Unrestricted Version Regional Program Plan In Support of the Regional Strategy for Central America and Mexico FY 2003-2008 The Regional Program Plan was approved by the Agency on July 19, 2004. It sets forth the Agency’s policy and strategic direction for regional programs and assistance in Central America and Mexico. Budget data contained in this document are estimates and do not represent a U.S. government commitment to provide a specific level of funding. Release Date: July 31, 2004 C O N T E N T S Page I. Rationale for Assistance and Summary Analysis of the Assistance Environment......................1 A. Summary of Regional Program Plan and Relationship to CAM Regional Strategy ...........1 B. Foreign Policy Interests and Goals in the Region...............................................................2 C. Overview of Regional Needs and Development Challenges ..............................................2 D. Regional Role of Other Donors ...........................................................................................3 E. Proposed Regional Program Plan ......................................................................................4 F. Cross-Cutting Issues...........................................................................................................5 II. Strategic Objectives ....................................................................................................................5 A. SO 2 Economic Freedom: Open, Diversified, Expanding Economies ...............................5 B. SO 3 Investing in People: Healthier, Better Educated People .........................................15 C. SpO 4 Timely Humanitarian Assistance and Crisis Response .......................................15 III. Program Resources..................................................................................................................20 IV. Program and Operational Management ..................................................................................21 V. Crisis Modifier...........................................................................................................................22 VI. Summary of Recommendations of Assessments...................................................................22 Annex I: Interim Adjustments to the G-CAP Regional HIV/AIDS Plan .........................................24 Annex II: RPP Transition Plan ......................................................................................................27 Management Letter........................................................................................................................35 USAID Strategy for Central America and Mexico Regional Program Plan FY 2003-2008 I. Rationale for Assistance and Summary of the Assistance Environment Summary of Regional Program Plan and Relationship to Regional CAM Strategy: Few issues are of greater collective strategic importance to the peoples of Central America, Panama, Mexico, and the United States than economic integration. The dynamics of this integration process and the potential benefits, both to the countries of the region and to the United States, are as profound as those associated with the integration of Eastern Europe into the European Union. However, to achieve this integration, the Central American countries must overcome a number of critical constraints. First, they must achieve economies of scale by removing artificial barriers to trade and movement of people within the region through creation of a customs union and expedited immigration procedures. Second, key laws, policies, and regulations must be harmonized so as to avoid skewing investments away from real comparative advantages. Third, once harmonized, these laws, policies, and regulations (including labor and environmental policies) must meet international standards within a reasonable period of time or risk the loss of new trading privileges. Fourth, the region’s judicial systems and regulatory agencies must demonstrate the capacity to enforce these laws and regulations in order to maintain the confidence of the world trading and investing community. Fifth, the Central American (C.A.) countries must significantly increase their investment in human resource development, sustainable use of resources and construction of economic infrastructure in order to be truly competitive in the world market. And finally, substantial resources must be available to support the transformation associated with the integration process, in order to assist industries and regions that will suffer economic loss as protective tariffs are removed so they can take advantage of the new opportunities created by freer trade. Helping Central Americans to overcome these constraints to economic integration is in the U.S. national interest, since the flow of illegal immigrants into the United States will decrease and opportunities for U.S. investment and trade will increase with a more prosperous and stable Central America. The economic integration process will also require the C.A. countries to consolidate democratic institutions and respect for human rights, issues that have plagued the region for centuries. The United States has other critical interests in the region, such as containing the growing HIV/AIDS problem in the region. This concern is both humanitarian and self-interested, as containing the further spread of this transmission vector into the United States is clearly in our national interest. Finally, protection of the unique environmental resources in the region’s key watersheds, and helping Central Americans to prepare for and mitigate natural disasters, have long been priority concerns for successive U.S. administrations. The United States cannot address all the issues confronting the region, however, and must select where its investment of development resources can have the greatest impact. Some issues can be most effectively addressed on a bilateral basis, while others are truly regional in nature. The purpose of this document is to describe the strategic options and opportunities for U.S. investment, and propose those regional program initiatives that will be of greatest benefit to Central Americans, and to the United States’ national interests. USAID has supported regional development initiatives in Central America since the formation of the Central American Common Market, over forty years ago. Rarely during this period have the opportunities for improved regional integration and development been as encouraging as they are now. It is also extremely significant that the neighboring countries of Panama and Mexico have been incorporated in many of the Central American regional institutions, in recognition that Regional Program Plan -1- July 19, 2004 resolving the region’s problems requires participation of the broader regional community. The elected leaders of the Central American, Mexican, and Panamanian governments today share a common vision of the advantages of jointly addressing the problems that plague each of their societies. They also realize that opportunities created by removal of trade restrictions among themselves and with the United States can only be fully exploited by acting together to remove other artificial national barriers to trade and development. Even more important, dynamic elements of the region’s private sector as well as multi-nationals have taken the lead in making integration a fact rather than just theory, as banks and supermarkets become regional competitors. Intra-regional trade in Central America has become almost as significant as trade with the United States, increasing to more than $3 billion in 2003. The USAID Strategy for Central America and Mexico (CAM), which fully supports the 2004-2009 Joint State-USAID Strategic Plan, was adopted in 2003 to demonstrate the U.S. Government’s (USG) recognition that its assistance could be provided more efficiently through coordinated bilateral strategies. The CAM Strategy creates a common framework to guide all USAID investments addressing issues of common concern across the region, on both a bilateral and regional basis. The six USAID Missions in the region have prepared or are preparing country development plans that specify the investments to be undertaken bilaterally within the context of the CAM strategy. This Regional Program Plan (RPP) describes a focused and concentrated program of USAID investments that will be programmed and managed on a cross-regional and/or sub-regional basis, in order to support integrated initiatives that pursue two of the Millennium Challenge Account objectives in Central America: Economic Freedom, and Investing in People. The Plan will be implemented in ways that maximize potential for impact and efficient management. U.S. Foreign Policy Interests in the Region: The United States has long considered the CAM region to be closely linked to its national interests, due to the geographic imperatives of our common border and the importance of the Panama Canal to the U.S. economy. Despite its relatively small population, Central America trades more with the United States than does any Latin American country except Mexico and Brazil, and the United States sees the North America Free Trade Agreement (NAFTA), the Free Trade Agreement (FTA) with Chile, the recently negotiated Central America Free Trade Agreement (CAFTA) and the anticipated FTA with Panama as key steps toward achieving the broader Free Trade Area of the Americas (FTAA). Successive U.S. administrations have also highlighted the importance to