, and Portugal-has in the last few years negotiated a major
base agreement with the United States.
A successful foreign policy, however, cannot be measured solely
by the signing of base agreements. When we examine the political
dimension of our foreign policy in the region, it becomes much
harder to label it a success.
Although Mr. Burt has noted that "our economic and military
assistance programs have proven to be an essential foreign policy
instrument," these programs alone will not bring stability to the
region. The current tensions between Turkey and Greece over
Cyprus and the Aegean already undermine the basic ability and de-
termination of the Alliance to act collectively in order to meet the
Alliance's classical objectives of deterrence and defense.
Regardless of the amount of aid we provide to either Turkey or
Greece, unless progress is made toward resolving their bilateral
disputes, NATO's southeastern flank will remain in disarray and
unable to fulfill its assigned tasks.
Cyprus is a major issue of contention between Turkey and
Greece and, because of the questions it raises, it is also a very im-
portant issue for the international community and the United
States. It, however, needs to be examined as a separate issue,
rather than as an appendage of U.S. policy toward Turkey and
Greece.
For the international community, Cyprus represents the failure
of treaty law and depicts the impotency of the United Nations as a
force for peace. Cyprus also demonstrates NATO's impotency as a
force for peace and implies that the Alliance is not concerned with
aggression perpetrated by its members.
The Cyprus issue is both simple and complex. It is simple be-
cause it is nothing less than an invasion and occupation of a sover-
eign nation, the Republic of Cyprus, by a foreign power, the Repub-
lic of Turkey, in violation of the 1960 Treaty of Guarantee. It is
complex because the shadows of violence have loomed larger with
the passage of time.
The passage of time serves to consolidate the de facto partition,
and it has become clear that a solution must be found now. The
involvement of the U.N. Secretary General and the continuing con-
cern expressed by the United States and the international commu-
nity are very important. But, the only country which has the
power to influence progress toward a settlement is Turkey, which
maintains approximately 25,000 occupation troops on Cyprus.
This year aid to Turkey presents a larger dilemma than in previ-
ous years. Administration officials have stressed both privately and
publicly that we should not attempt to pressure Turkey by linking
U.S. aid to progress on Cyprus. The administration's definition of
“pressure” precludes asking that Turkey abide by U.S. laws gov-
erning the terms under which U.S. assistance is made available.
The administration's definition of "pressure" also precludes asking
that Turkey does not undermine our basic policy in the region.
How, then, is it possible to assert that our aid programs help imple-
ment our policy?
The administration's insistence on viewing all issues through the
prism of East-West relations, which has inflated Turkey's strategic
value, is being successfully played back by Turkey to its own ad-
431
vantage. While we clearly desire to work with Turkey for our
common defense, Turkey has questioned its desire to work in con-
cert with the United States.
The Turkish Government has stated publicly that it may cancel
a recent agreement granting facilities used to supply men and ma-
teriel to the United States peacekeeping force in Lebanon. Turkish
officials have also warned that congressional action to reduce aid to
Turkey could provoke counteraction, such as a revision of the
United States-Turkish base agreement.
Consequently, while Turkey is effectively putting pressure on us
not to tamper with aid and complaining that the proposed levels
are already too low, we are dissuaded from discussing measures
and incentives that could be used to encourage Turkish coopera-
tion. We find ourselves being held hostage by our own aid pro-
grams. We not only give aid, but we also allow the recipient nation
to place conditions on our assistance.
The last 10 years have been marked by a deterioration in United
States-Greek relations. I do not seek to either endorse or condemn
any Greek Government's policies, but I feel that in general we are
more prone to criticize the present government because it repre-
sents a socialist ideology.
In the last year, there has been a marked improvement in
United States-Greek relations, evidenced by the signing of a new
defense and cooperation agreement. Americans of Hellenic descent
and the AHEPA, in particular, hope to contribute to the renewal of
the traditional friendship between Greece and America. A Cyprus
settlement will immeasurably enhance United States-Greek rela-
tions.
U.S. policy in the eastern Mediterranean faces an even greater
challenge this year. We must use all available resources to bring
stability to the region. We cannot afford to score short-term geo-
strategic gains at the risk of damaging our long-term interests in
the area. A sense of urgency and a sense of decency demand that
we actively pursue a Cyprus settlement.
The defense of NATO's southeastern flank is based on Greek and
Turkish forces working in concert in the air, on land, and on sea.
Progress toward a Cyprus settlement will ease the tensions be-
tween Turkey and Greece, and create a positive environment for
the resolution of other bilateral disputes. Until these tensions are
defused, no amount of aid to either country can insure the protec-
tion of our security interests in the region.
I respectfully recommend and urge this subcommittee to take ap-
propriate actions and to send a strong message to Turkey that, al-
though it is a valuable friend and ally, the United States is deeply
concerned with its violations of the international rule of law and
its policy regarding Cyprus. To date, three bills have been intro-
duced in the House of Representatives seeking to restrict aid to
Turkey–H.R. 4400, 4505, and 4749. We sincerely request that simi-
lar language be considered by this subcommittee during its delib-
erations.
The cost of maintaining the Turkish occupation troops on Cyprus
is approximately $225 million per year, based on Under Secretary
of State William Schneider's estimated cost of $9,000 per year per
Turkish soldier. This figure is equivalent to $230 million in grant
432
aid that Turkey is to receive under the proposed military assist-
ance program for fiscal year 1985.
I believe that these moneys should be authorized contingent
upon certification that Turkey has commenced a systematic with-
drawal of its occupation forces from Cyprus. The United States
cannot afford, either politically or economically, to use its foreign
aid to subsidize the subversion of its own foreign policy.
I also urge this subcommittee to maintain aid to Cyprus at the
current level of $15 million and that the subcommittee direct that
this aid be used for projects which foster mutual understanding
and cooperation between the Greek Cypriots and the Turkish Cyp-
riots.
I believe that your decisions will be based on our security inter-
ests as well as our traditions of respect for the sovereignty of exist-
ing states, the rights of all people to self-determination, freedom
and majority rule with full minority rights.
I do not suggest that we should use our foreign aid to dictate
policy to any nation. But, I do believe, that we have the right to
ask that our aid is used in the furtherance of our foreign policy
goals and not in violation of our own laws and principles.
I thank you.
[Mr. Cardiges' prepared statement follows:
PREPARED STATEMENT OF PETER H. CARDIGES
Mr. Chairman, members of the Subcommittee, I appreciate this opportunity to
present the views of the American Hellenic Educational Progressive Association,
AHEPA, an American organization whose membership is composed primarily of
Americans of Hellenic descent.
In presenting the Administration's foreign aid proposals for fiscal year 1985, As-
sistant Secretary of State Richard Burt has testified that the Mediterranean is a
success story for U.S. policy and that our foreign assistance is a key element of that
success. As evidence, he points to the fact that each of these four allies—Turkey,
Greece, Spain, and Portugal-has in the last few years negotiated a major base
agreement with the United States.
A successful foreign policy, however, can not be measured solely by the signing of
base agreements. When we examine the political dimension of our foreign policy in
the region, it becomes much harder to label it a success. Our foreign policy failed to
dissuade the Turkish Cypriots from their declaration of statehood and then failed to
prevent recognition of the Turkish Cypriot secession by Turkey.
Although Mr. Burt has noted that “our economic and military assistance pro-
grams have proven to be an essential foreign policy instrument" these programs
alone will not bring stability to the region. This Administration, in particular, needs
to be reminded that aid is a tool to implement U.S. policy; it is not a policy in itself.
Appropriating millions of dollars in foreign aid based simply on the recipient's
geostrategic location does not make either military or diplomatic sense. Other fac-
tors must also be taken into consideration-for example, the recipient's political ori-
entation, human rights record, economic system, trade relations, and its relations
with neighboring countries--thus aid to Turkey must be considered within its full
context, including Turkey's relations with Greece.
Assistant Secretary of Defense Richard Perle has stated that if we reduce or con-
dition aid to Turkey, we would damage our own security by weakening the NATO
Alliance. But, the current tensions between Turkey and Greece over Cyprus and the
Aegean already undermine the basic ability and determination of the Alliance to
act collectively in order to meet the Alliance's classical objectives of deterrence and
defense. Regardless of the amount of aid we provide to either Turkey or Greece,
unless progress is made toward resolving their bilateral disputes, NATO's southeast-
ern flank will remain in disarray and unable to fulfill its assigned tasks.
433
CYPRUS
Cyprus is a major issue of contention between Turkey and Greece, and because of
the questions it raises, it is also a very important issue for the international commu-
nity and the United States. It needs to be examined as a separate issue rather than
as an appendage of U.S. policy towards Turkey and Greece. For the international
community, Cyprus represents the failure of treaty law and depicts the impotency
of the United Nations as a force for peace. Cyprus also demonstrates NATO's impo-
tency as a force for peace, and implies that the Alliance is not concerned with agres-
sion perpetrated by its members.
The Cyprus issue is both simple and complex. It is simple because it is nothing
less than an invasion and occupation of a sovereign nation, the Republic of Cyprus,
by a foreign power, the Republic of Turkey, in violation of the 1960 Treaty of Guar-
antee. It is complex because the shadows of violence have loomed larger with the
passage of time. It is complex because the intercommunal negotiating process has
often been disrupted. It has recently become more complex since Turkish Cypriot
leader Rauf Denktash illegally declared the Turkish-occupied sector Cyprus an inde-
pendent state.
The passage of time serves to consolidate the de facto partition, and it has become
clear that a solution must be found now. The involvement of the United Nations
Secretary General and the continuing concern expressed by the United States and
the international community are very important. But, the only country which has
the power to influence progress towards a settlement is Turkey, which maintains
approximately 25,000 occupation troops on Cyprus. To support their argument that
reducing, conditioning, or suspending aid to Turkey will not work, Administration
officials point to the fact that the arms embargo did not work in 1975. At the same
time, they neglect to mention that Congress lifted of embargo in 1978 because of
assurances that this act would stimulate Turkish cooperation in seeking a Cyprus
settlement. Lifting the embargo—as a catalyst for progress on Cyprus-has not
worked either.
TURKEY
This year aid to Turkey presents a larger dilemma than in previous years. Turkey
is regarded as a strategic asset on two levels: manifestly, as a partner on the south-
eastern flank of NATO, and latently, as an access point to the Middle East. In light
of Turkey's growing ties with the Arab nations, it would be unrealistic to assume
that access would be permitted for non-NATO related activities.
Administration officials have stressed—both privately and publicly—that we
should not attempt to "pressure" Turkey by linking U.S. aid to progress on Cyprus.
The Administration's definition of “pressure” precludes asking that Turkey abide
by U.S. laws governing the terms under which U.S. assistance is made available.
The Administration's definition of "pressure” also precludes asking that Turkey
does not undermine our basic policy in the region. How then, is it possible to assert
that our aid programs help implement our policy?
The Administration's insistence on viewing all issues through the prism of East-
West relations, which has inflated Turkey's strategic value, is being successfully
played back by Turkey to its own advantage. While we clearly desire to work with
Turkey for our common defense, Turkey has questioned its desire to work in concert
with the United States.
The Turkish government has stated publicly that it may cancel a recent agree-
ment granting facilities used to supply men and materiel to the U.S. peacekeeping
force in Lebanon. Turkish officials have also warned that congressional action to
reduce aid to Turkey could provoke counter-action, such as a revision of the U.S.-
Turkish base agreement. Consequently, while Turkey is effectively putting pressure
on us not to tamper with aid and complaining that the proposed levels are already
too low, we are dissuaded from discussing measures and incentives that could be
used to encourage Turkish cooperation. We find ourselves being held hostage by our
own aid programs-we not only give aid, but we also allow the recipient to place
conditions on our assistance.
The Administration maintains that if we show our friendship to Turkey-by
giving it almost $1 billion in aid—then Turkey will respond in kind. On November
14, 1983, President Reagan signed the foreign aid bill for fiscal year 1984 which con-
tained more than $800 million worth of friendship; hours later, Turkey responded
by recognizing the Turkish Cypriot secessionist state, although the State Depart-
ment had repeatedly made it clear that such action was contrary to U.S. policy and
would subvert the U.N. Secretary General's efforts to stimulate a Cyprus settle-
ment.
434
GREECE
The last ten years have been marked by a deterioration in U.S.-Greek relations. I
do not seek to either endorse or condemn any Greek government's policies. But, I
feel that in general we are more prone to criticize the present government because
it represents a “socialist” ideology. Actually the Greek government's position on nu-
clear proliferation, which is often used as an example of Greek opposition to U.S.
policies, is no different than that of the British Labor Party or that of several U.S.
Presidential candidates.
Unfortunately, the Greek government--and the Greek people--are genuinely con-
cerned with a possible Turkish attack against Greece, particularly against Greece's
Aegean islands. A NATO guarantee raffirming the borders of both countries would
eliminate this concern.
In the last year, there has been a marked improvement in U.S.-Greek relations,
evidenced by the signing of a new Defense and Cooperation Agreement. Americans
of Hellenic descent, and the AHEPA in particular, hope to contribute to the renew-
al of the traditional friendship between Greece and America. A Cyprus settlement
will immeasurably enhance U.S.-Greek relations.
CONCLUSION
U.S. policy in the Eastern Mediterranean faces an even greater challenge this
year. We must use all available resources to bring stability to the region. We can
not afford to score short-term geostrategic gains at the risk of damaging our long-
term interests in the area. A sense of urgency-and a sense of decency-demand
that we actively pursue a Cyprus settlement.
The defense of NATO's southeastern flank is based on Greek and Turkish forces
working in concert in the air, on land, and on sea. Progress towards a Cyprus set-
tlement will ease the tension between Turkey and Greece and create a positive envi-
ronment for the resolution of other bilateral disputes. Until these tensions are de-
fused, no amount of aid to either country can ensure the protection of our security
interests in the region.
I respectfully recommend and urge this Subcommittee to take appropriate actions
to send a strong message to Turkey that although it is a valuable friend and ally,
the United States is deeply concerned with its violations of the international rule of
law and its policy regarding Cyprus. To date, three bills have been introduced in the
House of Representatives seeking to restrict aid to Turkey-H.R. 4400, H.R. 4505,
and H.R. 4749. We sincerely request that similar language be considered by this
Subcommittee during its deliberations.
The cost of maintaining the Turkish occupation troops on Cyprus is approximate-
ly $225 million per year, based on Under Secretary of State William Schneider's es-
timated cost of $9,000 per year per Turkish soldier. (Testimony of the Under Secre-
tary of State for Security Assistance, Science, and Technology_before the Subcom-
mittee on International Security and Scientific Affairs, House Foreign Affairs Com-
mittee, February 21, 1984.]
This figure is equivalent to the $230 million in grant aid that Turkey is to receive
under the proposed Military Assistance Program for fiscal 1985. I believe that these
monies should be contingent upon certification that Turkey has commenced a sys-
tematic withdrawal of its occupation forces from Cyprus. The United States can not
afford-either politically or economically—to use its foreign aid to subsidize the sub-
version of our own foreign policy.
I also urge this Subcommittee to maintain aid to Cyprus at the current level of
$15 million, and that the Subcommittee direct that this aid be used for projects
which foster mutual understanding and cooperation between the Greek-Cypriots
and the Turkish-Cypriots. Beyond symbolizing America's continuing concern for the
Cyprus problem, this aid is a gesture of appreciation for the Republic of Cyprus' as-
sistance during the past year in helping the United States meet important policy
goals in the Middle East.
Congress, and particularly the members of the Senate Foreign Relations Commit-
tee, have repeatedly expressed their concerns about Cyprus and the Eastern Medi-
terranean. I believe that your decisions will be based on our security interests as
well as our traditions of respect for the sovereignity of existing states, the right of
all peoples to self-determination, freedom, and majority rule with full minority
rights.
We do not suggest that we should use our foreign aid to dictate policy to any
nation. But, I do not believe that we have the right to ask that our aid is used in the
furtherance of our foreign policy goals, and not in violation of our laws and princi-
ples.
Thank you.
435
Senator LUGAR. Thank you very much, Mr. Cardiges
The Chair now recognizes Mr. Andrew Manatos, United Hellenic
American Congress and American Hellenic Alliance. Please pro-
ceed.
STATEMENT OF ANDREW E. MANATOS, ON BEHALF OF THE
UNITED HELLENIC AMERICAN CONGRESS AND THE AMERICAN
HELLENIC ALLIANCE, WASHINGTON, D.C.
Mr. MANATOS. Thank you, Mr. Chairman. I will also be repre-
senting today the views of Mr. Phil Christopher of the Pan-Cypriot
Association, in addition to the two groups that you mentioned.
As a person who spent over a decade on the staff here on the
Hill and remembering my chairman at the end of the public wit-
nesses section, I feel guilty to proceed at all. Therefore, I will
submit my views for the record and try to just make a couple
points if I might.
One is that Greek-American organizations such as those that are
here today, it should be understood, are first and foremost Ameri-
cans. I know that you know of your Greek-American community in
Indiana and there are no more patriotic people. What we say here
today, we say out of the interests, the long-term interests of our
country, the United States.
The points I think that are essential for you to understand as
chairman of this subcommittee and for the subcommittee to act on
this year are that, although our community shares the interest of
helping Turkey protect its flank of NATO, protect against the
neighbors that it has, that are unique in the world, with the Rus-
sians to the north, the Ayatollah to the east, and Iraq and Syria,
that we must take into serious consideration what are the ramifica-
tions of that activity that exists.
If one looks at the de facto policy toward Greece and Cyprus that
results from our policy toward Turkey, one must only conclude
that it can be interpreted to be very anti-Greek, anti-Greek Cypri-
ot, and that is certainly the way that it is being interpreted in
those countries. We have a lot to lose in that part of the world if
this perception of American policy continues.
Let me make just a couple of points that I am sure have been
verified in Indiana. In the early 1900's, Greeks loved everything
American, so much that literally one out of four male Greeks came
to this country and became citizens. That has been the tradition of
Greece up until just a little more than a decade ago, and there was
no country in the world, as has been stated earlier, that was more
pro-American.
But let us take a look at American policy toward Greece since
that time, and it might help us understand some of the things that
are going on in Greece and in Greek Cyprus about attitudes toward
the United States. The United States gave recognition to a military
junta in Greece that arrested 6 percent of the population. That was
a repressive junta, and it began a great deal of questioning of its
ally, the United States.
The next act was the invasion of Cyprus with American arms
and American guns. It could not have happened without our aid.
436
We had foreknowledge of that invasion and we stood by idly. And I
could tell you from the experience of the people in our communi-
ty—and if I might put a little parentheses in here, this is one area
where the Greek American community far surpasses anything the
Government is able to do, and that is in knowing the public opin-
ion of the people of Greece and the people of Cyprus. We literally
have thousands of conversations each year, in-depth conversations,
and we have been able to predict where public opinion is going in
those countries.
It is not a good picture and it is very disturbing to the people in
our community. After the junta, after the invasion and our taking
no action, each year when aid is increased to Turkey, when it is
common knowlege that there are landing craft on the shore of
Turkey opposite Greek islands, and when it is publicly stated by
Turkish officials that Greek islands should be theirs rather than
Greece's, one can easily understand the bewilderment of the Greek
citizens and the difficulty that those citizens have in maintaining
their pro-American attitude.
Now, make no mistake, Mr. Chairman. There is still a great deal
of pro-American feeling in Greece and in Greek Cyprus. But there
is also a growing and disturbing mentality, one might call it, in
Greece and in Cyprus that has become very suspicious of this coun-
try, and that suspicion enables these people to even begin to be-
lieve things that the United States is not guilty of, but that people
in Greece and in Cyprus would like to have that population think
that we are guility of.
It is a ball that is rolling in the wrong direction. It is a ball that
I am afraid and many people in our community are afraid will con-
tinue rolling unless our Government addresses this problem. And
frankly, Mr. Chairman, it does not have to be addressed in what is
a major, catastrophic way.
This country need only start sending signals, and really, a lot of
proposals are not major signals. If one takes a look at all of the
dollars that we have given the Turkish Army over the last 5 years,
all of the aid, to suggest that simply reducing that aid this year by
a few hundred million dollars would in some way immediately
jeopardize NATO's eastern defense, I frankly do not believe any-
body would agree to.
When I went downtown as Assistant Secretary of Commerce, I
learned that my suspicions from the Hill were correct and that any
agency you go to and tell them any program that they have, that
you are going to cut it by a certain percentage, they will tell you
that that is going to be the end of the world.
In fact, it has been my experience that I have yet to find a pro-
gram or an agency that could not be cut and still survive and,
frankly, not have the kinds of catastrophic proposals that have
been suggested. And a lot of people in our community are just
asking the Congress to do that this year, to let Turkey understand
that to continue the course that they are continuing is not only in
the best interests of Greece, not in the best interest of Cyprus or
the United States, but it is not in their best interest, either, and
that their aid will be injured.
The new Prime Minister Ozal made this point himself in a New
York Times interview. He said:
437
We must be good calculators, because our foreign policy could affect the aid we
get from the United States, and we are very dependent on that aid and we must be
very careful with what we do.
And frankly, Mr. Chairman, it really is that simple. We must
send a message to Turkey. People at this table would, I think,
many of them if not all, would be very happy to be here supporting
stengthening of our NATO wing, and if we can get some progress
on the Cyprus problem, hopefully in a year or two we can come
back and be in that position.
So frankly, it is in the hands of this committee and we would en-
courage you to do so. Because, as I said earlier, the ball is rolling, I
am afraid, in the wrong direction in these countries that are great
allies of ours, and if we feel we have problems in the eastern Medi-
terranean now, if that ball were to roll too far in the next decade
in Greece or in Cyrprus we would find that our problems would be
not insubstantial.
Thank you, Mr. Chairman.
[Mr. Manatos' prepared statement follows:
438
PREPARED STATEMENT OF ANDREW E. MANATOS
Mr. Chairman, I appreciate this opportunity to appear
before you today as you consider foreign assistance to Greece,
Cyprus and Turkey. Much of what I will say here today repre-
sents the views of the United Hellenic American Congress and its
Chairman, Andy Athens, the views of the Hellenic Development
Alliance and its Chairman, George Livanos anú my own views as
an American who has been involved in the details of this issue
for nearly a decade.
The organizations I mentioned are in
communication with citizens in literally every state and con-
gressional district in the country.
The people that I represent are Americans whose views are
shaped by the best interests of the United States. They are as
red-blooded and patriotic as any other category of people in the
United States. If you have any question about this, simply take
the time to inquire on this subject with any of your con-
stituents who are Americans of Greek descent.
Because
our origins are from Greece, and some of our
extended families still live in Greece, and many of us visit
Greece, we maintain a particular interest and particular ex-
pertise on this subject of the relations between the United
States and Greece.
When we discuss popular opinion in Greece
439
or predict Greece's future public policy, our opinions are
i
based on literally thousands of indepth conversations between
Greek-Americans and their family and friends in Greece.
It is the considered opinion of many in our community that
the United States is seriously jeopardizing its southern flank
1
of NATO by following such a defacto anti-Greece/Cyprus policy.
It is a myopic course charted for our country by the Executive
Branch.
That course, stated simply, maintains that because
Turkey has such truly frightening neighbors
Russian military
divisions and planes to the north, the Ayatollah and Irag to the
east and south, and Syria at its southern border, the United
States should supply Turkey with nearly a billion dollars worth
of military and economic assistance regardless of what Turkey
might choose to do with that assistance to its neighbors, Greece
and Cyprus.
Those charting this course for the United States
would, of course, have preferred that Turkey had not:
used
American arms in 1974 to kill 4,000 Greek Cypriots and capture
15 American citizens who happened to be on Cyprus and who have
not been heard from since the invasion; made public statements
;
indicating that Turkey should own some Greek islands off its
coast opposite which Turkey keeps the majority of its fleet and
landing craft backed-up by American arms; called for an "Is-
lamic strategy against Israel" at the Islamic summit meeting
last month; stood alone in the world endorsing the illegal
440
declaration of independence by Turkish Cypriots (yet another
step away from solving the Cyprus problem); and maintained, and
continue to maintain, between 18,000 and 30,000 troops as an
occupation army on the island of Cyprus.
The problem is, Mr. Chairman, that although the people in
the Executive Branch who are charting this course would rather
that these things did not happen, they have made it very clear
that they will not exercise the leverage afforded to the United
States behind our nearly $1 billion worth of aid to influence
Turkey in the direction of changing any of these matters. They
will suggest politely that Turkey should stop occupying the
Republic of Cyprus.
But they will not take advantage of the
reality that even Turkish Prime Minister Ozal said in a New York
Times interview
that Turkey will shape its foreign policy in
a way to assure American assistance.
Amid this nearly decade-old Executive Branch tilt toward
Turkey there are some recent bright spots of opportunity for
moving Turkey on the subject of its illegal occupation army.
Those spots, however, have not been adequately supported and
the probability of their success is therefore in doubt.
Setting aside legality, justice and the human rights as-
pects of the Cyprus issue, which I might add, a proper leader
441
of the free world should not set aside, let's just focus on the
practical impact this policy has on the southern flank of NATO.
The people of Greece and Cyprus follow closely American foreign
policy toward Greece, Cyprus and Turkey. Our policy is making
it very difficult for Greek and Cypriot citizens who want to
continue providing the kind of help that they have throughout
history. A few short years ago, the citizens of no other
country in the world liked America and everything American more
than the people of Greece. In the early 1900's one out of every
four Greek males moved to this country aná became a a U.S.
citizen.
In WWII, literally thousands of Greeks were executed
by the occupying German forces because they were hiding other
Allied forces. Greece has been with the United States in every
war.
Imagine the bewilderment of these people when they saw the
nation of Turkey, using American supplied arms, invading the
island of Cyprus with the foreknowledge of the United States who
stood idly by without even trying to stop the invasion as
President Johnson had stopped it a few years before. Imagine
the bewilderment of the Greek people as they saw such actions
rewarded by the Executive Branch of the United States govern-
ment as it attempted to continue the aid program to Turkey re-
gardless of these Turkish actions. Imagine the bewilderment of
the Greek people last month when they saw the Executive Branch
34-045 0484-29
442
reward Turkey with a couple of hundred million dollar increase
from the taxpayers pocket to Turkish aid as a result of the
giant step Turkey took away from solving the Cyprus problem by
illegally endorsing the unilateral declaration of independence
of that part of Cyprus which is occupied by Turkish troops.
Mr. Chairman, the public opinion in Greece today has the
potential of being extremely dangerous for the United States as
a result of our blatant and obvious tilt toward Turkey at
Greece's expense.
Some people who a few years ago would have
given their friend, America, the benefit of any doubt, are today
skeptical and suspicious of the United States.
They are
extremely disappointed in the various things we have done. And
more importantly, many of them are developing a mind set which
makes them vulnerable to believing things we have not done, but
are accused of doing by forces and interests which would like
1
i
to see all American influence in Greece removed. Mr. Chairman,
:
ask any Greek-American who has visited Greece of late if what
I have said is true.
The people who lovea America are
now
extremely vulnerable to misinformation being intentionally
planted about us.
I don't know how long our friends in Greece,
in all their political parties, can hold out as
we pile up
example after example proving our friends wrong. Once this ball
starts rolling against the United States, it is very difficult
to turn it around.
443
The Executive Branch has an extremely bad record in pre-
dicting the future of public opinion in Greece relative to the
United States. For nine years, our community has been predict-
ing events with extraordinarly accuracy because of our infor-
mation gathering network which I explained earlier. What I am
about to say springs from that expertise and I do not say it
unadvisedly. If the American foreign policy toward Greece and
Cyprus continues on the course outlined above there is a good
chance that within the next decade Greece could become part of
the Warsaw Pact.
If this happens to the cradle of Democracy,
it would be a symbolic and practical tragedy from which the free
world may never recover.
Senator LUGAR. Thank you very much, Mr. Manatos.
Let me just ask one question of you, following up the general
thrust of your testimony. Obviously, the plea being made, I think,
by you is that leverage of some sort would be effective. In other
words, you have suggested that a cut in the aid, accompanied by a
message that the cut is directly related to displeasure by the
United States with Turkey would lead to changes in Turkish for-
eign policy, and I think you even suggest there would be changes
that would be helpful with regard to Cyprus.
I
suppose this is the question of judgment that members of the
committee and members of the Senate have to weigh, and that is,
first of all, whether there is such leverage: to what extent, as Mr.
Perle discussed earlier, are we talking about foreign policy commit-
ments that are of value to us principally and secondarily to the
Turks, or is in fact the leverage the other way around?
And honest men and women have differed on this issue for sever-
al years in these hearings. What leads you to optimism that if a
cut of any sort was made, and it was made explicitly with the ra-
tionale that this indicates displeasure by the Senate or by the Con-
gress if the House were to go along, that there would be favorable
results?
Mr. MANATOS. I have two reasons that I would offer, Mr. Chair-
man. One is, although a lot of people will say during the arms em-
bargo that it was ineffective and did nothing for us, I can tell you
from having worked up here during that time that after the arms
embargo was in place for a little while and the reports started
coming back that spare parts problems were occurring in the Turk-
ish Army
I can tell you, the representatives of the Turkish Embassy came
into this very building and sat down with maps with us and said:
OK, where should the lines move? What do you want? How should
444
it be done? Soon thereafter they disappeared with these maps and
we could not get them to come back. We later found out that
around that time in fact spare parts were moving into Turkey
through NATO, even though we thought we had an embargo in
place.
That is the first reason. The second is Mr. Ozal's own interview
in the Times. I think he exposes what we pick up informally from
Turkey, and that is that they are extremely dependent on our aid.
We fear the Russians coming down and their neighbors that can be
described as horrible. But my golly, they fear them worse than we
do.
They are very dependent on our aid. He made that very public,
and he indicated that they had to be careful in their foreign policy
so that they did not interrupt this aid.
And I might add, I guess, Mr. Chairman, that since the embargo
has been lifted and these promises of concessions that were to be
forthcoming have been lifted, we have given Turkey all that it has
wanted, and we have seen not a step on Cyprus. So obviously that
approach-and I think a lot of your colleagues sincerely believed
that if they lifted that embargo there would be progress, and it has
been a number of years now since we have tried that option.
Senator LUGAR. That is certainly quite true. I can recall a brief-
ing by Mr. Clark Clifford at the White House with President
Carter at hand suggesting that a bipartisan group ought to help. I
can remember calls from President Carter to me at home asking
for support on the issue. So it has been a bipartisan quest and per-
haps evaluation.
I raise the question not out of criticism of your commentary, but
simply because I think it is the obvious question—that is, what
types of changes might be effected in bringing about some of the
goals that are suggested here today.
Senator Sarbanes, do you have questions of these witnesses?
Senator SARBANES. Mr. Chairman, I have no questions, but I
have one comment I would like to make on yours, and I need to
straighten out a matter of fact with Ambassador Hart.
I think that this is a very complicated and multidimensional sit-
uation. It seems to me that the action the committee took last year
did contribute to helping to get a base agreement with Greece,
which was important to American interests in the area.
The concern which this committee and the Congress have shown
toward Cyprus over the years established an important basis or ra-
tionale or environment for the forthcoming response of Cyprus to
problems America faced in the Lebanon situation. If there was any
country that responded promptly and forthrightly, it was the gov-
ernment of the Republic of Cyprus, and that was very important to
us in a whole host of respects.
It did not involve trying to negotiate some arrangement, as was
referred to here earlier now with the Turks. So a policy that is per-
ceived to be and is in fact more evenhanded or fairer amongst the
parties in the area may in fact bring significant benefits to Ŭ.S. in-
terests, and I think we have to keep
that in mind.
It may or may not produce a response in the area about which
you questioned, but it clearly has produced responses in other
areas which were very important to American interests. We are in
445
a situation in which the southeastern flank of NATO includes both
Greece and Turkey. The United States has relationships with both
countries and important interests with respect to both countries. I
think that has to be kept very much in mind.
I am also of the view that we need a skilled application of the
enormous amount of money going to Turkey-now proposed by the
administration to be $943 million. Mr. Perle obviously indicates
that his desire is that it should go well over a billion dollars. There
is a whole range of matters, it seems to me, on which Turkey could
be of help in resolving some problems well short of completely solv-
ing them. But there has been none of that, and the consequence
has only been to complicate the situation.
Ambassador Hart, the one fact that I wanted to try to get
straight is this. You say that the 5.8 percent of GNP that Turkey
spends on defense is the highest in the Alliance.
Ambassador HART. As a percentage, I understand that that is
true.
Senator SARBANES. I need to know where that comes from.
Ambassador HART. I will try to furnish that for the record.
[As of the date of publication, the information referred to had
not been supplied.]
Ambassador HART. It came from Defense Department people.
Senator SARBANES. I have a Department of Defense report on
allied contributions to the common defense, a report to the U.S.
Congress. This one is dated March 1982, I do not have the one
dated March 1983, which would cover the next year.
In this one, Greece was at the top of the list of the NATO coun-
tries at 5.63 percent and Turkey was fourth at 4.29 percent. Where
did the 5.8-percent figure come from?
Ambassador HART. It came from military sources and it was used
in a seminar which we recently had on the importance of Turkey
in NATO. I will get the substantiation for that figure, which I am
sure is correct, from the Defense Department people.
Senator SARBANES. If you could do it, and particularly if it could
be done in the context of a common measurement, as this report
does, we would appreciate it. This is Secretary Weinberger's report
to the Congress and therefore it reflects a common measurement. I
do not want a figure that it is based on some other scale and does
not provide you the comparative basis.
Obviously this figure that you have asserted, does not jibe with
the report that was given to the Congress by the Secretary of De-
fense. This is total defense spending as a percent of gross domestic
product, and it is a Department of Defense report on allied contri-
butions to the common defense.
Thank you, Mr. Chairman.
Senator LUGAR. Gentlemen, we thank you all very much for your
thoughtful testimony, your time, and your preparation for your
presentation here today.
This hearing is adjourned.
(Whereupon, at 5:06 p.m., the subcommittee adjourned, subject to
call of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
(NEAR EASTERN AND SOUTH ASIAN AFFAIRS)
THURSDAY, MARCH 8, 1984
UNITED STATES SENATE,
SUBCOMMITTEE ON NEAR EASTERN
AND SOUTH ASIAN AFFAIRS OF THE
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:19 a.m., in room
SD-419, Dirksen Senate Office Building, Hon. Rudy Boschwitz
(chairman of the subcommittee) presiding.
Present: Senators Boschwitz, Mathias, Biden, and Sarbanes.
Senator BOSCHWITZ. At this morning's hearing, we are going to
consider the administration's foreign assistance proposal for the
Near East and South Asia for fiscal year 1985,
We welcome, again, Gen. Edward L. Tixier, Deputy Assistant
Secretary for Near East and South Asia, Department of Defense,
who has not been here since a briefing yesterday; also, Ambassador
Murphy; Mr. Langmaid who is Deputy Assistant Administrator for
AID for the Near East; and Mr. Staples, who is Deputy Assistant
Administrator for AID for Asia.
Ambassador Murphy, why don't you begin?
STATEMENT OF HON. RICHARD W. MURPHY, ASSISTANT SECRE-
TARY FOR THE NEAR EAST AND SOUTH ASIA, DEPARTMENT OF
STATE
Ambassador MURPHY. Mr. Chairman, I am pleased to be here
today before the committee to testify in support of our fiscal year
1985 foreign assistance request for the Near East and South Asia.
I have submitted a fairly lengthy statement for the record and,
assuming that you would rather not have me read the 23 pages, I
would like to make a few points drawn from that statement.
First, our foreign assistance program's support objectives which
are vital to U.S. interests in the Middle East and South Asia are
for a just and lasting Middle East peace; the maintenance of unim-
peded access to the crucial oil resources of the Persian Gulf; resto-
ration of a sovereign, independent, and unified Lebanon; the return
of peace to an independent Afghanistan with the withdrawal of
Soviet military forces.
That cites four of our principal interests. If we are to advance
our major international interests, we have to provide the resources
commensurate with the need to strengthen the economies and de-
fense capabilities of key countries in this vital area of the world.
(447)
448
Our highest priority continues to be furthering the Middle East
peace process, to bring a just and lasting solution to the Arab-Israe-
li conflict through negotiation as proposed by President Reagan in
his initiative of September 1, 1982.
Israel and Egypt remain our principal partners in the quest for
peace. They would be the largest recipients of our proposed assist-
ance, and we have carefully examined their needs.
Our fiscal year 1985 request included, for the first time, an all-
grant FMS [foreign military sales] program for Israel and Egypt.
This is a change to respond to the negative impact of the debt serv-
ice burden on both countries.
Another priority area is the Southwest Asia-Gulf region. This im-
portant source of energy is threatened by the expanding intensity
of the Iran/Iraq war. Our assistance program is directed at bolster-
ing the security of countries in the region and en route to it.
The security and stability of Pakistan is a key element in the se-
curity of this region. Our assistance request for Pakistan reflects
the important role that it plays in opposing Soviet aggression in
Afghanistan.
In South Asia we want to encourage, through our economic as-
sistance, the growth of stable and independent states living in
peace with one another.
Mr. Chairman, I would be pleased to answer any questions you
may have at this time.
[Mr. Murphy's prepared statement follows:)
449
STATEMENT OF
RICHARD W. MURPHY
ASSISTANT SECRETARY
FOR NEAR EASTERN AND SOUTH ASIAN AFFAIRS
DEPARTMENT OF STATE
BEFORE THE SENATE FOREIGN RELATIONS SUBCOMMITTEE ON
NEAR EASTERN AND SOUTH ASIAN AFFAIRS
THURSDAY, MARCH 8, 1984
Mr. Chairman, Members of the Subcommittee:
I welcome the opportunity to testify today in support of
the Administration's proposals for Fiscal Year 1985 economic
and security assistance for the Near East and South Asia.
The Administration's proposal reflects the realities of our
foreign policy and national security objectives in this vital
region.
In each country, our' assistance programs are intended
to nurture relationships of mutual interest and trust and to
assist these governments in strengthening their security and
furthering their economic progress.
Our programs support objectives in the region which are
vital to our own peace, security and well-being :
We are actively pursuing a just and lasting Middle East
peace.
We are engaged in maintaining unimpeded access to the
crucial oil resources of the Persian Gulf.
450
--Qur assistance to Lebanon aims to help the Lebanese
Government restore peace and regain sovereignty over the
country.
We are working with friendly countries to safeguard our
vital interests in North Africa, Southwest and South
Asia and the Persian Gulf.
We are searching for peace in Afghanistan which would
include the withdrawal of Soviet military forces and the
restoration of Afghanistan independence.
In our efforts to advance the Middle East Peace process and
to promote the resolution of conflicts elsewhere in the region,
we recognize that the spirit of accomodation can grow more
readily if friendly states feel confident of their ability to
provide for their own security and for the economic and social
needs of their people.
An important change that the Administration is proposing
for the Fiscal Year 1985 Foreign Assistance involves a shift of
the FMS financing program to "on budget", thus requiring
authorization and appropriations of funds for the entire
program.
We are seeking this change so that we will be able to
offer FMS credits at concessional rates as an alternative to
market rates to avoid exascerbating the debt burden of many of
451
our friends.
As part of this proposal, the fiscal Year 1985
request would provide Israel and Egypt all their FMS credits on
a forgiven or grant basis.
We also propose that Jordan,
Tunisia and Morocco receive some of their FMS credits at
concessional rates.
The levels and terms of our proposed assistance have been
carefully developed within the constraints of our budget
stringencies and the President's economic program, and are the
amounts needed to meet essential requirements of the countries
to this region.
Our fiscal year 1985 foreign assistance request for the
Near East and South Asia will fund six major programs:
$3,160 million in Foreign Military Sales Credits (FMS)
including $2,575 million in forgiven credits for Israel
and Egypt
$65 million in grant Military Assistance Programs (MAP)
$11.9 million in International Military Education and
Training (IMET)
$1,928 million in Economic Support Funds (ESF)
$327,5 million in Development Assistance (DA) and
452
$620.2 million in PL480 food assistance.
Middle East Peace:
Our highest priority continues to be
furthering the Middle East Peace process to bring a just and
lasting end to the conflict and turmoil which has disturbed
this area for so long.
There are no quick and easy solutions
for peace in the region.
However, we will persevere with our
efforts and with the President's Middle East Peace initiative
of September 1, 1982.
Our assistance plays an important role
in furthering the peace process.
Ten years ago we helped negotiate the disengagement of
Egyptian and Israeli armed forces.
They have not clashed
since.
Five years ago a peace treaty ended thirty years of war
between Egypt and Israel.
Israel and Egypt remain our
principal partners in the quest for peace, and these two
nations are the largest recipients of our proposed foreign
assistance for Fiscal Year 1985.
This assistance is aimed at
ensuring their security and strengthening their economies, both
essential to their continuing on the path to a broader peace
settlement.
Similar programs, although smaller in amounts, are planned
for Lebanon and Jordan, also important participants in our
quest for a Middle East peace.
Lack of progress toward a more
peaceful, stable Lebanon will erode the chances for peace and
stability elsewhere in the region.
In its quest for
453
reconciliation, Lebanon needs our support, both moral and
material.
Jordan requires our continued support to build the
necessary confidence to join the peace process.
Our program
also seeks to improve the quality of Palestinian life in the
West Bank and Gaza, and to encourage economic and social
cooperation in the region.
Individual program reviews follow:
Israel:
The United States has a historic commitment to
Israel's security and economic well-being extending over the
past three decades.
Our assistance provides a tangible
demonstration of the strength and durability of that
commitment, and seeks to give Israel the confidence to take the
risks necessary to pursue the peace process.
To assist Israel in maintaining its qualitative edge in
military capability over potential aggressors, a $1.4 billion
FMS credit level is requested.
For the first time, this FMS
request would consist exclusively of forgiven credits, i.e.,
grant funds. This change is being proposed to respond to the
negative impact of the increasing burden of debt service on the
Israeli economy.
The overall level of FMS credits proposed for
Israel would decline from levels appropriated in previous years
because of the greater financial value of an all grant
program. . Israel's military needs have been analyzed by both
454
governments, and we each agree that the terms and level of the
Fiscal Year 1985 FMS request for Israel will achieve our mutual
goals.
The proposed $850 million ESF program also is to be all
grant.
The major portion will be provided on cash transfer
basis to support Israel's balance of payments; these funds
permit Israel to import essential civilian goods and services
without drawing down its foreign exchange reserves.
In
addition, $65 million of the request will be used to augment
endowments for four existing U.S.-Israeli binational
foundations.
These foundations (Binational Industrial Research
and Development Foundation, Binational Science Foundation,
Binational Agricultural Research and Development Fund, and the
U.S.-Israeli Educational Foundation) undertake a variety of
programs in education and research which contribute to the
technological base upon Israel intends to build its future
growth.
It has, however, become increasingly clear that helping
Israel to restore its basic economic strength and balance is
not and cannot be solely a function of the level of U.S.
assistance.
In other words, a somewhat higher level of ESF, as
the Congress legislated last year in the continuing Resolution,
while welcomed by Israel because every dollar helps, will not
455
address the basic problems that beset the Israeli economy.
What is needed instead is our steadfast encouragement to the
Israeli Government as it devises economic programs that can rid
the country of the twin perils of high inflation and an
increasingly difficult external accounts situation.
Our total
assistance, when we take into account the interest savings
associated with a shift to all grant FMS program, is almost
equivalent to what the Congress appropriated last year for
Israel.
In addition to its economic benefit, it serves as a
political statement of our strong support for Israel and,
particularly in the endowments proposed, directly addresses our
concern for Israel's future.
Egypt:
Egypt is key to our regional political and
strategic policies.
Egypt is an active partner in the Middle
East Peace process and continued Egyptian support is crucial to
its ultimate success.
The Mubarak Government publicly and
actively supports the Camp David Accords and the President's
September 1, 1982 peace initiative as well as our efforts to
foster restoration of stability in Lebanon.
During the past
year, Egypt has been helpful in deterring radical
destabilization efforts directed at neighboring countries, such
as Sudan and Chad.
Egypt's importance as a stabilizing force
continues to increase as tensions remain high elsewhere in the
region.
456
Cooperating directly with the United States, participation in
U.S.-Egyptian military exercises have served to enhance both
countries' ability to preserve stability in the region.
The
recent trend toward improved relations between Egypt and
moderate Arab states is evidence of Egypt's importance as
a
bulwark against radical forces which reject the idea of a
negotiated settlement with Israel.
Our sustained assistance
reinforces the accomplishments made through the Camp David
process and supports regional stability,
The request for $1.175 billion in forgiven FMS credits for
Fiscal Year 1985 reflects our commitment to a long-term
military supply relationship with Egypt to help it modernize
its forces and replace obsolete Soviet-supplied equipment.
Our
military assistance relationship with Egypt is a key part of
our efforts to maintain the regional balance of forces which
has been in danger of shifting in favor of Soviet-supplied
radicals like Libya and Syria.
The change to an all-grant
program has been made in recognition that military
modernization will not benefit regional stability if it is
accomplished by amassing debts which could undermine Egypt's
ability to sustain economic growth.
FMS for Fiscal Year 1985
will be devoted mainly to progress payments on F-16 and E-20
aircraft, tanks, armored personnel carriers and air defense
radars as well as to follow-on support for U.S. equipment
supplied over the past few years.
457
Our economic assistance helps maintain the continued
economic growth which is essential to Egypt's stability.
Our
program is designed to support economic policies which address
the existing constraints on development.
Over the past year,
the Egyptian Government has moved deliberately toward economic
reform, raising prices and liberalizing foreign exchange
regulations.
Our proposed economic aid program includes $243
million in PL-480 food assistance and grant ESF of $750
million.
The ESF program consists of a $ 300 million Commodity
Import Program, which will enable Egypt to import U.S.
manufactured goods and commodities, and $450 million in project
and sector assistance. Emphasis will be on rehabilitation and
expansion of urban water and sewer systems, increasing
agricultural and industrial production, and institution
building.
Lebanon:
Although we are watching the situation in Lebanon
closely, it is still difficult to predict how events will
evolve.
We remain committed to the achievement of long-term
stability and believe that U.S. economic and military support,
properly channeled, can assist in the attainment of this goal.
We do not intend to abandon either the people or the
Government of Lebanon; security and economic assistance are
an
important element of our policy toward Lebanon.
34-045 0-8430
458
Our military assistance consists of FMS credits and IMET.
The Fiscal Year 1985 request is for $15 million in FMS credits
This is a minimum level for follow-on support for U.S. origin
equipment,
When the situation in Lebanon stabilizes, more
funds may be needed to assist the Lebanese Government in its
efforts to continue the expansion and modernization of the
Lebanese Armed Forces.
Given the rapidly evolving situation in
Lebanon, it is impossible to state at this time what additional
assistance may be needed.
$800 thousand in IMET monies is
required to provide training to bolster the Lebanese Armed
Forces,
The ESF request of $20 million for Fiscal Year 1985 assumes
that the $150 million appropriated as no-year funds in Fiscal
Year 1983 will be fully obligated.
The Fiscal Year 1985 ESF
program will be concentrated on three sectors:
housing, health
and government revenue generation.
Jordan:
A stable and secure Jordan is essential to further
the President's Middle East Peace initiative.
Our security and
economic assistance encourages King Hussein's confidence in the
U.S. commitment to the security of Jordan as he seeks a formula
to enable him to join peace negotiations.
459
The proposed Fiscal Year 1985 assistance program for Jordan
consists of $95 million in FMS credits, $20 million in ESF,
$87,000 in PL480 Title II and $2 million in IMET.
Jordan has a
growing need for more modern armament as the result of the
massive Soviet arms transfers to Syria.
FMS financing assets
Jordan to acquire those weapons most. critical to its legitimate
self-defense needs.
In view of Jordan's economic problems
coupled with reduced levels of aid from Arab oil exporters,
half of the proposed FMS credits would be provided at
concessional rates.
The training funds under IMET enhance the professional
capability of Jordan's Armed Forces and assists Jordan in
continuing its training and advisory role in the region.
Our ESF programs will stress technology transfer and
technical assistance in the areas of rainfed agriculture and
renewable energy sources.
Work will continue on important
water development projects.
Middle East Regional Program:
The Regional Program request
for Fiscal Year 1985 consists of $15 million in ESF, $3 million
in Development Assistance and $2.29 million in PL480 Title II.
460
The ESF proposal furthers the Middle East peace process by
addressing objectives that cannot be met through conventional
bilateral programs.
This grant assistance will finance two
major activities:
$9 million will be used for development projects in the
West Bank and Gaza.
By financing these projects which are
implemented by U.S. private voluntary organizations, the U.S.
seeks to improve the quality of Palestinian life in these
territories.
$5 million will support the Regional Cooperation program
which consists of a variety of joint projects involving Israeli
and Egyptian participation.
We seek to use these funds in a
manner that promotes contacts between Israeli universities,
government ministries and private organizations and their
counterparts in Egypt. Cooperative projects help promote
relationship between Israelis and their Arab neighbors, thus
helping to break down barriers between people.
$3 million in development assistance funds will finance six
ongoing regional projects as well as project design and
evaluation.
Southwest Asia/Persian Gulf/North Africa:
The Southwest
Asia/Persian Gulf/North Africa region, a critical source of
1
461
energy to the free world, is simultaneously threatened by
Soviet encroachment through Afghanistan and by radical forces
from within.
About 40 % of the free world's oil imports
originate in the Persian Gulf.
Through our assistance, we help
to improve the security of these countries and to maintain the
availability of these vital oil supplies.
Our programs are
directed at supporting those countries in the region which
provide important access to military facilities as well as
other nations which provide transit rights into the region for
U.S. forces to be used in time of crisis.
In addition to the
security concerns which these countries face, some of them,
i.e., Morocco and Yemen, have very serious economic problems.
Oman:
Oman, strategically located at the entrance to the
Persian Gulf, is cooperating closely with the U.S. in our
common objective of maintaining security and stability in that
vital area and freedom of navigation through the Strait of
Hormuz and its approaches.
Oman's agreement to permit access
to its facilities represents a major contribution to American
force projection capability in Southwest Asia and an important
public expression of local support for our presence in the
region.
The military supply and training relationship between
the two countries contributes to Oman's continued willingness
to cooperate with the U.S. in security matters.
462
In an effort to broaden our relationship with Oman beyond
its security aspects, the U.S. -Oman Joint Commission was
established in 1980 in conjunction with the facilities access
agreement.
ESF assistance funds the U.S. contribution to this
Joint Commission which provides technical assistance for the
development of infrastructure and the non-oil sector of Oman's
economy
Our Fiscal Year 1985 request for Oman includes $45 million
in FMS credits, $20 million in ESF and $100 thousand in IMET.
The military equipment purchased from the U.S. through the FMS
program helps Oman strengthen its defense in the face of
threats from Soviet-supplied South Yemen and from Iran.
The
small IMET program will provide advanced training for officers
in the Sultan's Armed Forces.
$15 million of the $20 million in ESF will be used for
school construction; the remainder will fund feasibility and
design studies, technical assistance and training.
Yemen:
The proposed Fiscal Year 1985 assistance program
for the Yemen Arab Republic (YAR) is necessary to strengthen a
bilateral assistance program which offers a visible alternative
to Yemen's present heavy dependence on Soviet assistance.
The
strategic location of the Yemen Arab Republic, its porous
463
border with Saudi Arabia, and the large numbers of Yemenis
working in the oil states of the Peninsula underscore the
importance of Yemen in regional stability and, hence, to U.S.
interests in the area.
Furthermore, the YAR is a "buffer"
between the Marxist People's Democratic Republic of Yemen and
Saudi Arabia.
For Yemen, our Fiscal Year 1985 request consists of $30
million in development assistance, $10 million in MAP, $1.5
million in IMET and $5 million in PL480 Title I.
This strategically located country is one of the poorest
and least developed in the Middle East.
We are proposing a
small increase in development assistance in recognition of
Yemen's increasingly severe economic situation due to a decline
in Arab donor assistance as well as a decrease in worker
remittances.
The YAR Government has also had to cope with a
devasting earthquake in December 1982 which left up to 400,000
homeless.
Our projects are concentrated in the agriculture,
education and health sectors.
MAP funds will be used to fund follow-on support for U.S.
origin military equipment as well as to purchase ammunition.
We are requesting grant assistance because Yemen has been
financially unable to draw on credits for the past two years.
464
The IMET program seeks to expose as many Yemeni military
personnel as possible to training in the U.S., although some
training, in particular English language instruction, takes
place in country.
Morocco:
Morocco is of key strategic importance to the
U.S. and has a longstanding record of cooperation and
friendship.
Morocco has consistently taken moderate,
constructive positions on issues of mutual concern.
Over the
past three years, the U.S. and Morocco have reaffirmed the
closeness of relations with the establishment of Joint Economic
and Military Commissions, the agreement of King Hassan to
provide transit access and numerous exchanges of high level
official visitors.
Morocco is in severe financial straits and is again
confronting a drought disaster.
As part of an 'IMF economic
reform package, the Moroccan government has begun a program of
austerity measures designed to bring its balance of payments
into equilibrium by 1987.
For Morocco, the Administration is requesting $19 million
in development assistance, $15 million in ESF and $52.5 million
in PL480 food assistance.
These different forms of economic
assistance were intended to assist Morocco in this period of
economic austerity and budgetary stringency.
If the present
drought continues, more assistance may be needed.
465
Development assistance will be focused on agriculture,
population and energy.
The ESF will be used to increase water
supplies through continuation of a snowpack augmentation
project as well as for quick dispersing assistance to the
agricultural sector which is suffering from acute drought.
The
PL480 assistance will provide balance of payments support.
As a key country in North Africa, it is in our interest to
see Morocco maintain a suitable level of military
preparedness.
An increase of MAP to $40 million and some
concessional FMS credits are being proposed in recognition of
Morocco's severe economic problems.
MAP and FMS credits will
aid the Moroccan government in its maintenance and
modernization programs, including air surveillance equipment
and anti-armor weapons.
$1.7 million in IMET funding will
provide training for Moroccan military personnel in
communications, logistics and maintenance.
Tunisia:
A longtime friend of the U.S. and an Arab
moderate, Tunisia looks to the U.S. both for security
assistance in meeting Libyan threats to its security and for
support for continued Tunisian economic development.
As a sign
of our support for Tunisian stability following the early
January riots over higher bread prices, we offered the Tunisian
Government an additional $5 million of PL480 food assistance.
466
These disturbances were a reflection of the increasingly
difficult economic situation that Tunisia now faces, as it is
squeezed by declining receipts from exports and tourism,
mounting external debt, continued drought and a persistently
high unemployment rate.
The proposed ESF of $3 million for
Fiscal Year 1985 is needed to fund an ongoing program for
Tunisian graduate students in the U.S.,as Tunisia seeks to
reorient its technical sector from French to U.S. products and
technology
$5.85 million in PL480 food assistance is being
requested to assist Tunisia in coping with the impact of the
drought.
For military assistance, the FY-1985 request includes:
$50
million in FMS credits, $15 million in MAP and $1.7 million in
IMET.
$ 25 million of the FMS credits would be provided at
concessional rates of financing.
The FMS credits and MAP are
needed to enable Tunisia to complete its purchases under a
three year security assistance package, begun in fy 1982, which
includes F-5 aircraft, Chaparral missiles and M60 tanks.
Fiscal Year 1985 security assistance will also be used for the
purchase of necessary tank support equipment.
Payments will
begin on two C-130 transports.
IMET funding will permit
professional training for Tunisian officers as well as
technical training required to support recently acquired U.S.
equipment.
467
Pakistan:
The multiyear program for which we are again
seeking your support is designed to bolster Pakistan as it
confronts the challenges resulting from the Soviet invasion of
Afghanistan.
The continuing implementation of the program
remains key to Pakistan's ability to pursue its courageous and
principled opposition to Moscow's brutual attempt to subjugate
the Afghan people.
The cost of Pakistan's opposition to the
Soviet occupation has been high.
Besides the burden of 2-3
million refugees, Pakistan has been bombarded by aircraft and
artillery from Afghanistan (most recently on January 27, when
45 people were killed and 60 wounded), and Soviet-supported
terrorists have carried out sabotage, assassinations and an
aircraft highjacking.
Our assistance program for Pakisan also has goals apart
from meeting the threat from Soviet-controlled Afghanistan.
ву
addressing some of Pakistan's security concerns and
demonstrating the long-term reliability of the U.S. as a
security partner, we hope to help remove the underlying
incentive for the possible acquisition of a nuclear weapons
capability.
Our economic assistance ($200 million in ESF, $50
million in development assistance and $54 million in PL480 food
aid) is designed to stimulate economic and social development
as well as to provide balance of payments support.
Our 23
ongoing and planned development projects are heavily
concentrated in
468
the agriculture, population, health and energy sectors.
Our
economic assistance also supports Pakistani efforts to suppress
opium production and to interdict narcotics trafficking.
Our FY-85 military assistance request includes $325 million
in FMS credits and $1 million in IMET; it aims to help
modernize Pakistan's well trained but poorly equipped armed
forces,
FMS credits will be used to purchase F-16 aircraft,
M48A5 tanks, helicopters, APC's, artillery and anti-ship
missiles.
SOUTH ASIA:
U.S. objectives in South Asia remain
essentially unchanged from previous years.
We want to
encourage the growth of stable, strong, independent states
which live in peace with one another free of outside
interference.
We seek to contribute to the efforts the
governments of South Asian countries are making to develop
themselves economically and to bring about higher living
standards for their people in a region which is among the
world's poorest and most populous.
U.S. interests, as well as
the interests of the recipient countries themselves, are well
served by the carefully-designed mix of our programs in South
Asia.
India: The largest and most powerful nation in South Asia,
India plays a pivotal role in determining the prospects for
469
peace and stability in the region.
With its accession to the
leadership of the Non-Alignment Movement, it has enhanced its
role in international affairs.
In the past few years, India has moved in the direction of
liberalizing imports and decontrolling private sector activity,
with a view to upgrading domestic technology and injecting new
vigor into the economy.
With economic liberalization in India,
new opportunities have opened up for an expansion of our
bilateral relations in the areas of trade, investment and
scientific exchange.
The United States is currently about even
with the Soviet Union as India's number one trading partner.
We have made efforts to further improve our relations through
an exchange of high level visits, the heightened activities of
the Indo-U.S. Joint Commission and an expansion of cultural,
educational and scientific exchanges.
The centerpiece of this
latter effort is a proposed $110 million binational endowment,
which is designed to conserve our dwindling supply of U.S.-held
excess rupees by setting up an interest bearing facility to
fund joint study and exchange programs.
For Fiscal Year 1985, we are requesting a program in India
consisting of $87 million in development assistance, $125
million in PL480 and an IMET Program of $300 thousand.
Development assistance funding will be focussed in several
470
areas: irrigation, agricultural research, forestry, family
planning, health and nutrition.
The PL480 Title II program
provides urgently needed food supplies to contribute to feeding
some of the Indian population which falls below th
nutrition-based poverty line.
The IMET funds will provide for
sending military officers to intermediate and senior staff
colleges in the U.S. and for training in a number of technical
fields.
Bangladesh:
The U.S. pursues policies aimed at achieving
the interrelated goals of political stability and economic
development in Bangladesh as in South Asia as a whole.
Besides
helping to meet our humanitarian concern for the people of
Bangladesh, U.S. food and development assistance constitute the
major means by which we can work toward these objectives.
As a
developing country which has undertaken a number of bold
economic self-help measures, Bangladesh has earned and deserves
our continued support.
0.$. assistance presently supports the Bangladesh
Government's development strategy in priority areas such as
agriculture, rural development and family planning.
Our
proposed program for Fiscal Year 1985 consists of $8.2 million
in development assistance, $97.9 million in PL480 food and
commodity assistance, and $250 thousand. for IMET.
471
Nepal:
The aim of u.s. assistance in Nepal is to promote
economic and political development, with a view to contributing
to stability in Nepal and thereby in the region as a whole.
Nepal's geographic position between China and India inakes the
maintenance of its domestic stability particularly important in
a regional context.
Nepal continues to face economic difficulties.
Rapid
population growth, limited natural resources, and increasing
environmental degradation continue to inhibit the Nepalese
economic development effort.
For Fiscal Year 1985, we are requesting $15 million in
development assistance, $1.1 million in PL480 Title II grants
through the World Food Program, and $100 thousand for IMET.
Our development assistance program is concentrated on the
priority areas of rural development, resource conservation, and
health and family planning.
Sri Lanka:
A parliamentary democracy, Sri Lanka has
maintained its democratic traditions despite a serious outbreak
of communal violence last year.
Sri Lanka is committed to a
moderate, non-aligned foreign policy.
It plays a constructive
role in the U.N. and the Non-Aligned Movement.
472
An important goal of our economic assistance is to
demonstrate our continued support for Sri Lanka as it seeks to
restore communal harmony (which is key to its political
stability and economic progress), and our confidence in the
wisdom of the development policies of the government.
For
Fiscal Year 1985, we are proposing for Sri Lanka $41.5 million
in development assistance, $32.1 million in PL480 and $150
thousand in IMET.
In summary, we consider our FY 1985 submission to be
consistence with programs which the Congress supported in
previous years, justifiable in terms of the multifaceted
political, economic and security requirements of the Middle
East and South Asia, and realistic in the context of our
budgetary constraints.
Senator BOSCHWITZ. General, do you have an opening statement?
General TIXIER. No, sir; I do not.
Senator BOSCHWITZ. Mr. Langmaid, would you please proceed?
Mr. LANGMAID. Mr. Chairman, I also have a long statement. I
would be glad to go directly to questions if you prefer, or I could
summarize a few of the highlights.
Senator BOSCHWITZ. I would appreciate it if you would summa-
rize it.
Mr. LANGMAID. I would be glad to, sir.
STATEMENT OF BRADSHAW LANGMAID, JR., DEPUTY ASSISTANT
ADMINISTRATOR FOR THE NEAR EAST, AGENCY FOR INTERNA-
TIONAL DEVELOPMENT
Mr. LANGMAID. I am also pleased to be here today to support the
President's request for economic assistance to countries in the
Near East. The President is requesting $1.745 billion, consisting of
$1.693 billion in economic support funds and $52 million in devel-
opment assistance funds for this area of the world.
Attached to my statement which I am submitting for the record
is a table which summarizes the administration's request. Under a
separate appropriation, $301 million in Public Law 480's title I and
II is also planned for countries in the Near East region.
For Egypt in fiscal year 1985, we are requesting $750 million
under the economic support fund (ESF), the same level as in fiscal
year 1984. In addition, $238 million is planned under Public Law
473
480; $225 million under title I and $12.8 million under the bilateral
title II program.
We propose that the ESF resources be made available as grants,
continuing a policy set by Congress in fiscal year 1981. Public Law
480, title I, will be provided on a loan payable over 40 years, includ-
ing a 10-year grace period.
In the past, this committee, as have other committees of the Con-
gress, has been concerned with the rate of implementation of our
program in Egypt. I am glad to be here today to be able to say that
that rate has improved measurably over the past few years.
Expenditures for the first time have exceeded new obligations
Since the resumption of aid to Egypt in 1974, ESF expenditures in
fiscal year 1983 total-
Senator Boschwitz. That is a remarkable statement, that it took
you 10 years to get to that point. How much is now in the pipeline?
Mr. LANGMAID. The pipeline this year is approximately $2.4 bil-
lion.
Senator BOSCHWITZ. Mr. Langmaid, we give this aid not for the
purpose of putting it into the pipeline, as you may know, but for
the purpose of implementing the objectives that the aid is supposed
to bring about. We trust that it will not take you another 10 years
to come back and tell us that you are now up to a point where the
implementation of the program matches the scope of the program.
Mr. LANGMAID. I trust also that the rate of expenditure that we
have achieved now can be sustained in the years ahead so that
each year the pipeline should be diminished.
A pipeline of something like 2 years of aid is not unusual, given
the nature of the requirements in terms of the obligation of
projects. The construction of powerplants sometimes runs from 3 to
5 years, and that is a large part of this program.
It is also useful to note that with a rate of expenditure that size,
a number of programs are coming to the point where they are
making a meaningful impact on the situation of the people of
Egypt.
The development decentralization portfolio, one of our largest in
the program, has completed or has underway some 4,700 local in-
frastructure and service activities touching the lives of an estimat-
ed 32.5 million people in Egypt.
Public awareness of family planning has grown, and the use of
modern contraceptives has increased, with the result that there is
beginning to be a decrease in the overall population growth rate.
Major power plants are coming onstream, the total capacity of
which exceeds the capacity of the Aswan Dam. Major cement
plants are also coming onstream which, in total, should provide
adequate supplies of cement to Egypt to the year 1990.
These are but a few of the concrete achievements that are begin-
ning to be realized with this program.
As far as Israel, the largest recipient of economic assistance in
this region is concerned, our fiscal year 1985 request is for $850
million in grants from the economic support fund, of which $785
million is for balance of payments support, and $65 million is to
strengthen four United States-Israeli binational foundations.
With that, sir, I would just as soon go to your questions. Those are
the highlights of our program.
[Mr. Langmaid's prepared statement follows:]
34-045 -84-
.31
474
STATEMENT OF
BRADSHAW LANGMAID, JR.
ACTING ASSISTANT ADMINISTRATOR
BUREAU FOR THE NEAR EAST
AGENCY FOR INTERNATIONAL DEVELOPMENT
BEFORE THE SENATE FOREIGN RELATIONS SUBCOMMITTEE
ON NEAR EASTERN AND SOUTH ASIAN AFFAIRS
THURSDAY, MARCH 8,
1984
Mr. Chairman and Members of the Committee:
I am pleased to be here today to support the President's request for economic
assistance to countries in the Near East.
The President is requesting $1,745
million, consisting of $1,693 million in Economic Support Funds and $52
million in Development Assistance funds.
Attached to this statement, which I
am submitting for the record, is a table which summarizes the Administration's
request.
Under a separate appropriation, $301 million in Public Law 480
Titles I and II is also planned for countries in the Near East,
.
.
475
THE NEAR EAST
The Administration's primary objective is to help bring a just and lasting
peace to this crisis-torn area.
In this context, our economic assistance
programs are designed to support the efforts of those governments which are
undertaking risks on the road to peace by addressing some of the pressing
economic and long term development problems faced by these countries.
Certain
of our programs are directed at helping those countries which provide
important access or transit facilities into the region for U.S. forces and
support their deployment in time of crisis. Through our support of long term
economic and social development as well as economic stabilization, and through
support of emergency reconstruction efforts in Lebanon, A.I.D. helps
strengthen the recognition that the U.S. is dedicated to the security and
well-being of all friendly states in the area.
EGYPT
For Egypt in fiscal year 1985, we are requesting $750 million under the
Economic Support Fund, the same level as in FY 1984.
In addition, $238
million is planned under PL 480
$225 million under Title I and $12.8
million under bilateral Title II programs.
We propose that the ESF resources
be made available as grants, continuing a policy set by Congress in FY 1981.
PL 480 Title I would be provided as a loan payable over 40 years, including a
ten year grace period.
Interest on the loan would be two percent during the
grace period and three percent thereafter.
476
The program of economic assistance to Egypt continues to be built around three
central objectives: stability, productivity, and equity.
The main components
of the Economic Support Fund program are:
A $300 million Commodity Import Program to help assure the
availability of essential materials and capital goods for Egyptian
Industries, and for development programs and consumer items needed by
the populace.
$220 million to continue the rehabilitation and modernization of the
country's infrastructure.
This includes $200 million for the high
priority water and wastewater rehabilitation and expansion programs in
Cairo and Alexandria, and $20 million to continue improving the
electricity distribution system,
$110 million to help increase production and productivity in industry
and agriculture.
$75 million to enhance the provision of basic services at the local
government level through the Decentralization Sector Support program.
$45 million to strengthen essential social infrastructure in areas
such as family planning, science and technology, and training, and to
support feasibility studies and private voluntary activities.
f
The proposed FY 1985 program responds to Egyptian requests for balance of
payments support, the rehabilitation and expansion of Egypt's major urban
water and sewerage systems, and for its decentralization, production, and
477
population objectives.
The proposed program is consistent with the Government
of Egypt's five year plan. The program avoids investments in areas where they
might impact negatively on the pace of needed economic reforms.
The proposed FY 1985 assistance builds upon our ongoing program, which is
performing well.
The program is moving forward and increasingly is making
itself felt in Egyptian life.
Evidence of this includes:
Program implementation improved dramatically in FY 1983 over prior
years' performance.
Expenditures exceeded new obligations for the
1
first time since the resumption of U.S. assistance in 1974.
ESF
expenditures in FY 1983 totalled $856.3 million against a projected
level of $866.7 million, and total expenditures including PL 480 were
$1,129 billion.
For the first time, growth of the pipeline was reversed.
From a peak
of nearly $2.7 billion at the end of FY 1982, it dropped to a little
under $2.5 billion at the end of FY 1983.
By the end of FY 1983, the Decentralization Sector Support program had
completed or had under way some 4,700 local infrastructure and service
activities touching the lives of an estimated 32.5 million people out
of a total Egyptian population estimated at 46 million people.
Public awareness of family planning has grown and the use of modern
contraceptives has increased.
As a result, the population growth rate
has declined from 3 percent in 1980 to 2.7 percent in 1982, according
to Government of Egypt statistics.
478
Our investments in telecommunications are resulting in improved
telephone service in Cairo.
The first new telephone exchange began
service in December 1983 and three additonal exchanges are expected to
begin service during succeeding three to four month intervals.
The Suez cement plant is completing its shakedown and will begin
full-scale production within the next few months.
The Quattamia
cement plant will be completed within a year.
These plants will
increase Egypt's domestic cement production by as much as 60
percent, and together with other plants under construction should
satisfy domestic demand for cement through 1990.
In addition to the 300 megawatts of power now being generated by the
A.I.D. financed Talka/Helwan generators, this year the first and
second units at the Ismailia power station were completed, adding
another 300 megawatts of electrical generating capacity.
The
construction of the 945 megawatt Shoubra power plant is ahead of
schedule and the first unit will begin operation in January 1985.
Over the past year, major construction contracts were signed and
contractors have mobilized under the Low Income Housing project,
Safaga Grain Silos, Cairo Water, Cairo Sewerage, Canal Cities Water
and Sewerage and Alexandria Wastewater.
Preliminary rehabilitation
work in Alexandria and Cairo is already reducing sewerage overflows
and flooding.
479
There are two reasons for the marked improvement in delivering U.S. assistance
to Egypt.
First, the project portfolio has matured to the point where capital
projects in all major investment areas have passed the design and contracting
stages and have reached full-scale construction.
Second, A.I.D. and the
Government of Egypt have taken several measures to improve program management:
- A.I.D. and the Government of Egypt conduct joint, semi-annual
portfolio reviews to focus additional attention on "problem projects"
which are off their implementation schedules by more than a year,
still face unresolved implementation problems, or face redesign
decisions.
These same reviews identify projects for attention which are showing
early signs of falling behind.
The Cairo Mission reports monthly on actions being taken to put
"problem projects" back on track.
Using a new authority provided by Congress during FY 1983, A.I.D. and
the Government of Egypt deobligated $103.2 million from 13 projects
and eight CIP agreements.
The new authority provides a powerful tool
for taking corrective action on slow-moving projects.
While all program management problems have not disappeared, they have been
reduced considerably.
As of September 30, 1983, only ten projects in the
active portfolio of 85 projects were identified by A.I.D. and the Government
of Egypt as still facing significant implementation problems.
These projects
480
have an unexpended pipeline of less than $80 million.
We will continue to
work with Egyptian government officials to resolve outstanding issues.
Turning from our assistance program to Egypt's economic situation, there were
both positive and negative aspects to Egypt's economic performance over the
past year.
It is encouraging, however, that the positive elements were
largely the result of actions taken by the Egyptian Government rather than of
fortuitous events, as has sometimes been the case in the past.
The sharp deterioration in the balance of payments current account that
occurred the previous year was slowed in the Egyptian fiscal year ending June
30, 1983.
The current account deficit nevertheless grew by $100 million,
reaching $2.2 billion, as the trade deficit, which had been eased by lower
import prices the year before, jumped by $675 million.
The increase in the trade deficit was due largely to a continued drop in the
price of exported petroleum and increases in the price of imports.
The trade
deficit would have been been even larger if the government had not taken
measures to restrain imports. Perhaps the most important of these measures
was to require government agencies and public companies to buy foreign
exchange at the free market rate rather thar. the government rate.
This
amounted to a de facto partial devaluation.
It raised the local currency cost
of imports by about 30 percent and therefore discouraged public sector imports.
Much of the increase in the trade deficit was offset by a higher level of
remittances from Egyptian workers abroad after public sector banks were
allowed to pay near free market rates to attract them. Again, this was a de
facto partial devaluation.
481
Despite the somewhat larger current account deficit, the overall balance of
payments showed a surplus of $640 million, as compared to a deficit of $540
million the previous year.
Part of the improvement is accounted for by higher
disbursements of official loans and grants, especially those of A.I.D.
Egypt's debt service ratio is probably close to 30 percent, a heavy but not
unmanageable burden.
We estimate that Egypt's debt service will increase by
about $250 million in the current fiscal year, with half of that increase
attributable to FMS.
The increase in the debt service in the next few years
is likely to amount to $300 - 400 million annually, but
400 million annually, but FMS will contribute
very little to the increase if the Administration's proposal for all grant
funding beginning in FY 85 is accepted.
Without further policy changes, none of Egypt's foreign exchange resources can
be expected to grow to cover this increased debt service.
In fact, rapidly
rising domestic consumption of energy driven by low domestic energy prices is
likely to cut into oil exports.
It is therefore urgent that steps be taken to
encourage exports and to restrain demand which is both reducing the
availability of goods for export and increasing imports of consumer goods.
The Egyptian government is well aware of the extent and significance of its
balance of payments and fiscal problems.
On the one hand, it is making
economic reforms to correct the causes of its problems.
On the other hand, it
is searching for additional free foreign exchange, including cash transfers
from the United States.
As A.I.D. Administrator McPherson said two years ago,
A.I.D. is prepared to make a cash transfer to Egypt to help alleviate the
dislocations which could accompany major economic reforms,
but without basic
482
structural changes, particularly in pricing and subsidy policy, U.S. resources
will continue to be more effectively utilized in projects which address social
needs and promote increased economic productivity.
In conclusion, I believe that the economic assistance program to Egypt has
turned the corner.
Project implementation is now moving well.
Improved
management systems are in place to tell us quickly when projects are in
trouble and how efforts to resolve problems are proceeding.
The program is
focussed on the highest priorities of Egypt's five-year development plan.
Most importantly, the program is having an increasingly tangible impact on a
large portion of the Egyptian people.
ISRAEL
Our fiscal year 1985 request is for $850 million in grants from the Economic
Support Fund, of which $785 million is for balance of payments support, and
$65 million is to strengthen four U.S.-Israel binational foundations.
ESF resources Combined with the proposed FMS program provide a strong
demonstration of V.S. support for Israel and one which is intended to provide
Israel with the security needed to take the risks associated with further
steps toward peace in the Middle East.
As in the past, the ESF balance of
payments support grant will be implemented on the assurance that Israel will
continue to import non-defense goods from the U.S. in an amount at least equal
to the grant level, and that Israe? will follow agreed procedures for
selecting dry bulk carriers to ship grain.
These procedures were developed
with a view toward assuring a share of the market for U.S. flag carriers.
31.12.
483
Israeli economic performance in 1983 was disappointing.
Performance in
exports, which have contributed some 40% to Israel's gross domestic product,
was poor.
While recession in Western Europe and North America had been a
principal contributing factor to Israel's poor performance in 1982,
continuation of the export slump is attributable to the Israeli policy of
maintaining an overvalued exchange rate.
High defense expenditures, continued
efforts to maintain a high level of social services and economic security, and
cheap imports combined to sustain domestic demand at high levels despite poor
GNP growth performance. Buoyant domestic demand also added to inflationary
pressures and reduced the economy's ability to export.
Gross domestic product
expanded by only about 1% in 1982 and 2% in 1983.
However, per capita
consumption grew by over 4% in 1983.
The inflation rate increased to 190% (a
record rate) compared to 132% in 1982 and 102% in 1981.
Exports of goods and
services declined by one percent in dollar terms while merchandise imports
grew by 4%.
The non-defense goods and services deficit for 1983 was about
ܙ ؛
$3.9 billion, as compared to $3.2 billion in 1982.
The enlarged current
account deficit and amortization of external debt was financed by slight
increases in bond sales and net foreign investment in Israel, somewhat larger
increases in commercial borrowing and U.S. economic assistance, and a small
drawdown of foreign exchange reserves.
Israel's basic economic problems persist.
These problems are triple-digit
inflation and disequilibrium in the balance of payments.
The challenge is to
resolve these problems without undue sacrifice to the economic well-being of
the people.
Achievement of these objectives requires giving priority to
export expansion, constraining budget deficits, monetary expansion and private
consumption to hold growth in domestic demand, and careful scheduling of
military equipment purchases so that they do not unduly exacerbate existing
economic pressures.
484
In addition to balance of payments support, A.I.D. also proposes to provide,
on a one-time basis, $65 million for endowment of four U.S.-Israeli binational
foundations: the Binational Industrial Research and Development Foundation
($25 million); the Binational Science Foundation ($20 million); the Binational
Agricultural Research and Development Fund ($15 million); and the U.S.-Israeli
Educational Foundation ($5 million).
These foundations need additional
funding in part because their original endowments have shrunk in real terms
because they were invested at interest rates below the rate of inflation.
The
additional funds requested will also make it possible to fund larger
programs.
Funds will be provided to the foundations only upon successful
negotiation of changes designed to strengthen their financial condition.
The
activities of these foundations constitute important contributions to Israel's
longer term objectives in the areas of science-based and high-technology
production.
JORDAN
In fiscal year 1985 we are requesting $20 million under the Economic Support
Fund for Jordan, of which $13 million will be grants and $7 million will be
loans with maturities of 20 years, a five-year grace period, and five percent
interest.
These resources will be used to support priority development
programs in a country which is a moderate voice in the Arab world and which
seeks to play a positive role in responding to President Reagan's September 1,
1982 peace initiative.
While Jordan's level of per capita income places it in
the ranks of the middle-income countries, its need for external resources is
significant. Jordan continues to be highly dependent upon foreign assistance
to finance its ambitious development plans, and, with the declining price of
485
oil, some Arab donors have slowed or reduced their assistance to Jordan.
Remittances from Jordanian workers abroad have also leveled off.
In 1982
Jordan's overall balance of payments was in deficit for the first time in over
five years, while the expansion of gross domestic product was 5.5 percent,
well below recent growth rates.
With meager natural resources, Jordan's
successes are due to government policies which encourage a dynamic private
sector, and to a skilled and hard working labor force.
The fiscal year 1985 program will continue A.I.D.'s emphasis on technical
assistance and technology transfer projects which stress institution-building
involving both the public and private sectors, as the best means to make a
qualitative American impact with a relatively small assistance program.
In
support of Jordan's five-year plan to stimulate more geographically balanced
growth and subject to feasibility analysis, A.I.D. will help increase
agricultural production in the highland rainfed regions, and will initiate a
pilot effort to encourage the development of small enterprises in rural
areas.
Another major new initiative is the Jordanian-American Scholarship
fund, which will be set up to help finance Jordanians wishing to study in the
United States.
LEBANON
For fiscal year 1985 we request $20 million in grant funds under the Economic
Support Fund, a substantial reduction from the FY 1983-84 supplemental request
of $150 million.
This reduction has been envisioned since FY 1983, when we
decided to infuse a large amount into reconstruction of the beleaguered
Lebanese economy.
By this effort, we had hoped to attract other donor
486
contributions to Lebanon while providing highly visible, quick-disbursing
reconstruction assistance.
While the ongoing hostilities have slowed the
inflow of aid, our future assistance will be important to demonstrate support
for Lebanon during the difficult period of political reconciliation and
reconstruction.'
In FY 1983, we were able to accomplish a great deal despite constant security
threats and the April 18th attack on our Embassy.
AID maintained a full
Mission in Beirut until September 1983.
In September, the security situation
deteriorated very seriously and all of our Beirut staff has since be
withdrawn.
Most important among our accomplishments were the design of a $150
million reconstruction program, the establishment of productive working
relationships with the Lebanese responsible for reconstruction, and a
significant statement, by our very presence, of U.S. support for a unified and
peaceful Lebanon.
In the remainder of FY 1984 with a competent local staff coming to work every
day, we will continue to implement some projects and obligate additional funds
for these projects as the security situation allows,
We already have request
from international and private voluntary agencies to fund emergency relief
activities.
It is very likely these will be financed from last year's
supplemental. However, we are unable to precisely estimate these requirements
at this time.
In point of fact, the fast changing situation on the ground in Lebanon may
require redesign of the FY 1985 program.
Events have already required us to
reallocate, for emergency relief and support for American-sponsored
educational institutions in Beirut, part of the funding requested last year
487
for our supplemental $150 million reconstruction program.
We will probably
have to make further reallocations after, of course, prior consulation with
the Congress. Thus, some or all of the new $20 million request may be used to
replenish the funds already taken from the reconstruction program.
The program we propose for FY 1985 focusses on three sectors: housing, health,
and national income generation.
These sectors have been selected as those in
most need following two years of investing in capital infrastructure repair.
The proposed activities include:
housing reconstruction:
to be carried out by two private
voluntary organizations (PVOs) through complementary programs
of training in building skills and credit to the low income
homeowner for home repair or reconstruction;
health care improvement:
to finance the first stage of decentralizing
a terribly over burdened Health Ministry so that health care
in Lebanon can move from its current orientation toward
curative, hospital care to preventative clinic care which is
both more accessible and affordable; and
government revenue generation:
to provide technical assistance
to Lebanon's Finance Ministry and Central Bank in planning and
establishing national mechanisms for improving and collecting
government revenues.
488
MOROCCO
For fiscal year 1985 we are requesting $19 million in Development Assistance
funds and $15 million under the Economic Support Fund for Morocco.
In
addition, under a separate appropriation, we are requesting $40 million under
PL 480 Title I and $9.7 million for the Title II program,
The substantially
increased level of requested economic assistance reflects the fact that
Morocco, as a long-standing friend of the U.S., continues to face a
deteriorating economic situation marked by large budget and trade deficits,
rapidly increasing service costs on external debt, and other difficult
domestic economic problems.
Since the late 1970s Morocco has been struggling to overcome declining demand
for its principal export, phosphates, and growing competition and
protectionism that have limited agricultural exports.
These negative export
trends have coincided with dramatic increases in Morocco's import bills for
energy and food, but the persistent decline in phosphate prices since 1975,
the global recession of the past three years, and stagnation in domestic
agricultural production have limited the impact of the GOM's adjustment
efforts.
In July, 1983, the Moroccan Government adopted a broad program of austerity
measures and reduced or eliminated subsidies (thereby raising prices) on
consumer goods, water, electricity and petroleum products. The Government of
Morocco's 1983 operating and investment budgets were revised downward to
curtail persistent budget deficits.
In September, 1983, Morocco entered into
a new 18-month stand-by arrangement with the IMF for: $315 million.
Moreover,
the Government agreed to remove a further number of controls on prices,
thereby reducing the subsidy burden in the budget.
Other important elements
vr*.*".''
489
of the program are a sharp reduction in Government hiring, introduction of a
value-added tax, trade liberalization measures, and continuation of a flexible
exchange rate policy which included a devaluation of 10 percent in August 1983.
Morocco is also presently engaged in a rescheduling of its official and
commercial debt repayments.
Nevertheless, even with successful debt
reschedulings, Morocco will still require over $700 million in financing from
the donor community through the end of calendar year 1984 to meet its
obligations.
Active U.S. participation in a collaborative effort to provide
additional support through increased levels of ESF and P.L. 480 Title I,
together with CCC credits, is critical to Morocco's success in filling this
gap.
Morocco's overall balance of payments problems, its requirement for a high
level of wheat imports, the stagnant agricultural sector, and extensive
underemployment, have led A.I.D. to a strategy which concentrates on three
priorities
increasing food production on rainfed lands, reducing the rate
of population growth, and reducing energy costs.
A.I.D.'s agricultural
strategy combines Development Assistance funding, PL 480 Title I local
currency sales proceeds, and Economic Support Funds in an integrated program
to promote investment in agricultural production. The principal component of
A.I.D.'s population strategy is to help the government to deliver on a broad
scale basic health services combined with family planning education and
commodities.
In the energy sector AID will continue to assist the Government
of Morocco to improve its energy planning and policies, and to identify and
exploit domestic sources of conventional and renewable energy, and thus to
reduce energy imports.
84-045 0-84-32
490
A.I.D. also provides modest levels of support for a participant training
program both at U.S. universities and in-country, for central, regional, and
local government personnel.
OMAN
In fiscal year 1985 we are requesting $20 million under the Economic Support
Fund for Oman, of which $5 million would be in grants and $15 million in
loans.
The loan funds are repayable in twenty years with a five-year grace
period and five percent interest.
In 1980 the United States agreed to
establish a Joint Commission with Oman through which modest levels of economic
assistance would be channeled to respond to the Omani desire to broaden our
bilateral relationship beyond mutual security concerns in the area.
Oman's
high per capita income is based almost entirely on its oil wealth and obscures
the fact that the overall level of economic development is low.
The
modernization process is only 14 years old and the country has spent large
sums of money on creating the basic physical infrastructure upon which to
launch effective development programs.
Oman will require technical assistance
for many years to implement development programs which will meet the needs of
its people.
The fiscal year 1985 grant funds will support the work of the Joint Commission
in performing feasibility studies and technical assistance, and provide more
funding for the participant training project, which began in fiscal year 1983.
The $15 million loan will be used to support further expansion of the schools
construction project which the Joint Commission initiated in fiscal year 1983.
491
TUNISIA
For Tunisia, we are requesting $3 million in ESF grants to extend the
scholarship program, which under the Technology Transfer project funds
graduate-level education for Tunisians at U.S. universities.
The investment
will support A.I.D.'s phaseout process while giving evidence of continued U.S.
interest in Tunisia's economic progress and helping build linkages between
Tunisian and U.S. institutions.
YEMEN ARAB REPUBLIC
We are requesting $30 million in Development Assistance grants for Yemen in
fiscal year 1985 and, under a separate appropriation, $5 million in PL 480
Title I to finance rice and wheat imports.
Despite several years of rapid domestic economic growth, Yemen still ranks as
one of the world's poorest countries, particularly in terms of quality of life
Indicators. Beginning in the latter half of the 1970s, real gross domestic
product expanded between 5 and 9 percent per annum, fueled primarily by the
growth of remittances from Yemenis working abroad and by foreign assistance,
principally from Arab donors.
The world-wide recession, declining demand for
Arab oil, and the Iran-Iraq war have caused sharp declines in worker
remittances and Arab donor assistance.
Official estimates are that
remittances declined from a high of about $1.3 billion in 1979 to $1.0 billion
in 1981, but were up 10% in 1982 and in 1983 are expected to reach $1.2
billion.
Declining or stagnant remittances and rapidly increasing imports (up
50% during 1979-82 and up sharply in the first quarter of 1983) have caused
the external current account balance to deteriorate from a $300 million
492
surplus in 1977 to a $600-$700 million deficit during 1980-1982.
The deficit
may exceed $800 million in 1983.
These economic trends, coupled with a
devastating earthquake on December 13, 1982 in Dhamar Province, which
reportedly killed or injured 5000 people and left up to 400,000 homeless,
strongly suggest that the Government of Yemen will not be able to implement
}
its ambitious development schemes as previously planned.
Aside from some agricultural potential, Yemen's natural resources are meager.
Yet there is a reasonable prospect that by building up the physical and human
infrastructure, creating and strengthening institutions, mobilizing human
resources and further encouraging a dynamic private sector, it will be
possible to achieve substantial improvements in the quality of life for Yemeni
citizens.
In this context, the A.I.D. strategy places particular emphasis on
institutional and human resource development and appropriate technology
transfer, while other donors, particularly the Arabs, emphasize capital
construction projects.
Our strategy is manifest in our portfolio of projects,
which address a wide range of agricultural problems through a long term, U.S.
University, Title XII endeavor with the Ministry of Agriculture; a similar
collaborative assistance project in education which will improve primary
education and teacher preparation; and a broad-based participant training
project to introduce needed technical and managerial skills into governmental
and private institutions.
The portfolio also includes significant projects
addressing health service delivery in the Tihama, the poorest area of the
country, village-based development activities
particularly rural water
--------
supply projects and a new effort to train health care workers in family
+
planning education.
All elements of the A.I.D. program are heavily focussed
on the technical assistance and training which will help Yemen to achieve
self-sustaining development and address some of the basic needs of its people.
493
REGIONAL ACTIVITIES
In addition to these country programs we are requesting $3 million in
Development Assistance grant funds and $15 million in grants under the
Economic Support Fund for projects which impact primarily on the Near East.
The Development Assistance funds will finance project design and evaluation
work (about $800,000) for Near East development assistance programs, and six
continuing projects (about $2.2 million). These include: a Science and
Technology Information Transfer project, a project to stimulate private enter-
prise development, a legal education for human rights project, a program of
small projects in collaboration with the Peace Corps, a regional environmental
protection project, and family planning activities.
ESF funds amounting to
$500,000 will also support regional population activities.
The balance of our request under the Economic Support Fund will support
development efforts in the West Bank and Gaza ($9 million) which are
implemented in large part by American voluntary agencies and address needs in
such areas as vocational and higher education, community development,
land
reclamation, improved water storage, and agricultural cooperative marketing.
In addition, $5 million is requested to finance cooperative scientific,
technical and other activities of mutual interest to Israel and its Arab
neighbors, and $500,000 is required for project development and support
activities, primarily project design and evaluation services, related to the
development of ESF country programs.
Under a separate appropriation
$2,288,000 in PL 480 Title II is requested for programs in the West Bank and
the Gaza Strip.
494
SYRIA
No new funds have been requested for Syria since FY 1979.
Uncommitted
balances in the pipeline were frozen in 1983 as U.S.-Syrian relations
deteriorated, and in November, 1983, laws were enacted prohibiting A.I.D. from
making any further payments or delivery of goods and services to the
Government of Syria under A.I.D.-financed projects. The laws require that all
undisbursed funds be deobligated except for those funds required to complete
the training of Syrian students in the U.S. and needed to meet contractors'
legitimate obligations and termination expenses.
A.I.D. has begun
implementing this legislation, and we expect that all funds not required for
the forgoing purposes will be deobligated during FY 1984.
Thank you, Mr. Chairman.
I would be pleased to answer any questions that you
and members of the Committee may have.
NEAR EAST
PROGRAM SUMMARY
(In millions of dollars)
FY 1983
FY 1984
Actual
Estimated
750.0
750.0
FY 1985
Request
750.0
Egypt
ESF
Israel
ESF
785.0
910.0
850.0
Jordan
ESF
20.0
20.0
20.0
Lebanon ESF
150.0 11
20.0
Morocco ESF
7.0
15.0
DA
11.2
19.0
19.0
Oman
ESF
15.0
15.0
20.0
Tunisia ESF
5.0
1.5
3.0
Yemen
DA
28.1
27.5
30.0
Regional DA
4.4
3.8
3.0
ESF
12.5
14.0
15.0
NEAR EAST TOTAL 1/
1781.2
1767.8
1745.0
ESF
1737.5
1717.5
1693.0
DA
43.7
50.3
52.0
1/ Supplemental appropriation covering FYs 1983 and 1984
495
Senator BOSCHWITZ. Mr. Staples, I see that you, too, have an
opening statement.
Mr. STAPLES. Yes, sir. I have some very brief remarks that will
take about a minute, if I might.
STATEMENT OF EUGENE S. STAPLES, DEPUTY ASSISTANT ADMIN-
ISTRATOR FOR ASIA, AGENCY FOR INTERNATIONAL DEVELOP.
MENT
Mr. STAPLES. In terms of basic human needs, the South Asia
region contains the world's single largest concentration of extreme-
ly poor people, and it also, as Ambassador Murphy has noted, con-
tains one country-Pakistan-whose immediate neighbor-Afghan-
istan-is partly, if not very successfully, occupied by Soviet troops.
In South Asia our economic assistance programs concentrate on a
small number of critical basic problems. These include increasing
food production, helping in efforts to slow population growth, work-
ing on basic health care systems, and improving the management
of natural resource systems. Our programs are very important
sources of support in such subjects as agriculture and forestry re-
search, and throughout the region we continue to be a major factor
in basic institution building.
As concerns economic policy, most observers believe that over
the past several years of world recession, the South Asian govern-
ments, by and large, have managed their economies well. None has
been in danger of default. All are moving in the direction of eco-
nomic liberalization, with increased emphasis on private sector
growth and export performance.
We believe their economic and social development programs are
eminently worthy of continued U.S. support both for the basic
human needs at stake and because of the essential soundness of
their economic development policies.
I also would be pleased to respond to any questions you may
have.
[Mr. Staples' prepared statement follows:]
496
STATEMENT BY EUGENE S. STAPLES
DEPUTY ASSISTANT ADMINISTRATOR, BUREAU FOR ASIA
AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to testify on behalf of the Asia
Bureau's request for Fiscal Year 1985, with emphasis on South Asia.
Our request for South Asian countries includes $276 million in
Development Assistance for Bangladesh, India, Pakistan, Sri Lanka,
and Nepal; $200 million in Economic Support Funds for Pakistan; and
$311 million in P.L. 480 assistance under Titles I, II, and III.
This represents nearly two-thirds of the total Asia Bureau economic
assistance, and five-sixths of the food aid.
This allocation recognizes the political importance of these
countries to the United States, including Pakistan's status as a
front-line country, and its efforts to stem production of illicit
narcotics.
Also, the great majority of the world's poor people live
in South Asia.
Many health and other quality of life indicators in
South Asia are well below those elsewhere in the underdeveloped
world.
Increasing food production and decreasing population growth
rates continue to be pressing needs, although important successes
have been achieved in recent years.
497
South Asian countries were hard hit by the oil price increase of the
early 1970s.
There were considerable economic improvements in the
late 1970s and early 1980s, despite the worldwide recession.
Agricultural performance improved in the late 1970s due to good
weather, improved policies, and the cumulative effects of
development investment in that sector.
Workers' remittances also
made a difference.
Thus, the countries of South Asia started the
1980s desperately poor, but remarkably resilient economically, due
in considerable measure to wise economic management.
A.I.D. PRIORITIES
Poverty alleviation remains the underlying purpose of A.I.D.
programs in South Asia.
Economic growth in the context of equitable
social and economic policies is essential to this goal.
Our approach encourages sound economic policies, supports indigenous
scientific capability and the development of technology,
and
stimulates private institutions critical to the economic development
process.
Policy dialogue is essential.
In all of our cooperating countries
we work with host governments to improve economic and development
programs and priorities, and remove obstacles to development that
498
may be posed by inefficient policies.
A good example is the shift
in Bangladesh fertilizer sales to the private sector.
We support the application of effective technologies and
institutional frameworks, in which the United States is relatively
strong; thus technical assistance is a large part of the program,
although availability of grant funds may be a limiting factor.
But
capital assistance, carefully linked to technical assistance and
training, will also be needed to demonstrate institutional and
technical solutions to complex problems, and to increase
effectiveness of policy dialogue.
Private enterprise programming requires strong and creative efforts
in policy dialogue, institutional strengthening, development
finance, training, and information exchange. The private sector is
an important dinension of development, and we can be helpful in this
area.
The large and very poor countries of South Asia remain the region's,
and perhaps the world's, major development challenge. We have
helped to lay the foundations for sustained growth and development
in the subcontinent. We must ontinue a significant contribution to
the development effort of these countries.
499
BANGLADESH
For FY 1985, we are requesting $82 million in DA (a 4% increase over
1983), $75 million in Title I/III, and $23 million Title II for
Bangladesh.
The A.I.D. program expresses our humanitarian concern
for one of the world's poorest countries.
In addition, the United
States has an interest in working effectively with countries which
are adopting sound economic policies in pursuit of development.
A.I.D. will continue to support policy reform in Bangladesh.
During 1983, a slight increase in GNP and per capita income was
evident. Remittances from Bangladeshis working abroad were
unexpectedly strong, although 1984 may see slower growth in this
There was a partial recovery in the demand for jute, and
area.
harvests were excellent, thanks to good weather and increased
irrigation use.
Government policy reforms instituted in 1982 to
reinstate fiscal discipline, mobilize domestic resources and
encourage private sector involvement in economic development
continued to have a positive impact on the economy.
Nevertheless,
the country remains in a recession.
Despite vigorous efforts to
promote private investment, the industrial sector lagged. Though
modest overall growth was achieved in 1983, Bangladesh remains
extremely poor; its GNP per capita is estimated at only $142.
Agricultural production increases were mostly absorbed by the high
500
continuing rate of population growth.
At 1,600 people per square
mile, Bangladesh is the most densely populated agrarian country in
the world.
A progressive relaxation of the more rigorous aspects of martial law
and a gradual transition to a more open style of government took
place during 1983.
The Martial Law Administration has; from the
outset, pledged itself to a return to representative constitutional
government.
Presidential and parliamentary elections have been
scheduled for May and November 1984, respectively.
A.I.D. assistance strategy is aimed at reducing human fertility,
increasing foodgrain production, and supporting rural industries and
energy development in ways which facilitate agricultural production
and employment for the growing population.
In accordance with Bangladesh's own development priorities, A.I.D.'s
primary development objective is the reduction of fertility.
There
has been a significant increase in knowledge about family planning
methods since the early 1970s.
For example, the percentage of women
knowing about oral contraception more than doubled to 95 percent.
Use of contraception by married women has increased from 7.7 to 18.6
percent since 1975.
There is evidence to indicate that there is
still a considerable unmet demand for family planning services.
In
501
areas where high quality family planning services are readily
accessible, contraceptive prevalence rates have reached up to 40
percent.
In FY 1985, A.I.D. will continue to support the Bangladesh family
planning effort with commodities, participant training, local cost
financing for voluntary sterilization, a wide range of
community-based family planning projects of non-governmental
organizations, and a highly successful contraceptive retail sales
program.
In the agricultural sector, the A.I.D. program will promote improved
access to credit for agriculture and rural industries, increased
farmer access to agricultural inputs such as fertilizer and
irrigation equipment, and improved on-farm research.
Greater
private sector participation in the distribution of inputs will be
encouraged, and improved agricultural policies affecting foodgrain
pricing and marketing will be sought. The latter is the target of
PL 480 Title III and the Development Assistance effort.
A Food for Work III project will expand the rural roads system begun
under ito: predecessor projects, and include the construction of
small bridges and culverts to enhance the developmental value of the
roads.
The program will remain A.I.D.'s primary vehicle for
providing seasonal off-farm employment.
502
INDIA
In FY 1985 we are requesting $87 million in Development Assistance
and $125 million in P.L. 480 Title II food assistance through the
voluntary agencies. These represent a slight decrease from the FY
1983 Development Assistance level, and a four percent increase in
P.L. 480 Title II.
India is a major economic and political force in Asia
- a critical
factor in the peace and stability of the region. Our overall policy
toward India (reinforced by Mrs. Gandhi's 1982 trip to the United
States) is to conduct a cordial high-level dialogue on issues of
regional and global concern.
Our objective is to enhance
understanding in areas where our views differ, and develop channels
for cooperation in areas of mutual interest, such as economics and
commerce, science and technology, and education, and culture.
The
A.I.D. program represents U.$. commitment to India's continued
progress in economic development, with emphasis on improving
conditions for the poor majority.
Overall, India has enjoyed a decade of steady economic growth and a
well managed economy. Following a difficult year in 1982-83 due to
poor monsoon rains, projections for economic growth are again
rising. The potential for growth, however, is hampered by
.
503
continuing power shortages which are adversely affecting
agricultural production and industrial growth, and holding down net
gains in GNP.
The dramatic 50% increase in domestic oil production (in 1981-82
over the previous year), combined with lower international oil
prices, eased the pressure on India's balance of payments. It helped
offset the adverse impact of the world recession on exports, and of
the poor nonsoon rains which gave rise to increased food imports.
The Indian economy seems to be making up the ground lost last year.
Population pressures and growing resource scarcities pose
fundamental policy choices for the Government of India. In
response, it is gradually liberalizing its economic controls to
mobilize the private sector and generate greater economic growth.
recent promising sign was the loosening of import restrictions on
essential technology in certain key areas, a development which
A
should facilitate Indo-U.S. trade.
Through long-term efforts, India has reduced its population growth
rate to 2.2% and its crude birth rate to 36 per thousand. However,
the Government of India recognizes that further efforts are needed
to keep the population growth rate from wiping out development
gains. The Government is vigorously expanding its primary health
care system, including family planning services, and support for
indice...
504
other factors influencing adoption of a small family norm, such as
raising rural employment, better water and sanitation, and
elementary education.
U.S. assistance programs are designed to help India overcome its
persistent poverty through technological and institutional change.
The FY 1985 program emphasizes:
--Improved management of irrigation systems, support for water
management institutions, and emphasis on agricultural research,
all to increase agricultural production.
The combination of
better use of water, increased food production and enhanced
rural employment are the keys to poverty reduction in India.
These efforts are the centerpiece of A.I.D.'s program, and will
account for the majority of the proposed FY 1985 DA funding;
--Expansion of rural energy supplies and strengthening of
institutions and community efforts to protect forestry resources;
--Marketing and commercial dissemination of family planning
supplies;
--Biomedical research and other science and technology
approaches to development problems;
505
--Upgrading nationwide nutrition programs, including those using
U.S.-donated food under P.L. 480; and
--Use of P.L. 480 Title II commodities to PVOs to increase food
supplies to children and other nutritionally vulnerable groups,
and to promote agricultural development.
PAKISTAN
For fiscal year 1985 we are requesting $200 million in Economic
Support Funds, $50 million in Development Assistance and $50 million
in P.L. 480 Title I food aid.
This represents the fourth tranche of
1
the package of economic and food aid for the period FY 1982-87,
which we negotiated with the Government of Pakistan in 1981.
In
view of Pakistan's location on the Persian Gulf and its borders with
Afghanistan, China and India, the country occupies an important
place in U.S. strategic considerations.
Pakistan has taken a major
role in responding to the 1979 Soviet invasion of Afghanistan on the
diplomatic front and in providing a haven for over two million
Afghan refugees.
While Pakistan's economy has enjoyed impressive growth and declining
inflation over the past six years, its immediate economic prospects
depend on a number of key factors:
34-045 0-84-33
506
--A precarious balance of payments situation is the most serious
and immediate problem facing the country. Though IMF support
and high levels of overseas workers' remittances have helped to
narrow the current account deficit, the growth of remittances
has slowed dramatically over the past year.
The limited
potential for export earnings, the continually rising import
:
bill, and a sharp increase in debt service payments are key
factors affecting Pakistan's balance of payments.
I
1
--While an input-based agricultural growth strategy is yielding
some results, Pakistan must address fundamental problems of
agricultural pricing, marketing and research.
--Continued growth in the industrial sector depends upon a
1
revival of private sector confidence stimulated by deregulation
and investment incentives.
--Pakistan's population growth rate of three percent is among
the highest in the world. It offsets gains from productive
investment and undermines political stability.
The objectives of our assistance program are to provide Pakistan
with short-term balance of payments support and to stimulate the
country's long-term economic and social development. Our 23 ongoing
and planned development projects are designed to assist Government
507
of Pakistan policy formation in the agriculture, population, health
and energy sectors, with special emphasis upon private sector
development and narcotics reduction.
The main beneficiaries of our assistance are the rural poor, who
will gain from increases in agricultural production and higher rural
incomes, improved rural health services, reduced population growth
rates, and increased energy production.
Narcotics suppression is a priority U.S. program objective in
Pakistan, A.I.D.'s Gadoon-Amazai Area Development Project is
designed to transform Pakistan's principal opium poppy growing area
into an
area with a more diversified agricultural economy, with
alternative sources of income for farmers currently engaged in poppy
cultivation.
In 1983, just prior to the project's inception, the
Gadoon-Amazai area accounted for roughly half of the opium poppy
produced in Pakistan. A.I.D. is also working closely with the
Government and other multilateral and bilateral donors to implement
a Special Development and Enforcement Plan for the complete
eradication of all opium poppy production in Pakistan.
As noted earlier, Pakistan's population growth rate of three percent
continues to be a major constraint to Pakistan's development.
Fewer
than five percent of Pakistani couples have ever used modern means
of contraception, and only 20 percent know how to obtain them.
:
508
A.I.D. is in accord with Government strategies for population
planning
Our short-term approach is to help Pakistan improve
delivery of family planning services through the private sector as
well as through public sector health programs.
However, we realize
$
that broader socio-economic factors determine the demand for family
planning, child-spacing and overall fertility reduction.
Decreased
infant mortality, increased female education and improvements in
female employment and social status are important conditions for
--
increased use of family planning and. eventual declines in population
growth rates. We view our entire project portfolio as a means of
bringing about changes in these socio-economic factors.
SRI LANKA
For FY 1985 we are requesting $41.5 million Development Assistance
and $26 million P.L. 480 Title I and $6 million Title II. These
figures are 10% below the FY 1983 level.
We also anticipate the use
of $ 15 million in Housing Guarantees.
Sri Lanka is one of the
poorer countries in Asia ($300 per capita GNP), but has one of the
best records on meeting the
basic human needs of its people.
It is
1
committed to development with equity, and has taken major steps to
liberalize its economy and place increasing reliance on the private
sector.
We commend and support Sri Lanka for its commitment to
democracy.
Unfortunately, the Government's economic liberalization
LE
509
and divesture actions have slowed recently because of inflation and
recession, and major political and communal problems, which the
Government is working to resolve.
1983 was not a good year for the Sri Lankan economy.
The real GD
growth rate, having already slowed to 5.1% in 1982 from the 6%
average achieved in 1979-81, was expected to fall to about 4.2% (an
18% drop from 1982). This was due partially to the serious communal
disturbances of July 1983, and partially to a drought, which
The lack of
severely affected the Yala rice crop and the tree crop.
rainfall also resulted in daily two-hour power cuts during the last
quarter of 1983, which continue.
Tea production is at its lowest
tea
levels since 1965, but
due entirely to record tea prices
earnings are at an all time high.
The
The 1983 inflation rate was higher than anticipated at 15%.
debt service ratio, which stood at 25% of merchandise exports in
1982, is expected to continue to rise over the next several years.
The present debt service burden is large considering the recent and
prospective export performance.
The Sri Lanka's 1984 capital budget
is programmed to be 8% less than last year's, and the projected
budget deficit is down by 23%, but even these reduced levels are
considered too high by the IMF and the World Bank. "The Finance
Minister did pave the way in his budget presentation for continued
devaluation of the overvalues rupee.
Major structural problems in
510
the economy continue to be the slow growth of exports (both
traditional and non-traditional), excessive protectionism and an
inelastic tax base.
The Government of Sri Lanka remains committed to the basic policies
of economic liberalization and an opening up of the economy.
However, it must deal with these structural imbalances and budgetary
constraints to maintain the support of the aid and international
banking communities and to regain the track to self-sustained
growth.
1
Socio-economic indicators on education and mortality levels show
continued progress and improvements.
The school enrollment rate has
gone up from 79.1% in 1979 to 91.5% in 1981.
The literacy rate
improved from an estimated 78.5% to 86.5% during the same period.
Due to the extensive health care system in the country, the crude
death rate has dropped from 7.8 in 1976 to 6.1 per 1,000 population
in 1981. However, the health care system focuses extensively on
1
curative rather than preventive health care with resultant high
costs, and is faced with a large shortfall in the number of trained
medical personnel.
While these measures speak generally about the achievements in the
area of socio-economic development, they also indicate the growing
socio-economic demands in the years to come. Sri Lanka's population
.: Bari
I
511
will continue to expand, bringing the total population to at least
20 million by the year 2000, an increase of about 5 million or
one-third of the existing population.
A.I.D.'s program in FY 1985 will continue to stress the expansion of
food production, increasing employment and incomes, and human
productivity.
The program concentration in agriculture continues,
with new projects in Mahaweli Agriculture and Rural Development,
Irrigation Systems Management, and Development Training and
Support.
Additional funds will be provided for the large Mahaweli
Basin Development II Project.
A new project in Preventive Health and Family Planning Services
will particularly benefit infants, mothers and malnourished
children.
Funds also will be provided for two significant
environmental health projects, Malaria Control and Water Supply &
Sanitation.
Through P.L. 480 Title I loans and technical assistance,
A.I.D. is
!
encouraging a major long-term plan for investments in food,
agriculture and nutrition.
The focus of the Title II program is on
malnourished children and supplemental food for pregnant and
lactating mothers.
512
:
NEPAL
For Nepal, we are requesting $ 15 million in Development Assistance,
nine percent more than in FY 1983.
King Birendra's December, 1983
visit to Washington provided an opportunity for joint discussions on
Nepal's major development concerns, its commitment to deal
effectively with those concerns, and approaches to maximize the
effectiveness of A.I.D. resources.
It is clear that Nepal values
our assistance highly , and supports our basic development
strategy.
Nepal's economy continues stagnant. Agricultural production was
seriously affected by the weather over the past two years.
Resulting production shortfalls were upward of 20 percent of
"normal" years' production.
These shortfalls affected agricultural
processing industries, and exports declined accordingly.
Gains
continued to be made in other productive sectors, but the share of
non-agricultural sectors in terms of GDP is less than 10 percent.
Inflation continues at a level of 12 percent, reflecting continued
high demand pressure, and imports continued to increase as exports
fell. The balance of payments current account deficit rose from $96
million in 1981 to $200 million in 1983.
Prospects for 1984 are
improving as agricultural production appears to be recovering from
the previous years' drought conditions.
(Way
*****
513
The A.I.D. program in Nepal is directed to humanitarian and
development needs, keyed to Nepal's priorities as set out in its
Sixth Five-Year Plan. Very special attention is given to protection
of Nepal's natural resources,
a problem that has captured the
attention of the world.
Existing projects focus on agricultural and
rural area development, environmental degradation in the hill areas,
family planning and health, and teacher training. All projects
incorporate institution building, technology transfer, and manpower
training elements.
In FY 1985, we will start a new agricultural research and production
project to exploit gains being made in adaptive research on higher
yielding varieties of grain crops.
We will move into the second
phase of an effort to create a high-caliber agricultural institution
(Institute of Agriculture and Animal Sciences) through a joint
project with the World Bank.
On-going rural development and
resource conservation efforts will be made more effective by
incorporating conclusions reached in mid-term evaluations of two
projects in these areas.
A new project in female education will test alternative approaches
to increasing girls' participation in the school system, and
evaluating possible incentives for their longer retention in the
system, By providing increased and longer educational opportunities
514
for girls and women, a heightened awareness and motivation for
family planning is expected to contribute to reduction of population
growth rates. We will continue addressing the service delivery
aspects of the population problem through our integrated rural
health and family planning project.
CONCLUSION
This summarizes the U.S. assistance request for South Asia for FY
1985.
We are working on some new approaches while holding to our
basic purpose of helping countries meet the basic human needs of
their citizens.
I appreciate this opportunity to appear before you today, and am
ready to answer your questions.
Senator BOSCHWITZ. Let me ask you-any one of you-this ques-
tion. As you know all of the FMS loans, as well as the grants, of
course, are to be on budget this year. It is not clear to me, now that
they are on budget, what the terms of the concessional loans will
be.
Ambassador Murphy, or General Tixier, are you familiar with
this? What will the terms of the loans be?
Ambassador MURPHY. It is my understanding, Mr. Chairman,
that the terms of the loans-well, there is no one answer to that.
There is a difference in grace periods, for instance, on these loans
but the interest rates will vary between 3 and 5 percent.
I believe that each one is looked at case by case.
Senator BOSCHWITZ. So they will be truly concessional at the 3- to
5-percent range.
Ambassador MURPHY. Yes, sir. That is about 9 percent, I guess,
maximum below the commercial rates.
Senator BOSCHWITZ. None of you alluded to the debt problem,
except perhaps Mr. Staples, who says that the economies are doing
well in his neck of the woods, but I notice in a number of nations,
countries like Morocco, Tunisia, Israel, and others are having great
repayment problems. In the case of at least one-Tunisia—the
amount of their aid does not even come near their repayment obli-
gations.
Some of these countries have very high interest rates attached to
their loans. It would seem to me that the loans, as they are refi-
nanced in this country, certainly are not refinanced at the rates
that we are charging them.
Has there been any examination of the possibility of adjusting
some of those rates from earlier loans? Would you need legislation?
.
515
I don't believe that we have been approached for legislation on
that. Can it be done administratively?
Ambassador MURPHY. Would this be principally the FMS, Mr.
Chairman?
Senator BOSCHWITZ. Sure. It is principally the FMS.
General TIXIER. Sir, we are looking at that, and we are aware of
that problem. It is now under study between DSAA and State De-
partment to see what can be done. Several of those countries have
asked for that; Egypt in particular has asked for some relief, and
that is being studied to see what we can do about that.
Ambassador MURPHY. Mr. Chairman, did you mention Tunisia as
a case in point where they were not getting assistance in a sum
greater than what they are expected to repay?
Senator BOSCHWITZ. That is correct.
Ambassador MURPHY. My understanding is that we, in making a
request for, I believe, $75 million, are above the repayment level,
considerably above that, if we put together the concessional rates,
loans, the MAP assistance, Public Law 480 title I and Public Law
480 title II.
Senator BOSCHWITZ. Well, not all of those things are purposeful.
Why don't you just call them loan repayment grants?
Besides, as I see all of that, there is a total of about $24 or $25
million in grants, including MAP which is $15 million, IMET which
is $1.7, and Public Law 480. What are they going to do—repay us
in wheat?
And it looks like their obligations this year are somewhat larger,
about $30 million; 1985 gets considerably worse.
To return for a moment, General Tixier, to that problem, be-
cause I do not think we should leave it so rapidly, do you have the
authority to change the loan rates? You say you are looking at it.
General TIXIER. That is what we are studying now, sir, to see
how we can do that. I do not know if we have that authority or not,
right off the top of my head.
I know that we are looking at what we can do in order to solve
or help solve the problem. Of course, one step is by going to the
grant program. That doesn't help the people right now, not at all,
because that will be in the outyears. Their immediate problem is
meeting the interest payments schedules that they have now.
Senator BOSCHWITZ. And principal.
General TIXIER. Yes; and principal. But for so many of them, the
principal is delayed. They will have a grace period before they
start repaying the principal.
Senator BOSCHWITZ. These grace periods, in many instances, are
evaporating. They are coming to an end.
General TIXIER. Yes, sir; that is correct.
And that is the problem that we are trying to figure out how to
resolve.
Senator BOSCHWITZ. When they make loans, and during the peri-
ods of particularly high interest rates in this country when the
FFB rates were 13, 14 points and some of these loans were made
at that rate—the loan rate was locked in for a 30-year period or
whatever the period of the loan was. I presume that we did not go
out and borrow that money for 30 years at that rate.
516
I
Are you familiar with how the Government debt was structured
with respect to that? I presume we are turning it over into lower
rates. I do not see why we cannot pass on those lower rates.
General TIXIER. As I understand it, sir, when the loan is made,
when the money is committed, the rate was the going rate at that
time.
Senator BOSCHWITZ. That is correct.
General TIXIER. And there was no provision to lower those rates.
What has happened in several of those countries is, things-you
know, with the oil situation, with the lack of revenues that they
had thought were coming in, combined with urgency on their part
to buy some of the things that they needed to enhance their securi-
ty, I think that was something that fell through the crack.
Senator BOSCHWITZ. We certainly did not go out and borrow the
money for 30 years--the U.S. Government at those rates-or I sure
hope we did not.
As a result, it would seem to me that we could more equitably
reflect the actual rates at which we borrow.
May I ask this other question? In the event some of the moneys
that we committed—I didn't want to say “obligated”—but that we
committed-have not been used I presume that the interest rate at
the time they are used will govern, and not at the time they were
committed?
General TIXIER. That is correct. Yes, sir.
I was just passed information that they, in fact, did borrow at the
market rates. We are now locked into those.
Senator BOSCHWITZ. For 30 years?
General TIXIER. And we cannot refinance it.
Senator BOSCHWITZ. For 30 years? I am not familiar that the U.S.
Treasury goes out and does that.
General TIXIER. It is for whatever the term of loan was at that
time, for however long they had the money.
Senator BOSCHWITZ. I would like your colleague to check that
out, and we will as well.
General TIXIER. We will provide that for the record.
Senator Boschwitz. That would seem to me to be a way to give
some relief.
I am not sufficiently familiar with the financing of the Federal
debt to know whether or not 30-year obligations have been under-
taken, but I cannot believe that, at the top of the market rates,
they went out and borrowed for 30 years.
General- TIXIER. I believe, sir, that the rates are not necessarily
for 30 years. There is a time period to pay back. I am not sure that
they are all for 30 years. Some might be for 10 years for repay-
ments.
Senator BOSCHWITZ. You mean some of the loans that we made?
General TIXIER. Yes, sir.
Senator BOSCHWITZ. I agree with that.
General TIXIER. We will provide that information to you for the
record.
[As of the date of publication, the information referred to had
not been supplied.]
Senator BOSCHWITZ. We ought to take a look at that together, to
see whether or not some relief can be given in that regard.
*77*
---- ***TI*
.1993
517
..........
Many people say that the arms that we are selling into that area
and into the Middle East area are just contributing to a regional
arms race. I wonder, Mr. Ambassador, if you could review a list of
major sales made into the region, not only by ourselves, but the
Soviet Union, Great Britain, France, and China in the last couple
of years.
Ambassador MURPHY. The one figure, Mr. Chairman, that I have
in mind, other that our own sales, is that of the Soviet Union to
Syria in the period following the summer of 1982. We estimate that
was in excess of $2 billion.
I do not have for ready reference the figures on France, China,
and Britain, but I will be happy to supply those for the record.
Senator BOSCHWITZ. That would be just fine.
[The information referred to follows:)
DELIVERIES OF MAJOR WEAPONS TO THE NEAR EAST AND SOUTH ASIA1 BY THE MAJOR ARMS
SUPPLIERS, 1980-1983
Supplier
United
States
U.S.S.R.
France
United
Kingdom
PRC
Italy
Others2
1,700
2,660
4,965
2,790
3,200
5,115
60
335
485
145
90
140
480
470
145
20
110
280
1,410
8,330
440
3
Ground Force weapons:
Tanks and self-propelled guns.
Artillery .........
Light armor
Air Force weapons:
Supersonic combat aircraft .....
Subsonic combat aircraft4
Helicopters 5 .........
Other military aircraft
220
5
255
5
5
20
1,125
65
515
125
150
45
220
20
60
5
15
20
100
40
60
335
100
25
Naval weapons:
3
4
3
13
2
24
Major surface combatants?
Minor surface combatants 8
Submarines .......
Missile patrol boats...........
Air defense missiles:
SAM'S 9
17
17 .....
5
17
19
2
12
100
1
12
6
...!!
....ii..
2,160
5,490
830
180
20
4,800
1 Nations included in this region are: Afghanistan, Algeria, Bahrain, Bangladesh, Egypt, Iran, Iraq, Israel, Jordan, Kuwait
, Lebanon, Libya, Morocco,
Nepal, Oman, Pakistan, Qatar, Saudi Arabia, Sri Lanka, Syria, Tunisia, the United Arab Emirates, North Yemen, and South Yemen.
? "Other" arms suppliers include the FRG and the smaller industrialized nations of Western Europe, the non-Soviet members of the Warsaw Pact,
and emerging arms makers such as Brazil. Although they do not produce the full range of modern arms, these suppliers have in many cases carved
out niches for themselves in the new-weapons market, for example, Swiss turboprop training planes, or Brazilian wheeled light armor. In many
cases, "other" suppliers retransfer used arms produced elsewhere (e.g., Egyptian transfers of Soviet-supplied weapons to Iraq).
Light armor includes wheeled and tracked armored personnel carriers, armored reconnaissance vehicles, and armored infantry combat vehicles.
Typically armed with machine guns, but some carry light cannon.
Subsonic combat aircraft means primarily jet trainers, most of which can be configured with rockets, guns, bombs or air-to-air missiles to
perform limited combat roles. Two-place trainer" versions of supersonic combat aircraft
, however, are counted in that category.
* Embraces both transport helicopters, light observation/communications helicopters, and armed attack helicopters, the former type predominating.
8 Primarily military.cargo transports, or dual-use passenger and utility aircraft if delivered to regional defense ministries or armed services, but
also includes maritime patrol/surveillance aircraft and propeller-driven primary flight trainers.
? Major surface combatants are warships of frigate and larger size, whether gun- or missile-armed, and the larger amphibious support ships such
as tank landing ships, underway replenishment ships, and fleet oiters.
8 Includes gun- or torpedo-armed patrol boats, infantry or tank landing craft, yard auxiliaries, and such smaller naval units.
8. Embraces all categories of ground or naval based surface-to-air missiles, from shoulder-fired types (which predominate in this category) to
mobile and fixed SAM Systems. SĂM launchers are not included.
Senator BOSCHWITZ. As I look at the situations that exist in some
of the Arab countries, once again mentioning Tunisia and also Mo-
rocco, perhaps to some degree Yemen, I wonder what aid these
countries are receiving from some of their more affluent Arab
brethren.
Ambassador MURPHY. We can put that together for you, Mr.
Chairman.
518
+
As best we know, the loans, the assistance is not always made
public, but we can make a stab at that.
The information referred to follows:]
ARAB DEVELOPMENT FUNDS
In recent years, Tunisia has received increased assistance from the Arab develop-
ment funds, in particular from the Arab Fund for Economic and Social Develop-
ment, the Saudi Fund for Development and the Kuwait Fund. New commitments
from these funds to Tunisia in 1982 totalled $119 million. According to the Tunisian
Government's capital budget figures, drawdowns on previously extended OPEC
donor loans amounted to about $14.3 million in 1982 and $13.7 million in 1983.
There were no grants accorded to Tunisia by Arab countries except for a $10 million
special allocation from Saudi Arabia for disaster relief.
Our current information for Morocco derives from the activities of the donor
group which met in early November 1983 to discuss Morocco's balance of payments
financing gap. The Moroccan Government's estimate of assistance from Saudi
Arabia in 1983 was $170 million; this figure does not include security assistance
which is believed to be sizeable. Other Arab donors in 1983 included Kuwait ($20
million) and the United Arab Emirates ($55 million). In 1982 various Arab develop-
ment funds made commitments to Morocco of $207 million.
Lending to Yemen varies considerably from year to year. Arab donors do not pub-
licize amounts given for budgetary support. The following is our best estimate of
donors and amounts. Saudi Arabia is by far Yemen's largest donor. The Saudis pro-
vide direct budgetary support of at least $100 million per year. Yemen also receives
assistance from Kuwait and the United Arab Emirates. In 1982, the Arab develop-
ment funds made commitments to Yemen of $160 million. One of these funds, the
Saudi Fund has lent Yemen almost $200 million since 1975.
Senator BOSCHWITZ. Perhaps you can outline it a little bit. Cer-
tainly, our obligation does not run deeper than the obligations of
the Arab counties. For instance, in the case of Morocco, what type
of aid are they receiving in a general way and from whom?
Mr. LANGMAID. Mr. Chairman, in the case of Morocco, they re-
ceive-probably the largest donor is Saudi Arabia. The second larg-
est donor is the World Bank. The third probably is the French. We
are probably the fourth largest donor in the case of Morocco.
My recollection is that the Saudis are providing several hundred
million dollars a year to the Moroccan Government for their devel-
opment effort.
Senator BOSCHWITZ. Is that grants or loans?
Mr. LANGMAID. I believe most of that is grants.
In the case of Jordan-
Senator BOSCHWITZ. Pardon me. Why don't you continue with
Morocco just for the moment? You see, the World Bank—that, of
course, would be in the form of loans.
Mr. LANGMAID. That is in the form of loans at standard World
Bank terms.
Senator BOSCHWITZ. And that is also a large amount you say?
Mr. LANGMAID. That has been in the past over the $100 million
level; yes. They consider Morocco one of their principal effort coun-
tries in the area.
Senator BOSCHWITZ. And France?
Mr. LANGMAID. France is a combination of budget payments, in
the sense that the French provide substantial funding for teachers
and the education system in Morocco, as well as grants for techni-
cal assistance. But it is a combination of items-loans and grants.
519
There are also a number of the Arab donor funds which I distin-
guish from the Arab country contributions. Those funds are also
provided on a loan basis, also concessional.
Senator BOSCHWITZ. The Moroccans receive aid from France, but
are effectively blocked from shipping some of their agricultural
goods to the Common Market, I believe.
Mr. LANGMAID. I was not including that in the aid figures, but it
is correct. There are a number of French credit arrangements with
the Moroccan Government for the sale of grain.
Senator BOSCHWITZ. The Moroccans were here, Mr. Ambassador.
I presume that you spoke to them at some length, and the Prime
Minister very forcefully stated his case. He was a very forceful
fellow in general.
He pointed out that the needs of Morocco were great, and that
some countries that did not extend the same friendship, base
rights, whatever, were treated more generously than they are.
How do you respond to that?
Ambassador MURPHY. In preparation for the Prime Minister's
visit, we made a very careful review of our aid assistance program
for Morocco. We did find it possible to supplement the program by
$20 million in Public Law 480.
What the Prime Minister took up in particular was what he felt
was an insufficient attention on the part of the world, of potential
foreign donors, to the 10 years of drought in his country; that had
gone
largely-not unnoticed, but unmeasured as to the devastation
that it brought to the economy. The country has suffered, of course,
from the low prices in the world market for the phosphate produc-
tion from Morocco.
We do value that relationship very much indeed, and I think
that the Prime Minister's visit-and he brought with him five
members of the Moroccan cabinet-was a very valuable one. It
made for a very valuable exchange between Washington and Rabat
on the realities of the Moroccan economy and the prospects for
that economy
I believe that, while we were not able, given this point in the
current fiscal year, to be more forthcoming with him, we will be
looking very hard at the prospects for additional assistance for Mo-
rocco in the coming fiscal years.
He is a very businesslike man and, as you say, Mr. Chairman, a
very forceful man, indeed, in laying out the country's economic dif-
ficulties. We think that the Moroccan Government is making a
very serious effort in its program to stabilize the economic situa-
tion and trying to deal with the grievances of the Moroccan people.
Senator BOSCHWITZ. Well, they have had their problems in that
regard. I notice that their debt repayment schedule is very large in
relation to their economy. I see that they are going to require over
$700 million in concessional financing through 1984, just to meet
the repayment obligations.
I also note that they have had 10 years of drought, but that we
give them no Public Law 480 aid. Why is that?
Mr. LANGMAID. I am not sure of the figures that you are refer-
ring to. We have been providing over $25 million a year in Public
Law 480 title I, and approximately $10 to $15 million in Public Law
480 title II. The addition that the Ambassador referred to was an
520
:
$
increase in Public Law 480 of another $20 million, so we are talk-
ing about something approaching $45 million this year and another
$40 million next year in Public Law 480 food aid.
In addition, it is useful to mention, although it is not carried as
AID, under the Department of Agriculture blended credit program,
we are providing over $250 million in financing for agricultural ex-
ports to Morocco.
Senator BOSCHWITZ. You are quite correct. Pardon me. That was
not on my summary page.
Let me turn for a moment to Israel which, as you know, is
having also its share of problems. All these countries are having
their share of problems with respect to repayment. It is very likely
that we are going to increase in this committee, as has occurred in
the House, the amount of aid. It is a question of how much in the
case of Israel.
I wonder, Mr. Ambassador, if you would assess some of the re-
forms that they are making with respect to their budget and
whether or not you feel that will alleviate the current economic
crisis they are facing.
Ambassador MURPHY. We did have the opportunity, Mr. Chair-
man, in that last week to exchange views with the Finance Minis-
ter of Israel, Mr. Cohen-Orgad. He laid out the plans in terms of
the budget submitted to the Knesset by the Israeli Government.
We regard it as a good first step.
It is a program which, if the Knesset accepts it, will certainly
move the Israeli budget into a more austere phase. It is going to
have to be supported by monetary and wage policy measures which
are always difficult to apply. But we feel that the administration's
submission to the Congress of, I believe, $850 million of economic
supporting funds is a significant political economic contribution-
excuse me policy decision, economic contribution to the Israeli
economy.
We are concerned on the broader issue as aid is increased above
the proposed level of the effect of crowding out programs in many
other countries around the world.
Senator BOSCHWITZ. Well, we will increase the number overall.
We are concerned about that crowding out, too. We advised the
State Department that they should not come to us with an unreal-
istic figure, because then the crowding out would occur, and then
the State Department would talk to us and say the crowding out is
occurring, even as they knew it would.
So this year apparently, we are just going to add to the overall
figure, which perhaps will make the whole bill more difficult to
cope with legislatively. But we agree that the crowding out should
not occur.
Pardon me for interrupting you, Mr. Ambassador. Had you con-
cluded your comment?
Ambassador MURPHY. Yes. We are continuing in very close con-
tact with the Government of Israel on the issue of both the level of
our assistance and the need for long-term planning of the economy.
With the adoption of appropriate economic policies, we are con-
vinced that the Israeli economy can be turned around, that it can
be
put into a healthier condition. And the Finance Minister did ex-
plain in great detail, both to our experts in the Department and to
521
some outside economic consultants, his plan. I think all agreed it is
a good first step.
Senator BOSCHWITZ. Let me return to a line of questioning that I
began earlier, and then we moved away from it after we moved
away from Morocco. That is, the aid that is being extended to the
Arab States by their wealthier brethren.
I think Mr. Langmaid, you began to speak about Jordan, and I
did not want to leave the subject of Morocco at that moment.
Would you proceed with the extent of aid?
Mr. LANGMAID. Yes; I had mentioned Jordan after I had finished
with Morocco, as another country which is a major recipient of
funds from its Arab brethren.
In the case of Jordan, there was an agreement several years ago
which involved a number of Arab countries to provide support to
Jordan, which totaled something approaching $1.1 or $1.2 billion.
Unfortunately, the levels provides under that agreement have
never really fulfilled the terms of the agreement and the levels are
somewhat less. But in the last year, I believe Jordan received some-
thing over $500 or $550 million, principally from Saudi Arabia, but
from others also. My understanding is that that is all on grant
terms.
Senator BOSCHWITZ. What about the other countries? Tunisia?
Mr. LANGMAID. Tunisia I am less informed on. My sense is that
there are fewer grants in that relationship. But the Arab funds are
active in Tunisia, such organizations as the Kuwaiti Fund, the
OAEP Fund, et cetera. That would be on loan terms.
In the case of Yemen, with which I am somewhat more familiar,
there are sizable grants from Saudi Arabia as well as concessional
development loan projects from the Arab funds. Those clearly
exceed several hundred million dollars. Saudi Arabia is probably
the largest donor in the case of Yemen.
In the case of Egypt, there are virtually no funds from any of the
Arab States.
Senator BOSCHWITZ. Does that look like it might change? That is,
the Arab help to Egypt?
Ambassador MURPHY. Arab help to Egypt, sir?
Senator BOSCHWITZ. Yes.
mbassador MURPHY. I would not expect a public change in the
immediate future. but we have some reports of private funds
moving into the Egyptian economy, investments and some arrange-
ments on loans which are sort of quasi-official. But I think open
programs of economic assistance, probably not in the immediate
future.
As Egypt moves back into a closer relationship with the Arab
world, I think that that possibility certainly is going to come much
nearer.
Senator BOSCHWITZ. As I indicated earlier, Mr. Langmaid, there
was a great deal of talk about your programs in Egypt. Certainly,
here in the committee, we have sometimes expressed our dismay
about their pace.
Apparently, there is $103 million that was deobligated and is
now going to be reobligated, and the Egyptians are anxious to have
that in cash to assist them in their payments problems. They also
are seeking a couple of hundred million dollars of the ESF funds in
34-045 0-84-34
522
cash for the purpose of assisting them in their repayment prob-
lems.
What is the attitude of the Department, Ambassador Murphy,
and of AID with respect to that? Either one of you can respond.
Ambassador MURPHY. On the $103 million requested, that that
be in the form of a cash transfer, we would favor it. The basic ra-
tionale would be that we would see it as support for economic
reform measures and for steps, very positive steps, taken in terms
of increasing democratic participation in the Egyptian Govern-
ment.
We see the present Egyptian Government as clearly committed
to economic reform. I would cite in that regard the fact that, for
the first time in 10 years, you have had a very rapid series of steps,
measures taken to raise energy prices in Egypt for the consumers.
This is not an easy political decision, and yet the Egyptian leader-
ship has faced that, and they have raised in five separate bites the
cost of energy provided.
The President of Egypt publicly has addressed the need for eco-
nomic reform. He does not mince words with his own people about
the difficulties that that is going to cause for the ordinary citizen,
but he accepts and has mobilized the government behind him. He
accepts the need for a drive on economic reform.
This is all, of course, as in any country, going to be influenced by
the leadership's judgment on how fast you can move without upset-
ting stability. But we certainly want to record our appreciation of
his leadership in that area.
Mr. LANGMAID. Mr. Chairman, with regard to the $103 million of
deobligated money which is up for reobligation that the Ambassa-
dor refers to, I think it is also worthwhile to note that these funds
came from a number of agreements going back over several years.
And in considering making them available rapidly to the Egyptian
Government, we took that into account.
This is money that they had expected for some time. I think it is
also a function of their strong urging and our political relationship
that we wanted to go ahead and provide this as a cash transfer for
the $103 million.
With regard to the other half of your question as I understood it,
the request for $200 million--
Senator BOSCHWITZ. Excuse me. Before you leave that half of the
question, did you just say that the $103 million will be transferred
to them in cash to apply to their financial obligations, their inter-
est payments to us?
Mr. LANGMAID. Their request to us, which we have acceded to
and presented to the Congress in the form of a notification was for
a cash grant of $103 million. That is correct.
Senator BOSCHWITZ. Now, the other half of the question.
Mr. LANGMAID. As for the other half of your question, sir, in
terms of the $200 million, we have had a request from the govern-
ment that in their future program, which we understood to be
starting with the fiscal year 1985 program, they would like $200
million of that provided as a cash grant.
Our response has been that in the current context, we do not be-
lieve there is a basis for providing that kind of cash as part of the
program; that in terms of the development objectives we have, we
523
would prefer maintaining the program as a project program, so
that we can be sure the funds are spent on activities which we can
defend before you and the people as being economically defensible
in the Egyptian context.
We have also said, however, that were there to be a reform
effort, whose success depended upon rapidly disbursing aid, we
vould be delighted to change our minds and look at the issue more
carefully in providing grants of cash in the future.
Senator BOSCHWITZ. I gather from those statements that the
State Department and AID are at opposite poles.
Ambassador MURPHY. I should have added, Mr. Chairman, that
in saying that we favor it, we would favor it if tied to certain basic
economic reform measures and if tied into an IMF economic reform
program.
Senator BOSCHWITZ. Are you going to give them the money or
not?
Ambassador MURPHY. I am sorry, sir?
Senator BOSCHWITZ. I did not follow that altogether.
Ambassador MURPHY. Well, our attitude, when I said that we
would favor the transfer in the form of the cash transfer, there is a
condition there that it would be tied to further basic economic
reform measures.
Mr. LANGMAID. I am sorry, Mr. Chairman. I may have misunder-
stood the Ambassador. I thought his original statement referred to
the $103 million, and I was making a distinction.
Senator BOSCHWITZ. I thought his statement referred to $200 mil-
lion.
Ambassador MURPHY. $200 million was the amount that I took.
Mr. LANGMAID. I see. Thank you.
Senator BOSCHWITZ. So what are you going to do? Are you going
to give them the money or not?
Ambassador MURPHY. We are going to resolve our dispute, Mr.
Chairman
Senator BOSCHWITZ. Would you get back to me on that?
Ambassador MURPHY. I will, sir.
Senator BOSCHWITZ. As I look at the repayment schedule for the
Egyptians, I note that they are now repaying only interest, $370
million a year, and they have not even gotten to the principal part.
The Israelis, too, have a very substantial repayment, almost entire-
ly of interest as well.
I think it is really essential that we examine the rates under
which these loans have been made and see whether or not they
have been refinanced in our own country at lower rates. In the
event that they have, then we perhaps can either legislatively or
administratively, as the case may be, make some changes so that
we can lower the rates of interest if our own payments are at a
lesser rate.
Senator MATHIAS. Is the chairman referring to ESF funding?
Senator BOSCHWITZ. I am referring, Senator, to some of the loans,
principally FMS loans, that were made to the countries in question
at a time when rates were extremely high at 13, 14 percent, and
those rates are locked in for a 30-year period.
I cannot believe that the Treasury has gone out and borrowed at
13 or 14 percent for the entirety of the 30 years. They may have
524
made a short-term loan, and if they refinance that loan at a lower
rate, perhaps we can pass that lower rate on to the nations in-
volved.
Senator MATHIAS. I hope I am wrong, but the day may come
when a 13-percent loan would look pretty good.
Senator BOSCHWITZ. Well, I trust that you are wrong.
Senator MATHIAS. You may want to grab all that 13-percent
money you can get.
Senator BOSCHWITZ. Economic history would not seem to support
your rather dour prediction.
Senator MATHIAS. I sincerely hope that those fears are ground-
less.
Senator BOSCHWITZ. As you may know, in the history of our
country, those kinds of rates have not existed except in wartime oc-
casionally, and then again in the late 1970's and early 1980's.
I have been questioning the witnesses for some time, so I would
yield to Senator Sarbanes.
Senator SARBANES. I will defer to Senator Mathias.
Senator BOSCHWITZ. He defers to you, Senator, in the event that
you have some questions.
Senator MATHIAS. Thank you.
I met, as you did, with the Finance Minister of Israel within the
past several weeks, and I understand the concern that is felt not
only by the Finance Minister himself, but by his government over
the economic burdens that Israel not only is carrying, but will
carry, as the chairman's question just now suggests.
I know when Secretary Shultz was here recently, he suggested
that some of the military programs, the security programs, would
be grant programs to relieve this very problem of the service of the
debt.
Is the administration considering, both in the case of Israel and
in the case of Egypt, making some portion of the ESF funding cash
grant?
Mr. LANGMAID. Senator, in the case of both Israel and Egypt,
ESF is all grant. In the case of Israel it is all cash grant.
Senator MATHIAS. And in the case of Egypt it is also?
Mr. LANGMAID. No, sir. In the case of Egypt it is all grant, but it
is provided principally as projects, both technical assistance and
major project grants, but not cash grants.
Senator BOSCHWITZ. If I may comment on that, Senator, we were
discussing that prior to your coming in, because the Egyptians
have requested that some of the ESF be made to grants.
Senator MATHIAS. Cash grant as opposed to project grant?
Senator BOSCHWITZ. That is correct, because their interest repay-
ment obligations are approximately $400 million, slightly less this
year on earlier loans.
Ambassador MURPHY. I had better correct the record now.
Mr. Chairman, I was misinformed on that. We are not in favor of
the $200 million item. I apologize for my error.
Senator BOSCHWITZ. Well, then, pardon me, Senator. The State
Department does not want to make any of the ESF into cash
grants but the Egyptians will receive $103 million of earlier AID
money that is being reobligated in cash grants that they could
apply to their debt payment.
525
Senator MATHIAS. I am slightly confused as to the difference in
the way the ESF grants are treated as between Israel and Egypt. If
you have already discussed that, I can refer to the record.
Mr. LANGMAID. Senator, in the case of Israel, for a number of
years now, the ESF has been provided as a cash transfer payment
on grant terms. That is, a direct grant transfer to their central
bank account in the Federal Reserve Bank of New York.
For several years, we provided it on a quarterly basis, so the
money was divided into four branches and disbursed over the
entire fiscal year. This past year, we provided the full $910 million
appropriated as a cash transfer early in the fiscal year. I believe
the transfer took place late in December.
In the case of Egypt, we have never provided that kind of assist-
ance directly. In the early years, we provided our assistance as
loans and grants, much of it for reconstruction in the Suez Canal
area that had been damaged. In the later years, we have been pro-
viding it partly as a commodity import program, where the funds
are provided directly for purchase of U.S. goods and services as
well as a number of large capital projects and technical assistance
and training activities.
Does that help you, sir?
Senator MATHIAS. Í think that helps me to clear out the cobwebs
and see what is happening.
Now, beginning, say, in 1983, the two accounts were about equal,
were they not?
Mr. LANGMAID. The Eygptian account has always been some $30
or $40 million below. I think the original levels in that sense were
$785 million for Israel and $750 million for Egypt. I am talking
only about ESF, sir.
Senator MATHIAS. That is right; that is what I am asking about.
Then, in this budget, you have requested $850 million ESF for
Israel. And what has been requested for Egypt?
Mr. LANGMAID. In the case of Egypt, we are requesting $750 mil-
lion.
Senator MATHIAS. Is that going to create any problems?
Mr. LANGMAID. The request in our judgment maintains the rela-
tionship because the $850 million includes $65 million for the fi-
nancing of four binational foundations which were started several
years ago under different appropriations. We are proposing to re-
capitalize those with $65 million. For the core program, the request
is still for $785 million. The $65 million for the foundations is addi-
tional, and is required only once.
Senator MATHIAS. We have not only been visited by the Finance
Minister of Israel, but also by the President of Egypt. As I am sure
I do not have to tell you, there is some sensitivity about some
rough equivalence between the two accounts, which at least in the
Egyptian perception is contemplated by the Camp David agree-
ments.
I am just interested if you have had any adverse reaction to the
differential.
Ambassador MURPHY. Yes, Senator. There has been a pretty long
standing dispute on what exactly was promised in the context of
Camp David, and equivalent treatment, comparable treatment, did
that mean precisely the same amounts of money? It is our position
526
that that was not so committed, but equivalent and comparable
treatment was the approach.
Senator MATHIAS. Of course, if you look at the other side of the
coin, on the repayment schedule, as I understand it, in fiscal 1985
we will expect Israel to pay about $1 billion, whereas the Egyptian
repayment schedule will be about $500 million. Are those roughly
accurate figures?
Mr. LANGMAID. They are roughly accurate, Senator. Yes.
Senator MATHIAS. Are they not only roughly accurate, but are
they realistic in the light of the kind of economic conditions that
prevail in both Israel and Egypt?
Mr. LANGMAID. Yes, Senator, I believe they are. In the case of
Egypt, their debt-service ratio is still in a manageable range. It is
difficult, but manageable. The Egyptian balance of payments has in
fact been running a surplus for the last year. The way they
manage their economy they look at their debt as being a budgetary
cost, and their principal concern has been that the budget is under
very tight pressure.
The foreign exchange is available were they to purchase it in the
open market, which is also legal in Egypt, but they have chosen
not to because of the higher budgetary cost that would imply. The
situation is a little bit different than in the case of Israel, where
debt service is a heavy burden. But if we look at Israeli export ca-
pacity, and their demonstrated track record of being able to gener-
ate a high increase in exports when necessary, we believe that the
debt burden is manageable.
Senator MATHIAS. Higher ability to earn foreign exchange?
Mr. LANGMAID. They have been a major exporter both to the
United States and to the European Community for a number of
years, and have until recently been able to generate 8-, 10-, or 12-
percent increases in export earnings per year.
Senator MATHIAS. Very briefly, what is the historical reason for
the Israeli repayment schedule being twice the size of the Egyp-
tian? Is it because of the years of lending that have accumulated?
What is the reason?
Mr. LANGMAID. I believe that is so. If you look at the length of
programs, there were much higher FMS levels to Israel in the ear-
lier years.
Sentor MATHIAS. And they extended over a longer period?
Mr. LANGMAID. Yes, and extended over a longer period. The
Egyptians had no military assistance levels or loans until the re-
sumption of aid in 1975, and the economic aid provided Egypt prior
to the 1967 war was all on AID's most concessional terms, which
have been 40 years and 3 percent.
Senator MATHIAS. I was responding somewhat facetiously to the
chairman's question on interest rates, but let me return to that
question, because I am not sure that we really disposed of it. He is
talking about refinancing at current rates, which we hope some
day will be lower.
Senator BOSCHWITZ. I presume that we did not obligate ourselves
through the Treasury for 30 years at 13 or 14 percent, and that we
are now turning over that debt at lower rates. Whether or not we
are affording those lower rates to other countries is what I want to
find out.
527
Senator MATHIAS. Whether we are passing on that method or
whether there is a disposition to pass it on.
Ambassador MURPHY. We did undertake, Mr. Chairman, to give
you a more detailed answer on this. I am informed that legislative
actions which would change the interest rate would need new ap-
propriations to pay penalties associated with retiring old loans.
Senator BOSCHWITZ. I am not sure I understood the answer. We
need new appropriations for what?
Ambassador MURPHY. We need new appropriations if you retired
an old loan at that high rate of interest to pay the penalties associ-
ated with that, so I think that reinforces what General Tixier was
saying, that we are locked in without legislative action to the rate
of interest that was originally agreed to.
Senator MATHIAS. I have just one further question, Mr. Chair-
man. I see the red light is on, but if you and Senator Sarbanes do
not mind, I will ask this. Let us turn to Lebanon. As I understand
it, there are now substantial unobligated funds in the Lebanon ac-
count. Is that correct?
Ambassador MURPHY. Yes, sir.
Senator MATHIAS. Over $100 million?
Mr. LANGMAID. My understanding, Senator, is that of the $150
million that was appropriated, approximately $120 million remain
unobligated.
Senator MATHIAS. Of course, we all wish that the situation in
Lebanon would improve rapidly, and that stability will be restored,
and the normal kind of operations can be continued, but if that
seems to be delayed, I am wondering if any consideration is being
given to purposes that would be very much in the interest of the
United States of America, purposes that perhaps would not be
adopted specifically in a normal period of time, but which might
very well just fit the present contingency. I am thinking of Ameri-
can institutions in Lebanon which could well use additional fund-
ing, which need additional funding under any circumstances, but
which could get an infusion of funds at this moment, given the cir-
cumstances, given the funding opportunity.
I am thinking of the American University in Beirut, the Ameri-
can University Hospital, the International College. These are all
institutions which represent the best face of America that we can
present anywhere in the world, but particularly in the Middle
East. They are highly respected in the Middle East. They have a
record of positive and constructive service in the Middle East. They
would convey a message of concern by the American people in a
unique way and in a nonpolitical way.
I am wondering if there might be some access to these unobligat-
ed funds for purposes of this sort.
Mr. LANGMAID. Senator, I gave you the technical answer in
terms of the obligations. I did not mention reservation of funds.
There are a number of activities within that remaining balance of
$120 to $125 million which have been reserved for important pur-
poses, for example, emergency relief and disaster assistance in the
current context. We have already reserved $5 million. We may
have to reserve more for that purpose. We also have reserved funds
for AUB and BUC as well as other institutions to deal with both
this year and possibly also with fiscal year 1985.
528
1
;
Senator MATHIAS. I am aware of those reservations, but I am
thinking of something beyond just the minimum stipend that is
necessary to keep the doors open this year, whether this is an op-
portunity to make a demonstration of America's genuine commit-
ment to improving the lives of people in the Middle East, and to do
it in such a substantial way that it will be understood that it is not
just keeping going for a year, but that we are making a commit-
ment which will guarantee, say, that American University will be
there for the next generation. I do not know that we can guarantee
beyond a generation in the human course of events.
I wonder if there has been any thought given to that kind of pro-
gram.
Ambassador MURPHY. We are aware of the very serious financial
position of the university, Senator, and the administration and
anyone who has ever traveled or served in the area knows that
your words are right on the mark about the value of the universi-
ty, of the hospital, of the International College in terms of symbol-
izing American concern for the region and transmitting American
values. They have been for a century, in the case of the university
more than a century, our best advertisement in the whole region.
It would indeed be a nonpolitical gesture to find a way to help pre-
serve that institution over the next generation.
Let us look at it. There is an allotment, I believe, this year of $12
million for the university, but they have suffered heavily in terms
of damage to the installations, and they do need buildup on their
endowment. There is no question of that.
Senator MATHIAS. I think if you would look at it, and I hope sym-
pathetically, I cannot imagine anything that would be more con-
structive at this moment. There have been a lot of bombshells in
Lebanon in recent years, and this would be another kind of bomb-
shell. If they knew that American interest was not only going to be
continued, but guaranteed for some years in the future, I think it
would convey a message that nothing else we could do would suc-
ceed in transmitting.
Thank you, Mr. Chairman.
Senator BOSCHWITZ. Senator Sarbanes.
Senator SARBANES. Thank you, Mr. Chairman.
Secretary Murphy, I wanted to pursue for just a moment, before
I come back to the aid figures, this question of the implementation
of the provisions of the Camp David Accords. I understand that
there is an Israeli Ambassador in Egypt. Is that correct?
Ambassador MURPHY. Yes, Senator.
Senator SARBANES. But not an Egyptian Ambassador in Israel?
Ambassador MURPHY. No, sir. The Egyptian Embassy is under a
Chargé in Israel.
Senator SARBANES. Leave to one side for the moment whether
the equivalent or comparable treatment language in the Camp
David agreements presumed equal figures on assistance. You indi-
cated that it was your view that it did not, as I understand it-is
that correct?
Ambassador MURPHY. Yes, sir.
Senator SARBANES. Would not a premise of Camp David be that
both parties are seeking to implement it in equal measure?
Ambassador MURPHY. Yes, sir.
منعنعنع. من يهتم العمل يضم
نان تسخیرا محتملمع شوبسایت , قشم اعلام
529
Senator SARBANES. Well, that has not been happening, has it?
Ambassador MURPHY. Senator, we have heard from both parties
on this issue of violations of Camp David. I would say as a basic
comment that Camp David is very much alive and well. I know the
words are used about a "cold peace," a "freezing." The fact is, the
last shot was fired 10 years ago, and the treaty has been in effect
for 5 years. You can witness a number of exchanges, high-level ex-
changes between the two governments outside of the routine ex-
changes carried out by their respective embassies.
You have had one Cabinet Minister, as I recall it, last summer
visiting from Israel, and the visit by the Director General of the
Foreign Ministry of Israel returned by his counterpart from the
Egyptian Foreign Minister. In the next couple of days, I under-
stand the Israeli Minister of Trade will be present for the opening
of the Cairo Trade Fair. There is a whole fabric of relationships
which are alive and well.
I think that this is also witnessed in the large number of Israeli
tourists going to Egypt. I know there have been sticking points in
carrying out some of the undertakings in Camp David, but I think
we should be very careful not to knock what has been achieved
there and what is going on. With all of the frustrations, it brought
an evolution in Arab-Israeli relations, and I would say that it is a
very strong platform for the relationship, and is continuing to be
built upon.
Senator SARBANES. That is a very measured answer. I appreciate
it, but I come back to the fact that with respect to a very symbolic
manifestation of the relationship, there is not an Egyptian Ambas-
sador in Israel. This point has been made not just to you, but to
some of the visitors to whom reference has been made earlier.
Now, there is a very significant increase proposed here, is there
not, in terms of the improvement of the terms of aid for Egypt?
Ambassador MURPHY. Yes, sir, for both Egypt and Israel.
Senator SARBANES. Let's examine that for a second. In terms of
the terms this year compared with last year to both countries, the
Egyptians go from what, $465 million in grant to $1.175 billion in
grant?
Ambassador MURPHY. That is FMS only, Senator.
Senator SARBANES. That is an increase of what percentagewise?
Ambassador MURPHY. About 2.5, Senator, about a 2.5, 292 times
increase.
Senator SARBANES. And what is the Israeli increase?
General TIXIER. The Israelis, sir, have also gone to an all-grant
figure. Their all grant is $1.4 billion, and that is up from last year
it was $750 million for 1983. From 1984 it was $850 million.
Senator SARBANES. So they are getting about a 1-for-1 increase,
and the Egyptians are getting a 2.5-to-1 increase in grant aid on
the FMS. Is that correct?
General TIXIER. Yes, sir, but the total figures, I might add, are
still quite a bit different, and over the years they have been main-
tained at quite a bit higher for Israel than they have for Egypt in
that grant aid.
Senator SARBANES. That is quite true, but this whole arrange-
ment that we are talking about is post-Camp David, is it not?
There is considerable support, I think, for trying to move this proc-
----
530
1
I
|
ess along. In fact, I recall one hearing at which Senator Boschwitz
and I spent the entire hearing trying to press AID to move the
pipeline faster with respect to Egyptian aid, and I notice here that
for the first time in a number of years, the amount in the pipeline
has dropped by about $200 million. Is that correct, Mr. Langmaid?
Mr. LANGMAID. That is correct, Senator.
Senator SARBANES. That is the first time it has not been bigger?
In other words, you are finally getting the stuff out the other end?
Mr. LANGMAID. That is correct, Senator.
Senator SARBANES. Although there is still a lot in there. What is
it, over $2 billion?
Mr. LANGMAID. $2.5 billion, Senator.
Senator SARBANES. $2.5 billion still in the pipeline. But the thing
that concerns me a bit here is the marked improvement of the
terms. I do not object to that in and of itself, but when I relate it to
the Camp David accords and the movement on the peace treaty
and come smack up right at the outset against the fact there is still
not an Egyptian Ambassador in Israel, it gives me a good deal of
concern.
Ambassador MURPHY. Senator, I know you are as familiar as I
with the history of what happened there, but if I might just reca-
pitulate for a moment, the Ambassador to Israel was withdrawn as
a minimum gesture that the Egyptian Government felt it could
make in the wake of the Sabra-Shatila tragedy in 1982, and I think
that underlined that. Egypt, its president, its leadership, and I say
its people
remain committed to Camp David.
Camp David cannot flourish in isolation as a purely bilateral
accord. It needs an environment to achieve its full potential, and
the invasion of Lebanon upset that environment. The return of the
Ambassador to Egypt has been proposed on terms of once Israeli
withdrawal is achieved, withdrawal from Lebanon. There have
been other propositions, such as progress on the Taba dispute.
But I think the basic fact is that while we, Israel, and Egypt are
dedicated to Camp David and to the fullest possible achievement of
its potential, it simply cannot achieve that potential in isolation
from events elsewhere in the area.
Senator SARBANES. Even if one concedes something to that argu-
ment, the fact remains that you have significantly improved these
terms in a context in which, at least in my perception, the arrange-
ments and the relationship presupposed in the Camp David accords
have not significantly improved.
Senator MATHIAS. If the Senator would yield on that point. When
President Mubarak was here, I raised these very concerns, because
I share them with you, and I expressed them to President Mubarak
very much in the terms in which you have expressed them here
this morning.
I do not know that it is fair for me to quote in detail his re-
sponse, because we were having a private conversation, and I do
not want to violate any confidence. But I think it is fair to charac-
terize his response as positive, and I would not be totally pessimis-
tic that we are not going to see some improvement in that situa-
tion, which I would welcome as much as you.
But that argument was made very forcibly to President Mubarak
while he was here.
531
Ambassador MURPHY. And he has been left in no doubt about the
position of the administration on that, either, Senator, I can assure
you.
Senator SARBANES. Secretary Murphy, let me ask you this ques-
tion.
Senator BOSCHWITZ. If you would yield for just a moment on that,
Senator, as well, to me, I have listened to your entire line of ques-
tioning. Are you going to pursue that line still further? Because I
think it is particularly important now that a second agreement
that has been reached between Israel and one of its neighbors, Leb-
anon appears to have been or is in the process of being abrogated. I
would not like to think that some of Israel's neighbors would feel
that having one such treaty abrogated, that they should bring pres-
sure upon Egypt to abrogate or compromise its treaty, so, the im-
portance of the Ambassador at this time, I think, is heightened due
to the unfortunate circumstances regarding the May 17 agreement.
Thank you, Senator.
Senator SARBANES. Secretary Murphy, would you say that once
we take an aid figure up, or significantly sweeten or improve its
terms, it is very difficult to bring it back down without that being
read in the tea leaves as a negative message?
Ambassador MURPHY. Yes, sir, I would.
Senator SARBANES. In effect, you have racheted this program up
without the things actually happening out there, and you are now
in a posture where even if they do not happen you cannot bring it
back down.
Ambassador MURPHY. If I may say, Senator, things are happen-
ing out there. There is an ongoing performance of treaty obliga-
tions. I recognize the very high symbolic importance of the Ambas-
sador's return.
Senator SARBANES. I do not think it would serve any purpose for
me to try to detail all the rest of it. Do you assert that there is in
fact a greatly improving relationship in the context of which this
question of the Ambassador is just some kind of exception or aber-
ration?
Ambassador MURPHY. I think there are a number of other prob-
lems. I think the issue of the Ambassador has gotten a particularly
high profile, but there are other questions, and to be honest, I
would have to say that we hear complaints from both sides. Now,
we have taken the position, and it is largely accepted by the par-
ties, that when you have a complaint about the treaty, go at it in
the other fellow's capital. Go at it directly. That has been one of
the benefits of the treaty, that they have done so with exchanges of
letters between presidents and prime ministers. They are hearing
their disagreements and their different interpretations, and I think
it is a steady and ongoing process of making that treaty work.
Senator ŠARBANES. Well, my position, put very simply, is that if
you were going to engage in this kind of significant improvement
of the aid package, it should have been in the context of an im-
provement taking place in the Camp David accord relationship-in
other words, that those two things should have been moving in
tandem rather than having merely expectation which might either
be realistic or simply a vain hope.
532
Mr. Chairman, could I go on for a couple more minutes? I see
that the red light is on.
Senator BOSCHWITZ. Certainly.
Senator SARBANES. What are the criteria you are using to allo-
cate military assistance between grant, concessional, and regular
terms?
General TIXIER. Are you talking now about Egypt and Israel or
generally?
Senator SARBANES. Just generally.
General TIXIER. Generally, sir, we are concerned, of course, about
the country's capability to pay. We are in the grant business. The
majority of the grant money goes to Israel and Egypt. Regarding
concessional terms, we have asked for them again, or we have at-
tempted to explore that avenue again because of the inability of
the countries to meet these higher priced terms.
Senator SARBANES. Are the concessional terms the same? Is there
a standard concessional term that you are using?
General TIXIER. Concessional terms are about 5 percent as op-
posed to FMS, which is the going rate to the market.
Senator SARBANES. If you indicate that a country is receiving
concessional terms, are those terms the same in all the different
countries, or do the concessional terms themselves vary from coun-
try to country?
General TIXIER. I am told that they will vary from country to
country, yes.
Senator SARBANES. What I see happening is almost like a sort of
Santa Claus at work. We are struggling to find out here what the
criteria are that you are using. They are given this much grant,
this much concessional, and this much straight FMS, and now I am
told that even if you decide to offer the concessional it is not one
category, but could be a whole range of categories. You know, let .
us give them 7 percent, or 5 percent, or 3 percent, or whatever.
I think we need a statement that explains how these judgments
are reached, and particularly whether any sort of objective stand-
ard is applied in reaching these judgments; how they work out in
the particular, or whether it is simply whatever strikes one's fancy,
particularly keeping in mind the response that I got from Secre-
tary Murphy to a previous question that once you undertake a
level or certain terms, to do less than that in future years always
carries with it an extra interpretation in terms of the relationship,
an interpretation that may, in fact, not be intended.
I have just two other questions.
General TIXIER. Sir, if I may make one comment, I was misin-
formed. The concessional rates are straight across the board.
Senator SARBANES. They are the same for everybody?
General TIXIER. Yes, sir.
Senator SARBANES. So, if you say a country is receiving conces-
sional rates, they are the same in every country?
General TIXIER. Yes, sir, the same.
Senator SARBANES. I need to know exactly what those rates are,
and then the criteria that are used in deciding grant, concessional
or straight FMS, and how you put that mix together.
General TIXIER. Yes, sir. We will provide that.
533
[As of the date of publication, the information referred to had
not been supplied.]
Senator SARBANES. Secretary Murphy, the Coptic Pope Shenouda
continues to be held under house arrest, as I understand it. Do you
know what the intentions of the Mubarak government are with re-
spect to Pope Shenouda?
Ambassador MURPHY. Senator, I will investigate that and report
back to you. I do not have a recent reading on the situation of the
Pope.
Senator SARBANES. This question regarding the status of the
Coptic community there, in part represented by the difficulties
which Shenouda is confronting, seems to me a matter that should
be of some concern to the State Department.
Ambassador MURPHY. Yes, sir.
Senator SARBANES. Will you give us a report on that?
Ambassador MURPHY. I will, sir.
[The information referred to follow:]
COPTIC POPE SHENOUDA III
Coptic Pope Shenouda III has remained in government-enforced seclusion at a
monastery for over two years. Though Pope Shenouda's legal status is an issue
before Egypt's courts, in two interviews in late 1983, President Mubarak spoke of
the eventual return of Shenouda to his papal duties. The Egyptian Government has
eased restrictions on the Pope, allowing him to travel to other monasteries and pro-
viding greater latitude for visitors. Though some Copts have expressed concern that
a resurgence of Islam in Egypt might undermine minority rights, the government
has made it clear that Egypt is a secular state governed by civil law which protects
the rights of all citizens. We have made it clear to the Egyptian Government the
interest of the American people in religious freedom and our hope that Pope Shen-
ouda will be able to resume public life soon. We are encouraged by President Mu-
barak's success in diminishing sectarian tensions in Egypt.
Senator SARBANES. Thank you, Mr. Chairman.
Senator BOSCHWITZ. Senator Biden.
Senator BIDEN. Thank you, Mr. Chairman.
Gentleman, I apologize for not being here for your testimony and
for the questions of my colleagues. Unfortunately, and in the minds
of many it is unfortunate, I am the ranking member of the Judici-
ary Committee.
Senator MATHIAS. You were making trouble in another place.
Senator BIDEN. That is right. I was making trouble in another
place. Mr. Meese would rather me be there than here, because his
nomination is up in executive session, and since I am the chief
spokesman for this administration on those matters. General
laughter.]
Senator BOSCHWITZ. How much longer do you think he will be up
there?
Senator BIDEN. I think it might be another week. In any case,
gentlemen, I do apologize, because notwithstanding my responsibil-
ities there, there is nothing of greater interest and concern to me
than what we are about here today.
Let me, with the permission of the chairman, pursue a couple of
issues, and if, in fact, anything that I will raise has been raised by
any of my colleagues, or was covered in your testimony, just refer
me to that fact, and I will not keep you on that subject. I will check
the record.
534
There is a development, some would suggest a bit of a phenome-
non occurring in our foreign aid, particularly the foreign military
aid, where we are moving more and more over the last several
years from FMS sales to direct credits, grants, and that holds true
almost across the board, it seems, especially in this function. Let us
see. I spend too much time in the Budget Committee. I mean, in
this area.
Senator SARBANES. May I just add something?
Senator BIDEN. Go ahead.
Senator SARBANES. In the report that we asked for, I would be
interested in knowing the basis for arriving at the concessional
terms that are being used. In other words, I am told it is 5 percent.
I guess it could have been 6 percent. It could have been 4 percent.
It could have been 7 percent. All of that would be concessional, and
would represent a significant improvement over the standard FMS.
I would like to know what the rationale is that led to the selec-
tion of those particular terms. This is a very big departure taking
place here, and I think it has some rationale, but we need to know
exactly what the thinking is that has gone into it—what the terms
are, how you apply them, what kind of standards are being used,
and so forth.
Senator BOSCHWITZ. May I pursue that for a moment, Senator, by
pointing out that earlier, prior to your coming in, the concessional
terms were delineated as 3 to 5 percent, and I noted that you, Gen-
eral Tixier, in answer to the Senator said something else.
General TIXIER. I said 5 percent. We will come up with a figure.
Senator BOSCHWITZ. I think Ambassador Murphy said 3 to 5 per-
cent.
Senator SARBANES. That just underscores my point.
Senator BOSCHWITZ. Yes, it does.
Senator BIDEN. Well, again, I guess that teaches me to look at
the figures. Now, all kidding aside, the point that both my col-
leagues have made and which Senator Sarbanes has been pursuing
here is that there is a change. Now, I am not being critical of
change at this point, but it is distinctive. It is obvious. I would
argue that in the case of Egypt and Israel, for example, because of
their present economic circumstances, it is unrealistic not to talk
in terms in my view of grants. Once you get beyond the strategic
requirements that we have, and making that judgment as to who
gets how much, we could argue about that, whether it should be
more or less for each country, but when you get down to what is
the change that has taken place over the last several years in this
committee, moving from loans, concessional loans, direct loans, and
to grants, we are talking about major movements.
Just to pick a few, in the case of Israel and Egypt, and again, at
some point I will argue about the dollar amounts there, but none-
theless, the economies dictate that. I think it is unrealistic to kid
the American people and call it a concessional loan or a loan when
you do not know how it is going to be paid back, and if it is in our
security interest to do it, we have to do it.
But let me move now to Jordan. The dollar amounts are not
nearly as big, but we have gone from zero in FMS military aid, in
direct credit we have gone from zero in 1983 or 1984 to a proposed
95 for 1985, and guarantee, we have gone from 51 to 115 to zero,
535
and obviously, although the total number is less, the terms are
much more favorable going the route you have chosen in the mili-
tary. Is Jordan's economy in such shape that it could not sustain
the approach that we have used in the past?
Now, I will ask you questions about why we need it at all, but
assuming we make that judgment and we are in agreement, what
is the rationale for moving to direct credit?
Mr. LANGMAID. Senator, in the case of Jordan, although they
have a long-term, demonstrated history of being really superb eco-
nomic managers with very little resources to work with, in the last
couple of years they have had a number of problems. They have a
very low export base. Much of their earnings in foreign exchange
comes from worker remittances, Jordanian workers working in the
Gulf area. That has not been a growth market in the last few
years. They have had to cut back severely their development
budget.
So, I would say yes, they have had some economic problems. I do
not want to put them in the same category as some of the other
countries in the area, because of the severity of those problems, but
they nevertheless are very real to Jordan.
Senator BIDEN. Again, is the rationale for the movement in that
direction economic considerations on the part of the receiving coun-
try, or is there another reason for it? Is there a diplomatic, politi-
cal, military reason for it? Do you understand the thrust of my
question?
Ambassador MURPHY. I think, Senator, in the case of Jordan it
does come down to the economic rationale. They have had difficul-
ty on the FMS, on our military assistance programs, in repaying,
in meeting their former obligations.
Senator BIDEN. Now, I would ask any of you to respond who
wishes. Let us get more to the substance, and the need encom-
passed in the Jordanian request. I am advised that the $220 million
requested for the Jordanian rapid deployment force now, given the
euphemistic label of the Jordan logistics program-I think that is
correct. Is that right?
General TIXIER. Sir, that is a classified program. Still, if you
want to address that program, I would be glad to do so in another
forum.
Senator BIDEN. All right. I just asked the staff that, and they
told me this was all public, but let me withhold, and I will do that,
if not now, at a later date, with you, General.
How about this issue? There are some classified aspects to this,
but there are also some public aspects of the sale of Stinger antiair-
craft missiles to Jordan and Saudi Arabia. Will any of these mis-
siles be paid for with FMS funds?
Ambassador MURPHY. Senator, to the best of my knowledge,
Jordan has not determined the source of the funding, whether to
use FMS or not, assuming the sale goes through.
General TIXIER. They have not determined how they are going to
pay for that LOA.
Senator BIDEN. Can you tell me once again why, General or Mr.
Secretary, why you feel there is the need for these missiles, and
why you do not think they may be counterproductive in the sense
that they might be able to be used against Israel, a nation we are
536
also obviously finding it in our interest to make some significant
financial commitment to?
General TIXIER. Sir, we have the security of Israel primarily in
mind in the sale of these missiles to Jordan. I know that is not nec-
essarily a universal view, but it is certainly our view. Right now
there is maintained a very long secure border between Israel and
Jordan. The Jordanian Government is working very hard to keep
that at peace. However, at the same time Jordan is faced with a
tremendous threat, as we briefed yesterday in closed session, from
Syria, and they are concerned about the imbalance and the threat
posed by Syria.
They feel they need, and we feel they need protection against
that threat. The advent of Stinger into the area does not bring a
new weapons system per se-there are literally thousands of
Redeye and SA-7's in that area-but it does give them an addition-
al capability to meet that Syrian threat. That is the threat. I think
that is also a threat to Israel. A strong and secure Jordan is going
to be a benefit to Israel, and we are concerned about that.
In our dealings with any of those Arab countries, that is always
one of the things that is first and foremost in our mind. That is the
overall picture. No. 1, is it a benefit to the United States? No. 2,
how does it help the friend we are trying to help? And No. 3, how
does it impact the other friends we have in that area, whether we
are talking about Israel or whether we are talking to the Arabs?
Senator BIDEN. Let me pursue that again. It is hard to quarrel
with the stated rationale for how the decision was arrived at, and I
am not sure I want to quarrel about anything.
Up to now, I, at least, as one Senator, have been critical of the
attitude of the last administation and this administration, both of
them, as to what I believe has been a naive assumption, that not-
withstanding the fact that King Hussein is a reasonable man, and I
believe he is, notwithstanding the fact that King Hussein would, I
think, like to reach an accommodation with the Israelis, and not-
withstanding the fact that it is better to have Jordan, from an Is-
raeli perspective and, I would argue, a U.S. perspective, where it is,
in control of its own territory, that it is impossible for Hussein to
act with any degree of independence because of his need to be reli-
ant upon Saudi backing financially and Palestinian tolerance.
And what seems to be happening, and this was reported in the
New York Times today, is that the thrust of the administration at
this point seems to be that you all are devising what might be
characterized or at least the Times characterizes it as a new Mid-
east strategy of closer ties with Jordan, closer ties with Israel, and
closer ties with Jordan and Israel that will promote closer ties be-
tween the two nations.
Now, my first question, stemming from what you said, General,
is that true? Whether or not it is a new strategy or an old strategy,
is that part of the rationale that underpins the aid programs we
are talking about here for both Jordan and Israel? Second, if it is,
how do you assess the Saudi reception of this, and how do you
assess the Palestinian acquiescence in this if there is one?
Maybe, General, that is more appropriate for Secretary Murphy
to respond to, although I do not want to keep you from responding.
537
fire away.
General TIXIER. Being a fighter pilot, and not a diplomat, I will
let him answer it.
Senator BIDEN. I think we sometimes get more direct answers
from fighter pilots than we do from Senators, myself included, and
diplomats, so maybe I would rather you answer. But, Ambassador,
Ambassador MURPHY. OK. I will stay out of FMS terms. It cer-
tainly is not, as you point out, Senator, a new policy to have the
closest possible relations between Washington-Amman and Wash-
ington-Israel. That is very long standing. With all respect to the
New York Times, there is no new strategy under development.
When the talks broke off last April between the King and Mr.
Arafat, they broke off because Arafat could not get the backing of
his executive committee in Fatah for an arrangement with the
King. The King did look then as today for several moves in the
area, developments in the area which would allow him to move
into the peace process. His assessment was, that he could not move
in the face of a threat to Jordan economically, since his is a small
country without many indigenous resources. If he were going to
risk a break in the lines of support that had been there for several
years from the oil states, then this would be a risk that he would
have to measure very, very carefully. Where else would he find the
wherewithal to maintain and develop the kingdom?
Senator BIDEN. But you acknowledge that it is a risk that he has
to consider?
Ambassador MURPHY. Oh, yes, it is a risk. He looked at the situa-
tion of Egypt coming to the Camp David Accords. In terms of the
Palestinian support, he has always felt he could not speak for the
Palestinians without their acquiescence and having credible Pales-
tinians join with him in a delegation to meet with the Israelis.
Without trying to quantify just how important the PLO is in that
equation, how much it represents or does not represent the Pales-
tinian people, it is a factor that he has to take into account. He is
working on that. The first round of talks with Chairman Arafat
was concluded in February. We understand they will be resumed.
We understand no agreements have been reached as yet. But the
King has felt for some time now that time is running out. As he
looked at the situation on the West Bank, he wanted to move, but
he has to have firm backing to move, both from Washington, a firm
sense from Israel of what the results will be in moving, and the
other two factors of Palestinian support and the support of the oil
states. He is assessing those prospects.
Senator BIDEN. I assume that you, and when I say you I mean
the administration, from the President on through, that you have
concluded that there is some prospect for a favorable, from a Jorda-
nian perspective, favorable response from the oil states and from at
least portions of the Palestinians?
Ambassador MURPHY. We think that the circumstances of that
meeting, that set of meetings that took place in Amman, you had a
number of West Bank leaders visiting Amman at that time, giving
their input, according their hopes that they want to see something
move forward. Yes, there is a prospect. There certainly is a hope,
and as we look at the map, where else are we going to find hope in
terms of another move in the Middle East? It is in Jordan.
84-045 0-844-35
538
Senator BIDEN. I agree that that is a source of the hope, but this
is not, I guess, the place to debate our Middle East policy in any
detail or anything other than detail but our overall Middle East
policy, but my criticism has been that there has not been a coher-
ent policy from the way in which we took 3 years to figure out, in
my view, what our relationship with Israel was. We have, in fact,
bounced around on that, in my view, going from one extreme of
having difficulty with a memorandum of agreement that we could
not determine what it meant straight through to now, us making
Israel-the President claiming Israel is a strategic ally, which I be-
lieve it is, but a pillar of our position in the region.
And so, while this policy is developing and has been developing-
and these are my characterizations. I do not expect you to agree
with this. I would be flattered if you did, but I do not expect it. I
find that here we are, moving off on a military arm sales program
to Jordan that is designed to allow the King some freedom of politi-
cal movement and independence whereby he would be able to be in
a position to take care of himself if things began to fall away.
In fact, my fear is, we will find that is an expectation that is too
extreme. Not many of us wish to appear in the second edition of
"Profiles in Courage," and I do not think that the King of Jordan
is looking for that. There are very few Sadats in the world, Ameri-
can, Egyptian, Jordanian, or otherwise, in my view, and I would
say that King Hussein's record to date has been one of a decent
and honorable man, as I said before, but-understandably from my
prospective-a decent, honorable, and cautious man.
Ambassador MURPHY. It is a region where caution tends to
abound.
Senator BIDEN. I agree. I think that caution tends to impact on
longevity. Consequently, I think, in the name of helping Jordan, we
may be putting Jordan in a hole more than pulling it out of a hole,
but again, there will be plenty of time to debate that notion.
Maybe I could close this portion out, and I thank the chairman
for allowing me to go over my 10 minutes' time, by saying this. Tell
me again why there seems to be at least an added degree of opti-
mism about the potential flexibility of the Jordanians and King
Hussein. What has happened that makes you think that there is
that added dimension of flexibility now that was not there before?
Ambassador MURPHY. Senator, as I say, there is no new, factory-
fresh strategy at work here and no appreciation-I do not want to
hype this situation at all. The factors that led to the stalemate last
April are still in play. His expectations of what sort of deal can be
reached with the PLO unproven, what the willingness and recep-
tivity for his overture to come to the talks would be, what the re-
ceptivity would be in Israel, what this degree of support from
Washington
Senator BIDEN. Let me put it another way, and maybe this will
help, or perhaps even confuse things a little more. Without going
back into the arguments again and again, it is to none of the gen-
tlemen at this table that I have spoken about this before, so I am
not casting aspersions on any of you, but the Senator from Minne-
sota will recall that there was an optimism, a clear optimism
stated by high-ranking members of the administration as far back
as 2 years ago and as recently as 1 year ago about things such as
539
the real deep-seated feeling on the part of the high-ranking offi-
cials that the Syrians would move if the Israelis agreed to move. I
mean, we were specifically told that. We did not have to infer that.
That was specific. There was an optimism about the first introduc-
tion of the Reagan peace plan. Again, we were told privately and
publicly that we thought Hussein was ready to go now.
Senator BOSCHWITZ. In 48 hours.
Senator BIDEN. Yes, I did not want to be too harsh, but that is
true. Now, let me be very blunt. We were told not that there was a
mild optimism. It was stated to us when asked specifically by this
Senator and by the Senator from Minnesota, and several others,
questions relating to the likelihood of Syria pulling back, the likeli-
hood of Hussein stepping up to the ball, the likelihood of a whole
series of events I will not go into. We were told, without naming
names, we were told by various high ranking officials such things
as, well, I believe it, they told me, or we are confident that that
will happen, we cannot say that publicly because we do not want to
do that, but you know, we can tell you, Senators, that it is immi-
nent. In one case it was supposed to be 48 hours.
And we all are wrong. Who knows, if my view on the Middle
East for the past 6 years had been followed, we may have been
worse off. Why, it is easy for me to look at Carter, to look at
Reagan, and say, look, you have not gotten anywhere, and if you
had gone my way, we would be better off, which was different from
theirs. Who knows. If we had done it, maybe we would be worse off.
It is easy to Monday morning quarterback about what would have
happened, but there is no Monday morning quarterbacking from
the Senator from Minnesota and the Senator from Delaware and
others up here in the Senate. We did not say anything until after it
was over. I mean, we disagreed with the policy as it was going
along. Well, not we. Me, Joe Biden.
Now, what worries me a little bit is that we seem to be engaging
in what I would characterize, absent knowing any more facts than
are now at my disposal, and maybe the only place to go into more
detail is in closed session, but absent more facts, I do not see any-
thing that has changed that makes it any more likely that the
Reagan peace plan or version thereof, all of which has been contin-
gent all along on the Jordanian portion of the puzzle being fit into
the puzzle, I do not know of anything that enhances the prospect of
that.
And consequently we are setting off on a course that I would
argue, and I hope I am wrong, and I mean this sincerely when I
say I hope I am wrong, that is counterproductive rather than pro-
ductive. Again, General, I am not joking when I say that I have no
doubt about your sentiment and your intentions. That is, what is
A, you are approaching in the exact correct way in my view. What
is in the interest of the United States of America, first, and above
all else.
General TIXIER. That is right.
Senator BIDEN. And second, what impact does it have on the re-
cipient nation, and what impact does it have on our friends who
are not the recipient nation in the area. I have no doubt that you
are approaching it in that way.
General TIXIER. That is right.
540
Senator BIDEN. I welcome a response if you want to make one,
though I am asking you a question, but I just want to caution you
and go on the record here by saying that I think that the policy is
based upon fairly naive assumptions about what the parties in the
area are likely to be able to do, not what they want to do, but what
they are likely to be able to do. I do not see any reason why we can
expect any real change in willingness to make that leap. Now, that
is not to say you should not try. That is not to say you should not
hope for it. But it is to say that I am extremely doubtful, and I
think this, the military portion of the Jordanian package and the
composition of some of the things that we are contemplating, is, I
think, a serious mistake.
With regard to Lebanon, again, I am worried about what the aid
portion reflects in terms of policy. We have now resumed limited
training of Lebanese troops which are now almost exclusively
Christian. That is a slight exaggeration, but there is not a whole
lot of confessional concession in the military right now. But the de-
cisions have been deferred on any major rebuilding of the Lebanese
Army, and under the circumstances which we would be able to
resume shipping major items like tanks and armored personnel
carriers, we do not know quite where that is.
I sense in your policies, and your budgets are policy statements, I
suggest in your budgetary approach that you are reflecting the di-
lemma that you face, and that is that you want to do something to
keep the Lebanese Army in place and built up, so you are continu-
ing to train them and provide funds for that on the one hand, and
on the other hand you know there is a need for major hardware,
and this is my reading, and I want to correct my reading if it is
wrong. But it seems as though you are acknowledging by a decision
not to make major hardware transfers, which I think we would all
agree are needed by the army, your worry is that you do not know
where it is going to go, you do not know what is going to happen.
So, on the one hand you have the problem of wanting to keep
essentially the Christian Army in place, and on the other hand you
know if you give them major weapons materials you may, in fact,
impact upon the political dynamics in that country so that it turns
out to be counterproductive. Is that a correct reading of your
budget statement?
Ambassador MURPHY. We welcome you to the State Department
analyst group at any time, Senator. That is part of the dilemma,
yes. Just on that particular point, I might say, and the General can
speak to the question of deliveries, that we are not interested in
supporting any one faction over the other if it is possible to find a
way back to a reconstituted national army, again, looking at events
as they unfold.
Senator BIDEN. Again, I want to make it clear that I am not
being critical here of the Army, the Navy, the Air Force, or the
military in this. I say that not because I am afraid of you guys,
which I am, and that is only a joke. [General laughter.]
But I say it because I think you have been right all along. I will
not go back into that, into who struck John on that, but I would
also argue that some of you folks at the State Department and
maybe some of you people at this table have also been right. I
think if we had listened to the professionals on this little adventure
541
rather than to those others, we might not have ended up where we
are, but we are now in a situation where we have a problem, and I
would like to know what efforts have been made to reacquire, and I
emphasize reacquire, U.S.-supplied tanks and trucks which fell into
the hands of the Phalangists and which they reportedly refused to
turn over. How much U.S. equipment has been lost by the Leba-
nese Army? Could you give us an assessment of what factions now
control what portion of what has been lost?
General TIXIER. To give you the details, I would have to provide
that for the record. I can do that.
Senator BIDEN. I appreciate that.
[As of the date of publication, the information referred to had
not been supplied.]
General TIXIER. I can tell you that with the help of the Israelis
out of the Fourth Brigade area, and geographically that is in the
south, down in the south, the Fourth Brigade, equipment, a good
portion of it as I remember, 12 to 14 tanks, and do not hold me to
those figures—I will provide accurate figures-were returned to
the LAF up at Genai, which is the port to the north. Some of them
did fall into other hands. We are not really sure. We figure the
Druze got some, probably the Phalange have some. We have been
making an attempt to get that back.
Senator BIDEN. Again, I will not pressure you on that, not be-
cause you are not being candid, but because you do not have the
figures in front of you. I would be anxious to have as detailed a
response to that question as I could, General.
General TIXIER. Yes, sir.
Senator BIDEN. To the gentlemen from the State Department,
Lebanon has now canceled the May 17 agreement with Israel.
What is our official position on that action taken by the Gemayel
government?
Ambassador MURPHY. We very much regret the cancellation, and
as the Secretary said, those who were responsible for bringing it
about have the responsibility for replacing that agreement in terms
of security arrangements on the Israeli border.
Senator BIDEN. I am sorry. Would you say that again for me?
Ambassador MURPHY. Those who were responsible for bringing
about the cancellation of that agreement are now to bear the re-
sponsibility for replacing it if they want to get the Israeli forces out
of Lebanon.
Senator BIDEN. To translate that, does that mean the Syrians are
responsible for it, and now it is on their hands? Is that what you
say?
Ambassador MURPHY. The Syrians and certain Lebanese factions
as well.
Senator BIDEN. OK. Do any of you expect that in light of the can-
cellation, the Israelis are going to move south of their border, that
they are going to say, "well, it is over, and we are out anyway?'
Ambassador MURPHY. We understand there is total unity in
Israel on the question of insuring the security of that border, and
they have not decided how they are going to do it.
Senator BIDEN. Do you see any need to readjust aid figures, mili-
tary aid figures for Lebanon and/or for Israel in light of the cancel-
lation of the agreement? Does that have any impact?
542
Ambassador MURPHY. I do not think the agreement in its incep-
tion, when it was negotiated, had any bearing on the military bal-
ance, Senator. While its cancellation is deeply regretted, in direct
relationship, no.
Senator BIDEN. So there is no direct relationship between the
military and economic aid figures either to Lebanon and/or to
Israel based upon the cancellation of the agreement?
Ambassador MURPHY. As far as Lebanon, I think we just have to
say that the whole situation is under study, and we cannot reach
any decision about the shape of our programs or the size of our pro-
grams until we are further down the road.
Senator BIDEN. Do I have any more time?
Senator BOSCHWITZ. Please go right ahead.
Senator BIDEN. May I have another 5 minutes, if I could?
Senator BOSCHWITZ. Certainly.
Senator BIDEN. Two years ago I introduced an amendment which
passed by a single vote, and which we later determined should not
be pushed on the floor of the Senate in light of some changed cir-
cumstances, not the least of which is the Israeli Defense Force. The
Israeli military had moved into Lebanon, and public opinion began
to change here in this country, but that amendment related to the
question of our economic aid to Israel and our military aid.
I am one who believes that we would have been better off under
both administrations to say, hey, look, we want to be friendly with
everyone, but it begins and ends, if it has to, it begins, and if it has
to, it ends with our closest friend and ally in the region, and that is
Israel. I say that strictly from the standpoint of what I think, in
the Machiavellian sense, is in the interest of the United States.
I am not asking you to agree with that, because I know, officially
you could not, and privately you probably do not, but to that end, I
have concluded after 1142 years in this place that the greatest
threat to our security in the region is the threat to Israel's econom-
ic security. I think Israel is in bad shape economically. And I do
not know how Israel can, in fact, maintain its defense require-
ments and at the same time maintain the payback schedule to the
United States that is underway.
And so I introduced an amendment that said, look-and was cal-
culated based on just looking down the road at the repayment
schedule the Israelis have to make, I mean, just if we stopped right
now what that repayment schedule would be, and I said that-this
amendment said that we would not ask Israel as a matter of princi-
ple to pay back in any 1 year any more than they were receiving in
aid. The irony would be that we were getting to the point where
the aid package we gave to Israel was being exceeded by their re-
payment schedule. If we are going to do that, it would be better not
even to transfer the funds. You have to pay back $925 million this
year, and you are getting $850 million, so you send us the differ-
ence.
And so I introduced that, and it passed here by one vote. The ra-
tionale, again, for that, and the reason I am bringing it up is, I am
considering doing it again this year, and I do not ask for a position
now. At least, I would ask you to withhold taking a position. But I
would like you to consider whether or not the rationale for such an
amendment, whether there is any rationale from your perspective.
543
What I would like an answer to is this. To what extent do you
believe the Israeli debt ratio is able to be sustained in light of their
economic situation today? I mean, how much more of our largesse
can they stand from an economic standpoint?
Mr. LANGMAID. I was just going to look quickly, Senator, at the
figures that dealt with the military debt service in terms of the
total debt service to the United States. You also have Israeli pay-
ments on Israeli bondholders in the United States, which is a dif-
ferent kind of situation than the military debt. Let me, if I may,
Senator, answer the basic question that you are raising. The con-
cept of bilateral balancing of aid levels versus debt service implies
the concept that we never expect to have any of our loans repaid.
We have problems with that as a general concept. There obviously
are individual country situations, but earlier I think there were
several questions that dealt with Tunisia in somewhat the same
context.
When we look at the country's economic situation and its capac-
ity to service the loans which we are providing, we take into ac-
count their debt service. We do not necessarily take into account
their debt service to us. We take into account their total debt sery-
ice as part of an overall balance of payments, in the context of the
earnings they have to generate to service that debt. We do that
very carefully with most of the countries where we have major aid
programs. In fact, I would say in the case of all countries where we
have major aid programs. Where there are smaller programs, it is
a different kind of consideration.
In the case of Israel, we have looked very carefully at the eco-
nomic situation, their foreign exchange situation, as well as their
internal economic situation. If you look at the problems Israel has
had, say, in the last 3 years, they have been primarily problems of
a budgetary nature, and of a total domestic demand nature, not so
much of a foreign exchange nature. I am talking about relative
degree of difficulty now. There is no question that their economy is
in worse shape than either they or we would like, and it is worse
this year than last year.
It is worth noting, however, that although their gross national
product has increased only marginally in the last couple of years,
their private and public consumption rates have exceeded the
growth of gross national product by several percentage points. Pri-
vate consumption has been growing at 5 or 6 percent. GNP in the
last year or so has grown only 1 to 2 percent.
That kind of budgetary and private demand pressure is not sus-
tainable over a long period of time. It is those problems that really
are high priority to bring under control. Israel cannot bring their
balance of payments problems under control in the sense of divert-
ing more resources to exports, more resources into foreign ex-
change earning industries until they can bring the domestic situa-
tion under control.
Senator BIDEN. That is my point, and with that domestic situa-
tion the way it is in servicing the debt that they must service, I do
not know how the Israelis can take on much more in terms of
loans, concessional or otherwise, from the United States. That gets
back to the General's point about what is in the U.S. interest, and
we find ourselves, if you look at what I would consider to be conces-
544
sional loans, an area that I deal with more than the Middle East is
NATO, and if you calculate the total amount of money that the
United States is spending to sustain its interest, and I argue we
must, because it is in the interest of the United States. Some critics
would suggest that we are protecting Germany and Holland and
France, et cetera, but we are protecting the United States.
Nonetheless, we are more direct about that when we talk about
NATO in terms of our direct expenditures, not just as relates to
placement of troops, but in terms of the underpinnings required to
keep that going. I just would ask you to consider and maybe submit
for the record, rather than take the time now, your assessment of
the ability of the Israeli economy and what we see it doing this
year, next year, and the next several years to sustain the repay-
ment schedule that they now find themselves on.
What I do not want to be faced with, nor do you, I know, is in
effect, finding that we have in our own interest burdened them in
a way that they cannot continue to protect that interest. I want to
make clear that I believe they are protecting U.S. interests. I be-
lieve every dollar we send militarily has a direct relationship to
U.S. interests, and not a moral obligation. At any rate, do you
think you could do that for me?
Mr. LANGMAID. We would be glad to submit such a report, Sena-
tor.
Senator BIDEN. I have one more question, if I may. The fiscal
year 1985 aid request reduces economic aid to Israel, I believe, by
$60 million. Has this already been asked?
Senator BOSCHWITZ. No; but you are correct in that figure.
Senator BIDEN. Given the economic problems that I think we all
acknowledge beset Israel right now, what is the rationale and justi-
fication for this reduction?
Mr. LANGMAID. I think in part the answer, Senator, is, it depends
on which end of the tube you are looking at. From our perspective,
in terms of the administration request, the level is the same as we
requested in prior years.
Senator BIDEN. I know that, and by the way, I think that is accu-
rate. That is what you did request. I think last year that was the
request, was it not?
Senator BOSCHWITZ. That is right. It is the same request.
Senator BIDEN. So I guess what you are saying is, you did not
feel there was a need to go to $910 million last year?
Mr. LANGMAID. That is correct, Senator.
Senator BIDEN. And therefore you do not think there is a need
this year?
Mr. LANGMAID. We again, as we have each year, looked very
carefully at their economic situation, and have concluded that from
our judgment, in terms of what we have discussed with the Israelis
and what their plans are and their current situation, the request
we are making would ensure the economic vitality of that country.
It is very important; it is our, as it is your, principal preoccupation
with the aid program.
Senator BIDEN. Thank you. As a closing comment, let me say
that I would suggest, gentlemen, that in determining the direction
of our peace initiatives in the Middle East, when we consider what
is needed from the Jordanian portion of the equation, that we not
+
2
545
put too much of a burden on Jordan to do things which are unreal-
istic for them to do, and I would suggest to you that maybe an ele-
ment of the test as to whether or not they can sustain their part of
the bargain, if you will, will be the degree to which they believe
that they can continue to have sustained support from Saudi
Arabia.
I would argue that one of the ways to determine whether or not
the Saudis mean what they say, and they have helped a great deal
in Jordan, and they are good folks—I am not being critical of the
Saudis, but the degree to which they feel they can take the chance
to be more involved, you might use-to use the phrase that the
President used a lot during the AWACS sale, what the litmus test
might be whether or not you could get the Saudis to pay for what
you are proposing the Jordanians need rather than us, and they
are doing a lot of that now.
Ambassador MURPHY. If I may make one comment, Senator.
Going back in history, the September 1st initiative in the Hussein-
Arafat talks last year, it was not-or if it was—let me start that
way-if it was naive on our part, it was a very widely shared naive-
te. And, outside of this country, in the region, that was considered
in April of 1983 to be a deal nearly struck, and there was consider-
able disappointment, not only on the part of the King, but in the
region. They thought it was coming.
Senator BIDEN. Maybe "naive" is the wrong word. But I think
you are right; you are not the only folks who thought it was going
to happen. There are a lot of others.
But I would argue that Senator Boschwitz and I were among
those who thought it would not happen, and I am not suggesting
that that means that you should listen to us from this point. But I
would argue that the reasons why some of us thought it would not
happen related to some of the requirements that were needed to be
a part of the ingredient.
All I am asking you to do is to look very closely, to see whether
or not any of the mix has changed, not whether the expectation
has changed, not whether the verbal assertions have changed, but
what, in fact, has changed that would make us now believe that
they could do what they could not do before.
And, from where I sit looking at it, it seems that not only has it
not been a change that would enhance the prospect, but I would
argue that there has been a change that diminishes the prospect
and not enhances it.
So, rather than go on, that is the conventional wisdom. And,
again, I am being critical, but not in a pejorative sense. I think it
was reasonable for reasonable men to assume what you assumed.
And I was moving as much in my gut regarding human nature ind
how politicians function—and he is a politician and I am a politi-
cian-how they function, rather than on what people were saying
And, as I look at the situation now, I see no reason why Saudi
Arabia and no reason why Jordan would be willing to be any more
courageous-nor would I, were I they, by the way—than they have
been in the past, notwithstanding the fact that there is an in-
creased concern about Syria and an increased concern about Iran
for some of the same and very different reasons, both.
546
But I find the modus operandi, looking back as one student of
the region for 20 years and one participant in the policies, or com-
mentator at least on the policies for the last 12, I find that what
adds up to a Westerner concluding that now is the time to take the
chance usually adds up to the opposite for the Mideasterner.
So I just want to say this for the record, and I want you to mull
this around. As I am one guy who has a different view, I would
agree that increased danger brings about increased caution. God
bless the Saudis; they are fine people. But in terms of their foreign
policy, they remind me of the Mexicans in this hemisphere.
Mexico, in my view, buys its internal stability with support of ex-
ternal radicalism in the region.
Everybody says, “why doesn't Mexico speak out and join with us
more?'' Well, the reason why is they want to stay in power, they do
not want a revolution in their country. That is why. I can under-
stand that. I am not critical of that.
I would argue that the Saudis have a similar problem. I see noth-
ing to change that, nothing at all. And I see nothing to change the
Jordanian part of the equation, and I am anxious-if it not be on
the record or off the record, or do it in any form you want to do it
with me--for you to tell me and, I suspect, others on the committee
what are those elements that make you think the way you do.
Now, I know you are not hyping this. You are not saying this is
going to happen in 48 hours, and you are not saying you are posi-
tive this is going to work. But obviously, part of the program here
is, you think it is a step, or to quote unnamed officials—The New
York Times has 27 unnamed officials on retainer, I guess-but to
quote them, it says "Officials were generally pessimistic about any-
thing concrete happening this year, particularly in the year of con-
gressional opposition in an election year to certain arms for
Jordan. But they said the plan was a sensible, long-term strategy.
Said one senior official: "I am optimistic, but I know we've had
several strategies before, and they didn't work either.”
Now again, I am not asking you to say whether this is a new
strategy, and you say it is not. All I am saying is that there is the
notion here that this is part of a long-term effort to bring about, I
assume, to create the set of circumstances that allows Hussein to
do what I believe he wants to do; that allows the Saudis to do what
I believe they are inclined to do. And I do not want to damn them
by suggesting they are reasonable, because who is viewed as a
strong supporter of Israel saying he likes the Jordanians and
Saudis probably makes the Jordanians and Saudis suspect.
But is seems to me that is what you are trying to build, and I do
not know what the reason-if there is reason for this changed cir-
cumstances that makes you think it makes sense, I would like to
know them. And maybe the place to find them out is in a closed
session, rather than here.
Ambassador MURPHY. We would be happy at any time for a ses-
sion, Senator
Just on Stinger, if I may make one last comment from this side.
We will be making that presentation to the Congress in the coming
days, and I would say today only that it will stand as a justification
on its own, quite apart from the peace process or setting the stage
547
for the thing. We think it fills a very legitimate defensive need in
their inventory.
Senator BIDEN. I appreciate that and I thank you very much. I
am sorry to take so long, Mr. Chairman.
Senator BOSCHWITZ. Not at all, Senator.
Before I go on, I do not want Mr. Staples to think that his trip
up to the Hill was in vain. We will get to the Southeast Asian
region, but probably after you leave, Senator.
But I share the frustrations that you have been speaking about
in the Middle East. And a little earlier, Ambassador Murphy spoke
about the fact that the various players—and I think you mentioned
the Saudis, the Jordanians, and the PLO-and that there was some
hope of their coming together in some fashion. That is a story that
is no longer new to either Senator Biden or me. They allegedly
have been coming together for some time.
I share his frustration with all of the players over there, and I
also share the thought that, if they have conservative instincts sur-
rounding their instincts of self-preservation, they are less likely to
be of a risk-taking mind at the present time with what is going on
there in the Middle East.
I also express some frustration, I must say, about what I consider
to be great equivocation in respect to our relationship with the Is-
raelis. I know that that relationship has improved greatly in recent
years, perhaps even in recent months. Yet, it is always a push.
The relationships improve, but then something is happening in
the Defense Department that the memorandum of understanding
cannot go forward. And then something is happening in the State
Department that prevents implementation of other forms of agree-
ments between the countries. There seems to be an equivocation
because there seems to be this underlying feeling that the Israelis
are the underlying problem in the area, because of the Palestinian
issue, despite the fact that the Iraqis are invading Iran and then
being reinvaded by their neighbor, and that the Syrians are always
at odds with the Iraqis no matter what is happening, that the Liby-
ans are at odds with the Tunisians, that the Algerians and the Mo-
roccans do not get along well together, and there is internecine
warfare between North and South Yemen.
Yet, there seems to be a feeling-and I have had it expressed to
me by an American Ambassador-that, really, the underlying issue
continues to be the Palestinians, and if we could only solve that, all
would be well in the Middle East, and therefore, this equivocation
with respect to our relationship with the Israelis must continue.
That is extremely frustrating to me as I look back over history
and the time when those Palestinians became refugees and why
they became refugees, why they responded to the call of their own
leaders to depart so that the invading Arab armies could throw the
Israelis into the sea, and that they could return and have their
land and the land of the Israelis as well. I think that of all the ref-
ugees that existed, many of them in Southeast Asia during that
time, almost all of them have been resettled, all of them have been
graduated from the status of displaced persons; more have come
into Israel from these Arab countries that now treat their own
people as refugees still, after 35 years or something. It is shame-
less.
548
Yet, time and again, I have the feeling and the perception from
the State Department and, more recently, from the Defense De-
partment, that we have to keep Israel at arm's length, that if we
do not, we are in some way going to embarrass ourselves or create
greater problems with the Arabs.
Of course, that breeds the sense among Israel's neighbors that
they can play on that, and I believe they do.
So I have that frustration, that we are relying on people who are
not going to move—the Jordanians, the Saudis. I would like to be
pleasantly surprised but the internecine type of activities between
Those nations are so severe that you could solve the Palestinian
problem tomorrow and they would still be shooting at one another.
It is a frustration to think that now we might once again heighten
the arms race in the area, because we are hopeful that the players
will come to the table and negotiate.
Maybe it is the only hope we have in the area, but one of the
other hopes, in my judgment, is that there be no equivocation with
respect to our relationship with Israel. The chips, in my judgment,
might be stirred up a little bit, but then they will settle and people
will understand. I do not have to have an American Ambassador
coming to me and explaining to me that it is the Israelis who are
to blame in this area.
That is not the sentiment, at least of Senator Biden or myself.
Senator BIDEN. Of at least two of us.
Senator BOSCHWITZ. It is a cause of friction between the Congress
and the State Department, and it is something that should be laid
to rest. I think if it is, then indeed perhaps progress that has not
been made in the Middle East will be possible to be made.
Senator BIDEN. If the Senator will yield on that point, that is not
to say that if I were in your position, the Israelis would not drive
me crazy. They would drive me out of my tree, just like the British
do. The British bug me, and the French-my God, I am part
French-my middle name is Robinette-they are our ally. And,
God, if we say black is black, they say it is white. If we say the
Moon is made of green cheese, they say it is cheddar cheese. If we
say we should move left, they say right. I guess that is part of my
problem. It is in my blood.
But the difference is, we treat-we understand that frustration
and tolerance when we talk about the British. We understand that
frustration and tolerance when we talk about the almost-schizo-
phrenia of the Germans. I mean the Germans want us to do more,
but less. They want to be in, but out. They want to lead, but they
don't. I understand why, and I am a great fan of the Europeans,
and I do not think there is anybody in this Congress—that is a
very self-serving statement—who is more supportive, who speaks
out more for and is more in front on needing the strength with
NATO and move with NATO, et cetera.
I mean I am supposedly a liberal Senator who wrote the report
to deploy nuclear weapons in Europe. I feel strongly about that. We
must. And so on.
I am the guy that fights Ted Stevens every time he gets up on
the floor and starts talking about removing troops. But we deal
with that like it is a family, which it is. But when it comes to the
549
Israelis, we deal like it is our next-door neighbor, not family; like it
is somehow different.
And I would suggest-and this is a heck of a thing to subject you
guys to here, the two of us who essentially lecture you, or give you
our view of the world. It reminds me of, in my case at least, a less
articulate version of what Henry Kissinger used to do every time
he would come to testify. We would get his view of the world. We
never found anything out, but we would get his view of the world.
But it seems to me, Senator, that one of the problems is that
there are a whole lot of people who still exist in this country and
the State Department and Defense Department, in the Senate, in
the Congress, that really essentially are trying to do something
they know they cannot do. And that is, they believe we made a bad
bargain in 1948. We picked the wrong team.
There are 60 million or more of them, and they have all the oil,
and they have all these other things, and what did we end up
with-these few little folks sitting along the Mediterranean with
no natural resources. I think that is part of it.
So what happens now is, there is an attempt to modify a funda-
mental decision, and so we all are constantly half-pregnant; and I
compliment the administration on deciding to become fully preg-
nant. It decided I will not use the analogy that would be appropri-
ate, but we have been made pregnant. And now they are saying,
OK, Israel is a strategic ally, and so on and so forth.
I think the sooner we do that—that does not mean you are not
friends with the rest of that region. The sooner we say: "Bang, this
is it,” it allows two things. It allows us, in my view, to diminish the
expectations of those among the Arabs who are preventing what I
believe to be a majority of the Arab world willing to compromise,
willing to move, willing to recognize Israel. It gives them more
credibility and say: “Look, you can't keep tweaking these Ameri-
cans, you can't keep doing it. It's not going to work. So there. So
let's face it.”
And the second thing I would argue it would do, I have the facili-
ty, as you may have observed by now, to alienate everyone. The Is-
raelis, on the other hand, would have their anxiety diminished, and
they would get over this thing that the Israelis have which, I
argue, with some good reason up to now—that, well, they are
changing policy again. Here they go.
Remember the joke 2 years ago, General, gentlemen? You may
remember in Israel, at least the people of my generation in Israel,
it was well, what can you expect from the Americans? And the
answer was “a life jacket.”
Now, that was not official Israeli policy, but that was the night-
club humor that was going around. I think cartoonists in America
and humorists in other countries tell you more about what is hap-
pening in those countries than we politicians.
At any rate, I just want to underscore the point that the Senator
made; that I really think and I hope that the administration be-
comes fully pregnant, and I think we may give birth to peace in
that way. That is to say, here we stand; this is our relationship
with Israel; you ain't going to move it; it is immutable. Now we
will go from there.
550
And my argument is that the transfer of additional weaponry to
other nations in the region does two things: It sends a signal that is
not immutable in terms of what the Arab world can or cannot do,
and it increases anxiety on the part of the Israelis. You say well,
why should they be anxious? I think the reason why Begin did
some of the stupid things he did—and I know that is a terrible
thing to say about a head of state, but I think some of the Begin
policies were absolutely counterproductive.
And, as the Senator from Minnesota knows, I told Mr. Begin that
in a direct conversation, which was characterized as a confronta-
tion.
Senator BOSCHWITZ. Yes; in this room.
Senator BIDEN. So I am not reluctant to be critical of Israel, but I
think we have to understand what makes them move in looking at
our own interests.
We do that with the British. I do not know how many people tell
me, as former chairman and now ranking member of the European
Affairs Subcommittee-
Senator BOSCHWITZ. And, God willing, it will remain that way.
Senator BIDEN. That is right, God willing. God willing for the
British, because if I become chairman of this committee, let me say
they are in a whole world of hurt when it comes to Ireland. My
mother's maiden name is Finnegan, and I will tell you, they have
an absolutely stupid policy toward Northern Ireland. Look what
happens here. Every time we say-any of us Irish-American Sena-
tors say: "You speak to them, they say: "Look, wait a minute.
They are allies. I mean they are important. You may be right, but
let's not fight that out in the open.” That is what is said.
Now, how can we adopt that attitude about England, God bless
them? And, by the way, I am an Anglophile. I make no bones about
it. To the chargrin of my mother, I am. I am the guy that intro-
duced the resolution of support for the Falkland Islands. The first
phone call I got was from Jean Finnegan Biden: “Joey, what are
you doing?"
Do
you understand the point I am trying to make? I do not know
why I am doing it even, except to put it on the record.
Anyway, I expect support from you on my Irish policy when
things get going here, Rudy. [Laughter.]
Senator BOSCHWITZ. Senator, let me comment by saying that you
say you have aggravated everybody at one time or another. I might
tell you that it took me quite some time to adjust to your political
party, and then it took me a little
time with the Irish business, and
I have made those adjustments. But now French, too? [Laughter.]
As the Assistant Secretary knows, I am a great believer in con-
stancy in foreign policy. I think we probably are two of the more
flexible members of this committee, and as the Senator has just
said, he perhaps will take chances at his caucus, and I will take
chances that my caucus will not necessarily agree with. It is con-
stancy in foreign policy that you, Mr. Ambassador, and I have
talked about in the past, and that constancy applies to many
things.
Senator BIDEN. And I have been known to be constantly wrong,
too. [Laughter.]
Senator BOSCHWITZ. That's OK, as long as you are constant.
551
Gentlemen, we really have gone a little longer than had been an-
ticipated, and I do not want to overlook parts of this subcommit-
tee's jurisdiction that have not just a few million people, but hun-
dreds of millions of people. So I want to direct some attention there
as well, and pardon me, as it does not express a lack of interest at
all.
As you know, the political/military focus of the world luckily is
not in your part of South Asia, Mr. Staples. But before we leave
the Middle East, there is $20 million that is proposed in ESF aid to
Lebanon, ESF and perhaps some military aid.
Are there still funds left in the direct grant part of the aid pro-
gram and the military aid to Lebanon, or has that all been used
up? We know that about $120 million of the ESF is not used up.
General TIXIER. Sir, there are $15 million in fiscal year 1984
FMS credit being held by State, and $31 million in reallocation
credit being held by the Senate Appropriations Committee as of
right now.
Senator BOSCHWITZ. It seems perhaps not purposeful to propose
another $20 million of ESF grants or military grants. Perhaps the
Department or AID can reassess those funds, and maybe they can
be moved elsewhere to some of our friends, to Morocco or Tunisia,
that we have talked about this morning.
Also, we are expanding the Public Law 480 funds, and perhaps
we can do more with respect to some of our friends in that regard
as well. It seems to me we are expanding them rather substantially
for fiscal year 1985. So perhaps we can see that some of our friends
obtain more funding in this regard, Mr. Langmaid. That is more of
a comment than a question.
Also, before we leave that area, we would note that the Washing-
ton Post-and I do not like to make foreign policy on the basis of
what I read in the paper-but it says that helicopters have been
used in the chemical warfare that is being conducted, or at least
that is suspected of being conducted. And in this subcommittee, we
talked a good deal about transferring helicopters, and we were told
that they were for crop dusting, and that they were light, and that
they carry less than five people. And now I note that Iraq reported-
ly delivered the mustard gas it allegedly used almost exclusively by
helicopters and transport planes, the kinds of things that we have
been selling to them. That issue is something that we will continue
to talk about as well.
Mr. Staples, I wanted to ask you about the aid to Bangladesh,
most specifically that we are providing significant amounts of rice
to Bangladesh, and apparently they want wheat or they want vege-
table oils.
Why don't we supply more wheat? And I might add to that, that
Minnesota produces wheat and vegetable oils-no rice. And so, of
course, I have a more parochial interest in that as well. But appar-
ently that is what they want.
Mr. STAPLES. Senator, for the last 2 years, we have supplied some
rice as part of the Public Law 480 program to Bangladesh. The
major food grain shipment continues to be wheat, and we are also
supplying vegetable oils.
have the exact quantities jotted down here, if you would like
them in just a minute.
552
Senator BOSCHWITZ. Yes; if you would review them briefly. It is
my understanding that we are trying to push the rice, and they
want the wheat, and that the wheat is more directed at the poorest
people there.
Mr. STAPLES. Well, of course, basically the Bangladeshis are rice
consumers. It is traditionally a rice-consuming society. They have
in recent years begun to use rather significant amounts of wheat.
Senator BOSCHWITZ. Have they not been self-sufficient in rice,
however?
Mr. STAPLES. No, sir. They are about 142 million tons short of
their overall food grain requirements, and we supply rather large
amounts of food grains under the Public Law 480 program. They
also get rice from a good many other donors—I think both the Jap-
anese and the Thais.
They have bought rice, I think, from both Thailand and Burma.
The title I figures for fiscal year 1984 were $31 million of wheat,
$15 million of rice.
Senator BOSCHWITZ. Was that 15?
Mr. STAPLES. Yes; $15 million; $9 million in vegetable oil and $10
million in cotton.
The year before we supplied
Senator BoscHWITZ. What is the other $27 million--not $27 mil-
lion, but $33 million?
Mr. STAPLES. I think that is correct for 1984. In 1985 it is $75 mil-
lion. The figure is going up this year.
Senator BOSCHWITZ: 1983 is $93.426 million? 1984 is $87 million,
and 1985 is $97 million, $98 million?
Mr. STAPLES: I think those figures include title II, sir. These are
title III.
Senator BOSCHWITZ. Are you talking about title II or title I?
Mr. STAPLES. Title I, which in Bangladesh is title III.
Senator BOSCHWITZ. The economic aid that I have on my sheet is
title I or II. What is the $97 million? Is that title II grants?
Mr. STAPLES. The $93 million is the total Public Law 480 figure
for 1983.
Senator BOSCHWITZ. How much of that is title I and how much is
title II.
Mr. STAPLES. For 1983, the title I total was $60 million, and title
II total was $33.5 million, roughly.
Senator BOSCHWITZ. What are the terms on the $60 million? Are
they able to pay it back, or are we just creating a situation there
where they cannot pay it back?
Mr. STAPLES. No. sir. In Bangladesh, it is the title III program,
which means that-
Senator BOSCHWITZ. Is title III a different one again?
Mr. STAPLES. No, sir. Title III is, in essence a version of title I,
under which, if the government carries out certain agricultural
reform measures which are agreed to by that government and our
Government, the amount becomes a forgiven loan. They are not re-
quired to pay it back. And that is the case in Bangladesh.
Senator BOSCHWITZ. I notice that we also are giving a large
amount to India, and I also note that the U.S. assistance accounts
for less than 10 percent of India's external assistance. Does that
553
mean other nations, in the form of aid or grant aid, are providing
nine times as much as we provide?
Mr. STAPLES. Yes, sir, although by far the major factor is the
World Bank.
Senator BOSCHWITZ. That is in the form of loans.
Mr. STAPLES. It has mostly been IDA loans until recently.
As you probably know, recently the portions are beginning to
shift from ĪDA toward IBRD loans in the India case.
Senator BOSCHWITZ. Are the figures, Public Law 480 figures for
India, mostly eventually grants, too, because of the utilization of
the title III or Public Law 480?
Mr. STAPLES. No; The food aid in the India case is Public Law
480, title II.
Senator BoscHWITZ. Which are outright grants? ?
Mr. STAPLES. Yes, sir.
Senator BOSCHWITZ. Why do we give a country like India, with
which we have so many problems and which seems to be recalci-
trant about nuclear proliferation-more grants than we give to
Bangladesh? And besides which, they are an exporter of wheat.
Mr. STAPLES. India, by and large, is not an exporter of wheat.
Senator BOSCHWITZ. India has been an exporter of wheat in the
last few years. I am not quite sure if it was in the last year.
Mr. STAPLES. India has been, occasionally, an exporter of rice. I
am not aware of exports of wheat.
Basically, India is not yet, in our view, entirely self-sufficient in
food grain production. Their production has increased a great deal
over the last 20 years or so. When they have bad monsoons, which
they have every 3 or 4 years, or so, they drop below the line of self-
sufficiency.
Actually, they imported wheat from the United States commer-
cially in 1983. They imported 4 million tons of wheat to build up
their food reserves.
Senator BOSCHWITZ. One of those years I thought they exported
wheat. I may be wrong.
Do you include rice as a feed grain, a food grain?
Mr. STAPLES. Yes, sir.
Senator BOSCHWITZ. Do you? We talk about feed grains, and so I
sometimes confuse the terms.
Mr. STAPLES. In the case of Bangladesh, our entire program has
been a grant program. This year, in fiscal year 1984
Senator BOSCHWITZ. Through the utilization of title III?
Mr. STAPLES. No, sir. The development assistance program has
been an all-grant program.
Senator BOSCHWITZ. I thought you said Public Law 480. Pardon
me. Please go ahead. I interrupted you.
Mr. STAPLES. I was simply going to make the point that Bangla-
desh has been treated by the U.S. Government as a least developed
country, which means that to the extent possible, the entire pro-
gram, both development assistance and Public Law 480, is given on
grant terms.
Senator BOSCHWITZ. Well, I would hope that as we see the addi-
tional funds that are available through the Public Law 480 pro-
gram through all three titles, that we would direct them at Bangla-
desh, that we would direct them at Sri Lanka, that we would direct
34-045 0-84-_-36
554
them at Pakistan. Perhaps the Indians do not find the program
adequate with their large population-however, their policies are
also difficult for us to cope with, and if we are to in some way
grease them, whatever the purpose of this aid of $200-odd million
is, to gain their friendship, it is not working.
And as a result, I would hope that increased aid would be direct-
ed at countries such as I have mentioned, who are carrying quite a
burden as in the case of Pakistan, and are not being apologists, as
the Indians are, for the Russians and Afghanistan, quite aside from
their willingness to proliferate on nuclear matters which, I think,
hold very alarming types of consequences for the world at large.
I should include as well Nepal in our efforts, as a country that
has been extremely cooperative with us. It would be my hope that
we would be able to help it as well with the new amounts of aid
that we are increasing through Public Law 480
Do you have any other comments that you think the subcommit-
tee should make a part of the record with respect to this, to these
countries?
Mr. STAPLES. In regard to the uses of Public Law 480 in India, it
is important to note that a considerable amount of the Public Law
480 is used directly in either school feeding programs or in support
of some really very imaginative programs, aiming at the nutrition-
al problems of poor children and pregnant and lactating mothers.
This is a very carefully worked out program which is being car-
ried out by American voluntary agencies in cooperation with vari-
ous of the Indian state governments.
The other major part of Public Law 480 in India is also being
used for a very imaginative program to help the formation of coop-
eratives for vegetable oil production, because India is an enormous
deficit producer of vegetable oils.
The Nepal program in fiscal year 1985 actually provides for a
moderate increase in development assistance funds for Nepal,
which was agreed to during the King's visit this past year.
Senator BOSCHWITZ. We thank you gentlemen for coming. You
have been very patient.
This session is ended.
[Additional questions and answers follow:]
STATE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED FOR THE
RECORD
Question 1. Ambassador Murphy, what is the impact of Lebanon's abrogation of
the May 17 Israeli withdrawal agreement on Lebanon and the military balance in
the region?
Answer. The May 17 Agreement provided for the withdrawal of Israeli forces
from Lebanon and security arrangments for the protection of Israel's northern
border. Cancellation of the unratified May 17 Agreement is obviously a step back-
ward from these goals. Those responsible for rejection of the proposed Agreement
now bear responsibility for making new arrangements to achieve these goals which
ratification of the Agreement would have achieved. It is still too early, however, to
measure what impact, if any, cancellation of the Agreement will have on the mili-
tary balance in the region.
Question 2. In recent months we have seen the abrogation or freezing into a “cold
peace" of the two major agreements Arab countries have signed with Israel, the
May 17 Lebanese-Israeli agreement and the Egyptian-Israeli Camp David Treaty.
What impact do you think this will have on future efforts to negotiate agreements
between Israel and the Arab countries?
555
Answer. The Middle East is a region of vital importance to the United States and
our friends and allies. We have never believed that facilitating a peaceful settle-
ment would be an easy task. We know the price of our effort in Lebanon. With
regard to Egypt and Israel, we see the structure of the peace treaty as intact and we
are working on behalf of a warmer relationship.
We should be under no illusions that there are many in the Middle East and else-
where whose interests would not be served by settlement and who will work to un-
dercut our efforts. it is our responsibility, both in the Executive Branch and the
Congress, to provide the necessary support for those willing to take the very real
risks which come with entry into the peace process. If we are to play the construc-
tive role necessary to achieve peace between Arabs and Israelis, we will have to
demonstrate to all concerned that the United States can be depended upon to deliv-
er on its commitments and to stand by its friends.
Question 3. Israeli Finance Ministry officials estimate that their foreign exchange
current account deficit will be about $1.3 billion. Is the Israeli figure about right?
Answer. The Israelis are projecting a "financing gap"-not a current account defi-
citof $1.3 billion. The gap represents the deficiency in projected resources needed
to finance the current deficit and debt amortization after taking into account pro-
jected inflows from commercial and concessional non-U.S. Government sources. The
accuracy of the estimate depends on a number of assumptions concerning domestic
Israeli economic policy, the level of international economic activity, and availability
of various sources of financing. Our own assistance proposal reflects our belief that
with appropriate Israeli economic policy decisions the need for economic assistance
should be considerably less than the $1.3 billion projected.
Question 4. Do you believe the Israeli economy is in better or in worse shape than
it was a year ago?
Answer. The balance of payments deterioration evident in 1982 continued in 1983.
International factors were exacerbated by the GOI policy of maintaining an over-
valued shekel in the hope of dampening inflation. Not only was inflation unaffected,
but the overvalued exchange rate limited Israeli exports and encouraged imports. In
August the government tacitly abandoned its exchange rate policy via a modest 7
percent devaluation.
The continued adverse developments in both prices and exports combined with
uncertainties in the period following Prime Minister Begin's resignation to produce
a run on the dollar which, in view of the need to liquidate assets to obtain currency
for exchange, ultimately also led to a collapse of share prices. On October 11 the
government announced a devaluation of some 18 percent and a 50 percent increase
in the price of government controlled basic commodities.
Despite the deterioration in the external accounts and an increase in the rate of
inflation (which reached a new high of 191 percent) domestic consumption and in-
vestment expanded briskly. Private consumption increased by about 6.5 percent,
boosted by an average real wage increase of about 5 percent. Public consumption of
domestic goods and services increased over 6 percent. In fact, one of the characteris-
tics of Israeli economic performance in recent years has been consumption increases
which continually outstrip growth in the economy in general. The investment in-
crease was particularly driven by the relative cheapness of imports--the result of
an overvalued currency. Capital machinery and equipment imports increased by 23
percent in 1982 and 32 percent in 1983.
Question 5. When Secretary Shultz testified before the Committee on February 22,
he said the $850 million ESF figure seemed appropriate. He seemed to indicate the
Administration was willing to keep an open mind on the matter. Is that a fair im-
pression?
Answer. The Administration supports its proposal for $850 million in Economic
Support Funds. We remain convinced that additional grant cash transfer assistance
at this point is not the appropriate means of helping Israel cope with the economic
realities with which it is faced. The Secretary indicated our strong desire to be of
help to Israel as they move to develop economic policy approaches.
As in the past we are particularly concerned about budgetary changes which have
the impact of reducing the amounts of assistance available for other critical areas.
Question 6. The Israeli Government has proposed some reforms and a 9 percent
budget cut in an effort to alleviate the current economic crisis. What is the Admin-
istration's view of these measures including your assessment of the domestic Israeli
social impact in such areas as unemployment?
Answer. The Israeli Government recently presented to the Knesset a budget for
Israeli fiscal year 1984 which is in real terms slightly below fiscal year 1983 levels.
Although it had originally hoped to devise a budget containing a 9 percent across
the board budget cut, the Cabinet Interministerial Economic Committee rejected
556
such an approach in early January. The Finance Minister, therefore, negotiated sep-
arate budget reductions with each of the concerned ministries.
The introduction of this budget is a useful first step. But the correction of Israel's
economic imbalances will require the implementation of budget reductions and the
development of appropriate wage and monetary policies. Although the Israeli Gov-
ernment has indicated an intention to follow “restrictive monetary policy,” we have
heard no details on the implementation of such a policy and note that the budget
itself continues to call for large injections of new money via Bank of Israel money
creation.
Question 7. Can increased economic assistance be useful in helping Israel mitigate
the impact of the current period if austerity measures are implemented? What is
your long range view of the Israeli economy?
Answer. Increased U.S. assistance will not be useful in the absence of a thorough-
ly developed, well thought out Israeli program.
With appropriate domestic economic policies and a reasonably strong internation-
al economy, the Israeli economy should return to a pattern of export growth. Do-
mestic.economic measures will be vital to stemming triple digit inflation and re-
turning to a sounder balance between consumption and investment in the economy.
There is every reason to believe that Israel, with its abundance of human talents,
can take the necessary action. The longer term development of the Israeli economy
will depend on utilizing its human talent and resources for further development in
areas such as high technology and science based industry. Our own assistance pro-
posal seeks to directly address these concerns of the Israeli Government via new en-
dowment funds for the four existing binational foundations whose programs directly
contribute to achievement of these goals.
Question 8. In the past, U.S. officials have estimated that Israel was spending
about $400 million a year on West Bank settlements and development. Some Israeli
budget analysts say the new budget indicates a cutback or perhaps even a freeze. Do
you have any assessment?
Answer. The Israeli Finance Minister reported recently to the Knesset that GOI
expenditures on settlements were about $400 million per year. It is not possible to
determine precisely from public budgetary data the total budgetary cost of the set-
tlements because the information is not contained in separate line items.
For the same reason it is difficult to be precise about the exact impact of the new
budget proposals on settlement activity. Expenditures on settlements might de-
crease somewhat in view of an overall reduction in planned capital expenditures. At
the same time settlement activity is not a separate line item within that budget and
the exact impact on settlement activity will depend on the implementation of the
overall reduction.
Question 9. How long do you believe it will be before tangible agreements are
reached with the Israelis on the security cooperation issues discussed during Prime
Minister Shamir's visit last December? Do you believe anything definitive or sub-
stantial will result from the proposals for prepositioning of some U.S. equipment in
Israel, maintenance contracts or other measures which might assist the Israeli econ-
omy?
Answer. At the conclusion of Prime Minister Shamir's visit to Washington late
last year President Reagan announced our intention to undertake enhanced politi-
cal-military cooperation with Israel. The Joint Political Military Group (JPMG) was
formed as the mechanism for carrying out this enhanced cooperation. The first
meeting of the JPMG was held in Washington January 26-27. There will be follow-
on JPMG plenary sessions on a regular basis, normally every 6 months. Although it
is too early in the process of our ongoing consultations to say when tangible agree-
ments will be reached, the JPMG is considering subjects such as combined planning,
joint exercises, and requirements for prepositioning of U.S. equipment in Israel.
The Governments of Israel and the United States agree that the primary purpose
of political-military cooperation is to address areas of mutual security interest, with
priority attention being given to the threat posed by Soviet and Soviet backed ac-
tions in the Middle East region. The United States assists the Israeli economy
through a number of programs such as the four existing binational foundations,
ESF and FMS assistance, and cooperation agreements with numerous USG agencies
including the 1979 MOA on defense procurement. If elements of our political-mili-
tary cooperation assist the Israeli economy, then so much the better; but this is not
the primary objective.
Question 10. When President Mubarak and several Egyptian Cabinet Ministers
were here recently, they suggested that perhaps Egypt's debt repayment burden
could be eased by refinancing some of the old FMS loans which were made when
557
interest rates were higher than they are now. We were told the Administration was
exploring the idea. Is this proposal feasible? Please provide any analysis.
Answer. During their visit last month, Egypt's Ministers of Economy and Interna-
tional Cooperation proposed that one way we could reduce the economic burden of
FMS loans would be to refinance the ones made when interest rates were high at
today's lower rate. FMS loans were made at a rate which covered the cost of bor-
rowed money to the U.S. Government. We never intended to make money from
these loans. Therefore, agreeing to look into the feasibility of refinancing FMS loans
is consistent with the rationale behind the FMS loan program. An interagency
group is presently looking into the legal, budgetary and policy implications of refi-
nancing. We have not yet reached any conclusions. We are of course prepared to
consult fully with Congressional committees as appropriate.
Question 11. The Egyptians apparently will benefit considerably from the Admin-
istration proposal to provide $1.175 billion FMS on an all grant basis. Last year they
received $1.3 billion in FMS of which $465 million was cash grant. The Egyptians
have requested that the overall amount be restored to $1.3 billion to cover proposed
arms purchases. What has been our response?
Answer. We continue to believe that the proposed all grant FMS program of
$1.175 billion for fiscal year 1985 is sufficient to enable Egypt to meet the cash flow
requirements of its planned military modernization program. We have made our po-
sition clear to the Egyptians.
Question 12. We understand that some military specialists who have served in
Egypt believe that Egypt may have bought some weapons systems which are too ex-
pensive for their needs. They mention the four E-2C “Hawkeye" radar planes for
$1.5 billion and the latest model F-16C and D jets. Is it true that these concerns
were raised within the U.S. Government?
Answer. There has been no serious question among U.S. military specialists about
Egypt's legitimate military need for E-2Cs and advanced models of the F-16. There
was some concern expressed initially about Egypt's ability to absorb such complex
systems into its existing military organization, but the Egyptian armed forces are
adapting well to the technical demands of the systems and should be able to use
them effectively
Incidentally, the total projected cost of the E-2C program of four aircraft and sup-
port systems is less than $1 billion, spread over 7
years.
Question 13. A number of American business firms interested in investing in
Egypt are discouraged by the red tape. Is any progress being made in alleviating
this situation?
Answer. Potential investors continue to report encountering bureaucratic obsta-
cles/red tape in Egypt. The problems are relatively minor in some areas, such as
the petroleum sector, but discouraging in other cases. We are working with private
sector organizations and firms in identifying and informing the Egyptian Govern-
ment of regulations and practices which discourage investors. The Egyptians are in-
terested in attracting investment and have acted on some of the issues we have
helped bring to their attention. For example, the period for review of investment
proposals has been shortened.
Question 14. King Hussein last April declined to enter negotiations with Israel
after failing to receive a green light from the PLO and Saudi Arabia. Nevertheless,
the fiscal year 1985 Congressional Presentation Document prepared earlier this year
suggested the support was forthcoming, saying "Jordan is essential to the Presi-
dent's Middle East initiative. King Hussein continues active support for our shared
objectives.” Could someone tell us what tangible evidence you can cite of King Hus-
sein's "active support” for President Reagan's initiative?
Answer. King Hussein's efforts for our shared objectives, including supporting
President Reagan's peace initiative, have been demonstrated in diplomacy and lead-
ership within the Arab World to create the necessary conditions of support for his
entry into the peace process. These include:
Calling for decisions by majority rule instead of consensus which effectively
grants a veto to radical views. The appeal of this approach was demonstrated in the
recent Islamic conference which helped to reintroduce Egypt into the Arab family of
nations.
Urging cooperation among Egypt, Iraq, Saudi Arabia, and Jordan to strengthen
the voice and further the development of moderation in the region.
Publicly suggesting that, should the current disarray result in Syrian domination
of the PLO, the PLŐ would cease to be the "sole legitimate representative" of the
Palestinians, and Jordan would act accordingly.
And by restoring the Jordanian Parliament. Although primarily intended to satis-
fy public desire for greater political participation, the restoration had a range of ef-
558
fects. It created a way for moderate Palestinians to express themselves, and it pro
vides the inhabitants of the West Bank with a forum. This is important because we
know many West Bank leaders strongly support Hussein's entry into the peace
process and they have urged Hussein and Arafat to reach agreement which would
permit that entry.
Jordan wants to and must be a party to any effort to produce progress towards
peace in the Middle East. Hussein's support for President Reagan's initiative is
clearly on the record.
Question 15. The King was in Washington recently and later met in Amman with
Arafat. Do you have any evidence that Hussein is about to enter the peace process?
Answer. As you have seen from King Hussein's New York Times interview of
March 15 and his Face the Nation appearance March 18, Hussein has said that
under the current circumstances, he does not envision participation in the peace
process and suggests the possibility that we take another look next year. He said he
would continue his talks and efforts to avoid polarization of the region and he ex-
pressed his frustration with developments in the Middle East over the course of the
last 2 years. Among these were the Israeli invasion of Lebanon in which Israel con-
tinues to maintain troops, the United States August veto of a UNSC resolution con-
cerning continuing Israeli settlement activity in the occupied territories, the U.S.
strategic alliance with Israel, which Hussein argues diminishes the United States
ability to act as an intermediary rather than as an ally to one of the disputing par-
ties, and the United States apparent withdrawal of support for Lebanon, which Hus-
sein argues diminishes the credibility and reliability of the United States. He also
expressed frustration over our inability or unwillingness to help Jordan meet its le-
gitimate defense requirements. In addition, Hussein attributes to the Arabs an in-
ability to act. Finally, Hussein is of the opinion that Israeli rejection of President
Reagan's initiative is unalterable and the continuing settlement activity in the West
Bank, to Hussein, is evidence of Israel's intention not to withdraw from the occu-
pied territories. In his view then, negotiations on the basis of the principle of ex-
change of territory-for-peace, as embodied in UNSC Resolution 242, would not be
fruitful.
While we understand much of Hussein's point of view, we disagree with many of
his assessments and take encouragement from the possibility that we can reassess
with him the situation next year.
Question 16. According to recent U.S. Government estimates, Jordan will have to
repay in fiscal year 1985 to the U.S. Government in principal and interest on previ-
ous ESF, FMS and Public Law 480 loans more than $95.4 million. Did the Adminis-
tration take this into consideration before making the budget request?
Answer. The Administration requested ESF and FMS funding levels for Jordan
using criteria relevant to Jordan's development assistance and defense needs. Jor-
dan's overall economic situation is taken into consideration when the Administra-
tion requests funding levels. One element of the economic health of a country is its
ability to manage its external debt.
The Administration is aware that Jordan will face large debt repayments in fiscal
year 1985. The substantial deceleration in Jordan's economic growth may make debt
repayment more uncomfortable than previously foreseen.
Nonetheless, the Jordanians maintain an excellent international credit rating.
The Central Bank holds almost $1 billion in foreign exchange reserves, or 10 times
the expected debt repayment burden for 1985. Because of the fundamental health of
the Jordanian economy and the strong foreign exchange position of the Central
Bank, we have every confidence in the Government's ability to manage its economic
affairs prudently, as it has done in the past.
Question 17. How much aid to Lebanon is being held up because of the current
situation? Please furnish a breakout of how much has been obligated of the $150
million authorized last year for reconstruction and how much of the remainder is
being considered for obligation? In view of the situation, why do you really need
another authorization in fiscal year 1985?
Answer. Of the $150 million appropriated to Lebanon in fiscal year 1983 for recon-
struction and relief, $24.7 has been obligated. We have begun consultations with
Congress on the reprogramming of another $40 million for Grenada. That leaves
roughly $85 million in unobligated fiscal year 1983 Lebanon ESF funds, of which
another $30 million is firmly committed for relief, hospitals, and support for Ameri-
can educational institutions in Beirut.
Although the situation in Lebanon remains very fluid, Lebanon's reconstruction
needs remain very large. Assuming a greater degree of political accommodation and
stability than was evident in recent months, Lebanon should be able to resume its
rebuilding efforts.
559
Flexibility on our part is needed to assist once stability returns. A rapid accelera-
tion of the U.S. assistance program will also serve as a catalyst to other donors. We
have had to use some of our current funds for unanticipated relief needs and sup-
port of U.S. educational institutions like AUB. The $20 million requested for fiscal
year 1985 will replenish the funds needed for the rebuilding efforts. We believe it is
prudent to leave this request intact.
Question 18. How much are you providing in refugee assistance?
Answer. Out of the $5 million set aside for relief for displaced persons in fiscal
year 1983, $2.5 million has already gone to a variety of private voluntary and inter-
national organizations to assist the Lebanese who have been displaced by the fight-
ing.
Furthermore, we have agreed to provide an additional $.5 million to the U.N.
Trust Fund, $1 million to the ICRC, and upwards of $1 million to United States and
indigenous private voluntary organizations.
Since additional requests for emergency relief funds are coming in, we will soon
seek Congressional approval to allocate additional relief funds from the $150 million
appropriated last September.
Question 19. What are the plans for assistance to the American University and its
hospital? Considering the political situation in Beirut, what are the University's
long term prospects?
Answer. AUB has already received $5 million this fiscal year from our American
Schools and Hospitals Abroad (ASHA) account. In addition, it received one half of
the $7.6 million in ESF funds promised it for this year. It will receive the remainder
shortly.
AUB continues to be an important symbol of U.S. commitment to higher educa-
tion in the Middle East, and of U.S. presence in general. Many influential persons
throughout the Arab World have benefitted from an American style education at
AUB. We believe firmly that future generations should also benefit. Despite the vio-
lence in Beirut and its direct effect on AUB, the institution is highly regarded by
Lebanese of all factions and by the cultural elites of other Arab countries as well.
Therefore, we remain strongly committed to an American University of Beirut
which is economically viable and dedicated to academic excellence.
Question 20. Isn't the American University of Beirut a likely target for Islamic
extremists?
Answer. As we have learned through tragic experience, it is always dangerous to
underestimate the extremes to which terrorists will go. Unfortunately, one cannot
assume that any institution is automatically immune from terrorist attacks. Never-
theless, neither we nor the Lebanese can allow ourselves to be intimidated by such
potential threats nor allow education to be held ransom to fanaticism. In this
regard, the militia leaders of both the Druze and the Shia Amal have assigned spe-
cial priority to preventing further infringements on the security of the AUB
campus.
Question 21. Tunisia is facing a debt service problem. According to U.S. Govern-
ment estimates, Tuinisia will have to repay to the United States Government in
principal and interest on previous ESF, FMS, and Public Law 480 loans more than
$58.1 million in fiscal year 1985. This is more than the Administration is requesting
for military and economic aid to Tunisia. How does this new resource flow from the
Tunisian Government to the United States Government help stability and economic
development in Tunisia? Was the debt servicing question considered before submit-
ting the aid request?
Answer. The total fiscal year 1985 security and economic assistance proposals for
Tunisia is $76.349 million, which is larger than the fiscal year 1985 repayments the
GOT must return to the U.S. Government. The fiscal year 1985 figure includes $69.7
million for security assistance, of which a significant portion, $15 million, is grant
military assistance (MAP), and another portion, $25 million, is FMS credit at conces-
sional rates. This level of concessionality greatly enhances the financial value of
this aid while not excessively adding to Tunisia's external debt. Our on-going securi-
ty assistance is at a level that will enable Tunisia to continue its military modern-
ization program and help
to provide Tunisia with a deterrent to external aggression.
The bulk of fiscal year 1985 economic assistance proposals for Tunisia is for Public
Law 480 food aid. Annual assistance proposals are formulated by taking many fac-
tors into consideration, including a country's debt servicing position.
Question 22. In fiscal year 1984, the Administration proposed $90 million in guar-
anteed FMS loans (market rate) and $50 million in grant military aid. Because of
Congressional reductions in the Administration's requested funding they are now
scheduled to receive $87 million in guaranteed loans and $18 million in grant mili-
560
tary assistance. Why was Tunisia the country which suffered the single largest cut
from the Administration's requested level of grant military aid?
Answer. Our requests for Tunisia are geared to the payments schedule for U.S.
military equipment which the Tunisian treasury must meet. These payments
peaked in fiscal year 1984. We are proposing aid levels in fiscal year 1985 which will
permit Tunisia to finance the acquisition of the equipment to be acquired and
permit it to begin the procurement of new items. The final proportion of FMS to
MAP credits that ultimately emerged in the fiscal year 1984 proposals reflected the
best mix that was possible, given the level of assistance necessary, the limited funds
available for grant aid, and the great demand for these resources.
Question 23. In most cases when a country is severely cut from requested levels,
the Administration attempts to compensate the following year. In the case of Tuni-
sia, however, the Administration has further reduced the requests. Why is this the
case?
Answer. Security assistance to Tunisia rose sharply after fiscal year 1981 in order
to finance initial large military equipment purchases associated with Tunisia's
effort to modernize its military structure and develop a credible deterrent to possi-
ble Libyan aggression. Tunisia's military modernization drive was initiated as a
result of a 1980 Libyan-backed insurrection in the Gafsa military garrison. The Ad-
ministration did not envision that our extraordinary response for security assistance
in the post-Gafsa period, enabling Tunisia to finance initially large equipment pur-
chases, would establish a new baseline for security assistance. Compared to the
fiscal year 1981 FMS level of $15 million, our fiscal year 1985 program represents a
substantial quantitative and qualitiative improvement. Our concern for Tunisia's se-
curity and territorial integrity continues. Fiscal year 1984 security assistance, while
not at the level originally proposed to the Congress, was sufficient for Tunisia to
make scheduled payments for equipment previously ordered, as well as to begin new
orders. Fiscal year 1985 proposals will allow further additional equipment to be pur-
chased.
Question 24. Why is Public Law 480 aid to Tunisia being reduced from $15 million
to $5 million? Were the bread riots taken into consideration?
Answer. As a result of the bread riots, we were able to raise fiscal year 1984
Public Law 480 Title I food assistance from $10 million to $15 million. This was
done both to provide additional grain, primarily corn, to Tunisia in a time of eco-
nomic difficulty, and to help Tunisia financially through budgetary support meas-
ures. Fiscal year 1985 Public Law 480 requests were submitted prior to the bread
riots and reflect the overall economic assistance reduction originally decided upon
in 1981 because of Tunisia's steady growth in the 1970's. We recognize the economic
difficulties Tunisia has encountered in the last several years, and we will monitor
the situation closely to ensure the appropriateness of our aid levels.
Question 25. Senator Percy and Senator Boschwitz have supported continued eco-
nomic aid to Tunisia. Following the Administration's decision to cut off economic
aid, the Committee earmarked $5 million in ESF for Tunisia in fiscal year 1982 and
fiscal year 1983. Last year, Senator Percy and Senator Boschwitz wrote to the Secre
tary requesting that the program be continued. Why did you choose not to agree to
their request?
Answer. Our decision initially not to request ESF for Tunisia in fiscal year 1984
was based on the severe reduction in overall budget levels for ESF and because it
was felt that Public Law 480 was also a very useful means of providing economic
assistance to Tunisia. However, after a review of our policies toward Tunisia in
preparation for the Secretary's travel there in early December, and taking into con-
sideration Congressional interest, we allocated $1.5 million ESF to Tunisia. This
funded the scholarship program which was the specific concern the Senators ex-
pressed to the Secretary. For fiscal year 1985, the Administration is proposing $3
million ESF
Question. 26. A slight increase is proposed for the regional cooperative programs,
involving primarily Egypt and Israel. Is the program still being supported at the
Egyptian working level? Some U.S. officials have suggested that the program could
be broadened to go beyond the purely scientific area, to allow for programs such as
education and cultural exchanges. Would the Administration have any objections?
Answer. Egyptian officials at all levels continue to support trilateral development
programs undertaken with the United States and Israel. As for expansion of such
programs, we are prepared to look carefully at any regional cooperation proposal
that is submitted to us and is supported by the parties. We have tended to take a
broad view of the type of regional cooperation programs we could support and have
funded a number of activities which are not in the science and technology fields. We
561
believe that the current legislative language is adequate to support a wide variety of
regional projects consistent with AID's developmental mandate.
[Whereupon, at 1:07 p.m., the subcommittee adjourned, subject to
call of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
(WESTERN HEMISPHERE AFFAIRS)
TUESDAY, MARCH 20, 1984
UNITED STATES SENATE,
SUBCOMMITTEE ON WESTERN HEMISPHERE AFFAIRS,
OF THE COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:38 p.m., in room
SD-419, Dirksen Senate Office Building, Hon. Jesse Helms (chair-
man of the subcommittee) presiding.
Present: Senators Helms, Murkowski, Pell, and Zorinsky.
Senator HELMS. The committee will come to order.
Today the Subcommittee on Western Hemisphere Affairs will
hear administration testimony and two panels of public witnesses
on the administration's request for aid to Latin America, including
special legislation for increased aid to Central America.
The first panel includes: Under Secretary of Defense Dr. Fred
Ikle; Assistant Secretary of State, Ambassador Langhorne Motley;
AID Deputy Administrator Jay Morris; and AID Inspector General
Herbert Beckington.
Gentlemen, the committee welcomes you and we invite you to
begin with your opening statements as soon as the distinguished
minority ranking member of the subcommittee has spoken. Senator
Pell, do you have a statement?
Senator PELL. Yes, I do.
Thank you, Mr. Chairman. I join you in welcoming the adminis-
tration and public witnesses to discuss the aid request for the
region. I look forward to hearing their testimony and responses to
questions, especially with respect to the aid package for Central
America, largely based on the recommendations of the Kissinger
Commission.
I disagree with a good many of the political and security pre-
scriptions of the Kissinger report, which supports to my mind a
policy placing an emphasis on military solutions. I do not believe
the administration's request for about $400 million in military as-
sistance over the next 2 years to El Salvador is the best way of
achieving a peaceful solution to the conflict there.
The United States continues to funnel millions of dollars to our
guerrillas, the Contras, in Nicaragua. We are spending many more
millions in El Salvador. In Honduras, the United States is estab-
lishing a permanent presence which has many implications for our
Central America policy.
(563)
564
On the economic side, there is much merit to the proposal of the
administration, but I am concerned with the magnitude of the eco-
nomic assistance request-$8.5 billion over the next 5 years. I, as
other Americans are, am concerned about our budget deficits and I
ask, as I did of Secretary Shultz in February: Will the infusion of
$8.5 billion in additional economic aid buy peace and stability in
that region? And can we accomplish this objective without deepen-
ing our own involvement and ultimately without the introduction
of American troops?
Responses to these and other questions raised at these hearings
will benefit us as we go to markup next week.
Thank you very much, Mr. Chairman.
Senator HELMS. Thank you, Senator Pell.
The Chair would note that at 3 o'clock there will be a vote in the
Senate. However, that vote will run for 45 minutes, to take care of
Senators coming and going. So we will not have that time pressure,
at least.
Dr. Ikle, please proceed.
STATEMENT OF HON. FRED C. IKLE, UNDER SECRETARY FOR
POLICY, DEPARTMENT OF DEFENSE
Dr. IKLE. Mr. Chairman, thank you for inviting us to testify on
this critical issue of United States policy toward Central America,
particularly our assistance to El Salvador. I shall focus on the mili-
tary aspects. My colleagues here will address diplomatic, economic,
and other aspects
United States military assistance to El Salvador has been singled
out for particular criticism by some Members of Congress. In fact,
in 1981, 1982, and 1983 Congress consistently approved much less
military assistance than the President had asked for, about only
half of what the President requested.
Today, Mr. Chairman, another specific request for economic and
military assistance is before Congress, based on the recommenda-
tions of the Bipartisan Commission on Central America that the
President established in response to congressional suggestions.
The assistance is three-fourths economic and only one-fourth
military. Over half of this military assistance is for El Salvador, in
particular, $178.7 million as a supplemental for this fiscal year.
But the regular authorization and appropriation process is not
taking account of the urgency for the additional security assistance
for El Salvador. Hence, the administration is asking your support,
not only for the regular 1984-85 requests for economic and military
assistance for the region, but also for a $93 million emergency allo-
cation of security assistance to El Salvador.
As I see it, Mr. Chairman, this emergency allocation will give
Members of both Houses time to consider the comprehensive pro-
posal and to cast their vote on it without the question having been
prejudged by the Salvadoran army running out of critical supplies.
Note that the $93 million emergency request amounts to scarcely
more than half of the full supplemental requested for the remain-
ing 6 months of the fiscal year, and yet, some are apparently pro-
posing to cut this portion in half again.
565
I am reminded of a city council that could not agree how to build
a bridge across a nearby river, so it commissioned a group of ex-
perts. But then the council did not like the expert advice it had
purchased and cut the recommended budget in half. Yet, the city
council did not have the courage to cancel the project. It appropri-
ated funds sufficient only to build a bridge halfway across the
river.
Mr. Chairman, if Congress were to cut the President's proposed
military assistance in half, this would be like deciding to build a
bridge halfway across the river. Moreover, by denying the neces-
sary military assistance, Congress would assume considerable re-
sponsibility for a protracted military stalemate in El Salvador.
Such a cut in military aid would perpetuate the violence, frus-
trate economic recovery, prevent the consolidation of democracy,
prolong a situation in which human rights violations cannot be
eliminated.
Military strength, democracy, and peace reinforce each other.
Democracy strengthens the conditions for peace. Peace permits de-
mocracy to take root. And in environments such as in Central
America, we need military strength for the survival of democracy.
Mr. Chairman, I propose to submit the rest of my opening state-
ment for the record, so as to provide more time for you and your
colleagues for questions.
Senator HELMS. The entire statement will be made a part of the
committee record. Thank you, Dr. Ikle.
[Dr. Ikle's prepared statement follows:]
!
566
Statement by Fred C. Ikle
Before
Committee on Foreign Relations
US Senate
March 20, 1984
Mr. Chairman,
Thank you for inviting us to testify on the critical issue
of US policy toward Central America, particularly our assistance
to El Salvador.
I shall focus on the military aspects; my
colleagues here will address diplomatic, economic and other
aspects.
US military assistance to El Salvador has been singled
out for particular criticism by some members of Congress.
In
fact, in 1981, 1982, and 1983, Congress consistently approved
much less military assistance than the President had asked for.
Overall, Congress approved about only half of what the President
requested.
Today, Mr. Chairman, another specific request for economic
and military assistance is before Congress, based on the
recommendations of the Bipartisan Commission on Central America
that the President established in response to Congressional
suggestions.
The assistance the President requested for the
region in the FY 1984 Supplemental and for FY 1985 is three
fourth economic, only one fourth military.
Over half of the
military assistance is for El Salvador, in particular $ 178.7
million as a Supplemental for this Fiscal Year.
567
2
But the regular Authorization and Appropriation process is not
taking account of the urgency for additional Security Assistance
for El Salvador.
Hence, the Administration is asking your support,
not only for the regular 1984-1985 requests for economic and
military aid for the region, but also for an $93 million emergency
allocation of Security Assistance for El Salvador.
This emergency allocation will give members of both Houses time
to consider the comprehensive proposal and to cast their vote on it
without the question having been prejudged by the Salvadorian
Army running out of critical supplies.
You should note that the President's requests follows the
recommendations of the Bipartisan Commission.
Please also note
that the $93 million emergency request amounts to scarcely more
then half of the full Supplemental requested for the remaining
months of this Fiscal Year.
And yet, some are apparently proposing
to cut this portion in half again.
I am reminded of a City Council that could not agree how to
build a bridge across a nearby river, so it commissioned a
group of experts.
But then the Council did not like the expert
advice it had purchased and cut the recommended budget in half.
Yet, the City Council did not have the courage to cancel the
project:
It appropriated funds sufficient only to build a bridge
halfway across the river.
Mr. Chairman, if Congress were to cut the President's
proposed military assistance in half, this would be like deciding
to build a bridge halfway across the river.
Moreover, by denying
the necessary military assistance, Congress would assume considerable
568
3
responsibility for protracted military stalemate in El Salvador.
Such a cut in military aid would perpetuate the violence,
frustrate economic recovery, prevent the consolidation of
democracy, prolong a situation in which human rights violations
cannot be eliminated.
Respect for human life and protection
of human rights are values which cannot be properly promoted
during prolonged violent warfare.
Military strength, democracy, and peace reinforce each
other.
Democracy strengthens the conditions for peace.
Peace
permits democracy to take root.
And in today's world, the
democracies need military strength for their survival.
Democracy cannot take hold, unless a nation is able to
shield itself from those who use force to destroy the democratic
process
by burning voter registration lists and ballot boxes,
by destroying the economic basis of any elected government.
For El Salvador, President Reagan seeks to provide enough
military assistance so that this onslaught of violence can be
ended.
Clearly, the President is not "militarizing" his approach
some have alleged.
The economic aid recommended for
the next five years exceeds the military aid.
And the Soviet
military involvement in the Caribbean region has been much
larger than the US involvement.
The value of Soviet military
shipments to the region is almost seven times larger than the
value of US shipments.
Also, they have sent far more military
advisors than the United States.
In a region that has known so much violence, it is an
arduous task to nurture a fledgeling democracy and to strengthen
569
4
task is difficult enough in peacetime.
It is doubly difficult
when a determined, well-armed enemy wages war against the very
structure of democracy, as is now happening in El Salvador.
This is not to say that we can postpone a major effort
to ensure that human rights are safeguarded.
Even during the
current violence of war, we must press for the elimination of
all human rights abuses that are properly attributable to the
Government we support.
To this end, the Reagan Administration
has instituted several programs.
For example, in our training
of Salvadoran soldiers, we provide extensive indoctrination on
human rights.
The Administration also wants to provide training
to police forces, both to instill respect for human rights and
to improve the 'will and capability to apprehend those participating
in death squads.
The Administration has therefore proposed that
Congress remove a prohibition from the Vietnam years against US
training of police forces.
It seems to me, Mr. Chairman, prohibiting
such training while professing concern about death squads is a bit
like prohibiting the training of teachers while complaining about
illiteracy.
Some argue that negotiation should be a substitute for,
a level of military assistance sufficient to break the military
stalemate.
This is a dangerous illusion.
While negotiation
can--and must--complement adequate military efforts, it cannot
be a substitute for military strength.
In Central America--as in any other part of the world--
negotiation in and by itself cannot stop those who are determined
to use military force to seize power.
Negotiation can play a
34-045 0–84—37
570
5
useful role in facilitating an end to violence.
Negotiations
should bring about the participation of all those who are willing
to compete in the democratic process, by addressing their grievances.
The Reagan Administration continues to pursue the benefits of
negotiation vigorously.
But the hard core Communists, those who are resolved to
use vialence until they secure the monopoly of power, cannot
be converted through negotiation.
These are dedicated and
determined people--dedicated to destroy democracy, determined
to succeed by all means at their disposal.
Once these dedicated
people are armed and organized, democracy cannot be defended
without military power.
If we deny military assistance to those whom we ask to
advance democracy and human rights, their totalitarian enemies--
lavishly supported from the outside--are bound to win.
And once
such a totalitarian regime has taken over, the fate of people
in that country is beyond American influence.
We may have to
witness helplessly a massive, cruel deterioration in human rights.
Recall that in 1975, Congress terminated all military assistance
in behalf of South Vietnam and Cambodia.
Remember, thereafter,
the repression in South Vietnam, the concentration camps,
the
boat people, the genocide in Cambodia.
If totalitarian Communist regimes should become entrenched
in Central America, it would be a disaster not only for democracy
and human rights, but also for our national security.
We know
from long and bitter experience that such regimes, almost
always, will try to impose their type of dictatorship on
571
6
neighboring countries, either by promoting subversion; or through
open aggression where they expect little resistance.
The Soviet
Union, North Korea, Communist Vietnam, and Cuba all have done
this.
We do not face an isolated insurgency in El Salvador.
A harbinger of things' to come is the support and direction
Nicaragua currently provides for the insurgents in El Salvador.
This at a time when the Sandinista regime has neither fully
consolidated its grip on Nicaragua, nor completed its military
build-up.
It takes an extraordinary degree of foolishness to
expect that a vastly more powerful Sandinista regime would suddenly
turn into a more peaceful neighbor.
Costa Rica, one of Nicaragua's neighbors, is the oldest
democracy in Central America.
It has no army, only a small
militia.
What would the United States do if within a few
years, Costa Rica were attacked and asked for our help, say
under the Rio Treaty?
To refuse effective help to an ally so
close to us would devastatingly damage our ability to deter
aggression against Israel, Japan, or NATO.
But to become
involved at that late stage, when Nicaragua would have acquired
powerful military forces backed by Cuba, would result in a
major military confrontation.
Isn't it better to maintain an
adequate program of military assistance to avoid such an out-
come?
The Defense Department does not want to deter aggression
against democratic nations in Central America by having to station
large military forces there--as we now do in Korea and Central
Europe.
The Reagan Administraton, I can tell you, does not seek
to increase US military presence in Central America.
It would be
a tragedy if we ever had to divert major military resources to
that region.
With an adequate effort today, we can avert the need
for a much more costly, much more painful effort tomorrow.
572
Senator HELMS. Mr. Motley.
STATEMENT OF HON. LANGHORNE A. MOTLEY, ASSISTANT SEC-
RETARY FOR INTER-AMERICAN AFFAIRS, DEPARTMENT OF
STATE
Ambassador MOTLEY. Mr. Chairman, seeing that you have four
panelists here and that you have a vote at 3 o'clock, what I would
like to do is just submit for the record my prepared statement and
pass on, to give you more of an opportunity for questions. I will
pass on any comments at this time.
Senator HELMS. Without objection, your full statement will be
made a part of the record.
[Ambassador's Motley's prepared statement follows:)
573
PREPARED STATEMENT OF
THE HONORABLE LANGHORNE A. MOTLEY
ASSISTANT SECRETARY OF STATE FOR INTER-AMERICAN AFFAIRS
BEFORE THE
SUBCOMMITTEE ON WESTERN HEMISPHERE AFFAIRS
SENATE FOREIGN RELATIONS COMMITTEE
MARCH 20, 1984
Mr. Chairman, the Central America Democracy, Peace and
Development Initiative Act of 1984 is vitally important to the
future of Central America.
The exhaustive report of the National Bipartisan Commission
on Central America and the President's endorsement of its
recommendations make it possible to forge a comprehensive and
national program of action meeting immediate operational needs
within the compass of a long-term strategy.
The actions proposed by the Bipartisan Commission and
approved by the President will help to stabilize economies and
societies plagued by injustice and violence.
by injustice and violence. At the same time,
they will enable us to take the offensive against poverty, to
foster democratic development and respect for human rights, and
to help bring lasting peace to this troubled region so close to
the United States.
The President urges prompt Congressional action in support
of this program. As you know, the President will implement by
Executive action those commission recommendations not requiring
new legislation. The bill he transmitted to the Congress on
February 17 embodies the recommendations made by the Bipartisan
Commission that do require legislation.
I. The Central America Democracy,
Peace and Development Initiative Act of 1984
Mr. Chairman, in Central America communism, violence and
dictatorship feed on misery and a dismal history of injustice.
It is a destructive dynamic that oppresses the people of
Central America and will, unless altered, increasingly endanger
the rest of the hemisphere.
To break this destructive dynamic will require immediate
and persistent action in support of democratic self-determina-
tion, economic and social development that fairly benefits all,
and cooperation in meeting threats to the security of the
region. That was the consensus reached by the Bipartisan
Commission. It is also the basis of the President's
legislative proposals.
574
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The Bipartisan consensus. The Commission's discussions
with Central and Latin American leaders eliminated the screens
created by distance, paperwork, and partisan preconceptions and
exposed its members to the region's realities. They saw for
themselves what is happening in El Salvador anà in Nicaragua
and throughout the isthmus. The Commission found that Central
America's problems are complex, severe and deeply rooted. It
concluded that there are no quick fixes or shortcuts to solving
them. The U.S. interests involved, it pointed out, are both
moral and strategic. And they
And they are threatened both by human
rights abuse and economic misery and by Cuban and Soviet
intervention.
The Commission's recommendations are as direct as its
analysis. The Commission concluded unanimously that the
long-term will be far less manageable if we fail to deal with
existing challenges. It called for U.S. support for regional
diplomacy like Contadora, adding that the United States has a
special responsibility to contribute actively to the economic,
security, and political conditions, reguired for Contadora to
succeed. And it concluded that we are not doing enough to
protect our interests. It recommended that the Administration
and the Congress cooperate to provide the resources we and our
Central American friends need to attain a lasting peace built
solidly on democracy and equitable development.
The President's proposals. To implement the
recommendations of the Bipartisan Commission, the President
proposes:
A.
Economic Assistance
During the last several years, per capita GDP has fallen by
35% in El Salvador, 23% in Costa Rica, 14% in Guatemala, and
12% in Honduras. In four years, El Salvador has lost fifteen
years of economic development.
To halt such economic deterioration and the social and
political unrest it engenders, the Bipartisan Commission
recommended an additional $400 million this year for emergency
stabilization to set the stage for long-term development. The
President has requested these funds in the form of a
supplemental for FY 1984.
To make possible a comprehensive strategy to promote
democratization, economic growth, human development and
security, the Commission recommended almost doubling our
projected economic aid to roughly $8 billion over the next five
years.
The President's implementation plan for FY 1985-1989 calls
for a total of $5.9 billion in appropriated funds and
575
-3-
off-budget authorities to allow for $2 billion in insurance and
guarantees, the latter including housing investment guarantees
and a Trade Credit Insurance Program (TCIP) to be administered
by the Export-Import Bank.
For FY 1985, his program calls for $1.1 billion in
appropriated funds and $600 million in insurance and
guarantees.
Depending on country performance, we estimate that the
major beneficiaries of direct, bilateral aid in FY 1985 would
be El Salvador ($341 m.), Costa Rica ($208 m.), Honduras
($139 m.), and Guatemala ($96 m.). Although other countries
would receive more on a per capita basis, El Salvador, which
has suffered over $800 million in guerrilla destruction, would
be the largest single recipient.
This FY 1985 proposal includes:
About $550 million in balance of payments support to
finance the import of critical goods by the private sector.
1
$120 million in Public Law 480 food assistance, with local
currency proceeds used to reinforce programs in, for
example, education and health.
Major labor-intensive construction of infrastructure and
housing.
-
Significantly increased support for education, including
literacy and teacher corps, training and scholarships.
Major funding to develop commercial agriculture, the
backbone of the Central American economies, including
assistance to broaden ownership patterns and to increase
the availability of credit.
Funds to strengthen the administration of justice in the
region as the surest way to safeguard individual liberties
and human rights.
Support for the Central American Common Market and its
companion Central American Bank for Economic Integration to
revitalize intra-regional trade and restore economic
production and employment.
B.
Military Assistance
Without security, the best economic programs and the wisest
diplomacy will be unable to stop the opponents of democracy in
Central America.
576
-4-
The Bipartisan Commission unanimously recommended that the
United States provide to El Salvador "significantly increased
levels of military aid as quickly as possible, so that the
Salvadoran authorities can act on the assurance that needed aid
will be forthcoming (emphasis in the report). It also noted
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."
The President's proposal is as follows:
-
For El Salvador: To break the military stalemate as soon
as possible and provide a firmer basis for economic
recovery and democratic national reconciliation in El
Salvador we seek $178.7 million in FY 1984 supplemental
assistance and $132.5 million for 1985. Added to the $64.8
million available under this year's continuing Resolution,
the FY 1984-85 program for El Salvador would total $376
million.
--
To protect the elections and sustain progress on the
ground, $92.75 million of the $178.7 million supplemental
for FY 1984 is needed before this summer. These funds will
maintain operating capacity (such as ammunition) and
improve basic performance (such as training, medical
supplies and communications equipment), or both (such as
helicopters for tactical mobility and medical evacuation.)
---
'For the rest of Central America: $80.35 million in FY 84
supplemental military assistance and $123.4 million for FY
1985. The lion's share would be allocated to Honduras, a
democracy that still faces frequent violations of its
national territory by Salvadoran guerrillas seeking refuge
and using Honduras as a supply route, as well as by
Honduran guerrillas infiltrated from Nicaragua. Honduras
also faces a direct military threat from Nicaragua, which
has built up armed forces at least five times larger than
Somoza's National Guard and has received more than $250
million in military assistance from the Soviet bloc since
1979.
Conditionality. There is agreement among 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 to protect U.S. security and moral interests. There is
also a consensus that U.S. assistance should actively be used
to achieve these objectives.
The Commission recommends that military aid to El Salvador
should, through legislation requiring periodic reports, be made
contingent upon demonstrated progress toward human rights
577
-5-
objectives, including free elections and elimination of death
squad activities.
The Executive Branch and the Congress have not always seen
eye to eye on how best to achieve this shared goal. We must
now find a means to condition our assistance in ways that
work. In our view, effectiveness will require flexibility to
respond to specific circumstances as they exist at a given
moment.
Progress during the last three months demonstrates that
there are effective alternatives to the previous statutory
formula requiring determinations on an "all-or-nothing" basis
at pre-set intervals. Such a formula is not required to spur
Executive action, may actually trigger increased hostile action
by guerrilla forces, and can focus attention on the
certification process rather than on the underlying problems
and their remedies.
The Administration is prepared, however, to accept
conditions requiring that the Government of El Salvador
demonstrate progress on specified issues of common concern.
The only provisions unacceptable to the Administration are ones
that prejudge the situation on the ground or that create a
presumption that aid should be cut off.
We are, in sum, ready to work closely with the Congress to
ensure continuing human rights progress while preserving the
President's ability to pursue an effective foreign policy.
C.
Central American Development Organization (CADO)
The Commission recommended creation of a Central American
Development Organization (CADO) to give multilateral form and
substance to economic development efforts.
The President's proposal sets forth principles to guide the
negotiations for establishing this new institution in
conjunction with the Central American countries and other
donors.
The President intends to respect the principles set forth
in the legislation, both in his negotiations and in subsequent
U.S. participation in CADO. In line with these principles:
CADO would serve as a broadly-based forum for an open
dialogue on Central American political, economic and
social development and a continuous review of local
policies and of the uses to which foreign assistance is
put.
578
-6-
Participation would be open to the U.S., other donors,
and those Central American countries that commit
themselves to, among other things, peace and mutual
security, maintaining or making progress toward human
rights development, building democracy, and encouraging
economic growth through policy reforms. CADO would
include the public and private sectors, the latter
including representatives from both labor and business.
It would be supported by a small professional staff.
CADO would evaluate country performance and progress in
meeting objectives. It would then make recommendations
on political, economic and social development
objectives, mobilization of resources and external
resource needs, and economic policies and structures.
Disbursement of 25% of economic assistance funds
authorized under this Act and allocated for each Central
American country would be deferred until both the United
States and CADO have approved. Consistent with the
Constitution, ultimate control of U.S. aid funds would
remain with Congress and the President.
D.
Multiyear Funding
years.
To ensure effective planning and predictability, the
President's proposal departs from the conventional practice of
seeking economic assistance authorizations for only one or two
We are seeking an authorization that will extend
through FY 1989. We are also requesting that appropriations
under this authorization be made available beyond a single
fiscal year.
The reason for this innovation is that the bill represents
a five-year program. This is what was developed by the
Commission, and it is supported by our own analysis. This
approach has the fundamental virtue of enabling everyone
concerned both in the United States and in Central America
to know what could become available if performance standards
are met.
II.
Policy. Implementation and Timing
The scope and importance of the President's proposals to
implement the Bipartisan Commission's recommendations have
understandably led to many questions. Let me address a few of
the major ones.
579
-7-
A.
Are we asking for too much or for more than Central
America can usefully absorb?
No.
The sums requested are modest in relation to need.
The proposed appropriation of $1.12 billion for FY 1985 is
less than 15 percent of our proposed global economic aid budget.
for FY 1985 and less than 5% of the Gross Domestic Product of
the region. Relative to GNP, this is less than the aid
previously made available to some other parts of the world,
including South Korea and Taiwan. The total proposed program
of $8 billion over five years is much smaller than the Marshall
Plan, which in less than four years provided $42 billion at
today's prices.
One useful measure of the ability of Central America to
absorb is the shortfall in export earnings
export earnings from coffee and
sugar due to lower world prices and higher costs for imported
oil. This net hard currency loss amounts to about $1.5 billion
per year the same general magnitude as the proposed
assistance.
i
Moreover, as the Bipartisan Commission underlined, the need
for external assistance is enormous. Physical infrastructure
needs to be rebuilt, health and education systems need
expansion, and investment in productive capacity is essential
to employ the region's growing labor force.
considerable excess capacity exists to generate increased
employment and output. Private firms need working capital and
imported inputs. In the public sector, high priority
investment programs that have been suspended or cut back
because of austerity programs could be reactivated.
B.
Will the assistance be used effectively?
Yes. We will not subsidize inefficiency.
First, the largest part of the assistance will be balance
of payments assistance channeled to the private sector, rather
than to government programs.
Second, we will provide substantial technical assistance
and training for government officials to streamline operations
and increase efficiency.
Third, local policy reform will be required to receive and
ensure effective use of our funds. We will seek improved
opportunities and incentives for private sector investment. In
agriculture, adequate prices and access to land with secure
titles will stimulate investment and production by the people
who understand best how to do this the individual farmers.
580
-8-
In industry, good policies nobilize individual entrepreneurs to
make the right decisions concerning increased employment and
production. A key objective of CADO will be to engage the
private sector to identify activities that will most increase
productivity at the cutting edge of local production.
In addition, we are encouraged by progress on two important
sourcess of inefficiency:
Capital flight was a serious problem for 3-4 years
beginning about 1979. Recently, however, the Central
Banks of the region have greatly reduced such outflows.
Our A.I.D. Missions also are providing useful advice and
technical assistance to help Central American monetary
authorities meet the challenge.
Corruption has long been a problem in the region. But
recent media reports of abuse of u.s. assistance funds
have been exaggerated. And most were stimulated by our
own internal audit procedures. It is ironic indeed that
our very ability to detect corruption and identify
administrative deficiencies should become an argument
against aid.
C.
Are we seeking a military solution in El Salvador?
No. As President Reagan said a year ago, "the real
solution can only be a political one," with the Salvadoran
people deciding their own destiny through free and fair
elections. That is not a military solution.
We are requesting military assistance to enable the
Salvadoran armed forces to break the current stalemate. To ask
for less would be tantamount to prolonging the war and
decreasing incentives for the FDR/ FMLN to enter into serious
discussions with the Salvadoran Peace Commission about a
political settlement through elections. Passage of our
proposed economic and military assistance package could be a
deciding factor in ensuring participation of important elements
of the far left in the 1985 municipal and legislative elections.
So long as the guerrillas receive external assistance,
however, U.S. military aid must provide a defensive bulwark
behind which elections, reform, and recovery can proceed.
And
the fact is that progress has been substantial. The guerrilla
forces have carried out some spectacular raids, but the army
has been doing what counts: protecting major population
centers and defending the harvest. It is now defending the
elections and maintaining strict neutrality among the
candidates in the hotly contested nationwide presidential
campaign.
581
-9-
Violence against civilians continues to decline. Civilian
deaths from all political causes for the month of February
totalled 68 the lowest since the guerrilla war began in
1980. And this is despite the upsurge of killings from the
left, such as recent assassinations of conservative deputies
and the deaths of civilian train passengers.
------
Cur emergency request for $92.75 million of the proposed
$178.7 FY 1984 supplemental military assistance for El Salvador
must be seen in this context, and against the probability that
funding from the supplemental will not be available before
July. As the Bipartisan Commission emphasized, assurance of
adequate supplies is indispensable to maintain confidence as
well as the tempo of operations.
Finally, the amount of military assistance requested for El
Salvador should also be kept in perspective: total FY 1984
military assistance for El Salvador (that provided in the
Continuing Resolution plus the Supplemental request) is 3.6% of
our worldwide military assistance, and the FY 1985 request for
El Salvador is 2.1% of the global figure. These are not large
amounts, either in terms of our important interests in Central
America or of our worldwide responsibilities.
D. Shouldn't increased economic aid accompany or follow an
overall regional settlement?
If we want to give peace a chance, we must begin now to
rebuild the economies of Central America to create the climate
for peace.
There is no question that economic aid would be more
effective if there was peace. But the relevant question is
whether withholding economic aid produce peace. The answer
obviously, is no. Withholding aid until the war is over would
simply provide an additional element of leverage to the
guerrillas, who already exercise a veto over prospects for
peace. The search for peace must reflect operational
realities. The economies of Central America, fragile from the
beginning, have been subjected to the stress of economic crisis
and violence. The economic assistance which we are requesting
is essential support for any negotiated settlement.
With our support, the five Central American governments
have agreed last September to negotiate a peace agreement based
on à 21-point Document of Objectives. We support this Document
of Objectives because in accepting it, Nicaragua has agreed to
negotiate an agreement that could, if implemented on a
verifiable and reciprocal basis, meet our concerns in
Nicaragua. If a regional peace agreement is signed, even with
the best intentions of all the parties, it will not succeed if
the nations of the region are suffering from economic
collapse.
582
-10-
E.
Will these additional resources solve the problem?
Resources alone will not solve the Central American
crisis. But the Bipartisan Commission was absolutely right in
faulting our policy for not providing an adequate level of
resources. Moreover, resource predictability can enable our
diplomacy to take more effective advantage of the interplay
between different policy instruments to channel events toward
peaceful solutions, including negotiated solutions wherever
possible.
What is needed, in addition to the provision of adequate
levels of economic and military assistance, is demonstration by
the U.S. of a long-term commitment, the adoption by Central
American governments of appropriate economic, political, and
social policies/reforms, and an active diplomacy for peace.
III.
Conclusion
The crisis is acute. Our neighbors in Central America
urgently need the help of the only country capable of making
the difference.
We have a responsibility rooted in the history of our own
involvement in the area. U.S. moral and strategic interests
are both engaged. Doing nothing, or doing too little, are not
responsible alternatives.
There are some who are inclined to support only economic
assistance. Others are inclined to support only military
assistance. There is, however, no realistic alternative to the
balanced approach in the President's proposals.
Our initiative is based on sound analysis. It is based on
the consensus judgment that the area's problems have both
indigenous and extra-regional causes.
Our goals are realistic. The region's most progressive,
à emocratic forces strongly believe that we can work together
successfully to strengthen the moderate center in Central
America. These same people are convinced that our active
participation will serve both to defeat communism and to
bolster respect for human freedom in this critical part of our
hemisphere.
The approach is right. Effective action must include a mix
of developmental, political, diplomatic and security elements.
There is no such thing as a wholly "economic," a wholly
"political" or a wholly "military" solution to Central
America's problems. These elements must be pursued
583
-11-
simultaneously, equitably and humanely. Economies must be
protected as well as developed. Governments must be worth
defending. Home-grown poverty and Cuban-directed guerrilla
warfare are allies of each other; our policies must take aim at
both.
The approach proposed by the Bipartisan Commission and
adopted by the President calls for a constructive involvement
in Central America that addresses underlying causes of conflict
in the long term while preventing a guerrilla victory in the
short term. This kind of involvement now will eliminate the
need for greater involvement later.
Finally, I hope that your consideration of the Bill will be
infused by the Bipartisan Commission's unanimous conclusion, a
conclusion that guided its preparation and which is worth
quoting in full:
"The Commission has concluded that the security interests
of the United States are importantly engaged in Central
America; that these interests require a significantly
larger program of military assistance, as well as greatly
expanded support for economic growth and social reform;
that there must be an end to the massive violation of human
rights if security is to be achieved in Central America;
and that external support of the insurgency must be
neutralized for the same purpose."
Thank you.
.
584
DEPARTMENT OF STATE
BRIEFING PAPER
CENTRAL AMERICA UPDATE
El Salvador:
The pace oi election activity has intensified as the
Salvadoran Presidential campaign moves into its final week,
with major contenders vying for the large undecided voter
bloc. Christian Democratic candidate (and former President)
Napoleon Duarte appears to have a healthy lead over his nearest
rival, ARENA's Roberto D'Aubuisson, with former Minister of the
Presidency "Chachi" Guerrero, candidate of the National
Conciliation Party, holding onto third place. It appears,
however, that no party will draw the absolute majority needed
to win in the first round, necessitating a run-off in late
April or early May.
The total number of countries sending observers to the
elections now stands at more than 20, considerably more than in
1982. All Western Hemisphere countries except a handful
(Mexico, Brazil, Nicaragua and a few Eastern Caribbean
countries) have agreed to send official observers to the
elections. There will be a large US delegation. On the
European side, the British, Dutch, West Germans, Italians, and
Belgians have accepted the observer invitation. A large number
of individual observers and representatives of international
organizations (OAS, Christian Democratic International, etc.)
will also be p:esent.
The military is actively pursuing guerrilla groups in
several provinces to keep them off balance. The Salvadorans
expect some major guerrilla attacks this week and again before
the run-off election as well. Despite promises to the
contrary, the guerrillas clearly intend to create an atmosphere
of terror during the elections period. Three members of the
Legislative Assembly have been assassinated since January, with
the guerrillas claiming two of the murders as a "response" to
the elections. These left-wing death squad assassinations,
although probably perpetrated by the clara Elizabeth Ramirez
Metropolitan Front, allegedly a breakaway group from the FPL
guerrilla organization, have also been vindicated by the FMLN
umbrella guerrilla group's Radio Venceremos as "executions"
resulting from "the people's repudiation" of the Salvadoran
Legislative Assembly.
These murders by far left groups stand out all the more
given the overall decline in civilian deaths. February 1984
saw 68 press reported deaths, the lowest level since our
Embassy began keeping records in October 1980. The guerrillas
have also threatened reprisals against villagers who engage in
electoral activity and in recent days have begun a campaign
of terror within the capital city, setting off bombs, burning
buses and destroying gas stations. On March 6, the guerrillas
attacked a clearly marked Red Cross ambulance, killing two Red
Cross workers.
March 19, 1984
585
- 2 -
Nicaragua:
The Nicaraguan government is moving to prosecute and
convict leaders of the armed opposition in absentia. According
to a March 9 press report, 22 opposition leaders have been
charged with crimes ranging from assault to assassination and
will be summoned to court in Nicaragua. The purpose of the
trials clearly is to foreclose on the armed oppositions'
participation in the elections, particularly the candidacy of
such charasmatic leaders as Eden Pastora who enjoy wide name
recognition in Nicaragua.
At the same time, the democratic opposition, including
parties that have been allied with the Sandinistas, has
withdrawn from the Council of State's discussion of the draft
law to regulate the November 4 elections, protesting the
Sandinistas' unwillingness to incorporate their views in major
provisions of the law. The Sandinista National Liberation
Front (FSLN) ridiculed the walkout, saying the law would be
approved with or without the opposition and charging the
democratic parties with being afraid to face the Sandinistas in
an election. Many key electoral issues, including the rights
of political parties and media access, still have not been
addressed by the Council.
----
Guatemala:
.
:
The Guatemalan National Revolutionary Union (URMG), a
prominent guerrilla group, has threatened to regionalize the
Marxist-Leninist insurgency because of attacks by anti-
Sandinista groups on Nicaragua and has published a press
release deriding the electoral process in Guatemala and El
Salvador as comedies. In its press statement, the guerrillas
claimed that they see the Marxist insurgency in Guatemala as
part of a greater "Central American revolution."
Chief of State General Mejia has promised his government's
full cooperation in the formation and mission of a National
Peace Commission proposed by the rector of Guatemala's San
Carlos University. The Commission, whose mandate will be to
promote national reconciliation through dialogue leading to
full participation in elections, will include participants
Contadora
The three Working Commissions on political, security, and
economic issues, established by the January 8 Resolution of
Principles, continue their efforts to translate the 21-point
Document of Objectives into a comprehensive, verifiable
treaty.
The Commissions will have extensive consultations
throughout April to meet the April 30 deadline for presentation
of recommendations to the Foreign Ministers.
A US team established to support the core Four on Contadora
security matters recently traveled to the region to discuss
difficult security issues including means of inventorying arms
and troop levels, elimination of foreign security advisers, and
verification of security provisions. The President has
nominated Amb. Harry Shlauieman as his Special Envoy to advance
our efforts to promote diplomatic solutions.
34-045 0-84-38
586
THE SITUATION IN CENTRAL AMERICA
CHARTS
U.S. Department of State
587
EL SALVADOR
DISTRIBUTION OF FARMLAND
:
1971
11%
RENTED, SHARECROPPED
15%
LARGE PLANTATION
OVER 1,200 ACRES
1% OF THIE POPULATION
OWNED 40% OF THE LAND
SOURCE: 1971 AGRICULTURAL CENSUS
588
POPULATION DENSITY – 1982
600
(582)
(530)
500-
400-
ICHAEITAKTS PER SQUARE MILE
300
as when
ini
(252)
1xWire
.
--
200-
(121)
100-
(63)
EL SALVADOR
COSTA RICA
INDIA
FRANCE
U.S.A.
DECLINE IN GDP OF CENTRAL AMERICAN COUNTRIES
FROM PEAK YEAR THROUGH 1983
GDP
PEAK YEAR
GDP PER CAPITA
PEAK YEAR
EL SALVADOR
HONDURAS
COSTA RICA
GUATEMALA
NICARAGUA
-- 25%
2%
-15%
7%
1978
1981
1980
1981
1977
-35%
-12%
- 23%
14%
-- 38%
1978
1979
1979
1980
22%
1977
SOURCE: REPORT OF THE NATIONAL BIPARTISAN COMMISSION
ON CENTRAL AMERICA (JANUARY 1984)
J'MIMI.P01 DISK J5 M2
590
GDP & PER CAPITA GDP (REAL): 1978-1983
14
13,285
13,059
13
11.894
12
11,322
GDP
10.754
10,186 10.186
10
4,000
8,679
10.186
9
BILLIONS OF COLONES (1983 PRICES)
8
6,983
PER CAPITA
3,000
1
3,100
5,014
2.890
2,972
PER CAPITA GDP - COLONES (1983 PRICES)
6
2.552
2.660
2.203
2.140
2,375
2,368
1
5
2,000
1.976
2,080
GOP
3
1.000
2
0
1960
1965
1970
1975
1978
1979
1980
1981
1982
1983
1984
591
TOTAL ARMED FORCES
THOUSANDS
50 +
48,800
45
40
35
30
..
24,650
25 -
21,560
20
· 14,200 14,300
15,200
15
10
7,100
7,100
5
10
NIC.
HOND. GUAT. EL SALV.
NIC.
HOND. GUAT. EL SALV.
1977
1983
SOURCE: THE MILITARY BALANCE, INTERNATIONAL INSTITUTE FOR STRATEGIC STUDIES
592
TOTAL ARMED FORCES PER 1000 PEOPLE
1977
NICARAGUA
3.1
!
HONDURAS
4.3
GUATEMALA
2.3
EL SALVADOR
1.6
1983
NICARAGUA
17.4
HONDURAS
3.7
GUATEMALA
2.8
EL SALVADOR
5.1
:)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
SOURCE: THE MILITARY BALANCE, INTERNATIONAL INSTITUTE FOR STRATEGIC STUDIES
593
---
ASSESSMENT OF WAR-RELATED DAMAGES TO THE
SALVADORAN ECONOMY
1979-1983
353.5
U.S. MILLION
DOLLARS
300
252.9
200
120.5
100
99.1
AGRICULTURE
INFRASTRUCTURE
COMMERCE
&
INDUSTRY
DIVERTED
GOVERNMENT
SPENDING
SOURCE: U.S. EMBASSY ESTIMATE
594
"LAND TO TIE TILLER" PETITIONS AND TITLES (CUMULATION)
75,967
PETITIONS
FILED
10,000
60,000 -
55,287
PROVISIONAL
TITIE
GIANTED
50,000 -
10,000
-
30,000 -
20,000 -
10,000 -
5.1956
FINAL TITIT
GRANII!
DEC. NA
JIINF R1
DEC. 81
JUNE 82
Dr.C. 02
JUNE 03
DEC 03
595
"LAND TO THE TILLER"
-
BY DEPARTMENT
- % OF ELIGIBLE WHO HAVE FILED
AS OF NOV 9, 1983
100
90-
PEACEFUL ZONES
SOMEWITAT CONFLICTIVE ZONES
UN CONFLICTIVE ZONES
80
70 -
60 -
PERCENT
50
40
30-
20
10 -
AHUACHAPAN
SONSONATE
SANTA ANA
LA LIBERTAD
LA PAZ
CABANAS
LA UNION
SAN SALVADOR
CUSCATLAN
USULUTAN
SAN VICENTE
SAN MIGUEL
MORAZAN
CHALATENANGO
596
AVENAGE OIATUS
PIN MONTI
EL SALVADOR
CIVILIAN DEATHS ATTRIBUTABLE TO POLITICAL VIOLENCE
(SIX MONTH AVERAGES)
1,600
1.548
JUN 01
1,500
1,400
1,300
1,200
AVERAGE OF VARIED SALVADORAN SOURCES"
1.100
1,000 -
900
DEC 81
ACCORDING TO REPORTS IN THE SALVADORAN PRESS
000
700
600
514
JON 82
500
380
DEC 02
JUN 83
400
OEC. 03
300
200
101
100
• SOCONAO JURIDICO
CONES
UCA
101EIA TEORI
597
MILITARY AND ECONOMIC FUNDING FOR EL SALVADOR - FY 1980-84(CR)
:)
MILLION DOLLARS
260
243.7
240
ECONOMIC
220
MILITARY
195.5
200
182.2
160
140
www.
120
113.6
100
82.0
81.3
80
ناتناكت مامان جلد
64.8
57.8
viwie ...,
60
35.5
40
20
5.9
1980
1981
1982
1983
1984 C.R.
1
MILITARY ASSISTANCE
MILLIONS $ U.S.
110
136.3
130
LjCPO REQUESTS - SUPPLEMENTALS & REPROGRAMMINGS
AUTHORIZED BY THE CONGRESS
120
117.0
110
1 |
AUTHORIZED SUBJECT TO ACTION ON CHURCHWOMEN,
LAND REFORM
SECTION 506 EMERGENCY DRAWDOWNS
100
90
86.3
82.0
81.3
80
598
10
64.0
60
50
10
35.5 35.5
45.36
30
20-
27.0
10 -
6.0
3.1
3.1 0 0 0
6.0
10.5
.6
1977
1978
1979
1900
1981
1982
1983
1981
599
1
INTERNATIONAL NARCOTICS CONTROL PROGRAM
Fiscal Summary by Appropriation Limitation
($000)
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
I.
Country Program
28,608
32,600
40,550
4
II.
International Organizations
2,150
2,575
2,817
III. Inter-Regional Programs
3,349
3,400
4,050
IV.
Program Development and Support
2,427
2,625
2,800
TOTAL
36,534
41,200
50,217
600
FY 1985
International Narcotics Control Program
Fiscal Summary
($ 000)
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
I.
COUNTRY PROGRAM
LATIN AMERICA
$
$
Bolivia
Brazil
Colombia
Ecuador
Mexico
Peru
Latin America and Caribbean
Regional
$ 1,720
250*
3,490
75
7,835
1,824
888*
5,740
0
3,490
25
8,500
3,025
650
5,500
250
10,300
0
8,900
3,500
1,000
TOTAL
16,082
21,430
29,450
EAST ASIA
Burma
Thailand
East Asia Regional
4,995
3,410
121
4,500
2,500
170
5,000
2,800
300
8,526
TOTAL
8,10
7,170
8,100
SOUTHWEST ASIA
Pakistan
Turkey
Southwest Asia Regional
2,900
1,000
100
2,900
1,000
100
2,000
900
100
TOTAL
4,000
4,000
3,000
TOTAL COUNTRY PROGRAMS
28,608*
32,600
40,550
601
----
----
----
3
34-045 0-84-39
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
II.
INTERNATIONAL ORGANIZATIONS
Colombo Pilan
UN Fund for Drug Abuse Control
$
150
2,000
$ 75
2,500
75
2,742
TOTAL
2,150
2,575
2,817
III. INTER-REGIONAL PROGRAMS
Demand Reduction
DEA Training
Customs Training
INM EOP Training
200
2,019
1,010
120
250
1,975
1,000
175
400
2,200
1,150
300
TOTAL
3,349
3,400
4,050
IV.
PROGRAM DEVELOPMENT
AND SUPPORT
2,427
2,625
2,800
TOTAL INM PROGRAM
36,534*
41,200
50,217
* President's budget reflects $36;183,000 in obligations of which $ 28, 258,000
was for country programs. Amounts reflected in this budget include actual
obligations made but not reported in time for inclusion in Treasury reports.
602
4
INTERNATIONAL NARCOTICS CONTROL PROGRAM
Country Funding Summary
By Project
($000)
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
COUNTRY AND PROJECT TITLE
LATIN AMERICA
BOLIVIA
Narcotics Control (DNSP-Police)
Coca Production Control
Program Development & Support
280
1,200
240
$ 1,935
3,275
530
$ 1,800
2,770
930
TOTAL
1,720
5,740
5,500
BRAZIL
Enforcement Assistance (DPF)
250*
0
250
COLOMBIA
Narcotics Control-National Police
Narcotics Control-Customs
Program Development & Support
2,700
100
690
2,750
0
740
9,500
0
800
TOTAL
3,490
3,490
10,300
ECUADOR
Program Development & Support
75
25
0
TOTAL
75
25
0
603
5
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
$
MEXICO
Aviation Procurement and Operations
Aviation Maintenance
Field Support
Program Development & Support
Opium Survey
$ 0
6,870
350
415
200
$1,450
6,500
0
550
0
1,000
6,900
350
650
0
TOTAL
7,835
8,500
8,900
PERU
Peruvian Investigative Police (PIP)
Guardia Civil
Coca Production/Control
Customs Service
Program Development & Support
300
450
730
100
244
450
730
1,300
0
545
500
1,000
1,400
100
500
TOTAL
1,824
3,025
3,500
888*
650
1,000
LATIN AMERICA AND CARIBBEAN
REGIONAL
TOTAL LATIN AMERICA PROGRAMS
16,082*
21,430
29,450
604
6
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
EAST ASIA
BURMA
Enforcement Assistance
Program Development & Support
$ 4,950
45
$ 4,320
180
$ 4,820
180
TOTAL
4,995
4,500
5,000
THAILAND
Narcotics Enforcement Assistance
Customs Improvement
Crop Production Control
Drug Abuse Intervention
ONCB Project
Program Development & Support
2,120
190
435
150
90
425
950
130
680
120
150
470
1,300
0
1,000
0
0
500
TOTAL
3,410
2,500
2,800
EAST ASIA REGIONAL
121
170
300
TOTAL EAST ASIA PROGRAMS
8,526
7,170
8,100
605
7
Actual
FY 1983
Estimate
FY 1984
Request
FY 1985
SOUTHWEST
SOUTH ASIA
$
$
$
PAKISTAN
Enforcement Assistance PNCB
Crop Production Control
Demand Reduction Project
Program Development & Support
550
2,000
0
350
800
1,500
100
500
750
625
25
600
TOTAL
2,900
2,900
2,000
TURKEY
Enforcement Assistance
1,000
1,000
900
SOUTHWEST ASIA REGIONAL
100
100
100
TOTAL SOUTHWEST ASIA PROGRAMS
4,000
4,000
3,000
TOTAL COUNTRY PROGRAMS
28,608*
32,600
40,550
606
8
INTERNATIONAL NARCOTICS CONTROL PROGAM
BY FUNCTIONAL ACTIVITY
($000)
Actual
FY 1983
% of
Total
Planned
FY 1984
% of
Total
Request
FY 1985
% of
Total
ENFORCEMENT ASSISTANCE AND
INTERDICTION
19,232
52
19,275
47
23,480
46
CROP CONTROL ERADICATION
12,375
34
16,255
39
20,695
41
INTERNATIONAL ORGANIZATIONS
CONTRIBUTIONS
2,150
6
2,575
6
2,817
6
INTERNATIONAL DRUG DEMAND
REDUCTION
350
1
470
1
425
1
!
2,427
PROGRAM DEVELOPMENT AND SUPPORT
7
2,625
7
2,800
6
36,534
TOTAL PROGRAM
41,200
50,217
607
U.S. EFFORTS TO ACHIEVE PEACE IN CENTRAL AMOI CA
Report Submitted pursuant to Section 109(E) of the
Intelligence Authorization Act : Fiscal Year 1964
March 15, 1984
TABLE OF CONTENTS
Introduction..
...1
Background on Regional Peace Efforts.
..2
The Contadora Process.
4
Direct U.S. Efforts.
..7
Contadora and the OAS..
.12
Summary of Diplomatic Efforts...
.12
Other Dimensions of the U.S. Search for Peace.
.13
Conclusions and Recommendations..
..16
Appendices
1
A.
B.
C.
D.
E.
P.
G.
8.
San Jose Pinal Act
Cancun Declaration
President's Letter of July 21, 1983
Contadora 21 Point Document of Objectives
Contadora Resolution, January 8, 1984
FDR/FMLN Statement of January 31, 1984
ARDE Declaration of February 18, 1984
FDN Declaration of February 21, 1984
608
U.S. EFFORTS TO ACHIEVE PEACE IN CENTRAL AMERICA
Report Submitted Pursuant to Section 109 (E) of the
Intelligence Authorization Act for Fiscal Year 1984
The achievement of genuine, lasting peace in Central
America is the paramount goal of United States policy toward
the region. It constitutes a central component of a series of
closely inter-related U.S. national objectives. These
include: the strengthening of democratic institutions,
economic development and improved living standards for the
peoples of the region, and security for the countries of
Central America from external threats and foreign-sponsored
subversion! Our interests in the area are critical, as spelled
out clearly in the report of the National Bipartisan Commission
on Central America, and the Administration has pursued an
active search for means to end conflict and bring about a
reconciliation within and among the Central American nations.
Section 109 of the Intelligence Authorization Act of 1984
requested that the President report to the Congress on U.S.
efforts to achieve peace in Central America. Under Section
109, the President was encouraged to take several steps in
pursuit of this goal, specifically:
to seek a prompt reconvening of the Seventeenth Meeting of
Consultation of Ministers of Foreign Affairs of the
Organization of American States for the purpose of reeva-
luation of the compliance by the Government of National
Reconstruction of Nicaragua
JU
(1) with the commitments made by the leaders of that
Government in July 1979 to the Organization of
American States; and
(2) with the Charter of the Organization of American
States.
1
.
to vigorously seek actions by the Organization of American
States that would provide for a full range of effective
measures by the member states to bring about compliance by
the Government of National Reconstruction of Nicaragua with
those obligations, including verifiable agreements to halt
the transfer of military equipment and to cease furnishing
of military support facilities to groups seeking the
violent overthrow of governments of countries in Central
America.
:
to use all diplomatic means at his disposal'to encourage
the Organization of American States to seek resolution of
609
- 2 -
the cor.flicts in Central America based on the provisions of
the Final Act of the San Jose Conference of October 1982,
especially principles (d), (e), and (g), relating to
nonintervention in the internal affairs of other countries,
denying support for terrorist and subversive elements in
other states, and international supervision of fully
verifiable arrangements.
to support measures at the Organization of American States,
as well as efforts of the Contadora Group, which seek to
end support for terrorist, subversive, or other activities
aimed at the violent over throw of the governments of
countries in Central America.
This report, submitted in response to Section 109(f) of the
Act, is intended to inform the Congress of the efforts taken by
the countries of the area and by the United States to promote
peace in Central America, and to put these in the perspective
of other major developments in the area.
BACKGROUND ON REGIONAL PEACE EFFORTS
A prominent conclusion of the House Permanent Select
Committee on Intelligence in the report and legislation cited
above was that there must occur marked changes in behavior by
the Government of Nicaragua in order for peace to be possible
in Central America. We concur with that report and with the
report of May 13, 1983 and the Staff Report of the Subcommittee
on Oversight and Evaluation of the same committee of September
22, 1982, that the Government of Nicaragua bears a heavy burden
of responsibility for the tragic situation that confronts us in
Central America today. Specifically, the May 1983 report
said: "the Sandinistas have stepped up their support for
insurgents in Honduras" and that Cuban and Nicaraguan aid for
insurgents constitutes "a clear picture of active promotion
'for revolution without frontiers' throughout Central America
by Cuba and Nicaragua. The committee also reiterated its
earlier finding that the guerrillas in El Salvador "are well
trained, well equipped with modern weapons and supplies, and
rely on the use of sites in Nicaragua for command and control
and for logistical support. The intelligence supporting these
judgments provided to the Committee is convincing."
This conclusion, which remains valid today, is also shared
by Nicaragua's immediate neighbors, all of which perceive
themselves directly threatened by the Sandinista regime and its
Cuban sponsors.
Since Cuba began its most recent expansionist efforts in
1978, peace has been a much sought after, but elusive; goal in
Central America. To achieve this goal, the United States has
worked diligently in recent years to implement a four part
mlieu toward the region:
610
- 3 -
1.
2.
3.
Sport for cemocracy and human freedom;
Support for improved living conditions and economic
development in the region;
support fo: legitimate self-deiense capabilities against
subversion and the threat of aggression; and
Support for dialogue and reconciliation between and within
the countries of the region.
The u.s. has given vigorous and sustained support to
regional efforts to resolve disputes in Central America. The
complex, multilateral nature of the region's political and
security problems cross-border support for guerrilla groups,
competition in arms and military force levels, the presence of
foreign military advisers, and the contagious appeal of
political and economic justice rules out piecemeal or
bilateral solutions. What is clearly required is a
comprehensive, verifiable regional settlement.
Based upon its charter, the OAS normally would be, as the
House Intelligence Committee described it, "the proper and most
effective means of dealing with threats to the peace of Central
America, of providing for common action in the event of
aggression, and of providing the mechanisms for peaceful
resolution of disputes among the countries of Central
America." In practice, however, efforts to engage the OAS
constructively in the current conflicts have not been
effective. Nicaragua, a principal protagonist in the area, is
strongly opposed to OAS treatment of these issues, alleging
that the institution is too supportive of u.s. interests
(although the OAS was instrumental in helping the Sandinistas
to power in 1979). Accordingly, many other Member States are
reluctant to become involved in Central America, preferring to
rely on the Contadora mechanism. Recognizing this fact, the
OAS, at its 13th General Assembly in November 1983, applauded
the Contadora peacemaking initiative and "urged(d) it to
persevere in its efforts."
A number of states believe it would be helpful at some
point to pressure the Sandinistas for changes by formally
holding them to account in the OAS for their broken promises.
However, sufficient backing does not exist today for effective
OAS action.
Nicaragua was also uninterested in pursuing the potential
for regional negotiation offered by the October 1982 San Jose
Final Act. This was an effort of concerned hemisphere
denocracies Honduras, El Salvador, Costa Rica, Belize,
Jamaica, Colombia, the Dominican Republic and the United States
to set forth for the first time the essential conditions for
peace in Central America.
Nicaragua refused to receive the
Costa Rican Foreign Minister, whom the regional states had
appointed as their representative for discussing the San Jose
Final Act with Nicaragua.
-
611
- 4
: recognicior. o: che failure of inicial efforts to find a
3:1320:0:y eicis i. wice to pursue a settlement, the key
regional natio..s active i: the search beçan in early 1983 to
sees :i::e:en: -s 3.0.3 formulas that woulâ address the
obstacles to peace in the region, notably Nicaraguan
ot:ansigence. The resul: was Contadora.
The Contadora Process
By April 1983 responding to external and internal
pressures Nicaragua agreed to join El Salvador, Honduras,
Guatemala, ani Costa Rica in regional negotiations under the
auspices of what became known as the "Contadora Four" (Mexico,
Panama, Colombia, and Venezuela). Initially, much of the
region's leadership was guarded in its opinion of the Contadora
gooup's prospects recalling that Nicaragua had already
backed away from the OAS and the San Jose Final Act. But
pressures on Nicaragua to end the growing conflict and the
skillful diplomatic efforts of the other regional countries
allowed the new process to develop momentum.
1
The first operational issue treated by the Contadora Group
occurred in spring 1983 resulting from Nicaraguan interference
with Costa Rican use of navigation rights on the San Juan
river, the capture by Nicaragua of five Costa Rican guardsmen,
an incursion into Costa Rican territory by a Nicaraguan
military unit and the capture of a Costa Rican sport fishing
vessel by Nicaraguan patrol boats in Costa Rican waters. On
May 6, the Government of Costa Rica requested that an OAS
peacekeeping force be sent to patrol the border. The Contadora
Group, however, asked that the OAS defer action on the request
until it had had an opportunity to consider how to deal with
the border incidents. Costa Rica agreed to the deferral, and
on May 13, the Contadora Four Foreign Ministers met in Panama
aad agreed to create a Border observer Commission, composed of
civil and military representatives from each of the Contadora
Four countries, with responsibility for monitoring the border
and making recommendations for preventing incursions and
keeping peace. The border observer force began its work May
22, 1983 and, after consultations in both capitals and
on-the-ground inspections, reported to the May 28 - 30 meeting
of the contado a group.
By April 1983 Nicaragua had begun to participate in the
Contadora process. However, it still sought to avoid the
concept of regional negotiations, preferring to deal
individually and bilaterally with its neighbors from what it.
saw as a position of strength. Only on July 19, 1983, did
Nicaragua accept Contadora's multilateral framework for
On that date, Nicaragua head of state Daniel
Ortega announced a six point Sandinista Front diplomatic
612
. 5 -
2:03csal. Although it recognized the need for an end to arms
Supplies to the Salvaco:an guerrillas, it also called for an
ens to security assistance to the Salvadoran government; while
i: called for an end to foreign military bases in the region,
it studiously ignored the issues of foreign military advisers
anė Nicaragua's militarization. It said nothing about
democratization, and had no provisions for effective
verification. The U.S. urged Nicaragua to follow up its
proposal in the contado a group.
On July 17, chiefs of state of the Contadora Four met for
the first time and signed the Cancun Declaration on Peace in
Central America, which proposed that the Central American
states undertake a series of commitments for peace. The chiefs
o: state transmitted the text of their declaration to their
counterparts in the United States and other countries "with
interests in and ties to the region" including Cuba. The text
of the Cancun Declaration is appended to this report.
the President responded by letter to the four chiefs of
state on July 21, reiterating u.s. adherence to the four
Sundamental principles for peace in Central America. As the
official Contadora chronology described it, his letter
....signalled that (the United States ] government has
consistently expressed strong support for the Contadora group
and that the Declaration of Cancun, by articulating the
critical issues which must be treated to reach an effective and
enduring resolution of the Central America conflict, is an
izportant contribution to advancing that process." A text of
the President's letter is appended to this report.
:)
The Contadora process continued intermittently through the
summer of 1983, achieving an important milestone on September
10, 1983 when all participants, including Nicaragua, agreed on
a 21 point Document of objectives which addressed all of the
major concerns of the countries of the region and of the United
States. This document represented a major breakthrough in the
Central American peace process in the form of a written
commitment to an agreed set of objectives, which included
political, economic and security concerns.
In the security field, the Document of objectives called,
inter alia, for steps to end support for external subversion,
reductions in the numbers of foreign military and security
advisors, a halt to illegal arms trafficking, and controls on
armaments and troop levels. The socioeconomic objectives
eaphasized the need for greater regional cooperation and called
for assistance to,' and the voluntary repatriation of, Central
Azerican refugees. Democratization, national reconciliation,
and respect for human rights are prime elements of the
political objectives, which call for establishment throughout
the region of democratic, representative, and pluralistic
-
613
- 6 -
systems that ensure fair and regular elections. While there is
need for specizic a... verifiable undertakings on a range of
sensitive issues beyond 22. agreement of principles, this was
key first step for Coutaicra. A text of the Document of
Objectives is appeaces to this report.
a
Although Xicaragua billed itself as the first state to sign
the Document of Objectives, the Sandinistas were clearly
uncomfortable with many of them, particularly those calling for
respect for basic human rights and national reconciliation
through democratic pluralism. Consequently, the Sandinistas,
while unwilling to accept the opprobrium for scuttling
Contadora, have repeatedly sought to undercut the process by.
pushing their own agenda elsewhere.
In particular, they have sought to involve the United
Nations in Central American issues, anticipating a friendlier
hearing in 'this forum than in contadora or the OAS where the
Sandinistas' record works against them. In October 1983, for
example, Nicaragua introduced the Central American issue before
the U.N. Security Council --where it was discussed
inconclusively--breaking an explicit commitment to the
Contadora group that it would not do so. The other Central
American nations, the Coatadora Four and the U.s. all prefer
that the issues be treated in a local forum of those most
directly concerned rather than entering the highly politicized
arena of 0.N. debate.
1
1
In late October, Nicaragua tried another tack, presenting,
first to the contadora group (through Mexico), and then to the
U.S. four draft peace treaties. The treaties covered four
areas: Honduran-Nicaraguan relations; U.S. - Nicaraguan
relations; relations between the five Central American_
countries; and the conflict in El Salvador. Although the
treaties acknowledged the need for an end to support for all
guerrilla groups, and said that each state should not take
steps to thieaten or to attack the others, the treaties stepped
back from the position adopted by the signatories to the
Contadora Document of Objectives. For example, they ignored
the contadora objective of establishing democratic
institutions, reflecting instead the Nicaraguan position that
democratization is not susceptible to treatment in
iaternational agreements. They also sought to diminish
legitimacy of the elected government of El Salvador by treating
is as simply one of two belligerent parties to an internal
conflict; dis:egarded the objective of restoring military
balance among the Central American states; and made no serious
proposals for verification and control. (Although Nicaraguan
Foreign Minister Miquel D'Escoto affirmed that the treaties
provided for "on-site verification," the treaties contained no
such language.) The Nicaraguan draft treaties.deferred
treatment of foreign advisers and arms build-up, and failed to
614
- 7
acizess -.e Contadora objectives dealing with refugees. In
sor:, they cis:egardec Jany of the 21 points, and renewed the
Sandinista push for bilateral and piecemeal agreements. Thus,
wile paying lip-service to the aims of Contadora, the
Sandinistas were still fa: from eager participants, and
actively sought to change the direction oi the process.
Direct U.S. Efforts
In his April 27, 1983 address to a joint session of
Congress, the President announced his intention to nominate a
personal representative to facilitate Central American
negotiations - both talks between the states and dialogue
within countries to heal fragmented societies. Although the
United States and the regional governments agreed that direct
U.S. participation in Contadora would not be helpful, all
parties recognize the strong and legitimate U.S. interest in
the process and the need for our support and involvement. On
May 26, 1983, Senator Richard B. Stone was appointed by the
President as Ambassador at Large for Central American
aegotiations to fill this role.
Beginning with his trip to the nine participating Contadora
countries in early June 1983, Ambassador Stone's initial
consultations focused on ways to promote multilateral
negotiations within the Contadora process and on initiating
contact between the Salvadoran Peace Commission, established in
February 1983, and the FDR/FMLN guerrilla front. The
succeeding months were characterized by a series of
consultations among the Central Americans and the Contadora
Four. Ambassador Stone soon became a principal supporting
actor in these ongoing discussions, albeit not a direct
participant in the Contadora process. During this period, he
also began to set the stage for possible talks between the
Government of Nicaragua and its armed opposition.
Progress came first on bringing the Salvadoran guerrillas
to the table with the Peace Commission. On July 30, 1983,
Ambassador Stone made preliminary contact with representatives
of the FDR/FMLN guerrilla groups. In August, they met for the
second time. These efforts were instrumental in arranging
direct contacts between the Government of El Salvador and these
guerrilla groups. on August 297 19837 the Peace Commission of
the Government of El Salvador and representatives of the
FMLN/FDR guerrillas held their first direct meeting. That
meeting represented an important step by the Salvadoran
Government toward implementing the September 1983 Contadora
Document of Objectives which called for, "pluralism and its
various manifestations, .... full play for democratic
institutions, ...and the aeed for political accommodation in
order to bring about dialogue and understanding. At the
second meeting with the FDR/FMLN in Bogota September 21, the
615
- 3 -
Peace Commission offerethe opportunity to discuss electoral
92:antees.
The FDR/FMLN rejected the offer and insisted
instead, as in the past, on formation of a new provisional
governmen: in which they would be included prior to a "national
cebate“ and elections.
In their latest proposal, 'dated January 31, 1984, and
publicized in a Mexico City news conference on February 9,
1984, the FDR/FMLN leaders again proposed the formation of a
provisional government. The measures proposed by the
querrillas include abolishing the 1983 constitution,
iegitimizing the power of the insurgents, purging the army,
dissolving the security forces, banning the ARENA party, and
juiging and punishing civil and military personnel involved in
alleged political crimes. The formation of the provisional
government would be brought about through a negotiation which
would include mediators nominated by the various parties to the
talks and international witnesses. The process would culminate
with the organization of a single national army made up of the
insurgents an: the purged GOES forces, both of which would
retain their weapons. A copy of the FDR/FMLN statement of
january 31 is appended to this report,
While refusing to participate in elections, the guerrillas
had said that the voting scheduled in El Salvador for March 25,
1984 *would not be the object of direct military attacks."
Their recent actions and comments in their propaganda radio
broadcasts make it clear, however, that they have not wavered
in their violent opposition to the elections and that their
čestructive activities will continue before, during and after
the balloting. On January 27, a guerrilla group assassinated
Legislative Assembly Deputy Arnoldo Phol of the ARENA party,
calling the murder a "response" to the elections. on February
24, PAISA deputy Roberto Ayala was murdered, bringing to four
the number of Assembly members killed by leftist violence.
Although no group has yet claimed the Ayala murder, it is
almost certainly the work of the Clara Elizabeth Ramirez Front
(CERF), a leftist urban terrorist group which took
responsibility for the assassination of Pohl and another ARENA
deputy. In addition to these attacks on politicians, the
çuerrillas persist in other attacks against the population and
the economic infrastructure aimed at creating conditions that
would make it iapossible to carry out elections. These have
included the murder of an American woman, the destruction of an
iaportant bridge, the bombing of a civilian train, the burning
of a coffee processing plant that employed 400 people in an
area that has suffered significant economic hardship at the
hands of the FLN, and two attacks on an agrarian reform co-op
in which nine innocent co-op members, including 3 children were
killed. Nevertheless, the GOES has publicly reiterated, as
recently as February 2, 1984, that the door cemains open to
dialogue. The United States, through Ambassador Stone, also
616
- 9 -
coniirmed thai i: :emains ready to further sincere taiks. This
escort will be resumed after the March 1984 presidential
elections, looking toward legislative and municipal voting in
1935.
30th the Nicaraguan Democratic Force (FDN) and the
Revolutionary Democratic Alliance (ARDE) have made known their
interest in returning to a Nicaragua in which the original
promises of the Sandinista revolution were observed. ARDE had
issued a declaration of necessary conditions for its return on
December 16, 1982; its leader, Eden Pastora, stated that ARDE
would begia military operations against the government on April
15, 1983 if the conditions were not met. The government
brushed aside the declaration, and ARDE commenced guerrilla
operations in April 1983. The FDN, which had been conducting
military operations against the government since early 1982,
issued its conditions for an end to fighting on January 16,
1983. The Nicaraguan government similarly ignored this
declaration.
In late 1983, Ambassador Stone began consultations with the
various Nicaraguan arded opposition groups to promote a process
of national reconciliation that would complement his efforts to
support the parallel efforts toward reconciliation in El
Salvador. Although the various groups were initially divided
on what terms were acceptable for an end to the fighting, they
agreed to discuss a common platform and to meet with Ambassador
Stone in Panama from November 30 to December 1, 1983.
Following that meeting, the FDN, and MISURA (the Miskito, Suno,
and Rama indian opposition group), supported by ARDE, offered
to hold a direct or indirect dialogue with the Nicaraguan
government on ending the fighting in return for full
democratization. ARDE and the FDN issued further detailed
statements on this subject on February 18, 1984, and February
21, 1984, respectively (copies of these statements are appended
to this report). A comparison of their positions with that of
the leftist Salvadoran rebels clearly indicates that the
Nicaraguan opposition is prepared to accept a democratic
outcome, while the Salvadoran FMLN is insisting even more
rigidly on a power-sharing formula, without early elections.
Nevertheless, the Nicaraguan government has spurned
negotiations with its armed opponents, and the Nicaraguan
Minister of Justice affirmed on March 9, 1984, that the
government would try some of the armed opposition leaders in
absentia.
These efforts to stimulate the overall process of dialogue
within the region have offered both the FMLN/FDR and the
Nicaraguan government a peaceful and democratic way to end the
fighting. . Unfortunately, neither side has seized the
opportunity. As noted, the FMLN/FDR reject elections in favor
of immediate power-sharing. The Nicaraguan government appears
617
- 10 -
so have rüleč out negociacions with the arnes opposition and
shows no signs of changing iis political system in a way tha:
nou?: allow the opposition the right to compete for power.
Si..ce Deceabe: 4, 1933, 23:agua has ofered safe conduct,
under some concitions, to certain members of the armed
opposition, but it has excluded participation in this program
by the armed oppositior. leadership, thus denying them the
ability to contest the election scheduled for November 4,
1984. Although the unaraed, legal opposition will be allowed
to participate in those elections, there are numerous obstacles
to a true contest for power as will be seen below.
es
While Ambassador Stone was promoting internal dialogue, the
U.S. also actively pursued a program of clarifying and building
support for the multilateral Contadora process and its 21-point
Document of Objectives. On October 7, Secretary of State
Shultz met with Central American Foreign Ministers and UN
Ambassadors at the UN Geaeral Assembly. They discussed the
need to move forward simultaneously on all points elaborated in
the Document of Objectives and emphasized internal democracy in
all Central American couatries as an essential method to ensure
enforcement of all commitments. The Secretary and the Foreign
Ministers of Costa Rica, Eonduras, El Salvador, and Guatemala
followed up this discussion with a November 16 meeting on the
margins of the OAS General Assembly and again in Caracas in
January 1984 during the Venezuelan presidential inauguration.
During this same period, Assistant Secretary for
Inter-American Affairs Langhorne Motley made two trips to
Central America to discuss all aspects of the conflict. On his
first trip in September, Ambassador Motley hoped to include
Nicaragua, and the Nicaraguan Government initially welcomed his
visit. However, shortly before his scheduled arrival in
Managua, the Sandinistas cancelled his appointments with senior
officials. Assistant Secretary Motley postponed his visit, and
the Nicaraguan Government later invited him for talks on
October 13. In his discussions in Managua, Motley encouraged
the Nicaraguans to implement the original principles of their
· revolution through sincere negotiations based on the 21
points. In the meantime, we were active in pursuing these
issues both in this hemisphere and with our European allies,
most of whom backed the concept of a regional peace effort, but
lacked first hand information on the dynamics of relations in
the region and of contadora. In a series of visits and
consultations, Ambassador Stone and other senior officers
explained to European and other hemispheric governments how the
groundwork had been prepared for agreement in the Document of
Objectives and the reasons for strong u.s. support. We
confirmed the belief of nany Europeans that only a
comprehensive and completely verifiable treaty could bring
about peace in Central America.
84-045 0-84-40
618
- 11 -
During lovebe: ani December 1983, the contadora group
considered several proposals for converting the Document of
cojectives in:0 such a viable and verifiable final treaty. The
Contadora FC::, Xica:agua, and the othe: Central American
states all presented suggestions for the content of a final
agreement. À Vice :inisterial Technical Commission attempted
to reconcile the proposals, but it became clear that only the
nine Foreign Ministers could decide on the next steps to take.
On December 22, after consulting with Ambassador Stone, the
President once again publicly reaffirmed our strong support for
the peace process undertaken by the Contadora group. The
President said, "I want to reiterate my support and commitment
to (Ambassador Stone's] delicate but crucial mission."
Ambassador Stone traveled again to the region prior to the
January 7-8 Foreign Ministers meeting, to suggest means of
facilitatiag discussion of the various peace proposals and to
reiterate our strong conviction that contadora's momentum
srould be maintained. In his January meetings in Managua,
mbassador Stone emphasized to the Sandinistas that Nicaragua
could respond to all u.s. concerns by sincere negotiations to'
tuon the Docs-eat of objectives into a comprehensive,
operational, and verifiable agreement. He also urged the
Sandinistas to open a dialogue with the armed opposition
groups, noting those groups' offer to lay down their weapons in
exchange for democratization.
In these and other meetings we have made clear to the
Sandinistas our four policy objectives vis-a-vis Nicaragua:
(1) implementation of the Sandinistas' democratic commitments
to the OAS; (2) termination of Nicaragua's support for
subversion in neighboring states; (3) removal of Soviet/Cuban
military personnel and termination of their military and
security involvement in Nicaragua; and (4) the reduction of
Nicaragua's recently expanded military apparatus to restore
military equilibrium among the Central American states.
At the January 1984 Foreign Ministers' meeting, the
Contadora group reached a second important milestone in the
peace negotiations, an agreement on procedures and guidelines
for translating the 21 objectives into verifiable commitments.
A text of the January Final Resolution is appended to this
report. The Contadora Four and the Central Americans charged
three working commissions to refine proposals on political,
security, and socioeconomic issues. They agreed that the
Commissions would formally constitute themselves by January 31,
would prepare work plans by February 29, and would present
recommendations to the Foreign Ministers by April 30. Ву
619
12
establishing working groups ard a series of benchmark dates,
the Contadora group make clear that progress in all three areas
is essential if a formal peace agreement is to be attained.
The group since has aet the first two benchmark dates.
For its part, the United States.sent a team of security
specialists to Central America in February-March to provide
expertise to friendly governments in this phase of the process
and to underline our own strong commitment to its success. At
the most recent meeting of the Contadora group, held in Panama
on February 29, the working Commissions agreed on agendas to
guide their work until April 30. They agreed to caucus again
with the Vice Ministerial Technical Commission on April 2-4 and
24-28, before meeting with the Foreign Ministers. In moving
from the conceptual stage to actual drafting of language which
could form the basis of a Central American peace treaty, the
Contadora process has entered a labor-intensive phase. A
verifiable agreement to implement the 21 points would address
our concerns with Nicaragua behavior, would meet the interests
of the other Central American states, and would give Nicaragua
a concrete framework for peaceful political and economic
cooperation with its neighbors.
Contadora and the OAS
The United States and other members of the OAS have
respected the efforts of the Contadora group by supporting the
peace process it has fostered. In an effort to move the
process forward, we have not invited more direct OAS
involvement at this time, although we have been careful to
leave open that possibility. The OAS role in other regional
disputes has been very constructive. Future OAS involvement
could be appropriate and highly desirable, depending on the
circumstances that arise. We could for see circumstances where
the organization could play a useful role in helping to further
develop or implement the terns of an agreement in Central
America. At this stage, however, countries inside and outside
the region, as well as those involved in the Contadora process,
· would interpret a U.S. effort to shift the negotiating process
into the OAS as a vote of no-confidence in Contadora that would
greatly reduce its effectiveness. Others would see it more
simply as a U.S. effort to sabotage the peace process.
Therefore, the U.S. so far has attempted to achieve its goals,
including those mentioned in Section 109 of the Act, through
support for the contadora process rather than by more direct
and immediate involvement of the OAS or attempting to revive
the San Jose concept.
Summary of Diplomatic Efforts
As stated above, 0.5. support for the peace process has
been manifested by various actions : high-level public
620
• 13 -
sce:ements ci u.s. backing or the contadora process; meetings
sy she Secretary of Stace with Latin merican leaders on this
issue; a continuous process of consultations in the region:
Private dese:ches to so:e:...ents in Latin Serica and Wester:
2wzope asking thea to lead diplomatic assistance to these
regional negotiations; dispatch of a security-experts team, and
the efforts of the President's special envoy who over the the
past eight months has made 12 trips to Central and South
America to carry out his mission of furthering regional
dialogue.
Through all of these efforts, the Administration has actes
in full accord with the spirit of Section 109 of the Act. The
President has reiterated the continued, dedicated support of
the United States for the negotiating process and the cause o
peace in Central America.
His prompt nomination of Ambassador
Earry Shlaucenan to succeed Ambassador Stone is a sign of the
dininistration's intention to remain fully engaged in this
process.
ctie. Dinensions of u.s. Search for Peace
As implied in our four-point policy toward Central America,
the u.s. has contributed to the search for peace by providing
aeeded economic and security assistance to democratic countries
in the area, in order to reduce vulnerability to externally
supported insurgencies and to provide needed confidence to
facilitate participation in regional peace discussions. Ву
proposing significant increases in future U.S. assistance to
the region, as recommended by the Bipartisan National
Com ission on Central America, the President has demonstrated
our vital interest in this area and strong commitment to
peaceful development and the prompt resolution of regional
disputes.
As outlined above, an essential factor behind the progress
to date in Contadora has been Nicaragua 's willingness--albeit
çrudging--to participate in the process. While the shift in
Nicaragua's posture appears due in part to tactics and to a
desire not to be blamed for failure, it is clear that on a more
basic level, the Sandinistas have moved from a prior position
o unyielding obstructionism to their present stance as a
direct result of pressure from its neighbors, the U.S., other
governments and international bodies, and the armed Nicaraguan
cpposition. · The U.S. has attempted to bring economic and
diplomatic pressure to bear on Nicaragua precisely because it
had become clear that without it Nicaragua would be unwilling
to aodify its aggressive policies and non-democratic system of
iaternal controls. The U.s. has not been alone in taking such
steps: Western European and Latin American countries have
iasor med Nicaragua that additional economic assistance will
depend upon iaproving its attitude toward political pluralism.
621
- 14
:the sade time, the ardei opposition in Nicaragua has
3:8:ped up its activities, cenonstrating clearly to the world
he extent to which the Sicaraguan Revolutionary Government's
:::::e to respect its internal and external commitments has
les zo popular discontent. These actions have imposed a stiff
Price on the sandinistas and offer an incentive to explore
Situal acconsocation.
Although our relations with the Nicaraguan Government are
st:ained, the United States has kept open its direct channels
of communication to the Sandinistas. Initial attempts to
engage Nicaragua bilaterally were unsuccessful. Nicaragua did
not respond ia a positive, substantive manner to two U.S.
proposals made in August 1981 and in April 1982 to resolve
te..sions in the region. Through these proposals, the U.S.
ais:essed Nicaraguan's stated concerns about alleged U.S,
ise:vention and the activities of Nicaraguan exile groups in
the U.S., as well as Nicaragua's support for guerrilla groups,
militarization, the presence of foreign military advisers, the
need for decccratization, tre possible resumption of U.S.
economic assistance to Nicaragua, and international
veri:icatior.. More recently, in addition to Ambassador Stone's
conversations with Nicaraguan leaders, including four meetings
wita junta coordinator Ortega, Assistant Secretary of State for
I.ate:-Americaa Affairs Ambassador Langhorne A. Motley visited
Sice:agua in October 1983. Later that month, Ambassador Motley
received Nica:aguan Foreign Minister Miguel d'Escoto.
In late Noveaber and early December of 1983, as the
Nicaraguan araed opposition intensified its attacks, the
Sandinistas took several actions that suggested they might be
willing to address in a more serivus manner the concerns of
Nicaragua's neighbors and of the United States. These actions
iacluded announcing preparations for elections, now scheduled
for November 1984, an amnesty program for certain Miskito
Iadians, a safe-conduct program for some members of the armed
opposition, relaxation of press censorship, hints that certain
Cuban civilian advisers were leaving Nicaragua (which conformed
to previous rotation schedules), and assertions that some
Salvadoran guerrilla leaders had been asked by the Nicaraguan
gove:nment to leave the country. The Nicaraguan government
also reiterated its support for an end to all foreign support
for guerrilla groups in the region, a regional arms freeze
collowed by ans negotiations, and reciprocal bans. on foreign
iiitary bases and foreiga military advisers.
In December 1983, the Secretary of State noted the positive
acture of these gestures, but stressed that it was important
Er the United States to see what reality lay behind the
rhesoric. The United States made clear, through public
statements, cipionatic channels to the Nicaraguan government,
622
• 15 -
2.c in conversations with other governments, that it was
willing to respond in ki... to concrete and genuine steps from
che 'icaraguan governaent.
Thus far, nowever, that government has not taken actions
that would affect its basic policies of military expansion,
cepenċence on a substantial number of foreign military and
security personnel, and continued material support for
guerrilla groups in the region. In fact, a detailed look at
tae hints of noderation proved discouraging. Although 2,000
Cuban teachers left Nicaragua on normal rotation, about 1,000
may return this month, leaving the Cuban civilian presence at
4,500 to 6,500 and the Cuban military and security presence at
about 3,000 persons. In addition, the Soviet Union and other
Soviet bloc countries maintain about 100 military advisers.
While some civilian leaders of the Salvadoran guerrillas left
Vicaragua, the Salvadoran guerrilla military personnel remain.
Nicaraguan support for the Salvadoran guerrilla
command-and-control centers, training facilities, and arms
sipents has continued. Likewise Nicaragua continues to
receive heavy arms from the Soviet bloc, building an arsenal
at dismays and alars its neighbors.
S
The Nicaraguan military and security forces number at least
75,000 (including regular troops, reserves, and organized
zilitia), compared with about 43,000 in Guatemala, 22,000 in
cnduras, 40,000 in El Salvador, and about 8,000 civil and
rural guards and police in Costa Rica. In September 1983,
Vicaragua instituted universal draft registration, placing it
in a position to maintain and to expand its military force.
The GRN's tentative moves on the domestic front have
similarly lacked substance. The amnesty program for Miskitos
was ill-received by the Miskito people, 1,200 of whom fled to
Honduras in December 1983, claiming mistreatment and torture by
Nicaraguan authorities. Likewise, the safe-conduct program for
the armed opposition appears to have few it any takers among
the insurgents, who remain highly skeptical .of Sandinista
intentions.
Although the Sandinistas finally announced a date for
elections, a first step to potentially fulfilling its 1979
pledge to the OAS, the Nicaraguan opposition remains convinced
at the Nicaraguan electoral system now being devised will not
perait a true contest for power to occur. For example, there
has been no resolution of the issues of meaningful access to
32x-controlled media, or political parties' ability to organize
and conduct a political campaign free from intimidation and
2::assment, or Sandinista access to State resources.
Sandinista leaders have said that armed opposition leaders will
aot be allowed to run for office and it now appears possible
that the state of emergency (in effect since March 1982) will
623
- 16 -
:.00 be lisces or a long enough period to allow the opposition
a :21: chance - compete. A possible cice as to the type of
election plan es by the Sardinistas came from a comment of
iste: ci panning Feary Ruiz on February 3, 1984, when he
said the Nicaraguan people had a right to "pluralism, but with
a Sandinista kese-cny.
Meanwhile, the Nicaraguan government periodically offers
vivid rerincers that despite occasional relaxation, press
censorship reazins very much in effect. New crackdowns led the
independent newspaper La Prensa not to publish on three
cccasions in January ană February of 1984. Nor has the
government relaxed its control over news programming by the
remaining independent radio stations.
Conclusions and Recommendations
1
In the foregoing history, two themes emerge the
persistent efforts to achieve peace by the United States and
most regional governments, and the obstructionist response to
these efforts by the Government of Nicaragua. As noted, there
recently has been some movement by the Sandinistas away from
their basic iatraasigence, but we have nct yet seen any real
change in their goals of spreading revolution or consolidating
thei: rule. Rather, it appears that as the Sandinistas have
beccae increasingly isolated and pressured at home and abroad,
they have respcnded by giving out public hints and signals,
accompanied by some grudging tactical shifts. On the basis of
performance to date, their aim seems to be to adopt de minimis
changes sufficient only to reduce internal and external
pressure to modify their basic system. In the meantime, they
have taken no steps that are not instantly reversible, as they
proved when they cracked down with new intensity on La Prensa
in January and February 1984.
consequently, while the United States and Nicaragua 's
neighbors believe strongly that pressure is working--and indeed
has proven to be the only effective inducement to the
Sandinistas --we believe that it should only be reduced or
removed when Ficaragua undertakes the real changes in its
external and internal policies that will contribute to regional
peace. It is worth noting that ten of the twelve members of
the National 3i partisan Commission on Central America, chaired
by former Secretary of State Kissinger, concluded ".. we do not
believe it would be wise to dismantle existing incentives and
pressures on the Managua regime except in conjunction with
demonstrable progress on the negotiating front."
3i partisan congressional support for U.S. policy toward
Cent:al America renains an important goal of this
Administration. There are several areas in which future
congressional support is essential to meeting our objectives in
624
- 17
17 -
.1:
s area. First, proapt congressional approval of the Central
--:ica Democ:ac!!, ?eace, auc Development Initiative is an
ius:tan: first step. Inis proposal is proof of U.S.
recognition of its vital interests in the area and the need to
assis :a. ovative -223:35 to ceal with the complex situation.
2:00pt approval woulc signal continued bipartisan interest and
support in the United States for peaceful, democratic change in
time area. To not approve it or to dilute it significantly
wculd be read throughout the area as a sign of U.S.
unwillingness to shoulder its responsibilities in Central
Azerica. That would only weaken our friends' confidence in
their ability to help maintain security and democracy, and
proaote economic growth under terms of any negotiated
settlement -- or even to negotiate successfully. Second, early
Senate confirmation of Ambassador Harry Shlaudeman as Special
Presidential Envoy for Central American Negotiations is also
highly desirable. The third area is adequate and timely
Ending for programs authorized by the Intelligence
Authorization Act. Representatives of the executive branch
have discussed this with appropriate committees of the Senate
a... the House. We have found conclusively, that the broad
a::ay of incentives, both positive and negative, that currently
exists in the area plays a very important role in reassuring
ou: allies, and in convincing those who oppose them that the
U.S. will stand by its friends and its commitments. To hamper
U.S. ability to maintain these incentives would delay rather
than advance our efforts and those of other countries to
achieve peace in Central America.
625
Bulletin
Reprint
Declaration on Democracy
in Central America
October 1982
United States Department of State
Bureau of Public Affairs
Washington, D.C.
Following are texts of the Department
• National reconciliation in a
statement and summary of October 5, democratic framework;
1982 and the Final Act of the Meeting of Respect for the principle of
Foreign Ministers of Countries Inter- nonintervention;
ested in the Promotion of Democracy in • An end to arms trafficking and
Central America and the Caribbean of foreign support for terrorism and
October 4, 1982.
violence;
• Limitation of armaments;
DEPARTMENT STATEMENT,
• Control of frontiers under
OCT. 5, 1982'
reciprocal and verifiable conditions in-
cluding international supervision;
Yesterday in San Jose, Costa Rica, there • Withdrawal under effective condi-
was a meeting of foreign ministers of tions of reciprocity of foreign troops and
courtries interested in promoting military and security advisers; and
democracy in Central America and the • A halt to the importation of heavy
Caribbean. The meeting was attended by offensive weapons.
the Prime Minister of Belize, who con-
The conference also established a
currently holds the foreign minister
forum for peace and democracy that
portfolio, and five other foreign
would analyze within the framework of
ministers--Colombia, El Salvador, Hon-
the declaration the different peace pro-
duras, Jamaica, and Costa Rica. Assist-
posals and initiatives that emerged and
ant Secretary for Inter-American Af-
transmit the results to other interested
fairs (Thomas 0.) Enders attended as a
states. The conference also resolved to
special representative of the Secretary
create an office to provide technical elec-
of State, and Panama and the Domin-
toral assistance to those countries desir-
ican Republic designated special
ing to hold free and honest elections.
observers.
The Government of the United
The final act of the meeting empha- States believes that this initiative of
sized the importance of representative
these regional democracies marks an im-
democracy and pluralism to the peoples
portant step forward in the promotion of
of the region and as an essential element
representative democracy and the
in bringing about peace in Central
resolution of regional tensions within a
America. It also set forth certain other
peaceful framework. We hope other
conditions and actions to achieve peace
governments in the region will seriously
in the region:
address the concepts set forth in the
final act of the conference. They provide
a blueprint for peace in the region.
1 Read to news correspondents by acting
Department spokesman Alan Romberg.
626
3
FINAL ACT, OCT. 4, 1982
FINAL ACT OF THE MEETING OF
FOREIGN MINISTERS OF COUNTRIES
INTERESTED IN THE PROMOTION OF
DEMOCRACY IN CENTRAL AMERICA
AND THE CARIBBEAN
The representatives of the Governments of
the Republics of Belize, Colombia, El
Salvador, the United States of America, Hon-
duras, Jamaica, and Costa Rica, and the
observer representative of the Government of
the Dominican Republic, convinced that
direct dialogue among democratic countries is
the appropriate way to review the situation
in their states and, therefore, to search for
solutions to common problems, met in San
Jose, on October 4, 1982, represented as
follows:
BELIZE
His Excellency George Price
Prime Minister and Minister of Foreign
Affairs
COLOMBIA
His Excellency Rodrigo Lloreda Caicedo
Minister of Foreign Affairs
His Excellency Carlos Borda Mendoza
Ambassador of Colombia in Costa Rica
Ambassador Julio Londono
General Secretary of the Ministry of Foreign
Affairs
Ambassador Luis Carlos Villegas
Under Secretary for Economic Affairs
Mr. Julio Riano Ve dia
Deputy Chief of Protocol
EL SALVADOR
His Excellency Fidel Chavez Mena
Minister of Foreign Affairs
His Excellency Carlos Matamoros Guirola
Ambassador of El Salvador in Costa Rica
His Excellency Oscar Castro Araujo
Director General of Foreign Policy
Mr. Alvaro Menendez Leal
Director General of Culture and Communica-
tions
UNITED STATES OF AMERICA
His Excellency Thomas 0. Enders
Assistant Secretary of State for Inter-
American Affairs
His Excellency Francis McNeil
Ambassador of the United States in Costa
Rica
Advisers
Mr. Arthur Giese
Deputy Director, Central American Affairs
Mr. Ronald Godard
First Secretary, Embassy of the United
States in Costa Rica
Mr. Scott Gudgeon
Legal Adviser, Department of State
Mr. Donald Barnes
HONDURAS
His Excellency Edgardo Paz Barnica
Minister of Foreign Affairs
His Excellency Ricardo Arturo Pineda Milla
Ambassador on Special Mission
His Excellency Jorge Roman Hernandez
Alcerro
Ambassador on Special Mission
His Excellency Herminio Pineda B.
Charge d'Affaires a.i. of Honduras in Costa
Rica
JAMAICA
His Excellency Neville Gallimore
Minister of Foreign Affairs and Foreign
Trade
His Excellency Louis Heron Boothe
Ambassador of Jamaica in Costa Rica
His Excellency Neville Clark
Consul General of Jamaica in Costa Rica
COSTA RICA
Mr. Fernando Volio Jimenez
Minister of Foreign Affairs and Worship
Mr. Ekhart Peters Seevers
Vice Minister of Foreign Affairs and Worship
Mr. Alvar Antillon Salazar
Senior Director General of the Ministry of
Foreign Affairs and Worship
DOMINICAN REPUBLIC
His Excellency Jose Marcos Iglesias Inigo
Ambassador of the Dominican Republic in
Costa Rica
1. They expressed their conviction that it
is the ineludible task of governments that
have been legitimized by the will of the peo-
ple, expressed at the polls, to defend, pro-
mote, and develop a democratic, representa-
tive, pluralistic, and participatory system,
and that the time has come to define the con-
ditions that will permit the reestablishment
of a lasting and stable peace in Central
America;
2. They recognized the challenges facing
the democratic institutions of our countries,
and the unavoidable duty to face them firmly;
3. They likewise recognized that it is
necessary and desirable to establish organiza-
tions to help maintain and improve demo
cratic institutions;
4. They noted that democratic institu-
tions, in addition to serving as a means of ex-
pressing the sovereignty of the people, should
contribute to the strengthening of peace and
solidarity among peoples and the promotion
of economic development, freedom, and social
justice;
5. They reaffirmed the fundamental im-
portance of respect for international law and
treaties as the basis of regional cooperation
and security;
6. They stated that the maintenance of
peace and democratic institutions requires
respect for the fundamental values of human
dignity emanating from the Supreme Being,
and the elimination of existing conditions of
social injustice;
7. They stressed the need for the preven-
tion and solution of conflicts between states
to be channeled through the mechanisms for
peaceful settlement recognized by interna-.
tional law, and emphasized that it is the duty
of governments to use such mechanisms and,
if necessary, to create special mechanisms to
achieve that end;
8. They noted that the current world
economic crisis produces phenomena such as
disproportionate foreign indebtedness, a
deterioration of the international financial
system, and an increasing imbalance in the
terms of trade among states;
9. They considered that such phenomena
result in unemployment, inflationary trends,
serious financial problems, and political,
economic, and social conflicts which are ex-
ploited by totalitarianism for the purpose of
destabilizing the democratic way of life and
government;
10. They noted the objective enunciated
this year by the Chiefs of State and Govern-
ment on the occasion of the inauguration of
the President of Honduras, Dr. Roberto
Suazo Cordova, on January 27; of the Presi-
dent of Costa Rica, Mr. Luis Alberto Monge,
on May 8; of the President of Colombia, Dr.
Belisario Betancur, on August 7; of the Presi.
dent of the Dominican Republic, Dr. Salvador
*The Panamanian observer at this
meeting did not sign the final act.
The opening session was held in San Jose
at 9:30 a.m. and was attended by the Presi-
dent of the Republic of Costa Rica, Luis
Alberto Monge, who delivered the inaugural
address.
In order to have a moderator for the
discussions, the meeting of Ministers
unanimously elected Mr. Fernando Volio
Jimenez, Minister of Foreign Affairs and
Worship of Costa Rica, as Chairman.
The participants agreed on the following
points as the final result of their delibera-
tions:
627
Summary of the Final Act
In this final act, the democratic states of
the region, for the first time, set forth
the conditions they regard as essential
to achieve peace in Central America.
These conditions include:
• An end to foreign support for ter-
rorist and subversive elements operating
toward the violent overthrow of other
countries;
• An end to arms trafficking;
• A ban on the importation of heavy
weapons and limitations on all arma-
ments and forces to those required for
defense;
• Withdrawal of all foreign military
and security advisers and troops under
fully verifiable and reciprocal conditions;
• Respect for the principle of nonin-
tervention and peaceful solution of
disputes;
• Respect for human rights, in-
cluding fundamental freedoms such as
freedom of speech, assembly, and
religion and the right to organize
political parties, labor unions, and other
organizations; and
Jorge Blanco, on August 16; and in the Joint
Communiques of the Presidents of Costa Rica
and El Salvador of June 17, of the Presidents
of Honduras and El Salvador, of June 10, and
of the Presidents of Costa Rica and Panama,
of September 26, of this same year, and that
such objectives point to the adoption of
measures for the achievement of peace,
democracy, security, development, freedom,
and social justice.
THEY THEREFORE DECLARE:
1. Their faith in and support for the prin.
ciples of representative, pluralistic, and par.
ticipatory democracy which, when properly
understood, constitutes a way of life, of
thinking, and of acting which can accom-
modate within its scope different social and
economic systems and structures having a
common denominator, which is respect for
life, for the security of the individual, for
freedom of thought, and for freedom of the
press, as well as the right to work and to
receive proper remuneration, the right to fair
living conditions, to the free exercise of suf-
frage, and of other human, civil, political,
economic, social, and cultural rights.
II. Their concern about the serious
deterioration of the conditions of the present
international economic order and interna.
tional financial system, which gives rise to a
process of destabilization, anguish, and fear,
affecting, in particular, those countries that
have a democratic system of government. In
this regard, they appeal to the industrialized
democratic countrtes to step up their coopera-
tion with the democratic countries of the area
by implementing bold and effective initiatives
to strengthen the recovery and economic and
social development efforts of the various in-
terested countries in the area. As part of this
cooperation, the initiative of the President of
the United States of America with regard to
the Caribbean Basin is especially urgent and
should be encouraged and fully implemented
as soon as possible. Likewise, those present
recognize the economic cooperation and
assistance efforts undertaken by the Govern-
ments of the Nassau Group: Canada, Colom-
bia, Mexico, the United States, and
Venezuela
They support current efforts towards
subregional economic integration, including
the Central American Common Market and
the Caribbean Community and point out the
urgency of updating and improving those in.
tegration processes which are now in trouble
in order to place them in an appropriate
political, economic, juridical, and institutional
framework.
LII. Their conviction that, in order to pro-
mote regional peace and stability, it is
necessary to support domestic political
understandings that will lead to the establish-
ment of democratic, pluralistic, and par-
ticipatory systems; to the establishment of
mechanisms for a continuing multilateral
dialogue; to absolute respect for delimited
and demarcated borders, in accordance with
existing treaties, compliance with which is
• Establishment of democratic, rep-
resentative, and participatory institu-
tions through free and regular elections
in an atmosphere of political reconcilia-
tion within each state.
The final act called on each state of
the region to implement these condi-
tions, which will be presented to other
interested countries as indispensable to
the establishment of a lasting peace. The
final act also established a Forum for
Peace and Democracy to analyze pro-
posals for ending the conflict in Central
America against the overall framework
of these essential conditions and author.
ized the Costa Rican Foreign Minister to
transmit the results of the conference to
other states of the region.
The participating states noted that
legitimately elected democratic govern-
ments have a responsibility to defend
and develop democratic values. One im-
portant step toward the promotion of
democracy in the region is the par-
ticipants' resolve to create a body for
democratic electoral assistance, available
on request to advise countries wishing to
hold democratic elections.
the proper way to prevent border disputes
and incidents, observing, whenever ap-
plicable, traditional lines of jurisdiction; to
respect for the independence and territorial
integrity of states; to the rejection of threats
or the use of force to settle conflicts; to a
halt to the arms race; and to the elimination,
on the basis of full and effective reciprocity,
of the external factors which hamper the con-
solidation of a stable and lasting peace.
In order to attain these objectives, it is
essential that every country within and
without the region take the following actions:
a) Create and maintain truly democratic
government institutions, based on the will of
the people as expressed in free and regular
elections, and founded on the principle that
government is responsible to the people
governed;
b) Respect human rights, especially the
right to life and to personal integrity, and the
fundamental freedoms, such as freedom of
speech, freedom of assembly, and religious
freedom, as well as the right to organize
political parties, labor unions, and other
groups and associations;
c) Promote national reconciliation where
there have been deep divisions in society
through the broadening of opportunities for
participation within the framework of
democratic processes and institutions;
d) Respect the principle of non-
intervention in the internal affairs of states,
and the right of peoples to self-determination;
e) Prevent the use of their territories for
the support, supply, training, or command of
terrorist or subversive elements in other
states, end all traffic in arms and supplies,
and refrain from providing any direct or in-
direct assistance to terrorist, subversive, or
other activities aimed at the violent over.
throw of the governments of other states;
f) Limit arms and the size of military and
security forces to the levels that are strictly
necessary for the maintenance of public order
and national defense:
g) Provide for international surveillance
and supervision of all ports of entry, borders,
and other strategic areas under reciprocal
and fully verifiable arrangements;
h) On the basis of full and effective
reciprocity, withdraw all foreign military and
security advisers and forces from the Central
American area, and ban the importation of
heavy weapons of manifest offensive capabili-
ty through guaranteed means of verification.
The preceding actions represent the
essential framework that must be established
in each State in order to promote regional
peace and stability,
The signing countries call on all the
peoples and governments of the region to em-
628
1
brace and implement these principles and
conditions as the basis for the improvement
of democracy and the building of a lasting
peace.
They note with satisfaction the efforts be-
ing made in that direction, and deem that the
achievement of these objectives may be
reached more fully through the reestablish-
ment of the rule of law and the organization
of election processes that will guarantee full
participation of the people, without any
discrimination whatsoever.
The representatives expressed their ap-
preciation to the Government of the Republic
of Costa Rica for the courtesies it extended
to them, which made possible the successful
completion of their deliberations.
Signed at San Jose, Republic of Costa
Rica, on October 4, 1982.
For Belize
For El Salvador
For Honduras
For Costa Rica
For Colombia
For the United States of America
THEY RESOLVE
IV. To create a democratic organization to
provide development assistance and advisory
services for elections, the purpose of which
organization will be to maintain the electoral
system and to develop, strengthen, and stim-
ulate its utilization in the inter-American
area, providing advice to countries that re-
quest it about its practice and implementa-
tion. The organization will operate either
autonomously, sponsored by the countries
represented in the meeting and by other in-
terested countries, or as & section or branch
of the Inter-American Institute of Human
Rights, since suffrage is an essential part of
the theory and practice of human rights.
To request the Minister of Foreign Af-
fairs and Worship of Costa Rica, Mr.
Fernando Volio Fernandez, to prepare an ap
propriate document, containing the comments
of the participants in this meeting and of the
representatives of other democratic countries
and to circulate it among them and imple-
ment it as soon as possible.
V. Lastly, they agree to participate in a
Forum for Peace and Democracy, the pur-
pose of which will be to contribute to the
implementation of the actions and the attain-
ment of the objectives contained in this docu-
ment, and, within the framework of this
declaration, to study the regional crisis and
analyze the various peace proposals or ini-
tiatives aimed at solving it. The Forum may
be broadened by the inclusion of the col-
laboration of other democratic States.
The Forum may entrust specific tasks to
representatives of given participating coun-
tries, who will report on the results; and will
transmit the final act of this meeting, so that
comments and opinions deemed advisable,
may be presented to the Forum.
The representatives requested the
Minister of Foreign Affairs and Worship of
Costa Rica, on behalf of the participating
governments, to transmit this declaration to
the governments of the region and other in.
terested governments, and to obtain their
views on the principles and conditions for
peace that it contains.
They agreed to convene a new meeting as
soon as possible, in order to evaluate the
development of the objectives of the declara-
tion.
VII. The Plenary Session in this meeting
of Foreign Ministers noted with pleasure the
presence of Panama and the Dominican
Republic as observers.
For Jamaica
True copy of the original.
Alvar Antillon S.
Director General of the Ministry of Foreign
Affairs and Worship of Costa Rica
For the Dominican Republic I
Published by the United States Department
of State · Bureau of Public Affairs
Office of Public Communication . Editorial
Division · Washington, D.C. · December 1982
Editor: Colleen Sussman This material is
reprinted from the Department of State
Bulletin of December 1982. It is in the public
domain and may be reproduced without per-
mission; citation of this source is appreciated.
Bureau. of Public Affairs
United States Department of State
Washington, D.C. 20520
Postage and Fees Paid
Department of State
STA-501
3
Official Business
It address is incorrect
please indicate change.
Do not cover or destroy
this address label.
629
Souce: Letter to tie ?:esident 6:0.tinė ?:::::::.:s i
coicbia, Mexico, Pa..2:2, an Venezuela, JHO: 1983.
CC: ST2WDXT CX CENTRAL AMERICA:: 72.CZ
FACED WITH THE INCREASING CONFLICT IN CENTRAL AMERICA,
NE TE HEADS CE STATE OF COLOMBIA, SELISARIO BETANCUR, MEXICO,
AND
VIGUEL DE LA MADRID, PANAMA, RICARDO DE LA ESPRIELLA,
VENEZUELA, LUIS SERRERA CAMPINS, DECIDED TO MEET IN CANCUN, MEXICO,
CN JULY 17th, 1983.
WE ANALYZED THE CR-TICAL CENTRAL AMERICAN SITUATION AND
CONCURRED IN OUR DEEP CONCERN FOR ITS RAPID DETERIORATION IN THE
DST OP AN INCREASING HAVE. OF VIOLENCE, THE PROGRESSIVE INTEN-
S:FICATION OF ENSIONS, BORDER INCIDENTS AND THE THREAT OF AN
MED CONFLICT WHICH COULD BECOME GENERAL, . IN ADDITION TO ALL
TEIS, THE ARMS RACE AND FOREIGN INTERFERENCE CONFORM A DRAMATIC
PICTURE WHICS AFFECTS TE POLITICAL STABILITY OF THE REGION, IN
ZICH THE INSTITUTIONS CORRESPONDING TO DEMOCRACY, FREEDOM, SOCIAL
JUSTICE AND ECONOMIC DEVELOPMENT CAN NOT ADVANCE AND CONSOLIDATE.
THE CONFLICTS IN CENTRAL AMERICA PRESENT TO THE INTERNA-
TIONAL COMMUNITY WITE TEE ALTERNATIVE OF SUPPORTING AND REINFORCING
DECISIVELY THE PATH OF POLITICAL UNDERSTANDING THROUGH CONSTRUCTIVE
SOLUTIONS, OR TO PASSIVELY ACCEPT THE INTENSIFICATION OF THOSE
FACTORS WHICH COULD LEAD TO MORE_DANGEROUS ARMED CONFRONTATIONS.
THE USE OF VIOLENCE AS AN ALTERNATIVE SOLUTION DOES NOT
ESCLVE, BUT WORSENS TO UNDERLYING TENSIONS. PEACE
IN CENTRAL
YRICA WILL ONLY BECOME A REALITY IN AS MUCH AS THE FOLLOWING
FONDAMENTAL PRINCIPLES OF UNDERSTANDING AMONG NATIONS: NON-INTER-
VEXTION AND SELF-DETERMINATION OF NATIONS, EQUALITY AMONG NATIONS,
COOPERATION FOR ECONOMIC AND SOCIAL PROGRESS, PEACEFUL SETTLEMENT
0: CONTROVERSIES, AND THE FREE AND AUTHENTIC EXPRESSION OF POPULAR
HILL, BE OBSERVED.
630
- 2 -
THE CREATION 0: FAVOLE CO:DITIONS TO PEACE
IN THE
33:ON, BASICALLY DEPENDS ON THE ATTITUDE AND SINCERE, DISPOSITION
COMOS DIALOGUE ON ME PART OF T CENTRAL AMERICAN SCOLARIES,
OBICS CORRESPOND THE PRIM-.RY RESPONSIBILITY AND THE GREATEST
EFFORT IN SEARCE FOR AGREEMENTS TO ASSURE THE COEXISTENCE:
IN THIS RESPECT, IT IS INDISPENSABLE THAT THE POLITICAL
WILL F08 UNDERSTANDING, ALREADY MANIFESTED IN THE FIRST MEETINGS
07 TO CONTADORA GROUP, WILL CONTINUE TO BE CLEARLY EXPRESSED
THE
IN TSE PROGRESS OF OUR WORK TOWARD PEACE, SO THAT IT CAN BE TRANS-
LATED INTO SPECIFIC ACTIONS AND COMMITMENTS.
IT IS ALSO NECESSARY THAT OTSER STATES WITH CENTRAL
NERICAN INTERESTS AND TIES, CONTRIBUTE WITH THEIR POLITICAL
INFLUENCE TO REINFORCE TE AVENUES OF UNDERSTANDING AND AGREE.
TO SUPPORT, WITHOUT RESERVES, THE DIPLOMATIC ALTERNATIVE FOR
PEACE.
TIE EFFORTS OF THE CONTADORA GROUP HAD MADE POSSIBLE,
UP TO NOW, TEL INITIATION OF A DIALOGUE INCLUDING THE PARTICIPATION
OF ALL CENTRAL AMERICAN GOVERNMENTS, THE ESTABLISHMENT OF A SYSTEM
02 CONSULTATIONS, AND THE DEFINITION, BY GENERAL AGREEMENT, OF AN
AGENDA EMBRACING THE MOST RELEVANT ISSUES OF THE REGIONAL CONFLICT.
THESE ACHIEVEMENTS, ALTHOUGH STILL INSUFFICIENT, HAVE.
32EN ENCOURAGED BY THE SUPPORT OF NUMEROUS COUNTRIES, SEVERAL
ORGANIZATIONS, AND A DIVERSITY OF INTERNATIONAL PUBLIC OPINION
GROUPS. ALL OF THEM COINCIDE IN THAT THE ACTIVITIES OF THE
CONTADORA GROU? FAVE CONTRIBUTED TO ABATE THE DANGER AND REDUCE
THE RISKS OF GENERALIZED CONFLICT, AND ITS ACTION HAS ALLOWED
THE IDENTIFICATION OF THESE PROBLEMS AND CAUSES OF AN ESCENARIO
THAT IN OUR DAYS IS OF FEAR AND CONFLICT.
631
3
THIS GENEROUS SIT PORT OF THZ INDERATIORAL COMMUNITY
DEVOS PERO DE CONTINUE IN OUR ENDEAVOR AND MAKE TEE NECESSARY
2:20RTS IN FR10R 02. GORI, WHICH NOBLE PURPOSE COMPENSANTES ANY
FOSSISLE LACK OF UNDERSTANDING,
ENCOURAGED BY TSE WIDE SPIRIT OF SOLIDARITY OF OUR
COUNTRIES WITE THE SISTER NATIONS OF CENTRAL AMERICA, WE BELIEVE
IT IS NECESSARY TO ACCELERATE THE PROCESS THAT WILL TRANSLATE THE
DESIRE FOR PEACE IN PROPOSALS WHICH, DULY DEVELOPED, WILL BE ABLE
TO EFFECTIVELY CONTRIBUTE TO THE SOLUTION OF THE CONFLICTS.
FOR THIS PURPOSE WE HAVE AGREED UPON THE GENERAL GUIDE-
LIVES OF A PROGRAM TO BE PROPOSED TO CONTRAL AMERICAN COUNTRIES.
THIS IMPLIES THAT. BESIDES THE STRICT FULFILLMENT OF THE FUNDAMENTAL
PRINCIPLES OF INTERNATIONAL RELATIONS, THE NEGOTIATION OF AGREEMENTS
AND POLITICAL COMMITMENTS, WHICH WOULD LEAD, IN THE REGIONAL REALM,
TO AN EFFECTIVE CONTROL OF THE ARMS RACE, THE WITHDRAWAL OF FOREIGN
ADVISERS, TEE CREATION OF DE-MILITARIZED ZONES AND THE PROHIBITION
O: THE USE OF THE TERRITORY OF ONE STATE TO PLAN MILITARY OR POLI-
TICAL ACTIVITIES WHICH WILL CAUSE INSTABILITY IN OTHER STATES, THE
ERADICATION OF THE TRAFFIC OF ARMS AND THE PROHIBITION OF OTHER.
FORMS OF AGGRESSION, OR INTERFERENCE IN THE INTERNAL AFFAIRS OF ANY
· COUNTRY OF THE REGION.
0
TO ENSURE THE EFFECTIVENESS OF THIS GENERAL PROGRAM,
IT IS REQUIRED TO NEGOTIATE AGREEMENTS OUTLINING THE POLITICAL
COMMITMENTS TSAT WILL GUARANTEE THE REGIONAL PEACE. .THESE
AGREEMENTS COULD INCLUDE:
632
1
TO PUT AN END TO ALL EXISTING BELIGERANT SITUATIONS.
20:32:23 THE CURRENT LEVEL OF OFFENSIVE WEAPOXS.
- TO IITIAZE NEGOTIATIONS TO CONTROL AND REDÉCE THE
PESEXI ARSEXES AND THE CREATION OF TSE APPROPRIATE
MOCSANISMS OF SUPERVISION.
• TO ZAN TE EX:STENCE OF FOREIGN MILITARY BASES IN
TAIR TERUITORES.
TO INFORM IN ADVANCE ON TEL MOVEMENT OF ANY TROOPS
IN BORDERING ZONES, WHEN THE SIZE OF THE DETACHMENT
EXCEEDS TEE NUMBER ALLOWED BY THE EXISTING AGREEMENT.
TO ESTABLISS, ACCORDING TO THE SITUATION, JOINT BORDER
PATROLS, OR TELE INTERNATIONAL SUPERVISION OF BORDERS
38 OBSERVERS SELECTED AMONG THE INTERESTED PARTIES BY
COMMON AGREEMONT.
TO CREATE SECURITY JOINT COMMISSION TO PREVENT OR RESOLVE
BORDER INCIDENTS.
- TO ESTABLISE INTERNAL MECHANISMS OF CONTROL TO AVOID
THE TRAFFIC OF ARMS FROM THE TERRITORY OF ANY COUNTRY
OF THE REGION TO THE TERRITORY OF OTHERS.
TO PROMOTE A DISTENTION AND CONFIDENCE ATMOSPHERE IN
TE AREA, AVOIDING STATEMENTS OR OTHER ACTIONS WHICH
WILL ENDANGER THE NECESSARY CLIMATE OF POLITICAL TRUST,
.
TO COORDINATE SYSTEMS OF DIRECT COMMUNICATION AMONG
GOVÈRNMENTS, IN ORDER TO PREVENT ARMED CONFLICTS AND
GENERATE AN ATMOSPHERE OF RECIPROCAL POLITICAL TROST.
IN TEE SAME MANVER, WE CONSIDER TELAT SIMULTANEOUSLY
TO THE IMPLEMENTATION OF THIS GENERAL PROGRAM, THE TASK OF
CTING THROUGE SPECIFIC DIFFERENCES AMONG COUNTRIES SHOULD BE
OXITIATED WITS TEE SIGTING OF MEMORANDA OF UNDERSTANDINS, AND
E CREATION OF JOINT COMMISSION THAT WILL ALLOW THE INTERESTED
PARTIES TO DEVELOP COMYON ACTIONS GUARANTEEING TEE EFFECTIVE
COXTROL 0: THEIR TERRIZORIES, ESPECIALLY IN BORDERING ZONES.
633
**SE MASURES, GEARED TOWARDS THE ELIMINATION OF 183
THE
3
::070?S :S28:3 IG PEACE THE REGION, SHOULD BE ACCOMPANIED
: ; G73:: 1:33SZ ESCRS, TO RESTRENGHTEN THE DEMOCRATIC
:52:TUTIONS, OD TO GUARANTEE THE OBSERVANCE OF HUMAN RIGHTS.
IN TEIS REGARD, IT IS NECESSARY TO PERFECTIONATE THE
SOSIEMS O: POPULAR CONSULATIONS, ENSURE FREE ACCESS OF THE
DI?:3RONT OPINION VECTORS TO THE ELECTORAL PROCESS, AND PROMOTE
TEE FUL PARTICIPATION OF THE CITIZENS IN THE POLITICAL LIFE OF
TEDIS COUNTR:E.
TEE STRENGETENING OF DEMOCRATIC POLITICAL INSTITUTIONS
IS CLOSELY TIED TO THE EVOLUTION AND ACHIEVEMENTS BROUGHT ABOUT
BY ECONOMIC DEVELOPMENT AND SOCIAL JUSTICE. IN FACT, THEY ARE
TO JIMENSIONS OF THE SAME PROCESS WHICH, ULTIMATELY, ARE DIRECTED
TO THE FUL:ILMENT OF SASIC HUMAN VALUES.
WITH THIS' PERSPECTIVE, IT SEOULD BE FACED THE ECONOMIC
17DERDEVELOPMENT, WEICS IS AT THE ROOT OF REGIONAL INSTABILITY
AND IMMEDIATE CAUSE OF MANY OF ITS CONFLICTS.
TO REINFORCE MECEANISMS OF INTEGRATION, TO INCREASE INTER-
REGIONAL COMMERCE AND TO TAKE ADVANTAGE OF THE POTENTIAL FOR INDOS-
TRIAL COMPLEMENTATION, ARE SOME OF THE MORE URGENT ACTIVITIES
TO NEUTRALIZE THE EFFECTS OF THE WORLD ECONOMIC CRISIS.
HOWEVER, THE SELF EFFORT SHOULD BE COMPLEMENTED BY THE
SU??ORT OF THE INTERNATIONAL COMMUNITY, ESPECIALLY OF THE INDUS-
TRIALIZED COUNTRIES, THROUGH LOANS · FOR DEVELOPMENT, PROGRAMS
C: COOPERATION AND OPEN ACCESS FOR CENTRAL AMERICAN PRODUCTS TO
2:3 MARKOTS.
34-045 0-84_41
634
- 6
1
:
THE GOVERNMENT OF THE COUNTRIES MEMBERS OF THE CONTADORA
C?...? REITERT: 32:3 DECISION TO CONTINUE PROGRAMS OF COOPERATION
FAVORING TE SUB-REGION AND TO OFFER "EZIR COMMON EFFORTS TO CEANEL
ERNATIONAL SUPPORT TOWARDS THESE GOALS OF ECONOMIC REVITALIZE.IOO;
IN BASE TO TEESE. GENERAL GUIDELINES, WE HAVE ENTRUSTED
O OUR MINISTERS OF FOREIGN AFFAIRS TEE ELABORATION OF SPECIFIC
PROPOSALS WEICH WILL BE PRESENTED TO TEE CONSIDERATION OF CENTRAL
RICAN COUNTRIES IN THE OCCASION OF THE NEXT MEETING OF CEANCELLO.
:
WE MAKE AN APPEAL TO ALL MEMEBRS OF THE INTERNATIONAL COM
MINITY, ESPECIALLY TO THOSE WEICH HAVE EXPRESSED THEIR SYMPATHY TO
TE EFFORTS OF THE CONTADORA GROUP, AS WELL AS TO THE SECRETARY GE-
NERAL OF THE UNITED NATIONS AND TELE PRESIDENT OF THE PERMANENT COUNC
of me ORGANIZATION OF AMERICAN STATES, TO CONTRIBUTE WITH THEIR EX-
22:ENCE AND DIPLOMATIC ABILITY TO THE SEARCH FOR PEACEFUL SOLUTIONS
TO CENTRAL AMERICAN PROBLEMS.
1
BECAUSE OF ALL THESE CONSIDERATIONS WE HAVE ADDRESSED OUR-
SELVES TO TEE BEADS OF STATE OF THE AMERICAN CONTINENI, SEARCHING
:OR THEIR NECESSARY SOLIDARITY.
THE HEADS OF THE STATE OF COLOMBIA, MEXICO, PANAMA, AND
VENEZUELA RESTATE THE COMMON POURPOSES WHICH BRING THEIR GOVERN-
MENTS
MONES TOGETHER, IN THE TASK OF PIELPING TO BUILD A JUST AND LASTING
PEACE DESIRED BY THE PEOPLES OF CENTRAL AMERICA.
ISSTED IN CANCUN, MEXICO, ON JULY SEVENTEEN, NINETEEN
IGZTY TERES.
MIGUEL DE LA MADRID H.
PRESIDENT OF THE REPUBLIC
O: MSXICO
BELISARIO BETANCUR
PRESIDENT OF THE REPUBLIC
OF COLOMBIA
CAPDO DE LA ESPRIELLA
PRESIDENT OF THE REPUBLIC
LOIS HERRERA CAMINS
PRESIDENT OF THE REPUBLIC
635
SS:DET'S ENTE? OF JULY 21, 1983 TO TYE CONTADORA PRESIDENTS
Dear M. ?residen::
hank you for the letter which you and the Presidents of
coroabia, Hexico, and venezuela have sent to me concerning the
meeting held in Cancun on July 17, to review the current
situation in Central America.
:
I would like to congratulate you on the efforts which the
Contadora Pour are making to promote dialogue among the
countries of Central America.
My government has consistently
expressed strong support for the Contadora process. The Cancun
Declaration by articulating the crucial issues which must be
treated to reach an effective and enduring resolution of the
Central American conflict, is an important contribution to
advancing that process.
I continue to believe that a solution to the crisis in
Central America must encompass four basic priaciples:
Pirst, it is essential that democratic institutions be
established and strengthened as a means to resolve political
differences within the central American states. Only by
ensuring free and open participation in the Democratic process
can the peoples of Central America achieve reconciliation
within their societies.
636
-2-
Second, there must be respec: For the principle of
acr-intervention, inciucing a ban on support for subversive
elements that seek :) cestabilize other countries,
Third, the conflict in Central America must be removed from
the context of an East-West confrontation, through such
aeasures as the verifiable withdrawal of all foreign military
and security advisers, and a certifiable freeze on the
acquisition of offensive armaments,
And finally, the countr es of Central America must work
among themselves and with their neighbors to achieve and
sustain a level of economic growth that will guarantee the
basic aeeds of their people.
I am pleased that the Cancun Declaration recognizes the
importance of these fundamental principles. These issues are
inextricably iater-related, and must be addressed on a
comprehensive, regional basis which treats simultaneously the
coaceras of all the states affected by the Central American
conflict. An attempt to resolve these issues sequentially, or
on a pieceneal basis, will not achieve the goal we all share of
a lasting peace for all of Central America.
Equally important is the : need to ensure that all
undertakings assuned by the Central American states be fully
637
reciprocal and subject to comprehensive, fully adequate
verification. Clearly, no initiative can bring true peace to
Central America if one state is permitted to take unjust
advantage of its neighbors through failure to abide by peace
conditions which bind the others.
The Charter of the
Organization of American States makes clear that it should be
the purpose of the OAS to either prevent unjust acts committed
by one state against another, or to provide for common action
on the part of the members in the event of difficulties.
I
believe the OAS, as this hemisphere's regional forum, 18 the
appropriate mechanism to ensure that those who make
coraitments, comply with them.
The problems of Central America are complex, and their
solution demands untiring efforts. The activities which you
and your colleagues in the Contadora Group have undertaken are
proof of your sincere dedication to the goal of a -genuine and
lasting peace throughout the region. My own efforts in this
regard have been to dispatch my special emmissary to the region
and establish a bipartisan commission to exanine the problems
o: Central America and to propose solutions. You have my
2:3yers and chose 0% y count:ynen as you continue your work.
Sincerely,
Ronald Reagan
638
CONTADORA 21 POISIS
incat of bec: VSS
Considering:
The situation prevailing in Central America, which is characterized by an
atmosphere of tension that threateas security and peaceful coexistence in the
regions and which requires for its solution, observance of the principles of
intamational Law governing the actions of States, especially:
The well-determination of peoples,
Abn-interventions.
The sovereign equality of States
the peaceful settlement of disputas,
Retsaining from the threat of use of forces
Respect for the territorial categrity of states
Pluralia in its various panifestations,
mell support for democratic Institutions,
The promotion of social justice;
Intestational cooperation for developments
Requct for and promotion of human rights
me prohibition of terrorise and subversions
The daise to reconstruct the Central American homeland through prograine
Latogration of its economic, legal and social. Institutions;
The need for economic coopxation among the states of Central dverica so
to make i fundingntal contribution to the development of their peoples and the
strengthening of their independences
The undertaking to establish, promote or revitalize caprenentativa, democratic
wysties la all the countries of the region,
che unjust economic, social and political structure which exacerbate the
conflicts in Central America,
639
The urgent need to put an end to the tensions and lay the foundations for
understanding and solidarity among the countries of the areas
The amas race and the growing and traffic in Central America, which aggravate
political relations in the region and divert economic resources that could be used
for development,
The presence of foreign advisers and other forms of foreign military
interference in the zone:
The risks that the territory of Central American States may be used for the
purpose of conducting military operations and pursuing policies of destabilization
against others,
The need for concerted political efforts in order to encourage dialogue and
understanding in Central America, avert the danger of a general spreading of the
conflicts, and set in motion the machinery needed to ensure the peaceful
coexistence and security of their poopies,
Declare their intention of achieving the followirs obrestives:
To promote détente and put an end to situations of conflict in the area,
refraining from taking any action that might jeopardize political confidence or
prevent the achievement of peact, security and stability in the regions
To ensure strict compliance with the aforementioned principles of
international Law, whose violators will be held accountables
To respect and ensure the exercise of human, political, civil, economia,
social, religious and cultural rights,
To adopt measures conducive to the establishent and, where appropriate,
Laprovenert of democratic, representative and pluralistic systems that will
guarantee effective popular participation in the decisior-making process and ensure
that the various currents of opinion have free access to fair and regular elections
based on the full observance of citians' rights,
To promote national reconciliation offarts wherever deep divisions have taken
place within society, with a view to fostering participation in democratic
political processes in accordance with the Law;
to create polltical conditions intended to ensure the international security,
integrity and sovereigaty of the States of the region,
To stop the arms rac. in all its forms and begin negotiations for the control
and reduction of current stocks of weapons and on the number of armed troopa,
To prevent the installation on their territory of foreign military bases or
any other type of foreign military interference,
640
a
To conclude agreements to reduce the presence of foreign military advisers and
other foreign elements involved in military and security activities, with a view to
heir @limination,
To establish internal cont:ol machine:0 prevent the traffic in arms Eran
the territory of any country in the region to the territory of another ;
To eliminate the traffic in urms, whether within the region or from outside
it, intended for persons, organizations or groups seeking to destabilize the
Governments of Central American countries,
..
To prevent the use of the own territory by persons, organizations or groups
ain
seeking to destabilize the Governments of Central American countries and to return
to provide them with or peonit them to receive military or logistical support,
To refrain from inciting or supporting acts o£ terrorien, subversion or
sabotage in the countries in the areas.
To establish and coordinate direct carwmunication systems with a view to
preventing os, where appropriate, settling incidents between States of the region,
to continin himanitarian aid almed at helping Central American refugees who
have been displaced Crow their countries of origin, and to create suitable
conditions for the voluntary repatriation of such refugees, la consultation with or
with the co-operation of the United Nations High Commissioner for Refugees (HQ)
and other international agencies deemed appropriatas
o undertake economic and social development programes with the aim of
promoting well being and an equitable dietribution of wealth,
o revitalize and restore economic integration machinery in order to attala
sustained development on the basis of solidarity and autual advantages
to negotiate the provision of external monetary resources which will provide
additional means of financing the renumption of inter-regional trade, meet the
serious balance of payments problas, attract funds for working capital, support
programmes to extend and restructure production systems and promote medium and
long-term investment projects,
to negotiate better and broader secars to international markets in order to
increase the volume of trade between the countries of Central America and the rut
trade practices, the elimination of tariff and other barriers, and the achievement
of price stability at a profitable and fair level for the products exported by the
countries of the region,
do establish technical cooperation machinery for the planning, programming
and implementation of multi-sectoral Investment and trade promotion projects.
641
Me ininters ice Porziga airs of the Cent:alimerican count:123, with the
participation of the countries in the contadora Group, have begun negotiations with
the aim of preparing for the conclusion of the agreements and the establishment of
the machinery necessary to formalize and develop the objectives contained in this
document, and to bring about the establishment of appropriate verification and
donitoring systras. to that end, account will be taken of the initiatives put
Corvard at the meetings convened by the Contadora Group.
Panama City, 9 September 1983
Source: United Nations Security Council document S/16041,
October 13, 1983.
:
642
CORTADOR; RESOLUTION
OF JANU: 8, 1984
Measures for Carrying out the Commitments
Made in the Document of Objectives
The Governments of Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua,
whereas:
.
1. In September 1983, the five governments approved the
*Document of Objectives, the frame of reference for the
,
regional peace agreement; and
2. Measures must be taken to carry out the commitments
contained in that document,
643
-2-
Have resolved:
I. Tc take the following steps immediately:
1. Security Matters
(a) Preparation of a detailed register or
inventory of military installations, weaponry, and troop
strength by each Central American state in order to establish
the criteria for a policy of control and reduction of the above
that would place a ceiling on their numbers and provide for a
seasonable balance of forces in the region.
(b) Preparation of a census in each country and
adoption of a timetable for the reduction, with a view to their
elimination, of foreiga military advisers and other foreign
participants in military or security activities.
(c) Identification and elimination of all forms
of support, encouragement, financing, or toleration of groups
or irregular forces engaged in the destablization of Central
American governments.
:
(a) Identification and eradication of groups or
irregular forces participating from or through the territory
of one Central American state, in activities to destabilize the
government of another state in the region.
(e) Identification of areas, routes, and means
used for unlawful arns trafficking in and outside the region so
that such trafficking can be eliminated
*
644
- 3-
() Establishment of direct communication systems
in order to prevent and resolve incidents between the states.
2, 3olitica! Hatters
(a) To promote national reconciliation founded on
the principles of justice, liberty, and democracy and, to that
end, establish the mechanisms for creating a dialogue in the
countries of the region,
(b) to guarantee full respect for human rights
and, for such purpose, honor the obligations contained in the
pertinent international legal texts and constitutional
provisions.
(c) To promulgate of amend electoral laws with a
view to elections that guarantee effective participation by the
people.
(d) to create independent electoral bodies that
will establish a reliable electoral register and ensure the
impartiality and democratic nature of the process.
le) To draw up ofī as necessary, update
provisions guaranteeing the existence and participation of
political parties representative of the diverse currents of
public opinion.
() To set a timetable for elections and adopt
measures that will ensure the participation of the political
parties under conditions of equality.
!
645
-4-
ig) To encourage actions aimed at establishing
genuine coizical ::ust among the governments of the region
with a view to the celaxation of tensions.
3.
Economic and Social Matters
(a) to increase programs to aid Central American
refugees and facilitate their voluntary repatriation through
the cooperation of the governments concerned and in conjunction
or coordination with national humanitarian agencies and
competent international organizations.
(b)
TO cooperate fully with the Central American
(Economics Integration Bank, CEPAL, the Action Committee for
Supporting Central American Economic and Social Development and
SIECA.
(c)
To work together to obtain foreign resources
that will make it possible to revitalize. Central Americin
integration processes.
(d) To improve intraregional trade and promote
more and better access to international markets for Central
American commodities.
(e)
To encourage joint investment projects.
(f)
no introduce economic and social structures
that strengthen a true democratic system and allow the people
....
646
-5-
:ull access to the right to work, education, health, and
culture.
II.
To authorize the Technical Group, the advisory body
for the. Joint Meeting of the Ministers of Foreign Affairs of
Central America and tie Contadora group, to follow-up on the
actions envisioned in this document with respect to security,
political, and economic and social matters.
The Technical
Group will report to the Ministers' meeting regarding progress
in carrying out such measures.
III. To create, within the framework of the Contadora
Group, three working commissions responsible for preparing
studies, legal drafts, and recommendations pertaining to
security, political, and economic and social matters, as well
as to proposals for the verification and monitoring of
compliance with the measures agreed upon.
The working commissions shall be governed by the
following provisions:
(a)
They shall be made up of
representatives of the Central American governments. Each
country may appoint: up to two advisors per commission,
(b) The Contadora Group shall convene the
meetings and participate in them so that it can continue to
cooperate actively in an examination of the topics assigned and
in the preparation of the agreements.
647
-6-
ic)
Foreign advisory services, whether the;
involve persons on an individual basis or representatives of
international organizations, must be approved upon by consensus
in advance.
(d)
The working commissions shall be set up
by January 31, 1984, at the latest.
The participating
governments shall the efore appoint their representatives and
adivsors and duly inform the Ministry of Foreign Relations of
Panama of such appointments,
(e)
Each commission
shall prepare and
submit its timetables and work schedules before February 29,
1984.
The commissions shall carry out their
work within the franework established by the Document of
Objectives and the Technical Group shall coordinate their
work. They shall present this studies, legal drafts, and
recommendations to the joint meeting of the Ministers of
Poreign Affairs by April 30, 1984, at the latest.
Panama, January 8, 1984
:
Source: Letter to the vaited Nations Secretary General from
the Panamanian Mission to the United Nations, January 9, 1984.
648
-
FMLS/FDR PEACE PROPOSAL
OF JANUARY 31, 1984
(Text) A. Iatroduction
for some years, the FDR and the FMX have been struggling to achieve the definite
Liberacion of our people. Conviaced that the effort to achieve peace with justice
should be shared by the largest possible number of Salvadorans, we have proposed several
Uternatives for solving the current crisis, because only a powerful and speedy
effort can Lift our country from the ruins in which it has been submerged by the
: elogarchic regine and the U.S. Government's intervention. We are facing a complex
pacional and laternational situador. The old oligarchic society and the state which
served it have soaked their own fate in blood. They are unable to provide solutions
to the demands of thousands of Salvadorans and have created a repressive, exploitative
apparatus, carrying out polidcel maneuvers aimed at covering up their determination
to seek & military solution.
649
ia adiicioa, cte Reagan adaizistration's increasingly Interventionist role has extended
:he war and beatens to :e:ealize the conflict. We insist that the achievement of
peace in our country requires a process that includes the widest possible participation
:: polisical and social forces ad which makes viable a solution based on climinating
ose factors - because they are the source of this conflict.
ence, the FML-SDR propose che creation of a broad-based provisional government to
ca: cuc a poczated pla::c2a sutlindring all the necessary tasks. We must take on
chese tasks in order to overcome the present critical situation and allow our people to
cuarioue with their process of social, political, and economic changes towards a truly
usi society.
B.
The Broud-based Provisional Government
de proposal to create the broad-based provisional government is a result of the
developments achieved by the FDR and the Salvadoran people in the political and military
sector. The broad-based provisional government will be a government in which so force
will prevail; it will be the expression of the broad participation of political and
social forces – ready to eliminate the oligarchic regime and rescue the national
sovereignty and ladependence. Likewise, the existence of private ownership and foreign
vestments will aot be contrasy to our social interests.
The proposal !o: the establishment of a provisional government is the result of h
cevelopment of the people's democratic, revolutionary forces in the political and
litary areas.
i: l be a broad-based provisional government whose duration will be determined by
the fulfillment of its basic objectives, according to what is agreed upon between the
pares and based on the understanding that this will aot be a long-term government.
Tae basic objectives of the broas-based provisional government are as follows:
Rescue the sacional independence and sovereignty. '
2. Destroy the oppressive apparatus and establish the bases for a true democracy with
full compliance with buman rights and political freedom which seeks to fully implement
the people's participation to achieve definite pesce.
.
3. ; Attend to the people's 2050. urgent and med lace paedo and adopt: basic economic
aad social seasures to change these structurus
4.
Establish the necessary practical conditions to resolve the present stage of war
5. Prepare and hold general elections. The broad-based provisional government will have
a structure simplified to its highest level. It will consist of the following: -
government junta, ministerial ubines, advisory state council, and aupreme court of
justice. The provisional government will be comprised of representatives of workers,
peasants, teachers, employees, profussional collegus, universities, political parties,
aad business sectors, the FILV-EDR, and the national Army duly: purged. The
government organizations will Laclude this broad representation, excluding the
oligarchy and sectors and persons opposed co achieving the objectives of the provisional
governmeat and who advocate a dictatorship. -
84 015 0-84
650
C. Government Placior
mis platfora es:abilsizes the basic guidelines and necessary meusures to be adopted by
che road-based ::cöisicaal zoveel, with the contribucions and advice of several
organizacions, ses:s:, and c::::.S. It will become a scuemment program that seeks
so'ntions to the scst 'uzzent ceselorrent problems in this country,
1:5: of all, we propose a package ci'measures to be appiied immediately. Second, there
are some reasures and guidelines to enchance the broad-based provisional government's
acsica during ics administration. ediace measures:
1. Dissolution of the 1983 Constitucion and its replacement by a constitucional decrec
regulating the broad-based provisional government's activities.
2. Dissolution of the state of siege and all the decrees issued since 1980 which
violate indvidual and social liberties.
3. Freedom for ul political prisoners and missing persons and the annulment of all
sentences issued based on repressive and special decrees.
Full guarantees !or the exercise of collective and individual democratic rights
ud freedoms, À provisional statute should be issued to regulate agrarian, livestock,
and state workers' rights to organize labor unions. The unions will be indemified for
damage done to theii property through repression since 1979. The organization of the
people's power will be legitimized; this was created during the war in various zones of
che country.
5. Elimination of security corps, death squads, and their political arm, the ARENA
Nacionalist Republican Alliance) party. Creation of a civil police corps under the
iacerior Ministsy.
6. Wichdrawal of C.S. or any other countries' military advisers, latervention, and
silitary aid; an end to all supplies of weapons.
7. Purging of the government dived Forces. Once this is achieved, its leaders should be
orgmized wichia che broad-based provisional government's structures.
8. Lavestigation and trial of civilians and military officers responsible for
genocide, political crines, corture, disappearancès, and the Hlégal deprivacion of
individual Liberties. The death of FMLN fighters and of Army soldiers and officers in
combat does not constitute a crime.
9. The Supreme court of justice would investigace and pass judgment on crimes against
humit rights. It must also purge and reorganise the judicial branch. Non government
hunan rights orgroizations, which have defended the people during the dictatorship's
regint; would be usked to cooperate in this cask.
10. The return of endles and refugees and the implementation of an emergency program
co reintegrace and care for returning refugees, those who have been disabled by the
war, those who burve been dismissed from the Armed Forces, and the families and persons
who, as a result of the war, bave been left without protection. The broad-based
provisional goversent will request the cooperation of internacional agencies and
nor.governmeat orguizations for chese casks.
Implementation of an emergency program to reconstruct the economic, educacional,
and healch infrastructures, which have been either destroyed or damaged by the war.
651
The establishment oi a 2:3:0r20 on debts to benefit all and middle businessmen.
Mis sulc include a sapic asic concei; finance program to icnefit the industrial and the
ar::..::a! ar.c es:-ck sec:s-- as to promote econcic :eactivacion,
?:ice las and corros*: mies ccnsurec by RC people co i prove the people's
reai scores. The 22:kecii ad cisiribuer. of staples ist also be reorganized and
:::..les.
2. Penegociatior of the foreign cest, acknowledgiig the financial commitments acquired
57 p:ericus sovereats.
15. The reestablisiment of the autonomy of the National University of El Salvador and
de location of sufficient rescurces for its reorganization and operation. The uni-
versity campus wouid be put at the disposal of its legitimate authorities immediately.
:6. There would be a massive literacy campaign and an adult training program in the
areas of health, education, agricultural and livestock production, and community
organization.
27. development of a massive employment program through the promotion of state and
ace savestmeat chose sectors that produce jobs. An emergency program would be
Seceased co acquire the raw material and tools necessary for economic reactivation.
Procucers would be guaranteed adequate marketing channels and frameworks.
18. The prodot:CR ad ceve-opent of a popular organization program through the organi-
za:9= d consolida::on nicipalities, communities, and state institutions, which
so participate in the piano:26, elementation, and evaluation of programs that bene-
::: de comunica,
1
19. de development of a massive comunicacions program, with the creation and use of
25sive popular copricacica jeans for local consumption.
20.. he creation of an elec:cral organization that, on the basis of an agreement among
ise concerned parties, would prepare free general elections and a reliable electoral
:eg siy.
Escuoc and Social Refors
1. The establishmect of the requirements for the full implementacion of the agrarian
reios program, ensuring the free participation of farmworkers la this implementacion.
The cevelopaeat of a cooperatsrecozaaization program that would involve individual
sall farn owners.
2. The establishseat of the requirements for the full nationalization of the country's
saks and financial system co piase boch credit and finance organizations at the
service of the surority,
3. mehe establisest of the foundations for a complete reorganizacion of our foreiga
izace, iacluding the controi of primary export products: coffee, cotton, sugarcane,
in products, and meat. This would also include control-of-the-import of raw
çesials, laput producis, spare parts, and technology needed for our national
sduc:10a.
The establishaeat of the foundations for an adequate solution to the housing prob-
les of low-lacose sectors; ; che progressive expansion of social security services; and
e reorientation o. foreiga Lavescants for an effective. Contribution to the fulf111-
: of social needs.
652
Here:s Policy
Se
sroad-based provisional goverzent would develop its foreign policy on the basis
:: e..silosing criteria:
1.
the broadcased provisional goverraent would pursue a policy of world relations for
:43:, in opposi:10: s rasă ass buildup and ruciear weapons.
It would defend the
principies of peace::i coexisteace, self-determination, and nonintervencion; thus,
::: jota the smal?znes Loveeat and, consequently, carry out a struggle against
coloniaiism, ceocoloniai.sal, Zloris, racial discrimination, and apartheid. It would
es:aclish diplomatic relations with ocher countries regardless of their social systems
so he basis of tatlonal Interests. it would comply with pledges undertaken at inter-
national organizacions and would encourage active participation at international
srs for che discussion and solstos of problems arising from economic relations
between countries. Is would reafiis its Bolivarian traditions and would consequently
seek to promote and participate in regional forums that could strengthen the Latin
Azerican countries' position on regional political, diplomatic, financial, and social
probles.
2.
Is regard to ts relations ish the United States:
i. I: would propose that agreedets be concluded that guarantee both countries' national
sec: 108. Thus, the broadbased provisional government would pledge aot to permit the
3:aation of foreiga military jases and/or missiles in its cerritory. Also, the
3.5. Hvernment agens: pledge that it will not carry out, procote, or encourage actions
o sestabilization against the broad-based provisional government or the government that
es eiec:ed du:1.8cbis process. che Salvadoran Government would not endanger its
::0-: territory och act:vitses seeking to destabilize governments in neighboring
cuies, aoz vould it allow the movement of weapons and foreign troops through its
::::y. It would promote the cosclusion of pacts of nonaggression and noninterven-
to: la the uus's Esternal affas.
3. The Salvadoran Government's relations with the United States and Central America
seuld be reoriented and based on incondicional respect for the rights of self-
de::cination, ladependence, and cicaal sovereignty, and on mutual cooperation and
Lierdependence. Thus, it would seek to achieve Morazan's ideal of Central American
vaisy and would strive to free our region of foreign military forces. It would not
participate in silita y alliances; consequently, it would withdraw from the CONDECA
Cesszal aerican Defense Council;. it would actively participate in the promotion
and development of regional organizations that can guarantee political solutions to
Asterasional controversies with the conclusion of agreements that promote economic,
social, and political unity.
Procedures
out
I. order to carry this proposal, it is aecessary that a process of dialogue:
aeger-acion be initiated that wou'd deal with the following aspects:
..
In regard to the participants:
1.
the parties in conflict:
s.
an M-FDR delegat 08.
Å Salvadoran Government and added Forces delegation, and the U.S. ambassador for
Cez::11 aperia or anotter U.S. Government representative.
653
1
veslators without power of resolucion, appointed with the parties' approval.
:. ternationai "iscesses, such as representatiöes of the Contadora Group and other
cesso:a::: governzeass.
ase 1: 3:es: and unconditio:a: cialogue, organized by ore cr several mediators
... e:: con la a't or at the request of the parties, which would achieve sub-
siaative negociar-cas, with the ageada for those regotiations and the specification
sisaesses and procedures.
Phase 2: Direct negociacions between the parties la conflict, with the mediators
ac: a8 as soderators at the meetings, and with the attendance of ambassadors, appointed
bereits de governmeats, as witnesses.
C. Pledzes: The F-FDR state their willingness to negotiate a cease-fire once
che process of dialogue and negociatica has begun and when it has reached an advanced
Scage. Once the agreedeats are dran, the document would be signed by the parties la
ccllc:, by the witaesses in their role of guarantors, and by the mediators.
isedately afterwards, the agreements would be complied with in terms of the
23:eec-ca dates, ters, and order. his process will end with the organization of
a siagée national army consisting of FLV and government Armed Forces and duly purged.
Cachea, both aes would retain their own we &pons.
:sised] General Command of the FLY, Executive Comittee of the FDR
:3a:ed] El Salvador, 31 January 1984
:
Source: Foreiga Broadcast Information Service, Volume VI
Sumber 029, February 10, 1984.
.
654
REVCI
tar
CIDE
UNIDAD. SANDINISTA DE MISKITOS, SUMOS Y RAMAS (MISURASATA.
viiv
ARDE
MOVIMIENTO DEMOCRATICO NICARAGUENSE (M.D.N.)
FRESTE REVOLUCIONARIO SANDINO (F.A.S.)
DINO
FRENTE SOLIDARIDAD-DE:MOCRATA CRISTIANO (F.S.D.C.)
Soiidaridad de Trabajadores Democraticos
Nicaraguenses (S.T.D.V.)
Directorio Revolucionario
FOR PEACE AND DEMOCRACY IN NICARAGUA
On the eve of his death, General Augusto Cesar Sandino, symbol of
ar natiaality, deplored the high cost that we would have to continue
to pay to achieve peace and social justice.
Fifty years after his sacrifice, his fears have been fully confirmed.
Nicaragua has undergone a drama of vast proportions in this half
century, the social contradictions and causes of which are still present.
For this reason, we, Nicaraguans, must think first and foremost of
or country, to minimize the high cost in human lives that we are paying
for ar political tragedy.
ARDE has declared that its differences with the FSLN derive from the
anti-democratic system that has been imposed by that government in our
country. We have proposed in mumerous occassions the necessity to search
for political solutions with the hope to put an end to the national
arisis. However, the lack of response to ar initiatives has compelled
us to take up weapons.
On this occasion, we wish to stress ar position on the electoral process
to the people of Nicaragua, to the democratic sectors within the FSLN
and to the International caim odty. We are nationalist revolutionaries.
We believe in consolidating the achievements of the revolution within
a democratic framework that would guarantee authentic and effective plura
listic participation. Only in this context, the different political
tendencies of the nation could participate in facing ar multiple problems.
655
UNIDAD SANDINISTA DE MISKITOS, SUMOS Y RAMAS (MISURASATA).
Crv
-OVIMIENTO DEMOCRATICO NICARAGUENSE (M.D.N.)
ARDE
FRENTE REVOLUCIONARIO SANDINO (F.R.S.)
Daca
FREK'TE SOLIDARIDAD-DEMOCRATA CAISTIANO (F.S.D.C.)
SATIES
Diretorto Revolucionario
We insist on this last point, because an electoral process that excludes
the exdled democratic forces, would only serve to exarcebate the national
contradictions and to frustrate the expectations for peace and regional
secrides. On the basis of these and other considerations that have
been pointed out by ar alliance, we present the following basic conditions
that might render an electoral process trustworthy:
1. The point of departure tid put an end to the violence, that afflicts.
the nation is for the FSLY -3 agree to an electoral compranise that would
permit the participation, without exceptions, of all representative forces
and their leaders in our country.
2. The FSLN must-denonstrate a gerudine caudament to democracy, and must
end the superimposition of government functions over those of the party,
and must pardalarly separate the army's functions from those of the
party in powers.
3. The electoral process. should take place within a climate of national
reconciliadan, under the supervision of a Latin American instance, with
the appropiate legal. Instruments guaranteeing that legal procedures and
aboration are applied throughout.
4. Ale public Liberties must be restored and appropiate measures should
be created to guarantee the political activities of all opposition forces,
tirétigh the creata of favorable conditions for all political party.
actvides,
.
5. The nules of the electoral process must be clearly defined. The basic
guidelines for our parties must be established, and it must be pledged,
publicly and formally, that the electoral results will be respected, even
if they are adverse to the FSLN.
656
REVOL
OLUCIO
UNIDAD SANDINISTA DE MISKITOS, SUMOS Y RAMAS (MISURASATA).
ANZA
MOVIMIENTO DEMOCRATICO NICARAGUENSE (M.D.N.)
ARDE
FRENTE REVOLUCIONARIO SANDINO (F.A.S.)
FRENTE SOLIDARIDAD DEMOCRATA CRISTIANO (F.S.D.C.)
Direccorio Revolucionario
6. The various forms of institutionalized repression must be eliminated
and the internationalists and foreign military officers who are playing
roles that rightly belong to Nicaraguans must be sent away.
If the FSLN, pledges to take and then does take specific steps to
implement these legismate demands of those who are struggling for the
restoration of the revolution's original program, ARDE would suspend
military activities, under a priori guarantees by countries that have
renained neutral in the conflict:
We are not demanding power-sharing with the FSLN. We are only claiming
the right of all Nicaraguans to participate in the electoral contest
in equal conditions with the party in power. The FSLV has the historic
opportunity to prove to the international community, that its electoral
thetoric is based on its concern for saving the nation from wer and
crisis. It should place the national interest before the interest of the
party.
We once more declare that we are willing to seek a dignifled and the
soludia to ar national conflict. We thus render homage, on this soth
sufversary, to Sandino's aspirations, who said that the highest duty
of every good Nicaraguan citizen is to procure peace in Nicaragua.
Sarapiqr, Department of Rio San Juan, Nicarague, February 18, 1984.
San Jose, Costa Rica, February 20, 1984.
Directorio Revolucionario De ARDE
657
DECLARATION OF THE
NICARAGUAN DEMOCRATIC FORCE
OF FEBRUARY 21, 1984
Nicaraguan Democratic Force (FDN), after carefully weighing our
historic national reality and our current problems; and faced with
the responsibility of finding a solution to the Nicaraguan civil
was and providing for the peaceful coexistence of all nicaraguans
in freedom and democracy, addresses itself to the ruta of the Government
of National Reconstruction and requests that the Ministers of Foreign
Affairs of the Contadora Group, in their meeting of February 27,
1984, take this document under consideration.
The Nicaraguan conflict, which threatens the political and socio-
economic stability of the Central American: region, is due both to
Lotemal factors and to extracontinental agression it is at the
same time the immediate and principal cause of the regional crisis.
A bloody war is being waged within Nicaragua at a very high cost
in human lives. This makes essential the search for formulas for
peace, as was done La Jone of 1979 through the good offices of the
Organization of American States. (OAS).
In order to end the bloodshed and prevent the prolongation of this
conflict, which contindes to disturb the peace of this continent,
we propose the following PLAN FOR PEACE AND NATIONAL CONCILIATION,
developed on the basis of the Resolution of the XVII Conference of
Consultation of the Ministers of Foreign Affairs of the Organization
of American States, that will facilitate a durable and peaceful
solution to the Nicaraguan problem:
|
658
::
me imediate substinction of the Sardinista resine.
2)
Installation in Nicaraguan territory o: 2 Democ:2tic Provisiona:
Government o Jat:cual conciliatica, which should include the
main denoc:atic coups representative of the opposition to the
Scuoza and Sasciista seçimes, and which should select the free
will of the Vicaragizo people.
3)
Guarantees for the respect of human rights of all nicaraguaas
without exception.
4)
The initiation within one year of an authentic electoral process,
conducted in liberty and surrounded by guarantees before, during
and aites the casting of the vote that culminates in the election
of national authorities. The process should be supervised by
groups of actions such as Contadora and institutions the likes
of the Organization of American States and the United Nations.
For the initiatico add the implementasion of this plan, it is
ingezztive that there exist & state of freedom and full observance
of the civil and political sights of citizens, among which must be
included the followiac measures:
بع
The immediate with cawat o£ foreiga (cuban, soviet, buiçarian,
no coreai, palestinian, east german r etc.) military and
security forces that bave established themselves as a toue occupa
beton cury in Nicaragua. At the same time, withdrawal of all in-
ternational mercencies involved in public administration, includ
ing those gives nicaraguan citizenship after July 19, 1979.
5)
he mediate separation from the Sandinista Armed Forces and
other repressive organizations of individuals responsible for
cines against their own people and against humanity.
c)
Suspension of the state of emergency which suspends the civil
and political rights of Nicaraguan citizens.
Promulgation of a genuine amnesty Iaw, covering political offenses
659
e)
Derogation ci laws which violate internationally acceptec stancazė:
o: human righes, such as Decree 48, the General Law on Communica-
tions Media; Decree 1327, the Law on Patriotic Military Service;
Decrees 759 ans 760 which violate the right to private property;
and others
:)
dezagation of laws. sestricting freedom of labor unions; reestablish
ment of the right to strike, the right to bargain collectively,
and respect for interational labor agreements to which Nicaragua
is a party.
g)
Establishment of the rule of law, througte the distribution of the
powers af tice State among tree independent and complementary
powers: the Legislativer the Judicial wd the Executive.
5)
The establishment of the cigans at the state as true national
organizations, apart from all political and ideological sec-
tartani.ser and the total separation of the Sandinista party
Esou the political and politary agencies of the State.
·
1)
As end to the persecutior and exterdination of sectors of the
Nicaraguans population, especially that unleashed against those
of Miskito. Suma and Rama origin.
3). Ad immediate end to religious persecution, and a total separation
of the State and the so-called "Popular davrch".
k)
Repatriation of alI Nicaraguans with full guarantees of their
rights as citizens.
1)
Restoration to the Judiciary of its full functions, jurisdiction,
and autonomy.
660
Senator HELMS. Mr. Morris.
STATEMENT OF HON. JAY F. MORRIS, DEPUTY ADMINISTRATOR,
AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. MORRIS. Mr. Chairman, I would like to echo the sentiments
of my colleague from the State Department. Knowing your famili-
arity and the committee members' familiarity with the subject
matter, I would prefer to submit my statement for the record, so
that we can spend our time on a dialog.
[Mr. Morris' prepared statement follows:]
661
PREPARED STATEMENT OF
THE HONORA BLE JAY F. MORRIS
DEPUTY ADMINIST RATOR
AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. Chairman, I am pleased to appear before you to testify
on the vitally important Central Ame rica Democracy, Peace and
Development Initiative Act of 1984.
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 add ress 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 Central American
governments of their commitment and ability to undertake
fundamental economic and social reforms.
THE REGION'S PROBLEMS
Economic and social de velopment has been made most
difficult by the presence of military conflict within the
Central American region. Even we re this conflict to disappear,
however, the region would still face four severe problems :
economic instability, poor economic growth, economic and social
inequity, and weak political and legal systems. Let me
describe them.
1. Economic Instability. 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. The establishment of a Marxist government
in Nicaragua and internal strife in El Salvador exacerbated
this economic problem, leading to cutoffs of commercial credit,
662
· 2 -
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.
2.
Poor Growth Prospects. 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 industries have
been exhausted. Structural change is urgently needed to allow
for diversification of production and exports and to increase
productive employment opportunities for the region's rapidly
growing labor force.
Economic and Social Inequity. Though vastly different,
three of the countries Guatemala, El Salvador and Nicaragua
have 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
have the incentive and the means to 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. However, it needs improvements in the quality of life
to prevent 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
663
-
3 -
FY 1984 and a request for a $1,120 million appropriation in FY
1985, representing the first phase of implementation of this
program.
In the face of large federal deficits and urgent
domestic priorities, such a request requires compelling
justification. We believe that the report of the Bipartisan
Commission provides this. The situation is so alarming, the
Commission concluded, that "whatever the short-term costs of
acting now, they are far less than the long-term costs of not
acting now. If the proposed assistance can capture the
imagination and energies of the people of Central America, we
believe that it can support a dramatic turnaround in the
development situation of the region and eliminate a potentially
serious threat to U.S. national security.
Our major goals for the five-year program are the
following:
an end to the downward spiral in production by 1985;
--
achievement of an economic growth rate of at least 6% per
year in the region within six years, producing more than
250,000 jobs annually through export-led growth;
--
agricultural production increasing by 4$ 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.
--
i i
664
--
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 will reflect flexibility, 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
economic instability, poor economic growth, poor
equity performance, and weak political and legal systems is
essential.
the area
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. Our supplemental appropriation request in FY 1984
includes:
1
-
1
1
-
$290 million of Economic Support Funas (ESF);
$73 million in Development Assistance (DA);
$ 25 million in P.L. 480 commodities; ang
$12 million in other agency programs and increased
operating expenses.
In FY 1985, we are seeking appropriation of:
- -
1
$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.
PROGRAM STRATEGY
Our Central American 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.
665
.
- 5 5 -
-
A. Stabilization
The immediate priority will be to achieve economic
stabilization by eliminating unfinanced balance of payments and
fiscal gaps through 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.
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. 480
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. 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 is to lay the basis
for self-sustaining growth 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
incones, Our program for growth promotion through productive
employment stresses 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
34-045 0-84-43
*
666
- 6 -
stabilization assistance, and up to $1.3 billion in guarantees
and insurance. The latter will include trade credits provided
through A.I.D. and the Export-Import Bank and increased
insurance coverage by the overseas Private Investment
Corporation.
1. Policy reform. Increased employment is essential to
achievement of long-term growth and equity goals. In the past,
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.
Experience 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 permit an
equally rapid growth in the imports of raw materials and other
products needed to provide 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 iikely 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 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 suct, ar
expert 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.
667
- 7
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 is 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.
Altogether, we propose a total of $3.1 billion in
assistance in direct support for our equity goals. This figure
inciudes $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
668
- 8 -
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. We propose to support primary education,
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.N.).
2.
Health and Nutrition. We will support increased
action to improve health conditions, particularly in rural
areas, where government programs are inadequate. Control of
Talaria and other vector-borne diseases, dissemination of oral
renyaration therapy, and training of health workers will be
major elements of our program. We will expand our technical
assistance and education efforts for nutrition improvement, and
expand our food aid programs. The Peace Corps will cooperate
in inplementing our health and nutrition programs, and U.S.I.A.
will help in translating and disseminating educational
materials.
669
- 9
1
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 and result 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
empahsize private institutions in our approach.
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.
we can
Shelter. Much of the population of the isthmus lives
in substandard housing which lacks water, sewerage ana
electricity services. Although remedying this problem will
require both decades and massive financial resources,
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
670
- 10
10 -
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 improved
human well being. If we succeed in generating economic growth
in the region without broadening the 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
again 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 elements and 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. Third, we will foster
democratic leadership development, and international
collaboration of democratic forces. 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
In order to carry out this ambitious program, we propose
several departures from past practices.
671
- il
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 large bureaucracy but
would meet periodically and contain a minimum number of staff
necessary to achieve the purposes set out below. CADO would
also be structured so as to have labor representation. 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:
Li
establish goals and targets for economic, political and
social development;
recommend country performance criteria;
evaluate external assistance needs, and recommend
resource mobilization actions;
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 appropria-
tions not be made with country-level earmarkings. The
implementation of the program will also 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.
Third, we seek to increase the role played in the
development process. by private voluntary organizations to the
maximum extent feasibie. 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.
672
- 12
12 -
Absorptive Capacity
Finally, I want to make a few comments on the capacity of
the Central American countries to absorb productively the
proposed assistance. While our program is ambitious, I am
convinced that it is both feasible and essential. I believe
that a more modest program might be undercut by the political
uncertainty, insurgency in some countries, low commodity prices
and economic depression that now chacacterize the region. Let
me address the principal concerns.
Overall size is the first issue. The proposed
appropriations of $1.12 billion for FY 1985 for economic
assistance represents less than 5% of the region's GNP, and
less than the $1.5 billion in short fall in export earnings
from lower coffee and sugar prices and higher costs for
imported oil. Our initial effort is to stop the region's
spiraling economic decline, and get economic growth back into a
positive range. In this situation, the depressed state of the
region's economy and the existing excess capacity make
potential bottlenecks of little immediate concern. As the
world economy recovers, our aid should make possible a positive
rate of economic growth but the essential point is that our
aid is only reducing scarcity of resources, not providing
abundance, I would also note that we have provided higher
levels of aid relative to GNP to other parts of the world.
The limited implementation and management capacity of the
Central American governments is a second concern. Serious
deficiencies do exist as one would expect in poor countries,
but they have not created unusual implementation problems in
the past.
We are taking several steps to minimize such
problems as the aid level rises. First, the largest part of
the assistance will go to the private sector (including private
voluntary groups) rather than to government programs,
particularly during the early years. Second, we will provide
substantial technical assistance and training for government
officials to streamline operations and increase efficiency.
Third, governnent investments and social programs have been
dramatically cut back as a result of the region's financial
problems, so significant capacity for expansion is already in
place. Finally, I consider government policies on an equal par
with good management in determining effective absorptive
capacity. Without policy reform to assure effective use of our
funds, we may end up subsidizing inefficiency or policies that
benefit only a few. CADO plays a crucial role in such
reforms. We see it as a vehicle for assuring that our
assistance is indeed tied to action on the whole range of
policies economic, social, and political.
Thank you.
673
Senator HELMs. Very good. My distinguished colleague says, won-
derful. You are all gaining in popularity by the minute.
Does that put any pressure on you, Mr. Beckington?
STATEMENT OF HON. HERBERT BECKINGTON, INSPECTOR
GENERAL, AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. BECKINGTON. Yes, it does, Mr. Chairman. I do not have a
statement.
[The Inspector General's report on agrarian reform in El Salva-
dor follows:]
674

AGENCE INTERNATIONAL DEVELOPMENT
THE
INSPECTOR
CENERAL
AGRARIAN REFORM IR EL SALVADOR
A REPORT ON ITS STATUS
AUDIT DEPORT NC. 1-519-04-2
JANUARY 13, 1994
Kroatia Generalforucit
675
AGRARIAN REFORM IR EL SALVADOR
A REPORT ON ITS STATUS
AUDIT REPORT NC. 1-519-34-2
JANUARY 13, 1964
Under extremely difficult conditions, the
Government of El Salvador initiated a
large-scale Agrarian Reform Program. Much
has been accomplished. The program has
redistributed over 200,000 hectares of land
to cooperatives and individuals. Yet, the
three phases of the Agrarian Reform, which
have received about $200 million in AID
assistance, have
have had mixed results. Most
Phase I cooperatives are not financially
viable. Their future seems bleak without
additional assistance. Implementation of
Phase II has not been initiated. Phase III
has had some limited success but it has many
significant problem
problem areas with less than
one-half of the eligible recipients applying
to purchase the property to which they are
entitled.
676
TABLE OF CONTENTS
Page No.
EXECUTIVE SUMMARY
i
I.
INTRODUCTION
Background to the Agrarian Reform Program
i
II.
PURPOSE AND SCOPE
4.
III.
U.S. FINANCIAL SUPPORT TO EL SALVADOR'S AGRARIAN REFORM PROGRAM
5
IV.
AID'S INVOLVEMENT IN INITIATING THE EL SALVADORAN AGRARIAN REFORM
7
V.
ACCOMPLISHMENTS OF THE THREE PHASES OF THE AGRARIAN REFORM PROGRAM
8
Phase I
Phase II
Phase III
8
24
25
VI.
REVIEW OF THE AGRICULTURAL DEVELOPMENT BANK (BFA)
28
VII.
COMPLIANCE WITH FUNDING RESTRICTIONS
36
677
GLOSSARY
AID
Agency for International Development
BCR
Banco Central de Reserva (Central Reserve Bank)
BFA
Banco de Fomento Agropecuario (Agricultural Development Bank)
CPA
Certified Public Accountant
DI ECRA
la
Desarrollo Integral de Empresas de
Reforma
(Integrated Development of Agrarian Reform Enterprises)
Agraria
FAA
Foreign Assistance Act of 1961 as Amended
FEDECRE DI TO
Federacion de Cajas de Credito (Credit Union Federation)
FEDECACES
Federacion de Asociaciones Cooperativas de Ahorro y Credito de
El Salvador (Savings and Loans Cooperative Associations
Federation of El Salvador)
FESACORA
Federacion Salvadorena de cooperativas de la Reforma Agraria
(National Federation of Agrarian Reform Cooperatives)
FINATA
Finance
Financiera Nacional de Tierras Agricolas (
(National
Office for Phase III Agrarian Reform Lands)
GOES
Government of El Salvador
ISTA
Instituto Salvadoreno de Transformacion Agraria (Salvadoran
Institute for Agrarian Transformation)
MAG
Ministerio de Agricultura y Ganaderia (Ministry of Agriculture
and Livestock)
OAS
Organization of American States
678
EXECUTIVE SUMMARY
The El Salvadoran agrarian reform program was initiated in March 1980.
The originating decrees provided reform plans which called for expropriating
and redistributing all landholdings of 100 hectares or more. The reform
program consists of three phases. Phase I concerns land holdings of over 500
hectares. Phase II concerns landholdings of 100 to 500 hectares. Phase III
concerns land worked by renters or sharecroppers (Land to the Tiller). Only
Phases I and II I have been implemented so far.
We reviewed the agrarian reform program to determine its status and to
verify uses of selected AID funding. Our field work was conducted during
May-October, 1983.
We found that large amounts of land have been made available to peasants
and numerous cooperatives have been established for increased agricultural
production under the agrarian reform program. These changes have taken place
during a time of civil disorders, without a full public consensus about all
aspects of land reform and with limited institutional capability to implement
the program. Considerable progress has been made under these difficult condi-
tions.
Over 200,000 hectares of land has been redistributed to an estimated
500,000 peasants (including family members). Continued progress under this
program is, however, heavily dependent upon further financia? and other
support by the Government of El Salvador.
It should be noted that during the course of this review we found a broad
consensus of opinion amongst both V.S. and El Salvadoran participants, plan-
ners and observers of the agrarian reform program that the existence of the
program represents a remarkable break with the historical tradition of land-
holdings and use in El Salvador. Further, the consensus seemed to view the
break with the past to be essentially irreversible.
AID's funds have been used directly, and indirectly through supporting
project activities, to achieve project objectives. In some cases, however,
the funds have been used for purposes that were contrary to agreements between
the two countries.
Phases of the Agrarian Reform Program
Phase 1, by the fall of 1983, had reached a number of the program's
goals. Yet it is clear that substantial additional effort and support is
vital if the gains to date are to be preserved and progress toward the goals
of this phase of the program is to be maintained. Under the difficult
conditions existing in El Salvador throughout the three-and-one-half year
history of this phase the responsible agency, the Institute for Agraian
Transformation (ISTA), is still striving to accomplish a number of key program
elements. (See page 8.)
Phase II has not been initiated by the Ei Salvadoran government (see page
24.)
- i
679
Phase III had reached approximately the half way point in its stated goal
of providing land to the tiller. About one-half of the eligible recipients of
land under this phase had applied by April 1983 for the property they are
entitled to under this program. Our statistical sample indicated that
somewhat less than half of those who had applied were actually working the
property at the time of our survey. The El Salvadoran Agency (FINATA)
responsible for implementing this phase is enthusiastic about the program and
has made concerted efforts to fulfill its functions. Yet, the security
situation, resistance by
resistance by numerous landlords, and ambivalence within the
military have limited program accomplishments. (See page 25.)
The future success of the agrarian reform program largely depends upon
action to (1) make Phase I cooperatives financially viable operations; (2)
effectively implement Phase II reforms, and (3) facilitate the application,
registry, transfer of ownership, and use of Phase III farm lands.
Agricultural Development Bank
The El Salvadoran Agricultural Development Bank (BFA) plays a vital role
in the reform program by providing agricultural credit. BFA's financial con-
dition has been precarious due to the inability of many of its clients (pri-
marily Phase I cooperatives) to repay loans obtained from the Bank. The added
responsibilities of about 100 Phase I cooperatives and the Phase III recipients
assigned to BFA under the agrarian reform program have overtaxed BFA'S re-
sources, weakened its capital structure and have led to a break down in its
internal controls system. (See page 28.)
BFA has used the equivalent of about $1.4 million of AID funds for unallow-
able activities. AID must recover that amount. (See page 32.)
Mission Comments
The Director, USAID Mission to El Salvador, responded to a draft of this
report on December 7, 1983.
The Director said that the report failed to adequately recognize the accom-
plishments of the agrarian reform program in the real world context in which
it has taken place. He said the report treated Phase I ongoing processes as
no accomplishments at all.
The Director agreed that the financial viability of the Phase I coopera-
tives was the major obstacle to the success of the reform program. He said
that management and restructuring of the debt were: needed to establish finan-
cial viability of the cooperatives. He said the debt load of the cooperatives
must be restructured before they can reasonably be expected to be financially
successful. He said the key to restructuring the debt was legislation which
would separate the equating of the cooperatives' agrarian reform debt with the
compensation paid to former landowners. The Director did not consider the
cooperatives poor land quality and excessive memberships as major reasons for
the financial problems. The Director also criticized the mentodology we used
in projecting the results of our examination of selected Pnase I cooperatives
and Phase III beneficiaries.
. ii.
680
With respect to the BFA, the Director agreed that at the outset of the
agrarian reform program, the Bank was neither administratively nor financially
prepared for the task. He said, however, that improvements have been made and
that the BFA was stronger today than it was prior to inception of the program.
The Director did not offer any comments about compliance with the restrictions
placed on AID funds.
The Director's comments were considered in preparing the final report.
-iii-
681
1. INTRODUCTION
1
In October 1979 civil violence culminated in a coup d'etat under which a
group of military officers seized control and established a five-member civil-
ian/military Junta. That Junta issued an Armed Forces Proclamation which set
forth the purpose of the coup d'etat and the objectives of the new government.
The proclamation condemned the abuses of past regimes and announced a National
Emergency Program for accomplishing major changes in political, economic and
social structures. Among other things, the proclamation called for a major
agrarian reform program.
In early 1980, the Government of El Salvador (GOES) requested AID assis-
tance on such a program. The GOES advised AID that plans were incomplete but
the program would be guided by the following principles:
The structure of land ownership would be fundamentally altered in
favor of the campesino (rural peasants) sector.
-
The program would be national in scope and would cover all crops.
to special crops,
0
No exceptions would be made for lands devoted
including coffee.
The program would be carried out with and for the campesinos with the
government actively supporting the development of rural organizations,
cooperatives, unions, communal associations, and whatever other forms
of institutions the campesinos decided upon.
The program would not attempt to provide a small parcel for each cam-
pesino and the concern for productivity would necessitate some crite-
ria for minimum units of production. The GOES in April 1980, modified
this principle to allow for Phase III of the program.
Background to the Agrarian Reform Program
Land tenure is an important social, political, and economic issue in El
Salvador. In an attempt to deal with the land tenure issue, the Government of
El Salvador in 1932 established an agrarian reform agency in the aftermath of
a large scale revolt which resulted in the death of about 10,000 campesinos.
From 1932 to 1975, government agencies reportedly acquired 67,711 hectares
1/ of land. About 80 percent of that land reportedly was adjudicated to
10,700 families over a period of 43 years. Between 1932 and 1975, the agra-
rian reform agency went through several changes of name, organizational struc-
ture, and operational methods. The present organization, created on June 6,
1975, is called the Salvadoran Institute of Agrarian Transformation (ISTA).
ISTA'S general objectives are to raise the social and economic level of the
small farmer by providing land, technical assistance, credit and other bene-
fits as well as to increase agricultural production and productivity.
17 One hectare =
2.47 acres.
. 1
.
34-045 0-84-444
682
Government Decrees Nos. 153 and 154 dated March 5, 980 are the legal
bases of the new agrarian reform program. These Decrees established the para-
meters of the reform, the initial plans for implementing Phase I, and assigned
responsibility for implementing the program to the Ministry of Agriculture and
Livestock (MAG) and ISTA.
On April 28, 1980, the GOES issued Decree No. 207 which is the legal basis
for Phase III. The Decree also contains the initial plans for implementing
Phase III.
ISTA did not have the resources to implement both Phase I and Phase III.
To resolve this problem, the GOES issued Decree No. 525 on December ll, 1980.
That Decree created a new organization called the National Finance Office for
Agrarian Reform Lands (FINATA). FINATA was charged with implementing Phase
III (Land to the Tiller). FINATA's objectives for Phase III were the same as
those assigned to ISTA.
Phase I
The GOES began implementing Phase I (expropriation and distribution of
landholdings in excess of 500 hectares) on March 6, 1980. On that day, ISTA,
in coordination with various elements of the El Salvadoran government began
presenting legal expropriation documents to owners of properties containing
more than 500 hectares of land. As of March 31, 1983, ISTA had acquired ap-
proximately 426 17 properties under Phase I authority. These properties
were organized into approximately 317 17 production units called coopera-
tives. The cooperatives' members and ISTA co-manage the units.
Phase I cooperatives are classified according to who financed their pro-
duction and investment credits. One classification of cooperatives consists
of those who receive production credits from the quasi governmental agricul-
tural development bank (BFA). BFA is the single largest provider of produc-
tion and investment credits to these cooperatives and AID provided funds go
through BFA to 94 Phase I cooperatives. The remaining Phase I cooperatives
receive their credits from one or more of the various commercial banks that
provide funds for agricultural purposes. Financing from the commercial banks
for Phase I cooperatives is referred to as mixed bank financing.
Phase II
Phase II was to have dealt with the expropriation and distribution of
landholdings from 100 or 150 hectares (depending on the classification of the
land) to 500 hectares. This phase has not been initiated.
Phase III
This phase was initiated on April 28, 1980. At that time, the GOES esti-
mated that about 160,000 persons were eligible to receive land under Phase III
1/ These figures are estimated because neither USAID/El Salvador nor ISTA was
certain what the exact totals were on any given date.
- 2 -
683
authority. Subsequently, they reduced the estimated number to 117,000. The
implementation period of Phase III has been extended three times and is due to
expire on June 30, 1984. As of March 31, 1983, about 50,000 individuals, or
less than half of the 117,000 eligible, had filed applications requesting
approvai to purchase land. 17
1/ Prior to issuance of this report, FINATA reported that as of December 25,
1983, they had received 75,967 applications from 60,733 individuals.
- 3 -
684
II. PURPOSE AND SCOPE
The Office of the Regional Inspector General for Audit/Latin America
reviewed the agrarian reform program in El Salvador. The review was made in
the United States and in El Salvador during May to October 1983.
We sought to answer these questions:
1)
How much funding has AID provided for the program?
2)
What was AID's involvement in initiating the program?
3)
How well, is the program working?
4)
Has BFA used AID funds properly?
5)
Has AID complied with funding restrictions?
To answer these questions, we reviewed pertinent files and interviewed
officials in AID/Washington, USAID/El Salvador, the U.S. Embassy in San
Salvador and various GOES organizations. We examined pertinent books and
records in BFA's central office in El Salvador and selected branch offices in
various parts of the country. We visited beneficiaries under Phase I and
Phase III of the program and made such other tests and reviews as we con-
sidered necessary under the circumstances.
Our field work was limited by the war to secure areas in El Salvador. . The
secure areas varied from day to day. Incomplete, inaccurate, and at times
non-existent records hampered formation of definitive conclusions.
-
- 4-
685
III.
U.S. FINANCIAL SUPPORT TO EL SALVADOR'S AGRARIAN REFORM PROGRAM
Since fiscal year 1980, AID has provided over $200 million in support of
the agrarian reform program. As of March 31, 1983, about $29 million of AID
funds had been provided to the Agricultural Development Bank (BFA). BFA used
these AID funds to provide production and investment credits to Phase I and
Phase III recipients. The remaining AID funds were provided to various
activities in support of ongoing reform activities.
U.S. Assistance to El Salvador
in Support of the Agrarian Reform Program
5000)
FY 1983
Through
3/31/83
FY 1983
Planned
Through
9/30/83
FY 1980
FY 1981
FY 1982
Total
Title
Devevelopment Assis-
tance Projects !!
$14,400
$10,273
$18,625
$
$34,050
$77,348
Economic Support
Projects (ESF)
7,577
1,600
400
1,600
11,177
Subtotal
$21,977
$10,273
$20,225
$400
$35,650
$88,525
P.L. 480, Title I
Direct
2,880
8,800
5,500
11,176
N/A
28,356
Indirect 21
5,575
9,000
4,563
N/A
19,138
Economic Support Funds
Direct
20,000
N/A
20,000
Indirect 3/
36,200
20, 100
N/A
56, 300
Subtotal
$2,880
$34,375
$50,700
$35,839
N/A $123,794
Total
$24.857
$44.648
$70, 925
$36,239
$35,650 $212.319
1/ Indirect AID development assistance to the Agrarian Reform sector has been channeled
through various ongoing projects. These projects are briefly described on page 6.
2/ GOES-owned funds generated under sales of P.L. 480, Title I commodities, but agree-
ments between AID and the GOES required their use for agrarian reform support.
31 ESF generations were used in support of GOES 1982 and 1983 Fiscal Monetary Program
which included Colones 90.6 million ($36.2 million) in 1982 and Colones 50.2 ($20.1
million) in 1983 for support of
support of the operational needs of the agrarian reform
program. (U. S. $1.00 = 2.5 colones).
• 5 -
686
The Small Producer Development Project (No. 519-0229) is providing $9.750
million (loan $9 million; Grant $750,000) for technical and training assis-
tance. Also this project is providing capital to FEDECACES and FEDECREDITO
(local credit union federations) for relending to individuals and cooperatives.
FEDECREDITO is currently servicing 18 Phase I cooperatives and many small
farmers participating in this project will be Phase III beneficiaries.
The Public Sector Employment Project (No. 519-0256) is financing irrigation
systems, rural water reservoirs, reforestation and soil conservation activities
in rural areas which in many cases, include the agrarian reform sector. AID
assistance to this project through March 31, 1983 has totaled $40.505 million.
The Small Farm Irrigation Systems Project (No. 519-0184) is providing $2.3
million in tandem with the Public Sector Employment Project to finance the
construction of irrigation subprojects in the agrarian reform sector. Twenty-
one subprojects have been completed to date. Eight are underway and an addi-
tional eight are in the planning stage.
The Rural Small Enterprise and cooperative Development Project (No. 519-
0286) is providing about $1 million in support to strengthen farm cooperatives
and enterprises, primarily in the agrarian reform sector, and to develop the
newly formed Salvadoran Federation of cooperatives of the Agrarian Reform
(FESACORA).
- 6 -
687
IV.
AID'S INVOLVEMENT IN INITIATING THE EL SALVADORAN AGRARIAN REFORM
One of the questions we sought to answer was whether AID was actively
involved in initiating the current agrarian reform program. From our review
of the record, it is clear that AID had no advance notice of the October 1979
coup d'etat or the new government's intention to initiate major agrarian
reforms.
In the Spring of 1976, USAID/El Salvador attempted to develop a project to
support the then newly created ISTA in its land acquisition and redistribution
program. In late 1976, however, ISTA announced that it planned to expropriate
some 56,000 hectares of good land in the Usulutan area. Following that an-
nouncement, resistance developed against ISTA's plan and the GOES legislature
terminated ISTA's legal expropriation powers. AID at that point stopped act-
ively promoting an agrarian reform program.
With no advance notice of the new government's land reform program, AID
nevertheless moved quickly to plan a program to support the effort and signed
its initial project agreements to this end in July of 1980.
- 7 -
688
V.
ACCOMPLISHMENTS OF THE THREE PHASES OF THE AGRARIAN REFORM PROGRAM
The agrarian reform program has succeeded in dividing
dividing over 200,000
hectares of land among an estimated 500,000 (including family members) of the
peasant class, many of whom previously were without land. Over 300
agricultural cooperatives have been created with the objective of establishing
viable, self-sufficient, participatory family businesses for many peasants.
These changes have taken place in the midst of cevere civil strife, less than
complete public support for the reform movement, and with the inherent
institutional limitations of a developing country.
Notwithstanding these accomplishments, the future of Phase I cooperatives
seems bleak without further substantial reforms.
Most Phase I cooperatives are not producing sufficient income to be viable
organizations. Income is deficient in part due to the poor quality of lands
and excessive membership in the cooperatives. Most Phase I cooperatives have
little chance to recover on their own. Phase II has not been started. Phase
III appears to be moving ahead but less than half of the eligible recipients
have filed applications for property transfers.
Phase I
The GOES pre-implementation planning for Phase I was limited. Both the
GOES and AID were in the difficult position of dealing concurrently and on a
continuing basis with the development of a rational planning process and with
implementation problems resulting from lack of prior planning.
The GOES announced the new agrarian reform program concurrently with the
coup d'etat of October 15, 1979. Although the coup apparently was well planned
and implemented, it was evident that little preplanning had taken place for
implementing the agrarian reform program. The precipitous manner in which the
Junta announced its intentions to initiate the program left AID without a
policy statement, strategy, or plan of assistance at that time.
The lack of preplanning documentation greatly hindered our evaluation of
agrarian reform activities. There was no agreed to baseline data, no specific
targeted data, or pre-established required inputs to accomplish program
goals: In an attempt to obtain data on preplanning and implementation plans,
we interviewed the Minister of Planning, the Minister of Agriculture and the
Directors of ISTA and FINATA. These officials said that the Decrees were the
only preplanning documents and detailed plans the program
available. There were, for example, no pre-established numbers on the amount
of land involved overall or in each phase, nor the amount of funding required
for compensation.
no
on
were
con-
The GOES' general objectives for the agrarian reform program were
tained in Decree No. 153 of March 5, 1980. Decree No. 154 of March 5, 1980,
initiated Phase I. Parts of the two Decrees are presented below:
.8.
689
Decree No. 153
"For the purpose of this law, agrarian reform shall be
understood to mean the transformation of the country's
agrarian structure and the incorporation of the rural popu-
lation into the economic, social and political development
of the nation through the substitution of the latifundia
system by a more just system including property or land and
the exploitation of landholdings, based on an equitable
distribution of land, an adequate credit system, and com-
prehensive assistance to the producers in order that land
become the basis of economic stability for the peasant, as
the basis of his greater well-being and guarantee of his
freedom and dignity.
"The agrarian reform shall be applied throughout the entire
national territory, without regard to crop, location, pro-
ductivity, land tenure system, quality of soil, or any
variable; therefore, all land used for agricultural, live-
stock or forestry exploitation shall be affected by this
law, with the exceptions and limitations established by the
law itself.
"Land affected by the present law is understood to be any
property within the national territory belonging to one or
more individuals, estates, or associations exceeding one
hundred hectares for land within classifications I, II, III
and IV; and one hundred and fifty hectares for land within
classifications V, VI, and VII. These classifications
constitute the right to land ownership reserved for land-
holders."
Decree No. 154
"In order to implement the execution of the first stage of
the Agrarian Reform throughout the country, which will
include expropriation of landholdings in excess of FIVE
HUNDRED HECTARES, either as a whole or a combination of
several units belonging to one or more individuals, estates
or associations, the Salvadoran Institute for Agrarian
Reform is hereby authorized to proceed to immediate inter-
vention and taking of possession of landholdings involved,
through delegates of that institution or of the Ministry of
Agriculture.
Decree No. 153 makes clear that the GOES' goal was to expropriate and
distribute all landholdings used for agricultural purposes exceeding 100 or
150 hectares, depending on land classification. Decree No. 154 authorized the
first phase of the reform expropriation and distribution of landholdings in
excess of 500 hectares.
- 9 -
690
By March 1980, when the decrees were issued, AID had had insufficient time
to develop an overall implementation plan for the reform program.
Concurrent with the GOES issuance of Decree Nos. 153 and 154 on March 5,
1980, the agrarian reform program became the focal point of AID assistance to
El Salvador. The status of political, military, and economic reforms has
changed so frequently and moved so quickly that AID has been left in the posi-
tion of trying to keep up with the current state of this large and complex
program. Nevertheless, AID has made a concerted effort from the beginning to
identify constraints to implementing agrarian reform activities and assisting
the GOES by developing specific projects to deal with identified problem areas.
As a result, AID has numerous projects and funding sources flowing into insti-
tutions associated with the agrarian reform. Each of these AID inputs has a
specified purpose, objective and implementation plan.
Moving quickly, USAID/El Salvador, in May 1980, issued a Strategy Paper
for assistance to the agrarian reform sector. AID's basic strategy was to
analyze the program, identify bottlenecks and constraints to implementation,
and develop projects to assist the GOES in dealing with the problem areas.
Data on Program Accomplishments are Limited
Attempts to establish the accomplishments under Phase I were hampered by
the lack of and the unreliability of available data. Data on ail phases of
the program were limited and the accuracy of most data suspect. Accordingly,
much of the data examined and reviewed in this report were estimates or
approximations.
Complete or reliable numbers were unavailable from ISTA on many Phase I
reform activities. We could not establish why the information was unavailable
but as of September 1983, about 3-1/2 years after initiation of the reform
program, ISTA still had not completely:
1) surveyed the properties expropriated.
2) established the amount of land involved.
3) established the class of lands involved.
4) established the amounts owed to the previous owners.
5) established the amounts due from the cooperatives.
6) determined the number of properties expropriated.
In response to our draft report, the AID Mission noted the tasks listed
above were ongoing. The Mission provided us with data that they indicated
showed progress on the part of the GOES in adjudicating properties and in
obtaining knowledge about what was happening on Phase I farms. With respect
to item (6) above, the Mission noted that the number of properties expropriated
was 194, o figure which "has been a constant ...". This assertion of a
"constant" 194 is illustrative of the degree of confusion which we found so
pervasively present in the data and baseline information concerning the agra-
rian reform program.
For example:
-
10 -
691
1
USAID/El Salvador in its Project Paper on agrarian reform organization
dated September 29, 1980 gave this figure as 238.
-
The GOES Ministry of Agriculture reported in July 1982 that the number
of properties expropriated under the reform program was 278.
Checchi and Company, in an AID financed study on the agrarian reform
program, reported in January 1983 that the number was 262.
USAID/El Salvador in its Propect Paper on the Agrarian Reform Sector
Support dated May 23, 1983, reported that the number of properties
expropriated under Phase I was 360.
On September 19, 1983, ISTA advised the auditors that the number of
properties expropriated under Phase I was 207.
Neither AID nor the related GOES offices had reliable information on other
aspects of the program. For example, we were unable to obtain a reliable
listing of cooperatives formed by ISTA under Phase I.
After we determined that AID did not have a listing of the cooperatives,
we worked with ISTA for three weeks trying to develop a complete listing of
Phase I cooperatives as of March 31, 1983. We settled for the listing of 317
cooperatives that ISTA finally prepared for us. We found many errors in the
information presented by ISTA. Nevertheless, the listing of 317 cooperatives
and related information were the best data on cooperatives available at that
time and we used it as the basis for our audit work on Phase I.
Financial information from banks also was questionable. For example,
iriformation on loans, expenditures and repayments were frequently reported
from a branch bank to its home office by telephone or radio. Documents were
not always provided the home office to support the details of the transactions.
Also, production data for the period prior to the reform could not be obtained
for reformed units except by word of mouth from current cooperative members
who stated they had worked on the farm before the reform program.
The civil disturbances have created many unusual problems for the GOES
with respect to data collection on field activities. Nevertheless, there is
no way to verify accomplishments nor determine necessary actions required to
insure the success of the activities without the GOES's accumulating reason-
ably accurate data on these undertakings. AID's efforts have not been fully
successful in offsetting the lack of reliable program management data. Of the
17 cooperatives we visited, we found, for example, that no one from AID had
ever visited those farms. USAID Mission files showed that AID officials had
visited only one of the 41 cooperatives randomly selected for audit. There
are about 317 cooperatives in the program.
The Mission noted in their comments on the draft audit report that as of
June 1983, AID staff have visited 4 of the cooperatives included in our
audit. The Mission also reported that at the time of the audit, members of
its staff had visited 59 of the 317 cooperatives since the initiation of the
program in March 1980.
:
. 11 -
692
Unquestionably, the USAID/El Salvador staff works hard and consistently
gives its best efforts. The programs however, are massive, complicated and
many are located in very dangerous areas. Further, USAID/El Salvador has a
very small staff in comparison to the program in El Salvador. AID's continued
support of the agrarian reform program requires establishing some better means
of monitoring and analyzing what is happening in the field.
Cooperatives' Financial viability Is Questionable
From 1932 through June 1979, ISTA and its predecessor agencies reportedly
acquired about 82,165 hectares of land of which 61,650 hectares
distributed to 14,563 beneficiaries.
were
The pre-1980 acquired properties had previously been reported as coopera-
tives and ISTA referred to them as "traditional cooperatives," that is, a
farm owned by the cooperatives' members and operated by them as a private
enterprise activity to produce income and goods for their livelihood and pro-
fit. ISTA's current records and a visit to one of the units showed that most
of the units so classified are not cooperatives. The record showed that:
12
been broken
into
properties had
individuals;
small plots and assigned to
48
properties had been transferred to FINATA to be divided into small
plots and assigned to individuals;
3
properties had been classified as unusable for agricultural purposes;
32
properties had been organized into 21 production units on which ISTA
was attempting to develop working cooperatives;
8
properties had been organized into 4 working cooperatives; and
4
properties were unaccounted for.
ISTA has attempted to implement the new reform cooperatives along the same
lines they used for the pre-1980 units. That is, obtain the land, install the
campesinos who live on or around the land as cooperative members, and assist
them in developing the farms into self-sustaining operations.
We made a random sample of the Phase I and traditional cooperatives to (1)
see if they were in operation; (2) verify the use of AID funds, and (3) ident-
ify any problem areas affecting their operation, productivity or profitability
that had not previously been reported by AID. The sample was drawn from the
ISTA listings of 317 Phase I cooperatives and 107 "traditional cooperatives."
The sample selected totaled 41 cooperatives which were classed as shown
below. Due to security restrictions we were allowed to visit only 17 of the
cooperatives selected for audit.
- 12 -
693
Selected Visited
Phase I Cooperatives
35
16
(a) BFA provided financing
(19)
(7)
(b) Mixed-Banks provided financing
(16)
(9)
"Traditional Cooperatives"
Totals
6
41
1
17
SYS.ES
Distribution of Cooperatives in the Random Sample
No. of Phase
I Coops
Estimated No.
of Hectares
No. of Phase I
Coops in Sample
No. of
Coops
Visited
No. of
Hectares
in Coops Visited
Western El Salvador
Occidental
Central
87
78
63,666
62,799
9
9
7
9
6,333
4,008
Eastern El Salvador
Paracentral
71
Oriental
81
317
37,065
66,671
230, 201
9
35
0
0
16
10.341
The Phase I cooperatives appeared to have been structured without fully
considering the basic ingredients necessary for profit making productive en-
terprises. As a consequence, certain cooperatives have not been financially
viable undertakings.
The overall purpose of the agrarian reform program is to increase produc-
tion, income and employment. Under Phase I, the purpose is to establish
viable, self-sufficient, and participatory farm businesses.
Article 19 of Decree No. 153 provides that the allocation of land is to be
carried out taking into account a dynamic concept which will include property
size and quality of the soil in relation to productivity and income.
As Article 19 recognizes, the basis for any profit-making undertaking is
the relationship of capital, labor and management and their costs to market
prices. The Phase I cooperatives appear to have been formed without ISTA
having properly considered these requisites. Many Phase I cooperatives had
(1) massive capital debt, (2) no working capital, (3) large tracts of land
that were non-productive, (4) substantially larger labor forces than needed to
operate the units, and (5) weak management. This disequilibrium is faced with
- 13 -
694
the weakest market prices experienced by the agroindustry in recent history.
These problems alone, without considering the unstable civil and political
situation in El Salvador, may prevent most phase I cooperatives from becoming
financially viable enterprises. A financially viable enterprise produces
sufficient income to liquidate its current liabilities, pay its long-term
debts, satisfy its members' basic needs, , and generate revenues for
emergencies, replacements, and savings.
BFA and ISTA records on the cooperatives and our visits to 17 cooperatives
showed that many phase I cooperatives:
borrow production and investment funds at the beginning of
the planting seasons. These funds are used in large part to
pay themselves for their labor in cultivating their crops,
etc.
harvest and sell their produce for the best price they can
obtain.
receive insufficient income from their sales to repay the
funds they borrowed for production and investment purposes.
have no income to pay their other debts. These debts include
annual amortization charges for the property; interest ac-
crued on the debt for the property; production credits re-
ceived in 1980 (known as the emergency credit), and previous
production credits that have been refinanced.
resources
for emergencies, new
investment,
or
have no
savings.
The GOES's objectives are for the cooperatives to be able to liquidate
their debts, produce a reasonable living for their members and be self-
sustaining in the long run.
As the debt has mounted, cooperatives members have become more concerned
about their situation. Original expectations of improved economic and social
status are perceived by these members to be unachievable without some sort of
debt relief and reduction of operating costs.
Available financial data showed that many of the Phase I cooperatives had
been unable to repay even the production and investment credits they had bor-
rowed. Four classes of debt currently associated with the Phase I cooperatives
are referred to in this report.
1. The Agrarian Debt - This is the capital debt for the value (usually an
estimated value) of the land, real estate and other capital assets on
the land at the time the property was expropriated. This debt is
payable in equal annual installments over a 20-30 year period of time.
- 14 -
695
2.
Interest on the Agrarian Debt Interest on the agrarian debt is at
the rate of 9-1/2 percent annually on the outstanding balance.
3.
The 1980 Emergency Credit - During the March - September 1980 period,
when the expropriation process was taking place, ISTA provided credits
to the newly formed cooperatives on an emergency basis so they could
begin operations. These credits were frequently provided in cash.
Since 1980, the cooperatives' management and membership have changed
substantially and many of the cooperatives' current members do not
believe that they received the credits and therefore are not respon-
sible for repaying them.
4. Production and Investment Credits These are credits provided to the
cooperatives under normal business practices by BFA and mixed banks
for annual production and investment activities.
The above classes of debt are due in reverse order. Any income received
from operations is used first to pay the currently due production and invest-
ment credits. Any income remaining after paying those debts would be used to
pay on the 1980 emergency credits, most of which had been refinanced), then
the agrarian interest, and then the agrarian debt. Accordingly, when a coop-
erative does not have funds to pay its current production and investment cre-
cits, it also cannot make payments on any of its other debts.
Although BFA and ISTA reported that most cooperatives were repaying their
loans, many were merely paying off past debts with new borrowings. These
cooperatives.were not technically in default on their production and investment
credits but their debt was still outstanding.
The San Isidro cooperative is an example of the debt refinancing problem.
San Isidro had borrowed a total of $462,000 for production and investment
purposes since inception of the program. Of the $462,000, the cooperative had
repaid $72,000 of the principal. It is in arrears on a $125,000 repayment due
under this credit. However, they had previously refinaced over $50,000 of the
$125,000. Of the $265,000 outstanding but not due, $99,000 had been
refinanced.
Another example is the Santa Cruz Tazulath cooperative. This cooperative
was shown by the banks as being $40,000 in arrears on its production and in-
vestment credits. The cooperative's records showed that over $140,000 due on
previous production and investment credits had been refinanced. In addition,
this cooperative was over $62,000 in arrears on production credits obtained
outside the normal financing system.
The financial records of BFA, ISTA and the cooperatives also showed that
most cooperatives had not paid the 1980 emergency credits provided for the
1980 planting season. Most of the cooperatives had merely refinanced the
credits due. The El Refugio cooperative, for example, owed over $274,000 on
its 1980 emergency credits as of June 30, 1983, but this amount was technic-
ally not in arrears because it has been refinanced. In August 1983, the
At apasco cooperative showed an emergency credit debt of over $27,000, all of
which had been refinanced. The El Tatuano cooperative owed more than $36,000
that had been refinanced.
- 15
696
As of March 31, 1983, most Phase I cooperatives owed all the interest
accrued on their agrarian debt since the inception of the program in the Spring
of 1980. Only a few cooperatives had made payments on the principal of their
agrarian debt.
Of the 17 cooperatives we visited, one cooperative had made a payment of
interest to ISTA on their agrarian debt. That payment was less than the int-
erest due. ISTA had completed the required processes and issued titles to 27
of the approximate 317 Phase I cooperatives. Of the 27 Phase I cooperatives
that had received titles to their properties, only two had made some payments
to ISTA on the principal of their agrarian debt.
The debt of many Phase I cooperatives continues to increase annually. If
something is not done to stop this process, the cooperatives will be in such a
difficult financial situation that even the government banks may not be able
to provide them with production credits... Without the credits, most coopera-
tives would be unable to operate.
Our field trips to the cooperatives, reviews of their records on site and
discussions with cooperative members and officials of BFA and ISTA confirmed
that most cooperatives in Phase I were overwhelmed with debt. Few if any will
ever be able to repay the accumulated debts from their own resources.
An example of the debt problem is demonstrated by the financial status of
the La Labor cooperative. La Labor's financial statements for the year ended
March 31, 1983 showed $3.9 million as gross income from operations and $400,000
as a net loss from operations. This loss did not consider the agrarian debt
payments due plus interest and refinancing charges. The $400,000 loss from
operations amounts to about $200 per cooperative member. This is a signifi-
cant amount when compared with the per capita income in El Salvador of $540
annually.
The agrarian debt for la Labor was estimated by ISTA at $5 million. Annual
payments due on the capital debt were about $200,000 for a total of $600,000
due since inception of operations. . The accumulated interest due on the agra-
rian debt totaled about $1.8 million. This unpaid interest should have been
capitalized annually thereby increasing the amount due. In addition, La Labor
owed about $375,000 for the 1980 emergency credits that had been refinanced
and they had refinanced over $50,000 of production credits. (The La Labor
cooperative's debts total over $10 million.)
During our field work at La Labor, ISTA's Regional Director told us that
they have 11 traditional cooperatives and 87 Phase I cooperatives in his
region. Of those 98 cooperatives, he said that La Labor was the best in his
region in regards to potential and profitability.
Another example of the cooperatives' debt problems is the La Ceiba Phase I
cooperative. About 98 percent of the cooperatives' 299 hectares was non-pro-
ductive land. The estimated agrarian debt was about $114,000. Annual install-
ments on the land which after three years totaled over $17,000 had not been
.
- 16
-
697
paid. An additional amount due of more than $33,000 for interest on the agra-
rian debt had not been paid. Furthermore, this cooperative had to refinance
the 1980 emergency credits of $12,000 and production credits of
credits of more than
$10,000.
BFA credit agents required the members of La Ceiba to plant sugar cane on
their productive land instead of the usual corn crop in order to receive their
1983 crop year production credit. BFA insisted on this requirement because,
they said, La Ceiba would lose less money on sugar cane than they would on
corn.
The agrarian debt plus compounded interest at 9.5 percent has resulted in
a dramatic increase in debt of the cooperatives. If this process continues,
the debt could total about $2 billion by the year 2000.
oor
Prezi
4
11 As of September 1983, the total amounted to about $400,000,000.
- 17 -
w
34-045 0-84-45
698
For most of the Phase I cooperatives as now structured there is little
hope for becoming financially viable. The GOES believes that they do have a
few Phase I cooper- atives that may work as now structured.
The office for Integrated Development of Agrarian Reform Enterprises
(DIECRA), Ministry of Agriculture and Livestock (MAG) recently completed in
depth studies on 51 Phase I cooperatives. Based on its studies, DIECRA con-
cluded that (a) 9 of the cooperatives were viable operations; (b) 9 of the
cooperatives may become viable after 6 to 12 years of operation; and (c) 33 of
the cooperatives could not be made financially viable as structured. DI ECRA
pointed out, however, that their studies were based on the assumption that all
conditions surrounding operations of the cooperatives would be ideal.
Our review of Phase I cooperatives included four of those studied by
DI ECRA. We visited three of those four cooperatives. DI ECRA's studies on the
three cooperatives included in our review concluded that two could not be made
financially viable as structured and one of them may become viable after the
sixth year of operation. Our review confirmed that the two cooperatives could
not be made viable. We also agreed that the other cooperative may be viable
in the future. However, we are not sure that that cooperative can be made
viable without some debt forgiveness by the GOES.
There are several reasons for the poor performance of Phase I cooperatives.
In addition to the overriding debt problems, the quality of land and excessive
membership significantly affect the financial viability of these cooperatives.
Quality of Land
The poor quality of their land severely constrains the ability of most
Phase I cooperatives to become financially viable entities. Of the 17 cooper-
atives we visited, only three had mostly productive land that could be culti-
vated. Three other cooperatives had land that was mostly acceptable for cof-
fee trees. However, the remaining eleven cooperatives contained substantial
amounts of land that could not be made productive without unrealistic invest-
ments of capital. Overall, 43 percent of the land in the 17 cooperatives was
non-productive and most of the remaining land was of poor quality.
El Salvador has a total land area of 2,104,000 hectares 1!. The 1971
Census showed that a total of 1,451,894 hectares of land holdings were in
farms 21.
Much of the land in farms, however,
not suitable for
cultivation.
was
Approximately three-fourths of the country is mountainous with a wide range
of serious problems with respect to the land base. The good agricultural land
that does exist is mostly in the coastal plains of the southeast and the broad
valleys of the west central part of the country. Smaller areas of good quality
land are scattered throughout much of the country in the alluvial plains along
the many rivers. Some of the soils on the hills and mountainsides are good
quality but have special problems and limitations with respect to land use.
1/ National Geographic Institute: Atlas, 3rd edition, 1979 on El Salvador.
2/ According to AID's analysis of 1971 GOES Census.
• 18 -
699
The land resource in El Salvador was classified in 1974 by the Organization
of American States into the standard land capability classes. That
classification showed the following land base by capability class:
383,645 hectares in Classes I, II, and III. Land suitable for inten-
sive crops.
Good to moderate quality soils that could be mechanized
and many of which could be irrigated if water was available.
128,410 hectares in Class IV. Medium quality soils suitable for lim-
ited cultivation but subject to erosion. Most require erosion control
practices. Machine use limited by slope. Best for perennial crops.
385,000 hectares in Class VI 1/. Mostly very steep. Subject to
severe erosion, already heavily eroded or rocky. Not suitable for
intensive cropping. Adequate for perennial and tree crops, pasture
and forest. Some might be used... for cultivated crops on a limited
basis with the use of terracing, strip cropping, diversion ditches,
etc.
1
1,189,975 hectares in Classes V, VI, and VII 1/. Some of these (in
Class V) are in coastal plains and not subject to erosion but require
drainage, are subject to flooding, have a high water table or are too
shallow to bedrock. Others (in Classes VI and VII) are steep, eroded,
rocky, or have other limitations to the extent that bringing them into
cultivation is impractical and not economical. These lands are suited
for some forestry, pasture, and natural vegetation.
Lands in this class are not suitable
31,817 hectares in Class VII.
for any agricultural use. 21
USAID/El Salvador in its Country Development Strategy Statement dated
January 1979, presented data based on the GOES 1971 census showing that land
under agricultural production in El Salvador totales 932,716 hectares. That
amount was the sum of the agricultural production areas identified as (a)
temporary crops (488,436 hectares); (b) permanent crops (163,499 hectares);
(c) improved pastures (112,737 hectares); and (d) native pastures and wood-
lands (168,044 hectares). The total land under agricultural production in El
Salvador had remained basically constant for over 20 years as shown by the
1950, 1961 and 1971 censuses. The reason that the use of land for agricul-
tural production in El Salvador had remained at less than one million hectares
1/ Some of Class VI land is usable for agricultural productive crops such as
coffee trees due to its altitude, natural shade, etc. whereas Class VI
land under other situations is usable only for timber, natural vegetation,
etc.
2/ Total is 2,118,847. Difference of 14,847 hectares over accepted size of
El Salvador (2,104,000) is attributable to lands disputed with
Honduras.
- 19
700
as
over the long run is that the remaining land cannot economically be brought
into production. Furthermore, the Organization of American States,
discussed above, determined that only 897,055 hectares of land in El Salvador
was appropriate for agricultural production under USDA'S standard land
classification. Addition- ally, AID stated in their Janaury 1979 CDSS that
problems with remaining lands are such that bringing them into cultivation is
impractical and uneconomical.
In May 1980, however, USAID/El Salvador in its Agrarian Reform Sector
Strategy Paper reported that El Salvador had approximately 1,450,000 hectares
of land in farms. Of that farmland, about 662,000 hectares were in crops,
553,000 in pastures, and the balance in timber and other uses. El Salvador
may have about 1,450,000 hectares in farms but it has only about 932,000 hec-
tares of economically productive farmland that has normally been used for
agricultural production purposes. Accordingly, we assessed the land in the
Phase I cooperatives visited to determine whether it was productive. We found
that much of the land on most of the 17 cooperatives we visited was poor
quality land. . In fact, much of the land in the Phase I cooperatives that we
visited had never before been used for any agricultural purposes.
Based on the quality of land in the selected Phase I cooperatives we
visited, it is apparent that many of the Phase I cooperatives were created
from landholdings that included land other than agriculturally productive
land. It's also apparent that ISTA did not properly consider the size of the
farms and quality of the soil in relation to productivity and income in estab-
lishing cooperatives.
The data in the table below on the quality of land in the Phase I coopera-
tives are estimates. As previously discussed, accurate information on the
agrarian reform activities was extremely scarce. None of the cooperatives
visited had been surveyed by ISTA. Accordingly, neither ISTA nor the coopera-
tives knew the correct acreage or class(es) of their land.
However, many cooperatives had made plat maps of their farms showing pro-
ductive and nonproductive land areas, and the uses they were making of the
productive land. ISTA regional staff and co-managers on the farms had also
developed data on land use and production. We reviewed the cooperatives' plat
maps and land use data and compared them to ISTA'S field staff data on land
use and production. We then compared the cooperatives' and ISTA's data with
land classification maps prepared by the Organization of American States.
Based on these reviews, our observations, statements by cooperative members,
and opinions or estimates of BFA field representatives, we developed the data
presented in the following table. The estimates were conservative on the
quality of land in the cooperatives. Much of the land visited classed as
productive land probably would be assigned actual ratings of Class VI or
poorer.
- 20 -
701
Landholdings of Selected Cooperatives
KE C T A RES
Non-
Land
Area
Productive
Land
Productive
Land
Percentage of
Non-Productive
Land
Cooperative
1. La Labor
2306
1014
1292
44
2. La Ceiba
299
294
5
98
3. El Refugio
628
112
516
18
4. Buena Vista
122
7
115
6
5. Tacachico
526
152
374
29
6. El Tatuano
127
56
71
44
7. Rancho San Marcos
362
196
166
54
8. Sta. Cruz
Ta zulath
2482
1097
1385
44
9. Veracruz
478
450
28
94
10. Santa Magdalena
135
9
126
7
11. At apasco
274
56
218
20
12. El Zonte
851 1/-
13. La Concordia
126
22
104
17
14. Las Mercedes
164
5
159
3
15. San Isidro
1048
594
454
57
16. Los Mangos
561
98
463
17
17. San Francisco
Suchitoto
703
277
426
39
TOTALS
10.341
4.439
5,902
43
1/ This hacienda was listed as an ISTA "Traditional Cooperative". However, the
cooperative had been disbanded and the land distributed to individuals in
lots of from 6 to 37 hectares. We could not obtain a reasonable estimate on
the class of land involved. But, it appeared to be some of the poorest qual-
ity land visited. This land is not included in the totals.
- 21
702
The Mission commented that El Salvador is land poor in terms of both quan-
tity and quality of land, but the phase I farms are located on much of the
best land in El Salvador and many of these farms were profitable operations
comparable in production to any in the world.
At our request, the GOES prepared a map of El Salvador showing the loca-
tions of the 317 Phase I cooperatives. We compared that map with land classi-
fication maps prepared by the Organization of American States (OAS). Based on
that comparison, we estimated that over 75 percent of the Phase I cooperatives
are located in areas of predominantly Class VI, VII or VIII quality land.
The OAS land classification maps show that the good quality cultivable
land (Classes I, II, III and IV) in El Salvador is located in the west central
and southeast coastal areas. When we compared the OAS land classification map
with the GOES map showing the location of the 317 Phase I cooperatives, we
found that only about 20 percent of the cooperatives were located in the areas
containing the better lands. This estimate was corroborated by our visits to
selected cooperatives.
While our physical verification of land quality was limited to western El
Salvador, our comparison of the maps showed that most of the Phase I coopera-
tives in both western and eastern El Salvador are located in predominantly
Classes VI and VII land areas. (See sketch map below.)
Our random sample of 10 percent of the Phase I cooperatives in the west,
which contains 52 percent of the cooperatives and 55 percent of the land in
Phase I, provides a solid basis for projection purposes for cooperatives
located in the western half of country. This data, coupled with the informa-
tion developed from comparing the cooperatives' locations and land classifica-
tion maps strongly indicate that the finding on poor land quality in the west
applies equally to those cooperatives in the eastern part of El Salvador.
North
West
SAN
EasT
*SALGADOR
:
1.
Gepresents appro:iaste locations of cost of El Salvador's bester
quality lands classes I. II111 and ii). Abou: 20 percent of
the Pirase I cooperatives are located to these areas.
:.
About 75 percent of the lard in El Salvador is classed as Yi, Yli.
and Y!!! 0911ly. Abou! 8C percent of the Phase I cooperatives
are located in areas gredominantly of these classes of land.
- 22 -
703
Excessive Membership
Most Phase I cooperatives' memberships exceed the numbers needed to operate
the farms on an efficient and effective basis.
Decree No. 153 provided that Phase I cooperative members would be exclu-
sively campesinos who did not own land or who owned too little land to fulfill
their basic needs. Preference was to be given to those campesinos who earned
all or part of their income from the property prior to reform. Special legis-
lation was to be issued to regulate selection criteria. But that legislation
was not issued by the time the cooperatives were organized.
All the Phase I cooperatives visited during this audit had memberships
larger than the number of persons reportedly employed on the land prior to the
reform 1/. The larger memberships may serve short-term social and political
purposes, but they compound the cooperatives' financial difficulties.
The Phase I cooperative La Labor demonstrates the membership difficulties.
The pre-reform owner of La Labor had maintained for years about 2,000 full-time
employees. These employees lived on and operated the farm. The owner also
owned two other farms in the vicinity of La Labor. The La Labor "employees"
also operated both of the other farms. La Labor contains about 2,300 hectares
of land. The total land in the other two farms was about 2,800 hectares. The
total land in the three farms that belonged to the previous owner was about
5,100 hectares.
All 2,000 employees lived on the La Labor farm so they could have the
advantages of centralized services, e.g., schools, medical, social, housing,
and water.
Under the agrarian reform program, the La Labor farm was organized into a
Phase I cooperative. The La Labor cooperative now has about 2,100 members.
These 2,100 members live on and operate the 2,300 hectare La Labor farm and
there is not sufficient work for that number of people. Most of the members
work only 2 or 3 days a week. Even though the membership has reduced their
income, the farm is still not financially viable and cannot support that number
of people.
Another example of the membership problem is the Rancho San Marcos Cooper-
ative. This cooperative contains about 360 hectares of land. The land had
previously been rented by a meat packing plant and had been used only as a
holding area for cattle prior to slaughter. The farm contained about 160 hec-
tares of improved pasture and 200 hectares of non-productive land. The opera-
tion previously had eleven employees. Now that the farm has been formed into
a Phase I cooperative it has 56 members. They had converted 40 hectares of
pasture land to cultivation and had 115 head of dairy cattle. BFA advised us
1/ Membership in the cooperatives refers to individuals living and working on
the property. The "official cooperative membership of record" may be con-
siderably smaller in some units.
- 23
-
704
that this is the maximum number of cattle the land will support. However, the
production was insufficient to pay for operating costs with a labor force of
56 members.
ISTA recently completed a study of the membership of 12 selected Phase I
cooperatives. That study showed that membership in the cooperatives was more
than twice the pre-reform number.
Other Areas of concern
Several other areas were frequently mentioned by AID, GOES, and others as
problems affecting the Phase I cooperatives' operations. Some of those prob-
lem areas were:
(1) lack of capable managers;
(2) lack of technical assistance;
(3) state of the worldwide economy;
(4) low productivity;
(5) the civil war; and
(6) lack of institutional capability.
The above problem areas probably adversely affect the operation and profit-
ability of the Phase I cooperatives. For example, we noted that 40 of the 317
Phase I cooperatives reportedly had been abandoned due to the civil distur-
bances. Nevertheless, the land will only produce so much and support so many
people without regard to these additional reported problems. Until the land
productivity, capital investment, debt structure and labor force are brought
into some kind of equilibrium, efforts to deal with these additional problem
areas will not be successful in making most cooperatives viable.
USAID/El Salvador officials agree that the main problem with the Phase I
cooperatives is their weak financial condition. They also agree that the
agrarian debt is one of the major reasons for the cooperatives' lack of finan-
cial viability. USAID/El Salvador officials, however, disagree with our posi-
tion that the poor quality of land is one of the main reasons for the Phase I
cooperatives' poor financial performance. The Mission believes that the coop-
eratives have good quality land, and that their yields are high. The Mission
is of the opinion that the lack of adequate management is the main reason for
the cooperatives' poor financial performance.
Phase II
Phase
II of
of the agrarian reform program has not
been
implemented.
- 24 -
705
Phase III
Land to the Tiller
Phase III, which authorized the expropriation and sale of land to renters,
has begun to achieve results with over 25,000 applicants receiving and tilling
land purchased under this program.
By the summer of 1983, over 63,000 applications had been filed by about
50,000 individuals for land under Phase III authority. Most of the applica-
tions were approved. Recipients who were working the land were in a position
to substantially improve their economic and social positions. Thus, these
recipients had a vested interest in the program continuing and in the govern-
ment that provided the program.
Yet, more needs to be done because the negative side of the program shows
that less than one-half (about 50,000 out of an estimated 117,000) of the in-
dividuals eligible for property under Phase III had filed applications to pur-
chase the land. And about one-third of the applications filed did not result
in the applicants working the land. They were not working the land because
they had been threatened, evicted or had disappeared.
Phase III of the agrarian reform program was initiated on April 28, 1980
by Decree No. 207. Sections of that Decree follow:
"The purpose of this law is that the State acquire land
holdings which are not being directly exploited by their
owners, in order to assign them to the persons mentioned
herein, who from now on shall have preferential rights to
acquire said land holdings and become their rightful owners.
Therefore, landholdings or portions of same appropriate
for agricultural exploitation and regardless of their size
-- which at the present time are being exploited by simple
lessees or by persons holding lease contracts with an op-
tion-to-purchase clause, sharecroppers, contract purchasers
with ownership rights over the property, or other persons
who work the land directly through payment either in
cash or in goods are hereby expropriated.
"Beneficiaries who, in accordance with this law, have been
assigned land plots by ISTA 1/, shall be entitled to own
a maximum of seven hectares.
17
Decree No. 525 of December 11, 1980, created FINATA and
provided that FINATA replace ISTA as the implementing
agency for Decree No. 207.
- 25-4
706
"When expropriated landholdings or land plots exceeds seven
hectares, the excess land shall continue to be ISTA's pro-
perty, who should respect the rights of the lessee or other
person working the land during the current agricultural
year, and assign it to other beneficiaries after the end of
the harvest season. This seven hectare limit shall not be
applied to persons holding a lease contract with an option-
to-purchase clause, or to contract purchaser with ownership
rights who has acquired such property or land plot through
legal instrument, before the present
became
effective".
a
law
The GOES in 1980 estimated that 160,000 persons were eligible to receive
land under Decree No. 207 authority. That estimate has been revised downwards
several times and in July 1983 stood at 117,000 persons. The implementation
period of the program under Phase III has been extended three times and now
will expire on June 30, 1984. As of March 31, 1983, about 50,000 individuals
had filed 63,496 applications requesting approval to purchase land in accord-
ance with Phase III authority. 1)
To evaluate the effectiveness of Phase III we decided to interview indi-
viduals who participated in the program. The most reliable universe data on
the program was the application for purchase of land under Phase III authority
maintained by FINATA. Accordingly, to determine the results of the applica-
tions filed and the status of the individuals who filed the applications, we
selected and reviewed a random sample of 149 applications from a computer
listing of the total of 63,496. We visited or attempted to visit and interview
the individuals who filed the 149 applications. Individuals we could not
locate in secure areas were officially summoned by the government so we could
interview them. If the individuals did not answer the summons, FINATA offia
cially searched for them and provided a status on the individuals. In most
cases where the applicants did not answer the summons, FINATA found that they
no longer lived in the area and their whereabouts and condition were unknown.
Based on the results of this sample, we have estimated that of the 63,496
applications filed:
About 15,000 or 23 percent of the applications were for lands that at
the time of audit were inaccessible due to security reasons,
About 25,000 or 39 percent of the applications resulted in the appli-
cants receiving and using the land,
About 20,000 or 31 percent of the applications had not resulted in the
applicants acquiring and having use of the land. This number includes
applications that were not approved, applicants who no longer lived in
the area, applicants who had been evicted, etc.
1/ FINATA reported that as of December 25, 1983, they had received 75,967
applications from 60,733 individuals. FINATA also reported that by the
same date they had issued 55,287 provisional and 5,456 definitive titles
under Phase III.
- 26
707
About 6,000 or 9 percent of the applications had resulted in the
applicants being illegally evicted and not reinstated (this amount is
included in the 31 percent above).
The sample size ? in this review was small and therefore the sampling
error for an estimate of 31 percent is plus or minus 7 percent at the 95 per-
cent confidence level. That is, the estimate of 31 percent has a 95 confid-
ence interval of about 24-38 percent. Accordingly, the sample gives a 95
percent confidence level that the maximum deviation downward from our actual
finding of 31 percent (20,000) would be 24 percent (15,000), and the maxium
deviation upward from the sample's 31 percent is 38 percent (25,000). Simi-
larly, the estimate of 9 percent from the sample has a 95 percent confidence
interval of 5-13.
However, the actual number of the Phase III recipients not working the
land and who had been evicted probably is greater than that shown by our esti-
mate because there is a high probability that land owners and guerrillas alike
in the insecure areas are not enforcing the El Salvadoran Government's Decree
No. 207 (Phase III).
.
1/ In their comments on the draft report, the Mission referred to a CPA firm's
study made for the auditors. We had reviewed that CPA firm's study and
dismissed it as being statistically invalid because the CPA firm deviated
from the pre-established scientific sample.
• 27 -
708
VI.
REVIEW OF THE AGRICULTURAL DEVELOPMENT BANK (BFA)
BFA was founded in 1973 for the purpose of increasing the flow of credit
to the agricultural sector, particularly to the small farmers who previously
had no access to institutional sources of credit at competitive interest rates.
Until the agrarian reform was initiated in 1980,' the BFA performed these func-
tions well. The capital position of the bank was strong.
With the initiation of agrarian reform, demands for credit expanded enor-
mously. From December 1979 to September 1982, BFA's loan portfolio increased
from $56 million to $176.4 million, over a threefold increase. This increase
in lending activities strained the Bank's resources causing high operating
costs, low rates of recuperation, and inadequate loan supervision. As a re-
sult, BFA's financial condition was precarious. The delivery and supervision
of agricultural credit to the Bank's agrarian reform clients was less than
satisfactory. It appears that the Bank's financial position improved during
1983 due to the infusion of AID funds, improved rates of loan collections, and
actions by the GOES. The Bank's financial position, however, still.is a matter
of concern.
Through March 31, 1983, $29 million of AID funds had been authorized for
use by the BFA. BFA transactions and procedures disclosed several problems
impeding the effective delivery and administration of credit to agrarian
reform beneficiaries. In addition, $1.4 million of AID funds were used for
unauthorized purposes.
Background to Credit Component
Before the agrarian reform program, few beneficiaries either had access
to or had availed themselves of institutional credit. Phase I beneficiaries
were primarily wage laborers on the large haciendas. The previous owners of
these haciendas received production loans from the commercial banking system.
Longer term funding was obtained most often from either the haciendas' own
capital resources or from external loans.
A Decree No. 207 (Phase III) beneficiary who rented his land had access
to BFA credit through a note provided by the owner of the rental property cer-
tifying the type of crop produced and the total acreage planted. As a result
of agrarian reform, affected Phase I property owners lost access to tradi-
tional credit channels and more Decree No. 207 beneficiaries were expected to
use institutional credit sources.
When Decree No. 153 was implemented, the GOES' primary concern was to
maintain production from the affected properties. ISTA was assigned respon-
sibility for organizing beneficiaries into functioning production units and
for supplying the units with sufficient production credits to continue farm
operations. During the start-up phase of the program (March September
1980), $47.2 million in emergency credits were disbursed by BFA through ISTA
to the Phase I beneficiaries.
In order to facilitate the continuous availability of credit, the GOES in
August 1980 divided responsibility for providing credit between the various
28 -
709
banking institutions. BFA was assigned 92 of the Phase I cooperative farms
(currently 111) and Phase III recipients. AID in September 1980 authorized
BFA an initial $9.5 million in loan funds to be disbursed to the cooperatives
through a special line of credit, and an initial $500,000 in grant funds to
provide technical assistance relevant to BFA's new responsibilities. Later,
an additional $3.3 million in loan funds for credit was authorized.
In response to the increased demand for credit resulting from the reform,
AID authorized an additional $17 million in loan funds during 1981: (a) $16.2
million for the creation of an integral line of credit to replace the estab-
lished special line of credit; (b) $600,000 for institutional building support
in the form of additional technical assistance and equipment; and (c) $200,000
for an Integrated Pest Management Program.
Credit Component Results
Much progress has been made in delivering and administering credit to
Phase I and Phase III beneficiaries. The $29 million of AID loan funds
authorized for credit had been disbursed by BFA to agrarian reform benefi-
ciaries. Approximately 76 percent of the funds were used for production cre-
dit and 24 percent for investment credit. About 50 percent of the credit was
used to finance agricultural inputs for producing basic food grains, i.e.,
corn, rice, beans and sorghum. The longer term credit was used to purchase
livestock or for improving farm infrastructures. The remainder financed the
production of some of the major export crops.
Although much progress had been attained, the administration and delivery
of credit and related services to agrarian reform beneficiaries continues to
be beset by technical and administrative problems that have limited the effec-
tive use of AID funds.
Most of the problems affecting the delivery of credit can be attributed to
insufficient institutional capability.
Insufficient Institutional Capability
The Agricultural Development Bank of El Salvador (BFA) has not been able
to cope with the added burden and responsibilities created by agrarian reform.
BFA was to provide adequate and timely credit to Phase I cooperative farms and
Phase III beneficiaries in order to facilitate achievement of program goals of
improving the economic and social well-being of the agrarian reform benefi-
ciaries. Although BFA has been reorganized, the restructuring process is not
complete. As a result, BFA has not been able to effectively carry out its
assigned role. Three major problems affect the Bank's operation:
High operating costs;
1
Poor rate of loan recuperation; and
1
Weak fiscal, accounting and credit management controls.
- 29 -
710
High Operating costs
Since the start of the agrarian reform, BFA's administrative costs have
increased by about 43 percent, from $6.2 million to $8.8 million. Financial
costs have risen at an even faster rate, about 250 percent, from $3 million to
$10.6 million for the same period.
BFA finances its operations primarily from earnings generated by its two
principal activities, banking and commercial sales of agricultural inputs. in
order to meet the increased demand for credit, BFA was forced to increase its
use of high cost Central Bank (BCR) discount lines. In 1978, BFA financed 42
percent of its loan portfolio by borrowing from BCR. By 1981, that percentage
had increased to 67 percent. The cost of short-term borrowing increased from
$1.1 million in 1978 to $10.6 million in 1981, a ninefold increase. During
the same period, BFA's income from interest earnings grew by slightly more
than twofold. As a consequence of higher operating costs, both financial and
administrative, net losses from banking operations increased from $1.5 million
in 1978 to $3.5 million in 1981.
In spite of the progress attained to date, BFA's current financial condi-
tion continues to be weak and vulnerable. A lot more needs to be done in
order to enhance the Bank's financial viability. Foremost, BFA's banking
operation must become cost efficient.
Loan Recuperation
BFA has not been able to establish and implement an effective management
and reporting system for its outstanding loans. Thus, delinquent and uncci-
lectible loans present BFA with serious financial management problems which
substantially contribute to higher operating costs and overstatement of the
Bank's financial condition.
BFA's loan recuperation has been poor. Progress has been made toward
improving the rate of loan recuperation, which in 1980 stood at 40 percent.
But the projected rate of 76 percent for the crop year 1983/84, even if
attained, will be too low to help assure future financial stability.
BFA does not have a write-off policy and its uncollectible debt is listed
on the books as simply overdue. For example, as of September 30, 1982, of an
outstanding balance of $128.7 million, $22.9 million, or about 18 percent was
more than 360 days overdue. This practice results in an overstatement of the
Bank's equity capital because some of these loans are uncollectible and are
really not assets of the Bank. An independent analysis of BFA concluded that
if BFA's balance sheet was adjusted to reflect the overdue accounts, equity
.capital would be reduced by $48.4 million. The rate of loan recuperation must
be raised if BFA's operations are to be improved.
- 30 -
711
Management Controls
BFA's internal management policies and the system of accounting and inter-
nal controls have not been adequate to meet the additional responsibilities of
the agrarian reform program. As a result, BFA's financial condition has
suffered and effective project implementation has been impaired.
BFA lacked an effective and uniform system of accounting and internal con-
trols. Posting to books was not current; accounts were not timely reconciled;
and there were serious bottlenecks affecting the flow and analysis of account-
ing data. As a result, BFA's financial position and the results of its opera-
tions could not be clearly determined. For example, although all AID-provided
funds had been disbursed, BFA's Accounting Division was unable to provide us
in October 1983 with a financial statement of AID funds as of the cut-off date
of our report, March 31, 1983. Instead, we were given a qualified statement
for December 31, 1982. The reasons given to us for not having the data readily
available was that BFA was behind in its posting and the accounting division
was still trying to review and reconcile the data received from branch offices
and its data processing division.
BFA's system of internal controls does not ensure adequate use and account-
ability of resources.
Due to the dramatic increase in business, BFA's system of internal con-
trols had become ineffective. As a result, the review of loan data from
branch offices was inadequate and administrative bottlenecks had developed
which affected the timely analysis and supervision of activities.
We found little coordination for the review and analysis of data submitted
by BFA branch offices. Revisions were made by the various BFA headquarters
divisions without the proper adjustments and reconciliation. In some in-
stances, each division had a separate set of figures. For example, during our
review of AID funded subloans, we were unable to reconcile the data furnished
to us by the AID coordinating office, the branch offices or the accounting
division.
This lack of adequate management control has prevented BFA from exercising
more effective and timely control over the use of its resources.
Data Processing
BFA's data processing system was obsolete and produced such untimely and
inaccurate results that it had no management utility. A recent study of BFA'S
information processing requirements conducted by a computer expert found,
among other things, that the BFA system had (1) limited accessible memory; (2)
cumbersome input/output procedures; and (3) interactive programming
capability.
no
- 37 -
712
was
a
a
The consultant's report reviewed by AID which agreed with the
consultant's recommendations to procure and install new System. As
result, AID funds were set aside to conduct a thorough systems analysis, to
procure and install the new computer system and to provide for the training of
operators and programmers. Notwithstanding, the availability of funds to do
the system analysis, little progress had been made to identify and contract
with technical personnel. We were unable to clearly establish the status of
the procurement of the data processing system.
Unauthorized Use of AID Funds
Approximately $1.4 million of AID funds were used by BFA for unauthorized
purposes.
Under the terms of the agreement between AID and the GOES, loan funds
provided to BFA must be used for production related activities incurred after
June 28, 1980.
Proceeds from AID funded subloans, however, were used to liquidate a
portion of the emergency credits granted to some cooperatives at the start of
the agrarian reform program. Bank officials said that the decision to use AID
funds to liquidate portions of the emergency credit was made in light of the
severe liquidity crisis that BFA was experiencing at the time as a result of
the start-up demands of the agrarian reform program.
Records related to 44 cooperatives showed that $1.356 million of the
proceeds from the first AID funded subloans were used to refinance portions of
the emergency credit instead of being used for production related activities.
Although we understand the reasons that prompted BFA in their decision on the
initial use of AID funds, that use was specifically unallowable by terms of
the loan agreement.
The pertinent AID agreement specifically limited payments to activities
initiated
on
or after June 28, 1980. Accordingly, we recommended that
USAID/El Salvador recover the AID funds which were used to refinance ISTA
emergency credits provided to Phase I cooperatives before June 28, 1980.
Recommendation No. 1
USAID/El Salvador recover $1,356,056 used by BFA for
unauthorized purposes.
- 32 -
713
Financial Viability of BFA and its Cooperatives
The financial condition of BFA is inextricably linked to the debt struc-
ture of its agrarian reform beneficiaries, particularly the Phase I coopera-
tives and the ability of these farm operations to generate sufficient revenue
to repay their debts and to provide income for their members. Most coopera-
tives are not financially viable operations and, therefore, don't generate
sufficient revenues to pay their debts to BFA. BFA must depend on payments
from these cooperatives to ensure its own financial viability.
The majority of the Phase I cooperatives carry four kinds of debts:
1.
Agrarian reform debt, which for all Phase I cooperatives is estimated
to be $300 million in compensation to the former owners for the value
of land, buildings, equipment and improvements. The payment schedule
for these mortgages is 20 to 30 years, and the debt bears interest
charges of 9.5 percent per annum. Only meager payments have been made
on this debt by a few cooperatives.
2.
The ISTA/BFA portfolio or emergency credit, totaling $10.4 million for
BFA cooperatives. These credits have been controversial for many
cooperatives. As a result, repayments have been limited even when
cooperatives had the funds to pay.
3. Short-term production credit, Demand of BFA'S cooperatives for
short-term production credit for the 1983/1984 crop year was expected
to reach $23.2 million. Many cooperatives have experienced
difficulties in repaying their production credit. The unpaid
production credits oftentimes were refinanced thereby increasing the
debt and leaving the cooperatives little or no capability for further
borrowing.
4. Other credits from outside the financial system, such as savings de-
posits by members or purchases financed directly by suppliers or agri-
business firms. Because of the lack of records, the amount of this
debt could not be estimated.
The effect of the debt burden is demonstrated by the projected credit and
revenue figures for the cooperatives assigned to BFA for the 1983/84 crop
year. BFA estimates that these cooperatives will produce a harvest valued at
approximately $25.7 million. This harvest, combined with residual previous
year's export crops in storage and valued at $2.1 million, will provide gross
income of $27.8 million. Production and investment credit debt for the year
was estimated to be $23.2 million resulting in a projected gross profit of
$4.6 million, which is to be used to reduce the outstanding production and
investment debt of $16.4 million, carried over from the previous years. Thus,
even if the projected excess revenues could be realized, BFA cooperatives
would have at the end of the 1983/1984 crop year, outstanding production and
investment credit debts of about $71.8 million. It should be pointed out that
BFA projections did not take into consideration expenditures resulting from
other operating costs; interest and principal payments due on the agrarian
debt and other debts incurred outside the financial system.
34-045 OM-84-46
- 33
714
A major problem for the cooperatives is the lack of effective management
and record keeping which prevents the farms from realizing better returns on
their resources. Complicating the repayment problem are depressed prices for
their commodities and the civil strife being experienced in the country.
Finally, the technical assistance and training so important for increased
production and income have not been forthcoming from the responsible GOES
agencies.
The results of accumulated overdue debt are threefold: (1) financial
institutions (mixed banks) are reluctant to continue granting credit to levels
required by the cooperatives; soon most of the cooperatives may be assigned to
BFA, (2) it is becoming increasingly difficult for members to see the day in
which they will be making profits and enjoying the benefits of land ownership,
and (3) BFA's financial condition will continue to deteriorate due to the high
rate of uncollectible loans and continued high operating costs.
The emergency credits (ISTA/BFA portfolio), for example, appears to be a
controversial matter for most of the cooperatives. Many cooperatives received
emergency credits at the start of the program. Unfortunately, neither ISTA,
BFA or the cooperatives had a system of adequate controls and loan supervi-
sion. There have been accusations of inefficiency or wrongdoing and allega-
tions that many cooperatives never received all of the emergency funds loaned
to them. Thus, many cooperatives refused to repay the loans even when they
had available funds. In some other instances, natural disasters such as the
drought and floods of 1982, or civil disasters such as the cases where
cooperatives' members had to leave their hands due to the civil strife had
contributed to the cooperatives' precarious financial condition.
Un able to pay for the production credits, cooperatives refinanced these
outstanding debts in order to secure credit for the next crop season. The
added debt not only increased the financial burden, but it limited the cooper-
atives abilities to obtain medium and long-term credit.
There is concern among GOES officials about BFA's financial viability.
BFA is an agricultural development bank mandated to service credit needs of a
clientele that consists of high risk; marginal, and small producers. Servicing
a clientele of that nature requires considerably more supervision than the
clientele of commercial banks. Commercial banks enjoy much more latitude in
selecting clients and the type of activities they elect to finance. This
servicing has resulted in expensive operating costs and a high rate of delin-
quent and uncollectible loans which have presented BFA with serious financial
management problems since the start of the agrarian reform program.
For example, the administrative cost of managing each loan in 1981 was
$195; this compares with a cost of $126 in 1979. The interest spread between
what BFA receives from its lending operations and what the bank pays for de-
posits, funds, etc., was a negative 1 percent for 1981. The spread between
what the bank receives from its lending operations (average 6 percent) and
BFA's total cost (average 11 percent) was a negative 5 percent.
- 34 -
715
A consultant's review of BFA estimated that 33 percent of the loan port-
folio was uncollectible. In addition, about 20 percent of the loans clas-
sified as non-delinquent had hidden delinquencies, i.e., loans that were par-
tially delinquent but classified by BFA as current.
In sum, the increase in business resulting from the 'agrarian reform has
put BFA in a weak and vulnerable financial position.
The need to complete the Bank's restructuring process and the necessity to
bring the Bank's operation to an acceptable level of efficiency and cost
effectiveness cannot be overemphasized. It must be done. Although BFA has
made some progress in improving its financial position and reducing its oper-
ating costs, a lot more needs to be done if BFA is to survive as one of the
GOES's main vehicles to support the agrarian reform program.
In their comments on the draft audit report, USAID/E1 Salvador agreed that
the agrarian reform undertakings have overtaxed BFA's resources, weakened its
capital structure, and brokendown its internal control system. However, the
Mission claimed that these problems improved significantly in 1983 based on
some unidentified sources financial projections. They also expressed concern
that the draft audit report did not adequately present the progress attained
in overcoming the problems.
We agree that the USAID has provided substantial assistance to BFA and
that the Bank would have been in much worse condition without the assistance
provided. AID assistance should further improve the Bank's operations and
thereby, in time, its capital position. However, since BFA had not been able
to close its books for calendar year 1982, and, as of October 1983, was still
trying to establish and identify its delinquent accounts for the period from
1980 to date, we cannot place much credence in financial projections for
calendar year 1983.
In the Mission's opinion, the BFA's financial condition to date is stronger
than it was prior to the inception of the agrarian reform program. To support
its opinion, the Mission submitted three tables with condensed financial data
for the period 1978 through October 1983. We were unable to ascertain the
reliability of the data submitted because it was too condensed, and its source
unknown. However, we noted considerable difference with audited and adjusted
data available at BFA and with the results of the evaluation made by AID con-
sultants. For example, according to the Mission's estimates, BFA losses from
banking operations for 1982 were only $2.8 million. This drastically con-
trasts with AID'S consultant's estimated loss of $10.2 million.
- 35 -
716
VII.
COMPLIANCE WITH FUNDING RESTRICTIONS
AID has developed an unusual and complicated system to provide the GOES
approval for their use of Economic Support Fund generated local currency. This
process, however, does not appear to violate Section 730 of the Foreign Assis-
tance Act. ISTA, on the other hand, contrary to agreements with AID, has used
$2 million from P.L. 480 generated local currency for payment of compensation
to previous owners of expropriated properties.
The Foreign Assistance Act of 1967 as amended by the International Security
and Development cooperation Act of 1981 restricted the use of AID assistance
to El Salvador. Section 730 of the Act (P.L. 97-113) commonly referred to as
the Helms Amendment;
required that none of the funds authorized to be appro-
priated by this Act may be made available for the provision
of assistance to El Salvador for the purpose of planning
for compensation, or for the purpose of compensation, for
confiscation, nationalization, acquisition, or expropria-
tion of any agricultural or banking enterprise, or of the
properties or stock shares which may be pertaining thereto.
AID and the GOES have entered into an Economic Support Fund Grant Agree-
ment, Memoranda of Understanding and several amendments to each of the docu-
ments. Simply expressed, these agreements say that the GOES will create a
special permanent fund from GOES resources to be used exclusively for paying
compensation to those affected by the agrarian reform program and AID will
provide the GOES over $200 million in Economic Support Funds. The Economic
Support Funds will be used to finance imports from the U.S. for the GOES and
the local currency generated from those funds will be used to support the
budget of the GOES. The local currency funds are commingled in the central
bank accounts; are used to provide general support of the GOES budget; and,
are not traceable to specific uses.
The use of Economic Support Funds to support the GOES budget if they will
in turn pay compensation to previous land owners from other funding sources
appears technically proper and not in violation of the Helms Amendment.
USAID/El Salvador employed a Salvadoran Certified Public Accounting firm
to make financial reviews of selected AID funding. As a result of one of
those reviews, the firm reported in February 1983 that ISTA has used $2
million to pay compensation for property acquired under the agrarian reform
program.
The funding source for the $2 million used for compensation was from P.L.
480 generated local currency. Thus, the use of these funds to pay compensa-
tion did not violate the Helms Amendment which applies to funds appropriated
for the Foreign Assistance Act. However, the use of the funds was in viola-
tion of the Project Agreement between AID and the GOES. Accordingly, USAID/E1
Salvador had taken action to recover the funds used to pay compensation. The
Mission reported that $1 million of the funds had been recovered and the re-
mainder should be returned in the near future.
- 36 -
717
APPENDIX A
LIST OF REPORT RECIPIENTS
No of Copies
1
Assistant Administrator Bureau for Latin America and the
Caribbean (AA/LAC)
LAC/CAP
LA/CAF/E
Mission Director - USAID/E1 Salvador
Director - Office of Legislative Affairs (LEG)
Assistant to the Administrator for Management (AA/M)
Office of Financial Management (M/FM/ASD)
General Counsel (GC)
GC/LAC
Director Programs Operations Staff (LAC/DP/PO)
Director - OPA
PPC/E/DIU
S&T/AGR
FPC/E
Oifice of the Inspector General (IG/W)
IG/PPP
IG/EMS
AIG/II
RIG/A/W
RIG/A/Dakar
RIG/A/Cairo
RIG/A/Manila
RIG/A/Karachi
RIG/A/Nairobi
RIG/A/NE, New Delhi Residency
RIG/A/LA, Panama Residency
GAO, Latin America Branch, Panama
NNO) ل م در) - هد با N N - - -
1
2
12
1
i
1
1
1
1
1
1
1
1
-
- 37 -
718
1
!
January 26, 1984
AID MANAGEMENT
RESPONSE TO INSPECTOR GENERAL'S AUDIT OF
EL SALVADOR
AGRARIAN REFORM
Executive Summary
AID management is compelled to respond to the foregoing Audit
Report of the AID Inspector General for several reasons:
1.
The Audit, for reasons that are not clear, does not give
adequate recognition to the importance of El Salvador's
Agrarian Reform in the political, economic and social
setting in which it was initiated and has since been
carried out. The Report does not attempt to appraise the
Reform, its progress and problems, in this all-important
perspective. Little recognition is given to the fact that
this Reform marks a major departure from past inequities in
Salvadoran society and makes a fundamental change in the
lives of campesinos. A vivid example of their support was
when thousands of campesinos turned out to demonstrate for
the third extension of Phase III.
2.
Instead, the Audit approaches the Reform with a very narrow
focus. For example, the Audit frequently alludes to and
laments the lack of baseline data, quantifiable objectives
or implementation planning underlying the initiation of the
Reform. It is true that there was little planning done
prior to this Reform but for reasons that are totally
understandable and verifiable. In early 1980, immediate
initiation of the Reform became a political imperative to
help prevent political collapse, strike a blow to the Left
and help prevent radicalization of the rural population.
These were the immediate objectives of the Reform. They
were accomplished and in these terms the Reform has been an
undisputed success. This should have been apparent to the
Auditors, and would have been had they chosen to look at it
in its broader political, economic and social perspective,
3.
an
Apparently, the auditors became preoccupied with looking
only at accomplishment data that was "auditable" and
"verfiable. This resulted in a narrow, incomplete and in
some cases inaccurate portrayal of the Agrarian Reform
program. For example, missing from the audit is data on
assessment of suc! implementation elements as forming the
cooperatives, adjudicating claims, determining and making
compensation, issuing titles, training cooperatives
managers and assuring a flow of support services and
production inputs, etc. The approach taken by the Auditors
is useful in verifying proper use of funds but is not
useful for assessing the Reform in its total dimensions.
719
-2-
4.
We are also at a loss to explain why any audit or
assessment would not have addressed the subject of
production and productivity, which has been positive, and
which over the long haul are the key indicators of the
economic impact of the reform.
5.
We are perplexed about the Auditors' refusal to incorporate
any of USAID/El Salvador's extensive comments and
information regarding the above and other areas covered and
not covered by the Report. Our view is that the Mission's
comments contained much solid information that would have
made the Report a more comprehensive and accurate Report.
We are including, therefore, the more relevant and
important portions of USAID/El Salvador's comments.
6.
Finally, we are distressed to find that, after the Auditors
had in their earlier draft characterized one data sample as
not representing "valid statistical results for projection
purposes," the same data in the final report was
characterized as having a "95% confidence level."
Moreover, In using this data, the audit greatly
underestimates the accomplishment of the Agrarian Reform
program, For example, the Report indicates that only 39%
of applicants had received and were using their land when,
in fact, this data would show that 75% were farming their
own land.
For these reasons, AID Management believes it has a
responsibility to correct these deficiences and give the
interested reader a fuller and more accurate view of progress
and problems of El Salvador's Agrarian Reform. We would also
refer the reader to Report On The Situation In El Salvador,
State Department, May 16, 1984; Certification on Agrarian
Reform required in the 1984 FY second continuing resolution,
State Department, January 26, 1984.
End Summary
IG Audit Overlooks The Political and Economic Context of
Agrarian Reform
A serious shortcoming of the Audit is that it virtually ignores
the political and economic context in which the land reform
program was developed. The immediate objective of the agrarian
reform program was a political one, and it was hastily designed
and initiated to respond to an increasing social upheaval and
the very real possibility of general civil conflict. Farmland
traditionally in El Salvador was concentrated in the hands of a
small number of landowners. In 1979, for example, over 40% of
all land was owned by less than 1% of the population. Also,
over 70% of all farmers were sharecroppers or laborers on large
Agrarian reform was, therefore, designed to help the
farms.
720
-3-
2.3 million rural Salvadorans participate in El Salvador's
agricultural economy. Campesino organizations and unions
accepted agrarian reform and have worked peacefully within the
system to make the reform work. The broad popular
participation in the March, 1982 elections is a further
indication that the reforms, particularly the Agrarian Reform
Program, have been successful in stabilizing the political
crisis.
as
Management also believes that the IG report fails to give
adequate recognition to the major and more tangible
accomplishments of the agrarian reform program. In four years
over 92,000 Salvadorans have received over 23% of El Salvador's
scarce agricultural land either individually or a member of
a cooperative. Including families, more than 550,000 rural
dwellers, the vast majority of whom were landless poor, have
benefitted from agrarian reform. These beneficiaries represent
more than 25 % of El Salvador's rural poor population.
More specifically, as of late December, 1983 the following
progress had been made on distributing land under the agrarian
reform program:
Phase I (properties over 500 hectares/1,235 acres): Under
this phase, 426 properties have been affected, representing
just over 15 percent of the country's arable land, and 317
cooperatives have been established with 31,359 members.
Including family members, the number of Phase I
beneficiaries is estimated at 188,000, or 8 percent of the
rural poor.
Phase II (properties of 245-500 hectares/605-1,235 acres):
The implementation of this phase was initially deferred
pending a final decision on the amount of land that could
be retained by a landowner. This delay, however, caused
many farmers to hesitate in using this normally productive
land. In late December, 1983, the new Salvador an
constitution established the size of the land to be
retained by the owner. Owners have three years to sell
excess land to campesinos and their associations or small
farmers. They may not sell to relatives or business
associates. This phase should provide between 20,000 and
70,000 acres to campesinos. Equally important, it will
allow for this rich, productive land to move into
production again.
Phase III (rented or sharecropped land to a maximum of 7
hectares/17.3 acres): This phase has been extended three
times, the latest on December 27, 1983, thus allowing more
721
-4-
farmers to participate in this important element of the
agrarian reform program. Although far from complete, this
phase has benefitted 60,733 campesinos who had filed title
petitions for 228,230 acres, slightly more than 6 percent
of total farm land. Including family members, an estimated
364,000 people stand to benefit. Compensation to former
landowners as of December, 1983 totals $9.68 million.
These tangible accomplishments flow from an agrarian reform
that was hastily planned to respond to the political crisis of
1979/80. It has also been carried out in the midst of violent
civil strife, by institutions with all of the weaknesses and
shortcomings characteristic of those in developing countries.
Progress has been halting and painful, and not surprisingly,
the reform has polarized major segments of the society. Those
who lost land have often fought the reforms, sometimes in the
political arena and often with violence. The first president
of the Salvadoran Institute for Agrarian Reform (ISTA) and two
U.S. advisors were among the first casualties. Many campesinos
have since paid a high price in the inevitable conflict created
by a society seeking fundamental change in its political,
social and economic structure without provoking its total
collapse.
IG Audit Overlooks Production - Data, A Key Indicator of Progress
in Agrarian Reform
Key to an accurate appraisal of any agrarian reform program is
farm production in the reformed area. Yet, the IG Audit
virtually ignores this important question, and instead,
concentrates on the availability of documents, reports, etc.
Agricultural production is a function of the area planted and
the average yield. There is no question that in El Salvador
today there has been a overall decline in acreage planted.
Given the civil strife in El Salvador, however, a decline in
acreage planted should be expected. What is important,
however, is that the decline in acreage in the reformed areas
closely parallels that for the entire country.
In terms of yields, however, the reformed sector has achieved
results better than or equal to the national average. In fact,
yields in Phase I cooperatives were better in all crops except
sugar in 1982/83.
722
-5-
Yields:. Phase I Versus Traditional Sector
Tquintals per manzana?)
Pre-1980
average
1980/81
Reform Trad
1981/82
Reform Trad
1982/83
Reform Trad
Corn
28.4
45.0
26.5
35.0
27.0
30.0
26.2
Sorghum
17.5
26.2
17.4
21.2
17.8
15.6
13.5
51.9
47.4
56.7
51.1
56.9
36.1
46.4
Rice
(unhulled)
Beans
11.7
11.5
13.7
15.1
11.4
11.8
10.4
15.0
12.9
15.8
16.2
13.0
19.1
10.7
33.3
34.6
28.4
31.3
33.8
38.8
28.3
Coffee
(oro)
Cotton
(rama)
Sugar Cane
(short tons)
52.1
56.1
46.5
55.8
52.8
51.0
63.4
HN
1
One quintal equals 100 lbs.
2
One manzana equals 1.7 acres
Admittedly agricultural production in El Salvador is, a mixed
picture. However, given the violence rampant in the country and its
general economic decline, it is amazing that agriculture,
particularly in the newly reformed sector, is doing as well as it is.
Audit Claims Lack of Data to Support Phase I Accomplishment
The IG report, on page 10 states:
"[A]ttempts to establish the accomplishments under Phase I
were hampered by the lack [and] unreliability of available
data (and that] ISTA still had not completely: (1)
surveyed the properties expropriated, (2) established the
amount of land involved, (3) established the class of lands
involved, (4) established the amounts owed to the previous
owners, (5) established the amounts due, from the
cooperatives, (6) determined the number17 of properties
expropriated."
Further, on page 20, the Audit states:
"None of the cooperatives visited had been surveyed by
ISTA. Accordingly, neither ISTA nor the cooperatives knew
the correct acreage or class(es) of their land."
723
-6-
a
Actually, the surveying of affected properties and determining
their size and soil classifications had to be done as
prerequisite to establishing and paying compensation.
Accordingly, all properties for which compensation has been
approved or paid have been surveyed and their soil
classification information is contained with ISTA's listing
entitled, Composition by Class, Areas, Current Use and
Potential, of Various Farms in the Reformed Sector.
By law, moreover, the agrarian reform debt owed by the
cooperative equals the amount of compensation to be paid the
former owner. The number of properties compensated and amount
paid (in cash and bonds) are contained in the AID Mission's
monthly agrarian reform status reports. As of March 1983,
Table 1 of an ISTA report21,shows that 128 properties had
been paid for and payment for 11 more had been approved. At
the very time of the audit team's visit, moreover, the August,
1983 agrarian reform status report indicated that compensation
had been paid for 163 properties (38% of the properties)
totalling $ 106,800,182 in cash and bonds. As of late December,
1983, moreover, these figures show that $117,859,580 has been
paid for 184 properties (43% of the properties). Twenty-five
cooperatives have been issued titles to their properties.
About 190,000 formerly landless persons (8.5% of the rural poor
population) now have access to 220,000 hectares of Phase I land
(15.1% of the total land in farms). It is clear that the
progress made to date reflects real accomplishments are well
underway. In the meantime, the beneficiaries are enjoying
complete usufruct rights to the affected properties.
IT There has been confusion over the number of properties
involved in the Phase I reform sector. This confusion was
clarified, however, in March, 1983 when ISTA published its
Diagnostico de la Division de Adquisicion y Asignacion de
Tierras al Diciembre de 1982. This publication shows that 426
individual properties were affected under Decrees 153 and 154.
Of these 426 properties, 194 properties exceeded the 500
hectares limitation and were, in the strictest sense of the
tern, expropriated. An additional 232 properties, which did
not exceed 500 hectares individually, belonged to landowners
who held multiple properties exceeding the 500 hectares
limitation. These, too, were expropriated.
724
-7-
Given this clear progress, and the fact that 10 of the 17
cooperatives visited by the audit team had such surveys and
appear on the ISTA listings, we are totally baffled by the
Audit claim on page 20 that "none of the cooperatives visited
had been surveyed by ISTA."
The IG Audit states further on page 11, "we were unable to
obtain a reliable listing of cooperatives formed by ISTA under
Phase 1." In point of fact, a complete listing of the 317
Phase I cooperatives by property name, location, cooperative
association name, area and number of members is available in
Third Evaluation of the process of Agrarian Reform.
Audit Questions AID Efforts to Develop Reliable Data
The Audit also states on page ll, "AID's efforts have not been
fully successful in offsetting the lack of reliable data...
!
As management pointed out earlier, the data was and is there,
but the IG team was apparently unable to get it or unwilling to
use it, when so provided by the AID Mission. In terms of AID'S
efforts, it should be noted that, AID, working with ISTA, the
National Finance Office for Phase III Agrarian Reform Lands
(FINATA) and the Ministry of Agriculture and Livestock (MAG),
has conducted numerous studies to develop reliable land reform
data, such as:
1. Working with ISTA, AID has developed a standardized
management reporting and accounting system for Phase I
cooperatives.
2. Working through National Federation of Agrarian Reform
Cooperatives (FESCORA), AID is helping to conduct an
extensive management practices census of Phase I
cooperatives.
3. Working under AID supervision, the Agrarian Reform
Reasearch and Evaluation Program (PERA) of the Government
of El Salvador (GOES) has completed a profile of Phase III
beneficiaries, and established much baseline data. PERA
also made a study which resulted in an estimate of the
Phase III beneficiary universe.
IT Study of the Acquisition and Assignment of Land of 21
December, 1982
725
-8-
4. PERA, working with AID, has conducted a study of Phase
III beneficiary evictions, and a reinstallation study is in
progress.
Audit Asserts AID Staff Seldom Visits Cooperatives Studied.
Another questionable deficiency in the Audit is the assertion
that "Of the 17 cooperatives we visited, we found, for example,
that no one from AID had ever visited those farms (and) Mission
files showed that AID officials had visited only 1 of the 41
cooperatives randomly selected for audit". Mission records
show, however, that 4 of the 17 cooperatives had, in fact, been
visited by AID staff as of June 1983. The Rural Development
Office records indicate that AID staff had visited 59 different
cooperatives at the time of the audit, many of them
repeatedly. Under an AID contract, moreover, contractors from
"Technical Services of the Caribbean (STC)" had visited each of
the 100 cooperatives served by the Agricultural Development
Bank (BFA) as a normal function of their tasks. Moreover,
other STC personnel had visited a broad spectrum of Phase I
cooperatives in conjunction with-their work of developing a
standardized management and reporting system.
Audit Gives Undue Emphasis to Land Quality and Coop Membership
Size as Cause of Phase I Cooperatives Financial Problems
In addition to its discussion of the financial problems of
Phase I cooperatives, with which we do not take major
exception, the Audit goes on to indicate that the major
problems facing Phase I cooperatives are the quality of land
and excessive coop membership. There are several reasons for
the poor financial performance of many Phase I cooperatives, as
the Audit correctly notes in a section called "Other Areas of
Concern" on page 24.37 It is simply not true however, that
the major reasons for the Phase I cooperatives' financial
problems are poor land quality of excessive membership.
El Salvador is land poor in terms of both quantity and quality
of land, but the Phase I farms are located on much of the best
land in El Salvador and many of these farms were profitable
operations comparable in production to any in the world. This
is evidenced by the percentage of national cash export crops
produced on these farms in 1982 (coffee 11%, cotton 20% and
sugar cane 29%). The biased sample from which the Audit drew
these conclusions contained a disproportionately high
percentage of class IV, V, and VII lands characteristic of the
western region of the country. While these lands are
technically not suitable for intensive cultivation, significant
726
-9-
portions are, in fact, ideally suited to the production of
coffee El Salvador's most important export crop. The
western region, moreover, is the principal coffee producing
area in the country.
Another Audit contention is that excessive cooperative
membership unduly burdens Phase I cooperatives making them
financially unviable. Although some cooperatives may be
utilizing more labor than in pre-reform days, this does not
constitute evidence, ipso facto, that the cooperatives are
featherbedding their payrolls by the unprofitable employment of
members. Optimal economic efficiency is a function of the
technology employed and the factors of production.
Substituting labor for capital when membership labor is
abundant and all forms of capital extremely scarce may well be
both efficient and consistent with promoting the larger goals
of the reform. Furthermore, the relationship of membership to
income producing potential of the cooperatives is highly
variable as evidenced by farm plans developed by Integrated
Development of Agrarian Reform Enterprises (DIECRA) with AID
technical assistance. There undoubtedly exist significant
opportunities for increasing cooperative membership on some
Phase I farms.
!
Audit Reflects an Incomplete Understanding of Phase II Status
The Audit's treatment of Phase II is simply the sentence on
pages i and 24 that "Phase II of Agrarian Reform Program has
not been implemented." This cursory comment fails to grasp
what has, in fact, transpired with Phase II. Initially, action
on this phase was deferred due to questions about the size of
land to be left to landowners. As a result of this
uncertainty, many farmers left their land fallow. In December,
1983, the newly enacted constitution determined that farmers
could retain 245 hectares of 1,235 acres. With this
clarification of Phase II properties it is likely that between
20,000 and 70,000 acres of land will be made available to
"campesinos".
31
Noted were "(1) lack of capable managers, (2) lack of
technical assistance, (3) state of world economy, (4) low
productivity, (5) civil war, and (6) lack of institutional
capability.
727
-10-
Further, and equally important, by clarifying the size of land
available for sale to campesinos and their organizations, those
farmers who have been holding off their planting will quickly
put their land into production again. It should be emphasized,
also, that Phase II land is traditionally some of the most
productive in El Salvador.
Audit Conclusions on Phase III Accomplishments Based on
Deficient Analysis.
Regarding Phase III beneficiaries the IG Audit on pages 26 and
27, stated:
..that of the 63,496 applications filed,
About 15,000 or 23 percent of the applications were
for lands that at the time of audit were inaccessible
due to security reasons,
About 25,000 or 39 percent of the applications
resulted in the applicants receiving and using the
land,
-
About 20,000 or 31 percent of the applications had not
resulted in the applicants acquiring and having use of
the land. This number includes applications that were
not approved, applicants who no longer lived in the
area, applicants who had been evicted, etc.
About 6,000 or 9 percent of the applications had
resulted in the applicants being illegally evicted and
not reinstated (this amount is included in the 31
percent above)."
I
Two of these conclusions differ radically with most studies on
Phase III. Moreover, the information and the methods used to
reach the above conclusions are of questionable statistical
value. In fact, in an earlier Audit draft, the IG stated:
"Due to security difficulties which prevented completion of our
field work sample, this data does not represent valid
statistical results for projection purposes. This important
caveat, interestingly, was left out of the final Audit.
In its study of Phase III accomplishments, the IG used a random
sample of 149 applications, but only 78 were interviewed
because: 37 could not be interviewed for security reasons; 24
were no longer living in the area; and 10 did not show up.
728
-11-
To conclude that only 39% of applicants received and were
working their land, the IG Audit apparantly had to include the
37 who could not be interviewed because of security, the 24 who
had moved, and the 10 who had simply not shown up. Further,
the IG had to make the assumption that of the 71 not
interviewed none had received land. Of the 24 people who may
have moved, many may still retain title to their land or have a
friend or relative working the land. They could also have been
harvesting crops in another area and would be returning later
to farm their land. The ten "no-shows" can only be used to
conclude their non-availability. Also, conclusions from the 37
applications for lands inaccessible to the audit team for
security reasons are equally dubious.
The second questionable conclusion of the Audit is that 31% of
the applicants neither acquired nor were using their land. To
reach this conclusion, the audit team apparantly again included
the 24 not living in the area. Actually, only the 1 applicant
denied title, the 10 threatened applicants and the 8 evictees,
should be used, and the resulting percentage would be 12%, not
31%.
Clearly, the IG report uses a statistically biased and
ever-shifting interview sample (i.e., including all or some of
the 71 people in the non-interviewed universe with the 78
actually interviewed) to reach its conclusions.
In summary, if one must use such a questionable data base, the
percentage of beneficiaries working on their land under Phase
III would be closer to 76%, and not 39% as stated in the IG
Report. The
percentage of applicants not acquiring and using
the land would be closer to 12%, not 31% as asserted in the
Audit.
In terms of evictions, a study in June-July 1983, by the MAG,
AIFLD and the Salvadoran Campesino Unions interviewed about
1,900 beneficiaries on 928 farms. This sample was selected to
ensure a 95% confidence level. This study, shows that since
the beginning of Phase III, 5,634 beneficiaries had been
evicted and of those, 1,271 had been reinstated on their land.
Under this study the percentage of evictions is about 6%, not
the 9% as asserted in the IG Audit.
Audit Asserts Agricultural Development Bank (BFA) is in
Precarious Condition.
The Audit is critical of the Agricultural Development Bank's
(BFA) performance in servicing the needs of the agrarian
729
-12-
reform. Most serious is their conclusion that the B.F.A.'s
financial condition is precarious due to the inability of its
clients (primarily Phase I cooperatives) to repay credits they
obtained from the Bank. The BFA was subjected to severe
financial and administative pressure as a result of serving on
an emergency basis as the only source of credit in the initial
days of the reform. Subsequently the BFA has attended to about
100 Phase I cooperatives (large enterprises with heavy demands
for capital and supervised credit services, but generally those
representing the less profitable, more problem plagued
cooperatives). in view of these strains it is remarkable that
the Bank's financial condition has improved appreciably due in
part to significant financial and technical assistance from
AID. As of the end of October, 1983 the BFA showeto net
profit for the first time since the reform commenced in 1980.
This was achieved while setting aside $5.6 million (an expense)
in reserve for bad debts, a highly prudent management practice
in view of some reform sector clients' difficulty in repaying
loans from the first two years of the reform. The Bank's
financial integrity has been protected in part by making at
least temporary provision for non-banking operations income,
mainly handling PL-480 products and agricultural inputs.
These
operations generated $6.8 million in net income in 1983. These
measures combined with efforts at improved Bank management have
produced a steady improvement in the BFA's financial condition
between 1978 and August, 1983 as reflectd by the BFA's
financial statements. Loan recovery, especially from Phase I
cooperatives, remains a problem but has improved dranatically
from 40% in 1980 (the first year of the reform when the Bank
was forced to respond on an emergency basis to hundreds of new,
large clients with no opportunity to develop the necessary
capacity in advance) to 81% as of November, 1983. This has
been achieved in spite of depressed world market commodity
prices for the principal products of many of their client's and
under conditions of continuing rural violence. We believe that
both the Phase I cooperatives repayment performance and the
BFA's financial condition deserve recognition for the
accomplishments that they represent.
L
Drafter:LAC/CEN:PAskin/Hilkinsori:01/26/84:00768
Part
Clearances:
AAA/LAC:NDBrown
S?
i
34-045 0484-47
730
LAND REFORMS
PHASE I (MARCH 5, 1980):
FARMS LARGER THAN 1,235 ACRES
15% OF FARM LAND
o 317 COOPERATIVES FORMED
PHASE III ("LAND TO THE TILLER"
APRIL 28, 1980):
30
RENTERS AND SHARECROPPERS TO OWN THE LAND THEY WORKED
* MAXIMUM OF 17.5 ACRES PER RENTER/SHARECROPPER
PHASE II (DECEMBER 20, 1983):
FARMS BETWEEN 605 AND 1,235 ACRES
* OWNERS HAVE 3 YEARS TO SELL EXCESS
OWNERS MAY ONLY SELL TO PEASANTS, PEASANT ASSOCIATIONS
AND SMALL FARMERS
SIATEDEP 023 Page 22 01 Disk J5 !
731
EL SALVADOR
DISTRIBUTION OF FARMLAND
1971
11%
RENTED, SHARECROPPED
15%
LARGE PLANTATION
OVER 1,200 ACRES
1% OF TIIE POPULATION
OWNED 40% OF THE LAND
SOURCE: 1971 AGRICULTURAL CENSUS
732
Writing
LAND REFORM: 1980-1983
15%
PHASE 1
*
67%
PHASE II)
PRIVATELY
OWNED
&
WORKED
LAND
UNDER 605
ACRES PER OWNER
+ 10%
AVAILABLE
FOR
REFORM
PEOPLE INVOLVED: 550,000
11% OF TOTAL POPULATION
24% OF RURAL POPULATION
733
"LAND TO THE TILLER" --% OF ESTIMATED ELIGIBLE WHO HAVE FILED
60%
52%
50%
43%
40% -
33%
30%
25%
22%
20% -
11%
10%
DEC 80
JUN 80
JUN 81
DEC 81
JUN 82
DEC 82
DEC 83
JUN 83
734
"LAND TO THE TILLER" PETITIONS AND TITLES (CUMULATION)
75,967
PETITIONS
FILED
70,000
60,000
55,287
PROVISIONAL
TITLE
GRANTED
50,000 -
40,000
30,000
20,000 -
10,000 -
5,456
FINAL TITLE
GRANTED
DEC 80
JUNE 01
DEC 81
JUNE 82
DEC 82
JUNE 83
DEC 83
735
BY DEPARTMENT
"LAND TO THE TILLER"
% OF ELIGIBLE WHO HAVE FILED
AS OF NOV 9, 1983
100
90
PEACEFUL ZONES
SOMEWHAT CONFLICTIVE ZONES
F CONFLICTIVE ZONES
80-
70-
60
PERCENT
50
!
40
30
20 -
10
SONSONATE
AHUACHAPAN
SANTA ANA
LA LIBERTAD
LA PAZ
CABANAS
LA UNION
SAN SALVADOR
CUSCATLAN
USULUTAN
SAN VICENTE
SAN MIGUEL
MORAZAN
CHALATENANGO
736
PHASE II: EVICTIONS AND REINSTALLATIONS
O NUMBER OF EVICTIONS REPORTED TO LAND
REFORM AUTHORITIES:
5,027
O NUMBER OF REINSTALLATIONS OF EVICTED
PERSONS TO THEIR LANDS:
3,906
O NUMBER NOT REINSTALLED AS A PERCENTAGE
OF TITLE APPLICATIONS:
1.7%
Ü NUMBER OF LAND REFORM BENEFICIARIES
WHO HAVE ABANDONED THEIR LAND:
?
(SOURCE: FINATAI
STATE 023 pg 2. Disk J5 |
737
COMPARATIVE YIELDS OF REFORMED AND
NON-REFORMED LAND – 1981/82 HARVEST
3.28
3.05
3000 -
NON-REFORMED
REFORMED
2.34
2.03
2000
1.87
1.64
LBS PER ACRE
!
0.97
1000-
0.69
CORN
RICE
COFFEE
COTTON
SOURCE: OSPERA-PERA
738
1
***
ANALYSIS OF MAJOR MANAGEMENT RESPONSES TO IG AUDIT REPORT NO. 1-519-84-2
"AGRARIAN REFORM IN EL SALVADOR
A REPORT ON ITS STATUS"
DATED JANUARY 18, 1984
á
Office of the Inspector General
Agency for International Developinent
February 27, 1984
739
MANAGEMENT RESPONSE
EXCERPTS FROM TUE AUDIT REPORT
IG COMMENT
Under extremely difficult conditions, the Government of
El Salvador initiated a large-scale Agrarian Reform Pro-
gram Much has been accomplished. The program has redis-
tributed over 200,000 hectares of land to cooperatives and
individuals. Yet, the three phases of the Agrarian Reform,
which have received about $200 million in AID assistance;
have had mixed results. (from cover page summary)
"We found that large amounts of land have been made avail-
able to peasants and numerous cooperatives have been es
tablished for increased agricultural production under the
agrarian reform program. These changes liave taken place
during & time of civil disorders, without
without a full public
consensus about all aspects of land reform and with lim-
ited institutional capability to implement the program.
Considerable progress has been made under these difficult
conditions. Over 200,000 hectares of land have been re-
distributed to estimated 500,000 peasants
(including
family members). Continued progress
progress under this program
is, however, heavily dependent upon further financial and
other support by the Government of El Salvador.
an
"The Audit for reasons that are
not clear, does not give adequate
recognition to the importance of
El Salvador's Agrarian Reform in
the political, economic and
social setting in which it was
initiated and has since been
carried out.
An audit report is not a political assess-
dient nor Is it an advocacy, public rela-
tions or program document. It
мау,
of
course, be used as a reference or Source
document for any of these.
"It sliould be noted that during the course of this review,
we found a broad
broad consensus of opinion amongst both U.S.
and El Salvadoran participants, planners and observers of
the agrarian reform program that the existence of the
program represents a remarkable break with the historical
tradition of land holdings and use in El Salvador. Fur-
ther, the consensus seemed to view the break with the past
to be cssentially irreversible." (Executive Summary , page
1)
1
740
:
EXCEP.PTS FROM THE AUDIT REPORT
MANAGEMENT RESPONSE
C_COMMENT
*From our review of the record, it is clear that AID had no advance notice
of the October 1979 coup d'etat or the new government's intention to ini-
tiate major agrarian reforms.
"With no advance notice of the new government's
new government's land reforo program, AID
nevertheless moved quickly to plan a program to
to support the effort and
signed its initial project agreements to this end in July 1980." (page 7)
* The agrarian reform program has succeeded in dividing over 200,000 hectares
of land among an estimated 500,000 (including family neabers) of the peasant
class. Many of whom previously were without land. Over 300 agricultural
cooperatives have been created with the objective of establishing viable, ,
self-sufficient family businesses for many peasants. These changes have
taken place in the midst of severe civil strife, less than complete public
support for the refore movement and with the inherent institutional limit-
ations of a developing country
the Audit frequently alludes
to and laments the lack of base-
line data,
quantifiable objec-
tives or implementation planning
underlying the initiation of the
Reforn. It is true that there
was little planning done prior to
this Refora but for reasons that
Are totally understandable and
veriflable.
* The GOES pre-implementation planning for Phase I was limited. Both the
GOES and AID were in the difficult position of dealing concurrently and on
a continuing basis with the development of a rational planning process and
with inplementation problens resulting from lack of prior planning
One of the audit's
major
objectives was to assess
AID's
Involvement In tlie reform,
including its planning stages.
Although the coup apparently was well planned and impleaented, it was evi-
dent that little preplanning had taken place for iaplementing the agrarian
reforu program. The precipitous manner in which the Junta announced its
intentions to initiate the prograa left AID without
left AID without a policy statement,
strategy, or plan of assistance. at that time. (page 8)
"By March 1980, when the decrees were issued, AID had had insufficient time
to develop an overall plan for the reform program.
* The status of political, military, and economic reforms has changed so
frequently and moved so quickly that AID has been left in the position of
trying to keep up with the current state of this large and complex program.
Nevertheless, AID has made a concerted effort from the beginning to identify
constraints to implementing agrarian reform
agrarian reforma activities and assisting the
GOES (Government of El Salvador) by developing specific projects to deal
with identified problem areas. As a result, AID has numerous projects and
funding sources flowing into institutions associated with the agrarian re-
form. Each of these AID inputs hias a specified purpose, objective and im-
plementation plan.
"Moving quickly, USAID/El Salvador, in May 1989,
in May 1989, issued a Strategy Paper
for assistance to the agrarian reform sector. (page 10)
2
741
IG_COMMENT
MARAGDUT RESPONSE
2XCERTIS FROM THE_AUDIT REPORT
"We sought to answer these questions:
"1)
How much funding has AID provided for
the program?
*2)
What was AID's involvement in initia-
ting the program?
"3)
How well is the program working?
The function of an audit is to establish
and report that which 18
which 18 "auditable" and
"verifiable.
“4)
Has BFA used AID funds properly?
" * Apparently, the auditors become preoccupied
with looking only at accomplishment data
that WAR 'auditable' and 'verifiable.
This resulled in a narrow, incomplete, and
in some
Calles inaccurate portrayal of the
Agrarian Reform progran.
*5)
with
funding
Has
AID complied
restrictions ?
we
"Το answer these questions, reviewed
pertinent files and interviewed
interviewed officials
in AID/Washington, USAID/El Salvador, the
U.S. Embassy in
Embassy in San Salvador and various
GOES organizations. (Audit Purpose and
Scope Statement, page 4)
3
742
--
MANAGEMENT RESPONSE
EXCERPTS FROM THE AUDIT REPORT
IG COMMENT
"The Phase I cooperatives appeared to have
been structured without fully considering the
basic ingredients necessary for profit making
productive enterprises. As
consequence,
certain cooperatives have not been financially
viable undertakings.
a
"The overall purpose of the agrarian reform
program is to increase production, income and
employment. Under Phase 1, the purpose is to
establish viable, self-sufficient, and parti-
cipatory farm businesses. (page 13)
It was not the intent of the review to make an
assessment of the Salvadoran agricultural
economy In this connection, The Wall Street
Journal of February 21, 1984, reported:
a
"We are also at loss to explain why any
audit or
assessment would not have addressed
the subject of production and productivity,
which has been positive, and which over the
long haul are the key
the key indicators of the eco-
nomic impact of the reform.
"Total crop tonnage
production of the
reform sector of the economy has fallen
19.8% despite the fact that
that the govern“
ment-nationalized banks give the coopera-
tives top priority. The "traditional"
sector's output fell slightly léss, just
over 18%.
A financially viable enterprise produces
sufficient Income to liquidate its current
liabilities, pay its long-term debts, satisfy
its members' basic needs, and generate revenues
for emergencies, replacements, and savings.
"As the debt has mounted, cooperative members
have become more concerned about their situa-
tion. Original expectations of improved eco-
nomic and social status are perceived by these
members to be unachievable without some sort
of debt relief and reduction of
operating
costs.
While assessments of last year's crop yields
may vary, the audit report stresses the fact
that productivity must be measured in terms of
the cooperative's ultimate financial viability.
1
"Available financial data showed that many of
the Phase I cooperatives had been unable to
repay even the production and investment
credits they had borrowed. (page 14)
743
MANAGEMENT RESPONSE
EXCEIPTS FROM THE AUDIT REPORT
IG_COMMENT
"Audit Claims Lack of Data to Sup-
port Phase I Accomplishments" (and)
"Attempts to establish the accomplishments under Phase I were hampered by
the lack of and the unreliability of available data. Data on all phases
of the program were limited and the accuracy of most data suspect. Ac-
cordingly, much of the data examined and reviewed in this report were
estimates or approximations.
Efforts
to
"Audit Questions_AID
Develop Reliable Data
+
the data was And is, there,
hut the
IG
team was apparently
unable to get it, or unwilling to
line it, when 80 provided by the
AID Mission (in El Salvador).
the Mission noted that the number of properties expropriated was
194 a figure which 'has been a constant
This asscrtion of a 'con-
stant' 194 is illustrative of the degree of confusion which we found 80
pervasively present in the data and baseline information concerning the
Agrarian reform program. For example:
USAID/El Salvador in its Project Paper on agrarian reform organiza-
tion dated September 29, 1980 gave this figure as 238.
(Management's response on these
matters alluded to four different
GOES documents:)
The GOES Ministry of Agriculture reported in July 1982 that the num“
ber of properties expropriated under the reform program was 278.
(1)
"A Diagnosis of the (Agrarian
Reform's)
Bureau of Land
Acquisition and Distribution"
Despite the auditor's repeated
re
quests (as documented in the audit
workpapers) to AID and GOES offi-
cials as late as September and even
December 1983, they were advised
the information they
they sought (in-
cluding the reports cited in man-
agement's response) was not avail-
able. The first two reports listed
in the left hand column were received
by the auditors on January 23, 1984
(five days after the audit report
was issued), notwithstanding the
fact they are dated December 1982
and August 1983, respectively. The
remaining two documents listed have
yet to he received by the auditors
(In a July 1983 telegram,
telegram, USAID/E1
Salvador reported to AID/Washington
a synopsis of what the PERA study
would contain when officially is-
sued,
which
provided
to
the
auditors.)
Checchi and Company, in an AID financed study on the agrarian reform
porgram, reported in January 1983 that the number was 262.
"-
(2)
"A Study of Phase III Benefi-
ciary Evictions (PERA Reportſ
USAID/El Salvador in its Project Papet on the Agrarian Reform Sector
Support dated May 23, 1983, reported that the number of properties
expropriated under Phase I was 360.
*
131 "[The
"[The COES Agrarian Reform
Agency's) listing entitled,
'Composition by Class, Areas,
Current Use and Potential, of
Various Farms in the Reformed
Sector'"
On September 19, 1983, ISTA (GOES Agrarian Reform Agency] advised
I was 207.
the auditors that the number of properties expropriated under Phase
was
"Neither AID nor the related GOES offices had reliable information on
other aspects of the program. For example, we were unable to obtain a
reliable listing of cooperatives formed by ISTA under Phase I.
[4]
"Third Evaluation of the Pro-
cese of Agrarian Reform
"After we determined that AID did not have a listing of the cooperatives,
we worked with ISTA for three wecks trying to develop a complete listing
of Phase I cooperatives as of March 31, 1983. We settled for the listing
of 317 cooperatives that ISTA finally prepared for us. We found many
errors in the information presented by ISTA. (pages 10, 11)
5
744
.
...!!
MANAGEMENI RESPONSE
EXCERPTS FROM THE AUDIT REPORT
IG COMMENT
"Finally, we are distressed to find that,
after the Auditors had in their earlier
draft characterized one data sample A8.
not representing "valid statistical re-
sults for projection purposes,
the 8ame
data in the final' report was character-
ized As having a "95% confidence level.
( The statistical
sample of Phase III
beneficiaries referred to 18 described
and summarized on
PP
26-27 of the
report.)
The IG sample of Phase III recipients described
in the final report is statistically sound. The
limited degradation of sample accuracy caused by
the auditor's inability to interview some of the
sample of 149 beneficiaries has been factored
into the sample results and correctly reported.
For purposes of
of validating the methodology and
results of the audit sample, the IG sought and
obtained the services of a fully qualified, ex-
perienced statistician. The sample validation he
provided to the IG was also provided by him in
full to the Agency prior to report publication.
The IG's qualification of the sample's validity
was thus fully resolved prior to
to final report
18suance. Furthermore, the basis for this reso-
lution was fully described to and verified by the
Agency
1
6
745
34-045 0484-48
MANAGEMENT RESPONSE
EXCERPTS FROM THE AUDIT REPORT
IG_COMMENT
Our draft report submitted to senior AID management for comment in
November 1983 included the following section:
an
"Audit Reflects
Incomplcte
Understanding of Phase II Status
"Phase II of the agrarian reform
program has not been implemented.
(page 24)
"The Audit's treatment of Phase II
is simply the sentence on page 1
and 24 that "Phase II of Agrarian
Reform Program has not been imple-
mented. This cursory comment
fails to grasp what has, in fact,
transpired with Phase II. Ini-
tially, action
action on this phase was
deferred due to
questions about
the size of land
of land to be left to
land owners.
As a result of this
uncertainty many farmers left
their land fallow.
"Phase II of the agrarian reform program is the term used
hy AID to identify the unimplemented part(s) of the pro-
gram, i.e., the GOES plan to expropriate all landholdings
larger than 150 hectares (depending on land classification).
Phase 11 affected landholdings from 100 or 150 hectares to
500 hectares. Whatever the actual size of landholdings
that may be affected by the next phase of the program, the
properties in the 100 or 150 hectares size have not been
touched by the reform. And, the GOES does not have definite
plans to implement a next phase of the program at this time.
"It is apparent that owners of Phase II size properties are
in a quandary. They do not know what will happen to their
lands, 80 most seem reluctant to invest the necessary funds
to maintain their production levels, Although Decree No.
43 prevents large landowners from disposing of their land,
it is frequently reported that Phase II landowners are sel-
ling their farms'
assets and transferring their funds to
overseas banks.
"We could not substantiate the screports on Phasc II size
landholders actions However, the actions would be logical
and there may be substantive truth to the allegations.
AID management responded to this section of the draft audit report
by noting that since Phase II had not been implemented, it would
not be appropriate for the audit report to include a comment on
that phase beyond reporting that fact. We therefore deleted the
above cited language from the final report.
746
..
MANAGEMENT RESPONSE
EXCERPTS FROM THE AUDIT REPORT
IG COMMENT
"A consultant's review of BFA estimated that 33 percent of the
loan portfolio was uncollectible. In addition, about 20 per-
cent of the loans classified as non-delinquent had hidden de
linquencies, i.e., loans that
loans that were partially delinquent but
classified by BFA as current.
"In gum, the increase in business resulting from the agrarian
reform has put BFA in a weak and vulnerable financial position.
generated
As of the end of October, 1983, the
BFA showed a net profit for the first
time since the reform commenced in
1980. The Bank's financial integrity
has been protected in part by making
at least temporary
provision for
nonbanking operations income, mainly
handling P.L. 480 products and agri-
cultural inputs. These operations
$6.8 million in 'net income
1983. These measures,
combined
with efforts At Improved Bank manage-
ment have produced a steady Improve-
micht in the BFA's Financial condition
between 1978 and August 1983 48 re
Elected by the BFA's financial state-
ments. Loan recovery, especially from
Phase I cooperatives, remains a proh-
lem but has improved dramatically from
40% in 1980 (the first year of the
reform when the Bank
forced to
respond on an emergency basis to hun-
dreds of new, large clients with
opportunity to develop the necessary
capacity in advance) to 81% as of
November, 1983.
"In their comments on the draft audit report, USAID/El 'Salvador
agreed that the agrarian reform undertakings have overtaxed
BFA's resources, weakened its capital structure, and brokendown
its internal control system. However, the Mission claimed that
these problems improved significantly in 1983 based
unidentified sources financial projections. They also expressed
concern that the draft report did not adequately present the
progress attained in overcoming the problems.
on
some
We have carefully reviewed all data on the
Bank developed up to the end of our aud.lt
field work in September 1983. We reaffirm
the findings and opinions set forth in the
report. We have no comment on the asser-
tions made hy management regarding the
BFA's financial condition after our audit
field work ceased.
was
no
"We agree that the USAID has provided substantial assistance to
BPA and that the Bank would have been in much worse condition
without the assistance provided. AID assistance should further
improve the Bank's operations and thereby, in time, its capital
position. Ilowever, since BFA had not been able to close its
books for calendar year 1982, and, as of October 1983, was
still trying to establish and identify its delinquent accounts
for the period from 1980 to date, we cannot place much credence
in financial projections for calendar year 1983.
"In the Mission's opinion, the BFA's financial condition to
date 18 stronger than it was prior to the inception of the
agrarian reform program. To support its opinion, the Mission
submitted three tables with condensed financial data for the
period 1978 through October 1983. We were unable to ascertain
the reliability of the data submitted because it was too con-
densed, and its source unknown. However, we noted considerable
difference with audited and adjusted data available at BFA and
with the results of the evaluation made by AID consultants.
For example, according to the Mission's estimates, BFA losses
from banking operations for 1982 were only $2.8 million. This
drastically contrasts with AID's consultant's estimated
loss of $10.2 million. (page 35)
.
':
9
1
747
Senator HELMS. Dr. Ikle, the Kissinger Commission generally re-
flected the views held by Central Americans when they pointed out
that if the Central American aid package is to succeed it presup-
poses even greater amounts of private investment in Central Amer-
ica.
Now, such private investment, however, will not be forthcoming
until the security situation has improved. Without exception,
people with whom I have talked from Central America say this is
the case. Now, the major threat to that security in Central Amer-
ica is the terrorism mounted by the left in various countries, and
notably in El Salvador. The major effects of the terrorists there
have been to destroy the economy and to deny the average Salva-
doran the means to make a livelihood.
Now, is the United States committed to a policy which will seek
ultimate victory over those terrorist forces, that is to say, to put
them out of business for good?
Dr. IKLE. Mr. Chairman, I agree with you that private invest-
ment is totally discouraged by the protracted fighting and that the
threat to the country of El Salvador, and less immediately to other
countries right nearby, is the terroristic types of warfare that are
directed against the democratic institutions.
Now, to answer your last question, do we want to defeat the ter-
rorists, not only do we want to, but we have to. It has been argued
that negotiation can be a substitute for the levels of military assist-
ance that is sufficient to break the military stalemate. That is a
dangerous illusion.
Negotiation can and must complement our military efforts, but it
cannot be a substitute there for military strength. And in this part
of the world, like in any other part of the world, there are people
who are determined to use military force to destroy democracy, and
their minds cannot be changed by negotiation.
There are others who can be won over, who can be integrated
into the democratic process, and to that end we are supporting ne-
gotiation. But the hard core, those who are resolved to use violence
until they have a monopoly of power, must be defeated.
Ambassador MOTLEY. Senator, I would like just to agree with Dr.
Ikle. The President's policy is not that there is a military soluton
regionwide. However, among the four elements of this policy is the
security aspect, and that applies in each one of the countries.
For instance, in El Salvador. The reason for the $93 million is
that it is necessary to create the climate in which you can have the
other thngs which Dr. Ikle talked about. That is, the economic de-
velopment and the democratic reforms. In order for those to sur-
vive, it must be within a context of security.
And I fully agree with him that the negotiating track is comple-
mentary, one with the other, in order to achieve a lasting peace in
Central America.
Senator HELMS. In that context, is the administration asking for
enough to do the job?
Ambassador MOTLEY. The $93 million is our estimate of what is
necessary to run-through to the end of June, when we think is the
first time the congressional process would get to a point of address-
ing the overall fiscal year 1984 supplemental and fiscal year 1985
program.
748
Am I right on that, Fred?
Dr. IKLE. Right. And we have carefully, on the conservative side,
put together the security assistance proposals for the supplemental
in 1984 and 1985, and you will have noted that 1985 is less than
1984, because it is our hope and expectation that the security situa-
tion will improve if we can provide enough assistance for a vigor-
ous national security program for the Salvadoran Armed Forces,
and after the economic efforts and the institution-building efforts
would become increasingly important relative to the military
effort.
The $93 million will merely, as I put it, give you and your col-
leagues a chance to vote up or down on the Bipartisan Commission
recommendations before things are destroyed, so that they do not
have a chance any more.
Senator HELMS. So the administration is not asking for less than
it needs, in order to gain approval by Congress of something?
Ambassador MỘTLEY. No, sir, you are correct on that.
Senator HELMS. Now, Ambassador Motley, recently a high offi-
cial in our Embassy in El Salvador said that he avoided making
recommendations to the Government of El Salvador about the un-
desirability of socialist economic measures, such as the nationalized
banks, the export boards, vast seizures of property, unless he re-
ceived specific instructions to do so. He said to do otherwise would
be to act as a proconsul.
That leads me to ask this. Do you think the United States should
recommend the proven principles of free enterprise for countries to
which we are giving millions of dollars in economic aid?
Ambassador MOTLEY. Yes. I think when we represent those
things that we think are important to us, that is certainly in the
forefront, that is, the private enterprise sectors and the other
values that we hold close.
I think, with regard to El Salvador and nationalized banks, the
key there, Mr. Chairman, in my view—and there have been discus-
sions within the Government of El Salvador with the private
sector, with the Government, backward and forward, and I think
that the private sector, as I understand their feelings on the
matter, indicates that what they would like is the ability to create
private banks, rather than buy those banks that have been nation-
alized.
I think that is the thrust which is going forward in El Salvador
now. Rather than denationalize the nationalized banks, I think the
private sector in El Salvador would like to have the opportunity,
within a competitive framework, to create new private banks.
Senator HELMS. How about the nationalized exports?
Ambassador MOTLEY. The nationalized exports? That is an ele-
ment that other countries do to a varying degree. And in some
countries, especially less developed countries, it is felt that there is
an economy of scale in organizing the exports.
There is a pro and con argument. It obviously does not apply to a
country of our standing and economic maturity. I guess one could
make an argument both ways as to joining together in an effort to
maximize export capabilities. And I am avoiding the use of the
word “nationalize" in that sense.
749
But in some less developed countries, it may be to their interest,
within the rights of the private growers, if it be growers, to come
together in order to export. It is a tricky area.
Senator HELMS. When I look back over the history of this coun-
try, I wonder how great we would have grown if we had had that
sort of restriction.
Ambassador MOTLEY. It probably would not have worked for us,
Senator. I agree with you.
Senator HELMS. Well, we were once an undeveloped country.
I take it that you are familiar with what I am talking about in
terms of the statement by the Embassy spokesman?
Ambassador MOTLEY. I had heard of that statement earlier,
thirdhand, yes, sir. I am sure that all of our embassies, if they have
not already, will be instructed to make sure that those values that
are close to us are represented to the governments with which they
deal.
Senator HELMS. All right.
I will reserve the balance of my time, because I want Senator
Zorinsky to be able to present his opening statement. So please
keep track of the time that I have left.
Senator Zorinsky, you are recognized, and we welcome you, sir.
Senator ZORINSKY. Thank you, Mr. Chairman.
Much has already been written and said about the administra-
tion's proposals for lavish economic and military assistance to
Latin America and the Caribbean based on the report of the Kis-
singer Commission on Central America. I am glad that now the
members of the Foreign Relations Committee will have that oppor-
tunity to hear directly from the administration and an impressive
gathering of public witnesses. After this hearing, we should have a
much better idea about the feasibility of the administration's pro-
posals.
My personal views on this are that we do not have the ability to
control the internal events of every nation in this world, or even in
the Western Hemisphere. God knows, we have enough problems
controlling our own internal events. We do have the ability to let
nations in Central America know what our strategic concerns are
and to enforce them with the Navy and B-52's if necessary. That is
one of the reasons I support a strong defense.
I do not feel personally that we need to spend billions more,
hoping that somebody else is going to the do the job for us. I have
never
been able to adopt a philosophy of rent an army, which in
many instances I feel we have attempted to do throughout the
world.
The administration is requesting more than $8 billion over the
next 5 years in economic assistance. Considering the state of our
own economy, considering the plight of farmers who cannot get
credit and can barely make ends meet, or who are over their heads
in debt, that type of figure is mind-boggling.
This morning I attended a hearing of the Farm Credit and Rural
Electrification Subcommittee. Senator Hawkins was chairing the
meeting. A recommendation was made that we cut out $2 billion to
$3 billion of credit that would be assured in low-interest rate loans
to the rural electrics of this country and rural telephones.
750
Then this afternoon, coming on the heels of cutting $3 billion do-
mestically, we are asked to increase by $8 billion foreign aid to
Central America. This is politically and logically a very difficult
situation to explain to my constituents back in the State of Nebras-
ka.
As the ranking Democrat on the Western Hemisphere Subcom-
mittee, I surely want to help our neighbors in Central America.
But I seriously question if the answer lies in dishing out billions of
dollars in economic assistance. Therefore, I would like to hear from
the administration and the public witnesses regarding the ability of
the U.S. Government to administer such funds and the capacity of
the Central America countries to absorb those type sums.
Furthermore, I am concerned about such problems as endemic
corruption and capital flight. I understand that some of the food we
provide for the starving and hungry is being sold by corrupt gov-
ernment officials for profit, and that U.S. tax dollars are paying for
the risk of doing business in El Salvador while some Salvadoran
businessmen deposit their money in the banks of Miami.
I am sure that the American taxpayer would want to know why
the cost is so high, why the job cannot be done for less, and if we
are making the best out of the economic assistance that we now
provide to the area.
The administration's request for substantial military assistance
to the region is an outrage. The administration is talking about
$400 million in the next 2 years for El Salvador, under the theory
that military victory will lead to peace.
The Commission's assessment of the military situation is far
more positive than what I have been reading and from discussions
I have had with recent visitors to the region. Millions more in mili-
tary assistance to an army that does not have the heart to fight,
that has suffered major defeats, and that refuses to implement the
strategy and tactics taught by the U.S. military advisers, is a very
poor proposition.
It is no wonder to me why the Government of El Salvador is run-
ning out of bullets and guns. Guerrilla forces take them or buy
them from the government forces as quickly as we send them, and
the U.S. taxpayer gets no commission for those sales, only requests
for more booty
It seems to me that more military assistance is just going to pro-
long that bloody war, which is claiming far too many innocent vic-
tims as it is. I would appreciate it if the administration and the
public witnesses would address themselves to these very real con-
cerns.
In conclusion, I would like to have them also elaborate on their
views on the Contadora peace process, especially as it relates to the
situation with Nicaragua. My reading of the administration's
policy is that it downplays the Contadora process, because the
major role is played by the nations of the region. These nations can
help the United States achieve peace in the region and the U.S. in-
terests can be served best by working more closely with the Conta-
dora group
Thank you, Mr. Chairman.
Senator HELMS. Thank you, Senator.
751
1
I think I have 242 minutes left, so please blow the whistle on me.
I have one more question, Mr. Ambassador.
Recently there came to light some allegations that a guerrilla
commander in El Salvador, by the code name of Lobo-are you fa-
miliar with that?
Ambassador MOTLEY. Yes, sir, I have seen some press reports to
that effect.
Senator HELMS. All right. The report indicated that he allegedly
confessed that the left had arranged the murder of Archbishop
Romero, while some figures, including the former Ambassador to
El Salvador, Mr. White, says flatly that the coldblooded murder had
been planned and executed by one of the politicians down there.
What is the true story on that?
Ambassador MOTLEY. Well, sir, as to the so-called Commandante
Lobo, I have read press reports of his existence and his statements
in neighboring countries, that is neighboring to El Salvador, and
not the Salvadoran papers. We are trying to track them down, but
I am sorry at this stage that I am not able to provide you any more
information on that.
Senator HELMS. So you do not know whether one report is accu-
rate or the other? You do not know which one, if either, is accu-
rate?
Ambassador MOTLEY. That is correct, sir.
Senator HELMS. All right. I guess there is no point in my trying
to start another question with so little time.
Senator Zorinsky, did you want to begin your line of questioning?
I think you raised a number in your statement.
Senator ZORINSKY. Yes, I believe I did, Mr. Chairman.
And first, I have a followup question to one of the chairman's.
What is the status currently of the judicial proceedings in the case
of the murdered American churchwomen?
Ambassador MOTLEY. The case has been elevated to what they
call the plenario, which means it is ready to go to trial. As you un-
derstand, Senator, in the Salvadoran judicial system the last thing
to happen is a trial. Unlike our system where there is a trial and
then appeals come after that, in their system most of the appeals
come before the trial.
And through this long period of time there have been a variety
of appeals, and they have been exhausted to a large degree. It is
hoped that within the next month a jury will be picked and it will
go to trial.
Under their system, the trial itself before the jury should not
take as long a time as it does in our jury systems, because the evi-
dence has been put forward, positions have been taken, and all the
rest of that has already taken place. So once a jury is picked, I
would say within a week or so there would be the deliberations of
the jury.
The other open question that is leading to the picking of the jury
was the question of a change in venue, which has not yet been re-
solved.
Senator ZORINSKY. I agree with you that the last thing that takes
place in their system is the trial, except they rarely get that far
because the last thing that takes place is that the judge's house
gets blown up after the judge is selected.
752
Ambassador MOTLEY. Whose house is blown up?
Senator ZORINSKY. The judge's house.
Ambassador MOTLEY. Well, sir, we hope that you are incorrect on
that one. I am sure you do also.
Senator ZORINSKY. Well, I go from past precedents.
I understand that the families have requested that they be per-
mitted to see the report of Judge Tyler. Is the report still classi-
fied?
Ambassador MOTLEY. That is correct.
Senator ZORINSKY. When will the families be afforded the oppor-
tunity to see the report?
Ambassador MOTLEY. We have been in contact on this issue with
the families for quite a while, and we have outlined to them a
couple of ideas where a representative of the family, possibly their
lawyer, could have the file made available to him under the proper
circumstances.
Senator ZORINSKY. What are the proper circumstances?
Ambassador MOTLEY. Well, in other words, he could come up and
look at it in an area in which we would normally maintain classi-
fied material. We are trying to work something out with them. We
have been at it with them for about a month and a half and so,
dialoging back and forth, trying to figure out some formula which
is satisfactory to both parties.
Senator ZORINSKY. Regarding the upcoming election, will there
be any difference in attitude with respect to our continuing support
of El Salvador if Roberto d'Aubuisson manages to receive the ma-
jority of the votes?
Ambassador MOTLEY. Well, I cannot speak for the congressional
branch. You have a much better feel for that than I do, Senator
Zorinsky.
But I think it is fair to state that when you look at certain seg-
ments of our body politic, Mr. D'Aubuisson is viewed by some in
less favor than he is in other parts. If Mr. D'Aubuisson is the elect-
ed representative of the people of El Salvador, it is incumbent upon
the executive branch, I think, to deal with him as they would with
any other government.
Now, at the same time, I think I would go into that hypothesis
with my eyes wide open, and that is that there is in this country a
segment of our body politic that might be more skeptical of Mr.
D'Aubuisson than, say, Mr. Duarte, and to that effect maybe that
segment of the body politic may have a higher standard for Mr.
D'Aubuisson with regards to human rights and other elements of
our foreign policy that are important.
But I think that we in the executive branch will deal with the
elected representative of the Salvadoran Government. We will ana-
lyze not only what is important to us in our self-interest, all the
elements of our national policy, but how they react and what their
policies are. We will arrive at some kind of conclusion based on
that.
The Congress in its own deliberations will then arrive as to
whether it will continue its support, diminish or increase its sup-
port to El Salvador.
753
Senator ZORINSKY. If D'Aubuisson is elected will we continue our
current policy of not issuing Mr. D'Aubuisson a visa to enter the
country?
Ambassador MOTLEY. Visa applications are taken individually
and as they come up, sir.
Senator ZORINSKY. Even from leaders of countries after they are
elected?
Ambassador MOTLEY. No, sir, I think that may be just a little dif-
ferent set of facts. But generally speaking, I can tell you that for
leaders of countries, I am not aware of a leader of a country, of a
friendly country, in which a visa was a problem. It is usually a
courtesy
Senator ZORINSKY. Thank you.
A growing number of Members of Congress believe that the U.S.
military presence in Honduras is becoming a permanent one. The
planned expansion of contingency facilities at two airbases rein-
forces some Members belief that the administration is on a danger-
ous path.
What is your rationale for the military presence and pressure
currently being exerted on Nicaragua through the exercises in ad-
jacent Honduras?
Dr. IKLE. Senator, the purpose of the exercises was to enable us
to work together with the Honduran forces and to better prepare
both our forces and the Honduran forces. It is valuable for our
forces and they received valuable training in several areas. It is
valuable for both of our forces to be able to work together in the
event the contingency arises where we have to give assistance,
maybe pursuant to the Rio Treaty or some other contingency, to
Honduras.
It is not our desire—I repeat, it is not our desire-to increase our
military presence in Honduras beyond the limited presence that we
have there now. We may have future exercises there because of the
benefits of those exercises I have just mentioned.
It is fair to say, however, that the Government of Honduras and
the people of Honduras do feel threatened by the massive military
buildup that is taking place next door in Nicaragua. As you know,
Nicaragua has the largest military force in Central America.
Senator ZORINSKY. Could we cope with Nicaragua's military force
through our own intervention with military force?
Dr. IKLE. Well, if we were asked there, say under the Rio Treaty
or pursuant to the U.N. Charter, to fight off Nicaraguan aggres-
sion, presumably our military forces would be sufficient. It is pre-
cisely that kind of contingency that we want to avoid, that we have
to put in military forces into Central America to help such democ-
racies as Costa Rica or Honduras to defend themselves against
military aggression.
Senator ZORINSKY. In your estimation, now that we have put a
billion dollars in aid into El Salvador, are we better off now than
before we spent the billion dollars?
Dr. IKLE. We are better off in the sense that democracy now has
a good chance of taking root in El Salvador. We are now coming to
the second important election, in the spring. We have very active
political parties with different political philosophies that are will-
ing to compete within a democratic process.
754
Senator ZORINSKY. Those were not present at the outset?
Dr. IKLE. They were there before. But as we walked away, the
military strength of the guerrillas, supported from the outside,
would have been such that they could have destroyed democracy in
El Salvador.
Senator ZORINSKY. In other words, more than a billion dollars is
the price for maintaining that. For how long?
Dr. IKLE. In order to cut short the protracted stalemate in the
country—and here I would differ with one point in your opening
remarks, Senator Zorinsky—it is to that end that we want to in-
crease the military assistance. Hence, the President followed the
recommendations of the Kissinger report for increased military as-
sistance in 1984 and 1985.
Senator ZORINSKY. Do you believe you can rent or purchase any
army?
Dr. IKLE. We are not purchasing an army here. We are helping
the people of El Salvador to defend themselves. You are asking
whether they have the will to defend themselves. I think the high
casualties that these brave Salvadoran soldiers have taken, the ef-
fectiveness with which they fight, the skill with which they re-
spond to our training, all indicates that they have the will to
defend themselves.
Senator ZORINSKY. I have one last question. They do have a low
rate of reenlistment, do they not?
Dr. IKLE. The rate of enlistment has been improving. They have
been in a period of intense combat, with high casualty rates, for 2
years. That is their commitment. It is understandable, under the
provision that legally they can return to civilian life, that many of
them should want to do that.
But the rate of reenlistment has been improved and could be im-
proved further if the Government of El Salvador had the fiscal re-
sources to put some incentives in.
Ambassador MOTLEY. I would like to address directly your ques-
tion. Prior to 1982, the retention rate of the armed services was
less than 10 percent. By the end of 1983, the retention improved to
33 percent, with a 90 percent reenlistment of the eligible NCO's. So
I think we are making steps in the right direction.
Senator ZORINSKY. I have seen some figures that were quoted in
the newspapers, as high as a third to 40 percent were not reenlist-
ing. Do you know how valid those figures are?
Ambassador MOTLEY. Well, the figures that I quoted you come
from our Government services that deal with theirs.
Senator ZORINSKY. Thank you.
Thank you, Mr. Chairman.
Senator HELMS. Thank you, Senator.
I am speaking just as one Senator, but it seems to me that the
agenda for discussion with reference to Central America some-
where along the line has to be focused on what I think is the reali-
ty of it. The question is, do we want, “we” being the American
people, do we want Central America to be taken over by Marxists?
Now, people scoff about that but that is the issue. If we sit back
and do nothing or if we do not do enough and let that happen, I am
convinced that all of Central America will be lost and fairly quick-
ly.
755
At a briefing this morning, Dr. Ikle, I asked a distinguished wit-
ness if from the military standpoint he thought the Marxists were
capable of taking over Central America if El Salvador falls. His
answer was unequivocal, because this is sort of the last line.
I have been pleading with the President of the United States to
explain what is at stake to the American people. This is not just
some long ago and far away matter. This is the front door to the
United States. It is burning down.
I do not think it is an exaggeration to say that if we allow that to
happen in Central America what was allowed to happen in Viet-
nam and Cambodia, the slaughter will begin just as it did there,
and the mass exodus of people trying to save their lives and seek
freedom will begin. We will end up with 10 or 15 million additional
refugees.
I think we ought to consider that. I have urged the President of
the United States to explain that to the American people, and if
they say, we do not care, OK, we know something.
But I think once we are aware of the options, that the American
people will say overwhelmingly, let us stop it, because I know how
they reacted when the Communists took over Cuba. They are still
resentful of that. And the vast majority, I think, of the American
people would like that rectified. But that is neither here nor there.
Mr. Morris, let me ask you a question. Your Inspector General's
audit of the land reform in El Salvador indicates that when the
vast programs of land seizures were inaugurated in March 1980, I
believe it was AID had "no advance notice.” Is that so?
Mr. MORRIS. That is so.
Senator HELMS. After the reforms were announced in 1980, did
anybody from AID suggest to the revolutionary junta that these
programs were without exception monumental failures and that
there might just be a better, more legal way to achieve justice than
by the vast nationalization by degree? Did anybody from AID ever
bring that subject up?
Mr. MORRIS. Senator, since that occurred before my appointment
I cannot speak personally to that. But it is my understanding that
the Agency's participation in discussion regarding the implementa-
tion of that land reform is still the subject of some litigation, which
to a degree would circumscribe any reply the Agency might formal-
ly give you.
Senator HELMS. I will tell you what I would like for you to do, if
you will: Provide the committee with any records you may be able
to find of any AID officer at any time counseling the Salvadoran
Government or individuals therein that the nationalization of the
banks, the nationalization of the export industries, and the prime
agricultural lands were in fact bad economic policy.
I would like to have that information if it is available.
Mr. MORRIS. All right, sir. Are you referring just to 1980?
Senator HELMS. Well, you know, relative to that period, 1 year,
18 months, any time that they could have had some effect on the
implementation.
[The material referred to follows:]
756
EL SALVADOR'S REFORMS
In looking into your question, I have been unable to find any information whatso-
ever on this matter. Accordingly, I must reply as did former Assistant Administra-
tor Otto Reich to this question; namely, that we have no information of any AID
officer having counseled the Salvadoran Government on the reforms it enacted in
1980.
Senator HELMS. Mr. Beckington, I do not want you to sit out
there in left field without any questions at all. When you issued
your audit of the United States aid to El Salvador's land reform
program, AID management felt obliged to issue a lengthy rebuttal,
as I recall. That is kind of an unusual practice insofar as I know.
They said in effect that it was a lousy job. Do you think it was a
lousy job?
Mr. BECKINGTON. No, I do not, Mr. Chairman.
Senator HELMS. Now that you had time to reflect on the contents
of the report and the merits of AID's management response, in
other words, you think that your report was essentially sound, is
that so?
Mr. BECKINGTON. Yes, I do, in the areas that it covers.
Senator HELMS. In terms of policy which AID could adopt in its
future dealings with this and similar programs, what lessons would
this audit have for future policymakers?
Mr. BECKINGTON. One caveat, Mr. Chairman. I am not a policy-
making official of the Agency. As a matter of fact, I am precluded
by law from being a policymaking officer of the Agency.
But in a very general sense, I would say the lesson that I would
draw from that particular report, as well as a number of others, is
that these programs are very difficult in the lesser developed coun-
try environment. They are management intensive, in my judgment,
and they require an unusual amount of both audit and manage-
ment oversight if the intended goals are to be achieved.
Senator HELMS. Well, AID as I recall complained that one of the
things that was wrong was the fact that the audit consisted of what
they called auditable information. I do not quite understand that
complaint. I do not know what else you could audit except audita-
ble information. They said in effect, as I read what they said, that
you should have gone off and made a sort of an imaginative ap-
praisal of one aspect or another.
Is there anything else you could have audited except auditable
information?
Mr. BECKINGTON. Not very easily, Mr. Chairman. I think we were
probably wise to stick to the facts as closely as we could, to verify
them.
Senator HELMS. That is sort of a leading question.
I see that Senator Pell has returned. I was just taking advantage
of the time to ask a few other questions while no other Senator was
here.
Senator Pell, if you will permit me, I will leave to vote. Would
you please proceed for me? I will appreciate it, and I will be right
back.
Senator PELL (presiding]. Thank you very much indeed, Mr.
Chairman.
I realize that one question that I wanted to ask was asked in my
absence, but I am not sure the answer was as specific, at least as it
757
was reported to me, as it might have been. The question is, what do
we do, what are the administration's plans, if ARENA and the
D’Aubuisson party win the election?
Will we continue to extend aid or will we cut it off? Try your
hand possibly at being a little more specific than you were to my
colleague.
Ambassador MOTLEY. All right. We put our emphasis on the
process, not on the results. The results we assume, and I think we
have reason to assume it based on their 1982 election results, will
be representative of the will of the Salvadoran people. It will be
the elected representative of the people of El Salvador, whoever is
elected.
As an executive branch, I think it is incumbent upon us to estab-
lish relations with the government. What we keep in mind are
those things that are in our self-interest, that is, our national
policy elements, all of them-national security, human rights, the
other things that are important to us—and also keeping in mind
what their government policies are vis-a-vis this. On that basis,
then we would proceed with Mr. D'Aubuisson, Mr. Guerrero, or
Mr. Duarte.
Now, as I said earlier, I do not think there is any doubt in my
mind that there is a body politic or a group, a segment within our
society, that may want to establish a higher standard of proof for
Mr. D’Aubuisson with regard to human rights or other things, and
I think probably Mr. D'Aubuisson understands that.
So I think what we will do is deal on that basis, and if it meets
the criteria of the foreign policy elements of the administration we
will make our recommendations based on that, and I leave the Con-
gress to arrive at their own.
It is a hypothetical question, Senator. I recognize that, and I
know you do. And I know this is not the intent of your question,
but what we are getting prior to Sunday's elections, which more
than likely will result in a runoff in late April, is the suggestion
that should those elections result in the victory of Mr. D'Aubuis-
son, Congress is going to appropriate zero dollars for El Salvador.
I do not think, quite candidly, that is the way we should go about
it.
Senator PELL. Naturally, as a democratic power we intend to
accept the results of that election.
Ambassador MOTLEY. That is correct.
Senator PELL. Would that apply to Nicaragua, too? When I asked
Secretary Shultz the same question, whether he would accept the
results of an election in Nicaragua if the government went Com-
munist as a result of it, he demurred about accepting the result.
Ambassador MOTLEY. I do not know why he may have demurred
or not. But let me tell you this. This is the second election in El
Salvador. The last one was viewed by Members of your body and
others. And there will be Members of this body going down to the
next one. They will make up their own minds as to how close a free
and real election it is.
If the Nicaraguan elections ever get to the point in which they
can meet those standards and from what we have heard to date,
there are several gaps in that element, but those elections are still
not coming up until November and we will have an opportunity to
758
.
look at them. If they meet those kind of standards of a free elec-
tion, then we will deal with them like we deal with other govern-
ments.
Senator PELL. I recognize, too, that violence and terrorism is not
the sole monopoly of the right, that it exists on the left, too. I be-
lieve I am correct in saying that five members of the El Salvador
General Assembly, conservative members, have been murdered in
the last year and a half, something of that sort, by the leftists.
So I think we as Americans find the alternatives there pretty
disagreeable, with the majority of deaths being the result of the
right wing death squads or whatever they are called, with more
than enough, a substantial number, being conducted by the left as
well.
Do you see any real improvement? I read the report of the State
Department on human rights, but how would you measure the im-
provement in human rights in El Salvador?
Ambassador MOTLEY. I would characterize them in a sentence as
a significant, marked improvement from a benchmark of October
1980, which was the first time when we and other groups in El Sal-
vador have kept tabs on them.
The argument comes from the different ways in which the body
counts are done or which civilian deaths are attributable to politi-
cal violence or the so-called death squads and the rest of them. To
try to bring a little clarity to an otherwise confused situation, we
took an average of the varied Salvadoran sources, of which there
are four, and averaged them out, because each one of those sources
is used by different groups, human rights groups in the United
States, religious groups. And if you go back through the record of
this committee and the House, you will find at times those testify-
ing will one time use one source and the next time will use another
source.
So we averaged them all out. The U.S. Government has used one
source continually.
.
759
AVERAGE DEATIIS
PER MONTH
EL SALVADOR
CIVILIAN DEATHS ATTRIBUTABLE TO POLITICAL VIOLENCE
(SIX MONTH AVERAGES)
1.600
1,548
JUN 81
1.500
1,400
:
1,300 -
1,200 -
AVERAGE OF VARIED SALVADORAN SOURCES"
1.100
1.000
900
DEC 81
ACCORDING TO REPORTS IN THE SALVADORAN PRESS
000
700
600
514
JUN 82
500
380
DEC 82
JUN 83
DEC 83
400
300
200
101
100
• SOCORAO JARDICO
COMES
UCA
TUTELA LEGAL
760
Senator PELL. Excuse me. What is the one source you use contin-
ually?
Ambassador MOTLEY. It is the press reports in El Salvador.
Senator PELL. But that obviously would be, I would think, the
least correct of the various sources, because you only have those
that the government permits to be reported there.
Ambassador MOTLEY. Not necessarily, because I think the other
ones are suffering from some of the same inhibitions as the press
might be. Besides, some of the others counted civilian deaths in
guerrilla warfare as part of the death squads.
And so each one has different criteria. That is why we averaged
out the four that were used by all human rights groups in the
United States and religious groups and in El Salvador.
Senator PELL. Excuse me. But you just finished saying you did
not use the average. You use the one source.
Ambassador MOTLEY. No; the U.S. Government uses a separate
source. What I am getting to, Senator-and I will just pass this up
to you; it might be more helpful to you. And I will be quoting from
memory, sir, so you might have to help me on that.
Senator PELL. Thank you for the document.
Ambassador MOTLEY. You will see, on the top line is the average
of the four sources, and the bottom line is the source used by the
U.S. Government. The absolute numbers are not important, Sena-
tor. What is important is that you have seen a dramatic decrease,
no matter how you count it, by all of the sources through Decem-
ber 1983.
Now, what is not reflected on that chart is January and Febru-
ary of this year, because that chart was done up through December
1983. But I think you will agree with me, regardless of which
source you use, that there has been a dramatic drop.
In January and February of this year, if you will take that top
number there, which is the number for December 1983 for the top
line, which reflects 380, in January that number, according to
those same sources, dropped to 273. The bottom line, which has
104, in January that number dropped to 96, and in February it
dropped to 68.
Now, I am not here to defend absolute numbers. All I am trying
to tell you is, no matter whose sources you use, somebody is doing
something right in El Salvador, because the number of deaths are
going down regardless of whose figures you use.
Senator PELL. What were they, did you say, in January 1984?
Ambassador MOTLEY. In January 1984, if you use the top line,
that figure next to 380 would be 273. And the bottom line, which is
104, that figure becomes 96, and we have the figures for February
which would make it 68. We have not averaged out the figures for
February for the top line yet.
Senator PELL. Thank you.
have another general policy question that I am curious about.
It concerns the fate of the people who are released by the guerril-
las. My understanding is that when the guerrillas take prisoners of
war, they release them.
In the past I know the policy of the Salvadoran Government was
to put these people back into uniform and into the army, which
761
would obviously discourage the guerrillas from releasing them in
the future.
I am curious as to what the policy is today, if that has changed.
Ambassador MOTLEY. I do not know the answer to that question.
If Dr. Ikle cannot help me, we will have to get you something for
the record. But those released were those that were not killed by
the guerrillas, and there has been a lot of evidence of their killing
prisoners.
Senator PELL. My question concerns the fate of those who get re-
leased.
Dr. IKLE. I would think whether they wind up in the army would
depend on their age bracket.
Senator PELL. Their age bracket would not have changed more
than a few weeks.
Dr. IKLE. No, but if they are in the category where they are
about to be recruited in any event, that would not stop just because
they were taken prisoner.
Senator PELL. I guess what I am driving at is, should there not
be a policy of not putting them back in the army, because then the
incentive on the guerrillas I would think would be to kill all pris-
oners of war?
Dr. IKLE. I do not think that would make that much of a differ-
ence. The number of prisoners that the guerrillas can release
would not make a substantial difference on the size of the manpow-
er pool from which the army can recruit.
Senator PELL. It might not make a difference in rather grand
terms, but it makes a great deal of difference to the unfortunate
fellow who is either murdered or released. My point is, as a matter
of policy would there not be more of an incentive to release him if
they knew he was not going to be fighting again?
Dr. IKLE. I think it would be worth looking into, and we will get
you an answer as to what the experience has been with people who
are released and to what extent their subsequent recruitment
would have an effect on that.
Senator PELL. Maybe you could, when you obtain the result of
your inquiry, submit that for the record.
Dr. IKLE. Sure.
[The material referred to follows:
GUERRILLA PRISONER RELEASE POLICY
It would be speculative to discuss the effects or implications of retention in the
Salvadoran Armed Forces of government soldiers who were captured and then re-
leased by the guerrillas since there is no national level policy in El Salvador regard-
ing procedures for handling government soldiers who have been captured and subse-
quently released by guerrillas. Disposition of former prisoners is the prerogative of
individual department commanders. In one department, the commander's policy is
to allow the former POW the option of honorable discharge, return to active duty in
the same unit, or transfer to another unit. Another commander has a policy of uni-
formly discharging all former POWs. Some commanders reportedly regard former
POWs with suspicion and prefer to discharge them rather than risk incorporating
possible infiltrators into government units. However, POWs that are returned by
the guerrillas are usually released from further service.
Senator PELL. In the maneuvers that have just ended, the Big
Pine maneuvers, and prior to the Grenadero I maneuvers which
have not yet begun, my understanding from the New York Times
045 0-84-49
762
report is that there are 1,900 American troops in Honduras. Is that
a correct statement?
Dr. IKLE. The exact numbers that are there now I would have to
check. I am not familiar with it.
Senator PELL. Roughly?
Dr. IKLE. Roughly, it encompasses our people involved in training
people, the residual force from the previous exercise, and people
preparing for the next exercise.
Senator PELL. Does that not seem a pretty generous amount of
American soldiers to have in that part of the world, in a country as
small as Honduras?
Dr. IKLE. We have intelligence functions there. We have training
functions there. It is not designed to provide for the defense of
Honduras, but regional operations which are best conducted from
Honduras, like the regional training.
Senator PELL. It would seem to me that you are getting into seri-
ous consideration of the War Powers Resolution.
In connection with the tonnage of weapons flowing into El Salva-
dor, there have been various estimates made. The Department of
Defense estimated that about 5,400 tons of military equipment
have been sent to the Salvadoran Government between January
1981 and January 1982. Now, I think that compares with the esti-
mate of 50 to 200 tons per month in that same period for the guer-
rilla forces. Are those roughly correct?
Dr. IKLE. I think there was a discussion this morning in the
closed session of the intelligence estimates of what the guerrilla
forces received, and of course what the Salvadoran forces are re-
ceiving, we can measure that more accurately in dollars, because
that is the assistance we are providing, rather than the rough
figure of tonnage.
Senator PELL. Because it was in a closed session, I wanted to
draw out what you could say in open session.
Dr. IKLE. Let me get you an answer on that one. I do not like to
try to sanitize intelligence figures on the spur of the moment.
[The information referred to follows:
COMPARISON OF TONNAGES PROVIDED GUERRILLAS AND ESAF
We do not know the total tonnage of equipment provided to the guerrillas by out-
side sources and cannot, therefore, provide a meaningful comparison. We do know
that, through infiltration and capturing, the guerrillas have acquired enough equip
ment to arm 9,000 to 111,000 insurgents with a combination of small arms and crew-
served weapons.
Dr. IKLE. I do know and do recall the overall figure, which is very
important for the region, in that the Soviet Union sends supplies to
Cuba and Nicaragua and from Nicaragua into El Salvador. In
terms of the estimated value of the Soviet supplies, Senator, com-
pared with our supplies, they are seven times larger than our sup-
plies. That is an important figure to recall, and to get a sensing of
the intrusion of Soviet military power into the region compared to
our efforts.
Senator PELL. Also, we have to bear in mind that many of the
guns that we send end up in guerrilla hands.
Dr. IKLE. Unfortunately, some of the arms indeed do end up
guerrilla hands. On munitions, we established, and the detained
in
763
figures were given to you this morning in closed session, that the
guerrillas depend very heavily there on the supplies from Nicara-
gua.
Senator PELL. If it is permissible for those figures to be desani-
tized, maybe you could do so.
Dr. IKLE. Let us get for purposes of this hearing on the record
what we can release in public on these deliveries.
[The information referred to follows:
PERCENTAGE OF SALVADORAN GUERRILLA AMMUNITION INFILTRATED
Although the total amount of ammunition the guerrillas have acquired is not pre-
cisely known, we have been able to track a great deal of infiltrated material; it ap-
pears that the insurgents are receiving 80 percent of their ammunition from outside
sources. The 80 percent figure was made public in an open session on 20 March
1984.
Senator PELL. I think those are all the questions that I have at
this time.
[Pause.
Senator PELL. The chairman is voting. I do not feel authorized to
dismiss you, so I will put the committee into recess for a few min-
utes until he is back from voting.
[Recess.]
Senator HAWKINS (presiding]. I understand that Senator Helms
asked a question which one of you gentlemen would like to answer
for the record. Mr. Morris?
Mr. MORRIS. Yes, Senator, not so much an answer as a comment.
I did not want to delay the chairman when he announced that he
was leaving to vote, but when he was talking with the Inspector
General about the audit on land reform that was submitted, he
quoted from a management rebuttal. Rather than leave hanging in
the air the tone of management's views on that audit, I would like
the opportunity to say just a few words. The Inspector General and
I were continually in contact on a number of management prob-
lems, program problems, including those raised in this report. We
agree on many of the difficulties that were cited in that report, but
on the other hand, we do have some serious disagreements as to
some of the research methodologies, the statistics used, and sam-
pling techniques, and most importantly, perhaps, an area where we
feel the tone ignored the enormous accomplishment that has been
achieved in the face of great difficulties.
But as the Inspector General himself pointed out, he felt that
was a sort of policy judgment that went beyond the scope of the
audit, so I am not sure we even disagree about that.
I would also like to say, Senator, I do not know how long this
panel will be on, but by its very nature it will have to be fairly
brief and general. I realize we are going to be followed by platoons
of other panels, some of which no doubt are going to be replete
with anecdotes. I would hope that I can respond for the record to
what the subsequent panels may be saying about our Agency's pro-
gram.
Senator HAWKINS. You are taking a great responsibility on those
young shoulders.
Now, I have some questions for the panel. As you know, Florida
has been the destination for thousands of Haitians fleeing serious
764
economic conditions in their country. It is my view that many of
the conditions that the Kissinger Commission found as causes for
the problems in Central America are also present in Haiti. In addi-
tion, I understand that some of the Haitians fleeting Haiti in boats
land in Cuba, where they are often indoctrinated with propaganda
for a period of time and then put back into the water and pointed
back to Haiti.
Given these potentially explosive circumstances, why is our aid
to Haiti roughly one-half of that to the Dominican Republic?
Ambassador MOTLEY. Jay, would you take that?
Mr. MORRIS. Thank you very much. [General laughter.]
Senator, as you know, in Haiti, because of the difficulties with
government institutions and their capacities to administer some-
times technically arduous projects, we primarily work through pri-
vate and voluntary organizations. They, too, by their very nature,
impose a sort of natural constraint on our programing abilities,
and so I would say that it is the management of the programs
there that are forced upon us by circumstances that to a degree cir-
cumscribe our ability to increase aid there dramatically beyond its
present levels.
Ambassador MOTLEY. The allocation, if I might, Senator, of aid
between countries is always not only a difficult chore, but one in
which there is spirited debate between different countries. I think
that your question merits a more substantive answer, and we will
provide it to you in writing with regards to the levels of aid and
why they are as they are.
Senator HAWKINS. As I am sure you are aware, these two coun-
tries have roughly the same size population. They share the island
of Hispaniola, yet Haiti has twice the population density and less
arable land, and is in very serious economic straits, otherwise Flor-
ida would not be receiving so many Haitian refugees.
Bolivia has been governed by three separate administrations in
the past 3 years. Each has promised to undertake major efforts
against Bolivian narcotics traffickers. In August 1983, the current
Bolivian Government signed four agreements with the United
States which have the long-term objective of reducing coca cultiva-
tion to levels needed for just legitimate use.
At the same time, Bolivian coca production remains the source of
about half the cocaine entering the United States. The fiscal year
1985 budget calls for a continuation of substantial narcotics control
assistance to the Bolivian Government, $5.5 million. What justifies
the continued high level of assistance, and do you believe that the
President of Bolivia has a greater commitment to combat narcotics
traffic here than his recent predecessors? Third, does he have the
backing of the Bolivian military in his effort for eradication? Mr.
Motley?
Ambassador MOTLEY. To arrive at your question, Senator, I think
first a lot of our aid goes to help in the eradication and the inter-
diction of drugs, and I think removing the aid removes that ele-
ment of it. I do not consider that to be an option that would be a
preferred one. I think you have hit the nail on the head in your
opening statement in which you mentioned a number of govern-
ments in a short period of time. That would indicate to most people
1
765
that we are not talking about a government whose roots go down
throughout the country, certainly not for a long period of time.
I can tell you that in my discussions with our Ambassador to Bo-
livia, Ambassador Corr, that he, on a continual basis is in contact
with the President and other members of the Government, point-
ing out these four agreements, pointing out how they are of impor-
tance to us, and the questions such as you have raised do come up,
if in fact, targets are not met with regard to the interdiction and
eradication of drugs.
Senator HAWKINS. As I understand it, about half the proposed
funds for Bolivia are earmarked for drug eradication. Is that cor-
rect?
Ambassador MOTLEY. I do not know, but I will get those figures
for you. I came here prepared for Central America, but I will get
the figures for you. 1
Senator HAWKINS. And could you give me the status of the U.S.
crop eradication agreement that we have with the Bolivian Govern-
ment also?
Ambassador MOTLEY. Yes, ma'am, I will give you all the informa-
tion that we have.
Senator HAWKINS. And what results have been achieved, and
what do you project as the maximum achievable reductions during
1984, this calendar year.
Ambassador MOTLEY. Yes, ma'am.
Senator HAWKINS. Finally, what will these funds be used for if
the crop eradication program is not fully implemented? And what
has it been used for?
Ambassador MOTLEY. Yes, ma'am.1
Senator HAWKINS. I have a series of questions on Colombia,
Mexico, and Peru. Would you like those in writing?
Ambassador MOTLEY. We can do it either way. I am happy to
report to you that just 2 days ago in Colombia-it may have been
more than 2 days, but it is not more than 5 days—there was a sig-
nificant bust of cocaine, probably one of the largest. I cannot re-
member the exact figures, but I believe it was something like
15,000 pounds, somewhere in the nature of 15,000 pounds in Colom-
bia. It was a very significant bust.
Senator HAWKINS. Was that marihuana or coke?
Ambassador MOTLEY. It was cocaine, and some paste, too, I be-
lieve.
Senator HAWKINS. Did you say 15,000 pounds?
Ambassador MOTLEY. Yes, ma'am, 15,000 pounds.
Senator HAWKINS. Colombia exports more than half of the co-
caine and marihuana consumed in the United States. During the
past few years their coca cultivation has skyrocketed. We may be
interdicting it and seizing it, as you have just stated, but do you
know how much coca was cultivated in Colombia 4 years ago?
Ambassador MOTLEY. No, ma'am, I do not.
Senator HAWKINS. Would you provide that for the record?
Ambassador MOTLEY. Certainly.1
1 See page 1020.
766
1
:
1
Senator HAWKINS. Does the Government of Colombia know the
location of the major cultivations of marihuana and coke?
Ambassador MOTLEY. I am sure that they have a good idea of
some of it, because obviously if they were able to make a bust of
that magnitude, that evidences an ability to be able to go to the
sources, but whether they have total knowledge, I do not know. It
is obviously a question of resources. Again, it is one on which we
are working with the Colombian Government.
Senator HAWKINS. The United States and Colombia have signed
an extradition treaty. Has the Government of Colombia ever hon-
ored an American request for the extradition of a Colombian citi-
zen on drug trafficking charges to your knowledge?
Ambassador MOTLEY. We have had some differences of opinion
with the Colombian Government with regard to extradition. As to
your specific question, whether they have ever honored that, I will
have to get the answer to you.
Senator HAWKINS. During the past 3 years, the United States has
provided $24 million in direct assistance to Colombia, and multilat-
eral banks to which the United States is a major contributor pro-
vided $1.5 billion to Colombia in low interest or no interest loans-
that is an awful lot of money-while Colombia is continuing to
expand marihuana and coca cultivation, and rejects our extradition
treaty.
In your opinion, has Colombia been a good investment for U.S.
taxpayers?
Ambassador MOTLEY. I think if you add up all of the interdiction
that has taken place and the busting of the source of it, that is a
lot less drugs that potentially could have entered this country. I
think it is difficult to put it on a balance sheet basis, but I think it
is fair to state that it is the position of this administration that it is
worthwhile to continue to work with the Government of Colombia,
including the aid that is being provided to them, in this very, very
necessary and tough fight against drugs that enter the country.
Senator HAWKINS. We have twice the amount of coke on the
streets of Miami than we had before we put the task force into
place, and it is half the price, so I would say Colombians are ship-
ping much more than they have ever shipped before, because we
have interdicted $12 billion worth around our shores.
Ambassador MOTLEY. I understand that the worldwide produc-
tion of coke has gone way up, and that is one of the reasons that
you are seeing so much of it, and probably the reason why the
price has dropped so dramatically. I guess even in the drug trade
there is a certain element of market forces at work.
Senator HAWKINS. Mexico has the most ambitious crop eradica-
tion program in the region, employing helicopters to locate and de-
stroy poppy and marihuana fields. It is estimated that eradication
has reduced the amount of Mexican heroin in the United States by
more than 50 percent from its peak in 1975.
Since 1973, the United States has contributed over $76 million to
Mexican efforts to eradicate and interdict marihuana and poppies.
What have been the dividends for the United States on this sizable
investment?
"717
1 See page 1020.
767
Ambassador MOTLEY. As you pointed out, the eradication pro-
gram in Mexico probably has been the most successful one in this
hemisphere, and as you pointed out a little earlier, there has been
a considerable amount of eradication. I do not have the exact fig-
ures on it, but it is certainly the most successful one that we have
had in this hemisphere.
Senator HAWKINS. Have we learned any lessons in Mexico that
we could apply to Colombia?
Ambassador MOTLEY. We learn lessons every time on those. Each
country is different. The terrain is different. Obviously it is easier
to get helicopters to Mexico than it is to Colombia. Maybe the level
of training for the maintenance of helicopters may be easier in
Mexico than it is in Colombia. There are many different factors,
but I am sure that those things that we learned in Mexico are
freely passed on. There is a tremendous crossflow of information
within our Drug Enforcement Administration with regard to all of
these eradication programs.
Senator HAWKINS. Yes; I work with them on a daily basis, and
the big thorn in their sides are Colombia, Peru, and Bolivia. Mexico
has been an outstanding example along with Turkey. Those are the
only two countries I can think of. We gave the Colombians five hel-
icopters to observe and to eradicate, and I am told-I sent someone
down to look-they use the helicopters to lift the bales of marihua-
na in Colombia. They are stamped “Colombia.” They are so proud
of it, they stamp their country's name on the side of it. And we
have interdicted shiploads of it, and we find out they are using the
helicopters we sent them to eradicate, to lift the bales and put
them in the ships.
It seems to me something must be done to get Colombia's atten-
tion.
Ambassador MOTLEY. I think so. You have a different problem in
Colombia than you have in Mexico, and that is this. There is evi-
dence that the guerrilla groups in Colombia are using the drug
business as a way to fund their resources, so what you have is a
cross between the insurgent guerrilla activities and the drug trade
there. It complicates the issue.
Senator HAWKINS. In Peru, which is the source of about half the
world's supply of coca, the government approved and began eradi-
cating in mid-1983, pursuant to an assistance agreement signed
with the United States, and estimates that eradication will expand
fivefold during 1984. A key coca producing area is in the High
Sierra area of central Peru, and the Peruvian Government has
started a coca control program with AID assistance, and a rural de-
velopment program in the valley.
Could you tell me what is the status of that effort?
Ambassador MOTLEY. I certainly will.
Senator HAWKINS. Excuse me. Would those who wish to talk
aside from our witnesses please talk outside in the hall?
Please continue, Mr. Motley.
Ambassador MOTLEY. I can tell you that there is a geographical
difference in the highlands there in which the ability of helicopters
to get up to that altitude and operate is more limited than that
which you find in the lowlands, and that may be a problem in
768
Peru. However, I will get you the specifics that you have asked
for. 1
Senator HAWKINS. All right. I will submit some other questions
to you on Peru also.
Ambassador MOTLEY. There is one tangential thing that you
might want to keep in mind, and that is that Peru has been the
beneficiary of rather large amounts of Soviet military assistance,
including the providing of the helicopters. The initial helicopters
that were provided to them, Soviet helicopters, could not operate at
a higher range. I am sure that through the Soviet military assist-
ance, there is an enthusiasm to dedicate some of their wherewithal
to fight drugs that will eventually end up in the United States, and
I think that is something for us to keep in mind when we talk
about military assistance to the different areas.
Senator HAWKINS. The Caribbean continues to be a primary
transit area for the movement of elicit narcotics into the United
States, and as a result the Coast Guard has stepped up its interdic-
tion efforts in south Florida and the Carolina coastal region. Ja-
maican growers continue to export large amounts of marihuana to
the United States. Why have you proposed no narcotics assistance
to Jamaica?
Ambassador MOTLEY. I do not know the answer to that question.
I think it is a question of putting what resources we can eke out
among the different countries. It may be that Jamaica from a pri-
ority point of view may have missed the cut, but I will take a look
at it for you.
Jay, did you want to add to that?
Mr. MORRIS. We are not providing the level of assistance that we
do in Peru, but in my visit there I met with narcotics control offi-
cers, and there are some modest efforts under way, but as the Sec-
retary pointed out, the allocation problem, as was the case in an
earlier question, in the Caribbean is always a difficult one, with
many factors to weigh. We will give you the most detailed explana-
tion we can for the record.
Senator HAWKINS. The INM Bureau is supposed to oversee diplo-
matic initiatives to combat international narcotics trafficking.
What has the Bureau done in the past year to address the serious
problem of offshore banking in the Caribbean which is used to
launder and shelter narco dollars?
Ambassador MOTLEY. We will ask the Assistant Secretary from
INM to provide you a full report on that.
Senator HAWKINS. Thank you.
I see that Senator Helms has returned.
Senator HELMS (presiding]. Thank you.
Senator Murkowski.
Senator MURKOWSKI. Thank you, Mr. Chairman.
Dr. Ikle, I would like to inquire about the charge that U.S. arms
shipments to Salvadoran forces are getting into rebel hands. Is that
an extraordinary amount of arms that in fact is getting into the
hands of the rebels, or is it sensationalized by our news media and
not of an extraordinary and significant nature?
.
1 See page 1020.
769
Dr. IKLE. It is, in my judgment, not extraordinary. The Salvador-
an insurgents do not use large amounts of very advanced equip-
ment. They do not use tanks or aircraft. The aircraft that they use
come out of Nicaragua and fly in at night to drop off supplies and
go back to Nicaragua
In El Salvador itself, it is explosives and munitions and rifles,
such things as those, and some of these pieces of equipment that
they can, of course, capture when they overrun a government posi-
tion. The important thing is that the munitions, the continuing
flow of munitions to a large extent, is by far the largest percentage,
and we have briefed this morning on a classified basis our exact
estimate. The largest percentage of the munitions come in from
Nicaragua, not through capturing U.S. supplies with government
forces.
Senator MURKOWSKI. So speaking for the Department of Defense,
you are satisfied that the charge is actually built on probably the
captured arms during the overruning of government positions, and
the charge is without substantiation that our military assistance in
the form of munitions and arms is not falling into unauthorized or
rebel hands?
Dr. IKLE. I think that is contradicted on munitions by our best
estimate that by far the bulk of munitions has to come in through
Nicaragua, and is coming in that way. That is not to say that it is
very regrettable if any piece of our equipment winds up in insur-
gent hands, and we in our training and working with the Salvador-
an Government forces have to make sure that they do everything
to prevent that.
Senator MURKOWSKI. The charge has been made that the Salva-
doran troops are not effectively using the arms that we are sending
down, that they have not learned to use them. In your opinion, is
that true; does it have any justification?
Dr. IKLE. We had some reason, Senator, for dissatisfaction early
last year and still last summer. Since then, there has been some
new leadership and better use made of the training that we have
given the forces. With perhaps one temporary exception, the people
that we trained have performed exceedingly well. We also are satis-
fied with the overall national plan that the military leadership of
El Salvador developed, which, of course, combines the effort to es-
tablish military security in areas with the followup effect of eco-
nomic development and consolidation.
Senator MURKOWSKI. I have one last question, Mr. Chairman,
and I would appreciate a couple of the witnesses addressing this
issue. Basically, we are in a situation when the perception in the
minds of the American people of the whole Central American situ-
ation is very clouded with information, misinformation, charges,
countercharges, questions of not enough aid, too much aid, and not
going to the right place. I think the mentality is along the lines of
a mini Vietnam. How long is it going to be?
It has been said before this committee in the past that Ameri-
cans are looking for a quick fix, a response within a reasonable
timeframe. Can you, for the benefit of this committee relate, based
on your analysis of what we are doing in relationship to what you
have recommended, give us a timeframe within which we might
see our contribution and indeed our energies lessen, and within
770
which this whole situation might be resolved from the standpoint
of stability within that country, allowing us to change our aid from
military aid to economic aid?
Can you give us any idea of how long we are going to have to live
with this dilemma in Central America; that we cannot abandon it,
that we have to continue our contribution because the stakes are
too high? I agree with those statements, but by the same token,
when will it end?
Dr. IKLE. It is precisely because of that kind of concern that we
want to end the phase of warfare and violence so as to begin the
economic development which led most of the Kissinger Commission
in their recommendations and the President to propose to Congress
the profile of military assistance levels that is now before you, step-
ping up through the supplemental in this year, already less in
1985. We have not provided definite figures beyond 1985, but the
idea is that the requirement for military assistance would decrease
as the national plans of the Salvadoran Army make progress and
the guerrilla threat comes under increasing control, so that you
will have then perhaps a more diminishing long-term guerrilla
problem.
Senator MURKOWSKI. What is long-term in your opinion?
Dr. IKLE. Well, long-term as you now have in some other coun-
tries in the region, it is serious but it does not require the level of
military effort that we have in El Salvador.
For example, there is a terrorist problem in Colombia that has
been flaring up again.
Senator MURKOWSKI. Are you suggesting that it is going to be
something that we are going to have to prepare to live with for an
extended period of time?
Dr. IKLE. Well, in Colombia, we have had a terrorist problem for
an extended period of time. In Venezuela, the terrorism has been
brought pretty well under control. It was very serious at one
period.
Senator MURKOWSKI. But I think the perception of the American
people was that that problem was removed from our immediate
frontier
Ambassador MOTLEY. And the source of terrorism there has not
been the source of directed enormous amounts of U.S. aid or even a
significant portion of that aid. I think, Senator, to go back to your
original question, over the years from 1981 through 1984 it is a fair
statement to say that that which the administration has requested
in military assistance for every dollar of military assistance is $3 in
economic assistance, so the balance is there in that sense.
Second, of that money that has been requested since 1981 for
military assistance, the Congress has voted in many cases much
less than half, so what you get is a degradation in the system over
a period of time. I would envision that the military assistance nec-
essary to bring some kind of order as far as active guerrilla war-
fare as opposed to just terrorism or isolated acts of terrorism,
would be of a much shorter nature than the necessity for the eco-
nomic assistance, because the problems in El Salvador with regard
to the political, social, and economic problems, did not come up yes-
terday, and they are not going to go away tomorrow.
771
So, from an economic point of view, and that is one of the rea-
sons that we are inviting other donor countries to get involved,
over a period of time you will have to get first back to the level of
where they were. Today the GDP [gross domestic product), for in-
stance, in El Salvador, the personal GDP is at a level where it was
in 1963.
Senator MURKOWSKI. So you have to bring it up.
Ambassador MOTLEY. You have to bring it back up to this level
in order to go on. To answer your question generally, I would say
given the levels of military assistance that have been requested in
the past and not fulfilled, and given the levels that we have asked
for this time, if they are fulfilled, you will see the necessity for
military assistance go down, but you will have to have a continuing
need economic assistance in order to get out of these very deep
problems that they face.
Dr. IKLE. This is a very important question which is before Con-
gress. If Congress cuts back again, Secretary Motley reminded us,
by half or so, the request for military assistance, then without
question the military battle will be prolonged, warfare will be pro-
longed, and economic recovery cannot take off.
Mr. MORRIS. If I could just add an item on the economic side, as
Secretary Motley pointed out, the problems on the economic front
did not begin with the insurgency financed from the outside. They
have been neglected for a very long time, as the bipartisan commis-
sion pointed out.
All we are really doing is recognizing the level of need that has
long been there, although it has been exacerbated by the conflict,
but there are some encouraging signs on the economic front that
despite the terrible conditions under which we are attempting to be
of assistance, progress has been made. The decline in E Salvador
GDP that was rather precipitous over the last 4 years has halted,
and the data indicates that there is a slight upturn this year.
The same thing is true after a shorter decline in Costa Rica. We
believe that the indicators are that the level of assistance we are
proposing is reasonable to the need, that the results already indi-
cate progress is being made, and while it is not going to be a quick
fix-unfortunately, the American impatience with quick fixes does
not fit an untidy world, but I do think there is every reason to
hope that with persistence and long-term commitment to provide
psychological reassurance and stability, we will get there, and that
we are already on the move.
Senator MURKOWSKI. Mr. Chairman, I see my time is up, but in
view of the fact that I have been unable to get a time frame out of
the administrative representatives, which I would recognize is
pretty impossible, I would reflect again on a point that was made
in the testimony. Ambassador Motley's formal statement addressed
the question are we seeking a military solution in El Salvador?
And the answer was "No."
As the President said a year ago, the real solution can only be a
political one, and we have a long way to go. You support your
statement by the recognition that if aid were cut substantially, we
will go back even further. So I assume you are saying to the Ameri-
can people that we are in Central America with programs of assist-
ance and military aid for a long, long period of time, and unless we
772
are there in that capacity, we can expect a significant collapse of
Central America as we know it today. I take it that you are not
prepared to indicate whether we are talking about 3 years, 5 years,
7 years, or a decade. Is that correct?
Ambassador MOTLEY. That is correct. Given the levels which the
administration has asked for and receives, it is a problem, quite
candidly, with military appropriations. Given the levels that are
asked for, the tail of that assistance will be economic. However, as
Dr. Ikle pointed out, if you are going to nickel and dime it, it will
just keep moving along slowly.
Senator MURKOWSKI. Thank you, Mr. Chairman.
Senator HELMS. Thank you.
Senator Pell.
Senator PELL. Mr. Chairman, I have one point of detail. Senators
Dodd, Bingaman, and I sent a letter on February 3 to the adminis-
tration asking for review of the problems of diversion and misuse
of our economic assistance to El Salvador, and asking the Inspector
General to conduct a study of it. Did you receive that letter, sir?
Mr. BECKINGTON. I do not recall receiving it, sir.
Senator PELL. Let me, if I may, give you another copy. It is still
dated February 3, and I request that it be acted on as soon as possi-
ble.
Mr. BECKINGTON. Yes, sir.
Senator PELL. Thank you.
Senator HELMS. Gentlemen, you are 1 hour and 55 minutes older
than you were when the hearing began. I am sorry you got caught
up in the working mechanism of the Senate. Without objection, if
the committee will indulge me, Mr. Martin Dagata was here a
minute ago. Is he still here? Would you take a seat at the table,
please? I want to ask you just a couple of quick questions, and then
we will release this panel.
Mr. Dagata, you have been AID mission director to El Salvador
for almost 2 years.
STATEMENT OF MARTIN DAGATA, MISSION DIRECTOR IN EL
SALVADOR, AGENCY FOR INTERNATIONAL DEVELOPMENT
Mr. DAGATA. About a year and a half, Senator.
Senator HELMS. About a year and a half. Have you ever in your
capacity during that time counseled the Salvadoran Government
on any of the policies that I have been discussing here this after-
noon, the advisability of land expropriation, the advisability of na-
tionalizing the banks, the possible barriers to the markets invited
by the nationalization of the export industry, the political hazards
of one party controlling a major sector of the agriculture through
the phase 1 collective farms, any of those things? Did you ever give
them any advice on this?
Mr. DAGATA. Senator, since I arrived in El Salvador, I think the
major decisions have been made in terms of the direction that they
were moving in in those areas. I have had some conversations in
the area of coffee, the foreign trade expropriation in coffee, in fact,
to determine whether it would be useful for us to become involved
through technical assistance, some kind of advice.
773
In that area, I came to the conclusion that it would not. The
leadership of the new organization INCAFE shortly after I arrived
was put into the hands of a person that I think many consider and
I consider to be extremely competent, a coffee grower himself, who
is himself opposed to the action taken to create INCAFE, and who
had some, I think, interesting ideas on the problems that INCAFE
faced that I think were better handled by himself and his col-
leagues than any kind of assistance that we could provide.
In the area of agrarian reform, the question was very much a
matter on phase 3 of trying to complete the objectives that had
been set out for that reform. That, Senator, was a daily task that
consumed a tremendous amount of energy on the part of my own
staff and on the part of Salvadorans involved in that process. On
phase 1, there were several problems.
The problems that were cited by the Inspector General's report,
many of which we agree with, had been cited earlier by the Chec-
chi evaluation, which we commissioned. These problems again, I
think, took a great deal of energy on a daily basis from all of us in
El Salvador.
I think there are a lot of questions that can be asked about the
design of the reform. We have asked them, but in terms of trying
to make a process work, in terms of credit, getting credit to people
who need credit who do not get it on time at times, who do not get
enough, in terms of getting technical assistance to them to help
them diversify their production, these are the requirements. These
were perceived by us to be the requirements of the day.
We think that there has been under the circumstances quite a
bit of success in many ways which I could elaborate on if you like
in those reforms, both phase 1 and phase 3. Agriculture in El Sal-
vador, in a lot of developing countries, Senator, as you know, has
its difficulties today. When we compare the agricultural nonreform
sector with the reform sector, as best we can-the data are some-
what difficult-we think they are not doing that badly in the
reform sector.
We see some very serious problems on the horizon, some of them
that are with us or with them right now that need resolution, but
in terms of the possibility of a redesign of that program at that
point, when there were so many suspicions about the motivations
of people who were involved in the administration of the program,
for example, it strikes me in retrospect as possibly having been
counterproductive.
Senator HELMS. I must confess that I am kind of surprised at
your answer, and to be honest, I am disappointed, because what
you are saying to me is that you never once talked to these folks
about the advantages of what you and I proclaim to be the system
in all of the history of mankind, the free enterprise system,
Now, I could take it item by item, you know. You talk about the
farming. What has happened to the exports since they were nation-
alized? What has happened to farm production? The question about
using U.S. taxpayers' money to pay off or remunerate the people
whose land was seized, that sort of thing, did you never discuss
that?
Mr. DAGATA. I am sorry if I was not complete in my answer. We
have discussed that at length, Senator.
774
Senator HELMS. With whom did you discuss it?
Mr. DAGATA. We discussed it with the Government of El Salva-
dor, and as a matter of fact, we encouraged them to use their own
funds to meet their obligations.
Senator HELMS. I know, but I am talking about—well, let me put
it this way. If we tried to impose upon the people of the State of
Florida or the State of Rhode Island or the State of North Carolina
what we are insisting upon in El Savaldor, blood would run in the
streets of all three States.
Mr. DAGATA. I agree with you, Senator.
Senator HELMS. That is what we are talking about. We are forc-
ing them to do things which are totally incompatible with what we
say we believe in. Do you agree with that?
Mr. DAGATA. I agree that it would not be appropriate in the
State of Florida to pursue what is being pursued in El Salvador.
Senator HELMS. Or North Carolina. And I can guarantee you
that those farmers down there would be after you with a machete.
Mr. MORRIS. Senator, if I may add, the administrator in his testi-
mony before you on February 29 pointed out that he had discussed
these items with President Magana roughly 6 months ago, express-
ing some concern about some of the difficulties faced as a result of
the state marketing board and some of the problems in the way the
land reform program was designed.
I might also, if I might respectfully, take some issue with our
forcing them to do the things they are doing, as you know, those
reforms were enacted in March 1980, and they are a fact of life in
another sovereign country, but if you are asking, are we discussing
with them the flaws in this system as we find it, the answer is, yes,
sir, we are, and for Senator Pell, who asked the Inspector General
about the letter of, I think, February 3 or 4, sir, the mails must be
going astray both ways, because there is a reply dated February 28
which my staff supplied me, and I will be happy to give that to you
for the record.
Senator HELMS. Mr. Morris, let me say to you that culpability is
not just in the executive branch. I have heard it said here in the
U.S. Senate that unless they adopt this land reform, which is sei-
zure of land, we are not going to support them. The distinguished
chairman of this committee in all good faith, and he is my friend
and colleague, and all the rest of it, has said over and over again
boastfully, that the land reform is a part and parcel and the na-
tionalization of the banks and the nationalization of the exports.
Here we are saying, and I am including the Congress in that, we
are saying to the Salvadorans, you take this or else. No wonder
they are confused.
Mr. MORRIS. Well, Senator, I cannot speak for the chairman of
the committee and any comments he might make obviously about
bank nationalization or whatever, but I want to clarify one point.
We are certainly committed to the principle of ownership by the
mass of the people of the land in the country.
I think one of the reasons for the instability that the left has so
successfully exploited is the fact that 1 percent of the population
owned 40 percent of the arable land. We are not, however, in the
business of structuring that reform in a particular way, at least not
775
at the time it was originally enacted. We are now faced with a situ-
ation that we think we have to make workable.
We are discussing with them how to make it more effective and
more equitable, but we are certainly not opposed to the general
concept of having the land more widely held. I think we both prob-
ably would agree with that. It is a question as to the mechanisms
that are being used, and we share your views about some of the
problems with the mechanisms in place now.
Senator HELMs. You had better look at the statistics in this coun-
try about what percentage owns what percentage of the land, and I
think you will back up a little bit from that statement.
Well, there is no more time for debate. I thank all of you for
your patience, and I apologize for keeping you here for so long, but
it is one of those things that we could not help. Thank you all very
much.
Ambassador MOTLEY. Senator, may I please make one comment
on an earlier remark? In your initial questioning, we discussed the
death of Bishop Romero and allegations as to who may or may not
have been involved in the murder. I would just like to point out to
you that in testimony before the House Foreign Affairs Committee,
the allegation was made or allegedly it was made-I am basing this
on newspaper reports—the allegation was made that the State De-
partment covered up and that there were cables that were kept
from the Congress.
The facts of the matter are these, Senator. The two cables in
question were provided to the House Foreign Affairs Committee in
May 1983 at their request, and new copies were sent to the com-
mittee this past February. They are classified cables. They have
been there since then. State Department officials also testified in
May 1983 on the subject.
And as to the allegation of coverup, obviously, we think they are
totally baseless. I would just point out to you that that committee,
having been in possession of the documents, having had a classified
briefing, if they had felt there was any coverup, I would think they
would have stepped forward in that period of time.
I just wanted to clear the record on that.
Senator HELMS. Fine. Thank you, gentleman, very much.
We will move on now to the second panel.
[Pause.]
Senator HELMS. The Chair now will call: Dr. Rufus Waters, pro-
fessor of management economics at Wake Forest University; Dr.
Jacqueline Kasun, professor of economics, the University of Califor-
nia at Humboldt; Mr. John T. Plunket, president of the Association
of American Chambers of Commerce in Latin America; and Mr.
William Goodfellow, Center for International Policy; and Wayne
Smith of the Carnegie Endowment.
If you gentlemen and lady would come forward, please.
[Pause.
Senator HELMS. May we ask our audience to maintain a modi-
cum of order, please.
The second panel consists of five public witnesses. As I have indi-
cated, Prof. Jacqueline Kasun is a development economist from the
University of California. Dr. Rufus Waters is professor of manage-
ment economics at Wake Forest University in North Carolina.
776
Until last month he was chief economist at AID. Mr. Plunket is
president of the American Chambers of Commerce in Latin Amer-
ica. And Mr. William Goodfellow is an economist for the Center for
International Policy. Mr. Wayne Smith, of course, is associated
with the Carnegie Endowment for International Peace.
Dr. Kasun, since you are listed first we will call on you first. It is
nice to have you.
I believe it would be advisable for you to pull the microphone up
very closely.
STATEMENT OF JACQUELINE R. KASUN, PH. D., PROFESSOR OF
ECONOMICS, HUMBOLDT STATE UNIVERSITY, ARCATA, CALIF.
Ms. KASUN. Senator Helms, I would like to express some con-
cerns about the inclusion of population assistance and increased
levels of population assistance in the programs for Central Amer-
ica.
The Central American situation has been rightly described as a
crisis. I do not believe I need to elaborate on that for the benefit of
the committee.
The five little countries of Costa Rica, Honduras, Nicaragua,
Guatemala, and El Salvador could all fit together into the State of
California, but they have 4 million fewer people than California.
Their problems with political unrest, now so skillfully exploited by
Cuba and the Soviet Union, stem from the import substitution
strategy of economic development which they have all used since
the 1950's.
This method, which was greatly favored by the multilateral aid
agencies as well as the U.S. Agency for International Development,
subsidized rapid industrialization by means of foreign aid and do-
mestic taxes on agriculture and exports. It entailed comprehensive
government planning of investment and thus, of course, endless ri-
valries among the little countries, and government allocation of re-
sources, together with extensive exchange controls and price con-
trols.
Thus, the little countries of Central America, each of them no
bigger than Los Angeles County or the San Francisco Bay area,
have been using separate price and exchange controls, restricting
their imports from one another, and restricting the movement of
labor from one country to another.
In all of the many countries where this strategy of import substi-
tution has been tried, it has induced the rapid growth of capital-
intensive city industries, which offer few jobs, often in excess of
demand or raw materials supply, and it has created poverty and
unemployment in the rural countryside which pays the taxes to
subsidize urban industrialization.
It encourages corruption in the new Government planning offices
and exacerbates inequality. Thus, it creates the seeds of social and
political unrest. In addition, Central America has recently suffered
from increasing oil prices and the effects of the world depression
on exports.
In response to these problems, U.S. AID has since the mid-1960's
insisted that Central America, along with other countries receiving
our foreign assistent, must control its supposedly excessive popula-
777
:
tion growth. Posting, as Richard E. Benedick, State Department Co-
ordinator for Population Affairs, has put it, that controlling popu-
lation is a “matter of urgent global priority,” that “the ‘right to
multiply indiscriminately represents a misplaced morality," AID
has poured millions of dollars into the Pathfinder Fund, the Popu-
lation Council, Planned Parenthood, the Association for Voluntary
Sterilization, the U.N. Fund for Population Activities, and related
agencies in Central America.
In 1978, AID inserted sections 102 and 104(d) into the Foreign As-
sistance Act to require that countries receiving our aid must dem-
onstrate a commitment to population control.
These strong statements and forceful actions do not represent
the consensus among development economists. The assumptions of
the population control lobby have been strongly criticized by many
distinguished economists. The fact is that world resources are fully
adequate to permit economic development and comfortable living
standards for all peoples.
Less than half of the Earth's arable land is in use and yields
could be increased many times over. World agricultural resources
are capable of feeding 10 to 25 times as many people as now live on
Earth, using present methods. Supplies of industrial metals and
energy are not running out, but are increasing:
The world's entire population could be settled in the State of
Texas with a large suburban home with front and back yards for
each three-person family and all the rest of the world would be
empty.
Investment depends not on the birth rate, but on opportunities
for the efficient and profitable use of economic resources. Countries
which offer these opportunities will attract investment capital, and
the data show that countries with rapidly growing populations
have achieved just as high rates of investment and equal or better
rates of output growth as compared with countries having low pop-
ulation growth.
In Central America, land and other resources are abundant, and
my testimony includes a table showing population densities in Cen-
tral America, showing that they are lower than in many of the
Northeastern States of the United States.
The area of Central America, however, is in desperate need of
relief from arbitrary Government economic planning. It needs the
kind of economic efficiency that develops spontaneously in free
markets. It is not families who are out of control in Central Amer-
ica, but Government planners.
There is resistance to AID population control in Central Amer-
ica, as there has been throughout the world. Chris Hedges in the
Christian Science Monitor of January 13, 1984, described the bitter
response of El Salvadorans to AID's sterilization drive, which uses
a quota system to achieve more than 20,000 sterilizations a year in
that country, reportedly without adequate provisions for voluntary
consent.
AID's Richard Benedick has reported extensively to Congress on
the "sensitivity" of these programs and the opposition to them on
the part of foreign peoples. One of the first acts of the Sandinista
government in Nicaragua was to close the despised AID birth con-
trol clinics. Similarly, soon after the United States ignominious
34-045 0484-50
778
ejection from Iran, the Khomeini government made the same sym-
bolic gesture, closing the AID-financed birth control clinics.
The response of AID and its client agencies in the population
control network to what they admit to be widespread resistance is
to try harder, to spend more money, and apply more leverage, to
increase the populaton control effort now in Central America by
100 percent.
Such fanaticism must not be allowed to dominate or use our for-
eign policy. The United States needs secure peace in Central Amer-
ica, not an AID sterilization drive, to be defended and promoted at
the risk of our sons' lives.
Thank you.
[Ms. Kasun's prepared statement follows:
PREPARED STATEMENT OF JACQUELINE R. KASUN
The Kissinger Commission correctly describes the situation in Central America as
a crisis. In an area that is on the American mainland, within a few hundred miles
of the United States, an area that lies athwart our vital Caribbean sea lanes and
that surrounds the Panama Canal, a pro-Cuba Soviet Marxist government is en-
trenched in Nicaragua. This government is directing and supporting insurgency
throughout the area. Guerrilla war has raged in El Salvador for four years, killing
thousands, displacing a tenth of the population, and destroying many public serv-
ices. Cuba, massively armed with sophisticated Soviet equipment—three squadrons
of Mig-23's, helicopter gunships, assault helicopters, transport aircraft, Foxtrot sub-
marines, a Koni-class frigate, minesweepers, and landing craft, as well as a base for
nuclear submarines at Cienfuegos-now delivers 15,000 tons of arms a year to Nica-
ragua, for re-export to the insurgents in El Salvador, Guatemala, and other coun-
tries of the region.
The vital security interests of the United States require that Central America not
serve as a military base for the Soviet Union. Moreover, we must assure this fact
without pinning down a significant part of our military forces in the region. Noth-
ing would serve Soviet interests better than to divert the United States from its alli-
ances and commitments in Europe and the Middle East by a conflagration in Cen-
tral America. At the same time, it is by no means certain that the United States
can bring security to Central America, however much money and effort we are will-
ing to give. The Kissinger Commission frankly stated that to do this we will need
excellent policy, a great deal of cooperation from Central Americans, and much
luck. We are no longer the only great power; we face serious constraints and the
rivalry of a major hostile power in all areas of our foreign policy.
The five little countries of Costa Rica, Honduras, Nicaragua, Guatemala, and El
Salvador could all fit together into the state of California, but they have four mil-
lion fewer people than California. Their problems with political unrest, now so skil-
fully exploited by Cuba and the Soviet Union, stem from the import substitution
strategy of economic development which they have all used since the 1950's. This
method, which was greatly favored by the multilateral aid agencies as well as the
U.S. Agency for International Development, subsidized rapid industrialization by
means of foreign aid and domestic taxes on agriculture and exports. It entailed com-
prehensive government planning of investment (and thus, of course, endless rival-
ries among the little countries) and government allocation of resources, together
with extensive exchange controls and price controls. Thus the little countries of
Central America, each of them no bigger than Los Angeles County or the San Fran-
cisco Bay Area, have been using separate price and exchange controls, restricting
their imports from one another, and restricting the movement of labor from one
country to another.
In all of the many countries where this strategy of “import substitution" has been
tried, it has induced the rapid growth of capital-intensive city industries (which
offer few jobs), often in excess of demand or raw materials supply, and it has cre-
ated poverty and unemployment in the rural countryside which pays the taxes to
subsidize urban industrialization. It encourages corruption in the new government
planning offices and exacerbates inequality. Thus it creates the seeds of social and
political unrest-what the Kissinger Commission in classic understatement, calls
the situation of "flux” and “transformation.” In addition to these effects of a wrong-
779
headed development strategy, Central America has recently suffered from increas-
ing oil prices and the effects of the world depression on exports.
In response to these growing, multiple problems created by misguided central
planning for development and unfavorable world economic conditions, the U.S.
Agency for International Development has since the mid-1960's insisted that Central
America, along with all other countries receiving our foreign assistance, must con-
trol its supposedly "excessive” population growth. Positing, as Richard E. Benedick,
State Department Coordinator for Population Affairs, has put it, that controlling
population is a “matter of urgent global priority," 1 that “the 'right' to multiply in-
discriminately represents a misplaced morality,”.? and that "strenuous efforts will
be required to reach the two-child norm,” 3 AID has poured millions of dollars into
the population control activities of the Pathfinder Fund, the Population Council,
Planned Parenthood, the Association for Voluntary Sterilization, the U.N. Fund for
Population Activities, and related agencies in Central America. In 1978 AID insert-
ed Sections 102 and 104(d) into the Foreign Assistance Act to require that countries
receiving our aid must demonstrate a commitment to population control. This, of
course, is the basis of those so-called “requests” for “population assistance” which
AID reports from countries receiving our aid. They are required to "request” popu-
lation assistance.
These strong statements and forceful actions by AID, however, represent the be-
liefs of a rather small, but superbly organized and well-financed (with U.S. Govern-
ment funds) special interest group. They do not represent the consensus among de-
velopment economists. The assumptions of the population control lobby have been
strongly criticized by many distinguished economists, including Julian Simon,
Goran Ohlin,5 Mark Perlman, Peter Bauer,? Fred Glahe, 8 Colin Clark, Richard
Easterlin, 10 and others. The fact is that world resources are fully adequate to
permit economic development and comfortable living standards for all peoples. Less
than half of the Earth's arable land is in use, and yields could be increased many
times over. World agricultural resources are capable of feeding 10 to 25 times as
many people as now live on Earth, using present agricultural methods. 11 Supplies
of industrial metals and energy are not running out but are increasing. 12 Ridker
and Cecelski of Resources for the Future have said that "in the long run, most of
our metal needs can be supplied by iron, aluminum, and magnesium, all of which
are extractable from essentially inexhaustible sources.
Known world coal reserves are sufficient for a thousand years of use, possibly two
thousand. 14 The world's entire population could be settled in the State of Texas
with a large suburban home with front and backyards for each three-person family,
and all the rest of the world would be empty.
There is no economic evidence, though many economists have searched for it, that
rapid population growth retards the growth of the gross national product or re-
strains investment. 16 Investment depends not on the birth rate but on opportunities
"113
1
Prepared Statement of Ambassador Richard Elliott Benedick before the Subcommittee on
International Economic Policy and Trade Committee on Foreign Affairs, U.S. House of Repre-
sentatives, February 29, 1980.
2 Ibid.
3 Testimony of Ambassador Richard Elliott Benedick before the Foreign Relations Committee,
April 29, 1980.
Julian L. Simon, "The Ultimate Resource," Princeton University Press, 1981.
5 Goran Ohlin, "Économic Factors in Population Growth," in Ansley Coale (ed.), “Economic
Factors in Population Growth," John Wiley, 1976.
6 Mark Perlman, "Population and Economic Change in Developing Countries: A Review Arti-
cle,” The Journal of Economic Literature, Vol. XIX, No. 1, 1981.
? Peter Bauer and Basil Yamey, "The Third World and the West: An Economic Perspective,”
in W. S. Thompson (ed.), "The Third World: Premises of U.S. Policy," San Francisco: Institute
for Contemporary Studies, 1978.
8 Fred R. Glahe and Dwight R. Lee, "Microeconomics: Theory and Applications,” Harcourt
Brace Jovanovich, 1981, pp. 188–193.
9 Colin Clark, "Population Growth: The Advantages," Santa Ana: R. L. Sassone, 1972.
10 Richard A. Easterlin, "Population," in Neil W. Chamberlain (ed.), Contemporary Economic
Issues, Richard D. Irwin, 1973.
11 Roger Revelle, “The Resources Available for Agriculture," Scientific American, September
1976, pp. 165–178; Clark, op. cit.
12 Simon, op. cit.
13 Ronald G. Ridker and Elizabeth W. Cecelski, “Resources, Environment, and Population:
The Nature of Future Limits," Population Bulletin, Vol. 34, No. 3, August 1979, p. 29.
14 Clark, op. cit., p. 10; Ridker and Cecelski, op. cit., p. 26.
15 Francis P. Felice, "Population Growth," the Compass, 1974.
16 Simon, op. cit., Ch. 13, and "Economics of Population Growth,” Princeton University Press,
1977, Chs. 4 and 10; Nick Eberstadt, "Population Control and the Wealth of Nations: Implica-
Continued
780
for the efficient and profitable use of economic resources. Countries which offer
these opportunities will attract investment capital, and the data show that countries
with rapidly growing populations have achieved just as high rates of investment and
equal or better rates of output growth, as compared with countries having low popu-
lation growth.17
In Central America, land and other resources are abundant. The area, however, is
in desperate need of relief from arbitrary government planning; it needs the kind of
economic efficiency that develops spontaneously in free markets. It is not families
who are out of control in Central America but government planners.
There is resistance to AID population control in Central America, as there has
been throughout the world. Chris Hedges in the Christian Science Monitor of Janu-
ary 13, 1984 described the bitter response of El Salvadorans to AID's sterilization
drive which uses a quota system to achieve more than 20,000 sterilizations a year in
that country, reportedly without adequate provisions for voluntary consent. In a
country where "death squads” operate widely, is it realistic to expect that a sterili-
zation drive, promoted with all the diplomatic and financial leverage of AID, should
observe the niceties of true voluntarism?
The Agency for International Development is well aware of the resistance which
its population control programs elicit in many countries; AID officials have spoken
frankly about it. Richard Benedick has reported extensively to Congress on the
“sensitivity” of these programs 18 and the “lack of commitment” 19. and “opposi-
tion'
” 20 to them on the part of foreign peoples. One of the first acts of the Sandi-
nista government in Nicaragua was to close the despised AID birth control clinics.
The Sandinistas declared that from now on birth control was to be the private busi-
ness of citizens and not the business of the government. 21 Similarly, soon after the
United States' ignominious ejection from Iran, the Khoumeini government made
this same symbolic gesture, closing the AID-financed birth control clinics which had
spearheaded the movement for population control in Iran.22
One AID memorandum of 1982 frankly stated that all support for these programs
would collapse if the United States stopped financing them and forcing them as a
condition for receiving our aid. 23 It is reported in Mexico that the price which the
Mexican Government had to pay for International Monetary Fund assistance in
solving its recent balance-of-payments crises brought on by misguided economic
“planning” was to agree to a vigorous drive for population control.24 The Mexican
Government is now committed to reducing population growth to 1 percent per year
by the year 2000; this implies a limit of two children or less per family, depending
on how soon Mexican families comply with the program to reduce births.25 AID has
stated that the “sensitivity of population programs” is so great that it is desirable to
use the "multilateral agencies”-in Mexico's case, apparently, the IMF-
gates for AID itself in many cases. 26
-as surro-
HOW BAD IS THE SO-CALLED POPULATION PROBLEM IN CENTRAL AMERICA
The countries of Central America are neither very crowded nor very poor in com-
parison with other places, as the following table shows:
tions for American Policy,” prepared for Under Secretary of State for Security Assistance, Sci-
ence and Technology, Washington, D.C., Nov. 24, 1981.
1? Ibid.; Clark, op. cit.; Jacqueline R. Kasun, “A Consideration of the Cost-Effectiveness of
Population Assistance in U.S. Foreign Aid Programs,” 1982, prepared for the Under Secretary of
State for Security Assistance, Science and Technology, Washington, D.C.
18 Benedict, op. cit.
19 Ibid.
20 Ibid.
Population Reference Bureau, Intercom, March 1980.
22 Population Reference Bureau, Intercom, March 1979, p. 13.
28 AID, “Rationale for AID Support of Population Programs,” January 1982.
24 Alfonso Bravo Mier, “Report on Mexico's Situation in Relation to the Defense of Life,”
Comite Nacional Pro-Vida, A.C., September 15, 1983.
25 Ibid.; John S. Nagel, “Mexico's Population Policy Turnaround," Population Bulletin, Vol.
33, No. 5, December 1978.
26 AID Briefing Paper, June 20, 1981. p. 4.
781
Persons per
Country or State
GNP per capita,
dollars 1981
square mile 1982
Central America........
Honduras.......
El Salvador ...........
Nicaragua.........
Guatemala
Costa Rica.........
California........
India.........
China.............
Republic of Korea .......
West Germany.
Japan ...
New Jersey
Rhode Island
121
84
574
47
163
112
151
570
285
1,080
643
825
986
898
NA
600
650
860
1,140
1,430
NA
260
300
1,700
13,450
10,080
NA
NA
Source: Population densities from "Statistical Abstract of the United States," 1982–83; GNP figures from World Bank, World Development Report
1983.
The response of AID and its client agencies in the population control network to
what they admit to be widespread resistance is to try harder--to spend more money
and apply more leverage. Benedick insists that "the United States should seek to
keep the population problem at the forefront of the world's agendas" and that we
should "assign ... a population officer in the staffing of every Embassy where popu-
lation factors are important" 27—that is, of course, in his view, everywhere.
Moreover, the drive for population control in countries receiving our aid is only
one of the goals of the population activists in the Department of State. State Depart-
ment Document NSSM 200, classified in 1974 and not declassified until 1980, clearly
states that population control is to prevail also in the United States:
“Constructive action by the United States will further our objectives. To this end
we should: Urge the adoption of specific population goals including replacement
levels of fertility for DCs and LDCs by 2000. After suitable preparation in the
United States, announce a U.S. goal to maintain our present national average fertil-
ity no higher than replacement level and attain near stability by 2000.” 28
The document furthermore states that, to attain these goals, “mandatory pro
grams may be needed.” 29 In the meantime the population activists seek now to in-
crease their bitterly resisted programs in Central America by exploiting the need
for emergency assistance in that troubled region.
Bizarre as it may seem, the plain fact is that the foreign policy of this great
nation has been, is being, used — taken hostage” may not be too strong a term-by
a very special interest group with a monomaniac world view, the belief that what it
calls “overpopulation" is at the root of all human problems and that the United
States must lead a world crusade against population, regardless of cost. Such fanati-
cism must not be allowed to dominate or to use our foreign policy. The United
States needs secure peace in Central America, not an AID sterilization drive to be
defended and promoted at the risk of our sons' lives.
The United States is not the ruler of the world. We are operating under serious
constraints in Central America and elsewhere. We cannot afford to antagonize large
numbers of the population in such a sensitive area as Central America with its
innate vulnerability to insurgency and civil war. There is, of course, no difficulty at
any time in hiring people to carry out ADD sterilization campaigns or in bribing gov-
ernments to request" such "assistance.” In so-called "model" programs conducted,
according to AID's own statements, in China, Indonesia, and elsewhere throughout
the world, population controllers have brought their techniques of individual and
group pressure applied in the so-called "village system” to a high state of effective-
30 And the directors of such programs can put the money we give them into
ness.
28 Testimony of Ambassador Richard Elliot Benedick before the Foreign Relations Committee,
April 29, 1980.
28 NSSM 200, "Implications of Worldwide Population Growth for U.S. Security and Overseas
Interests," December 10, 1974, declassified on December 31, 1980, p. 19.
29 Ibid., pp. 118–119.
30 AIDAČ Cable (State 017208), sent to all AID Missions, January 1977; Statement of Dr. Alex-
ander Shakow, Assistant Administrator, AID, before the Select Committee on Population, 95th
Cong. 2d Sess., May 2, 3, 4, 1978, No. 8, Vol. II, pp. 171-172; AID Memorandum for Assistant
Continued
782
I
Swiss banks and prepare to flee when our cause has been defeated. But such things
do not serve our national interest.
AID's population control programs create antagonism where we need trust and
friendship. They magnify the costs of our legitimate efforts to achieve secure peace.
They anger our friends and comfort our enemies. In the interests of our own securi-
ty, we should eliminate the population control funds from the Central American aid
bill, terminate all so-called population “assistance” from all of our foreign aid pro-
grams, and repeal Sections 102 and 104(d) of the Foreign Assistance Act.
Senator HELMS. Next is Dr. Rufus Waters, professor of economics
at Wake Forest University, and I have already identified his previ-
ous connection.
How do you like Wake Forest?
Mr. WATERS. I love it. It is an absolutely delightful place.
Senator HELMS. Well, they had the misfortune of having me to
go to school there. But back in those days Wake Forest was at
Wake Forest and not at western Salem, and they started using
electric lights the year after I left. [Laughter.]
Dr. Waters, we are glad to have you. You may proceed.
STATEMENT OF ALAN RUFUS WATERS, PROFESSOR OF ECONOM-
ICS, WAKE FOREST UNIVERSITY, FORMER CHIEF ECONOMIST,
AGENCY FOR INTERNATIONAL DEVELOPMENT, WINSTON
SALEM, N.C.
Mr. WATERS. Thank you, sir.
Senator, I see this as being the very basic problem of a flawed
system, run, unfortunately, by competent people, even ethical
people. But if the structure is indeed faulty, then the outcome is
inevitably bad.
First of all, I would be so fundamental as to suggest that develop-
ment is a pervasive, long-run process, where multitudes of people
are involved in doing their own thing. It is untidy. If administered,
it is badly handled. It is a messy business.
It is a business of atmosphere and euphoria and success, but
nobody gets up in the morning saying, today I will develop eco-
nomically. They get up saying, today I will make a buck for my
family or for myself, and I will pursue a new and exciting idea.
None of this hangs well with the organizing mind, with what
have been called the regnant clerisy, the people who have a pro-
clivity for deriving their rewards from administration. Therefore, I
would like to suggest that we have basic problems here and that
trying to tidy up the operations of the system may be in fact self-
defeating.
Since people respond to incentives as they perceive them and as
they desire them, it is very difficult indeed for an outsider to struc-
ture a set of incentives which will induce people to pursue what
they conceive to be their own good, and we have 70 years of demon-
stration in this century alone that the idea of externally structured
rewards do not produce the kind of results we anticipate; they
produce stagnation and stolid boredom.
There is absolutely no evidence that I am aware of that aid by
government officials-and incidentally, I would always refer to gov-
.
Administrators, Mission Directors, AID Representatives and Principal AID Officers, June 11,
1980; National Security Council, “U.S. International Population Policy,” Fourth Annual Report
of the NSC Ad Hoc Group on Population Policy, April 1980.
783
ernment officials, not governments. I never took a government to
lunch, but I have met with many officials. So I would rather talk
about the personalities of the officials.
Aid by officials to other officials, there is no clear evidence that
that produces economic development, permits the untidy, rambunc-
tious behavior that we think of as development. Aid, in fact, may
even retard the emergence of the untidy developing society. There
is some evidence to that effect.
I believe that we should ask, or rather we should demand, more
convincing arguments from those who want to give U.S. taxpayers'
savings to the officials of the poor and usually nondemocratic na-
tions. The burden of proof must lie with the advocates of govern-
ment official to government official aid, and U.S. officials who in
turn derive their
livelihood from that activity.
The burden of proof must not lie with those who would in fact
question such activity. And this leads, of course, to the next point,
and that is that in the cult of what the British journal the Econo-
mist-as an Irishman, I do not like quoting British journals, but oc-
casionally I am forced to—what the Economist refers to as "ethic-
speak. " This is the language used to disarm critics: How can you
deny a decent life to the poor from your huge bounty? Heavens, I
see starving children; we must to their aid go.
I find that kind of argument insulting and repugnant, because of
course the real issue is that we are not transferring aid from our
bounty to the poor. We are transferring it from our bounty to the
officials of these benighted nations, as I have suggested.
In fact, we have been accused of throwing money at problems,
but that is ludicrous. We have not thrown money at problems, but
we have thrown money at officials in control, we have thrown
money at our own consultants and our own universities. Had we
thrown the money at the poor we might see a different outcome. I
would love to hear this widely discussed, but for some reason those
who have an interest in the system do not seem keen to do so.
Another fundamental point worth making is—and again, as an
Irishman I am well aware of this—that revolutions and coups are
not the automatic result of absolute or even relative poverty. They
are the work of professional revolutionaries, highly energetic,
clearly visible groups, to whom we owe nothing and from whom we
are due an answer to the question. Will your society be more open
and flexible and prosperous and humane than the present one if it
is allowed to evolve over the same time period?
The people who in fact generate revolutions, people identified by
such fine authors as Edward Luttwack in his handbook on "How to
Overthrow Your Government. Coup D'Etat"—these folks hate the
cooperative and self-directing nature of pluralistic open capitalist
societies.
I suggest that we get away from the idea that somehow nations
in poverty and nations oppressed rebel. Tell that to the Irish of the
1840's. They did not rebel then. They rebelled in 1798, and again in
1860's and again in 1916, in periods of relative prosperity.
Collectivism does not work. We do not have to talk about that.
All the evidence is out there. We are debating arcane models if we
think it does.
784
.
Land reform is a word loaded with virtue and mired in failure. I
suggest that, rather than trying to reform the land, which never
did me any harm, we try to find out, would it not be better to
reform the markets through which land is supposed to change
hands and move into its more effective occupation?
Again, I think it may be disingenuous, but I see the language as
being cultivated and used to obscure. Market reform, perhaps.
Legal reform, no.
Remember always, I pray, Senator, that the cost of any activity
such as the relaxation of a control or regulation will be borne by
those presently within the system, whereas what we are seeking to
do is induce more active, intelligent, energetic people to enter the
system. Relaxation of regulation brings others in, hurts those who
have lived the protected life.
I am somewhat afraid that, given the flawed system as I see it,
that a massive expansion of the number of dollars that we pour in
through this very, very tight-necked funnel of officials, any in-
crease in that is going to inevitably, no matter how good the will
on any side, going to result in substantial dissatisfaction as we see
our funds-and by that I mean the money which we are forced by
the tax laws to save-going to activities which we ourselves would
not countenance.
Finally, what can we do? I think we have an absolute right to
demand that those who accept our money be required at the same
time to dismantle some of the state monopolies, dismantle some of
the marketing boards and the other invidious organizations which
we have advised them to set up. On a one to one basis: We will give
you more money if you will do this; to eliminate above all else the
manipulation, as the Jamaicans do so exquisitely well, of exchange
rates so as to transfer wealth from the poor to those at the top.
Thank you, sir.
[Mr. Water's prepared statement follows:
PREPARED STATEMENT OF ALAN RUFUS WATERS
U.S. AID TO CENTRAL AMERICA
Our foreign aid program to Central America is basically flawed. Good and compe-
tent people may operate the program, and we may introduce complex techniques to
increase and extend control of what occurs, but the basic system is wrong. I would
therefore like to make a series of fundamental points about the role and the likely
effectiveness of foreign aid in general, and about Central America in particular.
Economic development
First, economic development means more of whatever people want. It is a perva-
sive, sustained, and long-run process of change. It means increased productivity,
new services and goods, and new ways of doing things. It means ordinary people
perceiving and grasping opportunities to better themselves and their families. It is
an untidy, seemingly disorganized, and usually rambunctious process. It is easily
killed by the tidy hand of the planner and the administrator.
Second, for economic development to occur there must exist the freedom for any
individual to participate, and the incentives for individuals to accept and overcome
the agony and the risk of change. Furthermore, the incentives must be what people
themselves perceive as incentives, and not what some official or outsider believes
that they should want for their own good. Finally, economic development will occur
where people are allowed and encouraged to form voluntary coalitions and compa-
nies for mutual gain. And, where the legal system makes it easy for people to go
into business with the blessing of the law.
785
Foreign aid
There is no clear evidence that a transfer of assets from our government officials
to government officials of poor countries (GO-GO aid] causes, or even permits, the
process of economic development to get under way. There is, on the other hand,
strong evidence the GO-GO aid may be a continuing hindrance to the process of eco-
nomic development.
We should demand more convincing arguments from those who want to give the
U.S. taxpayers' savings to the officials of the governments of poor and universally
undemocratic nations. We have been in the GO-GO economic aid business long
enough to be able to draw some general conclusions about its general effectiveness.
Even casual observation should lead a disinterested observer to conclude that those
nations which have prospered have done so largely without foreign aid. And those
who have had the largest gifts of foreign aid have prospered the least.
The burden of proof must lie with the advocates of GO-GO aid, the U.S. Govern-
ment officials whose careers derive from a growing aid program, and the consult-
ants and university faculty who are sustained by aid. The burden of proof should
not lie with those who question the effectiveness and moral propriety of GO-GO aid.
The "ethicspeak" of aid
What a recent issue of the Economist referred to as the "Ethicspeak” of aid is
allowed to disarm critics and produce unwarranted guilt. "How can we deny a small
share of our obvious bounty to the starving children of the poor nations?” the rhe-
torical question is insulting in its implication and ironic since it is usually posed by
those whose actions may well have transfer such wealth to themselves in both pecu-
niary as well as non-pecuniary form.
The question is usually posed by those members of the international regnant
clerisy most eager to see the tax savings of the people of the United States given to
“Third World” government officials. It has only recently been admitted that those
“Third World" government officials can be observed to use the aid for various ac-
tivities which defer the necessity for reform.
And, it is fundamental and totally domestic economic reform within the poor
countries which alone could eliminate the evils which exist. It is purile to say that
starving children have no ideology. Their parents do, and so do the government offi-
cials who rule the poor nations and knowingly follow policies which cause and
permit hunger and scarcity.
We are in the process of transferring abroad the conviction of the left wing in this
country that no one is to blame for their own circumstances or their own actions.
This is not only at odds with the deeply held convictions of a vast majority of our
own society, it is the path to economic failure and stagnation.
It is too late to try and blame external forces for the failure of the currently poor
countries to permit economic growth. We must not be bashful about calling the situ-
ation the way we really see it. If we cause offense to those in authority who exploit
their own people for personal gain, so be it. Our current sensitivity about offending
the people in control of the aid receiving nations does us no credit and them little
good.
We must demand
We have every right to demand that those who willingly take our
taxpayers sav-
ings be required to conduct certain immediate and visible reforms. They should be
required to dismantle at once the marketing boards and other state monoplies
which we in our ignorance helped them to construct with past AID programs. They
should be required to dismantle the foreign exchange controls and the fixed ex-
change rates which they so obvioulsy use to transfer wealth from their own poor to
the import consuming administrative classes.
The officials in control of the aid accepting countries should also be required to
establish at once a simplified legal system for those who want to get into business
either on their own or as corporate or cooperative groups.
Recent research has shown that the establishment of a legal business, which may
take no more than an afternoon in the United States, takes up to a year in certain
Latin American countries if it is to be allowed at all. Few new businesses have the
capital to sustain them through such a delaying system. One result of this system
may be that people are driven into the underground economy and to illegal activi-
ties. Such is not the way to initiate the process of economic development.
786
Coups and revolutions
A major and regular justification for massive social manipulation of the AID
client countries is that failure to do so will result in revolutionary change to our
disadvantage in the global conflict between Soviet communism and the Free World.
The argument is used to justify such wild goose chases as “population policy”
where there is not even strong evidence, let alone proof, that high rates of popula-
tion growth or high population densities are related to proverty per se. All we have
is the abstract reasoning of the cloistered clerisy on the subject, coupled to the
casual observation of travelers in poor nations. The attitude of our AID program
officials in this respect reminds this author of his time in the British Colonial Serv-
ice in Africa during the early 1950's. It is pure elitism.
The seemingly plausible assertion that there is a relation between poverty and
revolution is also used to justify United States taxpayers funding what amounts to
socialism in aid receiving countries. Our money is given to those who control the
state monopolies and to centrally controlled “cooperative” farms which are in fact
nothing but soviet style collectives. We even accept the jargon of the far left in
speaking of "The People," and their "Representitives," rather than working with
people in the broad and individualistic sense which underlies our own ideological
commitment to pluralistic capitalism.
Revolutions and coups [the most usual method of changing governments in the
aid receiving world) are not the automatic result of absolute or relative poverty.
They are not the result of efficient political oppression. They are the work of profes-
sional revolutionaries. This point is of particular significance in the light of current
thinking on the subject and the more traditional conclusions of the Kissinger Com-
mission report. In this, as in other aspects, the Kissinger Commission report para-
lells the thinking and the recommendations which governed policy in Iran prior to
that revolution.
To the always highly energetic, and mostly middle class, revolutionaries we of the
United States owe nothing. We are, however, due an explicit answer to the question:
"will your society be more open, more free, more flexible, and more prosperous than
the present one if we allow the present one to continue to evolve?”
Yet our clerisy panders to these people who continue to promise utopias despite
their production of stagnant and authoritarian regimes in every case where they
have seized power.
Socialism does not work
Arcane explanations, complex theoretical justifications, special cases, and "give us
more time” arguments are still used to excuse the visible failure of the collective
society. Socialism does not work. A preoccupation with the redistribution of existing
wealth results in bitterness, fragmentation of society, and failure to create new
wealth.
But we continue to use AID programs to fund abroad activities which would not
be counternanced in the United States. We continue to pour the taxpayers savings
into failed collective agricultural schemes, regional and river basin development
plans, and other projects which have a track record of failure upon failure.
Market reform, not "land" reform
Particularly in El Salvador, we have tied our money and our reputation to the
seizure and collectivization of farms under the unfortunate slogan of “Land
Reform."
I would point out that in El Salvador we back a scheme which forces those who
farm middle-sized farms to sell their land to a government agency at knock down
prices based on their tax returns from a previous era. Not only that, the officials
who control the government pay not with spendable cash, but mainly with bonds
worth only a fraction of their face value. Under these circumstances can we blame
the farmer who fights to hold his land and get one more crop from it before he is
driven out?
And what do the officials we give our AID money do with the land when they get
it? They put it into collective farms under their own control, and the rest they say
that they distribute it to the peasants. They lie.
Giving a man a title to a piece of land is normally considered a simple grant of
that land. But, not when-as in El Salvador—the title is not legally transferred for
30 years. And, not when the land reverts to the officials if the man dies before the
30 years are up. And not when the man cannot use the title for collateral to obtain
working capital for his farm. And not when the average life expectancy of the
people being granted the 30-year title is only 15 years at the most!
787
We are knowingly participating in a charade. It is not enough to say that El Sal-
vadoran officials are proceeding rapidly with the distribution of titles. They are only
playing a game in which we knowingly participate. Worse, we are helping them to
make the damnable process more efficient by our technical assistance.
The fundamental reason for our espousing anything done in the name of "Land
Reform" is that most of us do not realize that what is really needed is not reform of
the land but reform of the markets in which land is traded.
Only when markets are allowed to operate without manipulation by the officials
can land go to those who are able to use it most efficiently for society as a whole.
There is also that minority among us-unfortunately not a clear minority in AID-
who sincerely believe that the market is a pernicious institution and that the pater-
nalism of the socialist in authority is somehow more decent and humane. For such
people mere evidence and history are not enough; it is a matter of faith.
The administrative class
We must recognize that we have created in the past half century a substantial
domestic group which derives its income and its wealth, as well as its sense of self,
from being government officials. Even under the present administration this is an
expanding group.
We have also seen the rise of an international administrative class which is al-
ready a recognized sociological phenomenon. It is high time that we admitted that
these people are normal human beings and not somehow endowed with a superior
morality or with omniscience. They, like us, are capable of charity and caring and
selfless behavior. They are also, like us, motivated in any but the emergency situa-
tion by what is best for their families and their loved ones and themselves.
We must no longer assume that the people who implement our policies are disin-
terested or have the same goals as we do. The career goals of the people carrying
out the distribution of our aid money may differ radically from our intentions. The
giving away of valuable assets is a dangerously corrosive activity as any wealthy
and charitable person will tell you.
Aid is highly fungible. In other words it is a delusion to believe that you can
donate money to the officials of a foreign government for a specific purpose. What
will happen is that the officials will use the money you have provided to release
funds from their budget. They will then go ahead and do what they want with their
own money. It is now seen as a delusion to believe that we can target spending by
officials in a foreign nation. We cannot become another country's welfare agency if
the officials of that country have other uses in mind for our money.
Reality and "political reality"
It has been interesting to observe officials in AID speak of “Political Reality" and
“a lack of Political Will” when the rulers of aid receiving nations refused to act as
they were intended to. Never mind that the incentives were for them to act other-
wise. And it has been an interesting demonstration of constancy of human nature to
observe the same people refusing to recognize failure and repeating the same
projects over and over again in different nations. It may all have something to do
with the fact that to give precedence to the private sector, or even to admit that the
private and the public sectors are not coequals, would lead ultimately to an accept-
ance of the irrelevance of their own lives.
To reiterate, economic development is not an administered activity. Given its
head it has no role for the international civil servant or the Missionaries of the U.S.
Agency for International Development.
The ultimate distinction between a pluralistic capitalist society and one which is
in the hands of the officials is to be found in the pattern and nature of ownership.
Private ownership of the rewards of effort. Our society is based on the right to accu-
mulate, donate, alter, develop, and transfer to one's children the results of your own
thrift and labor.
Within AD such a statement draws the suggestion that one intends a "Crusade”
and the implication of fanaticism. But if our people do not understand the basic fact
of ownership's role, then all else is pointless and they will continue to work with
our tax dollars for the dawn of the collective society in each of the aid recipient
nations.
In conclusion, I recommend that you take a strong line and reject the Kissenger
Commission Report for what it is: a relic of the Latin American School of structur-
alist economics. A relic of the thinking which sought self justification by demonstrat-
ing that the failures of Latin America in earlier decades were the fault of outside
circumstances and malign foreign manipulation. Never was the fault with the offi-
:
788
.
cials in control. Always the solution could be found in the transfer of substantially
increased aid and the creation of more administrative jobs in proliferating agencies.
We must say no to all this. We must refuse to put vastly more money into the
hands of Agency for International Development. AID already has difficulty in effec-
tively managing the funds which it currently distributes in Central America. And
why do we need new groups of civil servants to coordinate the existing groups of
civil servants who oversee Central America? No more international or national
agencies should be created. Those in existence have failed. Less, not more, is what
we should try now.
Instead demand of the leaders in the Central American nations that put aside the
strangling statism which holds their people in bondage and denies the possibility of
vibrant economic change. We deserve reality; not “Political Reality.”
Senator HELMS. Thank you, sir.
Mr. Plunket.
1
1
STATEMENT OF JOHN T. PLUNKET, PRESIDENT, ASSOCIATION OF
AMERICAN CHAMBERS OF COMMERCE IN LATIN AMERICA,
WASHINGTON, D.C.
Mr. PLUNKET. Thank you, Mr. Chairman.
If I may clarify one point, the organization which I represent
here today is the Association of American Chambers of Commerce
in Latin America. There is an American Chamber of Commerce in
each of the Latin American countries, and these have voluntarily
organized themselves into this association.
Our association was one of the organizations which was invited
by the Kissinger Commission to submit its views and recommenda-
tions with regard to U.S. policy toward the Central America area.
After we had conferred with the presidents of the American Cham-
bers of Commerce in Central America and some of the members of
those chambers, we did submit our views and recommendations,
and we were pleased to see how closely our opinions coincided with
the conclusions reached by the Commission.
We were also impressed by the fact that a bipartisan group such
as the Commission, representing a broad spectrum of disparate
views, should be able to reach such near unanimity in the recom-
mendations which it submitted to the President. We hope that that
bipartisan spirit will continue in the Congress consideration of this
legislation.
The proposed legislation is concerned with both the economic
and the political challenges in Central America. I shall discuss pri-
marily the economic aspects. We do not belittle the importance of
the political and military problems. Obviously, unless there is
peace and unless there is an acceptable political ambience, econom-
ic recovery cannot be expected.
However, the 17,000 members of the 21 American Chambers of
Commerce in Latin America are neither politicians nor military
men. They are private sector businessmen, usually either Ameri-
cans resident in Latin America or citizens of the countries in which
they live.
We claim no special expertise in the areas of politics or military
matters. We do claim a great deal of expertise in business enter-
prise and management, in trade and commerce, and in economics
at the practical business level. And, with chambers in six Central
American countries, we represent considerable expertise as to what
life in that area is like.
789
During the 1960's and the early 1970's, Central America partici-
pated in the economic growth and industrialization which was typi-
cal of Latin America during that period. Factories were built, agri-
culture was expanded, jobs were created, infrastructure came into
being. The Central American Common Market was initiated to en-
large markets and create more cooperation and business opportuni-
ties and jobs in these little countries.
But during the latter half of the seventies the picture changed.
Energy prices and interest rates rose, while commodity prices fell.
The developed countries went into recession and established export
markets for Central America were lost or diminished.
Local markets fell off sharply. Plants reduced production or
closed. Jobs disappeared, reducing local markets still further. The
common market organization has become almost dormant. And, by
no means least important, war and terrorist violence have de-
stroyed infrastraucture, plants and work centers.
Today there are many industrial plants which are closed or
which are operating at a fraction of their capacity, and there are
many jobs which have disappeared. The principal reasons are
simple:
The companies lack working capital;
The plants are unable to obtain financing or foreign currency to
import, usually from the United States, needed replacement ma-
chinery, spare parts, raw materials, or components required in
their manufacturing process;
Their local markets have been adversely affected by the deterio-
ration of the economy of the region; and
The plants and the infrastructure upon which the plants depend
have been destroyed or so badly damaged by the terrorist violence
or military activity that plant operation is impractical, if not im-
possible.
In attempting to help provide economic well-being, therefore, we
are not starting from scratch. We are talking first about revivify-
ing an economy, not about creating one where nothing has existed.
That economy urgently needs growth, but first and more urgently
it needs reactivation of what already exists.
In discussing the necessity for economic rehabilitation, the report
of the Kissinger Commission has the following comment:
We recognize that large-scale economic aid alone does not guarantee progress. The
most successful growth efforts in the postwar period, including Central America's
own sustained expansion during the 1960's and 1970's, were led by the private
sector. In these cases government provided appropriate incentives and eliminated
roadblocks, rather than trying to make themselves the engines of growth. This must
be done again in Central America.
We are pleased that the Commission recognized the contribution
of the private sector, and we hope that the Congress, in considering
the proposed legislation, will take into account the capabilities and
the willingness of the private sector to provide assistance in the re-
building of the Central America economy.
Anyone who has ever walked through an Indian market in Cen-
tral America has realized that the Central American is inherently
a private sector entrepreneur and has been one since long before
the arrival of Columbus. His inherent impulse to trade has been
}
790
primarily responsible for the creation in recent years of the new
enterprises to which we have referred.
As capital and markets become available on a sizable scale, the
Central American entrepreneur took very naturally to the idea of
using the capital to produce something to sell in the market and,
incidentally, to make a profit by doing so.
Many of these new enterprises were joint ventures with foreign
partners who provided part of the capital and much of the technol-
ogy and technical expertise. Often part of the financing was provid-
ed by international banks. The participation of foreign industrial-
ists and financiers gave the Central American entrepreneur a more
sophisticated view of doing business.
He learned a great deal about plant management, about person-
nel management, about quality and cost control, and about market-
ing. He also learned that his partners and his creditors expected to
have full and constant access to his accounting records, and that
those records must be complete and up to date at all times and
that they must be examined periodically by independent public ac-
countants.
Both local and foreign businessmen are still interested in Central
America, but obviously it would be difficult for them to justify put-
ting more money into the area under existing conditions. However,
if the objectives of this proposed legislation can begin to be
achieved, if peace can be established, if government policies permit-
ting and encouraging the private sector to operate can be provided,
then the private sector can contribute a great deal to the rehabili-
tation of the Central America economy.
We believe that the best way to provide aid is to provide jobs.
With peace and governmental encouragement, the private sector
can and will participate in providing those jobs.
We urge your prompt and favorable attention to this legislation,
which will benefit both the United States and the friends of the
United States in Central America.
Thank you.
Senator HELMS. Thank you.
The Chair would like to mention that Senator Percy recommend-
ed that we invite you, sir, and I am certainly glad that he did.
Mr. PLUNKET. Thank you, sir.
Senator HELMS. I think that Senator Percy is otherwise disposed
today. There is a little election going on in Illinois.
Mr. Goodfellow, we will hear from you.
STATEMENT OF WILLIAM C. GOODFELLOW, DEPUTY DIRECTOR
CENTER FOR INTERNATIONAL POLICY, WASHINGTON, D.C.
Mr. GOODFELLOW. I appreciate the opportunity to appear before
this subcommittee.
I spent 2 weeks in El Salvador in December researching the aid
program. I want to share with you some of my own research and
some modest suggestions, that I think will limit the corruption and
waste that has plagued our aid program in El Salvador.
In general, I think that the United States should be more gener-
ous in providing foreign aid to Third World countries, especially
concessional foreign aid. However, I think it makes no sense to
791
wait until decades of economic deprivation finally bring on a politi-
cal crisis and only then increase our aid, as we have done in El Sal-
vador. By then it may be too late.
While I am a strong supporter of economic aid, I believe we
should only provide it when we know that it will reach the people
for whom it is intended. Close examination of our aid program in
El Salvador reveals that too frequently this is not the case.
Let me summarize my longer statement, which I hope you will
insert into the record.
Senator HELMS. Without objection, it will be so inserted.
Mr. GOODFELLOW. I want to bring to your attention some of the
instances of corruption and mismanagement and lack of monitor-
ing that have been revealed in the press as a result of three audits.
The first audit was done by the AID's Inspector General, which
said that the price checking unit set up in the central bank in El
Salvador to monitor overpricing of invoices, which is essentially
theft of our aid, that that unit is not functioning in an effective
manner. This report was done in April 1983.
In June 1983, Arthur Young & Co., an auditing firm, did another
report, which confirmed the earlier findings of the Inspector Gener-
al and said that the three Salvadorans in the price checking unit
who are supposed to monitor overpricing might be “susceptible to
pressure and possible intimidation" if they did blow the whistle on
some of the people involved in the theft of U.S. aid funds.
A team from the General Accounting Office was in El Salvador
in December, the same month I was there, and they also revealed
that AID loses financial control essentially the moment U.S.
moneys go into the central bank in El Salvador.
I would submit that these problems have not been taken care of.
For 21/2 years AID has been trying to get control of this problem,
and I do not think it is possible to achieve an eradication, even a
near-complete eradication, of the problem of waste and corruption.
I would like to share with the Senators some suggestions that I
have, modest suggestions, which I think might insure that some of
the money reaches the people for whom it is intended and that the
money achieves the desired results.
I would say, first of all, that only after resolution of the hostil-
ities can a large-scale reconstruction program begin. To launch an
ambitious program to rebuild El Salvador's damaged infrastructure
would be as futile as embarking on a large-scale hotel construction
project in Beirut.
I would like to suggest a number of specific legislative actions.
The first would be to condition economic support fund moneys with
the same conditions that apply to military assistance. I think that
ESF money should be distinguished and separated from develop-
ment assistance and from humanitarian assistance.
I think economic support fund moneys should be viewed as part
of the war effort, and I think they should be subjected to the same
human rights conditions and other conditions that are applied to
military aid. This would increase our leverage on the Salvadoran
Government to move in the direction of establishing democratic in-
stitutions, curbing human rights abuses by the security forces and
the death squads, and pursuing some of the economic reforms that
are so necessary.
792
.
The second suggestion would be to phase out cash transfers. As it
is now structured, the U.S. aid program provides U.S. dollars to the
Government of El Salvador, in the hope that Salvadoran business
people getting the cash from the central bank will spend it on U.S.
goods. Clearly, that has not worked.
I think that a better program would be a commodity import pro-
gram, where we give the Salvadorans the commodities rather than
the cash. This way, at least one opportunity for corruption is elimi-
nated. It does not insure the end use of the commodities, but it is
one step that I think would be useful.
The third suggestion would be to earmark counterpart curren-
cies. The General Accounting Office has made very clear that AID
is not able to adequately monitor the use of counterpart currencies.
I think these currencies should be earmarked for specific uses, es-
pecially currencies coming from the commodity import program
and the cash transfer ESF program, to make sure that they are
being spent for humanitarian assistance, for reconstruction, social
welfare programs, programs to help displaced persons and to help
the victims of the war.
Most of the steps I have suggested have been incorporated into
the House legislation. The House Foreign Affairs Committee's bill,
as I am sure you are aware, has been sidelined until at least after
the election in El Salvador.
Most of these suggestions, though modest, are something that the
committee should include in its own bill. I think that it will move
El Salvador in the direction of the peace and prosperity desired by
the Salvadoran people and the American people, and I think it is
the very minimum that the committee should do to insure that our
money is spent for its intended purposes.
Thank you.
Mr. Goodfellow's prepared statement follows:]
793
PREPARED STATEMENT OF WILLIAM C. GOODFELLOW
DEPUTY DIRECTOR
CENTER FOR INTERNATIONAL POLICY
ON ECONOMIC AID TO EL SALVADOR
BEFORE THE
SUBCOMMITTEE ON WESTERN HEMISPHERE AFFAIRS
OF THE
SENATE FOREIGN RELATIONS COMMITTEE
20 MARCH 1984
Center for International Policy
Washington, D.C.
34-045 0-84-_-51
794
Introduction
I am pleased to appear before this committee on behalf of the Center
for International Policy, a nonprofit research institution based here in
Washington. Don Fraser, former congressman and now mayor of Minneapolis is
chairman of the Center board, and Donald Ranard, a retired senior foreign
service officer, is our director.
I spent two weeks in El Salvador in December, and I want to share with
you some of my own research on the U.S. economic aid program and to suggest
same legislative steps the conmittee might consider to limit the corruption
and waste that has plagued the program.
In general, the United States can and should be more generous in
providing economic assistance to the Third World.
In 1982 we gave only
two-tenths of 1 percent of our gross national product in concessional economic
aid.
Most industrial countries were far more generous.
It makes no sense to
wait until decades of economic deprivation finally bring on a political crisis
and only then sharply increase our aid, as we have done in El Salvador. By
then, it may be too late.
While I am a strong supporter of economic aid, I believe we should
only provide it when we know it will reach the people for whom it is intended.
A close examination of our aid program in El Salvador reveals that too
frequently this is not the case.
795
2
Private Sector Support Program
In fiscal year 1983 $223.3 million or 76 percent of the total U.S.
economic-aid package was used for what the American embassy in San Salvador
calls reconomic stabilization" (see Table 1). The largest component was the
private sector support program, which provided $120 million to Salvadoran
businessmen to import capital and intermediate goods from the United States.
In order to get the U.S. dollars, Salvadoran businessmen must buy them from
the central bank in San Salvador.
The Salvadoran government is then able to
use local currencies generated from the sale of AID-provided U.S. dollars to
supplement its budget. In 1983, one-third of the Salvadoran government budget
was underwritten by the proceeds of U.S. balance of payments support programs.
For the Salvadoran business community, AID's private sector support
program is a great boon for not only does it make otherwise scarce dollars
available, it provides them at an advantageous exchange rate.
If private
.businessmen had to buy dollars on the open market, they would have to pay at
least 4.25 colones for each dollar.
The private sector support program,
however, makes dollars available at the official" rate of 2.5 colones per
dollar, thus providing a 59 percent subsidy.
Investment Plummets
Even with the advantageous exchange rate and tax breaks being provided
El Salvador's business sector, new private investment continues to plumet.
Rather than investing new money in El Salvador, most private sector
businessmen are trying to get money out of the country. Between 1979 and
1981, an estimated $1.1 billion in capital was taken out of El Salvador.
Moreover, some of the dollars being provided by AID's private sector support
796
3
program are illegally diverted to bank accounts in Miami and elsewhere.
Before El Salvador's central bank provides dollars to a Salvadoran
businessman wishing to import capital or intermediate goods from the United
States, the importer must present the central bank with an invoice indicating
the type of good to be imported, quantity and price. Only then will the
dollars be released, usually in the form of a line of credit from a U.S. bank.
Diversion of Aid Funds
Many importers defraud the program by inflating the cost of items they
#
import. They do this by presenting a fake or inflated invoice, or in some
cases by setting up a separate but wholly-owned company in the United States
to buy and then resell at a higher price the item to be imported.
For instance, if a Salvadoran businessman wants to buy $100,000 worth
of fertilizer from a U.$. firm, he presents the central bank with an invoice
for $130,000. Be pays $100,000 to the U.S. supplier and deposits the extra
$30,000 in a Miami bank account.
Because the private sector support program provides dollars at the
advantageous "official" exchange rate, there is an added incentive to divert
them to a bank account in the United States.
The problem has plagued AID for years.
On July 17, 1981 AID sent a
memo to Rep. Clarence Long, chairman of the Foreign Operations Subcommittee of
the House Appropriations Canmittee.
In response to concerns raised by
Representative Long, AID promised to establish in six months within El
Salvador's central bank "a system for price checking of import transactions to
identify and take appropriate action against violations of capital flight
regulation."
797
4
Price Checking Unit
In January 1982 the price checking unit in the central bank became
operational.
On April 20, 1983, AID's Inspector General issued a report on
the private sector support program for El Salvador. The Inspector General's
report concluded, "The price checking unit was not functioning in an effective
manner."
According to the report, of 72.268 import transactions involving
U.S. funds in 1982, only 112, or 0.15 percent, were ever reviewed.
Of those
reviewed, 20 percent were overstated.
In the cautious auditor's language of
the report, "This would appear too high an error factor and would indicate a
need for expansion of the sample."
The Inspector General's report went on to criticize the price checking
unit's insufficient staffing (only three people) and said its record-keeping
and reporting needed "radical improvement." The report did note, however,
that "after reviewing our draft audit report, USAID/El Salvador agreed with
our observations, findings and recommendations."
Arthur Young Report
An even more critical review of the price checking unit's operations
comes from an audit by Arthur Young and Company jointly canmissioned by AID
and El Salvador's central bank. The report, completed in June, 1983,
reiterates the criticisms of the earlier Inspector General's report:
the
price checking unit "is understaffed, inexperienced and has no work plan." It
continues, "None of the analysts have experience in the price checking
activity and they receive little, if any, managerial guidance or direction."
Part of the problem, according to the Arthur Young report, is
bureaucratic, but even if the system could be made to operate effectively, the
atmosphere of terror pervading El Salvador makes implementation difficult.
Referring to the three people in the price checking unit, the report says they
798
5
"might be susceptible to pressure and possible intimidation even if they do
discover invoices that have been overstated."
The report concludes, "A key
question is whether there is sufficient political will, or desire, to enforce
the administrative controls."
In response to both the April Inspector General's report and the June
Arthur Young report, AID recently has argued, "The problem has been taken care
of." When I was in El Salvador in December, I interviewed some twelve AID
officials at the U.S. embassy and was told that diversion of money from the
private sector support program was a serious and continuing problem. One ADD
official acknowledged, "Yes, it's happening. We all know it's happening."
Enforcement has been a problem, I was told, because the businessmen
involved are politically powerful.
GAO Audit
An audit team from the General Accounting Office also visited El Salvador
in December, and they too found AID's monitoring and control of balance of
payments cash transfers inadequate. The GAO team has given verbal briefings
to cammittees of both the House and Senate, but they have not prepared a
written report on their investigation.
According to the GAO team, once aid funds are transferred into El
Salvador's account at the Federal Reserve Bank in New York, "AID's financial
control ceases.
Because El Salvador conmingles funds from Al with other
funds, it becomes impossible to keep track of aid monies.
Moreover, the GAO found that in spite of AID's claim that U.S. funds
are used for productive imports from the United States, "In fact, the money
can be spent anywhere."
The GAO team also found that overpricing was still a problem.
799
6
*Controls to prevent capital flight through over-invoicing of imports are
weak, and allocations have been criticized."
Counterpart Currencies
Finally, the GAO pointed out another problem that the earlier audits
overlooked. The counterpart currencies generated by AID's balance of payments
programs are supposed to be spent on projects and programs specified by AID.
Initially, AID specified how the local currency generated by each of
its programs was to be spent. After that became impossible to track, AID had
to settle for general targets for the use of local currencies generated from
all of its programs.
After its December visit, the GAO team concluded, "AID
does not closely monitor local currency uses.
The aid program in El Salvador is beset with problems:
too much is
spent in the cities, rather than in the countryside where the need is
greatest; political rivalries and bureaucratic red tape severely limit the
Salvadoran government's ability to implement aid programs; and too much aid is
diverted to private bank accounts in Miami and Europe. The most
insurmountable problem of all, however, is the war itself.
The Kissinger
Commission acknowledged that without a "considerable reduction in the levels
of violence," the massive infusion of aid the commission is recomending would
not bring about economic recovery. Capital flight and corruption will
continue as the private sector tries to get money out of the country;
infrastructural improvements will continue to be destroyed; and the economy
will become increasingly dependent on U.S. aid, and more distorted and
unproductive.
800
7
Recommended Canmittee Actions
Only after a resolution of the hostilities is achieved can a
large-scale program of reconstruction and development begin in earnest. To
launch an ambitious program to rebuild El Salvador's damaged infrastructure
would be as futile as embarking on a large-scale hotel construction project in
Beirut.
For the short term, I would like to suggest a number of legislative
actions that I believe will limit, although not eliminate, the corruption in
our Economic Support Fund (ESF) programs and will encourage the Salvadoran
government to adopt policies conducive to econanic development, social and
econanic justice, and democracy.
1. Condition ESF
The conmittee should separate the Economic Support Fund monies from
development assistance and humanitarian aid.
ESF monies, whose primary
purpose is economic stabilization and not development, should be viewed as
part of the war effort and therefore subject to the same conditionality as
military aid. By so doing, we can increase our leverage on the Salvadoran
authorities to eliminate the death squads, curb the police and security
forces' abuse of human rights, implement the economic reforms the U.S. Embassy
has been promoting, and move toward a more open and democratic society.
Unlike most of the Economic Support Fund monies, the much smaller
amounts of development assistance funds and humanitarian assistance for the
most part do benefit the needy and contribute to development.
2. Phase Out Cash Transfers
801
8
The AID Inspector General, the Arthur Young report and the General
Accounting Office have all made it clear that the Economic Support Fund cash
transfer programs, particularly the private sector support program, are open
to abuse. While there is continuing debate over just how much money is being
stolen from the private sector support program, I have yet to hear anyone
claim that no money is being stolen or that the abuses revealed by the three
audits can ever be completely eliminated.
Let me suggest a relatively modest step that will ensure that our aid
monies are spent on imports and not pocketed by corrupt businessmen. Rather
than giving the Salvadoran central bank, and then private businessmen, dollars
in the hope that they will use them to purchase U.S. goods for import, we
should send them the goods directly using a commodity import program (CIP).
Of course this is no guarantee against end-use diversion, but at least we can
be sure that the full dollar amount of our aid is getting into El Salvador
and not being diverted to private foreign bank accounts.
Since it will take some time to get a camodity import program started
in El Salvador, and since CIPs are by nature somewhat slower disbursing than
cash transfer programs, the transition could not begin until fiscal year 1985,
and not be completed until fiscal year 1986.
We have seen effective commodity import programs in scores of
countries around the world; certainly it is not a novel idea.
When corruption is widespread and the central government's ability to
monitor and eliminate abuses is uncertain, a conmodity import program is
preferable to a program that merely transfers cash into the banking system in
the hope that it will be spent for the intended purpose.
3. Earmark Counterpart Currencies
802
9
The General Accounting Office has raised questions about AID'S
inability to closely monitor the use of local currencies generated by AID's
stabilization programs in El Salvador.
The committee should require that AID
designate how local currency from each of its programs will be spent, and
further that local currency expenditures be more clearly monitored.
Moreover, all local currencies generated by commodity import programs
should be deposited in accordance with section 609 of the Foreign Assistance
Act in a special account and made available only for the agrarian reform
program, restoration of public services, assistance for displaced persons, and
other humanitarian assistance.
Most of the legislative steps I have suggested have been incorporated
in the House Foreign Affairs Canmittee's bill, which is now on hold until
after the elections in El Salvador.
I think these measures represent a sound first step in the direction
of restoring our aid program's integrity and insuring that it moves Ei
Salvador toward the peace and prosperity that its own people and the American
people so fervently desire.
803
Table 1
U.S. ECONOMIC ASSISTANCE TO EL SALVADOR
FY 1979 thru FY 1983
($000)
FY 1979
FY 1980
FY 1981
FY1982
FY 1983
Development Assistance
6.917
43,155
32,817
36.773
58.927
Economic Support Fund
9,100
44.900
115,000
140.000
PL-480, Title I
3,000
17,100
27,300
39.000
PL-480, Title II
2.673
3,269
9.077
7,687
21,480
Canmodity Credit Corp.
Guaranty
4,000
27,100
21,310
25,500
Housing Investment Guaranty
9,500
5,500
5.000
5.000
Refugee Program
Disaster Relief
25
2.355
6,256
2.460
TOTALS
9,590
72.049
138,849
219,326
292.367
Table 2
U.S. ECONOMIC AID TO EL SALVADOR (FY 1983)
Percent of
Total
Category
Dollar Amount
76
222,306,000
Economic Stabilization
(balance of payments support)
21.1
61.781,000
Social Development
agricultural reform
35,100,000
health
19.000.000
Salvadoran election program 3,400.000
misc. social development 3,991,000
2.5
Humanitarian Assistance
7,280.000
بين
Other (policy improvement)
1.000.000
TOTAL U.S. ECONOMIC AID
$292,367,000
Source: U.S. embassy, San Salvador
804
Senator PELL. Thank you very much, Mr. Goodfellow.
Now, Mr. Smith.
STATEMENT OF WAYNE S. SMITH, SENIOR ASSOCIATE, CARNEGIE
ENDOWMENT FOR INTERNATIONAL PEACE, WASHINGTON, D.C.
Mr. Smith. Senator, I presented my remarks to be inserted into
the record.
Senator PELL. Perhaps you could give us some of your highlights.
Mr. SMITH. Yes, I will.
I simply wanted to note that I was only told as I arrived this
afternoon that I would be on panel two, rather than panel three.
But it was indicated that I would not have to change my testimony
because, unlike my colleagues on the panel here, I am not an econ-
omist, so my testimony remains the same, and I would give some
highlights.
I think it is no secret that I do not believe the administration's
policies are working in Central America. Three years after they
were implemented, we are further away from either a military vic-
tory or a negotiated solution than ever.
I frankly do not see anything in the Kissinger Commission report
which offers any real answers to the dilemma. I think that it does
at least move in the right direction in recognizing that the turmoil
in Central America is the result of social injustice, economic under-
development, political repression and so forth in the region.
And I, at least in principle, would applaud its recommendation
for increased assistance to the area. I think we would want to
make sure that that assistance were used in the right way, that is
not simply be siphoned off into someone's pocket, or, as is the case
in El Salvador now, that it goes into budget underwriting, which in
effect is ESF
And it simply is not true that three-quarters of our assistance to
El Salvador is economic assistance which helps the people. Much of
the economic assistance is ESF, which goes to the war effort.
But in principle, I would support the recommendation for in-
creased economic assistance, noting however that the Kissinger
Commission report itself states that: “Peace is an indispensable
condition to economic and social development”-in other words,
that without peace the economic assistance is not going to have the
desired impact.
Yet, there is not anything in the report or in the administra-
tion's proposal which carries us any closer to peace. On the con-
trary, the Commission recommends and the administration is now
proposing to escalate the war.
The administration is asking for drastically increased military
assistance, which will be used to arm and train enough men so that
the Salvadoran Army can go from under 40,000 men to 60,000 and
eventually, we are told, perhaps even as high as 90,000 men. And
we are told that the rationale for that is that that will give the Sal-
vadoran Army the ratio of superiority as recommended, I think, by
old Brigadier Thompson, to defeat the guerrillas.
If I thought it would, if I thought that that would win the civil
war and solve the problems in El Salvador, I would applaud. In
fact, I do not think that it is likely to accomplish any such thing.
805
On the contrary, we may be simply digging the pool deeper but
treading water in the same place. Because, as the administration
itself has indicated, the guerrillas have increased in strength from
some 3,000 to 5,000 in 1981 to now 10,000 to 12,000. So that the
more arms we ship in to arm the rapidly escalated or augmented
army, the more arms the guerrillas will capture, the more they
will be able—the more men they will be able to put in the field.
And by the time the Salvadoran Army is up to 100,000 men, the
guerrillas will be up to 25,000 or 30,000, and the ratio will be essen-
tially the same.
We are not going to break the stalemate that way. And I would
note that when I was in El Salvador recently with a group of other
Americans, our senior diplomatic and military officers there ac-
knowledged to us that they had no solid evidence, no concrete evi-
dence, of an arms flow across the border for a very long time. They
deduce that there must be some and there are "reports," but they
have no evidence.
Yet at a time in 1980 and early 1981 when there was a substan-
tial flow across the border, we had no difficulty in coming up with
proof of it, captured trucks and so forth. I would suggest that the
fact that we have not been able to come with anything over the
past 2 years or more would suggest that the flow in fact
is not sig-
nificant, that the guerrillas are acquiring most of their arms from
the army itself and most of their ammunition. Since they acquired
most of the arms from the army, they need the same kind of am-
munition for the arms, for the rifles.
The guerrillas, then, are not getting stronger because of outside
support; they are getting stronger because of the consequences of
the demoralization of the Salvadoran Army, and that is likely to
increase as we try to herd some 30,000 to 40,000 conscripts in short
order into its ranks. The morale problems we have now will be as
nothing compared to those we will have in the future.
I do not think the political strategy is working. I do not think
conditions for elections even exist. The group I was traveling with
in El Salvador had an opportunity to talk to a number of peasants,
who confirmed that they had been called in by the landowners and
threatened with reprisals if they did vote for D'Aubuisson and
ARENA.
I cannot in my wildest imagination imagine that Roberto D'Au-
buisson could represent the will of the Salvadoran people. I think
he can only win through intimidation. But the conditions for in-
timidation are there. I do not think conditions for free choice now
exist in El Salvador.
The fact that the administration itself is concerned over the pos-
sibility that D'Aubuisson may win the elections I think is seen in
the fact that it is trying to push through this $93 million emergen-
cy military aid package in such a short time, trying to get it
through even before the results of the elections are known.
We are told that is because if it is not approved the Salvadoran
Army will run out of ammunition and not be able to protect the
polling places. But Colonel Blandón, the chief of staff of the Salva-
doran
Army, has said that that is not the case, that the Salvadoran
Army will be able to provide security for the elections, in effect,
with or without the $93 million.
806
I would suggest that the administration's real motive in trying to
push the $93 million package through so quickly is that if D'Au-
buisson wins it is perfectly aware .that it will be very difficult to
get the Congress to approve in short order more assistance for El
Salvador.
In short, I do not think either the military or the political strate-
gies proposed by the administration will work. I think in the final
analysis the best hope for a satisfactory solution is through negoti-
ations, diplomacy, and particularly the Contadora process. The ad-
ministration should stop simply paying lip service to the Contadora
process and get behind it.
Meanwhile, with respect to U.S. assistance, in my view nothing
at all should be approved until we know the outcome of the elec-
tions in El Salvador, and if Roberto D'Aubuisson becomes Presi-
dent of the country I think the Congress will want to take a very
careful look at the situation and ask a lot of pertinent questions,
put a lot of pertinent questions to Roberto D’Aubuisson before it
makes a decision as to whether any aid at all should be given to
that government.
But beyond that question is the matter of how effective our aid
can be under present circumstances. And given the Kissinger Com-
mission's conclusions that economic assistance is not likely to
produce the desired results unless peace can be restored, and also
the military assistance will not work unless the recipient govern-
ments curb the appalling excesses of their security forces, I think it
would be nothing but commonsense to attach appropriate condi-
tions to any new U.S. aid. Otherwise, by the Commission's, the Kis-
singer Commission's own logic, we might simply be throwing
money away.
Yes, I would say increase economic assistance, but provided the
Salvadoran Government accompanies our efforts to cooperate with
the Contadora process by itself making a good faith effort to get
down to serious negotiations with the insurgents. It has not done
SO.
And military assistance should be conditioned with improvement
in the human rights area, and I think both things should be moni-
tored by the Congress.
Thank you
[Mr. Smith's prepared statement follows:]
807
PREPARED STATEMENT OF WAYNE S. SMITH
Senior Associate
Carnegie Endowment for International Peace
before the
enate Subcommittee on Western Hemisphere Affairs
U.S. Senate
Washington, D.C.
March 20, 1984
I appreciate the opportunity to appear before the Subcommittee
today.
More than three years after their implementation, this adminis-
tration's Central American policies have succeeded only in making a
bad situation worse.
In El Salvador, for example, we are further
away from either military victory or peaceful solution than we were
three years ago.
President Reagan's policies have failed not because
they haven't been given a fair chance, but because they are poorly
conceived and based on mistaken analysis.
Nor does the Kissinger Commission's report offer any real
answers.
In some ways it does at least move in the right direction.
Its forthright recognition of the fact that the roots of present
turmoil in Central America are to be found in the region's history of
repressive governments, social injustice and economic underdevelop-
ment, is certainly welcome,
What a change from March 21, 1981, when
Ambassador Jeane kirkpatrick was telling us that "revolutions in our
times are not caused by social injustice," and that one could not
808
Page 2
Prepared statement of Wayne S. Smith
March 20, 1984
explain the conflict in Central America as the result of social
injustice!
At least in principle, one must heartily endorse the Commission's
recommendation for increased economic assistance and emphasis on
social reforms to get at the basic causes of the region's insta-
bility--recommendations which are reflected in the proposed legisla-
tion the administration has presented to the Congress.
We would of
course wish to be careful that our assistance be used in such a way
as to really benefit the people of the region--that it not simply go
into budget underwriting and thus be siphoned off into someone's
pocket, or,
as is the case now in El Salvador, used for military pur-
poses rather than economic development.
(The administration's asser-
tion that three quarters of our aid to El Salvador is "economic
assistance which benefits the people is, therefore, simply not
true.)
Further, as the report itself states clearly:
*Peace is an
essential condition of economic and social progress."
Our economic
assistance, in other words, cannot have the desired impact--indeed,
may be wasted--unless peace can be restored to the region.
Yet, there is very little in the Kissinger Commission report,
and
nothing in the administration's proposal, which leads us toward
peace, or, indeed, toward solutions of any kind. Quite the contrary,
the report recommends, and the administration is now proposing, an
escalation of the war.
The administration requests a dramatic
increase in military assistance.
This is to be used to arm and train
809
Prepared Statement of Wayne S. Smith
March 20, 1984
Page 3
enough men so that the Salvadoran army can go from under 40,000 men
to 60,000 and eventually perhaps to the neighborhood of 100,000 men.
It will also be used to provide more helicopters to increase their
mobility.
When this is accomplished, we are told, the Salvadoran
army will have the ratio of superiority it needs to confront the
guerrillas and break the military stalemate.
But is it likely to work out that way? Obviously not.
This
escalation is likely to have consequences exactly the opposite of
what is intended.
First of all, if the higher force levels are to
produce the desired ratio of superiority, we must assume a static
quantity on the other side.
But how can we possibly assume any such
thing?
According to the administration's own statements,
the
guerrillas have increased in strength from some 3,000-5,000 men in
1981 to 10,000-12,000 now.
clearly, the more arms we ship in, the
more the guerrillas will capture, and, thus, the more men they also
will be able to put in the field.
That is the way it has worked in
the past and that is the way it will work now.
By the time the
Salvadoran army numbers 100,000, it will face a guerrilla force of
25,000 to 30,000.
We will have escalated the magnitude of the
conflict, but will not have broken the stalemate.
We will have dug
the pool deeper, but we will be treading water in the same place.
Even worse, rapid increases in force levels may be the prescrip-
tion not for victory but for the disintegration of the Salvadoran
army.
There are already serious morale problems and high desertion
and surrender rates. The Salvadoran army has not fought well--and
84-045 0-84-52
810
Prepared Statement of Wayne S. Smith
March 20, 1984
Page 4
that is an understatement.
Imagine the effect of herding another
30,000 or so conscripts into the ranks in short order.
The morale
problems we have now will be as nothing compared to those of the
rapidly expanded army.
Already there are reports of press gangs.
And remember, the more soldiers who desert and surrender, the more
arms will end up in the hands of the guerrillas.
(And here, if I might digress, I would like to emphasize that the
Salvadoran army is itself the major source of arms and ammunition for
the guerrillas.
When I was in El Salvador recently with a group of
other Americans, the most senior diplomatic and military officers in
our Embassy acknowledged to us that there has been no concrete evi-
dence of arms coming in from the outside for a very long time.
They
"deduce" that some must be, and they have the usual sheaf of uncon-
firmed "reports," but they have no tangible evidence.
Yet, at a time
in late 1980 and 1981 when there really was a substantial flow of
arms
across the border, we had no difficulty in coming up with all
kinds of proof--captured trucks laden with arms,
etc.
The fact that
in the last three years we have not been able again to produce that
kind of evidence suggests that external support is in fact insignifi-
cant.
There is some, yes, but it is not a significant factor.
After
all, if there really were a flood of Soviet weapons coming in through
Cuba and Nicaragua, as administration spokesmen are fond of
suggesting, where are they?
Lots of newsmen now have been with the
guerrillas.
To my knowledge, no one has seen any Soviet weapons.
On
the contrary, they seem to be armed almost exclusively with weapons
811
Prepared statement of Wayne s. Smith
March 20, 1984
Page 5
captured from the army.
In short, the guerrillas are growing stronger not because of out-
side support, but because of the consequences of the demoralization
of the army--a phenomenon our actions are now likely to stimulate
further.)
Our military strategy, then, leads only to a dead end.
Indeed,
the fact that some of our three and four-star generals think this
strategy will work says more about their own competence, or lack of
it, than anything else.
And what of our political strategy? will, for example, elections
solve anything at all? or even represent a step forward?
Absolutely
not.
On the contrary, the elections will foreclose a number of
options and result in a more complicated situation, no matter who
wins.
It is doubtful that appropriate conditions even exist for
elections.
How can there be a free choice when death squads and the
private security forces of various landowners threaten violence
against peasants unless they vote for the ultraconservative
Republican Alliance of Roberto d'Aubuisson?
By insisting that elections be held under such conditions, we may
have opened the way not to democracy but to the reins of power being
taken outright by the most murderous, anti-democratic elements in El
Salvador, elements who do not represent the will of the majority of
Salvadorans and could only win through intimidation.
If Roberto
d'Aubuisson wins the elections, he will almost certainly emasculate
what remains of the agrarian reform, give free rein to the death
victati
.....
812
Page 6
Prepared Statement of Wayne s. Smith
March 20, 1984
squads and in general try to turn the clock back to 1932.
What, in sum, can one say about a political strategy which banks
so heavily on elections that may well be won by a man to whom the
7.
U.S. Embassy will not even give a visa?
That the administration itself fears d'Aubuisson may win is seen
in the fact that it is trying so desperately to push a $93 million
emergency military assistance request through the Congress even
before the elections are held.
Spokesmen have suggested that unless
the money is forthcoming, the Salvadoran army will run out of ammuni-
tion and not be able to protect the polling places on election day.
But this obviously is not the reason for their haste. Indeed,
col. Adolfo Blandon, the Salvadoran Chief of Staff, has dismissed
such allegations, saying that although there were shortages of
certain kinds of ammunition, this posed no immediate threat and that
the army would certainly be able to provide adequate security, with
or without the $93 million.
No, the reason for the administration's unseemly haste is that it
is perfectly aware that if d'Aubuisson wins, it will be that much
more difficult to persuade Congress to provide more funds.
Who would
want to give d'Aubuisson $93 million in military assistance?
That
would be like turning it over to the death squads.
Even if Jose Napoleon Duarte wins, he will be a weak reed.
He is
trusted neither by left nor right, would face a hostile National
Assembly, would not have the cooperation of the army, and, indeed,
would likely inspire deeper divisions in the army than those that
813
Prepared Statement of Wayne s. Smith
March 20, 1984
Page 7
already exist.
And, meanwhile, no matter who wins, the civil war goes on.
Our
military strategy holds out not the slightest hope of ending it.
The
idea that the FMLN/FDR should simply have laid down their arms and
participated in these elections is only little short of absurd.
То
be sure, elections must be part of any settlement in El Salvador and
the FMLN/FDR should take its chances at the polls along with the
other parties.
But that can only reasonably be expected to happen
after conditions exist under which all sides have a modicum of
security for their participation.
Were I member of the FMLN/FDR, I
would not for a moment consider participation in these elections.
Not when they have been convoked and will be supervised by some of
the same people who direct the death squads.
The appalling excesses of the security forces and the right-wing
death squads was one of the principal causes of the civil war.
Peace
cannot be restored unless those excesses are controlled.
The
Kissinger Commission report says as much.
Yet, the administration
has done very little over the past three years to improve the
situation.
Apparently the President followed the advice of Jeane
Kirkpatrick, who in 1980 wrote that too much U.S. emphasis on human
rights in El Salvador only inhibited the government there from "using
the force at its disposal."
The certification process-oby which u.s. aid is tied to a presi-
dential "certifications that human rights abuses have been curbed--
had so few teeth that the president could virtually ignore it.
He
814
Page 8
Prepared statement of Wayne s. Smith
March 20, 1984
made no effort to use it as a lever to move the Salvadoran government
to end its abuses; rather, he simply went to the Congress every six
months and automatically certified that the situation had improved--
even as the carnage continued unabated.
Finally, having flouted the
intent of certification, he got rid of it altogether through the
veto.
At the same time, however, knowing full well that the increased
economic and military assistance it expected the Kissinger Commission
to recommend would have no chance of congressional approval unless
there were some visible effort to control the death squads, the
administration at long last began to move in that direction.
The American ambassador in San Salvador and vice president Bush
have warned the Salvadoran government that it must pay more attention
to human rights.
These pressures have produced some response from
the Salvadoran government.
Only time will tell, however, whether
this is more than cosmetic.
And one must certainly wonder why the
administration waited three years to exert such pressures.
Meanwhile, the fact remains that despite the thousands of political
murders in El Salvador every year, not a single person has been con-
victed of any of these crimes.
That is deplorable and it is simply
not credible that the U.S. has had insufficient leverage to move the
Salvadoran government to improve its performance.
Given that we are
so closely associated with that government, its dismal performance in
the human rights field not only undermines its own effectiveness, it
also diminishes the standing of the United states in the eyes of the
815
Prepared Statement of Wayne S. Smith
March 20, 1984
Page 9
rest of the world.
No wonder an international human rights oversight
group recently described this administration's human rights policies
as "a litany of failures."
When administration spokesmen encounter criticism of its central
American policies, they frequently charge the critics with wishing to
abandon the region.
Rarely, however, is that true.
Few critics wish
to cut and run.
The United States does to be sure have important
interests in Central America.
The point is, however, that present
U.S. policy does not protect those interests; rather, it endangers
them; and it carries us toward an ever more dangerous situation, one
which may culminate in a regional explosion.
Clearly, U.S. objectives in Central America should be:
1) to
make certain the area is not used as a military
a military platform by our
adversaries; 2) to halt the fighting which threatens to destroy the
area's economy; 3) to stop all cross-border support for guerrilla
groups; 4) to limit the size of armies and the nature of armaments so
that one nation cannot threaten another; 5) to reduce Soviet and
Cuban influence and presence, especially in Nicaragua; 6) to
encourage the emergence of participatory political systems which pro-
vide for the well-being of their people and respect their rights.
All these objectives could be better served by diplomacy than by
the sort of military options which have been pursued for the past
three years.
The "secret war" against the Sandinista government in
Nicaragua, for example, has not the slightest chance of overthrowing
that government.
Nor does it reduce Soviet and Cuban presence; on
!
816
Page 10
Prepared Statement of Wayne S. Smith
March 20, 1984
the contrary, it gives the Nicaraguans little choice but to increase
their military relationship with those countries in self-defense.
It
certainly does not interdict any weapons.
Quite the opposite.
The
Nicaraguans have presented draft treaties dealing with the termina-
tion of all such support in the area.
The u.s. would of course wish
to assure that there were adequate means of verification and enforce-
ment, but basically, the negotiation of such a series of treaties
would be a sound way to proceed.
Yet, the administration has not pursued it. Apparently, one
reason it has not done so is that to accept such treaties would of
course mean an end to U.S. support for the contras in Nicaragua.
The
U.S. is unwilling to consider such a step.
This is ironic, for the
American people had first been told by the administration that the
purpose of the secret war" was to halt an alleged flow of arms from
Nicaragua to El Salvador.
Now, when the administration has an oppor-
tunity through diplomatic options to close off any such residual
flow, it passes up that opportunity rather than end the "secret war."
The war obviously has become an end in itself.
And in El Salvador, as I have already stated, we are simply esca-
lating the war. Are we to keep escalating until American divisions
are fighting in Morazan province? That apparently is the plan.
Sensible alternatives are available:
diplomacy and negotiations.
The administration says it supports the Contadora process, but so far
this has been only a matter of lip service.
Representatives of all
the Contadora countries have complained that U.S. policies undermine,
817
Page 11
Prepared Statement of Wayne S. Smith
March 20, 1984
not support, their efforts.
By definition, the U.S. cannot be sup-
porting the contadora initiative and at the same time stepping up its
"secret" war against Nicaragua, escalating the war in El Salvador,
and preparing to fight a regional war.
If the administration wishes to extricate itself from the morass
in which its obtuse policies threaten to sink it, it must reverse
course quickly and begin pursuing negotiated solutions rather than
military outcomes.
Most importantly, it should really get behind the
Contadora initiative.
And as for U.S. assistance, nothing at all should be approved
until we know the outcome of the elections in El Salvador.
If
Roberto d'Aubuisson becomes president of that country, Congress will
want to take a careful look at whether any aid at all ought to be
provided to that country.
Beyond that question is the matter of how
effective our aid could be under present circumstances.
Given the
Kissinger Commission's conclusions that economic assistance is not
likely to produce results unless peace can be restored, and that
military assistance won't work unless the recipient governments curb
the appalling excesses of their security forces, it would be nothing
but common sense to attach appropriate conditions to any new U.S.
aid.
Otherwise, by the commission's own logic, we would simply be
throwing money away.
Yes, let's increase economic assistance, but
only if the Salvadoran government makes a good faith effort to get
down to serious negotiations with the insurgents.
By no reasonable
criteria has it yet done so.
818
Prepared statement of Wayne S. Smith
March 20, 1984
Page 12
And while military assistance in itself is not going to solve
anything, the leverage it provides, if properly employed, could be
useful, especially in bringing about improvements in the human rights
situation.
Congress should make certain military assistance is so
used.
Compliance in both cases--human rights and negotiations--must be
monitored by the Congress, for experience has shown that the adminis-
tration has too little interest in either.
For three years the
administration has paid lip service to diplomacy but has avoided
every opportunity to engage in it seriously.
If left up to the
administration, there would never be negotiated settlements in either
El Salvador or Nicaragua.
And unless Congress itself retains some kind of a handle on the
human rights question--preferably in the form of a revised and
strengthened certification process--one can imagine what would happen
once the present aid package were authorized.
The administration
would probably then go back to the see-nothing, do-nothing approach
of the past three years.
Congress must not let that happen.
819
Senator HELMS (presiding]. Thank you very much, Mr. Smith.
I have a few questions. Dr. Kasun, I understand that you re-
ceived a call from the Soviet consul general in San Francisco not
long ago. Is that correct?
Ms. Kasun. Yes, sir.
Senator HELMS. Would you turn the microphone around, please.
What did he want.
Ms. Kasun. I had appeared, sir, on Ted Koppel's "Nightline” tel-
evision program, regarding an adolesecent pregnancy program
being operated with U.S. funds through Johns Hopkins University
in the city of Baltimore. And I commented on that program. In the
course of the program, I stated that my acquaintance with the pro-
gram stems from a book which I had written on population control.
I mentioned the name of the publisher who wanted the manu-
script?
The next day, when I got back to campus I received a call from
Mr. Genady, who said he was the chief person, I think the chief
consul, in the San Francisco Soviet consulate. And he asked me
very insistently for a copy of the manuscript.
So I said, well, I had given it to some friends in Washington and
he could get in touch with them if he wanted to get it, and I gave
him the names of some people that I had sent it to in Washington.
In the meantime, I telephoned them and told them what he
wanted.
And then within 2 days he called me again and again asked for a
copy of my manuscript, which I again did not give him, and I have
not heard from him since then.
Senator HELMS. Why do you think he was so attracted or so in-
terested in that manuscript?
Ms. KASUN. He wanted, I am sure, material about U.S. popula-
tion control activities in the countries to which we are giving as-
sistance, because Marxists in those countries are using that infor-
mation in a detrimental way against the United States. They are
accusing us of human rights violations in our population control
programs.
Senator HELMS. So it is having an impact on our foreign policy,
then?
Ms. KASUN. Yes, sir, it is.
Senator HELMS. I asked AID's views on the value of population
control programs in general. Do you want to give me your views on
it?
Ms.
KASUN. Yes, sir. I see no value in promoting population con-
trol. There is no evidence to support the assumption that slower
rates of population growth result in higher levels of investment or
higher rates of economic growth.
The data show nothing of the kind, and these are simply assump-
tions made by AID to support their programs. The data do not sup-
port them. In fact, some of the most rapidly growing populations
have shown at the same time some of the most rapid rates of
growth in per capita output. So there is no evidence to support that
position.
And in particular, in Central America there is not a land prob-
lem or a population problem, unless you want to say that we
should have stringent population control in California, because we
820
are considerably more populated in a similar area than in Central
America. In fact, we are about 20 percent more crowded than Cen-
tral America. So we should have a sterilization drive in California
also if one is needed in Central America.
Senator HELMS. I am fascinated with your observation about
Texas being able to accommodate, did you say, all of the population
of the world?
Ms. KASUN. The whole population of the world.
Senator HELMS. How did you arrive at that statistical judgment?
Ms. KASUN. I did not do it. That comes from Prof. Frank Felice,
biologist at the University of San Francisco. But I checked it out
and it is correct.
The world is still mostly empty. I was impressed with that when
I flew from Humboldt County to Washington, D.C., just yesterday. I
looked down on great empty spaces.
In California, which as I said is more overpopulated than Central
America, if a little light private plane goes down, it is not likely to
be found until those bones are bleached white in the Sun. That is
how empty the Earth still is.
We all have the impression of being overpopulated because
human beings live in cities. We always live crowded together. We
have to do that for access. But all of the world outside our cities is
empty and it is a hostile wilderness in which we would be lost and
never found if we were to stray.
Senator HELMS. I realize that I am asking you to reiterate the
points that you have already made, but just in a sentence or two,
how do you think the developing countries with rapidly growing
populations can best achieve economic growth?
Ms. KASUN. I think the best way for them to achieve it is in the
same way that the United States achieved it and in the same way
that Hong Kong has achieved it and Singapore and Taiwan and
Korea and Japan: By primarily market-based economies, export-
based economies, in which the government role is linked to, when
it does anything, doing that which the market would do, but faster.
That is the principle of government intervention that I think can
possibly help. But as a matter of fact, I do not favor government
intervention.
Senator HELMS. Well, we did not have very much foreign aid, we
being this country, when we were getting started.
Ms. KASUN. No, sir, we did not. As a matter of fact, foreign aid
only saves the country the interest cost, if there is any. If it is get-
ting concessional money at concessional rates, it saves them the in-
terest cost on what they would have to pay if they were to get it
from private investors.
And that is not a very significant part of their GNP. For India,
the estimate is that all of the foreign aid which we have given
them, at such great sacrifice to the American taxpayers, amounts
to only about six-tenths of 1 percent of the Indian gross national
product. It is just nothing.
Senator HELMS. Thank you.
Dr. Waters, my Wake Forest friend, why do you think the
Agency for International Development continues to give money to
the people who run the state monopolies and enterprises in recipi-
ent countries?
i
821
Mr. WATERS. I think Senator, there is a fairly obvious explana-
tion for that, that if I have a valuable asset of which to dispose I
am, being as I am a decent and ethical human being, most likely to
give it to people who I know and understand and can find more
believable.
I find it very difficult to give a valuable asset to some rogue who
comes by and says he is going to start a company and do something
I have never heard of before. I would rather give it to somebody
solid of my group, who I can trust.
Senator HELMS. Now, you were chief economist with AID, were
you not?
that area.
Mr. WATERS. Yes, sir.
Senator HELMS. How do you evaluate the Private Enterprise
Bureau?
Mr. WATERS. I would like to be general, if I may, because I took
their money and served, and I do not wish to be petty. But I do feel
that we have not achieved, myself as one of those, much success in
It is difficult to persuade people whose social milieu, whose back-
ground and upbringing, is alien to the concept of high risk taking
at a low level, which is the essence of development, that they
should somehow suddenly become like that. It is very difficult.
I think we have chosen to operate the Bureau people of estab-
lished industry and civil servants. I just wonder whether that is
the kind of grouping most likely to produce what I have called the
rambunctiousness of economic development. I do not think so.
So I would assert that of course, it is a very minuscule program
by the standards of our activities in general
. But I would assert
that, for the reasons I have suggested, it has not done as well as if
we had put it in the hands of a bunch of low to middle-level busi-
nessmen out to turn a dollar.
Senator HELMs. My time is up on this round.
Senator Pell.
Senator PELL. Thank you, Mr. Chairman.
Mr. Smith, what is your assessment of Cuba's military relation-
ship with Nicaragua? Are they increasing it or decreasing it? What
do you feel they are doing?
Also, just for the record, when did you leave Cuba yourself? You
were chargé d'affaires, was it? What was your title?
Mr. SMITH. I left in the summer of 1982. I was chief of the U.S.
Interests Section.
I do not think there is any question but that there is a close mili-
tary relationship between Cuba and Nicaragua. It is my under-
standing that most of the equipment coming in now for the Nicara-
guans, however, comes from the Soviet Union rather than from
Cuba.
I think there is greater Cuban and Soviet influence and presence
in Nicaragua than the United States can be comfortable with. I dis-
agree, however, with the administration's means of addressing that
problem. I do not think the "secret" war reduces Soviet and Cuban
influence at all.
Senator PELL. But it is not a secret war any more.
Mr. SMITH. Well, I will put "secret” in quotes.
Senator PELL. But what would be your policy recommendation?
822
1
1
Mr. SMITH. I think that the objectives of the U.S. Government
should be to reduce Soviet equipment and Cuban personnel in
Nicaragua, stop any cross-border support for guerrilla groups, place
limits on the size of armies and the nature of their armaments. I
think all of that can be accomplished through diplomacy, hopefully
through the Contadora process.
I find it instructive that, while we were originally told that the
secret war had been launched to interdict the flow of weapons from
Nicaragua to El Salvador, when the Nicaraguans presented draft
treaties which addressed this issue—and to be sure, the United
States would want to make certain that there were means of verifi-
cation and enforcement. But rather than exploring the possibilities,
if anything, we simply escalated the secret war, one reason being
that if we began to explore the possibilities of putting in place such
a series of international conventions to halt all cross-border sup-
port for guerrilla groups, we would have to stop our support for the
Contras and we are not willing to do that.
So the war, rather than designed to stop any flow of weapons
from Nicaragua to El Salvador, has become an objective in itself.
Senator PELL. In view of the fact that the Contadora countries
which you just mentioned, all of them basically follow the same
economic system that we do, why are they so much less nervous
about the Cuban influence and the Communist influence in that
part of the world than we are? They are closer. They are more at
risk. And yet they seem far less worried. How do you analyze the
reason for that?
Mr. SMITH. I think the Mexicans, Senator, are aware of the prob-
lem, but their means of addressing it are quite different from ours.
They believe that it can be addressed through effective diplomacy
and through co-option. I think it is built into the PRI system that
you can co-opt various elements, and they believe that they can co-
opt the left in Central America, so to speak.
Senator PELL. Would the same apply to Venezuela, Colombia,
and Panama?
Mr. SMITH. To a lesser extent. I think they are all concerned, but
again, their antedote, or their means of addressing the problem, is
quite different from ours, and in my view more realistic, and would
have a greater chance of success. I do not see that our strategies
are leading to anything except greater escalation.
Senator PELL. Going to the fundamental sore in that part of the
world, it is the question in my mind of Cuba. So long as Cuba has
the policy she does now, we are going to have problems there.
Looking at it from the Cuban viewpoint, I would just be interested
in your reaction on this, I have long believed that they have ample
grounds for resentment, just as we do. They have seen us seek to
economically strangle her 25 years now, mount one major invasion,
the Bay of Pigs, and only the CIA knows of all the little invasions,
and sought to assassinate her chief of government, and refused to
have diplomatic relations. I can see why they would be annoyed at
us.
What would be your view? Would you agree with me, or do you
think I am wrong in saying that if we could normalize our rela-
tions—I do not say have friendly ones, but why should we have
worse relations with Cuba than we do with Bulgaria, Hungary, or
823
other Communist nations? If we had more normal and correct rela-
tions with her, would not the incentive for a good deal of this
export of violence be removed? What would be your opinion on
that?
Mr. SMITH. I think at least the opportunity to approach it more
pragmatically would be there. We both have reasons for resent-
ment, and I do not think either country, either the United States
or Cuba, has any reason to trust the other, certainly, but I think
the Cubans have realistically understood that as the situation
heats up in Centeral America, that the consequences for them
could be disastrous. They are prepared to negotiate. They are pre-
pared to see a political solution in Central America.
It seems to me that we should press them on that, that we
should try to put into place a series of international conventions
sponsored by or under the aegis of the Contadora group under
which the Cubans would commit themselves to stop military sup-
port for Nicaragua, to withdraw most of their advisers, to agree to
limits, to respect limits placed on the size of armies and arma-
ments, and so forth, in other words, a series of steps which would
respond to our security concerns and the security concerns of the
area. It would have to have means of enforcement and verification,
to be sure. I mean, in international politics no one should ever
trust anyone else.
Senator PELL. From the vantage point of all of your years in
Cuba, and that is why I am focusing my questions to you, what is
your thought with regard to Cuba's policy vis-a-vis Angola? Do you
see them pulling back from there? Was this discussed at all when
you were in Cuba, or is it too early?
Mr. SMITH. Yes, I think it is possible. Certainly in connection
with or accompanying a Namibian summit and a South African
withdrawal from Namibia, I think the Cubans would indeed be
willing to remove their troops from Angola, but only as part of a
Namibian settlement, and only accompanying the withdrawal of
South African troops from Namibia.
Senator PELL. If we could achieve a peaceful settlement in Cen-
tral America, not a Communist Government there, but a peaceful
settlement, do you think Cuba would accept it, or would she insist
on having a real say in what happens in Nicaragua?
Mr. SMITH. I think Cuban priorities are to preserve a friendly
Government in Managua and to see a political solution in El Salva-
dor, whether or not that solution places the FLMN/FDR in power.
Cuba would accept a political solution in El Salvador which did not
see the guerrillas win, yes.
Senator PELL. I apologize to other members of the panel, but we
are very lucky to have Mr. Smith with us. There are very few of us
who have had the experience that he has had of looking after
American interests in Cuba quite peacefully.
Mr. SMITH. Thank you, Senator.
Senator HELMS. There are only two of us here now, why do you
not take some more time?
Senator PELL. Thank you. I am finished.
Senator HELMS. Very well. Dr. Waters, let me follow up with one
or two questions which you can answer briefly. You touched on
824
land reform in general, but I would like to hear your assessment of
our problems with land reform specifically in El Salvador.
Mr. WATERS. Senator, that is a subject that I studied at one
point, and I wrote a major paper on it, but dropped it about 8 or 9
months ago. At that time my main problem was that which differ-
entiates us from the socialist society is the nature of ownership,
not much else. In other words, the right of people to transact, to
exchange, to modify the nature of their education, their assets in
any other form.
And I worried about any system which, if I may give you an ex-
ample, first of all established collective farms. To call them coop-
eratives is ludicrous. Second, with respect to individuals receiving
land tenure, and this is the true bulwark against a revolution, to
suggest that the title which is distributed gives the owner right to
the property after 30 years.
Now, in that society, the average age of the peasant to the best
of our knowledge runs—the person who is getting the title-runs
around 35 to 40, and that is being charitable. Life expectancy at
the present time, of course, we have no idea, but we think it is
around 50 to 55, given all conditions in the country. Therefore,
very few people are going to survive to actually claim on those
titles. What happens in the interim? If they die, the land reverts to
the state. They cannot deed it to their children. They cannot use it
for a mortgage or any of the active things that farmers do to raise
working capital.
So, I found the system as a whole was so flawed that it was
really not worth pursuing very hard.
Second, the owners of the land, prior owners of the land, the
middle-sized farmers in particular, were to be paid for their land at
a price based on their tax returns of the late 1970's. I would hope
that I would never have my home sequestered and have to pay for
it at its taxable valuation at this time, but that is an aside. There-
fore, they had every reason to hang on and get one more crop from
the land if they possibly could, and there you have a reason for
their strong feelings about being removed from the land.
In other words, I believe that the system is so structured, I be-
lieve that land reform in fact as it is so called, was the reason for
much of the violence we observe. I do not think that dickering
reform, and I hope this committee will consider in looking at this
bill-when I hear, for instance, the elimination of corruption is
achieved through hiring more and more people to watch it, and im-
posing more and more controls, it makes me think of a civil service
reform in Byzantium or something.
I would suggest that corruption occurs because an official has
something of value to give away, and you acquire something of
value to give away by being able to rig the price. I would suggest
that this committee make a major effort to write into this law a
demand that they first eliminate many of the controls and market
manipulations which are part of the societies of Central America,
and that second, this small reform, that a system be established
whereby an individual can legally establish a business within a
period of 1 month. You can do it in the United States in an after-
noon, but let us say it will take them 60 times as long.
825
Kontakt
WANAYA
:
2012
We had done some research on that, and it is worth looking at. It
is almost impossible to start a legal company, and that is part of
the reason why there are no middle-sized companies in Central
America. There are large companies, and there are small peasant
farmers, not much in the middle, and part of the reason is that it
is legally extremely difficult to start a company in a formal fash-
ion.
Senator HELMS. Gentlemen and Professor Kasun, you have been
most patient, not quite as patient as our third panel, who is yet to
be heard, but we appreciate your coming. May I have an under-
standing and agreement that Senators who are not able to be here
and indeed some who are able to be here may choose to inquire in
writing of your views on various things, and if questions are sub-
mitted, we would appreciate your responding so that they may be
made part of the permanent record.
Thank you all very much for coming and for your excellent testi-
mony.
Our third panel will discuss military, political, and human rights
issues of and in Central America. At this time we welcome to the
committee, Father Bryan Hehir of the U.S. Catholic Conference,
Mr. Howard Phillips, national director of the Conservation Caucus,
Mr. Robert White, professor of international relations at Simmons
College.
I regret that our fourth panelist, the Reverend Enrique Rueda, is
ill and will not be able to be with us today. However, the United
States former Assistant Attorney General, Mr. Jerris Leonard, has
requested to testify, and since we have a vacancy in the panel, we
have requested him to come.
If those four gentlemen would step forward and have a seat, we
are prepared to listen to your comments that you might have.
Father Hehir, we will lead off with you. We appreciate your
coming. I am so sorry that the mechanism of the Senate malfunc-
tioned today.
STATEMENT OF THE REV. J. BRYAN HEHIR, U.S. CATHOLIC
CONFERENCE, WASHINGTON, D.C.
Father HEHIR. These are important issues, Mr. Chairman, and
we appreciate the opportunity to be here. Delay is no problem.
I have submitted my written testimony for the record, and I will
summarize the key points in the 6 minutes available to me.
I testify on behalf of the U.S. Catholic Conference, which is a
public policy agency of the Catholic Bishops of the United States,
Mr. Chairman. We have been testifying on the question of El Sal-
vador and Central America regularly since 1980, and the scope of
the Catholic Conference testimony during that period of time has
always been with Central America as a region.
While I will specify particularly today some of our concerns
about the question of El Salvador and United States choices in El
Salvador, I want to reaffirm that our view is that the problem
facing U.S. foreign policy is a regional problem that requires a dip-
lomatic solution in the region if any one piece of it is to be re-
solved.
34-045 0-84-53
826
I think the place I would begin, Mr. Chairman, is a look at the
present moment in Central America and El Salvador particularly.
It seems to me the moment is marked by two different trends. One
is the rising danger of a regional war. There are a number of spe-
cific conflicts today inside El Salvador, on the Honduran-Nicara-
guan border, but I would want to emphasize that overriding all of
these specific conflicts is the danger that the war will spill over
boundaries and which boundary may be indifferent in the begin-
ning, but the possibility of a war encompassing the region it seems
to me is one of the major characteristics of the present moment.
Second, I think it is possible to argue that in spite of that enor-
mous danger, that the rising danger of war coexists with also possi-
bilities for peace, that there are fragile but real possibilities open
to a creative diplomatic initiative, and I would contend that the
U.S. role in the possibilities of a creative diplomatic initiative is
unique. Not that we could do it alone, but that no creative diplo-
matic initiative will be taken without full U.S. support.
Now, the present moment in Central America, I think, has to be
looked at in light of the present state of debate in the United
States. Obviously, U.S. choices in Central America or El Salvador
will be shaped greatly by the discussion that surrounds the Kissin-
ger Commission. There is no opportunity in testimony this brief to
do a full-scale analysis of the Kissinger Commission's report, but
here I would like to make some brief comments.
In evaluating the Kissinger Commission's report it is necessary
to distinguish what I would call its inner logic from its separate,
distinct elements. The report is an eloquent and valiant effort to
deal with an enormously complex problem, but I think one has to
evaluate it in several steps. There are some specific elements of the
report that stand on their own merit and can be judged piece by
piece. Let me indicate two different judgments about two different
elements in the report.
If one looks at the economic programs in the Kissinger report,
the U.S. Catholic Conference would support many of these econom-
ic programs, and would urge the Congress to support them. The
emergency stabilization program, the strengthening of the Central
American Common Market, a proposal for increased U.S. economic
bilateral assistance, the need to address the debt question, and new
trade guarantees for Central America are all things that while I do
not pretend to technically comment on each one of them we would
generally come here and say that the Congress ought to look favor-
ably upon.
There is another topic in the Kissinger Commission that is
touched only in passing, but I particularly want to call it to your
attention in the testimony of the bishops, and that is the reference
to population policy. This is not treated at length, but it is a con-
cern of the U.S. Catholic bishops.
The Catholic Church recognizes that population is a major ques-
tion in any developing country or most developing countries today.
Pope Paul VI in his encyclical, The Development of Peoples, in
1967, said that population was a problem, and that governments
needed to address it, but the question of how governments address
it is crucial in the view of the Catholic Church. Programs must re-
827
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spect the informed conscience of individuals, and they must rever-
ence the cultural and religious values of a nation.
At this point, we do not want to comment in detail upon differ-
ent reports that circulate of our population policies. I did not come
here prepared to do that. I simply wanted to state a principle, and
that is that any attempt to impose an unwanted population pro-
gram on a nation or to coerce the individuals will be opposed by
the bishops of the United States.
There are other distinct elements of the program of the Kissin-
ger report that could be commented on, but I comment now in the
inner logic of the report. The inner logic of the report is much
more problematical. In the short term, the report reaffirms the
basic direction of U.S. policy, a policy which the bishops have
argued several times now is in need of fundamental redirection,
fundamental redirection in terms of what I would call the primacy
of the political in U.S. policy, an argument that while there are
several elements of U.S. policy in the region there must be a hier-
archy among the elements, and that the redirection required is
that the United States be willing to pursue in detail, visibly and
vocally, a political and diplomatic solution in the region as its pri-
mary objective in concert with other key factors.
This primacy of a political and diplomatic role is dependent
greatly, we think, upon the U.S. fostering the concept and the idea
and the reality of dialogue within countries and among countries.
One of the things I wished to do in my testimony, Mr. Chairman,
was to highlight four different statements over the past year and a
half from the El Salvadoran bishops and from the bishops of cen-
tral America and the bishops of Latin America reinforcing the
need for primary effort in terms of dialogue among contending par-
ties in El Salvador and in the region
as the principal way to pursue
the needed bringing of the peace to Central America.
I now conclude, Mr. Chairman, by looking very specifically at the
question of El Salvador for just a moment. The Congress faces very
specific choices about El Salvador in light of the Kissinger report
and the recommendations that come from it.
In 1980, the U.S. Catholic Conference come before the U.S. Con-
gress to oppose the sending of $5.4 million of nonlethal military as-
sistance to the Government of El Salvador. Our position simply re-
peated the call of the late Archbishop Romero. In March 1980,
Archbishop Romero was assassinated for his vigorous defense of
human rights. In December 1980, four American women mission-
aries were brutally murdered because of their identification with
Neither of these unspeakable crimes has been resolved, yet in
1984 the Congress is being asked to approve military assistance for
Central America in the current and following fiscal years which is
100 times greater than the 1980 request.
A year ago Archbishop Hickey of Washington, speaking for the
U.S. Catholic Conference, come before one of the congressional
committees and argued that U.S. policy in Central America must
be a policy that supported three things, dialog, cease-fire, and nego-
tiations to end the war. We wish to reaffirm Archbishop Hickey's
position today. We are sure the political road is the only viable so-
lution in El Salvador, because the basic problem is political with
the poor.
with*YRITTANY 1 MESECA ******************* TANTRA
828
i
moral dimensions. It is the need for fundamental reforms in El Sal-
vador to address the questions of justice long denied and human
rights long abused for the vast majority of the population.
Because we are convinced of the need for a decisive political
option, we cannot commend, indeed, we must oppose the substan-
tial increases in military assistance being proposed to the Congress
for fiscal year 1984 and fiscal year 1985. Such increases, we believe,
will not signal a policy in support of dialog and negotiation. They
will too easily communicate a conviction that the fighting need
simply grind on in El Salvador.
But the U.S. role can be crucial, we believe, and therefore how
we decide this issue of further increases in military assistance is
particularly important. The U.S. Catholic Conference stands in sup-
port of human rights conditions for any military aid to El Salvador.
To provide aid without conditions, we believe, is to offer a blank
check to the Salvadoran military precisely when civilian control is
a key issue.
The Catholic Conference urges the Congress to take specific
measures to prevent further militarization of U.S. policy. The Con-
gress should prudently support economic aid, should contain explic-
itly the military dimension of U.S. policy. We realize there will be
a military dimension, but it should be contained, we would argue,
and it should place all its weight on the side of redirecting the
thrust of U.S. influence toward what I have called the primacy of
the political.
I thank you for your time, Mr. Chairman.
[Father Hehir's prepared statement follows:
829
PREPARED STATEMENT OF REVEREND J. BRYAN HEHIR
I testify today on behalf of the U.S. Catholic Conference
(USCC), the public policy agency of the Catholic Bishops of
the United States.
The USCC is appreciative of the opportunity
to appear again before a committee of the U.S. Congress to pre-
sent its position on U.S. policy in Central America with special
reference to El Salvador.
I.
The U.S. Bishops and Central America Policy
The USCC has been a visible participant in the policy debate
about Central America since the late 1970s.
There are two com-
plementary reasons which sustain the involvements of the Catholic
Bishops in this complex question.
First, precisely because the
impact of u.s. policy is so significant to the life of nations
and the lives of individuals in Central America, the bishops
feel a specific pastoral responsibility to examine U.S. policy
in light of human rights and issues of social justice. Second,
the strong and specific bonds of faith, trust, friendship and
communication which bind the Church in the United States to the
Churches of Central America impell us to use our moral influence
in the United States to shape U.s. policy in directions conducive
to peace in Central America.
Our bonds with the Central American
Church are greatly enhanced by the presence of U.S. missionaries
there; no fewer than eight of these priests, brothers and sisters
have sealed our relationship with Central America with their own
blood.
830
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The scope of the USCC policy concern for the last seven
years has encompassed the region of Central America.
While
this testimony focuses on El Salvador, our view is that the
problem facing U.s. policy is regional in nature and must be
addressed regionally.
II.
The United States and Central America: The Present Moment
The present moment in Central America is both dangerous
and delicate; it contains the potential of much greater suffer-
ing and destruction but it also holds out a slim possibility of
rescuing the peace.
The content of the present moment for U.S.
policy is shaped by the character of the situation there and
the nature of the policy debate going on here in these days.
The danger of the moment in Central America is the possi-
bility of a regional war.
Presently a series of specific con-
flicts fills the region (in El Salvador, on the Nicaraguan-
Honduran border) but the danger of any of these conflicts
spilling over borders to engulf the region is the great peril
of the moment.
Regional war would bring suffering and death,
destruction and chaos of an entirely new dimension.
Paradoxically, intensifying danger has generated some
possibility of a political breakthrough which could secure
the peace.
People recognize the peril of the moment and re-
consider what they are willing to negotiate.
Whether one
examines the internal situation in El Salvador or the state
1
831
-3-
of U.S.
Nicaraguan relations, there are fragile but sig-
nificant signs which a creative diplomatic initiative might
use to transform the character of the conflict in Central
America.
No single actor in the Central America drama has a
greater capacity to shape its future direction than the United
States,
At the present time the dynamic of U.S. policy is not
sensitive to the diplomatic potential of the moment.
Indeed
it is not difficult to make the case that the content of U.S.
policy has contributed to the danger of regional war.
The
persistent theme of USCC congressional testimony over the
past five years has been to stress the diplomatic potential
the U.s, has in the Central American region if we are willing
to work with other key actors.
But realizing our diplomatic
potential means placing the political resolution of the Central
American conflict ahead of military objectives
it requires a
diplomatic strategy in which the political perspective controls
military measures.
U.S. policy presently does not manifest
this order of values; there is not a convincing daily demon-
stration of a primacy of concern for diplomatic initiatives
aimed at a political resolution in the region.
Too often U.S.
policy, in its daily measures, seems fixated on military
pressures, coercive moves and the role of threat and intimi-
dation,
Such a policy has little potential to grasp the
832
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fragile possibilities for peace; it has great potential to
reinforce the dangers of a regional war.
The Bipartisan Commission
The Congress is now evaluating the direction and content
:..
of u.s. policy in light of the recommendations of The Report
of the President's National Bipartisan Commission on Central
America ("The Kissinger Commission").
The Commission has
served an important public function by focusing attention on
Central America and the choices facing U.S. policy there.
The Report's style of stressing the complexity of the region's
multiple crises
political, economic, military - rather than
reducing the problem immediately to its geopolitical element,
is a welcome shift of official statement.
From the beginning
of our participation in the policy debate, the 'USCC has
acknowledged a geopolitical dimension to Central America,
while denying that a geopolitical definition of the question
was adequate.
A full discussion of the Bipartisan Commission's Report
is beyond the scope of our testimony. To evaluate The Report's
short-term impact on policy, however, it is necessary to dis-
tinguish its inner logic from its separate elements.
There
are several distinct elements of The Report which can be
judged on their own merits.
The economic proposals are
particularly interesting and, on the whole, deserve both
833
--5-
public support and congressional approval.
These include the
recommendations for an emergency stabilization program, the
strengthening of the Central American Common Market, the
proposals for increased U.S. bilateral economic assistance
and the need for specific steps to address the debt problem
and to provide new trade guarantees.
While the economic
package will have to be designed so that Central Americans
control their own economic destiny, its elements are sound
and in USCC's view should be supported.
One particular aspect of u.s. policy, not treated at
length in The Report, which concerns the U.S. Bishops is the
question of population policy.
The Catholic Church recognizes
that population issues are serious questions in many develop-
ing countries, not least in Central America.
In 1967, Paul
VI in his encyclical The Development of Peoples explicitly
stated his conviction that governments needed to address popu-
lation issues.
It is imperative, however, that both govern-
mental programs be carried out with respect for the well
formed (and well informed) conscience of the individual and
with respect-indeed reverence for
the religious and cultural
values of a people and a nation.
Any attempt - public or
private
to impose undesired measures of population policy
on a country on any efforts to coerce individuals to partici-
pate in programs which they either do not understand or do not
Such
fully accept will be firmly opposed by the U.S. Bishops.
834
-6-
action is beyond the legitimate scope of governmental activity.
A crucial element in evaluating The Bipartisan Commission's
Report is to distinguish its elements from its inner logic.
While there are several specific elements which in the middle
to long-term we find helpful, the inner logic of The Report
reaffirms and intensifies the basic direction of a policy which
stands in need of fundamental redirection.
Redirection means
the way in which the elements of U.S. policy are related in
Central America.
While the Report gives more weight to local
and regional dimensions of the policy problem and does not
starkly stress the geopolitical element, it still fails to
set U.S. policy clearly in the direction of a diplomatic-
political solution for the Central America region.
Such a
direction requires a primacy of the political in U.s. policy:
such a direction would severely restrict and clearly subor-
dinate military elements (including military assistance) to
well defined political purposes; such a direction would
acknowledge that even the valuable economic proposals in The
Report cannot be implemented while civil war rages in El
Salvador and a state of war marks the Nicaraguan-Honduran
border.
Redirection requires a U.S. option to pursue rapidly
and principally a political-diplomatic role in Central America.
The Kissinger Commission Report fails to set that direction.
Its immediate impact is to reinforce and expand the present
logic of u.s. policy.
The USCC has found that logic
835
misdirected for four years; to reinforce it is to compound
our mistakes.
The inescapable vehicle for redirecting our policy and
bringing an end to the civil conflict in El Salvador is en-
compassed in the term "dialogue".
Without a serious, sus-
tained effort by the contending parties to engage in
unconditioned talks, monitored and if necessary guaranteed
by third parties, no truly political solution is possible.
I have indicated that the USCC takes with great serious-
ness the perspectives of the Central American Church.
NO
other institutional voice in the region has a more authentic
claim to reflect the true aspirations and views of those
peoples.
The USCC has taken with particular seriousness the una-
nimity and clarity with which the Salvadoran and other
Central American bishops have addressed the question of a
non-military resolution of the present crisis.
Since their
views are inadequately understood and occasionally misrepre-
sented in the U.s. public debate, it may be useful to highlight
them here.
Salvadoran Bishops and the Dialogue
In July of 1982, after it had become evident that, as
Archbishop Rivera put it, the March elections had changed
nothing, the Salvadoran episcopal conference unanimously
836
-8-
called for a dialogue.
Within weeks, Pope John Paul
wrote to the bishops encouraging their efforts for peace
and reconciliation and in his visit to El Salvador last
March stressed the need for a sincere dialogue from which
noone should be excluded.
In the CELAM meeting in Bogota last July bishops
from episcopal conferences throughout all of Latin America
issued "a call for mutual trust so that the way of dialogue
and of the indispensable negotiations can be regained, and
that they succeed in obtaining a solid and lasting peace,
reconciliation among brothers, and the reconstruction of the
social fabric of those countries"
The bishops went on to endorse, as has the Pope, "all
the initiatives and efforts of neighboring and friendly
countries, as well as of diplomatic groups working to help
facilitate a worthy solution".
The following month, on August 17, the presidents of all
the Central American episcopal conferences meeting in San Jose,
!
Costa Rica deplored the frightening conditions in their
countries, denounced the growing militarization and foreign
interventions, and said:
"We direct ourselves in the first
place to those groups in contest in our countries to beg them
in the name of God to end the violence and enter into an
honorable and civilized dialogue".
!
837
-9-
.
The most recent expression of the bishops of El Salvador
was their joint pastoral letter, "Called to Be Artisans of
Peace", issued last month on February 2.
It is a long and
very rich document, important as a reflection not only of
the hierarchy's thinking but that of a large sector of the
Salvadorean people.
On the matter of the dialogue, the bishops have this to
say:
"With the Pope we have repeated our conviction that the
true dialogue is not only the only possible solution but
above all the only human and Christian one.
We cannot accept
an illusory peace built on the corpses of more Salvadorans...
Once again we exhort those in armed combat to open themselves
to the dialogue and stop the senseless shedding of Salvadoran
blood".
These statements stand in ever sharper contrast with the
present trend of U.S. policy.
27.9
.-> wrth AGVA:42**********
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...-... Sn.
838
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III.
U.S. Choices in Central America:
The Future
The present moment in Central America and the policy debate
in the United States converge to create a series of specific
choices for U.S. policymakers.
The deliberations and decisions of
the U.S. Congress are a decisive element in making those choices.
I will propose now USCC recommendations about specific policy
choices.
EL SALVADOR:
In 1980 the USCC came before the U.S. Congress
to oppose the sending of $5.4 million of "non-lethal" military
assistance to the Government of El Salvador.
Our position simply
repeated the call of the late Archbishop Romero.
In March of 1980
Archbishop Romero was assassinated for his vigorous defense of
human rights; then in December four American women missionaries
were brutally murdered because of their identification with the poor.
Neither of these unspeakable crimes has been resolved, yet in 1984
the Congress is being asked to approve military assistance for
Central America in the current and following fiscal years one
hundred times greater than the 1980 request.
One year ago Archbishop James A. Hickey of Washington gave
congressional testimony on Central America policy.
He echoed the
appeal of John Paul II and the Salvadoran
Bishops in his
recommendation for U.S. policy.
Our policy, he said, should support
three steps in El Salvador:
dialogue, ceasefire and negotiations to
end the war.
The Uscc reaffirms Archbishop Hickey's proposal today.
839
-1l-
We are sure the political road is the only viable solution in El
Salvador, because the basic problem is political with moral
dimensions.
It is the need for fundamental reforms in El
Salvador to address the questions of justice long-denied and
human rights long-abused for the vast majority of the population.
Because we are convinced of the need for a deiisive political
option, we cannot commend, indeed we must oppose, the substantial
increases in military assistance being proposed to the Congress
for FY 1984 and FY 1985.
Such increases will not signal a policy
in support of dialogue and negotiations, they will too easily
communicate a conviction that the fighting need simply grind on in
El Salvador or worse, escalate into a greater conflagration.
Obviously the fighting is the product of two sides and both must be
willing to negotiate.
But the U.S. role can be crucial in
catalyzing negotiations.
How we decide to move can influence the
decisions of others.
The USCC stands in support of human rights conditions for any
military aid to El Salvador.
To provide aid without conditions is
to offer a blank check to the Salvadoran military precisely at the
time when civilian control is a key issue in El Salvador. But
human rights conditions are not a sufficient exercise of the
congressional role at this critical moment.
The USCC urges the
Congress to take specific measures to prevent further militarization
of u.s. policy.
The Congress should prudently support economic aid,
should contain explicitly the military dimension of u.s. policy
840
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and should place all its weight on the side of redirecting the
thrust of U.S. influence toward a rapid and thorough political
resolution in El Salvador.
U.S. policy should be vocally, visibly
and single-mindedly directed toward bringing the fighting to an
end and starting the political dialogue.
Obviously much has
happened since 1980 in El Salvador:
human rights have been violated
by the violent left and the murderous right; the fighting has
escalated, fueled by outside support for all parties.
Still it is
necessary simply to specify how far down the military road U.S.
policy has moved since 1980.
The USCC's purpose in 1980 was to argue against a U.S. military
contribution to the conflict and to argue for a highly visible
diplomatic engagement.
We feared that even with the best of
intentions, our military role would erode our political contri-
bution.
In 1984 we see our initials fears being fulfilled.
The
elements of u.s. policy are not being proportioned to enhance a
diplomatic role.
At this point in the conflict, some U.S. military
assistance will undoubtedly be part of U.s. policy, but the question
is how much, under what conditions and how the military and
political dimensions of policy should be related.
These are the
choices before the Congress today.
1
NICARAGUA.
The second most urgent policy issue to be addressed
after a negotiated settlement of the Salvadoran conflict, and
intimately linked to it, is the question of u.s. relations with
Nicaragua.
No regional diplomatic solution is possible without a
change in the tenor and themes of U.S.-Nicaraguan relations.
-13-
841
با للظر
The USCC is well aware of the many limitations of the present
government and has on more than one occasion expressed strong
opposition to policies or actions of that government.
while
acknowledging undeniable social advances in Nicaragua, particularly
benefitting the poorest, we remain deeply concerned about admitted
violations of human rights and excessive limitations on media,
political and trade union freedoms.
The Nicaraguan government's
relations with the country's ethnic minorities, while not to be
compared with the Guatemalan situation, remains gravely troubling.
Nicaragua's foreign policy goals in the region are a source of
concern to many.
And, as Catholics, we have been especially
offended by a series of events that constitute a pattern of
harrassment directed at bishops and other members of the clergy.
That official policy is directly responsible in each of these
cases can remain an open question; that the government has not
taken sufficient steps to prevent or rectify certain actions
cannot.
WALAUREA
Nevertheless, while the U.S. can properly address itself to
the policies of Nicaragua in the region and legitimately engage in
the process of evaluating internal human rights performance, the
present approach to doing so is seriously misguided and funda-
mentally flawed.
Instead of ameliorating tensions and seeking to influence
through effective diplomacy, present U.S. policy is moving in a
contrary, and increasingly dangerous, direction.
<--*....***...*L* MS. T.
Marker
KASTUEWU
WA
in his
84-045 0-84-54
842
-14-
The usCC has made three specific policy recommendations
regarding Nicaragua which we repeat today:
We oppose all covert aid to forces seeking by violence to
overthrow the present government.
Such aid corrupts our own
standards of policy formulation and conduct and it provides
convenient justification for further restrictions of freedoms
within Nicaragua.
We favor resumption of significent bilateral economic assistance
to Nicaragua conditioned, as in all such cases, to compliance with
established human rights criteria.
...u
And most importantly, we urge new efforts at political
engagement, testing seriously the initiatives for negotiations
offered by Nicaragua.
GUATEMALA.
Changes in leadership in Guatemala last August,
less than a year and a half after the previous military coup,
have
not evidenced significant improvements.
Reports of major human
rights abuses continue, hundreds of thousands of Guatemalans
remain displaced from their homes or in exile, the negative side of
such government programs as the creation of model villages and
civil patrols continues dominant, and official harrassment, at
times outright persecution, of the Catholic Church remains a
feature of Guatemalan life.
Another Catholic priest was murdered
last November.
843
-15-
The USCC remains firmly opposed to any direct assistance to
the military forces of that country, whether through military
assistance programs (MAP), military education and training (IMET),
foreign military sales credits (FMS) or encouragement of active
Guatemalan participation in a revived Central American Defense
Council (CONDECA).
HONDURAS
The constantly growing militarization of Honduras
is one of the most tragic by-products of the regional crisis.
We
can only view with alarm the continued build-up of U.S. military
assistance to and U.S. military presence in Honduras and the use
of Honduran territory for armed incursions into Nicaragua.
These
provocative actions greatly threaten the precarious peace between
these two nations.
The USCC repeats its often-stated concern for the well-being
of the many persons who have sought refuge in Honduras.
While
commending the Honduran authorities and people for receiving these
unfortunate victims of war and oppression in their own countries,
we express renewed opposition to the forced re-location of many
of them.
As the Honduran Bishops said on January 20, they have
already been uprooted, some more than once, and should not be
forced against their will to move once again.
844
-16-
COSTA RICA.
Still, fortunately, the democratic exception of
Central America, Costa Rica is nevertheless saddled with an
insupportable debt burden and experiences an economic crisis of
major proportions.
Combined international efforts to assist
Costa Rica overcome this crisis are necessary.
U.S. security
assistance, however, does not seem appropriate at this time.
REFUGEES.
The question of refugees cuts across all the
country issues and requires renewed attention by our government.
Contrary to an assumption that a negotiated settlement in El
Salvador would increase the numbers of persons seeking
unauthorized entry into the United States, we believe that peace
and economic recovery in the region are the indispensable conditions
for the U.S. to regain control over immigration flows.
Pastors and religious workers in this country have extensive
contact with Salvadoran and Guatemalan refugees here and are
convinced of their desire to return home, conditions permitting.
The USCC remains opposed to the practice of forcibly repatri-
ating undocumented persons from these countries seeking political
refuge and strongly urges the provision of extended voluntary
departure status for all such.
IV.
Conclusion
The last few years have witnessed a new kind of bold
assertiveness in the conduct of U.S. foreign policy, especially in
this hemisphere.
Some would describe it as agressive, truculent,
....
1
845
-17-
even belligerent.
It has obviously not been without its supporters
among the American people, as we witnessed last Fall with the
invasion of Grenada.
But many aspects of the policy, especially with regard to
Central America, continue to trouble, certainly to confuse large
segments of our population.
Our neighbors in the Americas, by
all available accounts, appear to be even more concerned.
The United States has an essential role of leadership to
play in the Americas but not an independently dominating one.
We
should demonstrate strength through forbearance and maturity in
our relations with small countries whose policies we may well seek
:
to influence. We should seek to influence through the politics of
diplomacy rather than through intimidation, subversion or war.
We should make real our essential partnership with the other
American states, recognizing that they too have leadership roles
1
to play in the hemisphere.
7
We believe that among the guiding principles that should
inform future decisions regarding our policy in Central America are
the following:
1.
The overriding need of the moment is to prevent expansion
of the present conflicts and to achieve peace in the region through
.
the diplomatic process of dialogue and negotiations.
1
1
846
-18-
2.
An active role for other American states, presently
0
represented by the Group of Contadora, show the meantimore strongly
encouraged and facilitated.
3.
The international dimensions of honefTsis should not be
ignored but neither should they be exaggerated.
4.
The human rights dimension of our policy should be brought
constantly to the fore.
Efforts to relate concern for human rights
بدنه حسینیه
with the conduct of foreign policy reflect the finest principles
of our society and are constantly to be encouraged.
:
5.
Conversely, military aid to the countries of Central
America should compose an exceptional, not routine and certainly
not dominant element in our relationship with them. While some
limited military aid may be a dimension of U.S. policy there, the
amounts currently sought must be considered unacceptable.
Senator HELMS. Thank you very much.
Mr. Leonard, I am glad we were able to work you in. We had to
decline your first request because we had a balanced panel, but
since Reverend Rueda became ill we are happy to have you. You
were Assistant Attorney General for how long?
STATEMENT OF JERRIS LEONARD, ESQ., WASHINGTON, D.C.
Mr. LEONARD. Mr. Chairman, I was Assistant Attorney General
from February 1969 until April 1971, a little over 2 years.
Senator HELMs. It is nice to see you here.
Mr. LEONARD. It is nice to see you, Mr. Chairman.
Senator HELMS. You may proceed.
Mr. LEONARD. Mr. Chairman, my name is Jerris Leonard. I was
Assistant Attorney General, as I said, in charge of the Civil Rights
Division of the U.S. Department of Justice for approximately 2
years. I appear here today as the attorney for Arturo Muyshondt,
or in Spanish pronounced "Mason," one of six Salvadorans named
by Robert E. White, former Ambassador to El Salvador, as a bitter,
angry, vindictive exiled millionaire whose extensive land holdings
have been expropriated for land reform.
Incidentally, I would like to introduce Mr. Muyshondt. Would
you stand up, please?
[A gentleman in the audience stood.]
Mr. LEONARD. Mr. White has charged that Mr. Muyshondt is re-
sponsible for the death of Archbishop Oscar Romero, many thou-
sands of Salvadorans, Americans, and others, plots the overthrow
of his government, controls and finances Roberto D'Aubuisson and
the rightist death squads, and finally, calls him a madman and
scum. Let there be no doubt in anyone's mind that the statements
are White's statements and not those of a third party.
s! :
847
.
1
- ***
------
I submit as evidence of that fact his answers given on national
television in an interview program when responding to questions as
to whether or not he adopted the statements of his alleged inform-
ant as his own. His answers were, and I quote, “I say that this in-
formation is reliable and from a reliable source, and I believe it to
be accurate, yes."
Second quote: "Oh, I am glad to repeat that I believe the evi-
dence is accurate that I presented to the committee.'
The third quote: "I am telling you that the source for this infor-
mation is a source that has been proven reliable to the U.S. Embas-
sy over years, that his information has been analyzed as credible
over the years.
What we have, therefore, Mr. Chairman and members of the
committee, is a former high official of the U.S. Government who
holds a title of respect and honor and will be referred to as Mr.
Ambassador for the rest of his life charging Arturo Muyshondt
with the most heinous crimes known to man, fascist style mass
murder of thousands of innocent victims, including the leader of
the Catholic Church in El Salvador.
If Mr. Ambassador were correct, he would have done a great
service to his country and the world by exposing this criminal, but
Mr. Ambassador is wrong, and he has perpetrated one of the most
grievous violations of another person's civil and human rights that
I can recall in almost 30 years of practicing law, a part of which
was spent prosecuting civil and human rights violators.
Mr. White's information came to him over 3 years ago, but he
chose not to make the name of Arturo Muyshondt public until Feb-
ruary 2 of this year. He cannot claim that he had insufficient time
in which to investigate. In contrast to the 3 years that Mr. White
had to investigate, we had only a matter of days from the day we
were retained by Arturo Muyshondt to clear his name.
My associate, Dan Maguan, Arturo Muyshondt, and I worked day
and night to compile the overwhelming mass of evidence which es-
tablishes without any question, any doubt that Mr. White has per-
petrated a grievious and irreconcilable wrong. He has exaggerated
that wrong, that violation of Mr. Muyshondt's civil and human
rights, by arrogantly refusing to retract his allegations in spite of
overwhelming evidence of his error. He has continued to rely on
such flimsy evidence as a Miami telephone listing to arrogantly
and adamantly adhere to his position that Mr. Muyshondt is guilty
of these heinous crimes.
In a moment I am going to summarize the evidence that is irre-
futable in proving that Mr. White has done irreparable damage to
Arturo Muyshondt, including making his family and himself a
target for death, and I will give you some proof of that in a
moment. But, Mr. Chairman and members of this subcommittee,
the evidence I present to you calls for you to act. You can take only
one action, and that is to recommend to the full committee and the
full Senate that Robert E. White be stripped of the title that this
Senate conferred upon him.
I will offer to you in a few moments on behalf of Arturo Muy-
shondt and ask you to adopt a resolution which I will present to
you which would restore the good name of Arturo Muyshondt and
..............-nin.:
...ti....
--------
1
.
848
..
his family by denying his false accuser from ever again using the
title ambassador.
We have provided and will provide you with documentary proof
of what I am going to present. Therefore I will simply summarize
briefly.
Arturo Muyshondt is a 35-year-old Salvadoran who lives with his
wife and three children, ages 10, 9, and 5, in their family home in
El Salvador. I have just a few weeks ago been in that home. It is
comfortable but it certainly is not ostentatious. He owns no real
estate, nor does he hold or otherwise maintain a residence in
Miami, Fla., nor has he ever held or maintained a residence in
Miami, Fla. The only real estate he owns are his home, his office,
an unimproved lot, a small dairy farm, cotton farms which are op-
erated by he and his brother, which are on leased land, two acres
of land on which his main business is located.
All of this real estate, Mr. Chairman, Senator Pell, are in El Sal-
vador. During a 1-month period in 1982 he rented an apartment in
Miami and installed a telephone in his name. He and his family
spent this time in Miami for security reasons following the comple-
tion of a kidnapping investigation in which Mr. Muyshondt was
principally responsible for the capture and jailing of the kidnapper.
For whatever reason unknown to us the listing continues, and we
are continuing to investigate it.
Mr. Muyshondt is not a millionaire, not at least by U.S. stand-
ards. His cotton business has resulted in a substantial financial
loss. His dairy farm, only a few years in operation, has yet to make
money. His economic mainstay has been his copra extracting busi-
ness, and his representation of a number of U.S. companies in Cen-
tral America.
He is not a multimillionaire exile, does not live in Miami, and
has not lost any land to agrarian reform. The best evidence of what
and who a man is, is obtained by interviewing those persons who
are closest to him. I did that in San Salvador recently. I personally
interviewed Msgr. Ricardo Aroste, who served as secretary to Arch-
bishop Romero. He confirmed that the archbishop had personally
inscribed a pastoral letter relating to the church's mission in El
Salvador as follows: "To Arturo, to continue looking for better
ways to serve our lovely country.'
I also interviewed two Jesuit priests, Father Francisco Estrada,
who was the former provincial or head of the Jesuit order in Cen-
tral America. He stated that the relationship between Arturo Muy-
shondt and Archbishop Romero was one of profound respect and
admiration. When asked if Arturo Muyshondt could have been re-
sponsible for the archibishop's murder, he stated, and I quote,
"That is impossible."
In an interview with Father Vero-Fajardo, another Jesuit, he
stated that he knew of his own personal knowledge--
Senator HELMS. Mr. Leonard, excuse me. Your time has expired.
I allowed Father Hehir to go over for a minute or two. Would you
please wind up in just a minute or two?
Mr. LEONARD. I will wind up if you give me 2 minutes.
Senator HELMS. It is an understanding that we will give Mr.
White additional time to respond.
........
:
849
Mr. LEONARD. I am submitting today an affidavit of Arturo Muy-
shondt together with documentation and another list of documents,
a statement, an extensive statement. I would urge the committee,
and this has nothing to do with the charges against him, it has
more to do with what really needs to be done in El Salvador from
the standpoint of really a man who is not deeply in politics, but is
deeply concerned about his country as a small businessman and
had some ideas.
Mr. Chairman, I will finish with that.
Senator HELMs. Thank you very much. Those documents will be
included in the record.
[Mr. Leonard's prepared statement and attachments follow:]
............... *****
I
850
March 20, 1984
Statement By Jerris Leonard, Former Assistant
Attorney General, Civil Rights Division, U.S.
Department of Justice, Before the Subcommittee
on Western Hemisphere Affairs, U.S. Senate
Mr. Chairman and members of the Subcommittee, I appear
here today as the attorney for Arturo Muyshondt, one of six
Salvadoreans named by Robert E. White, former Ambassador to El
Salvador, as
a bitter, angry, vindictive exiled millionaire,
whose extensive land holdings have been expropriated for land
reform.
White has charged that Muyshondt is responsible for
the death of Archbishop Oscar Romero, many thousands of Salva-
doreans, Americans and others, plöts the overthrow of his
government, controls and finances Roberto D'Aubuisson and the
rightist death squads and finally, calls him a "madman" and
"scum"--escoria in Spanish.
Let there be no doubt in anyone's mind that the statements
are White's statements and not those of a third party.
I submit
as evidence of that fact, his answers given on national television
in an interview program when responding to questions as to whether
or not he adopted the statements of his alleged informant as his
own.
His answers were
"I say that this information is reliable, and from a
reliable source, and I believe it to be accurate, yes."
"Oh, I'm glad to repeat that I believe the evidence
that is accurate that I presented to the Committee.'
"I am telling you that the source for this informa-
tion is a source that has been proven reliable to
the United States Embassy over years. That his
information has been analyzed as credible over the
years.
851
-2-
What we have therefore, is a former high official of the
U.S. Government, who holds a title of respect and honor and who
will be referred to as "Mr. Ambassador" for the rest of his life,
charging Arturo Muyshondt with the most heinous crimes known to
man--fascist style mass murder of thousands of innocent victims,
including the leader of the Catholic Church in El Salvador.
If "Mr. Ambassador" were correct, he would have done a
great service to his country and the world by exposing this
criminal Arturo Muyshondt.
But "Mr. Ambassador" is wrong and he has perpetrated one
of the most grevious violations of another person's civil and
human rights that I can recall in almost 30 years of practicing
law, a part of which was spent prosecuting civil and human rights
violators.
White's information came to him over three years ago, but
he chose not to make the name of Arturo Muyshondt public until
February 2, 1984.
He cannot claim that he had insufficient time
in which to investigate.
In contrast to the three years that white had to investi-
gate, we had only a matter of days from the day we were retained
by Arturo Muyshondt to clear his name.
My associate, Dan McGuan,
Arturo Muyshondt and I worked day and night to compile the
overwhelming mass of evidence, which establishes without any
question, any doubt that white has perpetrated a grevious and
852
-3-
irreconcilable wrong.
He has exaggerated that wrong,
that
violation of Arturo Muyshondt's civil and human rights by
arrogantly refusing to retract his allegations in spite of
overwhelming evidence of his error.
He has continued to rely
on such flimsy evidence as a Miami telephone listing to
arrogantly and adamantly adhere to his position that Arturo
Muyshondt is guilty of these heinous crimes.
In a moment,
I'm going to summarize the evidence that is irrefutable in
proving that white has done irreparable damage to Arturo
Muyshondt, including making him and his family a target for
death.
Mr. Chairman and members of this Subcommittee, the
evidence I present to you calls for you to act.
You can take
only one action, and that is to recommend to the full committee
and the full Senate that Robert E. White be stripped of the
title that this Senate conferred upon him.
I ask you, on behalf of my client, Arturo Muyshondt, to
adopt the Resolution which I present to you at this time, which
would restore the good name of Arturo Muyshondt and his family
by denying his false accuser from ever again using the title
"Ambassador."
We have provided you with documentary proof of what I am
going to present, therefore I will summarize our response to
White's "shotgun" charges.
.
853
-4-
Arturo Muyshondt is a 35 year old Salvadorean who lives
with his wife and three children, ages 10, 9 and 5 in their family
home in San Salvador.
I have been in his home.
It is comfortable,
but not ostentatious.
He owns no real estate, nor does he other-
wise maintain a residence in Miami.
The only real estate he owns or controls is:
1)
His residence;
2)
His office, which is the former Muyshondt family home
owned by his mother, brothers and himself;
3)
An unimproved acre of land on the Salvadorean Pacific
Coast;
4)
A 300 acre dairy farm, held by a corporation which he
controls;
5)
2,500 acres of cotton farms operated by a corporation
owned by he and his brother on land leased from others; and
6)
acres of land on which his copra oil extracting
business is operated by a corporation which he controls.
All of this real estate is in El Salvador.
During a one month period in 1982, he rented an apartment
in Miami and installed a telephone in his name.
He and his family
spent this time in Miami for security reasons following the
completion of a kidnapping investigation in which Sr. Muyshondt
was principally responsible for the capture and jailing of the
kidnapper. For whatever reason unknown to Sr. Muyshondt, the
listing of his name continued in the Miami directory.
We have
854
-5-
preliminary information indicating this may have been an error
on
the part of the telephone company.
.
Arturo Muyshondt is not a millionaire; at least not by U.S.
standards.
His cotton business has resulted in a substantial
financial loss.
His dairy farm, only a few years in operation,
has yet to make money.
His.. economic mainstay has been his copra
extracting business and his representation of a number of U.S.
companies in Central America,
X s.
Arturo Muyshondt is not a multi-millionaire exile--does
not live in Miami and has lost no land to Agrarian reform.
The best evidence of who and what a man is, is obtained by
interviewing those persons closest to him.
I did that in San
Salvador recently.
I personally interviewed Monsenor Ricardo Urioste, who
served as secretary to Archbishop Romero.
He confirmed that the
:
Archbishop had personally inscribed a Pastoral Letter relating to
the Church's mission in El Salvador as follows:
"To Arturo to
continue looking for better ways to serve our lovely country."
I also interviewed two Jesuit priests.
Father Francisco
Estrada was the former Provincial or head of the Jesuit order in
Central America.
He stated that the relationship between Arturo
:
Muyshondt and Archbishop Romero was one of "profound respect and
admiration."
When asked if Arturo Muyshondt could have been
responsible for the Archbishop's murder, he stated, "That's
impossible!"
1
855
-6
In an interview with Father Vera-Fajardo, S.J., he stated
that he knew of his own personal knowledge that Archbishop Romero
had stated that the relationship between the two men, Romero and
Muyshondt was "close" and one of mutual "great admiration."
His
knowledge came not only from his personal observations, but also
from his personal knowledge that either a writing or tape record-
ing of the Archbishop confirmed this fact.
Both of these Jesuits vigorously denied that Muyshondt
could possibly be the person named by White and that white must
have been mistaken in including Muyshondt in his charges.
Within a few hours of my interview with Father Vera-
Fajardo, he received a telephone call from a person named Carmen
Lavella, who represented herself to be associated with the
Center for Development Policy in Washington, D.C.
White is
associated with this organization.
The priest told me that
Lavella asked many of the same questions I had asked him earlier
and he told her what he had told me.
Mr. Chairman, the point here is most significant.
First, that series of interviews and telephone calls
man -----------
occurred on February 24, 1984, three years after white received
the information from his so-called informant, but it took him
three years to conduct the kind of basic inquiry that any reason-
able person would have conducted before charging an individual
with the most serious crimes against mankind that he has charged
Sr. Muyshondt with.
856
-7-
Second, he has had almost three weeks to investigate and
retract his allegations.
We have given him every possible
assistance to aid in such an investigation, but he has adamantly
refused to retract.
White has made his charges by using the Congress of the
United States, both House and Senate, as the vehicle to catapult
these charges across the headlines and airwaves of the world.
without such a vehicle, his charges would have largely been
ignored.
In making these unfounded and preposterous allegations
against another human being based on only the flimsiest of
speculation, he has abused the Congress and its search for truth.
In using aged rumors,
aged rumors, an unnamed and unreliable informant
who supplied him this information in his official capacity as
a
representative of the government of the United States, he has
betrayed us all, every single citizen of this country.
...
There is only one remedy. Strip him of his title by
adopting the suggested Resolution.
Such action will accomplish
two purposes, both of which are compelling in this situation.
First, it will sound a warning to all would-be sensationalist
"investigators" that they had better be sure before they make
the charges.
The second and most important is to restore the good
name of this honest man, Arturo Muyshondt, who has had to bare
his soul in order to refute the reckless charges made by White.
There is no public forum or body, other than the United
States Senate that can right the grievous wrong that white has
done to Muyshondt.
You have an obligation to right this wrong
and recommend that the Senate adopt this Resolution.
c
LS.... ....
857
SENATE RESOLUTION
Whereas on the
day of
19_
the United States Senate, upon the nomination of the President
of the United States, confirmed Robert E. White as Ambassador
to the Republic of El Salvador; and
Whereas, the said Robert E. White on, before and after
the 2nd day of February, 1984, engaged in a
in a course of reckless,
untruthful and dishonorable conduct toward a citizen of the
Republic of El Salvador; and,
Whereas, such reckless, untruthful and dishonorable conduct
constituted accusing said citizen of El Salvador, namely Arturo
Muyshondt of unfounded and unsubstantiated crimes against the
human race of the most heinous nature; and,
Whereas, the said Robert E. White came into possession of
such allegations while he served the United States as Ambassador;
and,
Whereas, the said Robert E. White, without attempting to
verify in even a most cursory manner, whether such allegations
and charges were true; and,
Whereas, the United States Senate finds that the utterance
:
of such charges, before public bodies and in the public media
were reckless, resulting in serious and irreparable damage to
the name, reputation and family, constituting conduct unbecoming
of a representative of the United States and the United States;
Now, Therefore, the United States Senate, having conferred
upon Robert E. White the title of "Ambassador," hereby withdraws
such title and honor and orders the said Robert E. White to
forever cease and desist from using such a title of honor.
34-045 0-84-55
858
March 20, 1984
STATEMENT OF ARTURO MUYSHONDT
I want to thank Senator Helms and his Subcommittee for allowing
my attorney to appear and refute the reckless and malicious
charges made against me by Mr. White.
There is no doubt in my
mind that when I am given the opportunity to present in the U.S.
1
Courts all of our evidence, that evidence will overwhelmingly
and beyond any doubt prove Mr. White's allegations to be false.
The proceedings held here today will be fully justified. I hope
the United States Senate will give serious consideration to the
resolution offered by my attorney to strip Mr. White of his
title of Ambassador.
Mr. White's allegations are irresponsible.
I and other foreign citizens who do business in the United States
and have been subjected to Mr. White's reckless charges, deserve
no less.
White and people like him dishonor the American people
in the eyes of law abiding foreign citizens who view the United
States as the defender of fairness and decency to all human beings.
859
AFFIDAVIT
Arturo Muyshondt being first duly sworn upon oath deposes
and states as follows:
1.
I am Arturo Muyshondt, a citizen of the Republic of El
Salvador, and I reside in the City of San Salvador in the Republic
of El Salvador.
2.
I am 35 years old, married and have three children,
ages ten, nine and five.
I am a practicing Catholic and was
educated by the Jesuits in El Salvador through high school.
I
attended Menlo School of Business Administration in Menlo Park,
--:-1, s.-,.,...- ........
California in 1974-75 and received a Bachelor of Science in
.
Business Administration from that institution.
3.
I am not wealthy.
My basic business is the extrac-
tion of vegetable oil from copra, which I purchase from local
cooperatives in El Salvador, processing the copra in my plant
in San Salvador and selling it to various customers, mainly in
the Central American area.
With my brother, I also operate
some cotton farms, totalling approximately 2,500 acres.
All of
the land is leased from others.
The cotton farms have lost
substantial monies in the last two years.
4.
I also own and operate a dairy farm of approximately
300 acres.
This is the only land anywhere in the world which I
own, other than my home, (office) and approximately one acre of
unimproved beach property in El Salvador. I entered the dairy
farming business in El Salvador by purchasing brown Swiss
860
-2-
dairy cows, approximately 87, after extensive travel through the
mid-Western part of the United States.
I am very proud of the
fact that I bought this dairy herd from dairy farmers in Wisconsin
and Ohio.
5.
With a relative of my wife, I have
I have an office in Coral
Gables, Florida, which imports machinery parts into El Salvador,
and we are trying to export some goods from El Salvador to the U.S.
W.
In addition, I hold in my own name, a representation
contract with an oil extraction machinery manufacturing company,
and currently do business with a few other American companies,
representing them in the Central American area.
6.
Beginning as early as November and December, 1983,
and culminating with a prepared statement, a press conference
and subsequent radio and television appearances, Robert E. White,
former Ambassador from the United States to El Salvador made
the most serious charges that one human being can make against
another.
(Oral Statement of White, Tab 1; Prepared Statement
of white, Tab 2; Transcript of "From the Editor's Desk, Tab 3.)
Ordinarily, a citizen of El Salvador would have little
interest in what a man like White has to say, but in this case,
the perjured testimony that Robert E. White gave before a Con-
gressional Subcommittee has not only resulted in great damage
4
to my name, the name of my family and my children, but it has
placed all of us in great danger of physical harm and death.
861
-3-
In fact, on Thursday, February 23, 1984, just a few weeks after
White made his false and inflamatory charges against me,
an
attempt was made on my life by a would-be assassin.
(Statement
of Ing. Posada, Tab 4.)
No such attempts have ever been made
on me or my family before.
7.
On February 6, 1984, this man,
Robert E. White,
Robert E.
appeared before a Congressional Subcommittee and uttered a vicious
and damaging defamation.
He alleged that I was
a member of a
group of Salvadorean exiles of great wealth, living in Miami,
revengeful because their land and properties in El Salvador had
been expropriated by the Salvadorean Government for land reform,
:
;
who had plotted and continued to plot the deaths of Salvadoreans.
He charged that I was a member of the group that was directing
the execution of such persons by manipulating Roberto D'Aubuisson
and persons associated with him.
Mr. White is a vicious liar.
;
.
He is also a thief, for he has stolen the most precious possession
my family and I have our good name.
8.
I have asked Mr. White to retract his false and
dangerous accusations.
(Letter of March 2, 1984, Tab 5).
I
have supplied Mr. White's lawyers with the information stated
immediately above.
The only response I have received from Mr.
White was through his lawyers.
Rather than retract his false
and malicious accusations and allow me to try and salvage my
good name,
MI..
White chooses instead to ask questions of me,
questions he should have asked before he made his false and
862
-4-
malicious accusations which have slandered my good name and
reputation and placed me and my family in danger.
(Letter of
March 7, 1984, Tab 6.)
9.
Had Mr. White been concerned with the accuracy and
truth of his accusations of me, he should have known the answers
to the questions asked by his lawyers.
I respond to Mr. White's
questions no longer in the hope that Mr. White will attempt to
undo the damage he has done--that appears to be futile--I respond
only in order to set the record straight.
(Affidavit of Arturo
Muyshondt dated March 13, 1984 and Letter dated March 15, 1984,
Tab 7.)
10.
Mr. White has accused me of being a member of his
"gang of six."
According to Mr. White, I live in Miami and am an
exile from my country.
I have prepared a statement which is
attached hereto that chronicles the amount of time I have spent
in the United States since 1978.
The dates and time spent are
taken from my passport and my recollection.
This information,
Mr. White could have had for the asking, had he been concerned
بلبل :۔
with the accuracy and truth of his statements. That I do not
live in Miami is clear; further, Mr. White's statements that I am
an exile from my country is preposterous.
(U.S. Travel Summary
of Arturo Muyshondt, Tab 8.)
11.
To the extent that the above statements and document-
ary
support prove that I am not living in Miami, am not wealthy,
am not a holder of "large estates" lost to land reform; and am
.
863
-5-
not an exile from my country no more shall be offered.
Had Mr.
:
White truly been interested or concerned with the truth of his
accusations, over and above his "7" questions (not to be confused
with his aberrational "gang of six") Mr. White could have and
"..
[
should have asked some or all of the following questions before
!
publishing his malicious defamation, which question, among others,
I would have gladly answered.
.......
12.
Q.
What is your full and complete name?
A.
Carlos Arturo Muyshondt Parker, Muyshondt was my
.
father's given name, and Parker is my mother's given name.
13.
Q.
How are you generally known?
A.
Arturo Muyshondt.
ini..
14.
Q.
Is your last name pronounced differently in Spanish
than it would be in English?
A.
Yes, in Spanish my last name is pronounced as if
it were spelled "Mason."
15.
3.11.17 1.*...*
... min.:.
Q.
Have you ever owned real estate of any kind in
Miami?
A.
Never.
16.
Q.
Have you ever temporarily resided in Miami?
A.
In late 1981, a relative of my wife's was kidnapped
in El Salvador.
I was participating in the negotiations and the
.
1
investigations in Guatemala and in El Salvador from December 10,
1981 to January 27, 1982. When the kidnapping was resolved, for
security reasons, my family and I went to Miami and rented an
1
..
1
.
1
.
!
864
-6-
apartment for a month.
We had a telephone in that apartment for
less than a month and then we left that apartment and stayed for
about twenty days in one of my wife's relative's apartment.
when
we cancelled the telephone, we gave the number of my wife's
relative's telephone in order to get the bill and recover the
deposit from the telephone company.
17.
Q.
You own an airplane.
Have you ever flown that
airplane to Miami?
In 1979 I bought an airplane in Miami and went there
to pick it up and fly it back to El Salvador.
In 1982, I flew the
airplane to Miami for repairs and flew it back to El Salvador after
the repairs were finished.
In December 1982, I flew my airplane
with my son, Arturo, to Miami for a business and pleasure trip.
Other than these three instances, I am quite certain that I have
never flown my airplane to Miami from El Salvador or from any
4
other place since 1979.
18.
Q.
Do you do business in Miami?
A.
Yes, my wife's relative and I maintain a small
business with an office in Coral Gables, Florida.
That business
is for the purpose of importing machinery parts into Central
America.
I also represent in Central America a company from
Ohio whose Latin American Division Manager resides in West Palm
Beach, Florida.
When the occasion arises for me to be in the
Miami area, I ordinarily visit with my business partner and will
visit or call the gentleman in West Palm Beach.
3
865
-7-
19.
Q.
Do you travel extensively to the United States?
A.
Not extensively, but a review of my passport to
assist in refreshing my recollection indicates that from December
4, 1978 when my current passport was issued, I made three visits
to the United States from December 4, 1978 through December 31,
1979, one of which was to pick up the airplane
to pick up the airplane referred to above.
On these three trips I spent not more than 20 days in the United
States.
In 1980, I visited the United States approximately 5
times, most of those visits were with my family on vacation, and
I would estimate that I spent not more than 44 days in the United
States during that year.
In 1981, I made only one visit to the United States in
early January, met with a business friend and spent not more
than five days.
In 1982, I was in the United States on quite a few occa-
sions because of the kidnapping of my wife's relative, to bring
::
in my airplane for repairs, and then to pick it up, and towards
the end of that year, I began travelling into the Midwest, looking
for dairy heifers.
I would estimate that I spent not more than
60 days in the United States in 1982.
In 1983, again I spent approximately 60 days in the United
States, early in the year looking for dairy heifers and choosing
the herd that I eventually bought in Ohio and Wisconsin and
returned to El Salvador.
I also spent some time on my machinery
-*-:den': isi 2
..........::::::
************* .carei... :-*. ** :* !
... ::
866
-8-
import business in Coral Gables and stayed on a number of occa-
sions at the Holiday Inn at Brickel Point in Miami.
Since Robert White's charges against me in early February
1984, I've spent considerable time in the United States.
20.
Q.
Has the Salvadorean Government ever confiscated or
taken any of your property for land reform or any other purpose?
A.
Never.
21.
Q.
It has been charged that you did not support the
Junta, which was established in El Salvador in 1979.
Is that a
true statement?
A.
It is false.
Even more, a member of M.RiS.,
Mario Audino, was a member of the Junta representing the free
enterprise sector. I show you a copy of a newspaper article and
picture which shows me as part of a group, M.R.S., that supported
that Junta, and the newspaper article clearly indicates that the
group in the picture did support the Junta of 1979.
(El Diario
De Hoy, 19 October, 1979, Tab 9.)
22.
Q.
It has been charged that you were one of the
founders and supporters of F.A.N. which became ARENA, which is
the party of Roberto D'Aubuisson.
Is that true or false?
A.
It is both true and false.
It is true that a
political movement which I helped to found, M.R.S., was one
of the founding organizations of F.A.N. in December of 1979.
When the articles and statements of principle of F.A.N. were
published in January 1980, I took out an ad in the newspaper and
int
867
-9-
had a press interview.
I show you photocopies of that ad and
from the interview on behalf of M.R.S. withdrawing its support
from F.A.N.
Since that time, I have not supported in any way,
F.A.N., ARENA, or Roberto D'Aubuisson.
(El Diario de Hoy,
5 February 1980, Tab 10.)
23.
Q.
It has been charged that your last name appears
in at least three places in the secret diaries that were seized
from Roberto D'Aubuisson in 1980.
What is your response to that
charge?
A.
Of course, I have never seen such diaries, and do
។ 1
not know whether my name appears or not.
I can state categorically
1
that I have never been involved with Roberto D'Aubuisson in any
way, other than as indicated above in late 1979 in association
!
through M.R.S., which was terminated in January 1980.
1
.
24.
Q.
Did you know Archbishop Romero.
A.
Yes.
1
25.
Q.
How long?
A.
For many years.
26.
Q.
Describe your relationship with Archbishop Romero.
A.
I consider my relationship with Archbishop Romero
to be a very close one.
We were good friends.
I admired him and
I believe he admired me. We had many discussions about our
country, its problems and how to solve those problems. We did
not always agree, but we respected one another's opinions.
believe that these discussions helped him to have a better under-
standing of the private business and economic sector and helped
I
868
-10-
me to better understand his deep concern and the concern of the
Church for the people of El Salvador.
I advised the Archbishop
Romero that I believed that he and the Church were used by the
Communists to the detriment of the Church and our country.
27.
e
You have been accused by Robert E. White of having
been responsible for Archbishop Romero's death.
Is that accusation
true or false?
A.
Totally false,
It is as preposterous and demeaning
as if he were to accuse me of killing my own brother.
28.
Q.
Have the "death squads" ever personally affected
you?
A.
I believe that there is substantial proof that my
brother was assassinated by some kind of organized "death squad."
There is substantial evidence to prove that on March 26, 1983,
while flying in a remote area of El Salvador, my brother's airplane
was shot out of the air by gun fire. The U.s. Federal Bureau of
Investigation had parts of the airplane and has conducted studies
which show that there is consistent evidence that two parts of
the airplane that we sent to the F.B.I. were shot by bullets
(F.B.I. Laboratory Report No. 31014008 S RU. Qy, November 14,
1983.)
I also know that certain events occurred at the scene of
the crash which are extremely suspicious and extraordinary.
I
do not know who killed my brother and therefore, I make no accu-
sations now.
Our investigation continues; we are close to the
answers and as soon as I have solid evidence, I will place the
responsibility squarely on the persons involved.
869
-11-
29.
Q.
Have you offered to cooperate with the U.S.
Federal Bureau of Investigation with respect to the so-called
Miami "gang of six?"
A.
Yes, my attorney contacted the F.B.I. and made
1
that offer. (Affidavit of February 16, 1984, Tab 11.)
Dated at Washington, D.C. this
19 day of, March, 1984
of
Arturo Muyshondt
Washington
)
SS
District of Columbia
)
PERSONALLY appeared before me this At day of March, 1984
the above named Arturo Muyshondt, to me known to be the person
who executed the foregoing Affidavit and acknowledged the same.
Cheryl Hudson
.
Notary Public
My Commission expires March 1988
:
.
-
.
:
1.1., 1-41c" ::..-:... 1.7.1 ..
1
870
[TAB 1]
3407
ORAL STATEMENT BY AMBASSADOR ROBERT WHITE
BEFORE THE HOUSE SUBCOMMITTEE
ON WESTERN HEMISPHERE AFFAIRS
FEBRUARY 2, 1984
MR, CHAIRMAN,
MY NAME IS ROBERT E. WHITE. I AM WARBURG PROFESSOR OF
INTERNATIONAL RELATIONS AT SIMMONS COLLEGE, I CHAIR THE
CENTER FOR DEVELOPMENT POLICY'S COMMISSION ON UNITED STATES-
CENTRAL AMERICAN RELATIONS, A PRIVATE GROUP WORKING FOR
BETTER RELATIONS BETWEEN OUR COUNTRY AND THE COUNTRIES OF CENTRAL
· AMERICA. DURING MY FOREIGN SERVICE CAREER I HAD ASSIGNMENTS IN
HONDURAS, NICARAGUA, AND EL SALVADOR.
FOR THREE YEARS NOW, I HAVE REFRAINED FROM REVEALING THE
FULL EXTENT OF OUR GOVERNMENT'S KNOWLEDGE OF OFFICIAL TERROR IN
EL SALVADOR. BUT IT IS NOW CLEAR THAT THE ADMINISTRATION
COVERED UP VITAL DOCUMENTS FROM THE KISSINGER COMMISSION AND
THE CONGRESS, AND I CAN NO LONGER REMAIN SILENT,
FOR THREE YEARS THE REAGAN ADMINISTRATION HAS PRETENDED
IT DID NOT KNOW THAT DEATH SQUADS. AND MILITARY BUTCHERY ARE
INTRINSIC FEATURES OF THE GOVERNMENT AND MILITARY OF EL SALVADOR.
FOR THREE YEARS THE ADMINISTRATION HAS KNOWN THE NAMES AND
INVOLVEMENT OF SEVERAL WEALTHY SALVADORAN EXILES LIVING IN MIAMI,
FLORIDA, WHO ORGANIZE, FUND AND DIRECT RIGHT WING DEATH SQUADS.
FOR THREE YEARS WE HAVE KNOWN THAT ROBERT D'AUBUISSON
PLANNED AND ORDERED THE ASSASSINATION OF ARCHBISHOP ROMERO.
::
THE CABLES GIVING THIS EVIDENCE AGAINST D'AUBUISSON, THE
MIAMI EXILES, AND ARENA EXIST. I HAVE KNOWN, THE STATE
DEPARTMENT HAS KNOWN, THE PENTAGON HAS KNOWN, AND THE WHITE
HOUSE HAS. KNOWN. · IF THE KISSINGER COMMISSION WAS NOT SHOWN
EXHIBIT A
871
.
2
THESE CABLES, THE MEMBERS WERE USED IN A SHAMELESS FASHION, AND
THEIR REPORT CAN BE CONSIGNED TO THE WASTEBASKET.
THE WHITE HOUSE IS ENTITLED TO PURSUE ITS OWN POLICIES.
IT IS NOT ENTITLED TO ITS OWN SET OF FACTS.
!
FOR FIFTY YEARS, EL SALVADOR WAS RULED BY A CORRUPT AND
BRUTAL ALLIANCE OF THE RICH AND THE MILITARY. THE YOUNG OFFICERS
REVOLT OF 1979 ATTEMPTED TO BREAK THAT ALLIANCE. IT WAS THE
REAGAN RENEWED TOLERANCE AND ACCEPTANCE OF THE EXTREME RIGHT WHICH
LED TO THE EMERGENCE OF THE NATIONAL REPUBLICAN ALLIANCE, ARENA,
AND THE RISE OF EX-MAJOR ROBERTO D'AUBUISSON.
ARENA IS A VIOLENT FASCIST PARTY MODELED AFTER THE NAZIS
AND CERTAIN REVOLUTIONARY COMMUNIST GROUPS. ARENA HAS NOT ONLY
A CIVILIAN PARTY STRUCTURE BUT ALSO A MILITARY ARM OBEDIENT TO
THE PARTY. THE FOUNDERS AND CHIEF SUPPORTERS OF ARENA ARE RICH
SALVADORAN EXILES HEADQUARTERED IN MIAMI AND CIVILIAN ACTIVISTS
IN EL SALVADOR. ARENA'S MILITARY ARM COMPRISES OFFICERS AND MEN
OF THE SALVADORAN ARMY AND SECURITY FORCES. MANY OF ITS MOST
EFFECTIVE MILITANTS IN THE MILITARY ARE NOT FORMAL PARTY MEMBERS,
MY EMBASSY DEVOTED CONSIDERABLE RESOURCES TO IDENTIFYING
THE SOURCES OF RIGHT WING VIOLENCE AND THEIR CONTACTS IN MIAMI,
FLORIDA. INFORMATION ON THE SALVADORAN EXILES RESIDING IN MIAMI
PROVED PARTICULARLY DIFFICULT TO DEVELOP; HOWEVER, IN JANUARY
1981 WE LOCATED A SOURCE WHO WAS REGARDED BY THE MIAMI GROUP AS
ONE OF THEM. THEY SPOKE TO THIS PERSON FREELY AND HE PARTICIPATED
IN SOME OF THEIR STRATEGY SESSIONS.
WHEN HE REFERRED TO THE MIAMI MILLIONAIRES THE MIAMI SIX
THE SOURCE CALLED THESE MEN "SCUM" (ESCORIA). HE SAID HE HAD
TALKED TO WEALTHY PEOPLE HERE WHO HAVE BEEN INTERROGATED AND
THREATENED IN MIAMI SUCH YOUNGER BUSINESSMEN/LAWYERS AS (NAMES
DELETED) AND OTHERS PEOPLE WHO HAVE DECIDED TO STAY ON AND
WORK FOR THE COUNTRY, TO KEEP THEIR BUSINESSES AND FACTORIES OPEN,
872
3
TO COOPERATE WITH THE GOVERNMENT WHILE CRITICIZING ITS INEFFICIENCY
AND HOSTILITY TO THE PRIVATE SECTOR. THESE MEN HAVE BEEN CALLED
TO MIAMI AND SEATED AT THE END OF A LONG TABLE, FACING THE "SIX“,
AND MADE TO ANSWER SUCH QUESTIONS AS "WHY ARE YOU CONTRIBUTING
TO THE COMMUNIST VICTORY BY KEEPING YOUR BUSINESS OPEN?" OR "WHY
DO YOU DO THE WORK OF THE, COMMUNIST AGENTS WHITE AND BOWDLER?",
(THE REFERENCE IS TO FORMER ASSISTANT-SECRETARY WILLIAM BOWDLER.)
THE MIAMI SIX EXPLAINED TO HIM THAT TO REBUILD THE COUNTRY
IT MUST FIRST BE DESTROYED TOTALLY, THE ECONOMY MUST BE WRECKED,
UNEMPLOYMENT MUST BE MASSIVE, THE JUNTA MUST BE OUSTED AND A "GOOD"
MILITARY OFFICER BROUGHT TO POWER WHO WILL CARRY OUT A TOTAL
CLEANSING (LIMPIEZA), KILLING THREE OR FOUR OR FIVE HUNDRED
THOUSAND PEOPLE. LAST, THE "SIX" MADE THE FOLLOWING THREAT:
"UNLESS YOU CLOSE DOWN YOUR FACTORY/BUSINESS, GET OUT OF THE COUNTRY,
STOP WORKING FOR ALIANZA PRODUCTIVA, INCAFE, AMERICAN EMBASSY,
ETC., YOU WILL BE SORRY."
WHO ARE THESE MADMEN AND HOW DO THEY OPERATE? THE PRINCIPAL
FIGURES ARE SIX ENORMOUSLY WEALTHY FORMER LAND OWNERS. HE CONTINUED
THAT CENTRAL POWER WAS EXERCISED BY THE MIAMI "SIX", NOTING THAT
OTHERS AMONG THE EMIGRES AND THEIR WEALTHY ALLIES HERE HAVE SOME
ROLE FROM TIME TO TIME BUT THE TOP LEADERSHIP IS VIERA ALTIMIRANO,
LUIS ESCALANTE, ARTURO MUYSHONDT, THE SALAVERRIA BROTHERS (PROBABLY
JULIO AND JUAN RICARDO), AND ROBERTO EDGARDO DAGLIO. ALL ARE
IN MIAMI. THEY HATCH PLOTS, HOLD CONSTANT MEETINGS AND COMMUNICATE
INSTRUCTIONS TO D'AUBUISSON.
THE EMBASSY HAS REPORTED TO WASHINGTON THAT RIGHTIST DEATH
SQUADS ARE FINANCED AND DIRECTED BY THIS GROUP OF SELF-EXILED
MILLIONAIRES IN MIAMI, AND KILL HUNDREDS OF THOUSANDS
SALVADORANS SUSPECTED OF LIBERAL OR LEFTIST SYMPATHIES.
IT IS UNACCEPTABLE THAT SUCH AN OPERATION IS GUIDED FROM
A MAJOR AMERICAN CITY AND THAT NOTHING IS BEING DONE TO STOP IT.
873
4
ROBERTO D'AUBUISSON, IT SHOULD BE REMEMBERED, IS THE MAN
THE ADMINISTRATION OF PRESIDENT CARTER CLASSIFIED, ACCURATELY,
AS A TERRORIST, A MURDERER, AND A LEADER OF DEATH SQUADS. · As
AMBASSADOR, I DENIED HIM ACCESS TO THE UNITED STATES EMBASSY
AND SUCCEEDED IN HAVING HIM BARRED FROM OUR COUNTRY.
SHORTLY AFTER PRESIDENT REAGAN OOOK OFFICE, THIS ADMINISTRATION
OVERTURNED THIS POLICY AND BEGAN THE PROCESS OF REHABILITATING
EX-MAJOR D'AUBUISSON. NO LONGER WAS HE A PARIAH. TODAY HE IS
ONE OF TWO LEADING PRESIDENTIAL CAND I DATES IN THE ELECTIONS
SCHEDULED FOR MARCH 25. IN A VERY REAL SENSE, THE REAGAN
ADMINISTRATION CREATED ROBERTO D'AUBUISSON THE POLITICAL LEADER.
YET FROM THE FIRST DAYS IN OFFICE THE REAGAN WHITE HOUSE
KNEW BEYOND ANY REASONABLE DOUBT THAT ROBERTO D'AUBUISSON
PLANNED AND ORDERED THE ASSASSINATION OF ARCHBISHOP OSCAR ARNULFO
ROMERO.
ACCORDING TO AN EYE WITNESS ACCOUNT, ROBERTO D'AUBUISSON
SUMMONED A GROUP OF ABOUT TWELVE MEN TO A SAFE HOUSE, PRESIDED
OVER THE MEETING, ANNOUNCED THE DECISION TO ASSASSINATE THE
ARCHBISHOP AND SUPERVISED THE DRAWING OF LOTS FOR THE "HONOR"
OF CARRYING OUT THE PLOT.
THE OFFICER WHO "WON" THE LOTTERY WAS LT. FRANCISCO AMAYA
ROSA, A D'AUBUISSON INTIMATE. AMAYA ROSA CHOSE A MILITARY
HANGER-ON AND SHARPSHOOTER NAMED WALTER ANTONIO ALVAREZ TO
FIRE THE SINGLE BULLET WHICH ENDED THE LIFE OF ARCHBISHOP ROMERO
AS HE SAID MASS IN THE ORPHANAGE OF THE GOOD SHEPHARD,
34-045 0-84-56
874
5
SOME MONTHS LATER, AS ARENA'S POLITICAL CAMPAIGN WAS GETTING
UNDERWAY, D'AUBUISSON DECIDED THAT ALVAREZ COULD NOT BE TRUSTED.
HE PRONOUNCED ANOTHER DEATH SENTENCE, A FOUR MAN DEATH SQUAD
WENT INTO ACTION AND EXECUTED WALTER ALVAREZ AS HE STOOD WATCHING
A SOCCER GAME.
ALL OF THE ABOVE INFORMATION WAS REPORTED TO WASHINGTON,
THE REAGAN WHITE HOUSE TOOK ON A GREAT RESPONSIBILITY WHEN
IT CHOSE TO CONCEAL THE IDENTITY OF THE ARCHBISHOP ROMERO'S
MURDERER AND NOT TO USE THE EVIDENCE GATHERED BY THE EMBASSY
TO WRITE A FINISH TO THE POLITICAL FORTUNES OF ARENA AND THE
AMBITIONS OF ROBERTO D'AUBUISSON,
DID THE KISSINGER COMMISSION HAVE ACCESS TO EMBASSY REPORTS
DETAILING THE SYSTEMATIC MURDER OF SALVADORAN MODERATES BY ARENA
AND THE INTIMATE COLLABORATION WHICH EXISTS BETWEEN HIGH MILITARY
COMMANDERS AND DEATH SQUADS?
PRESIDENT REAGAN HAS ADVOCATED FREE ELECTIONS AS THE SOLUTION
TO THE PROBLEMS OF EL SALVADOR. YET IN EL SALVADOR THE PRESS
IS CONTROLLED BY ARENA. WE CAN ALL BE CERTAIN THAT THE GOVERNMENT
WILL PERMIT NO MENTION OF D'AUBUISSON'S GUILT TO REACH THE PEOPLE
OF EL SALVADOR. HOW CAN PEOPLE CAST A FREE VOTE IF VITAL INFORMATION
IS DENIED THEM?
THE REAGAN ADMINISTRATION GIVES LIP SERVICE TO THE STRENGTHENING
OF THE JUDICAL SYSTEM OF EL SALVADOR. BUT THOSE WHO EXERCISE
POWER IN EL SALVADOR KNOW THAT THE REAGAN ADMINISTRATION KNOWS
THAT ARENA IS RESPONSIBLE FOR THE DEATHS OF THE ARCHBISHOP AND
MANY AMERICANS. DOES NOT THIS TOLERANCE FOR ARENA CONVICT US
OF DISGRACEFUL CYNICISM AND A DOUBLE STANDARD BEFORE THE WORLD?
THE NATIONAL DEMOCRATIC FRONT (FDR) HAS OFFERED TIME AND
875
6
AGAIN TO NEGOTIATE TERMS FOR REENTERING THE POLITICAL LIFE OF
EL SALVADOR. THE REVOLUTIONARY MOVEMENT HAS IMPOSED NO PRECONDITIONS
TO THE START OF NEGOTIATIONS.
IN CONTRAST, SALVADORAN PRESIDENT ALVARO MAGANA RECENTLY
STATED THAT "WHEN THE LEFT SUGGESTS SAN SALVADOR AS A MEETING
PLACE, (TO DISCUSS NEGOTIATIONS) THE PROBLEM IS THAT THEY ARE
COMMITTING CRIMES AGAINST THE COUNTRY. IF THEY CAME
IF THEY CAME HERE, I
WOULD HAVE TO ORDER THEM ARRESTED. THAT IS MY OBLIGATION."
HE HAS FURTHER STATED THAT HIS GOVERNMENT WOULD NOT COMPLY
WITH UNITED STATES CONGRESSIONAL STIPULATION THAT HIS GOVERNMENT
BEGIN UNCONDITIONAL DISCUSSIONS WITH. THE INSURGENTS. HE SAID,
"WE ARE NOT GOING TO SATISFY THAT CONDITION....IF NECESSARY WE
ARE GOING TO LOSE MILITARY AND ECONOMIC AID."
IN MY JUDGMENT, AS LONG AS WE CONTINUE MILITARY AID TO THE
PRESENT MILITARY LEADERSHIP OF EL SALVADOR, THEY WILL NEVER
PERMIT NEGOTIATIONS, IT DOES NOT MATTER WHO IS PRESIDENT. AS
LONG AS THE SALVADORAN MILITARY IS CONTOLLED BY MEN WHO COLLABORATE
WITH ARENA IN ITS
IN ITS CAMPAIGN OF WHOLESALE TORTURE AND MURDER, NO
NEGOTIATIONS ARE POSSIBLE.
THE UNITED STATES MUST CHANGE: ITS POLICY AND BEGIN TO WORK
FOR PEACE IN CENTRAL AMERICA, EL SALVADOR IS KEY. IN ORDER
TO BRING US CLOSER TO THIS GOAL, TOUGH ACTION BY THE CONGRESS
IS NECESSARY. SUCH ACTION SHOULD INCLUDE:
1) A
A CONGRESSIONAL STIPULATION THAT NO FURTHER MILITARY
AID SHALL GO TO EL SALVADOR UNLESS THE GOVERNMENT OF EL SALVADOR
CARRIES OUT, IN THE WORDS OF THE KISSINGER COMMISSION, VIGOROUS
ACTION AGAINST THOSE GUILTY OF CRIMES AND THE PROSECUTION TO
THE EXTENT POSSIBLE OF PAST OFFENDERS, ... AND SERIOUS SANCTIONS,
INCLUDING DENIAL OF VISA (AND) DEPORTATION OF US-BASED SALVADORANS
INVOLVED IN DEATH SQUAD ACTIVITIES.
876
7
2) THE CONGRESS SHOULD SUPPORT NEGOTIATIONS BY CONDITIONING
FURTHER MILITARY AID TO EL SALVADOR TO EL SALVADOR UPON SERIOUS
NEGOTIATIONS BY BOTH SIDES.
3).THE CONGRESS SHOULD DEMAND TO SEE INFORMATIVE CABLES
FROM THE US EMBASSY IN SAN SALVADOR ON THAT GOVERNMENT'S INVOLVEMENT
IN DEATH SQUAD KILLINGS.
I WANT TO THANK YOU MR. CHAIRMAN FOR THIS OPPORTUNITY TO
ADDRESS THE SUBCOMMITTEE TODAY, I WOULD BE HAPPY TO ANSWER ANY
QUESTION.
1
877
[TAB 2]
3414
PREPARED STATEMENT BY AMBASSADOR ROBERT WHITE
BEFORE THE HOUSE SUB COMMITTEE
ON WESTERN HEMISPHERE AFFAIRS
February 2, 1984
My
name is Robert E. White. I am Warburg Professor
of International Relations at Simmons College. I chair the
Center for Development policy's Commission on United States-
Central American Relations, a private group working for better
relations between our country and the countries of Central
America. During my Foreign Service career I had assignments
in Honduras, Nicaragua, and El Salvador.
:
The President and Congress have committed this nation
to ending our support for El Salvador's brutal apparatus
of terror. Yet the President is now preparing new military
aid requests which--if granted--will only encourage further
civilian murder.
Despite my grave reservations about the overall direction
of the Kissinger Commission report, its human rights recommendations
mark a major contribution to the human rights debate.
As you know, nine of the twelve Commission members
recommended in part that military aid should be conditioned
upon "termination of the activities of the so-called death
squads, as well as vigorous action against those guilty of
crimes and the prosecution to the extent possible of past
offenders. These conditions should be seriously enforced."
The Commission members also recommended "serious sanctions,
including the denial of visas, deportation, and the investigation
of financial dealings," against US-based Salvadorans connected
with death squad activities.
Congressional passage of this recommendation is urgently
needed, with the added proviso that congress--not the President--
should make this determination prior to allocating funds.
Only strong action can give hope that civilian murder
in El Salvador will be reduced. To understand this, one
must understand the inner-workings of violence in El Salvador.
The political and moral bankruptcy of the Reagan
Administration's policy in Central America comes clearer
with eachi passing month. In El Salvador, the ragtag forces
of revolution deal blow after staggering blow to an American
trained and supplied military force. In Nicaragua, the CIA-
sponsored counterrevolutionaries bear dramatic witness to
their own impotence. After two years of subsidies, the contras
have yet to take and hold a single village and each night
must flee over the border to safe haven in Honduras. Given
the miserable record of the forces we support, is it not
EXHIBIT B
878
2
past time to stop throwing guns and money at the problem
and ask why?
Any formulation of a national policy toward Central
America must begin with the recognition that conditions
in most of Central America justify recourse to revolution.
This is especially true of El Salvador. Even the excesses
of the despotic, venal Somoza clan in Nicaragua pale in
comparison with the brutal, starvation existence imposed
on the Salvadoran campesinos and workers by the economic
and military elites.
For most of this century the rich of El Sa:lvador--
families such as the Quindnez, the da solas, the Regelados--
have dominated an economy which has systematically reduced
the poor to a subhuman existence. In 1979, young officers
leagued with democratic revolutionaries and launched a program
dedicated to human rights and reform. Their efforts were
regularly subverted by Colonel Nicholas Carranza and other
high ranking members of the Salvadoran military. When leaders
for human dignity and change--men such as Archbishop Oscar
Romero and Land Reform Chief Roldolfo Viera--continued their
efforts on behalf of the poor, military death squads gunned
them down.
The fundamental error of the Reagan foreign policy
team has been to hide the fact that death squads and butchery
are intrinsic to the regime their policies have helped create.
As in Vietnam, this head-in-the-sand approach confuses our
own citizens, angers our allies, and does a profound disservice
to the peoples we purport to help.
Over the past three years the Reagan Administration
has suppressed facts which would have revealed the character
of the disloyal and murderous system which our military
and economic assistance supports.
The Reagan Administration may believe that a first-
hand, dispassionate account of the connection between Miami-
based Salvadoran exiles and death squads are not of interest
to the Congress. I believe Congress should make up its own
mind about that.
The Reagan Administration may believe that an eye witness
account of ex-Major Roberto D'Aubuisson ordering the assassination
of Archbishop Oscar Romero is not germane to the deliberations
of Congress. I believe the Congress should decide that
after hearing the facts.
I have referred to these events before. The response
of the Reagan Administration has been to ignore the charges
against D'Aubuisson and to dismiss the evidence against
the Miami exiles as vague and insubstantial. The Reagan
White House is entitled to pursue its own policies.
It
879
3
is not entitled to its own set of facts.
For fifty years, El Salvador was ruled by a corrupt
and brutal alliance of the rich and the military.
The young
officers revolt of 1979 attempted to break that alliance.
The Carter Administration gave all-out support to the drive
for profound change. It rejected the solutions of the extreme
right. When the Reagan Administration took office, it reidentified
the United States with the military and economic elites--
with disastrous results. It was the Reagan toleration and
acceptance of the extreme right which led to the emergence
of the National Republican Alliance, ARENA, and the rise
of ex-Major Roberto D'Aubuisson.
ARENA
ARENA is a fascist party modeled after the NAZIS and
certain revolutionary communist groups. ARENA has a politico-
military organization which embraces not only a civilian
party structure but also a military arm obedient to the
party. The founders and chief supporters of ARENA are rich
Salvadoran exiles headquartered in Miami and civilian activists
in El Salvador. ARENA's military arm comprises officers
and men of the Salvadoran army and Security forces. Many
of its most effective militants in the military are not
formal party members.
In the Carter Administration, men such as Vice President
Walter Mondale and the two top State Department officers,
Cyrus Vance and Warren Christopher, understood that to be
effective against the armed, violent, extremist left, the
United States had to reject the fascist, murderous right.
As a result, my embassy devoted considerable resources to
identifying the sources of right wing violence which sought
to destroy the working relationship between the Christian
Democrats led by Jose Napoleon Duarte and the progressive
officers led by Colonel Adolfo Majano.
The Miami Connection
Information on the Salvadoran exiles residing in Miami
proved particularly difficult to develop. However, over
the course of the year 1980, the embassy filed several
important but fragmentary reports on the exiles' activities.
It was not until early January 1981 that we located
a source who was regarded by the Miami group as one of them.
They spoke to this person freely and he participated in
some of their strategy sessions.
In its first report at the end of December 1980, the
embassy reported the angry reaction of the source to articles
in the Diario de Hoy, a right wing newspaper owned by Miami
880
4
exile Enrique Viera Altamirano. Editorials and articles
placed in the newspaper by Viera Altamirano forecast purges
in the Department of State, a retreat from human rights
considerations in United States policy and an end to social
reforms in Central America.
When he referred to the Miami millionaires, the source
said, these men are "scum" (escoria). For years, he continued,
they have bribed politicians and military officers, and
now they finance death squads and bribe the military to
terrorize the campesinos. They are the force behind the
psychopathic Major D'Aubuisson. Their return will put the
country into civil war. Their presence will cause many
people to believe the clock will be turned back. When
the Alvarezes and the Altamiranos return, he indicated he
would leave on the next plane.
In a subsequent report, the source said that many mod-
erate businessmen had resisted pressures from the ultra-
right, but they were now leaving as they were certain that
the Miami group would kill anyone who stood in the way of
their plan. He said that the recent wave of kidnappings
of businessmen, the bombings of US/Salvadoran firms, the
telephoned death threats and the Sheraton murders were all
the work of the Miami gang. He said he had talked to wealthy
people here who have been interrogated and threatened in
Miami such younger businessmenſ lawyers as (names deleted)
and others people who have decided to stay on and work
for the country, to keep their businesses and factories
open, to cooperate with the government while criticizing
its inefficiency and hostility to the private sector. These
men have been called to Miami and seated at the end of a
long table, facing the "six", and made to answer such questions
as "why are you contributing to the communist victory by
keeping your business open?" or "why do you do the work
of the communist agents White and Bowdler?" (The reference
is to former Assistant Secretary William Bowdler.) Then
it is carefully explained to them that to rebuild the country
new foundation it must first be destroyed totall
у
the economy must be wrecked, unemployment must be massive,
the Junta must be ousted and a "good" military officer brought
to power who will carry out a total cleansing (limpieza),
killing three or four or five hundred thousand people, what-
ever it takes to get rid of all the communists and their
allie's. Then and only then can the wealthy elite return
to preside over the reconstruction of the country on a new
foundation where the rights of property will be secured
forever. Last, the "six" made the following threat: "Unless
you close down your factory/business, get out of the country,
stop working for Alianza Productiva, INCAFE, American Embassy,
etc., you will be sorry."
on a
881
5
Now some fifteen businessmen and industrialists have
been kidnapped, held since before Christmas with no request
for ransom and the message is clear get out or the Miami
gang will have you kidnapped or killed. The deaths of the
AIFLD officials and Viera must be seen in this context,
he insisted, and the madness of the Miami gang recognized.
Who are these madmen and how do they operate? The
principal figures are six énormously wealthy former land-
owners who lost great estates in Phase 1 of the agrarian
reform but still have important holdings parcelled out to
nephews, cousins, grandsons, etc., that would be taken under
Phase II of the land reform; they also have liquid assets
and foreign investments which, combined, might be in the
range of two to five hundred million dollars. They have
always exercised decisive power in this country and cannot
believe that their day is over. Their tactics here were
simple: Co-opt bright people from the middle class, bribe
the top military leadership, kill anyone who made trouble.
They have continued to pursue these tactics in Miami but
on a far greater scale; for instance they have bribed many
military officers and politicians here and abroad to serve
their interests. But of even more concern is the fact that
they organize, fund and direct death squads through their
agent, Major Roberto D'Aubuisson. He never meets directly
with them anymore because he can no longer travel to the
U.S., but he operates out of Guatemala and has been in El
Salvador now for several weeks pursuing the strategy of
the "six" to destabilize the country and overthrow the Junta,
and using their tactics, bombing factories and offices,
kidnapping businessmen and now, very likely, murdering th
intellectual leadership of land reform. The object is to
terrorize those who are still working for a moderate outcome,
in or out of the government, and to impose a rightist dictator-
ship. Three previous attempts to carry out a rightist coup
have been foiled by the American Embassy, the PDC and the
majority of the officer corps. The failure of their last
effort was a bitter defeat for the "six" and they are in
an angry, Vindictive mood. Thus it is very dangerous now
for anyone they regard as a "communist collaborator",
very broad category in their books which necessarily
includes AIFLD.
a
He said that central power was exercised by the Miami
"six", noting that others among the emigres and their wealthy
allies here have some role from time to time but these are
the top leadership: Viera Altamirano, Luis Escalante, Arturo
Muyshondt, the Salaverria brothers (probably Julio and Juan
Ricardo), and Roberto Edgardo Daglio. All are in Miami
hatch plots, hold constant meetings and communicate instructions
to D'Aubuisson,
882
6
The embassy commented that for the last ten months,
many Salvadorans and some official Americans have been aware
that rightist death squads are financed and directed by
a group of self-exiled millionaires in Miami, that the pub-
lisher of the DIARIO DE HOY, Viera Altamirano is a principal
figure, and that many people have been bribed to cooperate
in their efforts to overthrow the government, reimpose the
status quo ante and kill hundreds of thousands of Salvadorans
suspected of liberal or leftist sympathies. Now we have
reason to believe that two officials of the American Institute
for Free Labor Development were targetted and murdered by
rightist death squads who may be acting under the direction
of the "Miami six". This may mean that anyone accused by
them of being "social reformers", whether Salvadoran or
American, is a target for murder. It is unacceptable that
such an operation is guided from a major American city and
that nothing can be done to stop it before another American
official or contract employee is murdered here. We are
unaware of any steps to investigate the information on this
operation that has been provided by the Embassy in the past.
We believe that steps must be taken immediately to get
to the bottom of these charges and that, if proven, the
guilty should be prosecuted to the limit of U.S. law.
883
7
Roberto D'Aubuisson
The administration of President Carter classified ex-Major
Roberto D'Aubuisson, accurately, as a terrorist, a murderer, and
a leader of death squads. As ambassador, I denied him access to
the United States embassy and succeeded in having him barred
from our country.
Shortly after President Reagan took office, this administration
overturned this policy and began the process of rehabilitating ex-
Major D'Aubuisson. The Reagan administration granted D'Aubuisson
a visa to enter the United States, made him an honored guest at
our embassy and saw to it that he met regularly with high ranking
administration officials and visiting Senators and Congressmen.
The legislators were, of course, unaware of the strength of
evidence against D'Aubuisson.
Primarily as a result of the Reagan administration's
acceptance of D'Aubuisson, his reputation and effectiveness
increased. No longer was he a pariah but a legitimate political
leader, well and favorably known to the United States embassy.
The fortunes of ARENA soared. D'Aubuisson emerged from the
March 1982 elections President of the new constituent Assembly
and his country's strong man. Today he is one of two leading
presidential candidates in the elections scheduled for March 25.
In a very real sense, the Reagan administration created Roberto
D'Aubuisson the political leader.
Yet from the first days in office the Reagan White House
knew beyond any reasonable doubt that Roberto D'Aubuisson
planned and ordered the assassination of Archbishop Oscar Arnulfo
Romero. In mid- November of 1980, a particularly brave and
resourceful American diplomat made contact with a Salvadoran
military officer who had participated in the plot to kill
Archbishop Romero. This officer was present at the March 22nd
meeting which resulted in the death of Archbishop Romero on
March 24.
According to this eyewitness account, Roberto D'Aubuisson
summoned a group of about twelve men to a safe house, presided
over the meeting, announced the decision to assassinate the
Archbishop and supervised the drawing of lots for the "honor"
of carrying out the plot. The Salvadoran officer informant was
disappointed that the luck of the draw had not favored him. He
gave bullets from his gun to the officer selected in order that
he might participate vicariously in the murder of the Archbishop.
The officer who "won" the lottery was Lt. Francisco Ama ya
Rosa, a D'Aubuisson intimate. Ama ya Rosa chose a military
hanger-on and sharpshooter named Walter Antonio Alvarez to fire
the single bullet which ended the life of Archbishop Romero as
he said Mass in the orphanage of the Good Shephard.
884
8
Some months later, as ARENA's political campaign was getting
underway, D'Aubuisson decided that Alvarez could not be trusted.
He pronounced another death sentence. A four-man death squad
went into action and executed Walter Alvarez as he stood watching
soccer game.
a
The reliability of this military officer as a trustworthy
source has been established over the months and years. All of
the above information was reported to Washington.
Policy Discussion
The Reagan administration made a major decision, for which
it must answer, when it chose not to use embassy reports and
other materials to move against the Salvadoran exiles who target
victims and fund death squads. The Reagan White House took on
a great responsibility when it chose to conceal the identity of
Archbishop Romero's murderer and not to use the evidence gathered
by the embassy to write finish to the political fortunes of ARENA
and the ambitions of Roberto D'Aubuisson.
Certain legitimate questions arise:
· The Reagan White House set up a bipartisan commission
to build public support for the administration's policies.
Did the Kissinger Commission have access to embassy
reports detailing the systematic murder of Salvadoran
moderates by ARENA and the intimate collaboration which
exists between high military commanders and death squads?
If they did not have such access, then the Reagan
administration has used the members of the Commission
in a shameless fashion and the report can be consigned
to the wastebasket. If however the report was written
with the full knowledge of where the responsibility lies
for the mass murder which afflicts El Salvador, then
Dr. Henry Kissinger and the Commission members owe the
public an explanation why officially-sponsored terrorism
in El Salvador received such superficial and inadequate
treatment in their report.
President Reagan has advocated free elections as the
solution to the problems of El Salvador. Presidential
elections are scheduled for March 25. Yet in El Salvador
the press is controlled by ARENA. We can all be certain
that the government will permit no mention of D'Aubuisson's
guilt to reach the people of El Salvador. How can the
workers and campesinos make an informed choice for
president when the Reagan administration has suppressed
the despicable record of one of the leading candidates?
How can people cast a free vote if vital information
is denied them?
The Reagan administration gives lip service to the
strengthening of the judicial system of El Salvador as
885
9
one road to a more civilized society. Those who
exercise power in El Salvador, the revolutionary
leaders as well as the military and economic elites,
know that the Reagan administration knows that ARENA
is responsible for the deaths not only of the Archbishop
but also of many Americans including iabor advisors
Michael Hammer and Mark Pearlman. Does not this
tolerance for ARENA give the lie to our stated goal of
improvement of the judiciary, and convict us of cynicism
and a double standard before the world?
The Reagan administration requests military assistance for
El Salvador to advance democracy, increase respect for human
rights and move the country towards a political settlement of
the conflict. The facts dictate precisely the opposite con-
clusion. The continuation of military assistance will only
signal support for ARENA and the disloyal and murderous economic
and military elites which continue to impose a system which
depends on organized terror for its existence.
The Road to Peace
Negotiations
The National Democratic Front (FDR) has offered time and
again to negotiate terms for reentering the political life of
El Salvador. The revolutionary movement has imposed no pre-
conditions precedent to the start of negotiations. They do have
an agenda of terms they wish to discuss.
The government of El Salvador has consistently refused to
negotiate. While the government has occassionally stated that
the revolutionaries might participate in elections, their actions
and words contradict these sentiments.
On October 9, 1983, President Alvaro Ma gana told the
Miami Herald, "when the left suggests San Salvador as
a meeting place, [to discuss negotiations] the problem
is that they are committing crimes against the country.
If they came here, I would have to order them arrested.
That is my obligation.'
According to the New York Times of June 19, President
Ma gana stated that, his government would not comply
with United States Congressional stipulations that
his government begin unconditional discussions with
the insurgents. He said, "We are not going to satisfy
that condition... If necessary, we are going to lose
military and economic aid..."
In my judgment, as long as we continue military aid to the
present military leadership of El Salvador, they will never
permit negotiations.
886
10
.
It does not matter who is president. As long as the
Salvadoran military is controlled by men who collaborate with
ARENA in its campaign of wholesale torture and murder, no
negotiations are possible.
The Reagan administration has also opposed negotiation.
Administration spokesmen hide behind facile phrases such as
"let the guerrillas compete at the ballot box" and "we reject
power sharing". There are, of course, several roads to peace
and justice which would not involve "power sharing" but these
would involve far-reaching reform of the military and elimination
from the ranks of the military, officers who work with ARENA. Any
hopes for that were dashed when President Reagan in a recent
report to the Congress affirmed progress oni democracy, human
rights and a political solution in El Salvador. This document
makes a mockery of the praiseworthy, tough and straightforward
message of Vice President George Bush on his recent visit to
San Salvador. It cuts the ground out from under Ambassador
Thomas Pickering's valiant attempts to bring the extreme right
under control.
The only way to defeat the extreme left is to reject the
extreme right. What we face in Central America is primarily a
political challenge, and only marginally a military threat.
The task is not, as the Kissinger Commission imagines, to defeat
the revolutionaries on the battlefield. The challenge is to
prevent the Soviet Union and Cuba from capturing the forces of
change. The day the young leaders of Central America see
Communist countries as their only arsenal for political and
logistical support for throwing off bloody dictatorship is the
day our security will truly be in jeopardy.
The United States must change its policy and begin to work
for peace in Central America. El Salvador is the key. Let us
join with democratic partners in Latin America and apply the
Costa Rican model to El Salvador. Working through the contadora
countries, negotiators would seek an agreement in which the
Salvadoran military and the revolutionaries would ratify a
ceasefire and the presence of an Inter-American peacekeeping
force. Both the military and the revolutionaries would then
disband, and after two years of peace and order, democratic
elections would take place. In the post-election period a
small national police force could gradually take over and replace
the peacekeeping mission. As in Costa Rica, the military would
be permanently abolished and political liberties guaranteed by
civilian rule.
In order to bring us closer to this goal, tough action by
Congress is necessary. Such action should include:
1. A stipulation that no further military aid shall go to
El Salvador unless the Government of El Salvador carries
out, in the words of the Kissinger Commission, "vigorous
887
11
action against those guilty of crimes and the prosecution
to the extent possible, of past offenders"; and the United
States government carries our "serious sanctions, including
the denial of visas [and] deportation" of US-based
Salvadorans involved in death squad activities;
2. A stipulation that Congress, not the President, will make
this determination prior to allocating any further funds
to El Salvador.
-
President Reagan has committed this nation to a policy of
ever-increasing military escalation, a policy which cannot work
and may well end in increasing pressure for intervention by the
United States military.
:
To begin the peace process in Central America, the Congress
should first require that the president commit to both negotiations
and elections, instead of continuing to insist that he will only
discuss FDR/FMLN participation in elections organized by the
Government.
Secondly, the President should instruct Ambassador Richard
Stone to develop a common negotiating agenda, in which both sides'
demands are included.
Thirdly, the President should convene negotiations, together
with the contadora nation, within three months of enactment of
legislation.
Fourthly, the Congress should support negotiations by
conditioning further military aid to El Salvador upon serious
negotiations by both sides.
As we all remember, President Carter brought former implacable
enemies together in the Middle East, and successfully negotiated
an agreement that none thought possible.
I believe this can be done in Central America, if the
President of the United States commits to peace rather than war, and
negotiations rather than escalation.
888
[TAB 31
3425
TED: DIDEPENDENT HETWORK PRESENTS
FROM THE EDITOR'S DESK
#125
"DEATH SQUADS"
in New York
RICHARD HEFFNER
| Executive Editor/Producer
Asst. Editorial Page Editor,
The Wall Street Journal
DANIEL HENNINGER
WILLIAM RUSHER
Publisher, National Review
GUEST
tin Boston)
ROBERT E. WHITE
fmr. Ambassador to El Salvador
Executive Producer
KATHLEEN S.M. SHEPHERD
Associate Producer
JANICE ELSESSER
FROM THE EDITOR'S DESK is a presentation of WPIX, Inc.
All rights reserved.
Copyright (c) 1984 by WPIX, Inc. This transcript may not be
reproduced in whole or in part, by any means, without permission.
VTR 2/9/84
INDEPENDENT NETWORK · 220 EAST 42nd STREET · NEW YORK, NY 10017
EXHIBIT C
's
889
HEFFNER:
I'm Richard Heffner.
Each week I chair
our
editorial board.
And joining me
today is Daniel Henninger,
assistant editorial page editor of the Wall Street Journal.
Also
with me here at The Editor's Desk is William Rusher, publisher of
the National Review.
And our guest, in Boston, is former u.s. ambassador to El
Salvador, Robert E. White.
Just
before congressional hearings began
on
President
Reagan's proposal for billions of dollars
dollars in aid to Central
America, Ambassador White said he could no longer remain silent,
accusing the administration of suppressing the facts concerning
right wing. death sqaud activities in El Salvador.
Well, since coverup is
is a
a serious charge, and since Ambas-
8ador White really hasn't held his tongue since the President
fired him three years ago,
we ought to ask if his statements now
34-045 0-84-457
890
/1/
are designed to scuttle the administration's requests for more
and more aid to El Salvador.
Mr. Ambassador?
ROBERT E. WHITE:
Well, I think, yes.
Yes, definitely,
because it's absolutely wrong for the Reagan administration to
pretend that progress has been made in curbing death squads and,
on the basis of that, ask for increased military assistance.
HEFFNER:
Bill Rusher?
WILLIAM RUSHER: Mr. White, before the House Foreign Affairs
Subcommittee on February 2nd, you named six specific people: Viera
Altamirano, Luis Escalante, Arturo Muys hondt, Roberto Edgardo Daglio
and the sallaverria brothers, Julio and Juan Ricardo, as behind the
recent wave of kidnappings of businessmen, of bombings of U.S.
and Salvadoran firms, the death threats, the recent death a quad
murders. Are you prepared now, outside the protection of
congressional immunity, to reiterate those charges?
WHITE : Oh, I have reiterated them many times, Mr. Rusher.
The point here is not the immunity. The point is though I
want to clarify one thing. what i have repeated is the report
that we sent from San Salvador in 1981, which listed these
names
from a source who was totally reliable.
RUSHER:
Has this source been identified?
WHITE:
The source is a confidential source.
You can't name
sources in El Salvador, or they die.
891
12/
RUSHER:
Of course not.
So you, then, are not making the
charge against these six people, as
I understand it, yourself.
You are
are quoting a report sent from El Salvador on the basis of a
confidential source, is that right?
WHITE:
I'm paraphrasing the report.
And the basic target
here is the Reagan administration and their policies.
And what I
am doing is citing an example of the type of information they
have, and which the administration has not acted on.
RUSHER:
Well, the Reagan administration may be your target,
but these six businessmen undoubtedly feel that they are at least
a collateral target.
Do
you make the charge against
them, sir, that they are
responsible for the death squads?
WHITE:
I say that this information is reliable, and from
reliable source, and I believe it to be accurate, yes.
I
HEFFNER:
Dan?
DANIEL HENNINGER:
Mr. White, precisely what ought to be
done to prevent or stop the death squad activity? What ca
can the
administration or anyone do to stop these people from killing
other people?
WHITE:
Well, the first step would be to recognize that
death squads are an integral part of the
an integral part of the government, that Irina
is a party modeled on Nazi lines, with a political framework but
also with a military arm.
And that military arm,
headed by
892
./3/
Robert d'Aubuisson, carries out torture and death by assigning these
reponsibilities to certain people.
HENNINGER:
But what should we do?
WHITE:
Well, I can't
HENNINGER:
You've suggested that some of these people ought
to be brought to trial.
The implication in the charges against
the six people in Miami is they ought to be deported.
But these
things can't
be done without either
a
rigorous deportation
hearing or
a serious trial.
And I'm just wondering whether the
information you cited is substantive enough to convict anyone of
the charges you've been making.
WHITE:
The
evidence
against
Roberto d'Aubuisson,
his
involvement in the murder of Archbishop Romero, is
SO
over-
whelming that I don't believe that any person reading it could be
under any doubt.
HEFFNER:
And suppose he's elected next month, Mr. Ambas-
sador?
Then what would you have us do?
WHITE:
Well, I think that the Reagan administration created
Roberto d'Aubuisson as a political leader.
Recall that under the
a
Carter administration we had classified Roberto d'Aubuisson as
terrorist. We had denied him access to the embassy, we denied
him access to our country.
With all the information that we had, and that we passed on
to the Reagan administration, they removed the restrictions on
893
14/
his entering the United States,
They made him welcome in our
embassy.
They treated him as a responsible leader.
The
Reagan
administration
in
effect
created
Roberto
d'Aubuisson, the presidential candidate.
Should he become pres-
ident, it will be a true disaster.
HENNINGER:
But will he not have been elected by the people
of El Salvador?
You're saying, in effect, that a democratic
election is a disaster?
WHITE:
I believe this not to be
to be a democratic election.
Elections do not have the same meaning in Central America, sir,
as they have in the United States.
You should recall that
Guatemala military and the Salvadoran military and Somoza always
held regular elections.
And this is another flawed election.
That is the last thing that El Salvador needs, is another flawed
election.
RUSHER:
Mr. White, suppose though, whatever your reser-
vations about the election that's scheduled to be held in El
Salvador, suppose that instead of d'Aubuisson, Duarte, the oppo-
sition, the rather more liberal candidate, wins the election.
Would it still be your position that death squads are,
death squads are, as you
said, I believe,
an integral part of
the government
of El
Salvador?
WHITE:
Well,
the death squads will still be an integral
part of the government, and it will require the all out support
894
/5/
of the Reagan administration to help Duarte root them out.
But
if Duarte is elected, there's at least the possibility that with
o
support he could indeed root them out.
RUSHER: And with respect to d'Aubuisson, the information that
you find so persuasive about his connection with the shooting of
the Archbishop, is that based upon the testimony of the d'Aubuisson
intimate that was in the group of twelve men at the
WHITE:
No, no.
This is based on testimony of a military
ubuissl
.
officer who attended the session where
that d'Aubuiss , called
the meeting that d'Aubuisson called where d'Aubuisson announced the
decision to kill the Archbishop and where they cast lots for what
they called the honor of the
killing the Archbishop.
RUSHER:
And do we know this officer's name.
WHITE:
Oh, yes.
RUSHER:
And who is that?
WHITE:
Well, the State Department knows his name,
RUSHER:
No, I mean, it has not been made public?
WHITE:
No, it has not been made public.
RUSHER:
Even though he must have been in a relatively small
group of men.
I can't understand the problem of identifying him.
WHITE:
Well, you may not understand it, but the fact is
that as far as
as I know that man
is still alive and still in El
Salvador.
I know that he
was alive in late 1983.
And, look,
this will all come out.
895
16/
The Reagan administration has corroborating evidence.
For
example,
8
man called Eduardo Avilar,
a d'Aubuisson intimate,
confessed in Panama to a United States officer, a United States
military officer, that he had participated in the killing of the
Archbishop.
And the Reagan administration has suppressed this
:
also.
:
HEFFNER:
Mr. Ambassador, when we come back from our break,
I want to ask you just why.
But at the moment, let's take
a
break, and then we'll come back to the Editor's Desk.
HEFFNER:
Mr. Ambassador, all of this is quite clear to you.
How do you account, though, for what the Reagan administration
has done and has not done?
WHITE:
I think the Reagan administration is so completely
transfixed by their interpretation of Central America, that it's
an east-west conflict, that they embrace anyone, no matter how
reprehensible, as long
as
he
or she will say that
they are
anticommunist.
HEFFNER:
Do you think there is anything of the east-west
conflict to it?
896
177
WHITE:
Oh, clearly.
But to the extent that you concentrate
on that, you miss the major point, namely that the revolution is
authentic, it's homegrown.
But it's important to beat
to defeat the extreme left.
The only way to defeat the extreme left is to reject the violent
right. If you embrace the violent right, as the Reagan admin-
istration has done, then you make moderates
they make it
impossible for moderates to work in an independent way, because
the minute they are pushed into the arms of the extreme right,
their credibility falls.
HEFFNER: Dan Henninger?
HENNINGER:
Mr. Ambassador, I want to
ask you one
you one last
question about the evidence reporting the death squad activity,
which you say is in the hands of the State Department.
Are you
saying, then, that Secretary of State Schulz knows about this
evidence and is suppressing it?
WHITE:
Well, it certainly
I don't know what people tell
Secretary of State Schulz.
Certainly many of us have stated over
and over again that Roberto d'Aubuisson is a death squad leader.
It
would seem to me that a responsible Secretary of State would ask
to see the evidence.
HENNINGER:
Are you suggesting he hasn't?
WHITE:
No, you're suggesting that he hasn't.
I'm sug-
gesting that it's his obligation to so ask.
897
/8/
RUSHER:
I think Mr. Henninger was not suggesting anything
about Secretary Schulz, except that possibly other people,
looking at the evidence, are not
not as persuaded, Mr. White, as you
are, from your special vantage point as
a foreign service officer
fired by the Reagan administration.
The position that I hoid, sir, today, is the same
WHITE:
that I held when I was ambassador.
As I explained to you earlier
in the program, my embassy recommended to Washington that they
classify Robert d'Aubuisson as
a terrorist.
An interagency com-
mittee met, considered the evidence, and classified him
as
$ a
terrorist.
The Reagan administration overturned that.
It's up to the
Reagan administration to explain why.
RUSHER:
Well, I think that different people can understand
evidence differently.
You've given us nothing except an uniden-
tified man who can't be named, apparently, in public, and told us
that he is the witness to all of these things, which you believe,
which is all right.
But I can imagine, without having studied the question
closely, that other people would take a different view.
WHITE: Well, of course, it is an obligation to study the
question closely, sir.
For example, are you familiar with the
American Institute for Free Labor Development report on
the
murders of their advisors in El Salvador?
898
19/
RUSHER:
Yes, I am.
I have been reports of it, and frankly
that is precisely the kind of tendentious argumentation that
worries me most about this.
I would be much more content,
sir
and I'm not hard to please about this
if you yourself, instead
of circling around the question and commenting on the evidence,
would simply make the charge, if you're so confident about it,
that these six men in Miami
are running death squads, and then
put it to them whether or not they want
on that basis to charge
you in a libel suit.
WHITE:
Oh, I'm glad to repeat that I believe the evidence
that is accurate that I presented to the committee.
RUSHER:
Yeah, but that's not quite the same thing.
HEFFNER:
And this isn't a court of law.
WHITE:
This is not the place to conduct
a legal argument.
I am telling you that the source for this information is a
Source
that has been proven reliable to the United States embassy over
years.
That his information has been analyzed as credible over
the years.
HEFFNER:
Mr. Ambassador, I'd like
to
move on
to
the
question of whether you feel the same attitudes that the Reagan
administration has exhibited in this instance, as you interpret
those attitudes, have impacted in a negative way on our policy in
the rest of Central America?
WHITE:
Oh, I think definitely.
We
have violated our solemn treaty agreements by sponsoring CIA
899
/10/
mercernaries against Nicaragua.
I'm no admirer
of the Sandi.
nista regime, but all the contras
have accomplished is
is to
80lidify the Sandinistas in their
in power.
I think mili.
tarizing Honduras is just absolutely the wrong thing to do.
HEFFNER:
would that lead you, then to look for the defeat
of the administration's
the spectrum of the admininstration's
efforts at aid in Central America?
WHITE:
Well,
I think that if you're referring
to
the
Kissinger Commission report and its recommendations, I think this
was
a typically sort of bipartisan document.
The Republicans
recommended guns,
and
the Democrats
recommended
social and
economic legislation.
And so they put them both together.
The fact is, of course,
that guns, contradict the need for
economic and social assistance.
HEFFNER:
Gentlemen?
HENNINGER:
Mr. Ambassador, would you prefer that
a govern-
ment be set up in El Salvador through a negotiated settlement
rather than the election that's going to be held soon?
WHITE:
Well, the point is that there's no contradiction
here.
You have to have negotiations before you have a truly
valid election.
The function of elections are not
to fix the
bases of
a society.
Once you fix those bases through nego-
tiation, then you can have an election to pick which team is
going to administer the country.
900
/11/
RUSHER:
But how about power sharing, Mr.
Ambassador?
This
is what the insurgents in El Salvador seem to want, a specific
sharing of power. I take it you would oppose that before the
elections.
WHITE: Power sharing is a facile phrase which, if you.
examine it, really means very little.' The revolutionaries have
agreed to negotiations without preconditions.
The government has
not and the Reagan administration has not.
The real point here
is that power is already shared.
The guerrillas control approx-
imately a third of their country, and they are
on the
they
have the initiative.
RUSHER:
I begin to think that you do favor, then, what the
government, at any rate, calls power sharing.
If they have power
already, you see nothing wrong with sharing a little bit more of
it with them before the election?
WHITE:
I think you misunderstand the nature of power.
What
we're talking about when you talk about an interim arrangement is
not sharing power, but sharing
80m e
kind of administrative
authority.
The power belongs to the military.
When the Reagan administration says they don't want
they
reject power sharing, what they're really saying is that they
reject any diminution in the power of the Salvadoran military.
And until you get that power limited and placed under the law,
you can never have peace in El Salvador.
901
/12/
RUSHER:
Do
you favor administrative participation and
sharing of control by the insurgents before the election?
WHITE:
No.
I don't think it's necessary.
Frankly, I think
at this point the Reagan administration has made such
a complete
mess of Central America, I think the only way that you are going
to get a solution to El Salvador's problems is to get people to
sit down together, and then through the Contradora group, bring
in some kind of inter-American military-civilian presence that
can take over the security of that country, and then disarm both
the guerrillas and the military.
HEFFNER:
Ambassador White, thank you
so
very much
for
joining us today on From The Editor's Desk.
In
just
a
moment
we'll come back
to the Editor's Desk to see how my colleagues
would set in their own perspective what we've just heard.
HEFFNER:
Gentlemen, you're the gatekeepers.
What did you
think?
Dan?
HENNINGER:
I would make two points.
First, on the death
8 quads.
It is a terrible kind of activity, but neither Ambas-
sador White nor anyone else has ever said precisely how it can be
stopped.
To me it's a little bit like asking the United States
902
/13/
to stop Mafia activity.
We're a big country.
Why can't we do
that?
on the matter of elections, I'm just hard put to see why
Ambassador White isn't willing to confer legitimacy on
South
American elections that he would on a North American election.
The last one they held down there was watched by any number of
.
North American observers, who all said it was
an honest election.
HEFFNER:
Bill?
RUSHER:
Ambassador White has obviously discussed these
matters a lot, and he's developed formula answers for questions
that come up.
And I thought that some of these forumla answers
were a little be disingenuous, that they sounded somewhat more
straightforward than when you inspected them. I would have liked
a little less comment on the evidence that convinces him about
some of these things, and a little more explicit assertion if he
indeed wants to be tested in that way.
At the end he had an interesting proposal which we didn't
have a chance to get into
about a military presence of an
inter-American type to disarm both the rebels and the army.
HEFFNER:
How do you react to that?
RUSHER:
Well, I'll tell you this:
No self-respecting
country is going to stand around and have its army disarmed
without, I should imagine, protesting.
That seems a little
unrealistic.
903
/14/
HEFFNER:
Dan, what did you think about that?
HENNINGER:
Well, I agree with that.
I want to pick up this
one point
HEFFNER:
Sure.
HENNINGER:
that Bill Rusher pressed on the matter of the
evidence.
We initially discussed this at the level of, say,
front page rhetoric. But if one is going to push an issue like
death 8 quads, you
are
indeed going
going to have to produce the
evidence, to finally, conclusively, come
come up with a conviction.
And that's an important point.
HEFFNER:
Gentlemen, thank you for joining me today on From
The Editor's Desk.
We do have to leave our
Editors at this point, but I hope
you'll stay with us for a final Editorial Note.
1
1
HEFFNER:
How much tongue there
was
in the Wall Street
Journal's cheek this past week when it entitled a lead editorial,
"Who Lost Beirut?", one doesn't quite know.
But remember, that's
what was asked about China, when it went communist, "Who lost
I--------
China?"
And about all those other defeats
if that's what they
were
when the way the world turns proved not to be the way
we
-.---. .-
1
would turn it.
-......
904
/15/
who, indeed, lost this country or that, as if they had been
ours for the losing, any more than ours for the keeping?
Political scientist Dennis Brogan once described what he
called Americans' illusion of omnipotence, the illusion that any
Biutation which distresses or endangers the United States can
only exist because some Americans have been fools or knave, when
actually they may exist because of conditions about which the
United States has little to say.
For, like it or not, America, powerful though she is, is not
omnipotent.
A great many things happen in the world, regardless
of whether the American people wish them to or not.
It's sheer
nonsense,
of course, but dangerous paranoia-making nonsense, too,
to hold quite so fast to this illusion of omnipotence, that when
other people, other places, are lost to us,
it must be because,
mistakenly, mischievously, or even maliciously, some among us did
the dastardly deed.
The Wall Street Journal blames the Congress.
Others blame
the administration.
The fact, of course, is that neither is
composed of fools or knaves, and Beirut never was ours to have
and to hold
or to lose.
I'm Richard Heffner.
Join us again next week as we look at
the world From the Editor's Desk.
(END)
905
[TAB 4]
3442
INTERVIEW MEMORANDUM
March 2, 1984
On February 24,
sy 24, 1984, Jerris Leonard interviewed Ing. Juan
Posoda, who is employed by Arturo Muyshondt Parker, in the offices
of Mr. Muyshondt Parker in San Salvador.
Posoda indicated that the previous evening, Thursday, February
23, 1984, he had been working late at the office.
He indicated
that earlier in the day, because of a mix-up in cars, he had been
driving a Jeep Cherokee station wagon that is ordinarily and
usually driven by Mr. Muyshondt Parker.
The automobile was parked
in one of the two stalls of the garage in the building where they
have their offices.
The metal garage door was closed at the time
that Mr. Posoda entered the garage area.
He decided to leave for
home about 9:30 p.m., and notified the night watchman to open the
garage door.
The night watchman opened the door and Posoda reached
to open the left front door of the Jeep Cherokee, at which time
at least three shots were fired, one of the shots smashing through
the window of the car door directly in front of him.
I asked him to refer to the photographs which had been taken
on the morning of January 24, 1984.
I asked him if those photo-
graphs depicted the exact location of the Jeep Cherokee the
evening before, and he indicated that it did indeed, that the
automobile had not been moved.
He reviewed all of the photographs
and indicated that they did indeed, reflect accurately the
situation immediately after the firing the night before.
1
!
:
34-045 0-84-58
906
--2-
Posoda said that he knew of no reason why an attempt would
have been made on his life, and did not believe that the gunfire
was meant for him, but rather for Mr. Muyshondt Parker.
He freely
admitted that there were many people in San Salvador, who knew of
the accusations of Ambassador White against Muyshondt Parker.
He
indicated that no one had ever before attempted to assassinate
him or shoot at him, and that there was absolutely no reason why
he would be the subject of such an attempt at this time.
He further allowed as how he felt certain that whoever fired
the shots thought that he was Arturo Muyshondt Parker, because
Mr. Muyshondt often worked late in the evening, always drove the
Jeep Cherokee, and in addition, Posoda had on a jacket that
belonged to Arturo Muyshondt Parker.
He stated that he had heard the charges against Mr. Muyshondt
Parker and could state categorically that the description of the
Miami exiles simply did not correspond with the facts, the
lifestyle, or any other aspect of Mr. Muyshondt Parker's life.
He stated that in addition, he had known him for some six or
seven years, knew him to be a man of very fine character, who had
the respect of his employees and the people he worked with, and
that under no circumstances could the charges by White be attri-
butable to Mr. Muyshondt Parker.
He stated that he believed that
Ambassador White had simply made a mistake in identifying Mr.
Muyshondt Parker.
He was frank to admit that he believed that
there was a strong possibility that Mr. Muyshondt Parker was in
physical danger.
907
[TAB 5]
3444
LAW ORACES OF
JERRIS LEONARD
A PROFESSIONAL CORPORATION
BUNE 1020
JERAS LEONARD
JAMES T. DEVINE
KATHLEEN HEENAN MOGUAN
THE FARAGUT BULONG
900 SEVENTEENTH STREET, N.W.
WASHINGTON, D.C. 20006
(202) 072-1005
TREX: POLOS SWEH
March 2, 1984
Mr. Robert White
c/o Zuckerman, Spaeder, Moore, Taylor & Kalker
1201 Connecticut Avenue, N.W.
Washington, D.C. 20036
Dear Mr. White:
On February 6, 1984, you voluntarily appeared before a commit-
tee of the United States House of Representatives, at which time
you accused Mr. Arturo Muyshondt Parker of being a member of a
"Miami Gang of Six," whose purpose among other things, was to
organize, fund and direct "death squad" activity in the country
of El Salvador, Further, you have accused Mr. Muyshondt of
directing activity which includes bribery, kidnapping, and murder,
both in El Salvador and the United States.
Prior to your February 6, 1984 appearance before the Congres-
sional Committee referred to above, you distributed and published
to representatives of the news media, a document titled "Prepared
Statement by Ambassador Robert White Before the House Subcommittee
on Western Hemisphere Affairs. February 2, 1984." The statement
identified above accuses Mr. Muyshondt of the same membership in
the "Miami Gang of Six" and the same "activities” of bribery,
kidnapping and murder which were re-stated by you on February 6,
1984.
Your "Prepared Statement" was given broad and general
publication by the media, a fact known by you and designed by
you to occur.
Subsequent to your February 6, 1984 appearance before the
Congressional Subcommittee where, on February 6 you re-stated
your false accusations against Mr. Muyshondt contained in your
"prepared statement," you appeared on a television interview
program titled, "From the Editor's Desk. The interview given
by you was taped on February 9, 1984 by WPIX, Inc. and given
broad and general distribution by the Independent Network on or
about February 12, 1984.
908
LAW OFFICES OF
JERAIS LEONARD
Mr. Robert White
March 2, 1984
Page Two
During this interview you were asked by Mr. William Rusher,
one of the members of the interview panel, the following question:
"Mr. White, before the House Foreign Affairs Subcommittee
on February 2nd, you named six specific people: Viera
Altamirano, Luis Escalante, Arturo Muyshondt, Roberto
Edgardo Daglio and the sallaverria brothers, Julio and
Juan Ricardo, as behind the recent wave of kidnappings
of businessmen, of bombings of U.S. and Salvadoran firms,
the death threats, the recent death squad murders. Are
you prepared now, outside the protection of congressional
immunity, to reiterate those charges?"
Your response to this question was:
"Oh, I have reiterated them many times, Mr. Rusher.
The point here is not the immunity. The point is--
though I want to clarify one thing. what I have
repeated is the report that we sent from San Salvador
in 1981, which listed these names from a source who
was totally reliable."
You, through your counsel, have been requested by the under-
signed on behalf of Arturo Muyshondt to retract the statements
made by you accusing Arturo Muyshondt of being one of the members
of your self-styled "Miami Gang of six" and the "activities" that
you have assigned to such membership. Further, you have been
given, through your counsel, sufficient information to prove that
Arturo Muyshondt could not possibly be a member of your "Gang of
Six" or in any way associated with or responsible for the
"activities" (bribing, kidnapping, and murder, among others)
which you assign to this group. I have been informed by your
counsel that you are "checking" with your sources as to the
validity of your accusations. That was two weeks ago.
Your counsel has been advised of the unsuccessful attempt to
murder Arturo Muyshondt, which attempt was made at his business
offices in the City of San Salvador on February 23, 1984. In the
face of the above occurrence and other information available to
you, your apparent reluctance to take immediate steps to retract
your inaccurate and false accusations of Arturo Muyshondt is
unconscionable.
:
-
909
LAW OFFICES OF
JERRIS LEONARD
Mr. Robert White
March 2, 1984
Page Three
Based on the foregoing, and on behalf of Arturo Muyshondt,
we demand that you immediately fully and completely retract your
false and defamatory accusations of Arturo Muyshondt which are
contained in your "prepared statement" in the substance of your
congressional statements and in the substance of your statements
given in the interview "From the Editor's Desk" all as pertain to
Arturo Muyshondt. We further demand that your retraction be in a
form and in a manner designed to receive the same broad and
general distribution by the mass media as was given by it to your
initial defamatory accusations of Arturo Muyshondt.
Respectfully submitted
1
w
Daniel J. McGuan
Attorney for Arturo Muy shondt
Law Offices of Jerris Leonard, P.C.
:
DJM/ch
cc:
Arturo Muyshondt
*
.
i
i
910
STATEMENT OF CHERYL HUDSON
On Friday, March 2, 1984, I deposited a copy of the
enclosed letter addressed to Mr. Robert White in an envelope
addressed to Ed James of the law firm of Zuckerman, et al.,
telephoned Metro Messenger delivery service for pick-up, and
a Metro Messenger picked up the envelope at approximately
2:20 p.m. on this date.
At approximately 3:05 p.m., I called Mr. James'
secretary to confirm that the envelope had, in fact, been
delivered and she informed me that it had been received at
2:50 p.m.
Cheryl Hudsose
u
Cheryl Hadson
911
[TAB 6]
3448
ZUCKERMAN, SPAEDER, MOORE, TAYLOR & KOLKER
ATTORNEYS AT LAW
1201 CONNECTICUT AVENUE, N. W.
WASHINGTON, D. C. 20036
VIRGINIA OFFICE
Suite 300
(202) 775-1440
2000 NORTH IOTH STALCT
AALINGTON, VIRGINIA 22201
(202) 775-1440
MARYLAND OFFICE
SUITE 202
ROGER E. ZUCKERMAN
BRUCE GOLOSTEIN+
ROGER C. SPAEDER
MARK W. FOSTER
WILLIAM W. TAYLOR II
PETER R. KOLKER
JOHN F. EVANS
JAMES C. MOORE II
JANET M. MEIBURGER
STEPHEN H. GLICKMAN
JUDITH K. MUNGER
LAWRENCE A. KATZ
MICHAEL R. SMITH
RONALD R. MAS SUMI
PEGGY CRESPI KAPLAN
G. RICHARD STRAFER
STEPHEN E. LEACH
RONALD B. RAV
EDGAR N. JAMES
JUDITH STURTZ KARP
17 WEST JEFFERSON STRCET
ROCKVILLE, MARYLAND 20060
(301) 140-9065
March 7, 1984
FLORIOA OFFICE
ZUCKERMAN, SPAEDER, TAYLOR A EVANS
GAOLCS INTERNATIONAL PLAZA
2655 LEJEUNE ROAD
CORAL GAILIS, FLORIOA 33134
(105) 444-1011
ALSO ADMITTED IN MARYLANO
• ALSO ADMITTED IN VIRGINIA
*ALSO ADMITTED IN FLORIDA
BY HAND
Daniel J. McGuan, Esquire
Law Offices of Jerris Leonard, P.C.
Suite 1020
900 17th Street, N.W.
Washington, D.C. 20006
:
Re:
Sr. Arturo Muyshondt
Dear Mr. McGuan:
We received your letter of March 2, 1984 addressed to former
Ambassador Robert E. White and have forwarded it to him. He has
not had an opportunity to review its text and, when he does, we
may wish to make a fuller response than we are able to do at this
point. Certain portions of it are entitled to some immediate
response, however, and we take this opportunity to provide it.
First, it must be obvious that Ambassador White's disclosures
to Congress were made out of a sense of duty. That same duty has
caused him to take seriously your client's prostestations that
the Embassy's source erroneously identified him as one of the
Salvadorans in Miami with direct links to the death squads. He
has undertaken a serious and sincere effort to determine if the
information which the Embassy received and forwarded to the State
Department unfairly implicated Sr. Muyshondt. As I hope you can
understand, that effort requires time. We assure you, however,
that should investigation reveal information which ought to be
disclosed to Congress in fairness to your client, those dis-
closures will be made along with appropriate statements to the
press.
912
Daniel J. McGuan, Esquire
March 7, 1984
Page 2
Secondly, as you know, what the Ambassador told Congress and
what he repeated in the interview to which your letter refers is
that his Embassy received information which it believed to be
reliable implicating D'Aubuisson and a number of other individ-
uals, including your client, in death squad activity. His
Embassy relayed that information to the State Department. His
primary concern was that the Reagan administration had not only
taken no action with regard to that information but has denied
its existence. Those statements do not subject Ambassador White
to liability for defamation.
The Ambassador has requested that we relay to you, however,
that, notwithstanding the futility of any defamation action which
your client might threaten, his principal concern is the truth.
Mr. Leonard advised us that Mr. Muyshondt was willing and eager
to answer any questions which we might put to him. Several ques-
tions have been raised both by Mr. Leonard's representations and
by our client's own investigation which, frankly, cause con-
I hope that you will relate them to your client and for-
ward us his responses.
cern.
First, Mr. Muyshondt apparently told your office that he owns
no property in Miami. Our information is that he apparently owns
property at 1865 Brickell Avenue in Miami and that he has a
registered telephone there.
Second, Mr. Leonard advised us that Sr. Muyshondt insisted
that he was not politically active as a supporter of Roberto
D'Aubuisson. Yet we find that the name Muyshondt or Meyson
(phonetic for Muyshondt) appears at least three places in the
secret diaries that were seized from D'Aubuisson when he was
arrested in 1981. In addition, your client appears to have been
active in F.A.N., a group of D'Aubuission intimates that later
grew into ARENA.
Mr. Leonard advised that Sr. Muyshondt insisted that the
Salaverrias were not brothers. On Tuesday, February 7, 1984, an
AP wire story ran in the Chicago Tribune in which the reporter
stated that: " [Julio] Salaverria
Salaverria said his brother, Juan Ricardo,
died in a car accident in Florida two years ago.
It would materially assist Ambassador White's ability to make
a reasoned response to Mr. Meyson's concerns if your client would
clear up the foregoing matters. In addition, it would also be of
benefit, I believe, for Sr. Muyshondt to provide answers to the
following questions:
913
Daniel J. McGuan, Esquire
March 7, 1984
Page 3
1.
Was Sr. Muyshondt ever
F.A.N.?
a member of or a contributor to
2.
Is he a member of or a contributor to ARENA?
3. Did he ever appear in public with Sr. Mena Lagos, Sr.
Richard Raubusch, or Sr. Jimenez Castillo?
4. Has he met with any of the other Salvadorans in Miami
identified by Ambassador White?
If the answer to either of the foregoing two questions is
yes, identify the date, time and place of the meetings, the
persons present, and the subjects discussed.
5.
ARENA?
Has he ever contributed money directly or indirectly to
6. Has he ever transported money, weapons or other things
from the United States to Salvador which he believed to be
intended for use in or support of assassinations?
7. Does he know any persons who have participated in or who
financially support the death squads?
In the meantime, Ambassador White will continue to pursue his
investigation of your client's concerns as, we understand, will
certain members of Congress.
Sincerely yours,
Will
11
William W. Taylor
Edgar N. James
Attorneys for Ambassador
Robert E. White
914
3451
[TAB 7]
LAW OFFCES OF
JERRIS LEONARD
A PROFESSIONAL CORPORATION
SUME 1020
THE FRUGUT BUILDING
900 SEVENTEENTH STREET. N.W.
WASHINGTON, D.C. 20006
(202) 872-1005
THE: 9H
JERAS LEONARO
JAMES T. DEVINE
KATHLEEN HEBNAN MCGUAN
March 15, 1984
William W. Taylor, III, Esq.
Edgar N. James, Esq.
Zuckerman, Spaeder, Moore, Taylor & Kalker
1201 Connecticut Avenue, N.W.
Washington, D.C. 20036
Re:
Arturo Muyshondt P. V. Robert E. White, et al.
Dear Messrs. Taylor and James:
We have received your letter of March 7, 1984. Enclosed
herein you will find our client's Affidavit with respect to the
seven questions raised by you on behalf of your client.
Our client does not care to comment further on the obvious
self-serving statements and further erroneous allegations contained
in the letter.
What has become obvious is that your client is, was and
continues to be badly misinformed relative to our client Arturo
Muyghont. This misinformation could have been avoided and our
client spared from the embarrassment, harassment, assassination
attempt and the substantial damages he has sustained if Mr. white
had taken the care to ask these questions of Sr. Muyshondt before
he made these allegations originally and affirmed them on national
public television on February 9, 1984.
It is also obvious to Mr. Muyshondt that your client has
no intention of issuing a retraction. On February 24, 1984, the
undersigned was in San Salvador and was informed by an important
witness, that an agent of your client had called this witness and
been informed that your client was mistaken. Certainly your client
must have received other information confirming his errors, but
he insists on asking questions that should have been asked before
making the false and defamatory accusations with respect to our
client.
very truly yours,
a
&
wish
Leonard
Jerris Leonard
JL/ch
915
AFFIDAVIT
Arturo Muyshondt P. being first duly sworn on oath states:
That he has read the letter of March 7, 1984 received from
the attorneys for Robert E. White and responds to said questions
as follows:
1.
Q:
Was Sr. Muyshondt ever a member of or a contributor
to F.A.N.?
A:
I was personally never a member of F.A.N.
In 1979
I founded M.R.S. (Movimiento Reformista Salvadoreño) which was one
of the founding organizations of F.A.N. in December 1979.
When
M.R.S. received the Principles and Charter of F.A.N. on January 14,
1980, M.R.S. decided not to participate and withdrew from F.A.N.
2.
Q:
Is he a member of or a contributor to ARENA?
A:
NO.
3.
Q:
Did he ever appear in public with Sr. Mena Lagos,
Sr., Richard Raubusch, or Sr. Jiminez Castillo?
A:
If by "appear in public" the question assumes at
"political" events, the answer is no. It is entirely possible
that I have been at social events with the persons named.
4.
Q:
Has he met with any of the other Salvadorans in
Miami identified by Ambassador White?
916
-2-
4.
A:
a)
I have known Luis Escalante since I was 13.
He has been a friend of my family's.
He was President of Banco
Agricola Commercial.
I have had some loans with that bank, and I
have seen him many times at social events.
b)
I met Enrique Altamirano many years ago.
I had
my first conversation with him in July 1983 at a wedding in Miami,
Florida.
c) I have
I have talked to Roberto Daglio just once in my
life in September 1983, in his office in Miami, regarding one of
my brothers, who worked for him as a pilot.
d)
I have known Mr. Juan Ricardo Salaveria for
many years.
He died a few years ago in Florida.
I met him at
various social functions.
e)
I met Julio Salaveria in 1970 when he was
President of Financiera de Desorallo a Inversion.
I had a loan
with his financial institution.
I did not see him again until
a few days after Robert E. White's charges in February, 1984 in
San Salvador.
5.
Q:
Has he ever contributed money directly or indirectly
to ARENA?
A:
NO.
6.
Q:
Has he ever transported money, weapons or other
things from the United States to Salvador which he believed to be
intended for use in or support of assassinations?
A:
NO.
917
-3-
1.
Q:
Does he know any persons who have participated
in or who financially support the death squads?
A:
NO.
Mbunda
ARTURO MUYSHONDT P.
Washington
SS
District of Columbia
)
1
SWORN TO before me this 13th day of March, 1983.
Cheryl Hudson
Notary Public
My Commission expires: March 1987
918
[TAB 8]
3455
Date
# Days
Reason
December 5, 1978
April 25, 1979
July 15, 1979
5-10
10-15 Pick up a new airplane
10-15
(no more than 20 days)
February 28, 1980
May 15, 1980
August 12, 1980
August 25, 1980
December 13, 1980
5-10 Touring with wife and parents
6 Touring/Visit with friend fm Guatemala
5-18 Disney World with Family
5-10 Visit with Family
5-10
(no more than 44 days)
January 2, 1981
3-5
Meet friend Dane Bowen
(no more than 5 days)
1
February 6, 1982
March 8, 1982
June 3, 1982
August 23, 1982
October 7, 1982
December 26, 1982
24
14
9
12
5-10
25
Kidnapping
Kidnapping
Visit with wife
Airplane repairs
Pick up airplane
Midwest (looking for heifers)
Operation in Mule Shoe, Texas
Miami, Hyatt Convention Center
(no more than 60 days)
-
Date uncertain, 1983
?
June 3, 1983 (Hotel)
16 Minnesota, Kentucky, Wisconsin, Ohio
Georgia, looking for heifers
July 7, 1983
6 Business/Holiday Inn, Brickel Point
August 26, 1983
10-15 Ohio, Wisconsin, Choosing heifers
September 23, 1983
7 Making arrangements to ship heifers
(Sent October 3) Holiday Inn, BP
December 26, 1983
4 Business/Holiday Inn, Brickel Point
January 13, 1984
6 Business/Holiday Inn, Brickel Point
February 8, 1984
This trip
(no more than 60 days)
919

Nombre del titular
Name
Carlos Aletture
Moyeliondt.
DATOS PERSONALES
PERSONAL DATA
Nacionalidad Salvadoreña por
Nationality
Lug
and
Personas que lo acompañan:
Persons acompanying Bearer:
Facidi peata
andere Getubre de 1998.
Estado civil_ociado
Sasterskizute:
Su esposa
Wife
Civil Status
Menores de 18 años que están bajo su patria potestad
Minors under the age of 18 who are under paternal jurisdiction
Profesión u oficio
Podstion
Dormidilio
Permanent address
o
Sezon les particulares
Seps for Birthmark-
o tutela:
to
TMBRE
SELGALVAD
DIRECCION GENERAL DE MIGRACION
Ficha (4845 E.S_de 23 iloissa
JUO18313
Documentos de identidad que se tuvieron
arjeta de Migración No. 123011
la vista:e
Feeha
4-Dic-78
(Firma del titular).
2
3/
920

VISASU.S. IMMIGRATION
໑iງຽ1•.
068 MIA 3264
PIINISTERIO DE RELACIONES EXTERIORES
EL SALVADOR SAS
VISA PARA SALIR DEL PAIS
No.
28060
Cualquier l'ing
15 MAIO 1979
با ما
- COLOMBIA
FEB 08 1984
VICE
díass
CCISO PASAPOma
no
WO
HUPUMLICA
EL SALVADOR
EL SALVADOR
SERVICES
ADIATREO
:Destined to bez
CONTATS
Woche
TF
to forest
Varian
a
MAYO
1979
725OL
?! MAYO 1979ACHO
(CLASS)
ADAPI
Pune
REPUOLIC! En
LAS CHICA
Eich deinczRTO
SALID
Rinn
-D
Launen Fashiod's Plan
teche
iS PO 1979
ראדווין
ABORTS
SALVARRO
TE
E 14 SET. 1983 031
SO
GEUN DOLARES
Kes
MI2. AEZEA EL SULYASZ
GLUN DOLARS
KUS
ADVERTENCIA
La persona 50 inmigrante que
acepte empleo sin autorización
quedará sujeta a que se le deporte.
IMPORTANTE
U.S. IMMIGRATION
• Retenga este permiso en su poder,
060 MIA C-16895
Ud. deberá entregarlo cuando salga
de los EE. UU. De no hacerlo asi,
su entrada a los EE. UU. en un
futuro puede verse demorada.
FEB 2 5 1984
NUMERO DE ENTRADA
2020 0202657 Vandrere
ACLASS)
8. APELLIDOS (igual que los Apellidos en NCURY Triba)
I MOYSHO NOT
BRIMER NOMBRE (igual que el primer Nombre en No. 1 de arriba
ARTURO
9. FECHA DE 10. PAIS DEL QUE ES CIUDADANO (igual que el No. 3 de arriba,
NACIMIENTO
ne or No. 2 EL SALVADOR
109110148 VEASE AL DORSO OTRA INFORMACION IMPORTANTE
SERVICIO DE INMIGRACION Y REGISTRO DE PARTIDA 1-94
NATURALIZACION DE LOS EE. UU.
(Rev. 1-1-83)N
STAPLE
HERE
24,84
921
[TAB 91
3458
19 October 1979
El Diario de Hoy
HEADLINE
M.R.S. Gives Support To the Army
CAPTION BELOW PICTURE
Supporting the revolutionary Junta. The M.R.S. yesterday gave
its support to the Army. The M.R.S., at the same time gave a
statement about the subject. Those attending were Jose Castro,
Juan Miguel Bonilla, Lic, Horacio Castellanos, Lic. Dagoberto
Marroquin, Dr. Roberto Amaya Diaz, Lic. Ernesto Gutierrez, Lic.
Arturo Muyshondt, Lic. Leonel Mejia y Julio Cesar Saldana. Atras,
Jose Ayala Pacheco, Luis Mendoza and Lic. Ricardo Escoto.
RANAE
.
922

Vato-de-Apoyo-a-Fuerza Armada
da el Movimiento Reformisto
-
"VA voto de apoyo a las her: gen de nuestro país ante el mun-
zas Armadas que se han denpust do.
cado con sentir del pliehlo.sk Dicho movimiento, como se-
lyadoreho, al tempo que han de nalamos en nuestra edición del
mostrado ser fleles en el miércoles, nació hace ya seis
cumplimlento de su sagrado de meses a raíz de la anarquía que
ber de defender la soberanía e caracterizaba al régimen ante-
integridad de todos los salvado- rior, derrocado el 15 de octubre
reños, formula el Movimiento por la actual Junta Revoluciona-
Reformista Salvadoreño, MRS. ria de Gobierno.
Asimismo, pide el MRS a los Lo anterior está contenido en
grupos extremistas acaten el lla- un pronunciamiento dado a co-
mado de la Junta Revoluciona- nocer ayer a EL DIARIO DE
ria de Gobierno y depongan sus HOY por sus principales, en el
actitudes hostlles que únicamen- cual el MRS se dirige al pueblo
te dañan los intereses de la pro- salvadoreño, a los gobiernos
ducción nacional, contribuyendo centroamericanos y a los pue
además a formar la mala Ima- --Favor pase a la página 32.
Y
EL DIARIO DE HOY. Viernes 19 de Octubre de 1979.
2
Voto de Apoyo
Viene de la página 3.-
IPOYAN A JUNTA REVOLUCIONARIA - Su apoyo a la Fuerza Armada dló ayer el MO-
blos y goblernos del mundo.
vimiento Reformistà salvadoreño, MRS, al tiempo que emitía un pronunciamiento al
Tal pronunciamiento, asegu-
efecto. De izquterda a derecha, José Castro, Juan Miguel Bonilla, Lic. Horacio Castella:
ran, es el inicio de una cruzada
Asimismo, manifiestan en el nos, L. Dagoberto Marroquin, Dr. Roberto Amaya Díaz, Llc. Ernesto Gutierrez, Lic. Ar
por el blen de nuestra patria, con
tercer punto que el MRS estará
Puro ivayshondt, Lic. Leonel Mejía y Julio César Saldaña. Atrás, José Ayala
Pacheca
el propósito de ayudar y contri-
atento al compromiso de la Jun- Luis Mendoza y Lic. Ricardo Escoto.
buir con el gobierno.
ta Revolucionaria de respetar
En su primer apartado, el
los derechos humanos y rescatar
MRS manifiesta que estará vigi-
la imagen del país Internacional-
En su relación con la libre 'em-
lante al decreto de libertad a los
mente; pide se invite a las orga-
presa, en el sexto punto de su
presos políticos, a la vez que pi-
nizaciones de Derechos Huma-
pronunciamiento, el MRS afir-
den a los grupos extremistas de nos, Amnistia Internacional y
ma respetar a la empresa priva-
poner su actitud hostil, en vista
Cruz Roja Internacional, para
da e individual a la vez que seña! Finalmente, en su septimo
de la buena voluntad de la Junta
que en
menor tlempo posible
lan que en la era moderna, la punto, el MRS reflere que "Jun-
Revolucionaria de Gobierno. puedan inspeccidnar las cárce-
empresa privada no sólovela por tos debemos buscar la dignifica-
Añaden en el segundo, que la
les del país y comprueben que no
sus intereses, sino que toma
clón del trabajador, del em-
medida anterior llevará al pron-i existen presos políticos, como- queda de la paz entre todos los muy en cuenta los intereses de) pleado público, de los empresa-
lo restablecimiento de la vida
también piden se investiguen y habitantes y con los pueblos del los trabajadores que son el prin- rlos, líderes y gobernantes,
normal del país, con lo cual se
esclarezcan los casos de los de- mundo, y el respeto a los dere-
clpal medio para poder alcanzar rechazando todo tipo de corrup-
ayudará a la Junta a levantar saparecidos y presos políticos chos individuales de cada uno,
el bienestar y desarrollo de El clón, pues con una actitud hones-
pronto el estado de sitio y ley
del pasado.
consignados en la Carta Magna. Salvador. La empresa privada, ta encaminaremos a nuestro
marcial,
En el cuarto punto dan su voto Afirmaron, por último, que el re- aseveran, debe suspender todas pais hacia la total recupera-
de apoyo a las fuerzas armadas conocimiento de la voluntad po- aquellas acciones obsoletas y clón".
en los términos referidos al prin- pular como fórmula de progreso comprometedoras, y actualizar- Concluyeron sus afirmaclones
clplo de esta nota, haciendo en el y Justicia social en el país, era
se con el objeto de poder dinaml- para EL DIARIO DE HOY,
quinto punto un llamamiento a poco más que Indispensable zar el progreso de nuestro país, relterando que el MRS se ha ca-
la Iglesia salvadoreña para que para lograr la verdadera paz. proponlendo soluciones que be-
racterizado desde su fundación
continúe en su lucha y afán de
neficien a los trabajadores, al
por sostener el anhelo y bús-
buscar para nuestro pueblo solu-
país y a ellos mismos, en una
clones que mejoren sensible-
identidad con todos los sectores
mente la vida de la familla sal-
i. clydadanos.
vadoreña.
1
q
923
[TAB 10]
3460
January 16, 1980
Response to Jaime Alfaro Castillo regarding the Articles of
Constitution of F.A.N.
After discussion with the different sectors from M.R.S., repre-
sentatives from the private and military sector, the M.R.S.
has decided not to support the F.A.N. in all the purposes and
ideals that are in accord with ours. Supporting F.A.N. publicly
when we decide to, but without being a member of F.A.N.,
1., because
we believe in the actual political situation of M.R.S. as a
movement rather than as a well-known; however, the ideals we
defend are aparently the same.
January 16, 1980
924
El M.R.S. ante la posición planteada de integrar el F.A.N., comuni-
ca al Comité Ejecutivo del F.A.N., lo siguiente :
El M.R.S. desde que fue invitado a formar parte del F.A.N. dió su
visto bueno y acordó tomar parte de la fundación e integración del
F.A.N., siempre que se cumpliera con las condiciones que el M.R.S.92
expuso en aquel momento; no obstante haber tenido un representante
en el comité ejecutivo provisional, éste no fué informado, ni aprobó
la primera publicación del F.A.N. que salió en dos periódicos del
país; aún así, el M.R.S. no creyó conveniente expresar públicamen
te no pertenecer al F.A.N. dando muestras de buena voluntad, por no
dañar en alguna forma la imágen del F.A.N.; mencionamos esto no como
reproche o pretexto, sino como una muestra de que siempre estamos
apoyando al F.A.N. en sus objetivos e ideales que se plantearon en
aquella ocasión, ya que estos son los mismos que el M.R.S.
se trazo
hace un año, como son:
- defender los principios de las libertades y derechos individuales.
- defender los principios de la propiedad privada en función social.
- defender el sistema republicano y democrático representativo del
gobierno de El Salvador.
evitar que la infiltración comunista llegue a tomar el poder eco-
nómico, político y de la Fuerza Armada,
-lo mismo que combatir la corrupción en todos los sectores,
dar reformas que lleven a crear más justicia a todos los salvadore
ños.-
como

SA
en todos los aspect
Después de efectuadas las consultas de los distintos sectores.qua
Forman elem
como también a representantes del sector pe
yado y del sector
M.B. S ha decidido, apoyar al F.A.
eguen a los objetivos ideales del
MERS apoynando le masodblica cuando así lo ameriter pero sin
creemos que el omento políticos actual
movimiento de imágen ya conocida que per
marezca
iem
ante se defiendan aparentemente lost-
mismos ideales.
necesi
Esperamos la comprensión de los integrantes del F.A.N., y tengan la
seguridad de que defendemos los mismos principios e ideales que he-
mos mencionado.-
JUSTICIA, LIBERTAD Y PAZ, A TRAVES DE LA DEMOCRACIA Y LA UNIDAD.
MOVIMIENTO REFORMISTA SALVADOREÑO, Enero 16 de 1980.
925
5 February 1980
El Diario de Hoy
Paid Advertisement
Salvadoreans.
The Movement to Reform Salvador (M.R.S.)
TO the Salvadorean People:
The responsibility for violence, hunger, misery, and workers
unemployment is and will be the major cause of International
Communism group or organization which wants to destroy the
Democratic System, the Economy and the Army, the Salvadorean
people to submit.
M.R.S. is an independent group; it does not compromise and is
not a member of any other political party or group.
more
926

9
MIMI
MOFIMLENTO A SALVADORTHO
a roba
(
SALVADOREÑO
El Movimiento Reformista Salvadoreño
MRS
EL DIARIO DE HOY, Martes 5 de Febrero de 1980.
al pueblo salvadoreño hace saber:
Que la responsabilidad de:
la violencia, el hambre, la miseria, la desocupación
es y va a ser consecuencia única de los grupos y organizaciones dirigidas por el comu.
nismo internacional que quiere destruir:
el sistema democrático, la economía y la Fuerza Armada
para esclavizar al pueblo salvadoreño
EI MRS. es un movimientos independientes que no tiene compromisos, ni 98
integrante de ingún grupo político ottvicoya que su único compromiso es con
el pueblo salvadoreñia, hace un llamamiento a la reflexión para que cada uno de los
que integran el pueblo salvadoreño sepa ver y reconocer sus derechos, pero al mismo
tiempo esté consciente de cuáles son sus deberes, porque actualmente todos exigen
sus derechos y pocos cumplen con sus deberes, creando un estado de peticiones
en el cual se pide todo y no se da nado. : .
A todas luces se ven síntomas de libertinaje, si así se le puede llamar al despliegue de
propaganda de los grupos extremistas de izquierda, que llenan la radio, T.V. y prensa
de desplegados y campos pagados; nosotros preguntamos, ¿de dónde viene todo
ese dinero y qué le están dando al pobre?
Sabemos que al pobre le están dando una esperanza ofreciendo lo que nunca le
piensan dar, sin embargo, critican y atacan todo lo que está en contra de sus intere-
ses, el cual es crear un sistema comunista TOTALITARIO EN EL SALVADOR.
Sepa el pueblo salvadoreño que el Movimiento Reformista Salvadoreño MRS, ha
apoyado los cambios pero cambios que no lleven a la esclavitud al pueblo, sino
que cambios que generen más riqueza, más progreso cultural y económico a
los más riecesitados, respetando siempre el don más preciado del ser humano, que
es la LIBERTAD.
JUSTICIA LIBERTAD Y PAZ, A TRAVES DE LA DEMOCRACIA Y LA UNIDAD
OVIMIENTO REFORMISTA SALVADOREÑO
MRS
927
1
La Prenas Grafica, 26 June 1980
"Suggest Cleaning of Corruption and Communists"
We support the changes within a democratic system which
increases productivity in all sectors because we believe the
only sectors that we have to destroy are the communist, and
corruption, affirmed Lic. Arturo Muyshondt, representing the
Movemento Reformista Salvadoreno (M.R.S.) in an interview
yesterday with a reporter.
What do you say about rumors that are circulating about
M.R.S. having a close relationship with F.A.N.?
About those rumors, if M.R.S. is a member of F.A.N., we
say that must be cleaned out as it is false.
928

2 LA PRENSA GRAFICA, Juev. 26 Junio, 1980
JO LAPRENSAGRARCHJarv:20 3 umo," 1800 trenere og end
la di mana su primer Guide for ydonit dat leerbedre end destruir und
mallas indicadas,
dad, aunque el hecho de
do si se erradican los
tales extremistas. Por el e éstos para beneficiar a
Limpia de...
extremistas de nuestra i
¿Qué dico Ud. sobre que en este momento no momento, seguiremos otros, porque creemos que,
mores que circulan sobre participemos en un frente atentos a las actuaciones - los únicos sectores que de
patria, quienes, en su par-
Vlene de la página 2
: el MRS. tiene relación común po' significa que en de la democracia cris
ticular Jerigonza politica,
bemos destruir son los co-
"No debemos olvidar dicen que luchan por y con
estrecha con el EANI'). el futuro no lo hagainos. tiana dentro del Gobierno. munistras y los corrup-
"El Movimiento Relor-
que cada dia que pasa nos
siempre y cuando exista ¿Qué opina con relación tos."
las mayorlas, pero eso es
acerca más al colapso de falso, porque sólo buscan
mista Salvadoreño hace un frente que sustenta los cambios socio- "Finalmente, el Lic.
que hablo. Por ello, la uni- satisfacer Intereses aje-
énfasis en su meta princi- nuestros mismos princi- económicos?
Muyshondt expresó que,
Ad
dad nacional en pro de la nos a nuestra nacionali. pal, que es la de que cada pios.
"En relación a los cam- en otra oportunidad ex-
paz y el trabajo se vuelve dad.
salvadoreño tenga garan- "En relación al P.D.G; bios, el M.R.S; como lo ex- pondrán la opinión del
ahora una cuestión de so- ¿Cuáles cree Ud.; Lic.
tizado, de la mejor mane- el M.R.S. siempre se man- puso en su oportunidad, no M.R.S. sobre los cambios
pervivencia nacional. O Muyshondt, que son las
ra, el derecho a la vida, la tiene atento a las ac. sólo los apoya sino que que se han realizado en el
causas principales de la
nos unimos ya o perecere-
alimentación, la salud, la tuaciones de este partido hasta proposo alternati- pals, ya que en la actuali-
inos. No hay alternativas. actual situación del pais?
educación y el trabajo. dentro del Gobierno. Si vas, siempre que se realidad están efectuando un
bien es cierto que coincidi-
“Sobre los rumores de
zaran dentro de la libertad
“Lo anterior será logra.
análisis de los resultados
“Al respecto, creemos
que es oportuno referirnos que el MRS es miembro mos en que este pals tiene y la democracia y que, a la sociales, políticos y
a una anterior publicación
del FAN, nos limitamos & problemas con los extre- vez conduzcan al incre- económicos de dichos
nuestra, en la cual expusi-
aclarar que se trata de mistas, no sabemos si mento de la productividad cambios".
mos las causas de los
problemas que agitan al
país; causas que deben
ser corregidas a la mayor
brevedad posible, si
queremos lograr una paz
duradera y fructifera. Di.
Jemos en aquella oportuni-
dad:
"EI M.R.S. considera
como las causas más im.
portantes de la actual al-
tuación:
1.-La corrupción en to-
dos los sectores.
2.- El no haber vivido
nunca una auténtica de-
mocracia.
i
3-La falta de visión fu-
Apoyamos los cambios ¿Cómo cres Ud. que se
turista y de sensibilidad
ien Übertad y dentro del puede lograr la pacifica-
social, económica y politi-
sistema democrático que ción del pals?
Incrementen la producti..
ca de los dirigentes de to-
"A través de la unidad
dos los sectores, lo que ha
vidad y la producción en de todos los salvadoreños.
provocado un verdadero
todos los campos, porque Por ello, Movimiento
desbarajuste socio-
creemos que los únicos Reformista' Salvadoreño
económico en esta nación.
sectores que debemos (MRS), 'ante la situación
4.-La conspiración co-
destruir son: los comunis- de violencia que vivimos,
mupista internacional,
tas y los corruptos", afir, hace un nuevo llamamien-
que ha fomentado la
ma el Lic. Arturo to a la unidad para que
corrupción, el dese-
Muyshondt, representante logremos pacificar al país
del Movimlepto Reformis.
quilibrio económico, 80-
y combatamos la corrup-
cial y político, creando así
ta Salvadorano (MRS), on ción. De esta manera, cre-
entrevista que le hicieran
el libertinaje como susti-
emos que evitaremos el
periodistas ayer.
tuto de la libertad, a efecto
colapso económico y
Al respecto, el Lic.
de tomar el poderi
aumentaremos la produc-
Muyshondt responde
destruir el sistema de
tividad en los diversos sec-
mocrático, la Ubre expre
sobre los siguientes pun- tores de la producción.
tos:
Pasa a la página 38
sión y la libertad de orga-
nización, de empresa, reli-
giosa y de asociación.
5.---Las flagrantes viola-
ciones a los derechos hu-
manos.
6.--La superpoblación.
“Nosotros creeinos que
cualquler cambio que se
Limpia de corruptog
y comunistas sugieren
1
labore
929
[TAB 11]
3466
AFFIDAVIT
James T. Devine being first duly sworn on oath, deposes
and states:
1.
He is a member of the Law Offices of Jerris Leonard, P.C.
2.
That the Law Offices of Jerris Leonard, P.C. represents
Arturo Muyshondt Parker of San Salvador, El Salvador.
3.
That on February 15, 1984 pursuant to the request of
Jerris Leonard, he spoke via telephone to Paul Donohue, Assistant
to John Mintz, Legal Counsel for the United States Federal Bureau
of Investigation.
4.
That he informed Paul Donohue that his client Arturo
Muyshondt had been named in the February 3, 1984 issue of the New
York Times.
In the same article reference was made to the state-
ment of a law enforcement agent that "the F.B.I. could not even
find some of these people."
He informed Donohue that Mr. Muyshondt
was available to meet with the F.B.I. at any time for an interview.
Mr. Donohue thanked Mr. Devine and stated that he would refer the
matter to the investigative division covering the area involved.
Shortly thereafter Ron Davenport of the F.B.I. called in reference
to the above matter and stated that he would contact the Washington
Field Office of the F.B.I. and check to see if the 11:30 a.m.
joint meeting on February 16, 1984 with our client, was agreeable
to the Washington Field Office.
5.
That on February 15, 1984, Mr. Devine was informed that
the Washington Field office called in the late afternoon to con-
'
firm this appointment.
930
-2-
6.
That on February 16, 1984 at 10:00 a.m. Gerry Fazita (ph)
of the F.B.I. called to cancel the scheduled interview indefinitely.
He stated that if they ever have a need to interview Mr. Muyshondt
in the future, he would get in touch with us.
Mr. Devine informed
him that Mr. Muyshondt was in and out of the country on occasions
and that if they wished to talk to him at any time, to contact
--
the firm and Mr. Muyshondt would gladly make himself available
during a subsequent visit to the U.S.
29 Nene
Aurico
James T. Devine
Vernice
Washington
District of Columbia
SWORN to before me this
16th day of February, 1984
Cheryl Hudson
Notary Public
My Commission expires March 1988
931
March 20, 1984
STATEMENT OF ARTURO MUYSHONDT
Beginning as early as November and December, 1983,
and culminating with a prepared statement, a press conference
and subsequent radio and television appearances, Robert E. White,
former Ambassador from the United States to El Salvador made
the most serious charges that one human being can make against
another.
Ordinarily, a citizen of El Salvador would have little
interest in what a man like White has to say, but in this case,
the perjured testimony that Robert E. White gave before a con-
gressional Subcommittee has not only resulted in great damage
to my name, the name of my family and my children, but it has
placed all of us in great danger of physical harm and death.
In fact, on Thursday, February 23, 1984, just a few weeks after
White made his false and inflamatory charges against me,
an
attempt was made on my life by a would-be assassin.
No such
attempts have ever been made on me or my family before.
On February 6, 1984, this man, Robert E. White, appeared
before a Congressional Subcommittee and uttered a vicious and
damaging defamation.
He alleged that I was a member of a group
of Salvadórean exiles of great wealth, living in Miami, revengeful
because their land and properties in El Salvador had been expro-
priated by the Salvadorean Government for land reform, who had
plotted and continued to plot the deaths of Salvadoreans.
He
charged that I was a member of the group that was directing the
execution of such persons by manipulating Roberto D'Aubuisson
932
-2-
and persons associated with him.
Mr. White is a vicious liar.
He is also a thief, for he has stolen the most precious possession
my family and I have--our good name.
The documents that are provided with this statement speak
for themselves, but let me tell you in summary form, who I am and
what I do.
My name is Arturo Muyshondt Parker.
I am 35 years old,
married and have three children, ages ten, nine and five.
I am
a practicing Catholic and was educated by the Jesuits in El
Salvador through high school.
I attended Menlo School of Business
Administration in Menlo Park, California in 1974-75 and received
a Bachelor of Science in Business Administration from that
institution.
I am not wealthy, but I do have a good business,
I
also believe that I have a good business reputation.
My basic
business is the extraction of vegetable oil from copra, which I
purchase from local cooperatives in El Salvador, processing the
copra in my plant in San Salvador and selling it to various
customers, mainly in the Central American area.
With my brother,
I also operate some cotton farms,
cotton farms, totalling approximately 2,500
acres.
All of the land is leased from others,
The cotton farms
have lost substantial monies in the last two years.
I also own and operate a dairy farm of approximately
300 acres.
This is the only land anywhere in the world which I
own, other than my home, office and approximately one acre of
933
-3-
unimproved beach property in El Salvador,
I entered the dairy
farming business in El Salvador by purchasing brown Swiss dairy
Cows, approximately 87, after extensive travel through the mid-
Western part of the United States.
I am very proud of the fact
that I bought, this dairy herd from dairy farmers in Wisconsin
and Ohio.
with a relative of mine, I have an office in Coral Gables,
Florida, which imports machinery parts into El Salvador, and we
are trying to import some El Salvador goods to the U.S.
In addition, I hold in my own name,
a representation
contract with an oil extraction machinery manufacturing company,
and currently do business with a few other American companies,
representing them in the Central American area.
I would like to clarify the misinformation presented by
Mr. White, giving facts, not assumptions, as he did. I have
never been an exile.
My permanent residence has always been in
San Salvador.
I was
never affected by the land reform.
I do
not belong to or support any political party at this moment,
and I have never been in ARENA (D'Aubuisson Party) at all.
I
did form a civil forum in 1979 before the coup.
This forum
was mainly anti-communist and conservative, but by no means
extremist.
My forum "Movimiento Reformista Salvadoreno"-"M.R.S."
(Salvadorean Reformist Movement) was at the beginning considered
to be part of "Frente Amplio Nacional"-"F.A.N.," but I decided
not to participate after it was founded.
}
A
934
-4-
I have never met with the persons Mr. White refers to as
the Miami Gang to discuss political matters.
I have probably
seen some of them only once or twice in my life at social or
business events.
I have been living and investing in my country since I
graduated in the U.S.A. from Menlo School of Business Administra-
tion in Menlo Park, California in 1975.
As for the kidnappings
and threats that are mentioned, I participated in the negotiation
and investigation of the first kidnapping (the Bustamante case,
December 9, 1981
January 27, 1982) that was resolved in my
country.
It was done to a businessman by a former military man
who had his residence in Key Biscayne, Florida, and who was in
custody for two years with several other persons who were being
prosecuted.
My participation was mainly for family ties, as the
person kidnapped was an in-law of mine.
After discovering the
kidnapper, I left for Miami with my wife and children for about
two months for security reasons (February-March, 1982).
,
I knew Monsenor Romero. There is no doubt in my mind that
he was a great person, the same way there is no doubt in my mind
that his image was used by irresponsible persons in favor of a
cause that, if it is not communist, it surely helps the communists.
I did meet with Monsenor Romero on many occasions to discuss
social and political topics.
Even though we did not agree on
everything we talked about, there was a friendly manner and a
great respect between us.
935
-5-
Mr. White irresponsibly played with my human rights by
making public declarations which have been seen and heard in
many
sectors of the media here in the U.S., in El Salvador and
in the rest of the world.
Such misinformation given to
irresponsible people causes more harm to my country than the
actual crisis in which El Salvadot is in, but what really shocks
me is to think that the person who accused me had such a top
post with the full responsibility as to report to the U.S.
Government for it to gather conclusions and take action or
make policies for my country.
As damaging and dangerous as Robert E. White's lies are,
they do provide an opportunity for me to express my views about
my country, what its needs are, what it doesn't need and what
must be done if Salvadoreans are to again be free to live in
peace.
In El Salvador since 1980 when the reforms were made, the
life of the peasants instead of improving, has worsened.
There
was hunger and poverty then; now there is even more hunger and more
poverty.
There was hope for these peasants; now there is none.
To criticize or to judge the changes would take too long
and I do not believe it to be at all positive.
These changes have
been made and now the problem is not how to turn back, but how
to make them work and keep up with them.
I believe it is neces-
sary to clarify what the mistakes were:
1)
Having made the
changes not with the purpose of improving the peasants' way of
936
-6-
living, but to destroy the productivity of the country which as
a consequence, brought more poverty; and 2) Having taken something
from someone without any payment in any part of the world is
called robbery and it is against human rights.
Agrarian reform
does not mean the transferring of land from one to the other, it
means a reform which improves the conditions of life of the
peasants who work in that land.
This has not been accomplished.
The problem in El Salvador, in my judgment, is a very com-
plex one.
First, there is a problem beyond El Salvador's control,
and this is an international interest which is communism and its
interest in taking power.
We also have many internal problems
and big ones, but these are the ones we Salvadoreans can correct.
In January, 1980, my forum, which by no means was
political party, expressed to the press a summary of its position
towards the problems in our country.
This forum was ridiculed
by the communists and ignored by U.S. representatives in El
Salvador because their aims and interests were different.
The causes of El Salvador's problems were summed up as
follows:
1.
Corruption in all sectors;
2.
Not having had an authentic democracy;
3.
The lack of future vision and social, economic and
political sensibility of the persons who run the system.
It is
what provoked an economic, social and political imbalance among
all Salvadoreans;
937
-7-
4.
The conspiracy of international communism which has
promoted corruption, the economic, social and political imbalance
creating the lack of moral restraint as a substitute of liberty
to gain power and to destroy the democratic system of free
expression, organization, enterprise, religion, association and
others;
5.
The clear violations of human rights;
6.
The overpopulation.
Any of the changes should have corrected these causes.
But after four years from the reforms, we still ask what happened?
The answer is clear, nothing has been done,
nothing has been done, and what is worse,
the causes are still there.
The real problem came about when it was decided to change
the system.
What should have been done was to improve the system.
The system is not a bad one; the ones to blame are the persons
who run it.
I believe we do have the basis to live in a free
society under a democratic system.
What we need is an orientation
and to have the right persons running it.
As an example:
If
one has a car and one tells someone who does not drive to drive
the car, the car cannot be driven.
Are we going to throw away
that car and keep the same person to bring him another car,
which would have to be thrown away again, because the problem
here is logically the person, but not the car.
This is what has
happened in El Salvador.
The car has been thrown away and the
person (politician) has remained.
The results are obviously in
front of us.
84-045 0-84-60
938
--8-
To find solutions in a given moment is impossible, but I
do want it to be clear that most of us Salvadoreans want a free
system.
We do reproach violence and want peace, but not communism
or guerrillas, as an alternative.
Our problem now is how to
obtain peace.
After the reforms of 1980, it is "recommended" to
us to have elections in 1982 and again in 1984; we go back again
to see problems in these "recommendations."
Elections should be what democracy expresses, but to obtain
a really good expression, there is a need of good basis and funda-
mental authentic democracy.
What was done in El Salvador was to
construct a building starting at the last floor and not at its
foundation.
The consequences are logical and clear.
The problem of El Salvador has three fronts:
1.
The Political, which has its grounds in the international
environment.
One sees that the leftists do not dare to participate
in elections, no matter what the results may be, either P.D.C. or
ARENA.
They are just going to say that they did not take part in
the elections.
In order to have the solution to our political
problem, we should have both systems competing together in a very
serious way.
They are asking for negotiation which the majority
of Salvadoreans are rejecting.
It could be by a referendum or a
plebiscite in front of any organization or any country who wishes
to supervise its authenticity by asking, "Salvadoreno, do you wish
a dialogue with the left or F.D.R.?"
The answer will be, "No!!"
939
-9-
This will be a demonstration of our rejection.
If by chance the
answer is yes,
we should go to a dialogue, a public dialogue in
front of the whole country, so everybody can see the aspirations
of the communists and have the opportunity to reject them; and
not in the shadows of foreign groups like contadora, whom we do
not recognize at all.
We believe they are intruding in our
problems, and we cannot accept that other countries with worse
problems than ours, and who are not able to correct them, come
and tell us how to solve ours.
This is like telling a mute to
teach us how to talk.
The majority of the Salvadoreans at this moment, wish to
have peace, destroying the communist menace.
The only ones who
want elections at this moment are the politicians, whose aim is
to take power.
2.
The Economic.
It is clear this is another front to
which we should have given more attention as the communists have
by trying to destroy it and hence, having more unemployment and
as a logical consequence, more hunger and more poverty.
We ought to have the free enterprise system as part of the
free system, not the free system as a part of the free enterprise.
Once more,
we see it would be too long to summarize the mistakes
that have been committed along the economic system.
There are
many, but if we balance the positive with the negative, we end up
with more of the positive things of the economic system of El
Salvador.
940
:
-10-
Let me mention the changes made in the banking system and
the export system in 1980:
1)
Banking was regulated by a central
bank (of the State) which had an absolute control over private
banking operations.
2)
Coffee exports, our main export product,
were also regulated by an organization of the State called
"Compania Salvadorena del Cafe."
What was really needed was
to
control them, and not to put them all in the hands of the State.
But this was done and as a result, we have a monopolized bank
and exports with no benefits for the Salvadoreans whatsoever.
In reference to our economic front, what El Salvador needs
first of all, is to produce at least what it was producing before.
If one has an enterprise working 30% of its capacity and its
break-even point is 50%, one could get all the help from the
world, but if one does not reach 50% and beyond, there is nothing
one can do.
He is lost.
El Salvador needs the economic aid that the only country
in the world can give:
the U.S.A.
But along with it, we also
need the best part of the U.S. economic system, its free market.
What we really need is not only to export our coffee, sugar,
cotton and raw materials, but to be able to export our finished
product creating by this more and better labor and wages for our
people and better prices for our agricultural products.
3.
The Military Front.
All revolutions being leftists or
communists have succeeded because by misleading, they have gained
the support of the people in countries like Cuba, Nicaragua, etc.
In El Salvador, they have been defeated because our people have
941
-11-
been hard to convince.
I do not have an idea of how many guerillas
there are, but I believe that approximately 80% of the guerillas
are there, not because of idealism, but to get paid.
The army has made its mistakes, but I go back to say again
that if we gather both positive and negative, we
we can find that
there is more positive. Unquestionably, there have been many
mistakes, but it is also certain that many of them have been
corrected.
The Minister of Defense, a person so honest and
capable that it would be hard to find someone like him, not only
as a military man, but a human person.
The day he leaves the
army, there would be an enormous fear of a turn-back in bettering
the military forces.
The phenomenon occurring now in El Salvador is no news for
us.
It has happened around the world in the past, and it will
happen in the future.
If we, the people who want a free world to
live in, who believe and fight for it, have now the chance to stop
this phenomenon, we should do it--stop communism in El Salvador.
As we saw Somoza leaving Nicaragua, who was far from being
the best for them, we see now
a new marxist regime to be even
worse than Somoza.
The same has happened in other countries of
the world.
The phenomenon in brief is as follows:
The communists
using the defects and mistakes of a free system portray it as if
it represents all of the system and talk about liberation, revolu-
tion, etc., when all they want is to impose their totalitarian
942
-12-
system.
Likewise do the corrupt politicians using the communist
menace to be imposed in power.
The right in my country does not mean corruption, murders,
injustices.
It means to be anticommunist.
It means not to let
us be driven by or be deceived by them.
We want to fight the
extreme right (murders, injustices, kidnappings, etc.), but at
the same time, we do fight the left that if it is not communism,
it surely serves the communists, .
Here is where many are confused.
I consider the majority of Salvadoreans to be of a conservative
ideology; and I say the majority considering the peasants because
in El Salvador, to be conservative is to be anticommunist; to
desire a free world with occidental principles.
The elections in
El Salvador are in front of us, only a few days away.
There are
only two alternatives for the Salvadoreans:
P.D.C. could lead us
to one side and ARENA to another side.
The guerrilla steals, murders, destroys.
It is a fact,
and there is also the possibility of an extreme right who murders.
Both are wrong and have to be eliminated.
But the problem here
is not to destroy the extreme right in order to let communism
win or destroy the communism to let the extreme right win.
They
should both be destroyed at the same time without confusing
these extremes with any sector or associate extreme right with
private enterprise as has been done.
Who should succeed is the sector who believes in a free
world for the people of El Salvador.
I can guarantee you that
)
943
-13-
the definition of "right" (anticommunists for a free world) is
very far from the one of "extreme right" (murders and corruption).
The vast majority of all Salvadoreans, being businessmen or
workers, belong to this "right" (anticommunists for a free world).
You have heard of an oligarchy that does not exist; of
fourteen families who nobody knows.
What we know is that there
are 14 states in our country.
You have also heard of 50 years
of a military tyranny, but have you ever wondered what it was
like in El Salvador before these 50 years?
Have you noticed the
economic improvement in all sectors in these 50 years.
During
these 50 years there was imposed on the private sector a central
bank to control the banking system, a social security system to
benefit the workers and labor unions were established.
There
was
an agrarian reform in the 1950's and also an educational
reform by founding one of the most modern educational T.V.
programs in Latin America.
I cannot say it did not have its
defects, but I see El Salvador as having more positive views
than negative in the last 50 years.
In those years, there was
economic and social progress for Salvadoreans even though the
problems we have, like overpopulation and world problems like
inflation which does not permit the economic development we
desire to continue.
The price of our sugar cane has not
increased in 30 years.
It is the same today as it was in
1950.
But a tractor for agriculture in 1950 was worth 10% of
944
-14-
its cost in 1980.
This is also true with respect to other
products that we export compared to the goods that we import.
To blame those 50 years is pure demogoguery.
Our country was
improving even without resources.
Let's give to any country in
America the same population by square miles that we have and you
will find even worse problems than we actually have.
When we accomplish political and economic stability, the
military aspect will improve as a consequence.
But we should
not forget that these three fronts (political, economic and
military) are like battles we must fight.
If we lose any of
them, we risk losing the war against the communists,
The only
way to succeed is by winning on all three fronts.
I want to add that one weapon to defeat the communists
is to give to the people something to lose.
If they have nothing
to lose, they could care less about other systems.
That something
is a free world where the individual has hope and faith.
We have
to guarantee each individual, in the best way possible, their
basic needs as human beings, which are
1) food;
2) health; 3)
housing;
4) education, and
5) work, inside a free world.
El
Salvador has all the resources to provide them; what it needs is
time to create it and the Salvadoreans' decision to do it.
The
time depends on your help.
Elections have been imposed on us.
I ask myself and ask
you, having a population of over 40% illiterates, who are they
945
-15-
going to vote for?
Having a population with little or nothing
to defend, who are they going to vote for?
A population with
hunger, who will they vote for?
The result of the elections has been the birth of many
political parties with many politicians who only want to gain
power and only a few Salvadoreans who really want to solve the
problems.
At this moment, I'm not sure who is worse for El
Salvador, P.D.C. or ARENA, but it is very sad to be waiting for
the one which is less worse and not to have the opportunity to
choose among the two best ones.
Again, I want to clarify that I do not belong to any
political party, but I do think that a P.D.C. Party has some kind
of compromise with the leftists, and the ARENA party, with a very
good ideology, but unfortunately not with capable people.
The
P.D.C. is promoting a "communitarismo."
Do you know what that
system is?
Nobody in El Salvador knows!!
Why would those alternatives be the only ones?
Just
because we have to have elections at this moment.
Elections in
any country brings along some kind of instability.
To have
elections in El Salvador at this moment is like injecting sick-
ness to a sick patient.
There have been many politicians and people from the U.S.A.
who have come to my country to criticize.
I now ask them if they
really know our problems?
If they have talked to the different
sectors or just with the ones who say they represent the different
sectors?
946
-16-
How long did it take the U.S. to accomplish the democracy
you now have?
In El Salvador, the immigrants arrived and were
mixed among the natives.
What did the immigrants do when they
arrived in North America?
Just remember that Americans are those who were born in
America, and do not forget it.
Do not think that Americans are
just the ones from North America.
There are several Americans
under communist power.
Let's not permit them to have any more
Americans under that regime.
To conclude this statement, I want to leave the anxiety
to you Democrats and Republicans, conservatives and liberals,
because I believe that all of you want a free world, and as we
Salvadoreans, reject communism.
Why then, instead of the require-
ments you impose on my country to make social and economic progress,
you don't impose requirements to improve the basic needs of the
human being, as
1) food, 2) health, 3) housing, 4) education,
and 5) work for all Salvadoreans within a free system, and not
to permit totalitarianism.
It is said that within a free system
there should be a respect for everybody's human rights, not just
for the Guerrilla and its followers.
There is one more requirement which you have not imposed,
which is to fight corruption among the public officials. It is
the principal cause for which our people do not receive the
benefits that a free system is supposed to confer.
947
-17-
I have attempted to outline my views on my country and
what needs to be done if it and the 5 million of us are to
survive as a free and independent people.
Without strong support
from our North American brothers and sisters, this is not possible.
Help us to impose policies which will assist us to reject the
extremes of the right and the left and find political stability,
human freedom and an economic system which will allow each
Salvadorean to work, achieve and benefit to the fullest extent
of his or her capabilities.
In this way will the people of the
United States have a strong and stable outpost of freedom,
democracy and prosperity in Central America.
948
IN THE UNITED STATES
DISTRICT COURT FOR THE
DISTRICT OF COLUMBIA
ARTURO MUYSHONDT,
Plaintiff,
)
)
)
)
Civil Action NO.
ROBERT E. WHITE,
)
Defendants.
COMPLAINT
Now comes plaintiff Arturo Muyshondt complaining of
the defendant Robert E. White and by his verified complaint
and in support thereof alleges and states as follows:
Jurisdiction
1.
Jurisdiction is predicated upon the provisions of
Title 28, 28 United States Code Section 1332, Diversity of
Citizenship.
The matter in controversy exceeds, exclusive
of interest and costs, the sum of $10,000.00
Parties
2.
Plaintiff Arturo Muyshondt (Muyshonát) is an adult
citizen of the Republic of El Salvador, who resides in the
City of San Salvador located in the Republic of El Salvador,
Central America.
949
-2-
3.
Defendant Robert E. White (White) is an adult
citizen of the United States, currently residing in the
State of Massachusetts, and at all times relevant herein was
a member and Chairman of the Center for Development Policy
Commission on United States-Central American Relations, which
organization is located and does business in the City of
Washington, District of Columbia.
COUNT I
Libel
4.
On or about February 2, 1984, at a "news" confer-
ence initiated by White in the City of Washington, District
of Columbia, White authored, published, circulated and caused
to be disseminated to the news media a written "oral state-
ment" (the statement), which among other things, included the
following statements of and concerning Muyshondt.
For three years the administration has known the
names and involvement of several wealthy Salvadoran
exiles living in Miami, Florida, who organize, fund
and direct right wing death squads.
For three years we have known that Robert
D'Aubuisson planned and ordered the assassination of
Archbishop Romero.
The cables giving this evidence against D'Aubuisson,
the Miami exiles, and ARENA exist. I have known, the
State Department has known, the Pentagon has known, and
the White House has known. If the Kissinger Commission
was not shown these cables, the members were used in a
shameless fashion, and their report can be consigned to
the wastebasket.
950
-3-
For fifty years, El Salvador was ruled by a
corrupt and brutal alliance of the rich and the
military. The young officers revolt of 1979
attempted to break the alliance. It was the Reagan
renewed tolerance and acceptance of the extreme
right which led to the emergence of the National
Republican Alliance, ARENA, and the rise of ex-Major
Roberto D'Aubuisson.
ARENA is a violent fascist party modeled after
the Nazis and certain revolutionary communist groups.
ARENA has not only a civilian party structure but also
a military arm obedient to the party. The founders
and chief supporters of ARENA are rich Salvadoran
exiles headquartered in Miami and civilian activists
in El Salvador. ARENA's military arm comprises
officers and men of the Salvadoran army and Security
Forces. Many of its most effective militants in the
military are not formal party members.
My embassy devoted considerable resources to
identifying the sources of right wing violence and
their contacts in Miami, Florida. Information on
the Salvadoran exiles residing in Miami proved
particularly difficult to develop; however, in
January 1981 we located a source who was regarded
by the Miami group as one of them. They 'spoke to
this person freely and he participated in some of
their strategy sessions.
When he referred to the Miami millionaires---
the Miami six--the source called these men "scum"
(escoria). He said he had talked to wealthy people
here who have been interrogated and threatened in
Miami--such younger businessmen/lawyers as (names
deleted) and others--people who have decided to
stay on and work for the country, to keep their
businesses and factories open, to cooperate with
the government while criticizing its inefficiency
and hostility to the private sector. These men
have been called to Miami and seated at the end
of a long table, facing the "six" and made to
answer such questions as "Why are you contributing
to the communist victory by keeping your business
open?" or "Why do you do the work of the communist
agents White and Bowdler?" ( The reference is to
former Assistant-Secretary William Bowdler.)
951
-4-
The Miami six explained to him that to rebuild
the country it must first be destroyed totally,
the economy must be wrecked, unemployment must be
massive, the Junta must be ousted and a "good"
military officer brought to power who will carry
out a total cleansing (limpieza), killing three
or four or five hundred thousand people. Last,
the "six" made the following threat: "Unless
you close down your factory/business, get out
of the country, stop working for Alianza Produc-
tiva, INCAFE, American Embassy, etc., you will
be sorry.
who are these madmen and how do they operate?
The principal figures are six enormously wealthy
former land owners. He continued that central
power was exercised by the Miami "six," noting
that others among the emigres and their wealthy
allies here have some role from time to time
but the top leadership is Viera Altimirano, Luis
Escalante, Arturo Muyshondt, the Salaverria
brothers (probably Julio and Juan Ricardo), and
Roberto Edgardo Daglio. All are in Miami. They
hatch plots, hold constant meetings and communi-
cate instructions to D'Aubuisson.
The embassy has reported to Washington that
rightist death squads are financed and directed
by this group of self-exiled millionaires in
Miami, and kill hundreds of thousands of Salva-
dorans suspected of liberal or leftist sympathies.
Roberto D'Aubuisson, it should be remembered,
is the man the administration of President Carter
classified, accurately, as a terrorist, a murderer,
and a leader of death squads.
Yet from the first days in office the Reagan
White House knew--beyond any reasonable doubt--
that Roberto D'Aubuisson planned and ordered the
assassination of Archbishop Oscar Arnulfo Romero.
According to an eye witness account, Roberto
D'Aubuisson summoned a group of about twelve men
to a safe house, presided over the meeting,
announced the decision to assassinate the Arch-
bishop and supervised the drawing of lots for
the "honor" of carrying out the plot.
952
-5-
The officer who "won" the lottery was Lt.
Francisco Amaya Rosa, a D'Aubuisson intimate.
Amaya Rosa chose a military hanger-on and sharp-
shooter named Walter Antonio Alvarez to fire the
single bullet which ended the life of Archbishop
Romero as he said Mass in the orphanage of the
Good Shephard.
Some months later, as ARENA's political cam-
paign was getting underway, D'Aubuisson decided
that Alvarez could not be trusted. He pronounced
another death sentence. A four-man death squad
went into action and executed Walter Alvarez as
he stood watching a soccer game.
The Reagan White House took on a great
responsibility when it chose to conceal the
identity of the Archbishop Romero's murderer
and not to use the evidence gathered by the
Embassy to write a finish to the political
fortunes of ARENA and the ambitions of Roberto
D'Aubuisson.
Did the Kissinger Commission have access to
embassy reports detailing the systematic murder
of Salvadoran moderates by ARENA and the intimate
collaboration which exists between high military
commanders and death squads?
A copy of White's Statement is attached hereto and incorporated
by reference herein as Plaintiff's Exhibit A.
5.
That the Arturo Muyshondt identified in the written
statement published, circulated and disseminated by White on
or about February 2, 1984 and referred to in Paragraph 4 is one
and the same person as plaintiff herein.
6.
The statements of fact of and concerning Muyshondt
published by White and referred to in Paragraph 4 are false and
untrue and constitute libel per se.
953
-6-
7.
In publishing, circulating and disseminating the
statement to the news media at the time and place referred
to in Paragraph 4, White did intend it to mean that Muyshondt
was and is a member of a "gang of six" El Salvador exiles
living in Miami and is responsible for the organizing, fund-
ing, and directing of right wing death squads in El Salvador,
which kill hundreds of thousands of Salvadoreans.
Further,
White intended his statement to mean that Muyshondt inter-
rogated certain wealthy people and certain unnamed businessmen/
lawyers and threatening them that "unless you close down your
factories/businesses, get out of the country stop working for
Alianza Productiva, INCAFE, American Embassy, etc., you will
be sorry."
Further, White intended his statement to mean
that Muyshondt was a founder and is a chief supporter of an
entity called ARENA and that through ARENA, Muyshondt funds
and directs the activity of a Roberto D'Aubuisson, who White
has accused of murdering Archbishop Oscar Arnulfo Romero.
The persons to whom the statement was communicated in the
United States, in El Salvador and in Central America under-
stood White's words to have such meaning.
8.
The defamatory written statement published,
circulated and disseminated by white was made with the
knowledge and intent that it be given and would be given
broad and general publication and circulation in the United
States, El Salvador and Central America and was calculated
-
954
-7-
to cause great injury to Muyshondt's reputation in that at
the time of the publication of his statement, White knew or
upon reasonable inquiry should have known that his statement
of facts of and concerning Muyshondt were untrue and further,
in making his untrue statement of facts of and concerning
Muyshondt, White acted with malice toward Muyshondt.
9.
At all times relevant to the publication of the
libel identified in Paragraph 4 above., Muyshondt was and con-
tinues to be, an honest and law-abiding person of good repute
and up to the date of the publications of said libel had
borne a good reputation in the United States, El Salvador
and Central America.
10.
As a direct and proximate result of the publishing
circulation and dissemination in the United States, El Salvador
and Central America of the untrue and libelous statements
published by White as cited above, Muyshondt has been exposed
to public hatred, contempt, ridicule and great danger of
loss of life and/or bodily injury.
Said defamatory and
untrue statements have been a source of great personal
danger, embarrassment and humiliation to Muyshondt, thereby
causing Muyshondt to suffer distress of mind and mental
anguish. Muyshondt's health has been affected and he has
suffered and continues to suffer from acute nervousness
and mental anguish. Muyshondt's reputation for honesty,
integrity and as a law abiding person has been and continues
to be and will continue to be impaired and damaged.
955
-8-
Count II
Slander
11.
Muyshondt reaffirms, realleges and incorporates by
Reference paragraphs 1 through 10 as paragraphs 1 through 10
of this count II.
12.
On or about February 6, 1984, White voluntarily
appeared before the House of Representatives Subcommittee on
Western Hemisphere Affairs in Washington, D.C., and at which
place and time did publish, circulate and cause to be dis-
seminated a written prepared statement.
White's prepared
statement included statements of and concerning Muyshondt
which statements are false and untrue and known by White to
be or upon reasonable inquiry should have been known by
White to be false and untrue when made.
A copy of White's
written prepared statement is attached hereto and incorporated
by reference herein as plaintiff's Exhibit B.
13.
On February 9, 1984, White appeared as a guest on
a television program styled "From the Editor's Desk," (the
program).
The program originated in New York, New York and
was
a presentation of WPIX Inc.
Mr. Daniel Henninger, Assistant
Editorial Page Editor, The Wall Street Journal and Mr. William
Rusher, Publisher, National Review, were panelists on the
program and were located in New York, New York during the
interview of White.
White was located in Boston, Massachusetts
during the interview.
The interview was conducted via a
closed circuit hook-up between New York and Boston, through
956
-9-
which medium the interview was taped for future publication,
circulation and dissemination to the general public in the
United States, El Salvador and Central America.
14.
During the course of the above described inter-
view, Mr. Rusher asked the following questions of White and
in response thereto, White made and acknowledged as true the
following statements of fact of and concerning Muyshondt:
WILLIAM RUSHER:
"Mr. White, before the House Foreign Affairs
Subcommittee on February 2nd, you named six
specific people: Viera Altamirano, Luis
Escalante, Arturo Muyshondt, Roberto Edgardo
Daglio and the sallaverria brothers, Julio
and Juan Ricardo, as behind the recent wave
of kidnappings of businessmen, of bombings
of U.S. and Salvadoran firms, the death
threats, the recent death squad murders. Are
you prepared now, outside the protection of
congressional immunity, to reiterate those
charges?"
ROBERT E. WHITE:
"Oh, I have reiterated them many times, Mr.
Rusher. The point here is not the immunity.
The point is--though I want to clarify one
thing. What I have repeated is the report
that we sent from San Salvador in 1981, which
listed these names from a source who was
totally reliable."
RUSHER:
"Has this source been identified?"
WHITE:
"The source is a confidential source. You
can't name sources in El Salvador, or they die."
957
-10-
RUSHER:
"Of course not. So you, then, are not making the
charge against these six people, as I understand it,
yourself. You are quoting a report sent from El
Salvador on the basis of a confidential source, is
that right?
WHITE:
"I'm paraphrasing the report. And the basic target
here is the Reagan administration and their policies.
And what I am doing is citing an example of the type
of information they have, and which the administra-
tion has not acted on.
RUSHER:
"Well, the Reagan administration may be your
target, but these six businessmen undoubtedly
feel that they are at least a collateral target."
"Do you make the charge against them, sir, that
they are responsible for the death squads?"
WHITE:
"I say that this information is reliable, and from
a reliable source, and I believe it to be accurate,
yes."
RUSHER:
"Yes, I am, I have seen reports of it, and frankly,
that is precisely the kind of tendentious argumen-
tation that worries me most about this--if you
yourself, instead of circling around the question
and commenting on the evidence, would simply make
the charge, if you're so confident about it, that
these six men in Miami are running death squads,
and then put it to them whether or not they want
on that basis to charge you in a libel suit."
WHITE:
"Oh, I'm glad to repeat that I believe the evidence
that is accurate that I presented to the committee."
A copy of the transcript of "From the Editor's Desk" is attached
hereto and incorporated by reference herein as Plaintiff's
Exhibit C.
958
-11-
15.
On or about February 12, 1984, the program identi-
fied in Paragraph 13 was given broad and general publication
throughout the United States on various television networks
and specifically was published and seen in Washington, D.C.
on Channel 20, February 12, 1984.
Excerpts therefrom and
other news reports relating thereto were published and dis-
seminated in El Salvador and Central America.
The questions
asked by William Rusher and the responses given by White
identified in Paragraph 14 herein were included in their
entirety in said program.
16.
The Arturo Muyshondt referred to by Mr. Rusher,
whose name and identity was acknowledged by White is one and
the same as plaintiff herein.
17.
The statements of fact of and concerning Muyshondt
published by White and acknowledged by White to be true are,
in fact, false and untrue and constitute slander per se.
18.
In publishing and acknowledging as true, his false
and defamatory statements, identified in Paragraph 14,
White
did intend them to mean that Muyshondt was behind the recent
wave of kidnappings of businessmen, of bombings of U.S. and
Salvadorean firms, the death threats and recent death squad
murderers in El Salvador, and the persons to whom White's
words were communicated understood White's publication and
acknowledgement of same to have such meaning.
19.
The slander of Muyshondt. by White was made with
the knowledge and intent of white that it be given and would
959
-12-
be given broad and general publication, circulation and
dissemination in the United States, El Salvador and Central
America and was calculated to cause great injury to Muyshondt's
reputation in that at the time of the publication of his
slander, White knew or upon reasonable inquiry should have
known that his statement of facts.of and concerning Muyshondt
were untrue and further, in making and acknowledging as true
his untrue statements of fact, of and concerning Muyshondt,
White acted with malice toward Muyshondt.
20.
At all times relevant to the publication of the
slander complained of herein, Muyshondt was and continues to
be an honest and law abiding person, and up to the date of the
publication of said slander had borne a good reputation in the
United States, El Salvador and Central America.
21.
As a direct and proximate result of the publishing
circulation and dissemination of the untrue and slanderous
statements by White as cited above, Muyshondt has been exposed
to public hatred, contempt, ridicule and great danger of loss
of life and/or bodily injury. Said defamatory and untrue state-
ments have been a source of great personal danger, embarrassment
and humiliation to Muyshondt, thereby causing Muyshondt to
suffer distress of mind and mental anguish.
Muyshondt's health
has been affected and he has suffered and continues to suffer
from acute nervousness and mental anguish.
Muyshondt's reputa-
tion for honesty, integrity and as a law abiding person has
been and continues to be and will continue to be impaired and
damaged.
960
-13-
Count III
Invasion of Privacy
22.
Muyshondt reaffirms, realleges and incorporates by
reference Paragraphs 1 through 21 as paragraphs 1 through 21 of
this Count III.
23.
On or about February 2, February 6, and February 9,
White caused to be published, circulated and disseminated by way
of the news and television media as alleged in Paragraphs 4, 12
and 14 respectively, statements which falsely and maliciously
accused Muyshondt of the commission and continued commission of
crimes of the most horrible nature.
24.
The crimes and unlawful activity of which white accuses
Muyshondt and which are denied by Muyshondt in their entirety are
highly offensive to Muyshondt and to any reasonable person in that
they wrongfully accuse Muyshondt and as a result thereby hold
Muyshondt up to pubic hatred, contempt, ridicule and tend to
violence and breach of the peace.
25.
The crimes and unlawful activities of which White
accuses Muyshondt a alleged in Paragraphs 4, 12 and 14 were delib-
erately intentionally, willfully, maliciously and wrongfully made
by White and known by White to be such at the time they were made
by him.
26.
As a proximate result of White's deliberate, intentional,
willful, malicious and wrongful accusations as alleged in Paragraphs
4, 12 and 14, Muyshondt has been exposed to public hatred, contempt,
ridicule, and danger of loss of life which has caused him personal
humiliation, mental anguish and suffering and to be degraded and les-
sened in the public esteem and will continue to be so in the future.
961
-14-
Count IV
Intentional Infliction of Emotional Distress
27.
Muyshondt reaffirms, realleges and incorporates by
reference Paragraphs 1 through 26 as paragraphs 1 through 26 of
this count IV.
28.
Because of the deliberate, malicious, defamatory and
false accusations made by White of and concerning Muyshondt as
alleged in Paragraphs 4, 12 and 14 of the complaint, White knew
that emotional distress would result to Muyshondt and White intended
emotional distress to result to Muyshondt.
29.
Such deliberate, willful and wrongful statements by
White as alleged in Paragraphs 4, 12 and 14 are outrageous and
intolerable as they offend generally accepted standards of decency
and morality.
30.
As a proximate result of the deliberate, willful and
wrongful statements by White of and concerning Muyshondt as alleged
in Paragraphs 4, 12 and 14 of this Complaint, Muyshondt has been
exposed to public hatred, contempt and ridicule which has degraded
and lessened him in the public esteem and has caused him to fear
for his life and therby caused him severe and emotional distress
which has resulted in a constant and continuous state of nervousness
which has caused Muyshondt loss of sleep and impaired health, and
will continue to do so in the future.
WHEREFORE, Plaintiff Arturo Muyshondt prays this Court for
judgment against Defendant Robert E. White jointly and severally
on Counts I, II, III and IV individually and in the aggregate for
962
-15-
compensatory damages in the amount of $5,000,000 and punitive
damages in the amount of $5,000,000 and his costs and disburse-
ments incurred in this proceeding.
Respectyy sybmitted,
ect
,
Poielli
Dello
Arturo Mushondt
Jerris Leonard, Esquire
Daniel J. McGuan, Esquire
Attorneys for Plaintiff
Law Offices of Jerris Leonard, P.C.
900 17th Street, N.W., Suite 10 20
Washington, D.C. 20006
(202) 872-1095
VERIFICATION
I, Arturo Muyshondt, being first duly sworn on oath depose
and state that I have read the above and foregoing complaint and
acknowledge that the statements contained therein are true and
correct to my knowledge and belief.
Williams
Arturo Murshondt
Washington
)
SS
District of Columbia
)
Subscribed and sworn to before me this
Filaay of March,
Cheryl budoon
1984.
Notary Polic
My Commission expires March 1988
963
DOCUMENT INDEX
Tab No.
1
Summary of Charges By Robert E. White Against
Arturo Muyshondt
2.
Request to Congressman Michael Barnes to
appear before House Subcommittee on Western
Hemisphere Affairs (March 5, 1984)
3
Father Francisco Estrada, S.J., Interview
Memorandum
4
Monsignor Ricardo Urioste, Interview Memorandum
5
Father Jaime Vera-Fajardo, S.J., Interview
Memoranda (two)
6
Honorable Alfredo Martinez Moreno, Interview
Memorandum
7
Statement of col. and Dr. Mauricio Daniel Vides
Casanova
8
Senora M.E. Augspurg de Muyshondt, Interview
Memorandum
964
[TAB 1]
3501
TAE CHARGES BY ROBERT E. WHITE
AGAINST ARTURO MUYSHONDT
On February 2, 1984, Robert E. White, former Ambassador from
the United States to El Salvador, issued a written statement
which was prepared for delivery to the House Subcommittee on
Western Hemisphere Affairs.
On that day, he held a press conference
in Washington, D.C. and issued the statement to the
press,
and
actually appeared before the Subcommittee on February 6, 1984.
Both prior to and after February 6, 1984, White held press
conferences, made press statements, had discussions with media
representatives, and on February 9, 1984, appeared on the
Independent Network program, "From the Editor's Desk" in which he
reiterated and reaffirmed the charges that he had made in the
written statement prepared for the House Subcommittee.
In the written statement, he identified six Salvadorean
nationals, including Arturo Muyshondt and accused the six,
including Muyshondt, of the following:
1. Being a member of the "Miami Six" and its "top leadership;"
2. "All are in Miami, hatch plots, hold constant meetings
and communicate instructions to D'Aubuisson;"
3.
The Miami Six are a "group of self-exiled millionaires
in Miami;
4.
The Miami Six "financed and directed the "rightist death
squads;"
965
-2-
5.
The man that the Miami Six control and direct "Roberto
D'Aubuisson planned and ordered the assassination of Archbishop
Oscar Arnulfo Romero."
6.
The Miami Six are "responsible for the deaths not only
of the Archbishop, but also of many Americans, including Labor
Advisors Michael Hammer, and Mark Pearlman."
7.
"Many people have been bribed to cooperate in their
(the Miami Six) efforts to overthrow the Government, reimpose
the status quo ante and kill hundreds of thousands of Salvadoreans
suspected of liberal or leftist sympathies; "
8.
"Two officials of the American Institute of Free Labor
Development were targeted and murdered by rightist death squads,"
directed by the Miami Six;
9.
"Anyone accused by them (the Miami Six) of being social
reformers, whether Salvadorean or American, is a target for murder;"
10.
The Miami millionaires "are scum (escoria);"
11.
The Miami Six "have bribed politicians and military
officers; "
12.
The Miami Six "finance death squads and bribe the military
to terrorize the campesinos;"
13.
The Miami Six are the "force behind the psychopathic
Major D'Aubuisson;"
14.
The return of the Miami Six to El Salvador will "put the
country into civil war;"
966
-3-
15.
The Miami Six *would kill anyone who stood in the way of
their plan;"
16.
The Miami Six were responsible for "the recent wave of
kidnappings of businessmen, the bombings of U.S./Salvadorean firms,
the telephoned death_.threats, and the Sheraton murders; "
17.
The Miami Six have called "younger businessmen/lawyers
and others
to Miami and seated at the end of a long table,
facing the 'Six' and made to answer such questions as
Why are
you contributing to the Communist victory by keeping your business
open?' or, why do you do the work of the Communist agents White
and Bowdler?' (the reference is to former Ambassador White and
former Assistant Secretary of State, William Bowdler);"
18.
The Miami Six then "carefully explained to them (the
people seated at the long table) that to rebuild the country on
a new foundation, it must first be destroyed totally, the economy
must be wrecked, unemployment must be massive, the Junta must be
ousted, and a good military officer brought to power who will
carry out a total cleansing (limpieza), killing 3 or 4 or 500,000
people, whatever it takes to get rid of all the communists and
their allies;* and then the Miami Six will "return to preside
over the reconstruction of the country on a new foundation...;'
19.
The Miami Six made the following threat, "unless you
close down your factory/business, get out of the country, stop
working for Alianza Productiva, INCAFE, American Embassy, etc.,
you will be sorry;"
967
-4-
20.
The Miami Six are responsible for the kidnapping of
"fifteen businessmen and industrialists.
The deaths of the
AIFLD Officials
21.
The Miami Six are "madmen;"
22,
*The principal figures are six enormously wealthly
former landowners who lost great estates in phase one of the
Agrarian Reform...
They also have liquid assets and foreign
investments which combined, might be in the range of $200 to
$500 million;"
23. The Miami Six "have always exercised decisive power in
this country, and cannot believe that their day is over;"
24.
The Miami Six tactics were "co-opt bright people from
the middle class, bribe the top military leadership, kill anyone
who made trouble."
25.
The Miami Six "have continued to pursue these tactics
in Miami, but on a far greater scale; for instance, they have
bribed many military officers and politicians here and abroad
to serve their interests."
26.
The Miami Six "organize, fund and direct death squads
through their agent, Major Roberto D'Aubuisson.
27.
D'Aubuisson pursues the strategy of the Miami Six "to
destabilize the country and overthrow the Junta, and using their
tactics, bombing factories and offices, kidnapping businessmen...
,
murdering the intellectual leadership of land reform."
968
-5-
28.
The objective of the Miami Six is to "terrorize those
who are still working for a moderate outcome in or out of the
Government, and to impose a rightist dictatorship."
29.
The Miami Six failed in their last attempt at a coup,
which "was a bitter defeat for the Six and they are in an angry,
vindictive mood.
Thus, it is very dangerous now for anyone they
regard as a
Communist collaborator' ..."
30.
The Miami Six "are in Miami, hatch plots, hold constant
meetings, and communicate instructions to D'Aubuisson."
31. The Miami Six are responsible for "the systematic
.
murder of Salvadorean moderates by ARENA and the intimate col-
laboration which exists between high military commanders and
death squads."
32.
The Miami Six have "the responsibility
for the mass
murder which afflicts El Salvador
officially sponsored
terrorism in El Salvador ...
969
[TAB 2]
3506
LAWORCES OF
JERRIS LEONARD
A PROFESSIONAL CORPORATION
GUME 1020
THE FRAT BONO
800 SEVENTEENTH STREET, N.W.
WASHINGTON, D.C. 20006
JERS LEONARD
JAMES T. DEVINE
KATHLEEN HEENAN MCGUAN
(202) 872.100
TREX: 04OSOWS
March 5
1984
Congressman Michael D. Barnes
Chairman, Sub-Committee
Western Hemisphere Affairs
House Foreign Affairs Committee
709 Annex I
Washington, D.C. 20515
Dear Mr. Chairman:
On February 6, 1984, former United States Ambassador
to. El şalvador, Mr. Robert White appeared before your Sub-
Committee and testified, under oath, that Mr. Arturo Muyshondt
was, among other things, a murderer, directed the death of
Archbishop Oscar A. Romero, lived in exile in Miami, was a
millionaire whose property had been taken from him for land
reform and numerous other reprehensible, venomous, criminal,
illegal, unethical and immoral charges.
This firm represents Arturo Muyshondt and our client
wishes to advise you that with regard to the above charges by
White against him, that he categorically denies these allega-
tions by White and is prepared to cooperate fully with you,
the members of your Sub-Committee, and staff in documenting
such refutation. He is prepared to offer irrefutable evidence
that the accusations made against him are false and have no
basis in fact.
Please also be advised that our client respectfully
requests an opportunity to appear before your Sub-Committee
in an attempt to gain equal access to the media which carried
the White allegations. We believe that a period of less
than one hour will be adequate to present the rebuttal with
documentation and brief testimony.
You should know. Mr. Chairman, that this matter is
most serious, as our client is satisfied that an attempt to
assassinate Mr. Muyshondt on Thursday, February 24, 1984,
was a direct result of the media credibility given to White's
allegations by virtue of your receiving his allegations.
It would be most unfortunate Mr. Chairman, if Mr. Muyshondt's
welfare should be further endangered by his inability to
receive equal treatment to that which you afforded to Mr.
White.
34-045 0-84-62
970
LAW OFFICES OF
JERAIS LEONARD
Congressman Michael D. Barnes
March 5, 1984
Page Two
Please be in touch with me or Mr. Daniel McGuan of this
office at your earliest convenience.
Sincerely,
La Land
Jerris Leonard
JL/ch
971
AFFIDAVIT OF MAILING
I, Cheryl Hudson, do hereby certify that I deposited
in the U.S. mail, 1st class, postage prepaid, a copy of the
attached letter to Congressman Michael D. Barnes at 4:30 p.m.
on the 5th day of March, 1984.
Cheryl
dudson
Cheryl Giudson
972
I
!
[TAB 3]
3509
INTERVIEW MEMORANDUM
March 2, 1984
On February 24, 1984, Jerris Leonard interviewed by telephone,
Father Francisco Estrada, who identified himself as the former
Provincial of the Jesuit Order in Central America.
I asked him
if he knew Arturo Muyshondt Parker, and he indicated that he knew
him extremely well and had for many years.
I then questioned him
with respect to his knowledge of Archbishop Oscar Romero, and if
he knew of the relationship between Romero and Muyshondt.
Father
Estrada indicated that Romero and Muyshondt knew one another
extremely well, that they had been in one another's company on
frequent occasions.
He characterized their relationship as "more
than normal" in that there existed between them a "profound
respect and admiration."
He further stated that Romero was well
aware of Arturo Muyshondt's concerns in attempting to resolve the
problems of El Salvador in a peaceful way.
I questioned him with respect to his role in the relationship
between Romero and Muyshondt and he indicated that in 1979, Arch-
bishop Oscar Romero had called him, Father Francisco Estrada, and
asked him to represent the Archbishop in meetings and dealings
with Arturo Muyshondt- Parker.
The Archbishop indicated that he
was very interested in Arturo Muyshondt Parker's views with respect
to the economic problems of El Salvador and their potential solu-
tions, but that he would not always have time to meet personally
with Arturo Muyshondt Parker and asked Father Estrada if he would
973
- 2-
serve as a liaison for the Archbishop with Muyshondt Parker.
He
indicated that he met on frequent occasions with Muyshondt Parker,
both at his home and at Father Estrada's home.
I next asked him what his views were with respect to the
accusations of former Ambassador Robert White with respect to
Arturo Muyshondt Parker being a member of the group of six
Salvadorean exiles in Miami that were directing the death squads
in El Salvador and specifically were responsible for the death of
Archbishop Oscar Romero.
That is impossible," responded Father
Estrada.
He then went on to indicate that he had known Arturo
Muyshondt Parker since he was in the primary school, that he knew
Muyshondt Parker's feelings about the problems of El Salvador and
the alternatives to solving those problems very well, indicating
that his knowledge and respect for Muyshondt Parker's views were
particularly strengthened after he began representing Archbishop
Romero in meetings and dealing with Muyshondt Parker.
He indicated
that at all times Muyshondt Parker had urged peaceful and non-
violent solutions; that he knew of Muyshondt Parker's personal
activities in El Salvador well enough to be able to state with
assurance that Muyshondt Parker did not meet the description that
former Ambassador White had given of the Miami exiles. He insisted
that former Ambassador White . must have confused Arturo Muyshondt
Parker with some other person and further said that he was willing
to be called by any person and to go any place to tell what he
knows about Arturo Muyshondt Parker and to defend him from the
charges that had been made against him.
974
[TAB 4]
3511
INTERVIEW MEMORANDUM
March 2, 1984
On February 24, 1984, Jerris Leonard interviewed Monsignor
Ricardo Urioste, Vicar of the Archdiocese of San Salvador at
his office at the Archdiocesan office in San Salvador.
Monsignor Urioste acknowledged that he knew Arturo Muyshondt
Parker and knew that he had on at least one occasion, had a
meeting with Archbishop Oscar Romero.
I then showed Monsignor Urioste a photocopy of the inside
page of the Pastoral Letter of Archbishop Romero purporting to
have an inscription from the Archbishop to Arturo Muyshondt
Parker. Monsignor Urioste said that he indeed did recognize the
handwriting of the Archbishop, that he had seen it hundreds of
times and could attest to the fact that it was indeed, although
not a good copy, the writing and signature of the Archbishop.
He specifically identified the signature "0.A. Romero" as being
that of Oscar A. Romero.
I asked him to identify the document
by placing the No. 1 with a circle around it.on the document and
he did that.
975

9933228
a Cortina
wa
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2 - بره. به ن مل رہا ہے۔
L-1327 Cnc
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2
+
)
Misión de la Iglesia
enmedio
de la crisis del País
now EDOA RIPARDO ROSE
TERO DEL ARDO BISPADO
CUARTA CARTA PASTORAL
de Monseñor Oscar A. Romero
Arzobispo de San Salvador
976
"To Arturo to continue looking for better ways to serve our
lovely country.
Oscar A. Romero"
THE CHURCH MISSION IN THE MIDDLE
OF THE COUNTRY- CRISIS
August 1979
The Fourth Pastoral Letter from
Monsenor Oscar A. Romero
Archbishop of San Salvador
977
[TAB 5]
3514
INTERVIEW MEMORANDUM
March 2, 1984
On February 24, 1984, Jerris Leonard personally interviewed
Father Jaime. Vera-Fajardo, S.J. of the Society of Jesus,
who
identified himself as a Jesuit Priest, who was the Senior Resident
at the Jesuit Residence in Santa Tecla, El Salvador.
He described
his function as being the "head" of the household of the Jesuits
living at that residence.
I asked him to identify a photocopy of a letter dated February
7, 1984, which purported to contain his signature and seal.
He
indicated that he indeed had prepared the letter and that he had
signed it and placed his seal on it, and thereupon I asked him to
again sign the letter as he had previously and he did so.
I asked
him if all of the statements contained in the letter were true
and correct; he indicated that they were.
I asked him if he was
under any kind of pressure, duress or threats to make the state-
ments in the letter or to provide this written declaration and
he indicated that not only was he not under any duress or threat,
but that he would be willing to travel anyplace, anywhere and
affirm these statements.
This interview took place in the offices of Arturo Muyshondt
in the presence of the brother-in-law of Arturo Muyshondt, who
served as an interpreter.
978
- 2-
I further questioned Father Vera as to his knowledge of any
relationship between Arturo Muyshondt Parker and Archbishop Oscar
A. Romero. - He indicated that he had no direct knowledge, but
that he knew that Father Estrada had spoken many times of the
cordial and friendly relationship that the two men had, and that he
was personally familiar with a statement that had been made by
Archbishop Romero which expressed a very high and deep regard for
Arturo Muyshondt Parker.
When I questioned him about the form of
the statement, that is, was it in writing or a tape recording, he
requested that I not press him on that subject, but he explained
emphatically, that there was in existence, proof that Archbishop
Romero in his own words, had described a close relationship with
Arturo Muyshondt Parker and described that relationship in terms
of great admiration for Muyshondt Parker.
He further stated that
there was no question in his mind that former Ambassador Robert
White had misidentified Arturo Muyshondt Parker.
I then asked the interpreter to leave the room, and with the
use of my Spanish-English dictionary and my limited Spanish,
satisfied myself that Father Vera was under no duress of any kind
and that the statements made in the letter, and the statements
made with respect to Archbishop Romero's personal opinion of
Arturo Muyshondt Parker were indeed, freely given and his own
statements..
979
1
.
[TAB 6]
3516
IGLESIA DEL CARMEN
SANTA TECLA
EL SALVADOR. C. A.
7 de Febrero de 1984
De: Jaime Vera-Fajardo, S.I.
Superior de la Residencia de PP. Jesuitas
Santa Tecla EL SALVADOR, C.A.
A: Quien Interese
Por informaciones de la prensa tengo noticia de que al Sr. Artu-
ro Muyshondt P., ciudadano salvadoreño, se le vincula de alguna manera
a los llamados "escuadrones de la muerte" que operan en El Salvador.
Conozco al Sr. Arturo Muyshondt desde hace muchos años, lo mismo
que a su familia: mamá, hermanos, esposa e hijos. En los últimos años
mi trato con él ha sido frecuente; semanal, por motivos de amistad. Po-
dría yo considerarme como asesor religioso y espiritual de su familia.
Conozco su pensamiento sobre la situación del país, sus principios éti-
cos y su trabajo.
Considero cotalmente falsa la acusación que se le hace de estar en
conexión con los "escuadrones de la muerte". Sé de su dedicación al tra-
bajo honrado, he alentado sus esfuerzos en este sentido, y me indigna
que se le haya podido lanzar tal acusación.
Por iniciativa mía personal, entrego al Sr. Arturo Muyshonde esta
carta para que haga de ella el uso que crea conveniente en orden a pre-
servar su fama.
A quien tenga conocimiento de ella le testimonio la honradez cris-
tiana del Sr. Arturo Muyshondt, la falsedad de la acusación que se le ha
hecho y la honorabilidad de su persona.
En fe de lo cual firmo y sello la presente
Santa Tecla, 7 de Febrero de 1984
Có.
are
Aline ler
Jaime vera-
tos Tasachll.
era-jardo,
F.I.
wao kao boj shell.
980
February 7, 1984
FROM:
Jaime Vera Fajardo
Senior Resident of the Society of Jesuits
Santa Tecla - El Salvador, C.A.
TO WHOM IT MAY CONCERN:
According to information received from the international press,
I have learned that Mr. Arturo Muyshondt P., a Salvadorean citizen,
has been allegedly linked with the so-called "death squads" that
operate in El Salvador. I have known Mr. Arturo Muyshondt many
years, as well as his family: his mother, his brothers, wife and
children. In the last years my relationship with him has been
frequently on a weekly basis, due to our mutual friendship. I
would like to consider myself as the personal religious and
spiritual advisor of all his family. I know his way of thinking
on the situation of the country, his ethical principles and his
work..
I consider totally false the accusation that has been made against
him, of his connection with the "death squads." I know of his
dedication to honest work. I have encouraged his efforts in that
direction and I am indignant that this kind of accusation has been
brought against him.
On my own personal volition, I have given Mr. Arturo Muyshondt
this letter in order to be used in whatever ,manner he deems con-
venient to preserve his honest name.
To anyone who reads this letter, I wish to express the Christian
honesty of Mr. Arturo Muyshondt, and the falsehood of the accusation
that has been made against his honor.
As stated, I seal and sign the present letter.
Santa Tecla, February 7,
1984
(Signed)
Jaime Vera-Fajardo, S.J.
981
INTERVIEW MEMORANDUM
March 2, 1984
On February 24, 1984, Jerris Leonard interviewed Father
Jaime Vera-Fajardo, S.J. again at the offices of Arturo Muyshondt.
Father Vera-Fajardo indicated that he had received a call
about 2:30 in the afternoon from a person identifying herself as
Carmen Lauela and stated that she was with the Center for Policy
Development in Washington, D.C. and working for its Commission on
United States
Central American Relations.
He indicated that
she had interrogated him carefully, much along the lines I had
with respect to his knowledge of Arturo Muyshondt Parker and that
he had provided her with the same information that he had provided
to me.
982
INTERVIEW MEMORANDUM
March 2, 1984
On February 24, 1984, I interviewed Alfred Martinez Moreno
in the library at the home of Arturo Muyshondt Parker.
Martinez Moreno identified himself as a former Chief Justice
of the Salvadorean Supreme Court and went on to detail a long
career in international law and diplomacy, having served in
numerous positions for the Salvadorean Government around the
world.
Martinez Moreno spoke excellent English and he and I
communicated freely and without difficulty.
Martinez Moreno first stated emphatically that former
Ambassador Robert White had simply mistakenly identified Arturo
Muyshondt Parker as a part of the group of Salvadorean exiles in
Miami, indicating that he was personally acquainted with Muyshondt
Parker, his family, his business activities, his personal assets,
and that there was simply no way that the description in white's
prepared statement to the House of Representatives Subcommittee
could possibly have been a description of Arturo Muyshondt Parker.
Martinez Moreno and I then had a lengthy discussion about
Robert White, the Justice concluding that White's problem was
that he came to El Salvador not as an Ambassador, but as a "Pro-
Counsul," that he was abrasive, insulting and demeaning and
obviously favored a leftist government for El Salvador.
Martinez
Moreno concluded by stating "White was a Pro-Counsul just like
Caligula, the last Pro-Counsul that I can recall.
I never liked
Caligula either."
Justice Martinez Moreno' indicated that he
983
-2-
would prepare a written statement and was also willing, and most
anxious, to appear before the House or Senate Committees to
discuss the problems of El Salvador and actions that should be
taken by the U.S. if El Salvador was to remain a free Democratic
society.
984
[TAB 7]
3521
Col. and Dr.
Mauricio Daniel Vides Casanova
San Salvador, March 1, 1984
Mr. Atty. Jerris Leonard,
Present
I, Mauricio Daniel Vides Casanova, of majority age,
Military man and Attorney, with residence in San Salvador, El
Salvador, Central America, with Personal Identification Permit
Number 1-1-015220, issued in San Salvador, the 21st of September
1978, before you respectfully disclose: that I have known Mr.
Arturo Muyshondt Parker since infancy and therefore can attest
to his exemplary conduct as a citizen, husband and father of a
family, respectful of the laws and very humane in the treatment
of his fellow men.
In view of the above, I can assure in a categoric manner,
that error exists in that declared by Mr. Robert White, ex-Ambassador
of the United States in El Salvador, when he accuses Mr. Muyshondt
Parker of being involved in the death squads" which operate in my
country.
In addition, I have read some publications of Mr. White
which have appeared in the international press, in which it is
stated that Mr. Muyshondt Parker is a millionaire banker, that he
has been affected by the Agrarian Reform of my country, and that
he resides in the City of Miami, Florida, United States of America,
things which are completely false and which can be investigated
by the proper authorities.
(signed)
col. and Dr. Mauricio Daniel Vides Casanova
985
Pnel. y c.
Nauricio Paniel Pides Casanova
San Salvador, 1. de marzo de 1984,
Señor Abogado Jerris Leonard,
Presente.
Yo, Mauricio Daniel Vides Casanova, mayor de edad,
Militar y Abogado, con domicilio en San Salvador,
El Salvador, Centro América, con Cédula de Identi-
dad Personal número 1-1-015220, extendida en San
Salvador, el día 21 de septiembre de 1978, ante -
usted respetuosamente expongo; que conozco al se-
ñor Arturo Muyshondt Parker desde su infancia, por
lo que puedo dar fe de su conducta ejemplar como =
ciudadano, esposo y padre de familia, respetuoso
de las leyes y muy humano en el trato con sus se-
mejantes.
En vista de lo anterior, puedo asegurar en forma
categorica, que existe un error en lo afirmado por
el señor Roberto White, ex-Embajador de los Esta-
dos Unidos en El Salvador, cuando acusa al señor -
Muyshondt Parker de estar vinculado a los "escua-
drones de la muerte" que operan en mi país.
Por otra parte, he leído algunas publicaciones
34-045 0-84-63
986
del señor White aparecidas en la prensa internacio
nal, en las que afirma que el señor Muyshondt Par-
ker es un banquero millonario, que ha sido afectd-
do por la Reforma Agraria de mi país y que reside
en la ciudad de Miami, Florida, Estados Unidos de
América, cosas que son completamente falsas, lo -
cual puede ser investigado ante las autoridades
competentes.
De usted con toda consideración,
?
Chel. y Dr. Maurtúto Daniel Vides Casanova.
987
[TAB 8]
3524
INTERVIEW MEMORANDUM
March 2, 1984
On February 24, 1984, Jerris Leonard interviewed Maria Elena
Augspurg De Muyshondt, wife of Arturo Muyshondt Parker.
She
indicated that she had known Arturo Muyshondt for the past 22
years, that they were married in 1971, that they had three
children, Arturo Wolfgang Muyshondt Augspurg, age 10, Maria
Elena Muyshondt Augspurg, age 9, and Juan Carlos Muyshondt
Augspurg, age 5.
She stated that she had read the statement of Robert White,
given to the House Subcommittee and that the statement was totally
false.
She indicated that the description of her husband's
activities as outlined in the White paper, simply could not be
substantiated, and that of her own knowledge, she knew that he
did not spend the kind of time in Miami and in the activities
indicated that white charged him of.
She further indicated that her husband was not a man of
violence, that he had continued to speak out for and support non-
violent solutions to the problems of El Salvador, that he was not
"right wing," but was viewed as one who believed strongly in the
private sector, but that his views were moderate when it came to
such things as programs. to assist the very poor of El Salvador.
She further stated that although her husband believed that
land reform was a "political gimmick," and basically unsound,
that she had often heard him state that it was a fact and now the
problem was to find the ways to make it work.
988
She indicated that her family had never been associated with
any violent activity, and that she was deeply upset about the
attempted assassination of her husband the night before
She indicated that her two older children were aware that on
or about the 2nd of February, charges were made against their
father as having been involved with death squads, killings and
the killing of Archbishop Romero.
She indicated that she has
told the children as little as possible, but has been required to
explain some of the circumstances to them.
She has noticed a
marked concern on their part for their father's welfare, and for
the welfare of the family.
She stated that she is frankly afraid
for her own safety and the safety of her husband and children.
Senator HELMS. Mr. White, do you wish to go next?
Ambassador WHITE. That is up to you, Mr. Chairman. Mr. Phil-
lips can go next, or I can go. Whatever you wish me to do.
Senator HELMS. Why do you not go now?
STATEMENT OF HON. ROBERT WHITE, WARBURG PROFESSOR OF
INTERNATIONAL RELATIONS, SIMMONS COLLEGE, BOSTON,
MASS.
Ambassador WHITE. Mr. Chairman, as you know, I had no ad-
vance notice that Mr. Jerris Leonard was going to be here today. I
had no advance notice that Mr. Arturo Mason was going to be here
today. Nevertheless, I had already prepared a statement on Mr.
Arturo Mason, and I will now read that statement.
My purpose in relaying information about the Miami connection
with the ARENA party and death squads to the Congress last
month was to point up the fact that the administration had impor-
tant information regarding the connection of Salvadoran exiles
with death squads which it had not investigated.
It has come to my attention that there may have been some con-
fusion regarding the proper identity of one person named in the
Embassy report, a report, by the way, which I did not prepare.
While this information came from a proven source and was report-
ed by a highly competent Foreign Service officer, human error is
always possible.
The name Mason occurs three times in the diaries taken from
Roberto D'Aubuisson in 1980, but as a result of inquiries I have
undertaken at the request of Mr. Jerris Leonard and Mr. Arturo
Mason, I take the first opportunity available to me to point out
that it appears that this source may have been in error by identify-
ing the Mr. Mason involved in death squad activity as Arturo
Mason.
I made my statement to the Congress out of a sense of duty
about information I learned in my official capacity. I have no wish
989
to injure anyone's reputation unfairly, and I recognize that the
report I quoted may have named Arturo Mason erroneously.
Thank you, Mr. Chairman.
Senator HELMS. Is that your statement?
Ambassador WHITE. That is my statement regarding Mr. Mason,
but I do have a statement on the substance of the issue here.
Would you like me to go on with that?
Senator HELMS. Sure. Start his clock over, please.
Ambassador WHITE. I will ask, Mr. Chairman, that the entire
report or my entire statement be included in the record.
Senator HELMS. Without objection, it is so ordered.
Ambassador WHITE. I will try my best to digest this. My purpose
here, Mr. Chairman, is to try to consider our policy in El Salvador
in terms of signals sent and received.
On February 6, I testified before the Western Hemisphere Sub-
committee of the House Foreign Affairs Committee regarding the
involvement of ex-Maj. Roberto D'Aubuisson and wealthy Salvador
ans in the intimidation and murder of Salvadoran citizens. I point-
ed out that the Carter administration had classified D’Aubuisson
as a terrorist and that the Reagan administration had reversed
that ruling, and had in a very real sense created Roberto D'Aubuis-
son, the political leader.
The
reaction of the Reagan administration was found in the New
York Times the next day, February 7. Administration officials said
the U.S. Embassy had lost contact with two key sources of informa-
tion about the death squads since Mr. White left as Ambassador.
The officials said losing the sources explained the failure to act
against Miami-based exiles linked to the killings or against Mr.
D'Aubuisson.
The officials disputed Mr. White's coverup charge, saying the in-
formation was far from conclusive, and in some cases had been con-
tradicted by other Embassy reports filed after Mr. White's depar-
ture. They said Mr. White's information had come from two Em-
bassy sources that the Embassy had lost contact with. The officials
said that the Embassy lost contact with the source of information
about the Miami exiles when the U.S. Foreign Service officer who
had dealt with him was brought back to the United States in 1982.
The informant, afraid for his life, refused to talk with anyone else,
and has dropped out of sight, officials said.
These statements by officials of the Reagan administration are
contrary to fact. Our officials have not lost contact with this impor-
tant and reliable source on death squad funding by wealthy Salva-
doran exiles. He is alive and continues to meet regularly with U.S.
officials. On February 14 I gave his name and whereabouts to an
officer of the Federal Bureau of Investigation, who in turn passed
it on to the Department of State, regarding the primary source who
linked D’Aubuisson with death squads and specifically with the as-
sassination of Archbishop Oscar Romero. Administration officials
said again, according to the New York Times, that the military of-
ficer who implicated Mr. D'Aubuisson in the assassination of the
archbishop was himself murdered in San Salvador about 2 years
ago, "probably because of what he knew."
Department of State spokesman Alan Romberg stated that the
information available to us is limited and incomplete and no con-
990
clusions can be drawn from it. On March 2, Ambassador Jeane
Kirkpatrick stated before a Senate Appropriations Subcommittee
that some people in our Government who have a commitment to
democracy in El Salvador believe there is real but nondefinitive
evidence linking Mr. D'Aubuisson to the central death squads. She
added, "I think that is what is true. I think it is nondefinitive, and
it involves anonymous informers and that sort of thing."
I note that between February 7 and March 2, the Reagan admin-
istration progressed from its position that no conclusions can be
drawn from available information to the point where certain mem-
bers of the Reagan administration have concluded that real evi-
dence exists to link D'Aubuisson to central death squads.
Contrary to the statements of this administration, the evidence
against D'Aubuisson is extensive and convincing. Contrary to Am-
bassador Kirkpatrick's assertion, the sources for Roberto D'Aubuis-
son's connections with death squads are not anonymous informers.
If this source is dead, this source, his death is a recent occurrence.
Certainly the Embassy cannot be said to have lost contact with the
source 2 years ago.
In my lengthy conversation with Judge Harold Tyler, it became
obvious that the source for much of his report, prepared in 1983,
relied on the same military officer who gave us the facts regarding
Roberto D'Aubuisson.
I have also given to the Federal Bureau of Investigation the
name of the military source who provided vital information on
death squad activities not only to my Embassy but also to Ambas-
sador Dean Hinton and to Judge Harold Tyler.
I point out that on March 3, 1984, the New York Times published
an article by Stephen Kinzer reporting the statements of a high
ranking Salvadoran Army officer regarding the integral links be-
tween the military high command and death squads. While this of
ficer has chosen to conceal his identity, I can assure you, Mr.
Chairman, that I know the officer and have spoken to him at
length. Indeed, I played a role in persuading him to speak out.
In my opinion, this officer is uniquely qualified to comment on
these matters, and I believe his testimony to be substantially accu-
rate. I ask that this article be made a part of the record of this
hearing today.1
Senator HELMS. Without objection, it is so ordered.
Ambassador WHITE. Thank you.
I would now like to turn to the case of the American mission-
aries, and I want to emphasize that there is a coverup by the Sal-
vadoran military, and there has been from the very beginning, and
there has been complicity by the Reagan administration in this
coverup from the beginning, and I quote in here a memorandum of
a conversation which I wrote after Mr. John Bushnell, Acting As-
sistant Secretary of State for Inter-American Affairs, asked me to
assert that there was progress in the investigation even though he
knew that there was no serious investigation.
In effect, Mr. Bushnell stated both positions could be held, that
the investigation was ongoing and that it was not a serious investi-
gation. I responded to this by saying that this was playing with
1 See page 1003.
991
words, and that either there was an investigation or there was not,
and if there was not, that we should say so. I point out that both
Mr. Bushnell and a Mr. Mullen from the FBI testified before con-
gressional committees, including this committee, to the effect that
a serious investigation was under way, and yet from my reports
and from the reports of the legal attaché in El Salvador, they knew
that there was no such serious investigation, and as you are aware,
gentlemen, subsequent events have certainly borne that out.
I now turn quickly to my last point, which basically stated is
that the logical result of everything that we are doing in Central
America leads inexorably to U.S. military involvement and combat
troops. In October 1983, this country invaded Grenada. According
to the Reagan administration, one of the objectives of the Grenada
invasion was to send a message to the Soviet Union and Cuba. I am
sure that those governments received the message.
I wonder, however, if the Reagan administration considered the
signal that Grenada sent to the military of El Salvador. The signal
of Grenada to the Salvadoran military was simple and direct: You
do not have to win on the battlefield against the revolutionaries. If
you are in danger of losing militarily, we the United States, will
send in combat troops to insure your victory,
The major obstacle to a negotiated settlement in El Savador is
the firm conviction of the Salvadoran oligarchy and hard line mili-
tary that the United States will bail them out through direct mili-
tary intervention. As long as this conviction is sustained by the di-
rection of present policy, serious negotiations will never take place.
Therefore in order to make clear the opposition of the Congress
to this policy of intervention, I suggest that Congress approve a
new version of the Byrd-Hatfield amendment barring U.S. combat
operations in or over Central America.
As long as the Salvadoran military believes in the message of
Grenada, it will never negotiate. Preclude the possibility of armed
intervention by the United States and they will quickly see the Sal-
vadoran military adopt a positive attitude toward negotiation. This
signal would be heard and understood. It would give an opportuni-
ty to the moderates in the Salvadoran Government and military
and the moderates among the revolutionaries to sit down and to
begin the vital work of healing and reconciling the divided Salva-
doran family.
I do want to point out one last thing, that these telegrams given
to the families of the nuns came from my Embassy. They were
given to the families of the nuns under the Freedom of Information
Act. There is nothing, absolutely nothing in these telegrams that
could possibly jeopardize the national security of the United States,
yet whole portions have been excised. I think this is one of the
most shocking chapters in the history of American diplomacy. The
Foreign Service of the United States has a primary obligation to
protect American citizens abroad, and I suggest to you, sir, that we
are not fulfilling our obligation under the Reagan administration.
Thank you.
[Ambassador White's prepared statement follows:)
992
ORAL STATEMENT BY AMBASSADOR ROBERT WHITE
BEFORE THE SENATE SUBCOMMITTEE
ON WESTERN HEMISPHERE AFFAIRS
MARCH 20, 1984
MR. CHAIRMAN,
MY NAME IS ROBERT E. WHITE. I AM WARBURG PROFESSOR OF
INTERNATIONAL RELATIONS AT SIMMONS COLLEGE, I CHAIR THE
CENTER FOR DEVELOPMENT POLICY'S COMMISSION ON UNITED STATES-
CENTRAL AMERICAN RELATIONS, A PRIVATE GROUP WORKING FOR
BETTER RELATIONS BETWEEN OUR COUNTRY AND THE COUNTRIES OF CENTRAL
AMERICA. DURING MY FOREIGN SERVICE CAREER I HAD ASSIGNMENTS IN
HONDURAS, NICARAGUA, AND EL SALVADOR,
WHEN RESPONSIBLE OFFICIALS TAKE DECISIONS IN THE FOREIGN
POLICY FIELD, THEY MUST CONSIDER CAREFULLY WHAT SIGNALS ARE
SENT BY TAKING OR WITHHOLDING ACTION ON A PARTICULAR PROBLEM.
THE REAGAN ADMINISTRATION UNDERSTANDS THIS PRINCIPLE AND OFTEN
EXPLAINS ITS INITIATIVES IN TERMS OF SENDING MESSAGES TO OUR
ALLIES OR TO OUR ADVERSARIES. FOR EXAMPLE, WHEN THE UNITED
STATES INVADED GRENADA IN OCTOBER OF LAST YEAR THE MESSAGE TO
THE SOVIET UNION AND CUBA COULD NOT HAVE BEEN MORE UNEQUIVOCAL.
LET US CONSIDER OUR POLICY IN EL SALVADOR IN TERMS OF
SIGNALS SENT AND RECEIVED.
THE REAGAN ADMINISTRATION AND DEATH SQUADS
ON FEBRUARY 6, I TESTIFIED BEFORE THE WESTERN HEMISPHERE
SUBCOMMITTEE OF THE HOUSE FOREIGN AFFAIRS COMMITTEE REGARDING
THE INVOLVEMENT OF EX-MAJOR ROBERTO D'AUBUISSON AND WEALTHY
SALVADORANS IN THE INTIMIDATION AND MURDER OF SALVADORAN CITIZENS.
I POINTED OUT THAT THE CARTER ADMINISTRATION HAD CLASSIFIED
993
-2-
D'AUBUISSON AS A TERRORIST AND THAT THE REAGAN ADMINISTRATION
HAD REVERSED THAT RULING AND IN A VERY REAL SENSE CREATED
ROBERTO D'AUBUISSON, THE POLITICAL LEADER.
THE REACTION OF THE REAGAN ADMINISTRATION WAS FOUND IN THE
NEW YORK TIMES THE NEXT DAY, FEBRUARY 7;
"ADMINISTRATION OFFICIALS SAID THE UNITED STATES EMBASSY
HAD LOST CONTACT WITH TWO KEY SOURCES OF INFORMATION ABOUT
THE DEATH SQUADS SINCE MR. WHITE LEFT AS AMBASSADOR.
"THE OFFICIALS SAID LOSING THE SOURCES EXPLAINED THE
FAILURE TO ACT AGAINST MIAMI-BASED EXILES LINKED TO THE
KILLINGS OR AGAINST MR. D'AUBUISSON.
"THE OFFICIALS DISPUTED MR. WHITE'S COVER-UP CHARGE, SAYING
THE INFORMATION WAS FAR FROM CONCLUSIVE AND, IN SOME CASES,
HAD BEEN CONTRADICTED BY OTHER EMBASSY REPORTS FILED AFTER
MR. WHITE'S DEPARTURE. THEY SAID MR. WHITE'S INFORMATION
HAD COME FROM TWO EMBASSY SOURCES THAT THE EMBASSY HAD LOST
CONTACT WITH.
"THE OFFICIALS SAID THE EMBASSY LOST CONTACT WITH THE SOURCE
OF INFORMATION ABOUT THE MIAMI EXILES WHEN THE UNITED STATES
FOREIGN SERVICE OFFICER WHO HAD DEALT WITH HIM WAS BROUGHT
BACK TO THE UNITED STATES IN 1982. THE INFORMANT, AFRAID
FOR HIS LIFE, REFUSED TO TALK WITH ANYONE ELSE AND HAS
DROPPED OUT OF SIGHT, OFFICIALS SAID."
THESE STATEMENTS BY OFFICIALS OF THE REAGAN ADMINISTRATION
ARE CONTRARY TO FACT, OUR OFFICIALS HAVE NOT LOST CONTACT WITH
THIS IMPORTANT AND RELIABLE SOURCE ON DEATH SQUAD FUNDING BY
WEALTHY SALVADORAN EXILES. HE IS ALIVE AND CONTINUES TO MEET
REGULARLY WITH UNITED STATES OFFICIALS. ON FEBRUARY 14, I GAVE
HIS NAME AND WHEREABOUTS TO AN OFFICER OF THE FEDERAL BUREAU OF
INVESTIGATION.
994
-3-
REGARDING THE PRIMARY SOURCE WHO LINKED D'AUBUISSON WITH
DEATH SQUADS AND, SPECIFICALLY, WITH THE ASSASSINATION OF
ARCHBISHOP OSCAR ROMERO, AN ADMINISTRATION OFFICIAL SAID, AGAIN
ACCORDING TO THE NEW YORK TIMES, THAT "THE MILITARY OFFICER WHO
IMPLICATED MR. D'AUBUISSON IN THE ASSASSINATION OF THE ARCHBISHOP
WAS HIMSELF MURDERED IN SAN SALVADOR ABOUT TWO YEARS AGO,
'PROBABLY BECAUSE OF WHAT HE KNEW'."
DEPARTMENT OF STATE SPOKESMAN ALAN ROMBERG STATED THAT
"THE INFORMATION AVAILABLE TO US IS LIMITED AND INCOMPLETE, AND
NO CONCLUSIONS CAN BE DRAWN FROM IT."
ON MARCH 2, AMBASSADOR JEANE KIRKPATRICK STATED BEFORE A
SENATE APPROPRIATIONS SUBCOMMITTEE THAT "SOME PEOPLE IN OUR
GOVERNMENT WHO HAVE A COMMITMENT TO DEMOCRACY IN EL SALVADOR
BELIEVE THERE IS REAL BUT NON-DEFINITIVE EVIDENCE LINKING MR.
D'AUBUISSON TO THE CENTRAL DEATH SQUADS, SHE ADDED, "I THINK
THAT IS WHAT IS TRUE. I THINK IT IS NON-DEFINITIVE AND IT
INVOLVES ANONYMOUS INFORMERS AND THAT SORT OF THING,"
I NOTE THAT BETWEEN FEBRUARY 7 AND MARCH 2, THE REAGAN
ADMINISTRATION PROGRESSED FROM ITS POSITION THAT NO CONCLUSIONS
CAN BE DRAWN FROM AVAILABLE INFORMATION TO THE POINT WHERE
CERTAIN MEMBERS OF THE REAGAN ADMINISTRATION, THOSE COMMITTED
TO DEMOCRACY IN EL SALVADOR, HAVE CONCLUDED THAT REAL EVIDENCE
EXISTS TO LINK D'AUBUISSON TO CENTRAL DEATH SQUADS.
CONTRARY TO THE STATEMENTS OF THIS ADMINISTRATION, THE
EVIDENCE AGAINST D'AUBUISSON IS EXTENSIVE AND CONVINCING.
CONTRARY TO AMBASSADOR KIRKPATRICK'S ASSERTION, THE SOURCES
FOR ROBERTO D'AUBUISSON'S CONNECTIONS WITH DEATH SQUADS ARE NOT
ANONYMOUS INFORMERS.
THE SOURCE WHO GAVE MY EMBASSY THE REPORT ON THE MURDER
OF ARCHBISHOP ROMERO WAS A PARTICIPANT IN THE MEETING IN WHICH
995
-4-
ROBERTO D'AUBUISSON PLANNED AND ORDERED THE PRELATE'S DEATH.
IF THE SOURCE IS DEAD, HIS DEATH IS A RECENT OCCURRENCE,
CERTAINLY, THE EMBASSY CANNOT BE SAID TO HAVE LOST CONTACT WITH
THE SOURCE TWO YEARS AGO, IN MY LENGTHY CONVERSATION WITH
JUDGE HAROLD TYLER IT BECAME OBVIOUS THAT THE SOURCE FOR MUCH
OF HIS REPORT PREPARED IN 1983 RELIED ON THE SAME MILITARY
OFFICER WHO GAVE US THE FACTS REGARDING ROBERTO D'AUBUISSON.
I HAVE ALSO GIVEN TO THE FEDERAL BUREAU OF INVESTIGATION
THE NAME OF THIS MILITARY SOURCE WHO PROVIDED VITAL INFORMATION
ON DEATH SQUAD ACTIVITIES NOT ONLY TO MY EMBASSY, BUT ALSO TO
AMBASSADOR DEAN HINTON AND TO JUDGE HAROLD TYLER.
I ASK YOU TO CONSIDER THE MESSAGE SENT BY THE
ADMINISTRATION TO THE DEATH SQUAD LEADERS OF EL SALVADOR
AND TO THOSE RICH SALVADORANS WHO FUND THEIR ACTIVITES.
THESE MISSTATEMENTS ON THE PART OF ADMINISTRATION SPOKESMEN
ARE INTERPRETED BY THOSE WHO FUND AND PRACTISE TERRORISM
AS A SIGNAL THAT THE REAGAN ADMINISTRATION HIDES THE TRUTH
IN ORDER TO PROTECT THEM AS ALLIES IN THE FIGHT AGAINST
SUBVERSION.
I POINT OUT THAT ON MARCH 3, 1984 THE NEW YORK TIMES
PUBLISHED AN ARTICLE BY STEPHEN KINZER REPORTING THE STATEMENTS
OF A HIGH RANKING SALVADORAN ARMY OFFICER REGARDING THE INTEGRAL
LINKS BETWEEN THE MILITARY HIGH COMMAND AND DEATH SQUADS.
WHILE THIS OFFICER HAS CHOSEN TO CONCEAL HIS IDENTITY, I
CAN ASSURE YOU, MR. CHAIRMAN, THAT I KNOW THE OFFICER AND
HAVE SPOKEN TO HIM AT LENGTH. IN MY OPINION, THIS OFFICER
IS UNIQUELY QUALIFIED TO COMMENT ON THESE MATTERS AND I
BELIEVE HIS TESTIMONY TO BE SUBSTANTIALLY ACCURATE.
I ASK
THAT THIS ARTICLE BE MADE PART OF THE RECORD OF THIS HEARING
TODAY,
996
-5-
THE AMERICAN MISSIONARIES
LET US CONSIDER THE CASE OF THE FOUR AMERICAN CHURCHWOMEN
WHO WERE DEFILED, TORTURED AND MURDERED BY THE SALVADORAN
MILITARY, SINCE 1981 THE REAGAN ADMINISTRATION HAS ROUTINELY
CERTIFIED PROGRESS IN BRINGING THOSE RESPONSIBLE TO JUSTICE.
YET THIS ADMINSTRATION HAS NOW REQUESTED THE PASSAGE
OF A SUPPLEMENTAL MILITARY ASSISTANCE OMITTING ANY
CERTIFICATION REQUIREMENT ON HUMAN RIGHTS PROGRESS AS
RECOMMENDED BY THE KISSINGER COMMISSION, AND WAS TO INCLUDE
PROGRESS ON THE CHURCHWOMEN CASE.
BUT THE COVER UP BY THE SALVADORAN MILITARY BEGAN
IMMEDIATELY AFTER THE MURDERS OF THESE FOUR WOMEN, TELEGRAMS
FROM MY EMBASSY AMPLY DOCUMENT THE COVER UP,
ON MARCH 5, 1981, MR. JOHN BUSHNELL, ACTING ASSISTANT
SECRETARY OF STATE FOR INTER-AMERICAN AFFAIRS TESTIFIED
BEFORE A HOUSE OF REPRESENTATIVES SUBCOMMITTEE AS FOLLOWS:
"MR. GOODLING: MY THRUST WAS TOWARD WHAT REPRESENTATIONS
WE ARE MAKING TO THE EL SALVADORAN GOVERNMENT TO GET ON WITH
PERHAPS A STRONGER INVESTIGATION AS TO JUST EXACTLY WHAT
HAPPENED.
"MR. BUSHNELL WELL AGAIN, I DON'T WANT TO BE IN THE POSITION
OF CRITICIZING INABILITY TO CONCLUDE AN INVESTIGATION. WE
HAVE A SITUATION GOING IN ATLANTA WHERE I SUPPOSE PEOPLE
ARE DOING EVERYTHING THEY CAN, BUT THEY HAVEN'T REACHED A
CONCLUSION YET, BUT CERTAINLY OUR PEOPLE HAVE BEEN FOLLOWING
THIS VERY CLOSELY AND I THINK THAT THEY BELIEVE THAT THEY
ARE DOING EVERYTHING THEY CAN. (EMPHASIS ADDED.)
997
-6-
ON JANUARY 22, 1981, A MONTH AND A HALF EARLIER, I
RECEIVED A TELEPHONE CALL FROM ACTING ASSISTANT SECRETARY
JOHN BUSHNELL. HIS STATEMENTS SHOCKED ME TO THE POINT THAT
I IMMEDIATELY DICTATED A MEMORANDUM OF CONVERSATION AND
SENT A COPY TO THE OFFICE OF CENTRAL AMERICAN AFFAIRS, BUREAU
OF INTER-AMERICAN AFFAIRS (ARA), DEPARTMENT OF STATE. THE
MEMORANDUM READS:
"PARTICIPANTS: JOHN BUSHNELL, ARA
AMBASSADOR WHITE, SAN SALVADOR
DATE: 1/22/81
JOHN BUSHNELL CALLED TO TELL ME THAT ARA HAD
FINALLY SUCCEEDED IN GETTING SOMETHING WHICH WOULD
PASS FOR A POLICY STATEMENT ON EL SALVADOR FROM THE
PEOPLE WORKING WITH SECRETARY HAIG. ACCORDING TO
BUSHNELL, HAIG STATED THAT EL SALVADOR WAS A GOVERNMENT
UNDER STRESS AND THAT HE THEREFORE WAS NOT GOING TO
BE A PARTY TO ANY CRITICISM OF THIS GOVERNMENT. THIS
STATEMENT ATTRIBUTED TO THE SECRETARY WAS IN RESPONSE
TO ARA'S CONCERN ABOUT HOW IT SHOULD HANDLE THE PROBLEM
OF HOW TO CHARACTERIZE THE SALVADORAN GOVERNMENT'S
INVESTIGATION INTO THE MURDERS OF THE AMERICAN
CHURCHWOMEN.
BUSHNELL SAID THAT THE SECRETARY'S STATEMENT
OBVIOUSLY CREATED A PROBLEM FOR ALL OF US.
I RESPONDED THAT I COULD CERTAINLY SEE HOW IT
CREATED A PROBLEM FOR ARA BUT THAT I DID NOT BELIEVE
THAT IT CREATED A PROBLEM FOR ME AT ALL. I STATED
THAT THE NEW ADMINISTRATION COULD IF IT CARED TO TAKE
THE POSITION THAT WHATEVER HAD HAPPENED PRIOR TO
JANUARY 20 WAS THE PROBLEM OF THE PREVIOUS ADMINISTRATION
WHICH WAS MORE OR LESS THE WAY I INTERPRETED THE ALLEGED
HAIG. STATEMENT. I SAID THAT HOWEVER MY ASSERTION
998
-7-
THAT NO SERIOUS INVESTIGATION WAS UNDER WAY WAS IN
MY OPINION ACCURATE AND THAT I DID NOT INTEND TO
CHANGE IT.
BUSHNELL STATED THAT IT COULD BE A PROBLEM FOR
ME TO THE EXTENT THAT I WAS SEPERATED FROM THE
DEPARTMENT ON THIS ISSUE I WOULD CREATE THE IMAGE
OF BEING ISOLATED FROM THE DEPARTMENT OF STATE, HE
WENT ON TO SAY THAT ARA HAD ONLY SAID THAT THERE WAS
'PROGRESS IN THE INVESTIGATION' AND THAT THIS DID
NOT NECESSARILY MEAN THAT THERE WAS A 'SERIOUS
INVESTIGATION', IN EFFECT, HE STATED THAT BOTH
POSITIONS COULD BE HELD, 1) THAT THE INVESTIGATION
WAS ON-GOING AND 2) THAT IT WAS NOT A SERIOUS
INVESTIGATION,
I RESPONDED THAT TO ME THIS WAS PLAYING WITH
WORDS AND THAT EITHER THERE WAS AN INVESTIGATION OR
THERE WAS NOT AND IF THERE WAS NOT, WE SHOULD SAY
So.
AMB/ID"
THREE DAYS LATER I RECEIVED A CALL FROM THE PERSONNEL
OFFICER OF THE ARA BUREAU IN THE DEPARTMENT OF STATE WHO
INFORMED ME THAT HE WAS CALLING AT THE INSTANCE OF ACTING
ASSISTANT SECRETARY JOHN BUSHNELL TO POINT OUT TO ME THAT
NOW WAS A PARTICULARLY ADVANTAGEOUS TIME TO RETIRE FROM THE
FOREIGN SERVICE.
THEN, ON MARCH 18, 1981, BEFORE THE SENATE COMMITTEE
ON FOREIGN RELATIONS, MR. FRANCIS M. MULLER, EXECUTIVE
ASSISTANT DIRECTOR OF INVESTIGATIONS, FEDERAL BUREAU OF
INVESTIGATIONS, VOLUNTEERED THE INFORMATION THAT THE LEGAL
999
-8-
ATTACHE IN EL SALVADOR BELIEVES "A CONSCIENTIOUS EFFORT IS
BEING MADE TO SOLVE THIS CRIME."
YET ON JANUARY 20, 1981 THE LEGAL ATTACHE IN SAN
SALVADOR SUBMITTED A REPORT TO WASHINGTON WHICH MADE CLEAR
THAT THE ONGOING INVESTIGATION WAS A HOAX, I SPECIFICALLY
RECALL THE EXCHANGE BETWEEN THE LEGAL ATTACHE AND COLONEL
ROBERTO MONTEROSA, CHIEF OF THE SALVADORAN COMMISSION
INVESTIGATING THE DEATH OF THE AMERICAN CHURCHWOMEN, THE
FBI AGENT POINTED OUT THAT VITAL STEPS IN THE INVESTIGATION
HAD BEEN OMITTED, MONTEROSA'S DEFENSE WAS THAT "ONE MUST
UNDERSTAND THE POLITICAL SITUATION IN EL SALVADOR."
I NOTE ALSO THAT ONE OF THE MAIN CONCLUSIONS OF JUDGE
TYLER'S REPORT INDICATED THAT ONE OF THE GUILTY MEN CONFESSED
HIS INVOLVEMENT IN THE MURDERS TO NATIONAL GUARD OFFICERS,
JUST DAYS LATER. THIS WAS CONCEALED BY THE NATIONAL GUARD
AND THE KILLERS WERE TRANSFERRED TO CONFUSE INVESTIGATORS.
THE REAGAN ADMINSTRATION CONTINUES TO COVER UP THE
TRUTH IN THIS TRAGIC AFFAIR. HERE ARE COPIES OF TELEGRAMS
WHICH MY EMBASSY SENT TO WASHINGTON.
SENT TO WASHINGTON. THERE IS NOTHING
ABSOLUTELY NOTHING IN THESE TELEGRAMS WHICH COULD JEOPARDIZE
THE SECURITY OF THE UNITED STATES. YET WHOLE SECTIONS OF
THESE MESSAGES WERE BLACKENED OUT BEFORE THEY WERE GIVEN
TO THE FAMILIES OF THE MURDERED WOMEN, WHO REQUESTED THE
MESSAGES UNDER THE FREEDOM ON INFORMATION ACT.
I REGARD THE CONTINUING COVER UP ON THIS CASE AS ONE
OF THE MOST SHAMEFUL CHAPTERS IN THE HISTORY OF UNITED STATES
DIPLOMACY. ONE OF THE PRIMARY DUTIES OF THE FOREIGN SERVICE
IS TO PROTECT AMERICAN CITIZENS LIVING OVERSEAS.
1000
-9-
IN THE NEW YORK TIMES OF MARCH 19, ANTHONY LEWIS HAS
WRITTEN A SCATHING AND ACCURATE ACCOUNT OF THE REAGAN
ADMINISTRATION'S PARTICIPATION IN THE SALVADORAN COVER-UP.
I ASK THAT THIS ARTICLE BE INCLUDED IN THE RECORD OF THIS
HEARING,
CONSIDER THE MESSAGE THE SALVADORAN HARD LINE MILITARY
RECEIVE FROM THE REAGAN ADMINISTRATION'S HANDLING OF THIS CASE.
THESE OFFICERS BELIEVE THE REAGAN ADMINISTRATION IS PROTECTING
THEM FROM THE INSISTENCE OF CONGRESS THAT JUSTICE BE DONE.
THE SALVADORAN PEOPLE ALSO RECEIVE A MESSAGE. IF THE UNITED
STATES DOES NOT EXACT JUSTICE WHEN ITS OWN CITIZENS ARE
VIOLATED, TORTURED AND KILLED WHAT HOPE IS THERE FOR JUSTICE FOR
THE FAMILIES OF THIRTY THOUSAND MURDERED SALVADORANS.
REAGAN POLICY DIRECTIONS
RECENT ACTIONS BY THE REAGAN ADMINISTRATION SHOW A NEW LEVEL
OF DIRECT UNITED STATES INVOLVEMENT IN CENTRAL AMERICA, THE
UNITED STATES HAS PLACED TROOPS INTO COMBAT ZONES ALONG THE
HONDURAN BORDERS WITH EL SALVADOR AND NICARAGUA. AMERICAN
PILOTS ARE FLYING RECONAISSANCE MISSIONS OVER REBEL-HELD
TERRITORY IN EL SALVADOR. THESE ACTIONS LEAD INEXORABLY TOWARDS
A REGIONAL WAR AND THE DIRECT INTERVENTION BY UNITED STATES
MILITARY FORCES IN CENTRAL AMERICA,
RECENT STEPS BY THE REAGAN ADMINISTRATION INCLUDE:
• A PERMANENT U.S. MILITARY PRESENCE IN HONDURAS;
• A 350-MAN U.S. ARMY INTELLIGENCE BATALLION STATIONED IN
HONDURAS TO FLY OV-1 MOHAWK RECONNAISANCE PLANES OVER
EL SALVADOR;
1001
-10-
• DEPLOYMENT OF A U.S. NAVY AIRCRAFT CARRIER GROUP OFF
THE CENTRAL AMERICAN COAST;
• PLANS FOR CONTINUED U.S. MILITARY "EXERCISES" IN HONDURAS
THROUGH 1988;
• MINING OF HARBORS ON THE PACIFIC AND CARIBBEAN COAST OF
NICARAGUA WITH U.S.-SUPPLIED MINES BY CIA-BACKED TERRORISTS.
YOU CANNOT ACHIEVE PEACE BY FUELING WAR, THE REAGAN
ADMINISTRATION CANNOT GIVE AN ANSWER TO THE BASIC QUESTION: HOW
WILL YOUR POLICIES PRODUCE PEACE RATHER THAN SIMPLY ENLARGING
THE ZONE OF COMBAT?
IN OCTOBER OF 1983, THIS COUNTRY INVADED GRENADA. ACCORDING
TO THE REAGAN ADMINISTRATION, ONE OF THE OBJECTIVES OF THE
GRENADA INVASION WAS TO SEND A MESSAGE TO THE SOVIET UNION AND
CUBA. I AM SURE THAT THESE GOVERNMENTS RECEIVED THE MESSAGE,
I WONDER, HOWEVER, IF THE REAGAN ADMINISTRATION CONSIDERED
THE SIGNAL THAT GRENADA SENT TO THE MILITARY OF EL SALVADOR,
THE SIGNAL OF GRENADA TO THE SALVADORAN MILITARY WAS SIMPLE AND
DIRECT: YOU DO NOT HAVE TO WIN ON THE BATTLEFIELD AGAINST THE
REVOLUTIONARIES. IF YOU ARE IN DANGER OF LOSING MILITARILY,
WE, THE UNITED STATES, WILL SEND IN COMBAT TROOPS TO INSURE YOUR
VICTORY,
THE MAJOR OBSTACLE TO A NEGOTIATED SETTLEMENT IN EL SALVADOR
IS THE FIRM CONVICTION OF THE SALVADORAN OLIGARCHY AND HARD-LINE
MILITARY THAT THE UNITED STATES WILL BAIL THEM OUT THROUGH
DIRECT MILITARY INTERVENTION. AS LONG AS THIS CONVICTION IS
SUSTAINED BY THE DIRECTION OF PRESENT POLICY, SERIOUS NEGOTIATIONS
WILL NEVER TAKE PLACE.
THEREFORE IN ORDER TO MAKE CLEAR THE OPPOSITION OF THE CONGRESS
TO THIS POLICY OF INTERVENTION, I SUGGEST THE CONGRESS APPROVE A
84-045 0-8464
1002
-11-
NEW VERSION OF THE BYRD HATFIELD AMENDMENT BARRING UNITED STATES
COMBAT OPERATIONS IN OR OVER EL SALVADOR AND NICARAGUA.
THIS AMENDMENT, IF SUCCESSFUL, WOULD CONSTITUTE A DRAMATIC
CHANGE IN OUR REAL POLICY AS OPPOSED TO OUR STATED POLICY, THE
LOGICAL RESULT OF OUR ACTIONS IN CENTRAL AMERICA IS UNITED STATES
MILITARY INTERVENTION WITH COMBAT TROOPS AND BOMBING MISSIONS BY
U.S. AIR FORCE PLANES AND PILOTS.
IF THIS ADMINISTRATION IS WILLING TO COVER UP THE COMPLICITY
OF HIGH RANKING SALVADORAN MILITARY OFFICERS IN THE DEATHS OF THE
AMERICAN CHURCHWOMEN, IF IT IS WILLING TO CLIAM THAT WITNESSES
TO THE FINANCING AND DIRECTION OF DEATH SQUADS DO NOT EXIST, THEN
I MUST CONCLUDE THAT THIS SUPPORT WILL ULTIMATELY EXTEND TO THE
USE OF AMERICAN SOLDIERS AND AIRMEN.
AS LONG AS THE SALVADORAN MILITARY BELIEVE IN THE "MESSAGE
TO GRENADA" THEY WILL NEVER NEGOTIATE. PRECLUDE THE POSSIBILITY
OF ARMED INTERVENTION BY THE UNITED STATES AND YOU WILL QUICKLY
SEE THE SALVADORAN MILITARY ADOPT A POSITIVE ATTITUDE TOWARDS
NEGOTIATION,
I URGE THE CONGRESS TO CALL ON THE ADMINISTRATION TO END
ITS SUPPRESSION OF EVIDENCE OF MILITARY RESPONSIBILITY FOR DEATH
SQUADS, TO PROHIBIT THE USE OF UNITED STATES COMBAT FORCES IN
OR OVER CENTRAL AMERICA AND TO LINK ANY ASSISTANCE TO EL SALVADOR
TO PEACE TALKS BETWEEN THE GOVERNMENT AND THE INSURGENTS.
THESE SIGNALS WOULD BE HEARD AND UNDERSTOOD. THESE SIGNALS
WOULD GIVE AN OPPORTUNITY TO THE MODERATES IN THE SALVADORAN
GOVERNMENT AND MILITARY AND THE MODERATES AMONG THE REVOLUTIONARIES
TO SIT DOWN AND TO BEGIN THE VITAL WORK OF HEALING AND RECONCILING
THE DIVIDED SALVADORAN FAMILY.
1003
[From the New York Times, Mar. 3, 1984)
DEATH SQUADS IN EL SALVADOR: EXAIDE ACCUSES COLLEAGUES
(By Stephen Kinzer)
A former Salvadoran military official has implicated high-ranking Salvadoran of-
ficials and civilians in acts of terrorism, including Roberto d'Aubuisson, a leading
candidate for El Salvador's presidency.
The former official, who has served at the highest level of the security police in El
Salvador, has given members of Congress extensive information on what he says are
the inner workings of Salvadoran death squads, how and why they were formed,
who directs and pays them and who selects their victims.
THE SALVADORAN'S CHARGES
He is believed to be the first officer with experience in the highest councils of the
Salvadoran Government to accuse fellow officers publicly of violent political crimes.
It was not possible to obtain independent verification of the accusations by the
officer, who asked to remain anonymous because of fear of reprisal. But a United
States Senator who interviewed him says he will seek an investigation of the
charges and a Congressman says he is confident of the former official's veracity.
These were among his charges:
The network of death squads in El Salvador was shaped by leading Salvadoran
officials, including Col. Nicolás Carranza, chief of the Treasury police, and former
Minister of Defense José Guillermo García, and is still directed by senior officials.
The man who organized and continues to direct the squads is Mr. d'Aubuisson, a
former army officer.
Mr. d'Aubuisson continued to receive a military salary through the late 1970's de-
spite official accounts that he had been dismissed from the army.
Money for rightist terror in El Salvador comes from Salvadoran exiles living in
the Miami area.
Government officials routinely ordered the police and soldiers to stay out of areas
where political murders were about to take place and that they helped assassins get
to refuges in neighboring Guatemala.
Veterans of Nicaragua's deposed national guard were used in some killings car-
ried out by Mr. d'Aubuisson's squads.
Minister of Defense Eugenio Vides Casanova is personally directing a cover-up in
the slayings of four American churchwomen in 1980 and that his cousin, a colonel,
ordered the murders.
I WOULDN'T WANT TO BE HIS PRISONER
The officer making these charges was interviewed by The New York Times at a
small hotel in the southern United States. He was known by journalists working in
El Salvador in the late 1970's. Congressional staff members and Central America
specialists who have interviewed him at length recently said they were confident of
his credibility.
In his interviews with The Times, he portrayed himself as a supporter of the Sal-
vadoran Government and a vigorous opponent of the guerrilla insurgency that has
enveloped his country.
One of the two members of Congress who has met with him, Senator Paul E.
Tsongas, Democrat of Massachusetts, said he was taken aback by the man's strong
promilitary-sentiments.
“Given the things he was saying, I expected some kind of liberal humanitarian,"
Senator Tsongas said. “What I found was one tough military veteran. I wouldn't
want to be his prisoner.”
The former official said he feared that if Mr. d'Aubuisson won the election on
March 25, his presidency might provoke a break between the United States and the
Salvadoran Government, thereby possibly aiding the insurgent guerrillas. He ex-
pressed no sympathy for even the moderate left, calling the Christian Democrats
Communist-oriented and corrupt and declaring that they were as great a threat to
the country as Mr. d'Aubuisson and Colonel Carranza. He said he considered Mario
Zamora, the Christian Democratic leader who was assassinated in early 1980, to
have been "a Marxist agent who guided Christian Democratic youth into the hands
of the guerrillas."
The former official said he had known Mr. d'Aubuisson for many years and con-
sidered him an "anarchic psychopath.” He said he feared that "uncontrollable vio
1004
lence" would consume El Salvador if Mr. d'Aubuisson was elected President, and
that this fear was one of the factors that led him to divulge closely held secrets.
Senator Tsongas said he would press the Senate Foreign Relations Committee, of
which he is a member, to investigate each of the man's many charges about the
involvement of the Salvadoran Government in acts of terror.
Representative James M. Shannon, Democrat of Massachusetts, who has also met
with the Salvadoran, said he was confident of his veracity.
“He knew things that only someone who had access to the high command would
know," Representative Shannon said. "He has the names and facts to substantiate
what a lot of people have been saying.”
Both Senator Tsongas and Representative Shannon are critics of the Reagan Ad-
ministration's policy in Central America.
Other people familiar with the Salvadoran and his allegations said he had been
known for his differences with Mr. d'Aubuisson. They said he might also be motivat-
ed by indications that young people close to him, possibly including relatives, may
be developing ties to terror groups.
In interviews, the former official spoke several times of the number of Salvadoran
youths who he said were being turned into members of death squads after joining
Mr. d'Aubuisson's political coterie.
Allegations that death squads in El Salvador are tied to high military officers
have been made before and have been cited by some Congressional critics of the
Reagan Administration's policy in El Salvador.
In recent months the Administration has made new appeals to Salvadoran leaders
to press for an end to death squad activity. Vice President Bush and Secretary of
State George P. Shultz have both visited El Salvador to present the Administration
case, and both said they were convinced the Salvadoran Government was making a
serious effort to curb political violence.
The Salvadoran military command has publicly denounced the death squads, and
military leaders have denied allegations that they are connected to violent acts.
“The Death squads must disappear forever to prove our determination to combat
them and our faith in the democractic process," Defense Minister Vides Casanova
said in November. “All Salvadorans must oppose and denounce them so they will
not only be illegal but condemned by everyone.
But according to the Salvadoran now sharing information with members of Con-
gress, General Vides Casanova and other important Salvadoran officers have or-
dered or covered up acts of political violence.
He said he had personal knowledge of these crimes because his Government post
had put him in direct contact with top military leaders. He said his office had regu-
larly received sensitive information detailing the officers' participation in violence
and that the agents sometimes monitored the development of assassination plots
formulated by officers.
The present structure of rightist terror in El Salvador, according to the former
official, grew out of the power struggle that erupted between reformist and conserv-
ative military factions in 1979.
After the October 1979 military coup, leftists gained a foothold in the Government
and formed a loose alliance with reformist officers led by Col. Arnoldo Majano, a
member of the revolutionary junta. Rightists led by Defense Minister García and
Colonel Carranza, then his deputy, were alarmed at this alliance.
Their campaign to outmaneuver Colonel Majano and force him and his allies from
the Government, according to the Salvadoran, secretly included a series of terrorist
acts. Rightist officers, he said, hoped to destabilize the country and create conditions
for a countercoup.
“García and Carranza asked d'Aubuisson to establish the Broad Nationalist Front
with the object of supporting the armed forces and destabilizing Colonel Majano,
who was becoming a problem for them,” the Salvadoran said evenly. “He did a good
job organizing street rallies and took on the task of eliminating people.”
Mr. d'Aubuisson was supposedly out of the army at this time, but according to the
former official he was secretly still receiving a salary. In fact, he said, Mr. d'Aubuis-
son actually received a substantial raise in his military pay during the time he was
organizing the death squads in late 1979.
“García and Carranza gave him their most suitable men in each part of the coun-
try for his squads,” The Salvadoran said. “The goal was to make it seem that the
revolutionary junta was incapable of governing, to create chaos so they could push
Majano out.
Colonel Majano was the target of sustained attacks from the right during his 14
months on the junta because of his support for land redistribution, nationalization
1005
of the banks and civilian control of the military. He is now in exile and reportedly
lives in Mexico.
The former military official said he had direct knowledge of the participation of
Mr. d'Aubuisson, General Garcia and Colonel Carranza in the process of selecting
death squad victims, many of whom have been trade unionists, student leaders,
peasant organizers and others considered potentially sympathetic to the left.
He said many of the men who carried out killings or kidnappings understood that
they were acting on Government orders and that such a conclusion was reasonable
because the police were cleared from the scene before assaults and full opportunities
for escape were provided.
GUATEMALA IS CALLED SCHOOL AND REFUGE
Mr. d'Aubuisson is known to have gone to Guatemala regularly during 1979 and
1980, and, according to the former military official, he was in contact there with
Mario Sandoval Alarcón and Leonel Sisniega Otero, the two leaders of the ultra-
right National Liberation Movement, a Guatemalan political party that has been
linked to political violence. The National Liberation Movement was formed in the
early 1950's with the help of the Central Intelligence Agency to overthrow the left-
ist Government of Jacobo Arbenz Guzmán, who fell from power in a C.I.A.-backed
coup in June 1954.
According to the Salvadoran, Mr. d'Aubuisson and his men moved freely between
El Salvador and Guatemala. In many cases, he said, assassins would drive directly
from the scene of a murder in El Salvador to an airstrip where they would board a
private plane for Guatemala.
Guatemala is the only country in Central America with a long history of death
squad activity, and the former official said Mr. d'Aubuisson went there to learn how
rightist squads were run. Trips to Guatemala after killings were also thought to pro-
tect the killers from possible private reprisals and from questioning by Salavadoran
agencies not involved in the plots.
He said the Guatemalan Government was not fully aware of the extent of these
ties and was not a party to the activities of the d'Aubuisson group, although its in-
telligence agencies were aware that Mr. d'Aubuisson was active there.
In Guatemala, the former military official said, Mr. d'Aubuisson met regularly
with a small group of wealthy salvadoran exiles determined to oust the Majano fac-
tion from the Government and repeal the legal changes that had cost many of them
much money and positions of political influence. Members of his group regularly
provided names of people they wanted killed, he said, and paid Mr. d'Aubuisson to
carry out their wishes.
“These exiles now operate out of Miami and still have the same relationship with
the squads,” he said. "With Carranza now head of the Treasury police, there is no
problem.
According to the Salvadoran, the two most stunning political murders of early
1980 in El Salvador, those of Mario Zamora and Archbishop Oscar Arnulfo Romero,
were both planned and carried out by Mr. d'Aubuisson with money from exiles in
Guatemala and under the protection of General García and Colonel Carranza. At
this time, the former official said, Mr. d'Aubuisson did not have a reliable team of
Salvadoran killers and used veterans of Nicaragua's deposed national guard as trig-
germen for both assassinations.
The killing of Mr. Zamora, an outspoken activist who was a spokesman for young
leftists in the Christian Democratic Party and who held a Cabinet post under the
revolutionary junta, happened when Mr. Zamora was engaged in a public feud with
Mr. d'Aubuisson. Mr. Zamora was killed by a squad that broke into his home on the
evening of Feb. 23, 1980.
Mr. Zamora's brother Rubén has become a leading spoksman for the Salvadoran
revolutionary movement. He has said he believes Mr. d'Aubuisson helped plan his
brother's murder.
A month after the Zamora killing, Archbishop Romero was slain while saying
mass at a hospital chapel in San Salvador.
"As for the case of the Archbishop, d'Aubuisson simply ordered it after meeting
with exiles in Guatemala,” the former official said. “He formed the teams, his men
followed the Archbishop to learn his habits and he picked the four men who carried
out the operation and the eight others who made up the security group.”
40 STICKS OF DYNAMITE ARE PRELUDE TO EXILE
Colonel Majano lost political ground continually through 1980, and most of the
leftists in the Government, including two key junta members, were forced from
1006
office. At one point, Colonel Majano ordered the arrest of Mr. d'Aubuisson on
charges of plotting a coup, but Mr. d’Aubuisson was quickly released through the
efforts of Defense Minister Garcia.
As Colonel Majano drove near the Salvadoran Institute for Agrarian Reform on
Nov. 11, 1980, a bomb made from 40 sticks of dynamite exploded just after his car
passed. This assassination attempt was carried out by squads working for Mr. d'Au-
buisson, the former official said.
Two weeks after the car-bomb attack, six members of the executive committee of
the leftist Democratic Revolutionary Front were kidnapped and killed, an action the
former military official said was also carried out by squads working for Mr. d'Au-
buisson. In mid-December Colonel Majano was finally forced to leave the junta. He
fled into exile soon afterward.
The Salvadoran was in a sensitive Government post when the four American
churchwomen were killed in El Salvador on Dec. 2, 1980. He said his post gave him
the opportunity to watch a coverup develop. American officials familiar with cir-
cumstances at that time confirmed that the Salvadoran was well situated to see the
inner reaction of the Government to the killings.
He said the murder of the churchwomen was "an unusual case" that did not in-
volve Mr. d'Aubuisson or what he described as “the normal structure.”
“National guardsmen at the airport spotted the women, and they radioed for in-
structions,” he said, speaking matter-of-factly and chain-smoking American ciga-
rettes. "Two of the women were coming from a conference of Maryknoll nuns in
Managua, Nicaragua, and the other two were known as suspicious.
"The word came down to eliminate them. It came from Col. Oscar Edgardo Casa-
nova, who was in charge in that zone.
Salvadoran and American officials have said there is no evidence to suggest the
five national guardsmen accused of killing the churchwomen were acting on orders.
But critics, including relatives of the women, have expressed doubt that a crime of
this magnitude would have been carried out spontaneously.
Colonel Casanova is a cousin of General Vides Casanova, then chief of the nation-
al guard and now Minister of Defense. Oscar Edgardo Casanova is now commander
of the Salvadoran Army's Second Brigade, stationed at the western city of Santa
Ana. He was transferred from La Paz, where the murders took place, weeks after
the women were killed. His transfer was part of a shake-up that the former official
said was principally designed to provide a pretext for protecting the women's kill-
ers.
According to the Salvadoran, the transfers sent a message to soldiers that they
would be protected if they were implicated in crimes of violence.
He said Colonel Casanova's involvement in the killing of the churchwomen was
known to several people at high levels of the Salvadoran Government.
"The men who did the killing have been promised that they will be freed through
the judicial system, which means that they can never be put on trial again,” the
former official said. “If they don't name Casanova, they will get out of jail as soon
as it is feasible."
KILLINGS SAID TO FOSTER MURDER AS WAY OF LIFE
The former official said that the January 1981 killing of José Rodolfo Viera, who
headed the land redistribution program that many wealthy Salvadoran landowners
bitterly opposed, was carried out by men working for Mr. d'Aubuisson. He described
the two men who have been accused in the killing, Capt. Eduardo Alfonso Avila and
Lieut. Isidro López Sibrián, as "integral members of the d’Aubuisson gang.”
Mr. Viera was killed together with two American labor advisers as they were
dining at the San Salvador Sheraton. Lieutenant López Sibrián remains on active
duty, and Captain Avila is “under the jurisdiction of a judge” while charges that he
left the country illegally are investigated.
The political party Mr. d'Aubuisson now heads, the Nationalist Republican Alli-
ance, emerged out of the Broad Nationalist Front as a vehicle for candidates in the
1982 election in El Salvador. Mr. d'Aubuisson became president of the Constituent
Assembly after the 1982 election and is now the Nationalist Republican Alliance
candidate for President.
According to the former official, Alliance money is routinely used to pay both
campaign expenses for Mr. d'Aubuisson's presidential bid and expenses of death
squads under his control.
"He formed them and he runs them," the Salvadoran said of Mr. d'Aubuisson and
the death squads. "Campaign contributors in Miami know that their money is going
for both purposes, campaigning and killing.”
1
1007
Because Mr. d'Aubuisson's squads have operated with such impunity, the former
official said, many Salvadorans have followed his example and taken to murder as a
way of resolving political grievances, personal quarrels or financial disagreements.
Violence is consuming the country," he said. He said the example of Mr. d'Au-
buisson had led “to a geometric increase in murders" over the last few years. People
see that all they have to do is go out and shoot someone and nothing will happen to
them, he said.
“Young people who want to do something for the country and for some reason are
attracted to d'Aubuisson,” he continued, "go to his office and ask what they can do
to help. Someone gives them a gun and the name of someone to kill.
“It reaches the point where his hitmen get bored and ask him what operation
they are going to carry out today. So he sends them out to kill a professor or throw
a bomb at some union leader."
He asserted that José Napoleón Duarte, the Christian Democratic leader and the
party's presidential candidate in the election this month, was told while he was
serving as Provisional President in 1981 that Colonel Casanova was the man who
ordered the killing of the American churchwomen. But he said Mr. Duarte chose
not to act on the information for fear that doing so might produce a violent reac-
tion.
Mr. Duarte has said he tried vigorously to pursue the case but was stymied by the
military and a timid judiciary.
[From the New York Times, Mar. 19, 1984]
ABROAD AT HOME—Is THERE NO DECENCY
(By Anthony Lewis)
BOSTON, March 18.-Sometimes the character of a Government-its values, its
sense of decency—is exposed by a single small episode. That has just happened to
the Reagan Administration.
The episode concerns the four American churchwomen killed in El Salvador in
December, 1980. Over the years since then their families have tried to get effective
help from the Reagan Administration in pressing El Salvador to act in the case.
They have met frustration in the past. Now they have met what would have to be
called mockery.
When Congress became impatient at the failure to bring anyone to justice for the
murders, the Administration decided to have a distinguished outside investigation of
what was going on in El Salvador. Harold R. Tyler, Jr., a former Federal judge in
New_York who had also been a high Justice Department official in the Eisenhower
and Ford Administrations, did the job.
Judge Tyler submitted a report to the State Department last Dec. 2. He told many
people that he had deliberately kept out of it anything that could properly be con-
sidered secret-so that the report could be made public.
Nevertheless, State Department officials immediately classified the report as
secret. They specifically refused to give it to the families of the murdered women,
explaining that to let it out might jeopardize the trial of five former Salvadoran Na-
tional Guardsmen who have been charged with the murders.
The thrust of the report became known despite the attempt to keep it secret.
Judge Tyler found that Salvadoran authorities had conducted a cover-up of the
crime. On Feb. 16 a story by Raymond Bonner in The New York Times detailed his
findings.
"The first reaction of the Salvadoran authorities to the murder," Judge Tyler
wrote, "was, tragically, to conceal the perpetrators from justice.” He said the cover-
up began within a day or two of the killings.
Judge Tyler found that the present Salvadoran Minister of Defense, Gen. Eugenio
Vides Casanova, may have been aware of the cover-up. Since the Tyler Report, a
former Salvadoran military official has said that General Casanova directed and
continues to direct the cover-up—and that his cousin, Col. Oscar Edgardo Casanova,
gave the order to kill the three American nuns and one lay missionary.
With the growing American awareness of a cover-up in the case, the families of
the murdered women and their lawyers renewed their request to the State Depart-
ment for copies of the Tyler Report. Last month their lawyers got a letter from the
office of the Department's Legal Adviser. It made a modest proposal.
The proposal was this: The family members and their lawyers could ask for secu-
rity clearances. If they passed that test,
they would have to sign a "non-disclosure
1008
agreement"
-a copy of which was enclosed with the letter. Then they could come to
Washington and read the Tyler Report.
The "non-disclosure agreement” required the families to promise that they would
“never divulge” what they read in the report, for the rest of their lives, without
prior permission from the State Department. Each family member also had to agree
to this clause:
"I hereby assign to the United States Government all royalties, remunerations
and emoluments that have resulted, will result or may result from any disclosure,
publication or revelation not consistent with the terms of this agreement."
Would they sign? I asked William P. Ford, brother of Sister Ita Ford, one of the
murdered nuns.
"No," Mr. Ford said. “I think the agreement is outrageous. It is also an interest-
ing device to silence us. Once they get us into the dark room, we can't say anything
without worrying about finding ourselves in some kind of litigation.
“The agreement requires silence for the rest of our lives. That is inconsistent with
the stated purpose of not affecting the judicial process in El Salvador, which anyway
is an obscene joke. Based on my conversations with people in El Salvador, if this
case is going anywhere it is going sideways over a cliff.
The way the Reagan Administration is behaving today in the case of the four
churchwomen is consistent with its performance from the start. Three years ago Al-
exander Haig, the Secretary of State, suggested to Congress that the women had
been killed in "an exchange of fire.” That was an ugly falsehood about four un-
armed women who had been dragged from their car, raped and murdered.
Congress cared enough about those murders to specify last year that 30 percent of
U.S. military aid to El Salvador could not be supplied unless and until “Salvadoran
authorities have brought the accused to trial and obtained a verdict.” The Reagan
Administration's answer is to participate in the Salvadoran cover-up, to ask for
much more military aid and to offer the women's families a small part of the truth.
Senator HELMS. Thank you, sir.
Mr. Phillips.
STATEMENT OF HOWARD PHILLIPS, DIRECTOR, THE
CONSERVATIVE CAUCUS, VIENNA, VA.
Mr. PHILLIPS. Thank you, Mr. Chairman and Senator Pell. Even
as we meet today, a decision is being formed concerning the future
of El Salvador, Central America, the United States, and the West-
ern Hemisphere as a whole. Regardless of our Government's policy,
some determination shall be made. Even if we default and seek,
however temporarily, to isolate ourselves from the decisionmaking
process, there shall nonetheless be a resolution to the region's
crisis.
The question being decided is simple in its formulation, but com-
prehensive and inescapable in its implications. By whose values, by
whose interests, by whose personnel, by whose systems, and by
whose authority shall the region in which we live be governed,
those of the Soviet Union and Marxism-Leninism or those of the
United States and our heritage of liberty and faith?
The battle has been joined. Our historic role as defender of the
hemisphere from European colonialism and imperialism pro-
claimed by President James Monroe in 1823 has been under in-
creasingly effective challenge from the international Communist
conspiracy. That is the reality. We may prefer not to recognize the
implications of that reality, but we cannot escape from its conse-
quences.
The choice to be made by U.S. policymakers, especially the mem-
bers of this U.S. Senate Foreign Relations Subcommittee on West-
ern Hemisphere Affairs, is, shall we resist the Soviet invasion and
try for increasing influence and hegemony in the Western Hemi-
1009
sphere, or shall we acquiesce in the asserted inevitability of their
dominion and our defeat.
It is doubtless true that our Soviet enemy seeks to exploit the re-
ality of economic hardship, limitations on liberty, and human cor-
ruption, but it is no less true that without resort to terrorism and
armed revolution, our enemy would be unable to fulfill its geostra-
tegic objectives in America's front yard. "There is no substitute for
victory," correctly observed Gen. Douglas MacArthur. If the Marx-
ist-Leninists pursue military victory while we strive merely for ne-
gotiated stalemate, they may not fully and immediately realize
their complete objective, but we by our acceptance of what they
have already taken by force of arms will have moved them closer
to their goals all the while limiting our own claims of interest.
We must recognize that military force, not consent of the gov-
erned, is the sine qua non of their success and the irreplacable un-
derpinning of their claim to legitimacy, whether in Nicaragua,
Cuba, or the Soviet Union itself. The prospect of a better life and
the defense of the benefits now enjoyed by men and women who
live in nontotalitarian societies in the Americas and elsewhere
cannot be fulfilled unless we clearly understand and address the
military threat posed to us by the Soviet Union and its allies.
As the Kissinger Commission has reported, last year some 15,000
tons of military equipment was shipped from Soviet bloc countries
to the Sandinistas in Nicaragua, who have been a source of support
for the antigovernment guerrillas in El Salvador and elsewhere.
In December 1983 alone, 4,000 tons of military equipment were
shipped by the U.S.S.R. to Nicaragua. News reports and official
sources have cited in detail the ongoing buildup of weapons and
ammunition in Nicaragua and Cuba of a kind and quantity such
that only the naive or the disingenuous would discount their ag-
gressive potential, and while the immediate threat is in El Salva-
dor, its ultimate object is neither Costa Rica, Honduras, Panama,
Guatemala, Belize, nor Mexico, but the United States of America
Under the Constitution of the United States, in article XIII, Con-
gress is granted the primary authority to establish the policies by
which we shall deal with the threat which now confronts us. One,
it is necessary to promptly and sufficiently provide military assist-
ance for El Salvador, to prevent any quick defeat at the hands of
Soviet-backed guerrillas. Two, unless we are prepared to recognize
and declare that an expansionist, fascist, colonial proxy regime in
Nicaragua is at war with us and with our vital interests, we will be
restricted from legitimately and effectively undertaking the actions
which are necessary to prevent the ongoing implementation of the
Soviet Union's empirialist design in Central America.
Three, our policy must be more than one of delayed defeat in El
Salvador and other nations which are under attack. We must have
the affirmative objective of replacing by whatever means necessary
the Communist junta which reigns by terror in Managua, Nicara-
gua, and which is in a state of war not just with its neighbors and
its own citizens but with the West as a whole.
Four, once having acknowledged the threat and resolved to
remove it, a necessary next step for Congress, which is sworn by
oath to defend our Nation, is to promulgate a policy of opposing
any further introduction of weapons and hostile forces into the
}
1010
Western hemisphere by our external foe. To overcome the military
challenge to our region's health, we must both bandage ourselves
against further infection and apply a tourniquet to the wound
which immediately threatens the wellbeing of the Americas.
Although through the Panama Canal Treaties we have surren-
dered our authority to independently restrict the flow of weaponry
through that waterway without the use of force, we have not sur-
rendered the principle of national interest and self-defense which
enables us to warn troublemakers wherever they reside that we
will do our best to limit the damage they do.
Let us make clear that we will not permit Soviet bloc vessels
which bear the implements of warfare to unload their cargoes in
Central America or the Caribbean, and that we reserve the right to
sink the ships which circumvent our embargo, and in order to pre-
vent the incumbent tyranny in Nicaragua from becoming a perma-
nent and larger challenge, as occurred in Cuba, let us promptly
recognize and extend our support to an alternative government
group which once installed in power will be a friend of the United
States and of the moral values which have inspired western liberty,
rather than a regime which seeks an artificial transplant of Soviet
style despotism.
A policy without purpose is a strategy for surrender. Our pur-
pose must be to free our neighborhood of nations from the threat of
external disruption, and to truly help our friends in El Salvador,
we must do more than treat their wounds. Every bit as important,
we must deny their present and prospective assailants a privileged
sanctuary for war planning and weapon accumulation in Nicara-
gua. Only in the context of such a policy openly declared and pub-
licly supported can we act successfully to prevent further Commu-
nist victories within range of our shores and our sealanes.
Thank you, Mr. Chairman.
Senator HELMS. Thank you, Mr. Phillips.
I was going to defer to Senator Pell for his line of questioning,
but I will proceed.
First of all, comments by witnesses appearing before any con-
gressional committee are protected by immunity. Members of Con-
gress are immune to prosecution for any statements they may
make in the conduct of the business of Congress. Now, I am not
sure that I agree with this. I have always felt that I should not
have the advantage over someone whom I may choose to criticize.
Mr. White, I notice that you have used the forums of both the
House and the Senate for your attacks on various people, and
while I did not know what Mr. Leonard was going to say, I can un-
derstand his indignation. I confess that I am puzzled by the se-
quence of events. I learned just now that on March 2, the lawyers
for Mr. Mason asked you for a retraction, but that the retraction
came only today. Is there any reason why? If you knew that what
you were saying was in error or probably in error, why did you
wait until today? Now, you obviously had your statement prepared
when you came here to retract, and I am just wondering why the
delay.
Ambassador WHITE. The delay, Mr. Chairman, was because we
had to investigate and find out to the best of our ability whether or
not the names listed were accurate.
1011
Senator HELMS. If you were sitting here in the chair and about to
go before this committee, would you not say, if I were there, you
would say, Mr. Helms, you have had 3 years to check, and you
have been making these statements throughout. As a matter of
fact, you talked about the “Gang of Six,” was it?
Ambassador WHITE. Yes, sir.
Senator HELMS. You are immune now. You do not have to face
the consequences of court action to what you say here. You are
immune. But are you saying that you know for a fact that the
other five are guilty?
Ambassador WHITE. Mr. Chairman, I know for a fact that the
names that I gave to the House subcommittee were the names
stated in the telegram. This was the purpose of my testimony, to
reflect the telegram which was sent from my Embassy to the De-
partment of State. I reflected that telegram accurately. When Mr.
Muyshondt through his lawyer brought to my attention that an in-
justice might have been done, I immediately looked into this
matter to the best of my ability, and in a very short time—that is,
just a day or two ago—I found out that indeed there is a substan-
tial probability that the source was in error. Therefore, I took the
first opportunity I had for a public statement to correct that injus-
tice to Mr. Muyshondt.
Senator HELMS. You have really, and I am not cross-examining
you, but from what I perceive to be, you have attacked the charac-
ter of many people in the Reagan administration. Did you mean to
do that?
Ambassador WHITE. I do not attack character, sir. I attack argu-
ments. I attack policies. I do not attack people.
Senator HELMS. Well, I do not think we should engage in a
debate about what is a character assassination.
Ambassador WHITE. Well, sir, you are the one who brought up
character assassination, and I am saying I do not.
Senator HELMS. Well, I say that you do.
Ambassador WHITE. Well, sir, all you have to do is cite to me,
Mr. Chairman, any examples that you have in front of you.
Senator HELMS. All right, I will put into the record what I think
is character assassination.
Now, let me ask you, what is your relationship with the Wash-
ington-based Commission on United States Central American Rela-
tions?
Ambassador WHITE. I am the chair of that Commission.
Senator HELMS. Have they assisted you financially in your inves-
tigations?
Ambassador WHITE. No, sir.
Senator HELMS. You have been quite interested in the particular
case of Archbishop Romero, and I assume therefore that you have
also investigated the recent claims-and I do not know whether
they are so or not-the claims of the former Salvadoran guerrilla,
Pedro Lobo, who said that he and other guerrillas were responsible
for the death of the archbishop?
Ambassador WHITE. Yes, sir, I am aware of those statements.
Senator HELMS. Have you investigated that?
1012
Ambassador WHITE. I am certainly to the best of my ability look-
ing into them. I believe that it is a most unlikely claim, and I con-
tinue to regard
Senator HELMS. Why on Earth would a man say that he killed
somebody when he did not?
Ambassador WHITE. Well, sir, we do not know that that man
exists. That is a pseudonym.
Senator HELMS. Do you know a Roberto Nusen? I hope I am pro-
nouncing it right, N-u-s-e-n.
Ambassador WHITE. I do not believe I do, sir.
Senator HELMS. You do not know him? You never heard of him?
Ambassador WHITE. Not to my knowledge.
Senator HELMS. He does not work for you?
Ambassador WHITE. Excuse me. This is my lawyer, Mr. Edgar
James.
No, sir, he does not.
Senator HELMS. May I ask the gentleman to identify himself for
the record?
Mr. JAMES. Yes. I am Edgar James.
Senator HELMS. And you are a lawyer?
Mr. JAMES. Yes, I am.
Senator HELMS. Are you representing Mr. White?
Mr. JAMES. Yes, I am.
Senator HELMS. Do you feel that he needs a lawyer here?
Mr. JAMES. A number of people have attorneys in the room.
Senator HELMS. Well, I am not sure.
Senator PELL. I think it is rather fortunate that he is here.
Mr. JAMES. Thank you, Senator.
Senator HELMS. To get back to Mr. Nusen, he has not assisted
you with any of your investigations?
Ambassador WHITE. No, sir. I have no idea who he is.
Senator HELMS. So therefore he could not be the source of your
information about the Miami gang?
Ambassador WHITE. No, sir, in no way.
Senator HELMS. My time is up. I yield to the Senator from Rhode
Island.
Senator PELL. Thank you very much, Mr. Chairman.
I would like to ask Father Hehir a question. Many of those in the
religious community in my own State of Rhode Island believe we
ought to cut off all military assistance to El Salvador. While I have
worked to hold levels down, I have some basic problems with the
total cutoff.
This feeling is felt very strongly. I get picketed every Friday by a
group of religious persons and others, and in fact have people in
my office on a vigil right now.
What do you believe should be the policy with regard to military
? cut it off or not
Father HEHIR. As I indicated, Senator Pell, in my written testi-
mony, in 1980 when the conflict was in a sense just beginning, the
U.S. Catholic Conference, the bishops, took the position of opposing
all military assistance to El Salvador. We never opposed economic
assistance, but we did oppose all military assistance.
We did it in light of the letter that Archbishop Romero sent to
President Carter at that time asking that all military assistance be
1013
opposed. We continued and continue to this date to believe that
military assistance is not the answer to the problems in Central
America.
The conflict, as you know, has escalated substantially on both
sides. Last year in his testimony before the Congress Archbishop
Hickey said that we recognize that, in spite of our attempt to cut
off all military assistance to all parties from all sides, we have not
been successful, and we recognized that some dimension of military
assistance would be part of U.S. policy from last year on, until
some kind of settlement.
That is the position that we take again today. That is not a posi-
tion that really encourages a great deal of military assistance, but
it does not call for the cutoff of all military assistance.
In terms of what we think the policy ought to be, in the testimo-
ny I presented today we have argued that the United States has a
unique diplomatic opportunity in the region, that our contribution
to the settlement of the region ought to be a political-diplomatic
settlement at a regional level, which requires political-diplomatic
settlements within countries, and that that ought to be the pri-
mary stated goal and policy, and not just the stated goal, but it
ought to be daily visible in U.S. policy.
There will be some military dimension, but we think it should be
contained and restrained. We do not think the increase being asked
for this year should be granted by the Congress, but we are not
saying no military assistance under any circumstances.
Senator PELL (presiding]. The choice that is presented to us is a
pretty tough one, whether we go along with the administration's
request-which is really I think pretty extreme in the amount of
weapons and arms involved, perhaps permitting this government
or whatever government is elected to control the situation or
whether to knock it off entirely and let the revolution that you feel
is there, but stalemated, come forth. Another is whether we pro-
long the agony by doing what we are doing now.
Those are really the three choices that we face. I was just won-
dering what your reaction was to one thought that I have, which is
that most countries in their history at some point or another have
a revolution of sorts, particularly when too much power rests with
too few. Perhaps it is your understanding that we are in the way of
that inevitable process. What would be your thought?
Father HEHIR. I do not know if I would understand it as an inevi-
table process, simply because I become a little nervous with the
concept of inevitablity in history. But I would simply rehearse
what I think you know.
Our definition of the problem from the bishops conference year
after year before this committee has been a definition that says
first of all, how you define the problem is enormously important to
your policy. We have stressed again and again that there were
more than enough human rights violations, more than enough in-
justice in El Salvador and in other Central America countries to
justify a drastic shift of social and political priorities quite apart
from outside intervention.
That has never meant for us that we have felt there was no out-
side intervention. It is simply to say that unless one begins with
the proper definition of the problem, which requires fundamental
1014
political and social change, you will not have a U.S. policy designed
to meet the problem.
Senator PELL. I wonder, from a philosophic viewpoint, it is some-
what like ghetto schools. Once they begin to change, they change
dramatically.
I wonder if you could give a formula as to when x percentage of
a country's wealth is owned by x percentage of the people, that
then that country will tip. It is an interesting thought.
Father HEHIR. I would not try to quantify a social process that
way. I think I rely on a more general definition of the problem,
which simply says that one must begin with the internal situation
and then look at the regional, international dimension.
Senator PELL. Thank you.
Ambassador White, I am wondering if you would just recap for
me. Let me make sure I understand what you said about the
churchwomen. Do you believe that we do know, the U.S. Govern-
ment knows, who the killers are, but is not saying? Is that your
view?
Ambassador WHITE. What I am saying, Senator Pell, is that the
Reagan administration has known from the very first days that
there was never a serious investigation into the death of the Amer-
ican churchwomen, and yet they have routinely certified progress
in this case.
There will never be a conviction of any Salvadoran military in
this case, because the essential structure of El Salvador is based on
the fact that the Salvadorn military are above the law. And if one
Salvadoran military person is convicted, then huge numbers of Sal-
vadoran military will feel threatened by that conviction.
So what I am saying is that the Reagan administration knows
from the reports that I sent in right from the beginning that there
was never any intention. And I have had the opportunity to talk to
Judge Harold Tyler at some length and I have gathered from him
the essence of his findings, and I believe that the findings of Judge
Harold Tyler will bear out my assertion that the Salvadoran Gov-
ernment has done everything it could to hamper the investigation
into the death of the American churchwomen.
Senator PELL. From your own knowledge, your own familiarity
with the situation, do you believe that we know within the Govern-
ment who gave the orders for the assassination?
Ambassador WHITE. I think that the statement by the high-rank-
ing military officer, the article which appeared in the New York
Times, fits in with everything we know. It is undoubted in my opin-
ion that Minister of Defense Vides Casanova knew from the very
first days that the military killed the American churchwomen and
that he knew who did it, and that he participated in the coverup.
And the relationship between Vides Casanova and Lt. Col. Oscar
Casanova, the man charged by the high-ranking Salvadoran mili-
tary officer as responsible for giving the order to kill the nuns,
would explain to a great degree why the military institution went
to such lengths to exercise a coverup.
Senator PELL. Thank you very much. My time has expired.
Senator HELMS (presiding]. Mr. White, let me see if I understand
what you are saying. You are saying, are you not, that Secretary
1015
Shultz, for example, is engaged in a conspiracy to cover up this
thing; is that correct?
Ambassador WHITE. No, sir; I am not saying that Secretary
Shultz personally is participating in a conspiracy. I am saying that
the Reagan administration has participated overall in a coverup,
yes, sir, participated in a coverup in the sense that they have not-
they have apologized for the Salvadoran military, they have apolo-
gized for the Salvadoran court system. They have reported progress
where there is no progress.
I consider that Secretary Shultz is an honorable man.
Senator HELMS. And he is Secretary of State, too.
Ambassador WHITE. Excuse me, Senator. May I just finish?
And I believe that one of the reasons that you now have a bill
before you that does not include a human-rights certification is be-
cause officials like Secretary of State Shultz would find it wrong to
put their name to a certification that clearly affirms as true what
is known to be false.
Senator HELMS. How would you feel about certification, about a
certification relating to violence on both sides? Would you like
that?
Ambassador WHITE. Yes, sir.
Senator HELMS. So would I.
Ambassador WHITE. I would be delighted.
Senator HELMS. We agree on that point.
Now, you never did answer my question about whether you are
maintaining your statement that the other five of the gang of six
are guilty, including one guy who has been dead for 2 years or
more. Are you still saying they are all guilty?
Ambassador WHITE. Let me repeat for you, Senator, what I said.
I said that my statement before the House subcommittee accurate-
ly reflects the telegram that came from my Embassy to the Depart-
ment of State. I have accurately reflected the report that came into
the Department of State. The source who gave us that information
is a totally reliable source.
Senator HELMS. Well, it was not all that reliable, because you
just retracted it.
Ambassador WHITE. Excuse me. There is always the possibility of
human error. Whether he made—whether the source was in error
or whether the officer was in error in transcribing the report, that
is something that the Department of State, the Reagan administra-
tion, should look into.
My obligation was to report to the Congress on the official
knowledge that I had of the existence of a report that named
people who funded death squads.
Senator HELMS. You are backpedaling a little bit.
Ambassador WHITE. No, sir.
Senator HELMS. Sure you are.
Ambassador WHITE. No, sir, I am not.
Senator HELMS. I was listening carefully to your answers to Sen-
ator Pell, and every sentence contained a qualifier: I think, I
gather, you know. And yet, whether you intend it or not, the per-
ception that you have is that you are saying flat out that the
Reagan administration, everybody—and I have to tell you, you are
accusing them, in my mind, of being corrupt.
5
1016
Now, what are you doing? Where are you coming from?
Ambassador WHITE. Well, that is your word, Senator, not mine. I
have never used that word, and I think it is an unfortunate choice
of words, I have to tell you.
Senator HELMS. No, it is not unfortunate. It is right on target.
Ambassador WHITE. Well, that is your opinion.
I point out to you, sir, that the American churchwomen were
killed in December 1980. This is 1984. The evidence against the
military people—there is a confession. One of the participants in
the murder has confessed.
The Salvadoran Government has delayed and has delayed, and
will never try those men. And the Reagan administration has gone
along with this charade, and I think that is a shameful act.
Senator HELMS. Well, of course, there are two sides to it. Now, if
it is any comfort to you, I wrote to the President some weeks back
and I told him that I thought he ought to lay out all the facts, all
of them, on this business of the killings going on down there. So
you are not alone in objecting to that sort of conduct. I do not
think any civilized person is.
I guess my point, sir, is I have never heard you say a mumbling
word about the multiplicity of deaths, many times anything
charged against the so-called right, the deaths caused by the left.
Now, if you protested that I have missed it.
Ambassador WHITE. Well, I have, sir. But I want to point out
that my tax dollars and your tax dollars are not going to support
the Salvadoran left and they are going to support the Salvadoran
right. And we have a legitimate requirement, it seems to me, to
make sure that our tax dollars do not go to fund death squads.
Senator HELMS. Well, as I understand it, our tax dollars are
going to try to ward off a takeover of Central America by the
Marxists, as described eloquently by Mr. Phillips.
Let me ask Father Hehir this question. You are here, as I under-
stand it, representing the U.S. Catholic Conference; is that correct?
Father HEHIR. Yes, Mr. Chairman.
Senator HELMS. What is the difference between the U.S. Catholic
Conference and the National Conference of Catholic Bishops?
Father HEHIR. There really is no difference, Mr. Chairman. The
memberships of both are the same. The U.S. Catholic Conference is
a civilly incorporated agency through which the bishops offer
public testimony and conduct public policies. The National Confer-
ence of Catholic Bishops is exactly the same group of people. That
is the juridical internal title in the church. It is the same member-
ship for both organizations.
Senator HELMS. How about the relationship of the two with the
bishops' conference? You will have to forgive this Baptist.
Father HEHIR. That is all right. The bishops conference is the
National Conference of Catholic Bishops and the U.S. Catholic Con-
ference. For example, the administrative board of the bishops con-
ference is in Washington these 3 days. They will meet a day and a
half as the National Conference of Catholic Bishops and they will
meet for a day and a half as the U.S. Catholic Conference.
The membership will not change whatsoever in the meeting. My
boss is the general secretary of the National Conference of Catholic
Bishops and the general secretary of the U.S. Catholic Conference.
1017
Senator HELMS. I see. Now, is it correct that, under the canon
law of your church, the Catholic Conference has no official status
to speak for any individual bishop or for the National Conference
of Catholic Bishops? Is that correct?
Father HEHIR. Not the way I understand the canon law, sir, no.
The National Conference of Catholic Bishops is juridically estab-
lished in canon law. It is a national episcopal conference.
Our national episcopal conference has voted to establish the U.S.
Catholic Conference and to be named by it, and when I come here
to testify, for example, I come here after it is approved within the
channels of the U.S. Catholic Conference for the bishops in the
United States.
So no, at least as I understand your question, I do not think that
is so.
Senator HELMS. Well, let me put it another way. Is the Catholic
Conference a separate corporate entity from the bishops confer-
ence?
Father HEHIR. When you start talking about separate corporate
entities I hear the sound of law, and I am not a lawyer. I think I
would have to ask our general counsel to answer that.
I can answer it in layman's terms. The membership of both orga-
nizations is the same, the president of both organizations is the
same, the general secretary, who is the chief executive officer here
in Washington, is the same.
When you ask me "a corporate entity,” I can get you an answer
from our general counsel.
Senator HELMS. That would be fine. I do not want to make a big
point of it.
[As of the date of publication, the information referred to had
not been supplied.]
Senator HELMS. You and I both have the advantage of not being
attorneys.
Father HEHIR. I guess that is a help. (Laughter.]
Senator HELMS. So you are really here representing merely your
own opinions. You are representing whom?
Father HEHIR. I never come to the Congress to represent my own
opinions. I have been for 11 years the director of the office of for-
eign policy affairs, the office of international justice and peace of
the U.S. Catholic Conference. I came here to speak in the name of
the U.S. Catholic Conference.
We use different witnesses. Last year Archbishop Hickey came to
speak in the name of the U.S. Catholic Conference. The question of
the witnesses, to be honest, has a lot to do with whether we are on
a panel or not. We usually do not put bishops on a panel.
Senator HELMS. I appreciate your patience with me.
Claiborne, would it be all right if I go on for a couple more min-
utes?
Senator PELL. Absolutely.
Senator HELMS. I notice in your prepared statement you wrote:
I have indicated that the USCC takes with great seriousness the perspective of
the Central America church. No other institutional voice in the region has a more
authentic claim to reflect the true aspirations and views of those people.
34-045 0-84-65
1018
When I read that, I was wondering if you had consulted the Nic-
araguan Bishops Conference.
Father HEHIR. Yes, we have. Archbishop Hickey, for example,
last year when he testified before the Congress had just returned
from consultation with the Nicaraguan hierarchy as a whole, a pri-
vate extensive session.
When Bishop Schlaeffer was here this year from Nicaragua, we
met with him. We have regular contacts with the Nicaraguan Bish-
ops Conference.
Senator HELMS. That is interesting, because Bishop-what is his
name-Pable Antonio Vega, he is the president of the Nicaraguan
Bishops Conference; is that correct?
Father HEHIR. Yes, he is.
Senator HELMS. He was quoted in an interview saying: "The San-
dinista government through its ideology and method is a Marxist-
Leninist government." That is a direct quote.
Do you agree with that?
Father HEHIR. My understanding is that, as I say, we take our
advice from the Nicaraguan bishops, and as president of the bish-
ops conference I think he rather speaks with more knowledge than
anything I have. I would not contest the judgment of the president
of the bishops conference.
Senator HELMS. Now, the bishop also said in this interview-and
I assume he was quoted correctly. You never can be too sure, with
some of today's journalism. He said: "There is total domination of
the people. There is submission to a totalitarian and materialistic
state, which at the same time does not respect human rights.”
Do you agree with that?
Father HEHIR. Well, as I say, I really have to listen to the presi-
dent of the bishops conference.
Senator HELMS. You do not disagree with it?
Father HEHIR. I am not in any position to offer any alternative
view of the problem.
Senator HELMS. Then he said in the same interview-and I will
not belabor this-he said: "In order to speak of free elections, it is
necessary that the citizens have full knowledge of what they are
choosing. The climate in which to conduct free elections does not
exist, because the Government"--and he is talking about Nicara-
gua—“because the Government controls the means of communica-
tions.'
I guess your answer if I were to ask you if you agree with that
would be the same?
Father HEHIR. Generally speaking, what we do with all the bish-
ops conferences is to rely upon their judgments of the internal
problems. We try to address the question of U.S. foreign policy as it
affects the area.
Archbishop Hickey last year in his testimony before the Congress
cited a whole range of human rights concerns that we had within
Nicaragua. I refer to that testimony in my testimony, and one of
the reasons we did that was precisely because we had had rather
extensive communication with the Nicaraguan bishops.
Senator HELMS. Well, I appreciate your patience with me.
Senator Pell.
Senator PELL. Thank you, Mr. Chairman.
1019
Ambassador White, I would like to go to the question of the
deaths in El Salvador. I know how shocked I was when I remember
on my way back to the airport I passed two corpses in the street, in
different places.
In your opinion, what is the percentage of deaths from the left
terrorists as opposed to those from the right?
Ambassador WHITE. The great majority of deaths by terrorism,
that is terrorism in the sense of torture, marching people off, kill-
ing them for the mere suspicion that they are sympathetic to an-
other side, the great majority of those are ascribable to the govern-
ment, to the military death squads, and to military sweeps through
the countryside.
I would guess that probably the ratio might be 80 or 85 percent
to 15 to 20 percent on the left. The left commits atrocities. Of that
there is no question, that the left is guilty of unacceptable behav-
ior, and particularly in these recent assassinations within San Sal-
vador. I think it is a truly regrettable development, because it had
seemed for a while that the left was maturing.
When I was in El Salvador the left regularly kidnapped, regular-
ly executed people, for example-just because they were bus driv-
ers violating a general strike. But then after the revolutionaries
came out and requested negotiations and said they were willing to
sit down with the government and negotiate, and as things devel-
oped through 1981 and 1982 and 1983, it seems to me that, from all
I could find out, that the left was acting much more responsibly.
They were taking prisoners and then releasing them to the Red
Cross.
And I felt that there had been a maturing. I do not argue they
had become more moral, just that they had become more pragmat-
ic and realized the terrible effect that these executions have on
their public image.
Now I do see this resurgence of killings and I condemn it.
Senator PELL. I was struck by the fact that, of the 60 deputies in
the parliament there, 5 have now been assassinated, 5 conserv-
atives have now been assassinated in a relatively short period.
How do you account for the fact that none of the deputies on the
left were assassinated?
Ambassador WHITE. Well, there are no deputies on the left.
Senator PELL. Well, then I should say in the center.
Ambassador WHITE. It is an important point. The military death
squads operated largely inside San Salvador. As a result, they
drove into the countryside those revolutionaries who were resident
in San Salvador. One of the reasons that a peasant movement has
developed countrywide is because the death squads drove the revo-
lutionary talent into the rural areas.
The Salvadoran military is increasingly stretched thin around to
counter rural revolution. As I understand it, an independent left
faction not related to the FMLN/FDR has begun a series of assassi-
nations particularly against right-wing deputies.
But I wrote, however, that Radio Venceremos has welcomed
those killings, and I regard that as a retrograde step on the part of
the left, and I again feel that it is most unfortunate.
Senator PELL. What do you think can be done to bring a decent
human rights situation or level of behavior, to El Salvador? Why
1020
should it have this really extreme form of death, of assassination
as a matter of practice?
Ambassador WHITE. The only way that this Government can stay
in power is by killing those who oppose it. Just because a man is a
military officer does not make his some kind of crazed killer. On
the other hand, just because a man or woman is a revolutionary
does not mean that they are wild Marxists. There are moderates in
the military and there are moderates among the revolutionaries.
In my view, the United States should urge the Government of El
Salvador to accept the offer of the revolutionaries to negotiate. The
minute that negotiations become a reality, that peace talks become
a reality, you will find that the more moderate military officers
will come to the fore and a restructuring of the Salvadoran mili-
tary, which is basic to ending death squads, will take place.
Senator PELL. Thank you very much.
Thank you, Mr. Chairman.
Senator HELMS. Mr. Phillips, do you have anything further to
say? You have been sitting there in isolation for about an hour.
Mr. PHILLIPS. No, sir. I said what I had to say. But I would be
pleased to respond to any questions that you may have.
Senator HELMS. The Chair thanks you.
Mr. Leonard?
Mr. LEONARD. Nothing further.
Senator HELMS. Father?
Father HEHIR. Nothing further.
Senator HELMs. Mr. White, do you have any further comments?
Ambassador WHITE. No, thank you very much.
Senator HELMS. Well, we thank all four of you for coming, and
we especially thank you for your patience. It has been a long after-
noon, and we did the best we could.
Since there is no further business to come before the subcommit-
tee, the subcommittee stands adjourned.
[Additional questions and answers follow:]
STATE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR
HAWKINS
Question 1. Can you confirm that $300,000 in MAP requested for Haiti were to be
used to repair and maintain the ships used by the Haitian Government to interdict
Haitians who are attempting to enter the United States illegally?
Answer. Our expectation is that Haiti would use the bulk of these funds primarily
for transportation, maintenance and communication equipment to assist the Navy
not only in its interdiction of both migrants and narcotics but also in its search and
rescue operations. We know the Haitian Government also wishes to improve its
military communications equipment across the board among the three services, and
might wish to use a portion of the funds for that purpose.
Question 2. Given these potentially explosive circumstances, why is our aid to
Haiti roughly one-half of that to the Dominican Republic? The two countries are
roughly the same size in population; they share the island of Hispanola (pron: his
pan Yo la) between them; they are strategically located in relation to the United
States--yet Haiti has twice the population density, less arable land, and is in more
serious economic straits.
Answer. We believe that the level of development and security assistance to Haiti
proposed by the President for fiscal year 1985 is adequate and appropriate to Haiti's
current economic and security needs and fully takes into account the fact that Haiti
is the poorest country in the Western Hemisphere. In proposing an increase in the
levels of Development Assistance (DA) and Public Law 480 for Haiti in fiscal year
1985 we have taken into account GOH efforts during the past year in the area of
fiscal reform, including compliance with a stiff IMF program, Haiti's record in the
1021
area of human rights and Haiti's continued record of cooperation in the areas of
migrant and narcotics interdiction programs. Since 1982 our level of Development
Assistance has nearly doubled. We believe this overall trend of increased levels to
be more significant than a comparison of Haiti's aid levels with other aid recipient
countries where our programs are designed to address different problems. Further-
more, given absorptive problems, gradual, incremental increases are more effective-
ly utilized than large aid increases. Because of human rights concerns (con ns also
expressed by the Congress in Section 101(b) of the Continuing Resolution) security
assistance to Haiti has been limited to very modest levels of IMET and MAP. The
higher levels of economic and security assistance provided to the Dominican Repub-
lic take into account the fact that the Dominican Republic is the largest functioning
democracy in the Caribbean, that our assistance programs to the Dominican Repub-
lic have been designed to address the quite different economic situation in that
country, and that country's very impressive record in effectively using foreign aid
provided by the United States and the multilateral donors.
Question 3. Jamaican growers continue to export large amounts of marijuana to
the United States (about 15 percent of total illicit imports). Why have you proposed
no narcotics assistance to Jamaica?
Answer. Both the Embassy and the Bureau for International Narcotics Matters
(INM) have had recent discussions with senior Jamaican officials on anti-narcotic
matters and have repeated the United States willingness to give favorable consider-
ation to a Government of Jamaica request for assistance on a cooperative cannabis
control program. The Jamaican Government, however, for its own political reasons,
has thus far chosen to take anti-narcotics action chiefly using its own resources. A
modest amount of U.S. assistance has been requested and provided to support Ja-
maica's interdiction efforts, such as training and support of drug-sniffer dogs, which
have been funded out of the INM training and Latin American regional budgets.
Future requests of this nature will be similarly funded.
Question 4. What progress, if any, has there been in the past year in working with
the Jamaican Government to reduce the amount of Jamaican grown marijuana en-
tering the United States?
Answer. The Jamaican Government has recently stepped up its campaign against
the marijuana trade, and has intensified manual eradication efforts to destroy can-
nabis cultivation and enforcement efforts against trafficking by dynamiting illegal
airstrips. Jamaican authorities reported that in 1983, fields with the potential to
produce 298.4 MT of marijuana were manually eradicated, 35.4 MT of stockpiled
marijuana were confiscated, and 11.36 metric tons were seized. While we are encour-
aged by these efforts against production and trafficking, it remains to be seen
whether the Jamaican Government will develop a systematic, islandwide program
for the eradication of cannabis cultivation.
Question 5. Considering the importance of the Caribbean as a transit area for illic-
it narcotics entering the United States, why does your budget provide less than
$900,000 in assistance to these island countries?
Answer. The U.S. strategy to interdict the flow of drugs through the Bahamas is
based on a joint operation of U.S. law enforcement agencies working with the Baha-
manian Government, rather than on the provision of a substantial commodity pro
gram to the GOCB. The National Narcotics Border Interdiction System (NNBIS),
DEA, Customs, and U.S. Coast Guard, assisted by U.S. Air Force helicopters work
together under Operation BAT to interdict drugs being transshipped through the
Bahamas to the United States. The DEA estimates that 10 to 35 percent of the
marijuana and 10 percent of the cocaine entering the United States are transported
through the Bahamas. This suggests that the joint drug interdiction effort has been
somewhat successful and that the importance of the islands as a transit point has
diminished. In addition, our Embassy in Nassau continues to work closely with and
receive the cooperation of the Bahamian Government on anti-narcotics matters.
INM is prepared to provide commodity support to enhance the Bahamian Govern-
ment's capability to work with U.S. agencies in the anti-narcotic effort. Our support,
consisting of communications equipment to establish an island wide Bahamian
police radio system, plus other equipment and funds to assist Bahamian law en-
forcement agency field operations was included as part of a larger U.S. support
package conveyed in a January 20 letter from Admiral Murphy to Foreign Minister
Adderley (the letter included the offer of a radar balloon). The GOCB has the letter
under advisement at the present time; when it agrees to the proposed support, we
will begin the process to provide the equipment.
Question 6. The INM Bureau is supposed to oversee diplomatic initiatives to
combat international narcotics trafficking. What has the Bureau done in the past
1022
year to address this serious problem of off-shore banking in the Caribbean which is
used to launder and shelter narco-dollars?
Answer. As stated in the Federal Strategy, Department testimony and other docu-
ments, responsibility for the off-shore banking aspect of the international narcotics
control program is assigned to the Office of the Legal Advisor and the Department
of Justice. ÎNM consults with the responsible attorneys in both Departments, re-
ceives regular reports on their activities, and advises them of developments in nar-
cotics trafficking. A similar request has been made separately by the Committee on
Foreign Relations and the Office of the Legal Advisor is preparing a more detailed
response on its activities in cooperation with Justice.
Question 7. How much coca was cultivated in Colombia 4 years ago? Does the Gov-
ernment of Colombia know the location of the major cultivations of marijuana and
coca?
Answer. According to the 1980 Narcotics Intelligence Estimate, an estimated 3,000
hectares were under cultivation with coca plants. The Government of Colombia is
aware of the areas where marijuana and coca are cultivated.
Question 8. The United States and Colombia have signed an extradition treaty.
Has the Government of Colombia ever honored an American request for the extradi-
tion of a Colombian citizen on drug trafficking charges?
Answer. To date, no.
Question 9. During the past 3 years, the United States has provided $24 million in
direct assistance to Colombia and multilateral banks, in which the United States is
the major contributor, have provided over $1.5 billion in low interest or no interest
loans. At the same time, Colombia has continued to expand marijuana and coca cul-
tivation and now rejects the extradition treaty. In your opinion, has Colombia been
a good investment for U.S. taxpayers?
Answer. We believe the assistance we have provided the Colombian government
has been a good investment and has been an important factor in contributing to a
disruption in the flow of drugs from Colombia to the United States. Under the Be-
tancur administration, Colombian anti-narcotics activities have increased as reflect-
ed by the high level of drug seizures by the National Police. They have confiscated
and destroyed over 3,000 metric tons of marijuana during each of the three preced-
ing calendar years, while manually eradicating more than 1,905 hectares of canna-
bis and 4,351 hectares of coca. Cocaine seizures totaled 2,475 kilograms and 113 co-
caine processing laboratories were destroyed in 1983. On March 11 of this year, the
police raided a large complex of cocaine laboratories and destroyed and seized 11
metric tons, a world record. While the results in terms of drugs seized and destroyed
are impressive, they represent perhaps 20 percent of estimated total production and
trafficking.
Question 10. What is the status of the Colombian marijuana/coca eradication pro-
gram? How effective do you expect this program to be when initiated? If the Colom-
bian Government does not follow through on its commitment to the pilot program,
what will be the consequences for U.S. narcotics control assistance?
Answer. The Colombian Government has decided to embark upon a program to
test herbicide effectiveness in eradicating coca and cannabis crops and to determine
if herbicides could be applied which do not adversely affect the environment and
health. Should the testing program prove that herbicides can be effectively and
safely used, the Colombian Government would make a policy decision on whether to
undertake a comprehensive aerial eradication program. While we are hopeful the
testing program and Colombian decision will present us with the opportunity to co-
operate in support of a full eradication program, it would be premature to consider
the possible scope or effectiveness of such a program. Continuation of U.S. assist-
ance to the Colombian anti-narcotic law enforcement effort would be necessary as
coca will continue to be transported from Bolivia and Peru to Colombia for conver-
sion into cocaine no matter the effectiveness of an eradication program. If imple-
mented.
Question. 11. Have the revised United States-Colombian Extradition Treaty and
the new Mutual Legal Assistance Treaty helped to combat narcotics trafficking be-
tween the two countries?
Answer. The new United States-Colombia extradition treaty is one of the most
modern extradition treaties to which the United States is a party. It contains provi-
sions which expressly encompass both trafficking and conspiracy to traffic offenses.
In recent months, the United States has requested the extradition of a number of
Colombians for narcotics trafficking. So far, the Government of Colombia has denied
two such requests and has not acted definitively upon the others. Since the denial of
those two requests, the United States and Colombia have been involved in an ongo-
ing dialogue with an effort to make the treaty more effective with regard to the
1023
extradition of Colombian nationals to the United States. There is currently pending
before the Colombian Council of State the internal legal issue of which branch of
that government is empowered to make definitive legal interpretations of the extra-
dition treaty.
The new United States-Colombia Mutual Legal Assistance Treaty is not in force
because it has not yet been ratified by the Colombian Government. If ratified, the
United States hopes that it too will prove to be a valuable enforcement instrument.
Question. 12. Other than the pilot program for crop eradication, what other evi-
dence do you have of the government's commitment to combat coca and marijuana
production and trafficking to the United States?
Answer. In addition to the law enforcement action described in paragraph 3
above, we note that on March 11, the Colombian police raided what was the largest
cocaine processing center ever found in any country? Colombia's police report the
seizure and/or destruction of 14 sophisticated cocaine laboratories, the seizure of 11
metric tons of cocaine and cocaine base, 10,800 drums of precursor chemicals and
fuel, numerous weapons, six fixed-wing aircraft and one helicopter.
Question. 13. Since 1973, the United States has contributed over $76 million to
Mexican effort to eradicate and interdict marijuana and poppies for opium and
heroin. What have been the dividends for the United States on this sizeable invest-
ment? What lessons have we learned from the Mexican experience and how is this
knowledge being applied elsewhere?
Answer. The eradication of cannabis and opium poppy cultivations reported by
Mexican authorities and subsequent reduction in marijuana and heroin production
demonstrates the dividends to the United States.
In 1975 Mexico produced an estimated 6.5 metric tons of heroin and supplied
about 87 percent of the heroin imported into the United States. The U.S.-supported
Mexican aerial eradication program reduced Mexican heroin production to an esti-
mated 1.39 metric tons in 1982, reducing the Mexican share of United States illicit
heroin imports to approximately 34 percent. At the high point of the eradication
program, 1977, approximately 10,000 hectares (24,710 acres) of opium poppy (enough
to produce about 10 metric tons of heroin) were destroyed. In the period December
1981 to December 1982, the Mexican Attorney General's office (MAGO) reported
spraying 15,956 opium fields totalling 943 hectares and 11,046 cannabis fields total-
ling 788 hectares. Total eradication during this period, including manual eradication
by the Army, is somewhat higher: 1,211 hectares of opium poppy in 22,772 fields.
The Mexican program has been undergoing a transitional phase, in which the
MAGO has been shifting its strategy to counter tactics by the traffickers, the latter
including the growing of crops in smaller, less accessible fields, often at higher alti-
tudes. Mexican authorities improved their eradication efforts in 1983, reporting the
destruction of 2,472 hectares of opium poppy, double the 1982 level, and eradicating
2,666 hectares of cannabis, three times the 1982 level. The MAGO is now testing a
new U.S. crop spraying airplane and boom, which early tests indicate can increase
the efficiency of these narcotics eradication programs.
The Mexico example shows that if a strong central government decides as a
matter of policy to allow the aerial application of herbicide and effective govern-
ment control over the countryside exists, an effective eradication program can be
conducted. In such a case, U.S. assistance in the form of resources, technical aid,
and enforcement cooperation can be especially effective in reducing trafficking.
Question 14. Is there a foreseeable end to U.S. assistance to the Mexican Govern-
ment for crop eradication?
Answer. The Mexican Government in the early 1980's indicated it wished to
assume full financial responsibility for the program. However, declining world oil
prices and a heavy debt burden have created serious long-term economic problems,
producing federal budgetary constraints on Mexico. Under these circumstances,
Mexico will continue to require U.S. assistance for the foreseeable future to carry on
an effective anti-narcotics program.
Question 15. A key coca producing area is the Upper Huallaga Valley (UHV) lo-
cated east of the Andes in the "high sierra" area of central Peru. The Peruvian
Government has started a coca control program and, with AID assistance, a rural
development program in the Valley.
(A) What is the status of this effort? (B) Has it shown any results to date? (C) It
has been reported that the government experienced unforeseen problems in starting
up the eradication program. What were these problems and how has this affected
the program?
Answer. During 1983 the coca control effort resulted in the eradication of 703 hec-
tares of illicit coca in the UHV. At the same time AID's development project in the
UHV progressed in implementation. The AID project is designed to provide exten-
1024
sion services and agricultural credit to farmers who eradicate coca, and to help pro
mote crop substitution.
Initial startup difficulties resulted from a number of factors, including logistics
and coordination problems resulting from the division of effort among several differ-
ent Peruvian government entities. Peru's economic problems, compounded by the El
Nino disasters, also diverted government attention and resources away from other
priorities, including narcotics. With recent personnel changes and new steps to co-
ordinate activities in the areas where both projects are focusing their efforts, the
increased availability of crop substitution assistance and extension services should
provide more incentive to farmers to eliminate coca cultivations this year.
Question 16. The FY 1985 budget calls for a continuation of substantial narcotics
control assistance to the Bolivian Government ($5.5 million). What justifies the con-
tinued high level of assistance? Do you believe that President Siles Zuazo has a
greater commitment to combat narcotics trafficking than his recent predecessors?
Does he have the backing of the Bolivian military in this effort?
Answer. We believe that we must be prepared to assist the Government of Bolivia
as narcotics control efforts there are expanded. To do anything less would belie the
seriousness of our intent. Therefore we are proceeding on the assumption that our
ongoing efforts will be successful and that we will have continuing control and
eradication programs underway in FY 1985 requiring substantial U.S. support. U.S.
funds will be allotted and disbursed only in fulfillment of the coca control project
agreements and as progress justifies.
President Siles Zuazo has shown a greater commitment to combat narcotics traf-
ficking than his recent predecessors, primarily by entering into agreements that
provide for reduction of coca production by 20,000 hectares within five years, aug-
mented enforcement efforts, and controls on legal coca to prevent diversion to illicit
markets.
The Bolivian Air Force has agreed to provide air transport services for special in-
vestigation units. Additionally, the Bolivian Army has made weapons available to
the special police force charged with narcotics control efforts and restoration of
order in the Chapare.
Question 17. About half of the proposed funds for Bolivia are intended for crop
eradication. What is the status of the U.S. crop eradication agreement with the Bo-
livian Government. What results have been achieved and what do you project as the
maximum achievable reductions during 1984? For what will these funds be used if
the crop eradication program is not fully implemented?
Answer. A coca eradication directorate has been formed which will oversee the
eradication effort. Given the absence of a security presence in the Chapare, eradica-
tion has not yet begun, although several farmers cooperatives willing to cooperate
in an eradication program have been identified. Eradication will only become possi-
ble when a security presence has been established in the Chapare. Under the project
agreement, the eradication goal for 1984 is up to 2,000 hectares, but the ability to
reach that goal will depend largely on whether the special police force soon to
deploy in the Chapare is able to establish government presence without substantial
resistance. Should crop eradication funds not be fully utilized, the funds would be
available for reprogramming to other areas where narcotics control efforts dictate a
need for additional funds or returned to the U.S. Treasury.
AID's RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR HAWKINS
Question 1. Can you tell me what programs you are funding this year to address
these problems (child health) in the Western Hemisphere, what the funding levels
are, and what the nature of these problems is in this region?
Answer. The Latin American and Caribbean region has experienced a consider-
able improvement in infant and child health in the past 10–15 years. Infant mortali-
ty declined from 85 infant deaths per thousand live births in 1965–1970 to 67 per
thousand in 1975–1980. Similarly, deaths among children aged 1-4 fell from 8.5 to
6.3 per thousand in this time period. These mortality rates, however, are only statis-
tical averages that do not differentiate changes in mortality by economic or geo
graphical subgroups. In other words, while infant and child health is significantly
better in Latin America and the Caribbean than in most of the developing world,
certain countries in this hemisphere (Haiti, Bolivia, Honduras) and certain areas
within countries (Brazil, Guatemala, Peru, Mexico) have mortality and morbidity
rates equivalent to the poorest countries in Africa and Asia. Diarrhea and acute res-
piratory diseases continue to be the major killers of children. Malnutrition, parasit-
1025
ic, viral and other infectious diseases continue to be major health problems for chil-
dren and adults.
A number of constraints impede both the improvement of health status and the
development of effective health services. Financial resources in Latin America and
Caribbean countries for health services are limited and not likely to increase in the
short term. In addition existing health resources are not allocated efficiently. The
high capital and recurrent costs of hospital based, curative health systems, which
are limited to urban populations, consume a major part of the public sector health
budgets in these countries. Therefore, primary health care services, which include
the technologies to reduce infant and child mortality, remain insufficiently devel-
oped and coverage is low. For example, only 30-40 percent of the children under 5
years of age in Latin America and the Caribbean are fully immunized. In addition,
continued high fertility rates, malnutrition, and lack of access to potable water pre-
vent, to some extent, continued improvements in health status. Finally, violence
and civil unrest in certain countries have created significant shifts in populations,
and large numbers of refugees and displaced persons. The health problems of these
individuals are acute, including significant increases in childhood diseases (measles,
polio, etc.) diarrhea and respiratory diseases. Large influxes of new populations have
also adversely affected the health status of the communities into which these indi-
viduals have moved, by overburdening water and sewerage systems, overcrowding
health facilities, etc.
Acute respiratory diseases and diarrhea diseases exacerbated by malnutrition con-
tinue to be the major killers of children. Recent information indicates, however,
that with increased access to potable water and expanded use of oral rehydration
therapy diarrhea is decreasing as a percentage of causes of all infant and child
deaths. Mortality from respiratory diseases is not decreasing at the same rate.
Thirty percent of infant and child deaths in Latin America and the Caribbean are
still attributable to respiratory diseases.
AID HEALTH PROGRAMS IN LATIN AMERICA AND THE CARIBBEAN
AID's health strategy focuses on reducing infant and child mortality by extending
and improving primary health care services. All of AID's projects in Latin America
and the Caribbean include the development and extension of such services includ-
ing: oral rehydration therapy for the treatment of diarrhea, immunizations against
childhood diseases, nutrition education, family planning, promotion of breastfeeding,
etc. In addition, AID provides assistance to improve the planning and management
capabilities of Ministries of Health in order that the quality and distribution of
health services may be improved. Support for such health services accounts for ap-
proximately 9 percent of the development assistance provided to Latin America in
1984 ($27 million). In fiscal year 1984, of the 13 countries with active health projects,
9 projects include AID financed oral rehydration (ORT) activities (Costa Rica, Do-
minican Republic, Ecuador, El Salvador, Guatemala, Bolivia, Haiti, Honduras and
Peru). In addition, funds from the Office of Health of AID's Bureau of Science and
Technology have been used to fund ORT research and promotion in Brazil, Mexico,
and Panama, countries which do not have bilateral health projects. The types of ac-
tivities funded include: the purchase of oral rehydration salts, training of health
workers, technical assistance for the design, implementation and evaluation of oral
rehydration promotion in primary health care programs, technical assistance to
design mass media promotion programs, technical assistance to design mass media
promotion programs, technical assistance to stimulate local private sector produc-
tion of the oral rehydration salts.
Immunization programs to protect children against childhood diseases (measles,
polio, diptheria, tetanus, pertussis, tuberculosis, etc.) are supported as components of
AID financed health projects, or by local currency generations from the Public Law
480 Title I programs in 8 Latin American and Caribbean countries (Costa Rica, El
Salvador, Honduras, Ecuador, Haiti, Peru, Dominican Republic and Bolivia). Train-
ing in cold chain maintenance is supported in two AID financed regional projects,
one implemented by the Pan American Development Foundation in Central Amer-
ica, and one implemented by the National Institutes for Health, Department of
Health and Human Services in the English speaking Caribbean. The types of activi-
ties funded include: the purchase of vaccines and cold chain equipment, training
and technical assistance in the design, implementation and evaluation of immuniza-
tion programs, and training and technical assistance in the maintenance of cold
chain equipment. Five million dollars were requested for the expansion of both oral
rehydration and immunization activities in Central America in the fiscal year 1984
1026
supplemental request, including $2.8 million for a Central American oral rehydra-
tion promotion program.
The following tables show funding levels for this year, and the types of programs
we are supporting.
FUNDING LEVELS FOR HEALTH PROJECTS IN FISCAL YEAR 1984
[In thousands of dollars]
Fiscal year 1984 CR
Fiscal year 1984
supplemental
Fiscal year 1984
total
Bolivia ............
Dominican Republic..........
Ecuador ........
Haiti...
Jamaica .......
Peru .....
Caribbean Regional.....
LAC Regional .........
Belize .....
Costa Rica.........
El Salvador
Guatemala.......
Honduras.........
ROCAP..........
624
4,924
239
5,850 .....
407
125
1,150
275
240
4,450
6,085
550
2,150
627
4,924
239
5,850
407
125
1,150
275
240
5,850
10,085
5,350
7,150
2,800
1,400
4,000
4,800
5,000
2,800
Total
27,072
18,000
45,072
.......
ORAL REHYDRATION PROGRAMS
Purchase of ORS
Technical
assistance
Training
Mass media
Research
X
X
Х
X
X
Guatemala.....
X
х
X
X
X
X
Countries with active health projects:
Belize .........
Bolivia........
X
Costa Rica........
х
Dominican Republic.......
Х
Ecuador ..........
Х
El Salvador .......
.... X
Grenada........
X.?
Guayana
Haiti........
X
Honduras........
Jamaica ........
Peru ........
х
Regional programs:
Regional Development Office Carib-
bean.
Regional Development Office Central
America.
Countries with S&T/HEA financed activi-
ties:
Mexico ....
Panama...
Brazil.
C.
X
X
X
X
X
X
Х
X
X
1027
IMMUNIZATION PROGRAMS
Vaccine
Cold chain
Training
(Immunization)
Technical
assistance
(Immunization)
Management
improvement
Nutrition
X
X
X
X
X
X
X
X
X
X
X
X
X
X
х
X
Х
X
X
X
X
Counties with active health projects:
Belize
Bolivia ....
Costa Rica .......
Dominican Republic ........
Ecuador
El Salvador .........
Grenada .........
Guatemala .........
Guyana .....
Haiti .....
Honduras
Jamaica ........
Peru.......
Regional programs:
Regional Development Office -
Caribbean.
Regional Development Office-
Central America.
Countries with S&T/HEA financed
activities:
Mexico..........
Panama
Brazil........
Х
X
X
X
Х
X
....... X
X
X
....
Question 2. It appears to me that a great deal of your aid for Central America will
be in the form of cash grants with the expectation that the country itself will then
distribute the funds according to their needs. This type of system, however, appears
to me to favor established businesses and organizations with existing links to the
government. I am very concerned that a substantial portion of any of the funds that
we authorize for Central America go directly to helping the poor improve the qual-
ity of their lives. I believe that we must act to address the underlying social and
economic conditions in the region that have provided fertile ground for insurgencies.
What programs are planned for Central America that will go directly to addressing
the plight of the poor in that region, and what percentage do they as an aggregate
represent of the overall economic aid package for the region?
Answer. We estimate that $142 million, or 15%, of the FY 1985 request for Cen-
tral America will be for projects which will directly benefit the poor. These projects
are in such areas as improved health and sanitation in rural areas, agrarain reform,
family planning, and education development. Also included are projects carried out
by U.S. and local private voluntary organizations. It must be emphasized that we
cannot solve the problems in Central America by treating the symptoms-nor do we
have enough resources to do so. What is most important is to strengthen the produc-
tive sectors of the countries to produce more, to employ more people productively in
the private sector, and to generate increased revenues that can finance extended
social services to an ever increasing proportion of those who lack basic health serv-
ices, education, and access to resources.
I would note that we consider the cash transfers, along with associated policy re-
forms, to be an important means of benefitting the poor by helping to stabilize the
economies and by encouraging economic growth, thereby increasing the number of
jobs for all sectors of the population.
Question 3. I believe that land reform is a critical feature of the overall resolu-
tion of the problems in El Salvador. I have visited the Republic of China (i.e.
Taiwan) and seen the tremendous success they have had with their land reform pro-
gram. Their program worked in such a way that it gave everyone, the old landown-
er and the new one, a stake in the future and prosperity of the country. One of the
keys to the Taiwanese program was, however, a sense of fairness. The old landown-
ers felt that they would receive a fair compensation for their land. I understand this
is not now the case in El Salvador and that many of the old landowners are skepti-
cal of ever receiving compensation for their land.
1028
Answer. There may be some former landowners who remain skeptical about ever
receiving compensation. It should be noted, however, that the Government of El Sal-
vador (GOES) continues to honor its obligation, as stipulated in the agrarian reform
legislation, to compensate former landowners.
In Phase I, compensation is paid in the form of long-term (30 years) interest-bear-
ing bonds for land and mix of cash and short-term bonds for livestock, machinery
and equipment. As of February 21, 1984, compensation paid on 212 of the 426 prop-
erties totaled $136 million, including $10.6 million in cash and $125.4 million in
bonds.
In Phase III, former owners are compensated half in cash and half in bonds for
farms under 247 acres; for larger farms the former owners are paid 25% in cash and
75% in bonds. As of January 26, 1984, over 500 owners has been paid the U.S. dollar
equivalent of $10.3 million.
The GOES is current in interest payments on all bonds and this fact should lessen
the skepticism of many of the former landowners. Moreover, the GOES continues its
efforts to make the bonds more attractive instruments of payment. Interest coupons
can be used to pay certain taxes and are traded on a secondary market. In coopera-
tion with the private sector, the GOES is investigating ways in which the agrarian
reform bonds could be directly exchanged for shares
in businesses which are now
state-owned. This idea was one of the results of the Checchi study of last year and
we are encouraging the GOES in this regard.
Question 4. I know that current legislation prohibits U.S. funding from being used
to compensate Salvadoran landowners. What impact do you believe that this
has on land reform efforts there?
Answer. The Government of El Salvador has severe budget problems because of
the economic warfare being waged by insurgents. Among other problems, the lack of
funds for compensation to former landowners has slowed the pace of the country's
agrarian reform.
Ms. Kasun's RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY SENATOR HELMS
Question 1. You have said that Nobel prize winner Dr. Theodore Schultz has disas-
sociated himself with support of the Chinese population control program. You said
in testimony before my subcommittee on Tuesday that the consensus of develop-
ment economists is that population control has no effect on economic growth. Can
you provide the Committee with some examples of criticisms of population control?
Answer. Many economists have concluded that population growth does not inhibit
economic development and have criticized the assumptions of population control
programs. Examples appear in Appendix A, attached.
Question 2. The Administrator of AID has recently sent to the Foreign Operations
Subcommittee of the Appropriations Committee three reprograming requests. One is
for an $11,750,000 10-year forward funding (through 1993) for "Population Technical
Assistance.” A second reprograming is a $39,654,000 5-year forward funding for
"Family Planning Operations Research, and a third for $34,000,000 for 10 years
forward funding for a "Population Information Program.” I understand you have
read these reprograming requests. Do you think they are a good use of $85 million
of the taxpayers' money?
Answer. I believe it would be a great mistake for Congress to approve these re-
quests for $85 million for foreign control. Such reprograming would remove these
programs from Congressional consideration at a time when the urgent need is for
serious reconsideration of the entire philosophy of foreign population control. In my
capacity as a special consultant to the Department of State in 1982 I wrote a paper
entitled “A Consideration of the - Cost Effectiveness of Population Assistance in
United States Foreign Aid Programs," in which I showed that the population con-
trol programs supported by United States foreign assistance are creating no demon-
strable improvement in economic or social conditions in the countries in which they
operate and are having an adverse impact on our foreign relations. I attach the
summary of this paper in Appendix B. My conclusions were corroborated by another
economist, Mr. Nick Eberstadt of Harvard University, who also submitted a paper
to the Department of State on the same topic at the same time. Also at the request
1029
of the Department of State in 1982, I prepared a critique of two Agency for Interna-
tional Development policy papers on population assistance in which I showed that
AID has provided no evidence whatever of any benefits of the population control
programs which it is financing in countries receiving our aid. In this critique, which
appears in Appendix C, I showed that AID bases all of its presumptions in favor of
population control, including its computer models, on unverified assumptions only,
and that the available evidence in fact contradicts AID's assumptions. The fact is,
there is no evidence that population control efforts have any beneficial effects what-
ever; on the contrary, there are significant indications that the effects are harmful.
Question 3. You say U.N Fund for Population Activities gives the Chinese popula-
tion program $50 million per year. How much of that is U.Š. AID funds?
Answer. According to the Population Reference Bureau (Intercom, May/June
1983) the United Nations gives $50 million a year to the Chinese program of popula-
tion control. The United States is the largest supporting donor to the United Na-
tions, directly contributing 40 percent of the total income of the U.N. Fund for Pop-
ulation Activities and also giving tens of millions of dollars to other U.N. agencies.
In addition, many countries which receive U.S. foreign assistance-such as the Phil-
ippines, Thailand, Guatemala, Honduras, Kenya, Mexico, and many others-donate
to the U.N. Fund for Population Activities. Statements by the Agency for Interna-
tional Development indicate that such donations may be regarded as evidence of the
"commitment” to “control of population growth” which the Agency requires as a
condition for giving U.S. economic assistance to countries under Sections 102 and
104(d) of the Foreign Assistance Act. The Agency has stated that “because of the
perceived sensitivity of population programs, it has been more acceptable to many
countries to receive support through multilateral agencies such as the U.N Fund for
Population Activities" i and that “AID played an important role in establishing
UNFPA.” 2 Thus the direct contributions of the United States together with the
contributions made by recipients of U.S. aid mean that the U.N. Fund for Popula-
tion Activities receives most of its support from the United States.
Question 4. In other words, what percent of the forced abortions in China are
being paid for with U.S. taxpayers' dollars washed through this United Nations or-
ganization?
Answer. At a minimum the estimate would be 40 percent, but, as indicated in my
remarks above, when account is taken of U.S. tax funds channeled to UNFPA
through countries receiving our foreign assistance, it would be much higher.
Question 5. International Planned Parenthood Federation, according to its 1983
Report to Donors, plans to give China's population control program an additional
half million dollars. How much of that money comes from the U.S. taxpayers?
Answer. IPPF receives 25 percent of its income, about $12 million annually, from
the United States. In addition, it receives donations from the U.N. Fund for Popula-
tion Activities, which is supported by the United States, and from the Population
Crisis Committee, which receives support from UNFPA which in turn is supported
by the United States. Therefore a minimum of 25 percent of the IPPF donations to
China come from the U.S. taxpayers, and, when account is taken of the labyrinthine
financial connections of the world population control network, the proportion is
higher. In a word, U.S. taxpayers are footing a major part of the cost of forced abor-
tion in China.
Question 6. You said that a New York Times reporter using Chinese statistics says
that the Chinese population control program in one province costs 15 times the
annual cost of supporting a child. Why is U.S. AID through third party organiza-
tions supporting such a clear waste of money?
Answer. This obvious waste illustrates the fact that the drive for population con-
trol is not rooted in a rational assessment of the economic circumstances in any
country. The insistence that "over-population" is the cause of all human problems
provides a simplistic refuge from serious thought about real problems of economic
policy. It also provides a convenient rationalization for totalitarianism. The Chinese
economy is suffering from desperate and long-standing problems of misallocation
and underuse of valuable productive resources. Labor is used at only a fraction of its
potential; the same is true of land (yields in China are only a fraction of those
achieved in Korea and Japan) and industrial resources. These problems stem from
the extremely politicized nature of governmental economic planning and they
cannot be corrected within the constraints of the present Chinese political system.
1. Am Briefing Paper on Population for the Administrator's Retreat, June 20, 1981, p. 4.
2. NSSM 200, "Implications of Worldwide Population Growth for U.S. Security and Overseas
Interests,” December 10, 1974, declassified on December 31, 1980, pp. 121-122.
1030
The alleged "population problem” therefore serves as a handy scapegoat on which
to blame the economic and social failures and frustrations of the Chinese system.
Question 1. Richard Benedick, a Deputy Assistant Secretary of State and an
ardent proponent of population control, has been put in charge of planning for the
U.S. delegation, not yet selected for the International Conference on Population in
Mexico City in August. What sort of message does that send to our friends in the
rest of the world, particularly Latin America? if he were named chairman of the
U.S. delegation, would that be helpful to our national interests?
Answer. Richard Elliot Benedick is known throughout the world as a committed
proponent of world population control. He has stated to Congress, "I believe an in-
sistence on the 'right' to multiply indiscriminately represents a misplaced morali-
ty, "3 and he supports the use of what he calls “incentives in population control pro-
grams. 4 He has predicted that such incentives "will become an increasingly promi-
nent and necessary feature of human society in future years."5 He believes in the
necessity of “a major push to elevate population policies into a matter of urgent
global priority" (emphasis in original). He has stated that "strenuous efforts will be
required to reach the two-child norm.
The fervor of Mr. Benedick's commitment to strenuous population control efforts
renders him unfit to be the head, or even a member, of the United States delegation
to the World Population Conference. His presence on our delegation would send a
message to our friends and allies throughout the world that the United States is
determined to limit their fertility by all means at our disposal. Such a message
would create hostility even in countries whose governments may wish to limit popu-
lation growth. Other countries will react just as we would if West Germany or Saudi
Arabia were to demand that we limit births in the United States.
Question 8. In January 1984 the State Department issued a PIO bulletin based on
a statement by Vincent Barabba, the U.S. Representative to the U.N. Population
Commission. I understand you have read the State Department Bulletin on his
statement. Briefly what are your comments?
Answer. Mr. Barabba has issued a most immoderate statement which reflects
badly on our government and our country. He has made a number of statements
which have no basis in fact and has issued what might be regarded as an ultimatum
to the Preparatory Committee for the International Conference on Population to
prepare a draft statement which conforms to the most extreme prejudices of the
population control lobby. Mr. Barabba also shows a lack of courtesy in challenging
statements and forecasts made by the U.N. Population Commission.
Mr. Barabba's claim that high fertility is a cause of unemployment, underinvest-
ment, lack of development, deforestation, soil erosion, “lack of food and water,
health services, education, shelter," and other calamities is without any basis in
fact. There is no economic evidence or theory to lend any credibility whatever to
these wild charges. Distinguished economists, some of whom are quoted in my Ap-
pendix A,_have thoroughly discredited such myths. Peter Bauer of the London
School of Economics has refuted them in detail in his recent book on development,
"Equality, the Third World, and Economic Delusion” (Harvard University Press,
1981). It is profoundly embarrassing that such a statement as Barabba's should issue
officially from the United States.
APPENDIX A.—WHAT SOME ECONOMISTS HAVE SAID ABOUT "OVERPOPULATION"
Peter T. Bauer, London School of Economics: “It relies on misleading statistics; it
misunderstands the determinants of economic progress; it misinterprets the causal-
ities in changes in fertility and changes in income.
Mark Perlman, University of Pittsburgh: "... if we use antinatalist programs, we
do so for reasons other than those simply offered by what we as economists now
know." 9
8 ܙܙ
8 Prepared Statement of Ambassador Richard Elliot Benedick before the Subcommittee on
International Economic Policy and Trade Committee on Foreign Affairs, U.S. House of Repre-
sentatives, February 29, 1980.
4 Ibid.
3 Ibid.
6 Ibid.
? Testimony of Ambassador Richard Elliot Benedick before the Foreign Relations Committee,
April 29, 1980.
8 With Basil S. Yamey, "The Third World and the West: An Economic Perspective,” in W.
Scott Thompson (ed.), The Third World: Premises of U.S. Policy, San Francisco: Institute for Con-
temporary Studies, 1978.
9 Some Economic Growth Problems and the Part Population Policy Plays," Quarterly Journal
of Economics, Vol. 89, No. 2, May 1975, pp. 247-56.
1031
11
Goran Ohlin, University of Uppsala: ". the more rigorous the analysis and the
more scrupulous the examination of the evidence, the smaller is the role attributed
to population as an independent source of economics problems." 10
Nick Eberstadt, Harvard Center for Population Studies: “Over the past decade and
a half the American government has led a far-reaching and well financed effort to
reduce fertility and curb population growth in the world's poorer regions. The
spirit animating the American approach . . . was Malthusian. Malthusian theory is
a poor foundation for economic development policy.
Richard A. Easterlin, University of Pennsylvania: ".. there is little evidence of
any significant association, positive or negative, between the income and population
growth rates.” 12 “. . . of the increase in population] that the present world growth
rate would produce in 71/2 centuries, most would take place in the last 150 years of
the period projected.” 13 “it is difficult to build a strong case for such programs [of
population control].” 14
Colin Clark, Oxford University: “This hysterical clamer about population growth
leading to poverty, famine and uncontrollable environmental deterioration is not
only false; it has a still graver fault. It effectively distracts attention from the politi-
cal questions, which will constitute the world's real problems.” 15
Julian L. Simon, University of Illinois: "Tens of millions of U.S. taxpayers' money
is being used to tell the governments and people of other countries that they ought
to take strong measures to control their fertility . . . But no solid economic data or
analysis underlie this assertion. Furthermore, might not such acts be an unwarrant-
ed interference in the internal affairs of other countries?”' 16
Fred R. Glahe, University of Colorado: nations with the highest population
growth rates have also experienced the highest growth in real output per capita on
the average . . . it should be pointed out that there is no law of diminishing returns
with respect to technology ...'
" 17
APPENDIX B.-A CONSIDERATION OF THE Cost EFFECTIVENESS OF POPULATION
ASSISTANCE IN U.S. FOREIGN AID PROGRAMS
(By Jacqueline R. Kasun, Professor of Economics, Humboldt State University)
SUMMARY
The paper addresses the question whether the population control programs fi-
nanced by the United States as part of its foreign assistance effort are helping to
improve social and economic conditions in the countries in which they operate and
whether they are making a positive, cost-effective contribution to the conduct of
United States foreign policy.
Statistical studies reported in the economic literature have failed to support the
hypothesis that slower rates of population growth encourage higher rates of growth
in per capita output. The regression analysis conducted for this paper similarly
finds no such relationship. On the contrary, there is statistical evidence that higher
levels of per capita income tend to be associated with higher population densities
and also some evidence that, for less-developed countries, higher rates of per capita
output growth tend to be associated with higher rates of population growth. A com-
parison of the data for 74 less developed countries during the period 1960-1978
yields the latter result, confirming the results of at least one previous study.
Theoretical studies, including computer models, of the relationship between popu-
lation growth and economic growth have yielded contradictory results. Though the
Coale-Hoover model finds population growth to have a depressing influence on
output growth, the more recent work of Julian Simon finds just the opposite to be
10 “Economic Theory Confronts Population Growth," in Ansley J. Coale (ed.), Economic Factors
in Population Growth, New York: John Wiley, 1976, p. 1.
11“Population Control and the Wealth of Nations: The Implications for American Policy," a
Report prepared for the Undersecretary for Security Assistance, Science and Technology, Novem-
ber 24, 1981.
12 “Population," in Neil W. Chamberlain (ed.), Contemporary Economic Issues, Homewood:
Richard D. Irwin, 1973, p. 347.
13 Ibid., p. 339.
14 Ibid., p. 337.
Population Growth: The Advantages, Santa Ana: Life Quality, 1975, p. 105.
16 The Ultimate Resource, Princeton University Press, 1981, p. 7.
17 With Dwight R. Lee, Microeconomics: Theory and Applications, New York: Harcourt Brace
Jovanovich, 1981, p. 189.
1032
the case in the long-run. Other theoretical investigators have similarly disagreed
with one another.
The case for restricting population growth on environmental grounds is weak.
World food production has increased substantially faster than population since 1950,
with some of the most dramatic increases occurring in the less-developed regions.
World food-raising capability greatly exceeds present levels of output. Estimates of
the number of people that could be supported with presently-known food-raising
technology range from ten times to twenty-five times the size of the present world
population. These estimates assume that at least one-half of the earth's surface
would remain in permanent conservation areas and no more than one-fourth of the
ice-free land area would be used for agriculture.
Nor are industrial resources approaching exhaustion. They are, in fact, when
measured by the usual economic indices of scarcity, becoming less scarce. In the
future, resource specialists forecast that most of our metal needs can be supplied
from "essentially inexhaustible sources." Though the world distribution of proved
oil reserves is uneven, coal supplies are widely distributed and exist in quantities
sufficient for a thousand years or more, at present rates of increasing use. Other
energy sources are also promising.
There is no evidence that slower rates of population growth make it easier to deal
with the pollution resulting from modern technology. Successful environmental
clean-up efforts have occurred in some of the most densely-settled industrial areas,
apparently depending primarily on efficient government backed by popular will.
Efforts to control population growth in the interests of restricting the numbers of
the “politically volatile age groups" receive no support the literature on the causes
of political unrest.
The main issue in population control is the question of plan versus market. Evi-
dence from countries in all stages of economic development throughout the world
shows that families do adjust their child-bearing in accordance with their income
constraints. There is no evidence or logical reason to believe that families have
more children than they “should” have because of an ability to shift the costs of
their children to society. The so-called "free" goods, such as schools, for children in
all societies are not free but are paid for by increased tax burdens which reduce
family income and the ability and desire to have children.
There is no indication that social planners have better foresight or judgment than
families in the matter of determining the optimal size of population or its optimal
rate of growth. Indeed, since public planners do not risk their own resources in their
projects, their incentives to avoid mistakes are less keen than those of families.
Economists do not generally believe that "excessive population growth” is the
cause of urban poverty or unemployment in the less-developed countries. Also, there
is little evidence of “underinvestment." The evidence, on the contrary, is that it is
not families but development planners who have failed to behave rationally with
respect to economic constraints.
There is little evidence that the poor in the less-developed countries lack access to
means of family planning. Traditional methods of limiting births are known
throughout the world, and locally-produced modern contraceptives are now avail-
able in many countries. In most of the less-developed countries, however, large num-
bers of children (by Western standards) are still the ideal.
The population control programs supported by United States foreign assistance
appear to be having an adverse impact on our foreign relations. The official effort to
"motivate" foreign peoples and foreign governments to restrict births is arousing
hostility and resentment, as official accounts abundantly testify.
Finally, the need to eliminate the adverse impact of federal deficits on the domes-
tic economy makes it desirable to reduce federal expenditures wherever possible.
The questionable value of these budget items makes them ideal targets for elimina-
tion.
APPENDIX C.-CRITIQUE OF Two PAPERS
(1) Memorandum to Mr. James L. Buckley from James L. Malone on U.S. Popula-
tion Assistance; and
(2) AID policy paper on “Human Resources Development: The World Situation:
Population
(By Jacqueline R. Kasun)
The primary defect common to both of these papers is that they fail to provide
any evidence that United States expenditures on foreign population assistance con-
tribute in any way either to the improvement of economic and/or social conditions
1033
"5
in the recipient countries or to the achievement of United States foreign policy ob-
jectives.
The reason for this failure is no doubt the fact that no such evidence exists, since
in fact those less-developed countries with the higher rates of population growth
have shown higher rates of per capita output growth on the average.1
In lieu of evidence that United States population assistance improves economic
and social conditions in the recipient countries, the papers under review provide
other material which is alleged to be supportive of the case for population programs.
This material is of several types. The type which perhaps gives the most convincing
appearance of being “hard” data consists of conclusions drawn from a selected
group of computer models. Unfortunately the papers do not acknowledge the fact
that computer results depend on the assumptions built into the programs and that
the choice of assumptions is necessarily arbitrary. Nor do they mention that at least
one highly sophisticated computer model has demonstrated the long-run benefits of
population growth.2
The papers abound in unsupported, impressionistic assertions regarding the sup-
posed harmful effects of population growth and the supposed benefits of government
programs to reduce population growth. Thus the Malone memorandum states that
‘an extensive body of analysis” shows that high fertility limits investment and thus
acts as a "drag on per capita income growth.” 3 The reference for this statement is
a single article written by Nancy Birdsall.4 Birdsall, however, states in her article
that “The idea that rapid population growth slows per capita income growth and
exacerbates inequality rests chiefly on two assumptions. First, it is assumed that
with rapid increases in the number of workers, each worker produces less in rela-
tion to the land and capital each has to work with *
In other words, Birdsall has not at all presented "an extensive body of analysis”
to substantiate her conclusion. She has simply assumed her conclusion that rapid
population growth reduces output per worker. Having already assumed her conclu-
sion, she doesn't need another assumption to guarantee it but states one anyway:
Second, as the number of dependent children per worker increases, it is
assumed that a country's total savings will go down, restricting the money available
for investments in education and in physical capital like housing, roads, and facto-
ries." 6
This assumption, while not, like the first, guaranteeing that rapid population
growth must reduce per capita output and income, virtually does so, since it implies
that each worker must have less physical capital to work with when population
grows. The rest of the Birdsall paper is an elaboration of these assumptions and
their supposed consequences, “supported” by references to other writings in a simi-
lar vein, none of which provide any evidence to verify these fundamental assump-
tions but which merely refer to each other as sources of "support.'
In a word, the case for United States population assistance expenditures rests on
assumptions which in fact are unproved, unquestioned foregone conclusions for
which no evidence has been provided, despite massively financed opportunities to do
so by a host of publicly-subsidized investigators and agencies over recent decades.
This is what Mr. Malone calls "an extensive body of analysis.” At the same time,
the awkward fact, as pointed out above, is that the statistical record for the less-
developed countries since the 1950's does not bear out these assumptions or their
presumed effects. Per capita output has outstripped population growth and has done
so most conspicuously on the average in countries where population has grown most
rapidly.
The two papers under discussion, failing to show that higher fertility reduces per
capita output growth or that United States population assistance improves economic
or social conditions, quickly slides into lengthy discussions of the magnitude of pop-
ulation growth and the question whether government programs can reduce fertility.
On the first point, however, the significant issue is not the magnitude of population
66*
1
!.
Jacqueline R. Kasun, "A Consideration of the Cost Effectiveness of Population Assistance in
United States Foreign Aid Programs," submitted to the Undersecretary of State for Security
Assistance, Science and Technology, December 1981, p. 11; Colin Clark, Population Growth: The
Advantages, (Santa Ana: R.L. Sassone, 1972), p. 84.
2 Julian Simon, The Economics of Population Growth, (Princeton: Princeton University Press,
1977.
* James L. Malone, Department of Statė Information Memorandum to Mr. James L. Buckley
on U.S. Population Assistance, dated November 25, 1981, p. 9.
4 Nancy Birdsall, "Population Growth and Poverty in the Developing World,” Population Bul-
letin, Vol. 35, No. 5, December 1980.
5 Ibid., p. 14.
6 Ibid.
34-045 0-84_66
1034
growth but its effects, and, as shown above, the papers fail to show what these are.
On the second point, there is little doubt that governments which have sufficient
"commitment" to the goal of reducing population growth can accomplish this objec-
tive. Evidence for this fact dates at least from the Pentateuch. Contrary to the as-
sertions of the papers, however, this is not the proper test of the cost-effectiveness of
U.S.-financed population programs. It is incorrect to conclude, as the papers do, that
population programs are cost-effective because they reduce the size of the popula-
tion on behalf of whom private expenditures for consumption and public expendi-
tures for education and health might otherwise be made. Carrying this thought to
its logical conclusion would indicate that society would be better off if no children
were born, or, even better, if there were no people at all! Absurd as this is, it is the
thought underlying numerous AID policy papers on the cost-effectiveness of popula-
tion programs.?
The fact is, of course, that people are not only consumers but producers and tax-
payers. Society not only “saves" educational and health expenses when a life is not
lived but loses the productivity of that life. And, as other economists as well as
myself have shown, the typical human being makes a net contribution to society
which is not only economically substantial but rising in this latter part of the twen-
tieth century. 8
The papers aver that there is a large and rising unsatisfied demand for United
States population assistance. This contrasts with other State Department state-
ments regarding foreign “resistance” to U.S.-financed population programs. 9
It also contrasts with numerous accounts of such resistance appearing in articles
by private research specialists. 10 It is, nevertheless, not unlikely that there is some
supportive agitation by certain groups for the population programs. In the course of
spending many hundreds of millions of dollars on foreign "family planning” over
the past fifteen years, the United States must have helped to establish dedicated,
vocal pressure groups in many countries to campaign for increased spending, just as
has happened here in the United States. Pohlman has written about the local
"bread and butter" advocates of population programs. 11 There is no evidence, how-
ever, that the special concerns of these groups coincide with the interests of their
countrymen or with the foreign policy interests of the United States in a stable,
peaceful world.
? In addition to the papers under review, see Edward W. Abel, et al, “The Impact of Thai-
land's National Family Planning Program on Fertility Decline and the Implications for Short-
Run and Long-Run Government Expenditures”, Contract No. AID/DSPE-C-0062, (Research Tri-
angle Park, North Carolina: Research Triangle Institute, 22 July 1981); also “Notes on the Cost-
Effectiveness and the Benefit-Cost of Family Planning Programs”, prepared by AID, undated,
with references.
8 See Richard A. Easterlin, "Population", in Neil W. Chamberlain (ed.), Contemporary Eco-
nomic Issues, (Homewood, Illinois: Richard D. Irwin, 1969); also Simon, op. cit.; Jacqueline
Kasun, "National Economic Policy and the Family”, address before the American Family
Forum, Washington, D.C., July 3, 1980.
9 Select Committee on Population, Report, "Population and Development Assistance,” U.S.
House of Representatives, 95th Congress, 2nd Session, Washington: U.S. Government Printing
Office, 1978), pp. 55, 59; Department of State Bulletin, Vol. 80, No. 2036, March 1980, p. 13; AID
"Briefing Paper on Population for the Administrator's Retreat, June 20, 1981,” states on page 4
that there is a need for “a more progressive policy on the part of many host country govern-
ments, particularly those in Africa, the Near East, and some countries in Latin America." "In
too many countries,” the paper states, “understanding of the impact of population growth on
development is still lacking and the political will to intervene with population and family plan-
ning programs is also low.” On the same page the paper comments on the "sensitivity of popula-
tion programs”. in many countries and the consequent advantage of providing aid through multi-
lateral and private agencies rather than through AID itself. Surely such strategies would not be
necessary if there existed the large and unsatisfied demand for U.S. population intervention
claimed by the papers under review. Similarly, the language of U.S. foreign aid law which calls
for U.S. strategies to "motivate" countries and people to limit births suggests a more active role
for the United States than is acknowledged in the papers under review.
10 Edward Pohlman, How to Kill Population, (Philadelphia: The Westminster Press, 1971), pp.
116, 135, 161; Goran Djurfeldt and Staffan Lindberg, “Family Planning in a Tamil Village," in
Lars Bondestam and Staffan Bergstrom (eds.), Poverty and Population Control, (London: Aca-
demic Press, 1980); David Lucas and Helen Ware, “Fertility and Family Planning in the South
Pacific,” Studies in Family Planning, Vol. 11, No. 8/9, August/September 1981, pp. 303-315; Mi-
chele Goldzieher Shedlin and Paula E. Hollerbach, "Modern and Traditional Fertility Regula-
tion in a Mexican Community: The Process of Decision Making,” Studies in Family Planning,
Vol. 12, No. 6/7, June/July 1981, pp. 278-296; Mary Taylor Hassouna, “Assessment of Family
Planning Service Delivery in Egypt," Studies in Family Planning, Vol. 11, No. 5, May 1980, pp.
159-166.
11 Pohlman, op. cit., p. 137.
1035
104.12
The papers present a picture of the nature and intent of the United States-fi-
nanced population programs which is quite different from that appearing in other
official sources. The AID policy paper, for example, asserts on page 8 that “the basic
objective is to help developing countries that wish to slow down population
growth to develop and manage cost-effective voluntary family planning programs of
information and services.” This statement implies that the United States is merely
responding to foreign countries' requests for population assistance. Other official
United States statements, however, give quite a different view. Section 104(d) of the
International Development and Food Assistance Act of 1978 states that “all . . . ac-
tivities proposed for financing . . . shall be designed to build motivation for smaller
families in programs such as education ... nutrition, disease control, maternal and
child health services, improvements in the status and employment of women, agri-
cultural production, rural development, and assistance to the urban poor.” Section
102 of the Act states that U.S. assistance will be "concentrated" in countries which
demonstrate their “commitment and progress" by their "control of population
growth”, along with other indications of serious intent. An explanatory footnote in
the Report on Population and Development Assistance by the House Select Commit-
tee on Population states that “the whole of AID's development assistance effort"
was intended to be included within the population control provisions of Section
These official statements clearly show that the United States is not merely re-
sponding to other countries' requests for population assistance but is acting on its
own strong initiatives; according to law, all United States aid programs must be
"designed to build motivation for smaller families”; the entire foreign aid program
is intended to operate as a program of direct and indirect population control. Coun-
tries receiving United States aid are urgently impelled to implement programs to
achieve "control of population growth”, are monitored in their efforts to do so, and
are rewarded for these efforts by appropriately "concentrated” aid. So many official
pronouncements have stated these purposes and strategies frankly and at length 13
that the two papers under review must be regarded as curiosities for their represen-
tation of the United States as passively responding to outside initiatives in these
matters.
Both papers claim that the United States is providing assistance only for "volun-
tary” programs of “family planning.” This statement, too, is rather significantly at
variance with information from other sources. The so-called "village system" of pop-
ulation control adopted with United States assistance in Indonesia 14 and promoted
in public statements by United States officials 15 certainly strains the limits of the
word “voluntary.” Should a system which requires men to publicly report their
birth control practices, which sets birth control “targets” for villages, and which
provides rewards and penalties for meeting or failing to meet the “targets" be called
voluntary”?
The fact is, then, that the United States is using its foreign aid program as a
means for pressing other countries into adopting government programs to achieve
"control of population growth.” The control of population growth throughout the
world has become one of the primary, stated objectives—if not the single, overriding
objective--of the United States foreign assistance program. How does this fact affect
the conduct of United States foreign policy? Does such a policy make it easier or
more difficult to attain our primary objectives of world peace and prosperity? Does
it make it easier or more difficult to obtain other countries' cooperation in working
toward these objectives?
In answering this question, it may be helpful to consider what our response would
be if other countries were imposing similar conditions on economic relations with
us-if, for example, Saudi Arabia were to require that we reduce our rate of popula-
tion growth in order to obtain oil.
12 Select Committee on Population, Report, op. cit., p. 111.
13 See, for example, AID "Memorandum for Assistant Administrators, Mission Directors, Aid
Representatives and Principal Aid Officers,” dated June 11, 1980; also AIDAC cable (State
017208) to mission directors regarding population growth impact of ÁID assistance, dated Janu-
ary 1977.
14 The Population Council, Studies in Family Planning, Vol. 9, No. 9, September 1978, pp.
235,237, and Vol. 5, No. 5, May 1974, pp. 148–151, and Vol. 7, No. 1, July 1976, pp. 188–196; The
World Bank, World Development Report, 1980, (Washington, 1980), p. 80.
15 Ambassador Marshall Green, Coordinator of Population Affairs, U.S. Department of State,
Speech, “United States Perspectives on World Population Issues," 'to The Conference Board's
Conference on Population Trends and Implications, Dallas, Texas, March 30, 1977; AIDAC cable
(State 017208), op. cit.
1036
No doubt some Americans could be found who would endorse such a policy in en-
thusiastic statements for Saudi Arabian publication, but I find it hard to believe
that such a policy would genuinely improve relations between our countries. No
doubt, also, the Saudi Arabian government would be able to create convincing “evi-
dence” of an international “consensus” on the need for such a program, as has been
done by officials of AID. On May 21, 1980 Ambassador Richard E. Benedick de-
scribed in fascinating detail for Congress the methods used by his Office of Popula-
tion Affairs to create the appearance of an international “consensus” on the sup-
posed need for world population control. (See Attachment A.)
More importantly, what would happen if the United States were to abandon its
efforts to impel the less-developed countries to control their rates of population
growth? The papers under review say that the alternative to present policy is disas-
ter-increasing poverty, inequality, dependency, urbanization, crime, disease, politi-
cal unrest, revolution, and war-the entire litany of the population bomb school of
thought. Other economists as well as myself have dealt with this list in great
detail.16 Suffice it to say here that there is no evidence of any connection between
population growth and these problems or any evidence that reductions in population
growth cure any of these problems.
The point, however, lies deeper. The fact is that there is no evidence that, in the
absence of government programs, human beings will automatically breed them-
selves into misery, which must be assumed if such programs are to be regarded as
necessary. As I have shown in detail in my other paper on this subject, 17 a great
deal of evidence shows that human beings everywhere know how to control their
family size and do so in rational response to their economic circumstances. They do
so for the very good reason that they will bear the costs of any mistakes that they
make and they know this. It is not families who are out of control, but government
planners, whose programs of economic and social control have imposed enormous
costs on families throughout the world in recent decades, as shown in my other
paper. 18 Unlike families, planners do not bear the costs of their mistakes. They
therefore do not view risk in the same way as families do and they are able to in-
dulge their economic and ideological preferences at the expense of others. As shown
in my other paper, current world problems of rapid urbanization and unemploy-
ment are the result of such errors on the part of planners and not, as claimed in the
two papers under review, “overpopulation." 19
What then would happen if the United States were to abandon its attempts to
make other governments implement programs of population control? Any govern-
ment wishing to implement such a program would still be free to do so. The prod-
ucts and services necessary for such programs are available from private suppliers
throughout the world. In addition, families throughout the world are familiar with
traditional methods of controlling births.20 Families in all countries would be free
to use whatever means they chose, subject to whatever conditions their own govern-
ment might impose, to control their size. They would do this, as families have
throughout time, in fully human ways, not like laboratory animals or fruit flies in
bottles.
Above all, no one would then be justified in accusing the United States of at-
tempting to interfere in the personal reproductive affairs of citizens of other coun-
tries. Such a stance alone should contribute significantly to a more relaxed atmos-
phere in which to arrive at mutual agreement on those elements of international
policy which are truly essential to the interests of the United States.
[Whereupon, at 7 p.m., the subcommittee adjourned, subject to
call of the Chair.]
16 Julian Simon, The Ultimate Resource, (Princeton: Princeton University Press, 1981), pp.
249–256; Simon, The Economics of Population Growth, op. cit., Appendix, pp. 493–506; Easterlin,
op. cit.; Kasun, “A Consideration of the Cost Effectiveness of Population Assistance in United
States Foreign Aid Programs," op. cit.
17 Kasun, “A Consideration of the Cost Effectiveness,” op. cit.
18 Ibid.
19 Ibid.
20 Ibid.
APPENDIX
STATEMENT OF HENRY L. WALTHER, EXECUTIVE VICE PRESIDENT, U.S. DEFENSE
COMMITTEE, FAIRFAX, VA.
My name is Henry L. Walther and I am the Executive Vice President of the
United States Defense Committee.
The United States Defense Committee is a public interest organization dedicated
to a strong national defense and foreign policy.
We are an organization of over 100,000 Americans who come from all walks of
life; machinists, farmers, small businessmen, doctors, lawyers and retired service
personnel.
What binds all these people together is a concern that due to inaction by the Con-
gress our Nation's defenses and America's posture in the international community
have diminished over the past 20 years to such a point that our very future as a
free and independent nation may be in jeopardy.
Meanwhile the Soviets have moved relentlessly, both in their military build-up
and their aggressive foreign policy, toward their stated goal of world domination.
Nowhere is this more evident than in Central America and the Caribbean Basin.
It is for this reason that I submit this testimony in support of the Administra-
tion's full funding requests for military aid to our allies in Central America.
On behalf of the more than 100,000 members of the United States Defense Com-
mittee I would like to express to you today our concerns about the situation in Cen-
tral America in the following four areas:
The future that the people of Central America face if the United States allows the
Soviets and their Cuban proxies to take over the region,
The security threat the United States will face if both Central America and
Mexico fall and we are forced to station troops to protect our southern border,
The threat to out economic lifelines the United States will face if the Communists
take control of the Panama Canal and the other vital shipping lanes of the Caribbe-
an Basin,
The impact of a tidal wave of refugees America will inevitably face if Central
America falls to the Communists.
On the first point, I think it's clear from a humanitarian point of view that it is
important that the United States does not let these poor people fall to communism.
A look at history shows the Communists have a clear record of violations of
human rights throughout the world.
And now in both Nicaragua
and El Salvador this record continues.
In Nicaragua, the Marxist/Sandinista government has stolen the revolution from
the Nicaraguan people who fought for Democracy.
It has imposed a new dictatorship, has yet to hold free elections it promised-in
writing—to the Organization of America States, and has initiated heavy censorship
of the media and churches.
The Sandinistas have slaughtered thousands of Miskito Indians and forced the
rest off their land and into refugee camps.
Through the use of violence and threats the Sandinistas forced the Nicaraguan
people to demonstrate against the Pope and they also regularly disrupt church serv-
ices.
In Managua the Sandinistas burned the synagogue and persecuted the Jewish
population until almost the entire Jewish population of Nicaragua has fled.
In El Salvador, where over 80 percent of the people voted in the 1982 elections,
Cuban backed guerrillas have been systematically blowing up bridges, roads, culverts,
power stations and destroying the crops, forcing the farmers off their land.
As a result the Salvadoran economy has shown a 30 percent decline each of the
Since the guerrillas began their attacks, over 500,000 Salvadorans have fled to the
United States.
.
last 4 years.
(1037)
1038
And in the most recent elections, the Communist guerrillas blew up airplanes car-
rying ballot boxes and through acts of violence prevented many who tried to vote
from doing so.
Clearly, the cost in human suffering to the people of Central America has been
enormous and will only get worse if we allow the Communists to strengthen their
foothold in the region.
The second point I would like to make involves the security threat the United
States will face if both Central America and Mexico fall to the Communists.
The fact of the matter is that if we allow Central America and Mexico to fall we
will be faced for the first time with having to deploy troops to secure our southern
border.
Indeed the Soviets have made clear their intentions in Central America.
In Nicaragua the Soviets have built a military establishment larger than all the
other Central American nations combined.
The Marxist/Leninist government of Nicaragua has declared that they are build-
ing a 250,000 man militia.
Compare this with neighboring Honduras' total military force of 15,000 and El
Salvador's force of 32,000.
There are now over 10,000 “advisors” from Cuba, the Soviet Union, East Germa-
ny, Bulgaria, North Korea and the PLO advising the Sandinistas in Nicaragua.
This mammoth military build-up cannot be justified in terms of self-defense.
Rather they have established a Communist stronghold from which they can
launch their "revolution without frontiers," not only in Central America but Mexico
as well.
If Mexico should fall to Marxist subversion the United States will be faced with a
security threat unlike anything we have ever seen in the Western Hemisphere.
For the first time in our history we could have a hostile Communist nation on our
southern border with 1,000,000 hostile troops just across the Rio Grande.
We would be forced to grapple with ways to find funds to fortify our border-an
estimated cost of at least $50 billion a year—and increase the size of our army by as
many as 1 million men.
Clearly we face a grave security threat if we don't do what's necessary now for
Central America.
The third point I would like to make is the threat to our economic lifelines we
face if we allow our vital shipping lanes and our vital resources to fall into the
hands of the Communists.
Geographically, the islands of the Caribbean form relatively narrow passages
through which ships must navigate, making it very easy for the Soviets to threaten
thesc choke points.”
Nearly two-thirds of America's foreign trade and one-half of America's petroleum
pass through the Caribbean Basin.
Additionally, the United States imports 97 percent of its manganese, 93 percent of
its bauxite and 76 percent of its nickel.
Most of the required amounts of these strategic minerals-essential to America's
aerospace and communications industries are supplied by Caribbean nations
through the Caribbean "choke points."
And in a European crisis, at least half of our supplies for NATO would go through
these areas by sea.
If these sea lanes were to be shut down by Marxist forces, we would not be able to
meet our commitments at home or to our NATO allies abroad.
The fourth point I will discuss is the potential refugee crisis we face if we allow
Central America to fall to the Communists.
The fact of the matter is that we face the possibility of 10 to 20 million refugees
pouring into the United States.
One only has to look at past refugee patterns from other Communist takeovers to
realize the actual number of refugees that will come into the United States from
Central America.
For example, when Cuba fell, fully 10 percent of the population fled that country.
And those people had to go by boat.
Similarly, when Vietnam fell, again more than 10 percent of the people fled.
And right now from Afghanistan; over 16 percent of their people have already
fled. And if the Soviets ever succeed in stopping the rebellion there, the figure could
reach 40 percent.
But using the low 10 percent estimate, 2.5 million refugees would stream out of
Central America alone.
With an average cost to the American taxpayers of some $4,500 per refugee, the
yearly bill to the American taxpayer would be $10 billion.
1039
That doesn't include the cost of protecting our southern border which for the first
time ever last year saw over 1 million illegal aliens cross into the United States
despite the fact we spent $225 million trying to stop them.
Nor does it include what would happen if Mexico, a country ripe for Communist
picking, should fall.
According to the Co-ordinator of Refugee Affairs, at least 7,500,000 refugees would
flee into the United States from Mexico alone, at an additional cost of $30 billion a
year.
That's just the tax bill.
The social problems will be dramatic.
They will be forced to leave their homes and the land they love to come north in
search of freedom.
Once here they will have to learn a new language and find jobs.
And, unemployment rates would go through the roof, creating depression-era con-
ditions, complete with bread lines and soup kitchens.
Clearly, if we allow Central America and Mexico to fall to the Communists the
impact of the tidal wave of refugees will be devastating.
Finally, I would like to say that the Reagan Administration-with the recommen-
dations of the National Bipartisan Commission on Central America-has developed
a comprehensive plan for preventing further Communist takeovers in Central
America.
Vital to this overall plan is the Administration's military aid requests for El Sal-
vador, Honduras, Costa Rica and Guatemala.
Frankly, any private investment or economic aid sent to Central America would
be like pouring money down a drain unless a security shield is provided and the
military situation is resolved.
Tragically, America has been doing just enough in Central America not to lose
but not enough to win.
And this is unfortunate since history shows that a stalemate in guerrilla war
works to the advantage of the guerrillas in the long run.
In fact, General John Vessey, Chairman of the Joint Chiefs of Staff, has stated
that in El Salvador in past years, Congress has appropriated only one-fourth of what
the United States should be spending to defend against Communist aggression.
In recent years the United States has stood by and watched while the Commu-
nists established control over Suriname, Nicaragua and Guyana.
Decisive action is needed now in the Central American theatre.
Congress must be committed to the re-establishment of the Monroe Doctrine and
to full military funding as the cornerstone of America's Latin American policy to
stop the Soviet/Cuban attempts to undermine the pro-American governments of
Central America.
On behalf of the 100,000 members of the United States Defense Committee, we
ask that at minimum you support the Administration's full military aid requests for
Central America.
And we ask that you look at the desirability of increasing the aid now in order to
avoid having to spend substantially higher amounts later.
First and foremost, the future of America depends on it.
But also because to deny the freedom loving people of Central America the help
they now so desperately need would be nothing short of a tragedy.
1041
ARRII QR
STITUTE
DEVELOPMENT
American Institute for
Free Labor Development
1015 Twentieth Street, N.W., Washington, D.C. 20036 (202) 659-6300
Cable Address: FREELAB
OFFICERS
Lane Kirkland. President
Martin J. Ward. Vice President
Glenn E. Watts. Secretary-Treasurer
William C. Doherty. Jr.. Executive Director
BOARD OF TRUSTEES
Luis Anderson Victor Artiles • Sol C. Chaikin Julio Cruzado Zavala .Tulio E. Cuevas
Thomas Donahue. David J. Fitzmaurice. Thomas W. Gleason • Robert F. Goss. James E. Hatfield
Richard I. Kilroy • Helcio Maghenzani Lloyd McBride . Frederick O'Neal. Charles H. Pillard
Albert Shanker • Jose Vargas Frank L. Walcott • William W. Winpisinger • William H. Wynn
STATEMENT OF WILLIAM C. DONERTY, Jr.
EXECUTIVE DIRECTOR OF THE
AMERICAN INSTITUTE FOR FREE LABOR DEVELOPMENT
TO THE
SUBCOMMITTEE OF WESTERN HEMISPHERE AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS, U.S. SENATE
MARCH 20, 1984
WASHINGTON, D.C.
The AFL-CIO would first like to express its appreciation to this Subcommittee
for the opportunity to comment on the situation in Central America and, in particular,
on the work of the National Bipartisan Commission on Central America and the
legislation proposed by the Administration for its implementation.
For many years, but especially since the events of 1979, a debate has been
raging among those who have lived, worked, studied or have had other interests in
Central America. The debate has centered on U.S. foreign policy, with the implicit
and totally justifiable assumption that U.S. policy must serve U.S. interests.
(There
are those, of course, who would not accept this assumption, and the AFL-CIO's
position is that they contribute nothing of substance to the debate.)
Simple solutions to complex problems are almost invariably wrong, and so it is
with the suggestions that the U.S. abandon the area or, at the other extreme, depend
on the use of military force.
Attributions of guilt to the United States for the
situation in Central America may embody a grain of truth, but suffer from gross
over simplification. The description of the cause of the region's revolutionary problems
have ranged from a historic local pattern of injustice and violation of human rights to
Twenty Years of Partnership for Progress
1042
- 2
2.
the identification of the influence and support of revolutionary movements by an
international communist conspiracy.
Against this backdrop of increasingly polarized debate two of your colleagues in
the Senate, realizing that a successful U.S. policy toward the area must be based on
the support of the American public, stepped forward on June 15, 1983 on the Senate
floor to propose the creation of a Central American Commission which later came to
be known as the National Bipartisan Commission on Central America.
It was no
accident that one, Senator Mathias of Maryland, is a Republican and the other, Senator
Jackson of Washington, was a Democrat. Senator Henry M. Jackson, of course, is no
longer with us, and we have attempted to honor his memory by the designation of the
work of the Commission, which he and Senator Mathias suggested, as the "Jackson
Plan."
The work of the Commission is now well known, and reflects the unanimously
agreed upon suggestions of twelve distinguished citizens representing various sectors
of the society. Lane Kirkland, President of the AFL-CIO, of course represented
American labor.
Both Republicans and Democrats were represented, as were the
business and academic communities. Their studies required listening to months of
testimonies from persons and organizations representing every conceivable point of
view. Members of the Commission took several trips to Central America and visited
the Contadora nations where, again, they listened to the opinions of distinguished
Latin Americans. The end result of their work, the Report of the National Bipartisan
Commission on Central America, is, in the opinion of the AFL-CIO, the basis for a
successful long term U.S. foreign policy toward the area.
In this regard, two concepts are particularly noteworthy. First is the concept
of "conditionality", which states that necessary changes must occur in the social and
political spheres if our aid is to be given. This means that progress on those fronts
must take place first, and be demonstrated
not just promised
before aid,
particularly military aid, be granted.
1043
- 3 -
The second important concept of the Report, the creation of an effective new
organization to
promote social and political change (the Central
American
Development Organization, or CADO), is absolutely essential to the development of
the region and U.S. security. The primary functions of CADO will be to encourage the
development of democratic private institutions, to assure that Central American
nations respect human rights, and to foster pluralistic societies in which free and
honest elections determine who will govern.
The AFL-CIO is an enthusiastic supporter of the Commission's Report. The
Executive Council issued a statement, unanimously approved, on February 21, 1984
(included as Attachment No. 1 to this Statement) which endorsed the work of the
National Bipartisan Commission on Central America and strongly called upon the
Administration to put it into practice.
The AFL-CIO has not supported a continuation of military aid to El Salvador as
long as there has not been demonstrated progress in reforming the judicial system and
in obtaining justice in the cases of American citizens killed by 'death squads.' For that
reason we object to the wording of the section on military assistance, which states
that such aid "be employed actively to foster human rights' objectives,
the
establishment of the rule of law and an effective judicial system." (Underscoring
added.) "To foster" is quite different than demanding the "demonstrated progress"
called for in the Bipartisan Commission's report.
We, in turn, call upon the
Administration to return to the language and the intent of the Commission to enforce
"conditionality" in the aid process.
The AFL-CIO finds the section in the legislative proposal on CADO to be less
than fully descriptive of the new organization and its functions. We have engaged in
detailed conversations on this point with Administration officials and have been
assured that the intent of the Commission's suggestions with regard to CADO can be
implemented without extensive wording changes in the proposal.
(Please see
A
1044
- 4-
Attachment No. 2 to this statement, which contains a summary of these discussions.)
A more detailed statement on the AFL-CIO position on CADO can also be found in our
February 23, 1984 presentation to the House Subcommittee on Western Hemisphere
Affairs.
The AFL-CIO has for several years been on record as favoring U.S. government
support for land reform, particularly in El Salvador and, even more particularly, for
the provision of funds to compensate former landowners.
We were pleased to see
support for this concept in both the Commission's Report and the proposed legislation.
The reasons for this are manifold: to expedite the issuance of definitive titles to the
new owners, which is denied by Salvadoran law until compensation is paid; to reduce
ex-landlord resistance, including illegal evictions and other more violent actions; to
eliminate, at least in part, the issue of inequity; and, by accomplishing these ends, to
perfect and institutionalize the land reform program.
Under the past two
administrations, the program has been a central feature of U.S. foreign policy and,
therefore, the United States should provide the monetary assistance to remove this
obstacle to its successful implementation, demonstrating that compensation is better
than confiscation.
We would like to close this statement with a call for patience and understanding
of the problems of countries which, for a variety of reasons, are far different than our
Own.
Even without the current violence and the world economic crisis, the countries
of Central America would be faced with economic hardships more severe than those
which existed for us during the heights of the Great Depression.
Under these
circumstances, economic development theories which have served us well are
perceived in Central America as simply maintaining an undesirable status quo. Thus,
there has been a call for revolution, indeed heeded by many who are in reality good
democrats. The test of "good and necessary" change - some would say "revolution"
has less to do with economic structures than with the guarantees of rapid improvement
1045
- 5-
(including change toward mixed economic systems) within the context of individual
freedoms, observance of human rights, freedom of association, and freedom of
political expression. Changes of this kind represent the types of democratic evolutions
in Central America worthy of the support of U.S. foreign policy and epitomized in the
Report of the National Bipartisan Commission on Central America.
1046
ATTACHMENT #1
Statement by the AFL-CIO Executive Council
on
The Report of the "Kissinger Commission"
February 21, 1984
Bal Harbour, FL
The report of the National Bipartisan Commission on Central America closely
parallels the views expressed by the AFL-CIO in Executive Council statements and
convention resolutions. Its recommendations represent a comprehensive and long overdue
approach to Central America's urgent need for massive social, economic and political
reform, and lay the basis for constructive bipartisan action to meet that need.
The Reagan administration is undermining the possibility of such action by
seeking to evade the Commission's recommendation that military aid to the government
of El Salvador be conditioned upon "demonstrated progress" by that government in ending
human rights abuses. The Commission clearly states:
With respect to El Salvador, military aid should, through
legislation requiring periodic reports, be made contingent upon
demonstrated progress toward free elections; freedom of
association; the establishment of the rule of law and an effective
judicial system, and the termination of the activities of the so-
called death squads, as well as a vigorous action against those guilty
of crimes and the prosecution to the extent possible of past
offenders. These conditions should be seriously enforced."
This was also the position adopted by our 1983 Convention, which said:
"The AFL-CIO reiterates its insistence that aid to the
government of El Salvador be contingent upon its progress in
implementing the land reform program, protecting trade union
rights, establishing a just judicial system, and bringing the right-
wing 'death squads' under control. Until we are satisfied that
progress is being made in these areas, the AFL-CIO will not support
military aid to the government of El Salvador."
1047
- 2.
But the Administration has opposed legislation requiring the President to
certify progress in these areas as a condition for providing military aid to El Salvador. Its
request for a fourfold increase in such aid this year skirts this condition and thus violates
a central principle of the Commission report.
The AFL-CIO is not convinced that the government of El Salvador has met the
conditions set forth in the Commission report, and we therefore do not support military
aid to that government at this time.
The AFL-CIO commends the Commission for its recognition that the crisis of
Central America is rooted in indigenous and long-festering social, economic and political
injustices which must be addressed by U.S. policy.
Though recognizing that these injustices are perpetuated by violent right-wing
extremists and exploited by forces backed by the Soviet Union and Cuba, our 1983
Convention resolution noted, "the deep-seated social and economic problems in the region
cannot be solved by military means alone." Similarly, the Commission report states that
"until rapid progress can be made on the political, economic and social fronts, peace on
the military front will be elusive and fragile."
The Executive Council welcomes the Commission report's emphasis on the need
for U.S. Policies to
"encourage the Central American nations to develop and nurture
democratic cultures, institutions and practices, including . . . free
and democratic trade unions. The importance of unions, which
represent millions of rural and urban workers, has been firmly
established in the region. They have been not only an economic
force, but a political one as well, opposing arbitrary rule and
promoting democratic values.
The AFL-CIO also welcomes the Commission's proposal that a Central
American Development Organization (CADO) be created to "provide a continuous and
coherent approach to the development of the region" in all its dimensions -- "economic
prosperity, social change, political modernization and peace." Membership would be open
to the seven countries of Central America and to the United States, with each country's
1048
- 3 -
delegation including representatives of "a democratic trade union movement, of business
and/or the government." Such a tripartite structure
similar to that of the International
Labor Organization
would strengthen the role of the democratic trade union movement
throughout the region.
In addition, Central American participation in CADO would "turn on acceptance
and continued progress toward the protection of personal and economic liberties, freedom
of expression, respect for human rights, and an independent system of equal justice and
criminal law enforcement."
The National Bipartisan Commission on Central America was conceived not by
the Administration but by Congressional leaders, such as Congressman Michael Barnes,
Senator Charles Mathias and notably the late Senator Henry M. Jackson, who understood
the importance of free trade unionism in the development of political democracy and
social justice in Central America. In participating in the work of the Commission, the
AFL-CIO sought to ensure that the views and interests of the trade unions of Central
America, with which we have warm fraternal relations, were effectively represented.
The Executive Council believes that the Commission's report reflects their, and our, hopes
for the region's progress.
1049
ATTACHMENT #2
March 1, 1984
Mr. M. Peter McPherson
Administrator
Agency for International Development
U.S. Department of State, Room 5942
Washington, D.C. 20523
Dear Peter:
By way of further clarification of an agreement by the Administration on the
essential recommendation of the National Bipartisan Commission on Central America
the establishment of the Central American Development Organization -- the AFL-
CIO and the Council of the Americas attach the following memorandum.
Sincerely,
Alfred Cumming
Director
Government Affairs
Council of the Americas
William C. Doherty, Jr..
Executive Director
American Institute for
Free Labor Development
Encl.
34-045 0-84-67
1050
CENTRAL AMERICAN DEVELOPMENT ORGANIZATION
OBJECTIVES
The objectives of CADO are to:
encourage regional development in its broadest sense
not only through
sound economic growth, development and reform, but also through demonstrated
progress in the areas of human rights, democratic institution building, more equitable
wealth distribution, and other measures designed to lead to constructive political
change;
provide a more effective decision-making role for the private sector,
including labor, small and medium sized businesses, and all types of democratic
cooperatives in the development process;
promote a regional approach to development that will place a premium on
intra-regional cooperation.
STRUCTURE
Membership would be open to representatives of the seven Central American
countries and the United States and other donors. Membership would be contingent on
acceptance of the above objectives. Decisions on expenditures would also be guided by
those same objectives. Other donor countries would be encouraged to coordinate any
development activities through CADO.
The Organization would be chaired by the
Administrator of U.S. AID or his designee. A Central American executive director
would be elected by the members. The 32-person assembly would be modeled on an
ILO tripartite structure that includes from each country:
two government representatives;
one business representative selected by the country's business community;
1051
- 2 -
one labor representative selected by the country's democratic labor group.
To avoid creating a new, expensive, and unnecessary bureaucracy, a small, but
highly qualified and experienced staff of about twelve professionals would provide
necessary support.
The staff would evaluate the proposals, make any additional
recommendations, and submit a proposal list to the delegates for debate and final
selection. Delegates also would have an opportunity to recommend specific programs.
The above would, of course, be subject to further discussions and negotiations
among the countries participating in the creation of CADO.
OPERATING GUIDELINES
The Organization would have effective veto power over the disbursement of 25
percent of the appropriated funds for each country program. The program funds would
be channeled through established AID programs.
The Organization would not administer programs, but would be expected to
consult with AID on a variety of possible programs for purposes of meeting the goals
of CADO.
All decisions of CADO in connection with the disbursement of funds would
be based on the approval of a simple majority.
The "dual key" mechanism will allow disbursement of the above mentioned 25
percent of appropriated funds only if both the U.S. Chairman and a simple majority of
CADO are in agreement. In other words, a simple majority of the CADO would have
effective veto power over expenditures.
Countries not meeting the human rights
provisions mentioned under "OBJECTIVES", as determined by a simple majority of
CADO, would be declared ineligible for participation in CADO programs.
SECURITY AND DEVELOPMENT ASSISTANCE
(INTERNATIONAL NARCOTICS CONTROL)
WEDNESDAY, MARCH 21, 1984
UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
1.C.
The committee met, pursuant to notice, at 10:07 a.m., in room
SD-419, Dirksen Senate Office Building, Hon. Paula Hawkins pre-
siding.
Present: Senators Hawkins, Pell, and Biden.
Senator HAWKINS. This hearing will come to order
Senator Biden is going to join us. He has requested that we start
without him. He will be here shortly.
This is the first time in a series of full committee hearings on
international narcotics control. Today we will receive testimony on
the fiscal year 1985 international narcotics control authorization
request and the so-called Hawkins amendment, which links foreign
aid to drug eradication.
No threat strikes America more frequently and savagely than il-
legal narcotics. Its deadly impact is felt in failed education, violent
crime, impaired national defense, reduced productivity, addiction,
and death. And the menace continues to grow.
The 1984 National Narcotics Intelligence Report found sharply
higher world production of heroin, cocaine, marijuana, and hash-
ish. Because over 90 percent of the illegal drugs consumed in the
United States are produced abroad, these huge foreign supplies
have resulted in lower U.S. street prices and subsequently higher
abuse, addiction, and death.
The most recent report by the National Institute on Drug Abuse
revealed that heroin addiction and death is now at a 5-year high.
There are an estimated 500,000 men, women, and, yes, children
who abuse heroin in the United States. Emergency room mentions
of cocaine have increased by 20 percent during the past year. There
was a 13-percent increase in marijuana-related hospital emergen-
cies during 1982.
Today, the Federal Government has committed an unprecedent-
ed amount of resources to combat the flow of illegal narcotics. ith
the repeal of the Posse Comitatus Act, the U.S. Armed Forces can
now assist State and local law enforcement officers in their efforts
to stop drug traffickers.
The South Florida Task Force, under the leadership of the Vice
President, has provided Florida with additional Federal judges,
more prosecuting attorneys, and hundreds of additional law en-
(1053)
1054
forcement personnel. As a result, drug arrests are up 27 percent.
Marijuana seizures are up 23 percent. Cocaine seizures are up 54
percent. These results are impressive, but the threat of these for-
eign narcotics continues to skyrocket.
On Miami's streets, we now have twice the supply of cocaine at
one-half the price, $20,000 per kilo. Nationally, emergency room
mentions of heroin, cocaine, and marijuana, as I have stated, are at
a 5-year high, in spite of the task force that is in place in south
Florida. Time and time again we have seen that the most effective
means of stopping narcotics is to attack them at their foreign
source.
Last year, by a vote of 96 to 0, the Senate passed the Hawkins
amendment, which links foreign aid with drug eradication. The
amendment was signed into law by the President on November 22,
1983, and it requires that all major drug producing countries de-
stroy their illegal crops as a condition for U.S. foreign aid and
international loans.
Drug eradication is in the best interests of all nations, not only
the United States. When a country's leadership cares about inter-
national narcotics control, production can be controlled, and abuse
lowered.
In 1972, Turkey was the source of nearly 80 percent of the heroin
consumed in the United States. Today, illegal opium poppy is no
longer cultivated in Turkey, and that country has become a model
for drug eradication. This success was achieved only through coura-
geous government leadership and Turkey's dedication of extensive
personnel and resources.
Recently I visited Turkey and met with Prime Minister Ozal,
who expressed Turkey's continued support for aggressive drug
eradication. I was very encourąged by his government's efforts to
stockpile and safeguard illegal opiates and to dedicate a significant
proportion of their law enforcement agencies in every province to
specialized narcotics enforcement.
To date the government has stockpiled nearly 70,000 tons of
poppy capsules with 49,000 tons buried in the ground. Among the
78,000 officers in the Turkish police, more than 1,000 are dedicated
to drug enforcement. Legal opiates produced in Turkey are strictly
regulated and controlled by the Turkish Government. Because of
this careful oversight, diversion from processing in Turkey is non-
existent. Excess planting by licensed farmers is very rare.
Sadly, one country, Colombia, continues to permit expanded nar-
cotics production and processing. The 1984 NIC report revealed
that Colombia was the world's leading producer of marijuana, with
an estimated 12,500 tons to 15,000 metric tons in 1983. That is an
increase of almost 30 percent over 1982.
During the past 3 years, Colombia has increased its coca cultiva-
tion by 1,000 percent, and it is now at 12,800 metric tons. It also
continued to be the world's leading processor of cocaine. Although
Colombia has signed an extradition treaty with the United States,
it still refuses to extradite any Colombian charged with drug traf-
ficking by U.S. law enforcement.
Time and time again it has been shown. Drug producing coun-
tries always seem to develop their own severe drug abuse problems.
Today Colombia is experiencing rapidly growing problems with
1055
children smoking basucos, a deadly mixture of cocaine and mari-
juana.
As in many other nations, profits from the sale of illegal drugs in
Colombia often end up in the pockets of antigovernment forces who
use this vast ill-gotten wealth to finance terror and destruction. By
its failure to eradicate vast cultivations of marijuana and coca, Co-
lombia has allowed terrorists to reap huge profits, while the gov-
ernment loses control. Only last week, a heavily armed guerrilla
movement, the M-19, attacked a Colombian jail and freed 125 dan-
gerous inmates.
During consideration of the proposed 1985 foreign aid bill, I
intend to oppose all direct and indirect aid to Colombia until they
eradicate a minimum of 10 percent of their illegal crops. Too many
young American lives have been destroyed to continue business as
usual.
Our first witness this morning will be Francis Mullen, Adminis-
trator of the Drug Enforcement Administration (DEA). Due to
meeting with the Attorney General of Panama, Mr. Mullen will
only be able to appear before this committee for a limited period.
Welcome, Mr. Mullen. Do you have a statement?
STATEMENT OF HON. FRANCIS M. MULLEN, JR., ADMINISTRATOR,
DRUG ENFORCEMENT ADMINISTRATION
Mr. MULLEN. Yes, I do, Senator Hawkins, a very brief statement.
I am pleased to be here today before the Foreign Relations Com-
mittee to discuss the role of the Drug Enforcement Administration
in the international drug control effort. Unlike many other inter-
national problems, drug trafficking and abuse have a direct impact
upon millions of American lives every day.
The Drug Enforcement Administration, along with the other
agencies represented here today, is totally committed to curtailing
illicit drug production and trafficking. We believe that this is an
achievable goal, although a difficult one.
Senator Hawkins, you and other members of the committee are
cutel aware of the international dimensions of the U.S. drug
problem. These concerns have been expressed in your legislative ef-
forts and accomplishments. The effects of drug trafficking have
taken its toll heavily in your home State. You have had private dis-
cussions, I know, with many of us here today regarding how we can
more effectively address this problem. You have had private meet-
ings here in Washington with many senior officials of source and
transit countries. You have inspected many of the actual source
areas and personally relayed the U.S. Congress deep concerns to
the heads of states.
These activities have complimented those of the Attorney Gener-
al, the Secretary of State, and others. We see the results in the
agreement of the Government of the People's Republic of China to
curtail production of methaqualone, and most recently in President
Zia's decision to enact stronger penalties for drug trafficking in
Pakistan.
Anyone who has given serious thought to our Nation's drug prob-
lem knows that we cannot fully succeed here in the United States
unless illicit drugs are controlled at their source. All of the good
1056
will, commitment, and resources devoted to domestic drug law en-
forcement serves to contain the problem and limit its impact. If we
are to have any significant reduction in the availability of illicit
drugs in the United States, then we and the governments of other
nations must work to eliminate the cultivation and production of
illicit drugs in the source and transit countries where the drug sup-
plies are most heavily concentrated.
I will not dwell on the scope of the drug problem today: You
have recently received the international narcotics control strategy
report from the Bureau of International Narcotic Matters. This
most comprehensive report clearly delineates the problem we face.
The Drug Enforcement Administration worked in close consulta-
tion with the State Department on this report. Suffice to say that
we still suffer from the widespread availability of heroin, cocaine,
and marijuana from foreign sources.
Specifically, in the area of assistance to other countries, DEA has
assigned 276 positions to 67 offices in 42 countries throughout the
world. The principal thrust of DEA's foreign effort focuses on pro-
viding assistance to foreign source, transit, and victim nations in
developing effective drug law enforcement programs.
Our activities center on the ability of DEA to provide expert
advice and authorized investigative intelligence and training assist-
ance to those countries most critical to the reduction of drugs des-
tined to the United States.
Our commitment to solve our own drug problem in the United
States must be matched by a parallel commitment to work with
foreign nations in solving their drug problems. Long-term success
requires that we work just as hard overseas as we do here at home.
We must work on all fronts, at the local, national, and internation-
al level.
I am very optimistic that with your continued support, the part-
nership of the agencies represented before you today will make sig-
nificant progress in our efforts.
That concludes my statement, Senator Hawkins, and I would be
pleased to answer any questions you may have.
Senator HAWKINS. Thank you, Mr. Mullen. Under your leader-
ship, the Drug Enforcement Administration has made more ar-
rests, more seizures and convictions than ever before, and you are
to be complimented for your great dedication to this war on drugs.
Mr. MULLEN. Thank you.
Senator HAWKINS. Recently, as you know, I led a Senate investi-
gative mission to the major opium-producing countries. Without ex-
ception, foreign law enforcement officials had praise for the DEA,
for the training that you have given their personnel. I think it is a
very valuable role that you are playing.
Would you describe the role of the DEA agents in the training
abroad?
Mr. MULLEN. Yes, we have a total of about 180 agents overseas,
and not only are they there to conduct investigations and to ex-
change and develop intelligence, but we do afford training to for-
eign officers in the areas of drug investigations, drug identification,
and most recently we have made a substantial effort in the area of
seizure and forfeiture of assets. This is an area of particular inter-
1057
est in Thailand, Hong Kong, Peru, and other Latin American coun-
tries.
I believe that in the past 10 years, and I know that is going back
a long way, we have trained over 17,000 foreign police officials in
narcotics investigations.
Senator HAWKINS. In Section 481 of the Foreign Assistance Act,
as adopted by Congress in 1971, which established the Internation-
al Narcotics Control function under the direction of the President
and the Department of State, if you read all they are supposed to
do with the money they get for foreign aid, it says.
Training for foreign personnel in narcotics enforcement and related procedures
and coordination of international efforts with domestic drug abuse strategies.
Does the training you provide and the funds that it costs come
from the DEA budget, or does it come from the State Department.
Mr. MULLEN. It comes from both areas, Senator Hawkins, but
when we are training overseas, we receive funding from INM.
Senator HAWKINS. I am concerned, as are many other Senators,
that the narcotics profits are financing terrorism, as we read in the
paper daily. The Government of Cuba is facilitating in the flow of
narcotics into Miami by providing safe harbor, refueling, repair of
vessels for the traffickers, and as you know recently four senior
members of the Cuban Government were indicted in Miami for
their role in drug trafficking.
Could you describe for me and the committee the link between
narcotics profits and terrorism? Specifically I am interested in M-
19 of Colombia, who have made headlines this morning, the Shin-
ing Way in Peru, and the Bulgarian connection that we read a lot
about.
Mr. MULLEN. Yes. You have identified two governments, I be-
lieve, which are institutionally involved in facilitating drug traf-
ficking activity. The Bulgarian Government, which I will deal with
first, does, we believe, facilitate drug trafficking activity through
their nation. We believe that drugs that are seized often show up
back in the traffic after having been seized, and we believe that
these funds obtained in this manner are used to obtain hard cur-
rency and to support terrorist activities in other parts of the world.
There is a much clearer picture in my mind in Latin America.
We have clear evidence of Cuban involvement in facilitating drug
trafficking activity, and even though there has been extensive pub-
licity of late regarding this matter, this activity continues. We con-
tinue, for example, to seize vessels and aircraft and the ship's log
or aircraft log shows that the aircraft had a stop in Cuba.
Recently there was a case whereby an aircraft was seized, and by
virtue of the time it took to get to the United States from Latin
America, it was clear it had to have had a stop in Cuba, and an
examination of the gasoline in the aircraft showed that it could not
have been obtained at the origin of the flight, nor could it have
been obtained in the United States.
You mentioned the recent activity relating to M-19. We have
had substantial activity this past week in Colombia on the part of
the Colombian authorities, and they did obtain information regard-
ing the location of what was believed to have been a single labora-
tory site, and 40 Colombian national policemen were sent to the lo-
1058
cation, but upon arriving found that they were opposed by at least
100 guerrillas believed to be members of the FARC, and this is a
militant armed wing of the Communist Party in Colombia.
And at this time I understand that there are now 1,000 Colombi-
an army troops in the area, and nine laboratories have been locat-
ed, and it is estimated that somewhere in the area of 12,500 kilo-
grams of finished cocaine hydrochloride or cocaine base, which is a
1-to-1 relationship to the finished product, have been seized, and
much of it destroyed.
There are observers from the embassy on the scene confirming
the finds and that the seized contraband is being destroyed. In ad-
dition, they discovered 10,000 barrels of fuel and ether, and as you
know, one barrel of ether would result in the preparation of about
ten kilograms of finished product. So it is a very substantial discov-
ery in Colombia, and in my opinion the Colombian national police
and the military there are doing an outstanding job once they re-
ceive information and have intelligence and are able to proceed
against a target.
But if I may add, Senator Hawkins, in this case we do believe
that the guerrillas were actually involved in the preparation and
protecting of the site.
Senator HAWKINS. Did the Colombian Government attack the co-
caine processing center because of its terrorism links or because it
opposes drugs?
Mr. MULLEN. I could not speak for the Colombian Government as
to their motives. They were not aware going in that this would be a
terrorist operation. They did not discover this until arriving on the
scene. So I would have to believe that it would be their opposition
to drugs.
And you pointed out something which is very critical, and that is
that a very serious domestic addict problem is developing in Colom-
bia, and although I recognize they have many problems in dealing
with terrorism and drug trafficking there, this is of great concern
to the Colombian Government, and no doubt an impetus for them
to take strong action.
Senator HAWKINS. How about the Shining Way in Peru?
Mr. MULLEN. I am not familiar with that particular group, Sena-
tor Hawkins. I would have to respond in writing to that.
Senator HAWKINS. The Bulgarian connection?
Mr. MULLEN. There is a company in Bulgaria, the Kintet Co., I
believe it is, that although it is supposed to be an international
export-import company, we believe it covers some drug trafficking
activity.
Senator HAWKINS. What do you think the goal of the Bulgarian
Government is, money or harm to the West?
Mr. MULLEN. I think the main goal, and this is a personal opin-
ion, and based on the reports that I have seen, would be to obtain
hard currency, but again, personal opinion, I do not believe that
several of the Communist bloc countries and Cuba are doing a
whole lot to assist us with our drug problem and to curtail the
transit of drugs through their territory.
Senator HAWKINS. I am personally aware of the DEA's initiatives
at your direction to control supply of chemicals such as acetic an-
hydrite and acetone used in the processing of heroin and cocaine.
1059
How effective have these efforts been, and are other countries coop-
erating in this effort?
Mr. MULLEN. The efforts have been successful. In 1983, for exam-
ple, Colombia agreed to control the import of ether, a necessary in-
gredient to the production of cocaine. And we have received assist-
ance from Mexico, from West Germany, and it is really a program
that is just beginning to take hold, and I have great hopes for this
particular area, that of controlling the precursors or the elements
necessary to prepare and make heroin and cocaine.
Senator HAWKINS. Does Colombia allow you to take aerial photo-
graphs of their country?
Mr. MULLEN. Yes, they have, in some areas. In the northwest
part of the country, I believe, we have done some photographic
work with regard to some air strips there, clandestine air strips,
and they have cooperated in this regard.
Senator HAWKINS. How about Peru?
Mr. MULLEN. I am not certain as to whether or not we have even
asked for aerial photography, the capability, in Peru. I would
answer that for the record, if I may.
[The information referred to follows:
The Drug Enforcement Administration has performed aerial photography in Peru
with the approval and cooperation of the Peruvian Government.
Senator HAWKINS. I spoke with the Ambassador yesterday, and
he said he would be willing to have you photograph Peru in an
effort to comply with the Hawkins amendment.
Mr. MULLEN. I will look into that if I may and get back to you.
That would be great.
Senator HAWKINS. How about Bolivia? Have we ever photo-
graphed-have they ever asked, or have you ever asked to photo-
graph, aerial?
Mr. MULLEN. I am not certain as to whether we have even asked
or whether they have offered.
Senator HAWKINS. How does that work? Do you volunteer the
service?
Mr. MULLEN. We volunteer the service when we think it can be
of help. There is a sensitivity here, as you can imagine.
Senator HAWKINS. Surely.
[The following information was subsequently received for the
record:]
For the record, the Drug Enforcement Administration has performed aerial pho-
tography in Bolivia with the approval and cooperation of the Bolivian Government.
Mr. MULLEN. There are some countries that just do not want the
United States or any other country, for that matter, photographing
their territory. But should we run into an obstacle, you can be sure
I would be very quick to call upon you for assistance.
Senator HAWKINS. Well, as you know, President Zia said he
would be delighted to have his country photographed if, you know,
we give the photographs back to him, and if we mark where these
areas are, they would eradicate.
Mr. MULLEN. It is not an area I really like to go into in an open
session, but if you would like to discuss it further in closed session,
I would be happy to do so.
Senator HAWKINS. Thank you.
1058
cation, but upon arriving found that they were opposed by at least
100 guerrillas believed to be members of the FARC, and this is a
militant armed wing of the Communist Party in Colombia.
And at this time I understand that there are now 1,000 Colombi-
an army troops in the area, and nine laboratories have been locat-
ed, and it is estimated that somewhere in the area of 12,500 kilo-
grams of finished cocaine hydrochloride or cocaine base, which is a
1-to-1 relationship to the finished product, have been seized, and
much of it destroyed.
There are observers from the embassy on the scene confirming
the finds and that the seized contraband is being destroyed. In ad-
dition, they discovered 10,000 barrels of fuel and ether, and as you
know, one barrel of ether would result in the preparation of about
ten kilograms of finished product. So it is a very substantial discov-
ery in Colombia, and in my opinion the Colombian national police
and the military there are doing an outstanding job once they re-
ceive information and have intelligence and are able to proceed
against a target.
But if I may add, Senator Hawkins, in this case we do believe
that the guerrillas were actually involved in the preparation and
protecting of the site.
Senator HAWKINS. Did the Colombian Government attack the co-
caine processing center because of its terrorism links or because it
opposes drugs?
Mr. MULLEN. I could not speak for the Colombian Government as
to their motives. They were not aware going in that this would be a
terrorist operation. They did not discover this until arriving on the
scene. So I would have to believe that it would be their opposition
to drugs.
And you pointed out something which is very critical, and that is
that a very serious domestic addict problem is developing in Colom-
bia, and although I recognize they have many problems in dealing
with terrorism and drug trafficking there, this is of great concern
to the Colombian Government, and no doubt an impetus for them
to take strong action.
Senator HAWKINS. How about the Shining Way in Peru?
Mr. MULLEN. I am not familiar with that particular group, Sena-
tor Hawkins. I would have to respond in writing to that.
Senator HAWKINS. The Bulgarian connection?
Mr. MULLEN. There is a company in Bulgaria, the Kintet Co., I
believe it is, that although it is supposed to be an international
export-import company, we believe it covers some drug trafficking
activity.
Senator HAWKINS. What do you think the goal of the Bulgarian
Government is, money or harm to the West?
Mr. MULLEN. I think the main goal, and this is a personal opin-
ion, and based on the reports that I have seen, would be to obtain
hard currency, but again, personal opinion, I do not believe that
several of the Communist bloc countries and Cuba are doing a
whole lot to assist us with our drug problem and to curtail the
transit of drugs through their territory.
Senator HAWKINS. I am personally aware of the DEA's initiatives
at your direction to control supply of chemicals such as acetic an-
hydrite and acetone used in the processing of heroin and cocaine.
1059
How effective have these efforts been, and are other countries coop-
erating in this effort?
Mr. MULLEN. The efforts have been successful. In 1983, for exam-
ple, Colombia agreed to control the import of ether, a necessary in-
gredient to the production of cocaine. And we have received assist-
ance from Mexico, from West Germany, and it is really a program
that is just beginning to take hold, and I have great hopes for this
particular area, that of controlling the precursors or the elements
necessary to prepare and make heroin and cocaine.
Senator HAWKINS. Does Colombia allow you to take aerial photo-
graphs of their country?
Mr. MULLEN. Yes, they have, in some areas. In the northwest
part of the country, I believe, we have done some photographic
work with regard to some air strips there, clandestine air strips,
and they have cooperated in this regard.
Senator HAWKINS. How about Peru?
Mr. MULLEN. I am not certain as to whether or not we have even
asked for aerial photography, the capability, in Peru. I would
answer that for the record, if I may.
[The information referred to follows:
The Drug Enforcement Administration has performed aerial photography in Peru
with the approval and cooperation of the Peruvian Government.
Senator HAWKINS. I spoke with the Ambassador yesterday, and
he said he would be willing to have you photograph Peru in an
effort to comply with the Hawkins amendment.
Mr. MULLEN. I will look into that if I may and get back to you.
That would be great.
Senator HAWKINS. How about Bolivia? Have we ever photo-
graphed-have they ever asked, or have you ever asked to photo-
graph, aerial?
Mr. MULLEN. I am not certain as to whether we have even asked
or whether they have offered.
Senator HAWKINS. How does that work? Do you volunteer the
service?
Mr. MULLEN. We volunteer the service when we think it can be
of help. There is a sensitivity here, as you can imagine.
Senator HAWKINS. Surely,
[The following information was subsequently received for the
record:)
For the record, the Drug Enforcement Administration has performed aerial pho-
tography in Bolivia with the approval and cooperation of the Bolivian Government.
Mr. MULLEN. There are some countries that just do not want the
United States or any other country, for that matter, photographing
their territory. But should we run into an obstacle, you can be sure
I would be very quick to call upon you for assistance.
Senator HAWKINS. Well, as you know, President Zia said he
would be delighted to have his country photographed if, you know,
we give the photographs back to him, and if we mark where these
areas are, they would eradicate.
Mr. MULLEN. It is not an area I really like to go into in an open
session, but if you would like to discuss it further in closed session,
I would be happy to do so.
Senator HAWKINS. Thank you.
1060
In 1972, as I stated, Turkey was the leading producer of opium
poppy, and 80 percent of the heroin consumed in the United States
was produced in Turkey, and today they have eliminated elicit
opium poppy cultivation. How important was Turkey's eradication
of the opium poppy to your drug control efforts?
Mr. MULLEN. It was the key, really, to the substantial reduction
of heroin abuse in this country. Turkey virtually eliminated the
growth of the opium poppy, and up to that time Turkey had been
the main supplier of licit opium to the United States from which
we obtain our morphine.
As a result, for a couple of years Turkey did not produce a licit
crop, and later developed a controlled system to produce the opium
poppy. We are again purchasing a substantial amount of our licit
needs from Turkey, a substantial amount also from India, but the
control effort on the part of the Turks was a very vital part of the
reduction in heroin abuse in the mid-1970's.
Senator HAWKINS. I know the Turkish success was not easily
achieved. None of these efforts are in the countries that we have
talked to. What do you believe the cost of eradication to the Turk-
ish Government was in terms of personnel and resources, do you
have any idea, in that 10-year battle?
Mr. MULLEN. I do not. I would perhaps defer to Mr. DiCarlo or
submit that answer for the record also.
[The information referred to follows.]
There is no doubt that the cost of the opium ban and the subsequent strict en-
forcement of controlled production was substantial both in terms of personnel and
resources to the Turkish Government. We do not however have the basis on which
to estimate those costs. We do know that the Turkish National Police have approxi-
mately 1,100 officers specializing in narcotic enforcement located in offices through-
out the country. Many other resources are dedicated to policing the controlled pro-
duction and processing of the poppy straw.
The Drug Enforcement Administration receives excellent cooperation from its
Turkish counterparts and has great respect for their abilities and dedication.
Senator HAWKINS. All right.
Senator Biden, I have finished with Mr. Mullen. He has an ap-
pointment with the attorney general of Panama, not our Attorney
General.
Mr. MULLEN. Actually, with both of them, Senator.
Senator HAWKINS. Oh, things are looking up. [General laughter.]
Senator BIDEN. I do have a few questions.
Senator HAWKINS. Go right ahead.
Senator BIDEN. I apologize for being late. It is good to see you
again.
As you are well aware, you and I have had an ongoing interest in
this subject, and the whole question of international drug traffick-
ing. The General Accounting Office--it seems like every time you
and I talk, I am talking about a General Accounting Office study,
but the General Accounting Office has just completed a report for
me entitled “Investigation of Major Drug Traffic Organizations."
I asked the GAO to conduct this study 3 years ago in order to
focus on three specific issues: How DEA has established who the
largest traffickers are and is focusing on them; how does the orga-
nization's violation classification system encourage DEA to focus
on the highest level of violations; and what are the investigative
1061
methods used in high level investigations and how successful are
they.
The GAO report concluded that your geographic drug enforce-
ment program used for classifying drug violators is, and this is ac-
cording to GAO now-I am doing this because I would like to get
some comment from you, and if you need more time to study it, I
would be happy to wait for it, but they suggest that your geograph-
ic drug enforcement program [GDEP] used for classifying drug vio-
lators is too broad to determine how much your investigative effort
is directed toward the heads of these organizations.
The report also indicates that DEA may be overstating the
number of arrests, and this is based on their review of case files
and interviews with agents and U.S. attorneys which show that
only 12 percent of the cases were ones where the head of an organi-
zation was actually arrested.
Also, in only 52 percent of the cases were the trafficking organi-
zations considered to be significant by the attorneys who handled
the prosecution.
In the report, GAO recommends, and the Department of Justice
agrees, that the DEA violators classification system should be re-
vised to provide for a separate category for persons managing con-
tinuing criminal enterprises. Such a category would provide the ad-
ministration and the Congress with a better measure of the DEA's
efforts against major organizations, it is argued.
What is the Department's plan of action, what is the timetable to
achieve it, relating to the intent of this recommendation of reclassi-
fication?
Mr. MULLEN. I have reviewed the draft, though I have not seen
the final report. As you have pointed out, we agreed that the
GDEP system needs modification, that it was broad, and we want
to be more specific, so we are going to break down the categories.
We do not want to discard the GDEP system, the one, two, three,
four classifications, because we then would have nothing with
which to measure our past successes or failures, and so we want to
retain this, but to break down the categories so we can better iden-
tify, say, a financier, a trafficker, an organized crime figure, a
public corruption type case, and we are working on that now. I do
not know what our timeframe is, but I will get that answer back to
you.
[The information referred to follows:
Our current plans are to implement a revised GDEP system on October 1, 1984.
Senator BIDEN. Good. That will be important. I think it is impor-
tant that we have an idea of the level and scope of the people you
are going after, and it is one thing to say that your class 1 violator
arrests have increased from 3,456 in 1982 to 3,660 in 1983, as re-
ported by the Justice authorization budget request for 1985. How-
ever, when I see in the GAO report that your class 1 violations list
may be overstated, and that up to 50 percent of the top cases hand-
picked by DEA for use by the GAO study, only 12 percent of those,
alleged in the report, only 12 percent of those involved were the
head of trafficking organizations, and I get concerned about where
our targeting of resources and the figures we are seeing. It seems a
1062
little bit misleading, not necessarily intentionally, but the effect is,
I think, somewhat misleading.
Mr. MULLEN. I thought this was a good GAO report, and as you
are aware, I am sure, it is very difficult to arrest and eventually
convict the head of an organization, but I believe the report also
shows that a majority of our field agents now believe we re target-
ed at the top of the drug trafficking elements.
Senator BIDEN. Well, I think that is right about the field agents,
but we get into a problem which I guess we will not go into now
because you have other places to go, and I have a few other ques-
tions. The part of the report that concerned me was the part relat-
ing to the U.S. attorneys out in the field who were not so sure that
the conclusion and assessment reached by your field people was
correct about whether or not the target was
Mr. MULLEN. I would like to review the specific area you are re-
ferring to and get back to you with an answer.
Senator BIDEN. I thank you for being cooperative in that regard.
I am not pressing the point, and I do not mean to be overly critical,
but this targeting aspect is one of the areas you and I have been
discussing for about 4 years now.
Mr. MULLEN. That is right.
Senator BIDEN. And I would like to pursue it with you later.
With your permission, Madame Chairperson, I would like to go
forward with a couple of more questions.
Senator HAWKINS. Go ahead.
Senator BIDEN. How do you define an organized drug trafficking
network?
Mr. MULLEN. This would have to be a group, and it could be two
individuals, but most likely more, organized with the means of ac-
quiring the drug from a source country and a means of distributing
those drugs in the United States. They would have to have both a
source and a means of distributing the drugs. And that to me
would be an organized network.
Senator BIDEN, OK.
Mr. MULLEN. And the financing, of course, would be yet another
factor.
Senator BIDEN. Now, this is, I guess, the definition you all used
when you stated that drug trafficking networks were supplying
over 90 percent of the illegal drugs imported into the United States
last year
Mr. MULLEN. Yes.
Senator BIDEN. So that one of the things that we tend to think
about up here in my companion committee, the Judiciary Commit-
tee, and in the other committees, it seems like, you have to spend
more time with me than anybody, probably, between here, the
Budget, Intelligence, and Judiciary Committees. Everything over-
laps. But one of the impressions that most people have is when we
talk about drug trafficking networks, we are talking about the
Cosa Nostra type organizations, including the Hispanic version,
and the Greek version, the Jewish version, and all the various or-
ganized crime networks that are out there.
But really what you are saying here is that-a network can con-
sist of merely two or more people who in fact have a means of
access to and distribution of drugs in the United States.
1063
Mr. MULLEN. That is correct, but we generally find that the net-
works do break down along ethnic lines. For example, you will find
with regard to cocaine that Colombian organized crime elements
are usually involved. We saw for the first time in the Rosenthal
case, our Southern Comfort long-term undercover investigation
aimed at the highest levels of drug trafficking, a link between Co-
lombian organized crime and the Italian organized crime, the
Mafia and La Cosa Nostra. So depending on the nature of the drug,
you will find it broken down along ethnic lines.
This is usually not true with regard to marijuana, where you
find many ad hoc trafficking groups, and with regard to dangerous
drugs, where you find motorcycle gangs involved.
Senator BIDEN. Just one more follow-up on that point. At some
point in our future discussions in this or another committee or just
in the office, what I am most interested in knowing, without at-
tempting to dictate the course of action you should be taking, that
of the 90 percent of illegal drugs imported into the United States,
what percent of them are what most people including myself, call
major trafficking organizations?
Now, "major" can be defined two ways. It is true, you could have
two people who have a multibillion dollar business. It is unlikely
that two would be able to do it, but possible. So it seems to me for
our purposes, and I suspect maybe the Senator from Florida would
agree with me that major tends to in my view break down in terms
of-the volume of dollars that they are generating from the trade,
and/or the size and scope of the network. That is very broad. And
once that is determined for us, I would like to know, to what extent
are you targeting those people. Do you understand what I am
saying?
Mr. MULLEN. Yes. You are very clear, and that is exactly what
we are doing. For example, we estimated at one time that La Cosa
Nostra, traditional organized crime, was responsible for about 90
percent of the heroin coming into the Northeastern United States.
We targeted that element as an organization, although there were
several organizations involved, and we have been relatively suc-
cessful in reducing that group's share of the heroin coming in, and
the heroin traffic by this group was from Southwest Asia. As a
result, we are starting to see some Mexican heroin showing up in
New York. As we have been successful with one group, another or-
ganized element has moved in.
I can identify those groups for you, and perhaps even give you a
percentage of the major groups.
Senator BIDEN. Well, for the record, I think that would be a
useful thing for us.
Senator HAWKINS. Surely.
[The information referred to follows:]
The Drug Enforcement Administration estimates that there are thousands of
major drug trafficking organizations in the United States. At the present time,
there are in excess of 500 such organizations targetted and under active investiga-
tion by the Organized Crime Drug Enforcement Task Forces alone. An even larger
number of others are targetted by DEA and the FBI outside of that program.
Drug trafficking is a continuing criminal enterprise in which various criminal
laws are violated for financial gain. It requires the collaboration of a large number
of people. The complex structure, pattern of racketeering and financial objectives
are the predominant characteristics of drug organizations. They do not necessarily
1064
consist of individuals with the same ethnic background. Those drug organizations
which are structured along ethnic lines often must depend on or actually ally with
other groups in order to accomplish a particular aspect of the operation. The inter-
relationships of many organizations, the fluid and ever-changing nature of associa-
tions makes it most impractical, except in rare instances, to assert with any degree
of preciseness the percentage of the total traffic controlled by any one organization.
We do, however, in conjunction with other agencies, make estimates of the supply
of illicit drugs to the United States. We also estimate the shares supplied by the
various source countries.
Senator Biden, I would be most pleased to have personnel of our Operations Divi-
sion brief you on the nature of the traffic in each drug area. The briefing would
provide in more specific terms the results of our efforts to identify major trafficking
organizations.
Senator BIDEN. Last question. I will shift subjects. I know you
have another appointment. By the way, I want to thank you. If you
look down the list of the people that we asked here, the heads of
the different agencies, thanks for coming. Apparently we still have
not gotten through to this or the last administration that when we
deal with the drug issue, it is just as important as dealing with
strategic arms control, or just as important as dealing with any
other foreign policy issue, Lebanon or anything else, in my view
and, I know, in the view of the chairman. They are equally as im-
portant, and yet we tend to be sent up the second team-but prob-
ably more competent, quite frankly, on the issue.
Mr. MULLEN. I would not go that far, Senator. [General laugh-
ter.]
Senator BIDEN. At any rate, my last question relates to the point
you just raised, and just so you do not wonder, Bud, behind me, nei-
ther of the people sitting here are on the Foreign Relations Com-
mittee. This fellow here is Foreign Relations, and he helps out on
this. This fellow here with the Judiciary Committee, who you deal
with all the time. And this fellow here is my staff member on the
Intelligence Committee, so I get three different lines of questioning.
From the intelligence side of this thing, let me ask you one ques-
tion that can be asked in the open. I do not think your answer
would require any breaches of security. Over the last year, and you
have told us it was going to happen, the Italian Government has
launched an offensive against what is known in this country and
there as the Mafia in Sicily, and the Camorra in Naples, both orga-
nized crime groups who play a major role in drug trafficking.
Can you give us any estimate of what their success has been, the
Italian Government, to the best of our knowledge, and what involv-
ment-or assistance that we have had in their efforts, and what
impact there has been on the United States, if you are able to
speak of that in open session?
Mr. MULLEN. I can speak to it partially. We, DEA and the FBI,
have put additional personnel into Italy. We have had agents trav-
eling to Italy, working over there. There is a new Italian anti-
Mafia law which can result in imprisonment even if you associate
with Mafia figures. When we have furnished information to the
Italian authorities which we obtain from informants or perhaps
from wiretaps in this country, the Italians have taken decisive
action, with hundreds of arrests. I cannot recall the exact number
off the top of my head, but hundreds of arrests.
And we will be in the not too distant future concluding some
very successful investigations as a result of this effort. Now, there
1065
is another area that should be discussed off the record which I
think this committee and the Judiciary Committee would find very
interesting and be very pleased with.
Senator BIDEN. I think it may be useful for the Senator from
Florida and the Senator from Delaware to maybe make arrange-
ments in the near term to get you up into a closed meeting session
with us to bring us up to date on that.
Mr. MULLEN. I would like to do that.
Senator BIDEN. Good, I am sorry I trespassed on your time so
long, Madam Chairman. I am finished. Thank you.
Senator HAWKINS. I have one last question. Maurice Turner, who
is Chief of Police of the District of Columbia, recently said that up
to 80 percent of the crime in the District of Columbia, is drug relat-
ed. What do you believe is the national impact of narcotics on
crime?
Mr. MULLEN. I do not think I would go as high as 90 percent.
Senator HAWKINS. He said 80.
Mr. MULLEN. I am sorry, 80?
Senator HAWKINS. Eighty percent.
Mr. MULLEN. Depending on the nature of the crime, certainly
burglaries, something of that nature, I would say over half would
be drug related, something of that nature. Robberies would be an-
other area wherein you have a high drug involvement. We find in
almost every case that there is some drug connection to robberies,
bank robberies and others. I would not be able to estimate with
regard to, say murders that are committed, and other violent
crimes of this nature. But there is no question that a substantial
amount of the crime is related to drug activity,
With regard to the District of Columbia, I have the highest re-
spect for Chief Turner, but I must say I have found that we should
be doing much more with enforcing the paraphernalia laws. I am
now seeing that paraphernalia. Although there is an antiparapher-
nalia law, it is just now being enforced, and even our 7-eleven's I
am told, are now selling the paper with which you make marijuana
cigarettes. So I think more could be done in the District to reduce
that percentage, in my opinion, and again, I have the highest re-
spect for Chief Turner, and will discuss that with him.
Senator HAWKINS. Thank you very much. Your contribution has
been very helpful.
Our next witness will be Assistant Secretary Dominick DiCarlo,
Bureau of International Narcotics Matters, Department of State.
Senator BIDEN. Before Mr. DiCarlo starts, I want to make some-
thing clear. I am not in any way suggesting that he is not an ex-
tremely competent person to speak to this subject. We have spoken
many times. I just think the fact that he is here and the Secretary
is not here is a reflection that the State Department still does not
consider this in the same category as other things.
For example, on minor things in Latin America, minor things in
Central America, minor things in the Middle East, minor things in
Europe, we get the Secretary of State here, because that is brief-
case foreign policy stuff. Here, the Secretary of State does not
come, and I think it is wrong. I think it is a mistake, and it is not a
reflection on Mr. DiCarlo. He cannot make them come.
34-045 0-844-68
1066
I am sure you will defend to the hilt that that is not the case, but
we have yet to have a Secretary of State come up here and evi-
dence that he has any knowledge of, any consideration of, or any
notion of the drug problem.
Senator HAWKINS. I hate to ruin your day, but I asked the Secre-
tary of State when he was at the witness table a week or so ago
how he felt we could stop the flow of drugs from Latin America
when he was pleading the case for the Caribbean. I was very sad-
dened to hear him say very soberly that the only way we are going
to stop the flow would be to stop the market in the United States,
which is exactly what the head of every foreign nation tells you
when they come to see me or come to see you. It is your fault. If
you guys quit using it, we will quit sending it.
Senator BIDEN. At least he did not say they will not stop until we
stop the Russians. That is kind of encouraging.
Mr. DICARLO. Senator, before I go on with my limited remarks, I
would like to say that perhaps the reason the Secretary is not here
is because he has read the statute passed by Congress. Under the
Foreign Assistance Act, the President of the United States is au-
thorized to enter into agreements with foreign nations. Under the
act, that authority was transferred to the Secretary of State, and
under that act assigned to me by the Congress. So, I think the Sec-
retary takes the position that this is the function of our office, and
therefore I am testifying here today.
Senator BIDEN. Well, as you know, we have done the same thing
in arms control. We have a thing called the Arms Control and Dis-
armament Agency, yet when we talk about arms control, he comes
up. He does not send up the head of ACDA, who we bring up inde-
pendently. So what we should do now is get you both to the table
next time. Please send a message to the Secretary that we are still
dissatisfied with the way in which-well, let me say I; I speak for
me-with the way the State Department treats the issue of drugs,
as if it is something that should not be on a foreign policy agenda,
and it is the single most important matter that could be on the for-
eign policy agenda.
Senator HAWKINS. I echo that sentiment.
Do you have a statement, Mr. DiCarlo? And would you identify
the people with you, please?
STATEMENT OF HON. DOMINICK L. DiCARLO, ASSISTANT SECRE-
TARY OF STATE, BUREAU OF INTERNATIONAL NARCOTICS
MATTERS, ACCOMPANIED BY CLYDE D. TAYLOR, DEPUTY AS-
SISTANT SECRETARY OF STATE, BUREAU OF INTERNATIONAL
NARCOTICS MATTERS; AND JAMES VAN WERT, EXECUTIVE DI-
RECTOR, BUREAU OF INTERNATIONAL NARCOTICS MATTERS
Mr. DICARLO. To my right, Mr. Chairman, is Mr. Clyde Taylor,
Deputy Assistant Secretary of State in our Bureau. To my left is
Mr. James Van Wert. He is executive director of the Bureau. They
will be the people I will be able to rely on for accurate information.
Senator HAWKINS. Designated by the President.
Mr. DICARLO. The committee has copies of our budget presenta-
tion, and my formal testimony provides highlights of the budget re-
quest, and also includes the budget tables. The President is request-
1067
ing $50.2 million for the international narcotics control program,
which is managed by our Bureau. If enacted by the Congress, it
would be $9,017,000 over the amount actually appropriated for
fiscal year 1984 under the continuing resolution.
The Department proposes to allocate $40.5 million or 81 percent
of the request to country programs, including $29.4 million for
Latin America, $8.1 million for East Asia, and $3 million for South-
west Asia. The largest increase would be an additional $6.8 million
to support a crop control program in Colombia, which we hope to
negotiate this year. Other country programs would remain at the
1984 level or increase slightly.
Manual eradication and interdiction efforts have increased in Co-
lombia, which is increasingly concerned about its rapidly expand-
ing domestic drug abuse problem. The program request of
$10,300,000 for Colombia is based on assisting Colombia in a com-
prehensive marijuana eradication program and an expanded coca
control program. The National Council on Dangerous Drugs has ap-
proved an experimental coca and marijuana herbicidal eradication
program.
It must be noted that last week, after a gunfight with heavily
armed insurgents, the national police claimed to have seized 10
tons of cocaine and paste while destroying 12 cocaine laboratories.
Training of the Bolivian special police forces has been completed.
In anticipation of these forces establishing law and order in the
Chapare region, we have requested $5.5 million for fiscal year 1985
to continue the coca control efforts which will begin this year,
which is budgeted at $5.7 million. We have budgeted $3.5 million, a
slight increase, to continue the coca eradication program in Peru in
fiscal year 1985, where our agreement calls for the eradication of
4,000 hectares, compared to the eradication of 703 hectares in 1983,
and 4,000 hectares which are scheduled for eradication this year.
The Mexican Attorney General's Office reports increased levels
of opium poppy and cannibis eradication in 1983. We expect a con-
tinued high level effort this year, and are requesting $8.9 million,
an increase of $400,000, to support the program in fiscal year 1985.
The Department is requesting $1 million to support a Latin
American and Caribbean regional program, including funds to pro-
vide an enhanced communication package for the Bahamas' inter-
diction effort.
The $2 million requested for Pakistan in fiscal year 1985 pro-
vides continued support for the reduction of poppy cultivation and
for enforcement efforts against heroin processing and trafficking.
Reflecting previous efforts in the Malakand, our budget is reduced
by $900,000. Pakistani opium production declined further in 1983 to
a level of 45 to 60 metric tons. The expectation is that the Mala-
kand agency will be opium free in 1985, and that the Gadoon-
Amazai area will be opium free in the 1986-87 crop year.
We have requested $900,000 to assist Turkey in upgrading its en-
forcement capabilities.
The Department has requested $2.8 million for Thailand, where
the government has sustained its military campaign to suppress
opium trafficking and heroin production along the Thai-Burma
border, and has recently begun controlling opium production in ci-
vilian police-military command villages where transitional assist-
1068
ance is being provided. The $5 million budgeted for Burma will in-
crease support for the Burmese air force's capability to airlift
ground forces engaged in poppy eradication and interdiction
operations.
The budget also includes $2.7 million for the United Nations
Fund for Drug Abuse Control, which is now undertaking coca con-
trol programs in South America and planning an expanded role in
Pakistan.
Finally, it should be noted in the context of the report we have
submitted that funds will be expanded in 1984 and 1985 to support
narcotics surveys in key source countries. The committee has re-
ceived copies of the Department's international narcotic control
strategy report in accordance with Public Law 98–164, which was
adopted last November. My remarks are organized in terms of the
law's information requirements.
First, we were asked to provide an assessment of the status of
narcotics production and trafficking. The preliminary estimates of
the production subcommittee of the National Narcotics Intelligence
Consumers Committee [NNICC] indicate that gross cultivation of
opium, marijuana, and coca increased in 1983 in the principal
growing regions which supply the United States market.
These reports also show that eradication levels increased in sev-
eral key countries, and that seizures also increased, as did the
amount of hectarage taken out of cultivation through government
bans, crop substitution programs, and enforcement activities.
Moreover, the available data show that local demand is increas-
ing rapidly in many source countries. Thus in some countries the
amount available for export did not change or did not change as
much as the increase in cultivation. Moreover, there were declines
in gross cultivation of opium poppy in Pakistan, Thailand, and
Laos.
The report provides production estimates for the years 1981
through 1985, and provides NNICC estimates on imports through
1982. Analysts are continuing to study these preliminary 1983 esti-
mates on production levels and the implications for trafficking and
consumption. The NNICC subcommittee anticipates having its
report on 1983 production and import estimates completed by June.
Second, we were asked to provide details on the various kinds of
U.S. assistance provided to narcotics source countries. In addition
to our programs, the report references relevant activities of the
U.S. Agency for International Development, the Drug Enforcement
Administration, other U.S. agencies, and international organiza-
tions.
Also reported are data on allocations under general U.S. assist-
ance categories, and data on loans by international development
banks.
Third, we were asked to provide an assessment of the impact of
the U.S. assistance on narcotics control. Assessments of the overall
impact on nonnarcotics assistance falls into three categories, which
are not necessarily exclusive. First, that other U.S. assistance does
not impact negatively or positively on the country's narcotic con-
trol decisions or performance. Second, that such assistance positive-
ly affects the overall disposition and capability of the country to co-
operate with the U.S. drug control objectives. And third, that in
.
1069
some cases a termination of U.S. assistance for narcotic policy rea-
sons would impact negatively on the country's disposition to con-
trol elicit drugs notwithstanding the first or second factors.
In general, the economic and other nonnarcotic assistance does
and should continue to affect positively each recipient country's
disposition to cooperate with the United States in achieving
progress in elicit drug control, but there are specific implications
associated with the various kinds of aid and impacts differ. Because
much of this information is sensitive, the Department has submit-
ted a classified report, and will respond to further questions on this
matter in a closed hearing.
Fourth, we were asked to comment on the development of plans,
programs, and timetables for narcotic control. Some countries have
adequate countryside narcotics control strategies. Others have
strategies for specific target areas. Others have little more than
goals and objectives. On balance, planning has improved.
Fifth, we were asked to assess the adequacy of the legal and law
enforcement measures taken by various countries relative to nar-
cotics control. This is an area in which we think there has been
considerable improvement in recent years.
Sixth, we were asked to report accomplishments in narcotics con-
trol. There was substantial progress in 1983. For example, the
Pakistanis suppressed opium production in the Malakand agency.
A U.S. aid development assistance program which is linked to nar-
cotics control was initiated in the Gadoon-Amazai area, and the
Pakistanis expanded their actions against heroin laboratories.
An agreement on a crop control program was signed with Bolivia
in August. Peru began coca eradication in the upper Huallaga
Valley. Colombia intensified its manual eradication efforts, and dis-
closed plans for testing herbicide eradication on both coca and
marijuana. The Government of Italy pledged $40 million to the
U.S. Fund for Drug Abuse Control for coca related development
projects in South America.
The Mexicans, who reported a significant expansion in opium
eradication, collaborated effectively on a herbicidal program in
Belize.
Seventh, we were asked to provide estimates of the maximum re-
ductions achievable in narcotics production by the producing coun-
tries as defined in the statute. The statute defines this as planned
reductions. Thus, estimates shown are based upon the proposed
government actions, taking into account other information on the
nature of the elicit drug production problem, such as climatic, geo-
graphic, political, economic, and social factors that affect both elicit
drug production and crop control.
Generally speaking, our report shows that these countries are
projecting varied levels of reductions in one or more categories, cul-
tivation, refining, or trafficking.
Eighth, we were asked to provide an assessment of the nature of
narcotics production. While coca prices at the farm gate declined,
farmers continued production both in an attempt to keep their
gross incomes at previous levels and also out of a need to harvest
maturing coca bushes which they had planted during the peak
price years.
1070
Mexican growers were planting crops in more inaccessible,
higher altitudes, and fields larger than previously seen have been
spotted recently.
Opium production continued to decline in Pakistan, but in-
creased significantly in Afghanistan, which continued to supply
Pakistani heroin laboratories. While Colombian traffickers are now
cultivating more coca leave to enhance their dominant position as
refiners, Bolivian traffickers are sending less of their paste to Co-
lombia and are now refining it into cocaine base or cocaine and
routing their contraband through Argentina, which is also becom-
ing an important final stage refiner of cocaine.
Colombian traffickers are believed to be responsible, at least in
part, for opening new marijuana fields in Venezuela and new pro-
duction activity in Brazil.
Ninth, we were asked to provide an assessment of the various
factors affecting production. Overall, farmers' needs for a cash
crop, government fears of disrupting local economies, and concerns
about political stability continue to work against narcotic control
efforts, while domestic drug abuse, economic disruption, interna-
tional pressures, the involvement of political insurgencies in the
narcotics trade and the penetration of organized political systems
by traffickers work to promote such control efforts.
Tenth, we were asked to report on the methodologies used to
project productions and production. The report provides details by
country of the various methodologies used, including negotiated
agreements on levels of eradication to be achieved. We are working
with other agencies and governments to improve both forecasting
and monitoring capabilities in the field.
Eleventh, we are asked to provide an estimate of additional re-
sources needed to achieve planned reductions. The response is
largely written in terms of projected 1985 levels of INM assistance
which are reflected in our proposed budget. This document has
been made part of the Department's report.
In sum, this report shows that adverse social, political, and eco-
nomic impacts are creating an improved environment for negotiat-
ing control agreements. No nation is really invulnerable to the
problems of drug abuse, and those nations which engage or indulge
in narcotics production and trafficking ultimately pay a price that
is greater than temporary economic benefits they are thought to
realize.
Moreover, we can assess and see the benefits of those control pro-
grams which we have assisted. These improved program efforts and
the growing recognition in source countries that the liabilities of
narcotics trafficking and drug abuse are outweighing the benefits
are the basis for our belief that more can and will be accomplished.
[Mr. DiCarlo's prepared statement follows:]
1071
TEST IMONY
ASSISTANT SECRETARY DOMINICK L. DICARLO
BUREAU OF INTERNATIONAL NARCOTICS MATTERS
DEPARTMENT OF STATE
TO THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
March 21, 1984
MR. CHAIRMAN:
As requested by the Committee, this testimony provides a
summary
statement and budget tables in behalf of the
President's request for an authorization of $50.2 million for
the Bureau for International Narcotics Matters for Fiscal Year
1985, and, a summary of the major findings of the International
Narcotics Control Strategy Report, which was submitted to the
Committee in accordance with the requirements of Section 481 of
the Foreign Assistance Act, as amended by P.L. 98-164.
I.
AUTHORIZATION REQUEST
an
The President is requesting appropriation of $50.2
million for the Department's international narcotics control
program which is managed by our Bureau (INM). If enacted by
the Congress, the appropriation would be $9,017,000 over the
amount actually appropriated
for Fiscal Year 1984 under
continuing resolution.
or
The Department proposes
to allocate $40.5 million, 81
percent of
the request, to country programs, including $29.4
million for Latin America, $8.1 million for East Asia, and $3
million for Southwest Asia. The largest increase would be an
additional a
$6.8 million to support a crop control program in
Colombia which we hope to negotiate this year. Other country
programs would remain at the 1984 level or increase slightly.
Manual eradication and interdiction efforts have increased
in Colombia, which is increasingly concerned about its rapidly
expanding domestic drug abuse problem. The program request of
$10,300,000 for Colombia is based on assisting Colombia in
comprehensive marijuana eradication program and
expanded
coca control program.
а
an
Training of the Bolivian special police forces has been
completed, and, in anticipation of these forces establishing
law and order in the Chapare region, have requested $5.5
million for FY 1985 to continue the coca control efforts which
will begin this year.
we
We have budgeted
eradication program in
$3.5
Peru
million to
in FY 1985,
continue
when our
the соса
agreement
1072
calls for eradication of 4,000 hectares
compared to
eradication of 703 hectares in 1983, and 4,000 hectares which
are scheduled for eradication this year.
we
The Mexican
Mexican Attorney
Attorney General's Office reports increased
levels of opium poppy and cannabis eradication in 1983;
expect continued high level effort this year, and
requesting $8.9 million to support the program in FY 1985.
a
are
The Department is requesting $1 million to support a Latin
American and Caribbean regional program,
program, including
including funds to
provide an enhanced communications package for the Bahamas
interdiction effort.
The $2 million requested for Pakistan in FY 1985 provide
continued support for the reduction of poppy cultivation and
for enforcement efforts against heroin processing and
trafficking. Pakistani opium production declined further in
1983 to a level of 45-60 metric tons; the expectation is that
the Malakand agency will be opium free in 1985, and that the
Ga doon-Amazai area will be opium free in the 1986-87 crop year.
We have requested $900,000 to assist Turkey in upgrading
its enforcement capabilities.
The Department has requested $2.8 million for Thailand,
where the Government has sustained its military campaign to
suppress opium trafficking and heroin production along the
Thai-Burma border and has recently begun controlling opium
production in civilian-police-military command villages, where
transitional assistance is being provided.
The $5 million budgeted for Burma will increase support for
the Burmese Air Force's capability to airlift ground forces
engaged in poppy eradication and interdiction operations.
The budget also includes $2.7 million for the United
Nations Fund for Drug Abuse Control, which is now undertaking
coca control programs in South America and planning an expanded
role in Pakistan.
we
Finally, it should be noted, in the context of the report
have submitted, that funds will be expended in 1984 and
1985 to support narcotics surveys in key source countries.
II.
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT
A.
Overview of Findings
were
Status: First, we
asked to provide an assessment of
the status of narcotics production and trafficking. The first
1073
chapter of the report includes preliminary worldwide production
estimates for calendar year 1983, and reports on key program
developments in
countries. Each country report also
includes a status assessment on production and trafficking.
source
The preliminary estimates of the Production Subcommittee of
the National Narcotics Intelligence Consumers Committee indicate
that gross cultivation of opium, marijuana and coca increased
in 1983 in the principal regions which supply the U.S. market.
But, these reports also show increases
in seizures,
eradication levels in several key countries, and the amount of
hectarage taken out of cultivation through government bans,
Crop
substitution
programs and enforcement activities.
Moreover, the available data show that local demand is
increasing rapidly in many source countries.
Thus,
in some
countries, the amount available for export did not change, or
did not change
much as the increase in cultivation.
Moreover,
there were declines in gross cultivation of opium
poppy in Pakistan, Thailand and Laos in 1983.
as
The INCSR report provides production estimates for the
years 1981 through 1985 (for most countries), and provides
NNICC estimates on imports
through
1982. Analysts are
continuing to study these preliminary 1983 estimates
production levels and the implications for trafficking and
consumption. The NNICC Committee anticipates having its report
on 1983 production and import estimates completed by June.
on
It should be noted that the data suggest important changes
within markets. For example, the four-year downward trend in
Pakistani opium poppy cultivation continued, but indications
are that opium cultivation increased by perhaps one-third in
Afghanistan, while heroin refining also increased.
The Production. Subcommittee's assumption is that gross coca
cultivation increased in 1983 in Peru and Bolivia, as well as
in Colombia (for which we have better data), but the available
information does not currently permit a reliable projection on
1983 cultivation in Bolivia and Peru, the
two
larger
producers. Our information indicates that this increased
production results, at least in part, from the maturing in 1983
of bushes which were planted during peak price years, three to
five years ago.
Today, prices are down at every link in the
cocaine trafficking chain; the indication is that there has
been over-production of leaf and coca derivatives; there is
increased consumption of соса paste through abuse; and,
traffickers in South America are aggressively establishing new
or larger markets in Europe and elsewhere.
1074
The preliminary NNICC data continue to show an upward trend
in cannabis cultivation in Mexico and Jamaica, while Colombian
cannabis cultivation in 1983 has apparently returned to
to about
the 1981 level.
on
U.S. Assistance: Second, we were asked to provide details
the various kinds of u.s. assistance provided to narcotics
source countries. This report illustrates how the Department
proposes to allocate $41.2 million in foreign assistance funds
in FY 1984 for drug control programs, and the proposed alloca-
tion of $50.2 million in FY 1985. The report cross-references
relevant activities of the U.S. Agency for International
Development, the Drug Enforcement Administration, other U.S.
agencies, and international organizations. Also reported
data allocations under general U.S. assistance categories
and data on loans by international development banks.
are
on
an
on
Impact of U.S. Assistance: Third, we were asked to provide
assessment of the impact of U.S. assistance narcotics
control. The public report we have submitted focuses only upon
narcotics-related assistance. Departmental assessments of the
overall impact of non-narcotics assistance fall into three cate-
gories, which are not necessarily exclusive: first, that other
U.S. assistance does not impact, negatively or positively, on
the country's narcotics control decisions performance;
second, that such assistance positively affects the overall
disposition and capability of the country to cooperate with
U.S. drug control objectives; and third, that, in some
in some cases,
termination of U.S. assistance for narcotics policy reasons
would impact negatively on the country's disposition to control
illicit drugs, notwithstanding the first or second factors.
or
a
are
of
a
in
In general, the economic and other non-narcotic assistance
does and should continue to affect positively each recipient
country's disposition to cooperate with the United States in
achieving progress in illicit drug control. But, there
specific implications associated with various kinds
assistance, and impacts differ. Given the time constraints of
producing report in early February response to complex
legislation adopted in mid-November, the sensitivity of
the
subject, the need for more information from some countries, and
the difficulty of analyzing this information, much of which is
classified, the public report provides an analysis only of the
impacts of narcotics related U.S. assistance. The Department
has submitted separately a classified annex (Volume II) which
discusses the impact of other U.S. assistance, and officials
are prepared to discuss this matter in a closed hearing.
we
Plans, Programs and Timetables: Fourth, were asked to
Comment on the development of plans, programs and timetables
1075
for narcotics control. Some governments have adequate, country:
wide narcotics control strategies; others have strategies for
specific target areas (including the strategies required under
program agreements with INM and AID); others have little more
than goals and objectives. On balance, planning has improved.
we
were
Legal and Law Enforcement Measures:
Fifth,
asked
to assess the adequacy of legal and law enforcement measures
taken by various countries relative to narcotics control. Some
countries like Burma and Malaysia have very strict penalties
for narcotics violations; some like Pakistan have just adopted
new laws designed to enhance
enhance enforcement; others
still
considering changes;
and a few have an inadequate legal base
for law enforcement. In sum, this is an
this is an area in which we think
there has been considerable improvement in recent years.
are
on
was
соса
Accomplishments: Sixth, we were asked to provide informa-
tion accomplishments in narcotics control for the various
source countries. There was substantial progress in 1983. The
Pakistanis suppressed opium production in the Malakand agency;
a development assistance program which is linked to narcotics
control
initiated in the Gadoon-Amazai area; and the
Pakistanis expanded their actions against heroin laboratories.
Agreements on a crop control program were signed with Bolivia
in August, 1983. Peru began
eradication in the Upper
Huallaga Valley. Colombia intensified its manual eradication
efforts and disclosed plans for testing herbicide eradication
for both coca and marijuana. The Government of Italy pledged
$40 million to the United Nations Fund for Drug Abuse Control,
for coca control-related development projects in South America.
The Mexicans reported a significant expansion in opium eradica-
tion and collaborated effectively on a herbicidal eradication
program in Belize. The specific gains (or reverses) associated
with each country's effort to cope with narcotics production
and/or trafficking are noted in the country reports.
were
as
Thus,
Planned Reductions: Seventh,
asked to
provide
estimates of the maximum reductions achievable in narcotics
production by the producing countries, as defined in the
statute; the statute defines this "planned reductions."
estimates shown are based upon proposed government
actions, taking into account "other information" on the nature
of the illicit drug production problem, and the climatic,
geographic, political, economic and social factors that affect
both illicit drug production and crop control. These "other
information" factors are the variables identified in subsection
(f).
1076
one
or
more
Generally speaking, our report
report shows that these
these countries
are projecting reductions in
categories:
cultivation, refining, or trafficking. These reductions vary
from country to country, and category to category.
Nature of the Problem: Eighth, we were asked to provide an
assessment of the nature of narcotics production. While coca
prices at che farmgate declined in South America, farmers con-
tinued high levels of production, both to attempt to keep their
gross incomes at previous levels and also out of need to harvest
maturing coca bushes which had been planted during peak price
years. Mexican growers were planting crops in less accessible,
higher altitudes, and fields larger than previously seen have
been spotted recently.
in
Opium production continued to decline
Pakistan,
but
increased significantly in Afghanistan, which continued to
supply Pakistani heroin laboratories. While Colombian
traffickers are now cultivating more соса leaf, to enhance
their dominant position as refiners, Bolivian traffickers are
sending less of their paste to Colombia and are now refining it
into cocaine base
cocaine and routing their contraband
through Argentina, which is also becoming important final
stage refiner of cocaine. Colombian traffickers
believed
to be responsible, at least in part, for opening new marijuana
fields in Venezuela, and new production activity in Brazil.
or
an
are
Factors Affecting Production: Ninth, we were asked to pro-
vide an assessment of the various factors affecting production.
The principal factors are price, climate, demand, and government
action. Parallel with our intensified diplomatic initiatives,
perhaps the most significant local factor driving narcotics
control actions in 1983
domestic drug abuse in the
producing countries, followed by broadening recognition of
of the
adverse effects of an uncontrolled drug trade a country's
economic and political stability.
was
on
Increasing demands for narcotics to satisfy expanding
domestic drug abusing populations are also keeping production
levels up. As explained in more detail in the country reports,
the stimulus for farmers and traffickers to continue cultiva-
tion, production and trafficking is economic. Despite depressed
prices at the farmgate, growers usually earn more
more from growing
narcotics
crops than from traditional agriculture. Inter-
nationally depressed agricultural prices and price controls on
domestic crops in many countries also impede the development of
alternative income to narcotics
crops. Overall, fears of
disrupting local economies and political stability continue to
work against narcotics control efforts, while domestic drug
1077
abuse, economic disruption, international
pressures, the
involvement of political insurgencies in the narcotics trade,
and the penetration of organized political systems by
traffickers worked to promote such control efforts.
Methodology: Tenth, we were asked to report on the method-
ologies used to project reductions in production. The report
provides details, by country, of the various methodologies
used, including negotiated agreements on levels of eradication
to be achieved. We are working with other agencies and govern-
ments to improve estimating, forecasting and
monitoring
capabilities in the field. There
caveats and footnotes
reporting on the multiple assumptions underlying the various
country estimates.
are
we
Resource Requirements. Eleventh,
were asked to provide
an estimate of additional resources needed
needed to achieve planned
reductions. The
response is largely written in terms of
projected 1985 levels of INM assistance, which are reflected in
our proposed budget and program plan. This document has been
made part of the Department's report.
Summary
In sum, this report shows again that there are no simple or
easily obtained
answers to all of the questions about the
impacts of drug abuse, drug trafficking and control programs.
a
While we have a broad knowledge of the social, political
and economic environments of these countries, and base of
detailed information on narcotics production and trafficking,
we have understandable difficulties in measuring the extent of
current cultivation and projecting the effectiveness of control
programs, just as we have difficulty in predicting the precise
impacts of either drug trafficking drug abuse
local
economies or populations, or measuring economic dislocations,
or analyzing domestic drug abuse and demand.
or
on
Yet, while some observations
may lack statistical
precision,
known from
Our discussions with officials in
these countries, and from Our own assessments, that adverse
social, political and economic impacts are creating an improved
environment for negotiating control agreements. No nation is
really invulnerable to the problem of drug abuse, and, those
nations which engage
in or
indulge narcotics production and
trafficking ultimately pay a price that is greater than the
temporary benefits they are thought to realize.
Moreover, we can assess and see the benefits of those
control programs which we have assisted.
source
These improved program efforts and the growing recognition
in
countries that the liabilities of narcotics
trafficking and drug abuse are outweighing the benefits are the
basis for our belief that more can and will be accomplished.
1078
Senator HAWKINS. Thank you, Mr. DiCarlo.
It is no secret that the State Department did not like the Haw-
kins amendment that was added to the foreign aid bill. But it was
signed into law by the President, and the law states very clearly in
subsection (4).
In addition, each report pursuant to this subsection shall include for each major
illicit drug producing country for which the President is proposing this U.S. assist-
ance for the next fiscal year a determination by the President of the maximum re-
ductions in illicit drug production which are achievable during the next fiscal year.
That report that you sent to my office February 1 does not say
anything about maximum reduction possible. You talk about
planned, you talk about projected. You can plan any amount. I
mean, you and I can sit down and say, let us take 80 percent, let us
take 2 percent.
The law states “the maximum reductions possible.” Now, I do
not see that you have kept the law on this at all.
Mr. DıCARLO. I believe it is "achievable.”
Senator HAWKINS. Achievable, maximum reduction achievable. It
is not planned reduction. Any country can send me a letter, and
they do every day, that we plan to do this, we plan to use the heli-
copters you gave us in Colombia to eradicate.
C01
However, we send Congressmen down there and they see our hel-
icopters lifting up bails of marijuana, wrapped in sackcloth and
stamped “Colombia.” They are so proud of the product, they put
their name on it. And our helicopters are lifting it up and putting
it on the airplanes and the ships to send to Miami.
Now, I can talk to the head of Colombia, and we have. I have
talked to the Ambassador and he says, we plan to do better next
year. Does that mean he plans to send twice as much next year
with the five helicopters?
Mr. DICARLO. That is the problem with the bill, Madam Chair-
man. The problem we have with this bill is that you have a defined
term and the definition of "maximum achievable" is defined in the
legislation. The term is defined as that which is planned.
Senator HAWKINS. I disagree.
Mr. DICARLO. I can perhaps point out the section of the bill
where that does it. It is a defined term. The reason we did not use
the term in the bill is because we did not believe that the Congress
would want us to say that the maximum achievable in the country
might be zero or 10 tons or a minimum.
So we used the definition that is included in the statute, that
which is planned, because I am sure we would not want a foreign
government to pick up that report and say, the maximum achieva-
ble is that which they planned. So what we did was use the defini-
tion to define the term as defined in the statute.
The problem that we saw in doing what we did was, we did not
feel that we should go and say that the maximum that a country
could achieve is that which they plan. But yet, the bill defines the
term that way.
Senator HAWKINS. They have some input. I am going to put in
an amendment that they do not do anything if we interdict any of
their drugs. That might get their attention.
But this was asking for their cooperation. I met with every Am-
bassador. I met with most of the heads of states. The minute we
1079
filed that amendment, everybody came. President Zia came from
Pakistan. Everybody from Latin America came and asked me to
withdraw it, because they did not know exactly how they could
plan any reduction, because they said, we are not in charge.
I want them to be in charge of their countries.
Mr. DICARLO. What I have done here is this. We had a defined
term in the statute. These bills served an impact in the sense that
the bill was introduced, governments heard about the bill. It was
an expression of concern by the Congress. I think the bill served a
valid purpose.
The reason we did not use the term "maximum reduction achiev-
able" in the report is because had we used it in the report and then
had a U.S. document say that the maximum achievable in country
X was very little or nothing, that perhaps would have presented
the contrary of what the Congress wants to express.
What we did was to take the definition and use the definition,
rather than use the term itself, because they could not draw any
such conclusion. I do not think that the authors of the legislation
would have wanted us to say that the maximum achievable in
country X that was not cooperating to the fullest extent was the
maximum achievable that they could achieve.
That is the term in the bill. That is the definition of maximum
achievable. It is not a question of a country overseas not wanting
to cooperate. It is not a question of the State Department not want-
ing to put it in the legislation.
But it was an attempt by the State Department to use the defini-
tion rather than the term, so that we do not lead people in foreign
countries who might want to cooperate to think that we were satis-
fied. That is the reason why we did that.
Senator HAWKINS. It is a judgment call.
Mr. DICARLO. I do not think it was a judgment call. I think we
used the definition. Instead of using the term itself, we used the
term as defined in the statute, so that we would not mislead
anyone.
What we have done here is that we are telling the Congress that
that is the maximum amount achievable under the definition in
the bill, because you define it in the bill.
Senator HAWKINS. The bill is very clear. We made it very simple
and very clear. Yet you made a judgment call that I think distorts
what a country can do.
The countries, when they realize the linkage with foreign aid,
are so concerned and so cooperative. They come all the time. I do
not mind the visits, but I want some action. I want eradication and
I want to stop interdicting in Miami. We are spending so much
money interdicting around Florida, it is just crazy, and twice the
amount of cocaine is on our streets.
So we can spend another $10 billion, I guess, and fortify the Flor-
ida, New Orleans, New York areas, but it is still getting through.
They are sending more than ever before. The way to get control of
the illicit drug problem is like they did in Turkey, and I mean,
they were tough. If you go back and read 1972, 1973, and 1974, it
took a while, but they got the message.
1080
That is exactly what I intend to do by this. If I have to amend it
this year to make it clearer to the State Department what I intend,
I will do so.
In some countries, your planned or projected reductions are de-
scribed in terms of hectarage destroyed. In other parts you use
metric tonnage. International heroin, cocaine and marijuana culti-
vation is now estimated to exceed $100 billion. I really am bewil-
dered why this would happen.
Mr. DICARLO. Perhaps we can go into that.
Senator HAWKINS. In some countries you do not have any projec-
tions. Why is that? Can you tell me why some countries have no
projections?
Mr. DICARLO. Because there are no plans.
Senator HAWKINS. By anybody?
Mr. DICARLO. Which ones are those? If you point to a specific
country, it might be different. There might be different problems
involved in each one of them.
Senator HAWKINS. The Southeast Asian countries.
Mr. DICARLO. In the case of Thailand, the Government of Thai-
land has taken the position that it will not enter into an eradica-
tion program at this time. Therefore, since they have no planned
specific reductions as defined in the statute, it was not included.
The statute states that the maximum amount achievable has to
be included. It then says the maximum amount achievable is based
on a planned reduction. Since there is no planned reduction, there
is no maximum amount achievable under the statute. That is the
reason why it was not included under that section.
Senator HAWKINS. How many countries are not cooperating?
Mr. DICARLO. Thailand is cooperating in many areas. Thailand is
carrying on an extensive military campaign with great loss of life
along the border regions of Thailand. You were there and I believe
you went into that question.
They also have started a new program, as we have stated in our
statement, in certain villages, the civilian military police districts
where Thailand has assumed jurisdiction over those areas, and
there is some eradication going on in those areas recently. This has
occurred over the recent past. We have a program going on, in its
second year now.
But in the areas where the United Nations has provided assist-
ance over the past 10 years, the Thais have not gone into a manda-
tory eradication program. We have been pushing the Thais in that
area. We have been asking them to do things in that area.
We are concerned about that, but the Thais have been cooperat-
ing extensively in many areas. In this area they take the position
that they cannot go into the areas because of political sensitivities.
They cannot go into the area and eradicate because the hill tribes-
men have not been incorporated as yet into the Thai society, for a
host of reasons, which I do not like, and I have been letting them
know we do not like it.
But I do not want to leave the impression that there is no coop-
eration.
Senator HAWKINS. The Burmese lose 100 men a month, they say,
100 men a month in their war on drugs and the warlords up in the
hills. The Thais do not lose that many people.
1081
Mr. DICARLO. Well, I would put it this way. The Burmese are
also engaged in an insurgent campaign with the BCP, the Burmese
Communist Party--
Senator HAWKINS. Sure.
Mr. DICARLO (continuing]. Who happen to be involved also in
narcotics.
The Thais take the position, they do not want to make their
opium growers insurgents, and therefore they have not been
moving against them. They are living there, they are not fighting
with the Thai Government.
The Burmese are attacking the problem to the best of their abili-
ty, and they are engaged in great loss of life, because what is going
on there is a fight with the BCP, the Burmese Communist Party.
They are fighting with others, with the Karen and many others in
that country. And they have been involved in an actual war in that
country for several years, not only on narcotics but an attempt to
incorporate a portion of their territory and control it completely
and eliminate the insurgent groups in that country.
The difference between Thailand and Burma is considerable.
Senator HAWKINS. Well, you go to Burma, they say the warlords
are in Thailand. You go to Thailand and they say they are in
Burma. I think the Burmese officials had the best answer of all
when you ask, where is Kung-Fa, and they say: One foot Burma,
one foot Thailand.
Mr. DICARLO. This is because of the--
Senator HAWKINS. Why, you can smash them like that if you get
both countries to work at it. It is against their religious princi-
ples to use drugs. This is for export purposes. They are having a
terrible problem there. And I saw much more evidence of coopera-
tion or even the existance of a problem, on the Burmese, who are
isolated, withdrawn from the world—they are like pulling the
shade down that I did with the Thais.
They do not even have a customs official in the embassy.
Mr. DICARLO. My problem is I do not want to be put in the posi-
tion of defending every Thai action as being good, because I have
taken different positions with the Thai. I say on balance they have
been doing a considerable amount in Thailand.
On the question of cooperation, there is a problem in Burma and
Thailand and it comes to a certain extent from both sides, histori-
cal problems that exist between the two countries. But more than
that, you have the position of the Burmese that they want to stay
independent of any involvement with other nations, as much as
they can.
They even isolate themselves from the ASEAN bloc. They do not
join the groups because they say they are independent.
The Burmese have a problem of cooperation. The problem is this:
Not that they do not want to cooperate with people on narcotics,
but they have a problem sometimes on how much, how far they
can go. They take the position that their insurgency-and you can
translate that into narcotics problems, because the BCP, other in-
surgents and narcotics traffickers are almost one and the same
group—they take the position that to cooperate extensively with
other governments on that question means third country involve-
ment or second country involvement in their internal affairs. And
34-045 0-84-69
1082
they are reluctant to get involved, on a question of philosophy,
with other governments to any great extent because it may consti-
tute having another government get involved in their internal af-
fairs, and they are very concerned about the perception, that that
perception not be gained.
Senator HAWKINS. How about Colombia? Let us talk about Co-
lombia. During the past 3 years the United States has given them
$24 million in direct assistance. Multilateral banks, in which the
United States of course if the major contributor, have provided $1.5
billion in low interest or no interest loans to Colombia.
And at the same time, Colombia has continued to expand their
marijuana and their cocaine cultivation, and rejects our extradition
treaty.
In your opinion as the President's representative, has Colombia
been a good investment for the citizens of the United States?
Mr. DICARLO. Well, on the $1.6 billion, I do not know what the
United States has invested in Colombia. I know that Colombia has
very little assistance from the U.S. Government. They may have
received loans from international banks.
But let me just go over the 3-year period that you mentioned, be-
cause I think it is extremely important that we do that. We have
not had 3 years where the Colombian Government has been able to
do all we might have wanted it to do. In the first 2 years of the
problem of that 3, it was because of U.S. law.
Until the repeal in December 1981 of the amendments to the
Foreign Assistance Act, which you all joined in and which were
very beneficial to us, we could not under U.S. law cooperate with
any government in eradicating crops using paraquat. After the law
was passed in 1981, we had another U.S. law which prevented us
from even discussing the issue with Colombia.
Senator HAWKINS. Did not the same restrictions apply to
Turkey?
Mr. DICARLO. No.
Senator HAWKINS. Mexico?
Mr. DICARLO. No-yes, and that is what happened. Let me give
you an example of what happened. In the case of Turkey, Turkey
did not eradicate its crop. The Turkish Government by law, having
control over its territory, imposed its will and said, we will take
action against you, and were able to do that.
In the case of Mexico, Mexico sprayed. Mexico was spraying with
U.S. support. We were precluded from assisting Mexico in spraying
paraquat on marijuana by an act of the U.S. Congress. Until the
U.S. Congress repealed the law, Mexico has to use its own re-
sources if it wanted to spray.
Now, from that point what occurred is this. After the Congress
repealed the amendments to the Foreign Assistance Act, we could
not proceed even to the point of discussing the issue with the Co-
lombians, because another act, an act of law, stated that we had to
comply with the National Environmental Protection Act.
After the Percy amendment was repealed or amended, we had to
then go and comply with the National Environmental Protection
Act [NEPA), which took another year. So that we could not even
discuss the issue with Colombia until December 1983. At that
time-
1083
Senator BIDEN. Mr. Secretary, those laws existed, but that does
not mean we could not discuss 75 other ways of dealing with the
problem
Mr. DICARLO. We have, sir.
Senator BIDEN. I mean at the time, at the time you were unable
to speak to Colombia.
Mr. DICARLO. I am sorry if I implied that. Let me clarify that.
We have been speaking to Colombia all along. We have been coop-
erating with Colombia all along, within the bounds that were per-
mitted to us by U.S. law.
You mentioned $24 million.
Senator HAWKINS. That is half your budget, by the way.
Mr. DICARLO. $16 million of that $24 million was mandated by
the Congress, taken out of our budget-it was a very meager
budget before I was here, so it was not a question of being done to
me personally—and directed to Colombia.
And under the provisions of that law, the Congress told us how
to spend the money. They mandated the spending of the money. It
was no longer a question of our negotiating with Colombia. It was
an act of Congress taking the money out of our budget and not in-
creasing our budget.
That was done in some ways which I never would have done
except for the mandate, but it was done. We have been negotiating
with Colombia. The action that occurred last week, the action
where the resolution is pending in the House of Representatives
now congratulating the Government of Colombia on its action, was
taken with assistance that was granted by the Congress in the
budget to the Government of Colombia, giving support for interdic-
tion efforts by the Colombian Government, and also manual eradi-
cation.
Colombia has been going into an eradication campaign. We have
been talking, we have been discussing. We have a group of people
down there working within the restraints of U.S. law to do some-
thing about the problem.
The difference is this. Since we have had our environmental
impact statement-and that occurred in December 1982-our am-
bassador left at that time. We started talking with, as permitted by
law, with the Colombians in February 1983. Then for the first time
the Colombians were able to use, if they desire to use it, herbicidal
aerial eradication, which we say is the only effective way of accom-
plishing that job, given the enormity of the problem in Colombia.
Colombia interdicts and destroys more than the 10 percent of its
crop that you mentioned last year and interdicts substantially
more. If you total the two, I believe the figure comes to something
like 25 percent is either interdicted or destroyed annually.
This is our problem now-
Senator HAWKINS. The cultivation has increased 1,000 percent.
Mr. DICARLO. No. What happened is this. I will take marijuana
first. You mentioned the fact of marijuana increasing in produc-
tion. And this is one of the problems with legislation that man-
dates or indicates progress because of reductions or increase.
The reason why the production was much lower last year than
this year in the case of cannabis was because there was a drought
1084
1
last year and the production was less. This year we had an in-
crease
Senator HAWKINS. Sometimes the Lord is on our side.
Mr. DICARLO. That is right. That has been our best, so far, that
has been our best asset, the weather. And we admit that. We admit
that up front.
But the problem is, how do we now get together with the Colom-
bians and have them go into a campaign which we think is very
effective, as the only real way of solving the problem, and that is to
eliminate it aerially? What has happened is this.
We have been discussing since February 1983 only, when we had
the ability to do it, that kind of campaign. The Government of Co-
lombia announced that it was willing to go into a testing program
to determine whether or not herbicides are safe. Our Government
is doing the same thing.
We are under a temporary injunction right now where we cannot
do the job. The Colombians have taken the position that they want
their scientists to go through these tests and they want to see
whether or not the herbicide we know is safe is safe by their stand-
ards and by their examination. That is what is happening right
now.
The testing by the Colombians is going on right now. These nego-
tiations have only started in February 1983 because by law we
were precluded from negotiating at an earlier time.
So I just want to say that we are not satisfied with everything. It
is my job to be more or less adversarial within the Department. I
have to be the one that pushes it, and I do. But when I come to a
committee I think I at least owe the fact that there are problems
that were caused not only by foreign governments, but by our own
laws.
We have succeeded, with your help, in accomplishing a great
deal.
Senator HAWKINS. What is the status of the extradition treaty?
Are they going to cooperate with us? Do they have this great new
spirit of cooperation? Have you talked to them about the status of
the extradition treaty which they signed?
Mr. DICARLO. I do not defend the Colombians on the extradition
treaty. What has occurred in Colombia, as is my understanding-
and the Justice Department would normally negotiate this-is that
an extradition treaty, long sought by all of us, long desired by all of
us, was accomplished under the prior regime.
The supreme court of Colombia has declared that that was a
valid extradition treaty. The present President of Colombia, who is
cooperating with us in other areas, has taken the position that he
does not accept the fact that Colombian nationals should be extra-
dited under a treaty. He does not like the treaty, which he says is
the first treaty ever executed by a Latin American country which
provides for the extradition of one of its nationals outside of the
country.
I think Colombia should live up to its obligations in that treaty.
That is the position taken by the Colombian Government. It is
under discussion now between governments.
Senator BIDEN. Can I interrupt right there on that point?
Senator HAWKINS. Go ahead.
1085
Senator BIDEN. You know, like that James Bond movie with the
southern Florida sheriff, he says, what we got here is we got our-
selves a communications problem. And that is what we got here, a
communications problem.
The communications problem is that the Senator from Florida
and I have a slightly different definition of maximum achievable
reductions. It seems we have a semantic argument here. You are
suggesting, as I read your responses about Burma, Thailand, and
Colombia, that maximum achievable reductions are ones that are
essentially defined by the country.
Mr. DiCarlo. No, sir.
Senator BIDEN. Because you talk about what Burma says it can
and cannot do. You talk about what Colombia says it can and
cannot do.
What we are talking about is that the United States should set
what we believe are maximum achievable results. It seems to me
that that is the fundamental difference here. To suggest that the
Colombian President says he has a problem, it seems to me that,
notwithstanding the fact that he has a problem, you should be set-
ting the standard for us in responsive legislation which says what
we should expect.
Mr. DICARLO. I believe while you were out of the room I went
into that question. This is the way the bill defines maximum
achievable. We were not looking to the way the Colombians would
define it. We are not looking to the way the Burmese would define
it. We are looking to the way the U.S. Congress defined the term.
Subsection (4) says:
In addition, each report pursuant to this subsection shall include for each major
illicit drug producing country which the President is proposing to furnish U.S. as-
sistance to in the next fiscal year a determination by the President of the maximum
reductions in illicit drug production which are achievable during the next fiscal
year. Such determinations shall be based upon:
(a) the measures which the country is currently taking and the measures which
the country has planned for the next fiscal year in order to prevent narcotic and
psychotropic drugs and other drugs from being cultivated and coming into the
United States; and
(b) the other information pursuant to this subsection.
Which is subsection (e), which is basically a reporting mecha-
nism.
Senator BIDEN. Well, it does not seem to me that you have done
that.
Mr. DICARLO. Again, sir, we have not placed the words “maxi-
mum achievable reduction" in the report. We used the definition,
and the reason we used it was because we did not want a foreign
government taking maximum achievable, if we used that term,
rather than planned reductions in the report, and report that that
country had achieved their maximum achievable.
I think that would have sent the wrong message, if we had used
that. Then what we would be saying in effect was the maximum
achievable might be the lowest common denominator. The lowest
amount that was planned would then become the maximum
achievable.
Senator BIDEN. Well, it says here if you can achieve it. We want
to know what you can do in any 1 year.
1086
Mr. DICARLO. Sir, I have a problem there, too. And to determine
that question I think what I am being asked to do—and by the
way, we were never given the ability, when this legislation was
passed, to testify in Congress. We testified 14 times before commit-
tees. We never testified on this bill.
And these are problems which we are concerned about. I think
the greatest asset that we have is when Senators and Representa-
tives go around the world expressing concern. This is the greatest
asset that we have, and we wanted this. But we were not given the
opportunity
Now, here is the problem we face. We have terms in this bill that
existed in the Rodino amendment. This is the first time we were
given an opportunity to talk about the problems we have with this
kind of legislation. If you go back to the Rodino amendment and
the Rangel amendment and you talk in terms of criteria, I think
then the term used was "adequate measures to prevent drugs from
coming to the United States."
Now, that is a concept that is mind boggling to me in and of
itself, because that would require us, if the intent of Congress was
this, that we should set forth all the adequate steps they could
take, pass judgment on whether those steps are adequate or inad-
equate. We would be passing on the budgets of other countries.
This bill even states that. It states in effect that we have to de-
termine whether or not they are spending enough money, whether
their laws should be changed.
Senator BIDEN. Wait a minute. I do not understand the problem.
We do that and everything else. We pass judgments on other coun-
tries, whether or not we are going to lend them money, and wheth-
er their internal mechanisms are such that it warrants us lending
the money.
We pass judgments on the military budget. We say, in the for-
eign military sales, that in order for you to be able to get this sale
you have to demonstrate to us your budget is A, B, C, and D, and
you have to say to us within that range that this legislation which
you have in your country prevents you from being able to do what
we want you to do.
We do that in military sales. We do that in econonmic aid. We do
that in everything else. Why do you have a problem in doing it in
drugs?
Mr. DICARLO. We are doing it, sir.
Senator BIDEN. Then what are you complaining about, sir?
Mr. DICARLO. I am not complaining. I am stating that the defini-
tion-
Senator BIDEN. That you agree with it?
Mr. DICARLO. I am saying that we are agreeing that the defini-
tion as provided to us in the bill--
Senator BIDEN. Requires you to go into their budgets, requires
you go into their laws, requires you to make those judgments. Do
you have objection to doing that?
Mr. DICARLO. We have done that, and it presents us with many
problems.
Senator BIDEN. Sure it does. As Jimmy Carter said, life is not
fair.
1087
Mr. DiCarlo. I am not saying it is not fair. I think it is good. But
what I am saying is, we have complied with the definition in the
statute.
Senator BIDEN. I have interrupted the Senator from Florida long
enough. I am sorry.
Senator HAWKINS. That is fine. Be my guest. I thought I was
fighting this battle by myself.
Have you ever seen the human rights book that floats around
the Department of State? It is about 2 inches thick. We have to cer-
tify that. You know, somebody over there has to certify that. The
Hawkins amendment certification is a very slim document, I want
to tell you.
Senator BIDEN. As a matter of fact, some could argue that we
give you too much leeway. You see, I think part of the problem,
Senator, is that this poor fellow is the only guy in the operation
who is dealing with this issue. I mean, the idea that you did not
have a chance to testify on this for 3 months and tried to negotiate
this. There was another bill similar to the Hawkins one which was
the Moynihan bill. I mean, this is not like it was sprung on any.
body. This has been rolling around the Congress for the past 4
years.
I do not wish to denigrate the Hawkins amendment, which I
have cosponsored. I certainly do not want to imply that.
Mr. DICARLO. Senator, what I am saying is, the most effective
allies that we have are Senators and Representatives that are con-
cerned.
Senator HAWKINS. And unified, 96 to 0. This means that Teddy
Kennedy and Jesse Helms voted the same way.
Senator BIDEN. Which means you may have a point. (General
laughter.]
Mr. DiCARLO. What I am saying is, I think we have complied
with the definition. The only point I want to make, Senator, is that
we were not complying with the request by the Bolivians, Burmese,
or anyone else. We thought we were reading the statute, looking at
the definition, and the only thing I think that perhaps the Senator
did mention was the fact that we did not use the term in the
report.
The only reason we did not use the term in the report, as I was
stating, is, we felt that it would weaken the intention that we are
all intending to accomplish, but I did use it. I used the defined
term rather than the other term.
Senator BIDEN. The kind of thing I think we are talking about is
this. We understand the Secretary of State having to make tough
judgments, and the President. We understand if he says, look,
Hawkins and Biden, if we press the Burmese Government on this,
what is going to happen is, it is going to cause the government to
topple. The Communists will take over. The Russians will be
coming, and they will have a new base there.
I mean, I am making an extreme point. Even we can understand
that.
Senator HAWKINS. But that, of course, is not true. I have visited
with the Burmese, and it is not true.
Senator BIDEN. It is not true, but we could understand if that
were the rationale, or to say in Colombia, look, if you really force
1088
Colombia to the wall on the extradition treaty, what will happen is,
they will in fact begin to supply the rebels in El Salvador, and such
and such will happen, and Latin America will go to hell in a hand-
basket. We could understand it.
What we want is a much clearer explanation from the President
of the United States of America, from the Secretary of State as to
why you cannot do what we, naively maybe, think can be done, and
what happens is, with all due respect, Mr. Secretary, we get a fair
amount of pablum. When we talk about Pakistan, we are told
about, well, you know, the problems up there in the north, and it is
true, there are problems, but what we want to know is, if you press
them to the wall, if you say to Zia, we are cutting your water off,
what does that mean?
What is your estimate, you meaning the President, what is your
estimate, Mr. President, of what result that will cause?
Mr. DiCARLO. At least, Senator, we do deal with that. We deal
with that in a classified report which was submitted.
Senator HAWKINS. At 3 o'clock yesterday afternoon.
Mr. DICARLO. There is no closed hearing. I could not discuss it
with you. We are willing to go into each and every one of those
questions.
Senator HAWKINS. Well, you had a year. You said before that
you could not talk to these countries about anything. Now let us
just talk about the last year. Can you tell me one crop that has
gone down? Everything has gone up dramatically. There have been
dramatic increases.
Mr. DICARLO. Senator, I think I should say this.
Senator HAWKINS. So our strategy was not working. Whatever
strategy you had did not work. Everything is up.
Mr. DiCarlo. No, ma'am. As a matter of fact, I can go into that
question. I cannot, and I state this before every committee I go
before, the United States cannot, control the production of opium
in Afghanistan, control the production in Burma, in the insurgent
areas. We cannot control production in any area. It is the govern-
ments in those countries that exist, and that is why we have legis-
lation such as this.
If we take it country by country on how our programs are work-
ing or not working, I think we can go into it. You mentioned Paki-
stan. I think in Pakistan you were there. I think you saw the tre-
mendous increase in the work going on. We have had the Attorney
General in Pakistan on occasions. We had Steve Solarz, who went
for the committee there, expressing interest. We have had many
people and yourself expressing a great deal of interest of the U.S.
Government in Pakistan.
What has happened in Pakistan? We know it has substantially
decreased. We know that in the Malakand agency it is out of pro-
duction. We know that in the Buner it is out of production. We
know that in the Gadoon-Amazai it is agreed to go out of produc-
tion. We know the Paks came to us and said, look, what we ·
thought was a problem before, we want to accelerate, and we want
to do more. We are now meeting in groups with the Pakistanis.
Senator HAWKINS. I was there. President Zia signed that law. It
had been on his desk for 2 solid years. Stiff penalties for drugs. I
wish we could pass it in the United States. Do you know why he
1089
signed it? The mothers—and I never saw a woman in Pakistan, but
in Lahore and Karachi the women were rioting against the govern-
ment because they wanted stricter drug controls, because their
children are on heroin.
Mr. DICARLO. Exactly.
Senator HAWKINS. That is why he signed the law, and he cooper-
ates. If you go across the street to Thailand, they do not like it.
They do not want to talk about it. They are shipping it. You go to
Hong Kong. Hong Kong says "it comes in ships from Thailand. You
have to go back to Thailand and tell them to stop it, and we do not
want to talk about it to Thailand." They do not like to talk about
it, right? They do not like to discuss it?
Mr. DICARLO. No. We continuously are in discussion. We are con-
tinuously negotiating, and we have made substantial progress, not
to the extent I would like to make it, though. I say that up front,
and you know that I have been pushing this issue in Thailand, and
some people say that in pushing one into the issue too hard we can
be hurt in enforcement or hurt in other areas.
But let us go to the other problem. Let us speak about Peru and
Bolivia.
Senator HAWKINS. And Colombia. I do not think it is coincidence
that 7 days ago they seized 10 tons of cocaine. It was just reported
yesterday or today. Seven days ago. Now, I do not believe that is a
coincidence, but what I want to know is what they are going to do
with it. If they are just going to store it and ship it to Miami, we
are in bad trouble. I want it destroyed.
Mr. DICARLO. I do not want to say here that I think the Colombi-
an Government is involved in any kind of activities like that. They
are not, in my opinion. I do not want to say that.
Senator HAWKINS. They have seized it. I would just like to see
you call them up and say to them, destroy, we do not want to see
this on the market. I will give them a gold medal. I will send them
a Senate seal. I will send them whatever we can if they will de-
stroy it.
Mr. DICARLO. I think it can be sent. My information is, it has
been destroyed, so perhaps the medals can now be sent. That is the
information I have just received.
Senator HAWKINS. From the man next to you?
Mr. DICARLO. Yes, who received his information from there.
Senator BIDEN. Can I spin off on one of these areas? Because I
think it relates to this a little bit. Again, I may be wrong, but it
seems to me that one of the reasons why we have the difficulty we
have in dealing with source countries, and I do not underestimate
the problem that it is for your agency and for the United States of
America to impact upon very serious internal problems in other
countries, but I have believed for a long time, that one of the rea-
sons why we have the difficulty we have is, most all of it is bilater-
al in nature, and at the highest levels in our Government, the Sec-
retary of State, Secretary of Defense, the President of the United
States.
We have not raised the issue sufficiently with our other partners.
For example, the Japanese have impacts in parts of Asia that we
do not. The Europeans have impacts in parts of South Asia and
1090
Southwest Asia that we do not. The Europeans even in some parts
of Latin America have an ability to impact that we do not.
And yet when you look at what is happening, notwithstanding
all of the hollering that we are doing, the International Narcotics
Control Strategy refers to the small contributions made by West
Germany, Sweden, Norway, to the U.N. drug control program, to
Italy's pledge of $40 million to the U.N. Fund for Drug Abuse over
the next 5 years, and apart from these efforts, the developing coun-
tries, or I should say the developed countries with whom we have
extensive relations are doing nothing to further the objectives.
I would argue that the reason why they are doing nothing is be-
cause we have not said, look, Jack, this is as important to us as
trade negotiations on agriculture. This is as important to us as INF
in Europe. This is as important to us, and so on. Because it is not
your fault, again. I think you are doing, and I mean this-you
know me. I have never been reluctant to tell you when I disagree
with you. I think you are doing a commendable job, and you have
upped the profile. Between you and Mathea Falco, your predeces-
sor-you are the only two hopes that have ever existed there,
period.
In my view, one of the problems—there is no single problem, but
one of the aspects of the problem is, it just has not been given the
profile on the international agenda of the developed countries that
it warrants in order to bring this thing to the level that has to
have a multinational effort applied to it. And so I guess I have a
very specific question.
To the best of your knowledge in your capacity, can you tell us
when, specify any examples when the Secretary of State or any
other Cabinet member has raised international drug control con-
cerns that we share with developed countries in forums such as the
one that I am about to mention, international financial organiza-
tions like the World Bank, the Organization of Economic Coopera-
tion and Development, NATO ministerial meetings?
To the best of your knowledge, have they been specifically raised
not by other people but by the Secretaries at those meetings, and if
so, to what extent have they been raised?
If you would rather submit it for the record, we would be happy
to wait.
Mr. DICARLO. By the Secretary, I have no independent knowl-
edge of that, so we will have to wait, and I will submit it for the
record, but I can say this. In our Federal strategy we make exactly
the same point you make about the necessity of raising this and
making it an international issue, because we can never, with all of
our resources, with all our legislation, with everything we do, solve
this problem. We have made that one of our principal priorities.
What I will say is this, though.
Senator BIDEN. You have made it. You are right. You have made
it.
Mr. DICARLO. I am speaking of the administration.
Senator BIDEN. How have they done it?
Mr. DICARLO. I know that when the President of the United
States-and we have visits from other heads of state coming to our
country, and they are drug producing countries. It is on the Presi-
dent's agenda, and has been. The only reason I do not give you the
1091
names—I can give you the names later-is, I do not like to repeat
conversations between chiefs of state in public.
Senator BIDEN. Well, those same chiefs of state, by the way, usu-
ally come up on the Hill after they see the President, and usually
either the pain in the neck Biden or Hawkins ask them after their
meeting with the President, did you talk about drugs, and I may be
mistaken, Paula, but I cannot think of any but one person, Zia,
who suggested in response to our questions in the Foreign Rela-
tions Committee, yes, that is right, Senators, the President asked
me about that, and he did press that.
And that is a question from the confirmation hearings of the
former Secretary of State Haig to Shultz. I have asked them to
make that kind of commitment, and yet when you ask them, and
even when you ask the foreign ministers who come up to us, and
there is not a foreign minister or head of state who comes and
speaks to the President that I can think of that does not come up
to the Foreign Relations Committee, and always their answer is,
well, not really, but what we talked about is the economic require-
ments of my country. What we talked about is the military needs.
What we talked about is what you in the United States are not
doing.
Mr. DICARLO. Well, when President Craxi visited here, that sub-
ject was discussed.
Senator HAWKINS. President Craxi?
Mr. DICARLO. President Craxi of Italy. You asked about other na-
tions.
Senator BIDEN. By the President of the United States?
Mr. DICARLO. By the President of the United States. Where they
agreed to get together and form a permanent group and committee.
The vice president or vice premier of Italy--
Senator BIDEN. Has that been done yet?
Mr. DICARLO. Yes, they are scheduled to come here in April or
May of this year to discuss with the-the vice president of Italy
with the interior minister will be discussing this issue in the for-
mulation of a permanent committee with the Attorney General of
the United States.
I can tell you that when the Secretary of State was in Pakistan
on his last visit, this subject was probably the subject of more ex-
tensive discussion-
Senator BIDEN. I acknowledge that for Pakistan.
Mr. DICARLO. I can say from public knowledge of a head of state
since it was done publicly and in public, partially, the President of
the United States in visiting Colombia raised this issue not only in
camera but in open discussion with the President of Colombia, Be-
tancur, soon after his inauguration.
Senator HAWKINS. What about the Netherlands a couple of
weeks ago? How about Morocco? I will get you the list of who we
have met with in the last 3 weeks.
Mr. DICARLO. I cannot give you everything, but I can go further
than that.
Senator BIDEN. We just want to keep helping you, Dom. We are
going to keep helping you every way we can.
Senator HAWKINS. We are on your side.
1092
Mr. DICARLO. In order to really inform on some of the things
that are occurring, I think the greatest interest we have—and we
are getting interest in Western Europe right now on this problem.
They are more interested in this now, not necessarily because we
are interested in it. That perhaps has been part of the problem for
too long. But they are vitally interested in the problem now be-
cause they are being devastated by this problem.
Senator BIDEN. They have been devastated ahead of us in Germa-
ny for the last 5 years, by the way. The percentage increase of
heroin overdose deaths has exceeded the United States in Germany
for 5 years. The impact on drugs in Europe has been as devastating
for the past 5 years.
I happen to chair NATO's Committee on Nuclear Planning, and
also a committee for NATO, or I used to in the old days when my
team was in the majority. At every meeting I would go to I would
raise it. Honest to goodness.
Senator HAWKINS. Now I am doing a good job, too.
Senator BIDEŃ. You are doing a great job, too, but unfortunately,
Lugar is the head of the committee. (General laughter.]
Having said that, though, the point I want to make, and then I
will ask for permission for some questions to be submitted in writ-
ing, is this. It just seems to me that we are in a position where we
have yet to put this on the scope in the way in which it warrants
being put on the scope, and notwithstanding your Herculean ef-
forts, and until we raise the international profile of this, we are not
going to make a great deal more progress in my opinion.
And I do not doubt the sincerity of the administration. I do not
doubt the desire of the administration if they could wave a wand
and end all this, but I do doubt that it has been made a priority
equal to the other two or three major international priorities on
the list with our trading partners. I would be very surprised if, in
fact, that were the case.
With your permission, Madame Chairwoman, I would like very
much to submit a series of questions to Mr. DiCarlo and to the fol-
lowing witnesses.
Dom, thanks. I am sorry we are beating on you. It is not you. We
are glad you are there. If you were not there, I think the whole
thing would drop off the chart completely. Thank you.
Senator HAWKINS. Thank you, Senator.
How often do you meet with the Secretary of State?
Mr. DICARLO. I have met with him on several occasions.
Senator HAWKINS. Once a month?
Mr. DICARLO. No. I met with him in December.
Senator HAWKINS. Of this year-of last year, 1983?
Mr. DICARLO. Yes, on two or three occasions.
Senator HAWKINS. You have not seen him this year?
Mr. DICARLO. Yes. I met with the Secretary in January, in con-
nection with a meeting with Foreign Minister Adderley of the
Bahamas.
Senator HAWKINS. You ought to come to our meetings. He is up
here a lot.
Mr. DICARLO. I am out going around the world telling about the
Hawkins bill.
Senator HAWKINS. I know. I have followed you.
1093
Mr. DICARLO. There is one question, Senator, that I think you
have asked that I have left unanswered, and that was the question
of Peru and Bolivia and what we can anticipate in the future. I
have made this statement when asked before the House, and I
think it is important that the Senate recognize what your problem
is. When we are asked questions like, how come there is more co-
caine or coke produced now than last year, I believe I can answer it
in this way.
We have no programs that were in effect eradicating the coca
crop in Bolivia. We have relatively no assistance going into Bolivia.
The agreement was achieved in August 1983. That agreement of
1983 will not significantly impact upon the amount of coca coming
into the country for several years, and if I can explain it, I would
do it in this way.
First, there is no government presence in the region producing
coca, the Chapare, in Bolivia at the present time. After our agree-
ments were signed we did not start eradicating coca. The Bolivian
Government did not start eradicating coca. And no coca will be
eradicated there until they have sufficient manpower and troops to
go in there and secure the area.
We have trained a group of 30 people who will be working with
forces, a strike force to go in there. We have completed the train-
ing of another 150 or 160 that are now prepared to go into that
area. Before anything can be done, they have to have the ability to
secure the area. So nothing has been done in Bolivia that would
impact upon the amount of coca being produced in that country
until this time.
Even if our program works, I can come back here next year and
you can tell me properly, it would be correct, that just as much or
more coca is available than was last year. That is going to be true,
because the amount of coca produced is so great that it exceeds-it
is produced in quantities that far exceed the amount that is re-
quired by the U.S. market.
As our programs begin to work, and we say up front, our pro-
grams are not short-term programs, programs that will have a
short-term impact on the United States, because as our programs
work, we start cutting back the production, there is still adequate
coca grown in those countries to more than supply the United
States market, even when we start cutting back, even if we start
cutting back in the percentages that you would like to see them cut
back and I would like to see them cut back.
We do not want to mislead anyone. Our program is long range.
I
give you the example of heroin. You visited the Far East, and you
know the problem. We are having successes. But the question is
asked, if you are having a success, how come more is available or is
just as available?
I think we have to point out, and we would be derelect in not
pointing it out, that there are probably over 1,700 tons of illicit
opium produced in the world. We in the United States use about 45
tons out of the 1,700 tons. It takes about 45 tons of opium to
produce 442 tons of heroin.
As we go around the world and we are successful in Pakistan,
and let us assume we are successful in other areas of the world, Í
cannot tell you at which point we are going to impact upon the
1094
availability in the United States. Again, it is long range, and it is
long term. We are making progress, but I do not think that
progress can be measured by what is available in the United
States. If we do that, I think we would be acting on an improper
assumption.
Senator HAWKINS. In quaaludes there was a dramatic drop at
once, was there not?
Mr. DICARLO. On the question of quaaludes, we dealt with-and
the DEA was very involved in this. It was produced in many coun-
tries. It was produced in Hungary. It was produced in Austria. It
was produced in the Federal Republic of Germany. It was produced
in China. And step by step, country by country, these went out of
production. We met with the Chinese Ambassador in Washington,
D.C. The Chinese did not want to deal with the United States on
this issue. The International Narcotics Control Board got involved.
You were involved in the effort and went to China about that time.
It was this kind of activity, dealing not with a natural crop grown
in areas like the hill tribe areas, or areas like where insurgencies
abound, or in Afghanistan, that we managed to bring under con-
trol, and yes, that was a great success, I think, in which many
people were involved, and was the kind of thing we are aiming for.
Senator HAWKINS. I want to reinforce what Senator Biden said.
We are on your side. We just came to help you.
I have about 40 more questions for you on different areas of the
world, the Caribbean, Mexico, Jamaica, Colombia, Bolivia, Peru.
We are going to submit them to you in writing, so that you can
answer them in writing. This hearing in going to become required
reading for the Secretary of State, and we will also recommend
that you get an appointment on a regular basis with the Secretary
to brief him. I know he has a lot of problems. We understand that.
But this Senator feels that this is the No. 1 problem in the United
States.
Mr. DICARLO. Senator, I think you should blame me for that.
Whenever I have asked for an appointment with the Secretary or
any principal in the agency, it has been granted to me. I have been
able to do within the Department, and if we ever have a conflict,
then it can be raised. We had none of those conflicts, except in one
instance of a difference of opinion between bureaus. So that if the
Secretary is not seeing me, it is not because of a lack of interest,
but because I was derelict and I did not request an appointment to
see him.
Senator HAWKINS. Well, before we excuse you, I would like you
to have an appointment with him, and suggest a better answer
than the one he gave to this committee a week ago when he said
the only way to stop the increase of illicit drugs was to stop the
market in the United States. That was his canned answer. It comes
from the Presidents of most countries when you first start talking
to them. Now we get a much better response. Since the passage of
the Hawkins amendment, they all want to know what they can do
to cooperate, as you know.
I appreciate the amount of time you spend on this. You travel.
You go to all these countries. You are well known and well respect-
ed in this field, and I want to thank you on behalf of the citizens of
1095
the United States for being vigilant and diligent, and let you know
that we are watching you.
Mr. DICARLO. Thank you.
Senator HAWKINS. Thank you.
Next we will hear from a panel composed of Lawrence Korb, As-
sistant Secretary of Defense for Manpower; Rear Adm. Paul Yost,
Chief of Staff, U.S. Coast Guard; Frank Kimball, Counselor for the
Agency for International Development, and William Logan, Direc-
tor of the Office of Investigations for the Customs Service.
Our first witness will be Dr. Korb. We have taken an inordinate
amount of time. I promised everybody they would be out of here by
12:30, so we will ask that you move quickly.
[Pause.)
Senator HAWKINS. Dr. Korb, we will start with you.
STATEMENT OF HON. LAWRENCE J. KORB, ASSISTANT SECRE-
TARY OF DEFENSE FOR MANPOWER INSTALLATIONS AND
LOGISTICS
Dr. KORB. Thank you, Senator. It is a pleasure to be here.
I would like to personally commend you for your leadership in
this very important area.
I have a statement for the record, and I will summarize it very
briefly. I will cover three topics, changes in the law and the posse
comitatus doctrine, the types of assistance that the Department of
Defense furnishes, and I will say a few words about our operations
in the Bahamas and Turks, the so-called OP BAT.
As you know, our ability to participate in international narcotics
controls was clarified by the changes to posse comitatus law in De-
cember 1981. According to this law, we can provide assistance any-
where provided that two things happen, it is passive and indirect,
and it is based upon a request from a civilian law enforcement
agency or the Coast Guard. We cannot, nor do we, take any initia-
tives in this area.
Defense assistance includes a couple of things, information, facili-
ties and equipment and related technical advice, and military per-
sonnel, provided that they do not participate directly in arrest and
seizure activities. There are, as you know, a couple of constraints
on our involvement. First of all, there can be no adverse impact on
readiness, and second, that we must get reimbursement where
there is no military benefit.
Now, let me talk about some specific types of assistance that we
provided in the last fiscal year. In fiscal 1983, the Department pro-
vided about $4 million of direct support and approved over 90 per-
cent of all the requests that were made of us. Attached to my
formal statement are tables of assistance provided by each of our
armed services.
Our major systems support included the use of the Navy E-2C
Hawkeye and the P-3 antisubmarine warfare aircraft. We had 72
AWACS missions, 55 B-52 sorties, 22 missions of our C-130's. In
Operation BAT, we had over 650 missions resulting in about $250
million of drug seizures.
For the Air Force alone, there were nearly 800 missions, thou-
sands of flight hours at a non-reimbursible cost of over $4.5 million.
1096
As you know, the army has loaned four Blackhawks, four Cobra
helicopters, and two Mohawk aircraft.
I have just been authorized to mention that the battle group
around the U.S.S. America, operating in the Caribbean, with Coast
Guard law enforcement teams, and using naval aircraft and ship
radars has cooperated in monitoring air and sea traffic in and out
of Colombia during the period from 12 to 20 March of this year.
We are very pleased to learn of the massive seizure in Colombia,
where you know-it has been mentioned this morning-the govern-
ment raided a large cocaine plantation. I do not know if our pres-
ence contributed to it. I hope that it did.
In addition to equipment, we have people who are involved in as-
Histance to law enforcement. The National Narcotics Border Inter-
diction System, with six regional centers, has over 40 military per-
Nonnel. There are Coast Guard law enforcement teams on Navy
whipu located throughout Key West, the Caribbean, and the gulf
.
Wo have worked in setting up balloon borne radars at Cape Canav-
oral and Key West, and we also provide technical advise to law en-
forcement committees in the U.S. attorney districts nationwide.
In terms of Operation BAT, I think it typifies quite well the type
of international role that the Department can perform. Operation
BAT, if you will, represents outer zone assistance. We were asked
to provide helicopter support in January 1983. The Defense Depart-
ment responded by providing a special warfare unit with two heli-
copters and over 20 people, and a complete plan for communica-
tions and a sensor system.
We were asked in January. The unit was deployed in May, and
we intend to maintain our commitment to this particular oper-
ation.
In conclusion, let me mention a subject that is of interest to the
committee, and that is our own internal program to protect our
own service people overseas. In all the countries with U.S. troops,
arrangements to curb trafficking exist with the host nation law en-
forcement authorities, international police groups, such as Interpol,
and American Embassy staffs. Each service also has decades of ex-
perience in criminal investigation and other drug activities.
Last year, the Department spent $76 million on drug abuse pre-
vention in the services. We handed down over 50,000 nonjudicial
punishments and 6,000 courts-martial for drug offenses.
In conclusion, we have set up in the Department a task force on
drug enforcement as evidence of our serious commitment. We want
to make sure that there is full compliance with law, policy, and the
intent of Congress without jeopardizing our primary mission, which
is national security. We also try to effect economies and efficiencies
in providing this assistance, for example, assuring that the best
available piece of equipment is provided for the right mission.
To be more effective, we need a couple of things, recognition that
our principal national security mission imposes certain limitations,
for example, in readiness or morale. We need to give E-2C air
crews a rest when they are in port with the fleet. And we also need
congressional assistance in insuring that the Department has suffi-
cient support and authority and resources to do what is necessary
when called upon.
Thank you.
1097
[Dr. Korb's prepared statement follows:
PREPARED STATEMENT OF HON. LAWRENCE J. KORB
INTRODUCTORY COMMENTS
Madam Chairman, other members of the Committee, I am pleased to present the
role of the Defense Department in curbing drug trafficking. We in Defense are very
appreciative of the long-standing interest and support the Chairman has given the
Department of Defense as it has moved into a relatively new area of operations. Her
guidance, and I add her prudence, has been very valuable in the avoidance of the
many pitfalls that accompany this new type of mission for Defense.
In my statement, Madam Chairman, I would like to cover three topics:
First, the changes in the law that have clarified the opportunities for DON par-
ticipation.
Second, the types of assistance that DOD can provide subject to concorn for rondl-
ness and, in some cases, reimbursement.
Third, I will cover our involvement in Operation BAT, recognizing that the full
Committee conducted a study of the Bahamian situation in (October 1943.
CLARIFYING THE POSSE COMITATUH DVOCTRINK
Military assistance, whether related to Public Law 98-164 (State Department Au.
thorization Act) and, more specifically, Section 1003, or other authoritiok, waam betur
defined in December 1981 when the President signed Public Law 97-86, clarifying
the impact of the Posse Comitatus Act (18 U.S.C. 1385) on military simmistanco w luw
enforcement.
Posse Comitatus law and policy specify constraints on military assistance to drug
enforcement.
Our assistance must be "passive" and "indirect,” except where direct assistance is
clearly authorized.
Our support is based upon requests from the civilian law enforcement agencies
we do not take major initiatives in civilian enforcement activities.
These limitations will become clearer as I outline the allowable types of assist-
ance.
Section 371 of Title 18 authorizes DOD to share information which is collected
during routine military operations with qualified Federal, state, and local law en-
forcement officials.
The Secretary of Defense, under Section 372, may make facilities and equipment
available to such officials. Section 373 authorizes technical advice relevant to the
use of Section 372 equipment and facilities.
While Section 375 bans direct participation of military personnel in drug enforce-
ment arrest and seizure activities, Section 374 allows for personnel assistance under
certain conditions.
Military personnel may be used to operate and maintain loaned equipment used
for controlling air and sea traffic.
Under emergency conditions, military personnel may transport or provide bases
of operations for Federal law enforcement officials outside the land area of the
United States (I will discuss the Defense Department activities in the Bahamas later
on).
Finally, all assistance provided by DOD is subject to reimbursement consider-
ations.
TYPES OF MILITARY ASSISTANCE
I would like to illustrate how law and policy operate in fulfillment of our respon-
sibilities.
DOD provides assistance to drug interdiction efforts in addition to its in-house
drug abuse prevention programs.
Interdiction has three components, each of which has a special meaning for De-
fense.
Detection and surveillance constitute the principal interdictive assistance func-
tions of DOD.
Interception
Having located a suspect, effective interdiction requires the means to intercept it.
Here DOD's role is largely limited to the provision of certain types of equipment,
34-045 0-84-70
1098
largely aircraft. Under Coast Guard tactical control, and consistent with its mari-
time law enforcement authority, the Navy may stop certain suspect vessels.
Arrest and seizure
DOD plays virtually no role in this area of interdiction-except where the Navy
operates under Coast Guard authority as mentioned above.
At this juncture, Madame Chairman, I would like to cover specific types of assist-
ance. To aid this effort, I have appended tables of assistance from each of the mili-
tary departments to this statement, and will summarize them for you.
Over the past fiscal year, the Army, Navy, Marine Corps and Air Force have pro-
vided substantial amounts of assistance to all levels of the drug enforcement com-
munity, with most going to Federal agencies. For all services, more than 90 percent
of requests for assistance were approved, with disapprovals very closely monitored
by my staff. Generally such disapprovals involve requests which would violate the
law-such as a request for military police to patrol a civilian park.
The major Defense systems engaged in drug enforcement activities include:
Navy E-2C “Hawkeye" surveillance aircraft with active and reserve crews which
patrol the East and West Coasts, the Gulf Coast and the Southwest border.
Navy P-3 anti-submarine warfare aircraft from reserve and active forces fly well
off shore covering Caribbean approaches, and the Atlantic and Pacific trafficking
lanes.
Marine Corps OV-10D aircraft, using very sophisticated sensors, are identifying
suspect aircraft, then assisting Customs in tracking them to a landing site.
The Air Force, too, rigorously committed itself in fiscal year 1983 to the drug
effort:
72 AWACS missions were flown at a nonreimbursable cost of nearly $3.9 million,
while 55 B-52 sorties were also made.
22 C-130 missions were also launched, largely in the Gulf area.
Third, in the Bahamas, 650 helicopter missions, leading to seizures of more than
$250 million of drugs, were flown in 7 months.
In all, the Air Force provided 799 missions, or thousands of flight hours, at a total
nonreimbursable cost of nearly $4.5 million.
The Army has been more active in lending equipment:
Four state-of-the-art Blackhawk helicopters, four Cobra helicopters, and two
Mohawk fixed-wing aircraft have been loaned to the Customs Service.
The Drug Enforcement Agency was using UH-1 helicopters on loan from the
Army, which have since been returned.
AREAS OF DEPLOYMENT
Security requires that I discuss the geographical deployment of miltiary assist-
ance in generalities, Madame Chairman, but I am always prepared to provide you
with detailed information in a protected forum. In brief, the deployments can be
summarily presented as follows:
DOD provides military personnel to the six regional centers of the National Nar-
cotics Border Interdiction System.
Coast Guard law enforcement teams are deployed with individual ships or flotillas
operating along U.S. coastlines and in the Caribbean. Together, shipboard as well as
Navy installation radars guard the Yucatan and Windward passages. Mobile Marine
Corps radars are provided when available on request along our borders. And, in Key
West and the Gulf
, Navy hydrofoils are engaging traffickers.
Balloon-borne radars, called “aerostats,” guard the Florida coast and approaches
from Cuba and the Bahamas.
Backing up this already impressive array of equipment and surveillance aircraft
is DOD's commitment to future strategy developments
Along land-locked borders, we have deployed Army, Navy, and Marine Corps air-
craft, to monitor potential incursions from Mexico.
Also of great importance is our effort to bolster cooperation with state and local
law enforcement officials as well. To date, my staff has met with many Law En-
forcement Coordinating Committees and U.S. Attorneys to explain DOD assistance
policies. Such meetings have been held in Maine, New York, Virginia, North Caroli-
na, Florida, Tennessee, Oklahoma, Mississippi, Louisiana and California.
My intention, Madam Chairman, is to demonstrate the Defense Department's
commitment to the effectiveness of the drug interdiction program. Although sei-
zures have risen sharply since we joined the drug battle, there is reportedly more
trafficking, growing geometrically against our efforts. The American market
1099
demand for illicit drugs provides a powerful incentive for domestic and foreign
criminal elements.
OPERATION BAT (BAHAMAS AND TURKS): PART OF DOD'S ZONE DEFENSE
Although Section 1003 of the State Department Authorization Act Public Law 98-
164) does not direct DOD involvement in international operations, our support to
the drug enforcement agencies acting under this law may be characterized as an
"outer zone” or secondary defense. Our assistance becomes important when other
in-country methods to prevent crop cultivation and distribution overseas fail. But
the "outer zone" defense also applies where a country becomes so overrun that it is
unable to cope-this is the case in the Bahamas where DOD is assisting DEA.
By May 1983, an Air Force special operations warfare unit was operating on site
with Navy assistance. A communication plan was completed by the end of the
summer, with the State Department agreeing to procure ground communications
equipment by December. The Defense Department, and especially the Air Force,
Madam Chairman, has responded to the Bahamian situation in a manner consistent
with the finest, wartime traditions:
The Air Force made far-reaching adjustments in training scheduling to avoid an
adverse impact on readiness.
Dedicated Air Force crews worked around the clock to keep the unit available de-
spite significant hardships, including the operational inefficiencies of operating far
from the home station, and under austere support conditions.
And, on January 9, 1984, three Air Force members made the supreme sacrifice
when they, along with a DEA agent and Bahamian police officer, were killed in a
helicopter crash at sea. The group was returning from a successful interdiction mis-
sion.
Despite that tragedy, Madam Chairman, the Defense Department remains unwav-
ering in its commitment, and has already replaced the lost helicopter.
I know that the Committee is also interested in DOD activities to protect Ameri-
can military personnel overseas. would like to add that the Status of Forces Agree-
ment (SOFA) in NATO, bilateral accords elsewhere, and the imperative of sover-
eignty govern our conduct in this regard. The host nations, often operating with
DEA, develop strategies which reach to the protection of American service people.
However, we have been asked to assist DEA in South Korea and Greece and, under
the law, are able to do so. Within DOD, of course, our drug abuse prevention pro-
gram is extensive, costing $76 million in fiscal year 1983, during which time there
were also 51,000 nonjudicial punishments and 6,000 courts-
martial for drug abuse
offenses.
SUMMARY
In closing, Madam Chairman, I wish to reiterate DOD's support of the drug en-
forcement community. In this regard, I have organized at Department level our own
Task Force on Drug Enforcement, headed by a highly respected Army Lieutenant
General. His mandate is to assure me, the Secretary of Defense, and the President,
that we are doing all that is feasible in this area. He and his staff are always avail-
able for consultation with Members, committees and staffs of Congress.
Thank you for the privilege of appearing before the Committee, Madam Chair-
man. I would be pleased to take questions from any of the distinguished Senators.
1100
TABLES OF MILITARY
ASSISTANCE
FOR (FY 83
US, ARMY
1. Major Areas of Deployment
Southwest us
~
Aircraft and radar units
B.
Southeast (US
Aircraft for on-shore and off-shore surveillance
II. Dypes of Support (approved requests)
Total costs Reimbursable
$ 1,200 $21,200
Paid
5° 1,200
A.
Facilities use
26
B.
Information
6(84
C. Equipment (2 denied)
37
80
NA
D.
27
156,000
9,000
9,000
Mission Support (aircraft,
NNBIS personnel) (6 denied)
E.
Training (2 denied)
40
NA
87
@
F.
Personnel (1 denied)
NA
329,000
329,000
329,000
G. Maintenance of loaned aircraft
1. Border Patrol
2. Us. Customs Service
TOTALS
III. Summary Requests
60,000
546,320
60,000
399,200
44,000
303, 200
Total
252
Approved
232
Denied
11
Pending
9
1101
(PROJECTIONS FOR FY 84)
US, NAVY
I. Major Areas of Deployment
Nortbeut
Aerial surveillance
Southeast
Aerial and maritime surveillance
Bahamas and Caribbean
Facilities; serial, maritime surveillance;
Coast Guard boarding party support; installation
radars
Southwest
Border Patrol
Far West
Aerial and maritime surveillance
II. Types of Support
Aviation
FY 198
Forces
ATLANTIC
E-2C
OV-10D
P-3/S-3
Subtotal
PACIFIC
B-2C/B
OV-10D
P-3/8-3
Subtotal
RESERVE
P-3 3
p
TOTAL
AVLATION SUMMARY
FY 1983: 3,000 flight hours were flown; $4 sillon Lacremental costs were incurred.
1102
OTHER
o
Loan and training in the use of spare equipment.
Temporary custody of prisoners at Naval Air Station (NAS) Guantanamo Bay, Cuba
while awaiting transportation.
o Escortlag/towing vessels seized by the Coast Guard.
Maintaining lookout for suspect vessels identified by the Coast Guard.
o
Use of shore-based air-search radars to detect and track suspicious aircraft.
This amounted to over 1,000 hours la Fyl83, Dostly at NAS, Guantanamo Bay.
0 Providing personnel to help pan the National Narcotice Border Interdiction
System (NNBIS) regional centers.
o Making available rifle and pistol ranges for agent proficiency training and
"burn" pits to destroy illicit contraband.
o Providing logistic support and replenishment at sea for Goast Guard ships.
US AIR FORCE
I. Major Areas of Deployment
Southwest (US (TX-OR-Western Gulf)
B.
Southeast (off-shore coast, FL, Gulfcoast)
C.
Bahamas and Caribbean
II. Bypes of Support
AVLATION
Missions
Costs
Reimbursement
Paid
E-3 (AWACS)
72
3,900,000
NA
B.
B-52 (Busy observer)
55
unavailable
NA
C.
UH-IN (OPSBAT)
650
594,000
NA
D.
C-130
-22
22
unavailable
NA
NA
TOTAL
799
4,494,400
OT:IER
Facilities
20
74,200
74,000
74,000
B. Equipment
124
C.
Mission Support...
23
NNBIS only
97,000
NA
NA
D. Miscellaneous
54
TOTAL
221
171,200
74,000
74,000
1103
Senator HAWKINS. Thank you, Dr. Korb.
In your opinion, is the drug trafficking threat increasing?
Dr. KORB. Well, Senator, all we do is provide information to
other agencies who are more properly concerned with this ques-
tion, and so, we do not make those particular judgments. I have a
personal opinion based upon my involvement here as well as listen-
ing to what has gone on here, and it seems to be. But that is not a
departmental position, because we do not make those judgments.
Senator HAWKINS. How have Coast Guard tactical law enforce-
ment teams been employed aboard Navy vessels?
Dr. KORB. Essentially what happens is that when our naval
forces are in an area which we think will involve us in doing some-
thing about interdicting the drug traffic, we deploy a Coast Guard
team on board for a specific period of time. For example, they
might ride a ship from Norfolk down to the Caribbean, or in this
particular exercise that I just mentioned, we put the Coast Guard
team on board the Navy vessels.
Senator HAWKINS. The Department of Treasury recently request-
ed the Department of Defense divert $11 million to the U.S. Cus-
toms Service for their operation and maintenance of aircraft. Does
the Department of Defense have the authority to honor this re-
quest, or would it violate the Economy Act?
Dr. KORB. We think it would violate the Economy Act, and we
have so informed the Department of the Treasury.
Senator HAWKINS. What impact has the revised Posse Comitatus
had on the morale in DOD?
Dr. KORB. Well, I think that in terms of the morale of the young
men and women of our forces that get involved in this, it has had a
positive impact, because rather than doing their training, if you
will, against make believe targets or simulated targets, they actual-
ly get to do the training in a real lifetime operation, and then they
can see the results of their efforts.
Senator HAWKINS. Thank you very much. We appreciate your co-
operation. It has been delightful working with you.
Dr. KORB. Thank you very much, Senator.
Senator HAWKINS. Admiral Yost, do you have a statement?
STATEMENT OF REAR ADM. PAUL A. YOST, JR., CHIEF OF STAFF,
U.S. COAST GUARD
Admiral Yost. I have a statement which I will provide for the
record. I would also like to summarize it.
Madam Chairwoman and members of the committee, I am Rear
Adm. Paul A. Yost, Chief of Staff of the Coast Guard.
I would like to thank you for your leadership in the drug eradi-
cation and interdiction program in this Nation. We appreciate it
very much, I do personally, and speaking for the U.S. Coast Guard.
First, I would like to go over some background on the nature of
drug trafficking, and at the same time update trends that are being
noted. The Coast Guard's role in our Nation's five-pronged Federal
strategy for prevention of drug abuse and law trafficking is focused
on the interdiction of drugs bound for the United States from for-
eign source or transit nations.
1104
Estimates for 1982, the latest figures available, from the Nation-
al Narcotics Intelligence Consumers Committee, show that about
85 percent of the annual supply of marijuana in the United States
was grown in foreign soil. Most of this amount was shipped by sea.
A small but increasing percentage is imported by air.
The committee also states, that is, the Consumers Committee,
that all cocaine consumed in the United States is foreign produced.
Most is smuggled into the United States by air, but we note a grow-
ing trend of cocaine shipments intermingled with bulk shipments
of marijuana.
During 1983, our overall efforts have provided an increased de-
terrent value by denying easy access to the United States via tradi-
tional maritime routes, and by increasing the cost of doing business
for the drug traffickers. Our number of pounds seized in fiscal 1983
were 37 percent lower than in 1982. That is primarily a result of
our deterrent effect and the much smaller 1982 crop in Colombia.
Let me also say that we are seeing an increase in fiscal year 1984
due to the much better 1983 crop in Colombia. Most maritime drug
traffic destined for Florida and the South and the Atlantic and the
gulf coast regions of the United States departs from South America
or Caribbean staging areas.
Marijuana from the Guajira peninsula on the north coast of Co-
lombia is the prime example of this. As seaborne smugglers pro-
ceed north, they normally pass through one of the four interisland
channels we call choke points. It is in these areas that Coast Guard
resources are most effectively employed.
The smugglers that successfully transit these choke points head
for the Bahamas, Florida, or the gulf coast. Some vessels attempt
to avoid the increased law enforcement pressure off Florida by
transiting the Eastern Caribbean and offloading further north
along the mid-Atlantic or the New England seacoasts.
There has also been some increase in drug smuggling on the west
coast, which could be a further reaction to the increased enforce-
ment pressure in the Caribbean. We have noted that as law en-
forcement pressure in the maritime region has increased, there has
been a shift to other modes and methods of transportation. There
has been a significant increase in air smuggling. Also, the use of
hidden shipboard compartments and attempts to navigate around
our placement of interdiction resources has been noted.
We believe that these tactics confirm the fact that we are having
a noticeable effect on maritime smuggling, since these elusive
efforts make smuggling more difficult and expensive for the
trafficker.
The operational effort to stem the overall flow of drugs has
become more effective through the coordination of all law enforce-
ment agencies' interdiction and intelligence gathering activities.
A review of our records indicates that we have seized 12 Pana-
manian, 5 Honduran, 2 Haitian, and 6 U.K. flag vessels since Janu-
ary 1, 1983. In addition, we have seized one vessel each from the
following countries during the same time frame: Canada, Cayman
Islands, Colombia, West Germany, Mexico, and Sweden. We have
also seized 17 vessels claiming foreign registry which were eventu-
ally declared stateless. These seizures netted a total of over 1.4 mil-
lion pounds of marijuana.
1105
smaller 1982 crop in Colombia.
Since the beginning of 1983, we have contacted foreign govern-
ments 66 times to confirm claims of registry. Internal procedures
vary widely from country to country, as do their registry systems,
so that time required for response also varies widely from country
to country. We, the State Department, and the involved Embassies
strive to minimize the time required to complete this process so
that valuable cutter time is not unnecessarily wasted while the reg-
ister check or negotiations for special arrangements are completed.
In closing, I would like to state that we continue to receive coop-
eration from those governments in the Central and South Ameri-
can and Caribbean nations that we routinely deal with and depend
on for the daily conduct of our at-sea interdiction operations. I
have no reason to doubt that the open relations we have estab-
lished with these countries will continue. I certainly hope this re-
mains the case. They are vital to our interest in this important
mission.
This concludes my statement, Madame Chairwoman. I will, of
course, be happy to answer any questions.
[Admiral Yost's prepared statement follows:]
PREPARED STATEMENT OF REAR ADM. PAUL A. Yost, JR.
Madam Chairman and members of the Committee, I am Rear Admiral Paul A.
Yost, Jr., Chief of Staff of the Coast Guard. It is a pleasure to appear before you
today to report on the Coast Guard's involvement in international drug control.
First, I would like to go over some background on the nature of maritime drug
trafficking, and at the same time update trends that are being noted.
The Coast Guard's role in our nation's five-pronged Federal Strategy for preven-
tion of drug abuse and drug trafficking is focused on the interdiction of drugs bound
for the United States from foreign source or transit nations. Estimates for 1982, the
latest figures available from the National Narcotics Intelligence Consumer's Com-
mittee (NNICC), show that about 85 percent of the annual supply of marijuana in
the United States was grown in foreign soil. Most of this amount was shipped by
sea. A small, but increasing percentage is imported by air. NNICC also states that
all cocaine consumed in the United States is foreign-produced. Most is smuggled
into the United States by air, but we note a growing trend of cocaine shipments
intermingled with bulk shipments of marijuana.
During 1983 our overall efforts have provided an increased deterrent value by de-
nying easy access to the United States via traditional maritime routes, and by in-
creasing the cost of doing business for drug traffickers. Our seizures in fiscal 1983
were 37 percent lower than in 1982, which is a function of our deterrent effect and
Most maritime drug traffic destined for Florida and the Atlantic and Gulf Coast
regions of the United States departs from South American or Caribbean staging
areas. Marijuana from the Guajira Peninsula on the north coast of Colombia is the
prime example of this. As seaborne smugglers proceed north, they normally pass
through one of the four inter-island channels we call "choke points.” It is in these
areas that Coast Guard resources are most effectively employed. Smugglers that
successfully transit these choke points head for the Bahamas, Florida or the Gulf
Coast. Some vessels attempt to avoid the increased law enforcement pressure off
Florida by transiting the Eastern Caribbean and offloading further north along the
Mid-Atlantic or the New England seacoasts. There has also been some increase in
drug smuggling on the West Coast, which could be a further reaction to the in-
creased enforcement pressure in the Caribbean. We have noted that as law enforce-
ment pressure in the maritime region has increased, there has been a shift to other
modes and methods of transportation. There has been a significant increase in air
smuggling. Also, the use of hidden shipboard compartments, and attempts to navi-
gate around our placement of interdiction resources have been noted. We believe
these tactics confirm the fact that we are having a noticeable effect on maritime
smuggling, since these elusive efforts make smuggling more difficult and expensive
for the trafficker. The operational effort to stem the overall flow of drugs has
become more effective through the coordination of all law enforcement agencies'
interdiction and intelligence gathering activities.
1106
Coast Guard drug interdiction operations concentrate on large motherships which
deliver contraband to smaller, faster contact boats well offshore. In addition to car-
rying marijuana, our intelligence sources indicate that many also carry quantities of
hard drugs (primarily cocaine). We are seldom able to seize these higher value low
volume hard drugs however, because they are usually disposed of prior to the at-sea
boarding of the vessel. We have observed actions that confirm this. Analysis shows
that while we must keep pressure on all facets of the maritime drug scenario, inter-
diction of motherships has the greatest potential for disrupting the maritime flow of
drugs. In addition to removing other contraband (including hard drugs), one mother-
ship seizure may remove as much marijuana from the market as would many con-
tact boat seizures closer to shore.
Since the mid 1970's the Coast Guard, in cooperation with local, State and other
Federal agencies, has increasingly employed our resources in an attempt to stem
the flow of drugs into the United States. Special operations were conducted specifi-
cally for narcotics interdiction, and as our experience grew, so did the Coast Guard's
success rate. In the early 1980's, the Administration embarked on an aggressive
campaign to reduce the availability and use of illicit drugs, and in January 1982,
the President created the South Florida Task Force on crime as a result of the con-
cerns expressed by the citizens of Florida. The Coast Guard responded to this effort
by reprograming resources and adding to the inventory of Coast Guard cutters,
planes, equipment and personnel based in Florida.
During the past several years we have significantly increased the number of
cutter patrol days expended for drug interdiction off the coast of Florida, in the Car-
ibbean, and in the choke points. Our air operations have also been stepped up. In
1982 two large Coast Guard cutters were relocated to Florida from other regions of
the United States to increase their ability to respond quickly to sightings and other
intelligence. The Coast Guard now averages about six of our larger cutters on patrol
at all times in waters off the Southeastern United States and in the Caribbean. We
have also reprogrammed some of our helicopter assets to make our flight-deck
equipped cutters more effective. Additionally, we formed a Surface Effect Ship
squadron of three vessels in Key West, which became fully operational in 1983.
In 1982 Congress passed legislation clarifying statutory restrictions on the use of
Department of Defense resources for law enforcement purposes. As a result, the De-
partment of Defense now has greater freedom to support federal law enforcement
agencies. DOD resources have been playing an important role in the federal drug
interdiction program by providing surveillance and support services, such as using
aircraft to search for smugglers and Navy ships to tow or escort vessels seized by
the Coast Guard to the nearest U.S. port. Additionally, Navy ships now also deploy
with Coast Guard Tactical Law Enforcement Teams (TACLETS) or Law Enforce-
ment Detachments (LEDETS) aboard. These teams or detachments conduct board-
ings of suspect vessels from their Navy hosts in the same manner as boarding par-
ties operate from Coast Guard vessels.
To increase further the number of surface assets available for interdiction, the
Coast Guard has been routinely deploying LEDET personnel on Navy Pegasus-class
PHMs operating out of Key West. These hydrofoils are being used as "pouncer” ves-
sels to interdict fast drug smuggling contact boats. We will conduct a joint evalua-
tion with the Navy later this year to verify the effectiveness of pouncer operations,
and to see if this concept is also useful in the Gulf of Mexico.
Since 1982, the Navy has assisted us in the seizure of 18 vessels, the arrest of 166
suspected smugglers, and the interdiction of 500 thousand pounds of marijuana and
46 pounds of cocaine.
The cooperation we receive from foreign governments is good. We routinely deal
with the governments of Colombia, Venezuela, Panama, Costa Rica, Mexico, Hondu-
ras, the Bahamas, Jamaica, Haiti, and the Dominican Republic, as well as British,
French, and Dutch island dependencies in the Caribbean. Our contact with them is
coordinated through the Department of State, and usually starts with a request for
a registry confirmation of a vessel intercepted by one of our cutters at sea. Prior to
taking any action against a vessel on the high seas, we must verify its claimed na-
tional affiliation to insure it is legitimate. If the vessel's claim is confirmed by its
flag state, the U.S. Embassy then negotiates with that government to permit the
U.Š. Government to board and search the vessel. If contraband is found, we then
seize it either on behalf of the nation we are dealing with, or for violation of U.S.
law. If the purported flag state refutes the vessel's claim of registry, we then follow
established procedures to declare the vessel stateless. The High Seas Convention
permits any nation to exert its jurisdiction over a stateless vessel, thus, we can
exert U.S. jurisdiction to board and search. Close cooperation of other governments
is absolutely crucial during this process. Their ability to rapidly verify claims of reg-
1107
istry at any time of day or night, and their willingness to enter into cooperative
arrangements with us to facilitate searches and seizures on the high seas are key
elements of our maritime interdiction program.
A review of our records indicates that we have seized 12 Panamanian, five Hondu-
ran, two Haitian, and six U.K. Flag vessels since January 1, 1983 using this process.
In addition, we have seized one vessel each from the following countries during the
same time frame: Canada, the Cayman Islands, Colombia, West Germany, Mexico
and Sweden. We have also seized 17 vessels claiming foreign registry which were
eventually declared stateless. These seizures netted a total of over 1.4 million
pounds of marijuana. Since the beginning of 1983, we have contacted foreign govern-
ments 66 times to confirm claims of registry. Internal procedures vary widely from
country to country, as do registry systems so the time required for responses also
varies widely from country to country. We, the State Department, and the involved
Embassies, strive to minimize the time required to complete this process so that val-
uable cutter time is not unnecessarily wasted while the registry check, or the nego-
tiations for the special arrangement are completed.
The Coast Guard is also operationally involved with foreign governments. We
have engaged in joint operations with Jamaica, the Bahamas, Haiti, Colombia,
Panama, and Costa Rica. We plan to continue operations with friendly governments
in the future.
In closing, I would like to state that we continue to receive excellent cooperation
from those governments of the Central, South American, and Caribbean nations we
routinely deal with, and depend on, for the daily conduct of our at-sea interdiction
operations. I have no reason to doubt that the open and cordial relations we have
established with these countries will continue. I certainly hope this remains the
case. They are vital to our interests in this important mission.
This concludes my prepared testimony, Mr. Chairman. I will be happy to answer
any questions you or the members of the committee may have.
Senator HAWKINS. Senator Pell has joined us, and has a brief
statement and some questions that he would like to ask.
Welcome, Senator Pell.
Senator PELL. Thank you very much, Senator Hawkins. I do not
want to interfere with your regular order. Do you want to hear
from all of the witnesses first before questions?
Senator HAWKINS. We are letting each witness be dismissed as
they finish. This is the Coast Guard witness.
As you know, Senator Pell held a very successful hearing in
Rhode Island.
Senator PELL. Thank you very much. As a captain in the Coast
Guard Reserve, alas, retired, it is a double pleasure for me to be
with Admiral Yost and his colleagues from the Coast Guard here.
Admiral Yost. I think we negotiated some of the Law of the Sea
problems together, Senator, some years ago.
Senator PELL. Exactly. I remember it well. And even when you
did not have quite as glorious a rank.
Admiral Yost. That is right.
Senator PELL. I am very glad to see you again.
Being a New Englander, we are particularly concerned with this
drug traffic, because it has moved North in part because of the
good job that you have done in the Caribbean. We have about 6,000
miles of jagged coastline being utilized by the smugglers to a great
extent.
In fact, it reminds me a little of when I was a boy. My State
would never have ratified the Volstead Act, and the smugglers
used to come ashore, and I remember most respectable citizens
would go down to greet them as they came to the beach. The boot-
leggers were next to the police station.
But this is not the case with the drug traffic, where I think there
is universal or general abhorrence of the drug traffic. There is no
1108
condoning of it at all. I think the reaction of our people is very
dif-
ferent. They want to help you, and not hinder you, as was the case
when we had responsibility to enforce the Volstead Act.
So, I congratulate you for the job you have done in the Caribbe-
an, and hope that you could do as successful a job off of New Eng-
land. I remember last year the hearing brought out the fact that
officials have seized 10 times the volume of drugs confiscated in the
previous year. That was because of your good work and also be-
cause the traffic has risen. We cannot continue to ask agencies
such as yours to do more and more with the same level of re-
sources. But I am particularly glad to learn your views of the ade-
quacy of the funding being devoted to combating the drug traffick-
ing problem.
We have just has published the hearing that we held on October
31, 1983. I do think you will find it of some interest, because Admi-
ral Gracey was one of our most, really, our most distinguished and
leading witness there.
Now, specifically, Admiral Yost, how much of the Coast Guard
budget for 1985 will be devoted to law enforcement, what percent-
age?
Admiral Yost. It is in the vicinity of 28 to 29 percent. That is
sometimes hard to identify in a multimission agency.
Senator PELL. How would that compare with the 1984 budget?
Admiral Yost. Well, it would be slightly higher.
Senator PELL. Of the 1984 budget, what percentage is devoted to
law enforcement?
Admiral Yost. We are also around 28 to 29 percent in 1984.
There is not an order of magnitude change.
Senator PELL. Now, your 1985 proposed Coast Guard budget for
operations, which I have looked at, has basically the same funding
level as 1984 if my recollection is correct. Given the fact that some
of this funding is going to be eaten up by inflation and a mandato-
ry pay raise for personnel, it would seem to me that the 1985
budget will actually be a decrease in real terms over 1984. Would
that not be correct?
Admiral Yost. I do not think that we could say it was a decrease
in real terms. We feel that in 1985 we have, as Admiral Gracey has
testified, sufficient money to do those things that we are currently
assigned. We are not rich. We never have been. We obviously could
use more money. But that is a national decision. We are not hurt-
ing for money. We have more concern with personnel resources
than we do money at the moment. For money we are not in bad
shape.
Senator PELL. What are the $2 figures? I do not recall them at
the moment.
Admiral Yost. I would have to prepare that for the record. The
dollar figures for 1984 and 1985 in OE, I believe, are $1.692 billion
in 1984 and $1.759 billion in 1985. The delta there was $67 million
in OE. I think there was some increase in other appropriations, so
the overall delta is about $80 million between 1984 and 1985.
Senator PELL. Do you mean there was an $80 million increase?
Admiral YoSt. An $80 million increase. Sixty-seven million of
that was in the operating expenses appropriation.
1109
Senator PELL. Was that not more than used up by the mandatory
pay raise and by the 3-percent or 4-percent inflationary figure? It
would seem to me from simple arithmetic that that would be the
case.
Admiral Yost. Yes, it will be.
Senator PELL. So in real terms there will be less. In real dollars,
in purchasing power, there will be less in 1985 than in 1984.
Admiral Yost. I would have to respond for the record. Your logic
seems compelling. I am just reluctant at the table here without the
ability to go over the budget to answer that question in detail.
[The information referred to follows:]
Overall dollar increases between 1984 and 1985 are slightly less than anticipated
cost of living increases. However, new vessels, aircraft and equipment purchased
with prior year funds are now coming on line to replace older high maintenance
cost facilities. This will allow us to continue programs at current levels with some
program enhancements in law enforcement and military readiness.
Senator PELL. The reason I am so interested in it is, I will have
an opportunity to testify on the Coast Guard budget before the ap-
propriate committee, and some of us on the Hill have always felt
the Coast Guard has been almost too good a soldier in not waving
the flag of alarm, which you do not find with your fellow 'armed
services.
Admiral Yost. I think I can say safely, sir, from the administra-
tion's point of view as well as ours, that we do not see a great addi-
tion to the Coast Guard budget between 1984 and 1985 as far as
dollars go.
Senator PELL. What is your best assessment of the percentage of
illegal drugs smuggled into the Nation that are being presently
seized by the Coast Guard?
Admiral Yost. We think that we are somewhere in the 15- to 20-
percent area of drugs seized. It is very difficult to tell, because you
do not know how many are being shipped. Unfortunately, they do
not come with a bill of lading, and so you do not know the tonnage
that is being shipped. It is hard to estimate what percentage you
are seizing. The estimates I have seen run anywhere between 15 to
30 percent, depending on whose estimates they are.
Senator PELL. What level of funding would you need to achieve
an interdiction rate of 70 to 80 percent?
Admiral Yost. I guess I would have to say a massive increase in
funding to achieve that kind of a percentage. I would want to put
as background that that is not the administration's program.
I have talked about a five-pronged program that the administra-
tion is using, and that includes education, drug treatment, re-
search, supply reduction, and then law enforcement being the final
prong of the five-pronged effort. The administration is not depend-
ing on law enforcement alone to shut down the drug operation, or
even to get 70 percent of it.
I would just have to say it would be a massive influx of funds in
order for us to put enough ships, men, and airplanes in the coastal
regions and choke points to have that kind of an interdiction rate.
Senator PELL. Could you submit for the record a rough estimate
of what it would take?
Admiral Yost. I would.
Senator PELL. Thank you very much indeed.
1110
[The information referred to follows:]
The 70 percent interdiction rate was a figure drawn up in a study a few years ago
as the amount of drugs it would be necessary to seize to make trafficking unprofit-
able. It was never viewed by the Coast Guard as a realistic goal. The resources
needed would be huge, both for the Coast Guard and for other law enforcement
agencies. For these reasons it is not feasible to draw up a list of resources needed to
achieve this interdiction rate.
Senator PELL. Is there much coordination between the Coast
Guard and other agencies when it comes to law enforcement?
Admiral Yost. The question, Senator, was what--
Senator PELL. Is there adequate coordination, particularly in
regard to intelligence gathering, between the Coast Guard and the
other agencies involved?
Admiral Yost. I think that the amount of cooperation has in-
creased orders of magnitude in the last 4 or 5 years. In the last
year or so, a good piece of that coordination and cooperation has
come through the NNBIS organization. It has also come through
the Posse Comitatus change that you have made. Secretary Korb
testified eloquently to the help that DOD Services has given us.
For example, from the Navy we are getting daily aerial surveil-
lance. We are getting Coast Guard boarding teams on their ships,
as he mentioned. We are getting high interest vessel profile sitings
from their vessels throughout the high seas. They are providing
towing and escort services. When we seize a vessel, they will often
tow or escort it to the port so that we do not have to pull our vessel
off station or out of the choke points.
Air Force also is giving us excellent cooperation, and we are talk-
ing now with the Army about some help from the Georgia Air Na-
tional Guard and some of the other Army fixed wing assets.
So, the coordination is good. NNBIS activities have been a big
help, particularly in the intelligence arena. We are getting far
more intelligence now than we got a few years ago. That is not be-
cause the intelligence was not available. The intelligence has been
available. But the coordination was not there to get that intelli-
gence, either raw intelligence or massaged intelligence, to the com-
mander on the scene who needed it.
That mechanism is being provided by NNBIS. It is getting better
every day, and what you would need, going back to your last ques-
tion, what you would need to shut down 70 percent of the traffick-
ing is very much dependent on the amount of intelligence you get.
With good intelligence, that massive effort that I am talking about
is substantially reduced to get 70 percent or any other number that
you want. Intelligence is the key.
Senator PELL. Do your helicopters work in collaboration with the
National Guard helicopters? For example, in my part of the coun-
try, your Otis Airfield is used by you. We have a massive, a large
number of National Guard helicopters in my State. Do they work
together, or do you operate separately?
Admiral Yost. Historically, we have had excellent cooperation
with the air arms of all of the services, including Air National
Guard. Most of that has been in the search and rescue area. When
we do not have a helicopter available for whatever reason, they
have been just absolutely wonderful in providing that backfill. I do
not think we have done as much of this in the drug interdiction
1111
business, because it is not usually an emergency scramble situa-
tion. It is a planned patrol type of situation, I would be very glad to
look further into the use of Air National Guard assets other than
the Georgia Air National Guard in these kinds of things. We are
working with Georgia Air National Guard now. I would expect we
would expand that, if it works, to other areas.
Senator PELL. I would hope it would, and maybe in Rhode Island
and New England it would, too.
Admiral Yost. That seems like a good place to try.
Senator PELL. The fact that you also have the responsibility for
the 200-mile fisheries limit would, it seems to me, mean that you
could not use all your assets on drug interdiction. How is it divided
up between the two?
Admiral Yost. I would have to provide for the record the exact
division between the two. We are multimission. We do use the
same unit for more than one mission, sometimes during the same
flight. They are involved in a multimission type of effort. So that
has been a problem. We want to be careful that we do not divert so
many assets to a single mission, drug interdiction, that we leave
great gaps and holes and bring great suffering on people who are
dependent on us for our other missions, including search and
rescue, of course, fisheries law enforcement, and other areas.
Senator PELL. In connection with the new equipment that you
have-I am thinking of the 270-foot cutters that are being built in
Rhode Island-how is that building program going? It is on target?
Admiral Yost. The 270-foot cutter program is lagging somewhat.
There have been some strikes, as you know. We have two ships de-
livered from Takoma. The other two are in process, and will be de-
livered in 1985 from Derecktor Shipyard. I would guess they might
be behind. A year behind, I am told, in Derecktor Shipyard. Or so
it looks to us. Mr. Derecktor might have a different answer. It is
sometimes a little hard in the middle of a shipbuilding program to
see where you are.
Senator PELL. The important thing is that the cutters be quality
made.
Admiral Yost. And I am sure, being built in Rhode Island, they
will be, sir. We are looking for a very, very fine vessel. It is a good
design. We feel we have gotten quality workmanship in both of the
shipyards.
Senator PELL. Let us just hope they have the same longevity as
the Duane Campbell class, which is still being used almost 50 years
after they were built. Well, I know it is more than 40 years.
I would like to bring out the point that the Coast Guard mission,
as you pointed out, is in all areas, fisheries, law enforcement,
search and rescue, marine pollution, and these missions are in-
creasing every year. The resources are essentially remaining static,
however, so you are in a difficult position, as I see it, of having in-
creasingly large numbers of responsibilities and more or less the
same resources to carry them out.
It is a tough job, which you are doing to the best of your ability,
but if this continues, I do not see how you are going to be able to
continue handling this unless you have your people work so hard
as to give them no leave and work 16-hour days. Do you have any
comments on that?
1112
Admiral Yost. I would like to address that. We are working very
hard. I think that we are stretched quite thin. At the same time, I
would be remiss if I did not mention to this committee that we
have in the last few budget years gotten a considerable amount of
money in our capital improvement program, some of that through
DOD money, as you know. From that we have been able to buy
three new SES's that are operating in Senator Hawkins' area, in
the Key West area.
We are remodeling, or shall I say “FRAM'ing,” the acronym for
fleet renovation and modernization all of our big 378-foot cutters.
We are giving our 210-foot cutters a midlife renovation which will
provide significant improvement in their capabilities. We are bring-
ing the new 270's on the line, as you know from your interface
with Derecktor in your own State. We have extended the life of
three Navy tugs that are quite old vessels, but we are modernizing
those.
We have, and I think this is one of the most exciting things, we
have just received a final amount of money in the 1984 budget
from DOD to allow us to buy up 17 new 110-foot patrol boats. This
will be a very powerful vessel, a very fast vessel, a very capable
vessel, and I frankly cannot wait to see a fleet of 17 110-foot, 29-
knot patrol vessels thrown at this drug and law enforcement prob-
lem throughout the United States. I think it will make a signifi-
cant impact.
We also have received all of our new Falcon jet aircraft. We are
having a few growth problems with them as we are trying to get
them into the air and flying the program hours they are scheduled
to fly. We are having a few engine problems. We are on the verge
of starting to receive our new Dolphin helicopters, which again will
have a significant impact in the business that we do in law enforce-
ment:
Senator PELL. But is it not a correct statement that because of
the decommissioning and the removing for renovations of some of
the cutters, that the number of cutters is remaining pretty much
the same?
Admiral Yost. It is remaining pretty much the same. Even the
number of hulls, particularly major cutter hulls, will drop over the
next few years as we renovate these major vessels. We are working
our people harder. We are going to try to augment the crews of
these vessels.
We are going to try to get more ship hours and ship days out of
them for that period of several years, while we do that. We are
going to work harder, but at the same time, you are absolutely
right, Senator. We expect there will be less hulls, large hulls par-
ticularly, during this renovation process.
Senator PELL. Thank you very much, Admiral Yost.
Thank you, Senator Hawkins.
Senator HAWKINS. Thank you for your participation and your in-
terest, Senator.
What is the average age of the Coast Guard cutter?
Admiral Yost. For our newer class of vessel, the 378's, they are
about 16 or 18 years in age. The 210-foot vessels are around 16 to
18 years. If you add in our 50-year-old vessels that the Senator
1113
talked about, we have raised the level of those vessels to an aver-
age of about 24 years old.
Senator HAWKINS. Is the average age going up or down?
Admiral Yost. Well, as we decommission the older vessels, the
average age will move from 24 to about 15 years, but right now it
is at 24 years. That is because we still have the 327-foot vessels
that are between 40 and 50 years old. We are operating the three
older Navy tugs that are in their forties. They are capable vessels.
We are glad we have them. But they do raise the average age of
your fleet.
Senator HAWKINS. You are doing a magnificant job with what
you have.
When we talk about the helicopters, do not helicopters require a
tremendous amount of maintenance? Do you not have to go over
them every-is it 14 hours, 20 hours of flying time you have to take
them all apart? How much down time do they have?
Admiral Yost. Let me talk about up time. It would be easier for
me to talk about up time. We are hoping to get out of these heli-
copters—the number that sticks in my mind is 800 hours a year.
Eight hundred hours a year we are planning to get out of these
new Dolphins. Let me say that we have not taken delivery of the
Dolphin helicopter yet because it has some engine problems, and
we want to be sure that we have the supply support and the engine
problems whipped before we begin to replace the H-52's.
We are spending a lot of maintenance time keeping the H-52's
flying and our older H-3's flying. We are getting about 650 hours a
year, which is what we are programing. That is not cheap, to take
an old helicopter and fly it that much.
Senator HAWKINS. But how many hours can it fly before you
have to go over it?
Admiral Yost. I am not absolutely sure, but I think about 10
hours between routine maintenance. That is, fly it ten hours, do
some routine maintenance, fly it 10 hours, do some more routine.
And then less frequently you do a major overhaul of specific com-
ponents that puts that bird down for a good number of days.
Senator HAWKINS. Do you have a spare parts problem?
Admiral Yost. In the older helicopters, we have some spare parts
problems. We are putting a significant amount of money in our
1984 and 1985 budget into buying some of the critical parts, rotors,
gear boxes, and some engines, in order to cut down on the amount
of time that they just sit there waiting for a spare part.
Senator HAWKINS. What is the country of origin of the majority
of the drug trafficking ships that are stopped by the Coast Guard?
Do you know?
Admiral Yost. Yes. There is a difference between the origin of
the drugs, which is obviously Colombia, and the origin of the
vessel, the flag of the vessel. Frankly, the major number of vessels
we seize are flying the U.S. flag. I would say, though, that those
vessels are the contact boats for the most part. Those are the
smaller vessels. The mother ships are coming out of Panama, Hon-
duras.
Senator HAWKINS. Caribbean countries?
Admiral Yost. Yes; and the United Kingdom and its possessions
around the Caribbean.
34-045 04-84-71
1114
Let me turn to my notes here, because I do not want to miss any
country. They would be disappointed if they did not make the
news.
Senator HAWKINS. That is right.
Admiral Yost. Seventy percent of the vessels that we seize, about
70 percent are U.S. vessels. They are usually the smaller vessels,
contact vessels, that sort of thing. Ten percent of the vessels we
seize are stateless. That leaves about 20 percent of the vessels we
seize are foreign vessels. Of the vessels that we have seized recent-
ly, 40 vessels were Panamanian, 18 were from Honduras, 17 from
the United Kingdom or its dependencies, 8 from Colombia, 7 from
Venezuela, and then it drops on off to Grand Cayman, Bahamas, et
cetera, with 4 or 5.
Senator HAWKINS. Thank you. Are you getting much cooperation
from Mexico? Can you chase a ship into the Mexican waters past
the Yucatan passage?
Admiral Yost. We are not getting that kind of cooperation from
Mexico. Mexico feels that they will take care of their own. They do
not want a lot of U.S. assistance in doing this. We have discussions
with them. We have had an exchange of officers now and then. We
have had visits, et cetera. But they are not in the forefront of coop-
eration among the Caribbean nations.
Senator HAWKINS. Thank you. I want to thank you for the tre-
mendous impact the Coast Guard has had on the drug interdiction
program in south Florida. We really appreciate your service. The
seizures are phenomenal, but again, I must repeat, we have twice
the amount of drugs on the street at half the price. That means a
lot is coming through.
Admiral Yost. Could I say one thing before I leave that?
Senator HAWKINS. Surely.
Admiral Yost. Drug interdiction and law enforcement is abso-
lutely critical to the entire problem of reducing drugs in this
Nation and in Florida. It is not the only thing. It is one of five of
the prongs. I do think that without effective law enforcement, that
without the kind of law enforcement that we now have, that the
drug usage in this Nation would be up considerably from what it is
now, and I can only agree with you, and thank you for your sup-
port, not only in the interdiction that the Coast Guard is involved
in, but in the entire scheme of eradication, education, and all the
other things you are concerned with and involved in. Senator Haw-
kins, thank you.
Senator HAWKINS. Thank you so much, Admiral.
We now will hear from William Logan, who is Director of the
Office of Investigations for the Customs Service. You may summa-
rize your statement. We are 10 minutes over when I promised all of
you you could leave.
STATEMENT OF WILLIAM R. LOGAN, DIRECTOR, OFFICE OF
INVESTIGATIONS, U.S. CUSTOMS SERVICE
Mr. LOGAN. Thank you, Senator Hawkins.
I do have a prepared statement for the record which with your
permission I will submit. I will try to summarize that as briefly as
I can, if I may.
1115
A major and significant part of U.S. Customs resources are dedi-
cated to combating the illegal traffic in dangerous drugs both at
the borders of the United States and in numerous foreign coun-
tries. A major thrust of our efforts has been in the area of interdic-
tion of dangerous drugs from throughout the world, and in provid-
ing training and instruction in narcotics enforcement to Customs
and other law enforcement officers from other countries.
We have come to realize that in enforcement of our laws, we
cannot afford to be isolationist, and that in order to successfully
combat the major criminal organizations involved in the narcotics
trade, we must work in cooperation with Customs and other law
enforcement agencies throughout the world.
In November and December 1983, Commissioner von Raab had
the opportunity to accompany Senator Hawkins on a factfinding
mission to several of the world's heroin source countries. Commis-
sioner von Raab advised me that he was impressed with the
amount of assistance which has been provided to some of the coun-
tries by U.S. agencies, but it was apparent to him that in order for
our programs to have any hope of overall success, it would be nec-
essary for U.S. Customs to provide additional drug enforcement
training to foreign customs personnel, and to increase the U.S. Cus-
toms presence in these countries by establishing additional Cus-
toms attaché or senior Customs representative positions in selected
embassies and consulates.
Over the past 30 years, Customs has become increasingly active
in its international activities. This increase has resulted from Cus-
toms efforts to become more effective in both its commercial and
its law enforcement responsibilities. It has also been based on
international obligations incurred under several multilateral and
bilateral agreements.
I can also attest to the fact that there has been increased recog-
nition within our Government of the essentially apolitical, techni-
cally oriented nature of Customs work, which enables us to operate
with other customs services throughout the world with great ease,
sometimes with a greater ease and with better results than would
be achievable at other levels of government.
Customs has established attaché or senior Customs representa-
tive offices in 10 foreign locations. Subsequent to Commissioner von
Raab's trip with Senator Hawkins, he directed me to advise the
concerned headquarters staff to increase their efforts to establish a
permanent Customs presence in other suitable locations, especially
in drug source and transit countries.
As a result, we have requested to open offices in Bangkok, Thai-
land; Karachi, Pakistan; New Delhi, India; Bogota, Colombia;
Manila, Philippines; and Rotterdam in the Netherlands. Our re-
quests have met with mixed reviews from the various posts, but I
am happy to announce that favorable responses have been received
both from Rotterdam and Karachi. In fact, the new office in Rotter-
dam is scheduled to open in approximately 4 months, and the con-
sulate in Karachi is currently holding office space in anticipation
of establishing a permanent Customs office in the near future.
Although our request to establish offices in Bangkok, Bogota, and
New Delhi have met with initial post reluctance, I have directed
1116
that our proposals be resubmitted to those embassies in those loca-
tions for further consideration.
Another U.S. Customs major activity involving continuous con-
tact with the law enforcement officials in source countries is in the
area of training, and is conducted under the auspices of the Depart-
ment of State's Bureau of International Narcotics Matters. This
program is designed to train foreign enforcement officials in border
control activities, emphasizing interdiction techniques, border sur-
veillance, antisumggling programs, cargo control, and various
search and seizure methods.
This program is aimed at foreign customs and other border con-
trol officials who are responsible for the indertiction of narcotics
and other contraband. To date, Customs has trained over 7,800 for-
eign customs officers form 72 different countries.
Customs also anticipates developing additional advisory projects
in the very near future for Pakistan and Thailand. These will per-
tain primarily to narcotics interdiction. The U.S. Customs presence
in these countreis was apparently a significant discussion topic
during Senator Hawkins' recent visit.
Even though these countries already have viable antinarcotics
programs, we feel that the additional expertise which can be of-
fered by a U.S. Customs adviser and/or attaché would be a positive
asset to these programs.
Other effective tools used by Customs to obtain intelligence and
assistance in international drug control include bilateral Customs
cooperation agreements. We currently have these mutual assist-
ance agreements on a customs to customs bais with France, Aus-
tria, Germany, and Mexico, and have pending or prospective agree-
ments with Italy, Canada, Spain, Japan, Korea, and Sweden. The
U.S. Customs Service is committed to encouraging these types of
agreements.
Notwithstanding the customs to customs agreements, the princi-
pal responsiblity for gathering drug related information in foreign
countries and for conducting domestic narcotics investigations lies
with the Drug Enforcement Administration. On January 5, 1984,
the Attorney General forwarded to the Secretary of the Treasury a
request for the assistance of designated Customs special agents to
conduct domestic drug investigations with specified guidelines.
On March 2, 1984, Commissioner von Raab and Administrator
Mullen signed the joint memorandum for future management of
narcotics investigations. This may lead to closer cooperation be-
tween DEA and Customs, and to an increased effectiveness of Fed-
eral narcotics investigations.
In addition, although the agreement is directed toward domestic
narcotics investigations, it is anticipated that it will also result in
an increased sharing of foreign narcotics intelligence, thereby im-
proving our effectiveness in narcotics interdiction and followup in-
vestigations.
I would like to take just a moment, if I may, to explain some of
the major domestic programs which impact on international drug-
related activity. Special enforcement operations conducted by the
Office of Inspection and Control within Customs focuses on the
interdiction of drugs and other contraband at various ports of entry
nationwide. Selection of these specific locations for these operations
1117
is determined through threat assessments based on intelligence,
smuggling trends, and recent interdiction results.
In order to concentrate necessary resources in this targeting op-
eration, we have recently established specialized contraband en-
forcement teams nationwide. These teams are composed of inspec-
tion personnel who have demonstrated an extremely high degree of
expertise in the interdiction of narcotics and other contraband.
At present, there are approximately 50 teams located throughout
the United States at selected airports, seaports, and land border
stations.
To improve our ability to determine which shipments, vessels,
and flights offer the most potential for significant seizures, teams
of Customs personnel have conducted onsite visits to two major
drug threat countries, Italy and Thailand. There they have scruti-
nized commercial cargo and passenger methods of operation. This
data was then developed and refined into intelligence reports high-
lighting essential elements of information which could be utilized
by field personnel to enhance or improve their narcotics interdic-
tion efforts.
Domestic programs conducted by Customs generally fall under
one of two descriptive headings, interdiction or investigation. Inter-
diction programs are directed primarily at the seizure and followup
investigation of the contraband itself, whereas Customs investiga-
tive programs concentrate on the financial aspects of both the nar-
cotics groups and their money laundering operations.
Two major interdiction operations are the Florida Joint Task
Group and the National Narcotics Border Interdiction System. The
primary objectives of these task groups are fourfold: to increase the
number of arrests and prosecutions of drug smugglers; to increase
the number of drug and currency seizures and forfeitures of assets
belonging to drug smugglers; to increase the number of seizures of
narcotic contraband; and to deter narcotics related smuggling and
associated financial transactions.
Operation Florida has reduced the flow of drugs into south Flori-
da. It has galvanized community spirit in south Florida, and has
brought a new feeling of confidence and optimism about the Gov-
ernment's ability to deal with drugs and crime. The success of Op-
eration Florida was instrumental in the administration's decision
to commit the combined interdictory resources of the U.S. Govern-
ment into the National Narcotics Border Interdiction System.
The Customs Service is very pleased to be a major contributor to
this system, which has proven so successful in productivity and ex-
ceptional in the improvement of interagency coordination. This
success is measured not only in the overall enforcement results
that has been achieved, but in the close cooperation being demon-
strated between agencies with such diverse missions.
The expertise and functions of these agencies have added more
weapons to the growing interdiction arsenal, and have contributed
immeasurably to our efforts to disrupt the drug smuggling threat
to the United States. This threat is evidenced in the sophistication
of techniques utilized by smuggling organizations to effect entry of
their drug shipments into the United States.
For example, one method of smuggling with which we are becom-
ing increasingly involved is in internal cargo conspiracy. Highly so-
1118
phisticated international organized crime groups have recruited
transportation industry employees for the purpose of smuggling
contraband into the United States contained within foreign cargo
shipments. These employees manipulate shipments and remove
contraband prior to Customs examination. These groups have been
documented in operation at most of the major airports and seaports
throughout the United States.
We are constantly gaining more and more information on these
groups' activities, and are currently extremely active in investigat-
ing and development methods to combat this threat. I am confident
that our efforts will be successful, and that we shall once more
force the narcotics smuggler to devise other means to attempt to
avoid seizure of their contraband by investigational organizations.
In addition to the interdiction operations, Customs has numerous
multiagency investigative programs which concentrate on identifi-
cation, seizure, and forfeiture of assets purchased from drug profits,
and on arrest or prosecution of those members of the criminal or-
ganizations who keep their distance from the illegal product but
who are involved in either the processing or the concealing of the
funds obtained from the criminal enterprise.
These activities have provided U.S. authorities with opportuni-
ties to infiltrate the organizations, to gather invaluable intelligence
on their activities, and to make significant numbers of arrests of
large-scale money launderers. Recent Customs seizures have in-
cluded amounts of. $6.5 million, $9.4 million, $15.9 million, in addi-
tion to numerous seizures in the half million to $3 million range.
The total amount of currency seized by U.S. Customs from 1979 to
the present is in excess of $259 million.
The experience gained from both our domestic and international
programs proves that the only recipes for success in improving our
efforts to stem the flow of drugs into the United States are a con-
certed domestic multiagency cooperative determination to commit
all available resources to combat the problem, and a commitment
from all involved countries, including source, transit, and recipient
locations, to dedicate their maximum efforts to stamping out the
drug trade at all levels.
Some governments do not see the problem in the same terms we
do. Some of them feel that drug trafficking is primarily the prob-
lem of the United States and other recipient countries, and they
are unwilling to commit themselves to a concerted or an effective
effort to curtail the traffic at the source or other in-country inter-
mediary level.
Other countries which do have antidrug programs and who are
often receiving massive amounts of American aid in order to con-
duct these programs at times do not appear to be providing ade-
quate support to our international efforts, and often appear, frank-
ly, to pay the programs and our concerns with only lip service.
As a result, in those cases where we obviously cannot rely fully
on another country's efforts to adequately address the production
and trafficking of illicit drugs in and through that country, we
have no alternative but to intensify our own control efforts with
respect to shipments from that country, regardless of the adverse
effects that such efforts may have on legitimate trade.
1119
For example, it is apparent that the Government of Colombia
does not have available resources to adequately police the cocaine
and marijuana traffic from Colombia to the United States. Even
though enforcement and interdiction are important elements in
our narcotics control strategy, a comprehensive crop eradication
program is of fundamental importance. An effective program has
not been implemented in Colombia, regardless of U.S. insistence
and U.S. entreaties.
U.S. Customs is therefore left with no choice but to concentrate
our resources on intensifying our efforts to interdict drugs being
transported from Colombia, despite the fact that our activities will
have a disruptive effect on legitimate shipments and passengers
from that area. We have no other choice. It seems that almost any-
thing we look at coming from Colombia has the potential to conceal
cocaine.
Last summer we were doing 100 percent examinations of cut
flowers from Colombia, because we regularly found cocaine hidden
in them. In addition, Colombian ships have a history of carrying
drugs into the United States. In January of this year we seized one
of their vessels, Ciudad de Popeon, in Los Angeles.
De Popeon belongs to the Grand Colombiana Line, and vessels of
this line have an extensive cocaine smuggling history. During cal-
endar year 1983, for instance, we seized 624 pounds of cocaine from
Grand Colombiana ships in several ports throughout the country.
The ship itself has since been released to its owners on a $5.3 mil-
lion letter of credit, but we will be watching her and all her sister
ships for any future violations.
I would like to emphasize that these actions we at Customs can
take within our present authority to effect changes in a situation.
We would rather treat Colombian ships and airplanes and the
people and goods they bring here just the way we treat all others,
but our experience has shown us that we cannot afford to do that.
So for the foreseeable future we will be giving special emphasis to
the program, to attempt to gain some control over the situation,
and to try to convince the Colombian authorities that they must
increase their own efforts to assist in curtailing the massive
amount of drugs, primarily cocaine and marijuana, being smuggled
from their country to ours.
In conclusion, I would like again to emphasize that without a sig-
nificant commitment from all domestic and foreign law enforce-
ment and government authorities to cooperate fully in this effort,
we cannot hope to be successful. We must convince all involved
countries that drug trafficking and abuse is not simply an Ameri-
can problem, but one that corrupts and destroys the political and
social fabric of all countries which participate in the production,
manufacture, processing, or trafficking of illegal drugs.
Madam Chairman, thank you again for permitting me to present
this testimony, this general overview.
[Mr. Logan's prepared statement follows:
1120
STATEMENT OF WILLIAM R. LOGAN
DIRECTOR, OFFICE OF INVESTIGATIONS
U.S. CUSTOMS SERVICE
BEFORE THE UNITED STATES SENATE
COMMITTEE ON FOREIGN RELATIONS
MARCH 21, 1984
MR. CHAIRMAN AND DISTINGUISHED MEMBERS OF THIS COMMITTEE, IT
IS INDEED A PLEASURE TO APPEAR BEFORE YOU TODAY TO DISCUSS THE
SUBJECT OF INTERNATIONAL DRUG CONTROL.
IN MAY 1980, MR. JUSTICE POWELL MADE THE FOLLOWING
STATEMENT :
"THE PUBLIC HAS A COMPELLING INTEREST IN DETECTING
THOSE WHO WOULD TRAFFIC IN DEADLY DRUGS FOR PERSONAL PROFIT,
FEW
PROBLEMS AFFECTING THE HEALTH AND WELFARE OF OUR POPULATION,
PARTICULARLY OUR YOUNG, CAUSE GREATER CONCERN THAN THE ESCALATING
USE OF CONTROLLED SUBSTANCES,
MUCH OF THE DRUG TRAFFIC IS HIGHLY
ORGANIZED AND CONDUCTED BY SOPHISTICATED CRIMINAL SYNDICATES.
THE PROFITS ARE ENORMOUS. AND MANY DRUGS, INCLUDING HEROIN, MAY
BE EASILY CONCEALED.
AS A RESULT, THE OBSTACLES TO DETECTION OF
ILLEGAL CONDUCT MAY BE UNMATCHED IN ANY OTHER AREA OF LAW
ENFORCEMENT,"
MR. JUSTICE POWELL'S STATEMENTS ARE AS APPROPRIATE TODAY AS
THEY WERE FOUR YEARS AGO,
IN VIEW OF THIS FACT, A MAJOR AND
SIGNIFICANT PART OF U.S. CUSTOMS RESOURCES ARE DEDICATED TO
COMBATTING THE ILLEGAL TRAFFIC IN DANGEROUS DRUGS BOTH AT THE
BORDERS OF THE UNITED STATES AND IN NUMEROUS FOREIGN COUNTRIES,
1121
U.S. CUSTOMS IS THE OLDEST FEDERAL LAW ENFORCEMENT AGENCY IN
THE UNITED STATES, HAVING BEEN CREATED IN 1789 WITH THE MISSION
OF PROTECTING OUR NATIONS BORDERS AND COLLECTING REVENUES FROM
TARIFFS,
, FOR ALMOST 195 YEARS CUSTOMS HAS SERVED THE NATION AS
THE FIRST LINE OF DEFENSE AGAINST FOREIGN INTRUSION, SMUGGLING,
INTERNATIONAL THREATS, AND COMMERCIAL FRAUD, AND HAS FOSTERED THE
NATION'S GENERAL WELL BEING, (AS A RESULT, U.S. CUSTOMS HAS
DEVELOPED INTO A TRULY INTERNATIONAL ORGANIZATION).
A MAJOR THRUST OF OUR EFFORTS HAS BEEN IN THE AREA OF
INTERDICTION OF DANGEROUS DRUGS FROM THROUGHOUT THE WORLD, AND IN
PROVIDING TRAINING AND INSTRUCTION IN NARCOTICS ENFORCEMENT TO
CUSTOMS AND OTHER LAW ENFORCEMENT OFFICERS FROM OTHER COUNTRIES.
WE HAVE COME TO REALIZE THAT IN ENFORCEMENT OF OUR LAWS WE CANNOT
AFFORD TO BE ISOLATIONIST, AND THAT IN ORDER TO SUCCESSFULLY
COMBAT THE MAJOR CRIMINAL ORGANIZATIONS INVOLVED IN THE NARCOTICS
TRADE, WE MUST WORK IN COOPERATION WITH CUSTOMS AND OTHER LAW
ENFORCEMENT AGENCIES THROUGHOUT THE WORLD.
LARGE NARCOTICS TRAFFICKING GROUPS CAN OFTEN SURVIVE THE
INCARCERATION OF THEIR MEMBERS, INCLUDING THEIR LEADERS, AND CAN
ALSO OVERCOME INTERMITTENT SEIZURES OF THEIR MERCHANDISE.
MANY
OF THEM CONSIDER SUCH LOSSES AS A NORMAL RISK OF DOING BUSINESS.
HOWEVER, FEW GROUPS ARE ABLE TO SURVIVE CONCERTED SUCCESSFUL
EFFORTS TO ATTACK THEIR ACTIVITIES AT ALL LEVELS. IT IS CLEAR
THAT NARCOTICS TRAFFICKERS ARE DEALT THEIR MOST SEVERE BLOW WHEN
WE CONCENTRATE OUR RESOURCES NOT ONLY IN DISRUPTING THEIR DRUG
1122
TRAFFICKING PATTERNS, BUT ALSO IN SEIZING AND FORFEITING THEIR
ASSETS AND/OR CASH WHICH THEY THOUGHT HAD BEEN EFFECTIVELY HIDDEN
OR LAUNDERED. IT IS MY CONTENTION THAT THE ONLY WAY WE IN
ENFORCEMENT CAN SUCCESSFULLY COMBAT THE CURRENT DRUG PROBLEM IS
TO COORDINATE OUR EFFORTS AND RESOURCES WITH THOSE OF OTHER LAW
ENFORCEMENT ENTITIES, BOTH DOMESTIC AND FOREIGN, IN ORDER TO
PROVIDE EDUCATION AND EXPERTISE TO AUTHORITIES IN OTHER
COUNTRIES, AND TO ATTACK THE NARCOTICS TRAFFICKERS AT EVERY
OPPORTUNITY .
THIS ASSAULT INCLUDES DESTRUCTION OF THE DRUGS AT
THEIR SOURCE, INTERDICTION AND SEIZURE OF THE DRUGS WHENEVER AND
WHEREVER THEY ARE ENCOUNTERED, PROSECUTION AND INCARCERATION OF
MAJOR FIGURES INVOLVED IN ALL ASPECTS OF THE TRADE, AND
DESTRUCTION OF THE FINANCIAL BASES OF THE PRIMARY TRAFFICKING
ORGANIZATIONS BY SEIZURE OF THEIR ASSETS.
THE
PROFITS INVOLVED IN THE NARCOTICS BUSINESS ARE
STAGGERING,
AS AN ILLUSTRATION OF THIS FACT, I HAVE PROVIDED YOU
WITH A COPY OF A DRUG ENFORCEMENT ADMINISTRATION (DEA) CHART
SHOWING THE PRICES OF HEROIN AT VARIOUS STAGES IN ITS DEVELOPMENT
FROM THE POPPY FIELDS IN THE THREE MAJOR PRODUCTION AREAS, TO THE
STREET LEVEL IN THE UNITED STATES. AS YOU CAN SEE, FOR EXAMPLE,
A PRICE OF 300 TO 400 V.S. DOLLARS PAID TO A FARMER IN PAKISTAN
OR AFGHANISTAN FOR 10 KILOGRAMS OF OPIUM CAN ESCALATE THROUGH THE
VARIOUS STAGES OF SALE AND PRODUCTION INTO A PRICE OF 1.5 MILLION
DOLLARS FOR THE RESULTANT 1 KILOGRAM OF CUT HEROIN AT THE STREET
DEALER LEVEL IN THE UNITED STATES. IT IS ESTIMATED THAT THE DRUG
TRADE IN THE UNITED STATES IS A 40 TO 60 BILLION DOLLARS A YEAR
1123
INDUSTRY, AND THE ENORMOUS AMOUNTS OF CASH ASSOCIATED WITH ALL
ASPECTS OF NARCOTICS AND OTHER RELATED ILLEGAL ACTIVITIES HAVE
SPAWNED A VIOLENT CRIME EPIDEMIC OF IMMENSE PROPORTIONS,
NARCOTICS INTERDICTION, INTELLIGENCE GATHERING, AND RELATED
FINANCIAL INVESTIGATIONS ARE OF COURSE A U.S. CUSTOMS NATIONAL
PRIORITY. IN ORDER TO FULLY IMPLEMENT OUR ANTI-NARCOTICS
PROGRAMS, CUSTOMS PERSONNEL ARE ACTIVE BOTH DOMESTICALLY AND
INTERNATIONALLY, AND I WOULD LIKE TO PROVIDE YOU WITH A BRIEF
EXPLANATION OF SOME OF OUR PROGRAMS AND INITIATIVES IN BOTH THE
UNITED STATES AND VARIOUS FOREIGN COUNTRIES.
IN NOVEMBER AND DECEMBER 1983, MR. WILLIAM VON RAAB,
COMMISSIONER OF CUSTOMS, HAD THE OPPORTUNITY TO ACCOMPANY A
MEMBER OF THIS COMMITTEE, SENATOR PAULA HAWKINS, ON A
FACT-FINDING MISSION TO SEVERAL OF THE WORLD'S HEROIN SOURCE
COUNTRIES,
COMMISSIONER VON RAAB ADVISED ME THAT HE WAS
IMPRESSED WITH THE AMOUNT OF ASSISTANCE WHICH HAS BEEN PROVIDED
TO SOME OF THESE COUNTRIES BY U.S. AGENCIES, INCLUDING THE
DEPARTMENT OF STATE, THE DRUG ENFORCEMENT ADMINISTRATION AND
CUSTOMS, BUT IT WAS APPARENT TO HIM THAT IN ORDER FOR OUR
PROGRAMS TO HAVE ANY HOPE OF OVERALL SUCCESS IT WOULD BE
NECESSARY FOR U.S. CUSTOMS TO PROVIDE ADDITIONAL DRUG ENFORCEMENT
TRAINING TO FOREIGN CUSTOMS PERSONNEL, AND TO INCREASE THE U.S.
CUSTOMS PRESENCE IN THESE COUNTRIES BY ESTABLISHING ADDITIONAL
CUSTOMS ATTACHE AND SENIOR CUSTOMS REPRESENTATIVE POSITIONS IN
SELECTED EMBASSIES AND CONSULATES.
1124
OVER THE PAST 30 YEARS, U.S. CUSTOMS HAS BECOME INCREASINGLY
ACTIVE IN ITS INTERNATIONAL ACTIVITIES. THIS INCREASE HAS
RESULTED FROM CUSTOMS EFFORTS TO BECOME MORE EFFECTIVE IN BOTH
ITS COMMERCIAL AND LAW ENFORCEMENT RESPONSIBILITIES. IT HAS ALSO
BEEN BASED ON INTERNATIONAL OBLIGATIONS INCURRED UNDER SEVERAL
MULTILATERAL AND BILATERAL AGREEMENTS.
I CAN ALSO ATTEST TO THE
FACT THAT THERE HAS BEEN AN INCREASED RECOGNITION WITHIN OUR
GOVERNMENT OF THE ESSENTIALLY APOLITICAL, TECHNICALLY ORIENTED
NATURE OF CUSTOMS WORK WHICH ENABLES US TO OPERATE WITH OTHER
CUSTOMS SERVICES THROUGHOUT THE WORLD WITH GREAT EASE: SOMETIMES
GREATER EASE AND WITH BETTER RESULTS THAN WOULD BE ACHIEVABLE AT
OTHER LEVELS OF GOVERNMENT,
AS A RESULT, CUSTOMS KAS ESTABLISHED ATTACHE OR SENIOR
CUSTOMS REPRESENTATIVE OFFICES IN 10 FOREIGN LOCATIONS. THESE
LOCATIONS ARE LONDON, BONN, PARIS, ROME, HONG KONG, TOKYO, MEXICO
CITY, OTTAWA, PANAMA CITY AND SEOUL. SUBSEQUENT TO COMMISSIONER
VON RAAB'S TRIP WITH SENATOR HAWKINS, HE DIRECTED ME TO ADVISE
THE CONCERNED CUSTOMS HEADQUARTERS STAFF TO INCREASE THEIR
EFFORTS TO ESTABLISH A PERMANENT CUSTOMS PRESENCE IN OTHER
SUITABLE LOCATIONS, ESPECIALLY IN DRUG SOURCE AND TRANSIT
COUNTRIES, AS A RESULT, WE HAVE REQUESTED TO OPEN OFFICES IN
BANGKOK, THAILAND; KARACHI, PAKISTAN: New DELHI, INDIA, BOGOTA,
COLOMBIA; MANILA, PHILIPPINES; AND ROTTERDAM, NETHERLANDS.
;
OUR REQUESTS HAVE MET WITH MIXED REVIEWS FROM THE VARIOUS
- POSTS, BUT I AM HAPPY TO ANNOUNCE THAT FAVORABLE RESPONSES HAVE
BEEN RECEIVED FROM ROTTERDAM AND KARACHI: IN FACT, THE NEW
OFFICE IN ROTTERDAM IS SCHEDULED TO OPEN IN APPROXIMATELY 4
1125
MONTHS, AND THE CONSULATE IN KARACHI IS CURRENTLY HOLDING OFFICE
SPACE IN ANTICIPATION OF ESTABLISHING A PERMANENT U.S. CUSTOMS
OFFICE IN THE NEAR FUTURE.
ALTHOUGH OUR REQUESTS TO ESTABLISH
OFFICES IN BANGKOK, BOGOTA, AND NEW DELHI HAVE MET WITH INITIAL
POST RELUCTANCE, I HAVE DIRECTED THAT OUR PROPOSALS BE
RESUBMITTED TO THE EMBASSIES IN THOSE LOCATIONS FOR
RECONSIDERATION,
ANOTHER U.S. CUSTOMS MAJOR ACTIVITY INVOLVING A CONTINUOUS
CONTACT WITH LAW ENFORCEMENT OFFICIALS IN SOURCE COUNTRIES IS IN
THE AREA OF TRAINING, AND IS CONDUCTED UNDER THE ; AUSPICES OF THE
DEPARTMENT OF STATE'S BUREAU FOR INTERNATIONAL NARCOTICS MATTERS.
THIS PROGRAM IS DESIGNED TO TRAIN FOREIGN ENFORCEMENT OFFICIALS
IN BORDER CONTROL ACTIVITIES, EMPHASIZING INTERDICTION
TECHNIQUES, BORDER SURVEILLANCE, ANTI-SMUGGLING PROGRAMS AND
METHODS, CARGO CONTROL, AND SEARCH AND SEIZURE METHODS.
THE
PROGRAM IS AIMED AT FOREIGN CUSTOMS OR OTHER BORDER CONTROL
OFFICIALS WHO ARE RESPONSIBLE FOR THE INTERDICTION OF NARCOTICS
AND OTHER CONTRABAND, TO DATE U.S. CUSTOMS HAS TRAINED OVER
7,850 FOREIGN CUSTOMS OFFICERS FROM 72 COUNTRIES.
THE EXECUTIVE OBSERVATION PROGRAM, DESIGNED FOR HEADS OF
FOREIGN CUSTOMS ORGANIZATIONS AND OTHER HIGH-RANKING OFFICIALS,
PROVIDES AN OPPORTUNITY TO MEET WITH U.S. CUSTOMS EXECUTIVE
MANAGEMENT IN WASHINGTON, FOLLOWED BY OBSERVATIONAL VISITS TO
SELECTED U.S. PORTS OF ENTRY. THE MID-MANAGEMENT SEMINAR,
CONDUCTED IN WASHINGTON, D.C., BUT ALSO INCLUDING VISITS TO
SELECTED FIELD SITES, ALLOWS MID-CAREER MANAGERS THE OPPORTUNITY
1126
TO MEET WITH COLLEAGUES FROM SEVERAL FOREIGN COUNTRIES TO DISCUSS
NARCOTICS INTERDICTION TECHNIQUES. THE NARCOTICS DETECTOR DOG
PROGRAM IS CONDUCTED AT THE U.S. CUSTOMS CANINE ENFORCEMENT
TRAINING CENTER IN FRONT ROYAL, VIRGINIA,
THE CLASSES PROVIDE
INSTRUCTION IN THE BASICS OF MANAGING DETECTOR DOG PROGRAMS, AS
WELL AS ACTUAL DOG HANDLER SKILLS,
THE TRAIN-THE-TRAINER WORKSHOP IS A NEW PROGRAM, DESIGNED
FOR OFFICERS WHO ARE RESPONSIBLE FOR CUSTOMS BORDER ENFORCEMENT
TRAINING ACTIVITIES IN THEIR OWN COUNTRIES,
THE PROGRAM PREPARES INSTRUCTORS TO TEACH THE
BASIC SKILLS
IN NARCOTICS INTERDICTION, INCLUDING PRACTICAL EXERCISES, AND
PROVIDES EACH PARTICIPANT WITH A TRAINING COURSE THAT IS READY TO
BE IMPLEMENTED UPON RETURN TO THE HOME DUTY STATION,
Two INM COURSES ARE CONDUCTED OVERSEAS,
THE FIRST, THE
BASIC ENFORCEMENT COURSE, IS DESIGNED TO TEACH BASIC NARCOTICS
INTERDICTION TECHNIQUES TO LINE OFFICERS AND FIRST-LINE
SUPERVISORS.
A MORE RECENT ADDITION HAS BEEN SCAN-IT TRAINING, A
COURSE ON THE DEVELOPMENT AND USE OF SPECIAL ENFORCEMENT TEAMS IN
NARCOTICS INTERDICTION OPERATIONS.
TO DATE, U.S. CUSTOMS HAS TRAINED OVER 7,850 FOREIGN CUSTOMS
OFFICERS AND EXECUTIVES, REPRESENTING 72 COUNTRIES, SINCE FY 82,
U.S. CUSTOMS HAS CONDUCTED 11 EXECUTIVE OBSERVATION PROGRAMS, TWO
MID-MANAGEMENT PROGRAMS, TWO TRAIN-THE-TRAINER PROGRAMS, FIVE
IN-COUNTRY ENFORCEMENT PROGRAMS, TWO DOG HANDLING SEMINARS, TWO
CANINE ASSESSMENT PROGRAMS, AND ONE V.S. SPECIAL PROJECT TRAINING
SEMINAR INVOLVING CARIBBEAN, CENTRAL AND SOUTH AMERICA CUSTOMS
OFFICIALS.
1127
IN THE REMAINDER OF FISCAL YEAR 1984, U.S. CUSTOMS PLANS TO
OFFER FIVE ADDITIONAL IN-COUNTRY COURSES; TWO MID-MANAGEMENT
SEMINARS INCLUDING PARTICIPANTS FROM PAKISTAN, TURKEY, LATIN
AMERICA AND THE CARIBBEAN; AND EXECUTIVE OBSERVATION PROGRAMS
INVOLVING PARTICIPANTS FROM TURKEY, JAMAICA, MEXICO AND PERU.
ANOTHER EXAMPLE OF COOPERATION IN THE CUSTOMS FIELD HAS BEEN
IN CONNECTION WITH LONG AND SHORT TERM ADVISORY ASSISTANCE. A
NUMBER OF AID FUNDED CUSTOMS ASSISTANCE PROGRAMS WERE CONDUCTED
BY U.S. CUSTOMS UP UNTIL THE LATE 1960's. THERE WAS LITTLE AID
FUNDED ACTIVITY IN THE 1970's. HOWEVER, WITHIN THE LAST SEVERAL
YEARS, AID HAD REQUESTED CUSTOMS ASSISTANCE IN PROVIDING BOTH
LONG AND SHORT TERM TECHNICAL EXPERTISE IN THE FORM OF ADVISORY
PROGRAMS FOR SEVERAL COUNTRIES THROUGHOUT THE WORLD.
UNDER THE INN PROGRAM WE HAVE HAD ADVISORS PERMANENTLY
STATIONED IN FOUR COUNTRIES: BOLIVIA, ECUADOR, COLOMBIA AND
THAILAND. THE ADVISOR POSITIONS IN ECUADOR AND BOLIVIA HAVE BEEN
DISCONTINUED BUT WE BELIEVE THAT THESE WOULD BE USEFUL POSITIONS
TO RE-ESTABLISH IN ORDER TO TRAIN, ENCOURAGE, EXHORT AND ASSIST
THE CUSTOMS OFFICIALS OF THESE COUNTRIES. FOR EXAMPLE, THE
CUSTOMS ADVISOR IN COLOMBIA IS AN INTEGRAL PART OF THE U.S.
NARCOTICS ASSISTANCE UNIT IN THAT COUNTRY, AND WORKS DIRECTLY
WITH THE NARCOTICS CONTROL OFFICE IN THE U.S. EMBASSY IN BOGOTA.
THE FOCUS OF THIS PROJECT IS CLEARLY NARCOTICS BOTH ERADICATION
AND INTERDICTION, AND THE ROLE OF THE U.S, CUSTOMS ADVISOR HAS
RECENTLY BEEN EXPANDED TO ASSIST ALL COLOMBIAN NARCOTICS CONTROL
AGENCIES, NOT JUST CUSTOMS, HE WORKS WITH THE
1128
NATIONAL POLICE, THE MINISTRY OF DEFENSE, AND COLOMBIAN CUSTOMS
AND IS THE PROJECT MANAGER FOR THE NATIONAL POLICE PROJECT WHICH
INCLUDES A SPECIAL ANTI-NARCOTICS UNIT. THE U.S. CUSTOMS
PRESENCE IN COLOMBIA IS OF GREAT IMPORTANCE FROM THE STANDPOINT
OF NOT ONLY OUR OWN ENFORCEMENT OBJECTIVES IN SOUTH AMERICA, BUT
ALSO AS AN INTEGRAL PART OF THE ADMINISTRATION'S NARCOTICS
STRATEGY FOR THE REGION.
CUSTOMS ALSO ANTICIPATES DEVELOPING ADDITIONAL ADVISORY
PROJECTS IN THE VERY NEAR FUTURE FOR PAKISTAN AND THAILAND.
THESE WILL PERTAIN PRIMARILY TO NARCOTICS INTERDICTION. U.S.
CUSTOMS PRESENCE IN THESE TWO COUNTRIES WAS APPARENTLY A
SIGNIFICANT DISCUSSION TOPIC DURING SENATORS HAWKINS' RECENT
VISIT. EVEN THOUGH THESE COUNTRIES (WITH THE ASSISTANCE OF THE
STATE DEPARTMENT AND DEA) ALREADY HAVE VIABLE ANTI-NARCOTICS
PROGRAMS (AS CAN BE SEEN FROM THE ATTACHED PHOTOGRAPHS OF HEROIN
AND MARI JUANA DESTRUCTION IN THAILAND) WE FEEL THAT THE
ADDITIONAL EXPERTISE WHICH CAN BE OFFERED BY A U.S. CUSTOMS
ADVISOR AND/OR ATTACHE WOULD BE A POSITIVE ASSET TO THEIR
PROGRAMS,
OTHER EFFECTIVE TOOLS USED BY U.S. CUSTOMS TO OBTAIN
INTELLIGENCE AND ASSISTANCE IN INTERNATIONAL DRUG CONTROL INCLUDE
BILATERAL CUSTOMS COOPERATION AGREEMENTS. WE CURRENTLY HAVE
THESE MUTUAL ASSISTANCE AGREEMENTS ON A CUSTOMS-TO-CUSTOMS BASIS
WITH FRANCE, AUSTRIA, GERMANY AND MEXICO, AND HAVE PENDING OR
PROSPECTIVE AGREEMENTS WITH ITALY, CANADA, SPAIN, JAPAN, KOREA
AND SWEDEN, THE U.S. CUSTOMS SERVICE IS COMMITTED TO ENCOURAGING
THESE TYPES OF AGREEMENTS WITH ANY COUNTRIES WHICH SHOW AN
INTEREST.
1129
THESE AGREEMENTS HAVE PROVED TIME AND TIME AGAIN TO BE
MUTUALLY ADVANTAGEOUS.
THE TERMS OF THE AGREEMENTS VARY, BUT
GENERALLY INVOLVE PROVIDING RECIPROCAL ASSISTANCE TO PREVENT,
INVESTIGATE AND REPRESS.ANY OFFENSES OF LAWS AND REGULATIONS
ENFORCED BY THE RESPECTIVE CUSTOMS SERVICES. GENERALLY THE
INFORMATION AND EVIDENCE PROVIDED UNDER THE AGREEMENTS CANNOT BE
RELEASED BY CUSTOMS TO ANY OTHER AGENCIES, NOR CAN THEY BE USED
FOR INVESTIGATION OR PROSECUTION OF VIOLATIONS OF LAWS OR
REGULATIONS WHICH HAVE NOT BEEN DELEGATED TO CUSTOMS FOR
ENFORCEMENT. THESE AGREEMENTS ARE THE RESULTS OF THE EXCELLENT
WORKING RELATIONSHIPS WHICH WE HAVE ESTABLISHED WITH OUR FOREIGN
COUNTERPARTS THROUGHOUT THE WORLD.
ONE RECENT RESULT OF THE COOPERATIVE U.S. AND MEXICAN
CUSTOMS ENFORCEMENT INITIATIVES RESULTING FROM THE BILATERAL
AGREEMENT IS OPERATION EAGLES, WHICH IS NOW OPERATIONAL ALONG THE
U.S./MEXICAN BORDERS WITH CUSTOMS TEAMS LOCATED AT BROWNSVILLE,
LAREDO, EL PASO, NOGALES, CALEXICO AND SAN DIEGO. THESE TEAMS
ARE DESIGNED TO PROVIDE A RAPID, MOBILE RESPONSE CAPABILITY FOR
USE IN INTENSIVE, SHORT DURATION SPECIAL OPERATIONS AT AND
BETWEEN PORTS OF ENTRY. THE PURPOSE OF OPERATION EAGLES IS TO
INCREASE THE INTERDICTION OF CONTRABAND BEING SMUGGLED INTO THE
UNITED STATES FROM Mexico. WE ARE WORKING IN VERY CLOSE HARMONY
WITH MEXICAN OFFICIALS AND HAVE BEEN EXTREMELY PLEASED WITH THE
LEVEL OF COORDINATION AND EXCHANGE OF TACTICAL INTELLIGENCE
BETWEEN U.S. AND MEXICAN CUSTOMS.
34-045 0-84-72
1130
NOTWITHSTANDING CUSTOMS TO CUSTOMS AGREEMENTS, AND
COOPERATIVE EFFORTS SUCH AS OPERATION EAGLES, THE PRINCIPAL
RESPONSIBILITY FOR GATHERING DRUG RELATED INFORMATION IN FOREIGN
COUNTRIES, AND FOR CONDUCTING DOMESTIC NARCOTICS INVESTIGATIONS,
LIES WITH DEA. However, ON JANUARY 5, 1984, THE ATTORNEY GENERAL
FORWARDED TO THE SECRETARY OF THE TREASURY A REQUEST FOR THE
ASSISTANCE OF DESIGNATED CUSTOMS SPECIAL AGENTS TO CONDUCT
DOMESTIC DRUG INVESTIGATIONS WITHIN SPECIFIED GUIDELINES,
ON
MARCH 2. 1984, COMMISSIONER VON RAAB AND ADMINISTRATOR MULLEN OF
DEA SIGNED A JOINT MEMORANDUM FOR FUTURE MANAGEMENT OF NARCOTICS
INVESTIGATIONS, WHICH SHOULD LEAD TO CLOSER COOPERATION BETWEEN
DEA AND CUSTOMS, AND TO INCREASED EFFECTIVENESS OF FEDERAL
NARCOTICS INVESTIGATIONS.
ALTHOUGH THE AGREEMENT IS DIRECTED
TOWARDS DOMESTIC NARCOTICS INVESTIGATIONS, IT IS ANTICIPATED THAT
IT WILL ALSO RESULT IN AN INCREASED SHARING OF FOREIGN NARCOTICS
INTELLIGENCE, THEREBY IMPROVING OUR EFFECTIVENESS IN NARCOTICS
INTERDICTION AND FOLLOWUP INVESTIGATION,
THIS AGREEMENT IS IN KEEPING WITH CUSTOMS COMMITMENT TO
COORDINATED AND COOPERATIVE LAW ENFORCEMENT, ESPECIALLY
CONCERNING NARCOTICS TRAFFICKING, WHICH HAS BEEN DEMONSTRATED IN
RECENT YEARS BY OUR ACTIVITIES IN NUMEROUS DOMESTIC MULTI-AGENCY
TASK FORCE OPERATIONS, ALL OF WHICH CONTRIBUTE TO OUR EFFORTS TO
DISRUPT AND DESTROY LARGE ORGANIZED DRUG TRAFFICKING GROUPS.
CUSTOMS DOMESTIC ACTIVITIES, BY THEIR VERY NATURE, ARE ALSO
INTERNATIONAL IN CHARACTER, AND EITHER INFLUENCE OR ARE
INFLUENCED BY OCCURRENCES IN OTHER COUNTRIES.
AS A RESULT,
1131
CUSTOMS OPERATIONS INVOLVING INTERDICTION, INFORMATION GATHERING,
AND INVESTIGATION OF NARCOTICS RELATED ACTIVITY ARE AN INTEGRAL
PART OF, AND A MAJOR CONTRIBUTION TO INTERNATIONAL DRUG CONTROL.
IN VIEW OF THIS FACT, I WOULD LIKE TO TAKE A FEW MINUTES TO
EXPLAIN SOME OF OUR MAJOR DOMESTIC PROGRAMS WHICH IMPACT ON DRUG
RELATED ACTIVITY.
SPECIAL ENFORCEMENT OPERATIONS CONDUCTED BY THE OFFICE OF
INSPECTION AND CONTROL FOCUS ON THE INTERDICTION OF DRUGS AND
OTHER CONTRABAND AT THE VARIOUS PORTS OF ENTRY NATIONWIDE.
SELECTION OF SPECIFIC LOCATIONS FOR THESE OPERATIONS IS
DETERMINED THROUGH THREAT ASSESSMENTS BASED ON INTELLIGENCE
INDICATORS, SMUGGLING TRENDS, AND RECENT INTERDICTION RESULTS.
IN ORDER TO CONCENTRATE NECESSARY RESOURCES IN THIS TARGETTING
OPERATION, WE HAVE RECENTLY ESTABLISHED SPECIALIZED CONTRABAND
ENFORCEMENT TEAMS (CET) NATIONWIDE, THESE TEAMS ARE COMPOSED OF
INSPECTIONAL PERSONNEL WHO HAVE DEMONSTRATED A HIGH DEGREE OF
EXPERTISE IN THE INTERDICTION OF NARCOTICS AND OTHER CONTRABAND.
AT PRESENT THERE ARE APPROXIMATELY 50 TEAMS LOCATED THROUGHOUT
THE UNITED STATES AT SELECTED AIRPORTS, SEAPORTS AND LAND BORDER
STATIONS
THE TEAMS PERFORM BOTH CARGO AND PASSENGER EXAMINATIONS.
IN
THE EXAMINATION OF CARGO, THE TEAMS ANALYZE DOCUMENTATION AND
REVIEW INTELLIGENCE DATA IN AN ATTEMPT TO IDENTIFY BOTH HIGH-RISK
AND LOW-RISK CARGO.
As A RESULT, CUSTOMS IS ABLE TO MOVE
LOW-RISK SHIPMENTS, WHICH REPRESENT THE MAJORITY OF IMPORTS, IN
AN EXPEDITIOUS MANNER WHILE INTENSIFYING OUR ENFORCEMENT
1132
ACTIVITIES ON HIGH-RISK SHIPMENTS,
THIS SELECTIVE APPROACH
BENEFITS THE IMPORTING COMMUNITY BY FACILITATING THE MOVEMENT OF
THE MAJORITY OF IMPORTS,
IT HAS ALSO RESULTED IN AN INCREASE OF
SEIZURES AND PENALTIES, WHICH INDICATES THAT THIS APPROACH WHEN
EFFECTIVELY EMPLOYED CAN BE OF MUTUAL BENEFIT TO CUSTOMS AND THE
IMPORTING COMMUNITY,
WITH REGARD TO PASSENGER PROCESSING AND
EXAMINATION, THE TEAMS HAVE BEEN EQUALLY SUCCESSFUL BY EMPLOYING
THE LATEST PROFILING MODELS AND OBSERVATIONAL BEHAVIOR
TECHNIQUES.
TO IMPROVE OUR ABILITIES TO DETERMINE WHICH SHIPMENTS AND
FLIGHTS OFFER THE MOST POTENTIAL FOR SIGNIFICANT SEIZURES, TEAMS
OF CUSTOMS INSPECTIONAL PERSONNEL HAVE CONDUCTED ON-SITE VISITS
TO TWO MAJOR DRUG THREAT COUNTRIES ITALY AND THAILAND. THERE
THEY HAVE SCRUTINIZED ALL COMMERCIAL CARGO AND PASSENGER METHODS
OF OPERATION,
THIS DATA WAS THEN DEVELOPED AND REFINED INTO
ANALYTICAL INTELLIGENCE REPORTS HIGHLIGHTING ESSENTIAL ELEMENTS
OF INFORMATION WHICH CAN BE UTILIZED BY FIELD PERSONNEL TO
ENHANCE THEIR NARCOTICS PROFILE AND IMPROVE OUR INTERDICTION
EFFORT,
IN ADDITION, A TĖAM IS CURRENTLY EN-ROUTE TO PAKISTAN FOR A
4 WEEK VISIT, AND AN ON-SITE VISIT IS PLANNED FOR COLOMBIA PRIOR
TO THE END OF THE FISCAL YEAR.
OTHER DOMESTIC PROGRAMS CONDUCTED BY CUSTOMS GENERALLY FALL
UNDER ONE OF TWO DESCRIPTIVE HEADINGS
INTERDICTION OR
INVESTIGATION,
INTERDICTION PROGRAMS ARE DIRECTED PRIMARILY AT
SEIZURE AND FOLLOWUP INVESTIGATION OF THE CONTRABAND ITSELF,
1133
WHEREAS CUSTOMS INVESTIGATIVE PROGRAMS CONCENTRATE ON THE
FINANCIAL ASPECTS OF BOTH THE NARCOTICS GROUPS AND THEIR MONEY
LAUNDERING OPERATIONS,
TWO MAJOR INTERDICTION OPERATIONS ARE THE FLORIDA JOINT TASK
GROUP (OPERATION FLORIDA), AND THE NATIONAL NARCOTICS BORDER
INTERDICTION SYSTEM (NNBIS),
IN JANUARY 1982 PRESIDENT REAGAN ESTABLISHED A CABINET-LEVEL
TASK FORCE ON CRIME IN SOUTH FLORIDA WITH SPECIAL EMPHASIS ON
DRUG RELATED CRIME. THREE WEEKS LATER, THE VICE PRESIDENT
ANNOUNCED THE FORMATION OF A SOUTH FLORIDA TASK FORCE TO CONTROL
THE "RAMPANT CRIME, AND EPIDEMIC DRUG SMUGGLING" PLAGUING THE
STATE OF FLORIDA. THE CENTRAL ELEMENT OF THE VICE PRESIDENT'S
TASK FORCE WAS THE CUSTOMS/DEA FLORIDA JOINT TASK GROUP, WHICH
BECAME OPERATIONAL ON MARCH 15, 1982. TASK FORCE GROUPS (WHICH
RECEIVE EXTENSIVE ASSISTANCE FROM THE U.S. COAST GUARD) ARE
CURRENTLY ACTIVE IN MIAMI, KEY WEST, FORT MEYERS, TAMPA AND
JACKSONVILLE,
THE PRIMARY OBJECTIVES OF THESE TASK GROUPS ARE FOURFOLD:
(1) INCREASE THE NUMBER OF ARRESTS AND PROSECUTIONS OF DRUG
SMUGGLERS; (2) INCREASE THE NUMBER OF DRUG AND CURRENCY SEIZURES
AND FORFEITURES OF ASSETS BELONGING TO DRUG SMUGGLERS; (3)
INCREASE THE NUMBER OF SEIZURES OF NARCOTIC CONTRABAND, AND (4)
DETER NARCOTICS RELATED SMUGGLING AND ASSOCIATED FINANCIAL
TRANSACTIONS,
THE SUCCESS OF THIS JOINT VENTURE MEASURED AGAINST THE
STATED OBJECTIVES IS EVIDENT. OPERATION FLORIDA HAS JUSTIFIABLY
BEEN DESCRIBED AS THE MOST SIGNIFICANT AND SUCCESSFUL U.S.
1134
INTERDICTION EFFORT IN RECENT HISTORY,
IN THE PAST YEAR, TASK
GROUP EFFORTS HAVE RESULTED IN OVER 1800 ARRESTS, AND SEIZURE OF
OVER 1 MILLION KILOGRAMS OF MARIJUANA, OVER 3,650 KILOGRAMS OF
COCAINE, AND OVER 160,400 DOSAGE OF UNITS OF METHAQUALONE.
OTHER SEIZURES INCLUDE VEHICLES, VESSELS, AIRCRAFT,
CURRENCY AND FIREARMS WITH A TOTAL VALUE IN EXCESS OF $23
MILLION,
OPERATION FLORIDA HAS REDUCED THE FLOW OF DRUGS INTO SOUTH
FLORIDA. IT HAS GALVANIZED COMMUNITY SPIRIT IN SOUTH FLORIDA AND
HAS BROUGHT A NEW FEELING OF CONFIDENCE AND OPTIMISM ABOUT THE
GOVERNMENT'S ABILITY TO DEAL WITH DRUGS AND CRIME.
THE SUCCESS OF OPERATION FLORIDA WAS INSTRUMENTAL IN THE
ADMINISTRATION'S DECISION TO COMMIT THE COMBINED INTERDICTORY
RESOURCES OF THE U.S. GOVERNMENT INTO THE NATIONAL NARCOTICS
BORDER INTERDICTION SYSTEM (NNBIS), THE CUSTOMS SERVICE IS VERY
PLEASED TO BE A MAJOR CONTRIBUTOR TO THIS SYSTEM WHICH HAS PROVEN
SO SUCCESSFUL IN PRODUCTIVITY, AND EXCEPTIONAL IN THE IMPROVEMENT
OF INTER-AGENCY COORDINATION,
. THE SUCCESS IS MEASURED NOT ONLY
IN THE OVERALL ENFORCEMENT RESULTS, BUT IN THE CLOSE COOPERATION
BEING DEMONSTRATED BETWEEN AGENCIES WITH SUCH DIVERSE MISSIONS,
FOR EXAMPLE, THE RESOURCES OF SUCH AGENCIES AS THE DEPARTMENT OF
DEFENSE, FEDERAL AVIATION ADMINISTRATION, FEDERAL COMMUNICATIONS
COMMISSION AND OTHERS WHICH NORMALLY DO NOT HAVE NARCOTIC
INTERDICTION MISSIONS, HAVE BEEN ENLISTED IN THE NATIONAL
INTERDICTION EFFORT.
THE EXPERTISE AND FUNCTIONS OF THESE
AGENCIES HAVE ADDED MORE WEAPONS TO THE GROWING INTERDICTION
ARSENAL, AND HAVE CONTRIBUTED IMMEASURABLY TO OUR EFFORTS TO
DISRUPT THE DRUG SMUGGLING THREAT TO THE U.S.
1135
CURRENTLY, CUSTOMS PERSONNEL FROM THE OFFICES OF PATROL,
INVESTIGATIONS, ENFORCEMENT SUPPORT, AND INSPECTION AND CONTROL
HAVE BEEN ASSIGNED TO STAFF THE NNBIS CENTERS. THEY PERFORM A
VARIETY OF ESSENTIAL FUNCTIONS IN SUPPORT OF THE NNBIS MISSION,
WHICH IS TO INTEGRATE THE INTERDICTION ACTIVITIES OF THE
PARTICIPATING AGENCIES.
CUSTOMS TAKES PART IN THE PLANNING OF SPECIAL ENFORCEMENT
OPERATIONS DESIGNED TO EFFECTIVELY INTEGRATE CUSTOMS RESOURCES
WITH DEPARTMENT OF DEFENSE EQUIPMENT ACQUIRED THROUGH THE
AUSPICES OF NNBIS. THE DEPARTMENT OF DEFENSE HAS PROVIDED SUCH
EQUIPMENT AS THE AIR FORCE E-3A (AWACS) AND THE Navy E-2B AND
E-2C (HAWKEYE) AIRCRAFT WHICH HAVE PROVIDED AN AIRBORNE RADAR
SURVEILLANCE CAPABILITY PREVIOUSLY UNAVAILABLE.
NNBIS HAS ALSO
OBTAINED AND COORDINATED THE USE OF OTHER DOD ASSETS SUCH AS THE
U.S. MARINE CORPS OV-10 (BRONCO) AIRCRAFT WHICH ARE USED FOR
TARGET TRACKING, AND U.S. MARINE GROUND RADARS USED FOR TARGET
ACQUISITION. THIS DEPARTMENT OF DEFENSE EQUIPMENT IS USED IN
SPECIAL INTERDICTION OPERATIONS WHICH COMPLEMENT U.S. CUSTOMS
RESOURCES.
THE OPERATIONS WHICH UTILIZE DOD ASSETS HAVE BEEN VERY
SUCCESSFUL,
THE AIR FORCE AND NAVY AIRBORNE RADAR PLATFORMS
ALONE HAVE BEEN INSTRUMENTAL IN THE SUCCESSFUL CONCLUSION OF 20
AIR INTERDICTION CASES AND MANY MARINE INTERDICTION CASES THROUGH
FEBRUARY OF THIS YEAR. ADDITIONALLY, THE LOAN OF THE BLACK HAWK
HELICOPTERS HAS ELIMINATED THE REQUIREMENT FOR CUSTOMS OFFICERS
TO TAKE THE SAME RISK AS THE SMUGGLERS THEY CHASE,
CUSTOMS
1136
PILOTS NO LONGER NEED TO ATTEMPT TO LAND CONVENTIONAL FIXED-WING
AIRCRAFT BEHIND THE SMUGGLER ON DIRT ROADS OR GRASS STRIPS DURING
THE HOURS OF DARKNESS.
THE JOINT USE OF DEPARTMENT OF DEFENSE AND CUSTOMS RESOURCES
ARE IMPORTANT STEPS IN CARRYING OUT OUR NATIONAL STRATEGY TO
SIGNIFICANTLY CURTAIL THE SMUGGLING THREAT TO THE UNITED STATES.
THIS THREAT IS ALSO EVIDENCED IN THE SOPHISTICATION OF
TECHNIQUES UTILIZED BY SMUGGLING ORGANIZATIONS TO EFFECT ENTRY OF
THEIR DRUG SHIPMENTS INTO THE UNITED STATES, FOR EXAMPLE, ONE
METHOD OF SMUGGLING WITH WHICH WE ARE BECOMING INCREASINGLY
INVOLVED IS INTERNAL CARGO CONSPIRACY.
HIGHLY SOPHISTICATED INTERNATIONAL ORGANIZED CRIME GROUPS
HAVE RECRUITED TRANSPORTATION INDUSTRY EMPLOYEES FOR THE PURPOSE
OF SMUGGLING CONTRABAND INTO THE UNITED STATES CONTAINED WITHIN
FOREIGN CARGO SHIPMENTS. THESE EMPLOYEES MANIPULATE SHIPMENTS
AND REMOVE CONTRABAND PRIOR TO CUSTOMS EXAMINATION.
THE GROUPS
HAVE BEEN DOCUMENTED IN OPERATION AT MOST MAJOR AIRPORTS AND
SEAPORTS THROUGHOUT THE UNITED STATES.
THE SELECTED EMPLOYEES HAVE DIRECT ACCESS TO THE CARGO AT
THE FIRST PORT OF UNLADING (AIRLINE CARGO HANDLERS, SHIPPING
COMPANY CLERKS OR DOCK WORKERS), OR BEFORE THE POINT OF CUSTOMS
CLEARANCE (BONDED TRUCK DRIVERS, CUSTOMHOUSE BROKERS, OR FREIGHT
FORWARDERS). THIS SMUGGLING METHOD HAS APPARENTLY BEEN DESIGNED
AROUND THE CUSTOMS PHILOSOPHY OF MOVING CARGO RAPIDLY TO
ACCOMMODATE THE IMPORT INDUSTRY.
1137
THESE GROUPS LITERALLY CONTROL CARGO TERMINALS WITH THEIR
ABILITY TO SMUGGLE ON A NATIONAL SCALE AND SELL THE SERVICE TO
INTERESTED PARTIES.
THEY CHARGE A HIGH PRICE AND THEY ARE NOT
OPPOSED TO PAYING THE RECRUITED EMPLOYEES AS MUCH AS TEN TIMES
THEIR ANNUAL SALARY FOR A MERE FEW MINUTES WORK,
THEY HAVE ALSO
OFFERED THESE EMPLOYEES THE SERVICES OF ATTORNEYS, MEANS OF
CONCEALING ILLEGALLY ACQUIRED MONEY IN FOREIGN BANK ACCOUNTS,
ACCOUNTANTS TO ASSIST IN LAUNDERING MONEY, AND HAVE ALLOWED THEM
TO REINVEST IN OTHER SMUGGLING VENTURES,
WE ARE CONSTANTLY GAINING MORE AND MORE INFORMATION ON THESE
GROUPS' ACTIVITIES, AND WE ARE CURRENTLY, EXTREMELY ACTIVE IN
INVESTIGATING AND DEVELOPING METHODS TO COMBAT THIS THREAT,
I AM
CONFIDENT THAT OUR EFFORTS WILL BE SUCCESSFUL AND THAT WE SHALL
ONCE MORE FORCE THE NARCOTICS SMUGGLERS TO DEVISE OTHER MODUS
OPERANDI TO ATTEMPT TO AVOID SEIZURE OF THEIR CONTRABAND AND
INVESTIGATION OF THEIR ORGANIZATIONS.
IN ADDITION TO OUR INTERDICTION OPERATIONS, CUSTOMS HAS
NUMEROUS MULTI-AGENCY INVESTIGATIVE PROGRAMS WHICH CONCENTRATE ON
IDENTIFICATION, SEIZURE AND FORFEITURE OF ASSETS PURCHASED FROM
DRUG PROFITS, AND ON ARREST AND PROSECUTION OF THOSE MEMBERS OF
CRIMINAL ORGANIZATIONS WHO MAY KEEP THEIR DISTANCE FROM THEIR
ILLEGAL PRODUCT, BUT WHO ARE INVOLVED IN PROCESSING AND
CONCEALING THE FUNDS OBTAINED FROM THE CRIMINAL ENTERPRISE.
REALIZING THAT THE PRINCIPAL MOTIVATION FOR MOST CRIMINAL
ACTIVITY IS PROFIT, IT FOLLOWS THAT WHEN NARCOTICS OR ANY OTHER
1138
CONTRABAND IS SMUGGLED INTO THE UNITED STATES OR ANY OTHER
COUNTRY, MONEY OR SOMETHING ELSE OF VALUE WILL GENERALLY BE TAKEN
OUT OF THAT COUNTRY TO BE USED AS PAYMENT FOR THE CONTRABAND.
ALSO, SINCE THE DRUG TRADE AT THE STREET DISTRIBUTOR LEVEL
IS PRIMARILY A CASH-AND-CARRY BUSINESS, AND SINCE HIGH VOLUMES OF
CURRENCY ARE GENERATED. THIS CURRENCY MUST BE RECYCLED IN SOME
WAY THROUGH THE INTERNATIONAL BANKING SYSTEM. THE SHEER BULK OF
THE CURRENCY INVOLVED, USUALLY IN SMALL BILLS, MAKES IT
IMPRACTICAL TO ATTEMPT TO PROCESS IT THROUGH ANY SYSTEM OTHER
THAN THE ORGANIZED BANKING SYSTEM.
AS A RESULT, CUSTOMS IN CLOSE COOPERATION AND COORDINATION
WITH THE INTERNAL REVENUE SERVICE, IS CURRENTLY UTILIZING THE
PROVISIONS OF THE BANK SECRECY ACT TO ATTACK THESE CRIMINAL
ORGANIZATIONS IN THEIR WALLET, WHERE IT HURTS MOST.
THE NEED FOR CRIMINAL ORGANIZATIONS TO LAUNDER NARCOTICS
GENERATED FUNDS OFTEN RESULTS IN THEIR PROFITS BECOMING THE SOFT
UNDERBELLY OF THE ORGANIZATION, SUSCEPTIBLE TO OUR ENFORCEMENT
EFFORTS, TO AVOID THE REPORTING REQUIREMENTS OF THE BANK SECRECY
ACT, THE NARCOTICS TRAFFICKERS IN MANY INSTANCES ARE FORCED TO
TAKE ADDITIONAL RISKS BY MOVING THEIR FUNDS INTO AND OUT OF THE
COUNTRY IN VIOLATION OF THE PROVISIONS OF THE ACT, OR BY
ATTEMPTING TO EXPAND THEIR OPERATIONS BY BRIBING OR COERCING
EMPLOYEES OF FINANCIAL INSTITUTIONS, OR BY PURCHASING OR
ESTABLISHING FINANCIAL INSTITUTIONS OF THEIR OWN.
THESE ACTIVITIES HAVE PROVIDED U.S. AUTHORITIES WITH
OPPORTUNITIES TO INFILTRATE THE ORGANIZATIONS, TO GATHER
INVALUABLE INTELLIGENCE ON THEIR ACTIVITIES, AND TO MAKE
1139
SIGNIFICANT NUMBERS OF ARRESTS OF LARGE SCALE MONEY LAUNDERERS,
AND SEIZURES AND FORFEITURE OF MAJOR AMOUNTS OF CURRENCY WHICH
WERE IN THE PROCESS OF BEING TRANSPORTED OR LAUNDERED.
RECENT
CUSTOMS SEIZURES HAVE INCLUDED AMOUNTS OF $6,5 MILLION, $9.4
MILLION, AND $15.9 MILLION, IN ADDITION TO NUMEROUS SEIZURES IN
THE } MILLION TO 3 MILLION DOLLAR RANGE.
THE TOTAL AMOUNT OF
CURRENCY SEIZED BY U.S. CUSTOMS IN FISCAL YEARS 1979 TO 1983 is
IN EXCESS OF 259 MILLION DOLLARS.
IN KEEPING WITH THE INTENT OF CONGRESS IN ENACTING THE BANK
SECRECY ACT, THE U.S. CUSTOMS SERVICE, OFFICE OF INVESTIGATIONS,
HAS DESIGNATED INVESTIGATION OF FELONY CURRENCY VIOLATIONS AS A
NATIONAL PRIORITY, AND THE U.S. TREASURY DEPARTMENT, IN JANUARY
1982, ESTABLISHED THE TREASURY FINANCIAL LAW ENFORCEMENT CENTER,
COMMONLY KNOWN AS TFLEC. TFLEC IS LOCATED IN THE FINANCIAL
INVESTIGATIONS DIVISION AT CUSTOMS HEADQUARTERS IN WASHINGTON,
D.C.
TFLEC UTILIZES THE SPECIALIZED TALENTS OF CRIMINAL
INVESTIGATORS, INTELLIGENCE RESEARCH SPECIALISTS, AND AUTOMATED
DATA PROCESSING SPECIALISTS, COMBINED WITH SOPHISTICATED
ELECTRONIC EQUIPMENT TO COLLECT, COLLATE, EVALUATE, ANALYZE, AND
DISSEMINATE FINANCIAL DATA GENERATED BY BANK SECRECY ACT REPORTS,
TO TARGET SUSPECTED CRIMINAL ORGANIZATIONS INVOLVED IN
LARGE-SCALE CURRENCY TRANSACTIONS,
Access TO TFLEC GENERATED INFORMATION IS NOT LIMITED SOLELY
TO U.S. GOVERNMENT AGENCIES.
UPON THE WRITTEN REQUEST OF A
RECOGNIZED DOMESTIC OR FOREIGN LAW ENFORCEMENT AGENCY, THE
1140
SECRETARY OF THE TREASURY CAN AUTHORIZE TFLEC TO PROVIDE THAT
INFORMATION CONCERNING A NAMED SUBJECT OR ORGANIZATION.
ACCESS
TO THIS INFORMATION IS, HOWEVER, PREDICATED ON THE REQUIREMENT
THAT THE SUBJECT OR SUBJECTS ARE BONAFI DE TARGETS OF AN ONGOING
CRIMINAL INVESTIGATION,
TFLEC INFORMATION WILL NOT BE PROVIDED
OUTSIDE FEDERAL GOVERNMENT AGENCIES FOR PURPOSES OF INITIATING
INVESTIGATIONS, OR TO PROVIDE LEADS IN RESPONSE TO NON-SPECIFIC
REQUESTS. TO DATE, THE SECRETARY HAS APPROVED THE RELEASE OF
FINANCIAL INFORMATION TO NUMEROUS DOMESTIC LAW ENFORCEMENT
AGENCIES AND TO SEVERAL FOREIGN COUNTRIES.
TFLEC WAS DESIGNED PRIMARILY TO SUPPORT FIELD OPERATIONS BY
SUPPLYING DATA OBTAINED UNDER THE PROVISIONS OF THE BANK SECRECY
ACT, AND TO FURNISH INVESTIGATIVE TARGETS TO MULTIAGENCY TASK
FORCES SUCH AS THOSE CURRENTLY OPERATING UNDER THE CODE NAME
EL DORADO. THESE TASK FORCES ARE CURRENTLY OPERATIONAL IN
SEVERAL MAJOR U.S. CITIES WHERE LARGE-SCALE CURRENCY MOVEMENTS
RE INDICATIVE OF MAJOR NARCOTIC TRAFFICKING AND MONEY LAUNDERING
ORGANIZATIONS.
UTILIZATION OF TFLEC INFORMATION, COMBINED WITH THE DIVERSE
TALENTS OF INVESTIGATIONS FROM DIFFERENT LAW ENFORCEMENT
AGENCIES, IS PROVIDING TO BE ONE OF THE MOST INNOVATIVE AND
SUCCESSFUL CONCEPTS IN LAW ENFORCEMENT IN RECENT YEARS,
THE EFFECTIVENESS OF TFLEC-GENERATED INTELLIGENCE CAN BEST
BE DEMONSTRATED BY THE SUCCESS OF ONE OF OUR EL DORADO OPERATIONS
IN THE SOUTHERN FLORIDA AREA. THIS OPERATION IS KNOWN AS
1141
OPERATION GREENBACK, AND IS A JOINT OPERATION INVOLVING THE
INTERNAL REVENUE SERVICE, THE U.S. ATTORNEY'S OFFICE, AND U.S.
CUSTOMS SERVICE PERSONNEL.
IN 1979 AND EARLY 1980, THE U.S. TREASURY DEPARTMENT
DETERMINED THROUGH ADMINISTRATION AND ANALYSIS OF THE DOMESTIC
AND FOREIGN TRANSACTIONS PROVISIONS OF THE BANK SECRECY ACT, THAT
DISPROPORTIONATELY LARGE VOLUMES OF CURRENCY WERE FLOWING INTO THE
STATE OF FLORIDA. THESE MONIES WERE SUSPECTED OF BEING DIRECTLY
RELATED TO NATIONAL AND INTERNATIONAL CRIMINAL ENTERPRISES,
PRIMARILY INVOLVED IN THE NARCOTICS TRADE.
ONE OF OUR EFFORTS TO INVESTIGATE THE LAUNDERING OF
CRIMINALLY OBTAINED FUNDS IS OPERATION GREENBACK, WHICH WAS
INITIATED IN MIAMI IN JUNE 1980. DURING ITS FIRST 3 YEARS, THE
PROGRAM HAS RESULTED IN INDICTMENTS AGAINST 210 INDIVIDUALS.
ONE
HUNDRED AND SIXTY-THREE PERSONS HAVE BEEN ARRESTED, AND OVER
$36.8 MILLION IN U.S. CURRENCY HAS BEEN SEIZED.
IN ADDITION,
PROPERTY IN EXCESS OF $11.2 MILLION HAS ALSO BEEN SEIZED, AND
CIVIL PENALTIES EXECUTED UNDER TITLE 31 ARE IN EXCESS OF $33
MILLION. BOND FORFEITURES HAVE BEEN IN EXCESS OF $1.6 MILLION
AND JEOPARDY TAX ASSESSMENTS TOTAL OVER $117 MILLION.
THE MOST RECENT OCCURRENCE IN THE BATTLE AGAINST ORGANIZED
CRIME IN THE UNITED STATES WAS THE DECISION BY PRESIDENT REAGAN
TO ESTABLISH DRUG ENFORCEMENT TASK FORCES IN KEY AREAS THROUGHOUT
THE COUNTRY. THESE TASK FORCES HAVE BEEN OPERATIONAL SINCE
FEBRUARY 1983, AND ARE INTENDED TO BE INVESTIGATIVE RATHER THAN
INTERDICTIVE IN NATURE, The U.S. CUSTOMS SERVICE HAS PROVIDED A
TOTAL OF TWO HUNDRED CRIMINAL INVESTIGATORS, INTELLIGENCE
1142
ANALYSTS AND SUPPORT PERSONNEL TO THE TASK FORCES TO CONDUCT
FINANCIAL INVESTIGATIONS. THE COMPLETE RESOURCES OF U.S. CUSTOMS
SERVICE, OFFICE OF INVESTIGATIONS, INCLUDING THE TFLEC, HAS BEEN
MADE AVAILABLE TO THE AGENTS INVOLVED IN THESE TASK FORCES.
AGAIN, THESE TASK FORCES ARE MEETING WITH PHENOMENAL
SUCCESS, THE STATISTICS INVOLVED IN ONLY THOSE CASES INVOLVING
U.S. CUSTOMS PARTICIPATION ARE IN THEMSELVES IMPRESSIVE. FIRST
YEAR ACCOMPLISHMENTS INCLUDE APPROXIMATELY 250 INDICTMENTS AND
180 ARRESTS, SEIZURES OF OVER $4 MILLION IN CURRENCY AND $2.7
MILLION IN PROPERTY, AND NARCOTICS/DANGEROUS DRUG SEIZURES AS
FOLLOWS: COCAINE 1.086 KILOS; MARIJUANA 39,234 KILOS; AND HEROIN
27.4 KILOS.
THESE STATISTICS FROM THE FINANCIAL INVESTIGATIVE TASK
FORCES ARE ONLY A PART OF THE OVERALL CUSTOMS SEIZURE
ACCOMPLISHMENTS,
ATTACHED ARE CHARTS DEPICTING THE AMOUNTS OF
NARCOTICS AND DANGEROUS DRUGS SEIZED BY U.S. CUSTOMS FROM FY 1978
THROUGH FY 1983. THE AMOUNTS INVOLVED ARE STAGGERING, AND
REGARDLESS OF OUR SUCCESSES, THEY ARE ONLY THE TIP OF THE
ICEBERG,
EXPERIENCE GAINED FROM BOTH OUR DOMESTIC AND INTERNATIONAL
PROGRAMS PROVES THAT THE ONLY RECIPES FOR SUCCESS IN IMPROVING
OUR EFFORTS TO STEM THE FLOW OF DRUGS INTO THE UNITED STATES ARE
1. A CONCERTED DOMESTIC MULTI-AGENCY COOPERATIVE DETERMINATION
TO COMMIT ALL AVAILABLE RESOURCES TO COMBAT THE PROBLEM, AND 2.
A COMMITMENT FROM ALL INVOLVED COUNTRIES, INCLUDING SOURCE,
TRANSIT AND RECIPIENT LOCATIONS, TO DEDICATE THEIR MAXIMUM
EFFORTS TO STAMPING OUT THE DRUG TRADE AT ALL LEVELS.
1143
THIS WILL NOT BE EASY TO ACCOMPLISH, IN SOME INVOLVED
COUNTRIES THERE ARE LEVELS OF OFFICIAL CORRUPTION WHICH ARE
BEYOND THE CONCEPTION OF MANY OF OUR CITIZENS, AND BRIBERY IS
OFTEN A WAY OF LIFE,
AS A RESULT, THE DRUG TRAFFICKER WITH HIS
IMMENSE PROFITS CAN OFTEN OPERATE WITH IMPUNITY. THIS
EXACERBATES THE PROBLEMS, AND EXASPERATES THOSE HONEST OFFICIALS
WHO ARE GENUINELY ATTEMPTING TO PROVIDE US WITH ASSISTANCE,
IN ADDITION, SOME GOVERNMENTS DO NOT SEE THE PROBLEM IN THE
SAME TERMS AS WE DO.
SOME OF THEM FEEL THAT DRUG TRAFFICKING IS
PRIMARILY THE PROBLEM OF THE UNITED STATES AND OTHER RECIPIENT
COUNTRIES, AND THEY ARE UNWILLING TO COMMIT THEMSELVES TO A
CONCERTED OR EFFECTIVE EFFORT TO CURTAIL THE TRAFFIC AT THE
SOURCE OR OTHER IN-COUNTRY INTERMEDIARY LEVEL.
OTHER COUNTRIES, WHICH DO HAVE ANTI-DRUG PROGRAMS, AND WHO
ARE OFTEN RECEIVING MASSIVE AMOUNTS OF AMERICAN AID IN ORDER TO
CONDUCT THESE PROGRAMS, AT TIMES DO NOT APPEAR TO BE PROVIDING
ADEQUATE SUPPORT TO OUR INTERNATIONAL EFFORTS, AND OFTEN APPEAR
TO PAY THE PROGRAMS AND OUR CONCERNS WITH ONLY LIP SERVICE,
AS A RESULT, IN THOSE CASES WHERE WE OBVIOUSLY CANNOT RELY
FULLY ON ANOTHER COUNTRY'S EFFORTS TO ADEQUATELY ADDRESS THE
PRODUCTION AND TRAFFICKING OF ILLICIT DRUGS IN AND THROUGH THAT
COUNTRY, WE HAVE NO ALTERNATIVE BUT TO INTENSIFY OUR OWN CONTROL
EFFORTS WITH RESPECT TO SHIPMENTS FROM THAT COUNTRY, REGARDLESS
OF THE ADVERSE EFFECTS THAT SUCH EFFORTS MAY HAVE ON LEGITIMATE
TRADE.
1144
FOR EXAMPLE:
IT IS APPARENT THAT THE GOVERNMENT OF COLOMBIA
DOES NOT HAVE THE AVAILABLE RESOURCES TO ADEQUATELY POLICE THE
COCAINE AND MARIJUANA TRAFFIC FROM COLOMBIA TO THE UNITED STATES.
EVEN THOUGH ENFORCEMENT AND INTERDICTION ARE IMPORTANT ELEMENTS
IN OUR NARCOTICS CONTROL STRATEGY, A COMPREHENSIVE CROP
ERADICATION PROGRAM IS OF FUNDAMENTAL IMPORTANCE,
HOWEVER, AN
EFFECTIVE PROGRAM HAS NOT BEEN IMPLEMENTED IN COLOMBIA,
REGARDLESS OF U.S. ASSISTANCE AND ENTREATIES.
U.S. CUSTOMS IS, THEREFORE, LEFT WITH NO CHOICE BUT TO
CONCENTRATE OUR RESOURCES ON INTENSIFYING OUR EFFORTS TO
INTERDICT DRUGS BEING TRANSPORTED FROM COLOMBIA, DESPITE THE FACT
THAT OUR ACTIVITIES WILL HAVE A DISRUPTIVE EFFECT ON LEGITIMATE
SHIPMENTS AND PASSENGERS FROM THE AREA.
FRANKLY, WE HAVE NO OTHER CHOICE. IT SEEMS THAT ALMOST
ANYTHING WE LOOK AT COMING FROM COLOMBIA HAS THE POTENTIAL TO
CONCEAL COCAINE, LAST SUMMER WE WERE DOING 100 PERCENT
EXAMINATIONS OF CUT FLOWERS FROM COLOMBIA BECAUSE WE REGULARLY
FOUND COCAINE HIDDEN IN THEM.
IN ADDITION, COLOMBIAN SHIPS HAVE A HISTORY OF CARRYING
DRUGS INTO THE UNITED STATES. IN JANUARY WE SEIZED ONE OF THESE
VESSELS, CUIDAD DE POPAYAN, IN LOS ANGELES. THE POPAYAN BELONGS
TO THE GRAN COLOMBIANA LINE, AND VESSELS OF THIS LINE HAVE AN
EXTENSIVE COCAINE SMUGGLING RECORD. DURING CALENDAR YEAR 1983,
FOR INSTANCE, WE SEIZED 624 POUNDS OF COCAINE FROM GRAN
COLOMBIANA SHIPS IN SEVERAL PORTS AROUND THE COUNTRY.
1145
THE POPAYAN HAS SINCE BEEN RELEASED TO ITS OWNERS ON A 5.3
MILLION DOLLAR LETTER OF CREDIT.
BUT WE WILL BE WATCHING HER AND
ALL HER SISTER SHIPS FOR ANY FUTURE VIOLATIONS.
I WOULD LIKE TO EMPHASIZE THAT THESE ARE ACTIONS WE AT
CUSTOMS CAN TAKE WITHIN OUR PRESENT AUTHORITY TO EFFECT CHANGES
IN A TERRIBLE SITUATION, WE WOULD RATHER TREAT COLOMBIAN SHIPS
AND AIRPLANES, AND THE PEOPLE AND GOODS THEY BRING HERE, JUST THE
WAY WE TREAT ALL OTHERS. BUT OUR EXPERIENCE HAS SHOWN US THAT WE
CANNOT AFFORD TO DO THAT. SO FOR THE FORSEEABLE FUTURE WE WILL
BE GIVING SPECIAL EMPHASIS TO THE PROGRAM, TO ATTEMPT TO GAIN
SOME CONTROL OVER THE SITUATION, AND TO TRY TO CONVINCE TH
COLOMBIAN AUTHORITIES THAT THEY MUST INCREASE THEIR EFFORTS TO
ASSIST IN CURTAILING THE MASSIVE AMOUNT OF DRUGS, PRIMARILY
COCAINE AND MARIJUANA, BEING SMUGGLED FROM THEIR COUNTRY TO OURS.
IN CONCLUSION, I WOULD AGAIN LIKE TO EMPHASIZE THAT WITHOUT
A SIGNIFICANTLY INCREASED COMMITMENT FROM ALL DOMESTIC
AND
FOREIGN LAW ENFORCEMENT AND GOVERNMENT AUTHORITIES TO COOPERATE
FULLY IN THE EFFORT TO CURTAIL AND DESTROY THE DRUG TRADE, WE
CANNOT HOPE TO BE SUCCESSFUL. WE MUST CONVINCE ALL INVOLVED
COUNTRIES THAT DRUG TRAFFICKING AND ABUSE IS NOT ONLY AN AMERICAN
PROBLEM, BUT ONE THAT CORRUPTS AND DESTROYS THE POLITICAL AND
SOCIAL FABRIC OF ALL COUNTRIES WHICH PARTICIPATE IN THE
PRODUCTION, MANUFACTURE, PROCESSING AND TRAFFICKING OF ILLEGAL
DRUGS.
MR. CHAIRMAN, THANK YOU AGAIN FOR PERMITTING ME TO PRESENT
THIS TESTIMONY, IN WHICH I HAVE PROVIDED THE COMMITTEE WITH A
GENERAL OVERVIEW OF U.S. CUSTOMS CONCERNS AND ACTIVITIES IN THE
AREA OF INTERNATIONAL DRUG ENFORCEMENT AND CONTROL. IF YOU HAVE
ANY QUESTIONS I WOULD BE PLEASED TO ANSWER THEM.
34-045 0-84-_-73
1146

Fleure
Price Structure of the International
Heroin Market
Southwr Adan Herala
Southeast Aslan Herola
Mexican Heroin
I armer
Pakistan/Alghanistan)
$1.9) 4110
10 le spum
Farmer
(Golden Triangle)
$400-700
10 kg opium
Farmer
$20,000-30,000
10 kg opium
Opium merchant
Opium buyer (romero")
$30,000-40,000
10 kg opium
$150 1.100
10 kg opium
Heroin lab operator
$100,000
Purity: 70-90%
(Sinaloa)
Heroin lab operator
$100,000
Purity: 30%
(Durango)
Morphone have distributor
(Turkey)
SA.(**) 9.00
I te nuwphine base
Major Mexican dhatributor
$400,000
Purity: 70-90%
lupart Polera/Import Press .c.b.
Iordulah ial
Haren labywialin
(lupe
(Turkey, lehenon, Syria)
10W) 10,000
AMMI 15.6MM)
Post Wro
l'uilty, MA IR
Ileron labuerator
(Pakistan)
Par aubing $7,500 4,040
Purity: 10-6016h
For injecting: $6,000-7.500
Purity Guine
Tab yirates
(jolden Triangle)
Murphina luna
$40X-1.000
Wernin haer:
1 (NKININKO
Majow distributor
(Bangkok)
ilovein No 4
$7,000-11.000
Purity: 0017
Mexican distributor
$600,000
fully, 40-002
Mexican dlstributor
$400,00
furity 10 011%
1
1
Manu distributor
.(limitnl Sontre)
Major distributor
Middle-level
Middle-level
Major distributor
(terop
411,(NMD 100,12X)
Purity: 70-90%
Major distributo/lab operator
(long Kong
In base
$8.0XX)-10.000
(1 kx heroin have
3 kg heroin No.3)
l'unity 10.94
Ilcron No. 4
$165,00-250,000
Purity: 90'6.
Major distributor
(l'utor)
Ileron No.
$40,000-45,000
Purity: 90%
Heroin No. 3
SR5.000-115,000
Purity: 30%
SMOX),(XX)
Purity: 60%
$XOX0,0XX)
Purity: 40%
Middle level
alatiilor
S800,000
Purity 15%
Local distributor
$1,800,000
Purity: 14.167
Local distributor
$1,500,000
Purity: 10-15%
Local distributor
$2,200,000
Purity 5.7%
Middle-level distributor
Ilimited Sintes)
$420,0XX). 41X1,000
Parts 41) AT
Middle-level distributor
(liurope)
$170.000-250,000
Purity (1 70
Midelle level distribuint
(llong Kong)
Hernin No. 3
$ 10,0XX) 11.000
Purity: 30%
Midelle level distributor
(United States)
$350,000-450,000
l'urity. 45
Retett ke
.
Store dealno
thrasiren 'S)
$1.SIN),(MM)
Part A "7
Steret traler
Southern S)
$1.5X0.000
Stocet drales
Mulwestern US)
$1.500,
Pursty SOT
Steret denier
If uripel
$1 1-2.0 million
I'moly 4 11
Street dealer
(I fong Kong)
Ieroin No.3
3.16.(MM) 4M
Purity: 307
Susret dealer
Ihastern US)
$1 7 Million
l'urity: 2-3%
Street dealer
(Central US)
$2 Million
Purity 9-10%
Street dealer
(Western US)
$4 Million
Purity 6-7%
Stroet denler
(Europe)
$1..3-2.0 Million
Streel dealer
(Southwestern US)
52.1111.000
Purity: 7.8%
Street dealer
(South-Central US)
$1.430,000
Purity: 6-77
Street dealer
(Midwestern US)
$2,400,000)
Parity.1.41
L'urlonited
1147

rcotics Smuggling: Major Routes and Cultivation Areas
U Sla
ENROL
la Sore Other very
Acea
Greenland
(Den)
Norway
Iceland
Finland
Sweden
Soviet
Union
Canada
Urted
Woh
Astor
OOR
Pola
Goemsey
FRO
CREC
Jersey
UK
France
Mongolia
man
Size
Marseille
Monaco
Joly
Yugo.
To the US
&
Detroit
Oleage
ve Yurt
From Southeast Asie
Spain
KE
Ste Francisco
United States
NOT
Sici
Greece
Leo Syne
China
Loe Ingalas
Tunisia
The Golden Crescent
Morocco
Irsa
Bermuda
Niche
To Europe
lere
Jordan
ve
Te Europo
Egypt
SA
Oase
Saudi Arabia UAE
Algeria
Pakistan
Libya
ti!
Larica
wesien
Jarista
Fron Southeast Asia
and Co
Bangiece
India
una
The Golden Triangul
Omer
201
Mexico
Mauritania
ee.
TAR
han to
SED
Mali
CE
verse
Niger
7o Europe
Chad
Senegas
Tom DBY
Sudan
Loops
Philippine
Kampuchea
Guate
EID
Nico
Upper
Yoite
Duros
Dr.
.
Venezuela
sier
Ethiopia
Coast
Sorte Los non ha
ME
Nigena
Cameroon
C.AR
Somalia
Colombie
Toge
Kuala Lupa
Marysia
Uganda
BNS
Ecuador
Kenya
Gabon
Ewa Congo
Zaire
Indonesia
Burun
Tanzania
Brazil
Petu
Te Asie
Angola
Mai
Zambia
Bolita
03
Mozambique
Zimbabwe
Namibia
Bolswara
Madagascar
SO Pacar
SO
To the US
and Europe
O.
Ana
South
Africa
Major Routes
Cocaine
OC
Marijuana
Uruguay
Chile
Argentina
Hashier
Opiate
Cultivation Areas
Coca
Licit Opium
Hashish
ilicit odium
Manjuana
C.A.R. -Central Amrican Republic
FRG - Federal Republic of Germany
GOR-German Democratic Republic
PORY -People's Democratic Republic of Yemen
YAR-Yemen Arab Republic
UAE - United Arab Emirates
1148

o ool
1149


1150


1151


1152

1153

.

1154

11

1155


1156
U.S. Customs Service
Number of Heroin Seizures
300
HEROIN
250
1
1
1
1
200
Number
150
100
50
78
79
80
81
82
83
FUTIWTE Suuret OLEMA
Fiscal Year
15
U.S. Customs Service
Pounds of Heroin Seized
700
HEROIN
G00
រ
1
T
500
400
Pounds
ខ្ញុំ
→
ជា
--
}
=
។
2008
100
7
79
0
8
2
3
FWIWIŁ Shot CLEAR
Fiscal Year
1158
U.S. Customs Service
Number of Cocaine Seizures
2000
VIA COCAINE
1600
1
1200
Number
800
1
1
400
0
78
79
80
81
82
83
FWIWDTE Sauror QLENA
Fiscal Year
1159
U.S. Customs Service
Pounds of Cocaine Seized
24000
COCAINE
20000
16000
12000
1
1
-
Pounds
1
8000
1
con
1
1
1
1
1
1
4000
78
79
80
81
82
83
FWIRD12 Souret DER
Fiscal Year
1160
U.S. Customs Service
Number of Marijuana Seizures
15000
WI MARIJUANA
12000
9000
Number
6000
3000
0
78
79
80
81
82
83
RwOil Suret CLEAR
Fiscal Year
-
1161
U.S. Customs Service
Pounds of Marijuana Seized
34-045 0-84-74
6000000
MARIJUANA
5000000
1
4000000
3000000
!
1
Pounds
-
2000000
1000000
78
79
80
81
82
83
FWINIZ Oct TENS
Fiscal Year
1162
U.S. Customs Service
Number of Hashish Seizures
6000
HASHISH
5000
4000
1
mo
-
{
Number
1
3000
ang
2000
1000
78
79
80
81
82
83
FOUTI DTE Sant CLEM
Fiscal Year
1163
U.S. Customs Service
Pounds of Hashish Seized
70000
BU HASHISH
60000
50000
40000
3
1
1
1
1
1
1
1
1
1
1
Pounds
30000
20000
10000
1
78
79
80
81
82
83
Fonote Speranta OLEMA
Fiscal Year
1164
U.S. Customs Service
Number of Morphine Seizures
250
W MORPHINE
200
150
1
1
1
1
1
1
1
1
1
1
1
Number
100
1
1
1
-
50
1
1
78
79
80
81
82
83
FWIWIE Souret: CLEA
Fiscal Year
|
1165
165
U.S. Customs Service
Pounds of Morphine Seized
70
MORPHINE
60
50
I
1
i
1
1
-
Pounds
30
...l
20
10
0
FOOTNOTE ner QLENA
Fiscal Year
1166
U.S. Customs Service
Number of Opium Seizures
300
QPIUM
250
1
1
200
150
1
1
0
Number
1
1
1
1
$
I
1
100
.
1
i
1
1
50
78
79
80
81
82
83
WiDi2 Set CUENA
Fiscal Year
1167
U.S. Customs Service
Pounds of Opium Seized
240
CIUN
200
160
120
1
1
1
1
-
1
1
1
1
1
1
1
1
-
1
Pounds
1
1
1
80
40
1
78
79
80
81
82
83
FUTIOTE Sant CUENA
Fiscal Year
1168
U.S. Customs Service
# Seizures - Other Drugs, Barbiturates, & LSD
Z OTHER DRUGS
4500
4000
3500
1
3000
2500
Number
2000
1500
1000
500
0
78
79
80
81
82
83
FOTOTC Sourct MEAR
Fiscal Year
1169
U.S. Customs Service
# Tabs - Other Drugs, Barbiturates, & LSD
50000000
OTHER DAUGS
40000000
30000000
1
1
1
Number of Tabs/Units
20000000
1
1
ill.
10000000
FY78
FY79
FY80
FY81
FY82
FY83
FWIVIL Suuret CUER
Fiscal Year
1170
U.S. Customs Service
Total Number of Seizures by Fiscal Year
25000
ALL TYPES NARCOTICS
20000
200002
15000
Number
1000
10000
5000
0
FY78
FY79
FY80
FY81
FY82
FY83
FOOTIOTE Souret MENA
1171
U.S. Customs Service
Total Pounds Seized by Fiscal Year
6000000
W ALL TYPES (Except Other)
5000000
4000000
4000000
Pounds
3000000
N
2000000
1000000
FYBE
FY78
FY79
FY80
FY81
FY82
FY83
FOTIDIE ner CLEAR
1172
Senator HAWKINS. Thank you. I have several questions.
Mr. LOGAN. Yes, ma'am.
Senator HAWKINS. Does the Colombian customs secure their air-
fields at night?
Mr. LOGAN. I would like to submit a detailed answer for the
record on that, but I can answer that briefly. There are landing
strips, both clandestine as well as official, that are secured during
the dark hours. Others are not.
Senator HAWKINS. Would you supply the same information on
harbors also?
Mr. LOGAN. Yes, ma'am.
[The information referred to follows:
We have no information which indicates that the Colombian Customs Service par-
ticipates in the securing of airfields, landing strips or harbors at night or any other
time for the purpose of allowing drug trafficking to take place. Over the years, we
have received, and we continue to receive information from various sources that
uniformed, armed Colombian military personnel have secured airports and airstrips
while airplanes were loaded with drugs. In fact, there are indications that some of
these military personnel are actually loading the airplanes in some instances.
Senator HAWKINS. I believe you answered the other question.
Would you give me the answer in writing about your intensified in-
spection of the Colombian planes, ships, cargo, and passengers, the
Colombian initiative?
Mr. LOGAN. Yes, ma'am.
[The information referred to follows:
From March 1-March 31, 1984, the United States Customs Service conducted in-
tense enforcement against cocaine originating in Colombia and destined for this
country. Current estimates: 50-70 percent of cocaine entering the United States is
arriving from Colombia.
Our initiative intended to meet four objectives: (1) Interdict cocaine; (2) Disrupt
the flow of cocaine into the United States; (3) Increase intelligence for later use; and
(4) Emphasize the high level of U.S. dissatisfaction with the Colombian govern-
ment's lack of enforcement activities against cocaine.
All four objectives were met.
Our scope was national. The full range of enforcement personnel from Customs
regions participated. The intensified effort reached persons, merchandise, and carri-
ers arriving directly or indirectly from Colombia by sea or air, and all Customs
ports which experienced any Colombian activity.
An action plan outlined all practicable activity and defined all actions that U.S.
Customs could pursue unilaterally within existing statutes and regulations. The
result would maximize impact on smuggling operations yet minimize adverse effects
on Customs personnel and operations.
A four phase strategy increased pressure week by week. Individual regions and
districts retained flexibility to adjust schedules and intensity, considering local fac-
tors within the plan's context. Miami district had long term intensive efforts under-
way and thus chose to implement the entire plan immediately and to continue
throughout the month.
Before the operation, Regional Commissioner Battard and a Customs survey team
conducted a Source Country Profile study in Colombia, working in concert with
DEA officials in the United States and Colombia. Much of their information and in-
sight was used and/or verified during this operation.
DEA contributed from this efforts' earliest stages and offered full cooperation and
support. Their trolling for additional tactical intelligence met with limited success
though one Miami seizure resulted directly from DEA supplied information.
DEA expects more information to surface in Colombia over time in the wake of
this Customs initiative. A valid mitigating circumstances stems from the fact that
virtually all DEA in country resources in Colombia were actively preoccupied with a
Colombian Government seizure of 1342 tons of cocaine in that country.
During that first week of March, crew members arriving and departing the
United States underwent intensive secondary examinations. In addition, Landed
1173
Quantity Verifications (LQV) were performed on all in-bond shipments prior to their
movements to the port of destination.
In the second week, all Colombian vessels were boarded and searched prior to dis-
charge of crew, passengers and cargo. All discharged cargo was LQV'ed and received
100 percent examination. At this stage, more Customs professionals became in-
volved. Canine teams searched vessels, cargo and baggage; Patrol officers performed
vessel searches and conducted surveillances; and Inspectors supervised stripping
cargo containers and tightened all examinations, especially bulk cargo shipments of
bananas and coffee. Also at this stage, Inspectors and Special Agents stepped up
outbound currency examinations (COČET).
During the third week of the operation, it expanded to full devanning and con-
tainer stripping of cargo.
By the fourth stage of the program, all passengers, crew, cargo and vessels sub-
mitted to intensive examination. Poor yield from bulk cargo shipments (bananas
and coffee) examination sapped resources; we discontinued this pursuit. Bulk cargo
is very labor intensive. When these time-consumers generated no seizures, we refo-
cused more energy on general merchandise and loose breakbulk shipments.
After the four major stages, our successes warranted continuing intense passenger
and crew examination for two more weeks. Cargo and COCET phases would contin-
ue based on informed targeting and selectivity. Many seizures occurring during the
operation sharpened our perceptions to target suspect shipments more readily. Two
cocaine seizures made at New York and Miami involved the narcotic mixed with
alcoholic beverages accompanying arriving passengers. We now know that any liq-
uids arriving from Colombia could contain cocaine, so all regions have been field
testing these liquids.
Examining bulk cargo proved to be a fruitless effort. However, it delayed ship-
ments and forced the commercial community as well as the Colombian Government
to heed the serious concerns of Customs. Several meetings took place during the op-
eration at Customs Headquarters with representatives from the Colombian Embas-
sy. U.S. Ambassador Lewis Tambs was constantly briefed on the operation's
progress. He was most supportive.
Seeing this, many carriers expressed their desire to help stem the flow of narcot-
ics into the United States. They realize that their vessels and aircraft are often ex-
ploited by narcotics traffickers; their cooperation with Customs could avoid costly
delays and conveyance seizures.
The following is a list of seizures and their locations from March 1-April 2, 1984:
Total Seizures: 90.
Currency: $1,717,588.
Cocaine: 1,721.2 lbs.
Heroin: 1.6 lbs.
Marijuana: 213,106 lbs.
Stowaways: 20.
Handguns: 1.
False Passport: 1.
Ether: 88,000 lbs.
Location:
Miami.......
53
New Orleans....
New York ......
6
Logan
1
San Juan
5
Los Angeles....
4
Gramercy, LA
1
Houston
3
Tampa......
1
Fort Myers
1
Sylvania, GA ...
1
Labelle, FL.......
1
Lafayette, LA
1
Calexico
1
San Ysidro
3
Nogales ......
1
Champlain.....
1
PDN Bridge
1
Rio Grande City
1
Atlanta.
1
:
Seizures
1174
Senator HAWKINS. Also, has the drug threat from Colombia in-
creased or decreased in the last year? I would like those answers
for the record?
Mr. LOGAN. Yes, ma'am.
[The information referred to follows:]
From the viewpoint of the Customs Service, the threat has increased in the last
year, as it has done for the past several years. Colombia is the largest supplier of
two major drugs, cocaine and marijuana, smuggled into the United States. Current
estimates indicate that Colombia supplies between 50 and 70 percent of the cocaine
and approximately 80 percent of the marijuana smuggled into the United States.
These percentages equate to between 62,500 and 87,500 pounds of cocaine, and ap-
proximately 24 million pounds of marijuana. The final retail (street) value of these
drugs is believed to exceed $28 billion. Seizure statistics over the last 6 months indi-
cate that of those cocaine seizures reporting country of origin, over 40 percent came
from Colombia, representing over 60 percent of the cocaine seized in this same cate-
gory
The increase in the threat of cocaine from Colombia is graphically illustrated by
the seizure of 13.8 tons on March 10, 1984 at a processing plant in Colombia. DEA
estimated the street value of this seizure in the United States would be $1.2 billion.
Only 5 or 6 years ago most knowledgeable law enforcement officers would have
scoffed at the idea of 1,000 pounds of cocaine stockpiled at any single location in the
world.
Senator HAWKINS. Our next witness is Frank Kimball, Counselor
to the Agency for International Development. I would ask that you
submit your statement for the record, Mr. Kimball, and I have just
three questions.
Much of AID's assistance is directed to major drug producing na-
tions. How do you coordinate your activities with the Bureau of
International Narcotic Matters?
STATEMENT OF FRANK B. KIMBALL, COUNSELOR, AGENCY FOR
INTERNATIONAL DEVELOPMENT
Mr. KIMBALL. Madam Chairman, we coordinate at two levels, one
in Washington and the other at the mission level. Where we have
programs in the field, we work under the umbrella of the country
team, under the guidance of the ambassador. In Pakistan, Bolivia,
and Peru which are our most active programs, AID and INM coop-
erate on a day-to-day basis.
[Mr. Kimball's prepared statement follows:
1175
PREPARED STATEMENT OF FRANK B. KIMBALL
Mr. Chairman, I am Frank B. Kimball, Counselor to the Agency
for International Development.
It is a pleasure to appear
before you today to update you on our efforts to reduce
production of illicit narcotics overseas.
A.I.D. is acutely aware of its responsibilities to help reduce
the cultivation of illicit narcotics that affects 15 million
Americans who use cocaine and 500,000 American users of heroin.
A.I.D. continues to play an important role in support of the
President's Federal Drug Abuse Strategy.
We work closely with
State/INM as part of the overall U.S. strategy in coordinating
our activities to ensure a proper response to the problem of
narcotics cultivation in countries where we have programs.
Eliminating the production of narcotics is, in part,
а
development problem.
Large scale cultivation of illicit drugs
takes place in developing countries usually by farmers who are
extremely poor .
In general, there is no one crop that can
provide a viable economical alternative to those farmers who
have traditionally produced narcotics.
Efforts at reducing the
production of narcotics are further complicated by the
remoteness of the growing areas and the strength of local
social and cultural traditions.
1176
The Gilman Amendment, Section 126 of the Foreign Assistance Act,
instructs A.I.D. to "give priority consideration to programs
which would help reduce illicit narcotics cultivation by
stimulating broader development opportunities."
We continue to evaluate our approaches to the problem of
narcotics production in the developing world.
We have an
A.I.D. Narcotics Policy Coordinator who works with the regional
bureaus to insure our program addresses the narcotics issue.
We also have a new Director of Strategic Studies, Martin Howell,
whose first project is to review A.I.D, activity in the
narcotics reduction area.
He will review our current course of
action and make recommendations on possible enhancements to our
existing efforts and identify new avenues by which to attack
the problem.
I would like to come to you today with stories of A.I.D.'s
instant success in increasing the income of the rural poor and
reducing the production of narcotics.
However, development is
a long term effort and quick results are seldom achieved.
In
many instances, long-term success in reducing the production of
narcotics requires basic changes in the economic behavior of
the regions where narcotics are produced.
In these instances,
long-term success not only requires a commitment to that
change, but a realization that it cannot be accomplished over
night.
1177
The successful implementation of enforcement and eradication
efforts is a sine qua non for the success of an income substitu-
tion effort.
Prerequisits for a successful program include the
firm commitment of the host government to suppress narcotics
cultivation coupled with its ability to project its influence
into narcotics cultivation areas; without these, there is very
little likelihood that U.S. assistance will result in any
significant reduction of illicit drug production in any given
country.
Where eradication efforts are underway, A.I.D.'s
development expertise can provide alternate crops, fertilizer,
irrigation systems, and other resources to encourage
enforcement of existing bans by host government authorities and
acceptance of eradication by residents of the affected areas.
The following countries are major producers of opium or coca in
which A.I.D. has a presence:
Pakistan
In late FY 1983 the $20 million Gadoon-Amazai Area Development
project was initiated, covering approximately half the current
poppy cultivation area of the country.
Poppy cultivation is
well integrated in the local society, which is resource poor,
and not self-sufficient in basic food grains.
Poppies are grown
in marginal land and there are a few obvious crop alternatives.
Providing alternative sources of income will be a major under-
84-045 0-84-75
1178
taking, requiring significant investment in infrastructure,
institutional development and human resources.
With this project, A.I.D. enters a new phase in its support of
the poppy eradication policies of the U.S. and the Government
of Pakistan, in which specific development programs may be
directly linked to specific enforcement activities.
Phase I of
the Gadoon-Amazai project will produce immediate and highly
visible benefits such as roads, potable water systems, school
repairs and construction.
It will also involve programs to
increase production of wheat and provide seed and fertilizer to
farmers.
Phase II will involve long-range projects such as
development of off-farm employment opportunities.
A.I.D. also assisted the Government of Pakistan in preparing a
Special Development and Enforcement Plan for the opium producing
areas for presentation at the December 1983 meeting of the
Pakistan Consortium in Paris.
The presentation was designed to
enlist other donors in the narcotics control effort, and a
number of multilateral and bilateral donors indicated they may
become involved.
The plan is designed to eradicate existing
poppy cultivation throughout the Northwest Frontier Province and
to prevent its resurgence or introduction into non-producing
areas.
1179
A.I.D. is a member of the U.S. Embassy Narcotics coordinating
Committee in Islamabad which acts to ensure a responsive and
coordinative U.S. efforts.
We currently have "poppy" clauses
in agricultural, irrigation, rural electrification and energy
projects.
The A.I.D. mission has a full time narcotics project
management officer who ensures that all projects in our port-
folio contribute to narcotics reduction efforts to the maximum
extent possible.
Finally, we have worked with and will continue
to offer assistance to INM in its Malakand-area project.
Thailand
A.I.D. administers one project in Thailand that is indirectly
related to achieving narcotics reduction objectives.
The Mae
Chaem Watershed Development project contains a "poppy" clause
to prevent narcotics producers from obtaining development
benefits, but it is primarily designed to increase income and
access to social services for the residents of the watershed in
Northern Thailand.
The project is also intended to reverse
environmental damage to the area caused by improper use of the
areas resources.
The total funding level of the project is $10
million and $3.1 million renains to be obligated.
It is too
early to evaluate impact of the project on narcotics production
from Thailand.
1180
Burma
Currently, A.I.D. does not have any narcotics-related projects
in Burma.
Moreover, preparation of a narcotics-related
development project still seems premature in light of the
Burmese interests in interdiction of narcotics traffic and
suppression of opium production--activities that are the proper
domain of State/INM.
In addition, the poppy growing region is
inaccessible and the safety of American personnel would not be
certain.
Should an appropriate narcotics-related development project be
found, A.I.D. would give it serious consideration.
We will
continue to discuss the situation in Burma with State/INM.
Bolivia
In Bolivia, A.I.D. is embarking on a new crop substitution
effort in conjunction with an INM eradication program.
The
U.S. Government and Government of Bolivia entered into a Five-
Year Coca Crop control project in August 1983.
Internal
Bolivian political difficulties prevented the issuance of a
decree creating the Bolivian agency responsible for narcotics-
related development projects until mid-January.
The Secretariat
for the Development of the Bolivian Tropics is now in place and
1181
the way is clear for implementation of the five-year, $14.4
million Chapare Regional Development Project.
The development
project is supplemented by $20 million in infrastructure loans
targeted for the Chapare region.
These loans will contain
"coca" clauses to prevent benefits from flowing to coca growers.
The Chapare Regional Development Project will provide credit
for both local agribusiness and to Chapare farmers cooperating
with the INM-assisted coca eradication program.
The availa-
bility of credit should help expand production and promote
markets for commercial livestock, agricultural and forestry
products from the Chapa re Region.
Peru
A.I.D. and INM are engaged in an effort to reduce production of
coca in the Upper Huallaga region of the Peruvian high jungle.
The A.I.D. Upper Huallaga Area Development Project began in
1981.
The project is providing a wide range of services to
farmers in the region including alternative crops in the region
such as rice, cocao, citrus fruits and coffee.
Extension agents
travel the valley providing farmers with improved methods.
Agricultural credit is provided at self-sustaining rates to
farmers who participate in INM's eradication efforts.
The
project is also providing roads and potable water systems to
residents of the valley.
1182
The GOP's budget constraints have resulted in a lack of counter-
part funds, which in turn has slowed procurement of needed goods
and services.
Recently, the security situation in the valley
has deteriorated.
The estimate from sources in the field is
that our project goals have been set back a year.
We remain dedicated to reducing production of coca and in pro-
viding alternative sources of income to farmers in the region.
We look forward to continued discussions with INM on the most
appropriate responses to the needs of the coordinated effort
and to continued cooperation in achieving our shared goals.
I would be happy to answer any questions you may have at this
time,
Senator HAWKINS. So you work with the ambassador in the coun-
try?
Mr. KIMBALL. Under his guidance.
Senator HAWKINS. The Pakistan Ambassador is fantastic in his
sense of mission, and I must commend him. We wish we could get
the same cooperation from the other ambassadors in that region of
the world. We think we are gaining on them, though. I am greatly
concerned that in some countries, such as Bolivia, roads and
bridges built by AID are assisting drug traffickers. Have you done
anything to avoid that problem?
Mr. KIMBALL. Madam Chairman, I think in looking at the drug
trafficking business, there is no end to the possibilities for people
who want to engage in illegal activities to use normally lawful
channels, not only roads and bridges but commercial aircraft,
banks and telecommunications.
In the case of, the Chapare Valley, where an AID road and
bridge project was done many years ago, and by happenstance I
was the project officer on that road, we did it in order to open up a
valley which at that time did not grow any coca. The purpose was
to provide agricultural land for farmers to settle and also provide a
link of the road which would eventually connect Santa Cruz with
Cochabamba.
It was tied in with the highway network master plan. It was
clearly justified on economic development grounds. And the sad
fact of the matter is that it also happened to grow into a coca pro-
ducing area. However, I think the programs we have designed
there now will bring back the original purpose and objective, and
hopefully in carrying them out we will be back on a legal develop-
ment basis in that valley.
1183
Senator HAWKINS. I wish you would submit for the record for
other Senators to read the crop substitution program that you are
involved in in Southeast Asia. I am very impressed with it. I
viewed it firsthand, but I would like that for the record, please, Mr.
Kimball.
Mr. KIMBALL. Yes; we will do that.
[The information referred to follows:]
DESCRIPTION OF CROP SUBSTITUTION PROJECT IN PAKISTAN
AID obligated a major crop substitution project in Pakistan's North West Frontier
Province in August 1983. An agreement, incorporating enforcement linkages, was
signed with the Government of Pakistan in October 1983. This five-year, $20 million
project is known as the Gadoon-Amazai Area Development Project.
The project covers an area which was responsible for about one-half of opium
poppy cultivated in Pakistan in 1982. About 116,000 people live in the 215 square
mile project area. As many as 62,000 people or 53 percent are engaged in poppy cul-
tivation if seasonal laborers are counted. Owner/tenant cultivators would comprise
a lower figure, roughly 30,000 people or 26 percent of the area's population.
The project is divided into two phases. The first phase, which will last about 1
year, will provide immediate benefits and lay the groundwork for the remainder of
the project. It will include building of roads, completion of engineering designs, and
gathering of weather data. It also will include farm trials and demonstrations, seed
multiplication, and other exploratory agricultural work.
The second phase, which will last 4 years, will focus on agricultural development,
infrastructure construction, and off-farm employment. The agricultural develop-
ment component will include methods to promote the increased production of exist-
ing non-poppy crops, new crops, improved livestock, and productive trees.
Limited enforcement began immediately. During the 1983-84 crop season, enforce-
ment will take place on government (Water and Power Development Authority)
land and on designated lands which did not have opium poppy cultivation in the
1982–83 growing season. An enforcement schedule has been set for the following
three growing seasons, and production of all opium poppy will be eliminated by the
beginning of the 1986-87 crop year.
Senator HAWKINS. This is the conclusion of our hearing. I think
that the seriousness of the problem cannot be overstated. My great
concern is that this problem is given very low priority by the De-
partment of State, and we are still outspent, outmanned, and out-
gunned by the international drug traffickers. I do not believe the
American people are going to continue to stand for business as
usual, and foreign aid is never popular in Congress. It is very diffi-
cult to get enough votes to help these countries. I personally be-
lieve that that is where we can get the foreign countries' attention,
and that is an important first step for this committee.
This hearing is adjourned. We thank you for your participation.
[Additional questions and answers follow:]
DRUG ENFORCEMENT ADMINISTRATION'S RESPONSES TO ADDITIONAL QUESTIONS
SUBMITTED BY SENATOR BIDEN
DRUG INTERDICTION INTELLIGENCE
Mr. Mullen, one of the major criticisms of the Justice Department's role in our
drug interdiction effort is that DEA fails to provide timely, tactical intelligence on
narcotics trafficking to the interdiction agencies that must rely on prior information
to drug busts. The Reorganization Plan of 1973 gave DEA exclusive responsibility
for intelligence gathering for drug enforcement purposes. In a June 13, 1983 GAO
report, the GAO concluded that, except for certain special operations, DEA's intelli-
gence on drug smugglers has been extremely limited and virtually nonexistent in
the Caribbean--the world's major drug transhipment point.
Question 1. What specific steps have you taken to improve your department's abil-
ity to provide time-sensitive, tactical drug trafficking intelligence to Customs, Coast
Guard, and other drug interdiction agencies? Be specific and include in your answer
1184
what resources—both personnel and dollars--you will be committing to this effort
in the coming year.
Answer. The DEA has implemented a number of programs to enhance ongoing
information dissemination to U.S. Customs and Coast Guard, including the assign-
ment of a Customs Analyst to DEA's Office of Intelligence. During fiscal year 1983,
for example, over 1,800 DEA documents related to drug trafficking activities were
provided to U.S. Customs Service at the headquarters level. Thus far in fiscal year
1984 over 1,100 DEA documents have been forwarded to Customs. These figures do
not include information provided through EPIC or direct field referrals. Approxi-
mately 222,000 separate pieces of information flowed through the El Paso Intelli-
gence Center (EPIC) in fiscal year 1983, all of which was made available to interdic-
tory agencies. Recent examples of the effectiveness of these programs include the
U.S. Customs Service seizure of approximately 13 pounds of white heroin and
$20,000 U.S. currency on December 22, 1983 in Long Beach, California. More recent-
ly, on March 2, Customs seized approximately 8 pounds of heroin at Seattle-Tacoma
International Airport as a result of DEA reporting from Karachi, Pakistan.
The effective use of information for drug interdictions is dependent to a large
extent upon the ability of Customs and Coast Guard to develop appropriate tasking
requirements in cooperation with DEA and other intelligence collection agencies
and to evaluate and disseminate the resulting information. Both the US. Customs
Service and U.S. Coast Guard are in the process of expanding and enhancing their
intelligence capabilities at the headquarters and field levels. The improved intelli-
gence programs by these agencies represent an important complement to DEA's in-
telligence program and will significantly strengthen the overall drug intelligence
system.
A problem exists with regard to the narrow definition of "tactical" or "interdic-
tion oriented” intelligence assigned by some critics. This definition limits tactical
intelligence to only that information which provides actionable information before
actual commission of a crime to the interdiction agency'. In actuality, most of the
tactical intelligence available will lack some of the components necessary to plan a
specific seizure at a particular location and specified time. This problem is inherent
in the fact drug smuggling operations are clandestine, sophisticated and well insu-
lated from enforcement penetration. DEA collects tactical intelligence whenever
possible as a result of ongoing investigative operations and liaison with state, local
and foreign government officials. This information is always passed to the appropri-
ate authorities.
Moreover, much of the available information is strategic in nature, and the value
of this information depends largely upon the ability of interdictory agencies to
evaluate and translate the information into the planning of operations. DEA's sup-
port to interdiction operations in the form of operational and strategic intelligence
is both active and significant, but not always readily visible. Strategic intelligence,
which represents our collective knowledge and experience concerning the drug traf-
fic, identified those areas and activities upon which enforcement resources can have
the greatest impact. This is the framework within which individual agencies may
effectively deploy resources and plan interdiction operations. Strategic intelligence
includes trafficker, vessel and aircraft profiles and information concerning conceal-
ment methods, trafficking routes and drug supply trends. Operational intelligence
identified specific individuals, organizations and conveyances involved in the impor-
tation and distribution of illicit drugs and, as a by-product, provides valuable details
as to the logistics of actual drug smuggling operations.
DEA cannot separate out those resources which are involved in developing inter-
diction related information. Our entire Special Agent and Intelligence Analyst
force, both domestic and foreign based, is involved throughout the investigative and
analytical process in developing information which may relate to the interdiction
function.
BAHAMAS: NEED TO BEEF UP THE DEA PRESENCE
Gentlemen, the recent tragic crash of the Air Force helicopter during a drug
interdiction mission in the Bahamas is a grim reminder to you and everyone in-
volved in the anti-drug effort of the seriousness of the drug trafficking problem in
the Bahamas. There is no question that the Bahamas is the preferred haven for the
drug trafficker as a transshipment point for drug cargo. It is my belief that DEA
representation in the Bahamas are ill-equipped and unable to really make a differ-
ence in stopping the smuggler before he hits the shores of Florida, Georgia, or other
southeastern coast lines. Air Force helicopter support cannot go on indefinitely. A
permanent, well-equipped, well-staffed DEA presence is required if we are really
1185
going to make a difference in that drug hotspot. A recent House Government Oper-
ations Subcommittee site visit to Puerto Rico revealed that Puerto Rico is also rap-
idly becoming a major transshipment haven for drug smugglers smuggling drugs into
the United States from South America.
Question 2. Your fiscal year 85 budget request includes an additional 35 positions
and $2.4 million from the creation of an additional task force in South Florida,
Puerto Rico and Virgin Islands. Is that an effort to correct the manpower and equip-
ment shortage I just noted?
Answer. The requested increase of 35 positions and $2.4 million is intended to
bring additional resources to focus on the highest levels of the drug traffic in Flori-
da, Puerto Rico and the Virgin Islands. It will target financing activities, sources of
supply and distribution organizations. The 13th Organized Crime Drug Enforcement
Task Force will include dedicated AUSAs and Special Agents of the DEA, FBI and
IRS. The focus on interdiction activities will continue under the aegis of the Coast
Guard, U.S. Customs Service, and the South Florida Task Force and NNBIS.
Question 3. Why was there no task force initially created in south Florida when
the President announced the 12 task forces last year?
Answer. The first objective in south Florida was to bring significantly increased
resources to confront the blatant smuggling situation and attack the street-level vio-
lence related to the drug traffic. The primary focus was on interdiction and develop-
ment of information which could be utilized later in attacking the organizations, the
financiers, sources of supply and distribution organizations. The present request for
resources to establish the 13th OCDE Task Force recognizes that the information
base is sufficient to now bring in increased investigative and prosecutorial resources
to capitalize on the results of the South Florida Task Force. The South Florida Task
Force will continue in its drug interdiction efforts. The new resources have not his-
torically been part of the South Florida Task Force (e.g., dedicated AUSA's, the par-
ticipation of the FBI, expanded Title III use and the increased involvement of the
IRS).
STATE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED FOR THE
RECORD
FY 1985 BUDGET REQUEST
Question 1. The proposed FY 1985 budget for international narcotics control calls
for an increase of slightly more than 20 percent over the amounts appropriated for
this program in 1984. (A) Did the Congress provide the INM program with adequate
funding last year to carry out its mission effectively? (B) Almost half of the increase
is for crop control eradication. Will the INM program continue to place greatest em-
phasis on this function? If so, why?
Answer. (A) The major impact of the $12 million reduction in the appropriations
sought for 1984, a reduction occasioned by the continuing resolution, was in the fol-
lowing areas:
In Colombia, the approximately $5.5 million reduction put the United States in a
position wherein we could not respond fully to a Colombian request to support a
program for aerial eradication of marijuana and coca cultivation. In Burma, the re-
duction has reduced flexibility to enter into programs other than the status quo, i.e.,
our assistance was limited to maintenance of aviation craft used for interdiction and
manual eradication programs. In Pakistan, we have lengthened the timeframe for
completing the Malakand agency project (especially the road project). We had to
adopt a no-growth posture in enforcement training and demand reduction projects.
Overall, the reductions in the amount requested for 1984, like previous budget
cuts, reduced the Department's flexibility to respond to the dynamics of the narcot-
ics situation. Historically, the Bureau, with Congressional agreement, has repro
grammed funds from one country where a program may not be moving on schedule
to another country where an unpredicted drug control opportunity has emerged.
That capability will be much less in 1984, although the Bureau is doing its best to
minimize lost opportunities until FY 1985 funding is available.
(B) Much of the requested budget increase for FY 1985 is the $6.8 million increase
requested for eradication programs in Colombia, presuming an agreement with Co
lombia to support a comprehensive coca and marijuana control program. Most other
country programs remain approximately at the FY 1984 level.
The FY 1985 request continues the emphasis on crop control supported by inter-
diction activities, including eradication where needed, in source countries where we
have programs. The reason for continuing this emphasis on crop control is that,
1186
while worldwide levels of illicit narcotics production remain high, experience has
shown, one, that interdiction alone cannot curb the large amounts of illicit narcotics
transhipped to the United States, and two, that crop control will, over time, reduce
availability. Interdiction, then, is a short-term defense, and, control of cultivation is
a long-term solution.
Question 2. The total international narcotics control program budget for FY 1985
is about $50 million. The illicit narcotics industry is a multi-billion dollar industry.
Some South American drug traffickers probably make more money in one year than
is being requested by the Administration for the entire worldwide program. Given
the severity of the problem and the enormous financial resources of drug-producing
and trafficking organizations, do you really believe that the United States can suc-
cessfully combat this problem with such a meager budget and resources?
Answer. There is no linear relationship between narcotics profits and control pro-
gram budgets. At a yield of 10 kilograms per hectare, the 2,472 hectares of opium
poppy which the Mexican Government eradicated could have yielded heroin which
could have sold for $5.4 billion (U.S. street value), but this eradication was only part
of the total program assisted by the United States in 1983 at a cost of $7.8 million.
Similarly, it costs $200 or less to eradicate a hectare of coca bushes, which could
yield two kilograms of cocaine that would have a U.S. street value of $1.6 million.
U.S. expenditures must be viewed as complementary to those of cooperating gov-
ernments and other donor nations or agencies. They correspond only to present and
anticipated opportunities to achieve drug control progress, not to the entire prob-
lem. Put another way, the Department's annual requests for international narcotics
control authorizations and appropriations are based upon estimates of activity
under existing agreements and assessments of new agreements anticipated during
the coming fiscal year. To the extent that the Congress reduces these requests, as it
has every year since 1979, the Congress has limited the flexibility needed by the
Department to respond to unanticipated opportunities or demands upon the system.
PROSPECTS FOR FUTURE
Question 3. Why does INM think that there is any greater chance for U.S. over-
seas drug control program to effect a reduction in the drug supply over the next 10
years?
Answer. The worldwide production of illicit narcotics far exceeds the amounts
currently consumed by drug abusers within the United States and other consuming
countries. For example, annual production of illicit opium is estimated to range
from about 1,500 to 1,900 metric tons; only 30-34 tons are needed to produce all the
heroin entering the United States. There is enough illicit coca produced to supply
about 170 tons of cocaine; currently the United States imports about 45 tons. As a
result, it will be necessary to make sizeable reductions in the world supply of illicit
drugs before this impacts on availability in the United States. Despite the dimen-
sions of the problem we believe that during the next 10 years U.S. narcotics control
programs in consonance with the efforts of other governments and international or-
ganizations will begin to reduce the availability of illicit drugs on the world market.
There are a number of reasons for this optimism.
First, the number of countries in which we have already seen progress or antici-
pate such progress is increasing. Senator Biden has referred to the successes we
have had in Turkey and Mexico and we can expect governments in both those coun-
tries to build on the progress already made with our assistance. But progress is not
limited to these countries.
In Pakistan we have seen the production of opium decline from a high of 800
metric tons in 1979 down to an estimated 1983 of 45-60 tons, in part because of U.S.
supported efforts of the Pakistani efforts to expand its ban on opium production into
new areas. The Pakistani Government is moving to extend its ban into other areas
and is seeking additional international support for such efforts. In Colombia, where
we have been supporting National Police manual eradication efforts, the govern-
ment has completed preparations for field testing of aerial herbicide eradication of
both coca and marijuana. Peru.is now moving into its second year of a coca eradica-
tion program that is scheduled to eradicate over 4,000 hectares of coca in 1984. The
United States suspended assistance to Bolivia in 1980, but is now working with the
government in the initiation of a coca program. Some efforts are in the beginning
stages, others like Pakistan are progressing to advanced stages of control; the con-
clusion remains that crop control is a long-term initiative.
The belief that our programs will show increased future dividends is also based on
the fact that an increasing number of producing and trafficking countries are begin-
ning to realize the adverse effects of narcotics activities on their societies. Virtually
1187
every source country has experienced the problems of economic dislocations, black
market profiteering and crime related to narcotics trafficking; several have also ex-
perienced political problems, including armed insurgencies supported by profits
from the drug trade. Countries like Pakistan, Thailand, Colombia, Bolivia, and Peru
are suffering escalating problems of drug abuse, especially among youth. The aware-
ness of government officials and other elements of society in producer countries
about the adverse domestic effects on them on the drug trade have improved the
prospects for cooperation with the United States and improved anti-narcotics efforts.
Question 4. How, in terms of magnitude of effort, budgetary resources, overall pro-
gram design, strategy or support from other U.S. departments in U.S. missions over-
seas does INM's proposal for $50 million next year differ from U.S. drug control pro-
grams 5 years ago? Should we expect any change in the availability of drugs in the
United States in 5 years? Why?
Answer. During the past 5 years, INM's Budgetary resources have not significant-
ly changed over the last 5 years and in fact in real dollar terms have actually de-
clined. Actual expenditures for fiscal year 1980 through fiscal year 1983 were:
Fiscal year:
1980 ....
38,474
1981 ....
34,740
1982...
35,053
1983 ....
36,534
The approved INM budget for fiscal year 1984 is $41,200, some $12 million less
than requested by the Administration. When this fiscal year 1984 figure is adjusted
for inflation, its actual purchasing power to affect programs is actually less than in
1980. See the attached chart "Funding History Fiscal Year 1978–1985" which com-
pares the INM Budget Authority with an Adjusted Budgetary Authority which in-
cludes the inflationary factor.
During the past 5 years there has been no major shift in INM's program priority.
INM continues to place its highest priority on narcotic crop control in source coun-
tries and its second priority on interdiction of drugs as they move from producing
areas through transit countries to the United States. There has, however, been a
significant change in the allocation of INM funds to these two priorities over the
past 5 years, as indicated in the attached Functional Activity Summaries drawn
from the fiscal year 1982 and fiscal year 1985 Congressional Budget Submissions. In
fiscal year 1980, 70 percent of INM funds were committed to enforcement programs
while only 20 percent were used in crop eradication and related income replacement
activities. Since then opportunities for bilateral crop eradication programs have in-
creased substantially and in its fiscal year 1985 budget, INM has earmarked 41 per-
cent for crop control activities while decreasing the portion devoted to enforcement
activities to 46 percent. As new opportunities for crop eradication develop, INM is
prepared to commit an increasing percentage of its budget to this priority activity.
USE OF INTERNATIONAL FORA
Committee comment.--Although drug source countries are increasingly confront-
ing serious domestic drug abuse problems and developed countries such as Italy and
West Germany have had such problems for several years, the United States is the
only country that makes a systematic effort to apply its diplomatic resources toward
drug control objectives. The International Narcotics Control Strategy Report refers
to the small contributions made by West Germany, Sweden and Norway to the
U.N.'s drug control programs and to Italy's pledge of $40 million to the U.N.'s Fund
for Drug Abuse Control over the next 5 years. Apart from these efforts, the devel-
oped countries seem to be doing nothing to further the objective of heroin, cocaine
or marijuana control in source countries.
In a report 5 years ago on Southwest Asian heroin, I (Senator Biden) proposed
that the United States should raise drug control issues in forums such as NATO,
international financial organizations like the World Bank, and the Organization for
Economic Cooperation and Development.
Question 5. Could you please cite specific examples of when the Secretary of State
or other Cabinet members have raised the international drug control concerns, that
we share with other developed countries, in forums such as the one I mentioned?
What were those countries' responses? Do they plan to do more or do they think
that overseas attempts to control drug production in source countries such as Paki-
stan, Burma or Colombia do not offer any promise of success?
Answer. The Administration has raised the narcotics issue as a priority matter in
both bilateral relationships and through multilateral fora such as those mentioned.
1188
Those raising the issue include the President, the Vice President, the Secretary of
State and the Attorney General, as well as Department representatives below Cabi-
net rank.
In particular, the United States has sought to raise the foreign policy priority
other countries assign to narcotics control, and to increase the level of funding and
other resources contributed to the international control effort. Both issues—foreign
policy priorities and increased support-have been raised by INM in special discus-
sions with government officials throughout Europe, and in Japan, Saudi Arabia,
Australia, New Zealand and Canada. The United States continues to pursue in-
creased contributions, most recently at the Commission on Narcotic Drugs meeting
in Vienna in February, while supporting the policy directions of the Fund.
We note that 45 other countries contributed to the United Nations Fund for Drug
Abuse Control in 1983, and that several countries increased their contributions over
1982.
The 1983 contribution of the Federal Republic of Germany, mentioned in the
question above, was in fact larger than that of the United States ($2,193,575 versus
$2,000,000), and those of Norway and Sweden were the third and fourth largest for
the Fund. In relation to their gross national products, these countries do not consid-
er these contributions particularly "small." Largely as a result of U.S. prodding,
many European countries are increasing their interest in drug control, both through
contributions to UNFDAC and through their own bilateral programs.
In addition to interdiction projects which it supports in several countries,
UNFDAC supports programs in such source countries as Burma, Laos, Pakistan and
Thailand, and is preparing project plans for the coca producing Andean countries
(Peru, Bolivia and Colombia). UNFDAC is also collaborating with the United States
and other prospective donors who have expressed support for the special develop-
ment project in Pakistan, which could end all illicit poppy cultivation in that coun-
try.
In addition to discussions initiated by U.S. representatives to the multilateral fora
named, Secretaries of State have raised the narcotics issue at NATO and OECD.
These discussions were frank, and we think productive.
It should be noted that U.S. executive directors at the multilateral development
banks provide the Department with annual reports on the projects being funded in
source countries, just one indication of their awareness. For example, the World
Bank is funding projects in such narcotics source countries as Afghanistan, Bolivia,
Burma, Colombia, Jamaica, Mexico, Morocco, Pakistan, Peru and Thailand.
INTERNATIONAL ORGANIZATIONS
Question 6. The United Nations Fund for Drug Abuse Control was established in
1971 to expand multilateral narcotics assistance to less developed countries.
UNFDAC has many programs in many of the countries which also receive U.S. nar-
cotics funds (e.g., Burma, Pakistan, Thailand and Turkey). Italy has pledged $40 mil-
lion to UNFDAC primarily for coca control in South America. Why is Italy making
such a large contribution at this time? Do you expect other European governments
to follow Italy's lead?
Answer. In response to the recommendations of UNFDAC's Executive Director,
Giuseppe di Gennaro, a respected former Italian judge, the Italian Government has
been considering a financial pledge to UNFDAC since early 1982. Combatting orga-
nized crime and its ally, narcotics trafficking, is an important plank in Prime Minis-
ter Craxi's political platform. His government wants to reduce Italy's role in narcot-
ics trafficking and processing. Understanding the importance of reducing coca
supply at its source, the Craxi government recognized the value of UNFDAC's plans
for coca control in the Andean region and in late 1983 pledged some $40 million
over 5 years in support of this UNFDAC program. The Italian pledge is an impor-
tant precedent. Other European governments, for example Norway, Sweden and
France, are interested in UNFDAC's Andean project and may follow the Italian
lead.
Question 7. What is the value to the United States of contributing to UNFDAC?
What are its strengths and weaknesses as an organization? How do you distinguish
UNFDAC's mission from that of the U.S. international narcotics control program?
Answer. The primary missions of UNFDAC and the U.S. international narcotics
control program are the same: strengthening control and enforcement measures, de
signing and implementing projects to reduce illicit supply as well as demand.
UNFDAC has important organizational strengths. As a U.N. agency, UNFDAC can
sometimes work where the United States cannot, e.g., Afghanistan and Laos. Also,
its programs will often be accepted by governments that prefer the presence and
1189
involvement of the United Nations over that of the United States Government, or
other providers of bilateral aid.
Through UNFDAC, many donor nations, both large and small, can be made
aware of international narcotics problems and participate in control projects.
UNFDAC's “master plan” concept and multi-sectoral approach to projects is an-
other strength and attraction. UNFDAC has adopted the principle that development
assistance in narcotics producing areas must be accompanied by host government
enforcement activities.
UNFDAC therefore more than complements U.S. bilateral efforts; its role can be
critical to our international strategy which seeks the involvement of other countries
and organizations. For example, the presence of UNFDAC in South America offers
the first non-U.S. role in drug control, a prospect which we and those governments
welcome as diffusing the political character of narcotics control programs based
solely on U.S. assistance.
UNFDAC also has characteristics that can sometimes result in organizational
weaknesses. It does not implement programs directly but acts through other U.N.
agencies; some of the latter perform better than others. With its small staff,
UNFDAC acts as an umbrella agency. As a U.N. agency, its decision-making process
is often slow and can be influenced by non-program considerations. Nevertheless, it
is the major vehicle for the internationalization of narcotics control projects in pro-
ducer and transit countries, an important goal of the U.S. international narcotics
strategy
TREATIES ON MUTUAL ASSISTANCE IN CRIMINAL MATTERS
Committee comment. The United States is party to Treaty on Mutual Assistance
in Criminal Matters with Switzerland which was signed in 1973 and became effec-
tive in 1977. It has served as a model for treaties with other countries. If the United
States can show probable cause to the Swiss that a crime has been committed, the
Swiss Government can turn over to U.S. investigators information that would nor-
mally be protected by Swiss bank secrecy laws. More broadly, the treaty permits
U.S. investigators to request Swiss authorities to provide a range of investigative
assistance within Switzerland (and vice versa). Such treaties of mutual assistance
can be an effective tool in the conduct of drug-related investigations-particularly
in the investigation of money laundering of financial transfers associated with drug
trafficking.
Question 8. The United States and Italy signed a mutual assistance treaty in No
vember 1982. What is the current status of the treaty? Has it been sent to the
Senate for advice on ratification?
Answer. The Italian Mutual Legal Assistance Treaty was signed November 9,
1982. Before the treaty is transmitted to the U.S. Senate, however, the Departments
of State and Justice are attempting to answer certain questions of interpretation
concerning one of the treaty provisions. The treaty is still pending before the Italian
Senate.
Question 9. Is the Administration currently conducting negotiations on such trea-
ties on mutual assistance in criminal matters with any of the governments responsi-
ble for the major bank secrecy and money laundering areas such as the Cayman
Islands, Panama or the Bahamas? Why not?
Answer. This Administration has actively sought, through diplomatic and law en-
forcement channels, to interest key money-laundering, bank secrecy jurisdictions
such as the Cayman Islands, Panama and the Bahamas, in negotiating mutual as-
sistance treaties concerning drug and other criminal matters. We believe that nota-
ble progress is being made in this area.
Within recent months, we have held an on-going series of consultations with the
United Kingdom on a variety of extraterritorial conflicts/matters. Within that con-
text, we have held discussions which we believe will prove helpful in combatting
narcotics trafficking activities relating to the Cayman Islands, a U.K. dependency.
The United States and Panama are currently engaged in exploratory discussions
with a view toward possible conclusion of a mutual assistance treaty in criminal
matters. An interagency working group has approved a draft treaty text for review
within Panama, which was presented to the Panamanian Attorney General when
he visited Washington in March.
The United States and the Bahamas have agreed to begin negotiating a mutual
assistance treaty on criminal matters during 1984. The United States has proposed
that the negotiations begin imminently, and we are awaiting a response from the
Bahamian Government concerning a mutually agreeable date.
1190
CONSPIRACY LAWS IN PRODUCING COUNTRIES
Question 10. One of the major problems in hampering the successful prosecution
and punishment of drug traffickers in many drug producing countries such as
Thailand and Pakistan-is the absence of conspiracy statutes. Consequently drug
traffickers have to be caught virtually red-handed with the possession of illicit drugs
if they are to be convicted.
What steps did the Department of State or Justice take in 1983 to encourage
these countries to draft and enact conspiracy and other statutes that would be
useful in the conduct of illicit drug trafficking prosecutions?
Answer. We have given the Thai Government information on U.S. conspiracy
laws and have urged them to enact similar statutes. The Thai judicial system gener-
ally functions effectively and narcotics offenders usually receive stiff sentences.
Thailand is considering the enactment of an assets seizure law.
We have been urging the Pakistani Government to enact conspiracy laws and to
increase penalties for convicted narcotics traffickers.
An ASEAN Seminar on Drug Problems held in late 1983, which was funded by
the Department of State (INM), recognized the importance of anti-conspiracy laws,
but decided that ASEAN recommendations would be improper because the matter
has implications beyond narcotics control operations. Malaysia is considering the en-
actment of a comprehensive assets seizure law. Other governments in the region
may decide to follow this example.
LATIN AMERICA
Bolivia
Question 11. The FY 1985 budget calls for a continuation of substantial narcotics
assistance to the Bolivian Government ($5.5 million). What justifies the continued
high level of assistance? Do you believe that President Siles Zuazo has a greater
commitment to combat narcotics trafficking than his recent predecessors? Does he
have the backing of the Bolivian military in this effort?
Answer. We believe that we must be prepared to assist the Government of Bolivia
as narcotics control efforts there are expanded. To do anything less would belie the
seriousness of our intent. Therefore we are proceeding on the assumption that our
ongoing efforts will be successful and that we will have continuing control and
eradication programs underway in FY 1985 requiring substantial U.S. support. U.S.
funds will be allotted and disbursed only in fulfillment of the coca control project
agreements and as progress justifies.
President Siles Zuazo has shown a greater commitment to combat narcotics traf-
ficking than his recent predecessors, primarily by entering into agreements that
provide for reduction of coca production by 20,000 hectares within 5 years, augment-
ed enforcement efforts, and controls on legal coca to prevent diversion to illicit mar-
kets.
The Bolivian Air Force has agreed to provide air transport services for special in-
vestigation units. Additionally, the Bolivian Army has made weapons available to
the special police force charged with narcotics control efforts and restoration of
order in the Chapare.
Question 12. About half of the proposed funds for Bolivia are intended for crop
eradication. What is the status of the U.S. crop eradication agreement with the Bo
livian Government. What results have been achieved and what do you project as the
maximum achievable reductions during 1984? For what will these funds be used if
the crop eradication program is not fully implemented?
Answer. A coca eradication directorate has been formed which will oversee the
eradication effort. Given the absence of a security presence in the Chapare, eradica-
tion has not yet begun, although several farmers cooperatives willing to cooperate
in an eradication program have been identified. Eradication will only become possi-
ble when a security presence has been established in the Chapare. Under the project
agreement, the eradication goal for 1984 is up to 2,000 hectares, but the ability to
reach that goal will depend largely on whether the special police force soon to
deploy in the Chapare is able to establish government presence without substantial
resistance.
Should crop eradication funds not be fully utilized, the funds would be available
for reprogramming to other areas where narcotics control efforts dictate a need for
additional funds or returned to the U.S. Treasury.
1191
Columbia
Question 13. How much coca was cultivated in Colombia 4 years ago? Does the
Government of Colombia know the location of the major cultivations of marijuana
and coca?
Answer. According to the 1980 Narcotics Intelligence Estimate, an estimated 3,000
hectares were under cultivation with coca plants. The Government of Colombia is
aware of the areas where marijuana and coca are cultivated.
Question 14. The United States and Colombia have signed an extradition treaty.
Has the Government of Colombia ever honored an American request for the extradi-
tion of a Colombian citizen on drug trafficking charges?
Answer. To date, no.
Question 15. During the past 3 years, the United States has provided $24 million
in direct assistance to Colombia and multilateral banks, in which the United States
is the major contributor, have provided over $1.5 billion in low interest or no inter-
est loans. At the same time, Colombia has continued to expand marijuana and coca
cultivation and now rejects the extradition treaty. In your opinion, has Colombia
been a good investment for U.S. taxpayers?
Answer. We believe the assistance we have provided the Colombian Government
has been a good investment and has been an important factor in contributing to a
disruption of the flow of drugs from Colombia to the United States. Under the Be-
tancur administration, Colombian anti-narcotics activities have increased as reflect-
ed by the high level of drug seizures by the National Police. They have confiscated
and destroyed over 3,000 metric tons of marijuana during each of the three preced-
ing calendar years, while manually eradicating more than 1,905 hectares of canna-
bis and 4,351 hectares of coca. Cocaine seizures totaled 2,475 kilograms and 113 co-
caine processing laboratories were destroyed in 1983. On March 11 of this year, the
police raided a large complex of cocaine laboratories and seized and destroyed 11
metric tons of cocaine and cocaine base, a world record. The results in terms of
drugs seized and destroyed are impressive; they represent perhaps 20 percent of esti-
mated total production and trafficking.
Question 16. What is the status of the Colombian marijuana/coca eradication pro
gram? How effective do you expect this program to be when initiated? If the Colom-
bian Government does not follow through on its commitment to the pilot program,
what will be the consequences for U.S. narcotics control assistance?
Answer. The Colombian Government has decided to embark upon a program to
test herbicide effectiveness in eradicating coca and cannabis crops and to determine
if herbicides could be applied which do not adversely effect the environment and
health. Should the testing program prove that herbicides can be effectively and
safely used, the Colombian Government would make a policy decision on whether to
undertake a comprehensive aerial eradication program. While we are hopeful the
testing program and Colombian decision will present us with the opportunity to co-
operate in support of a full eradication program, it would be premature to consider
the possible scope or effectiveness of such a program.
INM has requested $10.3 million for Colombia for FY 1985, predicated on a favor-
able decision on a full-scale eradication program by the Government of Colombia. If
the Colombian Government does not initiate full-scale eradication, the narcotics
control program would require a much smaller budget. We would explore with the
Government of Colombia à different basis for future collaboration. It is presumed
that Colombia would continue its manual coca and cannabis eradication programs.
Continuation of U.S. assistance to the Colombian anti-narcotic law enforcement
effort would be necessary as coca will continue to be transported from Bolivia and
Peru to Colombia for conversion into cocaine no matter the effectiveness of an eradi-
cation program, if implemented.
Question 17. Have the revised United States-Colombian extradition treaty and the
new Mutual Legal Assistance Treaty helped to combat Narcotics trafficking be-
tween the two countries?
Answer. The new United States-Colombia extradition treaty is one of the most
modern extradition treaties to which the United States is a party. It contains provi-
sions which expressly encompass both trafficking and conspiracy to traffic offenses.
In recent months, the United States has requested the extradition of a number of
Colombians for narcotics trafficking. So far, the Government of Colombia has denied
two such requests and has not acted definitively upon the others. Since the denial of
those two requests, the United States and Colombia have been involved in an ongo-
ing dialogue with an effort to make the treaty more effective with regard to the
extradition of Colombian nationals to the United States. There is currently pending
before the Colombian Council of State the internal legal issue of which branch of
1192
that government is empowered to make definitive legal interpretations of the extra-
The new United States-Colombian Mutual Legal Assistance Treaty is not in force
because it has not yet been ratified by the Colombian Government. If ratified by
both governments, the United States hopes that it too will prove to be a valuable
law enforcement instrument.
Question 18. Other than the pilot program for crop eradication, what other evi-
dence do you have of the government's commitment to combat coca and marijuana
production and trafficking to the United States?
Answer. The increasing seizures and manual eradication activities of the Special
Anti-Narcotics Police (SANU) have been described in Answer 15. This unit contains
1,200 officers and men whose salaries and arms are provided from the National
Police budget. In addition to the other seizures and manual eradication of coca and
marijuana reported above, we again note that, between March 10 and March 16, the
National Police raided what was the largest cocaine processing center ever found in
any country, at sites near the Yari River in southeastern Colombia, and achieved
the largest seizure of cocaine and precursors. As noted above, Colombia's police
report the seizure and/or destruction of 14 sophisticated cocaine laboratories, the
seizure of 11 metric tons of cocaine and cocaine base, 10,800 drums of precursor
chemicals and fuel, numerous weapons, six fixed-wing aircraft and one helicopter.
Question 19. Why should we believe Colombian efforts to date to disrupt drug traf-
ficking are anything other than token ones?
Answer. We believe the Colombian Government is committed to controlling the
production and trafficking of drugs and Colombian anti-narcotic law enforcement
action is an important factor in contributing to a disruption in the flow of drugs
from Colombia to the United States. Under the Betancur Administration, Colombi-
an anti-narcotics activities have increased as reflected by the high level of drug sei-
zures—especially marijuana-by the National Police. They have confiscated and de-
stroyed over 3,000 metric tons of marijuana during each of the three preceding cal-
endar years, while manually eradicating more that 1,905 hectares of cannabis and
4,351 hectares of coca. Cocaine seizures totaled 2,475 kilograms and 113 cocaine
processing laboratories were destroyed in 1983. While the results in terms of drugs
seized and destroyed are impressive, they represent perhaps 20 percent of estimated
total production and trafficking.
Again, we note that on March 11, the Colombian police raided what was the larg-
est cocaine processing center ever found in any country.
Question 20. Does the Colombian Government intend to undertake aerial eradica-
tion in 1984 of both marijuana and coca corps? When? Are there any topographic or
technical reasons why, by 1985 or 1986, aerial eradication of drug crops in Colombia
should not be as effective as they were in Mexico starting in 1976? Is there any con-
ceivable reason why in 1985 this Committee should not hear that the Colombian
Government is undertaking full-scale aerial eradication of marijuana and coca
corps?
Answer. The Colombian Government has decided recently to embark upon a pro-
gram to test the effectiveness of herbicides in eradicating coca and cannibis crops
without adverse environmental and health effects. Subsequent to the testing pro-
gram, the Colombian Government will decide whether to undertake a comprehen-
sive aerial eradication program. While we are hopeful the testing program and Co-
lombian decision will be positive and a full eradication program will ensue, we be-
lieve it premature to speculate on when an aerial eradication program may be initi-
ated or on the possible effectiveness of that program.
Mexico
Question 21. Since 1973, the United States has contributed over $76 million to
Mexican efforts to eradicate and interdict marijuana and poppies for opium and
heroin. What have been the dividends for the United States on this sizable invest-
ment? What lessons have we learned from the Mexican experience and how is this
knowledge being applied elsewhere?
Answer. The eradication of cannibis and opium poppy cultivations reported by
Mexican authorities and subsequent reduction in marijuana and heroin production
demonstrates the dividends to the United States.
In 1975 Mexico produced an estimated 6.5 metric tons of heroin and supplied
about 87 percent of the heroin imported into the United States. The U.S.-supported
Mexican aerial eradication program reduced Mexican heroin production to an esti-
mated 1.39 metric tons in 1982, reducing the Mexican share of U.S. illicit heroin
imports to approximately 34 percent. At the high point of the eradication program,
1977, approximately 10,000 hectares (24,710 acres) of opium poppy (enough to
1193
produce about 10 metric tons heroin) were destroyed. In the period December 1981
to December 1982, the Mexican Attorney General's office (MAGO) reported spraying
15,956 opium fields totalling 943 hectares and 11,046 cannabis fields totalling 788
hectares. Total eradication during this period, including manual eradication by the
Army, is somewhat higher: 1,211 hectares of opium poppy in 22,772 fields.
The Mexican program has been undergoing a transitional phase, in which the
MAGO has been shifting its strategy to counter tactics by the traffickers, the latter
including the growing of crops in smaller, less accessible fields, often at higher alti-
tudes. Mexican authorities improved eradication efforts in 1983, reporting the de-
struction of 2,472 hectares of opium poppy, double the 1982 level, and eradicating
2,666 hectares of cannibis, three times the 1982 level. The MAGO is now testing a
new U.S. crop spraying airplane and boom, which early tests indicate can increase
the efficiency of these narcotics eradication programs.
The Mexico example shows that if a strong central government decides as a
matter of policy to allow the aerial application of herbicide and effective govern-
ment control over the countryside exists, an effective eradication program can be
conducted. In such case, U.S. assistance in the form of resources, technical aid, and
enforcement cooperation can be especially effective in reducing trafficking.
Question 22. Is there a foreseeable end to U.S. assistance to the Mexican Govern-
ment for crop eradication?
Answer. The Mexican Government indicated in the early 1980's wished to
assume full finanical responsibility for the program. However, declining world oil
prices and a heavy debt burden have created serious long-term economic problems,
producing federal budgetary constraints on Mexico. Under these circumstances,
Mexico will continue to require U.S. assistance for the foreseeable future to carry on
an effective antinarcotics program.
Peru
Question 23. A key coca producing area is the Upper Huallaga Valley (UHV) lo-
cated east of the Andes in the “high sierra" area of central Peru. The Peruvian
Government has started a coca control program and, with AID assistance, a rural
development program in the Valley.
(A) What is the status of this effort? (B) Has it shown any results to date? (C) it
has been reported that the Government experienced unforeseen problems in start-
ing up the eradication program. What were these problems and how has this affect-
ed the program?
Answer. During 1983 the coca control effort resulted in the eradication of 703 hec-
tares of illicit coca in the UHV. At the same time AID's development project is pro-
viding technical assistance and agricultural credit to farmers who participate in the
eradication effort. The AID project is designed to provide extension services and ag-
ricultural credit to farmers who eradicate coca, and to help promote crop substitu-
tion.
Initial startup difficulties resulted from a number of factors, including logistics
and coordination problems resulting from the division of effort among several differ-
ent Peruvian Government entities. Peru's economic problems, compounded by the
El Nino disasters, also diverted government attention and resources away from
other priorities, including narcotics.
With recent personnel changes and new steps to coordinate activities in the areas
where both projects are focusing their efforts, the increased availability of crop sub-
stitution assistance and extension services should provide more incentive to farmers
to eliminate coca cultivations this year.
The Caribbean
Question 24. Jamaican growers continue to export large amounts of marijuana to
the United States (about 15 percent of total illicit imports). Why have you proposed
no narcotics assistance to Jamaica?
Answer. Both the Embassy and the Bureau for International Narcotics Matters
(INM) have had recent discussions with senior Jamaican officials on anti-narcotic
matters and have repeated the U.S. willingness to give favorable consideration to a
Government of Jamaica request for assistance on a cooperative cannabis control
program. The Jamaican Government, however, for its own political reasons, has
thus far chosen to take anti-narcotics action chiefly using its own resources.
A modest amount of U.S. assistance has been requested and provided to support
Jamaica's interdiction efforts, such as training and support of drug-sniffer dogs,
which were funded out of the INM training and Latin American regional budgets.
Future requests of this nature will be similarly funded.
34-045 0-84-76
1194
Question 25. What progress, if any, has there been in the past year in working
with the Jamaican Government to reduce the amount of Jamaican grown marijua-
na entering the United States?
Answer. The Jamaican Government has recently stepped up its campaign against
the marijuana trade, and has intensified manual eradication efforts to destroy can-
nabis cultivation and enforcement efforts against trafficking by dynamiting illegal
airstrips. Jamaican authorities reported that in 1983, fields with the potential to
produce 298.4 MT of marijuana were manually eradicated, 35.4 MT of stockpiled
marijuana were confiscated, and 11.36 metric tons were seized. While we are encour-
aged by these efforts against production and trafficking, it remains to be seen
whether the Jamaican Government will develop a systematic, islandwide program
for the eradication of cannabis cultivation.
Question 26. Considering the importance of the Caribbean as a transit area for
illicit narcotics entering the United States, why does your budget provide less than
$900,000 in assistance to these island countries?
Answer. Our Latin American strategy should be considered within the context of
the role played by the Department of State in the Federal Strategy for Prevention
of Drug Abuse and Drug Trafficking. The Federal Strategy for controlling the flow
of illicit substances into our country gives emphasis to crop control and interdiction
in source countries, interdiction in transit countries and at our borders, and related
enforcement activities, including financial and tax investigations, seizures of assets,
extradition and mutual legal assistance.
The Departments of State, Justice, Transportation and Treasury are part of a net-
work of agencies tasked by that strategy to reduce the availability of drugs flowing
into our country. These agencies agree that preventing cultivation, suppressing lab-
oratories, and destroying illicit narcotics at their sources will ultimately prove to be
the most effective means of reducing availability. While interdiction is an important
component in the U.S. strategies for the Caribbean, it is an expensive and resource
intensive effort which, even with modern technology, has stopped only a small per-
centage of the drug flow.
We have developed a total Caribbean strategy, not an island by island strategy,
that takes into account such variables as the multiplicity of trafficking routes and
the flexibility of trafficking operations, which we must match. Rather than building
up the forces of a single island nation, a more effective strategy is for U.S. forces to
cooperate with as many governments along the major trade routes as possible,
giving appropriate assistance where warranted. Thus, our strategy for the Caribbe-
an takes into account and complements the interdiction activities of the Drug En-
forcement Administration, the U.S. Customs, Coast Guard, and military, which have
primary responsibility for narcotics enforcement in that area.
The U.S. strategy to interdict the flow of drugs through the Bahamas is based on
a joint operation of U.S. law enforcement agencies working with the Bahamian Gov-
ernment, rather than on the provision of a substantial commodity program to the
GOCB. The National Narcotics Border Interdiction System (NNBIS), DEA, Customs,
and U.S. Coast Guard, assisted by U.S. Air Force helicopters work together under
Operation BAT to interdict drugs being transshipped through the Bahamas to the
United States. The DEA estimates that 10 to 35 percent of the marijuana and 10
percent of the cocaine entering the United States are transported through the Baha-
mas. This suggests that the joint drug interdiction effort has been somewhat suc-
cessful and that the importance of the islands as a transit point has diminished. In
addition, our Embassy in Nassau continues to work closely with and receive the co-
operation of the Bahamian government on anti-narcotics matters.
INM is prepared to provide commodity support to enhance the Bahamian Govern-
ment's capability to work with U.S. agencies in the anti-narcotic effort. Our support,
consisting of communications equipment to establish an island-wide Bahamian
police radio system, plus other equipment and funds to assist Bahamian law en-
forcement agency field operations was included as part of a larger U.S. support
package conveyed in a January 20 letter from Admiral Murphy to Foreign Minister
Adderley (the letter included the offer of a radar balloon). The GOCB has the letter
under advisement; when it agrees to the proposed support, we will begin the process
to provide the equipment.
Question. 27. The INM Bureau is supposed to oversee diplomatic initiatives to
combat international narcotics trafficking? What has the Bureau done in the past
year to address this serious problem of off-shore banking in the Caribbean which is
used to launder and shelter narco-dollars?
Answer. As stated in the Federal Strategy, Department testimony and other docu-
ments, responsibility for the off-shore banking aspect of the international narcotics
control program is assigned to the Office of the Legal Advisor and the Department
1195
of Justice. INM consults with the responsible attorneys in both Departments, re-
ceives regular reports on their activities, and advises them of developments in nar-
cotics trafficking.
SOUTHEAST ASIA
Burma
Question 28. Most of the U.S. assistance to Burma is for the purchase, mainte-
nance, and replacement of fixed-wing aircraft and helicopters used in eradicating
and interdicting poppy crops and refined products. Is this the most effective way for
the Burmese government to combat the situation? If so, do you consider the present
level of assistance adequate? It has been estimated by some observers that it would
take $25 million-$30 million worth of aircraft to have a major impact on opium
production. Do you agree?
Answer. Most of the opium growing and refining activities in Burma take place in
regions which are not under the control of the Burmese Government. Various insur-
gent groups control or influence these regions, including ideological revolutionaries
like the Burma Communist Party, ethnic separatists such as the Shan, Kachin, and
Lahu, and profit-oriented warlord smugglers such as the Shan United Army. These
groups have sizable, well-armed forces, and most are involved in opium sales, traf-
ficking, or refining of heroin to finance their movements. Military and police action
is the most effective way for the Burmese Government to combat the narcotics pro-
duction and trafficking activities of these insurgent groups.
The central strategy of the International Narcotics Control program in Burma is
to help the Burmese increase the mobility and ability of their police and military
enforcement agencies to act in narcotic suppression operations. The present level of
anti-narcotics assistance provides the Burmese Government with aircraft and com-
munications equipment for use in these efforts. We believe that the current level of
support is adequate in relation to the overall narcotics control budget. While addi-
tional equipment, such as large transport aircraft, might increase the Burmese abil-
ity to combat the narcotics activities of the insurgents, such equipment would be
justified for reasons beyond purely narcotics objectives.
Question 29. How much of a threat is the Burmese Communist Party to the stabil-
ity of the central government? Would you characterize the BCP as first and fore-
most a political force and secondarily a narcotics organization or vice versa?
Answer. Although it constitutes a serious drain on Burma's resources and retards
economic development, the BCP does not threaten the Burmese Government's sur-
vival or control in the Burmese heartland. The BCP started as a political force, but
it has increasingly turned to narcotics to finance its activities. It has become the
largest drug trafficking organization in the Golden Triangle, and is continuing its
efforts to expand its share of the narcotics trade.
Thailand
Question 30. What is the status of the Shan United Army? Is it still a viable nar-
cotics producing and trafficking organization? Is the Thai Government continuing to
pressure the SUA? In what ways?
Answer. The Shan United Army (SUA) operational commands have been pushed
out of Thailand by the Royal Thai Army, and are now operating inside Burma. The
SUA's influence and source of trade and supplies have been affected by repeated
Thai Army attacks, but it remains a viable narcotics producing and trafficking orga-
nization with refineries and networks in the producing areas within Burma. The
SUA's command and operational bases are essentially a Burmese problem now, al-
though the Thai Army continues to conduct operations against the SUA when SUA
forces venture into Thailand. We understand that a 300-man Burmese Government
team was compelled to halt its eradication activities in Tangyan Township, northern
Shan State when the SUA trafficking organization threatened retaliation.
Question 31. Thailand has a relatively large addict population. What is the scope
of the problem? What is the Thai Government doing to address this problem?
Answer. The RTG estimates the number of drug addicts in Thailand at from
300,000 to 500,000, but it is the first to say that this estimate is not based on surveys
or statistical samplings. There are over 65 approved treatment and/or rehabilitation
programs in Thailand, operated by the Ministry of Public Health, Ministry of De-
fense, Ministry of Interior, Bangkok Metropolitan Health Department (BMHD), sev-
eral Buddhist monasteries, and at least one private therapeutic community operated
by a Catholic group in Rajburi. In 1982 the BMHD opened the last three of 17 nar-
cotics outpatient detoxification clinics established under the USG's treatment and
1196
rehabilitation project. It is estimated that during 1982 there were more than 45,000
treatment admissions.
The Corrections Department has six prisons dealing with drug offenders, most of
whom are addicts. The facilities hold some 5,000 drug offenders, and an estimated
8,000 to 10,000 are incarcerated at some time during the year.
Thailand is moving toward a more active drug abuse prevention effort. Various
programs under the Public Health Ministry, Education Ministry, BMHD, and the
Office of the Narcotics Control Board are being expanded. BMHD is developing a
more aggressive outreach and early intervention program. We have provided some
assistance in these efforts, and the RTG has also asked UNFDAC to provide some
funding.
Question 32. Marijuana appears to have become an increasingly important com-
mercial crop in Thailand. Why? What is the Thai government doing about it?
Answer. High marijuana prices offer a get-rich-quick opportunity to a farmer will-
ing to take the risks. Farmers are encouraged by an increasingly sophisticated and
professional illicit market structure which provides seeds, fertilizers, guaranteed
prices, credit and protection to growers. Most Thai cannabis is cultivated in the
Northeastern provinces, by far the poorest region of Thailand, where one-third of
the population lives, and an area of insurgency for several decades. Marijuana has
become a major farm income factor in 12 of the Northeast provinces and production
continues to expand to meet market demands.
Massive amounts of government aid have been poured into the region, an exten-
sive road system has been constructed, and important new crops have been intro
duced. The results have been positive, and the central government now seems to be
decisively winning the insurgents over to the government's side. Some Thai officials
are beginning to recognize the dimension of the marijuana problem and to seek pos-
sible solutions. Between 125 and 200 hectares of cannabis were eradicated in 1983
(which would have yielded 300-400 metric tons of cannabis) but the enforcement
agencies are hampered by inadequate allocation of resources and manpower.
Question 33. The hilltribe populations in Thailand have produced opium for their
own cultural and religious use for many years. The Thai Government had indicated
that if necessary it would eradicate hilltribe opium crops by force. Has this taken
place? If not, why? How much of this opium production moves to the commercial
market?
Answer. There was some eradication earlier this year in civilian/police/military
command areas which have received development assistance. The Royal Thai Army
eradicated over 300 acres of opium poppy in Nan Province in January and February
1984. But, the international community continues to press the RTG to enforce its
anti-opium poppy cultivation law in areas which have received development assist-
Commercial opium production appears to be at a minimum in Thailand, although
accurate data are unavailable. Information confirms that some Thai opium reaches
the heroin refineries. The number of hilltribe addicts in north Thailand is currently
estimated at 35,000 about seven percent of the hilltribe population. The average
daily consumption per addict is estimated to be 3.2 grams, placing the annual opium
consumption of hilltribe addicts alone at 32 to 40 tons. Recent annual production
has been in the range of 35-55 metric tons.
ance.
SOUTHWEST ASIA
Pakistan
Committee comment.-Pakistan has evolved from being a primary source of opium
for the heroin entering the U.S. market to its current status of being a producer of
opium and refiner of heroin for United States and European markets. Due in large
part to unfavorable weather conditions, opium production has declined from a high
of 800 metric tons in 1979 to a 1983 estimate of 45-60 metric tons. However, the
amount of opium flowing into Pakistan from Afghanistan continues to increase. The
estimated production for 1983 is 400-575 metric tons of opium. The Pakistani Gov-
ernment has extended its ban on opium production into previously uncontrolled or
marginally controlled areas, especially in the Northwest Frontier Province-a so-
called “merged” area. The government has pledged to enforce its ban on opium cul-
tivation in merged areas where developmental assistance is provided. Pakistan has
also accepted restrictive poppy clauses which commit the government to keep
Question 34. What progress has the Government of Pakistan made this past year
in reducing opium production and refining in the Northwest Frontier Province?
What are the impediments facing the government? Should U.S. assistance to Paki-
1197
stan be reduced or eliminated if it becomes clear that sufficient efforts are not being
made to combat the problem? What do you consider an unacceptable effort?
Answer. The decline in Pakistan opium production from an estimated 800 MT in
1979 to an estimated 45-60 MT in 1983 is well documented and generally accepted.
While unfavorable weather may have contributed in some degree to this decline,
low prices for opium and enforcement measures by the Government of Pakistan
were more important factors. Climatic conditions in the opium growing regions of
Pakistan differ little from the contiguous growing regions of Afghanistan, where
sharp increases in production are believed to be taking place. Weather can affect
opium production from year to year, but it cannot be wholly responsible for the long
term decline that has occurred in Pakistan over the past 5 years. Farmers' decisions
to plant opium or other crops are heavily influenced by opium prices. In 1979, when
prices were over $200 per kilo, the incentive to plant was much greater than in
1981, when prices had dropped to about $30 per kilo. In late 1983, prices began
showing signs of rebounding, and are now reported to be over $100 per kilo. To the
extent that production remains low, and continues to decline, Pakistani enforce-
ment and the cooperative efforts of the USAID and INM development projects must
be considered key factors in this decline.
Late in 1983, 438 acres of newly planted opium poppy were plowed up on Mala-
kand Agency of the NWFP-site of INM's crop substitution/development project.
Some of the destruction activity was witnessed by U.S. Government personnel.
Recent reports indicate that destruction of poppies that were missed in the fall is
continuing this spring.
The acreage destroyed is significant in terms of the total poppy acreage remaining
in Pakistan. The situation with respect to heroin laboratories is more difficult to
quantify, because of the clandestine nature of this type of activity. During 1983, 14
heroin labs were reported "surrendered” to officials of the Khyber Agency of the
NWFP. However, the paraphernalia delivered consisted of pots, pans and other
equipment easily obtained on the open market and thus easily replaced. A simple
laboratory to produce low-grade heroin can be set up in any location in hours, and
be just as quickly dismantled and moved. There are indications that many lab oper-
ators have shifted to locations across the Afghan border, where operations can con-
tinue unmolested by NWFP enforcement personnel. Tribesmen along the Frontier
are well armed and cantankerous, and in the past have forcefully resisted govern-
ment efforts to shut down heroin laboratories. Under these circumstances, the atti-
tudes and actions of tribal and religious leaders become as important as enforce-
ment. Numerous reports during 1983 indicate that NWFP officials had some success
in enlisting the support of these leaders.
If heroin production in Pakistan is to be stopped, the forces must come from
within the society itself, whether they be based on Islamic injunctions or the simple
self interest of keeping Pakistan's youth from the deadly addiction of heroin. The
shift in Pakistani attitudes that we have witnessed over the past 18 months to 2
years owes much to the high level representations that have been carried out with
Pakistani officials by Congressional delegations, ranking State and Justice Depart-
ment officials, other official U.S. visitors.
The continuous encouragement of the Ambassador, DEA, INM, and other U.S.
Mission personnel in Pakistan has also had its effect. That said, we are still not sat-
isfied with enforcement against heroin processors and traffickers in the NWFP. We
expect to see arrests and successful prosecutions of major violators in 1984, and sen-
tences commensurate with the severity of the violations. We have not been in-
formed of any prosecutions under the amended Dangerous Drug Act, which provides
sentences of 2 years to life for narcotics trafficking, and will be greatly disappointed
if no such prosecutions occur in 1984.
Whether or not this would call for a reduction or elimination of U.S. assistance to
Pakistan is an open question. Pakistani weakness in enforcement against major
heroin producers and traffickers would have to be weighed against their relatively
good performance in reducing opium production. Since part of the Pakistani resolve
to eliminate narcotics production and trafficking springs from U.S. urging, the ef-
fects of which depend substantially on the overall climate of our bilateral relations,
any reductions in U.S. assistance could in fact have a negative effect on U.S. narcot-
ics reduction goals in Pakistan.
Question 35. More than 2 million Afghan refugees are now in Pakistan. How has
this contributed to the government's difficulties in combatting opium production
and trafficking?
Answer. The latest figures (December 1983) indicate there are now 3 million
Afghan refugees in Pakistan, heavily concentrated in the Northwest Frontier Prov-
ince. Most of the Afghans have no land to work in Pakistan, and thus cannot be
1198
opium producers, but many have become active in smuggling opium into Pakistan
from Afghanistan, and in the heroin trade between the NWFP and India. Most are
unemployed, in a land where unemployment and underemployment were high
before the refugees arrived, and depend on support from the Government of Paki-
stan and international donations. They turn to smuggling and narcotics trafficking
as an easy way to make large amounts of quick cash, and are willing to undertake
considerable risks.
While many of the refugees are tribally related to the Pakistanis of the NWFP,
some are not. Their movements across the rugged border areas and within the refu-
gee camps are nearly impossible for the Pakistani authorities to control or even ob-
serve. The religious and tribal controls that function within Pakistani society in the
NWFP do not always work with the Afghans. The refugees and their transborder
activities are probably an important factor in the continued high level of heroin pro-
duction and trafficking from the NWFP. However, the policy of refugee organiza-
tions, and of the freedom fighter groups, is to prohibit trade in drugs.
Question 36. An integrated rural development project funded by the United States
is nearing completion in the Malakand agency. Has the project succeeded in getting
farmers to adopt alternative crops and income sources? What kinds of crops are con-
sidered viable alternatives to cultivating poppies?
Answer. The rural development project in the Malakand agency has had some
success in persuading farmers to adopt alternative crops. In addition to the infra-
structure development underway, the rural "outreach” component of the project has
distributed thousands of bags of improved seeds and fertilizers, and taught farmers
to use them properly. Improved wheat and rice varieties are increasing yields; the
introduction of peanuts as an oil and food source has been moderately successful.
The project has recently distributed 2,000 top grade, U.S.-origin fruit trees and 1,500
rootstocks to farmers in the Malakand for future propagation and grafting. Fruit
groves, once established, provide a readily marketable product and income source,
and their permanent nature discourages diversions of land for popply cultivation.
Farmers think twice before uprooting valuable trees that have taken several years
to nurture to full production.
No crop substitution programs, however, can fully replace income derived from
opium cultivation, and neither the United States nor the Government of Pakistan
expects them to do so. With opium prices at their lowest levels, some high value
fruit and vegetable crops such as tomatoes or onions, intensely cultivated, can be
roughly competitive with poppy. But none of the major field crops, such as wheat,
rice, or sugar cane can compete with opium even at its lowest price levels. When
opium prices rise, the disparity becomes even greater.
No traveler to the NWFP can come away without a lasting impression of the pov-
erty of the land, and the pressures that population has placed on it. Tiny terraces
are built on mountainsides so steep that the terraces are as high as they are wide.
Barren, exhausted soil is visible on all sides, and overgrazing has stripped many
mountainsides of their vegetation, leading to near total erosion. The temptation to
plant high value opium on the scarce productive land that remains will always be
present. The only answer can be continuous and unrelenting enforcement of the
opium ban by Pakistan's authorities, a sustained effort to create employment oppor-
tunities off the land, and even out-migration of part of the NWFP population, which
is already too large to be supported by the available agricultural base. The influx of
Afghan refugees has exacerbated existing population pressures, making the NWFP
even more dependent on outside assistance from the rest of Pakistan and interna-
tional sources.
Question 37. The sprouting of heroin laboratories in Pakistan-some experts esti-
mate that there are 30 or 40 or 50 heroin laboratories in Pakistan-has been a
major problem in recent years. It is one reason why over 50 percent of the heroin on
American streets originates in Southwest Asia.
The INM request for enforcement assistance to Pakistan in FY 1985 drops to
$750,000 from $800,000 in 1984. How is this request supposed to address the problem
of heroin laboratories in Pakistan?
Answer. INM's budget request for enforcement assistance to Pakistan is deter-
mined by balancing the stated needs of Pakistan's enforcement agencies against the
perceptions of our own in-country U.S. personnel of how those needs can best be
addressed. Expenditures in such categories as training, U.S. personnel support, and
provision of vehicles, communications equipment and other commodities therefore
vary from year to year. Expenditures in each category are based on an analysis of
the capability of Pakistan's enforcement agencies to absorb and usefully employ the
U.S. assistance.
1199
While the total enforcement assistance request for FY 1985 drops by $50,000 as
compared with FY 1984, it is more instructive to look at where this money is being
employed than at the total. For example, more money is being devoted to POL,
spare parts and maintenance to keep vehicles already provided in an operational
status. The FY 1984 budget included $135,000 for the U.S. advisor who is supervis-
ing the communications installation and training program. For FY 1985, costs for
this advisor are programmed under the Southwest Asia Regional project. The
amount earmarked for local Pakistani technicians to keep the communications pro-
gram going has been doubled.
The law enforcement program supports Pakistani narcotics interdiction efforts,
not only in the Northwest Frontier Province, but countrywide. Joint narcotics task
force units and Customs drug cells are funded in trafficking centers such as Karachi
and Lahore. The heroin laboratories in the NWFP, the source of most of the heroin,
are an important part of this total effort. However, the problems to be faced in
eliminating them cannot all be solved by increasing funding from year to year. The
most fundamental obstacle to elimination of heroin labs is the continued absence of
full government control in the Frontier regions.
Encouraging Pakistani officials at both the national and provincial levels to assert
effective control over these areas is a continuing U.S. objective, shared by high level
executive branch visitors to Pakistan, Congressional delegations, and U.S. Mission
personnel in Pakistan. We believe that some progress has been made over the past
year in achieving this objective. Statements of officials such as the Governor of the
NWFP have become strong and specific regarding the Government's goals of elimi-
nating narcotics production and trafficking.
The National Government has recently extended narcotics and customs laws pre-
viously not applied to the tribal areas of the NWFP, and increased penalties for con-
victed narcotics traffickers up to a maximum of life in prison. We are keenly aware
that statements and extension of laws in themselves are not an effective answer,
and will be closely watching the situation in the NWFP during 1984 to see if these
changes in attitudes and legislation are translated into action. We will also be alert
for opportunities to fund the demonstrated needs of Pakistani law enforcement
agencies engaged in locating heroin laboratories and arresting their owners and op-
erators.
Question 38. What evidence is there that the Government of Pakistan took serious
and lasting steps to close (and not just temporarily disrupt) heroin laboratories in
1983?
Answer. During 1983, it was reported that 14 heroin laboratories were "surren-
dered” to the government. The equipment thus surrendered consisted of pots, pans
and other common utensils adapted for “lab” use, demonstrating again the simplici-
ty of establishing and outfitting a functioning heroin lab. Such simple operations
can quickly and easily be moved, and we have received numerous reports that lab
operators have set up across the Afghanistan border in response to pressures from
enforcement authorities, and tribal and religious leaders in the NWFP. We view the
"destruction” or “surrender" of heroin labs to be less significant than the arrest
and prosecution of their operators, owners or financiers. During 1983, we were not
encouraged by the number of prosecutions. Pakistani authorities at all levels have
been repeatedly advised of this U.S. concern, and our expectation is that this situa-
tion will change during 1984. Arrests, prosecutions and sentences will be a key
measure of Pakistani performance during 1984.
Question 39. Although dollar figures do not necessarily present the whole story,
they do provide a rough guide to general levels of U.S. drug control effort in drug
countries. Recent estimates indicate that Southwest Asia provides just over 50 per-
cent of the heroin in the United States, Mexico about 35 percent, and Southeast
Asia the rest. Yet Pakistan is scheduled to receive only $2 million in 1985 compared
to about $9 million for Mexico, $5 million for Burma, and $3 million for Thailand.
At first glance, it appears that Pakistan is due to receive a disproportionately small
share of American aid sent to heroin source countries. Why?
Answer. The narcotics control programs currently underway in Pakistan differ
significantly from programs in such countries as Burma and Mexico, where expen-
sive aircraft support, and airborne crop spraying programs, respectively, are funded.
Thailand's program resembles Pakistan's in the nature and extent of law enforce-
ment and crop control assistance. The amount of money programmed for Thailand
includes funds to support para-military and military anti-narcotics units deployed to
prevent narcotics trafficking in Thailand and across Thailand's land borders.
Funds for this purpose are not required for Pakistan, since the type of warlord
trafficking groups which operate along the Thai-Burma border do not exist in Paki-
1200
stan. Also, the conditions existing in each of the countries which receive INC assist-
ance differ, dictating differing programs and resource levels for each country.
The Administration attempts, through the program development and implementa-
tion process, to address these problems as the opportunities in the individual coun-
tries allow and as country needs dictate, resulting in changing programs and fund-
ing levels from year to year.
The FY 1985 budget request does not include funds for the Malakand Agency De-
velopment Project, the bulk of which was funded in FY 1982-84 (but some FY 1985
funds may be needed to complete this project). A major USAID undertaking, the
Gadoon-Amazai Area Development Project, for which $20 million have been allocat-
ed over a 5-year period starting in FY 1983, is not reflected in the INM budget. As
stated elsewhere, assistance from other countries has been increasing.
Turkey
Question 40. The FY 1985 request for Turkey provides primarily for enforcement
assistance. How do you rate the effectiveness of Turkish law enforcement in combat-
ting narcotics tarfficking? Specifically, how will the FY 1985 request improve Tur-
key's performance?
Answer. The United States has provided $2.2 million to the Turkish National
Police (TNP), and $1.3 million to the Jandarma (rural police) since 1980, primarily
for vehicles, communications and laboratory equipment purchases. While it is too
early to fully evaluate the results of this assistance program, the TNP has an excel-
lent enforcement record. The Jandarma is becoming more fully engaged in narcotics
enforcement in the border and coastal areas, and the remote eastern parts of the
country.
Seizures of heroin are of course not the only measure of enforcement effective-
ness, but they did rise from 69 kilos in 1982 to 295.6 kilos in 1983. While much of
this increase can no doubt be attributed to the efforts of the Turkish police forces
themselves, the transportation and communications capability provided by the
United States must also have a significant role. Paradoxically, as Turkish enforce-
ment against traffickers across Turkey becomes more effective, we may see a de-
crease in seizures, as traffickers shift to other, less risky routes. We are conscious of
the fact that a point will be reached at which the provision of additional equipment
may not produce much marginal benefit.
We regularly evaluate the Turkish program and monitor the use of U.S. provided
equipment, and there are still significant needs within the Turkish enforcement
sector that can be addressed by continued U.S. assistance. The TNP, which has re-
cently expanded its narcotics units to all 67 provinces, has a 5-year plan to increase
the total number of its narcotics personnel to 1,330 police by the end of 1986, which
would nearly double their present strength. With additional personnel come addi-
tional equipment demands, and we believe the U.S. assistance program is helping to
meet these.
Question 41. For many years, Turkey has been an opium smuggling route from
Asia to Europe. That being the case, what is the level of cooperation between
Turkey and Pakistan in attempting to combat the mutual problem? What has the
U.S. Government done in the past year to facilitate such cooperation?
Answer. Turkey cooperates fully with Interpol to provide the international narcot-
ics enforcement community with intelligence and acts on intelligence from a variety
of sources, including DEA. The opium, morphine base and heroin that moves across
Turkey comes from a variety of sources, but nearly all of it enters across land bor-
ders with Syria, Iraq and Iran, in Eastern Turkey. Some of this opium and its de-
rivatives originate in Pakistan, but it is also as likely to have come from Afghani-
stan or Iran. Whatever its source, the problem is the same for Turkish enforcement
authorities.
In addition to cooperation in intelligence, Turkish officials regularly exchange
views with their Pakistani counterparts in such fora as the Commission on Narcot-
ics Drugs. Both were represented at the recent CND meeting in Vienna. Officials
from both countries attended an October 1983 meeting in Athens of the Sub-Com-
mission on Illicit Drug Traffic in the Near and Middle East. The United States en-
courages cooperation between Turkey and Pakistan just as it does among all friend-
ly governments affected by the production and trafficking of narcotics.
INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT
Question 42. Would you please explain to the Committee the process by which the
International Narcotics Control Strategy Report was prepared? Did you experience
any problems of special concern in preparing the report?
1201
Answer. An agreement was reached at interdepartmental meetings involving the
Department's regional bureaus and relevant offices, USAID, DEA, and others that
INM would take the lead in developing the INCSR. The first step was to elicit infor-
mation from the various affected Embassies, a number grown considerably larger
than those which normally report narcotics matters as a function of the reporting
requirements of Public Law 98-164. Posts were given (a) the text of the amendment,
(b) an explanation of the amendment, as understood by the Department, and (c)
guidance on preparing reports. This set of three cables was reviewed/approved by
the major participating bureaus and agencies.
Reporting cables from posts were reviewed by INM, regional bureaus, DEA, AID,
and others for guidance in preparing the various chapters. For example, all data
were reviewed by the National Narcotics Intelligence Consumers Committee's sub-
committee on production, which includes DEA, INM, and CIA. As noted in the
INCSR, the data are a mixture of host government, embassy and subcommittee esti-
mates. Where needed, gaps in reporting and problems of competing estimates were
resolved by direct communication among subcommittee members, who met in both
formal and informal review sessions. Similarly, various staffs communicated in
formal and informal review concerning the content and sufficiency of narrative re-
ports. The majority of reports were reviewed in final draft with Embassies.
Copies of the final draft report were sent for review and approval to DEA,
USAID, the regional bureaus (AF, ARA, EAP, EUR, NEA) and to other offices and
bureaus (H, L, M and T), as well as to Treasury, Defense, and Health and Human
Services.
Several problems emerged in preparing the report:
(1) The time frame was too narrow to permit the kind of planning and assessment
which should precede the various kinds of analysis and reporting required. A bill
adopted November 10 required a major new report to be developed by February 1,
including information on countries not normally in the narcotics reporting loop.
Moreover, the reporting period fell over the Christmas holidays, a particular obsta-
cle to inter-governmental communication in Latin America.
(2) The definitions in Public Law 98-164 required the Department to scan initially
information from 46 countries which might meet the reporting requirement; when
the reports were analyzed, it was found that 27 countries met the definitions. Still,
there was need to develop information on countries which are not major sources of
narcotics for the United States, a data build-up that further compounded the report-
ing task.
(3) Much of the information sought on the impact of economic and military assist-
ance is sensitive, in that the information relates to how the bilateral relationship is
pursued, pressure applied, etc., necessitating the preparation of a further, classified
report (subsequently submitted).
(4) Much of the activity related to narcotics control cannot be quantified in terms
of hectares or metric tons, e.g., the need to establish a police presence in the Cha-
pare region of Bolivia as a prerequisite to any efforts to eradicate coca bushes.
(5) The definition of "maximum achievable reduction” is problematic (see below).
(6) Much of the data concerning narcotics production, refining, trafficking and
consumption is neither as plentiful nor as accurate as the assessments required by
the law.
Question 43. The requirements for this report make it very clear that it is to in-
clude for each country that is defined as a major illicit drug producing country a
description of the activities of the United States in international financial institu-
tions to combat the entry of illicit drugs into the United States. The report only
contains a table on assistance from multilateral banks to major illicit drug produc-
ing countries but nothing more. Why was this required information on U.S. efforts
in the IFI's not included?
Answer. This response was developed in two parts. First, information on the rela-
tionship, if any, between funding by Multilateral Development Banks (MDBs) and
other financial institutions and narcotics control projects was initially included in
the economic impact sections of each country report; this information subsequently
was transferred to the classified report along with other economic impact informa-
tion, for the reasons cited above. Second, an overview statement was not developed
in sufficient time to be included it the INCSR, but was provided by Treasury for a
hearing before House Foreign Affairs Committee and is part of that hearing record
on INCSR. A copy of the statement is attached to this response.
Question 44. The report is also required to include a determination of the maxi-
mum reductions in illicit drug production which are achievable during the next
fiscal year. However, the term “planned or projected reductions” has been used in
1202
the report to describe how well a given country might perform in achieving future
reductions.
Why was the Congressional required language not used in the report?
Answer. Although the statute does not instruct as to the format of the report, nor
require that the INCSR use the precise language of the statute, the INCSR closely
adheres to the statute. The various sections of the INCSR follow the 11 information
requests of the statute, in sequence, and the actual language of the statute is used
throughout the INCSR, except that the term "maximum reduction achievable” does
not appear.
Subsection (eX4) asks the Department to provide estimates of the maximum reduc-
tions in narcotics production achievable for each country meeting the definition of a
major producing country. The statute defines this maximum" as being determined
by “planned reductions" and other information. The estimates used in the INCSR
are based upon proposed government actions, also taking into account “other infor-
mation” in subsection (e)2) and (3), and the information required of such countries
by subsection (f)(1-4), including the nature of the illicit drug production problem,
and the climatic, geographic, political, economic and social factors that affect both
illicit drug production and crop control.
The reporting instructions sent to posts in fact used the term “maximum achieva-
ble reduction" and the information provided in the INCSR does, in our opinion,
meet the two specific criteria in (e)(4) which define that term. When the final draft
was prepared, reconsideration of all possible interpretations of the term led to a con-
clusion that it could be misinterpreted to mean that the United States Government
concurred that the given estimate was all that a country could do. This would be a
false signal, and counter to the continuing U.S. expression to other governments
that all source countries can and must do more until this problem is brought under
control.
Moreover, there is a compelling aspect for reporting "planned reductions.” If
there were rival estimates, e.g., the source country government and the Depart-
ment, which estimate would be controlling in determining whether a government
was taking adequate steps to cooperate with the United States?
While the temptation would always be to use the higher estimate, this could pose
a problem if the Congress sought to suspend aid to a country based upon its failure
to meet a numerical standard which its government believed it could not meet in
the first place. The Department has assumed that some consideration was given to
this possibility when the Congress chose to include "planned reductions” as its oper-
ative criterion. It should be noted that in some instances, e.g., Costa Rica, the De-
partment believes the estimate is too low, or, in others like Jamaica, that the re-
sponse is inadequate, and these caveats are stated in the INCSR.
In sum, the Department chose to use the defining terms rather than the caption
term, in a good faith effort to comply with all of the provisions of the amendment.
Question 45. For some countries covered in the report, planned or projected reduc-
tions are described in terms of hectarage destroyed. In other parts of the report,
metric tonnage seized is used as the measure of success. For some countries, no pro-
jections of reductions are made. How do you account for these inconsistencies in re-
porting
Answer. As noted in the INCSR, every effort was made to provide the Congress
with the "best available” estimate. The instruction to posts and the request of the
NNICC subcommittee was to express production and reduction in terms of both hec-
tarage under cultivation, and the equivalent of this production expressed in metric
tons. Where possible, both figures were supplied. This was done to give Members the
fullest possible reading on production, which requires that the reader know and
have an appreciation of different yield factors. For example, the common yardstick
worldwide is that one hectare of cannabis produces 1 metric ton of marihuana, but,
in Colombia, the estimate is 1.25 MT on average. Similarly, Bolivian and Peruvian
coca bushes have higher yields than Colombian, and Bolivian yields per hectare are
higher than in Peru. The problem of estimating comparable yields also entered into
estimates for Pakistan: while some analysts assume that 1 hectare of opium poppy
yields 8 kilograms of opium gum, yield factors range widely throughout the North-
west Frontier Province, with some data indicating a yield as high as 24 kilograms.
Another reason for reporting both hectarage and yields is to enable readers to
compare amounts seized, reported in metric tons, to amounts produced. Seizures are
an important measure of success, but, throughout the report, are subordinate to the
production and reduction figures.
It should also be noted that some countries, like Pakistan, rely heavily on the gov-
ernment's cultivation ban, and it is therefore necessary to provide estimates for hec-
tarage taken out of cultivation, and to attempt, where possible, to express this
1203
factor in terms of both hectarage and metric tons. Again, the yield factor was a
problem, especially in Pakistan, but also in countries where data bases are minimal
or non-existent.
As noted in the INCSR, uniform data are not available from all source countries,
and, in some instances, only one of the two key measures could be supplied.
In some countries, however, no estimates could be provided for varying reasons.
Mexico's strategy has been to attempt to eliminate all opium poppy and cannabis
cultivation spotted. This strategy makes it somewhat difficult to make year-to-year
projections. It could be inferred from the report that the Mexican objective in 1984,
assuming production equal to 1983, would be to eradicate 4,108 hectares of opium
poppy; while it might again eradicate 2,472 hectares, which doubled the 1982 effort,
the goal nevertheless would remain eradication of all cultivation. Jamaica presented
a different problem: the Government declined to estimate production or reduction
for 1984, and there are not sufficient data at present or cultivation, seizures, stock-
piles, etc., to permit an independent estimate of how effective the GOJ eradication
and anti-trafficking efforts announced for 1984 will be.
Question 46. If reductions cannot be achieved, does this necessarily mean that the
U.S. program in that country is failing? If not, why not?
Answer. The failure to provide estimates on reduction, or, the failure to achieve
reductions which have been estimated does not mean that the U.S. assisted program
is failing. Each country presents a different case, to be independently evaluated. Not
all progress in a country can be measured in statistical terms of hectares or metric
tons.
For example, the prerequisite task in the Upper Huallaga Valley of Peru, where
eradication has begun, and the Chapare region of Bolivia, is to establish law and
order. In Bolivia, this has meant recruiting, training and equipping a special police
strike force; the current task is for that force to establish a police presence in the
Chapare and a sufficiently secure situation which will permit'crop eradication and
rural development efforts to proceed. The INCSR and other reports to Congress
have amply documented the problems encountered, including the savage killing of
policemen in both countries by persons associated with political insurgencies and/or
narcotics trafficking organizations.
Moreover, as recognized by the statute, numerous factors can affect production,
and, implicitly, efforts at reduction, including political, social, economic and even
climatic factors. The history of narcotics control shows that weather and price have
caused wide fluctuations in production levels. Our objectives include helping these
governments obtain sufficient control of production, as in Turkey, so that these
upward pressures no longer have effect. But, this requires inter alia effective control
of the growing areas-which has not been achieved in Peru, Bolivia, Colombia, Paki-
stan or Burma.
Question 47. How reliable is the data base used in the report assumptions to es-
tablish levels of production and trafficking, domestic consumption, and planned or
projected reductions?
Answer. As explained in the INCSR (page 19), an extensive effort was made,
within a compressed time frame, to provide the Congress with the "best available'
data. To do so, the NNICC production subcommittee sharply advanced the time-
frame for producing its estimates. There are several problems with the data base; as
noted in the report, there are particular problems in estimating coca leaf cultivation
and cocaine production, so much so that the subcommittee concluded it could only
affirm that coca leaf production levels in Peru and Bolivia for 1983 were at least
equal to 1982. Efforts are being made, primarily through surveys, to improve the
production data base, which will then permit more accurate assessments of yield
and consequently of eradication/reduction.
Production data are invariably better from INM program countries, like Mexico,
Pakistan, etc., than from countries like Morocco or Argentina. Obviously, data from
Afghanistan, Syria and Lebanon, or even Laos, are suspect because the estimates
cannot be independently verified.
In all cases, production data are more reliable than data on domestic consump-
tion; few countries have the requisite epidemiological data for making the latter es-
timates. We note that INM is participating through several fora in an international
effort to assist other governments, especially in narcotics source countries, in im-
proving their consumption estimates. This is especially important from the latter
countries, because their domestic consumption drives production to sharply higher
levels, thus compounding the control effort.
Question 48. In many instances, the report vaguely addresses the amounts of addi-
tional U.S. assistance that might be required to effectively achieve maximum reduc-
tions in major illicit drug-producing countries receiving U.S. assistance. These esti-
1204
mates are important legislative requirements created to help Congress assess how
much assistance may really be required to begin to combat effectively the worldwide
narcotics problem. Why was this required information not included in more precise
terms in the report?
Answer. U.S. assistance for programs to control production is provided directly by
INM, or through control-related development projects, by USAID. The report pro-
vides very specific data on how much funding is provided from these sources, con-
sistent with estimates on production and reduction. In the latter instance, the allo-
cations are keyed to. planned reductions. Where discussions are occurring that
would lead to a significant expansion of reduction activity, as in Colombia, modified
estimates are provided.
Question 49. On February 1, the Bureau of International Narcotics Matters sub-
mitted to Congress its International Narcotics Control Strategy Report as required
by Public Law 98–164. That requirement stipulates that the report contain informa-
tion on all types of current and planned U.S. assistance to major drug source and
transit countries. Were officials of the Department of Defense--such as the Assist-
ant Secretary of Defense for International Security Affairs or the Assistant Secre-
tary for International Security Policy–who oversee U.S. security relationships with
foreign countries consulted in the preparation of this Narcotics Control Strategy
Report?
Answer. The INCSR was developed by the Department of State, in primary con-
sultation with the U.S. Agency for International Development, the Drug Enforce-
ment Administration, and the members of the National Narcotics Intelligence Con-
sumers Committee. The Bureau for International Narcotics Matters (INM) had lead
responsibilities for the Department, and acted in collaboration with regional bu-
reaus.
The other agencies cited in Public Law 98-164 as being required to consult with
the Congress on this report were provided copies of the draft report prior to its sub-
mission, and afforded opportunities for review and comment. Defense, Treasury,
Commerce, Justice and USAID, as well as State, participated in the required consul-
tation sessions with the two Committees.
Defense was represented in this process by the Assistant Secretary of Defense for
Manpower, Installations and Logistics. In addition, the INCSR was reviewed and
cleared by the Bureau for Politico-Military Affairs in the Department.
Question 50. How were Treasury Department or other officials who oversee U.S.
representation to international financial institutions such as the World Bank and
the IMF consulted in the preparation of the Narcotics Control Strategy Report?
What were their views about the use of the U.S. voice in World Bank and IMF deci-
sions regarding economic assistance to drug source and transit countries? Did they,
for example, support the notion that the United States should approve multilateral
financial aid to a country—such as Colombia or Bolivia-that does not take suffi-
ciently vigorous steps to control drug trafficking?
Answer. Treasury and other agencies engaged in the submission of the report
through the process outlined in the preceding answer. Treasury testified on Febru-
ary 23 before the House Foreign Affairs Committee, and said in part:
“For five years, the Treasury Department has worked closely with the Depart-
ment of State in identifying development assistance programs, including those of
the multilateral development banks, which have an impact on illicit narcotics pro-
ducing regions of the world. The MDBs are developmental institutions. Their
basic purpose is to help promote economic growth and development in borrowing
member countries. For this reason, although their activities are not specifically di-
rected at narcotics control, they can have a very helpful corollary effect. These
loans have all had a positive economic impact on drug-producing regions of the bor-
rowing countries. It is fair to conclude as well . that they have helped efforts
directed at reducing or controlling the rate of increase of illicit narcotics
production. The MDBs have every reason to support strongly increased efforts
to control illicit narcotics production. As important agents for development, they
seek to draw people into the licit economies of their borrowing member countries.
They cooperate with each other and with other international agencies such as the
United Nations Fund for Drug Abuse Control, and our own domestic agencies.'
Treasury has declared support for bilateral and miltilateral aid to narcotics
source countries. Like State and all U.S. agencies, Treasury is bound by Presidential
determinations on bilateral assistance under the provisions of Section 481, as
amended by Public Law 98-164, concerning adequate steps by source countries to
cooperate on nacrotics control, as well as the provisions of Public Law 86–147 and
its successors concerning votes in MDBs on loans to narcotics source countries.
0
.
1205
Question 51. The Cabinet Council on Legal Policy and its Working Group on Drug
Supply Reduction have been repeatedly described by the Administration as the focal
point for United States' drug control activities. For example, I (Senator Biden) have
been told that there is no need to create a single office to coordinate all U.S. drug
control programs because the Cabinet Council on Legal Policy already fulfilled this
function. In what manner did the Cabinet Council on Legal Policy consider, contrib-
ute to, or evaluate the International Narcotics Control Strategy Řeport? What were
the views of this Strategy Report of some of the other members of the Cabinet Coun-
cil on Legal Policy such as representatives from the Defense, Treasury and Justice
Department?
Answer. The statute specifies the agencies which must consult with the Congress
on the INCSR: State, Treasury, Health and Human Services, Justice, Defense and
the Agency for International Development. These were the agencies which reviewed
the draft INCSR and (with the exception of HHS) have been invited to testify on the
report topics. While these agencies are members of the Cabinet Councils created by
this Administration, the statute did not specify formal Cabinet Council involvement
and the Councils were not asked as a group to participate in the report.
AID's RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED FOR THE RECORD
Question 1. AID has approved a rural development project in the Gadoon-Amazai
areas of the Northwest Frontier Province. What is the status of the project? What
are the project objectives? Are they being achieved? How will you coordinate your
efforts with those of INM?
Answer. The project, obligated in August 1983, has entered its first phase which
will provide highly visible benefits such as road repair and construction, potable
water systems and schools. Efforts will be made to increase the return to wheat pro-
duction (the alternative income source to poppy cultivation) and increase off-farm
employment opportunities.
The project's objective is to contribute to eradication of opium poppy cultivation
in project areas by stimulating broader development opportunities. The Gadoon-
Amazai will be shifted from an isolated, poppy-based economy to a diversified agri-
cultural and non-agricultural economy linked to Pakistan's national economy. The
GOP has committed itself to phased enforcement of its anti-poppy ban in the project
area, with elimination of poppies by the 1986–87 crop period. The project is still in
the initial phases of implementation. Preparation of demonstration plots of substi-
tute crops was completed on schedule. It is proceeding without any major delays.
The Gadoon-Amazai project is closely coordinated with the GOP eradication effort
carried on with INM support. AID and INM field personnel meet regularly to
assure that eradication and development objectives are met.
Question 2. In 1984 the Agency for International Development is administering
about two programs specifically designed for drug producing regions: one program
in the Upper Huallaga Valley in Peru, and one program in the Gadoon area of
Pakistan.
As a rough estimate, how much money and how many programs is AID adminis-
tering in the major drug source countries of Latin America and Southwest and
Southeast Asia?
Answer. In 1984 AID will be administering three projects which will have a direct
impact on the production of illicit narcotics. These projects are the Upper Huallaga
Valley Development Project in Peru ($18 million in U.Š. funding, and $8.6 million in
GOP counterpart funding); the Chapare Regional Development Project in Bolivia
($14.4 million in U.S. funding, $21.8 million in GOP counterpart funding; an addi-
tional $28 million in AID funds are dedicated to projects in the Chapare that are
tied to the development effort); and the Gadoon-Amazai Area Development Project
in Pakistan ($20 million in U.S. funding, $1 million in GOP counterpart funding).
These projects are further described in responses to other questions.
In addition, the Mae Chaem Watershed Development Project in Thailand, author-
ized in FY 1980, is a 5-year project with total AID funding of $10 million, of which
$6.9 million has been obligated. The project's objectives are to protect the water-
shed, increase productivity of existing crop land, develop additional lands and cash
crops, and provide irrigation works, agricultural credit, extension and research sery-
ices to the 40,000 residents of the Mae Chaem Watershed. The Royal Thai Govern-
ment has committed to eliminate opium production in the area by the time of the
project's completion.
The FY 1983 assistance levels in drug source countries in Latin America, South-
west and Southeast Asia are as follows:
1206
(Dollars in millions]
Amount
Projects
Narcotics produced
Latin America:
Belize ...........
Bolivia ........
Costa Rica........
Colombia
Jamaica
$17.0
55.0
184.0
0
82.0
6.0
35.0
5 Marijuana.
19 Coca.
21 Marijuana.
0
26 Marijuana.
18 Marijuana.
34 Coca.
Panama ......
Peru ........
Asia:
Burma ......
India.........
Indonesia ........
Pakistan ........
Philippines.......
Thailand
13.8
89.0
71.8
200.0
86.8
21.8
3 Opium.
17 Marijuana.
45 Marijuana.
14 Opium/Marijuana.
30 Marijuana.
19 Opium/marijuana.
Question 3. Why is it that only two of these AID programs are directly designed to
reduce the production of illicit drugs?
Answer. The primary goals for three projects in three countries, the Gadoon-
Amazai project in Pakistan, the Upper Huallaga project in Peru, and the Chapare
project in Bolivia, include the reduction of illicit narcotics production. In Pakistan,
11 of 14 other AID projects have poppy clauses which prohibit conferring develop-
ment benefits on producers of illegal drugs. It would, however, be improper to guage
AID's dedication to reducing the production of illicit narcotics by the apparently low
number or dollar amount of direct anti-narcotics programs.
In Burma, the government does not permit poppy cultivation in those areas it
controls. Cultivation continues only in areas held by the Burmese Communist Party,
the Shan United Army, or some other insurgent group. AID has no programs of any
kind in the opium production region, in part because its personnel would be in jeop-
ardy. The Burmese view poppy cultivation primarily as an insurgency problem, and
treat it as such. The SRUB regards narcotics-related development as futuristic,
given the need first for a military solution and second because of the problems
which would be encountered now in development approaches. Other U.S. Govern-
ment agencies are properly involved in directly combating opium production in
Burma.
In general, drug producing regions are sparsely populated and isolated. By con-
trast, the bulk of AID programs are located where the bulk of the population of less
developed countries is located, so that development assistance can best help meet
the basic needs of the majority of the poor.
In some areas, the production of illicit narcotics is a development issue. That is,
no other crop is feasible for farmers in the area due to soil, climate or water condi-
tions. The drug may be used as a medicine or food. In some cases, the use of the
drug is a tradition in the culture, e.g., the chewing of coca leaves in the Andes. It is
in these instances that AID's development assistance can have an effect on the pro-
duction of illicit narcotics by stimulating broader development opportunities,
In other cases, narcotics are not a traditional crop. Producers have simply opted
for the more profitable illicit drug production over traditional, legitimate crops. In,
these instances, provision of development assistance is not a relevant response.
Question 4. AID's 1982 Policy Determination on Narcotics says that "it is AID's
policy to seek out opportunities to design projects that provide economic alterna-
tives to farmers in narcotics growing areas." Leaving aside the AID coca related
program in Peru, which had already begun by late 1982, in how many instances has
AID met this declared policy to seek out opportunities to design projects that pro-
vide economic alternatives to farmers in narcotics growing areas?
Answer. In addition to the Upper Huallaga Valley project in Peru, AID has, since
1982, implemented two other bilateral projects to reduce illicit narcotics production:
the Gadoon-Amazai Area Development Project in Pakistan and the Chapare Region-
al Development Project in Bolivia. Again, as previously noted, there is a condition
on the Mae Chaem Watershed Project requiring the Thai to end poppy production
in that area, and AID does impose “poppy clauses” on other projects in growing
areas, such as in Pakistan.
1207
AID assisted Pakistan in the preparation of the Special Development and Enforce-
ment Plan and in its presentation to the Pakistan Consortium in December 1983.
This SDEP targets the remaining opium poppy growing areas in Pakistan. An im-
mediate goal is to involve other bilateral donors and multilateral donors in anti-nar-
cotics efforts. Several donors made expressions of interest at that Consortium meet-
ing, and a multilateral development and enforcement action may soon begin.
In addition, AID has examined other possibilities to implement narcotics-related
development projects. Concerns for the safety of AID personnel in the proposed
project areas, or the inappropriateness of providing development assistance have led
to the decision not to implement the projects, for example, where narcotics produc-
tion is not traditional but is simply a commercial criminal enterprise.
As AID identifies opportunities for narcotics-related development assistance to
reduce the production of illicit narcotics, we shall make the most of those opportuni-
ties.
Question 5. In the last year, on what occasions have senior level AID officials,
such as the Administrator, discussed U.S. narcotics control objectives with the Sec-
retary of State or the Assistant Secretary for International Narcotics Matters?
Answer. On appropriate occasions, the Secretary and the Administrator have dis-
cussed coordinated efforts against narcotics, but a precise log showing at which of
their regular meetings the issue arose is not available. Regular consultations occur
at the senior level between AID and INM, both in Washington and in the field
where AID and INM personnel are members of the Embassy's narcotics country
team. The Counselor to AID, the Acting Assistant Administrator for Program and
Policy Coordination, and numerous other officials have had meetings with the As-
sistant Secretary INM and Deputy Assistant Secretaries, INM, with whom the AID
Director of Strategic Studies also meets frequently. AID's Narcotics Policy Coordina-
tor is in regular contact with senior INM personnel. Regional coordinators and
country desk officers also take part in regular AID/INM meetings.
U.S. CUSTOMS SERVICE'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED BY
SENATOR HAWKINS
Question 1. Does the Colombian Customs secure their airfields (and harbors) at
night?
Answer. We have no information which indicates that the Colombian Customs
Service participates in the securing of airfields, landing strips or harbors at night or
any other time for the purpose of allowing drug trafficking to take place. Over the
years, we have received, and we continue to receive information from various
sources that uniformed, armed Colombian military personnel have secured airports
and airstrips while airplanes were loaded with drugs. In fact, there are indications
that some of these military personnel are actually loading the airplanes in some in-
stances.
Question 2. Would you give me the answer in writing about your intensified in-
spection of the Colombian planes, ships, cargo and passengers, the Colombian initia-
tive?
Answer. From March 1-March 31, 1984, the United States Customs Service con-
ducted intense enforcement against cocaine originating in Colombia and destined
for this country. Current estimates: 50-70 percent of cocaine entering the United
States is arriving from Colombia.
Our initiative intended to meet four objectives:
1. Interdict cocaine.
2. Disrupt the flow of cocaine into the United States.
3. Increase intelligence for later use.
4. Emphasize the high level of U.S. dissatisfaction with the Colombian Govern-
ment's lack of enforcement activities against cocaine.
All four objectives were met.
Our scope was national. The full range of enforcement personnel from Customs
regions participated. The intensified effort reached persons, merchandise, and carri-
ers arriving directly or indirectly from Colombia by sea or air, and all Customs
ports which experienced any Colombian activity.
An action plan outlined all practicable activity and defined all actions that U.S.
Customs could pursue unilaterally within existing statutes and regulations. The
result would maximize impact on smuggling operations yet minimize adverse effects
on Customs personnel and operations.
A four phase strategy increased pressure week by week. Individual regions and
districts retained flexibility to adjust schedules and intensity, considering local fac-
1208
tors within the plan's context. Miami district had long term intensive efforts under-
way and thus chose to implement the entire plan immediately and to continue
throughout the month.
Before the operation, Regional Commissioner Battard and a Customs survey team
conducted a Source Country Profile study in Colombia, working in concert with
DEA officials in the United States and Colombia. Much of their information and in-
sight was used and/or verified during this operation.
DEA contributed from this efforts' earliest stages and offered full cooperation and
support. Their trolling for additional tactical intelligence met with limited success
though one Miami seizure resulted directly from DEA supplied information.
DEA expects more information to surface in Colombia over time in the wake of
this Customs initiative. A valid mitigating circumstance stems from the fact that
virtually all DEA in country resources in Colombia were actively preoccupied with a
Colombian Government seizure of 131/2 tons of cocaine in that country.
During that first week of March, crew members arriving and departing the
United States underwent intensive secondary examinations. In addition, Landed
Quantity Verifications (LQV) were performed on all in-bond shipments prior to their
movements to the port of destination.
In the second week, all Colombian vessels were boarded and searched prior to dis-
charge of crew, passengers and cargo. All discharged cargo was LQV'ed and received
100 percent examination. At this stage, more Customs professionals became in-
volved. Canine teams searched vessels, cargo and baggage; Patrol officers performed
vessel searches and conducted surveillances; and Inspectors supervised stripping
cargo containers and tightened all examinations, especially bulk cargo shipments of
bananas and coffee. Also at this stage, Inspectors and Special Agents stepped up
outbound currency examinations (COČET).
During the third week of the operation, it expanded to full devanning and con-
tainer stripping of cargo.
By the fourth stage of the program, all passengers, crew, cargo and vessels sub-
mitted to intensive examination. Poor yield from bulk cargo shipments (bananas
and coffee) examination sapped resources; we discontinued this pursuit. Bulk cargo
is very labor intensive. When these time-consumers generated no seizures, we refo-
cused more energy on general merchandise and loose breakbulk shipments.
After the four major stages, our successes warranted continuing intense passenger
and crew examination for two more weeks. Cargo and COCET phases would contin-
ụe based on informed targeting and selectivity. Many seizures occurring during the
operation sharpened our perceptions to target suspect shipments more readily. Two
cocaine seizures made at New York and Miami involved the narcotic mixed with
alcoholic beverages accompanying arriving passengers. We now know that any liq-
uids arriving from Colombia could contain cocaine, so all regions have been field
testing these liquids.
Examining bulk cargo proved to be a fruitless effort. However, it delayed ship-
ments and forced the commercial community as well as the Colombian Government
to heed the serious concerns of Customs. Several meetings took place during the op-
eration at Customs Headquarters with representatives from the Colombian Embas-
sy. U.S. Ambassador Lewis Tambs was constantly briefed on the operation's
progress. He was most supportive.
Seeing this, many carriers expressed their desire to help stem the flow of narcot-
ics into the United States. They realize that their vessels and aircraft are often ex-
ploited by narcotics traffickers; their cooperation with Customs could avoid costly
delays and conveyance seizures.
The following is a list of seizures and their locations from March 1-April 2, 1984:
Total seizures: 90.
Currency: $1,717,588.
Cocaine: 1,721.2 lbs.
Heroin: 1.6 lbs.
Marijuana: 213,106 lbs.
Stowaways: 20.
Handguns: 1.
False passport: 1.
Ether: 88,000 lbs.
Location: Miami-53_seizures; New Orleans—4 seizures; New York—6 seizures;
Logan-1 seizure; San Juan-5 seizures; Los Angeles—4 seizures; Gramercy, La.-1
seizure; Houston-3 seizures; Tampa-1 seizure; Fort Myers-1 seizure; Sylvania,
Ga.—1 seizure; Labelle, Fla.—1 seizure; Lafayette, La.-i seizure; Calexico-1 sei-
zure; San Ysidro—3 seizures; Nogales—1 seizure; Champlain—1 seizure; PDN
Bridge—1 seizure; Rio Grande City-1 seizure; and Atlanta-1 seizure.
1209
Question 3. Also, has the drug threat from Colombia increased or decreased in the
last year?
Answer. From the viewpoint of the Customs Service, the threat has increased in
the last year, as it has done for the past several years. Colombia is the largest sup-
plier of two major drugs, cocaine and marijuana, smuggled into the United States.
Current estimates indicate that Colombia supplies between 50 and 70 percent of the
cocaine and approximately 90 percent of the marijuana smuggled into the United
States. These percentages equate to between 62,500 and 87,500 pounds of cocaine,
and approximately 24 million pounds of marijuana. The final retail (street) value of
these drugs is believed to exceed $28 billion. Seizure statistics over the last 6 months
indicate that of those cocaine seizures reporting country of origin, over 40 percent
came from Colombia, representing over 60 percent of the cocaine seized in this same
category.
The increase in the threat of cocaine from Colombia is graphically illustrated by
the seizure of 13.8 tons on March 10, 1984 at a processing plant in Colombia. DEA
estimated the street value of this seizure in the United States would be $1.2 billion.
Only 5 or 6 years ago most knowledgeable law enforcement officers would have
scoffed at the idea of 1,000 pounds of cocaine stockpiled at any single location in the
world.
[Whereupon, at 1:03 p.m., the committee adjourned, subject to
call of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
(EAST ASIAN AND PACIFIC AFFAIRS)
THURSDAY, MARCH 22, 1984
UNITED STATES SENATE,
SUBCOMMITTEE ON EAST ASIAN
AND PACIFIC AFFAIRS OF THE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:15 a.m.,
in room
SD-419, Dirksen Senate Office Building, Hon. Frank Murkowski
(chairman of the subcommittee) presiding.
Present: Senator Murkowski.
Senator MURKOWSKI. I call this hearing to order. The Subcom-
mittee on East Asian and Pacific Affairs is meeting today to dis-
cuss the foreign assistance budget for Asia and the Pacific basin.
The Honorable John Melcher, my colleague from Montana, is with
us as a witness today.
He will be followed by the Honorable Paul Wolfowitz, Assistant
Secretary for East Asian and Pacific Affairs of the State Depart-
ment, Mr. James Kelly, Deputy Assistant Secretary of the Depart-
ment of Defense, and Mr. Charles W. Greenleaf, Assistant Adminis-
trator for Asia, Agency for International Development.
I have a short statement that I intend to make at this time. Then
I will call on my colleague, Senator Melcher.
This morning we are going to have the opportunity to explore in
detail the administration's request for economic and security assist-
ance to East Asia and the Pacific. The administration's current re-
quest for the region is approximately $793 million, an increase of
13.1 percent over this year's allocations. That amount represents
about 5 percent of the administration's worldwide budget. In com-
parison, the area represents 36 percent of the world's population.
We, of course, cannot overestimate the importance of Asia to our
Nation. The region contains two of the most important overseas
trading partners of the United States, Japan and the six countries
which make up ASEAN (Association of Southeast Asian Nations).
U.S. security is tightly linked to Asian affairs. American soldiers
have fought and died in the Pacific region in three wars in the last
four decades.
We must, as a Pacific power, assign a high priority to our rela-
tionships with the countries of Asia and the Pacific. We must
pursue economic progress and commercial interests. We must iden-
tify and contribute constructively in appropriate ways to political
(1211)
1212
,
evolution and change in the region. We have no choice. Asia's
future is our future.
Today we will hear, as I have indicated, from Senator Melcher,
who visited the Philippines last December. He asked to make a
report to this subcommittee on his findings, and we look forward to
the
At approximately 10:30, we will invite a panel of administration
witnesses to testify. Among those, as I have indicated, is Paul
Wolfowitz, Assistant Secretary of State, Jim Kelly, Deputy Assist-
ant Secretary of Defense, and Charles Greenleaf, Assistant Admin-
istrator, Bureau for Asia, Agency for International Development.
We are looking forward to hearing about the U.S role in Asia
from our witnesses and how our assistance programs contribute to
U.S. policy in the region.
Let us begin. Senator Melcher, would you please proceed with
your testimony on your trip last December to the Philippines. It is
a pleasure to welcome you this morning before the Senate Foreign
Relations Subcommittee on East Asian and Pacific Affairs.
Please proceed.
STATEMENT OF HON. JOHN MELCHER, A U.S. SENATOR FROM
MONTANA
Senator MELCHER. Thank you, Mr. Chairman. My thanks and
gratitude go to this subcommittee for allowing me to testify.
The United States has intertwined itself with Filipinos and their
Philippine Islands for more than four score of years.
Of the more than 7,000 islands, 426 are inhabited. They were
ruled by Spain for three and a half centuries. The Filipinos fought
a war of revolution against Spain. When at the turn of the century
Admiral Dewey entered Manila Harbor to vanquish the Spaniards
there, the Filipinos mopped up the remnants of Spanish domina-
tion from Luzon to Mindanao.
So we began with a delightful and intelligent people, an alliance
with an Asian land that has been mutually beneficial in trade and
cultural exchange.
Filipinos have served in our armed forces during all of this cen-
tury. The Philippine Armed Forces have been involved on our side
in every war we have engaged in during this century. We have
with them a military-strategic partnership vital to the non-Commu-
nist countries of Southeast Asia. It is that mutual defense agree-
ment that I wish to discuss with the committee today.
After our withdrawal from Vietnam, our only outpost in South-
east Asia is the Philippines. Cam Ranh Bay ship servicing and
repair facilities became available for the Russian fleet, as well as
the airfield facilities we had built in Vietnam.
Clark Air Force Base near Manila and Subic Bay provide our
only strategic air force and naval bases in this vast area. These
bases are strategic and vital to our military posture in this vast
area of the South Pacific Asian region and therefore vital to our
allies of the area. Without them, there can be no significant bal-
ance to the Japanese, South Korean, Philippine, Hawaiian forma-
tion of our Asian Pacific defense posture. Guam, with the Anderson
1213
Strategic Air Command Base, is 1,600 miles toward Hawaii. Our
link to Diego Garcia in the Indian Ocean is the Philippines.
The 5-year rental agreement with the Government of the Philip-
pines has been finalized at a time when their government was be-
sieged with political unrest caused by the Aquino assassination and
the illness of President Marcos. The facts of the assassination of
last August are under investigation by the Agrava Fact Finding
Commission. President Marcos' incapacity because of ill health
seemed to be overcome when I visited the Philippines and consult-
ed with him last December.
The Marcos regime for most Filipinos has been considered to be
a successful 20 years of economic progress that of late has become
uncertain from questions of infringements on political freedoms.
The test of the soundness of their political system will occur in
their May 16 parliamentary elections.
I have had an exchange of letters with President Marcos earlier
this year where I expressed common apprehensions here in Con-
gress of erosions in Filipino freedoms, and I attach both my letter
of January 19 and President Marcos' response of February 11 to
this testimony
Senator MURKOWSKI. They will be entered into the record at this
point.
[The material referred to follows:
U.S. SENATE,
Washington, D.C., January 19, 1984.
Hon. FERDINAND E. MARCOS,
President, Republic of the Philippines, Manila.
DEAR MR. PRESIDENT: My wife and I, as well as my staff members and Major Mat-
tingly, our Air Force escort, appreciated the opportunity to meet you and Mrs.
Marcos and thoroughly enjoyed our visit and the luncheon with you at Baguio City.
The hospitality of yourself and the Cabinet ministers that we met with and all of
the people of the Philippines with whom we came into contact was warm, friendly
and encouraging, much beyond our expectations.
The historic U.S.-Filipino alliance through 80 years and four wars must be sus-
tained and strengthened. I believe we can.
As we discussed at Baguio, I saw our goals for our visit to be twofold: First, the
use of food aid from the United States to the Philippines to meet urgent and imme-
diate needs, to be followed by long-term concessionary and barter trade arrange-
ments. Secondly, a need to enhance joint defense efforts between the U.S. and the
Philippines, recognizing the strategic importance of the Philippines for our mutual
interests and the defense of Southeast Asia. I am more convinced since our visit to
your beautiful land that these two goals were not only correct but that they also
need the urgent attention of the U.S.
Congress and government.
Following our meeting with you, Mr. President, on December 16 at Baguio, I met
with Cardinal Sin on Saturday, December 17, and on the following day, which was
Sunday, December 18, I met with UNITO and other opposition leaders including
Doy Laurel, Speaker Jose Laurel, Fernando Lopez, Ambroca Padilla, Soc Rodrigo
and Eva Kalaw. On December 20, I met with Minister Tanco, U.S. Aid officials, rep-
resentatives of the U.S. Embassy, Catholic Relief Services, CARE, and some Philip
pine business interests to discuss an Aide Memoire regarding short term and long
term food aid from the United States.
I delivered that Aide Memoire to U.S. officials on my return here to Washington,
and I believe it will receive a favorable response. A letter from Cardinal Sin dated
December 27 to Ambassador Mike Armacost has been considered here in Washing-
ton by government officials and I have urged that it be approved very quickly. This
December 27 proposal by Cardinal Sin is somewhat distinct from the Memoire, call-
ing for immediate authorization by the U.S. for food assistance, but is very essential
since it could provide food assistance to a great number of unemployed families
within a matter of days.
I met with Assistant to the President for National Security affairs Robert C.
McFarlane on January 17. I specifically asked that the U.S. agree to the Cardinal's
1214
letter requesting 30 metric tons of rice to replace a like amount purchased by the
Philippine government for immediate food aid to unemployed families be confirmed
by cable to the U.S. Embassy in Manila within the next 48 hours. I stressed to Mr.
McFarlane the importance of food aid and mutual defense efforts between the Phil-
ippines and the United States which you and I have previously discussed.
Because it is of mutual advantage both in the short term and the long term for
the Philippines and the United States to follow through on the food aid, trade and
defense agreements it might appear, Mr. President, that in a timely manner these
goals will be accomplished. However, as I made clear in a public news conference in
Manila on December 21, there are questions about the credibility of the current
Philippine government policies that must be answered. Inquiries have been made by
Members of the U.S. Congress and by the American public. I am asked, Mr. Presi-
dent: (1) If I can assure the integrity of the Philippine Parliamentary elections in
May; (2) If I can assure the democratic individual freedoms common to both the
people of the Philippines and the people of the United States; (3) If I can assure that
Amendment Number 6, giving special extraordinary powers to you as President as
well as special provisions for presidential arrests, will be revoked.
The morning before we left the Philippines, I had the pleasure of a lengthy break-
fast and visit with General Ramos, your nephew, whom you will recall we had the
pleasure of first meeting in your presence at Baguio. General Ramos' reputation
here with our military leaders, some of whom graduated as classmates with him
from West Point in 1950, is of the highest caliber. I have been disappointed and con-
fused to learn that his direct control of the Constabulary now and during the May
Parliamentary elections is no longer clear-cut.
I am well aware of the demands made by Unito and other opposition leaders to
assure their active participation in the May elections.
While I do not seek to intrude myself in the affairs of your government, Mr.
President, I must be very candid and forthright and tell you that most or all of
these points were raised with me in the meeting I had with opposition leaders on
December 18 and that many of these same points have been urged on me by busi-
ness, professional, and church leaders. I wish to do everything possible to persuade
our Congress and our government to move immediately on the matters of our
mutual interest, but my credibility in being persuasive hinges directly on the Philip-
pine government's credibility on these very points that the opposition raises. The
common bond that has closely allied our two countries has been the assured ad-
vancement of democracy for individual freedoms.
I encourage you, Mr. President, to give this letter your thorough consideration
and prompt response.
Best regards.
Sincerely,
JOHN MELCHER,
U.S. Senate.
MALACANAN PALACE,
Manila, February 11, 1984.
Hon. JOHN MELCHER,
Senator, U.S. Congress, Washington, D.C.
DEAR SENATOR MELCHER: Your visit with us last month gave Mrs. Marcos and me
some of our most pleasant moments in the New Year and a welcome opportunity for
some key officials in our government to take a close look at certain important as-
pects of current Philippine US relations.
I appreciate the emphasis you placed during our conversations on U.S. Food Aid
to the Philippines, long-term concessionary and barter trade arrangements, and the
value of joint defense efforts by the Philippines and U.S. governments in the context
of strategy for the defense of Southeast Asia. With respect to food, you are of course
aware of the Phillippine government's resolve to pursue the successes in its pro-
gram of self-reliance, and I am confident that the question of food aid in any area
where it may have some relevance will be accorded the proper perspective.
It is good to learn of your meetings with leaders of the political opposition because
this assures me that you went away with a fuller insight into the Philippine govern-
ment's programs and policies in response to the country's peculiar conditions and
requirements.
I am grateful for the pains you have taken to convey to me the concern that
seems apparent in inquiries you say have been addressed to you by some members
of the U.S. Congress and "the American public.” I wish to assure you and through
1215
you the interlocutors you have cited, that the parliamentary elections on May 14
will have the fullest measure of integrity-comparable, I must say, to the high re-
spectability which American citizens are accustomed to see in their own elections-
and that the individual freedoms, which had been ours to enjoy even before Admiral
Dewey's troops came to the Philippines, will receive continuing protection by our
government.
If there is any doubt about this as a result of mythical events recounted with
strange relish and outstanding inventiveness by some sectors of the American
media, I shall be deeply indebted to you if you could find an occasion to bring our
devotion to democratic principles to the awareness and appreciation of those who
have preferred thus far to regard us with skepticism.
The uneasiness conveyed in your letter over Amendment No. 6 to our Constitu-
tion and over provisions in our laws for "Presidential arrests” can only be a mani-
festation of an unbelievably durable lack of knowledge of Philippine conditions de-
spite all the information communicated by us to the world through all forms of
media.
Amendment No. 6 reads:
“Whenever in the judgment of the President (Prime Minister), there exists a
grave emergency or a threat or imminence thereof, or whenever the Interim Bata-
sang Pambansa or the Regular National Assembly fails or is unable to act adequate-
ly on any matter for any reason that in his judgment requires immediate action, he
may, in order to meet the exigency, issue the necessary decrees, orders, or letters of
instructions, which shall form part of the law of the land.”
It is an attempt on the part of liberal-thinking constitutionalists to avoid resort-
ing to what is referred to in Constitutional Law as the Commander-in-Chief provi-
sion, found in Section 9 of Article VII of the Philippine Constitution, which is as
follows:
"Sec. 9. The President shall be Commander-in-Chief of all Armed Forces of the
Philippines, and whenever it becomes necessary, he may call out such Armed Forces
to prevent or suppress lawless violence, invasion, insurrection, or rebellion. In case
of invasion, insurrection, or rebellion, or imminent danger thereof, when the public
safety requires it, he may suspend the privilege of the writ of habeas corpus, or
place the Philippines or any part thereof under martial law."
It is noted that the power embodied in the Commander-in-Chief provision involve
the:
(1) Calling out of the Armed Forces;
(2) Suspension of the privilege of the Writ of Habeas Corpus;
(3) The proclamation of martial law throughout the Philippines or any part there-
of.
Amendment No. 6 on the other hand is a provision meant more for an emergency
condition caused by inaction on the part of the Batasang Pambansa (The Parlia-
ment) whether for lack of time or any other reason. An example would be the case
of Presidential Decree No. 1896, which was issued under the authority Amend-
ment No. 6, providing for the registration of all voters in the Philippines. The mem-
bers of Parliament agreed in caucus that they had no time to work out the details
but agreed on the basic essentials and requested the President to issue a decree
after the adjournment of the Batasang Pambansa for the Christmas season. Inciden-
tally, it was the opposition that insisted on the new registration of all voters in the
Philippines, whether already registered or not.
There are, by the way, provisions in existing law concerning crimes which are the
object of so-called “Presidential Arrests." I refer to the Anti-Subversion Law, the
original Republic Act 1700, as amended, and the Revised Penal Code which contains
provisions on the penalty to be imposed for the crimes of sedition, rebellion, insur-
rection and conspiracy or attempt to commit these crimes. I point this out because
the elimination or amendment of Amendment No. 6 will not change the substance
of the existing Anti-Subversion Law or the provisions of the Revised Penal Code.
Incidentally, the power to issue a preventive detention action has been
suspended by
me in an order to the Minister of National Defense, the Minister of Justice, the
Chief of Staff of the Armed Forces, and the Chief of Constabulary dated January 23,
1984 which provides that no request for such preventive detention action shall be
entertained from December 1, 1983 to June 1, 1984.
To.conclude, there are instances where the President may exercise his emergency
powers but, acting with prudence, he may be unwilling to call out the armed forces,
or suspend the writ of the privilege of habeas corpus, or proclaim martial law.
Amendment No. 6 grants him the alternative of merely submitting this matter to
the courts immediately or of issuing an order which would stop a suspected individ-
1216
ual from engaging in what the evidence has shown to be any of the crimes of sedi-
tion, rebellion, insurrection, or conspiracy or attempt to commit these crimes.
Such alternative would be parallel to the action taken by President Lincoln, after
the attack on Fort Sumpter at the start of the American civil war, when he ordered
the arrest of some persons indentified by the military as participants in prepara-
tions for the civil war against the union. He refused to release these persons not-
withstanding the order of the Supreme Court, believing that his duty as President
required such actions as may be necessary to preserve the Union of the United
States. He also appropriated funds for additional Federal troops and for the railroad
without the approval of Congress.
The Federal Constitution does not have a Commander-in-Chief provision nor does
it authorize the proclamation of martial law, the suspension of the privilege of the
writ of habeas corpus by the President alone, or the calling out of the federal troops
in cases of civil disorders (notwithstanding which the national guard marched in
full battle gear during a riot at Kent University and killed four students). I reiter-
ate this precisely to show that it was to avoid having to use this extreme power of
the Commander-in-Chief that Amendment No. 6 was adopted because it is a more
benign and more just measure and at the same time it ensures swift and efficacious
suspension of acts prejudicial to the stability of the State.
In view of the prudence implicit in Amendment No. 6, one cannot possibly fail to
notice that the decree-making power granted under its authority is less than that of
the President of France, whose power as such gains even more force and scope on
account of the fact that he is at the same time the presiding officer of his country's
highest tribunal.
I am puzzled by your statement that Lt. General Fidel V. Ramos has lost direct
control of the Constabulary. As it happens, Gen. Ramos is the Chief of Constabulary
(Full title: Director-General of the PC-Integrated National Police), a position from
which he had not for one moment been estranged since he came to it. I fully agree
with you about the excellence of his reputation; I need not declare, therefore, that
precisely because of that I have no intention to take away his control of the Con-
stabulary
I am delighted by your reiterations of solicitude and note with understanding
your desire to satisfy some friends in the U.S. Congress and in the Philippine oppo-
sition that there is no reason for their doubts and fears to linger. I assure you that
events in the future will fully demonstrate the validity and the democratic quality
of the policies and measures with which we are striving to promote the welfare of
the Filipino people. You will recall that I fought in a war for freedom and nearly
lost my life in numerous battles of that war, battles, I must say, to which Filipino
soldiers were drawn to defend the American cause. Having made that recollection,
you will, I hope, be encouraged to consider that democracy is safe in this country
among our people, withstanding the alarums from some quarters.
Please visit with us again.
Sincerely,
FERDINAND E. MARCOS,
President of the Philippines.
Senator MELCHER. Filipinos speak English because it is the lan-
guage taught and spoken in all of their schools, colleges, and uni-
versities. Tagalog is the native dialect of Manila and the language
common to all their islands, although different provinces have a
variety of dialects. They are a people of diverse cultures, reflecting
centuries of mixing nationalities of the islands of the Pacific and
mainland Asia.
Their struggle of independence from Spain and from the 3-year
occupation of Japan during World War II is reflected in their
strength of tested character and their pride. The Filipinos are a
proud people, Americanized by choice, loyal to their friends and
particularly loyal to the United States.
The economic world recession has found them with their money
devalued and a $25 to $30 billion foreign debt, which is not an over-
whelming debt for a nation of 50 million people, with a trade defi-
cit averaging $3 to $5 billion per year.
1217
The base agreement of $180 million rental payments per year is
a modest amount compared to the payments of $502 million to
Greece, $934 million to Turkey, and $415 million to Spain, each of
which are assumed to be paid annually as long as we have bases in
those countries.
I found strong dissatisfaction with this current 5-year Philippine
agreement within the Philippine Government and a strong feeling
of our military that the Philippine Government dissatisfaction
would hamper cooperative mutual defense arrangements with
them.
Any suggestions to further restrict or infringe on the payments
of the rentals as due would be intolerable to the Philippine Govern-
ment and their business community. While their decision will prob-
ably be to use as much of the money as possible immediately for
relief of their pressing dollar shortage, Filipinos rightly view that
to be their decision, not ours.
They are allies, trading partners, and friends. They need not be
subservient to hasty, patronizing, uninformed, and misguided views
of others outside their country.
I urge this committee to quickly propose that our Government
immediately schedule payments due on the base rental agreements
and reopen the discussions to augment the agreement to realistical-
ly arrange for a sounder mutual agreement.
That agreement should recognize the value we receive for use of
these bases is understated. Better base perimeter security is essen-
tial. A closer and more compatible interworking of our Armed
Forces has been restrained because of on-again, off-again negotia-
tions that have been strained and become antagonistic. That is not
necessary and should be corrected by the reopening of the terms of
the agreement. I urge this committee to investigate these matters
and make corrections.
In addition, I am submitting a summary of a recent China-Philip-
pine agreement to enhance their joint commitments. I believe we
should note and contrast our benign neglect of U.S.-Philippine
policy with a more vigorous effort by the Chinese toward the Phil-
ippines.
[The material referred to follows:
CHINA-PHILIPPINE AGREEMENT
January 1984, China and the Philippines agreed to an eleven-point package of aid
and trade that now gives China an important leg-up in the Philippines that they
have never had before.
The PRC-Philippine agreement contains the following provisions:
(1) an agreement to increase trade by $500 million over current levels.
(2) an agreement for the Bank of China to place $40 million in the Central Bank
of the Philippines, and to extend a line of credit for the purchase of $20 million of
products other than oil.
(3) increase a current deferred payment program to the Philippines for the pur-
chase of oil in the amount of $140 million.
(4) Chinese offer to intercede on behalf of the Philippines with the International
Monetary Fund to get the best deal possible.
(5) an offer to have the Chinese Premier speak to President Reagan during his
U.S. trip on behalf of more assistance for the Philippines.
(6) an offer by the Chinese government to speak to Japanese Prime Minister Na-
kasone on behalf of more aid for the Philippines.
(7) a scientific and technological agreement to cooperate on seven projects.
(8) the establishment of a cultural exchange program.
1218
(9) a contract for the construction and management of a $50 million hotel in
China. Philippines to put up $2.2 million.
(10) a proposal to have Philippine Air Lines fly into China.
(11) an offer to have the PRC take part in unnamed future joint ventures with the
Philippines.
Senator MELCHER. Mr. Chairman, I would like to enlarge on my
statement of benign neglect. It is true that the basing agreements
were finalized last summer. It is also true that there has been no
sense of urgency on the part of either Congress or the administra-
tion to make certain that, at the time of extreme economic distress
in the Philippines, that we begin those payments on the terms that
were obtained in the agreement.
It is also true that the agreements were not satisfactory when fi-
nalized and that dissatisfaction arises from the Government of the
Philippines and, frankly, with our military commanders, because
the cooperation of the nature that we seek in this vast area of the
Pacific with the Philippines is simply hampered and hindered by
that dissatisfaction. I mentioned just briefly the fact that a better
perimeter of security is needed, and that is evidence of that dissat-
isfaction.
I have enclosed for everybody's review a map of the area, just to
put into the right context where the Philippines are in relationship
to Russian forces and where they are in relationship to our overall
view of how we defend the Pacific.
I might state that how we defend the Pacific is extremely impor-
tant to all of our allies.
Senator MURKOWSKI. Excuse me, Senator. The papers have just
been passed out and there has been a little bit of turmoil in the
back of the room. I would ask that the audience refrain from dis-
cussion.
Senator, please proceed.
Senator MELCHER. The map places into the proper perspective
how important it is to our allies, and particularly Japan, in the Pa-
cific that we have secure arrangements for the vital shipping
straits in Southeast Asia.
Japan, with its heavy dependence on oil coming out of the Per-
sian Gulf, needs placidity and peace in those shipping straits or
their industry would be brought to a halt almost immediately. That
is only one example, but there are many more.
I think the opportunity for this subcommittee to perform a vital
service to our relations with the Philippines is with us right now.
I would like to mention that I am not throwing out as an idle
thought the enhancement and augmentation of those base agree-
ments. I think it is absolutely essential that we consider that, and
the proper form for that consideration here in the Senate lies with
this subcommittee and the full Foreign Relations Committee.
Thank you very much, Mr. Chairman. I would be glad to answer
any questions that I could.
Senator MURKOWSKI. You have suggested, Senator, that this sub-
committee reflect on the appropriateness of reopening the terms of
agreement that have been reached with regard to the utilization by
our Government of the bases in the Philippines. You also have ac-
knowledged that agreement has been reached.
1219
You are aware of a letter to the President, sent to President
Marcos, indicating payment of some $900 million over 5 years on a
best efforts basis, which is basically under discussion and consider-
ation today. Do you have any specific recommendations, Senator,
that you would like to see consideration given to?
Senator MELCHER. I think it is apparent, first of all, that the
Philippine Government and the business community in the Philip-
pines desperately need dollars. I think the arrangements to follow
immediately are the exact arrangements that have been provided
for in the agreement.
I am very apprehensive that discussion in the House committee
seems to indicate that we should put conditions on those payments
in terms of what is our best thinking on the political events in the
Philippines. I find that, frankly, however well intentioned those ex-
pressions of concern may be, that would be antagonistic and insult-
ing, not just to the Philippine Government under President
Marcos, but it would be insulting to the entire Filipino people.
There is political turmoil of some extent, perhaps exaggerated in
news accounts, occurring in the Phillipines. That political turmoil
is of an internal nature, rising out of the dissatisfaction with the
government's explanation of the Aquino assassination.
To the credit of the Philippine Government, the Agrava Fact
Finding Commission is recognized as being independent of the gov-
ernment, and the criticism that now exists in the Philippines of the
efforts of that Commission relates itself to whether or not the gov-
ernment, and particularly the Armed Forces of the Philippines, are
fully cooperating with that Commission.
That is an internal dispute and one which I have some concern
for also. But I do not recommend that we as a government and as a
Congress intrude, as a bull in a china closet, to dictate under the
terms of the base agreement what is supposed to be the result of
the Agrava Fact Finding Commission on that very regretful
Aquino assassination.
Mr. Chairman, I point out that I am not entirely satisfied with
all of the commissions we have had and the studies we have had by
Congress over the Kennedy assassination that occurred in 1963,
and I suspect there are Filipinos who have the same feeling, share
that same feeling, that there must be something else that has not
been turned up in terms of President Kennedy's assassination. But
they are not intruding into our affairs, other than to the extent of
worrying about it, as some of us still do, whether we know all the
facts.
For us, within a few months after the rather dastardly killing of
Senator Aquino in Manila, I think it is rather farfetched for us to
be advised by a group in the House that we should set some sort of
new terms on the payment due on the rental of those bases. So
that is the first point.
Second, since the base agreement was arrived at, unfortunately a
continuation of this 5-year negotiation process—it has been unsatis-
factory in the past to some of the Filipino people and it certainly is
unsatisfactory right now as it stands not just with the government,
but with the business community of the Phillipine Islands. And we
should try to rearrange some of those aspects into more agreeable
conditions.
1220
The question of having to deal with this every 5 years means
that, in effect, our military is told: Well, when we get the basing
agreements finalized, maybe we can do something about moderniz-
ing the facilities at Clark Air Base or at Subic. And that is an on-
again, off-again approach that is not very constructive to some
planning of military operations.
Finally, I think it has to be noted that we do not have any other
outpost in Southeast Asia to base our overall plan for Pacific de-
fense other than the Clark Air Base and at Subic for the Navy.
So those are the words of wisdom that I have to offer.
Senator MURKOWSKI. Thank you, Senator.
I would like to draw to your attention my understanding of the
administration's proposal for Philippine assistance, and that of the
House. The totals are the same, but the mix is different. The House
has chosen to eliminate foreign military sales entirely and add that
sum to the economic support fund.
I would like briefly your view of the emphasis being placed on
economic assistance as opposed to military sales.
Senator MELCHER. My view is exactly this: If the Government of
the Philippines makes that recommendation in order to strengthen
their economic position, we should consider it. But since it is not a
part of the agreement at this point, we should not impose our will
on the Philippine Government. It is a question of, is it their coun-
try or are we supposed to dictate changing it in terms of an agree-
ment?
I think perhaps if the matter had been discussed with them pri-
vately, that might have been their recommendation. I think we
perhaps have gone beyond that stage now, where Members of the
House have expressed a strong feeling regarding the arrangement
and therefore the control of the money that would flow during the
first year, perhaps the second year, of payments.
In other words, the initiative here was wrongly put. If the Philip-
pine Government had asked for a change, that would be another
thing. It might be they would want to, if such a change had been
discussed with them.
But I think their clear problem has been, when are the first pay-
ments going to be made and when can they expect it. They have an
acute dollar shortage, and the quicker the better as far as they are
concerned.
Senator MURKOWSKI. I thank you very much, Senator, for your
testimony and your recommendations. They will be given consider-
ation by the subcommittee and the full committee. We wish you a
good day.
Senator MELCHER. Thank you, Mr. Chairman.
Senator MURKOWSKI. Our next witnesses will appear in panel
presentation, and they are: Paul Wolfowitz, Assistant Secretary for
East Asian and Pacific Affairs, Department of State; James A.
Kelly, Deputy Assistant Secretary, Department of Defense; Mr.
Charles W. Greenleaf, Assistant Administrator of Asia, Agency for
International Development.
Gentleman, we invite you to come up to the witness table, and
ask that you proceed as you appropriately have decided to present
your testimony.
1221
STATEMENT OF HON. PAUL D. WOLFOWITZ, ASSISTANT SECRE-
TARY FOR EAST ASIA AND PACIFIC AFFAIRS, DEPARTMENT OF
STATE
Mr. WOLFOWITZ. Good morning, Mr. Chairman. I am delighted to
have this opportunity to present our fiscal year 1985 request for bi-
lateral assistance for East Asia and the Pacific region.
I have a rather lengthy presentation which I will submit for the
record and will confine myself to some oral remarks.
Senator MURKOWSKI. I did notice the length of your prepared
statement and I agree with you entirely, it will be entered into the
record.
Mr. WOLFOWITZ. I would like to say something about our interest
and objectives in this terribly important region. The United States
has a long history of involvement with the peoples and nations of
East Asia and the Pacific. Our own population includes many who
came from the region. Our culture increasingly reflects their
influence.
For our part, we encourage and support in this region, as in
every other, the quest for a better life, for an open and democratic
political process, for economic freedom and prosperity, and for a
just and stable peace.
Economic developments in this region have been particularly
dramatic. As a result, East Asian countries now account for one-
sixth of all world trade, and their share is growing. American in-
vestments in the region now exceed $26 billion and continue to in-
crease. Our annual trade with East Asia and the Pacific exceeds
that with any other part of the world and is roughtly 30 percent of
U.S. foreign trade.
Although their past economic performance is extremely encour-
aging, East Asian and Pacific countries face today a number of
pressing problems. The world recession brought sharp declines in
income for producers of primary commodities, and we are only now
beginning to see an upswing in these markets.
Growth has been uneven in several countries and pressing politi-
cal and economic problems remain. The Philippine economy in par-
ticular is going through a difficult period, while the country is
facing an internal Communist insurgency.
While the countries of this region have looked primarily on trade
rather than aid for foreign exchange for development, official as-
sistance is still needed. We can expect, as in the past, that this as-
sistance will strengthen not only individual economies, but through
them the overall market system. That benefits us all.
In addition to our economic ties, we have essential strategic and
security interests in the region. These interests are threatened by
continued Soviet, North Korean, and Vietnamese military build-
ups, all of which far exceed any legitimate requirements for self-
defense.
The Soviets have greatly increased their ability to project mili-
tary power in the Pacific by a combination of huge numerical in-
creases, qualitative improvements, and forward deployment of
their forces to Vietnam. In 1983 they deployed strike aircraft in
Cam Ranh Bay for the first time and increased the number of sur-
veillance aircraft with which they monitor U.S. naval deployments.
1222
North Korea continues to spend at least 20 percent of its GNP on
its military forces, forces that are structured and deployed in an
aggressive posture toward the South.
Vietnam has doubled the size of its standing army since 1979 and
now, with more than a million men under arms, possesses one of
the largest standing armies in the world.
In this context, the economic and military assistance levels that
we are requesting help to provide the support and security within
which we and nations of the region can pursue, among others, the
following important goals.
First, the reduction of poverty and the economic and social in-
equities that foster violence and invite external interference;
Second, the strengthening of human rights and the commitment
to democracy and free markets by the countries of the region;
Third, the maintenance of close cooperative relationships with
countries that are in strategic proximity with key sea lanes of
communication;
Fourth, the assurance of access to the markets and raw materials
of the region;
And fifth, the protection of the front line states, Korea and Thai-
land, the enhancement of our treaty relationships with those two
countries and the Philippines and the maintenance and the use of
the critical military facilities in the Philippines.
There are, of course, other important objectives that our assist-
ance helps to support, such as efforts to cope effectively with the
large flows of refugees that still burden the region and efforts to
reduce narcotics trafficking.
Our fiscal year 1985 bilateral foreign assistance request for East
Asia and the Pacific totals approximately $793 million. That repre-
sents an increase of some 13.1 percent over the fiscal year 1984 al-
location of $701 million. If we include economic support funds
along with development assistance and Public Law 480 requests,
the largest share of this year's increase in both percentage terms
and actual dollars is in economic assistance.
The $314.8 million that we are requesting in economic assistance
represents an increase of 22 percent over the fiscal year 1984 allo-
cation of $258.1 million. Our combined request for military assist-
ance totaling $478.6 million is an increase of only 8 percent over
the 1984 fiscal year allocation.
Notwithstanding our great stake in the region, its vast size and
the security threats that it faces, our fiscal year 1985 request levels
for most program recipients are essentially straight lined from last
year, with little or no compensation for inflation. Most of the in-
creases we are seeking are in economic assistance.
The Philippines is the only country for which we are seeking
substantial increases, and those increases are tied to President
Reagan's best efforts pledge that was made as part of the 5-year
review of our military bases agreement last spring.
Thailand, the Philippines, and Indonesia are the three largest re-
cipients of economic assistance. All three have demonstrated the
capability to use such assistance effectively.
As for security assistance, some 92 percent of our request for the
region goes to the Philippines, Korea, and Thailand. This assist-
ance helps to maintain the unhampered use of military facilities in
1223
the Philippines, to deter direct military threats to Korea and Thai-
land, and to help the Philippines confront indigenous insurgencies.
In closing my oral remarks, I would like to add a general word
about our foreign policy toward this vital region. To a remarkable
extent, and especially given the divisions in this country in the
early 1970's, our policy toward the East Asia and Pacific region has
benefited from a bipartisan approach. That consensus is both reas-
suring to our friends and gives pause to our adversaries.
Congress has played a very important role in furthering this con-
sensus and helping to share an intelligent foreign policy for the
region. While serious problems and uncertainties continue to con-
front us, there has been a good deal of progress in the region as
well, for which our country and both the executive branch and the
Congress I believe can take some due credit.
Mr. Chairman, in view of the interest that this committee and
you personally have shown in increasing our efforts to improve eco-
nomic conditions in the region, particularly in the Philippines, I
am pleased to be able to note here that we have been able to put
together, in response to a joint request from the Government of the
Philippines and from Cardinal Jaime Sin, Archbishop of Manila-
and I may note, with some assistance from my predecessor here at
the witness stand, Senator Melcher, when he was in Manila-a
package of emergency food assistance for the urban poor in the
Philippines.
This assistance, which is in addition to $10 million already in our
fiscal year 1984 program, will consist of $4 million worth of title II
rice, a total of 10,000 metric tons, $1.5 million worth of rice that
will be provided through the world food program for an urban feed-
ing program, and approximately $700,000 of nonfat dry milk prod-
ucts.
In view of your own interest in our economic assistance pro-
grams for this region, I am sure you share my pleasure that we
have been able to make this additional contribution.
This is a good occasion to express my appreciation for the sub-
committee's support for our foreign assistance programs through-
out the region, and I might note also, to express my appreciation
for your personal role in highlighting a different subject, the for-
eign policy benefits that would derive from an expansion of our
energy trade with Japan and other nations of the region.
We look forward to working with the Congress, with this commit-
tee in particular, on foreign assistance and other matters in the
months to come as we continue our joint efforts to further the well-
being of the region and enhance our relations.
I would be happy to take your questions.
[Mr. Wolfowitz' prepared statement follows:)
1224
UurnXIMENT UN · STATE
FY 1985 FOREIGN ASSISTANCE REQUEST
STATEMENT OF
PAUL D. WOLFOWITZ
ASSISTANT SECRETARY OF STATE
BUREAU OF EAST ASIA AND PACFIC AFFAIRS
Mr. Chairman and Members of the Committee:
I am delighted to have this opportunity to present our FY
85 foreign assistance proposal for East Asia and the Pacific.
U.S. INTERESTS AND OBJECTIVES IN EAST ASIA AND THE PACIFIC
Our past investments in the economies and security of our
East Asian and Pacific friends have paid enormous dividends.
For 20 some years, East Asian countries have sustained higher
economic growth rates than any other part of the world. They
now account for one sixth of world trade, and their share is
growing. Our annual trade with East Asia and the Pacific
exceeds that with any other region. U.S. investments in the
region now exceed $26 billion, and continue to increase. And
despite formidable challenges to their security which persist
to this day, most of our friends have achieved a degree of
internal stability and national resolve rare in other parts of
the world.
However, just as important as the volume of trade is the
extent to which East Asian economies have come to symbolize the
dynamism of the free market system. Records for the largest
and longest sustained growth rates are held by nations from
this region. Such countries span the spectrum from lesser
developed and industrializing to industrial economies. It is
worth noting the extent to which they have accomplished
economic development while maintaining political stability as
well as cultural identity. These countries have accepted the
common features positive and negative which accompany
modernization. This is in sharp contrast to the dreary, rigid
mold the neighboring command economies have imposed on their
people.
There are also pressing economic problems to confront
despite the generally bright picture of the past several
years. The world recession brought sharp declines in income
for the many Asian and Pacific exporters of primary
commodities, and we have only begun to see an upswing in these
markets. The Philippines economy is going through a
particularly difficult period. Growth has been uneven in
several countries, and pressing politico-economic problems
remain.
We have a great stake in the prosperity and security of
East Asian and Pacific nations. Our FY 1985 assistance
programs are designed to protect this stake and to expand it to
those areas which are less prosperous and less secure.
Our foreign assistance proposals have also been developed
in the context of a disturbing buildup of Soviet military
1225
strength over the past few years. Unable to match the vitality
and progress of our friends in East Asia and the Pacific, the
Soviet Union, North Korea and Vietnam are threatening the
region with military build-ups that far exceed their defensive
needs. Huge numerical increases in land, sea and air forces
have been buttressed with qualitative improvements which are
becoming significant during this decade.
Soviet ground forces east of the Urals increased from 20 to
over 50 divisions since 1965, including deployments on the
Sino-Soviet border. Soviet air forces in the four eastern-most
military districts now have more than 3000 combat aircraft.
The Soviet Pacific Fleet is now the largest fleet in the Soviet
navy and contains approximately one-third of all Soviet
submarines, one-fourth of all principal surface combatants, and
one-third of all naval aircraft.
Soviet ability to project power is further enhanced by
forward deployment in Vietnam. Soviet surface combatants and
attack submarines normally found at Cam Ranh, combined with
aircraft deployments, present a clear and current danger to
free world sea lanes.
Recent evidence demonstrates that the Soviet build-up
continued during this past year. The Soviet Union has for the
first time deployed its Badger bombers to Cam Ranh Bay. And
following its downing of the KAL airliner, it stationed MIG-23
fighters in the Japan Northern Territories occupied by the
Soviets since world war II. Its SS-20 intermediate nuclear
missile force in Asia has grown rapidly from 99 launchers
February last year to 135 today.
Apart from the Soviet threat, the regional military threats
have continued to increase at a disturbing rate. Vietnam has
doubled the size of its standing army since 1979, and now with
more than a million men under arms, possesses the third largest
standing army in the world. Improvements in firepower, command
and control and weaponry have continued apace with the
numerical increases. In addition the Vietnamese have assembled
forces along the Thai-Kampuchean border which suggest they may
again this year attack Kampuchean refugee settlements on the
border.
North Korea continues to spend at least 20 percent of its
GNP on its military forces in an apparent effort to further
increase its numerical superiority over the South in land and
air forces. They have furthermore in Rangoon descended to
barbaric behavior against their southern countrymen, which
casts grave doubts over their protestations of peaceful
long-term intentions, and which violated the sovereignty of a
neutral country.
1226
In view of these economic and security challenges, we
believe our resources should be allocated to accomplish the
following objectives:
To strengthen human rights and the commitment to
democracy and free markets in the region.
To reduce poverty, economic and social inequalities which
foster violence and invite external interference.
To assure access to the markets and raw material of the
region.
To maintain close, cooperative relationships with
countries in strategic proximity to key sea lanes of
communication.
To protect the front-line states (Korea and Thailand),
enhance our treaty relationships (with Korea, the Philippines
and Thailand), and maintain use of military facilities in the
Philippines.
Accompanying these major goals are a number of other
important objectives such as effectively coping with refugee
flows and reducing narcotics cultivation and trafficking.
REGIONAL PROGRAM OVERVIEW
As has been the case since FY 1983, the development and
security assistance programs are integrated components of a
single program. All components are directly related to U.S.
interests in East Asia and the Pacific and Indian oceans.
The FY 85 bilateral foreign assistance request for East
Asia and the Pacific totals approximatly $793 million, and
would be an increase of some 13.1 percent over the FY 84
allocations of just over $701 million. Our total request for
economic assistance (DA, P.L. 480, ESF) is for $314.8 million
and would represent an increase of about 22 percent over the FY
84 allocations of $258.1. Our request for military assistance
(FMS, MAP, IMET) on the other hand would total $478.6 million
for FY 85 and represents an increase of only 8 percent over the
FY 84 allocations of $443.1.
Because of the strength of the East Asian countries
themselves, the level of effort required of us in the region is
proportionately a very small share of the U.S. world-wide
effort, even though the region itself is as important to U.S.
interests as any other region of the world. The East Asian
share of the FY 85 worldwide bilateral foreign assistance
request is some 5.1 percent.
1227
East Asia's share of the worldwide economic and military
assistance allocations for FY 85 would be approximately 5 and 8
percent respectively. Korea, facing the most formidable
regional military threat, requires the largest allocation of
military assistance.
Perhaps more important than the arithmetic balance between
economic and military assistance is the manner in which we
target our scarce resources to meet those problems which are
most closely linked to our national interests.
The largest recipients of Development Assistance are
Thailand, a treaty ally and front line state, the Philippines,
also a treaty ally and the host country for important joint
defense facilities, and Indonesia, which in area and
population constitutes roughly half of Southeast Asia. All of
these states have shown the capability of putting development
assistance to good use. They also sit astride or near key sea
lanes of communication.
Notwithstanding our great stake in the region, its vast
size, and the formidable threats to its prosperity and
security, our FY 85 request levels for most program recipients
are essentially straight-lined from the FY 84 allocation with
little or no compensation for inflation. We are requesting a
6.2 percent increase in Indonesia's total request level,
chiefly to augment its PL 480 program, a proposal to increase
Burma's Development assistance by $2.5 million, and modest IMET
increases in several countries.
The Philippines is the only country in the region for which
we are seeking substantial increases. In the Philippines we
have requested a total increase in bilateral assistance
programs of nearly $80 million to bring the total program Level
from $151 million in FY 84 to nearly $231 million for FY 85.
This level is, as you know, in accordance with President
Reagan's "best effort" pledge to seek $900 million of
assistance over a five year period following the review of our
Military Bases Agreement last spring. These bases have immense
strategic value for the U.S. Moreover, the U.S. presence and
assistance can help the Philippines to cope more effectively
with its difficult economic and security problems.
Some 92 percent of our security assistance (FMS, MAP, IMET,
ESF) request for the region is allocated to Korea, the
Philippines and Thailand. This assistance helps to deter
direct military threats to Korea and Thailand and to enhance
the U.S. strategic posture in Asia, the Pacific and Indian
Oceans by maintaining the use of military bases in the
Philippines.
1228
Our FY 85 military assistance request recognizes that
countries with low per-capita incomes and severe debt servicing
problems may require some form of concessional financing. The
Philippines fits this category and we have therefore, requested
that half of the FMS credits proposed for the Philippines be
offered at a concessional interest rate of 5%. Concessionality
for the Philippines takes into account the serious and mounting
economic difficulties it is experiencing.
In Indonesia a loss of export earnings and a current
account deficit of about $6.5 billion last year also indicates
the need for concessional financing. In addition, in an effort
to hold down our overall levels while providing necessary
assistance to a non-aligned state with which we have a very
important relationship, we have proposed reducing Indonesia's
total FMS levels by $5 million from FY 84,.
Considering the extremely heavy military purchasing
requirements forced on South Korea by the continuing North
Korean military buildup, we are requesting 10/20 loan terms for
South Korea. This form of concessionality extends the loan
terms for a country to provide a 10-year grace period in which
only interest is paid followed by a 20-year repayment period.
In this way we can demonstrate our interest in helping South
Korea deter another attack by North Korea while still holding
our FY 85 FMS request level down to last year's.
I would now like to discuss each of these country programs
in greater detail.
SOUTHEAST ASIA
PHILIPPINES
The Philippines has recently experienced the shock of the
Aquino assassination, followed by demonstrations, some
political changes and growing economic problems. We have
spoken out clearly on these issues. The U.S. Government has
expressed its outrage over Aquino's murder and we have urged
that it be investigated quickly and vigorously with a view to
bringing the perpetrators to justice. An independent board,
which has gained wide respect in the Philippines, is now
investigating this crime.
We have expressed our strong desire for rapid political
normalization; in particular, we have stressed the importance
we attach to the Philippines' holding free and impartial
elections in order to have a clear expression of the public
will and to encourage the growth of a new generation of
political leaders.
1229
There has been progress in this area. A new Presidential
succession mechanism is in place. In response to opposition
demands, provinces rather than regions will be the new
geographic units for elections, and a new voter registration
will take place. A new election code, which is acceptable to
key elements of the opposition, has been approved. Many key
opposition groups are presenting candidates. Additionally,
President Marcos has agreed to appoint some new independent
members on the election Commission.
For FY 85 we are placing our emphasis in the Philippines on
ESF. We are requesting $180 million in economic and security
assistance, of which $95 million is in ESF. We have
substantially increased economic assistance. Our ESF request
for the FY 85-89 year period is $475 million, up from $200
million in the previous five year priod. We more than doubled
ESF, an increase of 137%.
have significantly increased our ESF partly in
recognition of the fact that providing government services to
address the economic and social conditions in rural areas is
vitally important. This is a reality which the Philippine
Government also recognizes. ESF takes on added importance
because of the deteriorating economy during the past year.
Discussions with the Philippine Government concerning the
use of ESF have not yet been concluded, but we expect that half
of the funds will be devoted to a continuation of such
development projects as school construction, feeder roads and
municipal development in areas adjacent to clark Air Base,
infrastructure development in provinces near our bases, and
rural energy development, and construction of market
facilities, roads and schools throughout the Philippines. The
other half of the FY 85 ESF program will be devoted to a new
activity: local currency supporting the Philippine
Government's contribution to ongoing AID, World Bank and Asian
Development Bank activities.
We are requesting $39 million in Development Assistance
and $9.75 million in PL 480 Title II (excluding World Food
Program donations of $209,000). The global recession, with low
commodity prices and high interest rates for external
borrowing, have slowed export and economic growth. Depressed
domestic demand and investment activity have further aggravated
fiscal and balance of payments problems. Rural areas and
poverty groups have been particularly hard hit by the economic
slowdown.
1230
Some four million households in the Philippines are
considered below the poverty line. The Development Assistance
Program focuses on the poorer regions of the country with
emphasis on agricultural production, rural employment
generation, and family planning. PL 480 assistance also has
been centered in rural areas. These programs contribute to
development and stability in the Philippines.
The value of our military facilities in the Philippines
remains unchanged. Fortunately, throughout the recent
difficulties, the attitude of the Philippine people toward the
United States has remained constant, and support for our
military presence continues without any significant change.
The requested security assistance levels for the
Philippines are closely linked to the five year review of the
Military Bases Agreement conducted in April-May 1983. On the
day the review was successfully completed, President Reagan in
a letter to President Marcos made a "best efforts" pledge to
seek $900 million in security assistance for FY 1985-89.
Military cooperation is an integral part of the
US-Philippine relationship and has been so since the
independence of that nation. We use facilities which are
located on Philippine bases, work closely with our military
hosts, and enjoy unhampered use of these facilities. . The
Philippines has always procured the bulk of its military
equipment from the US.
For a number of years, the military's share of the national
budget in the Philippines has been smaller than that of any
other ASEAN country. Although the size of the military
establishment has grown in the past decade, its arsenal remains
very obsolete.
Yet, it is the Philippines, alone among ASEAN
countries, that faces serious, active insurgencies.
The communist sponsored insurgency, if unchecked, would
inflict suffering on the Philippine. people and ultimately
threaten US interests. In addition, while the Philippines does
not face any imminent foreign threat, the Soviet military
presence in the region has increased and the Philippines does
require a modest deterrent capability.
We have significantly increased our request for IMET, to $2
million. GOP financial constraints have resulted in a
lessening of the Philippines' contribution to the program,
whose value to both countries has, if anything, grown. In this
period of change and upheaval in the Philippines it is more
important than ever that we strengthen the existing close
personal ties with its younger military leaders, whose
1231
professionalism has been one of the country's strengths.
We have included MAP in the Philippine program for the
first time in four years, in recognition of the serious
economic situation there. We expect the Philippine Government
to request use of MAP and FMS financing for helicopters, trucks
anā armored vehicles, communications and engineering equipment,
new patrol vessels, retrofitting of ships, and spare parts for
major items of equipment.
We are requesting $25 million in MAP and $60 million in
FMS. The combined FMS/MAP total of $85 million compares with
$50 million last year. Our FY 85-89 request is for FMS/MAP of
$425 million compared with $300 million the previous five
years, an increase of 42%. These increases are less than they
appear because inflation has eroded the Philippine package
which had maintained constant levels since 1979. Moreover,
Philippine needs increased significantly in intervening years,
and the Philippine government suffered severe budgetary
difficulties.
THAILAND
Our
Thailand has been a close treaty ally for decades.
support for Thailand's continued development and security is
seen as a gauge of the American commitment to Thailand and to
ASEAN generally.
On its eastern border, Thailand faces a strong, well
proven Vietnamese military threat, in position there since late
1978. This has prompted an overdue modernization of Thailand's
military forces designed to provide a deterrent to further
Vietnamese aggression. The Thai must be accorded a high
priority in the allocation of assistance to enable them to
enhance their self-reliance.
Our MAP request is $5 million, the same
is $5 million, the same as for last year.
This is the only form of concessionality in our Thai assistance
package which can go for equipment purchases.
We are requesting $98 million in FMS funding, an increase
of $4 million over last year's amount. These funds will go for
a long overdue upgrading of Thai Air Force equipment, for the
Army's acquisition of additional armor, radar, armored
personnel carriers and howitzers and Navy missiles for new
patrol craft it has ordered.
For IMET funds, we are asking
are asking $2.4 million , an increase
of $200,000 over FY 1984. These funds will cover necessary
training for newly acquired equipment. The Thai invariably
make good use of IMET, and are eager to acquire the technical
1232
skills needed to use and maintain modern equipment.
The Thai economy, even while saddled with heavy. defense
requirements, has performed reasonably well. Social and
economic development needs are not being ignored because of
defense spending. Thailand's free market economy and open
society have thus far been able to balance these interests
skillfully. Security assistance from the United States has
been pivotal.
Our development assistance request of $27 million
represents a modest decrease from last year's figure of $29.3
million. It contributes, however, to Thailand's continued
emphasis on balancing necessary defense expenditures with
domestic development expenditures. Part of this assistance will
go to projects designed to deal with rural poverty in the
Northeast, where the communist insurgency once flourished.
new AID strategy emphasizing science and technology is being
developed for Thailand as well.
A
Thailand, with our help, is determined not to abandon these
villagers. ESF funds also directly contribute to the upholding
of Thailand's policy of first asylum for refugees, by assisting
refugee impacted Thai border villages.
Despite some pushoff problems, the Thai have continued to
support the refugee program. They have granted first asylum to
over 600,000 refugees since 1975, including 80,000 boat people,
and have 132,000 in refugee camps now awaiting resettlement,
thereby contributing significantly to international efforts to
cope with aggressive Vietnamese policies.
The UNHCR) Thai anti-piracy program, to which we contribute,
has not produced the results we had hoped for. Although there
is active patrolling, air and sea, by the Royal Thai Navy, no
pirates have been apprehended since the inception of the
program. Piracy attacks also still occur on many refugee boats
but the incidence has decreased from about 70-80% in 1982 to
50-60% in late 1983. A UNHCR assessment team has reviewed the
program and suggested a number of improvements that we support.
The RTG is considering these proposals.
On its eastern border, Thailand faces a strong, well proven
Vietnamese military threat, in position there since late 1978.
This has prompted an overdue modernization of Thailand's
military forces. This modernization, which has had our
support, will not make Thailand a match for the Vietnamese. It
will, however, in conjunction with other efforts, provide a
deterrent to further Vietnamese aggression. In order to
provide a credible deterrent, which will enable Thailand to
become more self-sufficient in an emergency, the Thai must be
1233
accorded a high priority in the allocation of assistance.
The Thai economy, even while saddled with heavy defense
requirements, has performed reasonably well. Social and
economic development needs are not being ignored because of
defense spending. Thailand's free market economy and open
society have thus far been able to balance these interests
skillfully. Security assistance from the United States has
been pivotal.
Our MAP request is $5 million, the same
the same as for last year.
This is the only form of concessionality in our Thai assistance
package which can go for equipment purchases.
In 1985, we are requesting $2.4 million in IMET funds, an
increase of $200,000 over FY 1984. These funds will cover
necessary training for newly acquired equipment. The Thai
invariably make good use of IMET, and are eager to acquire, in
particular, the technical skills needed to use and maintain
modern equipment.
For FY-85, we are requesting $98 million in FMS funding, an
increase of $4 million over last year's amount. These funds
will go for a long overdue upgrading of Thai Air Force
equipment and for the Army's acquisition of additional
equipment such as armor, radar and armored personnel carriers.
The Navy also requires missiles for new patrol craft it has
ordered.
INDONESIA
The geo-strategic significance of Indonesia's location and
size, and its standing as a moderate among non-aligned nations
and in the Islamic world add to the importance of our
relationship. Development and security assistance to Indonesia
is also consistent with our strong support for the Association
of Southeast Asian Nations (ASEAN), which represents the best
hope for peace and stability in Southeast Asia.
A strong and moderately-growing development assistance
program in Indonesia is necessary to increase manpower and
management skills, to advance agricultural research, to
continue to upgrade Indonesia's educational system, and to
promote the private sector's role in economic development.
Development assistance of $65 million is being requested
for Indonesia for FY 85, an increase of $1 million over the FY
84 allocation. An increase in pl 480/Title I assistance to $40
million is requested in recognition that rice and grain
supplies, have been diminished by late rains and droughts in
some areas. Food stocks need to be maintained at acceptable
1234
levels in order to forestall hardship and social unrest, as
well as to provide adequate emergency shipments to impoverished
areas. A PL 480/Title II request of a little over $7.7 million
supports voluntary agency programs and the world food program.
The requested FY 85 security assistance program for
Indonesia consists of $2.7 million in IMET funding, plus $40
million in FMS direct loans, half of this amount at
concessional interest rates and half at treasury rates. This
mix of concessional and treasury rates is considered necessary
to assist Indonesia in recovering from the effects of the
worldwide recession and serious budgetary shortfalls due to
declining oil and non-oil export revenue in 1981-82. In
addition to the FMS credit program, Indonesia is expected to
purchase some equipment through FMS cash procedures.
Indonesia's military forces remain critically short of
qualified technicians, program managers and officers. Most
U.S. training will be in technical fields related to these
shortages. The level of funding requested should permit
between 250 and 300 military students to attend our armed
forces schools in FY 85.
IMET deserves the highest priority support because of the
important role played by the professional military in
Indonesian society, the utility of the program in furthering
our foreign relations objectives and the desirability of mutual
service-to-service contacts.
Although Indonesia's recent economic problems have caused a
slowdown in military force modernization, U.S. security
assistance has helped to sustain a number of important
programs, including aircraft maintenance and spare parts, ship
overhaul and spare parts, improvements in air and sea defense
systems, the purchase of war reserve munitions, and, most
importantly, advanced professional training for the Indonesian
army, navy and air force.
MALAYSIA
U.S.-Malaysian relations are good and were enhanced by the
January visit to Washington of Prime Minister Mahathir bin
Mohamad. Malaysia's continued political stability and economic
development are important to peace and stability in Southeast
Asia. The Malaysians have also expressed interest in continued
defense cooperation with the United States within the context
of their non-aligned status.
Strategically located on the Strait of Malacca and faced
with Soviet-backed Vietnamese forces occupying nearby
Kampuchea, Malaysia is a responsible member of the Islamic
1235
Conference and Non-Aligned Movement. Malaysia has played a
constructive role in international affairs and has forcefully
advanced ASEAN's strategy to bring about a withdrawal of
Vietnamese forces from Kampuchea.
IMET plays a significant role in the U.S.-Malaysian
military relationship by providing a framework in which
mutually beneficial professional relationships are
established. The IMET request of $1 million is a slight
increase from the $900,000 level of FY 84. The IMET program
also provides an important means for the Malaysian Armed Forces
to meet their training needs as they attempt to adjust to a
more conventional force structure and sophisticated weaponry.
The $10 million FMS request level for Malaysia in FY 85 is
an increase from the FY 83 level of $4 million and would
restore the program to its FY 82 level. Although Malaysia has
not in the past made extensive use of FMS credits, additional
purchases are now likely as its economy improves and the
restrictions of the government austerity program are eased.
Possible purchases include transport aircraft, naval vessels
capable of patroling its exclusive economic zone (EEZ) and
weapon systems designed to enhance the modernization of
Malaysia's armed forces.
SINGAPORE
The U.S. enjoys extensive commercial relations with
Singapore, which is the site for many U.S. business regional
head quarters. Although formally non-aligned, Singapore shares
U.S. strategic perceptions and goals and its positions in
international fora support interests common to both our
countries.
Physically a tiny city-state, Singapore has come to play a
role in Southeast Asia completely out of proportion to its
size. Strategically located at the juncture of the Pacific and
Indian Oceans, Singapore permits valuable access for our
military forces to its modern ship and aircraft support
facilities It opposes an increased Soviet presence in
Southeast Asia and supports a continuing regional security role
for the U.S. as a barrier to Soviet expansion.
For FY 85, we are again requesting an IMET program of
$50,000. This modest amount of assistance serves to
demonstrate our continuing interest in Singapore's security and
helps ensure that its armed forces continue to look to the u.s.
for training and equipment purchases.
1236
BRUNEI
Brunei became fully independent January 1, 1984 and has
subsequently become a member of the Association of Southeast
Asian Nations. As ASEAN is the focus of U.S. policy in
Southeast Asia, close ties with all its individual members are
important.
Oil-rich Brunei offers significant commercial opportunities
for U.S. business and investment. In addition the Brunei
defense force which consists of the Royal Brunei Malay Regiment
numbering approximately 3000 men has expressed interest in
close ties with the U.S. Armed Forces.
Our security assistance request for FY 85 consists solely
of $30,000 in IMET. This is designed to furnish required
training as the Bruneian armed forces prepare to assume greater
responsibility. Further assistance will not be required, but
it is possible that Brunei may in time consider FMS cash
purchases.
ASEAN
The cornerstone of our policy in Southeast Asia is support
for the Association of Southeast Asian Nations, which has been
a highly effective force for stability and prosperity in the
region. In addition to the bilateral assistance programs to
its six members, we have developed a linited but high quality
cooperative regional assistance program as a further indication
of our commitment to the organization. Focussing on areas of
special concern to ASEAN we have funded technical assistance
activities in watershed management, energy and plant quarantine
as well as visits to the U.S. by media leaders. We are just
initiating a new program for small business requested by ASEAN
and we will also support a U.S. private sector effort to
enhance technology cooperation with the ASEAN business sector.
We are requesting $4.8 millon for this program, a slight
increase over our FY 1984 request of $4.5 million.
BURMA
Our principal objectives in Burma are to help prevent the
cultivation and trafficking of illicit Burmese narcotics to
international markets and to encourage Burma's evolution toward
a stable, prosperous and more open society which will
contribute to stability in Southeast Asia.
Burma's leadership remains committed to non-alignment,
socialism and self-reliance. However, within that context it
has moved toward closer cooperation with the West, including
the U.S., particularly in such areas as development, advanced
1237
technical training and educational exchanges. Burma recently
broke diplomatic relations with North Korea over the October 9,
1983 terrorist bombing in Rangoon which was carried out by
North Korean commandos.
As part of its opening to the West, the Burmese Government
has welcomed expanded bilateral cooperation with the U.S. in
areas such as narcotics control, where we are assisting Burmese
efforts to suppress opium cultivation and trafficking. Both
our narcotics and our development assistance programs have
responded to specific Burmese requests, and have led to a
gradual strengthening of our bilateral relations.
The $15 million in Development Assistance proposed for FY
1985 will enable AID to continue its support of Burmese efforts
to improve rural primary health care, to increase the
production of food and oilseed crops, and to modernize oilseeds
processing and distribution. It will also provide funds for a
new agricultural research and development project.
The modest budget increase proposed ($2.5 million over the
FY 1984 level) will maintain the momentum of our recently
established AID program, assist Burmese development efforts in
a promising new area, and demonstrate to the Burmese that we
are serious about helping them to meet their development needs.
The proposed increase in IMET funding to $300,000 for FY
1985 will provide additional training opportunities in the U.S.
for Burmese military officers. The Burmese Ministry of Defense
attaches considerable importance to this program, and has taken
pains to select its most promising officers for training in the
U.S. Since 1981, approximately fifty such officers have gained
exposure to U.S. concepts and methods by attending courses in
helicopter maintenance, field artillery and other subjects.
Since the military plays a central role in contemporary Burma,
IMET training should have a favorable long-term impact on
Burmese attitudes toward the U.S.
LAOS
Bilateral developmental assistance to Laos is at present
prohibited by the Foreign Assistance Act. The Administration
has told officials of the Lao People's Democratic Republic that
action to lift the Congressional ban on assistance would be
possible only once a pattern of sustained cooperation had been
established towards resolving the fate of Americans missing in
Laos from the war in Indochina.
Such a pattern of sustained cooperation has not yet been
established, although we are encouraged by recent progress on
this issue, including the December 1983 crash site survey by
1238
the Joint Casualty Resolution Center. If future progress
develops into a pattern of sustained cooperation, the
Administration would consult with members of Congress on the
question of lifting the ban on assistance to Laos.
NORTHEAST ASIA
KOREA
Continued peace and stability in Northeast Asia is
essential to our own security. The prevention of North Korean
aggression against South Korea is indispensable for peace and
stability in the region and the world. For the past 30 years
the US-ROK alliance has been successful in its central aim
deterring aggression and preventing a recurrence of hostilities
on the Korean peninsula. This absence of hostilities marked
though it has been from time to time by examples of North
Korean aggression such as the Pueblo Incident, the raid on the
Blue House, or, more recently, the North Korean attack in
Rangoon has allowed great economic and social progress in
South Korea.
In spite of South Korea's impressive development, the need
for continued US security assistance is as strong as ever. In
the past decade, North Korea which we estimate spends over 20
percent of its GNP on armaments, has carried out a major force
Duitdup which has seriously affected the military balance on
the peninsula.
North Korea has about 25 percent more armed forces than the
South, and 2 1/2 times as many armored personnel carriers,
artillery pieces, and tanks. North Korean tanks are larger and
more modern than those of the ROK. The North also maintains a
100,000 man commando force, probably the largest such force in
the world. With major elements of its forces only 35 miles
from Seoul, the North could launch an attack with very little
notice.
To counter this threat, the ROK, which spends six percent
of its GNP on defense, is engaged in a major force improvement
program designed to increase warning time, augment its
effective firepower, and enhance its air defense capability.
The program, which includes co-production of the F-5, and
acquisition of the F-16, TOW missiles, and HAWK modifications,
will cost several billion dollars during the FY 82-86 period,
with almost half slated for procurement from the U.S.
To assist the vital efforts of this front-line ally, we
provided a total of $185 million in FMS credits in FY-83 and
plan to provide $230 million in FY-84. It is worth noting in
this regard that during FY 82, the ROK paid some $254 million
1239
to the USG in principal and interest charges for previous
loans, exceeding by about $88 million the amount of new credits
provided in that year.
To ease the burden Korea faces in maintaining a credible
deterrent, we are proposing $230 million FMS credits for the
ROK, the same amount it should receive in FY 84. We also are
seeking legislation to provide 10 years grace and 20 years
repayment terms for Korea. This will enable Korea to devote a
larger proportion of each year's allocation to actual weapons
purchases, thereby permitting the Force Improvement Program
(FIP) to proceed on schedule.
Our Korean ally is doing its utmost for its own security.
It is clearly in the American interest to help Korea meet its
force improvement goals and mutual security objectives. We
should bear in mind that Korean combat forces, whose
capabilities are enhanced by FMS credits, are stationed with
our own forces along the DMZ and would operate with us under a
joint command in time of war. Thus, we have a very direct
stake in the force improvement efforts of this frontline ally.
PACIFIC ISLANDS
Since World War II the Pacific Islands have undergone great
changes, and in the past twenty years most have become
independent states. Our relations with them are friendly; we
share to a remarkable degree a belief in democratic government
and devotion to individual liberties. It is in the U.S.
interest to assist island governments in their efforts to
promote economic growth.
For FY 1985, we have requested $6 million in Development
Assistance to support a region-wide program with emphasis on
improving agricultural rural development and fishing
techniques, and to promote regional cooperation in this area of
small populations and small markets.
World War II also demonstrated the importance of the
Pacific Islands to our security. These islands lie across the
lines of communication between the u.s. West Coast and
Australia, New Zealand and Southeast Asia. Our military
assistance would consist of small IMET programs with a total
dollar value of $190,000.
FIJI
Fiji is a functioning democracy and a leader in regional
organizations. Our bilateral relations are excellent. "Fiji
also makes important contributions to international
peacekeeping efforts. The RFMF maintains more troops with the
1240
Sinai Multilateral Force and Observers (MFO) and with the UN
Interim Forces in Lebanon (UNIFIL) than are on duty in Fiji
itself.
Our $80,000 IMET program requested for FY 85 represents no
increase over FY 84'6 funding level. The money would assist
the Royal Fiji Military Forces (RFMF) in acquiring needed
professional and technical skills to better operate a small,
but modern defense force.
PAPUA NEW GUINEA
The United States has enjoyed friendly relations with Papua
New Guinea before and since its independence from Australia in
1975. The country's size, strategic location and resouces make
it a major actor in the South Pacific.
Papua New Guinea, which maintains the largest defense force
in the Pacific Island region, is expected to use its IMET grant
to provide training in improving logistics, management and
administrative capabilities, and search and rescue techniques.
The proposed FY 85 IMET program of $50,000 represents an
increase of $20,000 over last year's allocation.
TONGA
Tonga continues to be a reliable friend for the U.S. in the
South Pacific. The Tongan Government has welcomed port calls
by the U.S. Navy and has stated its willingness to host nuclear
powered vessels even when other island governments, concerned
an upsurge in public sensitivity to nuclear matters, have
been reluctant to do so. The proposed FY 85 IMET funds are
expected to be used for training in management, and maintenance
and repair skills. The IMET program of $30,000 represents no
increase over FY 84.
over
SOLOMON ISLANDS
The Solomon Islands, independent since 1978, is the second
largest of the Pacific island states in area and the third
largest in population. Its foreign policy has been markedly
pro-Western. The Government is attempting to upgrade its
rudimentary defense force with the objectives of assisting in
creating skills necessary for effective control and maintenance
of security and management of forces.. The requested FY 85
IMET level is $30,000 and as a new program, represents a
positive U.S. response to the expressed interest of the Solomon
Islands in obtaining assistance in upgrading their military
skills.
1241
TRUST TERRITORY OF THE PACIFIC ISLANDS
The United States has administered the Trust Territory of
The Pacific Islands (TTPI) since World War II and, since 1947,
under a Trusteeship Agreement with the United Nations. since
1969 we have been negotiating with the leadership of the TTPI
for new political relationships.
Last year two of the island governments, the Federated
States of Micronesia (FSM) and the Republic of the Marshall
Islands completed all the necessary procedures to enter into a
new and unique relationship with the United States, that of
Freely Associated States. The Administration is submitting the
Compact of Free Association to this Congress in order to
complete the process on our side and initiate the new
relationship with the FSM and the Marshalls.
For FY 1985 we will request $295,490,000 for the Compact
upon the enactment of the necessary authorizing legislation.
The Compact will regulate the relationships between the
United States and the Marshall Islands and the FSM. Under the
Compact, the United States is granted full powers and authority
for defense and security matters, including the right to
establish military bases and support activities, throughout the
freely associated states. The Compact specifies the amounts
and attendant objectives and purposes of United States grant
and service assistance to each of the freely associated
states.
The overall policy goals of the United States with regard
to the Compact are based on a review of United States policy by
the Senior Interagency Group on Foreign Policy and were
approved by the President on September 21, 1981. An important
policy goal of the United States is to see political stability
in the freely associated states. The Compact also implements
long-term United States national security requirements and
provides the basis for the accomplishment of shorter ter
contingency basing and logistic needs. The Compact
accomplishes the equally important goal of political stability
through provision of annual grant assistance.
The first year estimate exceeds by $152.8 million the
second year estimate and exceeds by $146.2 million the average
annual budget estimate. This is due to the inclusion of
several one time payments, the most significant of which is a
one-time $150 million payment for the settlement of all claims
resulting from the United States Nuclear Weapons Testing
Program in the Marshall Islands.
1242
CHINA
I now want to emphasize the importance the Administration
places on completing action on proposed legislative changes for
China.
Our expanding economic, scientific, and cultural ties have
been mutually beneficial and have become a very important
element of our overall relationship. Our commercial relations
are particularly healthy and hold great promise for both
countries. Since the establishment of diplomatic relations in
January 1979, trade with China has grown dramatically,
resulting in a U.s. trade surplus of approximately $6 billion
in 5 years. While two-way trade declined in both 1982 and 1983
from the record high of $5.5 billion in 1981, we expect
bilateral trade to bounce back to between $5.5 and $7 billion
in 1984 with an anticipated increase of high technology exports
to China.
We share a broad range of official exchanges over 100
Chinese delegations visit the U.S. each month and over
10,000 Chinese students now study in the U.S. The 21 Protocols
under the U.S.-China S&T Agreement have promoted valuable
exchanges in such widely varying fields as earthquake studies,
hydropower, and health.
Our rapprochement with China over the past decade has also
made important contributions to global and regional peace and
stability China shares our deep concern about Soviet
aggression in Afghanistan and the Soviet-backed occupation of
Kampuchea. U.S.-China relations have meshed well with our
existing alliances and security relationships in Asia and
Europe. The recent visit of Chinese Premier Zhao Ziyang helped
to underscore the importance of a stable and enduring
U.S.-China relationship.
Consistent with our growing relationship, the President in
June, 1981 decided to seek legislative change to laws that link
China with the Soviet Bloc. I am pleased to note that, with
your assistance, important progress was made in this effort
during the past two years in clarifying the provisions of the
Agricultural Trade Development and Assistance Act and by
lifting the prohibition on importation of Chinese furskins.
The proposal to eliminate the prohibition of foreign
assistance to China, which was submitted to the Congress in FY
1983 and, again, in our 1984 authorization bill, received
favorable consideration in both the Senate Foreign Relations
and House Foreign Affairs Committees. However, in both years,
the overall bill was not passed for reasons unrelated to
China. We have resubmitted the proposal concerning China in
this year's foreign assistance bill.
1243
Amendment of the Foreign Assistance Act would allow China
to participate in ongoing AID technical assistance programs,
under current funding levels, in the same manner as do most
other countries. We previously provided the committee staff a
paper outlining the type of ongoing projects for which we would
consider China's participation. I would stress that Chinese
participation in these programs will not threaten AID programs
with other countries but will contribute to China's development
through existing AID research and training projects while
familiarizing the PRC with commercially available U.S.
technology.
Our motive in seeking this change is the same as two years
ago; the President wants to remove an anachronism in our laws
that links China with the Soviet-bloccountries. We have no
plans for bilateral assistance programs, although some Chinese
have expressed interest in low interest loans.
Any such
programs would have to be authorized and appropriated by the
Congress.
CONCLUSION
In conclusion, our FY 85 foreign assistance request is
designed to protect and reinforce the great strides our friends
have made in bringing prosperity and security to East Asia and
the Pacific. Although the threats to this progress have grown,
we have limited our request to levels essential to our
interests. Economic and military assistance programs are,
believe, well balanced and both are targeted against economic
problem areas and critical military threats. We would most
welcome this Committee's support.
we
1244
Senator MURKOWSKI. Thank you.
Mr. Kelly, do you have a statement?
Mr. Kelly is Deputy Assistant Secretary of the Department of
Defense.
STATEMENT OF HON. JAMES A. KELLY, DEPUTY ASSISTANT
SECRETARY, DEPARTMENT OF DEFENSE
Mr. KELLY. Mr. Chairman, thank you for this opportunity to
offer comments from the Defense perspective on the administra-
tion's fiscal year 1985 foreign assistance request for East Asia. I
have submitted a statement for the record, and with your permis-
sion I will summarize it.
Senator MURKOWSKI. It will be entered into the record.
Mr. KELLY. Thank you.
We in the Department of Defense are convinced that a strong,
coherent, and reliable security assistance program, adquately
funded by Congress, is an absolutely essential complement to our
efforts to strengthen America's defenses. The administration's for-
eign assistance requests for East Asia and the Pacific have our
strongest support. They are fully justified. If anything, they are
less than we really need because of our efforts to keep the requests
to minimum prudent levels in view of economic constraints.
I would like to emphasize the following points, which I discuss
more fully in my prepared statement:
We continue to urge all of our allies to do more in the common
defense. Japan, Australia, and New Zealand are capable of doing so
without U.S. security assistance. However, our other three East
Asian allies look to us for financial support and they—the Republic
of Korea, Thailand, and the Philippines-would receive more than
90 percent of the major portion of the East Asian fiscal year 1985
request for security assistance.
Korean modernization requirements in the face of a North
Korean buildup easily could justify FMS credit levels higher than
we can request in the face of competing worldwide security assist-
ance needs. Korea pays us back currently more than the borrowing
authority which is requested. Thus, it is all the more important
that we provide the relief sought in the form of extended repay-
ment terms, 10 years grace and 20 years repayment, for Korea.
The Philippines' fiscal year 1985 levels are the first increment of
President Reagan's best efforts pledge, given at the time of the
1983 review of the military bases agreement. The United States
and the Philippines each contribute to our mutual security, the
Philippines by providing secure and unhampered use of facilities at
Clark and Subic, which are very important to our forward deploy-
ments, the United States in part by providing significant levels of
economic and security assistance. Failure of either country to pro-
vide its pledged contribution could cause the other to question its
pledge.
Our security assistance is most important to the Philippines for
maintenance and spare parts of their armed forces, as well as to
improve its forces' mobility and communications.
For Thailand, the main symbol of our commitment is our willing-
ness to provide security assistance support. The other ASEAN
1245
states, and undoubtedly Vietnam and the Soviet Union as well,
also look to our security assistance for Thailand, the ASEAN front
line state, as a major indicator of U.S. security interest in the
region.
The remaining major recipients of security assistance in East
Asia are Indonesia and Malaysia. U.S. support for efforts to mod-
ernize the defense forces of these nonaligned countries helps to
maintain their confidence in their ability to resist intimidation
from the growing Soviet power projection capability in Southeast
Asia. It thereby helps assure friendly flanks for the strategic
straits through which shipping critical to the security and well-
being of the United States and its allies must pass.
Mr. Chairman, there is strong and compelling strategic rationale
for our security assistance to all of our major East Asia aid recipi-
ents. We believe that the levels requested are the minimum sup-
port we can prudently provide to the defense improvements and
modernization of recipient countries' armed forces, in view of U.S.
commitments in the region and the nature of the threats posed by
Vietnam, North Korea, and the Soviet Union to regional stability
and peace.
Thank you, sir.
[Mr. Kelly's prepared statement follows:]
1246
PREPARED STATEMENT OF HON. JAMES A. KELLY
MR. CHAIRMAN,
THANK YOU FOR THIS OPPORTUNITY TO OFFER COMMENTS FROM A
DEFENSE PERSPECTIVE ON THE ADMINISTRATION'S FY 1985 FOREIGN
ASSISTANCE REQUEST FOR EAST ASIA. WE IN THE DEPARTMENT OF
DEFENSE ARE CONVINCED THAT A STRONG, COHERENT, AND RELIABLE
SECURITY ASSISTANCE PROGRAM, ADEQUATELY FUNDED BY CONGRESS, IS
AN ABSOLUTELY ESSENTIAL COMPLEMENT TO OUR EFFORTS TO STRENGTHEN
AMERICA'S DEFENSES. THE ADMINISTRATION'S. FOREIGN ASSISTANCE
REQUESTS WHICH ARE UNDER CONSIDERATION BY THIS COMMITTEE, PARTI-
CULARLY THOSE PORTIONS PERTAINING TO EAST ASIA AND THE PACIFIC,
HAVE MY STRONGEST SUPPORT, I HAVE BEEN HEAVILY INVOLVED IN THEIR
PREPARATION.
I AM CERTAIN THAT THEY ARE FULLY JUSTIFIED.
IF
ANYTHING THEY ARE LESS THAN WE REALLY NEED BECAUSE OF OUR EFFORTS
TO KEEP THE REQUESTS TO MINIMUM PRUDENT LEVELS IN VIEW OF ECONOMIC
CONSTRAINTS.
MR. CHAIRMAN, RATHER THAN TO BE REDUNDANT WITH COMMENTS ON
ISSUES MORE APPROPRIATELY ADDRESSED BY THE STATE DEPARTMENT
LET
ME SIMPLY SAY FOR THE RECORD THAT I HAVE READ ASSISTANT SECRETARY
WOLFOWITZ'S STATEMENT AND CONCUR FULLY WITH HIS REMARKS.
IN MY
STATEMENT, I WILL FOCUS ON A FEW ISSUES WHICH ARE OF PARTICULAR
CONCERN TO DEFENSE.
THERE IS STRONG AND COMPELLING STRATEGIC RATIONALE FOR OUR
SECURITY ASSISTANCE TO ALL OF THE MAJOR EAST ASIA AID RECIPIENTS,
THAT RATIONALE DERIVES FROM THE POLITICAL AND SECURITY INTERESTS
OF THE UNITED STATES IN EAST ASIA AND THE SECURITY NEEDS OF THE
EAST ASIAN COUNTRIES IN LIGHT OF THE SOVIET MILITARY BUILDUP IN
THE REGION AND THE THREATS POSED BY NORTH KOREA AND VIETNAM.
1247
THE SECURITY OF EAST ASIA AND THE PACIFIC IS VITAL TO THE
SECURITY OF THE UNITED STATES.
FIVE OF THE EIGHT DEFENSE AGREE-
MENTS TO WHICH THE U.S. IS A PARTY ARE LOCATED THERE, INCLUDING
BILATERAL TREATIES WITH JAPAN, KOREA, AND THE PHILIPPINES; THE
MANILA PACT WHICH ADDS THAILAND TO OUR TREATY PARTNERS; AND THE
ANZUS TREATY. THE SECURITY OF THE UNITED STATES IS TRULY INTER-
DEPENDENT WITH THAT OF EACH OF ITS PACIFIC ALLIES.
DURING THE PAST DECADE AND A HALF, THE SOVIETS HAVE STEADILY
IMPROVED THEIR MILITARY CAPABILITIES AND EXPANDED THEIR INFLUENCE
THROUGHOUT THE REGION.
THEIR EFFORTS CONTINUE UNABATED.
THE WAR
BETWEEN VIETNAMESE OCCUPATION FORCES AND THE KHMER RESISTANCE
FORCES CONTINUES IN KAMPUCHEA WITH CROSS-BORDER INCURSIONS INTO
THAILAND AND ATTENDANT DANGERS TO THE SECURITY OF OUR SOUTHEAST
ASIA ALLY.
NORTH KOREA CONTINUES TO EXPAND AND MODERNIZE ITS
ARMED FORCES WHICH ARE OFFENSIVELY CONFIGURED AND WHICH ALREADY
EXCEED ANY RATIONAL MEASURE OF PURELY DEFENSIVE REQUIREMENTS.
THE RANGOON BOMBING MURDERS OF REPUBLIC OF KOREA GOVERNMENT
OFFICIALS WERE GRUESOME REMINDERS OF THE IMPLACABLE HOSTILITY AND
AGGRESSIVE INTENT OF THE NORTH KOREAN REGIME WHICH DIRECTS THOSE
ARMED FORCES.
TO MAINTAIN THE SECURITY OF THE U.S., OUR ALLIES, AND OUR
SEA LANES AND TO MAINTAIN REGIONAL SECURITY, WE RELY PRINCIPALLY
ON OUR ALLIES TO MEET LOCAL THREATS WHILE MAINTAINING FORWARD
DEPLOYED FORCES IN KOREA, JAPAN, AND ELSEWHERE IN THE PACIFIC TO
FULFILL OUR COMMITMENTS AND TO MEET THE SOVIET THREAT. WE CON-
TINUE TO URGE ALL OF OUR ALLIES TO DO MORE IN THE COMMON DEFENSE.
JAPAN, AUSTRALIA AND NEW ZEALAND ARE CAPABLE OF DOING SO WITHOUT
1248
U.S. SECURITY ASSISTANCE.
HOWEVER, OUR OTHER THREE EAST ASIAN
ALLIES LOOK TO US FOR FINANCIAL SUPPORT AND THEY
THE REPUBLIC
OF KOREA, THAILAND, AND THE PHILIPPINES
WOULD RECEIVE THE
MAJOR PORTION OF THE EAST ASIA FY 1985 REQUEST FOR SECURITY
ASSISTANCE ,
KOREA STABILITY ON THE KOREAN PENINSULA IS ESSENTIAL TO
THE SECURITY OF NORTHEAST ASIA. THE FIRM U.S. COMMITMENT TO THE
DEFENSE OF THE ROK WAS REAFFIRMED BY PRESIDENT REAGAN DURING HIS
VISIT TO KOREA LAST YEAR,
THAT COMMITMENT IS MANIFEST IN OUR
FORCES STATIONED THERE WHO, IF DETERRENCE FAILED, WOULD BE ENGAGED
IMMEDIATELY ALONGSIDE ROK FORCES UNDER THE ONLY COMBINED US/ALLIED
COMMAND OUTSIDE NATO,
THE LEAST EXPENSIVE AND MOST EFFECTIVE WAY TO IMPROVE THE
CAPABILITIES OF THE US/ROK COMBINED FORCES COMMAND TO DEFEAT, AND
THEREBY DETER, A NORTH KOREAN ATTACK IS BY ASSISTING THE ROK TO
IMPROVE THE CAPABILITIES OF ITS FORCES. FMS CREDITS FOR KOREA
THEREFORE ARE THE MOST COST EFFECTIVE WAY TO ACCOMPLISH THE
IMPROVEMENTS NEEDED TO DEFEND OUR INTERESTS IN NORTHEAST ASIA.
FMS CREDITS UNDERWRITE A SIGNIFICANT PORTION OF THE ROK'S
DEFENSE PROCUREMENT FROM THE U.S. WHICH IS EXPECTED TO TOTAL OVER
$8 BILLION DURING THE PERIOD FY 85-89. OVER $200M OF ROK ANNUAL
PROCUREMENT FROM THE U.S. IS FOR SPARES AND LOGISTICAL SUPPORT
FOR ITS EXISTING INVENTORY OF AL MOST EXCLUSIVELY U.S. EQUIPMENT,
THE REMAINDER IS FOR NEW EQUIPMENT PURCHASES.
KOREA SPENDS 6% OF
GNP ON DEFENSE
APPROXIMATELY 35% OF ITS BUDGET
AND OVER 25%
OF ITS DEFENSE BUDGET IS SPENT IN THE U.S. OUR SECURITY ASSIS-
TANCE EQUATES TO APPROXIMATELY 5% OF THE ROK DEFENSE BUDGET.
1249
NORTH KOREA SPENDS MORE THAN 20% OF THE GNP OF ITS GARRISON
STATE ECONOMY ON THE MILITARY AND ITS OFFENSIVELY CONFIGURED
FORCES ENJOY A SUBSTANTIAL QUANTITATIVE ADVANTAGE OVER THE SOUTH.
THE ROK MUST MODERNIZE ITS DEFENSES WITH SOME URGENCY IF IT IS TO
KEEP THIS GAP FROM WIDENING AND IF IT IS TO BUILD THE FOUNDATION
FOR EVENTUALLY CLOSING IT.
KOREAN MODERNIZATION REQUIREMENTS COULD EASILY JUSTIFY FMS
CREDIT LEVELS MUCH HIGHER THAN THOSE REQUESTED.
BUT HIGHER LEVELS
ARE NOT POSSIBLE IN THE FACE OF COMPETING WORLDWIDE SECURITY
ASSISTANCE NEEDS. IF WE ARE TO KEEP THE TOTAL BUDGET WITHIN FEASI -
BLE LIMITS.
OUR INABILITY TO ACHIEVE THE HIGHER LEVELS NEEDED
MAKES IT ALL THE MORE IMPORTANT THAT WE PROVIDE THE RELIEF SOUGHT
IN THE FORM OF EXTENDED REPAYMENT TERMS.
CONGRESSIONAL AUTHORIZA-
TION OF 10 YEARS GRACE/20 YEARS REPAYMENT TERMS FOR KOREA WILL
ENABLE MORE OF THE KOREAN BUDGET TO BE SPENT ON NEEDED EQUIPMENT
INSTEAD OF DEBT SERVICE DURING THE CRITICAL NEAR TERM.
IT WILL
ALSO BE FURTHER EVIDENCE THAT THE UNITED STATES' CONTINUED COMMIT-
MENT TO STABILITY AND PEACE ON THE KOREAN PENINSULA IS TRULY A
NATIONAL COMMITMENT, SUPPORTED BY BOTH OUR EXECUTIVE AND LEGISLA-
TIVE BRANCHES OF GOVERNMENT.
SINCE 1976, CONGRESS ANNUALLY HAS AUTHORIZED A DOLLAR CEILING
ON THE AMOUNT OF U.S. DEFENSE ARTICLES WHICH CAN BE EARMARKED FOR
USE AS WAR RESERVE STOCKS FOR ALLIES (WRSA), A STOCKPILE INTENDED
FOR ROK WARTIME USE. APPARENTLY THROUGH OVERSIGHT, THE WRSA
AUTHOR IZATION WAS NOT INCLUDED IN THE CONTINUING RESOLUTION FOR
FY 1984. WITHOUT AUTHOR IZATION, WE WILL NOT BE ABLE TO TRANSFER
ANY ASSETS TO WRSA STOCKPILES IN FY 1984, EVEN THOUGH THE SERVICES
1250
HAVE IDENTIFIED ASSETS WHICH THEY WISH TO TRANSFER THIS YEAR.
WE
ARE REQUESTING AUTHORITY TO TRANSFER $125M IN FY 1984, AND $248M
IN FY 1985 IN US-TITLED ASSETS TO WRSA STOCKPILES,
I URGE YOUR
SUPPORT FOR THIS REQUEST FOR A PROGRAM WHICH CONTRIBUTES
SIGNIFICANTLY TO THE COMBAT READINESS OF THE US/ROK COMBINED
FORCES COMMAND.
THAILAND
UNLIKE KOREA, FOR WHOM AMERICAN TROOP PRESENCE IS
1
THE MAIN SYMBOL OF OUR COMMITMENT, FOR OUR OTHER EAST ASIAN FRONT
LINE ALLY, THAILAND, THE MAIN SYMBOL IS OUR WILLINGNESS TO PROVIDE
SECURITY ASSISTANCE SUPPORT,
THE OTHER ASEAN STATES AND, HINDOUBT-
EDLY, VIETNAM AND THE SOVIET UNION AS WELL, ALSO LOOK TO OUR
SECURITY ASSISTANCE FOR THAILAND -- THE ASEAN FRONT LINE STATE
AS A MAJOR INDICATOR OF U.S. SECURITY INTERESTS IN THE REGION.
THE INCREASED THREAT CAUSED BY THE VIETNAMESE OCCUPATION OF
KAMPUCHEA PROMPTED THAILAND TO MORE THAN DOUBLE ITS ANNUAL FMS
PURCHASES FROM THE U.S. TO ACCOMPLISH MUCH NEEDED MODERNIZATION,
THAILAND SPENDS 4% OF ITS GNP ON DEFENSE
ALMOST 20% OF ITS
BUDGET.
U.S. MILITARY ASSISTANCE AMOUNTS TO APPROXIMATELY 7% OF
WHAT THE THAI SPEND ON DEFENSE.
THAILAND SPENDS 8% OF GNP ON
DEVELOPMENT,
THIS PROPORTION IS APPROPRIATE FOR A DEVELOPING
COUNTRY WHICH STILL FACES AN INSURGENCY.
HOWEVER, IT LIMITS THE
EXTENT TO WHICH THAILAND CAN FINANCE WITHOUT CREDIT THE HARDWARE
IT NEEDS FOR MODERNIZATION.
THE THAIS ESTIMATE THAT THEY NEED TO SPEND APPROXIMATELY
$350M PER YEAR FOR CAPITAL PURCHASES TO REPLACE ATTRITION AND
CARRY OUT THEIR MOST IMPORTANT MODEST MODERNIZATION PROGRAMS.
THE THAI BUDGET CAN ONLY SUPPORT CAPITAL EXPENDITURES OF APPROXI-
1251
MATELY $200M, LEAVING A $150M ANNUAL SHORTFALL.
PROPOSED MAP AND
FMS CREDIT LEVELS ARE CRITICAL TO THAI EFFORTS TO COVER THIS
SHORTFALL.
PHILIPPINES
OVER THE LAST SEVERAL YEARS THE U.S. PRESENCE
IN THE PHILIPPINES HAS ASSUMED HEIGHTENED IMPORTANCE BECAUSE OF
SUPPORT REQUIREMENTS FOR OUR INCREASED INDIAN OCEAN DEPLOYMENTS
AND THE SOVIET NAVAL BUIL DUP WHICH INCLIDES THE USE OF MILITARY
FACILITIES AT DANANG AND CAM RANH BAY IN VIETNAM. IN LATE NOVEM-
BER/EARLY DECEMBER 1983, THE SOVIETS BEGAN DEPLOYING BADGER STRIKE
AIRCRAFT TO CAM RANH. THEY NOW HAVE ABOUT NINE OF THOSE AIRCRAFT
THERE IN ADDITION TO THE BEAR LONG-RANGE RECONNAISSANCE AIRCRAFT,
UP TO 20 SURFACE SHIPS, AND FOUR OR MORE SUBMARINES WHICH HAVE
BECOME THEIR NORMAL PRESENCE ON ANY GIVEN DAY IN THAT STRATEGICALLY
LOCATED PORT.
THE SOVIET ROLE IN THE CONTINUING VIETNAMESE OCCUPATION OF
KAMPUCHEA HAS ALSO MAGNIFIED ASEAN-WIDE INTEREST IN TANGIBLE
INDICATIONS THAT THE UNITED STATES WILL RETAIN ITS PRESENCE IN
THE SOUTHEAST ASIAN AREA,
THE U.S. FACILITIES AND FORCES AT CLARK AIR BASE, SUBIC
NAVAL BASE
AND ELSEWHERE IN THE PHILIPPINES ARE AN INTEGRAL PART
OF A SYSTEM OF DETERRENCE THAT SIGNALS TO POTENTIAL ENEMIES
AMERICAN RESOLVE TO MEET OUR COMMITMENTS. THE FACILITIES PROVIDE
THE CAPABILITY TO PROJECT U.S. POWER TO PROTECT VITAL AIR AND SEA
LANES EXTENDING FROM THE INDIAN OCEAN AND THE SOUTH CHINA SEA
NORTHWARD TO JAPAN. THEY ALSO PROVIDE THE PRACTICAL MEANS BY
WHICH THE UNITED STATES CAN FULFILL ITS COMMITMENT TO THE PHILIP-
PINES UNDER OUR 1952 MUTUAL DEFENSE TREATY, THESE CAPABILITIES
1252
IMPOSE CERTAIN DEFENSE CONSIDERATIONS ON POTENTIAL ADVERSARIES
AND CONTRIBUTE TO THE CONFIDENCE OF OUR ALLIES AND FRIENDS.
US MILITARY FACILITIES AT CLARK AND SIIBIC PROVIDE CONTINUOUS
AIR AND NAVAL PRESENCE IN THE WESTERN PACIFIC (WITHIN FOUR HOURS
FLYING OR FIVE SEA DAYS FROM JAPAN, GUAM, SINGAPORE, AND KOREA).
FURTHER, THE FACILITIES PROVIDE US THE CAPABILITY TO PROJECT AND
SUPPORT A US PRESENCE IN THE INDIAN OCEAN (WITHIN EIGHT FLYING
HOURS OR NINE SEA DAYS). THE UNITED STATES WOULD BE HARD PRESSED
TO MEET CONTINGENCIES IN THE INDIAN OCEAN, PERSIAN GULF, AND THE
SOUTHWEST PACIFIC WITHOUT US MILITARY FACILITIES IN THE PHILIPPINES.
THE FACILITIES GAIN ADDED VALUE BECAUSE OF THEIR PROXIMITY TO THE
MAJOR INTERNATIONAL STRAITS CONNECTING THE OIL RICH MIDDLE EAST
TO OUR ALLIES IN NORTHEAST ASIA. FINALLY, THE LOGISTIC, COMMUNI -
CATION AND REPAIR FACILITIES OF CLARK AND SUBIC SAVE BOTH REPAIR
COSTS AND VALUABLE TRANSIT TIME
SHOULD WE EVER HAVE TO REPLACE THE FACILITIES, THE CIRCUM-
STANCES OF THE RELOCATION COULD HAVE A SIGNIFICANT IMPACT ON THE
COSTS OF A MOVE.
SEVERAL YEARS FROM THE TIME A DECISION WAS MADE
WOULD BE NEEDED TO CONSTRUCT FACILITIES AT ALTERNATE LOCATIONS.
THE CONSTRUCTION OF REPLACEMENT FACILITIES, PROCUREMENT OF ADDI -
TIONAL SHIPS AND AIRCRAFT TO MAINTAIN THE SAME LEVEL OF MILITARY
OPERATIONS OVER LONGER DISTANCES, AND ADDED COSTS OF SHIP REPAIR
AT ALTERNATIVE FACILITIES WOULD INVOLVE EXPENDITURES OF SEVERAL
BILLION DOLLARS AND STILL RESULT IN DECREASED CAPABILITIES AND
FLEXIBILITY OF US FORCES IN THE WESTERN PACIFIC AND INDIAN OCEANS,
THIS IS THE STRATEGIC RATIONALE FOR MAKING GOOD ON PRESIDENT
REAGAN'S PLEDGE AT THE CONCLUSION OF THE 1983 REVIEW OF THE
1253
MILITARY BASES AGREEMENT TO EXERT HIS BEST EFFORTS TO PROVIDE
$900 MILLION IN SECURITY ASSISTANCE OVER THE NEXT FIVE BUDGET
YEARS.
THE FY 1985 LEVELS ARE THE FIRST INCREMENT OF THIS PACKAGE.
FAILURE TO PROVIDE THESE LEVELS COULD CAUSE THE PHILIPPINES TO
INSIST THAT THE REVIEW BE REOPENED WITH UNFORESEEABLE CONSEQUENCES.
ON THE OTHER HAND, THE VALUE OF THE BASES WILL BE ENHANCED BY
IMPROVEMENTS IN THE CAPABILITY OF THE PHILIPPINES TO CONTRIBUTE
WITH THE U.S. TO THE MUTUAL DEFENSE OF THEIR COUNTRY.
THE PHILIPPINES SPEND APPROXIMATELY TWO PERCENT OF GNP ON
DEFENSE, LESS THAN $1 BILLION PER YEAR.
OUR MILITARY ASSISTANCE
(FMS FINANCING, MAP, AND IMET) EQUATES TO 10.5% OF THE TOTAL
DEFENSE BUDGET, A HIGHER PERCENTAGE THAN FOR ANY OTHER ASEAN
COUNTRY. THIS PROPORTION IS INDICATIVE OF THE SPECIAL RELATION-
SHIP BETWEEN OUR TWO COUNTRIES AND OF THE COMPARATIVELY GREATER
DIFFICULTY FACED BY THE PHILIPPINES IN MEETING ITS DEFENSE NEEDS
AND ADVANCING TOWARD ITS STATED GOAL OF MILITARY MODERNIZATION AT
A TIME WHEN THE COUNTRY HAS BEEN ESPECIALLY HARD HIT BY THE WORLD
RECESSION.
BUDGETARY CONSTRAINTS HAVE CAUSED SERIOUS PROBLEMS FOR THE
ARMED FORCES OF THE PHILIPPINES (AFP) IN SUSTAINING FORCE AND
EQUIPMENT LEVELS AND CARRYING OUT MODERNIZATION PROGRAMS.
OUR
FMS FINANCING IS CRITICAL NOT ONLY TO PROCUREMENT OF NEW EQUIPMENT
BUT TO MAINTENANCE AND SPARE PARTS COSTS OF DAY-TO-DAY OPERATIONS
AS WELL.
ONLY SIX PERCENT OF THE AFP BUDGET GOES FOR PROCUREMENT ;
THE REST GOES FOR EXPENDABLES SUCH AS POL, CLOTHING, PERSONNEL
PAY AND ALLOWANCES, MEDICAL SUPPORT, AMMUNITION AND OTHER NORMAL
OPERATING EXPENSES.
MOST MAINTENANCE AND SPARE PARTS COSTS ARE
1254
SUPPORTED BY FMS,
FOR CY 1984, APPROXIMATELY $18M OF FMS CREDITS
WOULD BE USED FOR SPARES, TECHNICAL SERVICES AND TECHNICAL ASSIS-
TANCE. MOREOVER, UNDER CURRENT ECONOMIC CONDITIONS THE AFP WILL
PROBABLY SEEK TO APPLY MAP GRANTS OR FMS CREDITS TO THE APPROXI -
MATELY $18M IN FMS CASH PAYMENTS WHICH WILL COME DUE IN FY 1984.
REMAINING FMS CREDITS AND MAP GRANTS ARE NEEDED TO SUPPORT
0
EQUIPMENT PROCUREMENT IMPORTANT TO THE CAPABILITY OF THE AFP TO
CONDUCT OPERATIONS AGAINST THE COMMUNIST INSURGENTS OF THE NEW
PEOPLE'S ARMY, WE BELIEVE THAT THE AFP SHARE OUR PERCEPTION
THAT. JHEIR MOST URGENT MILITARY REQUIREMENTS ARE FOR EQUIPMENT
AND SPARE PARTS TO IMPROVE THEIR MOBILITY, COMMUNICATIONS AND
MATERIEL MAINTENANCE CAPABILITIES.
WE UNDERSTAND THAT THEY PLAN
TO PURCHASE ADDITIONAL HELICOPTERS, TRUCKS AND ARMORED VEHICLES,
COMPLETE THEIR SHIP RETROFIT PROGRAM, CONTINUE ACQUISITION OF
SPARE PARTS TO KEED MAJOR ITEMS OF EQUIPMENT OPERATIONAL, BEGIN A
PROGRAM TO ACQUIRE A NEW PATROL VESSEL, AND BUY COMMUNICATIONS
AND ENGINEERING EQUIPMENT. THESE PURCHASES, MADE WITH FMS CREDITS
AND MAP FUNDS, WILL HELP THE AFP IMPROVE THEIR CAPABILITIES
AGAINST THE COMMUNIST INSUR GENCY WITH EQUIPMENT WHICH WILL ALSO
IMPROVE THEIR CAPABILITIES TO DEFEND, WITH THE UNITED STATES,
AGAINST EXTERNAL THREATS,
OUR SECURITY ASSISTANCE PROGRAM ALSO ALLOWS THE GOVERNMENT
OF THE PHILIPPINES TO DEVOTE MORE OF ITS SCARCE RESOURCES TO
ECONOMIC AND SOCIAL DEVELOPMENT ,
MORE THAN HALF OF THE PROPOSED
$900 MILLION FIVE-YEAR PACKAGE ITSELF IS IN THE FORM OF ECONOMIC
SUPPORT FUNDS TO BE APPLIED DIRECTLY TO THESE PURPOSES.
1255
THE UNITED STATES AND THE PHILIPPINES EACH CONTRIBUTE TO OUR
MUTUAL SECURITY
THE PHILIPPINES BY PROVIDING SECURE AND UNHAM-
PERED 110F OF FACILITIES WHICH ARE VERY IMPORTANT TO OUR FORWARD
DEPLOYMENTS: THE UNITED STATES BY PROVIDING SIGNIFICANT LEVELS OF
ECONOMIC AND SECURITY ASSISTANCE.
FAILURE OF EITHER COUNTRY TO
PROVIDE ITS PLEDGED CONTRIBUTION COULD CAUSE THE OTHER TO QUESTION
ITS PLEDGE.
THESE EXTREMELY IMPORTANT NATIONAL SECURITY CONSIDER-
ATIONS SHOULD REMAIN PARAMOUNT IN THE DEVELOPMENT OF OUR ASSISTANCE
PROGRAM FOR THE PHILIPPINES.
INDONESIA AND MALAYSIA.
THE REMAINING MAJOR RECIPIENTS OF
SECURITY ASSISTANCE IN EAST ASIA ARE INDONESIA AND MALAYSIA,
INDONESIA SPENDS THREE PERCENT OF GNP ON DEFENSE. 11.4% OF THE
TOTAL BIIDGET.
OUR SECURITY ASSISTANCE IS EQUIVALENT TO 1.5% OF
THE INDONESIAN DEFENSE BUDGET. MALAYSIA SPENDS 8.2% OF GNP ON
DEFENSE, 18. 1% OF THE TOTAL BUDGET,
OUR SMALL AID PROGRAM EQUATES
TO ONLY 0.5% OF THAT EFFORT,
ALTHOUGH NON-ALIGNED, INDONESIA AND MALAYSIA ARE FRIENDLY
NATIONS WHO MAINTAIN POSITIONS ON NUMEROUS ISSUES WHICH ARE
COMPATIBLE WITH U.S. POLICY.
AMONG THESE ARE THEIR POSITIONS ON
RIGHTS OF PASSAGE THROUGH CRITICAL STRAITS ALONG MAJOR SEA LANES.
U.S. SUPPORT FOR EFFORTS TO MODERNIZE THE DEFENSE FORCES OF THESE
COUNTRIES HELPS TO MAINTAIN THEIR CONFIDENCE IN THEIR ABILITY TO
RESIST INTIMIDATION FROM THE GROWING SOVIET POWER PROJECTION
CAPABILITY IN SOUTHEAST ASIA. IT THERE BY HELPS ASSURE FRIENDLY
FLANKS FOR THE STRATEGIC STRAITS THROUGH WHICH SHIPPING CRITICAL
TO THE SECURITY AND WELL-BEING OF THE U.S. AND ITS ALLIES MUST
PASS,
1256
IMET.
I WOULD LIKE TO CONCLUDE WITH SOME GENERAL OBSERVA-
TIONS ON WHAT IS PROBABLY THE MOST COST-EFFECTIVE PROGRAM WE HAVE
FOR ENHANCING COOPERATION WITH OUR FRIENDS AND ALLIES, THE INTER-
NATIONAL MILITARY EDUCATION AND TRAINING (IMET) PROGRAM. IMET
TRAINING IMPROVES THE ABILITY OF OUR FRIENDS AND ALLIES TO MAKE
BEST USE OF U.S.-ORIGIN EQUIPMENT BY HELPING THEM AFFORD TECHNICAL
TRAINING OF MORE PERSONNEL IN U.S. MILITARY SCHOOLS. THE USE OF
COMMON EQUIPMENT AND COMMON PROCEDURES ENHANCES COOPERATION.
PROFESSIONAL TRAINING IS EVEN MORE IMPORTANT,
ALTHOUGH THE PAYOFFS ARE INTANGIBLE AND HARD TO DOCUMENT OR
MEASURE, PROFESSIONAL EDUCATION PROVIDES WHAT MAY BE THE MOST
ENDURING BENEFIT OF IMET TO THE UNITED STATES.
PROFESSIONAL
MILITARY EDUCATION IN THE UNITED STATES WILL NOT GUARANTEE THAT A
FOREIGN OFFICER WILL ALWAYS AGREE WITH AMERICAN IDEAS BUT IT DOES
INCREASE THE PROBABILITY THAT ANY DISAGE EMENTS WILL BE SUBSTANTIVE
DATHER THAN THE RESULT OF MISUNDERSTANDING OR FAULTY ASSUMPTIONS.
MOREOVER, THE ASSOCIATIONS FORMED WITH AMERICAN OFFICERS CAN
GENERATE A RESERVOIR OF GOOD WILL TOWARD THE U.S. ARMED FORCES
WHICH WILL ENHANCE FUTURE COOPERATION THROUGHOUT THE FOREIGN
STUDENT'S CAREER.
IT MAKES A TREMENDOUS DIFFERENCE IN OUR ABILITY
TO COMMUNICATE AND COORDINATE WHEN THERE IS PREEXISTING MUTUAL
UNDERSTANDING AND WHEN WE CAN BEGIN WITHOUT MANY OF THE CULTURAL
AND PERCEPTUAL OBSTACLES THAT MIGHT OTHERWISE EXIST.
1257
IT IS UNFORTUNATE THAT OUR BUDGET PROCESS ITSELF OFTEN
GENERATES PROBLEMS WHICH DETRACT FROM THESE IMPORTANT BENEFITS.
MOST TRAINING, PARTICULARLY THE LONGER COURSES, INVOLVES MAJOR
PERSONNEL ACTIONS WHICH REQUIRE DISLOCATION OF THE AFFECTED
OFFICER AND HIS FAMILY, REQUIRE ASSIGNMENT OF A REPLACEMENT, ETC.
THE BETTER MILITARY ESTABLISHMENTS PLAN THESE ACTIONS WELL IN
ADVANCE. FOR IMET RECIPIENTS, THIS MEANS PROGRAMMING PERSONNEL
FOR THE TRAINING ON THE BASIS OF THE ADMINISTRATION'S REQUEST; IT
WOULD BE TOO LATE IF THEY WAITED UNTIL THE BUDGET IS APPROVED.
IF THE SUBSEQUENT ALLOCATION IS LESS THAN REQUESTED, SOME
COUNTRY PROGRAMS MUST BE REDUCED, INCONVENIENCING MANY FOREIGN
SOLDIERS, SOME OF THEM SEVERELY, IN THOSE CASES, WHAT SHOULD
HAVE BEEN A GOOD EXPERIENCE WHICH PROMOTES A POSITIVE U.S.
IMAGE, BECOMES ITS OPPOSITE.
WE PUT THE RECIPIENT COUNTRIES IN A
DILEMMA.
IF THEY UNDERPROGRAM, THEY RISK BEING UNABLE TO FILL THE
TRAINING QUOTAS WHEN THEY ARE AVAILABLE; IF THEY PROGRAM FULLY,
THEY RISK THE HUMAN COSTS I HAVE DESCRIBED. MOST ADOPT THE LATTER
COURSE RATHER THAN RISK LOSING TRAINING.
THE IMET PROGRAM IS A SMALL ITEM IN THE TOTAL BUDGET.
We
SHOULD BE ABLE TO FULLY FUND IT.
MR. CHAIRMAN, OUR SECURITY ASSISTANCE PROGRAMS COMPLEMENT
AND SUPPORT U.S. FORWARD DEPLOYMENTS IN EAST AS'A AND THE PACIFIC,
PARTICULARLY IN THE CASES OF KOREA AND THE PHILIPPINES. MOREOVER,
THROUGH THEIR CONTRIBUTIONS TO STANDARDIZATION AND INTEROPERABILITY
OF EQUIPMENT AND TO MUTUAL UNDERSTANDING OF TACTICS AND OPERATING
PROCEDURES, THEY ENHANCE OUR COLLECTIVE ABILITY TO DEAL WITH THE
INCREASED THREATS TO PEACE AND SECURITY IN THE REGION.
34-045 0-84-480
1258
SECURITY ASSISTANCE IS AN INDISPENSIBLE COMPONENT OF OUR
EFFORTS TO STRENGTHEN FREE WORLD DEFENSES AGAINST THE GROWING
THREATS TO WORLD PEACE AND SECURITY, IN EAST ASIA, IT IS A
PARTICULARLY VITAL PART OF OUR BILATERAL SECURITY RELATIONSHIPS
WITH THE COUNTRIES OF THE REGION. WE BELIEVE THAT THE LEVELS
REQUESTED ARE THE MINIMUM SUPPORT WE CAN PRUDENTLY PROVIDE TO THE
DEFENSE IMPROVEMENTS AND MODERNIZATION OF RECIPIENT COUNTRIES'
ARMED FORCES IN VIEW OF U.S. COMMITMENTS IN THE REGION AND THE
NATURE OF THE THREATS POSED BY VIETNAM, NORTH KOREA AND THE
SOVIET UNION TO REGIONAL STABILITY AND PEACE.
Senator MURKOWSKI. Thank you, Mr. Kelly.
Mr. Greenleaf.
STATEMENT OF CHARLES W. GREENLEAF, JR., ASSISTANT AD-
MINISTRATOR, BUREAU FOR ASIA, AGENCY FOR INTERNATION-
AL DEVELOPMENT
Mr. GREENLEAF. Mr. Chairman, I have a very brief oral state-
ment in addition to the written statement submitted for the record.
Thank you for this opportunity to testify on behalf of the AID
request for fiscal year 1985, with emphasis on Southeast Asia.
Our total request of $315 million for assistance to Southeast Asia
includes $157 million in development assistance for Indonesia, the
Philippines, Thailand, and Burma, as well as regional programs in
the South Pacific and with the Association of Southeast Asian Na-
tions (ASEAN). It also includes $100 million in economic support
funds for the Philippines and Thailand, and $58 million in Public
Law 480, titles I and II food aid.
Poverty alleviation remains the underlying purpose of AID pro-
grams in Southeast Asia. Economic growth in the context of equita-
ble social and economic policies is essential to this goal. Our ap-
proach encourages sound economic policies, supports indigenous
scientific capability, and the development of technology, as well as
stimulates private institutions critical to the economic development
process.
My written testimony discusses the AID program in Southeast
Asia and our projects for fiscal year 1985, Mr. Chairman.
I look forward to answering any questions that you may have
about our request.
[Mr. Greenleaf's prepared statement follows:]
1259
PREPARED. STATEMENT OF CHARLES W. GREENLEAF, JR.
Mr. Chairman and Members of the Subcommittee:
Thank you for this opportunity to testify on behalf of the Asia
Bureau's request for Fiscal Year 1985, with emphasis on Southeast
Asia.
Our request for assistance to Southeast Asia includes $157 million
in Development Assistance for Indonesia, Philippines, Thailand and
Burma, as well as regional programs in the South Pacific and with
the Association of Southeast Asian Nations (ASEAN); $100 million in
Economic Support Funds for the Philippines and Thailand; and $58
million in P.L. 480 Titles I and II food aid. These amounts
constitute about one-third of the economic assistance and one-eighth
of the food aid in the total Asia Bureau request.
Provision of these funds recognizes the considerable importance of
these countries to the U.S. and the continuing serious development
problems. It also recognizes the dynamic progress that is being
made, in part with our assistance, in overcoming the regional burden
of poverty.
1260
In the Southeast Asian countries, growth performance was uniformly
strong throughout the 1970s. GNP in Thailand, the Philippines, and
Indonesia all grew in the 6-7 percent range
a stunning
development achievement due in no small part to the adoption of wise
development policies.
The remainder of this decade should see continued growth through
most of Southeast Asia, depending on economic policies, .levels of
concessional and non-concessional capital flows, growth "pull" from
developed country imports, and continuation of remittances. The
World Bank suggests growth in the 6 percent range for Thailand and
Indonesia.
In the Philippines long-term prospects should again
become excellent, if it successfully manages its current economic
problems.
A.I.D. PRIORITIES
Poverty alleviation remains the underlying purpose of A.I.D.
programs in Southeast Asia.
Economic growth in the context of
equitable social and economic policies is essential to this goal.
Our approach encourages sound economic policies, supports indigenous
scientific capability and the development of technology, and
stimulates private institutions critical to the economic development
process.
1261
Policy dialogue is essential.
In all of our cooperating countries
we work with host governments to improve economic and development
programs and priorities, and remove obstacles to development that
may be posed by inefficient policies. Good examples would be the
Indonesia government's enthusiastic support for increasing rice
production and increasing the scope of the family planning program.
We support the application of effective technologies and
institutional frameworks, in which the U.S. is relatively strong;
thus technical assistance is a large part of the program, although
the availability of grant funds may be a limiting factor. But
capital assistance, carefully linked to technical assistance and
training, will also be needed to demonstrate institutional and
technical solutions to complex problems, and to increase
effectiveness of policy dialogue.
Private enterprise programming requires intense and creative efforts
in policy dialogue, institutional strengthening, development
finance, training and information exchange. The private sector is
an important dimension of development, and we can be helpful in this
.
area.
The character of our programs in the rapidly developing countries of
Southeast Asia should begin to be modified in the next five years
1262
and beyond to reflect their changing economic status.
A shift to
more flexible programs stressing science and technology is occurring.
INDONESIA
With a $65 million Development Assistance program, $40 million of PL
480 Title I, and $8 million of Title II, our total Indonesian
request is about the same level as we allocated last year.
It is a
substantial program consistent with the size and importance of
Indonesia, and with the quality of the Indonesian Government's own
developmental efforts.
Indonesia achieved formidable economic progress through 1982.
Thereafter, a sizable decline in oil exports, together with a
continuing fall in non-oil exports, led to the emergence of a large
balance of payments deficit and severe strain on budgetary
resources.
Economic growth slowed substantially to no more than 3
percent in 1982 from the 8 percent growth rate of the previous three
years.
Oil production fell 16 percent and oil revenues fell 12
percent. A severe drought reversed the steady rise in agricultural
production.
The balance of payments changed from a $2.5 billion
surplus in 1981 to nearly a $7 billion deficit in 1983. In response
to this deteriorating economic climate, the government undertook a
host of reforms:
1263
1) devaluing the currency by 28%;
2) reducing fuel subsidies by 50%;
3) raising power costs by 20%;
4) closing the central bank's rediscount window;
5) decontrolling interest rates;
6) financing development activities with bonds;
7) rephasing more than $21 billion worth of industrial
infrastructure projects;
8) reforming the tax structure.
Early indications of the effects of these adjustment measures have
been favorable.
As a result of both internal measures and of the
upturn in the world economy, the Indonesian economy is expected to
improve in 1984.
Prudent management during the good times and
forceful responses to the bad have enabled 'Indonesia to weather the
recessionary storm better than most oil exporters.
The A.I.D. program in Indonesia has made substantial progress in
each of its main elements:
-Food production and resource management:
The FY 1985 portfolio
contains the latest in a series of agricultural research projects
that began in the early 1970s.
These projects have been essential
to boosting rice production
from 16 to 22 million tons per year.
Project focus has broadened to encompass crops other than rice and
1264
greater geographical diversity.
A.I.D. is also shifting the focus
of other agricultural activities from the Irrigated lowlands to the
rainfed uplands where environmental degradation and poverty provide
new challenges. A.I.D. is cooperating closely with the World Bank
in this area; in a collaborative innovation, we will monitor the
Bank-funded activities along with our own in a joint project,
Upland
Agriculture and Conservation.
-Improving primary health care and institutionalization of family
planning: The Diarrhea Mortality/Morbidity Reduction Project in the
1985 portfolio points the way toward achieving our goals in the
health field.
Diarrheal diseases are among the chief killers of
children in the developing world. This project will make extensive
use of Oral Rehydration Therapy, an inexpensive, simple and
effective example of an appropriate technology.
The Faculties of Public Health Project is an example of the
increased sophistication demanded by the very successful Indonesian
family planning program, which has moved beyond simple user
motivation or family planning commodity assistance.
The need now is
for more advanced training and technical assistance to consolidate
and institutionalize the gains to date and to extend those gains to
harder-to-reach areas.
The Government has repeatedly expressed
strong support for the family planning program at the very highest
level.
.
1265
-Off-farm employment:
A.I.D.'s Indonesia program attempts to
harness the dynamism of the private sector to further development
efforts.
The Private Sector Development Exploratory Project has
contracted with three U.S. consulting firms to provide American
expertise to Indonesian small and medium businessmen, and is
encouraging consultancy by Indonesian firms as well.
The project is
expected to prime the pump to introduce modern management techniques
into the Indonesian private sector.
We have two additional
private-sector projects scheduled for funding this year to carry out
such varied activities as management training and development of
credit institutions.
-Accelerating human resource development: We are also helping the
Indonesians further develop their human resource base through
training of personnel in a variety of sectors, as well as by
cooperation in educational planning and policy efforts.
They have a
mammoth task before them at all levels due to the complexities of
thousands of far-flung islands and concomitant cultural
differences. We are also training research specialists and teachers
of extension agent trainers through agricultural university
departments and rural communications training programs.
1266
PHILIPPINES
For FY 1985, we are requesting $39 million in Development
Assistance, $95 million in Economic Support Funds, and $10 million
in PL 480 Title II food assistance.
DA levels have been
approximately constant since 1979 when, during negotiations on the
Amended Military Bases Agreement, it was understood that the DA
would not be supplanted by ESF.
ESF levels reflect the Reagan
Administration's pledge of its best efforts to obtain from Congress
$900 million of economic and military assistance during FY 1985 - FY
1989 as the result of the satisfactory conclusion of the review of
the Military Bases Agreement during 1983.
U.S. interests in the Philippines are security, economic
development, and trade and investment.
t. Our economic and
humanitarian interests emphasize breaking the cycle of poverty and
establishing a more equitable pattern of economic growth. The
Philippines is a U.S. treaty ally and U.S. security assistance is a
major factor in assuring continuing unhampered use of Clark Air Base
and Subic Bay Naval Base.
Compared to an average annual economic growth of six percent
during the 1970s, the Philippine economy experienced a slower growth
of 2.6 percent in 1982 and 1.4 percent for 1983.
Some forecasters
expect no economic growth at all during 1984.
The global recession
1267
and an increasingly unfavorable trading climate have hindered
economic growth and further aggravated fiscal and balance of
.
payments problems.
As have other developing countries, the
Philippine Government tried to maintain living standards and
government services by borrowing heavily to offset growing trade
deficits.
The Philippines has recently been shaken by a series of
traumatic political and economic events.
Senator Aquino's
assassination sparked demonstrations in which certain political
changes were demanded. The unsettled political situation arising
from the assassination aggravated a difficult foreign exchange
situation, forcing the Philippines to seek a rescheduling of its
foreign debt.
Putting the Philippine economy back on a path of self-sustaining
growth will require hammering out a financial package with the IMF
and the commercial banks as well as successfully implementing the
longer-term economic policy reforms advocated by the World Bank.
The Philippines has abundant natural and human resources which we
believe will permit it to resume stable and equitable economic
growth, provided it takes the necessary steps to weather its current
economic difficulties.
1268
Even the relatively rapid economic growth of the 1970s did not
significantly improve the well being of the majority of poor
Filipinos who live in rural areas. The Philippine Government
initiated an impressive array of rural development activities and
social service programs targeted toward the rural areas.
The
benefits of these programs were often offset, however, by economic
policies which taxed the rural sector while protecting the modern
urban sector.
The World Bank's program of structural reforms, which
is strongly supported by A.I.D., addresses such policy issues.
A.I.D.'s current development assistance program strategy is
based on a comprehensive analysis of the dimensions and causes of
poverty in the Philippines.
This analysis identified an estimated
four million poor households, most of which are rural.
To address
the problems of these poor people, our development assistance
program strategy aims to increase rural productive employment. The
strategy emphasizes four areas:(1) fertility and infant mortality
reduction; (2) rainfed resource development; (3) rural private
enterprise development; and (4) better management of local
resources.
We are continuing to fund family planning programs as well as
beginning to test rural-based financing schemes for health
services. Rainfed resources development addresses a range of
ecológical and farm production problems affecting rainfed farmers,
1269
traditional fishermen, and landless laborers.
Rural enterprise
development, which will increase employment for the rural poor, is
supported through technical assistance and training carried out in
cooperation with a variety of public and private sector
institutions. Through our local resource management effort, we are
supporting rural financial services which will develop ways for
local government units to mobilize private sector resources for
development activities.
The current FY 1980-1984 ESF program is evenly divided between
activities which will improve socio-economic conditions for
Filipinos living near the U.S. military facilities and nationwide
economic development activities, comprising such projects as rural
energy development and construction of markets, elementary schools,
and rural roads.
For the period FY 1985 through FY 1989, ESF requested will total
$475 million.
Activities will concentrate more on rural development
nationwide
focusing on agriculture, rural industry, and energy
while a few programs will continue to be devoted to areas
adjacent to the U.S. military facilities.
We are planning to place
about one-half of the ESF resources into a series of non-project
assistance activities which directly alleviate the severe Philippine
balance-of-payments problems while simultaneously programming local
currency to support selected economic development efforts.
1270
In FY 1985, we are requesting $95 million in Economic Support
Funds. One-half of the FY 1985 ESF will support additional
components of FY 1980-1984 ESF projects already under way. The
other half of the FY 1985 ESF program will finance a new non-project
activity, the Rural Productivity Support Program (RPSP), which is
designed to address Philippine balance of payments problems. The
RPSP will also accelerate on-going rural development projects of
A.I.D., the World Bank and the Asian Development Bank by ensuring
that local currency is provided to activities which would otherwise
be delayed because of GOP budget reductions resulting from the
current economic conditions in the Philippines.
We are also requesting $10 million for Title II in FY 1985.
Maternal and child health care programs will be favored during the
phase-down between now and FY 1987, when Title II is scheduled to be
phased out.
The programs we have proposed are in the U.S. strategic and
economic interest, but at the same time, they have been designed to
benefit the rural poor who make up the majority of the 50 million
people living in the Philippines.
1271
THAILAND
We are requesting $27 million in Development Assistance and
$5 million in Economic Support Funds in FY 1985.
Last year's DA
request was slightly higher, but the ESF level is unchanged from a
year ago.
As the "front line" state in
Southeast Asia, Thailand, in concert
with its ASEAN partners, is central to the preservation of peace,
security and cooperation in the region.
The United States has a
fundamental interest in helping Thailand maintain its independence
and its influence among its neighbors.
In support of this interest,
U.S. economic policy in Thailand is directed toward the use of trade
and investment to help sustain broad-based economic development,
with continued reliance on the private sector and openness to the
world trading system.
We also share Thailand's goals of supporting
refugee programs, antipiracy activities in the Gulf of Thailand and
the control of illicit narcotics trafficking from Southeast Asia.
Thailand has experienced a consistently high rate of economic growth
since the early 1960s.
Gross Domestic Product in real terms grew at
an average of about 7 percent annually over the last decade,
bringing Thailand to the threshold of middle income status.
The
1272
Thai economy is expected to continue to grow at a real rate of
5-7 percent per annum during the next five years despite
sluggishness in the global economic system.
While these accomplishments have been impressive, Thailand's growth
pattern has been uneven in terms of its sectoral composition and
discribution of benefits.
Rural areas, largely dependent on rainfed
agriculture, have benefitted little from the country's overall
growth, while urban localities have experienced rapid and sustained
growth. Moreover, certain structural problems have emerged during
the past several years. These include the limited amount of
additional land that can be brought into cultivation, the estimated
12 million people subsisting under conditions of absolute poverty,
and the markedly deteriorated trade balance with a deficit in the
trade account of $2.5 billion in 1983,
The Royal Thai Government's current five-year plan addresses these
structural imblances in the economy and attempts to distribute
benefits more equitably. This plan is the first to explicitly
recognize the need to alleviate poverty in backward rural areas.
A.I.D. program strategy in Thailand supports the Government's
objectives to improve conditions in rural areas.
In addition, the
A.I.D. strategy is encouraging the private sector to play a
vigorous role in Thai economic development. A.I.D. is also
1273
.
supporting the transfer of scientific and technological knowledge
and skills appropriate to an emerging middle-income country.
We believe Thailand's future economic growth will depend
increasingly on applications of science and technology to expand its
agriculture and growing industrial base.
Support in this area is
consistent with A.I.D. endeavors to provide assistance that is
supportive of Thailand's changing economy and managerial capacities.
The FY 1985 program emphasizes:
Expansion of the public and private sector scientific and
technological resource base, in support of rural development.
Improvement in national development policy formulation, planning
and management.
Increased participation of private voluntary organizations in
the development process.
Continued support of the Thailand National Family Planning
program which seeks to reduce the rate of population growth to
1.5 percent by 1986, including greater coverage of underserved
areas. .
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Provision of Economic Support Funds to assist some 200,000 Thai
villagers in Laotian and Kampuchean border areas adversely
affected by the influx of refugees and military incursions.
BURMA
For FY 1985, we are requesting $15
are requesting $15 million in development
assistance for Burma. This level will continue to support Burma in
health and agriculture, two areas essential to its development.
U.S. Interests and foreign policy objectives in Burma, the
largest country in mainland Southeast Asia, are political,
developmental, humanitarian and commercial.
The U.S. is interested
in the long term stability and progress of Burma as an independent
nation in Southeast Asia.
The U.S. also has a strong development
and humanitarian interest in Burna, which stems from a recognition
of Burma's favorable long term potential for growth, particularly in
the agricultural sector. Although it is one of the world's ten
poorest countries in terms of per capita income, Burma is capable of
satisfying most food and other basic human needs of its own people
and even of contributing to world food supplies.
U.S. commercial
interests are also assuming increased importance.
The U.S. development assistance program, which was resumed in
1980 after an absence of 15 years, is designed to support both U.S.
1275
objectives and interests and Burma's own priority development
needs.
It is often identified by the Burmese Government as a key
contributing factor in the continuing improvement in bilateral
relations.
A.I.D.'s strategy is to select a few sound Burmese development
efforts in key sectors that show significant potential of
contributing to Burma's economic growth, and to concentrate A.I.D.
support on these programs for a sufficient period of time to show
measurable results.
A.I.D.'s program concentrates on supporting two high priority
programs of national scope: maize and oilseeds production in the
agricultural sector and primary health care in the health sector.
The objective of A.I.D.'s agriculture sector support is to increase
Burma's production of selected food crops, increase rural incomes
and improve nutrition.
The objective of A.I.D.'s health sector
support is the reduction of morbidity and mortality, especially
among infants and children.
In addition to the above efforts,
A.I.D. also supports the development of Burma's human resources
through training programs, mostly in the United States.
Accordingly, the program requested for FY 1985 will:
1276
Continue support to a long term effort to increase the
production of selected food crops such as maize and oilseeds through
Improved technology;
Continue assistance in edible oil processing and distribution
to benefit Burna's consumers, its producers' cooperatives, and its
private sector;
Start strengthening Burna's neglected capacity to undertake
applied agricultural research;
1
Continue supporting expansion of primary health care services
to rural areas; and
Continue training Burmese in key development skills.
SOUTH PACIFIC REGIONAL
For FY 1985, we request $6 million in Development Assistance, a 13
percent increase over last year, for the ten island nations included
in A.I.D.'s program for the South Pacific:
Cook Islands, Niue,
Tonga, Tuvalu, Western Samoa, Fiji, Papua New Guinea, Solomon
Islands, Vanuatu and Kiribati.
1277
The A.I.D. program began in the mid-1970s, primarily in response to
requests from our ANZUS partners (Australia and New Zealand) to
increase U.S. presence in the region.
The U.S. role is one of a
minor donor, with A.I.D. supplying about one percent of the total.
Our objective is to maintain a useful and meaningful presence in the
region, in concert with and supplemental to the major donors.
The A.I.D. strategy is to provide modest, non-bilateral and indirect
assistance from a regional development office located in Fiji. For
the most part, this assistance is provided through intermediaries to
the ten independent island countries.
Intermediaries used are U. S.
and indigenous private and voluntary organizations (PVOs) which
implement about 70 percent of the current program, some local
regional institutions, and the Peace Corps. The latter has primary
responsibility for implementing a small grants program that supports
self-help rural development projects with income-generation
objectives,
A.I.D. assistance consists of both "grass roots" community projects
The
and regional programs which benefit all the island countries.
strategy emphasizes agricultural, fishing and small business income
generating opportunities for rural and urban islanders, and helps
them satisfy their basic needs, primarily through appropriate
training and education activities.
Included are out-of-school,
non-formal education and vocational training in needed skills,
1278
principally for small farmers and fishermen, village women, and
unemployed youth, and assistance to regional institutions in
agricultural development, satellite communications, water and
sanitation, tuna research, and training.
Experience to date indicates that the A.I.D. program strategy is
increasing developmental skills at lower levels of society.
Further, several island governments now make better use of other
donors' bilateral and multilateral programs.
Private enterprise
assistance has focused on the individual entrepreneur--the farmer,
the fisherman, the craftsman.
ASEAN
A program level of $4.8 million in grant Development Assistance is
planned for the Association of Southeast Asian Nations (ASEAN).
A.I.D. assistance to ASEAN is funded from the Asia Regional account
and will continue support to ongoing ASEAN regional projects. ASEAN
regional projects concentrate on improving the capability of
existing regional institutions, mainly by provision of technical
assistance and training, frequently in regional institutions founded
or supported in the past by A.I.D.
Since FY 1979, A.I.D. ASEAN assistance has benefitted Indonesia,
Malaysia, the Philippines, Singapore, and Thailand.
Recently,
1279
Brunei joined the group.
ASEAN's purpose is to establish regional
identity and to promote regional cooperation.
We have strongly
encouraged this regional integration and stabilization, and ASEAN
continues to be the keystone of U.S, regional policies in Southeast
Asia.
The ASEAN region has a population of more than 250 million, about
two-thirds of whom reside in rural areas.
Several social and
economic indicators for the ASEAN region are relatively high
compared to other developing areas.
However, pervasive rural
poverty, inadequate employment opportunities, large trade deficits
and growing demands for a more equitable distribution of social and
economic benefits could weaken the political and economic structures
and the regional unity of the member countries. External assistance
will continue to be sought by ASEAN.
The A.I.D. program for ASEAN consists of agriculture, health,
energy, and related training activities.
From FY 1979 through
FY 1983, we have committed $17.3 million for U.S.-ASEAN development
cooperation.
There are currently nine ongoing A.I.D.-ASEAN regional
projects.
A.I.D. assistance to ASEAN regional projects is
additional to A.I.D. bilateral assistance to Indonesia, Thailand,
and the Philippines.
1280
CONCLUSION
This summarizes the U.S. assistance request for Southeast Asia for
FY 1985.
We are working on some new approaches while holding to our
basic purpose of helping countries meet the basic human needs of
their citizens.
I appreciate this opportunity to appear before you today, and am
ready to answer your questions.
Senator MURKOWSKI. Thank you very much, Mr. Greenleaf.
Gentlemen, as we begin to consider the entire East Asia regional
community, I would like to generalize with a few specific questions.
I note in examining some of the FMS financing that there appears
to be a substantial amount of FMS financing that has been unex-
pended, and on which I have no current information. My informa-
tion is through September 30, 1983.
My first question is, can the unexpended balance be carried over
to the next appropriation or authorization period?
Mr. KELLEY. I will take that one, Mr. Chairman. I have with me,
in case we get into further detail, the comptroller of the Defense
Security Assistance Agency, Mr. Morris. But I would answer your
question: yes, the unexpended balances can be carried over.
But if I may, I would like very briefly to try to explain what the
unexpended balances that are reported in our congressional presen-
tation document represent. They represent-if I can draw an analo-
gy in which a business would have a $1 million loan for the pur-
pose of building a new facility. During the course of the contract
and the construction of this facility, they might draw from the
lending bank gradual amounts.
That is in fact what we have here. We have something called
commitments not shown in the document, that in fact cover the
vast majority of the unexpended balances. For example, for the
Philippines we have $138 million, I think, shown as unexpended
balances. There is presently only $11 million of that, all from
within the current year or last year, that are uncommitted.
Senator MURKOWSKI. That answers my question. So in the case of
the Philippines in particular, you would be proposing under the ad-
ministration's proposal to add $60 million to that?
Mr. KELLY. Yes, sir.
Senator MURKOWSKI. How many of the 11 or 12 countries in con-
sideration in the regional group under discussion today carry a de-
linquency in their account due the United States?
Mr. KELLY. Mr. Chairman, the numbers, as I have checked them
this morning, reflect that all of our countries are current on their
payments except for the Philippines, which in two particulars, both
of which have arisen within the last 3 months, are in arrears on
some of their FMS credit payments.
1281
I have the amounts here with me. It is about $14 million total of
principal and interest. There is also an arrears of about $15 million
that has arisen on FMS cash cases, in which the Philippines had
undertaken to pay through the U.S. Government for the provision
of defense articles and services themselves.
Senator MURKOWSKI. How does the government go about assess-
ing an effort to maintain a current status on the repayment? Do
they contact a country and ask for an explanation?
Mr. KELLY. We certainly do.
Senator MURKOWSKI. Do they extend the credit or do they just
carry it in delinquent status as a consequence of the payments
having been missed?
Mr. KELLY. We work very closely with a country whenever a pay-
ment situation becomes in arrears.
As I am sure the committee is aware, sir, if FMS payments are
unpaid for a year, the Brooke amendment requirements come into
effect, which would severely impact the program. We have had nu-
merous representations back and forth with the Philippines, sever-
al of which are as recent as this morning, and in fact the Defense
Security Assistance Agency has two of its key people in Manila
right now discussing this issue with the Government of the Philip-
pines and with our own military assistance group that is in Manila.
Senator MURKOWSKI. Do you think it would be appropriate, since
we only have one delinquency in the region, to consider condition-
ing the FMS credits on the account being current before the au-
thorization and funding of additional FMS credits is made?
Mr. KELLY. I believe, sir, that there may be other delinquencies
around the world.
I would not want to recommend that course, sir, because security
assistance, like security itself, is based on our security require-
ments, rather than being exactly analogous to a commercial trans-
action. However, it is clearly a matter that under the law must be
kept in consideration.
Senator MURKOWSKI. I appreciate your concern for what may be
the case in other areas. Unfortunately, the prerogative of this com-
mittee this morning is limited to East Asia, and we have a pretty
good record, with the exception, evidently, of the current status of
the Philippines.
If we allow a situation to occur where we continue to advance
funds in this category of accounts when they are delinquent, then
one has to question what kind of precedent we are setting for other
countries who are making a genuine effort and not being treated
any differently. It is my offhand opinion that there should be some-
thing other than equality applied to those countries who cannot
maintain the current status of their accounts.
It would be reasonable, at least subject to your individual or col-
lective ability to convince me otherwise, to recommend that as we
consider these, since the Philippines is the only one that is delin-
quent, that they be granted the incentive of bringing the account
current before recommending to the full committee that the recom-
mendation of $60 million by the administration be transferred into
the account. So I leave it to you to convince me otherwise.
Mr. KELLY. Well, sir, in part, Mr. Chairman, I would say we
would only recommend this for very short, temporary periods. In
1282
the period that we have at issue here, for example, the vast majori-
ty of the FMS credit arrears are less than 2 weeks old. There are a
smaller proportion that I think go back to January 21.
So we would recommend that this would only be something that
would be very temporary. The requirements of law in the Brooke
amendment would not permit any further developments on an ac-
count that was more than a year in arrears, and with the process
involved, the fiscal year not beginning until October, I believe we
have adequate precautions to prevent that.
Further, sir, I have information even as late as this morning of
the serious intent of the Government of the Philippines to fully
pay its debt. I would note they have paid $105 million on past FMŠ
credits in recent years, and we expect that they will be able to con-
tinue to do so.
Mr. WOLFOWITZ. Senator, we will keep you closely informed on
this situation. The Embassy reported just this morning that they
are aware of no official debt payment that has not been made
before penalty clauses come into effect.
Senator MURKOWSKI. The debt, the past due debt, is about $28
million to $30 million, then?
Mr. WOLFOWITZ. No, sir. It is around $14 million.
Senator MURKOWSKI. I thought you said there were two catego-
ries. One was cash and one was FMS.
Mr. KELLY. The cash debt, sir, really is just a delay in the
progress payments that must be made.
Senator MURKOWSKI. It is still a delinquency, is it not?
Mr. KELLY. It is a delinquency, but it is not the same sort as fail-
ure to pay the credit requirements, because the progress payments
are only a share of the work that is proceeding and there is also a
termination reserve which has been accrued and this provides us
some protection.
Senator MURKOWSKI. Well, it either is or is not delinquent on the
cash account.
Mr. KELLY. It is an overdue payment, sir, and it is delinquent.
You are correct that the total money owed us beyond its date is
about $30 million, sir.
Senator MURKOWSKI. Thank you.
There is a reference in all of the ASEAN countries regarding the
manner with which we handle our FMS financing. The terminolo-
gy is with regard to rates being set, and it refers to concessional
and market interest rates. I know what a market rate is. A conces-
sional rate I find a bit bewildering, and I would like to have an ex-
planation of the application of concessional rates.
Who makes the determination to set a concessional rate, which is
a rate below market rates? Is it standard and uniform with the
ASEAN countries? That would be my first question.
Mr. WOLFOWITZ. With respect to security assistance, there are
only two ASEAN countries for which we are requesting conces-
sional rates. They are the Philippines and Indonesia, and the rate
is the same.
I believe worldwide that all FMS concessional requests this year
are at the same rate.
Senator MURKOWSKI. What is that rate?
Mr. WOLFOWITZ. I believe it is 5 percent.
8
1283
Senator MURKOWSKI. Why do we use the terminology, then,
"market rate” as well, if we are only loaning it at concessional
rates?
Mr. WOLFOWITZ. Sir, we are not loaning it only at concessional
rates. For example, in the case of Korea the entire request would
be at commercial rates or nonconcessional rates.
Senator MURKOWSKI. OK. So the only two countries are Indone-
sia and the Philippines that we are lending at concessional rates?
Mr. WOLFOWITZ. And in those cases we are only requesting half
at concessional rates and half at nonconcessional or market rates.
Senator MURKOWSKI. So in the case of the Philippines, with your
recommendation of $60 million, you are saying $30 million is your
recommendation for eligibility for concessional rates?
Mr. WOLFOWITZ. That is right, sir.
Senator MURKOWSKI. And in the case of Indonesia, where there
is $40 million requested by the administration under FMS, half
would be at concessional rates?
Mr. WOLFOWITZ. I believe that is correct, sir.
Senator MURKOWSKI. How do you make that value judgment? Do
you make it in the State Department?
Mr. WOLFOWITZ. Well, it is initially made in the State Depart-
ment. I guess it is subject to review, among other places, at the
Office of Management and Budget. The principal person responsi-
ble for this determination for the overall security assistance pro-
gram would be the Under Secretary for Security Assistance.
The basic criteria that he looks at in making that determination
are essentially the same as are used in considering concessional
rates for recipients of economic assistance. The most important
thing there is basically per capita income, although debt service
ratio and long-term ability to repay and other factors are taken in.
It is a judgment, but it comes down in effect to, for the poorest
countries—where we have already noted and taken account in our
economic assistance program of the fact that we do not want, in
helping them out, to burden them down with the kind of debt prob-
lems that will ruin them in the long run--that we should follow
the same philosophy when we are lending them security assistance.
Senator MURKOWSKI. We perhaps should follow the same philoso-
phy in this country and consider the significance of our deficit. It
would be a terrible state of affairs if we could not support the for-
eign security assistance loan program throughout the world be-
cause our increasing deficits would not support it. But that is an-
other matter for another time.
Mr. WOLFOWITZ. Sir, I agree with that. But I think the Asian
area is a useful one to make a point. In the case of Korea, which no
longer receives any concessional assistance from us but did receive
quite a lot in the past, it is now the case that the total of all
concessional assistance that Korea received over many years is less
than 1 year's U.S. exports to that country.
It is the case now that Korea is purchasing in the United States
from American workers roughly $800 million a year of military.
equipment, which as you will note is more than double what we
are proposing in the way of new FMS credits. So these countries
have a record on the whole of becoming paying customers over
1284
time, and the investment of helping them develop in the early
stage really pays off and it pays off for our economy.
Senator MURKOWSKI. I do not think I disagree with you there. I
am just questioning how you can set a concessional rate realistical-
ly when the price of money in the world at any given time equates
worldwide.
What we are doing basically with the other categories of econom-
ic support and military assistance are grants.
Mr. WOLFOWITZ. I think there is no other way to look at it than
that. Those are grants.
Senator MURKOWSKI. And it is significant. Those grants are
meaningful.
Thailand does not receive any consideration in this category of
concessional rate. It is just given to the Philippines and Indonesia,
which means somebody has to make a rather difficult value judg-
ment.
Mr. WOLFOWITZ. It is true that Thailand has a much more favor-
able debt service ratio, for example, and that would have been a
factor in that judgment.
I think you are a banker, sir, and I mean, you could arrive at
essentially the same result with an outright grant and a nonconces-
sional loan. The fact is, when we have a loan at concessional rates,
it is a mixture of grant component and the loan.
Senator MURKOWSKI. Well, that is true. But by the same token,
the way the foreign military sales financing loan program is set up,
they have the option of not taking what they cannot pay for. They
do not have to take it all. It is available. It is negotiated. It is indi-
cated, but their own financial priorities are going to dictate inter-
nally what they can legitimately handle.
And if you give them more than they can handle, the question
has to come up, are you doing a disservice because they cannot pay
you back? Then you run into the justification of trying to equate
one country's borrowing in this category with a preferential rate.
You know, if you are going to assist a country in its recovery, are
you going to do it in the area of economic support? I am inclined to
think so. That is where it will occur, as opposed to foreign military
sales financing. Theoretically, that benefits us because they are
buying those items from us.
Mr. WOLFOWITZ. Senator, these countries also, in differing
amounts, have military requirements that they have to pay for.
Since it all comes out of essentially one pot of economic resources,
it is the feeling and it was the strong recommendation of the Car-
lucci Commission that, in the case of countries that need grant as-
sistance, that grant assistance really should apply across the board.
Now, I suppose you could really give them an element of grant
and then a nonconcessional loan. I believe the benefit of mixing in
this way is it does involve a discipline. While there is a grant ele-
ment, it does include the discipline that they are spending their
own money and they are going to look at the purchases that much
more closely than if they just had a slug of U.S. grant assistance,
which they might spend more readily than if they had to go
straight to the market.
Senator MURKOWSKI. Well, I think you will agree that the mixed
category of grant and military assistance and repayment of foreign
1285
military sales, when you look at examples of some countries that
have a mix within those categories, it is pretty hard to separate
why one is in one category and not in the other.
I am concerned here with concessionality when what we are
trying to assist is the recovery, which can only come primarily
from assistance in the economic support area in the form of a
grant. I am not going to pursue this other than to say I have a con-
cern about the propriety of giving a country that has the right of
accepting or rejecting more than they can repay by making the al-
lowance of a preferential rate for some countries and not for
others.
I think that our effort to equate assistance to those countries can
best be expressed in the economic support area, which is a grant,
which I totally support, as opposed to trying to restructure and jus-
tify within the area of foreign military sales this assistance, be-
cause I think if you are going to help a country recover you are
probably going to do it in the area of economic support, which is a
grant.
Do you see the point I am trying to make?
Mr. WOLFOWITZ. I think I see the point and I think I do disagree.
I certainly agree that grant economic assistance will help countries
develop and help them recover. I do not argue that principle.
But I think also helping ease the burden of necessary military
expenditures has some of that same effect.
Senator MURKOWSKI. That is true, but they have to pay it back
and they are buying it from us. That is the theory behind the
credit program in the loan category that has been applied.
Mr. WOLFOWITZ. They have to pay it back if it is at concessional
rates, of course.
Senator MURKOWSKI. They are not going to pay it back from any-
thing that is generated from military sales, because these things do
not add anything to the economic structure of the country. They do
not produce anything.
If you give them economic support funds they can buy tractors
and produce a gross national product that will repay the foreign
military sales purchases. But the ability of foreign military sales
purchases to contribute anything functional for its own repayment
is not-
Mr. WOLFOWITZ. I understand that point and that is correct. But
take the very vivid example of Korea. Had we not provided the
grant military assistance we provided Korea in the past, they
would have had to take it out of their own resources, because they
needed that military support. And the end result is it would have
come out of economic projects and tractors and other things.
There is a certain fungibility of things. But in these countries,
the ones for which we are requesting military assistance, and par-
ticularly Thailand and Korea, which get the lion's share, have real
military requirements and they are going to have to meet them out
of their resources if they do not have assistance from us.
Senator MURKOWSKI. Well, I do not think you can necessarily put
all three of them together. I think that the contribution that the
United States makes in both the Philippines and Korea is most sig.
nificant—that is an understatement-from the standpoint of their
own national security.
1286
Now, we could discuss all day the merits of that. I would agree
that Thailand is in a different set of circumstances. But I think we
have shared our views and I respect your opinion.
With regard to your support of the concessional rate structure, I
still have a problem with the ability of the State Department to
fairly administer an arbitrary application of rates favoring one
country against another.
With that, I think the record will express my concern.
We will move now to the merits of some of the specific recom-
mendations made by the administration and the ones that I see a
little more enlightenment on. First of all, briefly, what is the policy
of the State Department in categorizing the classifications of for-
eign military sales as opposed to military assistance programs?
One is a grant and one is a loan. At what point do you allow a
classification into the grant MAP status and at what point do you
examine the request and say, no, that is not a grant status, that
belongs over in FMS?
I have attempted to look in some detail into the requests that
have come in from these countries on the categories, and there is
not an awful lot of information. I have seen in the case of one
country a memorandum indicating, based on our projections-
meaning the Defense Department—and discussions with the coun-
try, the principal projects for which requested military assistance
funds are expected to be applied. This experience leads me to be-
lieve that the formulation of these projections is kind of
It is an effort, perhaps in cooperation with the Defense Depart-
ment and the individual government, to put together an FMS list,
as opposed to what I assume, the foreign government would come
in with a specific list of what they felt they needed for their own
military capability, and the State Department would pass on an
opinion.
But from what I have seen, it appears the State Department is
part of the formulation of the wish list.
Mr. WOLFOWITZ. I think there are two separate questions there.
Senator MURKOWSKI. There are.
Mr. WOLFOWITZ. One is the FMS versus MAP question. We have
someone here from the Politico-Military Bureau, if you would like
to address it on a worldwide basis.
But let me just speak to the one element of grant in the case of
this request, and that is the MAP for the Philippines. Frankly, sir,
that is a product of the base review and negotiations. In the agree-
ment we agreed, as part of this best effort, on what we would go
for.
Senator MURKOWSKI. Does the Philippine Government-and I do
not mean to pick out the Philippines as an example among all of
the Asian countries, but it seems to be the case today strictly by
happenstance-did they submit a list totaling $60 million which is
your recommendation?
Mr. WOLFOWITZ. Well, first, let me say, on the second part of the
question
Senator MURKOWSKI. I might forget the first part when it is my
turn, but go ahead.
Mr. WOLFOWITZ. On the question of our involvement in the for-
mulation of these lists, it is fairly extensive. And when I say
1287
"ours," I mean the U.S. Government, not the Department of State.
I mean, it is principally the Defense Department.
We have in Korea a far more extensive example of what I am
going to cite in the Philippines. We have in the Philippines a so-
called JUSMAG [Joint U.S. Military Assistance Group), that con-
sists of 27 U.S. military personnel and 5 U.S. civilians that work
very closely with the Philippines Armed Forces in providing infor-
mation on the kinds of equipment that are available and helping to
assess needs and so forth.
I mean, in the end it is their decision, though we may agree with
it.
Senator MURKOWSKI. Well, is it our offer? Do we put a list to
them that says, for example, you should have 100 trucks?
Mr. WOLFOWITZ. In the end they have to make the decision on
what they need and what they can afford. But there is a great deal
of advice and involvement from us as to what various things can do
and what we think is most appropriate.
I think in every case we are talking, when you now come down
to a $60 million FMS request or much larger requests in the case of
Thailand or Korea, we are talking about an FMS program that is a
fraction of the total defense needs of those countries.
As I mentioned in the case of Korea, just in terms of purchases
from the United States alone, their total purchases far exceed the
amount that we have provided in FMS.
Mr. KELLY. If I may, Mr. Chairman, I would just like to add
something. First of all, I do not think that the process—and that is
what this is, a process of dialog between the representatives of the
United States, both State and Defense Department, and the coun-
try at hand—that there is not much of an analogy here to the U.S.
domestic and military budget program. We have a discussion with
our counterparts within the country in which their security needs
are identified and we try to reach a form of an agreement on these.
These will often, but not always, involve the tabling of very
lengthy lists of equipment that would be needed in the view of a
particular country to meet its security needs over some period of
the next few years. This assessment is then reviewed and comment-
ed on by the mission in country, and is then reviewed and dis-
cussed within the Washington panels as well.
The actual amount of security assistance requested will frequent-
ly not be related to that. It will always be smaller than the
amounts that the country has indicated that it needs. But it may
be so much smaller as to bear very little relationship to the overall
assessment by the country of what it needs.
Senator MURKOWSKI. Well, let us talk about the Philippines spe-
cifically. I asked a question, if you have a list from the Philippines
indicating what they want to purchase with the $60 million that
you recommend in that category?
Mr. KELLY. We have had several lists, sir, which exceeded by
many times the $60 million. I provided to the committee a consoli-
dated list of the most recent items which we believe the Philip-
pines would obtain over the fiscal year 1985 program if it is ap-
proved.
Senator MURKOWSKI. I did refer to that list.
Mr. KELLY. Yes, sir.
1288
Senator MURKOWSKI. But it was very apparent that it appeared
to be the State Department's list
Mr. KELLY. No, sir. This is the Defense Department's view of
what is appropriate.
Senator MURKOWSKI. Oh, Defense Department. I stand corrected.
Mr. KELLY. Or requested, or expected to be purchased by the
Philippines.
But there are many items not on that list that the Philippines
may require or may believe they require or may have expressed an
interest in. But these seem to be the items that are most likely to
be provided with the $85 million of security assistance that the
committee has been requested to provide.
Senator MURKOWSKI. In the case of the Philippines, is their list
classified?
Mr. KELLY. The only part of it, sir, that is classified are the exact
quantities of particular equipments and some of the dollars associ-
ated with them. The list of items there, as I state in the letter, can
be unclassified and I am ready to talk to it if you wish, sir.
Senator MURKOWSKI. For example, trucks. I assume trucks are
unclassified?
Mr. KELLY. Yes, sir; they are not classified.
Senator MURKOWSKI. OK. Who makes the determination who the
Philippines buys the trucks from, other than the United States?
Does the Defense Department direct them to Chrysler, General
Motors, or Ford?
Mr. KELLY. We could do it two ways, sir.
Senator MURKOWSKI. How do you do it?
Mr. KELLY. The two ways it can be done are, at the country's
option, they may come to the United States military services, in
this case the Army, and in a way join up with the U.S. Army's own
buys of trucks. This would be an FMS cash case and they would
receive exactly the same truck and they would pay the U.S. Gov-
ernment, who in turn would use its own contracting procedures to
obtain the trucks, just as we would for our own forces.
Senator MURKOWSKI. So the actual routing of the transfer of
that, then, the transfer would advance the money to them?
Mr. KELLY. No, sir. The Philippines, in the case of
Senator MURKOWSKI. Let us say they want to buy 50 trucks. How
does that work? This is under the cash loan program.
Mr. KELLY. For 50 trucks, the Philippines would announce that
they wish to use FMS credits for those. They would identify these
funds and the funds would be transferred from the Federal Financ-
ing Bank to the Philippines' bank and in turn paid into the De-
fense Security Assistance Agency's accounting center, so that the
Army can then pay whichever U.S. manufacturer they are bought
from.
But I would say, sir, there is another procedure. The Philippines
could make their own deal with a U.S. truck manufacturer and re-
quest that that arrangement, a commercial transaction, be funded
under the FMS credit provisions. That is also a possible way that it
can be done.
Senator MURKOWSKI. That brings me back to another subject
that we talked about earlier. The payback on the FMS funding is
scheduled to retire the debt within what period of time?
1289
Mr. KELLY. It varies, sir, from country to country.
Senator MURKOWSKI. Let us talk about the Philippines.
Mr. KELLY. In the case of the Philippines, sir, there is--
Senator MURKOWSKI. If you give them $60 million this year, how
long do they have to pay that $60 million back?
Mr. KELLY. It would vary, sir. For the concessional rate, which is
2 years grace and 7 years for repayment, the other $30 million--
Senator MURKOWSKI. When you say 2 years grace you mean no
payment for the first 2 years?
Mr. KELLY. Yes, sir; no payment for the first 2 years.
Senator MURKOWSKI. No interest payment for the first 2 years?
Mr. KELLY. Interest would be accrued, but not paid.
Senator MURKOWSKI. And then they start paying, how?
Mr. KELLY. Over a 7-year period they would amortize both princi-
pal and interest over that time until it was concluded.
Senator MURKOWSKI. How much is the Philippines' total debt on
FMS?
Mr. KELLY. Do you mean the entire debt of the Government of
the Philippines?
Senator MURKOWSKI. On FMS, yes.
Mr. KELLY. It would be about $189 million.
Senator MURKOWSKI. $189 million. And they have only been car-
rying it, then, for a couple of years?
Mr. KELLY. Oh, no, sir. Some of this would go back 5, 6, or 7
years.
Senator MURKOWSKI. Well, if they are paying it back over a 7-
year period, it would seem to me that the outstanding balance of
the total FMS unpaid credits would be far in excess of that.
What did we give them last year?
Mr. KELLY. $50 million, sir, in credits, of which $11 million are
still not drawn down.
Senator MURKOWSKI. And the year before?
Mr. KELLY. $50 million, sir.
Senator MURKOWSKI. That is $100 million. The year before?
Mr. KELLY. The year before was also $50 million.
Senator MURKOWSKI. So you have $150 million.
Mr. KELLY. They have not yet fully borrowed against those cred-
its, would be my answer.
Senator MURKOWSKI. Yet they owe less than $200 million? If
they have been doing it for several years, it would seem to me their
balance would be more than $200 million.
Mr. KELLY. Yes, sir; except they only have to pay what they have
actually borrowed against.
Senator MURKOWSKI. That is right. So are you implying that they
have not during those previous years borrowed the total amount
that was available to them?
Mr. KELLY. Yes, sir. They have not borrowed the total amount
available over those past years.
Mr. WOLFOWITZ. Also, sir; the repayment starts rather quickly, so
some of it is repaid.
Senator MURKOWSKI. Well, if you have a 2-year grace period you
are not starting the repayment very quickly.
Mr. KELLY. I think, sir, it might be helpful if I provided for the
record of this committee a very detailed breakdown of those past
34-045 0-84-82
1290
payments from the Philippines, so that you can clearly see which
year is reflected and which debts. I have a payment schedule here,
but it does not relate very directly to the past grants.
Senator MURKOWSKI. What do we have, say, for Korea, where we
have been lending significantly larger amounts? Maybe I can find
it.
[Pause.]
Senator MURKOWSKI. It was $1.7 billion, I gather, which was the
principal amount through September?
Mr. KELLY. Yes, sir. Of that, $767 million has been paid back, so
it would be the difference or a little bit less than $1 billion.
Senator MURKOWSKI. So the country is really mortgaging its
future income for debt retirement from this category.
Mr. KELLY. It is mortgaging its future income against its own se-
curity, sir.
Senator MURKOWSKI. Well, that depends on your total point of
view, of whether the security of Korea and the Philippines are to-
tally independent of the United States. This is one Senator that
might argue a little on that point.
Mr. KELLY. I would agree with you, sir. We have 39,000 U.S.
troops in Korea and they are not inconsequential to the defense of
that country.
Mr. WOLFOWITZ. But also, Senator, the South Koreans are taking
an increasingly large burden of that defense, and at our urging. I
think they also know that if they want to keep our commitment
there they have to increase their share, as they have been doing.
Senator MURKOWSKI. We were pursuing the classification, and
somehow we got off the subject a little bit, of how you keep it cate-
gorized separately, the grant military assistance vis-a-vis the for-
eign military sales. In other words, I have from you a list of poten-
tial FMS purchases. However, there is a recommendation for $25
million in MAP, and I do not have anything other than a random
narrative of parts and odds and ends and so forth and so on.
Mr. KELLY. Senator, the MAP and the FMS credits are both ways
of providing defense articles and services and training. The only
difference in these, sir, is that the U.S. taxpayer pays the full
amount of the MAP funding. With regard to the FMS credits, these
must certainly in principal, if not in full interest as well, conces-
sionary or otherwise-recipient countries must pay back the
amount of the FMS credits.
So they buy the same things, sir, but the source of the money to
pay for them is different.
Mr. WOLFOWITZ. The breakdown, sir, is a negotiated one as a
result of the review of the bases.
Senator MURKOWSKI. Who negotiates that? The Defense Depart-
ment? The State Department?
There is an awful lot of flexibility here, gentlemen. You say that
in the MAP “these funds will be used as appropriate for equipment
listed in the paragraph on FMS financing.
We on the committee are expected to make a determination of
whether we approve or disapprove of your budget. We really are
trying to ascertain whether we approve or disapprove of your dis-
cretion.
Mr. WOLFOWITZ. There are two things, sir--
1291
Senator MURKOWSKI. Now, please do not misunderstand me. I am
not talking about you. I am criticizing the system here. I am talk-
ing about our whole foreign aid program under this set of applica-
tions. So my criticism or frustration is not directed toward you.
Mr. WOLFOWITZ. I understand that, sir. But there is a further
step in this process, and there has to be. As Mr. Kelly described
earlier, we, working with countries, develop an idea of what their
military needs are, and these military needs in every case far
exceed what our FMS or MAP or combined request comes up with.
Only after they actually know how much money they are getting
and also look at their own budgetary picture will they make a deci-
sion on what they are actually going to buy. Those requests will
invariably or almost invariably come in being some part of that list
that you have in front of you.
When it comes in, in fact there has to be a U.S. Government de-
cision made, and by law Congress has to be notified if those
amounts-if a total sale exceeds a certain amount or if an individ-
ual item exceeds a certain amount, and then of course Congress
has the opportunity to disapprove it.
So once the money is appropriated, authorized and appropriated,
the individual expenditures then have to be approved as well.
Senator MURKOWSKI. Well, in fairness, the MAP is limited this
year to two countries, the Philippines and Thailand. Previous to
this it had only been extended to Thailand?
Mr. WOLFOWITZ. That is right.
Senator MURKOWSKI. So you seem to use different justifications
to achieve specific recognition of a country. For example, if we use
Thailand, the acknowledgment was made earlier in your presenta-
tion that you did not give Thailand concessionary interest rates, for
reasons we really did not go into.
But that is the only country that has received MAP until your
1985 proposed budget. So it would appear to a novice that you are
giving them due consideration for reasons on one hand and on the
other you are treating them a little differently. Why are you giving
them MAP and none of the other countries? Yet you are not ex-
tending to them the concessionary loan interest rate that you are
extending to at least two other countries?
It seems like an arbitrary application of principle, which may or
may not have a foundation. I am sure it has a foundation, but
again, it seems like there should be some specific guidelines. They
either meet a criteria or they do not meet a criteria. If they do not,
then they fall into another category.
Mr. WOLFOWITZ. I think there has to be some discretion. I think,
with respect to the basic question of what countries are considered
eligible for concessionary military loans and which are not, the
single dominating criterion is per capita income, and the same
standard that the World Bank uses in deciding what countries are
eligible for concessional development loans.
It is not the only criterion and, of course, in the case of countries
with whom we have base agreements, we invariably end up negoti-
ating these best efforts packages. The Philippines is not the only
one. And in the course of those negotiations, one of the bits of ne-
gotiating capital our people can put on the table is to increase the
1292
grant component of the assistance. That is where the $25 million
figure in the Philippine case comes from.
Senator MURKOWSKI. I am going to excuse myself. I have to leave
to vote. We will just take a short recess.
[Brief recess.)
Senator MURKOWSKI. I apologize for the brief inconvenience. Ob-
viously, I had no control over the timing, though.
We were discussing a couple of points. One was the application of
the military assistance category. I would like to conclude that, and
then I have a different area of questioning to pursue. I believe we
have one other witness and we will conclude this hearing by 12:30,
so that gives you some idea of the timetable that we are on.
What assurance do we have within the categories that there is a
specific criteria for placing various things in the military assist-
ance program category as opposed to the foreign military sales fi-
nancing? I am back to that question.
Mr. WOLFOWITZ. Do you mean how would a decision be made
that a particular item be funded with one rather than the other?
Senator MURKOWSKI. Yes.
Mr. WOLFowitz. That basically is the decision of the government
involved, sir.
Senator MURKOWSKI. The government involved has that choice,
then?
Mr. WOLFOWITZ. They have that choice. Moreover, they also pur-
chase things with their own cash.
Senator MURKOWSKI. I know, but let us keep the conversation
pretty basic
Are you applying that in the case of the Philippines, if they
wanted to increase their grant they would simply ask for more in
that category?
Mr. WOLFOWITZ. Oh, no, no. I am sorry.
Senator MURKOWSKI. I am asking for the criteria which you
accept for a recommendation that it be placed in MAP. We have a
recommendation from you of $25 million in the case of the Philip-
pines.
Mr. WOLFOWITZ. If we get the appropriation that we are asking
for, they will have $60 million of FMS credits and $25 million of
grant money.
Senator MURKOWSKI. That is correct.
Mr. WOLFOWITZ. And when they come in with a request to pur-
chase specific items, they can use whatever mix of that $25 million
grant or $60 million of credit and their own cash to pay for a par-
ticular item.
Senator MURKOWSKI. My logical question, then, would follow:
Why then do they not ask for $50 million in military assistance
and a lesser amount under FMS, because they will not have to pay
it back?
Mr. WOLFOWITZ. The answer is, I am sure if we had offered that
in the negotiations they would have been very pleased and would
have taken it right away. The outcome of the base review was to
agree that we would do-
Senator MURKOWSKI. Well, it is noticeable that in the previous
years there has not been anything in MAP. It has been my under-
standing that generally from a policy point of view we were trying
1293
to eliminate that category, because we have it today only in Thai-
land and the Philippines and we previously had it only in Thai-
land.
Mr. WOLFOWITZ. There was a period when President Carter spe-
cifically was trying to eliminate grant military assistance, and that
is the reason in fact I believe why for a period over the last 3 or 4
years under the previous base agreement there was no grant-
Senator MURKOWSKI. But you have not recommended it for any
other country other than those two?
Mr. WOLFOWITZ. Not in East Asia, but elsewhere, yes, we have.
Senator MURKOWSKI. Well then, let us stay in East Asia.
Mr. WOLFOWITZ. The general recommendation of the Carlucci
Commission, sir, was that there needs to be a grant component in
military assistance for those same countries that we recognize the
need for a grant component in economic assistance.
Senator MURKOWSKI. Well, I find that as less than within the
reasonable realm of discretion, in the sense that you are just free
to go out and negotiate, in the case of the Philippines, that we are
going to go $25 million in military assistance where we have not
done anything before, and we are not going to give any consider-
ation to the other countries. That seems to be awfully broad discre-
tionary action. That is my interpretation.
The other thing that we have not talked about, that we should
very briefly, if we can get to it briefly, is the manner in which con-
sideration for the 5-year use by the United States of Subic and
Clark were negotiated. It is my understanding that they were nego-
tiated and those negotiations have been concluded.
I do not know whether you were here when Senator Melcher rec-
ommended in effect that those negotiations be reopened and, as a
consequence of our close relationship with the Philippines, that ad-
ditional consideration be given. Perhaps for the record you could
enlighten the committee on the specific consideration given in the
negotiations for the use of the bases, as opposed to any other con-
sideration of the Philippines?
Mr. WOLFOWITZ. As part of the base review, we agreed on a pack-
age of economic support funds and military assistance over a 5-year
period. It is our strong view that that should not be regarded as
rent, but should be regarded as part of an overall security relation-
ship from which we benefit through use of the facilities, the Philip-
pines benefits both from our presence in the facilities and from this
assistance.
Senator MURKOWSKI. I think the record will reflect that I did not
use the terminology "rent," and I understand that that is not your
intention. I was referring to consideration and you are referring to
the fact that it is a military assistance package that is before you.
Mr. WOLFOWITZ. That is right, it is part of a total security rela-
tionship.
I feel strongly, sir, that we should not reopen agreements like
that once they have been negotiated. I think one of the problems
with the change in the allocation that has been proposed on the
House side is that at least it could invite the other side, as I think
Senator Melcher pointed out, to say: Well, if you want to change
things, we will change things also.
1294
I think there is certainly a valid argument for additional eco-
nomic assistance for the Philippines, having nothing to do with the
facilities there or their value to us or to the Philippines, but having
to do with the crisis the country faces.
As I mentioned in my opening remarks, the fact that we have
just recently, and with Senator Melcher's help, put together a
package of emergency food aid, for example. I am not against addi-
tional assistance, but I am strongly against reopening a very care-
fully negotiated agreement.
Senator MURKOWSKI. What do you think his particular point
was? Not having had the benefit of being here through his entire
testimony, it would appear to me, in view of the letter the Presi-
dent sent to President Marcos indicating what the executive
branch position was on a best efforts basis-and it does appear that
since negotiations were concluded, that there was some semblance
of agreement or the negotiations would not have been concluded,
but there is a concern for additional consideration.
You said you did not recommend it. But I am wondering if you
could enlighten me on why he feels that additional consideration is
necessary.
Mr. WOLFOWITZ. I should not try to speak for him, but I think I
heard him say something with which I strongly agree. Maybe that
is part of his thinking, namely that those bases are of great value
and great benefit to the United States. I think that fact should per-
haps be a bit more widely appreciated.
That is why I feel strongly that we have to carry through on the
best efforts pledge the President has made. However, I do not be-
lieve that we should reopen it. I do not believe that we should pro-
pose a larger package. And if the argument is that the Philippines
has additional economic needs at this time, which I believe is a
valid argument, we should consider that on its merits and not as
something related to the facilities.
Senator MURKOWSKI. Well, in view of the substantial increase
over last year's and the previous year's payments to the Philip-
pines across the board-I think it is nearly a $100 million increase
if you consider all the items that are included—that that repre-
sents additional consideration and a best efforts basis, I guess, by
the administration in following the President's recommendations to
conclude successful negotiations with the Philippines. Is that your
interpretation?
Mr. WOLFOWITZ. It certainly is, although a lot of that increase
also reflects the fact that there has been considerable inflation
during the 5 years since we negotiated the last package. As a
matter of fact, if you break down the new request into its economic
component and military component, I think you will find that the
military component has increased less than inflation during that
period, although the economic portion shows a real increase.
Senator MURKOWSKI. The countries in East Asia that have simi-
lar consideration in their foreign assistance program to our coun-
try include Korea, Philippines, and what other nations?
Mr. WOLFOWITZ. I am sorry? Do you mean that have alliance re-
lationships with us? Those would be Korea and the Philippines.
Senator MURKOWSKI. I mean, where we negotiate as we have
done with the Philippines.
1295
Mr. WOLFOWItz. Only the Philippines.
Senator MURKOWSKI. There is no consideration given for Korea
in that regard for our military presence there?
Mr. WOLFOWITZ. No. So far as I am aware, the countries for
which we have these best efforts pledges are Greece, Portugal,
Spain, Turkey, and the Philippines.
Senator MURKOWSKI. Would it not be a little clearer to take the
consideration out of the foreign assistance budget and just have it
an actual negotiation, so you would not cloud the comparison of aid
and assistance to the other countries, which theoretically are on
the merits specifically of aid and assistance and not as additional
consideration for a U.S. base?
Mr. WOLFOWITZ. Well, you make a fair point, Senator, that it is a
pretty gray area. But the grayness, I think, is an inevitable result
of the fact that the countries involved feel that what we are giving
them is rental. We feel strongly as a matter of principle that it is
not rental and that that is assistance related to an overall security
relationship. That puts us in this gray area.
Senator MURKOWSKI. It makes it very difficult to compare what
our aid and assistance should be to the 11 or 12 countries that we
have before us when one is singled out because of its uniqueness
and because of our facilities there.
Mr. WOLFOWITZ. I grant you that there is an apple and several
oranges there at the same time.
Senator MURKOWSKI. The last area that I want to get into, and I
will be specific with the Philippines again, is the question of the
position of the House Foreign Affairs Committee with regard to
striking all of the $60 million in FMS credits.
The rationale of the House is simply to change the mix and not
the dollar amount?
Mr. WOLFOWITZ. That is correct, sir.
Senator MURKOWSKI. They have stricken the military sales and
added to the economic support. I do not have their report, but I
assume the justification for that was a concern and a perception
with regard to the Government of the Philippines currently and
whether it would be construed that an increase in military support
of $10 million, which was the increase proposed by the administra-
tion, would be seen as having some political overtones associated
with the Marcos government?
Mr. WOLFOWITZ. No, sir. I believe that in the report-and I know
Congressman Solarz, who is the author of the original change, in
testimony and in conversation has indicated that the rationale is
not to drop military assistance, but to convert loans to grants, so
that what they have come up with is an entirely grant package.
And from that point of view, from an economic rationale, it
makes sense and probably would have some attraction at this point
in time to the Government of the Philippines.
Senator MURKOWSKI. That is true, but that would prohibit the
purchase of these items that Mr. Kelly has indicated have been re-
quested.
Mr. WOLFOWITZ. It would not limit the purchase. It would just
mean that they would have to take it out of their own funds, sir.
Senator MURKOWSKI. That is correct.
:
1296
Do you think, Mr. Kelly, that they would go ahead and pursue
these purchases?
Mr. KELLY. They will pursue some of them, sir, but they might
not pursue all of them.
Mr. WOLFOWITZ. I would say, as a point of agreement, that I am
pleased to note that the House Committee in its report noted the
importance of carrying out the President's best efforts pledge.
Senator MURKOWSKI. Right, keeping the entire dollar amount.
Mr. WOLFOWITZ. That is right.
Senator MURKOWSKI. I agree with that.
Mr. WOLFOWITZ. And keeping the agreement. I think one of the
problems is in changing the mix in this wayand by “in this way”
I mean what would be a unilateral action by the U.S. Government
or the U.S. Congress-it at least arguably invites the reopening of
the whole package and the whole agreement.
I think we have a base agreement that very much serves U.S. in-
terests. I think we have succeeded, particularly in the recent very
difficult months in the Philippines, in separating our presence in
the Philippines from the political issues the country faces and
making it clear that those facilities would not keep us silent on
issues, but at the same time we were not going to have them drawn
into the political debate.
I think something that could appear to revise the terms of that
agreement invites reopening the agreement and invites reintroduc-
ing the whole issue of those facilities into Philippine politics, which
would not serve American interests or Philippine interests, I be-
lieve.
Senator MURKOWSKI. Well, the elections are scheduled for May
16, is that correct?
Mr. WOLFOWITZ. I believe it is the 14th.
Senator MURKOWSKI. Well then, what role in an observer capac-
ity might the United States be asked to contribute?
Mr. WOLFOWITZ. The Philippine Parliament has actually issued
an invitation to both Houses of Congress to send observers to the
elections. That would be I think, apparently, a very welcome form
of observation. Except by invitation, I think it is not our practice to
supervise other people's elections.
Senator MURKOWSKI. No, but when asked that puts a little differ-
ent light on it.
Mr. WOLFOWITZ. I think it definitely does, and I think it would be
welcome and I think it would serve our interests as well as the in-
terests of the Philippines.
Senator MURKOWSKI. So would you recommend that the Congress
send observers at the invitation of the Philippine Government for
this election?
Mr. WOLFOWITZ. I think it would perform a very useful function,
sir, yes.
You are talking about elections that would be conducted over an
enormous area, and I believe there are 50,000 islands in the coun-
try, so one could only observe a portion of it. But I think even that
is useful.
There is within the Philippines a very impressive grassroots
movement, a national movement for free elections, which is orga-
1297
nizing a very impressive effort, an indigenous effort to monitor the
elections.
Senator MURKOWSKI. As far as observing it, how meaningful is
this election in the sense of expanding a democratic base in the
Philippines? Is the National Assembly which will be elected in May
to have any meaningful power, or does the constitution dictate oth-
erwise?
Mr. WOLFOWITZ. I think it does have meaningful power. The
Philippine Constitution, as I think everyone knows, gives extraordi-
nary powers to the President. But Parliament itself has powers,
and I believe the process of selecting leaders in a democratic way-
and a number of important steps have been taken that would seem
to suggest the possibility of a truly open political competition, in-
cluding a reregistration of all voters in the Philippines, to try to
get rid of dead voters and phantom voters and so forth, and a
number of other requests that were specifically demanded by the
opposition and that the government has granted.
I think this says that it will be an election that will, in fact, help
to choose a new future leadership.
Senator MURKOWSKI. You have indicated the extraordinary
powers that the Constitution provides to the President, and to ask
if you support or if the administration supports that really is a
question that is not of our affair. It is strictly a matter for the Phil-
ippine people to decide through the appropriate democratic process.
But indeed, there is a perception in this country that that is the
case, and there is a perception that the Aquino investigation has
been handled in less than an appropriate manner. Again, that is
subject to a great deal of interpretation, and I do not think that we
can evaluate the merits. That again is something that is the re-
sponsibility of the people of the Philippines.
I am concerned about trying to resolve this mix between your
proposal in the area of military sales and the House's proposal and
the fact that it is going to be resolved in conference. My recommen-
dation would very possibly be in the area of a compromise to
reduce the military sales from $60 million to $30 million and in-
crease the economic support from $95 million to $125 million.
So for the benefit of the balance of this discussion, that is my
tentative recommendation. My rationale again is based on a couple
of reasons.
One is the question of where we can best assist the Philippine
people in their recovery, and is it indeed by increasing by $10 mil-
lion in the area of military sales or can it be done in the area of
economic support? I am inclined to agree that it should be in the
area of economic support.
Now, the thing that concerns me is what kind of signal that is
going to send to the Philippine Government and how they are
going to accept that, if indeed the conferees come up with some
kind of compromise where the amount is insured but the FMS
credits are reduced.
Since I have had an opportunity to examine just what the FMS
credits are for, I personally am satisfied that they are not of a type
that will be used by the current government in the Philippines to
bascially enhance its political objectives. This list of hardware does
not basically do that.
1298
On the other hand, I am not so sure the media is going to com-
municate that fact, because there are an awful lot of assumptions
around the United States that an increase in the FMS area will
somehow benefit the continued political authority and power of the
government
In view of the attitude of the House, which I have attempted,
and I think quite well, to address, in recognition that there is a de-
linquency, although it has been very well explained by Mr. Kelly,
on the FMS credits, I am inclined to think that my recommenda-
tion will be to keep the total dollar amount, but reduce the FMS by
about $30 million and increase the economic support to $125 mil-
lion.
I am open-minded, however, on the outcome of the elections and
how those elections are handled. Not that it is directly an affair of
the United States, but obviously it is of great interest to the United
States for stability in that part of the world.
As a consequence, I would be willing to make a recommendation
to keep a good deal of flexibility within the area of the conferees
that will ultimately resolve this. That is a rather extended position,
but I think it tries to accommodate your interests and the impor-
tance that you have placed on military sales. I think it is responsi-
ble because it attempts to direct a perception. I think it is accepta-
ble to the Philippine Government because the overall dollar
amount is still there. And I think it offers ultimately an incentive
to carry their credits in the current category.
I am going to have to vote again, unfortunately. If you have any
rebuttal to my recommendation, you have a couple of minutes.
Mr. Wolfowitz. I can do it now or give it to you for the record,
sir
Obviously, I prefer what you just said to what the House action
has been. I would still like to see the original mix or, if we were to
depart from the original mix, I think it should be something that is
done by a mutual agreement of our two governments and not as a
unilateral action by us.
Senator MURKOWSKI. I would hope that by keeping the total
dollar amount, at least from the standpoint of our intent here in
the committee, it would reflect that we want to keep the entire
dollar amount intact.
Mr. WOLFOWITZ. I think that is a very important point, which
the House also made and which I certainly appreciate. I think it
should be emphasized that we are not arguing about the total; we
are arguing about the composition of the total in the light of the
economic circumstances in the Philippines, and not attempting, as
I do not think we should be trying to do, to send political signals.
I think our use of facilities in the Philippines is not a political
signal of approval for a particular government or a particular
party, nor should they become signs of disapproval. I think we have
an arrangement that works very well.
Senator MURKOWSKI. I have one other question that I am going
to ask you upon my return. I hate to keep you over, but I will have
to.
Brief recess.
Senator MURKOWSKI. We will try to conclude this hearing within
the next few minutes. I apologize for these delays.
1299
You were concluding your remarks about convincing me that I
should change my mind as regarding my recommendations.
Mr. WOLFOWITZ. I am glad to hear that, Senator. Did I succeed?
Senator MURKOWSKI. No, but I remembered at least what you
were speaking of when we recessed.
Mr. WOLFOWITZ. If I could recapitulate quickly, I would like to
see the original request approved, of course. I think it is critically
important-and I am glad to see we have a consensus with you and
with the House-that the full request be approved.
I also believe, however, that the mix that we have requested be-
tween FMS and ESF should be the one appropriated, unless by
some mutual agreement, not just of our own government but with
the Philippine Government, we come to a different mix.
Senator MURKOWSKI. That is fair enough. I appreciate your point
of view.
I might advise you and formally advise the committee that when
we get into the foreign assistance markup I am going to question at
great length the appropriateness of a couple of things that we have
discussed at length here.
One is the manner in which concessional rates are made avail-
able to some countries and the categorical requirements for dedica-
tion of specific items into the appropriate classifications, specifical-
ly the military assistance program. I think we should have, from
the standpoint of congressional intent, some specific definition of
what we mean, and not just leave it up to an incidental or a parts
category.
And last, I think that somehow we should have the ability to
compare our nations fairly, recognizing that in the case of the Phil-
ippines we have a unique relationship based on the fact that we
have two strategic bases there, and when you throw that in as a
consideration, as opposed to a rental, which it is not, I think it dis-
torts the concept and application of assistance.
Furthermore, I intend to pursue the significance of what econom-
ic aid I think can do ultimately to speed the assistance, and I think
that the trend that has been established to reduce military assist-
ance is a good one, one that I would continue to support.
I would anticipate spending a good deal of time within the full
committee on examining in more detail the foreign military sales
financing application.
With those general comments, I will move away from the specif-
ics of the budget to a couple of housekeeping matters. Senator
Helms has requested as a member of the Subcommittee on East
Asian Affairs that the subcommittee hear an additional witness
today, and I will call on that witness at the conclusion of the panel,
Dr. Jacqueline Kasun.
I want to advise Dr. Kasun that Senator Helms is on the floor
managing an agricultural bill, so he will be unable to join us. I will
introduce her later.
Without objection, I am going to introduce a prepared statement
by the Lawyers Committee on International Human Rights, as re-
quested by Senator Pell, and it is entitled "Human Rights in the
Philippines.
[The statement referred to follows:]
--
1300
PREPARED STATEMENT OF THE LAWYERS COMMITTEE FOR INTERNATIONAL HUMAN
RIGHTS, NEW YORK, N.Y.1
In September 1983, the Lawyers Committee for International Human Rights sent
a delegation to the Philippines to examine the human rights situation in that coun-
try. Based on that visit, as well as additional information gathered both before and
since the trip, the Lawyers Committee issued a 142-page report on human rights in
the Philippines in December. We concluded that a deplorable and deteriorating
human rights situation today infects both the quality of life and the long-range se-
curity of the Philippine Republic.
MILITARY ABUSES
Despite the technical lifting of martial law in January 1981, in recent years seri-
ous abuses by Philippine security forces have continued unabated throughout the
country. In the past year, they have grown worse. Political killings of civilians, par-
ticularly in areas with an active communist insurgency, have increased dramatical-
ly since 1982. As noted in the State Department's Country Reports on Human
Rights Practices for 1983, more cases of summary execution by government security
forces were documented for the first half of 1983 than for the entire year of 1982.
Nineteen eighty-three also brought a dramatic rise in cases of disappearances, the
unlawful abduction of civilians by government forces. During the first half of 1983,
79 disappearances were documented-a startling rise over the 29 cases documented
for the entire year of 1982.
Those who survive arrest or unlawful abduction by security forces are frequently
tortured in barbaric fashion. Persons seized as alleged subversives are beaten, suffo-
cated, choked with water devices, subjected to electric shocks, burned, raped and
mutilated. Like political killings and disappearances, documented instances of tor-
ture increased sharply in 1983. Today, torture is a standard operating procedure of
Philippine security forces engaged in counterinsurgency efforts.
While these abuses violate Philippine law as well as international norms, the
most pervasive form of abuse in the Philippines-arbitrary arrest and preventive
detention without charge-has the sanction of law. Pursuant to a series of presiden-
tial decrees, President Marcos has claimed for himself the power to order people ar-
rested without warrant and held without bail until he personally orders their re-
lease. Last year the Supreme Court of the Philippines upheld these broad powers,
and declared the judiciary powerless to review the validity of the detention of
anyone arrested in this fashion. Accordingly, merely by calling someone a threat to
national security, President Marcos can detain him or her indefinitely, at his sole
and unfettered discretion.
A system of one-man rule supported by military force provides the context in
which these violations occur. Vital safeguards inhering in a system of checks and
balances no longer operate. A subservient judiciary has acquiesced in President
Marcos's assumption of broad legislative powers and important judicial functions,
and has largely adbicated its vital role in protecting basic rights.
HUMAN RIGHTS AND THE DEMOCRATIC PROCESS
These patterns of abuse have had a profound and debilitating effect on the stabili-
ty of democratic institutions and processes in the Philippines. In the countryside,
years of human rights violations by security force personnel have produced a popu-
lar wave of disaffection. Growing numbers of Filipinos have thrown their support to
communist insurgents, whom they perceive as the most effective opponents of a
brutal government. While estimates vary, the New People's Army (NPA), the armed
wing of the Communist Party of the Philippines, appears to include from 7,000 to
10,000 members. Its mass base of support is substantially greater and continues to
grow. The radicalization of rural Filipinos poses a serious challenge to democratic
institutions in the Philippines.
The assassination of Benigno Aquino last August triggered a parallel wave of pop-
ular disaffection in Manila. Waves of protest unleashed by his murder, widely as-
sumed to have been ordered at the highest levels of government, express growing
discontent with over a decade of authoritarian rule. In the wake of the assassina-
tion, the moderate opposition in the Philippines has insisted on a restoration of gen-
uine democracy.
1 This statement was prepared by Diane F. Orentlicher, Deputy Director of the Lawyers Com-
mittee for International Human rights. Since 1978, the Lawyers Committee has worked to pro-
mote international human rights through law and legal procedures.
1301
Significantly, human rights concerns have figured prominently in the current
debate over participation in parliamentary elections scheduled for May of this year.
In January, the Philippines' highly splintered opposition agreed to participate in
those elections only if six conditions were met by February 14. Chief among those
conditions was the repeal of various laws and decrees that accord President Marcos
marital law-type powers, such as the power of executive arrest and the power to
enact emergency laws. In response, President Marcos agreed to suspend his power of
warrantless arrest and detention only until June 1, 1984, but made clear his refusal
to relinquish law-making powers. One opposition group has announced its tentative
plan to field candidates despite only partial satisfaction of the six demands, while
others have decided to boycott. Although the moderate opposition is thus divided on
the question of participation, it is striking that the entire range of moderate opposi-
tion forces agreed that this decision should turn, at least in part, on matters that go
to the heart of human rights abuses in the Philippines.
Democratic opposition forces have sent a message that the United States cannot
safely ignore. The future of democracy in the Philippines is inextricably bound with
progress on the human rights front.
U.S. POLICY
The turbulence that now racks the Philippines poses a critical challenge to U.S.
policy. Expressions of anti-American sentiment have, to varying degrees, formed
part of the protests that have taken place since the assassination of Senator Aquino.
To a disturbing extent, recent calls for President Marcos's resignation have been
coupled with protests against the continued presence of the two U.S. bases in the
Philippines, Clark Air Force Base and Subic Bay Naval Base. In part, this senti-
ment is the product of the U.S. Administration's verbal defense of President Mar-
cos's human rights record during the recent period of serious abuses. Public state-
ments such as Vice President Bush's unfortunate praise of President Marcos's “ad-
herence of the democratic process” in 1981 have led many Filipinos to identify the
United States with the worst excesses of the Philippine Government.
More generally, the growing strength of communist opposition forces poses a long-
term threat to the stability of an important strategic ally of the United States. This
challenge cannot be met unless the Philippines' serious human rights problems are
addressed adequately. As noted earlier, the increasing lawlessness of Philippine se-
curity forces has greatly enhanced the popular appeal of non-democratic opposition
forces.in the Philippines.
On the positive side, several factors render the potential for a constructive and
effective U.S. policy toward the Philippines far greater than in other troubled re-
gions where strong security interests of the United States are at stake. First, long-
standing ties between Americans and Filipinos make our capacity for constructive
influence unusually strong in the Philippines. Indeed, in view of those ties, which
are based on a shared commitment to democratic values and freedoms, Filipinos
expect the United States to defend their fundamental rights when they are threat-
ened. The U.S. Administration's perceived silence in that regard in recent years has
been widely interpreted as tacit support for the authoritarian rule of President
Marcos, and has done inestimable damage to U.S. relations with the Filipino public.
Second, the very fluidity of current political developments in the Philippines ren-
ders the potential impact of constructive influence by the United States far from
negligible. And finally, while the steady growth of the communist insurgency poses
a long-term threat to democracy in the Philippines, NPA influence today is suffi-
ciently contained that effective solutions remain possible.
Faced with the opportunity to promote a constructive resolution of the crisis that
now confronts Philippine democracy, Congress should not fail to act. As Congress
considers the administration's request for military and economic aid to the Philip-
pines for fiscal year 1985, it should take affirmative steps to ensure that future aid
is used (and is seen by Filipinos) to promote respect for fundamental rights and
thereby secure a return to stable democracy in the Philippines.
RECOMMENDATIONS
A valuable first step would be for Congress to enact legislation requiring the Ad-
ministration to submit semi-annual reports describing in detail the state of human
rights observance in the Philippines and to supplement those reports if Congress
should deem them inadequate. This requirement would ensure that Congress re-
ceives up-to-date and comprehensive information on one of the principle causes un-
derlying the present crisis in the Philippines, and would thereby enable Congress to
tailor U.S. policy to the specific demands of a critical and rapidly evolving situation.
1302
At the same time, the reporting process itself would serve to promote human
rights observance in the Philippines in a manner that is consistent both with our
recognition of that nation's sovereignty and with our current obligations to the Phil-
ippine Government. By requiring semi-annual reports on human rights observance
in the Philippines, Congress would send an unmistakable signal that it considers im-
provement in that area vital to its consideration of future aid requests or other as-
pects of U.S. policy toward the Philippines. Yet, because the reporting requirement
would not compel Congress to cut aid if the administration report reached certain
conclusions, it would not give rise to the charge that it is an attempt to dictate in-
ternal policies or that it compels action inconsistent with our obligations under the
Military Bases Agreement (MBA) or other treaty obligations between the Philip-
pines and the United States. In this respect, a reporting requirement would not
impose any rigid restraints on Congress's ability to protect our security interests-
embodied in the future of the U.S. bases in the Philippines.
At the same time, by making human rights an integral component of U.S. policy
toward the Philippines, the reporting requirement properly recognizes that progress
on the human rights front is, in fact, necessary to the security of the bases. Today,
the greatest threat to the future of the bases is posed by a growing perception
among Filipinos that the United States is no longer a champion of their basic
rights. Just as adoption of the reporting requirement would send an important mes-
sage to the Philippine Government, it would send an equally vital message to the
Filipino public, challenging their perception that the United States tacitly supports
human rights violations in their country. In short, a reporting requirement would
afford Congress the flexibility necessary to strike the proper accommodation be-
tween our security interests and human rights concerns in the Philippines.
The reporting requirement outlined above would enhance other efforts Congress
may undertake to promote respect for democratic values in the Philippines. It
would, for example, strengthen the value of the authorization bill recently reported
out of the House Committee on Foreign Affairs. Pursuant to a proposal introduced
by Rep. Stephen Solarz (D-N.Y.), that Committee approved the Administration's re-
quest for $180 million for FY 1985 as the first installment of a five-year package
committed under the recently concluded MBA review. But instead of approving $85
million in military aid and $95 million in Economic Support Funds (ESF) as request-
ed by the Administration, the Committee recommended that Congress grant $25
million in Military Assistance Program funds and $155 million in ESF. The Commit-
tee thus recommended that Congress "front-load” the economic portion of aid com-
mitted to the Philippines over the next 5 years, explicitly leaving open the possibili-
ty of “back-loading" military aid in the later years of the agreement's term.
This measure creates a valuable opportunity for Congress to signal the type of
progress it considers relevant to its review of requests for future aid tranches under
the MBA. The report of the House Subcommittee on Asian and Pacific Affairs states
that "significant progress * in curtailing human rights abuses" is one of several
factors that will be relevant to such deliberations, but a stronger message is both
possible and necessary. Enactment of a reporting requirement together with the
Solarz proposal would make clear Congress's concern that progress in human rights
occur before military aid levels are raised.
Additionally, the reporting requirement would allow Congress to signal its con-
cern about specific problems of particular concern, thereby strengthening the con-
structive potential of the Solarz approach. For example, legislation establishing a
reporting requirement could specify particular areas—such as the President's power
of preventive, indefinite detention that must be addressed in the Administration's
report. In this way, the Philippine Government would understand that Congress is
concerned about this particularly serious problem, while Congress would avoid the
inter-governmental sensitivities that might be posed by an explicit requirement that
such powers be abolished as a condition to future aid.
In addition to the reporting requirement, Congress should specifically prohibit
any aid to the Philippines Constabulary, a police force that operates under the com-
mand structure of the Armed Forces of the Philippines (AFP). As a unit of the AFP,
the Constabulary now benefits from military aid to the Philippines. But as a police
force, it is barred by Section 660 of the Foreign Assistance Act from receiving such
aid. The Constabulary is consistently identified as a gross violator of human rights.
Accordingly, Congress should take affirmative steps to ensure future compliance
with Section 660.
By taking such measures, Congress can seize the initiative, help reverse destabiliz-
ing trends in Philippine politics, and ensure a viable basis for United States-Philip-
pine relations for years to come. Decisive action is as necessary as it is possible.
Failing such action, the prospect of a further deterioration is disturbingly real.
1303
Senator MURKOWSKI. There is one other question, and this is a
pre-prepared question concerning Thailand and the impact on
other Southeast Asian countries if we were to sell the F-16. Do you
have a position or a recommendation on sales of the F-16 to
counter any threat that may be facing Thailand? And are they
looking at any other aircraft that would be better suited, or do you
have a position on it?
Mr. WOLFOWITZ. Senator, Thailand and a number of other coun-
tries in Southeast Asia and elsewhere have requested F-16's or ex-
pressed an interest in them. It is something that is being studied
right now, not just exclusively for Thailand or even exclusively for
Southeast Asia, but on a worldwide basis. And before we make any
decisions we will be consulting with the Congress on it.
Senator MURKOWSKI. Thank you.
I think in view of the fact that this hearing has covered a good
portion of the Asian countries, with the exception of China, and we
have not had an opportunity to explore in any detail the arms
sales to Taiwan and that matter, that I will schedule another hear-
ing on China. It will include the matter of arms sales to Taiwan, so
I do not intend to get into that at this time. We will attempt to
schedule it very soon to accommodate your schedule, and hopefully
it will not be as extensive in length as this.
I trust that you will understand that my concern again was not
to direct as much of this to the Philippines in particular so much
as I was interested in getting into the overall procedure as to how
the foreign military assistance financing is applied. You have been
very helpful in providing that information from a working point of
view with regard to how you have to work with what you have.
Are there any other items of a pressing nature?
(No response.]
Senator MURKOWSKI. Very well, I will excuse this panel and
thank you all for being here today.
I am going to ask the last witness, who has been patient, to come
to the witness table. I understand that there is a prepared state-
ment. And I do want to advise the witness, Dr. Kasun, that she
may come forward at this time.
I want to introduce you to the committee. This is Dr. Jacquelin
Kasun. I have indicated to you that Senator Helms cannot be
present at this time.
I want to also advise you that, should you wish to make a more
extensive statement at the time that this committee will take up
the matter of China and Taiwan under two separate areas of inter-
est, you may feel free to do so.
I am going to allow you a very short period of time today, with
the option that you may, if you wish, care to have a reasonable
amount of time, as opposed to what I am going to give you, which
is an unreasonable amount of time, at the next hearing, which will
be scheduled after the President returns from China, approximate-
ly 1 week thereafter.
If you do not understand that, I would be happy to repeat it.
Ms. KASUN. I think I understand, sir, but you did not say what
the unreasonable amount of time was.
Senator MURKOWSKI. I am only going to be able to give you about
3 or 4 minutes. So you may summarize your statement and I will
1304
accept your entire statement for the record, or you may consider
the alternative of making your entire statement verbally when the
President returns from China. But I feel compelled to schedule it
after that time because I think it would be more appropriate.
STATEMENT OF JACQUELINE R. KASUN, PROFESSOR OF
ECONOMICS, HUMBOLDT STATE UNIVERSITY, ARCATA, CALIF.
Ms. KASUN. I have submitted a complete statement and will give
you a summary.
Senator MURKOWSKI. It will be printed in the record. You may
proceed.
Ms. KASUN. My concern is with our population assistance to the
People's Republic of China, Mr. Chairman. It is now widely known
that the People's Republic of China is operating the world's most
coercive program of population control, including forced abortion,
sterilization, and infanticide.
What may not be so widely known is that U.S. foreign aid dollars
are supporting the Chinese program. According to the Population
Reference Bureau, the Chinese population control program receives
about $50 million a year from the United Nations, whose largest
supporting donor is the United States. The Chinese program also
receives support from International Planned Parenthood, which in
turn gets a large part of its money from the U.S. Government.
The Chinese were using a birth quota system as early as the
early 1970's. By 1979 they had established the one-child family
norm. By 1982, Christopher Wren was reporting in the New York
Times on thousands of Chinese women being rounded up and
forced to have abortions.
Michele Vink reported in the Wall Street Journal on women who
were “handcuffed, tied with ropes or placed in pig's baskets” for
their forced trips to the abortion clinics. The People's Republic
press itself now openly speaks of the "butchering, drowning, and
leaving to die of female infants."
As the horror of the system has mounted, so have the accolades
in the population lobby press. Topping it all, Rafael Salas, director
of the U.N. Fund for Population Activities, has presented the Chi-
nese Government with an award for excellence.
The Chinese system of population control is not the result of
overpopulation in China, but rather the result of a catastrophic
misdirection of policy and abuse of power by the Chinese Govern-
ment. After more than three decades of economic mismanagement
by their central planners, the Chinese people have realized one of
the slowest rates of development and lowest standards of living on
Earth.
Most of their economic resources are unused. For example, less
than a third of their agricultural land is in crops. Far more densely
populated nations around them in Asia have forged ahead of them
in economic development. Taiwan, with a population density more
than five times as great as China, produces eight times as much
per capita and has a larger volume of trade.
The Chinese estimate that it now costs approximately three
times their per capita GNP to prevent one birth in Guangdong.
What this means is that with a tiny fraction of the effort now
1305
being lavished on stamping out births the Chinese could support
the children in question and still have enough left over to mount a
sizable investment program for the improvement of their economy.
The United States cannot change the Government of China. We
cannot stop their mad experiments upon their own people. We can
and we should, however, separate ourselves from this savagery. For
the sake of our national honor and our name in history, we should,
we must, immediately terminate all support for the U.N. Fund for
Population Activities, for the International Planned Parenthood
Federation, and all organizations which support population control
in the People's Republic of China.
Thank you.
[Ms. Kasun's prepared statement follows:]
PREPARED STATEMENT OF JACQUELINE R. KASUN
It is now widely known that the People's Republic of China is operating the
world's most coercive program of population control, including forced abortion, steri-
lization, and infanticide.
What may not be so widely known is that the United States foreign aid dollars
are supporting the Chinese program. According to the Population Reference Bureau,
a population activist group supported by the United States Government, the Chi-
nese population control program receives about $50 million a year from the United
Nations, whose largest supporting donor is the United States. The Chinese pro-
gram also receives support from the International Planned Parenthood Federation
which in turn gets a large part of its money from the United States Government. 2
The Chinese program of population control has been operating with varying de-
grees of intensity since the 1950's. It has been intensely studied and widely reported
in the house publications of American population organizations—the Population
Council
, the Population Reference Bureau, Worldwatch, and related groups. Cultur-
al exchanges between China and the United States have taken Americans to China
and brought Chinese to this country to study and explain the system. American tel-
evision and Steven Mosher's recent book Broken Earth: The Rural Chinese (Free
Press, 1983) have brought it to public attention.
By the early 1970's the system of birth quotas was in effect in China. The quota
system meant that couples who had pregnancies out of turn were denying that
privilege to others and were therefore subjected to intense peer group pressure for
abortion and/or sterilization. Punishments—such as loss of pay and employment
and dismissal from school--and rewards-such as payments for sterilization and va-
cations for abortion-were in effect. The program was greatly admired by enthusi-
asts such as the U.S. State Department's Ambassador Marshall Green for its use of
the so-called "village system” of population control, because this system uses group
rewards and peer pressure as means of enforcement. When the group reward (such
as additional seed or fertilizer for crops) depends on meeting the village birth reduc-
tion quota, group pressure on recalcitrant couples is very effective. The U.S. Agency
for International Development admired the village system so much that, under the
direction of Dr. R. T. Ravenholt, the agency introduced it into AID's program for
Indonesia.5
From the two-child family of the 1970's it was only a step for China to the one-
child family norm proclaimed in 1979. Increasing reports of repression and resist-
ance began to reach the outside world at the same time as the evaluations by the
United States-based population organizations became ever more admiring and fund-
ing from the United States increased. 6 By 1982 Christopher Wren was reporting in
Population Reference Bureau, Intercom, May/June 1983.
2 International Planned Parenthood Federation, Report to Donors, 1980, p. 40.
3 Pi-chao Chen, "Lessons from the Chinese Experience: China's Planned Birth Program and
Its Transferability,” The Population Council, Studies in Family Planning, Vol. 6, No. 10, October
1975, pp. 354-366.
4 Ambassador Marshall Green, “U.S. Perspective on World Population Issues,” The Confer-
ence Board, Dallas, Texas, March 30, 1977.
AID, Memorandum for Assistant Administrators, Mission Directors, AID Representatives
and Principal AID Officers, 11 June 1980; Hearings of Select Committee on Population, 95th
Congress, 2nd Session, Vol. II, Apirl 25, 26, 27, 1978.
& U.N. Fund for Population Activities, 1980 Report and 1981 Report.
34-045 O-RA.
1306
the New York Times on thousands of Chinese women being “rounded up and forced
to have abortions." He described women "locked in detention cells or hauled before
mass rallies and harangued into consenting to abortions.” He told of “vigilantes
(who] abducted women on the streets and hauled them off, sometimes handcuffed or
trussed, to abortion clinics” and of "aborted babies which were crying when
they were born." ? Michele Vink reported in the Wall Street Journal on women who
were "handcuffed, tied with ropes or placed in pig's baskets” for their forced trips to
the abortion clinics.8 As Steven Mosher points out, the People's Republic press itself
now openly speaks of the “butchering, drownings, and leaving to die of female in-
fants and the maltreating of women who gave birth to girls” 9 in this society where
only the son can care for his parents in their old age.
As the horror of the system has mounted, so have the accolades in the population
lobby press. The Population Reference Bureau lists is among "well-designed family
planning programs.To Worldwatch, which is supported by the United Nations and
therefore indirectly by the United States, cites it among its “Population Policies for
a New Era.” 11 Planned Parenthood of Korea, which receives support from Interna-
tional Planned Parenthood, which in turn receives support from the United States,
has launched its own one-child family drive, 12 Topping it all, Rafael Salas, director
of the U.N. Fund for Population Activities which was created at the urging of the
U.S. Agency for International Development and which receives financial support
from the United States, 13 has presented the Chinese Government with an award for
excellence. I am proud to say that a distinguished member of my profession, Dr.
Theodore Schultz, a Nobel Laureate enlisted as an adviser to the U.N. Fund for Pop-
ulation Activities, told the agency to remove his name from the award. 14
The honey-voiced narrator of a Nova film being shown on public television in the
United States assures us that this brutal program is necessary in order for China to
“modernize" and to avert what she calls the "catastrophe” of excess population. The
fact is, the Chinese system is catastrophe. It robs human beings of their dignity,
treating them as if they were livestock being bred for the convenience of the state.
The Chinese system of population control is not the result of overpopulation in
China but rather the result of the catastrophic misdirection of policy and abuse of
power by the Chinese Government.
After more than three decades of economic mismanagement by their central plan-
ners, the Chinese people have realized one of the slowest rates of development and
lowest standards of living on earth. Though they have vast industrial and agricul-
tural resources and are an industrious and intelligent people, their output in 1981
amounted to only $300 per person, barely enough for survival. Most of their econom-
ic resources are unused. For example, less than a third of their agricultural land is
15 Far more densely populated nations around them in Asia have forged
ahead of them in economic development. Taiwan, with a population density more
than five times as great as China's, produces eight times as much per capita and
has a larger volume of trade. 16 The Republic of Korea, with a population density
four times as great as China's has a per capita output of almost six times as great
as China's. 17
From the Great Leap Forward through the Proletarian Cultural Revolution and
up to the current one-family drive, recent Chinese history has consisted of one mad
experiment after another, with devastating consequences for the Chinese economy
and the Chinese people. What China needs is not population control but political
rationality and economic efficiency. According to Christopher Wren, the Chinese es-
timate that it now costs more than $865 to prevent one birth in Guangdong. 18 This
in crops.
Christopher Wren, "Chinese Region Showing Resistance to National Goals for Birth Con-
trol," New York Times, May 16, 1982.
8 Michele Vink, "Abortion and Birth Control in Canton, China," Wall Street Journal, Novem-
ber 30, 1981.
9 Steven W. Mosher, “Why Are Baby Girls Being Killed In China?" Wall Street Journal, July
25, 1983.
10 Population Reference Bureau, Intercom, March/April 1983, p. 7.
11 Worldwatch Paper #53.
12 International Planned Parenthood Federation, People, Vol. 10, No. 2, 1983, p. 28.
13 NSSM 200, "Implications of Worldwide Population Growth for U.S. Security and Overseas
Interests," December 10, 1974, declassified on December 31, 1980, pp. 121–122.
14 New York Times, June 24, 1983.
15 Food and Agriculture Organization of the United Nations, FAO Production Yearbook 1980.
16 World Bank, World Development Report, 1979, 1980, 1981, 1982.
17 Ibid., 1983.
18 Wren, op. cit.
1307
is almost three times the per capita gross national product and fifteen times the
annual cost of supporting a child in China. What this means is that with a tiny frac-
tion of the effort now being lavished on stamping out births, the Chinese could sup-
port the children in question and still have enough left over to mount a sizable in-
vestment program for the improvement of their economy. A sustained and efficient
development program of this magnitude would bring China to comfortable prosperi-
ty rather than the ruin which it is now producing.
The United States cannot change the Government of China. We cannot stop their
mad experiments upon their own people. We can and we should, however, separate
ourselves from this savagery. We should, like Professor Schultz, let the world know
that we do not countenance or support such things. For the sake of our national
honor and our name in history, we should--we must-immediately terminate all
support for the U.N. Fund for Population Activities, for the International Planned
Parenthood Federation, and all organizations which support population control in
the People's Republic of China.
HOW BAD IS THE SO-CALLED "POPULATION PROBLEM" IN CHINA?
Many countries are more crowded than China, but few produce as little per
person, as the following table shows:
Persons per
GNP per
Country or State
square mile,
1982
capita dollars,
1981
.............
Taiwan
Rep. of Korea .........
Japan
West Germany
United Kingdom........
India.........
Switzerland .....
China.........
France ......
United States ........
Pennsylvania
Maryland .......
New York.........
1,482
1,080
825
643
595
570
398
285
256
64
264
429
371
1 2,280
1,700
10,080
13,450
9,110
260
17,430
300
12,190
12,820
n.a.
n.a.
n.a.
i Federal Reserve Bank of San Francisco.
Source: Population densities from Statistical Abstract of the United States, 1982-83; GNP figures from World Bank, World Development Report
1983.
"1
WHAT SOME ECONOMISTS HAVE SAID ABOUT "OVERPOPULATION"
Peter T. Bauer, London School of Economics: "It relies on misleading statistics; it
misunderstands the determinants of economic progress; it misinterprets the causal-
ties in changes in fertility and changes in income
Mark Perlman, University of Pittsburgh:
if we use antinatalist programs,
we do so for reasons other than those simply offered by what we as economists now
know."
Goran Ohlin, University of Uppsala: the more rigorous the analysis and
the more scrupulous the examination of the evidence, the smaller is the role attrib-
uted to population as an independent source of ecomomics problems." 3
Nick Eberstadt, Harvard Center for Population Studies: “Over the past decade
and a half the American government has leds a far-reaching and well financed
effort to reduce fertility and curb population growth in the world's poorer re-
1 2
i With Basil S. Yamey, "The Third World and the West: An Economic Perspective," in W.
Scott Thompson (ed.), The Third World: Premises of the U.S. Policy, San Francisco: Institute for
Contemporary Studies, 1978.
2 "Some Econmomic Growth Problems and the Part Population Policy Plays," Quarterly Jour-
nal of Economics, Vol. 89, No. 2, May 1975, pp. 247-56.
3 "Economic Theory Confronts Population Growth,” in Ansley J. Coale (ed.), Economic Factors
in Population Growth, New York: John Wiley, 1976, p. 1.
1308
4
1 10
gions . . . The Spirit animating the American approach . . . was Malthusian. Mal-
thusian theory is a poor foundation for economic development policy.”
Richard A. Easterlin, University of Pennsylvania: “... there is little evidence of
any significant association, positive or negative, between the income and population
growth rates." 5 "
of the increase in population] that the present world growth
rate would produce in 71/2 centuries, most would take place in the last 150 years of
the period projected.” 6 “it is difficult to build a strong case for such programs (of
population control.” 7
Colin Clark, Oxford University: "This hysterical clamour about population growth
leading to poverty, famine and uncontrollable environment deterioration is not only
false; it has a still graver fault. It effectively distracts attention from the political
questions, which will constitute the world's real problems.” 8
Julian L. Simon, University of Illinois: “Tens of millions of U.S. taxpayers' money
is being used to tell the governments and people of other countries that they ought
to take strong measures to control their fertility . . . But no solid economic data or
analyses underlies this assertion. Furthermore, might not such acts be an unwar-
ranted interference in the internal affairs of other countries?”' 9
Fred R. Glahe, University of Colorado: “ nations with the highest population
growth rates have also experienced the highest growth in real output per capita on
the average
. . it should be pointed out that there is no law of diminishing returns
with respect to technology .
Senator MURKOWSKI. Thank you. I appreciate your statement.
You made reference in your opening remarks to foreign assist-
ance to China. I assume you were speaking specifically of U.N. aid,
as opposed to aid from the United States, is that right?
Ms. KASUN. That is right. The Chinese program receives some
$50 million a year from the United Nations, whose largest support-
ing donor, as you know, Mr. Chairman, is the United States. The
Chinese program also receives support from International Planned
Parenthood, whose largest supporting donor is the United States.
Senator MURKOWSKI. I very much appreciate your testimony, and
your entire statement will be entered in the record. You may feel
at ease if you wish to make a presentation at the hearing which
will be held on China, and it will include arms sales to Taiwan and
it will be after the President returns from China, probably the 6th,
7th, or 8th of May.
Thank you for your testimony.
Ms. KASUN. Thank you, Mr. Chairman.
[The following information was subsequenty received for the
record:]
U.N. FUND FOR POPULATION ACTIVITIES,
New York, N.Y., April 2, 1984.
Her Excellency MRS. JEANE J. KIRKPATRICK,
Ambassador Extraordinary and Plenipotentiary, Permanent Representative of the
United States of America to the United Nations, U.S. Mission to the United Na-
tions, New York, N.Y.
DEAR MADAM AMBASSADOR: My attention has been drawn to testimony given by
Professor Jacqueline R. Kasun at the Senate Foreign Relations Subcommittee on
East Asia and Pacific Affairs on 22 March 1984, in which she states "According to
the Population Reference Bureau, a population activist group supporte
by the
4 “'Population Control and the Wealth of Nations: The Implications for American Policy,” a
Report prepared for the Under Secretary for Security Assistance, Science and Technology, No
vember 24, 1981.
5 “Population," in Neil W. Chamberlain (ed.), Contemporary Economics Issues, Homewood:
Richard D. Irwin, 1973, p. 347.
6 Ibid., p. 339.
7 Ibid., p. 337
8 Population Growth: The Advantages, San Ana: Life Quality, 1975, p. 105.
9 The Ultimate Resource, Princeton University Press, 1981, p. 7.
10 With Dwight R. Lee, Microeconomics: Theory and Applications, New York: Harcourt Brace
Jovanovich, 1981, p. 198.
1309
United States government, the Chinese population control program receives about
$50 million a year from the United Nations, whose largest supporting donor is the
United States”.
The statement that Chinese populations programme receives about $50 million a
year from the United Nations is incorrect. May I point out that UNFPA has provid-
ed $50 million to China in support of its comprehensive population programme over
a period of four years (1980–1984), and not one year. This support was approved at
the 27th Session of the UNDP Governing Council, of which the United States is a
member. UNFPA funds have been allocated in support of the first census to be un-
dertaken in China since 1964 (approximately $12 million) and for such other items
as demographic training and research, training of maternal and child health/family
planning personnel, family planning services, delivery and programme evaluation
and population information, education and communication programme.
A further proposal for allocation of $50 million to China for the period 1985-1989
is being presented to the 31st Session of the Governing Council in June 1984. This
will include projects on data collection and analysis, MCH/FP services and training,
demographics research and training and population information, education and
communication programmes.
In providing support to population programmes, the UNFPA has been consistent-
ly guided by the over-all considerations that these programmes should be voluntary
and should respect the principle laid down in the World Population Plan of Action
that “All couples and individuals have the basic right to decide freely and responsi-
bly the number and spacing of their children and to have the information, educa-
tion and means to do so." UNFPA does not support programmes relating to abortion
and it may be pertinent to state here that no government has requested support for
such programmes.
At another point in her testimony Professor Kasun stated that “Topping it all,
Rafael Salas, director of the U.N. Fund for Population Activities which was created
at the urging of the Agency for International Development and which receives fi-
nancial support from the United States, has presented the Chinese government with
an award for excellence. I am proud to say that a distinguished member of my pro-
fession, Dr. Theodore Schultz, a Nobel Laureate enlisted as an adviser to the U.N.
Fund for Population Activities, told the agency to remove his name from the
award”.
The facts on this matter are that no award was ever presented by me or by
UNFRA. The laureates for the United Nations Population Award are selected by
secret ballot and by a committee of ten member states of the United Nations who
are Australia, Bangladesh, Burundi, China, Colombia, Egypt, Japan, Mexico, Tuni-
sia and Yugoslavia.
As regards Dr. Theodore Schultz's resignation, I enclose a copy of a letter dated 30
August 1983 which I addressed to Dr. Schultz as the Secretary of the U.N. Popula-
tion Award Committee, which is self-explanatory.
It would be very much appreciated if the Chairman and Members of the Senate
Foreign Relations Subcommittee on East Asia and Pacific Affairs are apprised of
the above facts so that any misunderstanding regarding UNFPA support to national
population programmes in general and to the programmes in China, in particular,
may be corrected.
I remain, dear Madam Ambassador,
Yours sincerely,
RAFAEL M. SALAS,
Executive Director.
U.N. FUND FOR POPULATION ACTIVITIES,
New York, N.Y., August 30, 1983.
Prof. THEODORE W. SCHULTZ,
The University of Chicago, Department of Economics, Chicago, Ill.
DEAR PROFESSOR SCHULTZ: I have just returned to New York. Your letter of 18
July 1983 was received in my office on the twenty-second of the month, long after
you released it to the Press. I have been in Japan and the Philippines since early
July and had to reply to the inquiries of the New York Times over the telephone
from Tokyo, without having seen the letter.
I was surprised and distressed at the tone and content of your letter, which im-
pugns without justification the integrity both of the United Nations Population
Award Committee and the recipients of the Award.
1310
Although the texts of the Rules and Regulations were sent to you before you came
to New York and I explained them to you in the Committee session, you seem to
have neither read them nor understood the explanation, so let me repeat:
The Committee for the United Nations Population Award, was established under
General Assembly Resolution 36/201, and consists of ten member countries elected
by the Economic and Social Council for a period of three years. Current members
are Australia, Bangladesh, Burundi, China, Colombia, Egypt, Japan, Mexico, Tuni-
sia and Yugoslavia. The Secretary-General and the Executive Director of UNFPA
serve as ex-officio members of the Committee.
Under Article 4 of the Regulations governing the Award, five eminent individuals
who have made significant contributions to population-related activities are to be
selected by the Committee to serve as honorary members in an advisory capacity for
a renewable term of three years. Though the members of the Committee receive
advice from the Honorary Members, their right remains to accept or reject any
advice given, and to decide by secret ballot on their choice of awardees. The Com-
mittee invited you to serve on these terms as an Honorary Member and you accept-
ed.
The Rules of Procedure of the Committee clearly states that decisions of the Com-
mittee will be made by a majority of the elected and ex-officio members (Rule 6.1)
and that such decisions must be made by secret ballot (Rule 6.2). Under Rule 8, all
proceedings of the Committee are in closed session. It is understood that no partici-
pant will divulge any information regarding the proceedings to any outsider.
For you to release your letter to the public was thus a total violation of the confi-
dentiality of the discussions of the Committee and of the good faith in which I sup-
posed you had accepted our invitation.
You stated in your letter“ on March 18 at the outset of the meeting of the
U.N. Committee, it was announced that ‘only Heads of State' would be considered in
making the award despite the fact that none of the qualified nominees for this
award is Head of State or a high public official. The decision of the Committee was
totally self-serving. As state appointed members, they decided to court favor of those
to whom they are beholden regardless of the excellent qualifications of other nomi-
nees”.
This statement is totally inconsistent with the facts. The Committee held three
meetings (20 January, 18 February, and 18 March 1983) to review nominations for
the 1983 Award. At its meetings on 20 January and 18 February, it reviewed all the
valid nominations and established the procedure and the modality for dealing with
them. The third meeting of the Committee was called on 18 March for a final
review of the nominations and the choice of laureates for 1983. All the honorary
members were invited to attend this particular meeting. Three who were unable to
attend sent written statements which were presented to the Committee. The Com-
mittee received your advice at the morning session, and the advice of Dr. Raul Pre-
bisch at the afternoon session. It was at the afternoon session, which you chose not
to attend, that the final decisions of the Committee were arrived at through secret
ballot.
The Committee thus went through an extensive process of review before reaching
its decisions on the 18th. At the end of the Committee session, a formal announce-
ment regarding the decisions of the Committee was made by the Chairman of the
Committe to the press and a copy of this announcement was sent to you.
I find if somewhat strange, therefore, to receive a letter from you almost five
months after the meeting, in which you accuse the Committee of being "self-serv-
ing”, and call its integrity into question. How this award can "serve” the interests
of the Committee members you never explained. Membership of the Committee was
decided upon without bias towards any individuals or individuals and with full rep-
resentation by various regions and groupings in the United Nations system. Its
votes represent the judgment of the countries represented as to who merits the
award. Your comment exposes your lack of understanding of diplomatic practice
and the workings of the United Nations.
I would also take issue with you on your statement that “the harm was done by
awarding the prize to a public official in China where public policy is responsible for
the appallingly high rate of female infanticide and a prize to the Head of State of
India despite her cruel mandated sterilization".
These statements are at variance with the facts. In the case of China, you ought
to have known that female infanticide is a crime punishable by law. It is a centur-
ies-old practice that the Chinese Government hopes to eradicate through its family
planning programmes. It is as ludicrous to accuse Dr. Qian Xinzhong of being in any
way responsible for female infanticide in China, as it would be to accuse the U.S.
Secretary of Health and Human Services of social crimes in the U.S.A.
1311
In the case of Inida, the policy of her government has always been one of persua-
sion and it has consistently opposed coercion in any form. During the 1975-1977
family planning campaign, there were a few cases of excesses committed by over-
zealous officials; and these officials were suitably punished. Mrs. Indira Gandhi her-
self has, on several occasions, quite clearly stated the voluntary nature of the Indian
family planning programme, and has issued clear and specific instructions against
use of any coercion in implementing the programme.
You have maligned without justification two well-known and respected public offi-
cials of India and China who are directly concerned with the implementation of pop-
ulation programmes and policies in countries which comprise more than 40% of the
world's population. Their performance in implementing these policies has been con-
sidered impressive, not only by the members of the Committee but a large number
of interested and concerned institutions and individuals around the world.
The United Nations believes in the sovereign right of countries to determine their
own population policies, with due regard for the rights of individuals and couples.
While there is no denying your right to express your personal views in these mat-
ters, I feel you have gone beyond the bounds of propriety by making self-righteous
pronouncements in a field of which, as your letter reveals, you have very little un-
derstanding.
The Committee, with whom I have consulted in preparing this reply, has accepted
your resignation as an Honorary Member of the Committee. And I want to assure
you that we have removed your name from the list of Honorary Members and from
all UN documentation to be issued henceforth on the subject of the Population
Award.
Yours sincerely,
RAFAEL M. SALAS,
Secretary, Committee for the United Nations Population Award.
Senator MURKOWSKI. With that, we will conclude the hearing
before the Subcommittee on East Asian and Pacific Affairs on the
foreign assistance program. I thank those of you who are left here.
We wish you all a good day.
[Additional questions and answers follow:
STATE DEPARTMENT'S RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED FOR THE
RECORD
Question 1. In a recent released report titled Torture in the Eighties, Amnesty
International outlines a 12-point program that governments can implement to end
the use of torture as a tool of state policy. Most of these points focus on three main
topics:
(a) Government accountability for its occurrence, specifically investigating allega-
tions of abuse by government officials and prosecuting torturers
(b) Abolition of secret detention centers
(c) Rehabilitation of torture victims.
To what extent are these three actions acted on by the Philippines Government?
Has the United States Government in the past urged the implementation of similar
actions? Will it do so in the future?
Answer. Torture is prohibited under the Philippine Constitution; however, some
individuals arrested for violating national security laws have said they were tor-
tured. The most reliable source of human rights statistics in the Philippines, Task
Force Detainees in Manila, had no figures on the number of cases of torture in late
1983, when the State Department's annual human rights report was completed. The
Philippine Ministry of National Defense admits that abuses occur and investigates
complaints, but asserts that some charges of torture are false and are being used as
a legal tactic by arrested subversives to gain their release. Most complaints of tor-
ture or mistreatment center on the period immediately following arrest.
In areas of military activity against insurgents, there have been allegations of
military abuse ranging from harassment and extortion to rape and murder. Reports
of alleged abuse have appeared
in the press and have come from Philippine human
rights organizations, which believe that the government is not doing enough to curb
abuses and punish abusive military personnel. The Ministry of National Defense
has investigated some reported abuses, but frequently has failed to find evidence. A
combination of criminal prosecution and disciplinary administrative action has been
used to deal with abusive personnel, although few receive severe punishment.
In an official 1983 study for the Philippine National Police Commission, the un-
necessary use of physical force was singled out as the most common police offense,
1312
accounting for more than one-quarter of all such offenses. Most of these violations
were found to occur at the place of arrest or at police stations. The Commission
stated that it was seeking fuller information on this undesirable phenomenon, with
a view toward curbing it.
Arrested persons are generally promptly charged, although this is not always the
case, particularly with regard to alleged "national security offenders. Such individ-
uals are sometimes held incommunicado by military intelligence units for days or
even weeks before the government presents charges or acknowledges that it is hold-
ing them.
We are unaware of any programs aimed at the rehabilitation of alleged torture
victims in the Philippines either by the Philippine Government or by Philippine
human rights on civil liberties organization. We have asked our Embassy in Manila
to look into this question.
Amnesty International, when it asserted in its 1983 report that torture during in-
communicado detention of persons arrested on national security grounds is "so prev-
alent as to amount to standard operating procedure for security and intelligence
units," noted that there were allegations of torture in 32 of 49 individual cases it
had examined in 1981. It did not, however, estimate the total number of cases na-
tionwide. As indicated previously, the Manila-based Task Force Detainees, the most
reliable source of human rights statistics in the Philippines, had no figures on the
number of cases of torture in late 1983.
We are not aware what, if anything, the Philippine Government is doing about
any secret detention centers it may be operating. U.S. Government officials have on
numerous occasions expressed our human rights concerns to the Government of the
Philippines. These concerns specifically cover the types of incidents cited in the Am-
nesty International Report.
We shall continue to engage in active diplomacy on human rights. We understand
how difficult it is for the Philippine military forces to deal with the active Commu-
nist insurgency, but we believe that all abuses of the civilian population must be
halted.
We know that the Philippine Government is aware of the need for an effective
counterinsurgency program which combines social and economic programs with
military measures.
Question 2. The Philippines has an impressive constitution and laws that guaran-
tee protection of key fundamental rights of its citizens. Yet there are a number of
practices and legislation enacted which in effect undermine this protection and vio-
late international law. Has the United States Government conveyed concern that
such laws can encourage abuse and disregard for constitutional guarantees, and
should therefore be reviewed with the possible aim of amending them or repealing
them?
Answer. The background notes submitted with the question list two Philippine
legal procedures as subject to question:
(1) waiver of detention, by which detainees waive their right to be presented to
the proper judicial authority; and (2) the Preventive Detention Action (PDA), under
which persons arrested and detained can have suspended the privilege of the writ of
habeas corpus and can continue to be detained after acquittal or having served their
sentence.
I had not previously heard of the practice of waiver of detention. Upon checking, I
find that the Department of State likewise knows of no instance where detainees in
the Philippines have been forced to sign waivers of detention. We are asking our
Embassy in Manila to look into the matter.
As for the PDA, Section 15 of the Philippine Constitution does authorize the sus-
pension of the privilege of the writ of habeas corpus “in cases of invasion, insurrec-
tion, rebellion, or inninent danger thereof, when the public safety requires it.” As
you suggest, however, the institution of the PDA was enacted by Presidential
Decree and is an outgrowth of emergency legislation also enacted by decree during
the period of martial law between 1972 and 1981. These arbitrary arrest and deten-
tion powers have become an increasingly vocal political issue in recent months, and
the political opposition and others in January 1984, called for the suspension of the
President's authority to issue PDA's as a condition for participation in the May par-
liamentary elections. Although President Marcos did agree to suspend PDA's for
election-related offenses for the duration of the campaign, he has taken the position
that abolishment of the pertinent presidential decrees might be a proper subject for
discussion, once the new parliament has been constituted after the election. The
United States has made representations to the Philippine Government on numerous
cases, involving detentions under PDA authority, and has pressed for scrupulous
regard for constitutional guarantees and for the completion of the political normal-
1313
ization process which was only partially realized when marital law was lifted in
1981.
Question 3. What does the United States Government know of the paramilitary
groups operating in the Philippines and reportedly responsible for abusing and ter-
rorizing the residents in the area where the groups are located? Has the United
States Government expressed its concern that such groups should be disbanded
again in the light of the human rights problems that are created by their action?
Answer. There have been reports about various paramilitary groups, including
several “lost commands” for years. These appear to consist of private security
forces, such as were especially prevalent in the pre-martial law era, serving particu-
lar commercial or political interests, usually at the local level and often in remote
rural areas, such as northwest Samar, the province of Agusan del Sur in Mindanao,
and in the case of the “Rock Christ" group, in the Lanao provinces of Mindanao.
These forces are reputed to include former soldiers, either those who have been dis-
charged or deserters. At times some of these groups have been accused of abusive
actions. Some stories have alleged connections between these “paramilitary groups”
and elements of the Philippines Government or military. Some groups have boasted
of such connections, but it is difficult to confirm such reports.
Little has been heard about these paramilitary groups in the last year or so. In
the past U.S. Government officials have expressed concern to Philippine authorities
about these groups.
MILITARY ABUSE
Question 4. Why in your opinion does the Philippine Government not investigate
and take action against the numerious acts of barbaric violence and abuse, extraju-
dicial executions and "disappearances” allegedly committed by members of its mili-
tary? Does the United States have an established procedure for communicating with
the Filipino Government about individual cases of abuse that come to its attention?
Answer. The Philippine Government has carried out investigations and has stated
that substantial numbers of military personnel have been disciplined for abusive be-
havior. In fact, however, they are seldom severely punished, and the punishments
usually take the form of demotions or dismissal from the service. The State Depart-
ment's annual report to the Congress for 1983 on human rights practices in the
Philippines did cite several recent instances where members of the Philippine mili-
tary were convicted and sentenced to long prison terms for crimes against civilians.
The government has said that it is often difficult to gather evidence, and many
cases remain unsolved. However, government investigations do not always appear to
be pursued with vigor.
Several years ago, President Marcos took cognizance of the strong U.S. Govern-
ment interest in human rights and designated the Minister of Defense and the
Office of Detainee Affairs within the Defense Ministry as principal points of contact
through which our Embassy could communicate on individual abuse cases. We use
those channels regularly, but do not hesitate to bring cases to the attention of
others in the top levels of the Philippine Government, as warranted.
[Whereupon, at 12:57 p.m., the subcommittee adjourned, subject
to call of the Chair.)
APPENDIX
STATEMENT OF WERNER FORNOS, PRESIDENT OF THE POPULATION INSTITUTE,
WASHINGTON, D.C.
My name is Werner Fornos and I am the President of the Population Institute, a
non-political public interest organization that promotes, through communication,
education and information, public awareness to stimulate action toward reaching a
more equitable balance between global population and global resources. I appreciate
this opportunity to present this statement to the Senate Foreign Relations Subcom-
mittee on East Asian and Pacific Affairs.
My reason for testifying is that when the Subcommittee held hearings on March
22, it heard from only one witness on the People's Republic of China's efforts to
reduce its population growth. Unfortunately, that one witness, Jacqueline Kasun, a
member of the Humboldt State University faculty, made no effort to be objective
about the program. She is an acknowledged opponent of population assistance, who
believes there is no population problem in a world that grew by an unprecedented
82 million people last year. She is certainly entitled to her opinions, but, in her zeal
to advocate her position, she has presented testimony to this Subcommittee filled
with innuendoes, half-truths and errors. If the testimony had been presented to Pro-
fessor Kasun for a grade in one of the courses she teaches, I fear the student would
be destined to repeat the course.
Let us begin with Professor Kasun's opening sentence: “It is now widely known
that the People's Republic of China is operating the world's most coercive program
of population control, including forced abortion, sterilization, and infanticide.'
Legal abortion is part of the People's Republic population program. There have
been accounts of “forced abortions” in the U.S. press, as documented by Professor
Kasun. It is not clear how extensive abortions or "forced abortions" are in China. At
this point, and for the record, I would like to point out that the Population Institute
does not advocate abortion as a means of birth control; on the contrary, abortion is
the result of failure to adopt modern family planning methods.
Voluntary sterilization is a legitimate method of family planning and one that is
utilized in most industrialized countries. It is, in fact, the leading method of birth
control in the United States. Market Facts, a New York based research firm, recent-
ly announced that 11.6 million men and women in the United States have chosen
sterilization as their method of fertility regulation, compared to 10 million who use
oral contraceptives—the second most popular U.S. method.
As for Professor Kasun's charge that infanticide is a method of reducing popula-
tion growth in China, I can only conclude that she has been either misinformed or
that she is terribly confused. I have visited the People's Republic twice in the last 4
years and I do know that infanticide is a problem that has the Chinese quite con-
cerned. The constitution of the People's Republic of China provides explicitly for the
protection of the rights and interests of women and children, including the prohibi-
tion of infanticide.
However, as reported in the Chinese press and described by the Chinese Govern-
ment, cases of female infanticide have occurred, perhaps as a consequence of the
feudal mentality that still exists among some people who view sons as more prefera-
ble than daughters. The Government of China considers these cases as intolerable
crimes and they have been dealt with sternly according to the law. Exposure in the
press is part of the effort to mobilize public opinion to condemn such crimes. It is
only with the support of its people that China has achieved remarkable progress
with its family planning program. It is unreasonable to reproach China's family
planning policy just because such cases are exposed and denounced in the Chinese
press. The occurrence of social phenomena does not mean that it represents govern-
ment policy.
Professor Kasun has also asserted that the Chinese population program receives
$50 million a year from the United Nations Fund for Population Activities
(1315)
1316
percent of UNFPA funds while 72 percent came from 19 other donors in the indus-
(UNFPA). The fact is that the UNFPA has assisted the Chinese population program
for 6 years, with funding expected to total $51 million through 1984. Thus, China
with 33 percent of the population of the developing world has received only 4 per-
cent of the $1.2 billion the UNFPA has provided to voluntary population programs
in more than 130 developing countries.
In the 6 years that the UNFPA has been assisting the People's Republic of China
with its efforts to reduce population growth, the United States has contributed 26.5
trialized world. The remainder was provided by developing countries, including the
People's Republic of China.
The UNFPA provided China with $18 million for technical advice, equipment,
training, research, and analysis for census and related data collection. Equipment
included 21 American IBM computers, which were provided following careful review
by a U.S. interagency committee. Another $27.5 million was available for family
planning program management and evaluation, education information, research,
training and service delivery, as well as for contraceptive production and research.
The remaining funds are being used for communication and education and for over-
all program development and oversight.
UNFPA assistance to the Chinese family planning program was reviewed in
detail and approved by the UNFPA governing council, of which the United States
and the governments of 49 other industrialized and developing countries are mem-
bers. The program has been executed by highly qualified organizations, including
elements of the United Nations secretariat, the World Health Organization, the
Rockefeller Foundation and the Program for the Introduction and Adaptation of
Contraceptive Technology. All have had extensive experience and deal only with
voluntary programs. In addition to assistance from UNFPA, the population program
of the People's Republic has received support from the Japan International Coopera-
tion Agency, the Danish International Development Agency and from the Govern-
ment of Norway.
I think it is important to place into the record a summary of China's population
growth problem and what that country is doing to remedy what its government
views as a national crisis.
In the 1970's, the People's Republic of China began its family planning program
following 20 years of experiencing high birth rates, low mortality rates, and a high
natural growth rate which resulted in a population increase of 280 million. Family
planning is a basic policy and explicit in the Chinese constitution; China has a na-
tional goal of keeping the nation's population within 1.2 billion by the year 2000.
The program has succeeded in reducing the natural growth rate considerably (from
26 per 1,000 in 1970 to 14 per 1,000 people in 1982), but the rate is still far short of
China's low growth target.
The task ahead is arduous. China's population is now about 1.032 billion, which is
23 percent of the world total, or one-third of the population of the developing world.
China's population is increasing by about 13 million annually. One-third of the pop-
ulation (350 million) is under 14 years of age. In the 18 years from 1982 to 2000, it is
anticipated that 11 million couples will marry each year. Should each of these cou-
ples give birth to two children (22 million annually), a total of 400 million will be
born by the turn of the century.
In view of these facts and in line with its policy, China continues to advocate
among its young people the principles of its family planning program: late mar-
riages, late births, fewer births, and healthier births.
With the aim of encouraging the one-child family, no marriage is contracted
before the man has reached 22 and the woman 20 years of age, man and wife are
dutybound to practice family planning, birth quotas have been established, contra-
ceptive services are free and easily accessible. And incentives and disincentive play
a large role in the implementation of this program.
Acceptance of the one-child family is promoted through free child health care;
child care contributions; work point awards; increased retirement income for par-
ents; preference in employment, in housing, and in land distribution; and through
cash awards. Neighborhoods are allowed to work out their own plan, including in-
centive schemes.
The Chinese Government follows through on the principle of education and per-
suasion in implementing the family planning policy and tries to assure that the
people understand the necessity of birth control and its benefits to the country and
the individual. Government departments, with the help of national women's and
youth organizations, have made concerted efforts to give advice and technical assist-
ance. Dramatists, opera singers, musicians and painters have been drawn into the
campaign to publicize the importance of family planning.
1317
Professor Kasun's testimony does not demonstrate evidence that she really knows
much about China's family planning program nor, from the frequent footnoted ref-
erences to secondary sources, does it indicate she has ever been to China. As I said
earlier in this testimony, I have been there; I have seen the family planning pro-
gram in action; I have talked with officials in the family planning program and,
perhaps more significant, I have talked with many rank and file Chinese citizens
about family planning. I do not profess to be an expert on China's family planning
program, but I am more than casually acquainted with it. Professor Kasun indicates
that the population lobby holds up China's program as one to be emulated by other
developing countries. In the years that I have been associated with the effort to
reduce global population growth, I have never heard or read about anyone in the
population field suggesting that the Chinese program is worthy of emulation-cer-
tain facets of the program, such as the ready accessibility of contraceptives to the
most remote villages, perhaps-but not the program as a whole.
There is, in fact, an ongoing controversy about the use of incentives and disincen-
tives to ensure widespread use of fertility regulation methods. Incentives and disin-
centives are devices used when a country is on the very brink of demographic disas-
ter. It is relatively easy for a college professor in California to make value judg-
ments on programs which may offend her sensibilities, but when you're living in a
country with more than a billion people and you're looking ahead to an increase, by
the end of this century, that is 50 million people in excess of the current population
of the United States, you have hard decisions to make. I do not know that China is
making all the right decisions. I know that its population growth is declining and
that it still has a long way to go. I reject Professor Kasun's sophomoric argument
that China does not have a population problem, but rather than it has an economic
problem. The two problems are often inexorably intertwined.
Finally, I would like to quote Dr. Qian Xinzhong, the Minister-in-Charge of
China's State Family Planning Commission:
"The socio-economic conditions and the development requirements of different
countries are varied, therefore it is only natural that their population policies and
measures will differ. At present, policies for population control have been adopted
by developing countries with populations totaling 80 percent of the developing world
and positive results have been attained, contributing immensely to the slowdown of
the world's population expansion.
"Developing countries must first and foremost rely upon their own efforts to solve
their population problems by developing their national economies and taking effec-
tive measures for population control. However, it also calls for friendly internation-
al cooperation. In this light, it is beneficial that the United Nations and its popula-
tion organs, particularly the United Nations Fund for Population Activities, have
been of assistance to developing countries by providing cooperation.”
I have met Dr. Xinzhong on several occassions and we have talked at length. I
have found him to be a dedicated, decent individual, who has led a program in a
country that has an unique demographic dilemma. He certainly does not deserve
the abuse he received from a California college professor, who relies almost exclu-
sively on secondary sources in her effort to attack a U.S. foreign assistance program
that a vast majority of the developing world's people deem vital to its efforts for
achieving economic progress and an improved quality of life.
STATEMENT OF KEVIN F. OWENS, POLITICAL AFFAIRS REPRESENTATIVE, MOVEMENT FOR
A FREE PHILIPPINES
Mr. Chairman, at least three Senators with this subcommittee have at one time
attempted to campaign as candidates for the office of President of the United States.
They ran because they were convinced that the American public would be better
served under this style of leadership than with the incumbent President they hoped
to replace.
Although the Presidential selection process is exhausting for all parties involved,
no one denies any of you the right to compete for the office, or threatens your liber-
ty when you challenge the leadership of those who do get elected. If you are unsuc-
cessful with your campaign, you can try again in four years. President Reagan at-
tempted three national campaigns before he finally won the White House.
The American political process, while not perfect, is a good system. It works well
in creating and moderating leadership. It gives an open forum for critics against
government policies, and an opportunity for those critics to try to win a chance to
affect national direction. It gives the people a chance to either
support their nation-
al leaders, or to replace that leadership if they are unhappy. It works well, by pro-
1318
tecting the rights of all to compete and complain and to advocate their own ideas of
government.
Imagine for a moment that things are different. Picture in your mind a President
you remember, or maybe someone in the future yet to hold that office. This Presi-
dent has served his 8 years in the White House, and is approaching the end of his
term convinced that no likely candidate offers leadership of good caliber. This Presi-
dent is ending his tenure under a cloud of controversy over widespread government
corruption, ballot fraud charges, and abuse of his authority. A large element of the
society is so unhappy with his Administration that they are protesting in the
streets, and the public is so disturbed with his misuse of the Presidency that they
are ready to call a Constitutional Convention to revise the rules of government.
But, this President is powerful, and getting rich in office. If he leaves office, he
may face legal challenge to the wealth gained through corruption. He will no longer
have the power, the wealth, and the control of a nation at his disposal if he accepts
the constitutional limits on his tenure, and steps down. To preserve his position, this
President creates a subversive threat. Some public facilities at the Capitol are blown
up. A few government cars are shot at. The President declares these actions the
work of a “Communist insurrection” that threatens the security of the country. This
insurrection naturally requires prompt and drastic action. So the President obliges,
and declares martial law. All newspapers and media facilities are closed. Banks are
closed. Critical business is nationalized. Congress is closed, and the opposition lead-
ers are arrested and jailed.
The President then reconvenes Congress, with only members of his own Party
able to attend. Under the intimidation of martial law, this Congress agrees to a new
Constitution allowing the President tenure for life, barring elective challenge. The
President is given the right to legislate by decree. the public vote on this new consti-
tution is supervised and counted by the Army, and the Armed Forces are led by
President appointees. When the press is allowed to publish again, they are forced to
submit to government censorship, or be closed. Criticism of the President, the
Armed Forces, or the government is prohibited. Criticism of any kind may be inter-
preted as a communist threat, and result in arrest without the right to trial.
The President's friends and family then begin to “nationalize" any business or
property they deem critical to national security, and assume personal control of
these properties. Any challenge to these actions is a security threat, and dealt with
harshly.
Assume, in this changed America, you are a Senator from the opposition party.
You have been jailed on the first day without charge or trial. If you continue to
demand a trial, the government will create evidence that proves you were part of a
conspiracy, and try you before a military tribunal, unless you accept publicly the
President's action to "save the country”.
This could not happen in America. Are we so sure? Could any of the recent Presi-
dents have attempted it if they were sure of the Armed Forces support? It hasn't
happened yet in America, and I pray to God it never does. But it did happen in the
Philippines. Everything I've just described took place in this former American terri-
tory.
Twelve years ago, Philippine President Ferdinand Marcos, nearing the end of his
8-year reign as President, created an “insurrection” threat, and declared martial
law. The Army arrested and jailed opposition members after the press and Congress
were closed. President Marcos, who was facing public demonstrations against his
corruption, ballot fraud, and abuse of power, created a new Constitution that gave
him the Presidency for life, and gave him the right to decree any rules he chose. He
has been ruling the Philippines since 1972 with an iron fist to protect himself from
political challenge.
On the
day martial law was declared, Senator Benigno Aquino was jailed for con-
spiracy. He was tried 5 years later by a military tribunal, and sentenced to death.
That sentence was never carried out. Marcos stayed that execution. Two years later
he was sent to America for heart surgery. In August last year, the unrepentent
Aquino attempted to return home to speak for his people. As soon as he got to
Manila Airport, he was arrested by Philippine security forces and shot to death. The
President's wife, Imelda, and Army Chief of Staff, Fabian Ver, remain prime sus-
pects in that murder. In the past 7 months, little evidence has been made public to
discredit that suspicion. This is the Marcos.
I speak here today on behalf of the Movement for a Free Philippines, or the MFP.
The MFP is an opposition group here in America, organized by former Senator Raul
Manglapus, presently in exile here in the United States. On the first day of martial
law, back in 1972, an arrest warrant was issued against him. He was out of the
country on a speaking tour at the time, otherwise he would have been in jail with
1319
his friend, Senator Aquino. Instead, for the past 12 years he has been unable to go
home.
Many of you are probably aware of Senator Manglapus, because for most of that
12 years he has been asking your help in restoring the democracy that Marcos de-
stroyed. He has been asking the Congress, and the various Administrations, to with-
draw support from the Marcos regime, and try to find ways to support freedom and
democracy for the Filipino people instead. He hopes to remind you that the Filipino
people were at one time American citizens who chose to use our constitutional
ideals as a direction for a nation of their own. Marcos destroyed that dream.
There have been many eloquent speakers before these bodies of Congress in
recent years to discuss the Philippine situation. I've been told by spokesmen that
"we know Marcos is a bastard, but he's our bastard, and to force a collapse of the
Marcos government may be counter productive to the interests of both the United
States and the Republic of the Philippines.” A withdrawal of support to Marcos may
create a revolution similar to what took place in Nicaragua, Iran, and Cambodia. I
disagree with those projections, and I would like to explain why. I would also like to
express a view that a change in the American view of the military situation in the
Philippines would be of advantage to both countries, because this change is neces-
sary if the United States ever hopes to distance its security interests from the for-
tunes of that gangster presently ruling the Philippines.
The Defense Department has given two fundamental reasons for not initiating ac-
tions that could antagonize the Marcos government:
1. The American military installations at Clark Air Force Base and Subic Bay
Naval Base are strategically located to protect western sealanes and allied nations
in the region. Loss of the bases would be a severe blow to America's forward de-
fenses.
2. Despite his domestic short comings, President Marcos is a moderate dictator,
compared to Idi Amin or Pol Pot. President Marcos has been a solid ally to the
United States, and very cooperative in regional defense needs.
All parties involved with the Philippine situation are aware of these arguments.
They are valid concerns in light of the massive Soviet build-up at Cam Ranh Bay in
Vietnam. The Soviets are rapidly enlarging their naval presence, and the Vietnam-
ese maintain occupation armies in Laos and Cambodia, and have conducted military
skirmishes into Thailand and Burma. If the United States military were to with-
draw from the Philippines, many observers are convinced both the Soviets and the
Vietnamese would take this as a signal of reduced American commitment in the
region, and an invitation to launch new adventures against Thailand, Malaysia, In-
donesia, Burma, and the Philippines.
Additionally, Communist China is ready to reincorporate Hong Kong when the
British lease expires at the end of the century. They make no secret of their inten-
tion to reclaim Taiwan when the opportunity presents itself. An American pull-back
from the Philippines may initiate an armed attack on Taiwan. Since the United
States has already withdrawn recognition of Taiwan, the American commitment to
Taiwan has to be considered limited.
These and other strategic concerns about an American withdrawal from the Phil-
ippines are legitimate worries, and Marcos has made it clear that the American
military is welcome as long as the United States cooperates with his government.
His government. The Marcos Administration. Twelve years ago Marcos declared
martial law, and has ruled the nation since then at gunpoint, not by popular sup-
port. Occasionally, he permits minor elections with the press controlled by his gov-
ernment, the ballots counted by his army, and opposition leaders subject to arrest at
any time he chooses. At no time in this period has he permitted the Filipino people
to choose between himself and an opponent. At no time has he permitted an elec-
tion on his rule to be independently supervised. Marcos does not represent the Phil-
ippines, he represents himself. Marcos rules the Philippines the way Al Capone
ruled Chicago in the 1920's: by buying friends, silencing enemies, and frightening all
others.
As far as the Opposition is concerned, any deals with Marcos do not present the
Filipino people, but are deals to help Marcos. The American base agreements are
clear examples of this in a multiple number of ways:
1. The military agreement is supposed to be a "mutual defense pact”,
protecting
the Philippines from hostile foreign threats. An invasion can reach the Philippines
only by coming across the sea. To control an attack,
the Philippines
needs a naval
and air force capable of confronting an enemy task force at sea. The Philippines has
not yet built, bought, or negotiated for even one destroyer or cruiser, the backbone
ships of naval warfare. Naval defense of the Philippines at present is almost entire-
ly dependent on the American Seventh Fleet. Yet the size of the Philippine military
1320
has grown dramatically. This growth is not to meet any possible enemy invasion, or
the Navy would be much stronger than it is; instead the military is used to control
the domestic population, and prevent internal challenge to the rule of Marcos. The
American role is to protect the Philippines from any 1941 style invasion, while the
Philippine armed forces have a different task. This is not a mutual defense, it is
relieving Marcos of the expense of defending the Philippines, and charging the cost
to the American taxpayers.
2. The most recently negotiated Bases agreement calls for the United States to
contribute $900 million in foreign aid over 5 years. This $900 million is so the Amer-
icans can have the privilege to defend the Philippines from a foreign enemy. The
American taxpayer thus, in effect, pays to protect Marcos, and provides Marcos
much more money to enrich his family, and enforce his rule to an oppressed people.
The United States has agreed to spend extra for a service they offer. They should be
paid if the defense pact was mutual.
3. American foreign aid to protect the options on those bases does not go to the
Filipino people, but to the Marcos regime, where the Marcos family skims it's share
right off the top, and then gets to distribute the rest to friends and relatives for
whatever projects they deem necessary. Charles Bowsher, the U.S. Comptroller Gen-
eral last month complained to the GAO that Imelda Marcos has acquired unaudited
control of at least $200 million in U.S. aid money since 1979, and the American Gov-
ernment can find no accounting for it. At the same time, we have been informed
that Imelda Marcos has at least $800 million in a private Swiss bank account.
American money diverted to the private accounts of the Marcos family does not
help the Filipino people.
The Bases Agreement has a certain detrimental effect on the Philippines, because
as long as the United States is so committed to the bases, the Philippines has no
need to prepare to defend itself from any foreign attack; the Americans will protect
them. The Philippine armed forces can be politicized as a private Marcos army dedi-
cated to protecting Marcos from the will of the Filipino people. Because of the
American obsession with maintaining the bases, Marcos can demand and get nearly
a billion dollars from the U.S. Government to remain and protect him. Because
America is so cautious not to offend the Marcos regime, the foreign aid to the Phil-
ippines can be pocketed by the Marcos family with impunity, while the Filipino
people go hungry, suffering with a chaotic economy created by Marcos.
Many American Government spokesmen have justified this situation by pointing
out that the United States should not be expected to interfere in the internal affairs
of an allied government, and at least the bases are available to counter the Soviet
build-up in Vietnam, and to prevent further losses to the communists in the region;
losses that would be more likely if the bases were closed. This debate does not take
into account that the American contribution is an interference in the internal af-
fairs of the Philippines, weighted in favor of the Marcos government. The Filipino
people see this as an American interference and an obstacle to democracy.
Twelve years ago Marcos destroyed the democracy the Filipino people had, and
has ruled the land by personal fiat since then. This personal rule is backed up with
guns from America, money from America, and international support from America.
The United States is bankrolling a local tyrant who denies the Filipino people their
liberty, and their right to change the leadership by the vote. What are the Filipino
people supposed to think about American friendship? Claims of U.S. warmth for the
Filipino people ring hollow when that claim is made through a government gangster
who robs and terrorizes the land for personal profit.
The Movement for a Free Philippines feels the United States Senate could better
serve the United States Government and American-Philippine friendship by advo-
cating less support for the Marcos regime, and greater attention to the Filipino peo
ples. I offer a few constructive suggestions to maintain that friendship with the Fili-
pino people:
1. The American contribution to the defenses of Southeast Asian Allies should not
be so entirely dependent on the bases in one country, like the Philippines. Corrupt
governments, like Marcos represents, are able to blackmail the United States into
uncritical support of his regime, and for agreements to make excessive financial
contributions to his pockets. This also relieves Marcos of providing an adequate de
fense for his own country. Most American allies in the region are concerned with
the growing Vietnamese-Soviet threat to the area. Therefore, let these allies offer to
share the responsibility for hosting the Seventh Fleet. This way, one small country
wouldn't have to be the lightning rod of concern by being the only American base,
and one corrupt government wouldn't be able to blackmail the United States so
easily on the defense issue.
1321
2. Foreign aid to the Philippines should be either reduced or strictly controlled,
because that aid is being used to prop up an unpopular, repressive regime. Presently
that aid is going to the Marcos family private accounts, to Marcos friends for frivo-
lous projects, or to the Marcos army to intimidate the Filipino people. If the United
States targeted specific uses for the aid, required independent audits of its use, and
stipulated improvements in the rights of the people before any money was given,
this would direct the money to the peoples of the Philippines, signal the world that
the Americans have limited confidence in the integrity of the Marcos government,
and let the Filipinos know that the United States is concerned with their well being.
3. Military aid to the Philippines is presently used to help Marcos suppress his
own people, and politicize his army, while defense needs are left to the Americans.
American military aid should be directed to making sure the Philippines can defend
itself from a foreign invasion, not protect Marcos from domestic critics. Military aid
should be specified for specific use, and contributions closely audited. The Philip-
pines needs anti-sub attack ships, not more anti-personnel small arms.
4. Representative democracy, and popularly elected leaders is the form of govern-
ment the United States should advocate in the Philippines. It was there before
Marcos dismantled it to make himself “king," and it could be restored with some
help. The Embassy and the White House should be asked to demonstrate a concern
for Philippine democracy by pressing Marcos on citizen liberties, and by showing an
interest in opposition leaders.
I've been cautioned in the past that if Marcos falls, and the Filipino people are
given the right to choose their own government, that the opposition leaders will
turn the Philippines into an anti-American leftist dictatorship. I agree that this will
probably happen if the change comes by armed rebellion, and that is what may
happen if changes are not made now. I disagree if the change is peaceful, and the
democracy and constitution of 1970 are restored intact. The growing Communist re-
bellion, and leftist opposition are frightening to American policy makers, convincing
many that a change will be comparable to Cuba, Nicaragua, Iran, or Cambodia.
However, the vast majority of Filipinos unhappy with Marcos remain silent because
they are intimidated by government threats, and the leftists do not offer them a
choice they find acceptable. The surge of protests in Makati business district is prob-
ably more in line with the thinking of the people. These protesters, complaining of
the murder of Benigno Aquino, are pro-democracy, pro-enterprise, anti-Marcos, anti-
leftists, and neutral on American relations. The Philippines has had a tradition of
democracy and constitutional law for most of the twentieth century, and this is
what they lost in martial law. This is what they want restored. With a restoration
of a peaceful democracy, it is more likely that the country would move in directions
similar to Spain, Portugal, Greece, or Argentina. These are examples of countries
ending dictatorships in favor of democracies.
The leadership would probably remain friendly with America, because, with or
without Marcos, America has been the closest friend of the Philippines throughout
the twentieth century, and all Filipinos are aware of this. In a restored democracy,
the Filipinos may not always elect the best leadership. This is true for American
elections too. But, as long as they have the right to vote, and to compete for that
leadership, the mistakes can be corrected at the next election. The Filipino people
are an intelligent, honest, and industrious people. It may not seem that way looking
at the Philippines today under Marcos' corrupt government. Look at the millions of
Filipinos living in America. They are contributors to the American society that we
can all be proud of.
Please encourage the United States Senate to convince the rest of the American
Government to take a stand in favor of the Filipino people, and not be so supportive
of the Marcos regime.
SECURITY AND DEVELOPMENT ASSISTANCE
(PEACE CORPS AUTHORIZATION)
THURSDAY, MARCH 22, 1984
UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The committee met, pursuant to notice, at 4:46 p.m., in room SD
419, Dirksen Senate Office Building, Hon. Richard Lugar presiding
Présent: Senators Lugar and Tsongas.
Senator LUGAR. This hearing of the Foreign Relations Committee
is called to order for the purpose of hearing testimony on the Peace
Corps authorization.
It is a great pleasure for the Chair to recognize our witness
today, the Director of the Peace Corps, the Honorable Loret Ruppe
I am joined by my colleague, Senator Paul Tsongas, who has had
experience in the Peace Corps, who has offered good testimony in
the past from that experience, and who wishes to question the wit-
ness on one occasion today.
May I ask my colleague, do you wish to hear the testimony, or
would you prefer to ask your questions and then have us proceed?
Senator Î'SONGAS. I would appreciate it if I could ask my ques-
tion.
Senator LUGAR. The Chair recognizes Senator Tsongas.
Senator TSONGAS. Let me say that I am very indebted to the
Peace Corps personally for what it did for me. I went into the
Peace Corps as a conservative Republican, and emerged as a liberal
Democrat. [General laughter.]
So there is clear value in those kinds of programs for all of us.
Let me say that obviously I am a great supporter of the Peace
Corps. I would also like to say that as we now struggle with the
Meese appointment, which I guess you struggle with and I do not
at this point, when the history of the Reagan administration is
written, the appointment of Ms. Ruppe will be among the best ap-
pointments they made. I would just like to say that for the record.
For someone like me, it is difficult to admit those things, but I
am very pleased to do that.
I only have one concern, Mr. Chairman, and that is that we have
received letters from a significant number of Peace Corps volun-
teers in the field who are concerned about the people who have
been appointed as directors in the various countries. The concern is
that some of the country directors would appear to be political ap-
pointees without the proper experience in the field, and their per-
formance has been less than optimal.
(1323)
1324
I do not know whether that is true or not. What I would request
is a report on how in country directors are chosen, what the crite-
ria are, and what the backgrounds of some of these people are. I
see no need to specify particular countries, because, all we have is
an unproven allegation, if you will, but if we had a sense of the
criteria and who some of the appointees would be and have been,
we could just look at that ourselves.
I am very supportive of the program. I would hope that we could
not only pass what has been proposed to us, but that we might also
look at the kind of approach that has been taken by the House
side, which I believe has increased the amount to $134 million.
I am sorry that I have to leave, but I will leave my group of in-
terns with you, and if they have any outrageous questions, feel free
to intervene. [General laughter.]
Thank you, Mr. Chairman.
Senator LUGAR. Thank you very much, Senator Tsongas.
Ms. Ruppe, do you have a statement that you would like to deliv-
er at the outset of the hearing?
Ms. RUPPE. Yes, Mr. Chairman. I have a statement that I would
like to submit for the record. I know that you are very busy.
Senator LUGAR. Without objection, your full statement will be
made a part of the record, and I ask unanimous consent that a
statement by Thomas J. McGrew on behalf of the Committee of Re-
turned Peace Corps Volunteers be made a part of the record at this
point. He has asked that that statement might be made through
this submission as opposed to his personal appearance. The Chair
would recognize that request and will make it a part of the record
at this point.
[Mr. McGrew's prepared statement follows:
1325
STATEMENT
OF
THE
COMMITTEE OF RETURNED PEACE CORPS VOLUNTEERS
ON THE
PEACE CORPS BUDGET
BEFORE
THE COMMITTEE ON FOREIGN RELATIONS
OF THE
UNITED STATES SENATE
March 22, 1984
1326
EXECUTIVE SUMMARY
The Peace Corps Budget Committee proposes that
the Peace Corps Budget for programs outside Central
America should be increased for Fiscal Year 1985 to
at least $120.8 million rather than the $105.8 million
budget authority requested by the Peace Corps Agency.
The Committee strongly opposes the cut of 203 volunteers
built into the Peace Corps' budget request and suggests
instead, a 10 percent increase in the number of volunteers
as a first small step back to a 10,000 volunteer Peace
Corps. The Committee supports the Administration's
proposal to increase the Peace Corps' activities in
Central America by $9 million and 141 new volunteers.
The Peace Corps Budget Committee, an organization
of former Peace Corps Volunteers, has looked at the sharp
decline over recent years in the Peace Corps budget and
number of Volunteers and would like to propose renewed
support for the entire Peace Corps Program, as it was
in the mid-1960's with almost 16,000 Volunteers and a
budget of $149 million. Peace Corps Staff in Washington
and in the field are turning down, in some countries,
more than half of the requests for Volunteers made by
the host countries, because there is no budget to support
these requests.
The Peace Corps Budget Committee asserts that the
Peace Corps is an extremely successful and worthwhile
program both to the Volunteers and to the communities
in which the Volunteers serve. Peace Corps is extremely
cost-effective and leaves a long-remembered and valuable
contribution to the host countries. It is a uniquely
American gesture of personal commitment, the effect of
which cannot be underestimated. It is also a direct and
tangible way of conducting foreign policy at the village
or local level.
The Peace Corps Budget Committee proposes that any
increase in budget should be used primarily for increasing
the number of Volunteers in the field. Beyond this priority,
the Peace Corps Budget Committee requests that the Volunteer
readjustment allowance be increased to reflect a more
realistic cost of living for returning Volunteers.
1327
MR. CHAIRMAN, MEMBERS OF THE COMMITTEE:
We appreciate the opportunity to appear before
this Committee to discuss the Peace Corps Budget for
Fiscal Year 1985.
Our committee was formed by two
organizations of returned Peace Corps Volunteers, the
Returned Peace Corps Volunteers of the Washington, D.C.
area and the National Council of Returned Volunteers,
to express the concern we former Volunteers feel over
the continuing decline of the Peace Corps reflected
both in the program's inadequate funding and in the
declining number of Volunteers who are able to serve in
the Peace Corps.
Over the years, we have seen Peace Corps shrink
from a peak of 15,556 volunteers in 1966, to less than
4,700 in 1983.
We have watched with dismay as year
after year the budget ax has fallen heaviest on this
Agency.
(Table A)
Apparently, 1985 is to be no exception.
The Administration has proposed two Peace Corps Budgets
for FY1985, and both Budgets would cut the number of
Volunteers in service.
The first budget, submitted by
the Peace Corps Director on February 1, 1984 would keep
the Peace Corps' appropriation at the FY 1984 level of
1328
$115 million.
Because of inflation, that Budget would
cut the Peace Corps by 203 volunteers.
The second Budget
divides the Peace Corps into two parts:
Central America
which is to get $18.2 million and 141 more volunteers,
and the rest of the world, which is to get $105.8 million
and 203 fewer volunteers.
The net effect of that
Budget is an increase of $9 million in the Peace Corps'
Appropriation and a cut of 62 volunteers in the Peace
Corps itself.
This statement will focus on the second,
more recent, Budget program and more specifically on the
non-Central America part of that proposal.
Any loss in the number of volunteers is a step
in the wrong direction.
We support an expanded Peace
Corps presence in Central America and in the rest of the
developing world.
If tiny Cental America needs at least
2,125 volunteers in the next four years, think how great
the need is elsewhere in Africa, Asia, South America and
the Caribbean.
This is not the time to cut the number of Peace
Corps volunteers.
At the very least, Congress should
maintain a stable Peace Corps outside Central America by
appropriating $109,860,000 for FY1985 to restore the 203
volunteers the Administration proposes to cut.
We
1329
recommend, however, that Congress go a step further and
endorse the goal of 10,000 volunteers by the 1990's.
To meet this goal, Congress should begin to increase the
number of volunteers by 10% annually.
This would require
an FY'85 appropriation of $120.8 million.
(Table B)
THE THIRD WORLD NEEDS MORE ASSISTANCE
John Kennedy in 1963 said that Peace Corps volunteers
"will lay a seed which will bring a rich harvest for all
in later days."
Given the significant reduction in the size
of the Peace Corps, one would think that the job is nearly
finished,
Reality is otherwise.
As Peace Corps funding has
been slashed, many countries in the Third World have gone
into a downward spiral, a negative developmental spiral,
from which they have yet to recover.
If you wonder whether the world needs more Peace
Corps volunteers, consider these grim facts of Third World
life:
* Most of the sickness and disease in the Third
World is attributed to unsafe water and poor
sanitary conditions. Volunteers have helped
to dig wells and worked to improve urban and
rural sanitary conditions.
*As of 1980, less than 10% of children in the
Third World were being immunized against the
six major childhood diseases. Five million
were killed by these diseases. Medical
volunteers have played an important role in
several nations' immunization programs.
)
1
1330
*Worldwide, 120 million children of school age
have no school they can go to. Thousands of
education volunteers have taught millions of
Third World students over the past two decades.
*In Africa, per capita food production has fallen
20% in the last twenty years. Nations that once
fed themselves must now use scarce foreign
exchange earnings to import food. Agriculture
volunteers have helped thousands of farmers
increase their food production.
*Twenty-Four African countries are suffering from
a terrible drought which is causing hunger and
famine. According to the FAO, in Mali alone,
100,000 children will starve to death this year.
PCVS of all backgrounds have played an important
role in dozens of disaster-relief efforts.
In every area where help is needed, Volunteers have
been able to improve things in their local areas.
Un-
fortunately, the problems have grown while the number of
volunteers has shrunk.
It is a disgrace that there continue
to be more requests for volunteers than there are volunteers
to fill them.
(Table C)
Indeed, more than half the re-
quests for volunteers are never even passed on to the
U.S. by the Peace Corps country directors because the
directors know there is no budget to support so many requests.
With additional funding, these requests could be met, and
Peace Corps could also expand into other countries that have
expressed an interest in beginning a Peace Corps program.
1331
THE U.S. HAS AN IMPORTANT STAKE IN THIRD WORLD DEVELOPMENT
The economic and political ties that bind us to
the Third World were neatly summed up by Secretary Shultz
when he told the Southern Center for International Studies
that "there will be no enduring economic prosperity for
our country without economic growth in the Third World,
and there will not be security and peace for our citizens
without stability and peace in developing countries."
There are compelling humanitarian reasons for the
U.S. to play a much greater role in bringing prosperity
to the Third World.
There are also some very practical
foreign policy considerations.
By the year 2,000, over five billion people will
be living in the developing countries.
These people need
food, housing, clothing, and jobs.
If their needs are not
met, we will all feel the shock waves of the Third World's
economic and political instability.
This instability is a threat to peace and to
economic growth in the United States.
Keep in mind that
one in five American jobs depends in some way on trade,
and non-OPEC developing nations account for nearly 40% of
the U.S. exports.
1332
Peace Corps service is sometimes diffcult, some-
times exhilarating, and almost always worthwhile.
As
volunteers, we were privileged to become part of a
culture radically different from our
own.
We came to
understand how most of the people on this planet live,
and we believe we made a difference in the lives of the
people with whom we lived and worked.
We know there are many other Americans out there
who also want an opportunity to serve in the Peace Corps.
Last year, 16,723 people applied (a remarkable number, in
view of the Peace Corps' extremely low visibility), 10,195
were considered, but only 2,977 were actually accepted.
(Table D)
Although some were not suited for the life of
a volunteer, many others had to be turned away for budgetary
reasons.
With a little more funding, Peace Corps can find
a place for these good candidates who may have a real
contribution to make to the Third World.
Additional funding will also allow Peace Corps to
expand the applicant pool and place the many good candi-
dates.
More times than any of us care to count, we have
heard friends say "I didn't know Peace Corps still existed.'
Obviously, Peace Corps isn't getting its message out.
1333
U.S. FOREIGN POLICY BENEFITS FROM PEACE PROGRAMS
In deciding how 1985 foreign aid funds will be
allocated, Members of Congress should weigh the unique
contribution Peace Corps makes to U.S. foreign policy
objectives.
Several government agencies provide humanitarian
and technical assistance to the Third World, but only
Peace Corps sends its volunteers to live among the people,
to work, eat and socialize as they do.
Volunteers create
a reservoir of good will toward the United States that
cannot be duplicated by any other government agency.
Peace Corps also provides this country with a pool
of former volunteers knowledgeable about countries which
play a major role on the international stage.
If the U.S.
is to fashion an intelligent and effective foreign
policy for Third World countries, we continue to need
Americans who understand the cultures and speak the
languages.
Finally, several members of your Committee recently
sat on the Commission on Security and Economic Assistance,
headed by Frank Carlucci.
In its final report, the
Commission expressed serious concern about the declining
public support for foreign aid.
1334
While many Americans are suspicious of, or outright
opposed to certain foreign aid programs, we do not think
this negative attitude extends to the Peace Corps.
On the
contrary, we have found that Americans admire Peace Corps
volunteers, and are proud of the humanitarian work Peace
Corps does in the name of the United States.
A 1973
study of American attitudes toward global poverty and
development revealed that 88% of those surveyed saw the
Peace Corps as the single most effective effective organiza-
tion helping Third World people (Paul A. Laudicinia, World
Poverty and Development:
A Survey of American Opinion,
Washington, D.C.:
Overseas Development Council, October
1973).
President Reagan expressed this same attitude when
he stated, in March of 1981, "Volunteers have fought, and
often conquered, illiteracy, hunger, poverty and illness
in nearly ninety countries.
Their efforts, dedicated to
world peace through international good will, have done much
to replace fear and mistrust with mutual understanding.
If Congress increases Peace Corps' funding and visibility,
Americans may become more aware of the needs of the Third
world, and feel better about foreign aid in general.
1335
PEACE CORPS FUNDING IN PERSPECTIVE
Congress should appropriate $120.8 million for the
Peace Corps in FY85 exclusive of any commitments in Central
America.
This would be the first small step back to a
10,000 volunteer Peace Corps.
One Hundred and Twenty million dollars is a small
sum in a foreign aid budget that totals $15 billion.
It
is a modest amount when compared to the $7 billion requested
for security assistance programs, and the $313 billion for
defense programs.
It is a drop in the bucket in a world
that spends $660 billion a year on arms.
If the burden of poverty is not eased in the develop-
ing countries, the world is likely to pay a heavy price in
lives and resources down the road.
We can watch conditions
deteriorate, or,
or, through a revitalized Peace Corps, we
can
redouble our efforts to help Third World nations find
solutions to the problems they face.
An expanded Peace Corps is an investment in stability
and international good will, and it speaks to the very best
in the American people.
Thank you.
1336
:
TABLE A
PEACE CORPS BUDGET SINCE 1962
Adjusted by CIP-U
1967+100
FISCAL YEAR
CURRENT DOLLARS (000)
CONSTANT DOLLARS (000)
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1881
1982
1983
1984
30,000
59,000
95,964
104,100
114,000
110,000
107,500
102,000
98,450
90,000
72,500
81,000
77,000
77,687
81,266
80,000
86,243
99,179
99,924
105,531
105,000
109,000
115,000
33,482
65,121
104,650
112,056
120,635
113,169
107,500
97,889
89,889
77,386
59,769
64,645
57,851
52,598
50,413
46,893
47,512
50,575
45,963
42,760
38,546
37, 703
38,539
1337
TABLE B
RECOMMENDED BUDGET AND VOLUNTEER
FORCE THROUGH 1991
(Excluding Central America)
FISCAL YEAR
STABLE
FORCE
(000) 2/
10%
INCREASE
(000) 2/
NUMBER OF
VOLUNTEERS 1/
1985
109,860
120,846
4,233
1986
126,284
138,912
4,656
1987
145,580
160,138
5,121
1988
167,345
184,079
5,633
1989
191,810
210,991
6,196
1990
219,220
241,142
6,816
1991
249,823
274,805
7,498
1/ Dollar figures for a stable force for 1985 are based upon a
restoration of the 203 volunteers scheduled to be dropped at an
average cost of $20,000 per volunteer
2/ The annual 10% increase in the budget is a proxy for a 10%
increase in the number of volunteers.
The dollar figures for 1986-1991 assume that the previous year's
number of volunteers will be maintained. The increased costs reflect OMS's
estimates for inflation for each of those years, using the GNP deflator
for the previous calendar year.
Those inflation estimates are as follows:
for FY1986 budget
1984
1985
1986
1987
1988
1989
4.5%
4.8%
4.5%
4.2%
3.9%
3.6%
1
1338
Table C
REQUESTS/INPUT
)
Requests for
Volunteers
Input of
% of Requests
Filled
Volunteers
1972
4,786
3,608
75
1973
6,185
4,112
38
1974
6,320
4,320
68
1975
4,311
2,942
68
1976
4,347
2,948
74
1977
5,652
3,751
66
1978
4,793
3,717
78
1979
4,259
3,331
78
1980
4,354
3,118
72
1981
4,259
2,659
63
1982
3,794
2,863
75
1983
3,685
2,977
81
*/
Does not include requests estimated at over 3,500 in FY83
that were withdrawn or not transmitted to Peace Corps Washington because
they could not be filled within the Peace Corps' known budget constraints.
1339
Table D
APPLICANTS / TRAINEES
Total
Applicants
Applicants
Considered
Trainees/New
Volunteers
1977
13,908
8,306
5,752
1978
13,661
7,987
7,072
1979
17,771
8,564
6,328
1980
16,495
8,445
5,994
1981
15,627
8,334
4,863
1982
14,577
9,866
4,542
1983
16,723
10,195
2,977
1340
THE COMMITTEE
The Committee of Returned Peace Corps Volunteers
on the Peace Corps Budget was formed by the National
Council of Returned Volunteers and the Washington, D.C.
area Returned Volunteers organization in an attempt to
reverse the steady decline in the size and activities of
the U.S. Peace Corps. The Budget Committee includes
members of both political parties and represents a wide
variety of Volunteer experiences. The members are:
Thomas J. McGrew, Nigeria 64-67, a partner at Arnold &
Porter, Washington, D.C. (Chair); Donald T. Bliss,
Micronesia 66-68, a partner of the Washington, D.C.
office of O'Melveny & Myers; Susan I. Greeley, Ghana
75-77, Computer Systems Analyst at the Veterans Administra-
tion; Neil G. Kotler, Ethiopia 64-66, Legislative Aide
to Rep. John Conyers, Jr.,; Holland G. McKenna, Upper
Volta 71-73, Economic Analyst at the Airline Pilots
Association; Charles D. Smith, Ethiopia 64-66, associate
editor, interpretive releases, American Council for
Nationalities Service and senior associate, Conflict
Analysis Center; James Stepanek, Colombia 67-69, Editor,
The China Business Review, at the National Council for
U.S.-China Trade; Joan Timoney, Senegal 78-80, Legislative
Assistant to Sen. Quentin N. Burdick.
The Budget Committee's sponsoring organizations are:
The National Council of Returned Peace Corps
Vonunteers is the only existing "alumni" organization at
the national level for returned Peace Corps Volunteers.
It publishes a newsletter, undertakes special projects
such as the 20th Anniversary Conference of the Peace Corps
held in Washington in 1981, and coordinates and supports
local returned Volunteer groups throughout the country.
D.Cist
Returned Peace Corps Volunteers of Washington, D.C.
is the Washington-area Peace Corps alumni organization. It
is affiliated with the National Council of Returned Peace
Corps Volunteers. This local group, with nearly 300
dues-paying members, sponsors a variety of activities for
area returned Volunteers and publishes its own newsletter.
Among the group's activities are foreign policy issues
forums on topics relating to Third World countries where
Volunteers have served.
1341
Ms. RUPPE. Mr. Chairman, could the Peace Corps also insert a
tribute to Senator Tsongas into the record in recognition of his tre-
mendous support?
Senator TSONGAS. You are not going to object to that, are you?
Senator LUGAR. Not at all. That will be done.
Ms. RUPPE. Thank you. We are very proud of him also.
[The tribute to Senator Tsongas follows:]
NOTE WITH SORROW
Paul Tsongas has long been an ardent supporter of the Peace Corps. This, of
course, is a welcomebut not surprising-boost from Capitol Hill since the good
Senator from Massachusetts spent nearly three years in Ethiopia as a Peace Corps
Volunteer.
But the Senator's continued commitment over the years to the operation of the
Peace Corps as well as to the goals of the institution itself is very telling for two
important reasons. First, it underscores the proud record which the Peace Corps has
of strong bipartisan support. And, of equal note, Senator Tsongas' strong, positive
backing for Peace Corps activity throughout the third world, belies a staunch belief
that hard work and caring are beyond the bounds of politics.
We wish to thank Senator Paul E. Tsongas for his unfailing belief in what our
volunteers are trying to do in the global village. We wish also to make it known
that we are proud of his achievements in the Congress. He is afterall one of us.
Senator LUGAR. Would you please proceed with any summary of
your statement or any additional comments that you wish to
make?
STATEMENT OF HON. LORET M. RUPPE, DIRECTOR, THE PEACE
CORPS, ACCOMPANIED BY
BY THOMAS WILSON, DIRECTOR,
OFFICE OF FINANCIAL MANAGEMENT
Ms. RUPPE. I will give you a very brief summary of the full state-
ment. Mr. Chairman, I am very pleased to be here, and very appre-
ciative of your being here. I have come in support of the Reagan
administration's budget request of $124 million for the Peace Corps
for fiscal year 1985, which does represent an increase of $9 million
over the agency's 1984 budget of $115 million.
I feel very strongly that this increased level of the 1985 budget
request affirms the importance of the Peace Corps not only as a
vital component of our overall United States approach to interna-
tional development, but it also recognizes the Peace Corps as the
important vehicle of public diplomacy which it is, teaching the peo-
ples of the developing world and our own country about each other.
This 1985 figure does include $9 million for new activities for the
Peace Corps in Central America as requested by President Reagan
in the Central American Democracy Peace and Development Initia-
tive Act of 1984, which is currently under congressional consider-
ation. The $9 million for new activities in the region was recom-
mended by the National Bipartisan Commission on Central Amer-
ica, chaired by former Secretary of State Henry Kissinger.
This budget request will allow us to recruit 2,955 new volunteers
to maintain a level of more than 5,200 volunteers in 59 countries.
I find that the past year has been a very encouraging one for me
as Director, because I have witnessed a reemergence of public
awareness of the valued place Peace Corps holds in the foreign af-
fairs community and the world at large. The Carlucci Commission,
the Kissinger Commission, and a special report to the President
1342
have all outlined Peace Corps' accomplishments and given it tre-
mendously high grades and a high level of appreciation.
This past year Peace Corps established programs in Haiti and
Burundi for the first time. We also reestablished programs in Sri
Lanka and Grenada. I personally was in Sri Lanka just a month
ago swearing in a new group of Peace Corps volunteers who will
train English teachers in that country, and we have two volunteers
presently in Grenada working in the area of education.
We have continued our strong outreach to other organizations to
maximize our limited resources, and I am announcing the planning
of two interagency projects: The teacher-text-technology project, in
which we work with USAID, the Department of State, and USIA to
assist selected countries in secondary and higher education devel-
opment; and an interagency agreement combatting communicable
childhood diseases between Peace Corps/Africa and USAID to offer
technical and training assistance to selected countries in address-
ing health issues of immunization, malaria, oral rehydration, and
diarrheal disease.
Another interagency agreement which has proven highly success-
ful is a small projects assistance fund, in which we are working
with USAID to support selected projects at the village level in agri-
cultural, energy, and small enterprise development.
I am proud to say that our Peace Corps partnership program
celebrated its twentieth year, and that this particular year under
the leadership of the Office of Private Sector Development we have
already surpassed the amount that we raised all of last year. We
hope to have at least 300 projects going around the world.
We have intensified our efforts to recruit Hispanics, blacks, and
older Americans, and I am pleased to say that in the audience
today is a former volunteer, Florence Brooks, who is one of our re-
cruiters and who was on the "Today" show this morning emphasiz-
ing that Peace Corps has no upper age limit and that we are seri-
ously looking for early retirees and people my age and older to
serve in the Peace Corps.
The agency goals for fiscal year 1985 include increasing our Gre-
nada program to a fully operational level, maintaining support for
our administration's Caribbean Basin Initiative, expanding our
small enterprise development sector worldwide, and upgrading the
administrative capability of our Peace Corps posts by completing
the installation of computers in up to 10 more overseas posts.
Thirty-seven such computers have been installed in Peace Corps
overseas offices already.
Over 100,000 Peace Corps volunteers have served abroad, provid-
ing direct assistance to millions of people on an individual basis,
and we are very pleased that the administration recognizes this
and has given us a budget figure that will allow us to continue and
to expand our programing
Thank you very much, Mr. Chairman. I welcome questions from
the committee.
[Ms. Ruppe's prepared statement follows:)
1343
PEACE CORPS
curry
Place
STATEMENT
OF
LORET MILLER RUPPE
DIRECTOR
THE PEACE CORPS
BEFORE
THE SENATE COMMITTEE ON FOREIGN RELATIONS
MARCH 22, 1984
806 Connecticut Ave., N.W. Washington, D.C. 20526
1344
MR. CHAIRMAN, MEMBERS OF THE COMMITTEE:
INTRODUCTION
IT IS A PLEASURE TO APPEAR BEFORE YOU TODAY IN SUPPORT OF THE
ADMINISTRATION'S REQUEST THAT YOU AUTHORIZE APPROPRIATIONS WHICH WILL ENABLE THE
PEACE CORPS TO CONTINUE ITS EFFORTS ON BEHALF OF WORLD PEACE AND FRIENDSHIP FOR
FISCAL YEARS 1985 AND 1986.
I HAVE JUST RETURNED FROM A FIVE-NATION PROGRAM INSPECTION TOUR, WHERE I
SAW VERY VIVIDLY PEACE CORPS VOLUNTEERS PROMOTING WORLD PEACE AND UNDERSTANDING
ON A PERSON-TO-PERSON LEVEL.
I MET A VOLUNTEER COUPLE FROM IOWA WORKING WITH
VILLAGERS IN THE INTERIOR OF PAPUA NEW GUINEA TO INCREASE THE VEGETABLE YIELD
FOR SALE TO A GOVERNMENT-SPONSORED MINING PROJECT. THE PROJECT PROVIDES FOOD TO
THE MINERS AND INCOME TO THE VILLAGERS, HELPING TO IMPROVE THEIR VERY PRIMITIVE
LIFESTYLES.
IN SRI LANKA I SWORE -IN THE FIRST GROUP OF ENGLISH LANGUAGE
TRAINERS. THESE FINE VOLUNTEERS
AMERICANS OF ALL BACKGROUNDS
EMBODY THE
PEACE CORPS COMMITMENT TO HELPING OTHERS HELP THEMSELVES. PRESIDENT JAY
PRAISED THE VOLUNTEERS FOR ASSISTING IN ESTABLISHING ENGLISH AS THE
LINK-LANGUAGE UNITING THE PEOPLES WITHIN THIS BEAUTIFUL COUNTRY.
LAST NOVEMBER I VISITED THE DROUGHT-STRICKEN SAHEL AREA OF WEST AFRICA.
I
SAW THE RAVAGED COUNTRIES OF DRY WELLS AND NO RAINFALL
I ALSO OBSERVED THE
HOPE FOR A BETTER WAY OF LIFE THERE. AS PRESIDENT SANKARA SAID DURING MY
MEETING WITH HIM: "I ONLY WISH THAT THE SEVEN MILLION UPPER VOLTANS WOULD WORK
WITH THE SAME ENERGY AND COMMITMENT THAT PEACE CORPS VOLUNTEERS WORK."
INCIDENTALLY, HE IS A FORMER PEACE CORPS LANGUAGE TEACHER.
I COULD GO ON, BUT YOU, TOO, HAVE SEEN THE RESULTS OF THIS MOST
COST-EFFECTIVE FOREIGN ASSISTANCE PROGRAM, SO LET ME REVIEW FOR YOU SOME OF THE
HIGHLIGHTS OF THE PAST YEAR AND OUTLINE OUR REQUEST FOR FISCAL YEAR 1985.
1345
THIS PAST YEAR HAS BEEN A VERY ENCOURAGING ONE FOR ME AS DIRECTOR OF THE
PEACE CORPS, BECAUSE I HAVE WITNESSED A REEMERGENCE OF PUBLIC AWARENESS OF THE
VALUED PLACE PEACE CORPS HOLDS IN THE FOREIGN AFFAIRS COMMUNITY, AND THE WORLD
AT LARGE. FOR EXAMPLE, THE COMMISSION ON SECURITY AND ECONOMIC ASSISTANCE,
A PRESIDENTIAL COMMISSION CHAIRED BY AMBASSADOR FRANK CARLUCCI, ENDORSED THE
PEACE CORPS, NOT ONLY FOR ITS IMMEDIATE POSITIVE EFFECTS ON THE FAMILIES AND
VILLAGES IN LESSER-DEVELOPED NATIONS, BUT ALSO FOR THE ENDURING HUMAN RESOURCE
DEVELOPMENT AND INSTITUTION BUILDING REPRESENTED BY 23 YEARS OF CONTINUOUS,
"PEOPLE-TO-PEOPLE" PROGRAMMING. THE CARLUCCI COMMISSION SINGLED OUT THE OVER
100,000 RETURNED PEACE CORPS VOLUNTEERS AS AN EFFECTIVE CONSTITUENCY,
KNOWLEDGEABLE AND CONCERNED ABOUT FOREIGN AFFAIRS.
IT CALLED UPON RETURNED
PEACE CORPS VOLUNTEERS TO JOIN A PUBLIC CITIZENS' NETWORK TO EDUCATE AMERICANS
OF THE NEED FOR INTERNATIONAL DEVELOPMENT ASSISTANCE.
THE NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA, CHAIRED BY FORMER
SECRETARY OF STATE HENRY KISSINGER, HAS STRESSED THE POSITIVE EFFECTS THAT WILL
RESULT FROM AN ENHANCED PEACE CORPS PRESENCE IN CENTRAL AMERICA. PRESIDENT
REAGAN HAS ENDORSED THIS RECOMMENDATION.
IF THE NECESSARY LEGISLATION PASSES
CONGRESS, PEACE CORPS WILL BE AT THE FOREFRONT OF GOOD WILL AND SKILL-SHARING IN
CENTRAL AMERICA, DOUBLING OUR EFFORTS IN LITERACY TRAINING, TEACHER TRAINING,
HEALTH, NUTRITION, SMALL BUSINESS, AND AGRICULTURE.
ANOTHER POSITIVE EVALUATION OF PEACE CORPS CAME IN AN INTERNAL REVIEW OF
COUNTRY PROGRAMS SUBMITTED BY SECRETARY OF STATE SHULTZ AND MYSELF TO PRESIDENT
REAGAN. THIS REPORT CONCLUDED THAT THE PEACE CORPS MAKES SIGNIFICANT LONG-TERM
CONTRIBUTIONS TO OUR FOREIGN POLICY IN THREE AREAS: 1) BY PROMOTING
DEVELOPMENT; 2) BY CONTRIBUTING TO U.S. PUBLIC DIPLOMACY; AND 3) BY EDUCATING
AMERICANS ABOUT CONDITIONS IN THE THIRD WORLD.
IN THE PREPARATION OF THIS
REVIEW, TWENTY U.S. AMBASSADORS, REPRESENTING A GEOGRAPHIC CROSS-SECTION OF THE
1346
DEVELOPING WORLD, EXPRESSED A UNANIMOUS PERCEPTION OF THE PEACE CORPS AS
EFFECTIVE IN PROMOTING BOTH DEVELOPMENTAL AND PUBLIC DIPLOMACY GOALS IN THEIR
COUNTRIES. WITH THIS BUDGET REQUEST, THIS ADMINISTRATION IS AFFIRMING ITS
CONTINUED SUPPORT FOR THE PEACE CORPS, A SUPPORT THAT FULLY RECOGNIZES THE
IMPORTANCE OF THE PEACE CORPS IN THE INTERNATIONAL ARENA.
I WOULD LIKE TO ILLUSTRATE FOR YOU SOME OF THE HIGHLIGHTS OF THIS LAST YEAR
AT PEACE CORPS:
A.
VOLUNTEER DISTRIBUTION
OVER 5,000 VOLUNTEERS SERVED IN 59 COUNTRIES THROUGHOUT THE WORLD.
AMONG
THESE:
400 VOLUNTEERS SERVED AS BUSINESS ADVISORS TO COOPERATIVES, CREDIT
UNIONS, AND CHAMBERS OF COMMERCE. THEY TRANSFERRED ACCOUNTING,
MARKETING AND MANAGEMENT SKILLS TO THEIR LOCAL -COUNTERPARTS.
--
1,800 VOLUNTEERS PROVIDED TECHNICAL ASSISTANCE IN A VARIETY OF
AGRICULTURAL AND RURAL DEVELOPMENT PROJECTS. MOST OF THESE VOLUNTEERS
HELPED SMALL FARMERS IMPROVE THEIR CROP MANAGEMENT TECHNIQUES.
AGRICULTURAL EXTENSIONISTS, TRAINERS AND TEACHERS ALSO TRANSFERRED
SKILLS IN LIVESTOCK AND FISHERIES DEVELOPMENT SYSTEMS.
--
800 RENEWABLE ENERGY/APPROPRIATE TECHNOLOGY VOLUNTEERS WORKED
FULL-TIME ON ENERGY-CONSERVING STOVES, CHARCOAL PRODUCTION, SOLAR FOOD
DRYING, BIOGAS PRODUCTION AND BLACKSMITHING. ANOTHER 475 WORKED IN
THESE AREAS IN SECONDARY PROJECTS TO COMPLEMENT THEIR EXISTING JOB
ASSIGNMENTS.
450 VOLUNTEERS SERVED AS PLANNERS, DESIGNERS AND SUPERVISORS OF THE
CONSTRUCTION OF SMALL DAMS, SPILLWAYS AND IRRIGATION CANALS IN RURAL
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AREAS.
VOLUNTEERS ALSO ASSISTED IN DEVELOPING VILLAGE SANITATION
SYSTEMS. THEY PROVIDED TECHNICAL ASSISTANCE TO MINISTRIES AND
RURAL GROUPS IN THE OPERATION AND MAINTENANCE OF POTABLE WATER
SYSTEMS. THEIR WORK HAS ENABLED POOR RURAL COMMUNITIES TO INCREASE
AND GAIN CONTROL OVER THEIR WATER RESOURCES.
900 VOLUNTEERS WORKED ON HEALTH EDUCATION AND COMMUNITY HEALTH
ORGANIZATION,
THE SE EFFORTS INCREASED THE ABILITY OF COMMUNITIES AND
INDIVIDUALS (PARTICULARLY WOMEN) TO MEET THEIR OWN HEALTH AND
NUTRITIONAL NEEDS IN A SELF-RELIANT WAY.
B.
NEW COUNTRY ENTRIES
WE WERE VERY PLEASED TO ACCOMPLISH THE FOLLOWING NEW COUNTRY ENTRIES THIS
PAST YEAR:
THE ARRIVAL IN MARCH 1983 OF SIX VOLUNTEERS IN HAITI, WHERE A PROGRAM
WAS ESTABLISHED FOR THE FIRST TIME IN PEACE CORPS HISTORY.
THERE ARE
NOW TEN PEACE CORPS VOLUNTEERS WORKING THERE IN FORESTRY, VOCATIONAL
EDUCATION, PUBLIC HEALTH, AND APPROPRIATE TECHNOLOGY PROJECTS. WE
THANK THE MEMBERS OF THIS COMMITTEE FOR THEIR SUPPORT AND
ENCOURAGEMENT IN THIS ENDEAVOR.
.
THE SPRING 1983 INAUGURATION OF A PEACE CORPS PROGRAM IN BURUNDI,
PLACING THIRTEEN VOLUNTEERS IN EDUCATION AND AGRICULTURE.
THE SIGNING, THREE MONTHS AGO, OF A COUNTRY AGREEMENT WITH SRI LANKA,
AND THE DECEMBER ARRIVAL OF THE FIRST GROUP OF TRAINEES WHO WILL BE
TEACHING IN A NEW ENGLISH EDUCATION PROGRAM CRITICAL TO SRI LANKA'S
GOAL OF INCREASING THE NUMBER OF ENGLISH TEACHERS BY 9000 IN THE NEXT
FIVE YEARS.
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--
THE RE-ESTABLISHMENT OF A PEACE CORPS PROGRAM IN GRENADA, BEGINNING
WITH TWO VOLUNTEERS IN EDUCATION.
WE EXPECT TO INCREASE THESE
NUMBERS, HOPEFULLY TO FOURTEEN BY NEXT JUNE, WITH VOLUNTEERS WORKING
IN THE AREAS OF EDUCATION, HEALTH, AND AGRICULTURE. WE PLAN TO
FURTHER INCREASE THE NUMBER OF VOLUNTEERS BY SEPTEMBER IF FEASIBLE.
WE ALSO COMPLETED TWO COUNTRY WITHDRAWALS.
THE TWO YEAR PHASED-OUT
DEPARTURE OF THE PEACE CORPS/MALAYSIA PROGRAM WAS COMPLETED, IN NOVEMBER 1983.
THIS EXIT WAS BASED ON THE INCREASED LEVEL OF DEVELOPMENT OF THAT COUNTRY.
WE
CONCLUDED OUR PROGRAM IN OMAN IN LATE MAY, 1983.
C.
NEW PILOT PROJECTS; INTERAGENCY AGREEMENTS
IN ADDITION TO THE NEW COUNTRY ENTRIES JUST MENTIONED, WE SAW THE PLANNING,
AND IN SOME CASES THE IMPLEMENTATION, OF NEW PILOT PROGRAMS IN COUNTRIES WHERE
PEACE CORPS ALREADY HAS A PRESENCE, SUCH AS:
--
THE IMPLEMENTATION OF A PILOT SELF-HELP HOUSING PROGRAM IN COSTA RICA
WHICH RECEIVED A $300,000 ONE-YEAR GRANT FROM AID.
FOURTEEN PEACE
CORPS VOLUNTEERS ARE WORKING ON THIS PROJECT WHICH IS DESIGNED TO NOT
ONLY HELP LOW-INCOME FAMILIES UPGRADE THEIR HOUSING, BUT ALSO TO SERVE
AS A WIDER-BASED COMMUNITY DEVELOPMENT PROCESS.
THIS PROJECT WILL
SERVE AS A PROTOTYPE FOR FUTURE ONES IN OTHER LATIN AMERICAN
COUNTRIES.
THE PLANNING OF TWO NEW INTERAGENCY PROJECTS OF WHICH PEACE CORPS IS
AN INTEGRAL PART: 1) THE TEACHER-TEXT-TECHNOLOGY (TTT) PROJECT, IN
WHICH PEACE CORPS WORKS WITH AID, DEPARTMENT OF STATE, AND USIA TO
ASSIST SELECTED COUNTRIES DEVELOP AND UPGRADE THE QUALITY OF EDUCATION
AT THE SECONDARY AS WELL AS THE HIGHER EDUCATION LEVELS; 2) THE
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COMBATING COMMUNICABLE CHILDHOOD DISEASES PROJECT (CCCD)--A JOINT
PROJECT GRANT AGREEMENT BETWEEN PC/AFRICA AND AID, TO OFFER TECHNICAL
AND TRAINING ASSISTANCE TO SELECT PILOT COUNTRIES ADDRESSING THE
HEALTH ISSUES SURROUNDING IMMUNIZATION, MALARIA, ORAL REHYDRATION, AND
DIARRHEAL DISEASE.
0.
PRIVATE SECTOR SUPPORT INCREASING--PEACE CORPS PARTNERSHIP BENEFITS.
THE OFFICE OF PRIVATE SECTOR DEVELOPMENT (OPSD) WAS CREATED AT THE PEACE
CORPS IN DIRECT RESPONSE TO THIS ADMINISTRATION'S STRONG EMPHASIS ON PRIVATE
SECTOR INITIATIVES. A PRIMARY GOAL OF THE OFFICE IS TO INCREASE SUBSTANTIALLY
THE LEVELS OF SUPPORT AND PARTICIPATION OF THE PRIVATE SECTOR IN PEACE CORPS
PROGRAMS AND ACTIVITIES. IT SERVES AS THE FOCAL POINT FOR IDENTIFYING AND
.
COORDINATING GIFTS AND CONTRIBUTIONS TO THE PEACE CORPS TO FURTHER ITS OVERALL
PURPOSE AND MISSION IN DEVELOPING COUNTRIES.
IN FY 1984, THE OFFICE OF PRIVATE SECTOR DEVELOPMENT FOCUSED ITS EFFORTS ON
FACILITATING THE DONATION OF IN-KIND GIFTS AND CONTRIBUTIONS, AND DIRECT
FINANCIAL ASSISTANCE TO PEACE CORPS PARTNERSHIP PROJECTS.
THE OFFICE OF PRIVATE SECTOR DEVELOPMENT ACHIEVED SEVERAL SUCCESSES THIS
PAST YEAR.
IT REACHED AGREEMENTS WITH A VARIETY OF COMPANIES TO TRANSPORT
FREE-OF-CHARGE SEED, BOOKS, DENTAL EQUIPMENT, AND OTHER VITAL ITEMS CONTRIBUTED
TO THE PEACE CORPS BY A VARIETY OF PRIVATE SECTOR SOURCES.
THESE DONATIONS WILL
REACH OUR PEACE CORPS VOLUNTEERS IN COSTA RICA, DOMINICAN REPUBLIC, BARBADOS,
ECUADOR, GUATEMALA, PARAGUAY, AND HONDURAS. WE HOPE SOON TO HAVE OTHER DONORS
TRANSPORTING SEED TO VOLUNTEERS SERVING IN THE SUB-SAHARAN AFRICA REGION,
NORTH
E
AFRICA, THE NEAR EAST, AND THE PACIFIC.
THE OFFICE OF PRIVATE SECTOR DEVELOPMENT WILL CONTINUE ITS EFFORTS IN FY 85
TO PURSUE STRATEGIES THAT WILL RESULT IN GREATER PARTICIPATION FROM THE PRIVATE
1350
SECTOR. ONE WAY TO ACHIEVE THIS GOAL IS THROUGH THE PEACE CORPS PARTNERSHIP
PROGRAM, WHICH CELEBRATES ITS TWENTIETH ANNIVERSARY THIS YEAR. THIS PROGRAM
OFFERS A UNIQUE COMBINATION OF FINANCIAL ASSISTANCE AND CROSS-CULTURAL EXCHANGE,
AND OVER THE PAST TWO DECADES IT HAS PROVIDED THOUSANDS OF AMERICANS WITH THE
OPPORTUNITY TO PARTICIPATE IN VITAL PROJECTS UNDERTAKEN BY VOLUNTEERS AND THEIR
HOST COUNTRY COMMUNITIES.
SINCE 1964 THE PEACE CORPS PARTNERSHIP PROGRAM HAS
RAISED OVER $3 MILLION IN SUPPORT OF OVER 2,000 PROJECTS IN HOST COUNTRIES.
IN FY 1983, $94,848 WAS RAISED IN SUPPORT OF PEACE CORPS PARTNERSHIP
PROJECTS. THUS FAR THIS YEAR OVER $100,000 IN CASH AND PLEDGES HAS BEEN RAISED,
APPROXIMATELY 34% OF OUR GOAL, WHICH IS TO SUPPORT 200 PROJECTS IN FY 1984.
THE PEACE CORPS PARTNERSHIP PROGRAM HELPS TO CARRY OUT PEACE CORPS' THIRD
GOAL--"TO PROMOTE A BETTER UNDERSTANDING OF OTHER PEOPLES ON THE PART OF THE
AMERICAN PEOPLE."
E.
RECRUITMENT STREAMLINED
THE PEACE CORPS CONTINUES ITS PROGRAM OF STREAMLINING THE COMPLEX PROCESS
FOR MATCHING THE THOUSANDS OF REQUESTS FOR VOLUNTEERS OVERSEAS WITH THE
QUALIFICATIONS OF THE MANY AMERICANS WHO WISH TO SERVE.
SINCE THE BEGINNING OF FY 1983, THE FOLLOWING IMPROVEMENTS WERE MADE IN OUR
RECRUITMENT FUNCTION:
1.
OUR AUTOMATED PROJECT COST ACCOUNTING SYSTEM NOW HELPS US TO DEVELOP
THE MOST COST-EFFECTIVE METHODS FOR RECRUITING VOLUNTEERS WHO ARE IN HIGH
DEMAND OVERSEAS SUCH AS MATH AND SCIENCE TEACHERS AND SKILLED
AGRICULTURALISTS. SUCH INDIVIDUALS REMAIN DIFFICULT TO FIND AND EXPENSIVE
TO RECRUIT.
2.
NEW WORD PROCESSING EQUIPMENT, WHICH ALSO HAS DATA PROCESSING
CAPABILITY, HAS BEEN PLACED IN SEVEN AREA OFFICES. THE OTHER
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OFFICES WILL RECEIVE SUCH EQUIPMENT DURING FY 1984. THE EQUIPMENT WILL
HELP SPEED APPLICANT PROCESSING AND ENABLE LOCAL OFFICES TO MAINTAIN BETTER
CONTACT WITH COLLEGE PROFESSORS, COMMUNITY LEADERS, MEMBERS OF THE PRESS
AND OTHERS WHO CAN HELP US ATTRACT QUALIFIED AMERICANS FOR SERVICE.
F.
MINORITY AND SENIOR CITIZEN RECRUITMENT EFFORTS
WE HAVE RECENTLY DELINEATED CERTAIN SPECIFIED AREAS OF THE COUNTRY FOR
INCREASED CONCENTRATION IN OUR RECRUITMENT DRIVE SEEKING LARGER NUMBERS OF
HISPANIC AMERICANS IN THE PEACE CORPS. WE HAVE SENT RECRUITERS TO COLLEGES AND
UNIVERSITIES IN PUERTO RICO, AND WILL BE EXPANDING HISPANIC RECRUITMENT EFFORTS
THROUGH THE ESTABLISHMENT OF AN AREA OFFICE IN MIAMI. THE SOUTHWEST (DALLAS,
SAN ANTONIO) OFFICES AS WELL AS OUR OFFICES IN LOS ANGELES AND NEW YORK ARE
CONTINUING TO DIRECT THEIR EFFORTS TO THE LARGE HISPANIC COMMUNITIES WITHIN
THEIR AREAS. AS YOU KNOW, THE KISSINGER COMMISSION ON CENTRAL AMERICA HAS
RECOMMENDED THAT THE PEACE CORPS INCREASE ITS PROGRAMS TO COMBAT ILLITERACY IN
CENTRAL AMERICA, AND IF THESE PROPOSALS ARE ADOPTED BY CONGRESS, THE PEACE CORPS
WILL BE GIVEN ADDITIONAL FUNDING TO MULTIPLY SUCH RECRUITMENT EFFORTS.
WE HAVE
ALREADY PRODUCED A RECRUITMENT BROCHURE IN SPANISH, AND WE PLAN TO HAVE MORE
RADIO SPOTS AND POSTERS AIMED AT ATTRACTING MINORITIES.
I AM PLEASED TO REPORT THAT IN 1983 WE RECEIVED 30% MORE APPLICATIONS FROM
BLACK AMERICANS THAN IN 1982. I PLAN TO MEET WITH THE CONGRESSIONAL BLACK
CAUCUS AND THE HISPANIC CAUCUS IN THE NEAR FUTURE TO ELICIT IDEAS FOR FURTHERING
OUR RECRUITMENT STRATEGIES GEARED TOWARDS THESE GROUPS.
WE ARE ALSO INVOLVED IN ONGOING EFFORTS TO INCREASE THE NUMBER OF OLDER
1
AMERICANS IN PEACE CORPS. SPECIAL EFFORT HAS BEEN MADE THIS PAST YEAR TO HAVE
PEACE CORPS PARTICIPATE IN PRE-RETIREMENT SEMINARS CONDUCTED BY BUSINESS AND
INDUSTRY. TOWARD THIS GOAL, WE APPRECIATE THE EXCELLENT COOPERATION WE HAVE
1352
RECEIVED FROM MANY ORGANIZATIONS IN AND OUT OF GOVERNMENT, INCLUDING RCA, THE
FORD MOTOR COMPANY, AND THE U.S. DEPARTMENT OF AGRICULTURE. IN FY 1985, WE WILL
CONTINUE TO EXPAND OUR OUTREACH TO THE SENIOR CITIZEN COMMUNITY THROUGH WORK
WITH TRADE ASSOCIATIONS, THE CORPORATE SECTOR, AND COMMITTEES ON CAPITOL HILL.
G.
HIGHER PLACEMENT FIGURES
THE PLACEMENT UNIT OF THE PEACE CORPS WAS RESPONSIBLE FOR PLACING 2975 NEW
VOLUNTEERS INTO OVERSEAS ASSIGNMENTS IN FY 1983. THIS FIGURE WAS UP FROM 2893
VOLUNTEERS IN FY 1982.
FOR FY 1984, ABOUT 2700 VOLUNTEERS WILL BE PLACED.
PEACE CORPS HAS BEEN
INCREASINGLY MORE SUCCESSFUL IN RECENT YEARS IN FILLING REQUESTS FROM OVERSEAS,
WHICH ARE OFTEN FOR PERSONS WITH SUBSTANTIAL TECHNICAL BACKGROUND.
IN FY 1983,
77% OF ALL REQUESTS WERE FILLED AS COMPARED WITH 72% IN FY 1982.
ALSO, AS IS TRADITIONAL, PEACE CORPS CANDIDATES WILL BE SCREENED AND
RECEIVE INITIAL INTRODUCTION TO THE PEACE CORPS TRAINING CURRICULUM PRIOR TO
OVERSEAS DEPARTURE.
ABOUT 515 CANDIDATES WILL GO THROUGH THE CENTER FOR ASSESSMENT AND TRAINING
(CAST) IN FY 1985. THIS EIGHT DAY PROGRAM PROVIDES SCREENING FOR THE MOST
SENSITIVE AND DIFFICULT PEACE CORPS ASSIGNMENTS.
THE CREST PROGRAM IS BRIEFER AND LESS EXPENSIVE THAN CAST. A FIVE DAY
PROGRAM, CREST WILL BE USED WHEN TRAINING RATHER THAN SELECTION IS THE MAJOR
PRIORITY. OVER THE LAST SEVERAL YEARS, THIS PARTICULAR FORM OF STAGING HAS
PROVEN HIGHLY POPULAR AMONG NEW VOLUNTEERS, HOST COUNTRY OFFICIALS, AND PEACE
CORPS STAFF. ABOUT 1135 CANDIDATES WILL RECEIVE THIS PROGRAM IN FY 1985.
THE TRADITIONAL COMPREHENSIVE STAGING, WHICH RUNS FOR 3112 DAYS, PROVIDES
INITIAL TRAINING AND ORIENTATION BUT DOES NOT PROVIDE EXTENSIVE SELECTION OR
TRAINING ACTIVITIES.
IT WILL BE USED FOR ABOUT 930 CANDIDATES IN FY 1985.
1353
A MAJOR PROJECT FOR FY 1984 WILL BE TESTING OF THE "OVERSEAS ASSESSMENT
INVENTORY." THIS WRITTEN QUESTIONNAIRE MAY PROVIDE INDICATIONS WHETHER A GIVEN
APPLICANT CAN ADAPT WELL IN ANOTHER CULTURE, A VERY IMPORTANT INGREDIENT IN
SUCCESS OF PEACE CORPS VOLUNTEERS.
H.
NEW OFFICE OF MARKETING RESEARCH
A NEW OFFICE OF MARKETING RESEARCH WAS FORMED LATE IN FY 1983. DURING
FY 1984 AND FY 1985 THE UNIT WILL UNDERTAKE PROJECTS DESIGNED TO:
RESEARCH DEMOGRAPHIC TRENDS AND EXPLORE REASONS WHY INDIVIDUALS JOIN THE
PEACE CORPS.
DEVELOP MARKETING STRATEGIES AIMED AT OLDER AMERICANS AND MEMBERS OF
MINORITY GROUPS.
O PRODUCE NEW RECRUITMENT POSTERS, BROCHURES, SLIDE SHOWS AND OTHER
MATERIALS.
PLAN NATIONAL ADVERTISING CAMPAIGNS ON RADIO AND TELEVISION.
1.
IMPROVED MANAGEMENT
DURING THE PAST YEAR, WE HAVE CONTINUED TO IMPROVE THE MANAGEMENT OF
VARIOUS SUPPORT SERVICES PROVIDED TO OUR PROGRAM, BOTH AT HOME AND OVERSEAS.
WE
HAVE STRENGTHENED BOTH OUR ADMINISTRATIVE AND PROGRAM MANAGEMENT BY:
--
UPDATING OUR PEACE CORPS MANUAL WHICH INCLUDES AGENCY-WIDE POLICY AND
PROCEDURES GUIDELINES;
REVIEWING AND TESTING OUR INTERNAL CONTROL SYSTEMS;
INTRODUCING AND TESTING A NEW PROGRAM REVIEW SYSTEM FOR OVERSEAS
POSTS, AND AN AUDIT FOLLOW-UP SYSTEM;
34-045 0-84-86
1354
--
ESTABLISHING AN ADMINISTRATIVE INTERN PROGRAM TO PROVIDE A CADRE OF
HIGHLY QUALIFIED ADMINISTRATIVE OFFICERS FOR OVERSEAS; AND
--
EXPANDING THE USE OF AUTOMATED DATA PROCESSING IN FIELD OFFICES AND
HEADQUARTERS.
WE WILL CONTINUE TO STRENGTHEN OUR MANAGEMENT SUPPORT ACTIVITIES IN BOTH
FY 1984 AND FY 1985.
MANAGEMENT PLANS FOR THIS COMING YEAR INCLUDE:
DEVELOPING DETAILED INSTRUCTIONS FOR OVERSEAS POSTS ON THE DEVELOPMENT
OF COUNTRY PLANS AND BUDGETS;
DEVELOPING STANDARD OPERATING PROCEDURES HANDBOOKS FOR OVERSEAS POSTS,
AND TOOLS FOR SELF-EVALUATING MANAGEMENT AND PROGRAM EFFECTIVENESS;
CONTINUING TO EXPAND DATA PROCESSING IN FIELD OFFICES, AND THE USE OF
MICRO-COMPUTERS IN OVERSEAS POSTS;
--
IMPLEMENTING AND REINFORCING SKILLS DEVELOPMENT TRAINING AT WORKSHOPS
FOR OVERSEAS COUNTRY DIRECTORS AND ADMINISTRATIVE OFFICERS;
INCLUDING ALL PEACE CORPS OVERSEAS POSTS IN OUR MICRO-COMPUTER
NETWORK; AND
CONTINUING TO REALLOCÁTE POSITIONS WHERE FEASIBLE FROM PEACE CORPS
HEADQUARTERS TO OVERSEAS POSTS TO ASSURE PRIORITY IS GIVEN TO OVERSEAS
STAFFING NEEDS.
J.
BETTER TRAINING
AT HEADQUARTERS HERE IN WASHINGTON, THE OFFICE OF TRAINING AND PROGRAM
SUPPORT, A MERGER OF THE OFFICES OF PROGRAM DEVELOPMENT AND TRAINING MANAGEMENT
1355
COORDINATION, WAS CREATED IN ORDER TO PROVIDE CLOSER COORDINATION BETWEEN
TRAINING AND PROGRAM ASSISTANCE TO THE FIELD.
UNDER AN INTERAGENCY AGREEMENT WITH USAID, PEACE CORPS ESTABLISHED A SMALL
PROJECTS ASSISTANCE FUND OF $40,000 IN EACH OF 31 COUNTRIES TO PROVIDE PEACE
CORPS VOLUNTEERS WITH FUNDS TO SUPPORT SELECTED PROJECTS IN AGRICULTURE,
ENERGY
AND SMALL ENTERPRISE DEVELOPMENT. A SMALL ENTERPRISE DEVELOPMENT SECTOR
SPECIALIST WAS SUBSEQUENTLY HIRED TO PROVIDE THE AGENCY WITH TECHNICAL EXPERTISE
IN ALL AREAS OF INCOME GENERATION.
APPROXIMATELY 150 PEACE CORPS VOLUNTEERS IN
THE CARIBBEAN AND CENTRAL AMERICAN SUB-REGIONS PARTICIPATED IN TRAINING SESSIONS
DESIGNED TO PREPARE VOLUNTEERS TO HELP SMALL-SCALE FARMERS ASSOCIATIONS AND
COOPERATIVES IN CONDUCTING FEASIBILITY STUDIES AND CONSTRUCTING BUSINESS AND
MARKETING PLANS.
THE ENERGY SECTOR DEVELOPED AND CONDUCTED A MODEL FOOD PRESERVATION
IN-SERVICE TRAINING PROGRAM IN FIVE COUNTRIES FOR OVER 100 PEACE CORPS
VOLUNTEERS AND 50 HOST COUNTRY NATIONALS. THIS SECTOR ALSO EXPLORED THE
POSSIBILITY OF INTRODUCING MICROHYDRO AND PHOTOVOLTAIC TECHNOLOGIES INTO PEACE
CORPS ENERGY PROGRAMMING.
THE AGRICULTURE SECTOR DESIGNED AND TESTED A TWO-WEEK AGRICULTURE MARKETING
IN-SERVICE TRAINING PROGRAM IN COSTA RICA AND THE PHILIPPINES AND THEN CONDUCTED
PROGRAMS IN PAPUA NEW GUINEA AND CAMEROON.
THE FORESTRY SECTOR DESIGNED AND CONDUCTED THREE ONE-WEEK MULTI-COUNTRY
IN-SERVICE TRAINING WORKSHOPS IN AGROFORESTRY FOR EIGHTY-FIVE PARTICIPANTS FROM
FIFTEEN COUNTRIES IN WHICH 50 PEACE CORPS VOLUNTEERS AND 35 HOST COUNTRY
COUNTERPARTS PARTICIPATED.
THESE ARE ONLY A FEW OF THE ONGOING EFFORTS TO PROVIDE THE HIGHEST QUALITY
TRAINING TO OUR PEACE CORPS VOLUNTEERS, WHO IN TURN IMPART THIS VITAL KNOWLEDGE
TO THE PEOPLE IN THE LESSER DEVELOPED COUNTRIES.
1356
K. PEACE CORPS CALLED TO ASSIST IN DISASTER SITUATIONS
MORE AND MORE, PEACE CORPS IS BEING RECOGNIZED AS AN EFFECTIVE,
HUMANITARIAN FORM OF ASSISTANCE IN DISASTER SITUATIONS. FOR EXAMPLE, IN
RESPONSE TO THE SEVERE DROUGHT IN BOTSWANA AND AT THE REQUEST OF THAT
GOVERNMENT, PEACE CORPS/BOTSWANA QUICKLY ARRANGED A DROUGHT RELIEF PROGRAM.
A
CALL WENT OUT FOR THIRD-YEAR EXTENSION VOLUNTEERS WITH SKILLS IN GENERAL
CONSTRUCTION, MASONRY, CARPENTRY, AND PLUMBING.
PEACE CORPS/LESOTHO, GHANA, AND
HONDURAS RESPONDED, PROVIDING A TOTAL OF EIGHT VOLUNTEERS WHO ASSISTED IN ROAD
CONSTRUCTION AND PUBLIC WORKS.
IN GHANA, TWO VOLUNTEERS WORKED WITH EMERGENCY FOOD AID DURING THE
REPATRIATION OF AN ESTIMATED ONE MILLION GHANAIANS FROM NIGERIA.
PEACE CORPS WAS ABLE TO PROVIDE VOLUNTEERS TO HELP IN INITIAL
RECONSTRUCTION EFFORTS FOLLOWING THE DISASTROUS EARTHQUAKE IN YEMEN.
PEACE
CORPS VOLUNTEER MICHAEL BOLSTER, OF PRINCETON, NEW JERSEY, WAS HONORED FOR THIS
EFFORT BY PRESIDENT REAGAN.
IN ADDITION, SISTER MADELINE CHORMAN, ALSO NAMED AN OUTSTANDING PEACE CORPS
VOLUNTEER IN 1983 (FOR HER MANAGEMENT OF THE KORLE BU HOSPITAL CANTEEN IN ACCRA,
GHANA), RECEIVED A DONATION OF OVER FOUR TONS OF FLOUR AS A RESULT OF HER
PERSONAL REQUEST TO PRESIDENT REAGAN DURING THE AWARD CEREMONY AT THE WHITE
HOUSE.
II.
THE BUDGET REQUEST
WE SUPPORT THE ADMINISTRATION'S REQUEST TO AUTHORIZE THE APPROPRIATION OF
$124,000,000 FOR ACTIVITIES UNDER THE PEACE CORPS ACT FOR FISCAL YEAR 1985, AND
SUCH SUMS AS MAY BE NECESSARY TO SUPPORT ACTIVITIES UNDER THE PEACE CORPS ACT IN
FISCAL YEAR 1986. WITHIN THE $124,000,000 IS INCLUDED A SUM OF $9 MILLION
1357
DOLLARS, TRANSMITTED AS PART OF THE ADMINISTRATION'S RESPONSE TO THE REPORT OF
THE NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA FOR NEW ACTIVITIES THAT
SUPPORT THE COMMISSION'S RECOMMENDATIONS. THIS REQUEST, INCLUDING THE
$9,000,000 INCREMENT FOR NEW CENTRAL AMERICA ACTIVITIES, WILL SUPPORT A MODEST
OVERALL PROGRAM INCREASE FOR THE PEACE CORPS IN 1985.
OUR 1985 REQUEST HAS BEEN DEVELOPED IN FULL COORDINATION WITH THE
DEPARTMENT OF STATE AND THE AGENCY FOR INTERNATIONAL DEVELOPMENT.
OTHER HIGHLIGHTS OF THIS BUDGET REQUEST FOR 1985 INCLUDE:
INCREASING OUR GRENADA PROGRAM, WHICH WILL BEGIN THIS CALENDAR YEAR, TO
A FULLY OPERATIONAL LEVEL;
MAINTAINING SUPPORT FOR THE ADMINISTRATION'S CARIBBEAN BASIN INITIATIVE
BY TRAINING LOCAL CARIBBEAN AGRICULTURAL ENTREPRENEURS TO CARRY OUT SUCH
BASIC BUSINESS FUNCTIONS AS FEASIBILITY STUDIES, INVENTORY CONTROL,
PRODUCT DEVELOPMENT AND MARKETING;
EXPANDING THE SMALL ENTERPRISE DEVELOPMENT SECTOR WORLDWIDE BY ENHANCING
THE BUSINESS SKILLS NOT ONLY OF VOLUNTEERS WITH BUSINESS BACKGROUNDS, BUT
ALSO OF VOLUNTEERS WITH LIMITED BUSINESS EXPERIENCE; AND
UPGRADING THE ADMINISTRATIVE CAPABILITY OF OUR POSTS BY PURCHASING AND
INSTALLING DESKTOP COMPUTERS IN NINE OVERSEAS POSTS, BRINGING THE TOTAL
NUMBER OF POSTS WITH DESKTOP COMPUTERS TO FORTY-SEVEN.
THE 1985 BUDGET REQUEST AFFIRMS THE IMPORTANCE OF THE PEACE CORPS NOT ONLY
AS A VITAL COMPONENT OF THE OVERALL V.S. APPROACH TO INTERNATIONAL DEVELOPMENT,
BUT ALSO AS AN IMPORTANT VEHICLE OF PUBLIC DIPLOMACY, TEACHING THE PEOPLES OF
THE DEVELOPING WORLD AND THE UNITED STATES ABOUT EACH OTHER. ONE OF THE
NOTEWORTHY RESULTS OF A RECENT SURVEY OF OUR AMBASSADORS WAS THE LARGE NUMBER OF
1358
TESTIMONIALS TO THE EXTRAORDINARY ABILITY OF OUR VOLUNTEERS TO BUILDING LASTING
CROSS-CULTURAL RELATIONSHIPS.
THESE LASTING RELATIONSHIPS ARE AMONG THE MOST
IMPORTANT OUTCOMES OF PEACE CORPS PROGRAMMING.
III.
OTHER LEGISLATIVE PROPOSALS
S. 2321 WOULD CORRECT AN UNINTENDED CHANGE IN THE PEACE CORPS AUTHORITY TO
EMPLOY FOREIGN NATIONALS ABROAD MADE BY THE FOREIGN SERVICE ACT OF 1980. PRIOR
TO THE PASSAGE OF THAT ACT, THE PEACE CORPS COULD EMPLOY FOREIGN NATIONALS FOR
INDEFINITE PERIODS. UNDER THE NEW PROVISIONS ENACTED BY THE FOREIGN SERVICE
ACT, THEY HAVE BEEN SUBJECTED TO THE FIVE YEAR LIMIT ON PEACE CORPS EMPLOYMENT
WHICH IS APPLICABLE TO U.S. CITIZENS, AND THE CONCOMITANT "OUT AS LONG AS IN"
RULE.
FOREIGN NATIONAL EMPLOYEES PROVIDE NECESSARY ADMINISTRATIVE SUPPORT
ABROAD. THE PEACE CORPS POSTS WILL LOSE MANY OF THESE VALUABLE EMPLOYEES IN THE
NEXT FEW YEARS UNLESS THEY ARE EXEMPTED FROM THESE TWO RULES.
PEACE CORPS TECHNICAL PUBLICATIONS CONTAIN MUCH INFORMATION WHICH IS
VALUABLE TO PRIVATE VOLUNTARY ORGANIZATIONS AND HOST-COUNTRY MINISTRIES. THE
BILL PROPOSES AN AMENDMENT TO THE PEACE CORPS ACT WHICH WOULD FACILITATE
DISSEMINATION OF THIS VALUABLE INFORMATION BY AUTHORIZING THE PEACE CORPS TO
SELL ITS TECHNICAL PUBLICATIONS AT COST, AND TO CREDIT THE PROCEEDS OF SUCH
SALES TO ITS CURRENT APPROPRIATIONS. THE PEACE CORPS CANNOT AFFORD TO PROVIDE
LARGE NUMBERS OF ITS PUBLICATION GRATIS, OR WITHOUT BEING ABLE TO RECOUP, FOR
ITS OWN USE, THE PROCEEDS OF SALES. UNDER PRESENT LAW, THE PROCEEDS OF SUCH
SALES MUST BE REMITTED TO THE TREASURY.
1
GLOBAL INTERDEPENDENCE
POLITICAL AS WELL AS ECONOMIC
IS ONE OF THE
HALLMARKS OF THE 1980'S. IN THAT CONTEXT, OVER 100,000 PEACE CORPS VOLUNTEERS
1359
HAVE SERVED ABROAD, PROVIDING DIRECT ASSISTANCE TO LITERALLY MILLIONS OF
PEOPLE ON AN INDIVIDUAL BASIS. BEYOND THE ECONOMIC BENEFITS TO THE UNITED
STATES THAT RESULT FROM STABILIZING AND DEVELOPING THE ECONOMIES OF POORER
NATIONS, AN INCALCULABLE RESERVOIR OF INTERNATIONAL GOODWILL HAS BEEN
GENERATED BY THESE VOLUNTEERS THAT IS INVALUABLE FOR US TODAY.
THANK YOU FOR THIS OPPORTUNITY TO TESTIFY BEFORE YOU TODAY.
Senator LUGAR. Thank you, Mrs. Ruppe.
Will you describe in greater detail how the work of the Peace
Corps has been integrated into the Caribbean Basin Initiative? You
mentioned that, and I would like, just for the sake of the record, to
have some examples of how that initiative has been furthered
through the Peace Corps.
Ms. RUPPE. From the very beginning, we have had volunteers
throughout the Caribbean, so we considered how we could most ef-
fectively help in the whole Caribbean Basin Initiative, and what
special training our volunteers have that would be particularly val-
uable in upgrading skills and talents throughout those countries.
Our volunteers are a human resource out at the village level
working with the small farmer, the small business person, and
women in development. We felt very strongly that we could make
an impact by giving our volunteers special training in doing prefea-
sibility studies and marketing studies to allow them to be the link
between microeconomic factors, the small businessman, the small
farmer, and the available markets.
We know that there are funds available for very small business
people, but rarely do these people know how to make out a loan
proposal. So we have given our volunteers special training in such
matters. We have connected with private voluntary organizations
interested in the Caribbean to discover new markets. What crops
should a small business person grow?
We have coordinated with the Smithsonian Institute, with some
of their aquaculture experts. We are now doing some Caribbean
crab ranching. We have introduced snow peas, which have a high
market rate, and we also have worked to upgrade the quality con-
trol and design of handicrafts throughout the Caribbean.
Those are some specific projects, and I would be happy to submit
more for the record.
Senator LUGAR. I think it would be interesting if you could make
an additional submission. That clearly has been one of the major
objectives of this administration, and I think it is interesting to see
how agencies and programs that are already in progress dovetail in
order to strengthen that situation.
By the same token, you have indicated that additional funds
have been requested by the administration for the Peace Corps,
particularly after the recommendations of the Kissinger Commis-
sion. They suggested the value of that. Can you offer some explana-
tion of how Peace Corps will work to fulfill those objectives? Grant-
ed that they are a part of our general markup and consideration of
1360
several parts of this authorization, or the budgetmaking that we
are in the process of doing, and we do not know what parts will
survive. But even given those footnotes, how do you see the Peace
Corps proceeding with the Kissinger report?
Ms. RUPPE. Well, before the Kissinger report was really fleshed
out, our original budget request was $115 million. The $9 million
additional raises the total to $124 million, which would give us the
capability to start implementing the Kissinger Commission recom-
mendations for Peace Corps activities in Central America.
The Commission had actually recommended that we quadruple
or quintuple our numbers in Central America.
Senator LUGAR. What are those numbers now, roughly?
Ms. RUPPE. We have approximately 600 volunteers working in
Honduras, Guatemala, Belize, and Costa Rica. We decided to start
out by doubling those numbers. The appropriation and the authori-
zation we are requesting would enable us to begin placing an addi-
tional 1,500 volunteers between 1985 and 1989, starting with ap-
proximately 150 volunteers in fiscal year 1985.
Part of this increase would be for going back into Panama. We
very much would like to reenter Panama. The Commission was pri-
marily interested in the problem of under-education throughout
Central America, and concluded that our volunteers would be very
valuable in creating a "literacy corps” to teach Spanish to Indian-
dialect speakers and a “teacher corps” at primary, secondary, and
technical levels to teach math, science, and vocational education to
rural schoolchildren. Our agricultural volunteers will give farmers
special literacy training.
These proposals open up a new dimension to Peace Corps, so that
we can recruit far more Hispanics. We need that type of fluency in
literacy training. For many years Peace Corps, because of tight re-
sources, has been unable to expand its recruiting efforts in areas of
our country where we have tremendous population swings.
For example, we have tended to recruit primarily on the west
coast, the Midwest and the Northeast, and we have had very little
recruitment outreach into the Sun Belt. If this funding is approved,
it will give us the capability to open more offices throughout the
Sun Belt States. We already have a potential office selected in
Miami. We have increased our recruiting in Puerto Rico. With this
funding we could move ahead, not only in literacy but also in the
fields that we have already established ourselves in, including agri-
culture, small business programs, low income housing, and health.
Senator LUGAR. Currently you do not have Peace Corps volun-
teers in El Salvador, do you?
Ms. RUPPE. We had a program there until the level of violence
was so high that it was felt the volunteers could no longer serve
there free from danger to their health and safety, but once stability
returns, we would certainly want to have volunteers back there.
The same holds true with Nicaragua.
Senator LUGAR. Is there current Peace Corps activity in Mexico?
Ms. RUPPE. The Peace Corps has never been invited into Mexico.
Senator LUGAR. You have enumerated the other Central Ameri-
can countries, and possible reentry into Panama.
Ms. RUPPE. We were also in Nicaragua at one time, and again,
when violence came, we withdrew.
1361
Senator LUGAR. In the days that the Peace Corps was founded
and subsequently, there was much discussion of the idealism of the
youth who entered the Peace Corps. How would you characterize
the type of person who comes in now? You have described the vol-
unteers as people of all ages and even suggested that people of your
age and older would be not only welcome but would be very valua-
ble. I would just like some idea of a profile, if you have one, of who
the volunteers are, why they come, and how you would describe the
morale of the people who are serving.
Ms. RUPPE. Well, our median age is now approximately 28 years
old. About 6 percent of our volunteers are minorities. About 400
are over 50 years of age. We have no upper age limit. We have a
gentleman serving in Haiti who is now 82, who is doing wonderful
work there, Mr. Odilon Long. Of course, now we have Florence
Brooks competing with him among the ranks of our most famous
volunteers.
But still our largest segments of volunteers has an education
background of some sort. They teach English, math, or science. One
of the greatest needs today is for people with agricultural back-
grounds. Of course, in the sixties, when Peace Corps started, as you
well know, being from Indiana, there were far more families en-
gaged in agriculture. There were about 15 million Americans in-
volved in agriculture that Peace Corps could have approached for
volunteer service. Today there are under 5 million as American
farmers. Also there were far many more math and science teachers
in the sixties, and the needs are even greater in the eighties.
I just returned from a five-nation tour, and it was confirmed to
me again and again that our volunteers are great, motivated Amer-
icans. One young fisheries volunteer said to me after a very long
day in the field="I just want you to know I am working my butt
off here, and I just hope you will go back to Washington and get
the support for this program, because this is one of the greatest
things I think my country is doing.
They love America. They love the countries they are serving in
and the people they are working with. I tell them, and I feel it very
firmly—this was the 36th Peace Corps country, Nepal, that I vis-
ited—that they are doing more to promote world peace and friend-
ship for our country than almost anything else. The relationships
that are established and the knowledge that comes back to Amer-
ica to help us to grow and develop in our partnerships with the de-
veloping world is so valuable.
So they are just a great group, whatever age they are. Most of
them are very highly skilled. Most of them have a college degree or
several years of hands-on experience.
Senator LUGAR. How do you go about attempting to recruit vol-
unteers from the field of agriculture? Through your regular re-
cruitment offices? How would you describe it?
Ms. RUPPE. We have recruitment centers all around the country,
Mr. Chairman. We have about 62 recruiters out, but I am proud to
say that on a per capita basis they do very, very well. In agricultur-
al recruitment we send letters to all the agricultural schools asking
their placement people to recommend Peace Corps service. We
point out the advantages of Peace Corps experience. We show the
career development possibilities. We explain the needs for agricul-
1362
tural graduates in the developing world. We send out letters to
graduating seniors on any mailing list we have.
We are also going to agricultural schools and asking them to
think about the possibility of a master's course being incorporated
into Peace Corps service, and some schools are doing that. The
Graduate School of Arizona State, for instance, has supplied us
with students who do a master's program as part of their Peace
Corps service. We would like to do more of that, because we are
having difficulty getting enough people with agricultural skills in
the 59 countries that we are in. We think if we set up more plans
like that, it would help to give us a steady supply of people with
those skills to help in the developing world.
Also, this past year I signed an agreement with Secretary Block
whereby he sends a letter to every retiree of the U.S. Department
of Agriculture encouraging them to apply for Peace Corps service.
We try to advertise in agricultural journals, organic gardening
periodicals, and similar publications whose readers might see us
and think about Peace Corps service.
Senator LUGAR. How long would a typical volunteer serve who
came from an agricultural background?
Ms. RUPPE. Well, he or she would receive at least 8 to 12 weeks
of intensive training. Thirty million dollars a year is spent by
Peace Corps on training, because we feel that is the key to the ef-
fectiveness of our volunteers. Our language training in the eighties
is far improved from the sixties. We are doing most of our training
overseas, in the country in which the volunteers serve.
Let us say you were going to be in agriculture. You would prob-
ably be placed in a village, live with a family, have your language
training 6 hours a day, go out to the fields with the farmer of the
village, and perhaps receive additional stateside training in all dif-
ferent agricultural techniques.
Senator LUGAR. I would like to mention that our distinguished
colleague, Senator Cranston from California, would like to submit
questions from the committee that have not been asked by Senator
Tsongas or by me today for the record, and I would ask that you
respond to them, if you would.
The chairman will keep the record open for other questions from
other Senators for the remainder of this day, in the event that
others are not able because of schedules in the Senate to attend the
hearing. They will have an opportunity during this business day to
submit other questions. We would ask that you respond as rapidly
as possible for the record, so that it will be complete before we
have the markup on the authorization.
I have no further questions. I simply would join my colleague,
Paul Tsongas, in commending the extraordinary record that you
have compiled. It has been a remarkable achievement, and one
that I am very excited about. It is a pleasure to have the chance to
preside over this hearing today about an agency for which I have
great enthusiam and affection. I have no doubt that other members
of the committee will feel the same way. We will proceed into the
markup with a good hearing.
We appreciate your full testimony, your additional comments,
and responses to the questions today.
1363
Ms. RUPPE. Thank you very much, Mr. Chairman. We are very
proud of your State for the large number of volunteers it has given
us over the years. Thank you.
Senator LUGAR. Thank you.
The hearing is adjourned.
[Additional questions and answers follow:]
PEACE CORPS' RESPONSES TO ADDITIONAL QUESTIONS SUBMITTED FOR THE RECORD
Question 1. Regionally, where do you find the greatest demand for Peace Corps
services? Is this demand reflected proportionately in the FY 1985 budget request?
Answer. The greatest demand continues to be in Africa where we have our largest
presence. In responding to demand for Volunteers we take into account our ability
to recruit, place, train and support the types of Volunteers requested and our over-
all world-wide balance.
Question 2. If the Peace Corps is, as you say, one of the most cost-effective and
visible U.S. foreign assistance programs, why is its budget authority remaining es-
sentially static taking into account inflation? How do you determine the cost-effec-
tiveness of the Peace Corps programs?
Answer. We strongly believe that Peace Corps is one of the most cost-effective for-
eign assistance programs and the 100,000 returned Volunteers and 5,000 current
Volunteers certainly contribute much to our visibility. However, in formulating his
budget and determining the proper mix of programs, the President must take into
account many factors and considerations beyond the scope of Peace Corps.
It costs us about $20,000 to $23,000 to recruit, place, train and maintain a Volun-
teer in the field for 1 year. This represents less than one-fifth the amount other for-
eign assistance agencies spend to maintain a technician in the field. Numerous am-
bassadors, government leaders and ministry officials have expressed their belief in
the effectiveness of Volunteers.
Question 3. What do you foresee happening to the Peace Corps budget in the next
few years? Will it continue to shrink in real dollar terms?
Answer. It is difficult to say, given the budgetary problems the government faces.
However, the planning levels for the Peace Corps included in the budget for 1986
and beyond show growth in the Peace Corps' budget at approximately the anticipat-
ed rate of inflation.
Question 4. Technically, the Peace Corps budget request is $105.8 million. In addi-
tion, $18.2 million is being proposed for Peace Crops Central America programs as a
part of the Central America Democracy, Peace and Development Act of 1984. That
Act embodies the Kissinger Commission recommendations for greater Peace Corps
services in Central America. Why wasn't the $18 million proposed for Central
America submitted as part of the Peace Corps budget request?
Answer. The Peace Corps' initial budget submission was developed prior to the
release of the Kissinger Commission report. Subsequently the administration decid-
ed to identify the total level of support to Central America in the budget request
incorporating the Kissinger Commission recommendations for foreign assistance to
that region. The original $115 million request level included $9.2 million for Central
America. The Central America Democracy, Peace and Development Act package in-
cludes $18.2 million for the Peace Corps Central American programs: the basic $9.2
million for ongoing programs in Central and Latin America and the Caribbean, and
an additional $9 million to implement the Kissinger Commission recommendations.
Question 5. Last year, the Peace Corps Congressional Presentation Document
noted that “since 1982 the Peace Corps has been able to reverse, for the first time in
several years, a downward trend in the annual number of replacement Volunteers
entering service overseas.
(A) This year, the Peace Corps budget proposal calls for both a reduction in re
cruitment of Volunteers and a reduction in Volunteer years of service. These reduc-
tions seem to fly in the face of last year's statements to this Committee. Likewise,
the FY 1985 budget request projects a reduction of about 242 percent in recruit-
ments, communication and development education. How do you explain these appar-
ent contradictions?
(B) At the same time that recruitment is declining, the administrative support
portion of the budget
is increasing. Wouldn't it be more productive to increase the
number of Volunteers in the field rather than the number of program officers in
Washington and overseas?
Answer. (A) In 1983 we placed 2,988 new trainees overseas, an increase of 125
from the previous year which itself was an increase of 134 from the year before.
1364
These two solid years of increases after a long period of decline represent a signifi-
cant turnaround.
Unfortunately, cost increases, particularly overseas, during 1984 and 1985, have
led us to project a reduction in the number of new trainees we will be able to afford
in 1985. Because of these reductions, we are projecting a requirement for a smaller
recruitment effort in 1985.
(B) While our program support budget is increasing slightly in 1985, this is not
due to staff increases. In fact, staff levels are declining. Further, since 1981 the pro-
gram support portion of our budget has declined from 33.3 percent to a projected
31.3 percent in 1985 while the Volunteer operations portion has increased from 58.6
percent to 60.7 percent. This has been accomplished in the face of extremely diffi-
cult programmatic and operational conditions.
Question 6. The GAO issued a May 1981 report entitled "The Preparation of Vol-
unteers for Peace Corps Service: Some Areas Need Management Attention.” That
Report noted that in some countries key elements of Volunteer training were being
handled creatively and effectively but that in other countries the training programs
varied in quality and effectiveness. The GAO recommended, among other things, ac-
celerating the development of a core curriculum for pre-service training, and estab-
lishing a system to collect and evaluate attrition data so that management can
make changes to minimize the adverse effects of attrition. Have these recommenda-
tions been implemented? If so, when and to what degree? If not, why?
Answer. Due to a decentralized training system, the quality of Peace Corps train-
ing has varied from country to country. To address this problem, the Agency has
developed the Integrated Training System--a management system which standard-
izes Peace Corps training philosophy, goals, and minimum standards of quality
training. This system clearly articulates what is acceptable and not acceptable in
terms of (1) hiring qualifications for trainers, (2) country staff advance preparation,
(3) training methodologies, (4) content, and (5) evaluation. In addition, this system
establishes a monitoring review process which allows us to systematically evaluate
training programs, identify problems and provide needed assistance. We are intro-
ducing the Integrated Training System to the field at all directors and regional pro-
gramming and training conferences held during 1984.
Integrated Training System requires the provision of training materials and train-
ing assistance. The following training manuals were developed or revised during
1983-1984:
(1) The Trainer Resource Guide- A resource book for Peace Corps training. It
provides detailed definitions of terms methodologies, and reports used in Peace
Corps training.
(2). Bureaucratic Effectiveness and Working with Counterparts-Focuses on
characteristics of bureacracies and strategies for working effectively within
them.
(3) Personal Safety-Addresses general Volunteer safety, with specific focus
on rape and sexual harassment.
(4) Role of the Volunteer in Development—This manual integrates women in
development (originally a separate manual) concepts showing how they are a
vital part of any development project.
Plans are underway to develop the following additional manuals:
(1) In-Service Training-This new manual will focus on working with commu-
nity leadership structures, improving planning and management skills, and in-
creasing Volunteers awareness of available resources and assistance for devel-
opment projects, i.e., Peace Corps Partnership.
(2)-Cross-Culture-Helps Volunteers develop new skills for entering and work-
ing in a new culture. It also examines how to balance cultural sensitivity with
personal safety and needs.
Complementing these materials will be a training managers conference which will
be held in Africa. This conference is geared towards improving management skills
as they relate to training.
The recommendation in the GAO report to establish a system to collect and evalu-
ate attrition data for management has been implemented. The Office of Special
Services has in place an automated data management system that supplies attrition
information to the central data base. A semi-annual attribution reporting system
presents attrition rates by fiscal year of entrance on duty dates together with rea-
sons for terminations and characteristics of early terminées. Through management
exercises specifically prepared for this purpose, these countries are to identify the
strengths and weaknesses of the programs in areas relevant to attrition and to de
velop
a plan to make changes to enable as many Volunteers as possible to complete
their Peace Corps service. Country assessments and action plans are being reviewed
1365
etc.
front page article in the local newspaper which promoted Peace Corps service.
in Peace Corps/Washington to determine trends and to make recommendations for
agency-wide changes to increase Volunteer retention.
Question 7. There appears to be an ever increasing demand for Volunteers with
special skills. What skills are most in demand by host countries and how is the
Peace Corps responding to the demand?
Answer. Countries overseas most often request Volunteers with agricultural back-
grounds. Many of these requests require individuals with education backgrounds in
plant pathology, large animal husbandry, soil science, and other agricultural sub-
specialities. Teachers are next in order of frequent requests, most often teachers of
English, mathematics and science. Foresters, engineers (especially civil engineers),
and individuals with construction and special education backgrounds are also fre-
quently requested.
Special steps taken to recruit individuals with these highly technical skills in-
clude:
Funding of graduate assistantships for returned Volunteers to intensively recruit
in academic departments such as agriculture, forestry, engineering, mathematics,
Specialized direct mail appeals to graduating seniors in these disciplines where
mailing lists are available.
Other targeted mailings in cooperation with the Office of Personnel Management,
the Department of Agriculture, The Society of American Foresters and many
others.
Creation of public service announcements and campus newspaper advertisements
specifically targeted to scarce skill audiences.
Question 8. What specific efforts have been made during the past year to utilize
more effectively returned Peace Corps Volunteers? Please cite examples. Will this
effort carry over into the FY 1985 budget?
Answer. This Agency has made specific efforts to use the expertise of Returned
Peace Corps Volunteers in many of our training and other programmatic activities
in the past year. Many of the assistant trainers in our state-side technical training
are RPCV's with expertise in a wide range of skill areas including fisheries, forest-
ry, health/nutrition, rural development and agriculture. Other RPCV's are utilized
for in-country pre-service and in-service training. Returned Volunteers are used as
in
In addition to the above, the past year has shown that RPCV's have moved into
management and programming positions within Peace Corps both in headquarters
and overseas. Many Country Directors and Associate Country Directors are former
Volunteers. In headquarters, many desk assistants, desk officers, chiefs of operation
and even one regional director, are RPCV's.
In a recent survey of new Peace Corps Volunteers, 31 percent attributed their in-
terest in service to discussions and contacts with returned Volunteers. In January
1984 we wrote to over 4,000 recently returned Volunteers and asked them to assist
us in recruitment efforts. We made the same request of the 38 active returned Vol-
unteer groups. Many former Volunteers are responding by speaking to community
groups about their own experiences and by meeting one-on-one with prospective new
Volunteers to give them first hand knowledge about service overseas.
Examples of day-to-day assistance provided by returned Volunteers are legion:
The Cleveland area returned Volunteer group provided assistance to our staff in
recent mid-western recruiting campaigns.
Returned Volunteers addressed interested students at the University of North
Carolina. A University professor who is a returned Volunteer was the subject of a
At Indiana University recently, 10 returned Volunteers showed their personal
slides to 65 prospective applicants.
Similar activities are planned for FY 1985.
Question 9. How many applications did the Peace Corps receive from Black and
Hispanic Americans during 1983? How many of these applicants were selected for
Peace Corps service?
Answer. In FY 1983, 1,548 applications were from minority candidtes, 189 of
whom have been selected for Peace Corps service.
Minority breakdown is as follows:
Black Americans
93
Hispanic Americans..
50
American Indians.........
22
Asian Americans
24
Total......
189
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Question 10. Please describe the Peace Corps involvement in the Caribbean Basin
Initiative and how this is reflected in the proposed FY 1985 budget. Do you believe
that it is appropriate and in keeping with the Peace Corps mandate of addressing
basic human needs in developing countries for Volunteers to conduct fesibility stud-
ies and develop business plans for agricultural enterprises as the Peace Corps plan
now proposes? What results do you hope for from these projects?
Answer. The Peace Corps began a program in FY 1983 to support the economic
self-reliance focus of the Carribean Basin Initiative. Peace Corps' CBI activity has
been directed toward small and medium scale agribusiness development. The PC/
CBI program has trained select groups of Volunteers with agricultural and business
backgrounds to assist host country small farmers associations, cooperative and host
government agencies in developing agribusiness feasibility assessments and business
plans.
Completed assessments and business plans can help small and medium scale
farmers and groups to qualify for agribusiness financing under the various agricul-
tural credit programs which are or will be available in the Caribbean countries.
There are several potential projects with identified export markets, as well as
projects with local regional markets.
To continue the Peace Corps commitment to the Caribbean Basin Initiative, we
have carried over the slot for our Caribbean Basin coordinator to implement phase
III of the project, e.g., to review each of the projects identified by the Volunteers
and to provide technical assistance in the field. In addition, the Caribbean Basin
coordinator will be developing a pre-service training module to be incorporated with
all of Inter-America's operating training contracts.
This will enhance the trainees' skills to provide both technical advice and to assist
host country small farmers associations and cooperatives in developing agribusiness
feasibility assessments and business plans to qualify for financing under various ag-
ricultural credit programs.
This type of program is not a new focus for Peace Corps. Since the early 1960's
Volunteers have been providing management and marketing assistance to farmers
cooperatives and groups throughout the developing world. The “CBI” activities ar
designed to place more emphasis on this program area and to provide Volunteers
with the skills required to provide effective technical assistance. The “CBI” program
does not reduce the emphasis on other traditional programs such as health, sanita-
tion, nutrition, skill training, and other basic human needs.
For the past 23 years Peace Corps Volunteers have been addressing basic human
needs through programs designed to impart knowledge, skills and know-how, and
income generation. All of these areas are critical for long term solutions. For exam-
ple, teaching people about food production, diet and food preparation addresses the
need for better nutrition and health. However, if the people cannot generate income
to buy food or the seeds and fertilizer to grow it, little improvement will be possible
over the long run.
Because of low productive capacity the developing countries have limited job op-
portunities. The majority of the populations are either unemployed or underem-
ployed. Job opportunities and income generation must be created by the people
themselves. Food production businesses offer an excellent opportunity for economic
self-help. Land is generally an abundant natural resource. Due to low productive ca-
pacity in agriculture, most countries are now importers of food staples. This drives
up prices causing balance of payment problems and nutritional problems for the
poor majority who can not afford to purchase food for a balanced diet. This situation
assures a market for locally grown food that can be sold at lower prices than im-
ported products.
Although small scale farmers have some basic agricultural skills and some land
resources, their lack of business management and marketing skills has generally
made it difficult to obtain credit and kept productivity low. The Peace Corps' CBI
program is designed to assist small scale farmer groups to improve their business
and marketing sales, and income. The expected benefits will be improved agricultur-
al productivity, more income for small scale farmers, employment generation, in-
crease in food supply, lower prices; and, in the long run, greater economic self suffi-
ciency and ability to fulfill basic human needs.
Question 11. A new Peace Corps program began last year in Haiti. What is the
status of that program? Are you confident that the Government of Haiti has cooper-
ated fully with your agency's efforts? How much money is the Haitian Government
contributing to the program?
Answer. Currently there are eight Volunteers working on projects related to natu-
ral resources/forestry, fisheries, vocational education, public health and appropriate
technology
1367
Peace Corps/Haiti is staffed full-time by an Associate Peace Corps Director who
serves as the Peace Corps Representative, and a Haitian Administrative Office/
APCD. They are assisted part-time by a secretary and medical officers.
Over the past year staff and Volunteers have developed good working relation-
ships with Haitian counterparts. Programs have been developed in close collabora-
tion with Haitian ministeries and their subsidiary agencies in local areas. In coop-
eration with the Ministry of Planning, Peace Corps has begun also to collaborate
with private voluntary organizations such as CARE and the Medical-Social Complex
of Cite Simone.
Further slow but steady and well planned expansion in all of the above programs
is anticipated during FY 1985. Assuming the current level of requests continues, ap-
proximately 50 Volunteers may be in service by the end of FY 1985.
We had anticipated that the Government of Haiti would not provide funds toward
the Peace Corps program. However, in the past year the Government of Haiti has
given Peace Corps an estimated $800 per Volunteer in the form of in-kind contribu-
tions. The in-kind contributions are free housing, motorcycles, refrigerators, and a
project vehicle. We welcome the Government of Haiti's efforts and look forward to
increased amounts of contributions.
Question 12. When will the Peace Corps begin its new program in Grenada? How
many Volunteers will be involved? What will be the program's objectives?
Answer. In January 1984, two Volunteers were placed in Grenada, a Spanish
teacher and a Business Education Instructor. reports from PC/Eastern Caribbean
staff and from the Volunteers, indicate that they have received a warm welcome
and their teaching duties are going well.
By the summer of 1984 we plan to have recruited, placed and trained 14 Volun-
teers, as follows: 4 Science Instructors, 4 Spanish Teachers, 2 French Teachers, 3
Mathematics Teachers, 1 Physical Therapist.
In the coming months, PC/Eastern Caribbean staff will be working closely with
the Government of Grenada officials to assist in alleviating their critical short-term
needs and identify areas of sustained programming for the long term.
Question 13. Is Peace Corps considering entry during FY 1985 into any other coun-
tries? If so, where and why?
Answer. Equatorial Guinea has requested Peace corps Volunteers because of its
extreme need for assistance. When the present government assumed power in 1979,
they found that the country's economic and administrative structure had been
almost completely destroyed under the previous regime. They require assistance in
basic areas, such as agriculture, health and nutrition and education, which could be
provided by Peace Corps Volunteers and projects. The State Department supports
the Peace Corps entry into Equatorial Guinea.
A survey visit has just been conducted in Equatorial Guinea to determine host
country interests and the suitability of the country for placement of Volunteers
with regard to health and communication facilities, food availability and general
living conditions. The study team recommendations will be evaluated in the context
of budget constraints.
Question 14. For FY 1984, what are the expected host country contributions to
Peace Corps? How does this break down regionally? How does this compare to previ-
ous years?
Answer. Expected host country contributions to Peace Corps For FY 1985 are
$5,435,000.
Region
1983 actual
1984 estimate 1985 estimate
Inter-America .............
North Africa, Near East Asia, and Pacific
Africa .........
$403,000
1,276,000
3,853,000
$325,000
1,393,000
3,619,000
$314,000
1,452,000
3,669,000
Total ..........
5,532,000
5,337,000
5,435,000
Question 15. From past experience, what kinds of country programs and Volun-
teer skills provide the greatest return on investment? What is the Peace Corps
doing to ensure that this knowledge is being applied systematically?
Answer. Peace Corps' return on investment in development can be evaluated in
several ways: Success of individual projects and long term impact on host country
counterparts and institutions.
1368
The most immediate is the direct effectiveness of its Volunteers on their project
sites. In this regard, Peace Corps focuses on a limited number of tried and tested
program areas such as health, fisheries, forestry, and education. In each of these
program areas, Peace Corps has developed effective technical training (both pre-
service and in-service) and technical support to the Volunteers in the field.
Many of the fisheries programs which have utilized generalist Volunteers with a
biology/chemistry foundation have been particularly successful over the years. Par-
ticipating farmers and fishermen often greatly increase their income while increas-
ing the supply of animal protein available to nearby communities. Peace Corps has
responded by increasing programming efforts in fisheries and expanding and im-
proving stateside training for Volunteers.
In each of these program areas the Peace Corps' has developed useable "How-to”
technical manuals and has made them available to Volunteers and development or-
ganizations world-wide. For example, the “Agricultural Extension Manual” has
been requested by over 100 development organizations in Third World countries,
many of which do not have Peace Corps Volunteers.
Country programs that provide the greatest return on investment are those that
are village based and incorporate a counterpart relationship between a Volunteer
and a host country national. These programs, regardless of technical area, usually
involve extension and continue long after the Volunteer leaves. Furthermore, in-
creased self-reliance is achieved because the skills the Volunteer originally brings
are then transferred to a host country national.
It should also be noted that Peace Corps measures its effectiveness by the impact
these programs have on host country institutions. In many cases host country minis-
tries have adopted methods and approaches first developed by Peace Corps. In the
Cameroon for example, Peace Corp's approach to fisheries extension has been adopt-
ed by the government. In Togo, the education ministry has adopted Peace Corps ap-
proach to school gardens and it is now required by all primary schools in the coun-
try.
Question 16. Are any special efforts being made to address the severe drought con-
ditions now affecting much of Africa?
Answer. The enormity of the problem related to drought conditions and conse
quences of the current trend has caused a marked decline in agricultural productivi-
ty and in the supply of fuel wood. This situation has led a number of governments
to request the assistance of the international donor community to collectively ad-
dress the problem. As part of this program, Peace Corps has assigned Volunteers to
government parastatal projects in the affected countries to assist in the implemen-
tation of community forestry initiatives and nation-wide improved cookstove pro-
grams.
In those countries in which Peace Corps is operating, Volunteers will be working
to address these needs. Programming will continue in the areas of forestry, im-
proved cookstoves, nutritional education and rehabilitation, rehydration therapies,
irrigation and agricultural production projects, water supply and well construction,
and special emergency assistance programs (including collaborative efforts with AID
in the Public Law 480 program in Ghana and elsewhere and short-term water pump
and wells repair interventions in Mali).
Question 17. How do the FY 1985 Peace Corps programs give particular attention
to the integration of women into the national economics of developing countries as
required by Section 3(h) of the Peace Corps Act? Please cite specific examples.
Answer. Peace Corps provides pre-service training to all Volunteers on the inte
grated role of women in development, including economic development. The goals of
the training are to identify roles that both men and women play in the development
process and how those roles may affect the Volunteer's activities in development.
Specific examples of Peace Corps work with women in economic development
projects are as follows:
In Morocco, women are trained in carpentry and welding to manufacture aids for
the disabled such as wheelchairs, crutches and therapeutic toys for disabled chil-
dren. Funds came from the Women-to-Women Peace Corps Partnership Program.
In Costa Rica, Volunteers work in a 4-H/Women's Business Development Pro-
gram to train women's groups in basic administration and production of household
items made from local materials and appropriate technology.
In Sierra Leone, marine fisheries Volunteers are working with women in coastal
fishing villages in improving methods of fish drying and smoking (processing) as
well as marketing.
In Nepal, Volunteers work in a program to develop income-generating projects for
women on the village level. UNICEF and the Nepal Rastra Bank are working in
conjunction with Peace Corps/Nepal on this program.
1369
Question 18. Section 8(c) of the Peace Corps Act requires Peace Corps to provide as
part of the training of Volunteers, “instruction in the philosophy, strategy, tactics,
and menace of communism.” What has Peace Corps done to implement this provi-
sion? How do you interpret the objectives of Section 8(c)? How have Volunteers re-
sponded to this training program? What practical application does it have once the
Volunteer is in-country?
Answer. The Peace Corps has designed a special training module which is present-
ed to new Volunteers at the time of staging, just before they depart for their coun-
try of assignment.
This consists of a trainer-led discussion of Marxist-Leninism and comparisons
with other philosophical approaches in the context of the developing world. A com-
panion piece to the discussion is a handout which provides specific information of
the “philosophy, strategy, tactics, and menace of communism.'
This handout also implicitly gives recognition to the Volunteers role as a repre-
sentative of the American people.
Because Volunteers are required to remain scrupulously non-political in their ac-
tivities overseas we emphasize ways for them to avoid being drawn into politically-
based confrontations which could undermine their effectiveness.
Volunteers have responded to this training with moderate enthusiasm. In some
cases animated discussions occur. We are continuing to evaluate the effectiveness of
the training module.
The ability to understand the appeal of communism to developing nations and the
capability for dealing with potentially destructive confrontations are the principal
practical applications of this training once the Volunteers are in-country.
Question 19. Of the 58 countries where there is a Peace Corps presence, in how
many instances does Peace Corps collaborate with AID or other development assist-
ance agencies on projects? What is the economic benefit to the Peace Corps? Are
there any drawbacks to this kind of relationship?
Answer. Peace Corps collaborates with AID and other development agencies on
projects in at least 56 countries where Peace Corps has a presence. The benefits to
Peace Corps are both economic and programmatic. They include the use of resources
(particularly those of AID) for technical assistance and training, including:
The development of many recent programming thrusts such as forestry, oral rehy-
dration therapy, and small projects assistance which has accelerated the implemen-
tation of Peace Corps' Forward Plan priorities.
The training of host country nationals alongside their Volunteer counterparts and
relevant ministry officials facilitating the process of skill transfer and institutional
building
The development of technical training manuals in new program areas resulting
from field-tested, in-service trainings which once developed, are available for long
term Peace Corps use.
One area of potential disadvantage is in safeguarding the role of the Volunteer in
development. To counter this, "the role of the Volunteer" is given additional em-
phasis during staff training; in pre-service and in-service training, Peace Corps Vol-
unteers participate in continuous discussion of appropriate development philosophy;
and PCVs receive additional support from field staff.
Question 20. What is the Peace Corps FY 1985 contribution to the United Nations
Volunteer Program? Is this an increase or decrease? What are the advantages to the
United States of maintaining a strong presence in this program?
Answer. United States support for the United Nations Volunteer program is
made up of two separate components. The first is an annual contribution to the
UNV special voluntary fund, which is in the form of a grant from Peace Corps. For
FY 1985 this contribution will be $150,000 which is equivalent to the FY 1984 contri-
bution.
The second type of financial support to UNV is in the form of direct payments of
certain Volunteer support costs for UNVs who are U.S. citizens. The budget line
item covering these payments is based on the number of Americans serving as U.N.
Volunteers. In FY 1985 Peace Corps anticipates placing 35 new American Volun-
teers which is 10 less than FY 1984 but we will maintain a higher level of Volunteer
years (60) due to higher number of new Volunteers in FY 1984.
The primary advantage to the United States for maintaining a strong presence in
the United Nations Volunteer program is that it allows the United States, through
Peace Corps, to demonstrate its strong support for the voluntary movement world-
wide.
Question 21. What were the 1983 calendar year expenditures of the Office of Pri-
vate Sector Development? What was the FY 1984 budget request for this office?
1370
(a) How much did this office raise in direct financial assistance and in in-kind
gifts and contributions?
(b) How many businesses participated in the office's programs last year?
Answer. The Office of Private Sector Development was created at the Peace Corps
in direct response to this administration's strong emphasis on private sector initia-
tives. A primary goal of the Office is to increase substantially the levels of support
and participation of the private sector in Peace Corps programs and activities. It
serves as the focal point for identifying and coordinating gifts and contributions to
the Peace Corps to further its overall purpose and mission in developing countries.
The FY 1983 expenditures for this office were $235,000, much of which presented
the fixed cost of establishing this office. (Records are kept on a fiscal, not calendar
year basis.) During this same year $84,000 was received in direct financial assistance
to the Peace Corps plus approximately $75,000 in in-kind contribution from the
Asgrow Seed Company. Two businesses made direct financial contributions to the
Partnership Program of $5,000 each. Activities in this area continue to grow.
Against an FY 1984 budget of $265,000 the Peace Corps has received over $103,000
of direct financial assistance through the first 6 months of FY 1984. Prospects for
the remainder of FY 1984 look equally bright.
(Whereupon, at 5:11 p.m., the committee adjourned, subject to call
of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
(IDA VII REPLENISHMENT)
TUESDAY, MARCH 27, 1984
UNITED STATES SENATE,
SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY
OF THE COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The subcommittee met, pursuant to notice, at 10:10 a.m., in room
SD-419, Dirksen Senate Office Building, Hon. Charles McC. Ma-
thias (chairman of the subcommittee) presiding.
Present: Senators Mathias and Biden.
Senator MATHIAS. The subcommittee will come to order.
We are meeting for the second hearing of the subcommittee on
the administration's request for funding the U.S. contribution to
the seventh replenishment of the International Development Asso-
ciation (IDA).
We are fortunate this morning to have witnesses who will speak
from particularly powerful positions and who will have the oppor-
tunity to give the subcommittee some guidance, very timely guid-
ance, before we begin marking up the fiscal year 1985 foreign as-
sistance legislation. The markup will actually begin this afternoon.
So, Secretary McNamara, you will have the last word.
In this hearing, I hope we can focus both on the International
Development Association's seventh replenishment and on the ques-
tion of the mix, the appropriate mix, between bilateral and multi-
lateral assistance.
There have been some trends that I personally have found dis-
turbing in recent years. One of them is the fact that the military
component in our overall assistance programs is climbing. It is now
more than 40 percent of the total assistance that we give to other
peoples of the world. At the same time, our contributions to the
multilateral lending institutions have declined as a percentage of
our total assistance efforts.
Less than 10 percent of the administration's fiscal year 1985 for-
eign assistance budget request is for multilateral institutions.
I raised this subject with Secretary Shultz when he appeared
before the committee.
We have here what I consider to be an anomaly of our military
assistance rising and our cooperative efforts with the other nations
of the world declining in the overall aid programs.
In part, the decline in the multilateral component is a result of
the 25-percent cut which has been negotiated for IDA VII, as com-
pared with IDA VI.
(1371)
1372
We have not had the constituency or the vocal support for multi-
lateral lending that was apparent and audible at one time in this
country.
The multilateral institutions have been the subject of criticism
and have been the subject of some diminution by those who believe
that bilateral programs are in the greater interest of the United
States, and by those who are not as concerned about what happens
in the lesser developed countries.
I would hope that these hearings would remind us of the kind of
leverage that can be gained through multilateral lending. For
every dollar that we give to the International Development Asso-
ciation, other nations give three.
I think there is also importance in recalling that aiding the
lesser developed countries strengthens the ties that bind us to the
developing world. This is in our own selfish interest as well as in
their interest.
In 1970, 29 percent of American exports of goods and services
went to the lesser developed world; 10 years later, by 1980, 40 per-
cent of our exports went to the developing world. This means that
the jobs now held by American working men and women are de-
pendent on our ability to do business with the developing world.
Thus, the funds that go to IDA are not wasted.
Since IDA was founded, 27 nations, which formerly received IDA
funding have graduated-that is, their economies are sufficiently
improved that they no longer require IDA funding.
Without further comment from me, let me ask Secretary McNa-
mara, who was formerly President of the World Bank and of IDA,
to let us have his views on these important issues.
Mr. Secretary, welcome to the committee.
STATEMENT OF HON. ROBERT S. McNAMARA, FORMER PRESI-
DENT, WORLD BANK AND INTERNATIONAL DEVELOPMENT AS-
SOCIATION, WASHINGTON, D.C.
Mr. McNAMARA. Thank you, Mr. Chairman.
I am most grateful for the opportunity to appear before you this
morning.
I have a statement. It is approximately 16 pages long. I am quite
prepared to read it to you, if you wish.
Senator MATHIAS. Your are a veteran of appearances before con-
gressional committees, so I will let you do anything you like. But if
you would prefer, we would include your full statement in the
record and let you comment as you wish.
Mr. McNAMARA. I think that might save you some time. But I do
wish, before taking your questions, to refer to one part of the state-
ment, and to read just one particular section. It addresses some of
the points that you yourself made in your introduction, and it also
puts into context the entire foreign aid program that lies before
the Congress.
I will read from page 10 of my statement which I believe you
have a copy of.
What I say is this. Put bluntly, the United States does not have a
development assistance program today, and I want to stress that.
1373
1
We do not in this country have a development assistance program,
despite what is alleged to be a $15.5 billion program of foreign aid.
Our people believe that that is a development assistance pro-
gram, but it is not. It is not a "development assistance program" if,
by that term, one means a program of economic aid to low income
countries with the funds distributed on the basis of need and the
ability to use them productively.
This is what I mean by development assistance program. That is
what the public understands by development assistance program.
That is not what we have.
I want to refer you to the table attached to my statement on
page 16 to demonstrate what I have just said.
Senator MATHIAS. Page 16?
Mr. McNAMARA. Yes, page 16. It is the table at the end of the
statement. It is headed, "U.S. Foreign Aid Appropriations by Fiscal
Year."
It is the last column, fiscal 1985, and the last figure in the last
column, $15.5 billion, which the administration points to, which the
Congress points to, which the press points to, and which the public
believes is our development assistance program.
It is not.
The $15.5 billion, as you can see from the figures above, include
$9.8 billion in security assistance. Now this is not development as-
sistance. It has no place in a foreign assistance program, a develop-
ment assistance program. That ought to be part of the Defense
budget. I believed so when I was Secretary of Defense and I believe
so today.
If one took that out, we would then have remaining some $6 bil-
lion in foreign assistance, nonsecurity assistance.
Well, what is that?
Of that, $6 billion, a very substantial portion, some $3.4 billion,
goes to middle-income countries. By my definition, that is not de-
velopment assistance, at least not the way the average American
normally interprets development assistance, that is, assistance to
low-income countries to be used for poor people.
I am not arguing that we should not give that $3.4 billion. I am
just arguing that it is not development assistance. That goes to
other low-income countries. By low-income countries, I mean those
countries with incomes per capita in 1980 or 1981 dollars of about
$410 per capita, or less. This compares with our income per capita
of something on the order of $10,000.
These are very, very poor countries. In those countries live 2.2
billion people. These are the countries of South Asia, such as India,
Bangladesh, and they are the countries of sub-Saharan Africa.
Those are the poor countries and those are the poor people that
our public believes are receiving development assistance.
As I suggest to you, of the total of $15.6 billion, which has been
requested for fiscal 1985 for foreign aid appropriations, only $2.8
billion is development assistance going to low-income countries,
and, of that, $700 million really is not development assistance. It is
a subsidy to our farmers.
Now, I am not arguing whether the subsidy should be granted to
the farmers; but I don't think we should kid ourselves that that
1374
$700 million is in the foreign aid appropriation because we are
trying to help poor people in low-income countries.
It is not there for that reason. It is there because we want to sub-
sidize the farmers.
Now, if you take that out, we are left with $2.1 billion and of
that a certain amount is emergency relief to certain special situa-
tions.
Then you finally get down to something on the order of less than
$2 billion out of the $15.5 billion that is development assistance.
I think it is misleading and a gross distortion of what we are
doing to lead the American people to believe that we have a pro-
gram of development assistance.
We do not.
I would be very happy to take your questions, sir.
[Mr. McNamara's prepared statement follows:]
1375
U. S. Foreign Assistance Policy
A Statement by Robert S. McNamara
To The Senate Sub-Committee
On International Economic Policy ·
Mr. Chairman, Senators, Ladies and Gentlemen
I come before you as a concerned American.' My concern stems
from my belief that the United States has an important role to
play in the development of the Third World and that our preoccupation
with short-term problems affecting limited areas of that world is
taking undue precedence over our Nation's long-term economic,
political, and security interests.
One sees this trend most
clearly in the foreign aid appropriations budget, where there has
been a clear shift in the balance towards security assistance and
away from economic development assistance, an action which I con-
·sider to be short-sighted and regrettable.
The most serious abrogation of U.S. leadership is occurring
with respect to the low-income developing countries.
This group
of the world's poorest nations, those with incomes per head below
$410, includes more than half of the world's population and 80
per cent of the world's approximately one billion people living
in "absolute poverty" --literally on the margin of life.
Most
1376
of these countries are in Sub-Saharan Africa, where annual real
per capita growth fell by an average of almost one percent in the
1970s and by more than two percent so far in the 1980s.
At present, these countries rely on "official development
assistance" 1/ for 80 percent of their external capital.
Yet
it wasn't that long ago that countries like Korea, Indonesia,
and Turkey were highly dependent on concessional flows, much of
it provided by the International Development Association (IDA),
but since then they have become significant borrowers from U.S.
banks and important trading partners of the United States.
Many
of the low-income LDCs are still exporters of primary.products,
but gradually, through their own efforts and with outside help,
they will be drawn more fully into the world's trade and financial
system.
As the economic leaders of the free world, this process is
very much in our national self-interest.
This process of eventual integration is nowhere more clearly
seen than in the case of the People's Republic of China, a country
of vast resources and potential.
China's membership in the IMF
and The World Bank was reestablished recently amid expectations
that China could be given assistance in developing its resources,
reforming its policies, and establishing the basis for a more
vigorous economic relationship with the West.
The
1/ Official Development Assistance (ODA) is defined as grants and
those loans whose degree of concessionality exceeds 25 percent
of the face value of the loan.
1377
efforts of The World Bank Group in China are now just beginning
to take shape, and the IDA lending was to provide the leading edge
of this new relationship.
The position of the U.S. Administration
on funding IDA's Seventh Replenishment places those planned efforts
very much in doubt.
And I needn't point out the obvious strategic
costs of not following through on our new and constructuve relation-
ship with the People's Republic.
I am focussing on IDA for the simple reason that more than
90 percent of its lending is to the low-income countries and because
it has a proven track record of delivering high quality projects.
Objective assessments of this critical arm of The World Bank, such
as that undertaken by the U.S. Treasury in 1981, have concluded
that IDA does its job exceptionally well.
The average rate of return
on its projects is 18 percent, despite the fact that it operates in
the least hospitable environments.
Its project rigor is no different
than that applied on IBRD projects.
It is actively engaged in building
viable institutions and providing sound policy advice in countries
where few donors have a voice.
It is in this context that I am dismayed at the results of the
recently concluded negotiations on IDA's replenishment in which the
actions of the United States resulted in the forced acceptance by
other donors of a replenishment volume for FY85-87 lending which is
25 percent lower in nominal terms, 40 percent lower in real terms,
4
1378
1
and 70 percent lower in real per capita terms than the IDA6 agree-
ment reached in 1979. Despite the urgent pleas of all 32 other
donors, the U.S. position was inflexible.
Because of the burden-
sharing arrangements among donors by which the U.S. took up a 25
percent
share of the total replenishment (despite our much larger
share in donor GNP), the volume was set at $9 billion.
This is a
setback for IDA's borrowers, but much more it is in my view damaging
to U.S. interests as well.
U.S. Interests and the Developing Challenge
Let me share my views with you concerning the development
challenges that are being faced, especially by the poorest nations,
and the interests of the United States in the outcome of that battle.
Developing countries are at the moment caught in the same rapidly
changing economic environment that is producing serious strains in
the industrialized world.
While LDCs are trying to deal with basic
economic bottlenecks in infrastructure, agriculture and human resources,
they are simultaneously being pressed hard to adjust quickly to changes
in energy balances and trade structures, and to deal with the uncer-.
tainties surrounding world growth and the price of borrowed capital.
For middle-income LDCs, those with incomes per capita above $410
and accounting for more than three-quarters of the Third World's output,
progress will in my view depend on the following critical factors:
(6) resumption of world growth; (b) resistance to protectionism in
1379
industrialized nations; (c) continued access to commercial capital; and
(d) greater efficiency of domestic policies.
On the trade side, it is estimated that each one percent in world
growth has been associated with a five percent rise in the volume of
manufactured exports in middle-income oil-importing LDCş.
For this
reason,
the prolonged recession and the resurgence of protectionism
have been very harmful to countries which have pursued the outward-
looking policies which they were universally advised to follow.
LDCS
export volumes fell in the 1980-82 period. Export prices also
plummeted--in fact, commodity prices were lower in real terms than
at any time since World War II--so that developing country purchasing
power shrank.
Recession plus protectionism has proven to be a double-
weighted burden on LDCs in their attempts to undertake adjustment
policies and repay their mounting debts.
Middle-income LDCs which rely heavily on commercial capital are
facing greater obstacles in borrowing funds because of the liquidity
problems of a few key borrowers and the changing regulatory and
banking environment in the U.S.
Many newly industrializing countries.
are caught in a perverse grip--one half of debt service payments are
for interest, yet they cannot export enough to reduce their indebt-
edness.
As a result, on a net transfer basis (disbursements minus
debt service), major borrowers are now net exporters of capital to
the tune of $20 billion in 1982, yet their indebtedness still rises.
1380
A number of key borrowers need sustained adjustment programs
combining net positive flows of resources and enforceable conditions.
These reforms cannot be advanced by private lenders, nor can they be
limited to the short-run, especially as long as world trade volumes are
stagnant.
There is a unique role to be played by the IMF and The
World Bank in this process, but of course they too must be adequately
capitalized to be effective.
In addition, other middle-income countries
are being denied commercial capital because commercial banks want to
restructure their balance sheets and reduce the proportion of their
international lending.
Being creditworthy is no longer a guarantee
of gaining access to capital.
The problem is even more severe in many respects in the low-
income LDCs; these countries depend primarily on official concessional
flows (ODA) and, despite the deteriorating economic environment they
face, this sources of finance has not grown since 1980.
Moreover,
two-thirds of scarce ODA resources provided bilaterally are destined
for middle-income countries.
Put differently, if the ODA provided
by OECD and OPEC countries were allocated only to those in greatest
need, ODA flows to the poorest countries could be tripled without any
budgetary impact on donors.
The lack of resources is particularly acute in the poorest LDCS
because of the very serious obstacles they confront in their battles
against poverty, illiteracy, and premature mortality.
What is very clearly
1381
needed, and this is now widely recognized, are more efficient economic
policies at the sectoral and national level and a clearer system of
incentives for production and saving at the household and firm level.
The fruits of individual labor will be lost if the system of economic
incentives fails and those energies are not harnessed.
Governments
are moving to do so.
While there can be no substitute for self-help,
additional external resources are particularly needed to allow time
for the reform measures to take hold.
The keys to assisting these poorest countries are: (a) sustaining
a flow of external concessional resources in real terms, in the context
of specific development priorities and (b) integrating these flows with
technical assistance and policy advice.
Without a critical mass of
resources and a commitment to see policy reforms through to the end,
these countries will not be able to break the gridlock of poverty
which envelops them.
Low-income LDCs recorded very little progress
in the 1970s, and growth in the 1980s has been considerably bleaker.
Even if trade prospects rebound, it will take years to reverse the
damage of recent years.
Exports must be diversified, public enter-
prices reformed, and savings rates increased.
At the moment, however, even if governments are willing to under-
take the difficult reforms which are required, it is increasingly hard
to secure adequate external financing on appropriate terms.
Advice is of
1382
course always easy to give, but imagine an industrialized country
such as our own being advised to reduce protectionist barriers,
bring the public deficit to balance, reduce the real wage of workers,
shelve subsidies on agricultural production ranging from water use
to price supports, and to accomplish these adjustments in 18 months,
while at the same time remaining in office.
Consider of course that
political structures are far more fragile in developing countries,
so that the price of bread. or of public transport is not merely
a line-item in the budget, but on the margin can determine whether
a family's food budget is met or employment becomes feasible, and
ultimately whether a government remains in power.
Indeed, it is a clear lesson of the post-war period that
political stability does not ensue from military strength, in the
absence of broadly shared economic development.
I believe you will
agree that building up military hardware in LDCs is not a substitute
for building viable economic institutions.
A preoccupation with
security concerns to the detriment of economic concerns will not
prevent the unraveling that is sure to occur if economic conditions
deteriorate too far.
This process, which I fear is well underway,
judging by the frequency of international debt reschedulings and
changes of governments, will be very costly to U.S. economic and
political interests if it continues.
Much has been invested in
and gained from the international trade and financial system and
in its strength lies the best hope for future peace and stability.
1383
I would submit that America's long-term interests are being
served admirably by the multilateral financial institutions.
Multi-
lateral sources of assistance are effective precisely because they
are not spigots which are turned on and off depending on current
foreign policy considerations. Strategic interests, after all,
are essentially long-term. Regional security interests, political
stability, and the development of democratic political values are
not overnight phenomena; they emerge out of long-standing and con-
structive relationships and broad-based economic development.
In
this area, IDA serves the interests of the United States in many parts
of the world, most particularly in Africa.
It is one of the great
ironies of development that critics of IDA should view the institu-
tion as insufficiently responsive to U.S. concerns when the Association
is viewed in the field as promoters of market-based development and
Western economic interests.
The United States was the leader in the establishment of IDA
and has traditionally relied heavily on IDA to deliver resources,
technical assistance, and development advice to the poorest nations.
Yet, despite its strong economic position in the industrialized
world, and the remarkable strength of the dollar, the U.S. has seen
fit to reduce its share in IDA's funding dramatically.
America now
contributes 25 percent of IDA resources despite the fact that the
U.S. produces close to 40 percent of the OECD's output and income.
This retreat from international responsibility is seen in the
1384
aggregate by America's relatively weak performance in measures of
official assistance to GNP, where we rank close to last among our
peers.2) It is all the more vivid, however, with respect to the
poorest nations, which currently receive less than one-tenth of a
penny of each dollar of U.S. output in aid commitments.
Put bluntly,
the U.S. does not have a development assistance program today if by
that term one means a program of economic aid to low-income countries
with the funds distributed on the basis of need and the ability to
use them productively.
While I would be the first to argue that our foreign assistance
budget is inadequate overall-- with respect to total appropriations
it absorbed 1.2 percent in FY84--or compared with our stake in the
global economy, what concerns me even more is the heavy concentration
on security assistance per se and on a few troublespots in particular.
The geographic and functional balances in the proposed FY85 foreign
aid budget have left the United States without a credible assistance
policy towards the low-income developing countries, which, afterall
include 2.2 billion of the world's people.
Let me be specific.
2/ In 1981, the latest year for which data is available, U.S. ODA flows
amounted to 0.27% of GNP compared to 0.38% for the OECD as a whole,
0.42% for Canada, 0.75% for France, 0.48% for Germany, 1.08% for the
Netherlands, and 0.37% for the United Kingdom. In 1949, at the
beginning of the Marshall Plan, when U.S. per capita income in real
terms was less than half of what it is today, U.S. ODA amounted to
2.79% of GNP.
1385
U.S. Foreign Aid Appropriations in FY85
Proposed U.S. foreign aid appropriations in FY85 are roughly
$15.5 billion, of which $9.75 billion would be allocated to security
assistance.
As the table attached to this statement indicates, 91
percent of security assistance is for middle-income countries, and much
of it is concentrated in the Middle East.
This is money spent in
support of today's political interes ts.
Unfortunately, however, no
parallel efforts are being made to address America's problems of
tomorrow.
Military assistance now claims about 40 percent of the inter-
national affairs budget--Category 150 appropriations.
This is
significantly higher than in the past because Foreign Military Sales
(FMS) guarantees have now been shifted from an off-budget item (which
still encumbered U.S. resources) to direct credits and loans.
Taking
this fact into account, it is still clear that the military component
of the budget (including FMS) has increased very rapidly in recent
years--by 60 percent, for example, when comparing FY80/82 data with
FY84/85 figures.
The economic support fund (ESF) as part of the security assis-
tance portion of the budget has also increased--by 75 percent between
FY80 and FY85.
The main beneficiaries of ESF flows are Egypt, Israel,
Turkey, and Central America.
This category of assistance alone now
absorbs 22 percent of appropriations.
84-045 0-84-88
1386
At a glance, it should be seen that the portion of the foreign
aid budget which is allocated in support of immediately perceived
security interests is approximately two-thirds of the total.
Only one-third of appropriations is for "Development Assistance"
relevant for long-term development and, I would argue long-term U.S.
interests,
including food aid, bilateral development aid, and, the
smallest component, multilateral assistance.
Less than half of
"Development Assistance" appropriations proposed for FY85 will be
for low-income LDCS,
Indeed if we exclude food aid, which is frankly a program of
greater interest in U.S. agricúlatural producing states than overseas,
and some other emergency relief programs, the core of the U.S. foreign
assistance policy to the poorest nations is USAID and IDA.
Through
hese programs, the United States will provide only $1.7 billion in
actual development aid to this poorest group of LDCs--11 percent of
total foreign aid appropriations.
In fact, appropriations for IDA, the key institution in channel-
ling assistance to low-income LDCs, would receive an FY85 appropriation
equal to no more than 4.8 percent of total U.S. foreign aid.
I find this
to be totally disproportionate with our vital interests in the countries
of Sub-Saharan Africa, Bangladesh, Burma, Sri Lanka, India, Pakistan, and
China.
Moreover, as I have pointed out, it serves to reduce by
1387
$2.25 billion the amounts that other donors are willing to provide
to the Association for its FY85-87 lending program.
It may be worth
mentioning that the funds which donors commit to IDA are only called
upon as needed to finance disbursements, so that the cash outlays
associated with the FY85-87 appropriations will not occur until the
late 1980s and early 1990s.
Some would have us believe that it is the U.S. Congress that has
lost faith in international financial institutions and development
aid to low-income countries.
I frankly hope that it will be the
Congress that will see fit to shift the balance of our assistance
program so that bilateral aid--primarily security assistance and
financial support of middle-income countries--doesn't claim 92 percent
of monies and multilateral aid--almost totally development assistance
to low-income countries--only 8 percent.
While in a budgetary sense bilateral and multilateral aid may
compete for funds, in an economic sense they can be complementary.
Bilateral aid often aims to shore up economies with infusions of
immediate assistance.
Multilateral aid attempts to develop a country's
long-term productive capacity.
Although it may take a while to emerge,
proposed cutbacks in multilateral aid will weaken institutions in
LDCs and ultimately make bilateral programs more costly and less
effective.
Seen from a different perspective, bilateral aid programs
1388
1
may be initiated or terminated, as they have been in Africa for
example, depending on political exigencies, but development progress
is unlikely to ensue from on-off funding.
It would therefore be a
mistake to underestimate the benefits of multilateral assistance
and to undercapitalize these programs.
What should be done?
My suggestion would be to start with IDA and to move swiftly
to support the IDA7 supplementary arrangements which are being
proposed to prevent a serious drop in IDA's lending program.
The
supplementary arrangements aim to raise $3 billion--the difference
between the $12 billion consensus level reached by 32 donors and
the $9 billion firmly espoused by the Administration and ultimately
accepted by others.
A U.S. contribution of $250 million a year
for FY85, FY86, and FY87 would trigger sufficient additional con-
tributions from others to reach this $3 billion target.
Such action would in the long-run do much more for world security
than a like amount for military sales or security assistance--or even
development assistance to middle-income countries.
It would add three
dollars of assistance for each dollar the U.S. contributed and it would
mean the difference between a stagnant lending program, particularly in
Sub-Saharan Africa, and one which was growing in real terms.
1389
Indeed a U.S. supplemental contribution of $750 million over
three years, such as that proposed by Senator Danforth, would bring
total U.S. contributions up to the levels of past appropriations for
IDA, which were above the $1 billion mark in FY79, FY80, and FY83.
Frankly, I do not believe that it is the Congress which is the major
obstacle to adequate IDA funding levels.
Development is a tenuous and complicated process for which there
are no easy solutions.
For each two steps forward, there is at least
one step backwards.
The most effective approach is to support those
efforts which are successful.
And backing a winner means backing IDA.
America's vital interests are widely believed to be critically
at stake in the Middle East and in Central America.
I would submit
that they are equally critically at stake in the plains of Kenya and
Sudan and in rice paddies of Bangladesh.
A world power must be
faithful to its allies, but a world economic power must also support
the system which spawns new allies.
I urge you to consider seriously
whether the breadth of America's current and future interests are
being served by the U.S. failure to properly support IDA and the
over fifty independent nations and 2.2 billion people it serves.
Thank you.
Washington, D. C.
March 27, 1984
1390
U.S. Foreign Ald Avpropriations by Fiscal Year al
(in adllions of dollars)
Low Income
Countries
FY84 b/
Middle Income
Cantries Total
Low Income
Cauntries
FY85
Middle Income
Cantres Total
FY80
FY82
Security Assistance
Military Assistance /
755
979
90
1,993
2,083
466
5,619
6,085
Econaudc Support Fund
1,972
2,919
401
2,793
3,194
392
3,046
3,438
Other (net)
-72
22
102
102
272
272
Total d/
2,655
3,920
491
4,888
5,379
858
8,937
9,795
Development Assistance
Bilateral Assistance
Developeent Ald
Food Aide
1,856
886
1,991
1,847
1,000.
851
627
1,140
1,010
996
699
1276
972
2,272
1,671
1,637
Multilateral Barks
IDA
Others
1,072
406f/
700
562
869
155
76
224
945
379
690
194
60
292
750
486
Other (net)
287
443
317
513
830
275
814
593 8/
Total
4,507
4,552
2,819
2,963
5,782
2,854
3,414
5,772
TOTAL FOREIGN ATT
7,162
8,472
3,310
7,851
11,161
3,712
12,351
15,567
Memmo Items:
Development Assistance to low income LDCs in FY85 *
$2,854
as % of US Federal Budget
0.29
as % of US GNP
0.07
per capita in US
$11.96
1391
Footnotes
a/ The lo income cantries, defined as those with per capita QNP below $410 in 1981, have
a combined population of 2.2 billion and average GNP is $270 per person. The middle
Income cantries, defined as those with per capita GNP above $410 but below $5,200,
have a combined population of 1.1 billion and average GNP is $1,500 per person.
b/ Includes supplemental requests.
Excludes foreign and litary sales guaranteed by the U.S. Government of $2,380 million in
FY80, $2,923 udllion in FY&2, and $4,400 add llon in FY84.
d/ of this total, $2,977 million is for Egypt and Israel in FY84, and $4,177 mllion in
FY85.
el of this total, $261 odllion is for Egypt in FY84, and $243 million in FY85.
f/ Excludes $830 million in callable capital appropriation.
8/ Includes receipts of $496 million.
Senator MATHIAS. It certainly is not an adequate one, given the
resources of the United States and given the effort that other na-
tions are making.
Mr. McNAMARA. Absolutely. It is a disgrace.
I would like again to allude to one or two comments that I made
in my statement to give them particular emphasis.
I do not believe that the average American understands that in
relation to our national income, we give less in foreign assistance,
including what I would suggest is not really development assist-
ance, we give less than any other major country in the world.
Senator MATHIAS. We have slipped below the Italian contribu-
tions.
Mr. McNAMARA. I think we have.
The Italians had stated that they were embarrassed at how low
their contribution was, and they had determined to increase it. I
believe they have done so, and I believe we now have slipped below
them.
We are way below the average of the OECD nations, and even
further below the levels of such countries as Germany and France.
I was also going to compare what we are doing today with what
we have done in the past.
At the time of the Marshall plan, we provided about 2.49 percent
of our GNP in foreign assistance. Today, we provide about 0.27 per-
cent.
In the intervening 30 years, our GNP, per capita, in real terms,
measured any way you wish-television sets per family, children in
college, meat consumption per family, real income measured any
way you wish-our real income per capita has more than doubled
since the time of the Marshall plan. But our foreign assistance, in
relation to our income, has dropped 90 percent.
It is not correct that we cannot afford additional foreign assist-
ance. It is correct, and I accept the decision of the American
1392
people, that we do not wish to. But I think it is a total distortion to
suggest that we cannot afford it.
We can afford it. But we do not choose to.
I disagree with that decision, but if that is the decision of the
Congress, obviously I accept it.
Senator MATHIAS. Let me ask a question that may not be fair to
you because you will be attacked for having been the head of one of
the great, multilateral, financial institutions for whatever you say.
What about the mix of bilateral and multilateral aid? Take this
not from your perspective as former President of the World Bank,
but from your perspective as a former member of the President's
Cabinet.
Mr. McNAMARA. Mr. Chairman, I have been on both sides of that
battle, and I am not so naive as to believe that foreign offices in
any major country of the world, whether it is the United States or
any other major country, will give up the leverage in support of
foreign policy that is linked to bilateral aid. That is a major reason
for bilateral aid. The reason is not primarily to help poor people in
poor coutnries. The reason for much bilateral aid is to support for-
eign policy. The foreign offices of the major powers are not going to
give up that leverage. I understand that.
But I think you alluded to the fact that in fiscal 1985, the multi-
lateral aid proposed for the Untied States in relation to the total
foreign aid is less than 10 percent. It has never been that low in
the last 30 years, that I can recall.
I do not know of any other major nation in which it is that low
today. I think it is a total distortion and a total imbalance. It is
contrary to our interest.
Multilateral aid can do things that bilateral aid cannot. Bilateral
aid can also do some things that multilateral aid cannot. Bilateral
aid can buy, in the short run-or at least it is thought it can be-
support of foreign policy objectives. This is why foreign ministries
all over the world support it.
Senator MATHIAS. It is really hiring people to do things that we
want done.
Mr. McNAMARA. It is hiring people to do such things as support
your foreign policy. And countries all over the world do it. But no
country does it to the extent we do, that is, 90 or 91 percent of the
foreign aid appropriation going through bilateral channels. It is
contrary to our interest.
Why is it contrary to our interest? It is because the multilateral
institutions, in this instance particularly the World Bank and the
IMF as well, can accomplish things that bilateral aid cannot.
For one thing, it can provide continuity. Bilateral aid is turned
on and off like a spigot. While that may be rationalized in relation
to changes in foreign policy or changes in behavior of nations with
respect to the United States, it cannot be rationalized in relation to
development policy. You cannot advance development efficiently by
turning the aid spigot on and off. That is what we do in bilateral
aid. But we do not do that in multilateral aid. There is a con-
tinuity.
Second, multilateral aid can provide what I will call conditional-
ity, which bilateral aid cannot. Now, conditionality, I know, is a
very controversial subject. But I would submit to you that condi-
1393
tionality is absolutely essential in certain cases. Money should not
be provided from external sources in certain circumstances unless
the recipient behaves in certain ways. It is absurd to pour money
down a drain. Bilateral aid is frequently poured down a drain be-
cause its objective is not development. Rather, its object is support
of foreign policy. And, if it supports the foreign policy, whether it is
wasted or not wasted in terms of development is not an issue. That
is always an issue for multilateral assistance.
Senator MATHIAS. Of course, again there is a myth which I think
is widely prevalent, that development assistance is a form of char-
ity.
You and I are old enough to remember Bert Lahr and the song
he used to sing about doing well by doing good. In large measure,
the United States has done just that, we have done well by doing
good. This is because in helping the lesser developed countries to
develop their economies, we have developed them as markets for
American goods and services.
What has been your experience regarding this?
Mr. McNAMARA. That is exactly my experience, Mr. Chairman.
A moment ago, in your opening statement, you pointed to the in-
crease in our exports to developing countries over the last 10 or 15
years. That has been a major source of employment in this coun-
try, and not just employment, either. Because of the comparative
advantage of certain of these developing countries in producing cer-
tain goods, they can produce them more cheaply than we can, and
we can produce goods that we export to them more cheaply than
they can. The net of this is not only do we increase our employ-
ment in the sense that we are providing for exports that we other-
wise would not have, but, as a nation, we are realizing a real, eco-
nomic advantage from the trade.
So, by helping these developing countries advance, we advance
our own economic welfare, just as we advanced our economic wel-
fare by the Marshall plan and the stimulus it gave to economic
growth in Europe, which was a major source of advance in this
country over the last 30 years.
Senator MATHIAS. And, of course, you build in business for the
future. If you help them to buy an American-made tractor, you are
almost guaranteeing a market for American-made parts, American-
made replacements.
Mr. McNAMARA. Korea was a recipient of development assist-
ance 15 or 20 years ago. That was used to help develop a founda-
tion for economic growth in Korea, which is a major market for ex-
ports of goods from the United States today. We are benefiting by
that action. There is no question about it.
This is just one of 50 examples that could be given.
Senator MATHIAS. Of course, we have some very difficult prob-
lems which we will confront this afternoon and in the next several
days, one of which centers around the Central American issues.
The Kissinger Commission estimated that, from the present time
through the end of the decade, there would be a shortfall in foreign
exchange of about $24 billion in the five Central American repub-
lics, and that capital on this scale would have to move into Central
America from some source, some external source, merely to bring
back their economic activity to the 1978 level. This is not to ad-
1394
vance them into any Elysian Fields of prosperity, but just to hold
them to the 1978 level of economic activity.
Now, that faces us with very difficult tasks of apportionment be-
cause resources are limited.
What we contribute to IDA has to be weighed against what part
of that $24 billion shortfall we are going to contribute. We have
special responsibilities in Central America.
How would you address the apportioning of United States contri-
butions, say, specifically, as we look at the decisions we will have to
make with respect to Central America?
Mr. McNAMARA. Well, only a fool would leap into discussing Cen-
tral America today, Mr. Chairman, and I do not wish to get into
any great detail on it because I am not an expert on it.
However, I was asked by Dr. Kissinger to appear before his Com-
mission with reference to the question you have just raised. I did
not do so because as I stated, I am not an authority on Central
America. He pressed me, however, on my opinion relating to the
general question.
If you wish, I will read the answer that I gave him, and I will
then add a comment to it.
The answer I gave him is in a letter dated September 13, 1983, of
course prepared long before the Commission report came out. I see
that my file copy has September 1984 on it, but it is September 12,
1983. I will read it to you. It is relatively short:
Dear Henry: Upon returning to my office two days ago, I found your letter of
August 18 awaiting me. In it, you asked for my insights on any aspects of your Com-
mission's mandate. Because my knowledge of the problem you are studying is limit-
ed, this reply will be brief.
Perhaps I should explain why it is limited. During my 13 years
at the World Bank, I visited almost all of the 100 developing coun-
tries and most of them several times. In that entire period, I visited
Central America only once. I went to Costa Rica on a visit.
The reason I did not visit the other countries and the reason my
knowledge of the area is limited is, as you will see, I believe those
other countries were mismanaging their economies, their elite were
seeking to maintain their privileged positions, politically and eco-
nomically, and they were not utilizing their resources to advance
the social and economic welfare of the mass of their people.
I believed that, were I to visit those countries, they would em-
brace me literally and figuratively. I'd appear on the front page of
the newspapers in a posture that appeared to be endorsing their
policies, and I was not willing to be used in that way.
Hence, I did not go.
Now, may I continue with the letter as I wrote it to Dr. Kissin-
ger:
In sum, I believe: (1) You were quite correct both in restricting your study to long-
term issues and in broadening its focus beyond Central America.
That was his stated initial objective, I think; for reasons unrelat-
ed to this hearing, it was necessary for him to change that focus.
(2) We greatly overestimate the effect of political instability in Central America
on our security, and we seem unaware of the danger to us of such instability in
Mexico.
(3) For the next decade or two, Mexico's labor force will grow at the highest rate
of any large country in the world. Unless the government-
1395
That is to say, the Mexican Government-
Unless the Mexican Government creates jobs to absorb that labor force, a signifi-
cant part of it will flow across the 2,000 mile border into the United States. Neither
the United States nor Mexico has begun to lay out the political and economic pro-
grams which are necessary to effectively address this problem. Failure to do so car-
ries with it enormous political, economic, and security risks for our country.
If I may interject a comment I read the other day in the New
York Times, the President, even in this restrictive expenditure pro-
gram which he has laid before the Congress, is proposing to in-
crease the border patrol on the Mexican border by a third. I think
that is absurd. It is a total waste.
You cannot keep Mexicans in Mexico if they do not have jobs.
They don't want to live up here. They want to live in Mexico. But
the word to underline is "live." If they can't live there, they will
live up here. And no amount of an increase in border patrol is
going to stop it.
Senator MATHIAS. In addition to that, of course, it arouses a
great deal of antagonism within Mexico. I happened to be in
Mexico City at the time the announcement was made that the
Carter administration was going to increase the length and height
of the fence along the Rio Grande. This aroused a week of very in-
flammatory news reporting in Mexico, understandably inflamma-
tory.
This is just the kind of thing which exacerbates the relationship,
rather than improve it.
Mr. McNAMARA. It is just as absurd to try to increase the height
of the fence or keep people out as it is to increase the border
patrol. If it could not be done in Berlin, it surely cannot be done
over a 2,000-mile border between the United States and Mexico.
Let me resume my letter:
(4) The problem in Central America is essentially economic, social, and political in
origin. It has been exacerbated by, but not caused by, Soviet and Cuban interven-
tion. The solution to the problem requires action by the Central American Govern-
ments in each of these fields. We can assist those governments in implementing
such programs, but we cannot impose them upon their societies. Moreover, the ab-
sorptive capacity of their leaders and their institutions to receive foreign technical
and financial assistance is limited. It should not be overloaded. A Marshall Plan for
Central America is likely to do so.
(5) Because of such capacity limitations, the majority of the countries in Central
America are likely to be unstable for years to come. What we can do is contain the
effects of such instability by: (a) maintaining a unified approach to the problem with
the major countries of the region, particularly Mexico, Venezuela, Colombia, and
Panama-we have not done so; (b) Making clear to the Soviets that we will not
accept their offensive forces in the hemisphere, now or later; (c) Joining with the
Latin American countries in their efforts to normalize relations with Cuba and to
obtain agreements that Cuba will not use one country in the hemisphere as a base
from which to subvert the established government of another country.
(6) We should not use military force in Central America unless we are asked to do
80 by the OAS, and then only if our forces are accompanied by troops of major Latin
American nations.
Now, that was my response to him and it bears on the question
that you asked me, which is, is the financial assistance program
proposed for Central America reasonable in relation to other ele-
ments of the proposed foreign aid program?
I again wish to stress that I am not an expert on either Central
America or, for that matter, on the total foreign aid program. But I
would point out to you that I understand, of the $24 billion that
1396
the Kissinger Commission indicated was required for external fi-
nancial assistance to Central America between now and the end of
the decade, our Government plans in a 5-year period to supply-as
I understand it-about $8 billion. This is roughly $1.8 billion per
year.
There are 20 million people in Central America, I believe. Now,
$1.8 billion divided by 20 million is $90 per capita.
The appropriation request that lies before you includes $750 mil-
lion a year for IDA. That will go to 2.2 billion people. If my multi-
plication is correct, that is on the order of 35 or 40 cents per capita.
I do not believe that is an appropriate relationship-35 to 40 cents
per capita-for 2.2 billion of the poorest people in the world, versus
$90 per capita per year to people in a middle income status, that is
to say, in a country of middle income status, and, as I suggest, with
what I call capacity limitations, to receive and utilize those funds
for solid development purposes.
Senator MATHIAS. That, of course, does raise the question of how
do we deal with the poorest of the poor countries.
Some of your arguments is directed to the fact that foreign aid
dollars are not going to countries that are in the poorest condition.
Now, on the old theory of doing well by doing good, if you assist
the poorest of the poor countries, and I leave aside the moral argu-
ments for doing so for the moment, that will be the longest time
before we see any sort of material return, because their economies
are furthest down the line and they will be a major market for
American goods and services the longest into the future.
What argument can we offer to the American taxpayer who may
be willing to support security assistance, who may be willing to
hire help somewhere in the world, but is not enthusiastic about
providing charity while we have people here who are not adequate-
ly housed, fed, educated, or cared for in other ways?
Mr. McNAMARA. Well, I would give an answer in two parts.
First, I believe, as you have indicated, that there will be growth
in the economies of the poor countries. It occurs, or can occur, at
fairly significant rates. That growth will stimulate exports from
this country and will provide a net benefit to this country.
So, in our own narrow economic interest, I believe I can demon-
strate to one of our citizens who questioned this, that he will be
better off spending these funds for that purpose than if we spent
them either in our private economy or somewhere else in the
public economy in the United States.
Beyond that, I would suggest that if he does not accept that argu-
ment, if he is unwilling to add to the $15.5 billion that is proposed
for foreign aid in order to provide additional assistance to the poor-
est countries, then I would suggest that one should reallocate
within that total.
I will say to you what I said for 7 years as Secretary of Defense:
at the margin-and I am just talking about at the margin now-we
buy more in defense, we buy more in security by transferring a
dollar from security assistance to development assistance. I be-
lieved it then, I said it then, and I believe it now.
If you had to, therefore, I would urge that you reallocate within
the $15.5 billion from security assistance to development assist-
1397
soon.
ance. We will be better off 5 and 10 years from now. We will be
more secure 5 and 10 years from now if one does that.
Senator MATHIAS. I think that may very well be proven all too
One of the interesting features of being in Washington is having
the chance to meet and talk with a constant stream of visitors from
around the world who come here. I recently have picked up a note
of concern about instability in the Third World, instability in the
poorest of the poor countries where, because of the economic condi-
tions that eixst there. This is the kind of unhappy development
that could involve us in very much greater security problems than
would be the case if we were helping more on the economic side.
Mr. McNAMARA. If you think we have instability in Central
America today, you have not seen anything compared to what
there is going to be in some other parts of the world 5 and 10 years
from now if the world continues as it is.
You cannot take people on the margin of existence, as are tens of
millions of people I was going to say hundreds of millions, and I
think that would be a correct statement-such as people in sub-Sa-
haran Africa, and actually reduce their average incomes per capita
for every year without ultimately developing substantial instabil-
ity. And this is virtually what has been going on now for 5 or 10
years. That is predictable.
Senator MATHIAS. You have said 5 to 10 years. One of the knowl-
edgeable visitors that we had recently was saying only months. I
questioned him on that. I asked him if he meant months or years.
He repeated: “I mean months."
Mr. McNAMARA. Well, I could point to coups or attempted coups
in parts of the world that have occurred in the last 12 to 18 months
which, in my opinion, in part, in major part, have been a function
of a lack of economic and social advance, to support your conten-
tion. I could probably predict one or two in the next 12 or 18
months.
But I do not want to exaggerate the situation in the near term.
What I do want to suggest, though, is that there are some very,
very serious problems developing in the Third World that are going
to affect our security in years to come if we continue as we have.
Senator MATHIAS. Before I yield to the Senator from Delaware,
let me ask you two technical questions that draw on your expertise
as President of the World Bank.
First, we occasionally hear or see situations that seem to fall be-
tween the functions of the IMF with its particular short-term reme-
dies and the long-term development programs of the World Bank.
you see the need for any new financial institutions which could,
in some cases, provide a bridge function providing for the short
term emergency type of assistance combined with long-term aid?
Or, is there some way to coordinate the IMF-World Bank function
that would cover that work?
Mr. McNAMARA. I do not see the need for a new institution. I do
believe that the existing two institutions, the IMF and the World
Bank, can, between them, meet the requirements you point to.
They can do it within their structures. They can do it within
their authorities. They cannot do it, at least not for long, unless
they are provided additional financial resources. I was going to say
Do
1398
funds, but "funds" is the wrong term because, in the case of each
of those institutions, they operate substantially without a drain on
the U.S. taxpayer. They do it by utilizing, in a sense, in the case of
the Bank, the borrowing power that they get by having certain of
their securities in effect guaranteed by the U.S. Government.
So, there is no net drain on the taxpayer for that purpose. Nor is
there a drain for many of the IMF purposes.
However, I believe that both of those institutions are going to be
constrained by limited resources in carrying out the functions that
they have the authority to carry out, which would include the func-
tion to which you alluded.
Senator MATHIAS. Well, that leads me to my second question.
You referred to the necessity for having the resources.
During your administration of the World Bank, there was a re-
markable increase in total lending. The growth was really
dramatic.
Is there any end to this? What can the world community the
world financial community, and the world political community look
to as to the requirements of these institutions in the foreseeable
future?
Mr. McNAMARA. The answer is that there is an end. One very
good illustration of what I mean is Japan.
When I went to the Bank on April 1, 1968, Japan was still receiv-
ing financial assistance from the Bank. As I recall, we were still
disbursing on loans previously authorized for projects that had
been approved but not yet fully completed.
Shortly thereafter, as I remember it, sometime in 1970, it ap-
peared to me that, instead of in the future providing financial as-
sistance to Japan, we could expect Japan to loan to the World
Bank funds that the Bank in turn could lend to developing coun-
tries.
I discussed the matter with Finance Minister Fukuda, who later
became Prime Minister. He agreed to my diagnosis. In the inter-
vening 10 or 12 years, Japan has been a major source of funds to
the World Bank.
Now, a number of countries have what I will call “graduated”
from the status of client to donor at the World Bank. I would
expect more and more countries in the world to do that.
However, the financial needs of many of the other countries,
those still in various stages of development-and I would point to
Turkey as an illustration-are likely to increase.
So, to answer your .question specifically, I think in the next 5
years, the IBRD, the hard-loan window of the World Bank, will
need additional financial resources, which, in general, it can
borrow on the capital markets of the world. That is where it ob-
tains the bulk of its funds.
To borrow it will need some additional guarantees from govern-
ments which would not be a drain on the taxpayers of those gov-
ernments.
Now, the International Development Association is in a different
category, that being the soft-loan window of the World Bank lend-
ing to the low-income countries.
There is graduation from that group, too. Many of the countries
that are now borrowing from IBRD and some that will graduate
in
1399
from the IBRD have, in the past 10 or 15 years, been recipients of
IDA funds. They will move out of that category as their incomes
rise, as their ability to borrow on the commercial markets in-
creases.
So, there is a movement out of the IDA recipient category. How-
ever, the countries that remain in that category are going to con-
tinue to need funds and on a large and I think increasing scale for
years
and years to come. This will be a drain on the taxpayer, as it
is this year. The appropriation that lies before you calls for an ap-
propriation of $750 million per year for 3 years for IDA. I hope
that will be raised to $1 billion. If it is, that will trigger an addi-
tional $2.25 billion over that 3 years from other countries.
It is very much in our interest that our additional amount and
the additional $2.25 billion be loaned to those nations so that they
may increase their rate of economic advance with all of the bene-
fits that you have alluded to and I have alluded to, to our country.
But I see that continuing for an extended period.
Senator MATHIAS. Let me yield to the distinguished Senator from
Delaware, Mr. Biden.
Senator BIDEN. Thank you, Mr. Chairman.
Mr. Secretary, it is good to see you again. I apologize for being
late and not hearing all of your testimony.
I would like to pursue a couple of questions along the lines of the
issues you were discussing with Senator Mathias.
Senator Mathias and I, and I think many others in the Senate,
agree with you about the importance of the ecomomic assistance
and, that, in fact, it could be translated in many instances into se-
curity assistance.
Let me walk you through what I get asked by constituents. It
would be helpful to have this on the record.
First of all, a constant refrain that I hear, even from our col-
leagues, is that the United States is doing much more than other
developed countries and it is about time for them to ante up.
Where are the Japenese who are beating us up and about the head
economically? Where are the Germans? Where are the British?
Where are the Saudis? Where are the Arab sheikdoms? Where do
they all come into the picture? Why don't they do more? We could
do more if they would do more.
I would like you to respond to that assertion for the record.
Mr. McNAMARA. Let me just refresh my memory on the exact
figures and then I will give them to you.
Pause.
Senator MATHIAS. It is reassuring to me to know that you have
to refresh your memory from time to time.
Mr. MCNAMARA. Well, I am not as acquainted with this matter
these days as I was 2 or 3 years ago.
Senator BIDEN. I am not so much looking for the specific num-
bers as I am for the principles.
Mr. McNAMARA. But the specifics are of some interest and I will
just take a moment.
One way of looking at it is that we provide about 25 percent of
IDA's resources, although our gross national product is 40 percent
of the OECD's output and incomethe Europeans, North Ameri-
cans, and Japanese.
1400
So, we are providing far less than you would have thought we
would provide in relation to our income. That is one way of looking
at it.
In addition, using 1981, which is the latest year for which data
are available-and I think our situation would appear even worse
in 1984–in 1981, the U.S. official development assistance, as it is
known, which is the category of concessionary aid, amounted to
0.27 percent of gross national product. That was one-third less in
relation to gross national product than the average for the OECD
nations, the European, North American, and Japanese nations.
In comparison to Canada, we had 0.27 percent and they had 0.42
percent. That is fifteen twenty-sevenths more, or 50 percent more
than ours in relation to income.
Now France had 0.75 percent-approximately 300 percent of ours
in relation to income.
Germany had 0.48 percent-what is that, 80 percent more than
we did in relation to income.
And so it goes, down the line.
With the single exception of Italy, I think, in 1981, we are the
lowest in relation to income of any nation in Western Europe,
North America, or Japan, in terms of foreign assistance. And, since
1981, Italy has said that they are embarrassed by their position
against their peers and they have increased their program accord-
ingly.
Senator BIDEN. How do you respond to the next point made,
which is that we, in fact, are spending so much money on our mili-
tary to protect the Western World and also on military assistance
that we are doing much more than our part, even when you com-
bine the two, military and economic, than are the remainder of the
OECD nations in terms of total security requirements and needs?
In other words, sure we do less per capita and less as a percentage
of GNP than the Germans, but we do a great deal more for the
Western World so that it would make sense for them to pick up the
slack on the economic front because they do not move forward suf-
ficiently on the military front.
Mr. McNAMARA. Well, the figures are not quite as disparate as
some would indicate, Germany versus the United States in defense
expenditures as a percent of GNP.
If I may disgress for just a moment, I would argue that I think
we could maintain our security with a lesser rate of increase in our
defense budget. I believe that security is the first priority of any
President. I believe we can afford whatever we need for security. I
really mean that. I understand that it is controversial to say it, but
I believe it.
But I do not believe that we need the defense budget that has
been proposed to the Congress
Senator BIDEN. But all of you "former Secretaries of HEW think
that way.” [General laughter.]
Mr. MCNAMARA. And, we “former Secretaries of HEW” along
with some former Chiefs of Naval Operations, who have endorsed
the statement I just made, feel very strongly on this.
Senator BIDEN. And, by the way, there are a number of people
within the present military establishment who, if they could, would
endorse that statement.
1401
Mr. McNAMARA. I know that, and I hope the Congress will recog-
nize that and act accordingly.
But, to go back to your point, I think that we must recognize
that we have security interests that are much broader than those
of the Federal Republic of Germany. We are a Pacific power as
well as an Atlantic power. It is entirely appropriate, then, I think,
that we should be spending more on defense than Germany.
Now, having said that, let me go back and say that as far as the
foreign aid appropriations request that lies before you is concerned,
as I mentioned a moment ago, it totals some $15.5 billion, of which
$9.8 billion is for security assistance.
I said when I was Secretary with respect to a somewhat similar
question and similar figures-and I would repeat to you today that
I believe at the margin we buy more for security by transferring $1
out of security assistance, assuming, for the minute that you can't
increase the total, by transferring $1 out of security assistance and
moving it to development assistance.
Senator BIDEN. Well, that being the case, do you think we should
have this assistance a part of the Defense budget?
Mr. McNAMARA. I do not. Oh, I'm sorry, I thought you were
going to say a part of foreign aid.
I believe the security assistance should be part of the Defense
budget. I argued that point in the mid-1960's. There was a meeting
at the White House one night attended by leading Members of both
parties of the House and Senate at which this subject was brought
up. It was the Congress that said no, no, for goodness sake, do not
transfer security assistance out of foreign aid. We won't be able to
pass the rest of foreign aid. So, let's confuse the public-of course,
they did not use that term and I should not attribute that to the
Congress-but they said let's continue to include security assist-
ance in foreign aid appropriations and thereby gain support for the
nonsecurity element.
Senator MATHIAS. Would you call that pusillanimous pussyfoot-
ing?
Mr. McNAMARA. I sure as heck would.
Senator BIDEN. Well, I won't touch that one. I will let it go. [Gen-
eral laughter.]
With regard to the security assistance aspect of the aid budget, if
you are correct, and I believe you are, don't we get, to quote a
former Secretary of another department, more bang for the buck if
it is bilateral rather than multilateral?
Mr. McNAMARA. No; I alluded to that a moment ago. I men-
tioned that I am not so naive as not to understand why most na-
tions have a higher percentage of their foreign assistance flowing
through bilateral channels than multilateral channels. It is a
means of what I will call buying support for their foreign policy.
This is well recognized around the world.
I do not believe that the real world is going to change tomorrow,
and therefore I would not think of suggesting that most of the de-
velopment assistance of the United States should flow through
multilateral channels. It is not going to and so I am not suggesting
that.
But I do suggest that the present split between bilateral and
multilateral assistance is contrary to U.S. interests. It is on the
34-045 0-84-89
1402
order of 91-percent proposed to flow through the bilateral channels,
and 9 percent through the multilateral channel. I think that is less
than optimum.
I think our national interests would be served by shifting a por-
tion from bilateral to multilateral.
My recollection isand you can check this, but I think I am cor-
rect-that most OECD nations have at least 20 percent going
through multilateral channels. The administration is proposing
something on the order of 9 percent.
Senator BIDEN. Well, I understand your statement, but why do
you make that statement? I mean, so what?
Mr. McNAMARA. Because the mutilateral agencies can provide
development assistance with a greater benefit than the bilateral
agencies can. I mentioned two specific indications of that. One is
continuity.
The bilateral assistance is turned on and off as it serves our for-
eign policy purposes, which change each year, or which change fre-
quently. The multilateral assistance is provided on a continuous
basis, subject to the second point, which is that the mutilateral as-
sistance carries a conditionality that the bilateral assistance nor-
mally does not.
Because you are trying to achieve a foreign policy objective, bi-
lateral assistance does not place emphasis on insisting that the
managers of the macroeconomic policies of the developing countries
adjust those policies to what I will call the optimum. But the multi-
lateral assistance does carry such conditions and therefore is a
much more efficient way of applying external financial resources
for development purposes.
Senator BIDEN. In the poorest of the poor countries, on which you
have spent some time and about which you have been speaking to
us and the world about for a long time, in those poorest countries-
and this is going to sound like a simplistic question, but I think it
is an important one-how much is necessary?
Let me put it in another way.
You will hear the argument that the fact of the matter is things
are so bad, are so far gone in some of the poorest of the poor coun-
tries, that what we are doing, although it is morally justifiable and
is from a humanitarian standpoint very useful, in the scope of pro-
viding that security assistance aspect of it, that is, somehow you
are going to bring that nation along, that poorest of the poor, so
that there is not the ferment of revolution, so that there is not the
anti-Western bias, so that there is not the opportunity for the god-
less Communists to come in and take over, and so on, that, in fact,
it is so small, relative to the need, that it really does not make any
difference on that score, so it is better to send guns.
Mr. McNAMARA. Well, let me refer to two facts in refutation of
that.
The U.S. Treasury study made in 1981 or 1982 by the present ad-
ministration of the International Development Association and its
activities showed that, on average, the rate of return per year in
the poorer countries of International Development Association
loans was on the order of 18 percent.
Senator BIDEN. What do we mean by the "rate of return?”
1403
Mr. McNAMARA. We mean the contribution to the economy
above repayment of capital. We mean just exactly what an interest
rate in this country is. Today the prime interest rate is 11.5 per-
cent; that is the rate of return on your deposit in a bank, essential-
ly. The comparable rate on an investment, the average investment
by IDA in agriculture or what have you--
Senator BIDEN. To the economy of that country.
Mr. McNAMARA [continuing]. To the economy of that country is
18 percent. This is a very high rate of return.
It simply shows that there are many, many opportunities for effi-
cient utilization of capital.
Senator BIDEN. Again, I am not suggesting that there are not
and that the rate of return is not high.
Mr. McNAMARA. Oh, I realize that. But that is one point. It is
not correct to say that this is a bottomless pit, you are throwing
good money after bad, there is no way to invest capital with advan-
tage in the poor countries-all of this is not correct, evidence the
U.S. Treasury study.
The second point, that it is a drop in the ocean and does not ac-
complish much, that those countries are beyond the ability to ad-
vance and we should not be wasting our money trying to even
though on a particular project you get a high rate of return, that
in general it does not contribute anything and they can't move for-
ward, here, too, there is evidence to the contrary.
Over 10 years between 1967 and 1968 on the one hand and 1977
and 1978 on the other, over a decade, the cereal-grain production in
India, which is the foundation of their economy and the foundation
of economic and social advance in that country, the cereal-grain
production, adjusted for weather differences so that it is on a com-
parable basis, increased 50 percent.
Now, that is a tremendous accomplishment. It was not by any
means all the result of external aid. I do not want to imply that.
But external aid contributed to that, helped make that possible.
I do not know anything more important that one could have
done in India at that time than to have increased the food produc-
tion, and that is a tremendous advance and it is representative of
what can be accomplished in other countries with external assist-
ance.
Senator BIDEN. Let me be much more specific. Let us assume
that the grain needs for India, for the sake of simplicity, are 100
million metric tons, and in fact they were producing only 5 million
metric tons. We move in and through the aid components, it in-
creases 50 percent, so you now have 7.5 million metric tons, but
their needs are 100 million metric tons.
So although you show a 50-percent increase, the 50-percent in-
crease does not have any fundamental impact upon that society. It
does in fact have humanitarian aspects to it. There are 2.5 percent
more people, theoretically, who will be able to have advantages and
so forth. But it is not going to alter the societal difficulties as a
consequence of bringing more into balance the economic needs of
that community.
Therefore, why not, Senator, send the outfit in power more guns
for the same amount of money to make sure that they can keep
those godless Communists from coming up over the hill?
1404
Mr. McNAMARA. Well sending them the guns is one sure way, in
my opinion, to cause disorder, which will have a ripple effect and
ultimately be disadvantageous to us and weaken our security,
rather than strengthen it.
Second, the increase of 50 percent in cereal-grain production,
even though it may not bring their food consumption up to our
level, which I would say is excessive, nonetheless, is likely over
time and in association with other actions, is likely to lead to a
higher probability of political stability in the area; and in addition,
it carries with it tremendous humanitarian advances.
Let me just mention one brief illustration of that. The last time I
was in West Bengal, which is a major area of India, I visited a
World Bank project to see whether we were or were not accom-
plishing our purpose. In that particular case we were providing
technical assistance, financing, I will call it agricultural extension
services, to very, very small farmers, farming about 214 acres, to
help them increase their output.
In this particular case the farmer, driving a bullock, had two as-
sociates with him who were landless people. They neither owned
nor leased land. He was a tenant farmer, but they normally were
totally unemployed. They were then working for him.
I said: “Why are they working for you? You have got such a
small piece of land." He said: "I have been shown how to produce
two crops a year instead of one. In order to do so, I have got to
accelerate my harvesting, accelerate my sowing. I need these two
landless people to help me during this time."
I turned to one of them and said: "What has this meant to you?”
All of this is through interpreters, of course. And they said to me,
and this is the point: "It means more days during the year when
we can eat two meals instead of one." About 200 days when they
could eat two meals, instead of 100 days previously.
Now, I do not think we should be ashamed of having advanced
human beings the ability to eat two meals for 100 additional days.
Senator BIDEN. Neither do I. And I would like to conclude with a
statement and my last question. The statement is that I disagree
with the view that is held by many of my colleagues, that the
American people are unwilling to increase the amount of money
spent on economic assistance.
Quite frankly, I would argue that their greatest repulsion is over
the military assistance that they do not seem to understand. If you
in fact were able to convince the American people-and I do not
mean you personally; I mean we—were able to convince the Ameri-
can people that the billion dollars, the $10 billion or $20 billion in
total aid, was going to go into the bellies of those children or of
that family or of those individuals, to get them from one meal a
day to two meals a day, in fact I believe there would be broad sup-
port for it in this country.
I am one of those people, and maybe it is part of a generational
problem that I have--but I am one of those people who believe that
the folks have not-and I emphasize, have not-lost their hearts or
their compassion.
They have lost faith in the delivery system. That is our Govern-
ment. And that is not a political comment, Democratic or Republi-
can. And I believe they have grave doubts about the absorptive ca-
1405
pacity, in the sense that they are not at all sure it gets from the
military or political apparatus in control down to the belly of the
children.
So I think if I could wave a magic wand and make clear to the
folks of this country one concept, one notion, it would be that the
economic aid, the IDA aid, and aid of the nature we are talking
about actually got-if I could make it clear to them, make sure
they believe that it really got to the point you have just illustrated
with that one case, then I believe we would have little or no prob-
lem, even in tough economic times in this country, doing that. I
really believe that.
Mr. McNAMARA. I totally agree with you, and I have talked to a
lot of Americans.
Senator BIDEN. I have one more question. I think I know the
answer, but I think it is important to get it on the record.
The traditional criteria for determining IDA eligibility has been
per capita GNP. Secretary Regan has suggested that "the general
credit standing of the nation” needs to be taken into account as
well.
Would you comment on whether or not you agree or disagree
with that statement, and if so in either case why?
Mr. McNAMARA. I totally agree with it. But I totally disagree
with the way in which he applied it. I think he said that in connec-
tion with suggesting it was not necessary for the United States to
support the level of IDA that every one of the other donors, some
30 other nations, were willing to support, that is, a total of $12 bil-
lion for 3 years.
Regan was suggesting that that was not necessary, that it should
be cut by the U.S. unilateral action alone, which it finally was,
from $12 billion to $9 billion, the reason being that one should rec-
ognize that China and India did not need such concessional assist-
ance, that they should borrow all of their external financing re-
quirements on the open market.
He should have talked to Walter Wriston of the Citicorp and
talked to San Armacost of Bank of America, and they would have
told him that, sure, China and India can borrow some on the open
market, we hope they will. The World Bank is assisting them to do
But a commercial banker would be out of his mind to finance all
of the external financing requirements of India and China through
commercial banking sources. He ought to be removed if he did.
Senator BIDEN. Thank you, Mr. Secretary.
And thank you, Mr. Chairman, for allowing me so much time.
Senator MATHIAS. Thank you, Senator Biden.
I have just one, perhaps two, very brief final questions. You men-
tioned with Senator Biden the question of the impact of this pro-
gram on India. India will be the principal sufferer by the result of
the reduction in IDA replenishment.
Can India go to the commercial market if it has need for further
borrowing?
Mr. McNAMARA. May I, before I answer the question directly,
say that I believe you are correct in implying that India will be a
principal sufferer. I think there are other very important suffer-
ers-China, sub-Saharan Africa, and Bangladesh.
SO.
1
1406
Senator MATHIAS. I was going to get to China in a minute.
Mr. McNAMARA. I am sorry, Mr. Chairman.
Well, I would simply point out that this reduction of $3 billion in
the level that other nations would have supported is going to have
very, very serious effects on many countries, including India.
Now, could India borrow its financial requirements on the com-
mercial markets? (a) It could not; and (b) it should not. I think
were India to try to finance its requirements for external funds
solely through the commercial markets and were it to continue to
do that for any considerable time, it would not be able to service
that debt when it came due 10 to 20 years from now.
Senator MATHIAS. You are just borrowing trouble as well as
money?
Mr. McNAMARA. Yes, exactly. My God, we want our banks to be
prudently managed. At least I do and I am sure you do. And I do
not think we should be encouraging the commercial markets to un-
dertake obligations that are not likely to be serviced.
And India and China, if we are looking ahead 10 and 20 years-
and that is the period we should be looking at for debt service-
India and China are going to need such large quantities of finan-
cial assistance in the next decade or two-as we did in the 19th
century—to advance their economies that they should not be ob-
taining them all on market terms.
Senator MATHIAS. You have almost answered my final question,
because I was going to say, since we were introducing China as a
new borrowing customer, what would be the impact. But as you
just pointed out, it is to further constrict the available resources.
Mr. McNAMARA. Yes; I think that some who have testified before
you, if I understand their testimony correctly, have pointed out,
and I think it is true, that China's reserves today, China's trade
balance today, is such that the Chinese are not in the same dire
financial straits as many other developing countries.
But that is because China has not yet begun to utilize external
financing in a way that it is in our interest and theirs to encourage
them to do in the next decade or two. When they begin to do that,
if they obtain that all through the commercial markets, they would
build up a debt that could not possibly be serviced from the likely
foreign exchange receipts of that country 10 or 20 years from now.
Senator MATHIAS. Well, we have drawn upon your knowledge
and experience to the great benefit of this committee, Mr. Secre-
tary. We are very grateful to you for being here.
Mr. McNAMARA. Mr. Chairman, it was an honor and a pleasure
to appear before you again.
Senator MATHIAS. You read into the record a large part of a copy
of your letter to Secretary Kissinger, but I would suggest, with
your permission, that we put the original text in as part of the
record.
Mr. McNAMARA. Yes, by all means do so. Let me correct a typo-
graphical error in the copy that I have with me today, which shows
the date as September 1984. Obviously, it was September 1983.
Senator MATHIAS. We will see that the correct date appears.
The letter referred to follows:]
1407
WASHINGTON, D.C., September 12, 1983.
Dr. HENRY A. KISSINGER,
National Bipartisan Commission on Central America, Washington, D.C.
DEAR HENRY: Upon returning to my office two days ago I found your letter of
August 18th awaiting me. In it you asked for my "insights” on any aspects of your
Commission's Mandate. Because my knowledge of the problem you are studying is
limited, this reply will be brief:
In sum, I believe:
1. You are quite correct both in restricting your study to long-term issues and in
broadening its focus beyond Cental America.
2. We greatly over-estimate the effect of political instability in Central America
on our security, and we seem unaware of the danger to us of such instability in
Mexico.
3. For the next decade or two, Mexico's labor force will grow at the highest rate of
any large country in the world. Unless the government creates jobs to absorb that
labor force, a significant part of it will flow across the 2,000 mile border into the
United States. Neither the United States nor Mexico has begun to lay out the politi-
cal and economic programs which are necessary to effectively address this problem.
Failure to do so carries with it enormous political, economic, and security risks for
our country.
4. The problem in Central America is essentially economic, social, and political in
origin. It has been exacerbated by, but not caused by, Soviet and Cuban interven-
tion. The solution to the problem requires action by the Central American govern-
ments in each of these fields.
We can assist the governments in implementing such programs, but we can not
impose them upon their societies. Moreover, the "absorptive” capacity of their lead-
ers and their institutions to receive foreign technical and financial assistance is lim-
ited. It should not be over-loaded. A “Marshall Plan" for Central America is likely
to do so.
5. Because of such "capacity limitations”, the majority of the countries in Central
America are likely to be unstable for years to come. What we can do is contain the
effects of such instability by:
(a) Maintaining a unified approach to the problem with the major countries of the
Region-particularly Mexico, Venezuela, Columbia and Panama (we have not done
so).
(b) Making clear to the Soviets we will not accept their “offensive” forces in the
hemisphere, now or later.
(c) Joining with the Latin American countries in their efforts to normalize rela-
tions with Cuba, and to obtain agreement that Cuba will not use one country in the
hemisphere as a base from which to subvert the established government of another
country.
6. We should not use military force in Central America unless we are asked to do
so by the OAS, and then only if our forces are accompanied by troops of major Latin
American nations.
I will be happy to try to answer any questions which your staff wishes to put to
me.
With best wishes.
Sincerely,
ROBERT S. McNAMARA.
Senator MATHIAS. Let me say in that connection that if you have
any further thought or ideas that you would like to contribute to
the record, we will keep it open for a reasonable time.
Mr. McNAMARA. Thank you, but I think I will not have, sir. It
was a great pleasure to be here with you. Thank you.
Senator MATHIAS. Our next witness is Mr. C. Fred Bergsten, di-
rector of the Institute for International Economics, and a veteran in
appearing before this committee, which he has always illuminated.
1408
STATEMENT OF HON. C. FRED BERGSTEN, DIRECTOR, INSTITUTE
FOR INTERNATIONAL ECONOMICS, WASHINGTON, D.C.
Mr. BERGSTEN. Mr. Chairman, as always, it is a pleasure to be
here. I have prepared a succinct statement, and will briefly sum-
marize it and then see what you would like to pursue.
In my statement I make four basic points, which add up to sug-
gesting that the proposed IDA VII replenishment is inadequate.
Therefore, it is an absolutely minimum requirement that the Con-
gress support the proposed U.S. contribution, but that the Congress
in addition take any steps that you might find appropriate and fea-
sible to raise the amount, or at least leave the door open for in-
creases in the future if ideas regarding that subject would change
in various quarters.
In addressing these issues, I will try to draw on the experience I
had in a previous incarnation as Assistant Secretary of the Treas-
ury for International Affairs from 1977 to early 1981, when I was
responsible for concluding the IDA V negotiation and carrying out
the totality of the IDA VI negotiation.
The first point, Mr. Chairman, is simply to stress that the pro-
posed replenishment is a very substantial reduction in the most im-
portant program of concessional assistance in the world. It is a cut
of about 50 percent in real terms from the negotiated level of IDA
VI, which was no profligate expansion of lending but did envisage
modest positive growth of about 4 to 5 percent annually in IDA
lending.
By contrast, what we are talking about here would be a 50-per-
cent cut in real terms from the negotiated level. As it turned out,
the actual level of lending by IDA during the IDA VI period was
substantially less than negotiated, for two reasons, both attributa-
ble to the United States.
The first, of course, was the stretchout from 3 to at least 4 years
in the fulfillment of the U.S. pledge. The second was the overvalu-
ation of the dollar in the exchange market, which you and I have
talked about in other contexts, but here had the effect of sharply
reducing the value of the contribution of other countries. The
deutschmark, yen, et cetera, contributions of other countries went
much less far in dollar terms than had been envisaged at the time
the replenishment was negotiated.
The result was that the actual IDA VI package turned out to be
about 20 percent less than had been thought to be negotiated, at-
tributable mainly to the United States. The proposed IDA VI pack-
age would represent a further cut of 20 percent, extending, as a
result of U.S. action, the steady reduction in IDA lending program.
Just to cut it one other way, in terms of availability of IDA funds
in terms of the per capita position of the recipient countries, now
that China has been added to the rolls, the reduction actually
amounts to about 60 percent from the actual IDA VI level. Now,
that is a little misleading. I do not want to overstate it, because
China of course adds another billion people to the rolls.
But if one views IDA as trying to meet in some sense the per
capita needs of its recipient countries, this is further dramatization
of how sharp this proposed cutback really is. And so on whatever
1
1409
basis you want to use, it is very clear that this replenishment will
force the institution to cut its program level very sharply.
Now, the second point is to ask, is that justified? If the world
economy were booming and in exceptionally favorable shape, one
might say—indeed, you implied it in a question to Secretary McNa-
mara-is it not time to turn the tide, perhaps begin cutting back
on concessional assistance? And so my second question would be: Is
the state of the world economy one which would justify, or even
call for, a cutback in concessional assistance?
Unfortunately, of course, the facts are to the contrary. The devel-
oping countries, particularly the poorest of them, who are served
by IDA, are still reeling from the deepest world recession since the
1930's and associated events. Their per capita growth rates have
plummeted, indeed have remained negative in Africa for almost a
decade and a half, and they have become negative throughout our
own hemisphere in Latin America.
The terms of trade of the developing countries, depending on the
region, have declined by anywhere from 20 to 40 percent over the
past 3 to 5 years. Alternative sources of funding have dried up just
when they are needed most because of the impact of the debt crisis
on bank lending, and the impact of global recession on budgets and
hence concessional assistance in many industrial countries.
Rising protectionism, even here in the United States, where un-
employment has declined sharply and the economy is growing rap-
idly, limits the scope for export expansion as an alternative means
of the developing countries' earning critically required foreign ex-
change.
Again, the overvaluation of the dollar continues to depress com-
modity markets for many LDC exports, impair their competitive
position, increase the real cost of their debt burdens, and reduce
the real value of much of their foreign assistance.
So I would argue that the world situation, if anything, calls for
more concessional assistance rather than these dramatic cuts. Now,
in response to such reasoning it is sometimes argued that IDA
really does not have anything to do with the global economic crisis
because, after all, it provides long-term development help rather
than short-run balance of payments assistance, and because the big
debtor countries—Brazil, Mexico, Yugoslavia, and the like-do not
receive IDA funds anyway.
I think both points miss the basic nature of the crisis and the
role of IDA in contributing to its solution. It is, of course, true that
IDA funds long-term projects. However, it is now clear that the
global economic problem is a long-term problem.
We have come through, perhaps, the most critical crisis stage of
the debt problem, but it is very clear that we have now entered
into a second stage of that crisis which focuses primarily on finding
longer run sources of finance for the developing countries to re-
place at least some of the substantial cutback in the growth of
lending by commercial banks.
So normal IDA funding is quite relevant in this context I do be-
lieve, parenthetically, it would be desirable to speed up IDA's dis-
bursements, both by increasing its total level of activity and by a
greater use of nonproject lending, so that it could contribute more
1410
rapidly and more extensively to dealing with the immediate foreign
exchange shortages of developing countries.
Even more importantly, however, one has to look at IDA in the
broader context of world financial flows. You or Senator Biden
asked Secretary McNamara about who were the big losers from
this cutback in IDA program level, and focused on the direct losers,
the big IDA borrowers: India, China, the sub-Saharan African
countries.
However, one has to look at the picture in what economists call a
general equilibrium context, and the losers go well beyond the
direct IDA recipients themselves, for the following reason. Most ob-
servers agree that the current or recent level of IDA credits to the
African countries should be maintained or even increased. Hence,
the cutback in IDA lending would fall on India, China, and perhaps
a few other borrowers.
Now, one of the notions for easing the burden on those countries,
in addition to pushing them into the private market, which I think
Secretary McNamara referred to quite effectively, is to give them
more money from the World Bank itself. You graduate them from
IDA up to World Bank. However, nobody has increased-and
nobody has proposed an increase in-World Bank funding.
So when you cut back IDA and try to move some of the previous
IDA borrowers up to the World Bank without increasing World
Bank lending, you are obviously saying somebody who has been
getting World Bank lending will get less. Now, who does that turn
out to be? It turns out to be the biggest World Bank borrowers,
who are the biggest debtor countries now plaguing the health of
the world economy as a whole-Brazil, Mexico, Yugoslavia, Argen-
tina, and a few others.
So the net effect of cutting IDA is that the very debtor countries
who are part of today's most pressing global economic and finan-
cial problem either have to look for yet more bank credit, which is
unlikely to be available to them since that's the nub of the prob-
lem, or depress their economies further to reduce even more their
need for external funds, thereby enhancing the risks of political in-
stability that you were discussing earlier.
The net effect of cutting IDA is thus not just directly felt by IDA
countries, but will deepen the global debt crisis modestly but seri-
ously. The amounts involved approximate $1 billion a year, adding
something on that order to an international financial problem
which is already likely to remain difficult for years to come. So one
must see it in the broader context and realize that there are effects
going beyond the debtor countries, the IDA recipient countries
themselves.
In short, the IDA VII package has been constructed in a manner
that can only intensify the problems of the world economy. It is ex-
tremely shortsighted for the United States, I think, in its own eco-
nomic and financial, let alone foreign policy and humanitarian, in-
terests to foster such an outcome.
I am a strong supporter of the concept of graduation, as you
know, Mr. Chairman. Indeed, I initiated much of the current U.S.
policy based on that concept during my tenure at Treasury. But
the timing of implementing that concept has to be calibrated to the
1411
realities of the world economy, and that has patently not been done
in the case before us.
The final question: If there has been a cutback that is not called
for under an objective reading of the circumstances, who is to
blame? Unfortunately, I am afraid the responsibility must be
placed almost entirely on the U.S. administration.
Every other country, every other country, wanted to at least
maintain the nominal IDA VI level of $12 billion. Many others
would have gone to $15 billion or $16 billion. And to stay even with
IDA VI in terms of the per capita incomes of recipients, if China
were included, the replenishment would have had to exceed $20 bil-
lion. In preparing for these hearings, I went back and looked at my
notes from the IDA VI negotiation. That reminded me that many
donors wanted to go to $15 billion even then, which was 3 or 4
years ago.
Now, a number of other donor countries have indeed indicated
an intention to supplement the negotiated IDA VII package with
voluntary contributions pro-rated against the national $12 billion
total. If they do so, of course, they are likely to do it via some spe-
cial fund that would prohibit procurement from nonparticipants,
notably the United States, and thus cost us business, like the esti-
mated half-billion dollars of exports we have already lost from the
delay in fulfilling the U.S. pledge to IDA VI.
To all of this some may raise the question that Senator Biden
did. Is it not right for the United States to reduce its share to IDA?
Is not the United States doing too much?
Well, again, when I was at Treasury I negotiated a cut in the
U.S. share from about 31 percent in IDA V to 27 percent in IDA
VI. But I would suggest that the process has now gone much too
far. During the IDA VI period, the United States contributed in re-
ality only 15 percent because of the 1-year stretchout, while other
countries went ahead. And the real U.S. share during the IDA VII
period would clearly be less than the negotiated 25 percent to the
extent that other countries come in with supplementary nonnego-
tiated contributions.
These numbers simply do not fit very well with our share of the
combined GNP's of the donor countries, which, depending on how
you calculate it, ranges between 30 and 40 percent. Particularly at
a time when the United States is the only industrial country expe-
riencing rapid economic growth and falling unemployment, and is
a net importer of huge amounts of money from the rest of the
world to finance our massive current account and budget deficits, it
really is not very seemly for us to be cutting back.
I would stress that last point, Mr. Chairman. As you know, again
from the broader world economic and financial context, the United
States is not providing finance to the rest of the world right now.
Whatever the numbers, the United States is draining finance from
the rest of the world.
Senator MATHIAS. We are borrowers.
Mr. BERGSTEN. Yes, we are the biggest borrower the world has
ever seen. I am sometimes amused when some of your fellow Mem-
bers of the Congress or spokesmen for the administration chastise
other countries for their profligate policies and excessive reliance
1412
on external finance. The United States today is the most extreme
case of that in human history.
We are importing this year somewhere between $75 billion and
$100 billion from the rest of the world, including some of these
poorer developing countries, in the guise of what is normally called
capital flight. We are not transferring resources to the rest of the
world. We are draining resources from the rest of the world.
And in that environment, to be so niggardly as to cut back the
modest amounts that all other countries wish to do for the poorest
countries through IDA I think is particularly unseemly of a great
country, and indeed not something that we can afford either in eco-
nomic or in foreign policy terms.
The argument is also made that Congress is to blame. Some in
the administration have said Congress would never approve more
than the proposed $750 million a year that has been sent up to you.
I have to say that, as one who spent countless hours working
with you and others in the Congress to get budgetary support for
these institutions for 4 years, I can only have enormous sympathy
for those who raise the issue of congressional support. But the
point as made is simply wrong
If
you
look at the record, in 4 of the last 6 years, Congress has in
fact appropriated much more than the $750 million that is being
cited as an absolute ceiling. Indeed, in 2 years Congress voted over
$1 billion in a given year for IDA. And so I think the record simply
suggests that Congress, working with a supportive administration,
is willing to provide amounts of money well greater than have been
proposed in this current replenishment exercise, and it is really
both intellectually erroneous and politically somewhat cowardly to
hide behind the Congress in saying that $750 million is the abso-
lute maximum that can be appropriated.
Finally, it should be noted that the Congress has ultimately
voted every penny ever pledged by the United States to the multi-
lateral development banks. There have been arrears and those are
bad, but the United States has never reneged.
I believe the delays, with eventual fulfillment of the pledges,
troublesome as that may be, are less undesirable than limiting the
level of the entire refunding from the outset, as is now being done
in IDA VII. So if that were my choice, a fear of some delays in the
future versus cutting it from the outset, I would take the former.
A final point: In talking about the budget deficits the country
faces and which you here in the Congress are facing and trying to
deal with every day, I would make one final comment. It seems to
me that the multilateral approach is particularly desirable, indeed
almost necessary, in just these circumstances.
This is, of course, because of the tremendous leverage afforded by
our contributions to the multilateral development banks. The ques-
tion came up earlier, where do you get more bang for the buck?
Well, in these institutions you get immediate multiplicative bang
for the buck, because for every $1 we put into IDA $4 of lending
ensues. It seems to me that in terms of burden sharing this in fact
the optimum way to go and therefore commends itself particularly
in a time of budget stringency.
In this context I would note one final irony which bears on some
of the questions you raised earlier, Mr. Chairman, about Central
1413
America. Back when the Treasury published its so-called assess-
ment of the development banks in 1982, which by the way gave
them very high marks and rejected virtually all the criticisms
against them, I suggested to the House Banking Committee that it
would be shortsighted and cost ineffective to cut funding for the
Fund for Special Operations of the Inter-American Development
Bank, the Western Hemisphere equivalent of IDA, at a time of in-
creased concern for precisely those countries in Central America
and the Caribbean that were served by its program.
Funds were nevertheless cut savagely, which resulted in a cut, of
course, in contributions from other countries. Now, along come the
Kissinger Commission and the administration, feeling compelled to
propose a massive new program of bilateral aid to the region, after
just having cut multilateral aid 1 year earlier and thrown away,
thrown away, the multiplier effects that would have brought in
three times the money from other countries that we would have
put in ourselves.
Let us not make the same mistake with IDA today.
Thank you very much.
[Mr. Bergsten's prepared statement follows:)
1414
THE UNITED STATES
AND
IDA VII
Statement by
C. Fred Bergsten
Director
Institute for International Economics
Before the
Committee on Foreign Relations
United States Senate
March 27, 1984
Summary and Conclusion
The proposed $9 billion replenishment of IDA ("IDA VII")
represents an enormous cut in the level of international
concessional assistance at a time when the sharp deterioration of
world economic conditions in recent years counsels an increase in
such funding instead.
This cut results almost wholly from the
recalcitrance of the United States to go along with the desire of
other donor countries to maintain financing at the level of the
past few years, if not raise it substantially.
Authorization of the US contribution proposed by the
Administration is thus an absolute minimum. Indeed, I would urge
the Committee to take whatever steps might be appropriate to
raise that amount or at least leave the door open for doing so
later.
In addressing these issues, I will draw on my experience
as Assistant Secretary of the Treasury for International Affairs
during 1977-January 1981, when I was directly responsible for
both concluding the IDA V negotiation and conducting the entire
IDA VI negotiation.
1415
:
reeling from the deepest world recession since the 1930s and
associated events:
their per capita growth rates have plummeted, remaining
negative in Africa and becoming negative throughout
Latin America
their terms of trade, depending on the region, have
declined by 20-40 percent over the past three to five
years
alternative sources of funds have dried up, just when
needed most, because of the impact of the debt crisis on
bank lending (where record levels of real interest rates
make them most unattractive in any event) and the impact
of global recession on budgets and hence concessional
assistance in many industrial countries
rising protectionism, even in the United States where
unemployment has declined sharply, limits the scope for
export expansion as an alternative means of their
earning foreign exchange
dollar overvaluation continues to depress commodity
markets for many LDC exports, impair their competitive
positions (because many of their currencies are tied to
the dollar), increase the real cost of their (largely
dollar-denominated) debt burdens, and reduce the real
value of much of their foreign assistance (as in the
case of IDA VI, as noted)
In response to such reasoning, it is sometimes argued that
IDA has little to do with the global economic crisis because (1)
1416
The Magnitude of IDA VII
The $9 billion replenishment proposed for IDA VII represents
a substantial reduction in the most important program of
concessional assistance in the world:
it is a cut of about 50 percent in real terms from the
negotiated level of IDA VI, which envisaged modest but
positive growth of 4-5 percent annually in the real
level of IDA lending
-
it is a cut of about 20 percent from the actual level of
annual lending under IDA VI, which worked out to be
about 20 percent less than the negotiated amount because
of two earlier US blows to the institution:
its
stretchout of IDA VI payments and the overvaluation of
the dollar in the exchange markets (which reduced the
dollar value of other countries' contributions)
in terms of per capita availability of funds to eligible
recipient countries, now that China has been added to
the rolls, the reduction is almost 60 percent from the
actual IDA VI level (after a cut of 15 percent terms
from the negotiated magnitude in per capita terms)
Hence it is clear, on whatever basis one wishes to use, that
the IDA VII replenishment will force the institution to cut its
program level sharply.
Is this justified by the state of the
world economy?
The World Economic Outlook
Unfortunately, the facts are to the contrary.
The
developing countries, particularly the poorest of them, are still
1417
it provides long-term development rather than short-run balance
of payments assistance and (2) the major debtor countries do not
receive IDA funds anyway. Both points miss the basic nature of
the crisis and the role of IDA in contributing to its solution.
It is true, of course, that IDA funds long-term projects.
However, the global economic problem is at least equally long-
term in nature.
Indeed, the "second stage" of the debt crisis
into which we have now entered focusses primarily on finding
longer run sources of finance for the developing countries to
replace some of the substantial cutback in the growth of lending
by commercial banks.
Normal IDA funding is quite relevant in
this context, although I would support some speedup in IDA'S
disbursement profile through greater use of non-project lending
(as well as a higher level of total activity) to enable it to
contribute even more.
Even more importantly, one must note that it is the major
debtor countries who will indirectly bear much of the cost of the
proposed large cutback in IDA lending.
Most observers agree that
the recent level of IDA credits to the African countries should
be maintained or even increased. Hence the cutback in aggregate
IDA lending would be accommodated by shifting India, China and
other IDA borrowers to the IBRD.
But there is no proposal for an increase in IBRD
resources.
Hence the IDA "graduates" can be accommodated only by
like "graduation" of current IBRD borrowers.
This must mean
primarily the largest, most advanced of those borrowers:
Argentina, Brazil, Mexico, Romania, Yugoslavia and the like.
The
no
1418
result is that the very debtor countries who are at the heart of
today's most pressing global economic problem must either look
for yet more bank credit, which is unlikely to be available, or
depress their economies further to reduce even more their need
for external funds.
The net effect of cutting IDA is thus to deepen the global
debt crisis, modestly but seriously.
The amounts involved
approximate $1 billion yearly (in the aggregate) --adding that
much further to an international financial problem which is
already likely to remain difficult for many years to come.
In short, the IDA VII package has been constructed in a
manner that can only intensify the problems of the world
economy--which are already quite severe. It is extremely
shortsighted for the United States, in its own economic and
financial (let alone foreign policy and humanitarian) interest to
foster such an outcome. I am a strong supporter of the concept
of "graduation," and indeed initiated much of the current Us
policy based on that concept during my tenure at Treasury.
But
the timing of the implemention of that concept must be calibrated
to the realities of the world economy, and that has patently not
been done in the case before us.
Who Is to Blame?
Unfortunately, the responsibility for this outcome must be
placed almost entirely on the US Administration,
Every other
country wanted to at least maintain the nomimal IDA VI level of
$12 billion.
Many other donor countries would have gone to $15-
16 billion.
To stay even with IDA VI in terms of the real per
1419
capita incomes of recipient countries, now including China, the
replenishment would have had to reach $21 billion.
A review of
my notes from the IDA VI negotiation reminds that many donors
wanted to go to $15 billion even then (1979-80).
Indeed, a number of donor countries have already indicated
an intention to supplement the negotiated IDA VII package with
voluntary contributions pro-rated against a notional $12 billion
total.
They will likely do so via a "special fund" that would
prohibit procurement from non-participants, notably the United
States, and thus cost us business,
(The United States has
already lost an estimated $500 million of exports from the
similar procedures adopted by other countries in the wake of the
US delay in fulfilling its pledge to IDA VI.)
To all of this, some may argue that it is proper for the
United States to reduce its share in IDA--a trend toward which I
accomplished much during my period at Treasury (e.g., cutting the
US share from 31.4 percent in IDA V to 27 percent in IDA VI).
However, it appears that the process may now have gone too
far. In reality, the United States contributed only 15 percent
of IDA funding during 1981-84 (because of the stretchout, even
assuming its completion this year).
As noted, the real US share
during the IDA VII period will clearly be less than the
negotiated 25 percent because of supplementary (non-negotiated)
contributions by other donors.
These numbers do not comport well with our roughly one-third
share of the combined GNPS of the donor countries, or our 40
percent share of the total when allowance is made for per capita
1420
income (as per our own graduated income tax principles). They
seem particularly inadequate at a time when the United States is
the only industrial country experiencing rapid economic growth
1
and falling unemployment, and is a net importer of huge amounts
of capital from the rest of the world to finance our massive
current account and budget deficits.
Again, both economic self-
interest and statesmanship would suggest a more generous
position.
It is also argued that the Congress is to blame, because it
would never approve more than the proposed $750 million per
year.
As one who spent countless hours seeking Congressional
support for these bills for four years, I can only have enormous
respect for the thrust of that concern.
But it is simply
incorrect:
in FY 1984, $945 million has already been provided under
Continuing Resolution and $150 million more may be voted
in FY 1983, Congress voted $945 million for IDA
--
in FY 1980, $1.072 billion was provided under Continuing
Resolution
--
in FY 1979, Congress voted $1.258 billion for IDA
So amounts far greater than the proposed $750 million have
actually been approved by the Congress on four separate occasions
during the past six years.
Indeed, amounts greater than the $1
billion annually which would be needed to permit a total
replenishment of $12 billion (with the United States at 25
percent) have been voted twice, and may be again this year.
Again, particularly in light of today's overall budget situation,
1421
1
I would not minimize the difficulty--but it demonstrably can be
done, and has been done in the past.
Finally, it should be noted that the Congress has ultimately
voted every penny ever pledged by the United States to the
multilateral development banks.
The United States has frequently
been in arrears on its pledges, but has never reneged.
Such
delays are highly undesirable, and undermine both the programs of
the institutions and the position of the United States in them.
But I believe the delays, with eventual fulfillment of the
pledges, are less undesirable than limiting the level of the
entire refunding from the outset as is being done in IDA VII.
The Multilateral Approach
These reminders of the massive budget problem facing the
Congress, and our country as a whole, bring me to a final
point:
that the multilateral approach is particularly desirable
in just such circumstances.
This is because of the tremendous leverage afforded by our
contributions to the multilateral development banks. At the IBRD
itself, every dollar we pay in directly levers sixty dollars of
total lending because of the combination of burden-sharing among
countries and heavy reliance on callable (rather than paid-in)
capital, even before counting the additional leverage from co-
financing with private lenders. The ratio is much less for IDA,
of course, but each dollar of US money still directly generates
four dollars of total assistance.
Of course, one would not support a program solely to benefit
from such burden-sharing if the program itself were flawed.
But
1422
the Treasury's own
assessment" of the institu ions, published in
1982, gave them very high marks and rejected virtually all of the
criticisms which have been made.
It is thus hard to understand
the proposed cutbacks in IDA, and even harder to understand how
the Administration can hope to successfully pursue i's stated
policy objectives there while being the sole source of sharp
cutbacks in program level and scope.
In this context, one final irony should be noted.
In
commenting on the Treasury "assessment,"
I suggested to the House
Banking Committee at the time that it would be short-sighted and
cost-ineffective to cut funding for the Fund for Special
Operation (FSO) of the Inter-American Development Bank--the
Westerm Hemisphere equivalent of IDA--at a time of increased
concern for precisely those countries, in Central America and the
Caribbean, that were served by its programs.
Funds were
nonetheless cut, resulting in a cutback of the contributions of
other donors,
Now the Kissinger Commission and the
Administration have felt compelled to propose a massive new
program of bilateral aid for the region.
Let us not make the
same mistake with IDA.
1423
.*.*..."----
Senator MATHIAS. Thank you, Mr. Bergsten.
Secretary McNamara made a statement, I believe perhaps before
you came into the room, that it is one of the great ironies of devel-
opment that critics of IDA should view the institution as insuffi-
ciently responsive to U.S. concerns, when the association is viewed
in the field as promoters of market-based development and West-
ern economic interests.
Do you find that equally ironic?
Mr. BERGSTEN. I find that equally ironic. And again, I would cite
some conclusions reached by the assessment of the institution by
the current Treasury, which they published. They concluded, as I
would conclude, that whenever the United States has gotten its
own act together, been clear in what it has wanted in terms of pro-
grams through the multilateral institutions, those institutions have
responded.
That has been true in both economic terms and in terms of over-
all U.S. policy objectives. There is an irony, but the bottom line to
me is that the United States has been able to pursue its objectives
effectively through this institution, and any claim that somehow
we give up effective use of our money is simply erroneous.
Senator MATHIAS. There has been some references today to the
graduation of IDA recipients who move on to nonconcessional bor-
rowing. What is the critieria for graduation? How do you get your
diploma in this case?
Mr. BERGSTEN. Well, that is a little bit more of an art than a sci-
ence. There are a number of criteria that one has to assess in the
case of a given country. You mentioned some of them earlier. Per
capita income is one key test. Market creditworthiness as tested in
the market is another.
Broader criteria of economic development are important: success
in expanding exports, diversification of exports. That is terribly im-
portant, because increased export earnings do provide an alterna-
tive, of course, to capital inflow and provide the best single indica-
tor of creditworthiness.
The private banks, if they look at any single factor in determin-
ing whether to extend additional credits to developing countries,
like to see whether their exports are expanding rapidly and on a
diversified basis, because if they are that provides an indicator of
earnings potential, which then suggests that the credits can be
repaid.
So export earnings are terribly important. There are broader in-
dications of economic development as well, but I think these are
In addition, though, one really has to emphasize the point I made
in my statement: Graduation cannot be pursued on a linear basis,
irrespective of the course of the world economy. When the world
economy is booming, you can more rapidly graduate countries, be-
cause the environment for export earnings, private financial flows,
and alternatives to concessional help are much more available.
When the world economic condition is tough, as it is now, then
you have to go slowly. Though I, as I mentioned, was in the fore-
front of beginning to push the graduation process for Brazil
,
Mexico, and others in the late 1970'S, I would equally be the first to
say that one has to slow down the process right now.
**********....
the key ones.
RT
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1424
There is one other point, Mr. Chairman. There are not only grad-
uates; there are dropouts. Just as some countries proceed rapidly,
other countries fall back, both industrial countries and developing
countries.
It may come to pass from time to time that a country that we
thought had graduated and had passed the threshold and no longer
needed concessional help may have to fall back and become eligible
for that kind of help again. A country that seemed to be progress-
ing dramatically away from the need for concessional help or direct
World Bank lending may, because of changes in circumstances,
may have to be helped for a longer time than we thought.
So again, it is not a linear process. It is not a one-way street. And
one has to be sensitive to all of that in reaching mature judgments
about how to set lending levels and program in this area.
Senator MATHIAS. As you know, the IMF is sometimes criticized
for having too much influence on economic decisions in various
parts of the world in which it does business. In contrast, we hear
less complaints about the World Bank imposing austerity and im-
posing harsh economic programs on its recipient countries.
What influence have you observed does the World Bank have in
questions of this sort? Is there as much a difference in the two op-
erations?
Mr. BERGSTEN. I think there are two important differences that
explain that difference in reactions which you quite rightly men-
tion. One is that World Bank conditionality, which certainly is
there and is important, is aimed more at long-term than short-term
factors. The World Bank's focus, of course, is on development
projects of a long-term nature, rather than immediate budgetary
positions or expansion of credit, external borrowing requirements,
of the countries themselves. So by virtue of being long term rather
than short term it is not quite as much in the public eye and there-
fore not as subject to criticism.
Second, the World Bank is basically working on the supply side,
whereas the IMF is frequently working on the demand side. The
World Bank is trying to increase output. Even when it is rather
tough in its requirements, those are aimed at increasing savings,
increasing the level of investment, increasing export orientation,
things which are essentially growth expanding over time.
The IMF, by contrast, must by virtue of its responsibilities often
clamp down on economic growth in order to cut inflation, external
deficits, and the like. So both the difference in timing and the dif-
ference in focus between the supply and demand sides explain
much of the difference in perception and criticism that the two in-
stitutions get
Senator MATHIAS. Are there any suggestions that you have for
improvement in the World Bank operation?
Mr. BERGSTEN. Well, I would pick up on the question you just
raised. I think increasingly the World Bank and IMF should be
working much more closely together in given countries. They some-
times do it, but they sometimes do not.
I make that recommendation because increasingly, as I said in
my statement, these adjustment problems are of a long-term
nature. The old 1-year IMF programs simply are no longer ade-
1425
quate to deal with the more lasting adjustment problems that
countries face.
Likewise, the traditional IMF focus on limiting demand expan-
sion is not enough. The supply side must be brought in. So I would
counsel, in fact in all cases where possible, linkage between an ex-
tended IMF program and World Bank participation, particularly
through its structural adjustment loans, which get away from the
traditional project finance, provide a more rapid infusion of funds
to help deal with the immediate external constraint, but also pro-
vide them more leverage for the Fund and Bank together to work
on the supply side, the growth orientation of a country over time,
to try to take advantage of the current situation, in a sense, to get
more solid policies adopted.
I think the IMF supports policies of that type, but they are not
really its forte, and that is where the World Bank's comparative
advantage lies. So I support whatever steps can be taken from out-
side to push the Bank and Fund to work increasingly together.
In the case of countries with long-term adjustment problems,
and that is now most of the developing countries—I think we
should push it, and I think the outcome would be highly desirable.
There is one other point. I would like to reiterate something I
said briefly in my commentary that the World Bank should be
looking to expand the nonproject total of its lending.
I am not against its project loans by any means, but I think in
terms of helping meet the current world financial problem and in
terms of providing broader leverage for it on supply-side policy fac-
tors, like savings policies, investment incentives, export orienta-
tion, that the Bank should and could be doing more through the
nonproject window.
Indeed, Mr. Chairman, I think the world is missing a big oppor-
tunity right now by not sharply expanding the role of the World
Bank. Here I am going beyond ÍDA and talking about the Bank as
a whole. But we have to ask ourselves the following question: Over
the next 5 to 10 years, all of the major developing countries are
going to continue to run sizable, albeit smaller than in the past,
external deficits. However, the cutback in financing from the
sources of the last decade, primarily the private banks, is going to
be even greater.
So as we look ahead, we have an ex ante gap in meeting the le-
gitimate external deficits of the developing countries. I say legiti-
mate because countries at this early stage of development still
should normally be running current account deficits and importing
capital from the rest of the world.
But a major question that they face, and which the world econo-
my as a whole faces, is how to plug that gap. At my institute, in
fact, we are doing a big study of that, trying to see what possibili-
ties exist for unleashing new sources of private capital.
But I think one conclusion is going to be that the World Bank, as
a financial intermediary between the private capital markets and
the major developing countries, could and should be doing much
more, both in quantitative terms and, as I mentioned, in terms of
nonproject lending, so as to both accelerate the pace of its interme-
diation function and to get broader leverage to promote long-run,
1426
sound, growth-oriented policies in the developing countries them-
selves.
Incidentially, I think ways can be found to do that which would
not tax the budgets of the United States or other donor countries.
Some financial innovation is quite possible, I think, within the very
solid, businesslike framework of the World Bank family, and I
would recommend that both the administration and the Congress
start doing some creative thinking along those lines.
Senator MATHIAS. I have one final question, which relates to the
sort of Solomonic role of this committee, in which we have to
divide the baby. The administration's current request for the whole
aid program provides roughly 9 percent for multilateral aid, it pro-
vides over 40 percent for military assistance.
What would be your comment on that kind of division of the pie?
Mr. BERGSTEN. Well, I would share the views that Secretary
McNamara was expressing earlier, that it is a mistake to think one
can buy very much in terms of long-run stability and therefore for-
eign policy and security benefit to the United States by emphasiz-
ing
ing so heavily the military and direct security assistance side.
I think there is a need for aid of that type in particular circum-
stances. I would not denigrate it completely. But in terms of alloca-
tion, I do think the skewing that you referred to is badly distorted.
The record of development assistance in terms of avoiding politi-
cal instability is not perfect. The correlation between economic
growth and political stability is itself by no means a clear one or a
firm predictor of events.
But my judgment would be that channeling a somewhat larger
share into the development side would make sense in terms of our
security, as well as economic and humanitarian interests. I would
add that, when one comes to dividing up the pie in another way, as
between multilateral and bilateral, we do get bigger bang for the
buck multilaterally, both in terms of other countries multiplying
our contribution and in terms of the efficacy of getting effective
policies.
Again, I am sometimes bemused. The current administration
often talks about trying to promote more effective policy use of
funds by recipient countries. Yet, by cutting back the funding for
the development institutions they obviously reduce the ability of
those institutions to lever such policies.
I think the record, particularly as debated by this institution a
decade ago, is quite clear that because of their nonpolitical nature,
because of their international nature, the multilateral institutions
get more effective policy leverage from their funding than do bilat-
eral donors, including the United States.
So I think the multilateral side gets more bang for the buck,
both in dollars terms and in cost-effectiveness terms, and I would
therefore counsel some reordering of the balance in that sense as
well.
Senator MATHIAS. We are very grateful to you for returning once
again to this committee. You know how much we rely upon you
and how much we value your opinions. So we are grateful to you
for being here today.
Mr. BERGSTEN. Thank you very much, Mr. Chairman.
1427
Senator MATHIAS. Our final witness of the day is Mr. Bruce N.
Rich, representing the international project, Natural Resources De-
fense Council, Inc. Mr. Rich, welcome.
STATEMENT OF BRUCE M. RICH, ON BEHALF OF THE INTERNA-
TIONAL PROJECT, NATURAL RESOURCES DEFENSE COUNCIL,
INC., WASHINGTON, D.C.
Mr. Rich. Mr. Chairman, I appreciate very much the opportunity
to appear before the subcommittee today concerning authorization
of the seventh U.S. replenishment of the International Develop-
ment Association. I am testifying on behalf of the Natural Re-
sources Defense Council and seven other national environmental
organizations with over 5 million members and supporters in the
United States.
These environmental organizations wish to express today for the
first time before the Congress their endorsement of and support for
U.S. replenishment of IDA. Our support is based on the conviction
that widespread poverty and environmental deterioration in large
parts of the developing world are inextricably related
Senator MATHIAS. Mr. Rich, let me interrupt just to ask you one
question. I have here not only a copy of your statement, but one
from the National Wildlife Federation. Would you like that to be a
part of the record?
Mr. Rich. Yes; the National Wildlife Federation has submitted
that for the record, with your permission.
Senator MATHIAS. Well, we will include that to follow your state-
ment as a part of the record today.
Mr. Rich. Thank you, Mr. Chairman.
And our support is also based upon the conviction that sustain-
able economic development is not possible without sound manage-
ment of natural resources. My testimony will discuss briefly the
interconnection between the alleviation of poverty in IDA countries
and natural resources management and sustainable economic de-
velopment. The testimony will underscore the central and critical
role of IDA in addressing these development problems.
Before concluding, however, I shall emphasize the concern of the
national environmental organizations that IDA and the World
Bank need to take strong concrete actions to implement their al-
ready existing official policy commitment to natural resources
management.
In the poorest countries, where IDA is often the first and most
important source of foreign assistance, people on the margin of ex-
istence are compelled to destroy the resource base on which future
productivity depends. The four principal biological foundations of
the global economy-forests, croplands, grasslands, and fisheries-
are under severe and increasing pressure.
In many parts of the world, especially the poorest countries, poor
land use is destroying the regenerative and sustaining capacity of
the environment. Sub-Saharan Africa, one of the two main regions
for IDA assistance, already presents a profoundly frightening ex-
ample of how far the vicious cycle of poverty and ecological degra-
dation has gone.
1428
1
According to estimates of the United Nations, 55 percent of the
land area of the African continent and 25 percent of its population
is now threatened by desertification. Not only in Africa, but all
over the globe, from Nepal to Haiti, there are 1.5 billion people
whose only fuel is wood, dung, or crop wastes, and whose immedi-
ate physical existence is threatened by deforestation, erosion, and
desertification. Thus, extreme poverty and ecological deterioration
are part of the same syndrome of underdevelopment in many of
the poorest of those countries.
The resultant endemic social and political instability will present
in many cases sooner or later a threat to U.S. economic and politi-
cal security. When we read of the great cost of U.S. assistance to El
Salvador or the expense of dealing with illegal refugees from Haiti,
we should also remember that these are the two most eroded and
deforested countries in the Western Hemisphere. Haiti in particu-
lar, is the very poorest and most deforested country in our hemi-
sphere, and it is a current recipient of IDA assistance.
The answer to the problems of the hundreds of millions of mostly
rural poor in the world's neediest countries is, of course, economic
development. But development can only be sustainable if it is based
on sound management and conservation of the natural resource
base.
The national environmental organizations wish to underscore,
then, the great interest that the United States has in insuring that
IDA effectively carry out its mandate. One condition of IDA's effec-
tiveness is that it have adequate financial resources to do its job.
Another condition, and of as crucial importance to IDA's effec-
tiveness as an adequate seventh replenishment, is that IDA-fi-
nanced development activities do not undermine the longer term
sustainability and stability of the natural resource systems on
which these development activities depend.
In a number of statements and documents over the past decade,
the World Bank has stated numerous times its official policy com-
mitment to sound management of natural resources and the envi-
ronment. This is described in some detail in my prepared state
ment.
The most important of these policy commitments is the 1980
U.N. Declaration of Environmental Policies and Procedures Relat-
ing to Economic Development, a copy of which is attached to my
testimony. This was signed by the President of the World Bank at
that time and the heads of nine other leading multilateral develop-
ment agencies.
The national environmental organizations wish to express their
concern, however, over evidence of the World Bank's and IDA's in-
adequate attention to management of natural resources and the en-
vironment. Last June, the House Banking Subcommittee on Inter-
national Development Institutions and Finance held special over-
sight hearings on the environmental aspects of multilateral bank-
funded projects.
Testimony presented over 2 days raised serious questions about
what the World Bank and other multilateral institutions were
doing in the area of natural resources management. The World
Bank, at the request of that House subcommittee and of the Treas-
ury Department, prepared an extensive response to the testimony.
1429
Regrettably, this response did not address or join, in our judgment,
many of the most important issues and questions raised at the
hearings.
For example, questions were raised about whether the Bank had
enough professionally trained people, either within its Office of En-
vironmental and Scientific Affairs or in other divisions, to ade-
quately and competently address problems of natural resources and
ecological management. Currently the World Bank has only one
professionally trained ecologist among over 5,550 employees.
The Bank's response to this staffing question was in effect a non-
response, and I will just quote the main sentence from that re-
sponse: "The World Bank, with its Office of Environmental Affairs,
is the oldest, largest and most experienced institution dealing with
these issues."
Testimony also pointed out that the Bank had prepared a series
of environmental checklists and guidelines, but that there were no
procedures or regulations to insure the use and early integration
into project design of these guidelines. It was also pointed out that
checklists and guidelines were virtually absent for the single larg-
est lending sector, agriculture and rural development. Projects in
agriculture and rural development accounted for nearly 40 percent
of IDA credits in the Bank's fiscal year 1983.
The Bank's response to these concerns was the following:
"The World Bank has prepared the largest and most comprehen-
sive series of guidelines of any of the development assistance agen-
cies. Many of them are available in French, Spanish and English.
They are widely used by other development organizations through-
out the world. Their systematic use and rigorous enforcement
and I emphasize the next word, "would”- "would be adequate to
ensure that most development projects would not incur serious en-
vironmental, health or socio-cultural consequences
Although this response acknowledges in a round-about fashion
that the guidelines are not systematically used and enforced, there
is no indication that the Bank has any plans to do anything about
the situation or even views it as a matter for concern.
Moreover, there is a growing body of evidence that the sustain-
ability of individual projects and whole sector policies is seriously
hampered by the Bank's inadequate consideration of natural re-
source and ecological concerns. În my prepared statement I have
just cited three illustrative examples.
Two are projects which were considered to be failures by the
Bank's Operations Evaluation Department, and a good part of that
failure was due to inadequate consideration of natural resource
concerns and environmental management. The other example is a
whole sector policy paper on fisheries, which in 79 pages does not
even mention some of the most basic and widely accepted princi-
ples of sustainable management of fisheries resources.
In conclusion, the national environmental organizations believe
that IDA's role and effectiveness is so important to the world and
to U.S. interests that the Congress should strongly express in
report language accompanying the authorization of the seventh
U.S. IDA replenishment its concern that IDA's effectiveness is con-
strained by inadequate consideration of management of natural re-
sources and the environment.
1
1430
In our judgment, such language should state the expectation of
the Congress that IDA and the Bank will undertake in the near
future specific, concrete actions, such as ones enumerated in an at-
tached outline to my statement, to remedy serious deficiencies in
management of natural resources and the environment which have
been reliably identified as a matter of record.
To summarize, it is difficult to understate the U.S. interest in
supporting and promoting the continued and increased effective-
ness of IDA. The effectiveness of IDA, however, is seriously dimin-
ished in our judgment by two threats: An inadequate seventh U.S.
replenishment and inadequate attention in IDA projects to man-
agement of the natural resource base on which sustainable econom-
ic development indeed depends.
Thank you.
[Mr. Rich's prepared statement follows:]
1431
TESTIMONY OF
BRUCE M. RICH
ON BEHALF OF
NATURAL RESOURCES DEFENSE COUNCIL,
COUNCIL, INC.
NATIONAL WILDLIFE FEDERATION
SIERRA CLUB
FRIENDS OF THE EARTH
I ZAAK WALTON LEAGUE OF AMERICA
NATIONAL AUDU BON SOCIETY
ENVIRONMENTAL DEFENSE FUND
ENVIRONMENTAL POLICY INSTITUTE
CONCERNING THE 7th U.S. REPLENISHMENT
OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION
BEFORE THE
SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
WASHINGTON, D.C.
!
March 27, 1984
1432
CONTENTS
I.
Introduction....
1
II.
Poverty, Natural Resources Management and Sustainable
Development.....
4
III. Guiding Principles of U.S. Foreign Assistance Policy
Include Basic Human Needs, Targeting the Needy,
Environment and Natural Resources
6
IV.
Importance of I.D.A. and the U.S. Stake in its
Effectiveness
9
A.
Importance of I.D.A.
9
B.
The U.S. Stake in I.D.A. 's Effectiveness.
il
V.
Urgency of the Need for I.D.A. to Adequately
Implement Its Policy Commitment to Management of Natural
Resources and the Environment.
14
A.
The Official Policy Commitment of I.D.A. to
Sound Management of Natural Resources and the
Environment
14
B.
Serious and Growing concern of National
Environmental organizations with Evidence
of I.D.A. 'a Inadequate Management of Natural
Resources and the Environment.
17
C.
Need for a congressional Expression of concern
to Accompany the I.D.A. Replenishment.
25
VI.
Conclusion..
27
APPENDIX:
Outline of Actions to Bring About Improved Natural
Resources Management and Conservation in World Bank
Programs and Projects
1433
I. Introduction
Mr. Chairman, I appreciate very much the opportunity to
appear before this Subcommittee concerning authorization of the
7th U.S. replenishment of the International Development
Association (I.D.A.).
I am Bruce M. Rich, an attorney with the
International Project at the Natural Resources Defense Council,
Inc. (NRDC).
I am testifying on behalf of eight national
environmental organizations:
the Natural Resources De fen se
Council, Inc., the National Wildlife Federation, the
Environmental Defense Fund, Friends of the Earth
U.S., the
Sierra Club, the Izaak Walton League of America, and the National
Audubon Society and the Environmental Policy Institute.
Together, these organizations have over five million members and
supporters in the United States.
The Natural Resources Defense
Council has over 40,000 members and the National Wildlife
Federation 4.1 million members and supporters nationwide.
The
.....
Environmental Defense Fund has 47,000 members, and Friends of the
Earth - U.S., 35,000.
The Sierra Club has 380,000 members, the
Izaak Walton League of America 45, 000, and the National Audubon
Society one half million members.
The Environmental Policy
Institute is a non-membership research and advocacy organization.
These national environmental organizations wish to express
their endorsement of U.S. replenishment of the International
Development Assocation.
The environmental organizations strongly
urge a 7th u.s. I.D.A. replenishment which at the very least
34105
1434
would not reduce 1.D.A's resources in real terms.
This would
mean an annual U.S. contribution of one billion dollars a year
for the next three years.
our support is based on the conviction that widespread
poverty and environmental deterioration in large parts of the
developing world are inextricably related and that sustainable
economic development is not possible without sound management of
natural resources and biological systems.
I.D.A. has a pivotal
and crucial
indeed, perhaps the crucial
role within the
international system in dealing with these momentous problems.
In past hearings before the Congress, the environmental
organizations have vigorously criticized the environmental
performance of the World Bank and the other multilateral
development banks, but always as constructive supporters of what
the banks are trying to accomplish.
Our criticism
and our
support
is based on the finding that much more multilateral
assistance with increased attention to environmental management
is necessary to begin to address the overwhelming economic and
natural resources problems that plague a large part of our
planet.
My statement will discuss the interconnection between the
alleviation of widespread poverty, natural resources management
and sustainable economic development, and then review relevant
U.S. foreign assistance policy as set out in multilateral and
bilateral aid legislation.
The testimony will underscore the
central and critical role of I.D.A. in addressing development
1435
problems to which our foreign assistance legislation gives high
priority and articulate the important interests the U.S. has at
stake in ensuring I.D.A. 's effectiveness.
Before concluding, I shall emphasize the concern of the
environmental organizations that I.D.A. and the World Bank need
to take strong, concrete actions to implement their official
policy commitment to natural resources management.
This is a
matter of the gravest concern for the groups I represent since
its continued neglect will risk, in our judgment, the long term
effectiveness of I.D.A. 's activities; call into question its
ability and will to implement its own policies; and undermine the
basis of the support the environmental groups are expressing for
I.D.A. today.
We wish to make clear, however, our conviction that an
inadequate U.S. I.D.A. replenishment will pose the gravest and
most immediate risks of all by increasing the probability that
hundreds of millions of human beings will continue to destroy for
short-term survival the natural resource base on which their
long-term sustenance
and our long-term security
depend.
Thus, it is urgent that the Congress authorize a U.S.
replenishment that will enable I.D.A. to do its job; and that the
Congress, in accompanying report language, strongly express its
concern that the World Bank undertake actions to remedy
demonstrated deficiencies that undermine the Bank's policy
commitments concerning management of natural resources and the
environment.
1436
II.
Poverty, Natural Resources Management and sustainable
Development
The gravest and most widespread forms of global
environmental deterioration are at the same time underlying
causes and consequences of the poverty of hundreds of millions of
human beings.
In the poorest countries
where I.D.A. is often
the first and most important source of foreign assistance
people on the margin of existence are compelled to destroy the
resource base on which future productivity depends.
Poverty, in
conjunction with, and as as a result of, population growth and
skewed economic and social structures has led to massive
deforestation, erosion and desertification in large areas of the
planet.
This ongoing destruction of the carrying capacity of the
earth's life-supporting biological systems creates conditions
that result in still greater poverty.
The four principal
biological foundations of the global economy
forests,
croplands, grasslands, and fisheries
are under severe and
increasing pressure.
In many parts of the world
especially the
poorest
poor land use is destroying the regenerative and
sustainable capacity of the environment.
Sub-Saharan Africa
one of the two main regions for I.D.A.
assistance
already presents a profoundly frightening example of
how far the vicious cycle of poverty and ecological degradation
has gone.
According to estimates of the United Nations, 55% of
1437
the land area of the African continent and 25% of its population
are now threatened by de sertification.
Africa's population is
growing at a rate which cannot be sustained by its resource
base:
its population of 430 million will reach 800 million by
the turn of the century.
As a result, more and more marginal
land is cleared and overgrazed; the desert is advancing both
north and south at a rate of 100,000 hectares a year.
In almost
all of sub-Saharan Africa
19 countries
the average daily
calorie intake is below the level to meet average daily minimum
physiological requirements.
Not only in Africa, but all over the
globe
from Nepal to Haiti
there are 1.5 billion people whose
only fuel is wood, dung or crop wastes and whose immediate
physical existence is threatened by deforestation, erosion and
de sertification.
In the words of the World Conservation Strategy,1/
"For all
these people conservation is the only thing between them and at
best abject misery, at worst death."
The answer to the problems of the hundreds of millions of
mostly rural poor in the world's neediest countries is, of
course, economic development targeted to remedy their precarious
situation.
1/
World Conservation Strategy prepared by the International
Union for the Conservation of Nature and Natural Resources
(IUCN) with the assistance of the United Nations
Environmental Programme (UNEP) and the World Wildlife Fund
(WWF), in collaboration with the Food and Agriculture
Organization of the United Nations (FAO) and the United
Nations Educational, Scientific and Cultural Organization
(UNESCO).
1438
But development can only be sustainable if it is based on
sound management and conservation of its natural resource base.
The President of the International Development Association
reaffirmed this himself in a speech at the beginning of his
tenure:
in order to be sustainable, development must
include vigorous and studied attention to resource management."
"For sustainable development and wise conservation are,
in the
end, mutually reinforcing
and absolutely inseparable
goals." 27
III. Guiding Principles of U.S. Foreign Assistance Policy Include
Basic Human Needs, Targeting the Needy, Environment and
Natural Resources
Over the past decade the U.S. Congress has enacted
legislation which repeatedly and very explicitly has targeted
bilateral and multilateral u.s. foreign assistance for programs
that add ress the basic human needs of the needy and poor rural
majority in developing countries.
In addition, U.S. foreign
assistance policy has increasingly focused on one of the most
critical factors underlying the plight of the poor in the
developing world:
deterioration of the environment and
mismanagement of natural resources.
In Section 102 of the Foreign Assistance Act, the Congress
2/
Clausen A.W., "Sustainable Development: The Global
Imperative," Fairfield Osborn Memorial Lecture, 1981.
1439
set forth the principles which govern U.S. foreign assistance,
stating that
"United States development assistance should
focus on critical problems in those
functional sectors which affect the lives of
the major ity of the people in the developing
countries; food production and nutrition;
rural development and generation of gainful
employment; population planning and health;
environment and natural resources
(Foreign Assistance Act of 1961, as
amended, Section 102(b)(5))
The same Section states that "participation of the United States
in multilateral institutions shall also place appropriate
emphasis on these principles.
(Foreign Assistance Act of 1961,
as amended, Section 102(a), emphasis added.)
Section 128 of the Foreign Assistance Act of 1961, as
amended, directed the President in fiscal year 1983 to attempt to
use "not less than 40%" of bilateral economic assistance funds
"to finance productive facilities goods, and services which will
expeditiously and directly benefit those living in absolute
poverty (as determined under the standards for absolute poverty
adopted by the International Bank for Reconstruction and
Development and the International Development Association)."
Section 1102 of the International Financial Institutions Act
of 1977, as amended, directed the Secretary of the Treasury to
consult with the representatives of other member countries of the
multilateral development banks
"for the purpose of establishing guidelines within
each of these institutions which specify that, in
a manner consistent with the purposes and charters
of these institutions, a specified proportion or
annual lending by each institution shall be
1440
designed to benefit needy people, primarily by
financing sound, efficient, productive, self-
sustaining projects designed to benefit needy
people in developing countries, thus helping poor
people improve their conditions of life.
According to Section 1102(b), 'needy people' means those people
living in "absolute" or "relative" poverty as determined by the
I.D.A. and the I.B.R.D.
In addition, several amendments to the Foreign Assistance
Act over the past seven years have authorized and given
increasing priority to bilateral assistance for programs to deal
with environmental and natural resources problems, especially
with respect to deforestation, loss of genetic diversity,
watershed management and fuel wood shortages (Foreign Assistance
Act of 1961, as amended, Sections 118, 119, and 103(b)(3)).
3
In Section 118 of the Foreign Assistance Act, Congress
declared that "It is
in the economic and security interest
of the United States to provide leadership both in thoroughly
reassessing policies relating to natural resources and the
environment, and in cooperating extensively with developing
countries in order to achieve environmentally sound
development."
Section 118 also set forth requirements for
environmental assessment of AID-funded projects.
As a result of
this policy, AID has become the undisputed leader among bilateral
agencies in incorporating environmental concerns into project
design, and in funding environmental and conservation-related
projects.
Clearly, then, one of the most important principles
1441
governing both U.S. bilateral and multilateral assistance in
recent years is alleviating the plight of the poorest of the
world's poor.
The Congress has also determined
and acted on
the
finding that natural resources management is not an adjunct to
promoting economic development, but a critical problem on whose
resolution sustainable, successful development depends.
There is no institution
bilateral or multilateral
which
through its mandate and because of its potential role is better
placed to address these challenges than the International
Development Association.
IV.
Importance of I.D.A. and the U.s. Stake in its Effectivess
A.
Importance of I.D.A
I.D.A. is in many respects the most important of all
development institutions because it is by far the largest single
source of development assistance for the poorest countries on
earth.
These countries, located mainly in South Asia (including
India and China) and sub-Saharan Africa, contain more than half
of humanity.
At the time of the sixth I.D.A. replenishment in 1980 the
U.S. National Advisory Council on International Monetary and
Financial Policies submitted a special Report to the Congress in
which it noted that:
1442
"I.D.A. lend ing is designed to reach the
poorest countries in which live most of the
800 million persons who exist in absolute
poverty. This existence is characterized by
na Inutrition, illiteracy, disease, low life
expectancy and squalor. While 90 percent of
I.D.A. 's resources go to countries with
average per capita incomes below $300, the
median per capita income of I.D.A. borrowers
is only $ 200. This results because wealth is
generally concentrated in the urban areas
while the major ity of the people in recipient
countries are rural. Poverty in I.D.A.
countries is also characterized by the past
neglect of measures to improve the quality of
the human resources of these countries. when
the degree of rural poverty and the poor
human resource base are added to the
generally poor physical resource base of
I.D.A. borrowers, the enormous magnitude and
urgency of the poverty problem becomes
clear. Measures to alleviate poverty in
I.D.A. countries will require major efforts
in the rural areas. External assistance on
appropriate terms can play a vital and
ca talytic role in this effort."
Since then, the number living in absolute poverty has
increased.
At the same time, I.D.A. 's real resources have
decreased, principally due to U.S. dilatoriness in appropriating
in a timely fashion the amounts it had pledged for the 6th
replenishment.
The poorest countries that are I.D.A. recipients are also
the nations suffering from the greatest environmental stress and
deterioration.
Haiti and Nepal, for example, besides having per
capita incomes among the lowest on earth, are also often cited as
ca se studies of extreme deforestation and soil erosion.
Large
parts of sub-Saharan Africa are threatened by desertification to
a large degree caused by deforestation and overgrazing.
Population and resource use pressures in India and China have
1443
kept these countries perilously close to the brink of ecological
and economic disaster.
The money I.D.A. disburses has an effect that is much
greater than mere dollar amounts would indicate, since in many
instances it is the first and principal source of outside
economic assistance and technical advice in the need iest
countries in the world.
Moreover, I.D.A. finances on the average
only 44% of the cost of projects, the remainder coming through
co-financing arrangements with local or international agencies.
I.D.A. serves as a magnet or catalyst to promote additional
foreign assistance and investment in the very countries that are
most in need of such assistance and investment,
I.D.A. 's longer-
term effectiveness is especially enhanced through project
components with a large multiplier effect such as planning,
training, research, technology transfer, and other forms of
institution building. Finally, I.D.A. policy dialogue with
borrowers can have considerable effect on their development
priorities and policies.
B.
The U.S. Stake in I.D.A. 'S Effectiveness
In a world that is more and more interdependent
economically, ecologically, and politically - it is difficult to
understate the u.s. stake in I.D.A. 's continued and improved
effectiveness.
1444
I.D.A. is potentially an optimal vehicle for implementing
two of the major, and interconnected guiding principles of
bilateral and multilateral (c.f. Section 102, Foreign Assistance
Act of 1961, as amended) foreign assistance policy:
targeting
the basic human needs of the poorest people in the poorest
countries, and management and conservation of their environment
and natural resources.
I.D.A. was established, in fact, in the words of the 1980
Special Report to the President and the Congress of the National
Advisory Council on International Monetary and Financial
Policies, "largely as the result of international initiatives by
the United States undertaken against a background of strong
expressions of support within the Congress, in particular Senate
Resolution 264, 85th Congress, Second Session."
Ensuring the economic and ecological stability of I.D.A.
countries is a prime U.S. strategic interest.
Seven of the 10
top I.D.A. recipients border on or near the Indian Ocean and have
been subject to the efforts of other nations to expand their
influence in ways directly opposed to U.S. and Western
interests.
our trade and economic future is becoming
increasingly linked to the fate of I.D.A. recipients, either as
sources of raw materials or
as potential markets.
Extreme poverty and ecological deterioration are part of the
same syndrome of underdevelopment in the poorest countries.
The
resultant endemic social and political instability will present
in many cases, sooner or later, a threat to U.S. economic and
1445
political security.
When we read of the cost of U.S. assistance
to El Salvador or of the expense of dealing with illegal refugees
from Haiti, we should also remember that these are the two most
eroded and deforested countries in the Western Hemisphere.
Haiti, in particular, is the poorest and most deforested country
in the Hemisphere
and a recipient of I.D.A. assistance.
It would be ironic, and almost absurd for the Congress to
authorize large foreign aid programs of an emergency nature for
Central America and the Caribbean while simultaneously
contributing to the risk of future instability in other regions
by crippling I.D.A. 's effectiveness.
Moreover, U.S. replenishment of I.D.A. is extremely cost-
effective in comparison to bilateral aid, since every dollar the
U.S. puts in will result in approximately four dollars of I.D.A.
assistance and nearly ten dollars of total financing being made
available for projects.
The u.s. Treasury came to the conclusion in a 1982 study 3
that "continued u.s. participation in the MDBs is justified by a
fundamental interest in a more secure and stable world."
This
statement is all the more true for I.D.A., which focuses its
assistance on many of the countries where the risks of future
insecurity and instability are greatest.
31
"United States Participation in the Multilateral Development
Banks in the 1980's," Department of the Treasury, 1982.
1446
v
.
Urgency of the Need for I.D.A. to Adequately Implement Its
Policy Commitment to Natural Resources and Environmental
Management
The environmental organizations have underscored in this
testimony the critical position that I.D.A. occupies in the
international system and the great interest the U.S. has in
assuring that I.D.A. effectively carry out its mandate.
One condition of I.D.A.'s effectiveness is that it have
adequate financial resources to do its job.
Another condition
and of as crucial importance to I.D.A.'s effectiveness as an
adequate 7th replenishment
is that I.D.A.-financed development
activities do not undermine the longer-term sustainability and
stability of the natural and social systems on which they depend.
A.
The Official Policy Commitment of I.D.A. to Sound
Management of Natural Resources and the Environment
Over the years, the World Bank has been a leader among
multilateral agencies in making policy statements and commitments
at the highest level to the principle that economic development
cannot be sustainable without, in words uttered by I.D.A. 's
president in 1981, "vigorous and studied attention to resource
management."
This is because, again in the words of the Bank's
president, "sustainable development and wise conservation are,
in
the end, mutually reinforcing - and absolutely inseparable
goals." (emphasis added).
Similar words were spoken by I.D.A. 's
previous president, who took the pathbreaking initiative of
1447
hiring an environmental adviser for the Bank two years before the
1972 Stockholm Conference on the Human Environment.
Only one
year after the Stockholm Conference, the Bank officially
established an office of Environmental Affairs (now known as the
Office of Environmental and Scientific Affairs).
In 1980 the
former president of the Bank publicly endor sed the World
Conservation Strategy, a major international development policy
statement prepared with the assistance and collaboration of three
United Nations agencies and two international non-governmental
conservation organizations.
The strategy emphasizes that
conservation is a prerequisite and sina qua non of sustainable,
rational economic development rather than one objective among, or
equivalent to, others.
It is "that aspect of management which
ensures that utilization is sustainable." (emphasis added).
In February 1980, the President of the World Bank along with
nine other heads of multilateral development agencies signed a
joint United Nations "Declaration of Environmental Policies and
Procedures Relating to Economic Development."
Each institution
pledged to endeavor, to the best of its ability, to, among other
things:
"1. Institute procedures for systematic examination of
all development activities, including policies, programs and
projects, under consideration for financing to ensure that
appropriate measures are proposed . concerning natural
re sources and environmental management [i.e., "the
principles and recommendations of the (1972 Stockholm)
United Nations Conference"];
"2. Enter into cooperative negotiations with
governments and relevant international organizations and
agencies, to ensure integration of appropriate environmental
1448
measures in the design and implementation of economic
development activities;
"3. Provide technical assistance, including training,
on environmental matters to developing countries, at their
request, thus developing their indigeneous capacity, and
facilitating technical cooperation between developing
countries;
"4. Give active consideration and, if appropriate,
support project proposals that are specifically designed to
protect, rehabilitate, manage or otherwise enhance the human
environment, the quality of life, and resources thereto
related;
"5. Initiate and/or otherwise cooperate in research and
studies leading to improvement of project appraisal,
implementation and evaluation methodologies, including cost-
benefit analysis, of environmental protection measures
The full text of the Declaration is reproduced in an annex to
this statement.
Most recently, on February 24th of this year,
representatives of three of the organizations on behalf of whom I
appear today met with the President of the Bank and other high
level Bank officials.
We discussed our support for the Seventh
1.D.A. Replenishment before the Congress and expressed our
concern over the Bank's inadequate implementation of its official
commitment to environmental and natural resources management.
We were pleased to be able to report back to our members
that the Bank acknowledged at this meeting that its staff needs
to focus more on natural resource management issues.
The Bank
strongly expressed the need for a direct, broadened and in-depth
dialogue with our organizations, starting with a series of
meetings with the Bank's vice-presidents.
We were also
encouraged by the Bank's acknowledgment that more attention needs
1449
to be given to natural resources and environmental management in
its policy documents.
B.
Serious and Growing concern of National Environmental
Organizations with Evidence of I.D.A. 's Inadequate
Management of Natural Resources and the Environment
Last June, the House Banking Subcommittee on
International Development Institutions and Finance held special
oversight hearings on the environmental aspects of MDB-financed
projects.
Testimony presented over two days raised serious
questions about what the World Bank and other MDBs were doing in
the area of natural resources management and consideration of the
ecological and sociological conditions necessary for the survival
of tribal peoples.
The World Bank prepared an extensive response
to the testimony.
Regrettably, this response did not directly
add ress or join, in our judgment, many of the issues and
questions raised at the hearings.
For example, questions were
raised about whether the Bank had enough professionally trained
people, either within the Office of Environmental and Scientific
Affairs or in other divisions, to adequately and competently
address problems of natural resources and ecological
management:
It was pointed out that the staff of the Office of
Environmental and Scientific Affairs appeared to be impossibly
small
especially with respect to critical pre-project review
to carry out the enormous responsibilities that the Bank
ascribes to it.
Even now, the Director of the Office of
84-045 0-84-92
1450
Environmental and Scientific Affairs of the World Bank has only
one ecologically trained person actually involved in identifying
environmental problems early in the project cycle.
The other
persons employed by the office work with the Bank's Economic
Development Institute, or focus on developing guidelines for
projects of Bank-funded Development Finance Corporations.
Testimony also pointed out that there is no evidence that staff
in the Bank's regional offices and in the Operations Evaluation
Department have sufficient professional training or experience to
systematically deal with ecological concerns.
The Bank's response to the staffing question was,
in effect,
a non-respon se:
the World Bank, with its Office of
Environmental Affairs, is the oldest, largest and most
experienced institution dealing with these issues
The testimony pointed out that
"The World Bank has prepared a series of
environmental checklists and guidelines, but
there are no procedures and regulations to
ensure their systematic use and early
integration into project design. Even if the
existing optional guidelines were
systematically applied, they would be
inadequate."
One of the reasons why the guidelines, even if used, would
be inadequate, is that almost none exist for the Bank's
and
I.D.A.'s
single biggest lending sector :
Agriculture and Rural
Development. The single checklist that has been prepared in this
sector concerns pesticide use, and it does not even mention basic
and widely accepted technologies such as integrated pest
management.
Projects in agriculture and rural development
1451
accounted for nearly 40% of I.D.A. credits in the Bank's Fiscal
Year 1 983.
The Bank's response to these concerns was the following:
"The World Bank has prepared the largest
and most comprehensive series of guidelines
of any of the development assistance
agencies. These guidelines are regularly
reviewed, and are updated and expanded as
warranted. Many of them are available in
French, Spanish, and English. They are
widely used by other development
organizations throughout the world. Their
systematic use and rigorous enforcement would
be adequate to ensure that most development
projects would not incur serious
environmental, health, or sociocultural
consequences. (emphasis added).
Although this response acknowledges in a roundabout fashion
that the guidelines are not systematically used and enforced,
there is no indication that the Bank has any plans to do anything
about the situation or is even concerned about it.
The virtual
lack of ecological guidelines for the single most important
lending sector is simply ignored in the response .
Staffing and procedures, of course, are only means to ensure
sound projects and policies.
An institution such as the Bank can
rightfully point out that in the end its internal administrative
priorities and connitments should not be put into question
without evidence of inadequacies in the project and policy area.
But there is a growing body of evidence that the
sustainability of individual projects and whole sector policies
is seriously hampered by the Bank's inadequate consideration of
natural resources and ecological concerns.
1452
I shall cite just three illustrative examples from some of
the research the environmental organizations have been
gathering:
two projects, and a Bank Policy Paper for an entire
sector.
In a book pubished by the World Bank in 1982, "I.D.A. in
Retrospect:
The First TWO Decades of the International
Development Association," the Bank describes in some detail the
conclusions of a 1980 post-project evaluation conducted by the
Operations Evaluations Department.
The project
an agriculture
and irrigation scheme designed to increase rice production around
Lake Alaotra in Madagascar
was
a failure with a probable
negative rate of return.
Let me state first of all that it is to the Bank's credit
and one very important sign of the Bank's institutional
commitment to improving its performance
that it conducts
independent evaluations and occasionally makes negative results
public, as in this case.
Unfortunately, as this project and
project evaluation show, lack of expertise in natural resource
management can undermine not only projects, but the Bank's
ability to learn from, or even recognize the nature of its
mistakes.
The evaluation cites "severe technical difficulties in
managing difficult peat soils" along with sociological
difficulties as the major factors responsible for failure.
The
"difficulties in managing the peat soils" were compounded by
inadequate functioning of the project's irrigation system.
A
close reading of the nature of the soil management and irrigation
1453
problems reveals that they are linked to what the evaluation
report calls "Factors Beyond Human control."
"Long standing
erosion in the hills near the lake," the evaluation states,
"resulted in flooding during the monsoon, but the soils retained
very little moisture in the dry season.
Rivers and canals silted
up, making irrigation ineffective."
Mr. Chairman, it has been common knowlege of large parts of
humanity for at least 2,500 years that upland erosion, flooding
and siltation of downstream rivers and irrigation systems are not
only not "beyond human control" but are largely man made and can
be at least partly controlled by watershed management and
reforestation.
It is extremely disturbing that a Bank post-project
evaluation conducted in 1980 and publicized in 1982 should so
completely ignore the key role that widely known and tested
resource mangement techniques could have in preventing similar
project failures.
I am submitting for the record the full text of the excerpts
the Bank has published from the Lake Alaotra project evaluation.
The second project in question is the Nepal Settlement
Project, involving an IDA credit of $6 million which was
disbursed from 1975 through 1982,
He re the Operations Evaluation
Department (OED) correctly and candidly identified the
environmental management problems in the project, which were
SO
direct and obvious that they would be evident to many non-
experts.
1454
The project had the goal of resettling migrants from hill
areas of Nepal, in many instances deforested and eroded, into
pristine tropical forest areas in the country's lowlands, over
18,000 hectares of which were to be cleared.
The timber was to
be sold abroad.
The Operations Evaluation Department called the project a
failure
the economic rate of return was one sixth that
originally estima ted
and the Bank finally cancelled half of
the original credit, still unspent, only in late 1982.
One of
the main reasons for the project's failure was a change in
Nepalese government policy concerning conservation and exports of
scarce timber resources.
In fact, in 1976, only months after the
initiation of the project, the Nepalese government, alarmed by
indications of accelerating nation-wide deforestation, shifted to
an official policy of conservation of all remaining forested
areas.
The Nepalese restricted and then banned all exports of
unfinished and semi-finished hardwood, and withdrew active
support for this forest clearing, timber export and resettlement
scheme.
But the project continued without even minimal attention
being paid to the serious environmental risks of uncontrolled
deforestation, erosion and flooding which were identified as
early as 1974.
Let me cite the analysis of the Bank's Project
Performance Audit Report on the seriousness of these concerns:
" The river system in large portions of
the Terai is extremely unstable, changing
course with every flood and threatening human
settlements within a considerable distance
1455
from existing river beds. where the
surrounding areas are still covered with
forest, the floods are much less
destructive. De forestation thus tends to
greatly increase the erosive impact of floods
and, indeed, the probability of floods
occurring. It was expected under the project
that these concerns would be taken into
account in the siting of villages and of
fields and tracks and that protective forest
would be preserved where required
However, "during project implementation all
trees were felled. Suitable conservation
methods have not been introduced to
compensate for the removal of tree crops.
"Areas were completely clearfelled regardless
of the slope of the land, posing erosion
hazards after removal of the stumps and
creating a future shortage of firewood after
the stumps are used up. The conflict between
agricultural interests and wildlife
preservation remains un resolved."
Recent Nepalese Forestry Department estimates express great
concern about the deforestation and ecological mismanagement that
has been unleashed in the area of the Bank project, predicting
that the entire Terai region will be deforested within 20
years.
The areas that are currently settled have gone in a few
years from pristine forest to the prospect of fuelwood shortages,
and a relatively recent Bank mission suggested that a Terai
Reforestation project be identified to address the problems
caused by the deforestation in which the Bank had a role in
promoting.
The last example I wish to cite is the world Bank Fishery
Sector Policy Paper, issued in December 1982.
Bank sector policy
papers have great importance for the sustainable management of
the natural resources, on which successful long-term economic
development depends.
This is not only because of the large
1456
amounts disbursed in Bank and I.D.A. lending, but, more
importantly, because of the policy influence the Bank exercises
in borrower countries. Thus, the organizations I represent find
it extremely disturbing that the paper either fails to mention
key and widely accepted principles of fisheries management or
refers to them only in an indirect or overly general way.
The
crisis in world fisheries caused by widespread overexploitation
is not addressed, and widely used fishery management concepts
such as maximum sustainable yield and an ecosystem conservation
standard are not mentioned.
More importantly, the Fishery Policy Paper expresses no
clearly stated commitment on the Bank's part to taking specific
actions in its project, country, and sector planning, and policy
dialogue with member governments to ensure that ecologically
sound management measures needed to assure sustained fishery
production are effectively carried out.
The paper was prepared by the Bank's Agriculture and Rural
Development Department and reflects an apparent lack of any
substantial input or review by marine biologists and fisheries
management experts.
Accompanying my statement is a letter from
eight national and international environmental organizations to
the President of the Bank requesting a revision of the Fishery
Policy Paper so that it will incorporate the most basic
principles of sustainable management.
A detailed critique of the
Fishery Paper, with specific references, is also attached.
During our meeting with the President and other high level
1457
officials of the Bank last February 24th, we were pleased to hear
a forthright acknowledgment on the Bank's part that the Fishery
Sector Policy Paper was seriously inadequate, and that our
comments were welcomed as constructive suggestions which the Bank
will actively consider implementing. One high level Bank
official stated outright that the Fishery Paper was "clearly" a
failure in its treatment of resources management and that he
"subscribe(a) to the suggestions [we] made to the Bank."
Thus, we look forward to some indication of specific actions
the Bank plans to take to remedy the serious deficiencies it
acknowledges to exist in the Fishery Paper.
Up to now, however,
we have not received a response from the Bank which reflects the
substance of the comments which were made to us on this matter.
. C.
Need for a congressional Expression of concern to
Accompany the I.D.A. Replenishment
In this testimony. I have only been able to give
isolated examples of what the environmental organizations
perceive to be widespread neglect by the Bank of crucial natural
resource and ecological concerns.
The Bank in its responses so
far has done nothing either to directly answer many of the
questions we have raised, or to give substantive, factual
indications and evidence of concrete actions to remedy
de ficiencies.
We have prepared a brief "Outline of Actions to Bring About
Improved Natural Resources Management and conservation in World
1458
Bank Programs and Projects," which also accompanies this
statement.
Many of these suggested actions directly reflect the
specific pledges made in the 1980 "Declaration on Environmental
Policies and Procedures Relating to Development" signed by the
President of I.D.A.
We believe that I.D.A's role and effectiveness is so
important to the world and to U.S. interests that the Congress
should strongly express, in the report language accompanying
authorization of the 7th U.S. I.D.A. replenishment, its concern
that I.D.A. 's effectiveness in carrying out its tasks is
constrained by inadequate consideration of natural resources and
environmental management.
In our judgment, such language should
state the expectation of the Congress that I.D.A. and the Bank
will undertake forthwith, specific, concrete actions, such as the
ones enumerated in the attached "Outline, " to remedy serious
deficiencies in natural resources and environmental management
which have been reliably identified as a matter of record.
Our recent meeting with the President of the Bank and other
high level officials was encouraging in that the Bank expressed
its strong desire for a continuing dialogue on these concerns,
starting with a series of meetings to be arranged with the Bank's
vice-presidents.
We were disturbed, however, by indications at
the meeting that the main issue at stake for the Bank was
more
one of our "perception" of what the Bank was doing rather than a
real question of substance.
Our statements last June before the
House Banking Subcommittee on International Development
1459
Institutions and Finance and parts of the Bank's response to that
testimony indicate, however, that there are glaring, irrefutable,
inconsistencies between the Bank's official environmental policy
statements and its actual performance in both project and sector
work.
It is not unusual for large institutions such as the Bank to
encounter delays and bureaucratic obstacles to fully implementing
sincere policy commitments made over several years at the highest
level.
The environmental organizations I represent today think
that the Bank's pledges on environmental policies and procedures
relating to development represent a real commitment to concrete
actions, since otherwise the Bank's central mission of
sustainable development will be tragically undermined.
We believe in the proposition that "sustainable development
and wise conservation are not only mutually reinforcing, but
absolutely inseparable goals.'
Thus, continued evidence of
systematic absence of effective measures to implement this
principle in the Bank in the future will lead us to have serious
doubts about that institution's long-term effectiveness and
create pressures within our constituencies to seriously question
the value of U.S. financial support for I.D.A. and the I.B.R.D.
VI.
CONCLUSION
The poverty of nearly half of humanity in the poorest
nations may be, after nuclear war, the single greatest threat to
1460
the economic, ecological and political future of the globe.
The
destruction of life-sustaining ecological systems for short-term
survival is one of the most important effects and causes in the
vicious circle of increasing impoverishment in which many of the
neediest nations are trapped.
The mandate and role of the International Development
Association make it the unique and indispensable linchpin of all
international efforts to address these problems, on which the
fate of the world literally depends. No U.S. bilateral program
can begin to match its potential cost-effectiveness, since every
dollar the U.S. invests in I.D.A. will eventually result in nine
extra dollars invested in in-country projects.
Increased contributions to I.D.A. today may save the U.S. a
great deal by reducing the need for expensive and less efficient
emergency bilateral aid programs in other parts of the world
tomorrow.
Thus, it is difficult to understate the U.s, interest in
promoting the continued and increased effectiveness of I.D.A.
The effectiveness of I.D.A. is seriously menaced by two
threats:
an inadequate 7th u.s. replenishment, and inadequate
attention in I.D.A. projects to management of the natural
resource base, on which sustainable development depends.
The environmental organizations strongly endorse a 7th U.S.
replenishment, which, as
which, as a bare minimum, will not gravely reduce
I.D.A.'s resources in real terms. This would mean an annual U.S.
contribution of at least one billion dollars a year for the next
1461
three years.
The Administration's request of $ 750 million a year
not to speak of a lesser authorization
indicates a tragic
shortsightedness concerning the underlying causes of important
long-term threats to global and U.S. security.
The environmental organizations wish to recall that a U.S.
replenishment of one billion dollars a year would represent an
investment for this county of approxima tely 50 cents a year in
each person living in the neediest countries, or an annual
investment by each U.S. citizen of roughly 5 3/4 cents in the
human welfare and ecological future of half the planet.
Our
decendants may not forgive us if we decide, with all the
information and evidence we have available in the late 20th
century, that this is too much to pay.
We think it is equally essential that the Congress express
its concern that inadequate measures by the World Bank to deal
with the ecological deterioration which forms a link in the
vicious cycle of poverty will tragically undermine I.D.A. 's
mission and raise serious doubts about the Bank's will and
ability to implement its own policy commitments.
Continued neglect by the Bank of effective natural resource
and environmental management is contrary to U.S. bilateral
Foreign assistnace policy and to long term u.s. security
interests.
It is contrary to the interests of the poor in
developing countries and contradicts the high level policy
commitments made by the Bank itself for more than a decade.
1462
Outline of Actions to Bring About
Improved Natural Resources Management and conservation
in World Bank Programs and Projects
I.
INCREASE STAFF ING
A.
Add qualified staff to the Office of Environmental and
Scientific Affairs (DESA) which does not have adequate
personnel to handle its current responsibilities.
B.
Increase qualified personnel trained in natural
resources management in the regional offices and in
both country projects and programs departments.
C.
Streamline procedures to ensure that qualified experts
are hired out of project budgets when OESA or regional
office staff identify the need for natural resources
specialists.
II.
GIVE GREATER PRIORITY TO FINANCING SOUND NATURAL RESOURCES
MANAGEMENT PROJECTS AND PROJECT COMPONENTS SUCH AS:
A.
Watershed management for all projects that depend on
it, including hydroelectric and agricultural schemes.
B.
Small-scale forestry, including fuelwood lots, village
forestry and agroforestry.
C.
Restoration of productivity of lands degraded by
deforestation, waterlogging and salinization.
D.
Population and family planning.
E.
Sanitation and public health.
F.
Inclusion of forestry and integrated pest management in
agriculture and rural development projects when
feasible, with particular attention to safeguards to
prevent pesticide misuse.
G.
Conservation of wetlands, estuaries, mangrove swamps,
coral reefs and other important fish breeding habitats
in all projects affecting coastal zones.
H.
Conservation of pristine natural areas in national
parks and other protected areas to prevent the loss of
genetic diversity and preserve the future biological
capital of borrower countries.
I.
Investment in alternative energy such as solar and
geothermal projects.
1463
III.
ENSURE GREATER ATTENTION TO LONG-TERM NATURAL RESOURCES
CONSERVATION AND MANAGEMENT IN ECONOMIC AND SECTOR POLICY
AND RESEARCH
'
A.
Include natural resources expertise in preparation of
sector policy papers, country economic memoranda, CPPS
and other policy documents,
B.
Incorporate natural resources concerns and expertise in
each stage in the Bank's policy dialogues with
borrowing countries.
c.
Conduct operational research to revise the analytical
framework used to calculate benefits and costs of use
and management of natural resources.
IV.
IMPROVE INSTITUTIONAL INCENTIVES FOR GREATER ATTENTION TO
SOUND NATURAL RESOURCES MANAGEMENT
A.
Add, as a significant factor in evaluation of job
performance of Bank staff and in their career
advancement, the demonstration of full consideration of
natural resources conservation and management.
B.
Require Vice Presidents of the Regions and of the
Operations Policy Staff (OPS) to prepare regular
reports (e.g., bi-monthly) on their progress in
implementing all of the above.
1464
DECLARATION OF ENVIRONMENTAL POLICIES
AND PROCDURE & SLATING TO
ECONOMIC DEVELOPMENT
1
WHEREAS, ECONOMIC AND SOCIAL DEVELOPMENT IS ESSENTIAL TO THE ALLEVATION
OF MAJOR ENVIRONMENTAL PROBLEMS BY PROVIDING FOR AN INTEGRAL RELATIONSHIP
BETWEEN SOCIETIES AND THE ENVIRONMENT, REALIZING ALSO THAT ECONOMC
DEVELOPMENT AND SOCIAL GOALS SHOULD BE PURSUED IN SUCH A MANNER AS TO AVOID
QR MINIMIZE ENVIRONMENTAL PROBLEMS PECULIAR TO IT,
RECOGNIZING THAT, THE MAJOR ENVIRONMENTAL PROBLEMS OF THE DEVELOPING
COUNTRIES ARE NOT NECESSARILY OF THE SAME XATURE AS THOSE OF DEVELOPED
COUNTRIES IN THAT THEY ARE PROBLEMS WHICH OFTEN RELECT THE IMPACTS OF
POVERTY WHICH NOT ONLY AFTECTS THE QUALITY OF LIFE BOT LIFE ITSEL.
CONVINCED, THAT IN THE LONG RUN ENVIRONMENTAL PROTECTION AND ECONOMIC
AND SOCIAL DEVELOPMENT ARE NOT ONLY COMPATIBLE BUT INTERDEPENDENT AND
MOTUALLY RONSORCONG.
ACKNOWLEDGING, THAT THE NEED FOR ENVIRONMENTALLY SENSITIVE AND
RESPONSIBLE DEVELOPMENT HAS BECOME MORE IMPORTANT AND URGENT IN UGHT
OF INCREASING POPULATION AND CONCOMITANT PRESSURES ON THE EARTH'S RESOURCES
AND LTE-SUPPORTING ECOLOGICAL SYSTEMS IN SOME AREAS.
ACKNOWLEDGING, THE SOVEREIGN RIGHT OF GOVERNMENTS TO DETERMINE THEIR
OWN PRIORITIES AND DEVELOPMENT PATTERNS.
RECALLING, THAT THE STATES WHICH ADOPTED THE DECLARATION OF THE UNITED
NATIONS CONFERENCE ON THE HUMAN ENVIRONMENT (STOCKHOLM, 1972) STATED THEIR
COMMON CONVICTION (PRINCIPLE 25) THAT THEY WILL ENSURE THAT THE INTERNATIONAL
ORGANIZATIONS PLY A CO-ORDINATED, FFICIENT AND DYNAMIC ROLE IN THE PROTECTION
AND IMPROVEMENT OF THE ENVIRONMENT,
1465
CONSIDERING, FURTHERMORE, THAT INTERNATIONAL DEVELOPMENT ASSISTANT
INSTITUTIONS HAYE, ALONG WITS THE MEMBER GOVERNMENTS. A RESPONSIBILITY TO
2NSURE THE SUSTAINABILITY OF THE ECONOMC DEVELOPMENT ACTIVITIES FINANCED
BY THEM,
THE BORE, THE UND DESIGN DECLARED THAT THE
LE RLATTORM THEIR SUPPORT FOR THE PRINCIPLES AND RECOMMENDATIONS
FOR ACTION OF THE UNITED NATONS CONFLYCS
WILL, TO THE IST OF THE ABILITIES, ANDEAVOUR 70:
ie INUOTE PROCEDURES FOR SYSTEMATIC EXAMINATION OP AL DEVELOPMENT
ACTIVITIES CLUDING POLICI, PROGRAMM AND PROJECTS UNDER CONSULATION
FOR FINANCING TO ENSURE T&AT APPROPRIATE MEASURES ARE PROPOSED FOR COMPLIANCE
WIT: SEGMON I ABOVE
2 ME TO CO-OPERATIVE NEGOTIATIONS WITH GOVERNMENTS AND LELYANT
NATIONAL ORGANIZATIONS AND AG@YCISS, 20 DYSCAS!EGRATION OF APPROPRIATI
OMVIRONMENTAL MEASURES IN THE DESIGN AND IMPLEMEYTATION OF ECONOMIC
DEYSLOPMYT ACT.SS:
2 OVDE TECHNICAL ASSISTANCE, NCLUDING TRAINING, ON ENVIRONMENT.LL
HATTERS TO DEVELOPING COUNTRIE. AT TH2R LEQUEST, THUS DEVELOPING THEIR INDI
GEYZO OS CAPACT, AND FACULTATING TECHNICAL COOPERATION BETWEEN DEVELOPING
COUNT:
GYE ACTIVE CONJO BRATION AND, I APPROPRIATE SUPPORT PROJECT
PROPOSALS THAT ARE SPECIALLY DESIGNED TO PROTEC., REHABIL TATE MANAGE OR
OTHERYE FLANCE THE HUMAN ETVIRONMENT, THE QUALIT? OF LIFE AND 2SSOURCES
:: STO SLATV
DITATE AND/OR OTHERWISZ CO-OPERATION RESEARCH AND STUDIES
LEADING TO MPROVEET OF PROJECT. APPRAKSAL IMPLEMENTATION AND VALUATION
LETHODOLOGIES, INCLUDING COST-JENEFIT ANALYSIK. OF YVIRONMENTAL PROTECTION
HEASURE
34-045 0-84-93
1466
6.
SUPPORT THE TRAINING AND INFORMING OF OPERATIONAL STAFF IN THE
ENVIRONMENTAL DIMENSION OF ECONOMIC DEVELOPMENT;
.7. PREPARE, PUBLISE AND DISSEMINATE DOCUMENTATION AND AUDIO-VISUAL
MATERIAL PROVIDING GOWANCE ON THE ENVIRONMENTAL DIMENSION OF ECONOMIC
DEVELOPMENT ACTIVITIES
ADOPTED AT NEW YORK ON I FEROARY 1980.
TEE AFRICAN DEVELOPMENT BANK
Xwme Danker Pardwar
Pudd cat
THE ARAB BANK FOR ECONOMIC DEVELOPMENT IN AFRICA
Chadu Ayari
President
THE ASIAN DEVELOPMEYT BANK
Turoichi Yoshida
President
THE CARBBEAN DEVELOPMENT BANK
William Dom
Pradidaat
THE INTER-AMERICAN DEVELOPMENT BANK
Antonio Ortiz Mona
President
1467
THE WORLD BANK
Bobas S. MeNam
Proton
THE COMMISSION OF THE LOROPEAN COMMUNITIES
Roy Jokes
President
THE ORGANIZATION OF AMERICAN STATUS
Alaedro OrrILA
ary-Generai
SE ONIT XATIONS DEVELOPMENT PROGLIMME
Bradford Marne
Administrator
THE ONITID NATIONS STVORONME PROGRAMME
Harga K. Talba
Buty Director
1468
Lake Alaotra: A Failure in the Paddy Fields
In 1970, Madagascar signed an agreement for a $5 million
IDA credit for the irrigation of 12,000 hectares around Lake
Alaotra. An IDA team calculated that rice production on this
area could possibly triple in 10 vears. Production, it was felt.
could also be increased by double cropping rice or encour-
aging farmers to plant fodder and other crops after the rice
harvest.
In 1980, five years after the project was completed, an
independent evaluation team from the Bank concluded that
few of the original objectives were accomplished. Rice pro-
duction was up only 14 percent; farm incomes had barely
increased, while inequities in wealth had grown, adding to
social tensions. The project's rate of retum, calculated initialk
at 11 percent, and estimated at completion at 22 percent as
the price of rice boomed worldwide, actually may prove to
be negative.
The project, in short, made "no significant contribution"
to the economy of Madagascar and its 9 million people. Too
much focus was placed on irrigation development, and broader
responsibilities for the development of the Lake Alaotra re-
gion were neglected. The project suffered from severe tech-
nical problems in managing difficult peat soils. Most seri-
ously, the project increased tension and disrupted traditional
ties and disciplines, at a time of couninwide political and
social turmoil. The area's traditional inhabitants resented the
distribuuon of land to outsiders. Traditional values of sharing
and village cooperation have been eroded, and dependence
on the government increased. The evaluation report listed
other detailed factors contributing to the failure of the proj.
ect, among them:
system did not produce the water required to plant
secondary crops. Double cropping of rice turned out to
be technically impossible, as no suitable short-cycle va-
rieties could be developed. Farmers preferred to graze
cattle on rice stubble, rather than raising fodder crops,
so that the pilot cattle-fattening component of the project
did not work either.
Faulți Design and Execution. Canals were dug lower
than the fields they were meant to irrigate: in peat soils
they sank even deeper. In rainted areas, some marshy
land was reclaimed but excessive drainage destroyed
the peat soils and accelerated weed growth. When peas-
ants attempted to eradicate weeds by burning, the peat
soils often caught fire, further reducing productivity.
Farmers complained of receiving less water than before,
and yields in many areas have actually dropped.
. Institutional Weakness. The project's executing agency
did not possess the technical and managerial resources
required to implement a major project. Furthermore,
because of low vields, farmers were unwilling to repay
land recovery charges. Their arrears rose from 41 per-
cent of their annual charges to 91 percent in five years.
Without these revenues, the project agency was unable
to maintain the irrigation works and provide the needed
extension services.
Inadequate Superi'ision. With more frequent and inten.
sive supervision as an input to the management process,
the project might have avoided some of the pitfalls. More
supervision expertise by IDA, for instance, might have
led to a resolution of the peat soil issues.
Factors beyond Human Control. Longstanding erosion
in the hills near the lake resulted in flouding during the
monsoon, but the soils retained very little moisture in i
the dry season. Rivers and canals silted up, making ir-
rigation ineffective.
Wrong Assumptions. The appraisal report overestimated
the supply of labor available in the area. Migrant labor
had to be used during critical peak periods of rice cul-
tivation, namely at transplanting and harvest time. But
this labor supply proved unreliable. Some of these prob-
lems have been eased by permanent immigration into
the project area, but this had added to social tensions
and other problems.
• Unrealistic Goals. Cultivation of an off-season crop never
succeeded because poor management of the irrigation
While the project may achieve some increase in rice pro-
duction, it will not be because of good project design. Rather,
other unintended consequences-immigration, population
growth, and intensive cultivation for subsistence rather than
cash will be responsible. However, there are plans to re-
habilitate the scheme and strengthen the project agency as
a part of a general effort to increase production in the region.
1469
NATIONAL WILDLIFE FEDERATION
1412 Sixteenth Street, N.W., Washington, D.C.
NATIONAL
20036
2024-797-6800
March 27, 1984
TM
WILOLIFE
FEDERATION
Statement of the
National Wildlife Federation
Concerning the Seventh U.S. Replenishment of the
International Development Association
Before the
Subcommittee on International Economic policy of
the Senate Committee on Foreign Relations
The National Wildlife Federation submits this statement to
express support for the 7th Replenishment of the International
Development Association, on the condition that the World Bank
undertake in the near future measures to adequately implement
its official policy commitment to sound natural resources
management.
The National Wildlife Federation (NWF) is the nation's
largest conservation organization, with over 4 million members
and supporters.
The Federation is dedicated to the wise use
of natural resources and believes that appropriate use and
management of natural resources underlies sustainable economic
development.
We are providing assistance to conservation
organizations, forming all over the developing world, which we
hope will lead to a growing constituency for natural resource
management and conservation in each country.
One of our goals
is to build an awareness that conservation is basic to
development and not a luxury.
This month at the annual meeting of the Federation our
51 state and territorial affiliates unanimously passed a.
1470
resolution calling upon the World Bank and other multilateral
banks to carry out their responsibility to build conservation
into all their programs and projects.
A copy of this
resolution is attached to this statement.
Our concerns include extinction of wildlife, loss of soil
productivity, salinization of agricultural soils, erosion, and
pesticide abuse, which are just a few of the environmental.
problems the Third World faces today.
These problems stem from
the rapid development which has taken place in these countries,
often without consideration of environmental ramifications.
Such unsound development not only affects local environmental
quality and human welfare, but global natural resources and
worldwide economic, social, and political stability as well.
The ecological stability of the Third World is heavily
influenced by multilateral development banks (MDBS) especially
the World Bank.
These institutions provide funding for projects
in such environmentally sensitive areas as agriculture, electric
power generation, industry, and transportation.
World Bank projects are frequently implemented without
adequate consideration of their environmental effects.
But
perhaps even worse,
some projects fail to produce expected
economic benefits because their planning failed to include
sound resource management.
Lack of environmental planning has
been a significant factor in the failure of IDA projects in
Madagascar and Nepal.
Large-scale agriculture projects
involving intensive pesticide use have created serious human
health and environmental hazards.
In the Sudan, resistant
1471
strains of insects are appearing in IDA project areas,
threatening the economic value of the projects.
The World Bank does not have adequate procedures or staff
to address these environmental factors in the project planning
process.
The local impacts of unsound development projects are
readily apparent.
The long-term global effects are perhaps
less immediately obvious but may ultimately be more costly.
Razed tropical moist forests, and habitat loss throughout the
world, reduce global biological diversity and therefore eliminate
untapped natural resources.
Pesticides used in developing
countries contaminate food exported to the developed world and
poison migratory wildlife.
Erosion of the natural resource
base in the Third World may have serious long-term consequences
for global stability.
In February of 1980, the chief executives of the major
multilateral development banks, including the World Bank, signed
a joint "Declaration of Environmental Policies and Procedures
Relating to Economic Development."
In this document, the
executives pledged that their institutions would include
environmental assessment and evaluation in their project
planning procedures.
They also pledged to support projects
designed to protect and enhance environmental quality and
natural resources.
It is apparent, however, that in over four
years there has been little improvement in policy or practices.
NWF strongly believes that long-term, sustainable economic
development is not possible without sound environmental manage-
ment and conservation.
Therefore, though we support the
1472
7th U.S. replenishment of IDA, our support is conditioned on
the expectation that the World Bank will undertake in the near
future actions to implement its policy commitment to sound
natural resources management.
Some of the needed measures are
described in the outline which accompanies Mr. Rich's statement
on behalf of a number of national environmental organizations.
We request that the Congress express its concern about the
World Bank's implementation of its environmental policy in
language accompanying the 7th U.S. IDA replenishment.
1473
NATIONAL WILDLIFE FEDERATION
1412 Sixteenth Street, N.W., Washington, D.C. 20036
202_-797-6800
اندازه
TM
Resolution No. 17
MULTI-LATERAL DEVELOPMENT BANKS
AND NATURAL RESOURCES CONSERVATION
WHEREAS, the Vaited States is the single most important donor to such
international institutions as the World Bank, the Inter-American Develop-
nent Bank and the Asian Development Bank (known as multi-lateral develop-
ment banks (MDBs ]); and
WHEREAS, one of the main purposes of these banks is to assist the
economic betterment of less developed countries and help to raise the
standard of liviag of their peoples by such projects as road and dam
building, clearing of tropical rain forest for mono-cultures and farn
developments; and
WHEREAS, conservation and sound management of natural resources are
vital to long-term sustainable economic development, in such areas as
soil, watershed and fisheries management and prevention of deforestation
and desertification, public health and conservation of genetic resources;
aad
WHEREAS, the chief executives of each of the multi-lateral development
banks declared that "in the long run environmental protection and economic
and social development are not only compatible but interdepeаdent and
mutually reinforcing" and that "international development assistance
institutions have a responsibility to ensure the sustainability of
the economic development activities financed by them;" and
WHEREAS, each of these banks pledged in the United Nations "New York
Declaration" of Febrary, 1980, to: "easure integration of appropriate
environmental measures in the design and implementation of economic
development activities;" support natural resources conservation and man-
agement projects; support training of both bank and borrowing-country
personnel in environmental areas; and to systematically examine all
development activities to ensure compliance with the conservation princi-
ples and recommendations of the United Nation's Conference on the Human
Environment (Stockholm, 1972); and
WHEREAS, although the World Bank has been a leader in beginning to
implement this pledge, aevertheless, none of the MDBs has made the ade-
quate staffing, policy and procedural commitment necessary to fulfill its
obligations under the New York Declaration; and
WHEREAS, the actual progress of the MDBs in meeting the goals of the
New York Declaration has been the subject of special Congressional over-
sight hearings and of an investigation by the U.S. Treasury Department;
and
1474
WHEREAS, improvement in living standards of many developing countries,
through ecologically sustainable programs, for example in Central America,
has implications for the national security of the United States;
NOW, THEREFORE, BE IT RESOLVED that the National Wildlife Federation,
in annual meeting assembled March 15-18, 1984, in Atlanta, Georgia, calls
upon the multi-lateral development banks to fulfill the pledge they made
in the New York Declaration; and
BE IT FURTHER RESOLVED that the National Wildlife Federation calls
upon the United States Government, through the Treasury Department, to
use its voice and vote, on the Board of Directors of each bank, to vigor-
ously promote: 1) sound natural resources management policies and proj-
ects to complement long-term economic goals; and 2) internal changes
within the banks concerning leading procedures, shaping of economic
development strategy, and appropriate staffing levels, to enable the banks
to carry out the pledge of the New York Declaration.
1475
NATIONAL WILDLIFE FEDERATION
1412 Sixteenth Street, N.W., Washington, D.C.
20036
202-797-6800
TM
EDERAT
June 28, 1983
Statement of Barbara J. Bramble
On Behalf of the National Wildlife Federation
before the
Subcommittee on International Development Institutions & Finance
of the House Banking Committee
Environmental Impacts of Projects and Policies
of the Multilateral Development Banks
On behalf of the National Wildlife Federation, I am pleased
to have the opportunity to appear today, to discuss the environ-
mental aspects of the activities of the multilateral lending
institutions.
These are major international institutions
charged with development assistance to poor nations.
Their roie
is to lend money at preferential rates for projects and programs
which should provide the basis for the gradual improvement of
the standard of living of developing nations.
But frequently,
the unintended consequences of many of these projects actually
make the situation worse for the very people they are trying to
help.
The reasons for this are many, and would require a long
discussion of development theory to uncover.
But one of the
reasons for the difficulties and failures of many development
projects, as well as entire programs, is the lack of under-
standing among planners of how natural resource systems function.
In many instances the planners apparently fail to recognize the
4inth HIVUAL MEETING HAPCH 15-18, 198+ Omni !acernational Hotel Atlanta, Georgia
no/
1476
real opportunities and constraints in which the projects must
operate.
It is this subject which we have come to discuss today.
:
The National Wildlife Federation (NWF) is the nation's
largest conservation organization, with over 4.2 million members
and supporters.
The Federation is dedicated to the wise use
of natural resources.
The NWF International Program was formed
because we believe that appropriate use and management of natural
resources underlies sustainable economic development.
We are
providing assistance to conservation organizations, forming
all over the developing world, which we hope will lead to a
growing constituency for natural resource management and con-
servation in each country.
One of our goals is to build an
awareness that conservation is basic to development and not a
luxury.
Currently, we are learning from our colleagues in other
countries that this process of awareness building is complicated
by the entrenched, traditional development thinking of influential
international organizations, including the multilateral development
banks (MDBS).
For example, a bank's country programme paper
may be used by the local government as its development strategy
and major planning tool.
Yet this document may contain little
information or analysis of the status of the natural resource
base of the country or the proper role of resource management
in the overall development plan.
In addition, the decisions of
the MDBs pave the way for other, perhaps even larger, investments
by commercial banks, in the same or related projects.
The
1477
presence of the MDBs provides investment confidence.
Therefore,
the influence of the MDBs on development thinking, and directly
on natural resources, goes way beyond the dollar amounts
actually invested by them.
We are concerned because we are seeing important decisions
being made without necessary information about their consequences.
These decisions are adversely affecting millions of people as
well as the natural environment.
NWF wants to make very clear that we believe in the necessity
of economic development in the less developed countries.
Improvement in the standard of living for these nations
is just
as crucial for the long-term conservation of natural resources,
as sound resource management is to sustainable development.
So
we are seeking to improve the chances of success for long-term
development, not to stop it. We believe that if the development
programs of the MDBs can be directed toward sound resource manage-
ment and appropriate technology, they will influence other lenders
in that direction as well.
Let us discuss a few specific examples to illustrate some
of the current problems, and then we would like to recommend
improvements.
Water Projects
One category of projects which cause serious problems is
large scale water projects for irrigation and hydroelectric
power production.
These projects have been, and probably still
are, conceived and carried out without full appreciation of the
constraints of the predominantly tropical ecosystems in which
34-045 0-84-94
1478
they are located. The litany of unintended consequences of many
of these projects is familiar and will be elaborated in more
detail by others today.
But I will outline a few of the more
serious impacts that have been experienced.
Irrigation schemes cause severe environmental impacts and
social disruption.
By their nature they interrupt the seasonal
pattern of river flooding in which rich silts are deposited to
renew the lands' fertility.
Often thousands of people are
forcibly moved to less productive land to continue subsistence
farming, while the better land is converted to mechanized mono-
cultures. Even if the people are allowed to stay, the scheme
1/
may support fewer families than already farmed the region.
If the irrigation scheme is designed for the production
of export crops instead of food, the net nutritional status of
the region may actually decrease.
Converting subsistence farms
to monocultures increases their vulnerability to pests, and
2/
initiates the treadmill of mass applications of pesticides.
Hundreds of thousands of irrigated acres are losing
productivity due to waterlogging and salinization because of
inadequate drainage, for example in India and Pakistan.
IT See description of the Rahad project, in The World Bank by
Cheryl Payer, pp. 281-2.
2/ Instead of investigating the utility of integrated pest
management and the intercropping system used for years by
local farmers, the World Bank has shackled all participants
in the irrigation schemes to rigid regimes of specific
seeds, fertilizers and pesticides. These rules are enforced
by the power to withhold credit and insurance. The Diama
Dam project in Senegal allows only commercial rice, the
Rahad project, cotton and groundnuts. The latest develop-
ments at a similar cotton project in the Sudan, called
Gezira, should be an expensive warning. (See p. 7 below).
1479
Downstream water quality is reduced due to lack of dissolved
oxygen, pesticide contamination and lower flows.
This adversely
affects river and coastal fisheries which are often principal
sources of protein.
Hydroelectric power reservoirs usually occupy large areas
of bottomlands.
In some cases the project inundates the only
fertile farmland for miles around.
The two dams planned for the
Artibonite Valley in Haiti will flood land that could feed
up to 60,000 people.
Several projects have flooded major
parts of the homeland of entire tribes of indigenous peoples,
as did the Bayano Dam in Panama.
The Volta River project in
Ghana flooded 80,000 people from their homes.
Since most land
suitable for crop production is already under cultivation, the
residents must be moved to more marginal areas. In other cases,
the reservoirs flood important tracts of tropical forests, which
may contain potentially valuable species, found nowhere else;
Panama's Bayano Dan is an example.
. And ironically, the
resulting power production is not available to rural people,
but is carried out of the region for urban and industrial uses.
Reservoirs covering tropical moist forests are prone to
severe water quality degradation due to decay of the forest
3/
vegetation over a period of perhaps decades. Thus, reservoir
fisheries may not develop as a source of protein to compensate
for that which was inundated.
37
Lake Brokopondo in Surinam is the classic case, in which
hydrogen sulphide was produced by the decaying vegetation,
causing workers at the dam to wear gas masks for two years.
The lake water was acidified in this process, corroding the
dam's machinery.
1480
One of the most dismaying consequences of many of these
projects has been the major increase in debilitating diseases,
such as shistosomiasis and onchocerciasis, among the people
living along the banks of the reservoirs or canals.
Disease
rates have reached 70 and 80 percent of these populations in
Africa, and the problem is growing in Latin America.
Another effect is common, but not as direct:
shifting
cultivators, forced out of the bottomlands (if the area was
populated). or else entering the area for the first time via
access roads to the project, move up onto the surrounding hill-
sides to cut forests and grow crops as best they can.
Bare
hillside plots, subjected to tropical rain and sun, erode
quickly and lose their fertility.
The farmers must move on,
to continue the deforestation process.
Meanwhile silt
accumulates in the reservoirs, and damages power generation
machinery or irrigation works.
The project life may be
shortened, the forest, fisheries and soil resource base of the
region is degraded, and the food production potential for the
4/
people of that area does not improve, and perhaps declines.
Unless the end use of the electricity, or the irrigation
water is labor-intensive industry or agriculture, it is hard
to see the benefits to justify the natural resource destruction.
47 The World Bank has begun to consider this factor in its
project planning and has recently required setting aside
watershed protection areas as national parks and forest
reserves to reduce deforestation. This has been done in
Colombia at the Guavio nydro project, and in the Phillipines
in the Pantabangan and Magat watersheds.
1481
But often the result is mechanized monocultures, mostly of export
crops such as cotton in Senegal and the Sudan, or industries
which can employ only trained, and often foreign, labor such
as the aluminum smelter subsidized by Ghana's Volta River
project.
And the monocultures may not be sustainable, as
illustrated by the Gezira irrigation scheme in the Sudan.
There,
pesticide use to protect the cotton crop has so unbalanced the
natural system of insect predators (requiring more and more
pesticides) that the cost of imported chemicals now exceeds the
foreign exchange earned by the cotton.
This cotton program
has been the cornerstone of the economy of the Sudan.
The World Bank has put almost $6 billion into hydro dams
between 1980 and 1982, and almost $1 billion into irrigation
and drainage in 1982 alone.
The IDB spent half a billion dollars
on hydroelectric power in each of 1981 and 1982.
Current plans,
apparently, are to continue this process.
Cattle Ranching
For this category of loans, the benefits are even more
difficult to discern.
Both the World Bank and the Inter-American
Development Bank (IDB) have put considerable sums of money into
cattle production, particularly in Central America and Brazil.
They have made loans to finance cattle ranches, construct beef
packing plants and protect livestock against diseases.
Lending
for livestock operations
has
been
the single most
important type of credit activity in the agriculture sector,
1482
according to the World Bank's policy paper on agricultural
credit in 1975.
Between 1971 and 1977 the World Bank and the
IDB provided more than $1 billion to Latin America for these
purposes.
Most of the livestock loans go toward the develop-
ment of large ranches.
This beef is being produced for export,
much of it to the United States.
The environmental and social
consequences of these projects are almost all adverse.
Much of the expansion is taking place on land that is not
suitable for cattle grazing. Instead, tropical forests are
being cut down, on a huge scale, and converted to grasslands
47
for a short period of years. Many of these projects must be
abandoned within 10 years .Grassland productivity of these soils
is extremely low, permitting yields as low as 22 pounds of beef
per hectare per year.
By contrast, intensive agro-forestry
techniques could produce thousands of pounds of corn and other
5/
vegetables per hectare per year, on a sustainable basis.
In other cases, where tropical forests are not being cut
down, preferential credit for cattle operations is encouraging
the conversion of the limited supplies of fertile cropland to
cattle production.
Yet the region's per capita beef consumption
47 Tropical forest soils are, by and large, infertile. The
nutrients reside principally in the tree cover itself, and
are quickly recycled from fallen leaves and branches back
into living trees. So when the forest is cut and burned,
the nutrients in the ashes, and the top inch or so of soil,
can be used for only a few years until they leach out or
wash away in heavy rains.
5/ Nations, James D. and Daniel J. Komer, "Immigrants and Beef
Exports: Deforestation in Central America", Cultural
Survival Quarterly, Spring 1982, p. 10.
1483
is actually declining, so there is no benefit to the majority
of the population.
Farmworkers, displaced as cropland is
turned into pasture, must seek out marginal lands, often
tropical forests and hillsides, to grow food.
This adds to
the destructive impact of direct forest conversion, especially
degradation of watersheds and remaining tropical forest
habitat.
In addition, cattle ranching requires very little labor,
so it contributes to already massive unemployment or
underemployment.
Many factors combine to indirectly encourage the expansion
of cattle ranching in Central America, including U.S. demand
for lean, inexpensive beef for processed products and fast food
hamburgers. But the banks are contributing directly, by
financing these projects.
The cattle ranches are not very productive at their best,
and compare badly with even traditional peasant agriculture,
much less intensive agro-forestry.
It is not in the best interest
of anyone, except the individual landowners, for these lending
programs to be continued.
Transmigration Schemes
Another category of bank lending is financial assistance
to governments who wish to move millions of landless people into
undeveloped tropical forest regions.
The projects are advocated to relieve the population
pressure in crowded areas, and to open up vast undeveloped
1484
resources.
Brazil and. Indonesia are implementing two of the
most grandiose of these schemes, both with the assistance of
the World Bank.
The problems and impacts of these projects
are strikingly similar.
In both, hundreds of thousands of
people are being moved into tropical forest regions each year.
Tools, seeds, roads, and in some cases housing, village centers,
schools and clinics are provided.
Instead of planning a forest-
based economy, project proponents intend that the land be
cleared for farming.
So to perfect their homestead title,
each immigrant family must clear a certain proportion of their
land immediately.
But very little of this land is suitable
for farming.
In Indonesia, the crowded island of Java has a rich
volcanic soil, and a successful system of intensive agro-
forestry, which supports 65% of Indonesia's population on 7%
of its land.
But the transmigration project is designed to
move up to 15 million people to tropical forest regions on the
thinly populated outer islands.
Estimates vary, but even fair-
quality soil probably accounts for less than 5% of the total
land area of the outer islands.
Good-quality soil, defined as
that which would still be fertile in 20 years, accounts for less
than 1% of the area.
The plan is for the immigrants to grow
upland rice, which requires regular applications of fertilizer
and water.
Thus, to have any chance for success, these farmers
must have access to reliable credit to buy fertilizer and
irrigation to bring water throughout the growing season.
1485
Neither are likely.
Meanwhile, invaluable tropical forest is
being cut for these settlements,
The farmers' yields so far
have been low, because of their inability to buy sufficient
fertilizer; and in some areas the rodent population, having
lost its forest habitat, is happily destroying the rest of the
61
crop.
In Brazil, too, many of the settlements are failing, for
lack of expensive inputs, and lack of training in the special
and difficult task of farming soils of former tropical forests.
The Polonoreste project is designed to settle Brazil's vast
Northwest, by clearing nearly 2 million hectares (mostly tropical
moist forest) near the Bolivian border. In Brazil's earlier
attempts to colonize the Amazon basin along the Transamazonica
Highway, only 7% of the settlements appear to be successful
after several years.
This project is endangering several indigenous tribes,
some of whom have only recently been contacted by outsiders.
The tribal people are vulnerable to decimation by diseases,
such as influenza and measles, and loss of the land which
sustains them.
To its credit, the World Bank has acted to
ameliorate some of the worst aspects of the Polonoreste project
by insisting on the demarcation of substantial areas as national
parks and tribal reserves.
But we cannot ignore the fact that valuable ecosystems are
being destroyed, for unsustainable uses, in an attempt to
5
New Scientist, 22/29 December 1977, p. 804.
}
!
!
1486
relieve political pressures caused by overpopulation and
unemployment.
A resource with great potential for sustained
management is being destroyed or permanently degraded for a
short-term use.
Ecologists and land managers are just beginning
to learn how to use tropical forests over the long-term without
degrading their productivity.
The forests should not be
destroyed before we learn to extract their value on a
sustainable basis.
Ironically, in Indonesia, the most ambitious transmigration
plans would relocate less than Java's annual population increase
of 2.6 million.
Thus, each year the government faces the same
pressures with less resource base to rely on.
Clearly
forestry-based alternative sources of income, and labor-intensive
industry on Java would be projects more in the long-term
interests of Indonesia.
Lessons to be Learned
I have gone through this list, not to accuse the sponsors
of these projects of malevolent intent; nor in hope of stopping
all such projects.
I think planners can learn to avoid some of
the worst errors of the past and build in environmental safeguards.
Indeed, the World Bank has learned much from these past experi-
ences, and its environmental staff is publicizing improved
7/
analytical techniques. But I want to point out what this past
7/ See e.gi!
See e.g., "Environmental Optimization in Hydrodevelopment of
Tropical Rainforest Regions", Robert J. A. Goodland,
Man Made Lakes and Human Health, 1979, Panday, R.S. (ed.)
1
1487
history demonstrates :
(a) environmental planning and sustainable
natural resource management must be part of overall analysis and
strategic economic planning; (b) there is a need for full
assessments of the environmental impacts of development projects
before decisions are made; (c) there must be evaluations of
impacts found after project completion; and (a) these studies
must be made public and information widely distributed.
We still find government and development agencies pushing
for large-scale water projects, cattle expansion, and trans-
migration schemes, without appropriate environmental safeguards.
They are either uninformed about the potential impacts, which
may limit the project's economic future and degrade their
natural resources, or else they are advocating the projects
for other reasons, such as to strengthen their claims in a.
8/
territorial dispute. In either event, public disclosure of
the environmental assessment would permit the true costs and
benefits of the projects to be evaluated.
At the very least,
such information would encourage the U.S. directors on the
banks' boards to take positions consistent with the stated
goals of our policy to target development assistance to the
poor.
87
The upper Mazaruni hydroelectric project in Guyana is
proposed at least in part to defend western Guyana against
territorial claims by Venezuela. Brazil's Polonoreste
project apparently is hoped to avoid border disputes with
Bolivia.
1488
One of the basic problems is still that the function of
the renewable resource base is not understood.
This seems to
be the case in Indonesia, where the difference between the
capability of the soils to sustain agricultural crops between
Java and the other islands is profound.
Yet the assumption
still is common that the Java home garden system can be simply
transplanted.
In other cases, engineers and economists may
still be thinking of damage to the renewable resource base as
an "externality".
But we are not talking about expensive but
reversible mistakes, such as permitting industrial plants to be
built without pollution control equipment.
(By and large, such
plants can be retrofitted, although often at a much greater
cost, than that, of proper original design.)
Here we are instead addressing long-term degradation or
loss of resources such as agricultural soil, fisheries, water-
shed protection, future reservoirs of biological diversity,
and irreversible harm to indigenous peoples.
These people and
environmental factors are not external to these projects:
they
are crucial to how, or whether, the projects can achieve their
central purpose.
Progress at the World Bank
Some analysts have concluded that the banks really do not
consider long-term environmental issues as part of their concern,
and that they are more interested in maximizing financial
9/
returns to governments and "well placed individuals".
97 Payer, Cheryl, The World Bank, p. 295.
1
1489
Certainly these serious adverse effects are rarely acknowledged
even as unfortunate side effects of the banks' "real" work.
Public relations reports and brochures may indicate that appro-
priate environmental analysis is undertaken when necessary,
but (with significant exceptions) this is not carried out in
practice.
The significant exception is the Office of Environmental
and Health Affairs of the World Bank.
This office is attempting
to implement four vital functions, and it is making remarkable
inroads, considering its size.
But a staff of four or five
professionals cannot possibly accomplish what is needed.
They
are responsible for:
(1) writing, and "lobbying" through the
bureaucracy, analyses and recommendations of the World Bank's
policies regarding environment and natural resources, seeking
higher level recognition and support for serious environmental
planning; (2) producing guidelines, handbooks and criteria to
help bank personnel take natural resource factors into account
in project preparation; (3) producing training materials and
seminars for bank economists and engineers, many of whom do not
yet understand the relevance of these factors to their work; and
(4) evaluation of the environmental aspects of most bank projects
as they come through for approval.
Any one of these tasks
would swamp an office this size.
The staff is also trying to
cajole other development banks to follow their lead.
But they are up against thousands of development economists
and engineers.
Their project evaluation responsibility is
1490
especially difficult, since they have little time to perform
the review, and they do not have the benefit of environmental
staff in the field to help them spot problems. They have held
up several projects in order to force inclusion of environmental
safeguards.
But politically that is difficult, and they cannot
do it very often.
We know from experience that appropriate environmental
planning starts at project conception, and continues through
evaluation of alternatives, and project design. Catching a
project at the end, just before approval,
always means that
the environmental factors are seen as expensive add-ons and
delays; and they will be resisted for that reason, more than any
objection to their value.
Thus, the World Bank environmental
office can improve a few disastrous projects, but as currently
structured, and with its tiny staff, it cannot effectively
promote ecologically sustainable development.
Recommendations
The ultimate objective of our recommendations is sound
natural resource management over the long term.
We are not
interested in the production of documents or the institution
of procedures for their own sake. But we recognize that large
bureaucracies can only act on the basis of established rules
and procedures.
Therefore the intermediate objectives are
process-oriented.
1491
We also recognize that the activities of the MDBS are
responsible for only part of the global degradation of natural
resources, and that other actors are involved, if not as
easily identified.
But the Federation believes that we can only
make progress if we work methodically on each part of the over-
all problem, as it is isolated and understood.
We are therefore
not singling out the MDBs as villains or assigning blame.
But
we do see some serious problems that they are causing, or
perpetuating, through lack of environmental planning.
If that
can be remedied, it will contribute toward sustainable economic
development.
1.
Internal Review
We hope that as a result of this hearing the Subcommittee
will enumerate needed changes and additions to the instructions
from the Treasury Secretary to the United States executive
directors of the banks, in order to promote improved environ-
mental planning and analysis.
Therefore, we invite the
Subcommittee to consider the following recommendations to be
adopted as goals of the United States representatives to the
banks:
a)
All the banks should create policy and evaluation
offices similar to the World Bank's Office of
Environmental and Health Affairs, and staff them
adequately for their workload.
b)
These offices should supervise the implementation of
procedures to incorporate environment and natural
1492
resource planning in all sector and country development
strategy analyses.
For example, the World Conservation
Strategy (produced by UNEP, the World Wildlife Fund,
the International Union for the conservation of Nature
and Natural Resources) should be addressed and adapted
as part of each country's strategic planning.
c)
Environmental planners should be added to all project
evaluation teams so that environmental factors and
appropriate analysis of alternatives are taken into
account along with economic factors from the beginning
of project analysis.
The World Bank is on the right track in several of these
areas, but the others do not appear even to have started.
2.
Strategy Regarding Tropical Forests
It seems `appropriate for this Subcommittee to consider
the effects of certain types of development activities, and to
develop guidelines for the U.S. directors of the banks in the
exercise of their "voice and vote" on bank decisions.
Several
such guidelines are needed, and we offer here one example,
regarding tropical forests (TMF) :
a)
It should be the policy of the United States to promote
only sustainable use and management of tropical forests.
1)
Prudent management would dictate that, while we
still know so little about how TMF work and how to
manage them, development within TMF should be
minimized.
1493
2)
There is enough unavoidable invasion of TMF
currently underway, by landless poor and illegal
timber cutters, that all purposeful, controllable
invasion should be eliminated.
But in any event,
all such developments must be limited to tree crop
projects or agro-forestry, to resemble as closely
as possible the natural system.
Therefore, the
United States should vote against all cattle ranch-
ing, migration or annual crop assistance projects
that affect tropical forests.
b)
Appropriate alternatives that the United States should
support include:
1)
organic farming research, extension and credit
programs in non-forest areas;
2)
extension and research to support existing small
family farms (up to 3 hectares);
3)
transmigration to non-forest areas;
4)
tree farms and other rural energy projects;
5)
small watershed projects to supply power and irriga-
tion needs;
6)
projects to rehabilitate watersheds, irrigation
systems and degraded lands;
7)
rural and urban sanitary water supply and
rehabilitation of leaking water systems;
8)
labor-intensive industry;
9) family planning.
1494
Additional similar policies, such as to support fisheries
enhancement projects only within the context of riverine and
coastal land management plans and the sustainable yield of the
fisheries, should be developed.
3.
Legislation
Along with Bruce Rich and Brent Blackwelder, who are also
testifying today., I have evaluated the elements that would
constitute appropriate legislation by which the United States
could guide the banks along the road to better evaluation and
use of natural resources for sustainable development.
The
National Wildlife Federation believes the following concepts
should be included as goals for United States policy:
a)
Establishment of procedures to incorporate natural
resources as basic factors to be taken into account in
planning development strategy for a sector, a country,
or a region.
b)
Inclusion of environmental planners as part of project
evaluation teams.
c)
Availability to the public of environmental analyses
of projects before project approval.
d)
Post-construction analysis of environmental costs and
benefits of projects and programs, which also must be
made public.
e)
Inclusion of environmental stipulations in the list of
loan conditions, for appropriate oversight and enforce-
ment, along with engineering and economic conditions.
1495
To reinforce the importance of these goals, the United States
must be prepared to
a)
vote against any project that does not have an adequate
environmental assessment available for scrutiny by the
U.S. Government prior to the project vote; and
b)
vote against any project which fails to meet criteria
for ecological sustainability, protection of indigenous
people, and conservation of critical natural resources.
The Federation stands ready to work with the Subcommittee
to turn these concepts into workable legislation.
.
We must remember that the whole concept of development
assistance is relatively new,
It grew out of the destruction
of Europe in World War II.
Thus, in little over 30 years, the
industrialized world has been trying to learn how to make a
process of change happen for other people when we really do not
understand that process ourselves.
So far, development agencies
have been only partially successful in some places, at great
cost in damage to the natural resource base, and with little
benefit to the people they are trying to help.
We are on a
learning curve, I hope, and this hearing is part of
a continuing
process of our collective comprehension of how to encourage
sustainable development.
1496
The development assistance organizations have to learn to
do it right soon, or we will all suffer, even in the industrialized
world.
True national security for us in the United States
depends upon improving the standard of living within the
countries that are our neighbors, all around the globe that is
our common home.
Thank you for the opportunity to address the Subcommittee
on this important subject.
1497
Natural Resources Defense Council, Inc.
1725 I STREET, N.W.
SUITE 600
WASHINGTON, D.C. 20006
202 223-8210
New York Office
122 EAST 42ND STREET
YEW YORK, N.Y. 10168
212 949-0049
IVestern Office
25 KEARNY STREET
SAN FRANCISCO, CALIF. 94108
415 421-6561
January 24, 1984
Mr. A.W. Clausen, President
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Dear Mr. Clausen:
We are writing on behalf of eight national and international
environmental organizations with over five million members in
North America and the Developing World. Our concern is the World
Bank Fishery Sector Policy Paper issued in December, 1982.
Bank sector policy papers have great importance for the
sustainable management of natural resources, on which successful
long term economic development depends. This is not only because
of the very large scale of Bank lending, but also because of the
policy influence the Bank exercises in borrower countries. The
Bank is rightly viewed to be, in most instances, a leader among
international development agencies in formulating and
implementing ecologically sound policies and procedures.
Thus, we are disappointed that the Fishery Sector Policy
Paper fails to mention a number of key and widely accepted
principles of fisheries management or refers to them only in an
indirect or overly general way.
The crisis in world fisheries
caused by widespread overexploitation is not addressed, and
concepts such as maximum sustainable yield and an ecosystem
conservation standard are not mentioned. The paper lacks the
rigor which we have come to expect from official Bank statements
on technical matters.
We find particularly disturbing the lack of any reference to
most of the fisheries management principles set out in the World
Conservation Strategy, endorsed by the President of the Bank in
1980, and in the Law of the Sea Treaty, which embodies the
arduously developed consensus of almost all Bank member countries
on a number of issues critical to sustainable fisheries
management.
Most importantly, the paper expresses no clearly stated
commitment on the Bank's part to taking specific actions in its
project, country, and sector planning, and policy dialogue with
Vew England Office: 16 PRESCOTT STREET • WELLESLEY HILLS, MA. 02181.617 237-0.172
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100% Recycled Paper
1498
member governments to ensure that ecologically sound management
measures needed to assure sustained fishery production are
effectively carried out. The Fishery Sector Policy Paper lacks
the vigorous and systematic commitment to conservation set forth
in policy speeches by the Bank's two most recent presidents and
in the Bank signed 1980 Declaration on Environmental Policies and
Procedures Relating to Development.
We respect fully request that the Bank revise the Fishery
Sector Paper to incorporate these concerns. We are offering the
attached comments, with specific chapter and page references, in
the hope that they will be considered in such a revision. In
addition, organizations with in-house fisheries expertise, such
as the National Wildlife Federation, would be willing to offer
more detailed comments once a revision is begun.
We suggest that in the future, draft policy papers
concerning important natural resource issues be circulated more
widely among environmental specialists and organizations to
provide a forum for timely communication on critical ecological
concerns.
Thank you very much for your attention to this matter.
Sincerely,
--------
Thomas B. Stoel, Jr.
Director, International Project
Natural Resources De fense Council
Michael Bean
Director, Wildlife Project
Environmental De fense Fund
:
Bruce M. Rich, Attorney
International Project
Natural Resources De fense Council
Fran Lipscomb
Director, International Activities
National Audubon Society
Barbara Bramble
Director, International Program
National Wildlife Federation
Roque Sevilla Larrea
President, Fundacion Natura
Quito, Ecuador
Jack Lorenz
Executive Director
Izaak Walton League of America
Liz Raisbeck
Legislative Director
Friends of the Earth, U.S.
Brent Blackwelder
Director, Water Resources Policy Center
Environmental Policy Center
CC:
Katherine Fuller, World Wildlife Fund U.S.
Tom Lovejoy, World Wildlife Fund U.S.
Michael Wright, World Wildlife Fund U.S.
1601 Connecticut Avenue, N.W.
Washington, D.C. 20009
:
1499
1
Mr. Ernest Stern, Senior Vice President, Operations
Mr. S. Shahid Husain, Vice President, Operational Policy Staff
Mr. Montague Yudelman, Director, Agriculture and Rural Development
Mr. Visvanathan Rajagopalan, Director, Projects Policy Deaprtment
Dr. James A. Lee, Environmental Advisor
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Mr. James Conrow
Office of Multilateral Development Banks
Robert T. Banque
Office of Multilateral Development Banks
U. S. Treasury Department
15th & Pennsylvania Avenues, N.W.
Washington, D.C. 20002
The Honorable Jerry Patterson, Chairman
Subcommittee on International Development Institutions
and Finance
Committee on Banking, Finance and Urban Affairs
U.S. House of Representatives
Washington, D.C. 20515
Lynne Corn
The Honorable Mike Lowry
Member of Congress
1206 Longworth Building
Washington, D.C. 20515
1500
:::
COMMENTS:
WORLD BANK FISHERY SECTOR POLICY PAPER
Chapter 1:
Status and prospects of World Fisheries.
This chapter fails to mention what we believe to be the two
most important factors and policy issues concerning the status
and prospects of world fisheries during the past decade:
overexploitation and habitat destruction.
According to the World
Conservation Strategy (prepared by IUCN in collaboration with FAO
and UNESCO with assistance and advice from UNEP and WWF),1)
"Overfishing is the main threat to marine living resources and a
significant threat to fresh-water ones"
(WCS 4.4).
The Strategy
also notes that coastal wetlands and shallows, which provide
essential habitats for two thirds of the world's fisheries, "are
being destroyed the world over, with severe effets on the
economies that depend on then most closely."
(WCS 2.10)
Overfishing is mentioned only twice, in other chapters in
the Paper, as a cause
a cause of either full exploitation of stocks or of
declines in the total catch of some species (pp. 25, 40), but the
real magnitude and policy implications of the problem are never
addressed.
Again, according to the World Conservation Strategy,
because much utilization of fisheries is not sustainable, their
- .-- -- --
1/
IUCN: International Union for the Conservation of Nature and
Natural Resources, Gland, Switzerland; FAO: Food and
Agriculture Organization of the United Nations, Rome, Italy;
UNESCO: United Nations Educational, Scientific and Cultural
Organization, Paris, France; UNEP: United Nations
Environment Programme, Nairobi, Kenya; WWF: World Wildlife
Fund, International, Gland, Switzerland.
1501
contribution to national diets and incomes is likely to
diminish.
The result of past and present over fishing is that the
annual world marine catch is 15-20 million tons (or about 20%-
24%) lower than it might otherwise have been, and at least 25 of
the world's most valuable fisheries are seriously depleted." (WCS
4.3)
Chapter I of the Paper attributes the decline in growth of
.
world fisheries supply in the 1970's to "the dramatic drop in the
catch of anchoveta in the Pacific Ocean, off Peru and Chile." (p.
13) It does not mention the consensus expressed in the reputable
scientific literature on the reasons for this fisheries
debacle : over fishing and insufficient attention to ecological
data (such as effects of the El Nino current) in determining and
enforcing allowable yields. (see Idyll, 1973; Payne, 1977 p.
452)
The chapter makes a passing reference to the possibility
that "rebuilding and better management of currently depleted or
heavily fished stocks (especially anchoveta and herring)" could
increase world fisheries production up to 25 million metric tons
(p. 12), again without either mentioning the over fishing and lack
of sustained yield management which has decimated fisheries
worldwide (especially anchoveta and herring). (See Payne, 1977;
Idyll, 1973; May et al., 1979). More importantly, this statement
and the rest of the Paper ignore growing scientific evidence that
many depleted fisheries may never be rehabilitated because
seriously over fished marine ecosystems often become permanently
altered so that species of commercial importance are replaced in
their ecological niches by other species of limited use to humans
84-045 0-84-95
1502
(May et al, 1979; Payne, 1977; Idyll, 1973).
Moreover, harvesting of multi-species ecosystems such as
fisheries may lead to discontinuous, "catastrophic" collapses
which are counter-intuitive and irreversible.
(May et al, 1979;
May, 1977)
"Since these catastrophic changes are seldom, if
ever, predictable in a quantitative sense, and since they can be
expected to occur in almost any severely exploited ecosystem, the
need for conservation and contingency planning is emphasized."
(May et al., 1979).
Chapter II:
Changing Conditions for World Fisheries.
The second chapter mainly focuses on issues and implications
associated with establishment of 200 mile Exclusive Economic
Zones (EEZS) in international law.
Thus, it is all the more
surprising that the Fisheries Sector Policy Paper
a major
policy document of a United Nations family institution
should
so completely ignore the relevant provisions of the Law of the
Sea Treaty concerning management of fisheries in the EEZ.
The
United Nations Convention on the Law of the Sea (UNCLOS)
represents the codification of more than a decade of high-level
policy discussions concerning the management and exploitation of
marine fisheries by nearly all of the participating members of
the World Bank.
In all probability, this treaty will have
entered into force by the time many new Bank fisheries projects
are ready for implementation, making the Policy Paper's disregard
1503
of its provisions all the more distressing.
UNCLOS contains 320 articles and annexes.
Two articles (56
and 57) define the EEZ and set forth the sovereign rights that
pertain to it, codifying what has already become a fact under
customary international law:
control by coastal states of most
of the fish resources of the world.
More than forty additional
articles, however, set forth agreed policies directly and
indirectly relating to management of fisheries resources in the
EEZ. Significantly, most of these provisions address
environmental and ecological concerns.
In particular, Article 61 addresses the major management
issues associated with exploitation of EEZ fisheries.
Article
61.2 provides that each coastal state is to ensure, through
proper conservation and management measures, the prevention of
overexploitation of living resources in its EEZ; and Article 61.3
specifically states that coastal states shall take measures to
maintain or restore populations of harvested species at levels
which can produce the maximum sustainable yield (MSY).
Article
61.3 includes a list of qualifying factors which coastal states
can take into account in addition to MSY in setting allowable
catch limits; some of these factors are economic (e.g.,
particular needs of coastal fishing communities) and others are
environmental, such as the interdependence of stocks.
Article
61.4 requires that the coastal state take into account effects on
species associated with or dependent on the harvested species
with the view that populations of dependent or associated species
be maintained or restored
at a level where their reproduction
1504
is not seriously threatened.
The principle set forth in Article 61.4'-- sometimes
referred to as an "ecosystem conservation standard"
was
incorporated into the most recent major regional fisheries
convention, the Convention for the Conservation of Antarctic
Marine Living Resources (CCAMLR), which regulates fishing in the
Southern Ocean surrounding Antarctica.
This convention has as
signatories many of the world's leading fishing nations,
including Japan, Chile, the USSR and Norway.
with respect to
Article 61, one international legal commentator noted that "What
is of particular importance in these provisions is that they
apply to all species, whether they are the subject of a
commercial fishery or of no economic importance, and that they
contain the obligation to regulate direct or indirect effects of
fishing on these species so that their populations be maintained
at sufficiently high a level to make their extinction
impossible....(states are) bound to preserve species not for
their immediate economic value but because of the role they play
in the ecosystem" (de Klemm, 1981).
In as much as Article 61 sets forth management principles to
prevent overexploitation, Article 62 sets forth the principle of
"optimum utilization" of living resources in the EEZ so as to
avoid underexploitation of resources in a hungry world.
Under
62.1, states are to determine what part of the allowable catch of
target species they wish to harvest in their respective EEZs, and
then allow other states to harvest the remainder, provided, of
course, that all states follow the strict conservation principles
1505
set forth in
Article 61.
In UNCLOS, as in the World Conservation Strategy,
conservation (including conservation of non-commercial species)
and optimum utilization are inextricably dependent on one another
and linked:
conservation is the prerequisite for rational
utilization.
Incredibly, this critical policy principle is never
articulated in the Bank's Fishery Sector Policy Paper;
conservation is mentioned only once, in Chapter 4, as a "benefit"
of fisheries development rather than its sina qua non.
Moreover, an entire part of UNCLOS
part XII
deals with
"Protection of the Marine Environment."
Article 192 establishes
a general obligation of states to protect the marine environment,
and Article 197 obliges states to cooperate in formulating
international standards, rules and practices to bring about that
end.
Article 194.5 provides that states take measures to protect
and preserve fragile or rare marine ecosystems and the habitats
of depleted or endangered marine species.
Nowhere in the 79
pages of the Sector Policy Paper are these universally recognized
marine ecological concerns mentioned.
In addition, both UNCLOS (Article 206) and the World
Conservation Strategy emphasize the importance of environmental
assessment by coastal states of all activities, land-based or
marine, which may have harmful effects on the marine
environment.
Article 205 of UNCLOS obliges states to communicate
reports of these assessments "to the competent international
organizations which should make them available to all States."
The Policy Paper does include (p. 45, Chapter 4) a full paragraph
1506
on the need for a cross-sectoral approach in planning so as to
take into account impacts of industrial, energy or agricultural
activities on fisheries resources.
However, exactly how the Bank
plans to ensure this
mandatory early environmental assessment
is one of the more commonly accepted means worldwide
is
neither made clear here, nor later in the Policy Paper in Chapter
5, "The Role of the World Bank.'
Finally, the Fishery Sector Policy Paper makes no mention of
the growing number of Regional Seas treaties and Action Plans
associated with the Regional Seas Programme of the United Nations
Environment Programme (UNEP).
This program has promoted a number
of international agreements and protocols to address problems of
environmental management and assessment in the world's major
regional seas including problems associated with management and
conservation of fisheries stocks and their habitats. Seas for
which the littoral countries have adopted Action Plans and signed
regional marine environmental management treaties include the
Mediterranean, the Caribbean, the Arabian-Persian Gulf, the Red
Sea and Gulf of Aden, West Africa, and the East Asian Seas.
To summarize:
Chapter Two
and the entire Fishery Sector
Policy Paper
ignores many of the major resource management
issues associated with extension of the EEZ, issues which have
been identified and agreed upon by the vast majority of Bank
member states in UNCLOS, in regional agreements, and by the
President of the Bank in 1980.
These issues include adoption of
a modified standard of Maximum Sustainable Yield, and/or of an
"ecosystem conservation standard" to maintain or restore
1507
harvested populations, conservation of non-target, non-harvested
species dependent on marine ecosystems, optimum utilization (on a
conservation base) of EEZs; and protection of habitats of
depleted, rare or endangered marine species.
The issues
discussed in Chapter Two are limited mainly to questions of
micro-economics ("the type of industry to employ; the amount to
invest in supporting infrastructure," etc.) (p. 24)
Reference is
made to devising and enforcing regulations (p. 25) without ever
mentioning the principles on which such regulations must be
based.
Overfishing is mentioned (pp. 24-25) as a constraint to
potential development of stocks, rather than as the catastrophic
consequence of past development and management based on short
term micro-economic considerations instead of on scientific,
biologically sustainable principles. These principles have been
incorporated into the more recent international fisheries
agreements such as UNCLOS and CCAMLR.
Chapter 3:
Structure and Dynamics of the Industry.
Nowhere in this chapter or in the rest of the paper is there
mention of the critical importance of intact coastal wetlands and
shallows--especially mangroves and estuaries--for the economic
sustainability of world fisheries, both off-shore and coastal.
According to the World Conservation Strategy, the life cycles of
species utilized by two-thirds of the world's fisheries are
dependent on the ecological integrity of these endangered coastal
1508
ecosystems which serve as spawning, nursery and foraging grounds
(2.10).
In some tropical and semi-tropical areas, such as the
Gulf of Mexico, up to 97% of commercially exploited species are
dependent on these habitats.
The Paper's vague reference to the
need for cross-sectoral planning on p. 45 is neither explicit
enough nor sufficiently focused to indicate any serious and
meaningful consideration of this crucial policy issue.
Surely, a
major objective of World Bank fisheries policy should be to
ensure that non-fisheries sector projects do not destroy or harm
the biological underpinnings of future fishery development.
Chapter 4:
Development Objective, constraints and options.
Conservation of marine resources is described as
a
development objective (pp. 39-40) or benefit (p. 6) among others,
along with such economic and social goals as increasing incomes
and foreign exchange, and improving nutrition.
But conservation
is not, especially in the case of management of living resources,
a post hoc benefit, nor is it only one objective among, or
equivalent to, others. It is, in the words of the World
Conservation Strategy, "that aspect of management which ensures
that utilization is sustainable and which safeguards the
ecological processes and genetic divesity
essential for the
maintenance of the resources concerned."
(WCS 1.6, emphasis
added)
Conservation has been recognized worldwide as the
1509
prerequisite and first principle of natural resource development,
which makes possible the sustainable realization of other
objectives such as increased foreign exchange, improved
nutrition, or increased incomes.
According to the World Conservation Strategy, conservation
of living resources is to be achieved through the realization of
three principal objectives :
1.
The maintenance of essential ecological processes and
life support systems (it has already been noted that, for
fisheries, coastal wetlands and shallows are particularly
critical habitats);
2.
The preservation of genetic diversity (addressed by
Articles 194.5, and 61.4 of UNCLOS);
3.
Sustainable utilization of species and ecosystems (for
which
.....MSY and an "ecosystem conservation standard" are
particularly important).
It is surprising and disappointing to find no mention of
these three principles in the Chapter dealing with development
objectives or anywhere else in the paper.
Moreover, the problem of incidental capture of non-target
species is never raised nor addressed.
Incidental take is
responsible for the destruction and waste of over 7 million
metric tons of fish a year (more than 10% of total world annual
1510
fish harvests in recent years) (WCS 4.5).
Several species of sea
turtles are threatened with extinction through incidental catch,
and incidental catch of cetaceans, expecially dolphins and
porpoises, is greater than intentional harvesting. Surely, the
Bank should make a connitrent to ensure that measures to deal
with this problem be considered in its fisheries projects.
These
measures include modifications of fishing gear and methods, and
establishment of closed seasons or protected areas for some
fisheries.
International agreements such as the Inter-American
Tropical Tuna Convention already require the adoption of such
methods.
The discussion in Chapter 4 on constraints to fisheries
development also gives little consideration to the enormous
importance of conservation.
Mention is made only that
"aggressive fishing practices can...alter the reproductive cycles
of species" and that overfishing can cause problems in fisheries
dealing with migratory or mobile species.
This discussion fails to point out the following fundamental
constraints to fisheries development, constraints which are
threats to the resource itself:
overexploitation, habitat
destruction, and pollution.
The options and strategy that should follow from these
conservation objectives and constraints (which the paper omits)
should therefore include:
assurance "that the principal
management goal for estuaries, mangrove swamps and other coastal
wetlands and shallows critical for fisheries is the maintenance
of the processes on which the fisheries depend (wcs, 5.7);
1511
"adoption of conservative management objectives for the
utilization of species and ecosystems (WCS, 7.41);" and reduction
of "incidental take" as much as possible (wcs, 7.5)."
Chapter 5:
The Role of the World Bank.
This chapter notes that the Bank will rely heavily on
outside agencies
especially FAO
to provide technical
assistance in the fisheries sector.
In light of this statement,
it is especially surprising that no mention is made of the World
Conservation Strategy and its principles, since the WCS was
prepared in collaboration with FAO, as well as endorsed by the
President of the World Bank.
On the very last page there is a single paragraph which
refers in very general terms to the possibility that the Bank
"can" or "may" play a role in disseminating information on the
environmental consequences of development projects and in
promoting natural resource conservation programs or
institutions.
This is not the systematic and substantive
commitment to the essential role of conservation in the
development of natural resources that has been set forth in the
speeches of the two most recent Bank presidents, the World
Conservation Strategy, UNCLOS, and the 1980 New York Declaration
on Environmental Policies and Procedures Relating to
Development.
In the recent words of the Bank's president,
in order to be sustainable, development must include vigorous and
1512
studied attention to resource management"
(Clausen, p.10).
"For
sustainable development and wise conservation are, in the end,
mutually reinforcing--and absolutely inseparable--goals."
(Clausen, p. 19)
1513
References
Beddington, R. and May, R.M., "Harvesting Natural Populations in
a Randomly Fluctuating Environment, Science, Vol 197, pp. 463–65
(1977).
Clausen, A.W., "Sustainable Development:
Fairfield Osborn Memorial Lecture, 1981.
The Global Imperative,'
" in The
De Klemm, C., "Living Resources of the Ocean,
Environmental Law of the Sea, Johnston, D.J., ed., pp. 71-180,
IUCN, 1981.
Holt. $.J. and Talbot, L.M., "New Principles for the Conservation
of Wild Living Resources, Wildlife monograph No. 59, The Wildlife
Society Inc., 1978.
Idyl, C.P., "The Anchovy Crisis," Scientific American, vol, 228,
NO. 6, pp. 22-30 (1973).
International Union for the conservation of Nature and Natural
Resources (IUCN), World Conservation Strategy: Living Resource
Conservation for Sustainable Development, 1980.
Johnston, D.M. and Enomoto, LM.G., "Regional Approaches to the
Protection and Conservation of the Marine Environment,
" in The
Environmental Law of the Sea, Johnston, D.J. ed., pp. 285-362,
IUCN, 1981.
Johnston, D.J., "The Environmental Law of the Sea: Historical
Development, in The Environmental Law of the Sea, Johnston, D.J.
ed., pp.17-71, IUCN, 1981.
Loftas, T., "Where have all the anchoveta gone?," New Scientist,
vol, 55, NO. 813, pp. 583-586 (1972).
May, R.M., Beddington, J.R., Clark, C.W., Holt, S.J., Laws, RM.,
"Management of Multispecies Fisheries," Science, vol. 205, pp.
267-77 (1979).
May, R.M., "Threshold and breakpoints in ecosystems with a
multiplicity of stable states," Nature, Vol. 269, pp. 471-77
(1977).
Payne, I., "Crisis in World Fisheries," New Scientist, voi, 74,
No. 1053, pp. 450-452 (1977).
United Nations, The Law of the Sea, United Nations Convention on
the Law of the Sea, 1983.
United States Council on Environmental Quality and United States
Department of State, The Global 2000 Report to the President,
volumes, 1980.
1514
THE STATE OF
INDIA'S ENVIRONMENT
1982
******************...--***"
A CITIZENS' REPORT
---".y
CENTRE FOR SCIENCE AND ENVIRONMENT
NEW DELHI
A
1515
A Statement of Shared Concern
With efforts to conserve the country's ecological bank still minimal, India is
rapidly becoming a vast wasteland. Indians cannot now close their eyes to this
continuing degradation of their natural environment.
As this report shows, the list of environmental problems is too long and the
human costs of environmental degradation just too high to allow for any
complacency.
It is false to argue that environmental conservation acts as a brake on
economic development. On the contrary, the experience gained in the last three
decades has convincingly shown that there can be no rational and equitable
economic development without environmental conservation. Environmental
degradation invariably results in increased economic inequalities in which the
poor suffer the most. Environmental degradation and social injustice are two sides
of the same coin. The human condition and the state of the environment are
closely related to each other.
The kind of economic and social development we want will ultimately
determine whether the environment will be conserved or further destroyed. For
human beings the environment is not just a pristine collection of natural entities
that must be admired, but it is one vast, complex entity that offers a range of
natural resources for their use, for their economic and social growth and to meet
their material and spiritual aspirations.
In a country like India, with a high population density and high level of poverty,
virtually every ecological niche is occupied by some occupational or cultural hu-
man group for its sustenance. Each time an ecological niche is degraded or its
resources appropriated by the more powerful in society, the deprived, weaker
sections become further impoverished. For instance, the steady destruction of our
natural forests, pasture lands and inland and coastal water bodies has not only
meant increased economic poverty for millions of tribals, nomads and traditional
fisherfolk, but also a slow cultural and social death: a dismal change from rugged
self-sufficient human beings to abjectly dependent landless labourers and
squalor-stricken urban migrants. Current development can, in fact, be described
as the process by which the rich and more powerful reallocate the nation's natural
resources in their favour and modern technology is the tool that subserves this
process.
The resource-use pattern initiated by the current development process is,
thus, not just attacking and destroying the environment the wildlife, forests and
fisheries, for instance but also the vast majority of human being, especially the
poor, and their cultures. A development process that does not care for human life
cannot care for the human environment or vice-versa. The world's cultural
diversity is no historical accident. It springs from the world's biological diversity.
And today both stand equally threatened. With each passing day, both the
physical shape and the cultural milieu of Bombay nudges closer to New York.
The product-use pattern encouraged by the current development process is
such that it is separating people from their immediate environment: the artificial
has become the more desirable, the imported environmental misfit has become
the more appropriate. This has gone to the ridiculous extent that even such an
intimate biological behaviour as breastfeeding is being disrupted by commercial
propaganda and mothers, in increasing numbers, are becoming dependent on a
supply of multinational milk power, which is lethal when mixed with polluted
water.
!
1516
min.
As an aggressively high-consumption oriented culture intensifies amongst a
well-to-do minority across the world, it is creating a rat race amongst the rest, both
between and within nations, to become a part of it. The desire to join this growing,
multinational culture is so strong that for most people it has left no freedom to
choose. The individual has no alternative.
Our growing capabilities in science and technology have helped us to acquire a
technological literacy that allows us to converse with the rest of the world as
equals and has rightly earned us international prestige amongst the community of
nations. But science and technology cannot be allowed to impose their own value
system on society. On the contrary, the use of science and technology in society
has to the governed by a human, socially appropriate value system. Otherwise we
will get a rampant materialism, the extreme symbol of which is the young man
amongst us who does not even mind burning his bride if he does not get the
promised scooter and refrigerator in dowry.
The culture exported from the so-called developed countries, which we are
adopting unthinkingly is at the heart of the crisis. We never ask the question:
developing towards what? This growing multinational culture must be destroyed
because it leads to economic chaos, increased social disparities, mass poverty and
filthy affluence in coexistence, environmental degradation, and ultimately civil
strife and war.
To get a balanced, rational development and to preserve the environment, a
new development process is needed. The biggest intellectual and political
challenge of our times is to articulate and demonstrate this new kind of
development.
It is a reflection of our prevalent culture that development has come to mean a
mere increase in consumption and production of material goods and services.
Development is not a product that can be obtained with economic growth. On the
contrary, it is a process which enables all levels of society - individual,
community and nation to become more self-reliant and more independent in
choosing and deciding their own future.
Building up self-reliance at the level of the community, without which self-
reliance at the level of the nation is, illusory, is not possible without the
restoration of human beings, relationships with their immediate environment, and
this will require an enormous change in current education, production and
product-use patterns, and management and governance of environmental
systems and public services. Participatory management, for instance, will be
essential. Health, forestry and energy experts all over the world now realise that
neither the delivery of basic health services to control the daily epidemic of
diarrhoea nor the establishment of community woodlots to increase the supply of
cooking energy is possible without community participation. Multinational
chemicals are less important for the health problems of developing countries than
immediate environmental sanitation, the immediate local herbal wealth and care
and development of the immediate agricultural resources to provide adequate
nutrition,
Women invariably suffer more from unbalanced development and
environmental degradation. As our understanding of both feminist and
environmental concerns grows, we find that women are more interested in the
restoration of the environment, which provides the family with its basic needs,
than their cash-hungry men. Especially within families where basic needs are
gathered, it is women who are left to fend for the family. The new development
process will demand that women and men share equal power in society.
· * * .
1517
Thus, an environmentally enlightened development process necessarily
demands a new culture, which will be:
egalitarian, with reduced disparities between rich and poor and power equally
shared by men and women;
resource-sharing;
participatory;
* frugal, when compared to the current consumption patterns of the rich;
* humble, with a respect for the multiplicity of the world's cultures and lifestyles;
and,
* it will aim at greater self-reliance at all levels of society.
The environmental crisis, born out of a global maldevelopment, affects all
countries of the world, North or South, East or West. But no country can wait for
the rest of the world to find a solution. In India, particularly, the problems are too
pressing. We strongly believe that a sustainable egalitarian development is
possible if we keep in mind what Mahatma Gandhi once said: There is enough in
the world for everyone's need but not enough for everyone's greed.
Anil Agarwal
Claude Alvares
Shalinaz Anklesaria
Ramesh Awasthi
Bhubanesh Bhatt
Chandi Prasad Bhatt
ujjayant Chakravorty
So B. Chaphekar
Ravi Chopra
Darryl D. Monte
Usha Deka
Bharat Dagra
Madhar gadgil
Rajiv Gupta
Ashish Kothari
smitu kothari
Sharad kulkarni
John kurien
Kailash Malhotra
Thomas Mathew
Anupam Mishra
sunita Narain
Sevanti Ninan
Naren Panjwani
Urmila Pingle
Moko Prasad
Mahesh Rangarajan
Purnima Rao
A. Ko'Dunn' Roy
Kalpana Sharma
Ravi Sharma
Shyam jha
Navin Jugal
K.Po Kannan
84-045 0-84-96
1518
!
Senator MATHIAS. Thank you very much.
What have you seen as the contributions that the multinational
institutions have made toward helping to protect the environment
of the developing world? What sort of positive record is there to
point to?
Mr. Rich. I think in the World Bank especially that there is a
positive element. In my statement I emphasize the negative be-
cause we think that much more needs to be done. But I think it is
important to point out that the World Bank hired an environmen-
tal adviser as early as 1970. That was 2 years before the Stockholm
Conference on the Human Environment. And in 1973 it set up an
Office of Environmental Affairs, and this was before the U.S.
Agency for International Development devoted more attention to
environment and natural resources concerns.
The Bank has also in other sectors done very innovative work.
For example, there is a 1978 forestry-sector policy paper which
takes into account in great detail the ecological and natural re-
source management concerns associated with forestry projects.
So there has been progress. What we are saying is that much
more progress needs to be accomplished.
Senator MATHIAS. But the fact that they have been able to do
some things demonstrates that they might be able to do more, does
it not?
Mr. Rich. Well, it certainly does. I think that the Office of Envi-
ronmental Affairs within the Bank is a tiny office. There are only
five staff positions. Indeed, there is only one person who is involved
in a systematic way in reviewing the more than 315 new projects a
year, totaling over $15 billion and credits, and the hundreds of on-
going projects.
Even so, this office has been, given its staffing levels and its in-
stitutional constraints, it has been effective.
Senator MATHIAS. Where would you like to see the greater efforts
placed in the future? What do you see as the major environmental
challenges that face the developing world, let's say, over the next
decade, and how would you like to see the World Bank help ad-
dress those challenges?
Mr. Rich. Well, the world currently, the developing world, par-
ticularly IDA countries, face great environmental threats, mainly
from desertification, which is a tremendous problem in Africa, as I
mentioned, and through the effects of deforestation in the tropics,
which is proceeding at an alarming rate.
The multilateral development institutions, and particularly the
World Bank, could do a great deal to address these problems by
concentrating more in the forestry area and, above all, insuring
that their large-scale infrastructure projects, such as hydroelectric
projects, roadbuilding activities, and large-scale rural development
projects, are as environmentally sound as possible.
In the past that has not always been true, as a couple of the ex-
amples I cite in my prepared statement illustrate. To accomplish
this, there would be a need for better procedures within the World
Bank to insure environmental review of all the projects, prepara-
tion of guidelines and checklists for sectors where these do not
exist, and above all adequate staffing to insure that the environ-
WAS
D
1519
:
mental and natural resources factors can readily be reviewed on a
systematic basis, which is not occurring now.
Senator MATHIAS. I referred a minute ago in talking with Mr.
Bergsten to the Solomonic decision that we have to make in this
committee. But I know that there are other decisions in which
people have to choose very painfully between different objectives.
At a time when there is financial limitations in almost every
part of the world, what advice would you give to a government
which must choose between feeding people and planting trees, one
that simply does not have the capacity to do both at the same
time?
Mr. Rich. Mr. Chairman, I am glad you raised that question, be-
cause that is often a question which comes up in the discussion of
development priorities. I think it is a somewhat incorrect or not
completely accurate statement of the problem.
The question is not a choice between feeding people and natural
resources management. I think that the choice is really that eco-
nomic development is absolutely necessary for these countries and
that inadequate attention to natural resources management will
tragically undermine the sustainability of that economic develop-
ment.
So if you want to insure that you have the capacity to feed
people 30 or 40 years from now, you had better pay attention in
designing these projects to management of soil erosion, deforest-
ation of watersheds above hydroelectric projects, deforestation, and
1
1
.
1
SO on.
::
:
I think it is interesting to note that the singlemost important
IDA recipient, India, has shown much more attention to its envi-
ronmental problems than in the past. I have here a document enti-
tled “The State of India's Environment, 1982" [indicating), which
was prepared by a nongovernmental organization of Indian scien-
tists, and academics, and environmentalists, using only Indian ex-
pertise and finance. It points out the serious environmental and
natural resource problems in India and of some development
projects as an absolutely essential part of the development and eco-
nomic challenges facing that country.
So I think the two are inextricably related.
Senator MATHIAS. We are very grateful to you for being with us
here today and for expressing a point of view that is often, if not
overlooked, at least not adequately represented in these consider-
ations. So I think you supply a very important element to the dis-
cussion.
Thank you very much.
Mr. Rich. Thank you very much, Mr. Chairman.
Senator MATHIAS. Very well. There being no further business,
the subcommittee will stand in recess until the call of the Chair.
[Whereupon, at 12:07 p.m., the subcommittee adjourned, subject
to call of the Chair.]
SECURITY AND DEVELOPMENT ASSISTANCE
TUESDAY, MARCH 27, 1984
UNITED STATES SENATE,
COMMITTEE ON FOREIGN RELATIONS,
Washington, D.C.
The committee met, pursuant to notice, at 2:10 p.m., in room SD-
419, Dirksen Senate Office Building, Hon. Charles H. Percy (chair-
man of the committee) presiding.
Present: Senator Percy.
The CHAIRMAN. I want to apologize to my distinguished col-
league, Senator Tower, for my tardiness. We were in a luncheon
that just couldn't seem to accelerate.
We very much appreciate Senator Tower being here to testify on
assistance programs for Turkey, Jordan, and Pakistan. These are
programs that have not been without controversy in the past, and
we very much value the chairman of the Armed Services Commit-
tee taking the time to be here to advise us as to his views on these
particular programs.
We welcome your appearance, Senator Tower, and you can start
right in.
STATEMENT OF HON. JOHN TOWER, A U.S. SENATOR FROM
TEXAS
Senator TOWER. Thank you very much, Mr. Chairman. This is
the second time that you have been courteous enough to permit me
to appear before your committee this year. I only wish that you
would give me an opportunity to reciprocate on the hospitality, and
perhaps you will come to testify before the Armed Services Com-
mittee.
I have not had an opportunity to say so until now, but congratu-
lations on your substantial win, and I am confident that it will be
translated into an election victory this fall.
The CHAIRMAN. We had, as we call, a little friendly discussion
among the Republican family. Now that is behind us, and we go on
to the next stage.
Senator TOWER. Mr. Chairman, as you are aware, I visited the
Middle East and Southwest Asia in January of this year, and again
during February. The reasons for these trips were to assess the po-
litical and military situation in the region, and to obtain on-the-
scene information on the military capabilities and requirements of
key U.S. friends.
During these two trips, I visited eight countries in the region:
Israel, Egypt, Lebanon, Jordan, Syria, Saudi Arabia, Turkey, and
Pakistan. I would like to share with you my observations.
(1521)
1522
Before presenting these observations, I 'would like to comment
from my perspective, as chairman of the Committee on Armed
Services, on the interrelationship of security assistance and nation-
al defense.
As a lead-in to these comments, I would like to briefly describe
trends in the international security environment because they
highlight the increasing importance of U.S. programs to provide
military assistance to our friends and allies. The most dominant
and ominous development on the security scene, one which is well
known to the committee, is the relentless and unprecedented
growth in the power of Soviet military forces. There may be differ-
ences of opinion on the severity of this adverse trend, but few will
disagree that the United States-Soviet military balance has been
shifting in favor of the Kremlin.
While the unfavorable trend in the overall balance of United
States and Soviet military capabilities is alarming, the United
States is also troubled by a new development, the increased Soviet
ability to project military power to world areas far from the Eura-
sian landmass. As a result of the growing reach of Soviet forces,
the struggle for power and influence between the United States
and the Soviet Union has become global in nature.
While the potential for conflict between Washington and Moscow
in distant world regions has been heightened by the improved abili-
ty of Soviet forces to operate in noncontiguous areas, more direct
threats to U.S. interests have arisen from the bold Soviet Union
use of aggressive proxy states, such as Cuba, Vietnam, and Libya.
In Latin America, Southeast Asia, the Middle East, and Northern
Africa, Soviet clients are seeking to destabilize neighboring coun-
tries with potentially serious consequences for the interests of the
United States and other Western nations.
Moreover, these new Soviet and Soviet-sponsored threats are
emerging in world regions which are outside the traditional system
of Western alliance. Despite the fact that these new threats have
the potential to seriously undermine the economic well-being of
member states, the response of Western alliances has been weak
and often fractured. America has been forced to unilaterally
assume, least in the near term, major defense burdens in distant
world areas.
Against this backdrop, it is important to recognize the growing
interdependence of national economies. The economies of the West-
ern World are particularly dependent on the free flow of oil and
other raw materials as well as continued access to the world's mar-
ketplaces for their exports. The emergence of threats in resource-
rich regions has heightened this strategic vulnerability of the West.
The security environment in which we now operate has also been
made more complex and difficult by the significant diffusion of
military, economic, and political power and influence in the world
which has occurred in the past two decades.
In summary, the United States is confronted by the following un-
favorable trends in the international security environment:
The widening geographic extent of the United States-Soviet mili-
tary competition.
1523
New threats in distant world areas which have increased inter-
national instability and which are outside the long standing system
of Western alliances.
Less certainty of continued and uninterrupted access to natural
resources and marketplaces which serves to increase the exposure
of the West's economic vulnerabilities.
Increasing diffusion of power and influence resulting in more
powerful forces-political, military, and economic-potentially op-
posing U.S. interests.
These trends clearly show that the task of protecting U.S. world-
wide interests, which in themselves have grown considerability, has
become exceedingly more complex and demanding over the last two
decades. As a consequence, the security relationships between the
United States and key nations in troubled regions have become in-
creasingly important. It is in the context that U.S. security assist-
ance is playing a critical role.
Last month, Secretary of Defense Weinberger described U.S. se-
curity assistance and arms sales programs as: “The overseas con-
terpart of our defense effort and represent no less an investment in
U.S. national security than the programs for the Department of
Defense." I completely agree.
The Senate Armed Services Committee views security assistance
as a direct extension of the U.S. defense program. By enhancing
the defense capabilities of our friends and allies, security assistance
and arms sales help to strengthen our forward defense strategy
and, thereby, to improve our overall defense posture.
When U.Š. friends and allies are strong and capable of defending
themselves, the burden of common defense is shared. The United
States is able to direct her own resources and capabilities to areas
where burden sharing is not possible.
Moreover, security assistance is extremely cost-effective. It is far
less expensive for the United States to train and equip foreign mili-
tary personnel for their national defense than it is to train and
equip equivalent U.S. personnel. And, in many cases, it may be
those foreign soldiers and that equipment which provide a deter-
rent to aggression or the critical first line of defense should a con-
flict break out.
If aggression does take place, U.S. military assistance may
enable
friendly nations to handle the threat on their own, without
placing U.S. lives at risk. Failure to help meet the legitimate de-
fense requirement of U.S. friends and allies increases the prospects
that United States forces would have to be employed in times of
crisis.
Should aggression take place in areas vital to U.S. interests and
deployment of U.S. forces be necessary, friendly forces trained and
armed by the United States add a force multiplier to our own
combat capabilities because the forces would be interoperable. In
short, security assistance and arms transfers increase our coalition
warfighting capability
In addition to these standardization benefits, security assistance
also provides a key vehicle for improving the power projection ca-
pabilities for the United States. We are able to retain foreign mili-
tary bases, have access arrangements, and acquire overflight privi-
leges in large part because we have security assistance programs.
1524
Acknowledging this linkage between security assistance and
power projection requirements, the Congress has consistently given
higher priority to those countries permitting U.S. bases or access to
their facilities.
Mr. Chairman, I can't overemphasize the benefits that we derive
from security assistance. In recent years, we have made an effort
to enhance the capability of U.S. rapidly deployable forces. Be-
tween fiscal years 1982 and 1984, the Senate Committee on Armed
Services increased funding for U.S. force projection programs by
130 percent. These investments make sense only if we have the re-
quired enroute access, transit privileges, base rights, and use of fa-
cilities overseas.
In short, we can't and won't be able to accomplish critical power
projection capabilities on our own. We need the cooperation and as-
sistance of friendly and allied nations, and they want and need our
assistance to develop their own armed forces. This is the essence of
mutual security, one of the cornerstones for preserving stability
and coping with aggression throughout the post-World War II
period. Security assistance has been and is the single most impor-
tant instrument for promoting mutual security relationships.
I should note that these strategic benefits come at very little cost
to the U.S. Treasury. In recent years, funding for security assist-
ance has amounted to less than 1 percent of the Federal budget
and less than 2 percent when compared to the defense budget. In
this regard, if the congressional budget process could accommodate
it, I would be prepared to trade off hundreds of millions of dollars
in the defense budget for equivalent increases in military assist-
ance funding
A key reason for my journeys abroad was to assess the military
need and requirements of a number of key friends and allies. In
this regard, I am concerned about congressional pressure to reduce
assistance to three key United States friends: Turkey, Pakistan,
and Jordan.
Members of Congress, reacting to domestic political pressure,
have begun calls to reduce the level of security assistance to
Turkey. The House Foreign Affairs Committee has already reduced
the administration's request for military assistance by $39 million,
from $755 to $716 million. There will no doubt be pressure on this
committee to make more substantial funding reductions. I have no
doubt that such action will not serve the United States interests
and will make a solution to the delicate problem of Cyprus harder,
not easier, to achieve.
The United States derives substantial benefits from a strong bi-
lateral relationship with Turkey. Turkey occupies a strategically
critical location and is key to defense of NATO's southern flank,
including Greece. In addition, she has the second largest military
force in NATO. She controls Soviet access to the Mediterranean
and abuts potential lines of Soviet advance into Iran and into the
Persian Gulf. Turkey is nearly completely surrounded by hostile or
potentially hostile neighbors: The Soviet Union, Bulgaria, Syria,
İran, and Iraq.
Turkey has just undergone an important transition from military
rule to democracy with nationwide parliamentary elections on No-
vember 6 of last year. In addition, municipal elections were held on
1525
March 25; six political parties participated, providing evidence of
Turkey's commitment to the democratic process. This is an ex-
tremely critical time for Prime Minister Ozal's new government.
Reductions in U.S. assistance levels would send counterproductive
signals regarding the U.S. commitment to this fledgling democracy.
The administration has requested $755 million in military assist-
ance in fiscal year 1985 that would be used to help modernize Tur-
key's armed forces. These funds would be used for a variety of criti-
cally needed equipment including the F-16 aircraft, the ongoing
M-X8A1 tank upgrade program, air defense improvements, and
communications and electronic equipment. In my view, these items
meet legitimate defense requirements of Turkey and will help
Turkey to fulfill alliance commitments, which in turn contribute
directly to United States national defense.
Pakistan is on the frontline with Soviet-occupied Afghanistan.
The brutal Soviet invasion of Afghanistan has highlighted Paki-
stan's geostatic value in stemming Soviet expansion southward
toward the Indian Ocean. Islamabad has taken a courageous stand
by leading diplomatic activity against the Soviet invasion of Af-
ghanistan.
As a result, Pakistan has been subjected to new and strong politi-
cal and military pressures. Violations of her airspace by Soviet air-
craft, border incursions, and related pressures stemming from the
influx of between 2 and 3 million Afghan refugees make Pakistan
extremely vulnerable.
I might add, Mr. Chairman, that Pakistan is bearing half of the
cost of maintaining these 2 to 3 million refugees.
In addition, India has recently increased its anti-Pakistan rhet-
oric.
The administration has requested $325 million in FMS credits for
fiscal year 1985, primarily to assist Pakistan in paying for equip-
ment already on order from the United States, including F-16
fighter aircraft, air defense radars, and helicopters. I think addi-
tional requests may include air-to-air missiles and surveillance air-
craft.
Pakistan will also use her own national funds to purchase equip-
ment and training for her navy and army. As it now stands, the
majority of Pakistan's military equipment is obsolete and in need
of replacement.
Finally, let me talk about Jordan, a key United States friend in
the moderate Arab world. Our close relationship with Jordan and
with King Hussein stems from the historically close cooperation
with the United States on security issues, her moderating role in
the Arab world, her potentially central role in the Middle East
peace process, and her proximity to critical areas of the Middle
East and Southwest Asia.
Attention has been focused on the remarks that King Hussein
made recently in which he expressed his frustration over U.S.
policy in the Middle East. He essentially indicated that uder cur-
rent circumstances, he does not envision Jordanian participation in
the peace process at this time.
However, during my two visits to Jordan, I found that King Hus-
sein shares many of the objectives of the United States, including
support for President Reagan's peace initiative of September 1,
1526
1982. A number of recent Jordanian initiatives are worthy of men-
tion:
Calling for decisions within Arab councils to be made by majority
rule instead of consensus which effectively grants a veto to radical
views. The appeal of this approach was demonstrated in the recent
Islamic Conference which helped to reintroduce Egypt into the
Arab family of nations.
Urging cooperation among Egypt, Iraq, Saudi Arabia, and Jordan
to strengthen the voice and further the development of moderation
in the region.
Publicly suggesting that, should the current disarray result in
Syrian domination of the PLO, the PLO would cease to be the sole
legitimate representative of the Palestinians, and Jordan would act
accordingly.
And by restoring the Jordanian Parliament. This created a
forum for Palestinians to express themselves, and it provides the
inhabitants of the West Bank with a forum. Many West Bank lead-
ers strongly support Hussein's entry into the peace process and
they have urged Hussein and PLO leader Arafat to reach agree-
ment which would permit that entry.
I am deeply concerned that U.S. policy, particularly congression-
ally mandated policy, in the region not become too narrowly fo-
cused or too insensitive to our broader interests in the region, nor
too susceptible to domestic political pressure. Despite the recent
withdrawal of the proposed sale of Stinger's to Jordan, the United
States needs to work with King Hussein on issues pertaining to
Jordanian security and relations with other regional countries, par-
ticularly on the Arabian peninsula.
King Hussein is deeply worried about Syrian intentions in the
wake of the massive Soviet supported military build-up by Damas-
cus and about the effects of the withdrawal of U.S. peacekeeping
forces from Lebanon. Syria has openly threatened King Hussein if
he attempts to join the peace process, and terrorist groups have
carried out assassination attempts on Jordanian diplomats in pro-
test against Jordan's efforts to join the peace process.
At this juncture, it is important that the United States provide
some tangible evidence of U.S. reliability. Under these circum-
stances, approval of the administration's full request for security
assistance is critical,
In this regard, I am very concerned about an amendment adopt-
ed by the House Foreign Affairs Committee which would prohibit
the use of foreign military sales funds for the purchase of advanced
aircraft, new air defense systems, or new advanced military
weapon systems unless the President certifies to the Congress that
Jordan is publicly committed to the recognition of Israel and to
prompt entry into peace negotiations.
In my view, this language only calls into question U.S. reliability
and as a result will not encourage King Hussein to enter the peace
process. The President's withdrawal of the notification of the sale
of Stingers to Jordan and Saudi Arabia obviates the need for this
language, and I would urge the committee not to adopt similar lan-
guage.
The $95 million in foreign military sales credits requested by
President Reagan would be used to improve Jordan's air defense
1527
4
capabilities and to develop a mobile force capable of defending
against vastly superior armored and air forces. This would include
antitank missiles, armored vehicles, communications equipment,
training, and follow-on support.
Let me conclude, Mr. Chairman, by saying that the United
States derives substantial benefits from her security assistance and
arm sales programs. From my perspective as chairman of the Com-
mittee on Armed Services, security assistance enables our friends
and allies to work with the United States to develop collective secu-
rity arrangements, to share part of the collective defense burden,
and to better defend themselves against internal conflict or exter-
nal aggression.
Security assistance programs are effective. They cost very little
when measured against their return, and they represent the most
explicit assurance of U.S. willingness to stand by our friends and
allies, short of stationing U.S. forces abroad.
Therefore, I urge the committee to authorize the security assist-
ance program at the funding level requested by the President. In
particular, I strongly recommend the programs for Turkey, Paki-
stan, and Jordan be authorized at the requested levels. I would fur-
ther urge the committee to avoid the congressional tendency to add
funds to certain country programs at the expense of other critical
friends who are facing serious external threats.
In this regard, the Congress in recent years has added funds
above the President's request for Israel. While I am a strong sup-
porter of our assistance programs to IsraelI believe, Mr. Chair-
man, we have a moral obligation to try to help preserve the territo-
rial and political integrity of Israel, and I believe that it is in our
national interest-I am troubled when these increases come at the
expense of other critical nations. If a determination is made that
military aid to Israel should be expanded, then this should be done
by increasing the overall funding for the security assistance pro-
gram, and not by shortchanging other valued friends.
Mr. Chairman, this concludes my statement. I will be delighted
to respond to any questions that you or the members of your com-
mittee might have.
The CHAIRMAN. Senator Tower, we thank you very much. I think
your statement constitutes one of the most helpful and powerful
statements on the value to the United States of America of our se-
curity assistance programs abroad.
When you go to the extent of saying that you would be prepared
to trade off hundreds of million of dollars in the defense budget for
equivalent increases in military assistance funding, I don't know
how you could put it in a more meaningful and significant way
than to say that. I am not accepting that offer as of the present
time. Others may, but certainly you couldn't put it any more clear-
ly as to how strongly you feel about these programs.
Let us first take Turkey. There has been, obviously, a concern
about Cyprus. This has been a nagging problem. If Turkey really
wants significant long-term help in military modernization from
the United States, why has Turkey endangered that relationship
by recognizing an independent Turkish Cyrpus?
1528
Was that necessary? Did you get the feeling that there was pres-
sure existing inside Turkey to do that? Was it essential that they
do it at the time?
Senator TOWER. I think you will have to concede that there is
enormous domestic political pressure on the government in Turkey
to do that. I don't think that the recognition really makes much
difference. That is more form than substance. It doesn't really
change anything.
The fact is, I think that we should go back in time and remem-
ber that the situation in Cyprus was not created by the Turks. It
was created by the government of colonels in Greece, a government
that we very strongly disapproved of. If you will remember, an au-
thoritarian military government that prompted a bloody coup
d'etat in Cyprus in which Makarios was overthrown and replaced
by a government that favored Enosis, a union with Greece. The
Turkish reaction was to that.
I am not endorsing all of the Turkish actions, but I think that we
have to act in terms of our own national interests and not try to
pressure Turkey through reducing foreign assistance. The effect
that that might have would be to prolong settlement, because the
Greeks would realize then that they could continue to exact per-
haps more concessional terms than they should. In other words, we
are weighing in on one side of the argument there.
In fact at the time that we enacted the Turkish embargo, our
Secretary of State, Mr. Kissinger, was on verge of getting an ac-
commodation on the basis of very concessionary terms by a politi-
cally tenucus government in Turkey. When we enacted the embar-
go, this failed. Kissinger briefed several Members of Congress at
the time and pled with them not to do this, but they went ahead
anyway. The result was the fall of a friendly government in
Turkey, and a less conciliatory government took place.
We run great risks, Mr. Chairman, when we make snap judg-
ments here in the Congress and try to intervene in a very delicate
negotiating process which we are not capable of following or par-
ticipating in on a day-to-day basis.
The CHAIRMAN. In your judgment, is Turkey in fact recognizing
that there has to be and there is a linkage?
Senator TOWER. I think the Turks do recognize that, and I think
that there are actually problems that are even knottier that have
to do with the Aegean Sea, access to the Aegean and the Aegean
seabed, and all of these things.
I think that the Turkish attitude is one of desire to negotiate
these things. Let's not ignore the fact that from time to time the
Greeks are capable of being intransigent themselves. The fact is
that Turkey has been a strong ally of the United States. They are a
stronger NATO ally than Greece.
Are we to punish a strong ally that has continued, even in the
face of rather hostile action by the Congress of the United States,
to fulfill their NATO mission. Remember that we have no problem
with base permanence in Turkey as we do in Greece. Prime Minis-
ter Papandreou of Greece has said that at the conclusion of the 5-
year agreement, that he will run us out of our bases over there. He
has also opposed the INF deployment, and he has also urged a nu-
clear freeze on the Balkans, all contrary to American policy.
1529
I see no reason why we should, at this particular point in time,
express displeasure to Turkey. We are punishing an ally who is
performing a function that is vital to us and our national interests.
Why should we sacrifice our own national interest in this particu-
lar issue.
The CHAIRMAN. Did you get the feeling that with the return of
Turkey to a democracy and a democratic form of government, that
they be more responsive to human rights issues than the previous
government, particularly with respect to items that are of impor-
tance to us on Cyprus, such as the issue of missing persons, the sit-
uation where families cannot be reunited. Would they just reach
out and try to find a way to somehow turn that situation around a
little bit.
When I was in Cyprus, I found a great deal of interest in the fact
that even the Cypriot students have to go abroad for a college edu-
cation, and they lose a lot of these. In their own self-interest, if
they could create a University of Cyprus, they would get a lot of
help from this country and many other countries. You would make
an excellent head of that government, and you wouldn't find it a
bad place to live, I think, Mr. Chairman.
Did you see any interest in the new government in saying that
maybe some of these issues that we haven't made progress on, per-
haps now we can make some progress?
Senator TOWER. I think that we can move in that direction, Mr.
Chairman.
As far as the suspension of what we would refer to as the civil
rights in Turkey, they took a step that they considered to be neces-
sary to counter terrorism and total political chaos in that country.
They reduced incidents of terrorism substantially to the point
where Turkey is virtually free of terrorism today.
What I am saying is that we have to make our assessment on
security assistance on the basis of what is in the national interest
of the United States, and what is in the interest of the NATO alli-
ance. Only Turkey and Norway, of the NATO allied nations, have
borders with the Soviet Union. Norway has a very short border,
and Turkey has a long and exposed border with the Soviet Union,
and it is in an area surrounded virtually by unfriendly states,
states that are in an adversarial relationship to the United States.
Therefore, that should be the primary consideration dictating our
policy toward Turkey.
The CHAIRMAN. How helpful could Turkey afford to be to NATO
interests in the Persian Gulf region?
Senator TOWER. Turkey has really no force projection capability
of its own. As a matter of fact, as I noted, their military is a virtual
museum of antiquated American equipment. They are still using
old Fletcher class destroyers that you and I might have thought
were the last whisper in World War II, Mr. Chairman, but they are
no longer so. They are using old aircraft.
The fact is that they have some very important bases. You will
have to remember, too, that Turkey is a very important listening
post for the United States. Turkey is essential to us in any verifica-
tion process for a strategic arms limitation and reduction agree-
ment. From the standpoint of force projection, overflight rights,
and bases are enormously important.
1
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1
1530
Incidentally, I might note that Turkey maintains a fairly equita-
ble relationship with both Iran and Iraq that could be of great help
to us in trying to resolve that situation.
The CHAIRMAN. There is a press report that I saw this morning
that there is a possibility that Pakistan has actually detonated a
nuclear device. Is there any information that you have? Did you
discuss with Pakistan whatever efforts they might be making to
detonate a nuclear device? Do you believe that there should be any
relationship between assistance offered to Pakistan, if the reports
are actually substantiated?
Senator TOWER. I don't think that there should be, Mr. Chair-
man. Let's look at the position that Pakistan is in. It borders on
Afghanistan, with the Soviet pressures there. India has made very
bellicose statements about Pakistan. President Zia, whatever your
personal opinion or our collective opinion might be of him, I be-
lieve is a very sincere man, dedicated to peace. He is trying to
wage a peace offensive as far as India is concerned.
Remember, India is also in the business of trying to develop a
nuclear weapon. I don't know whether Pakistan has detonated
such a device or not. I would suggest that the best information on
that would be an intelligence briefing.
The CHAIRMAN. On Jordan, you did, in your testimony, make ref-
erence to comments that have been made by King Hussein. Could
you expand a little and evaluate the recent statements that he did
make which were critical of the United States. Did they come from
utter frustration? How seriously do you take those comments?
Senator TOWER. I think they stem from enormous frustrations.
These are frustrations that he has expressed privately, but has not
expressed publicly. Here is a man who is trying to be a moderate
voice in the Arab world. He is trying to get the Arabs to back away
from the requirement in the Arab League that they act on consen-
sus basis, which means that they have to have a unanimous vote
before they can act. He is advocating a majority rule in that orga-
nization, which would be of enormous benefit to us because the
moderate states far outnumber the radical states.
The only three radical states, really, at this point in time are
Syria, Libya, and South Yemen. I think that King Hussein has
been particularly bold and very courageous against the less moder-
ate, or what we might call the radical Arab States.
He has been subjected to assassination threats, the threat of ter-
rorism from these countries. He has been friendly. He has indicat-
ed that he desires to participate in the peace process, and I think
he holds out the best hope of being a key player in that peace proc-
So we seem to be playing into the hands of Damascus, from time
to time, because Khaddam told me that Syria would have no part
of any Palestinian settlement in which Hussein was a key player.
So we should be reinforcing Hussein in my view, because he does
represent a voice of moderation. All things are relative in that Byz-
antine world over there.
The CHAIRMAN. Finally, did you have discussions in Jordan about
the use of a rapid deployment force, and get a feeling as to whether
they could move if there was an emergency in the Persian Gulf
area?
ess.
1531
Senator TOWER. I think, given the proper equipment and logisti-
cal support, they could. I think the fear that this force might be
used for aggressive purposes is groundless, because I think it would
require additional support from the United States for that force to
be used.
Again, I think we should view that as force in the hands of a
friendly power that would help protect our interest in the region,
reducing the likelihood that we have to spend American treasure
and shed American blood to guard and protect our vital interests
in the region.
The CHAIRMAN. I want to thank you very much, Senator Tower,
for your taking the time to appear and give us such a strong and a
helpful statement.
Senator TOWER. Let me say finally, Mr. Chairman, that I think
that our ability to maintain a friendly, normal, and a reinforcing
relationship with the moderate Arab States really enhances the
prospects for future Israeli security. I don't think that the people of
Israel want to remain in an armed camp forever.
If through the moderate Arab States, we can achieve ultimately
a reconciliation, then that, in my view, goes to the long-term bene-
fit of the State of Israel that we all support very strongly.
The CHAIRMAN. Thank you very much.
The hearing is adjourned.
[Whereupon, at 2:45 p.m., the committee adjourned, subject to
call of the Chair.]
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