Latin America Advisor

A Daily Publication of The Dialogue

Will the New US Aid Plan for Central America Be Successful?

Q: U.S. Secretary of State Hillary Clinton announced last week in Guatemala that the United States would increase its aid to Central America to $300 million in an effort to help the region improve security. Altogether, donor nations represented at the Central American Security Conference pledged nearly $1 billion in aid for Central America. Will Central American governments spend the money effectively? Do the countries in the isthmus have a good plan to fight the drug cartels? Will Central American countries be able to raise their low tax collection rates in order to support security efforts?

A: Francisco Villagrán de León, Guatemala’s outgoing ambassador to the United States: “The conference was an important step toward raising awareness of the region’s grave security challenges and mobilizing financial and technical support for the countries’ efforts to face them. The region’s political leaders showed a clear willingness to undertake a region-wide effort and presented a coherent collective strategy. Given this demonstration of political will, it makes little sense to second-guess their commitment and action plan. More important is recognizing the nature of the challenge, acknowledging co-responsibility for its existence and understanding the kind of support that is needed to confront it. In the last decade, Central America has seen a dramatic increase in trafficking in drugs, weapons and persons; money laundering; and, of course, violence and the corrupting power of criminal organizations. Central America did not bring this problem unto itself; it is rather the consequence of its geographic position and the demand for drugs in the United States. Central American countries, as developing democracies, have a limited capacity to deal with these problems. Many of the key institutions involved-law enforcement, prosecutors’ offices and judicial institutions-are still weak. At the operational level, the countries have been working to strengthen coordination, including information exchange, and through the Central American Integration System (SICA) have been refining the joint regional strategy presented last week. It focuses not only on strengthening law enforcement and judicial institutions but also prevention, rehabilitation and prison reform. Last week’s meeting produced welcome new pledges of assistance. It should be understood that Central American countries will not see or receive the bulk of these funds; rather they will get badly needed equipment (radar, communications and other non-lethal items) as well as training and technical support. It is also critical to understand that the overarching objective of this security assistance must be to strengthen the capacity of Central America’s governments to carry out this fight.”

A: Kevin Casas-Zamora, senior fellow in the Latin America Initiative at the Brookings Institution and former vice president of Costa Rica: “For all the talk about the co-responsibility of drug consuming countries in solving Central America’s security crisis, the meeting in Guatemala yielded relatively little in the way of fresh funds to combat organized crime. True, the World Bank and the IDB committed $1.5 billion, but these resources will come as loans. The conditions and contours of these pledges are unclear (for instance, do they include Costa Rica’s recent $132 million security-oriented loan from the IDB?). Non-reimbursable commitments were very few, with the United States slightly revising up past offers (President Obama had offered the region $200 million while visiting El Salvador last March), and Spain, Australia and a couple others making small new pledges. The real value of the meeting was political, namely the support uttered by a remarkably broad group of nations and organizations, represented in some cases at the highest level, for an unprecedented regional effort to improve the isthmus’ dire security situation. It may be that the international community will step up its commitment once the strategy is fleshed out more clearly and turned into a coherent set of fundable proposals. What was unveiled in Guatemala was merely a blueprint that still requires a lot of technical work if it is to lead to concrete improvements. Lastly, donors will be paying attention to the Central American governments’ efforts to improve tax collection to fund their security policies. The signs on that front are not discouraging. Honduras’ legislators have recently approved a temporary tax hike, earmarked for security policies, expected to yield $80 million per year. The current governments in El Salvador and Costa Rica are engaged in similar political battles. Sadly, Guatemala, where the threat of organized crime is most pressing, seems unable to break the age-old political jinx that has impeded any kind of tax reform. The Guatemalan elite -recalcitrant and reactionary as any in the world-seems unfazed by the security crisis and has vowed to resist any security-oriented tax hike. In all likelihood they will prevail.”

A: Francisco Altschul, ambassador of El Salvador to the United States: “I can’t speak on behalf of the rest of the countries, but I can tell you that El Salvador is committed to ensuring transparency with its public administration and usage of international resources. The government has decisively enhanced important measures to guarantee transparency, such as the support in the implementation of the Law of Transparency and Access to Information, the partnership with Transparency International and the creation of the Development Cooperation Information System (SICDES). SICDES is already available on the Internet and provides information to citizens on issues such as the amount of money received by cooperation projects and profiles of the implementing entities. The Central American security strategy is a historical breakthrough, a unique answer toward transnational problems. This strategy is by nature a regional effort. It is not the sum of national programs but rather the articulation of a common approach against criminality. The new regional strategy has five areas (crime prevention, prosecution, rehabilitation, reinsertion and institutional strengthening) and 22 approved projects. Central America initiated a short list of common security actions in July 2010. That is the reason why we have reinforced our joint patrol operations and the exchanging of police intelligence operations. Several measures have been taken recently to raise low tax collection rates in El Salvador. The government has projected an increase from 1 to 14 percent in revenues earmarked in the national budget to combat crime. Secondly, El Salvador has started a social dialogue in order to foster a fiscal pact which could define national priorities and resources to address those priorities. The goal of this dialogue is to increase tax collections to at least 17 percent of GDP by 2014. Furthermore, President Mauricio Funes has addressed the need of a more just and accountable tax system, one in which the wealthiest support the improvement of citizen security. President Funes has proposed a special tax that will focus only on the wealthiest natural and legal persons in El Salvador.”

A: James M. Meyer, partner at Harper Meyer in Miami: “It is generally agreed that the security issues in Central America largely stem from violence related to organized crime. The drug cartels have shifted their focus from Mexico and other countries to Central America precisely because many of the political institutions in the region are so weak, making the impact of any internally generated response to the cartels’ incursion speculative at best. Unless there is a pre-designed strategy and implementation program, together with dedicated non-monetary resources from other countries which have had some success in pushing back against the drug traffickers, sending even a significant amount of funds alone will not likely be successful. In fact, until rampant corruption is thwarted and rule of law is brought to bear, there is a real concern that money flowing to the government will be wasted or even diverted by and to some of the individuals and organizations allowing or causing the violence to occur. The suggestion and rationale of imposing a special tax assessment without more would be equally deficient. Until the governing institutions can inspire the confidence of the private sector, it will be difficult to muster any significant support for such measures. Until measures of a nature similar to Plan Colombia and the Mérida Initiative are taken in Central America, wherein all sectors of society see that their sacrifices in implementing real reform may not be futile and that their acts of defiance against organized crime have a meaningful chance for success, mere funds will not solve the problem. With the United States still one of the largest sources of demand for illicit drugs and the largest supplier of military-grade weapons being imported to the region, there is a moral obligation for the United States to respond to the needs of Central America in much the same manner that it did for Colombia and Mexico. Moreover, with organized crime in Latin America quickly becoming one of the greatest threats to national security in this hemisphere, failure of the United States to mount a strong campaign in the region seems irresponsible.”