Central America: Reconstruction After Hurricane Mitch

98-1030 F

CRS Report for Congress

Received through the CRS Web

Central America: Reconstruction

After Hurricane Mitch

Updated October 12, 1999

Lois McHugh, Coordinator

Analyst in International Relations

Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

ABSTRACT

The United States and the international community have launched a major relief and

reconstruction response to the devastation in Central America caused by Hurricane Mitch

(October 26-November 5, 1998). This paper provides background on conditions in the region

both before and after the hurricane. It identifies the humanitarian and reconstruction aid

provided by the United States and the international community and discusses the future course

of the reconstruction effort. The President requested an emergency supplemental of $955.5

million on February 16, 1999 to pay for the U.S. effort (which includes reconstruction aid to

Caribbean countries and Colombia). P.L. 106-31 appropriated $999.9 million for

reconstruction programs. The supplemental request did not include trade expansion effort.

Trade provisions are included in a Senate bill, S. 371, the Caribbean and Central American

Relief Act, introduced on February 4, and its companion bill, H.R. 984, introduced on March

4 and reported to the full committee on May 18. The Administration trade bill (H.R. 1834)

was introduced on May 18. This report will not be updated again.

Central America: Reconstruction after Hurricane Mitch

Summary

On February 16, the Administration transmitted an emergency supplemental

request for $955.5 million to provide reconstruction assistance to the Central

American countries devastated last Fall by Hurricane Mitch. The supplemental did not

include any of the trade expansion provisions which the Administration has proposed

previously, and which the Central American countries include as their highest

priority. The Senate supplemental appropriations bill (S. 544) passed the Senate on

March 23 and the House bill (H.R. 1141) passed the House on March 24. The final

legislation, P.L 106-31, increased the funding to $999.9 million. Trade expansion

provisions were included in the Central American and Caribbean Relief Act (S. 371),

introduced on February 4 by Senator Graham of Florida and 9 cosponsors and its

companion bill (H.R. 984) introduced on March 4 by Congressman Crane and 3

cosponsors. The Administration bill, H.R. 1834, was introduced on May 18.

Hurricane Mitch left a swath of destruction in its path across Central America

from October 26 through November 5, 1998. The storm, which dumped torrential

rains on the region, devastated Honduras and caused severe damage in Nicaragua.

It produced lesser destruction in El Salvador, Guatemala, Belize, and Costa Rica. In

addition to killing thousands and displacing many from their homes, the floods and

mud slides also threaten the economy of the Central American countries through

destruction of crops, cropland, and infrastructure, such as roads, bridges, and electric

power equipment. The United States and international donors began providing

emergency relief once access to the area became possible. By mid December, the

U.S. government had pledged or provided $304 million. By mid-November, the

immediate emergency was over, and donors began to focus on longer term recovery.

The Inter-American Development Bank (IADB) and the World Bank sponsored

a donors’ meeting on December 10 and 11 in Washington to examine the damage

assessments being made by the regional governments and U.S. and U.N. experts and

to develop a multilateral reconstruction program. USAID sponsored a meeting for

private sector donors on December 14. At a May 25-28 follow-up meeting in

Stockholm, donors pledged about $9 billion, including $5.3 billion from the

InterAmerican Development Bank and World Bank over the next four years and over

$3 billion by bilateral donors.

The Administration has clearly stated its intention to use the opportunity

provided by the disaster and the necessity for reconstruction to bring about significant

changes in Central America. The reasons given for this emphasis are the trade

potential of the region, support for the growing movement toward democracy, and

concern that a slow response might trigger instability in the region or encourage large

numbers of disaster victims to migrate to the United States. The President traveled

to the region on March 8 to 11.

This report describes the situation within the region, and the U.S. and

international response to the disaster. It also discusses the longer term needs so far

identified and the U.S. and international response to these needs.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The U.S. Response to the Disaster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

U.S. Emergency Response Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

U.S. Emergency Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Types of Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

USAID’s Office of Foreign Disaster Assistance . . . . . . . . . . . . . . . . . 5

USAID Development Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Defense Department . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Debt Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

U.S. Immigration Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Peace Corps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Legislative Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Supplemental Appropriation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

International Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Current Situation By Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Honduras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Background on Honduras . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Extent of the Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Emergency and Reconstruction Response . . . . . . . . . . . . . . . . . . . . . 17

Nicaragua . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Extent of the Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Emergency and Reconstruction Response . . . . . . . . . . . . . . . . . . . . . 21

Guatemala . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Extent of the Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Emergency and Reconstruction Response . . . . . . . . . . . . . . . . . . . . . 23

El Salvador . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Extent of the Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Emergency and Reconstruction Response . . . . . . . . . . . . . . . . . . . . . 25

Tables

1. U.S. Hurricane Mitch Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2. USAID/OFDA Aid to Central America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3. Estimated Country Allocation of USAID Supplemental Funds . . . . . . . . . . 10

4. International Cash Assistance to Central American Countries as of 12/1/98 . 12

Central America: Reconstruction after

Hurricane Mitch

Introduction

Hurricane Mitch, which struck Central America between October 26 and

November 5, 1998, was the most damaging storm to hit Central America in decades1.

According to U.S. satellite imagery systems, the storm affected 40 percent of the land

mass of Honduras, Nicaragua, Guatemala, and El Salvador. Honduras suffered the

most damage and loss of life. Nicaragua also suffered large losses. Guatemala, El

Salvador, Belize, and Costa Rica suffered less damage. Deaths, injuries and loss of

homes and infrastructure were the result of floods and mud slides made worse by

years of environmentally destructive agricultural practices. Damage to infrastructure

(roads, bridges, power and telephone systems, and public buildings) and destruction

of crops and cropland will require long-term reconstruction. In all of the countries,

clean water is scarce and disease from contaminated lakes, streams and flooded areas

is an ongoing threat. (U.N. and U.S. medical personnel report that no major outbreaks

of disease have occurred, and attribute this to special attention to disease control by

the local governments and the relief agencies.) The U.S. Agency for International

Development (USAID) had prepositioned relief equipment and personnel in the region

before the storm touched land and began relief efforts as soon as weather permitted.

Other countries and international governmental and nongovernmental agencies also

responded quickly. Destruction of bridges and roads made emergency relief possible

only with helicopters in many areas. By November 12, assistance was flowing

smoothly and major roads and bridges had been repaired in all countries. People were

returning to their homes and damage assessments were underway. (Information on

the disaster is updated frequently. For information on conditions, view the reports of

governments, private voluntary agencies, and U.N. agencies on the web at the

following address: http://www.reliefweb.int/)

Even as the emergency response was occurring, discussion of the medium and

long term reconstruction of the area began within the region, at international

meetings, and within the U.S. government. This effort is well underway.

Preliminary assessments made by the World Bank and U.N. Development

Program (UNDP) for the December 1998 donor’s meeting in Washington estimated

1

The largest disasters occurring in the region prior to Hurricane Mitch identified by the

USAID Office of Foreign Disaster Assistance were earthquakes in Nicaragua (1972) and

Guatemala (1976) and a Hurricane in Honduras (1974). The earthquakes in Nicaragua and

Guatemala resulted in the deaths of 10,000 and 23,000 respectively. The Honduran hurricane

killed 8,000. Deaths from Hurricane Mitch are estimated to be between 8,000 and 9,000 with

as many as 9,000 missing.

CRS-2

the total damage in the region of $5.361 billion2. Check on these figures. This

included $1.3 billion in the social sector (housing, health, education), $1 billion in

infrastructure (roads, bridges, water, sanitation, energy), $2.9 billion in productive

sector (agriculture, manufacturing, trade, services) and $68 million in environmental

damage. U.S. disaster advisors report that it will be at least two years before the

agricultural sector is back to normal and at least that long until the affected countries

can harvest a fruit crop. Replacing housing will be a major concern. On February

16, the Administration requested a supplemental appropriation of nearly $956 million

to reimburse agencies for the money already spent, and provide reconstruction

assistance to the countries of Central America, the Caribbean and Colombia.

While Hurricane Mitch was the most destructive storm in decades, the area is

subject to frequent tropical storms and other natural disasters. International

development and disaster personnel agree that damage caused by Mitch was

magnified by environmental problems. Some reports estimate that 50 to 75 percent

of the economic losses resulted from poor design and siting of homes, roads, bridges

and industry. Additional damage was caused by poor land use procedures (such as

deforestation and hillside farming with no soil conservation) and poor watershed

management. The reconstruction effort will attempt to reduce the vulnerability of

these countries to future storms and especially focus on reversing the environmental

degradation of recent years. An international meeting held on February 16-19, 1999,

discussed disaster preparedness and the response to both Hurricanes Mitch and

Georges (a storm which occurred a few weeks earlier, largely in the Caribbean). The

February 22, 1999 report prepared for the meeting by the U.N. Office for the

Coordination of Humanitarian Affairs (OCHA) is posted on the

[http://www.reliefweb.int] web site. Among the concerns mentioned in this report are

poor dissemination by national governments of storm warnings to their populace, lack

of communication between regional governments about the course and damage of the

storm, and lack of local governmental disaster response plans and procedures.

Another concern is that due to lack of available land, many homes are being rebuilt

in disaster areas. Some victims are being settled in makeshift shelters which are likely

to remain permanently due to inability or unwillingness of governments to resolve

long standing land availability problems. Both regional governments and donors want

to make sure that reconstruction programs address past environmental degradation

(such as deforestation, cultivation of marginal lands, and lack of soil conservation)

which increased the damage caused by the storm. Safe population resettlement in

areas which are less prone to disaster is also a major concern.

2

In requesting the supplemental appropriation the United States used the damage estimate of

$8.5 billion. This amount was based on replacement costs estimated by the Army Corps of

Engineers. Some voluntary agencies criticize the use of Corps estimates because they rely too

heavily on U.S. labor and material costs. Another estimate used by the Administration is

$7.5 billion. This estimate is derived from the World Bank/UNDP damage assessment, but

relies on the “replacement costs” which are defined in the assessment to include “in addition

to the losses in assets (infrastructure and lost production damaged by the event), income lost

and production that will not be obtained indirectly due to the event, and investment that will

have to be made to recuperate a similar production level to pre-hurricane levels”. A third

estimate cited by the Administration is $10 billion. According to USAID, this is the amount

of damage caused by both Hurricane George in the Caribbean and Hurricane Mitch as

estimated by the World Bank/UNDP.

CRS-3

The U.S. Response to the Disaster

The United States is generally a leader and major contributor to relief of

humanitarian disasters. In the case of Central America, it is clear that the response

to Mitch will be a major long term effort and that the U.S. goals for the

reconstruction program are ambitious in comparison with other disaster responses.

USAID Administrator Atwood stated in a November 19 press conference that the

U.S. aim “is to repair the infrastructure of this region so that it is even better than it

was before this storm.” He added that the U.S. response was self serving as well as

humanitarian. “...this region has been a region wherein we have invested a great deal

in the development of democracy and open markets. And as a consequence of that,

we don’t want to see a storm, a bad one, destroy the investments that we have all

made together, the people of this region and the United States.”3 At a press

conference on January 28, 1999, U.S. spokesmen gave the following reasons for this

attention: to ensure that recently established democracies remain stable; to revitalize

economies that were struggling before the hurricane; to prevent a mass flood of illegal

immigrants to the United States; and, to help reverse environmental degradation

resulting from the hurricane and develop mitigation systems to lessen the damage of

any future natural disasters. Assistant USAID Administrator Mark Schneider

suggested that the reconstruction program will be a three to five year process.4

President Clinton echoed these comments during his trip to the area, from

March 8 to 11, 1999. Over the course of the trip, he expanded on U.S. goals for the

area. These include: expansion of trade and investment in the region; concern for

workers’ rights, especially a ban on child labor; protection of the environment and

reversal of destructive practices; and, fairness in treating migrants from all countries

in the United States. While in the region, he promised $25 million to assist in

implementing the Guatemalan peace accord, $25 million over five years to support

regional environmental initiative through CONCAUSA, $11 million over three years

from USAID/OFDA for disaster mitigation programs, $8.2 million for programs to

eliminate child labor, and support for the Organization for American States pilot

project on street children.

U.S. Emergency Response Mechanism

The President has wide authority to provide emergency assistance for foreign

disasters and the United States government provides disaster assistance through

several U.S. agencies. The Office of Foreign Disaster Assistance (OFDA) in USAID

(FY1999 appropriation of $200 million) can respond immediately with relief materials

and personnel including some already located in various countries around the world5.

OFDA has emergency response teams of experts (DARTS) which can be put together

quickly to respond to disaster. OFDA also provides assistance through grants to

governmental and nongovernmental agencies in the disaster area. USAID is the U.S.

3

USAID News Briefing. Transcript. Washington. November 19,1998.

4

U.S. committed to helping Central America recover from Mitch. USIS Washington File.

January 28, 1999.

5

Authorized in Sec. 491-493 of P.L. 87-195, the Foreign Assistance Act of 1961.

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agency charged with coordinating U.S. government and private sector assistance.6

It also coordinates with international organizations, the governments of countries

suffering disasters, and other governments. OFDA has wide authority to borrow

funds, equipment and personnel from other parts of USAID and other federal

agencies. USAID administers Title II of the Food For Peace program which provides

food aid to victims of disasters (about $338 million in FY 1999). The Department of

Defense has a humanitarian assistance program which received a $50 million

appropriation in FY1999. In addition, the President has the authority to draw down

defense equipment and direct military personnel to respond to disasters7. The

President may also use the Denton program8 to provide space available transportation

on military aircraft and ships to private donors who wish to transport humanitarian

goods and equipment in response to a disaster.

U.S. Emergency Assistance

President Clinton announced the

Table 1. U.S. Hurricane Mitch Aid

first round of U.S. government

($s - millions)

emergency aid totaling $70 million on

November 5. Over the following weeks, USAID-OFDA

$34

with visits to the region of senior U.S.

USAID Development aid

$5

officials and Mrs. Clinton, American USAID Food for Peace

$52

$63

assistance pledged had grown by Department of Agriculture

DOD

506(a)

drawdowns

$75

December 4 to $304 million, using every

DOD humanitarian & airlift $75

available emergency relief tool. Table 1 Total U.S. aid

$304

summarizes the major components of

U.S. aid, while individual elements are

discussed below. In addition to the aid shown in table 1, the United States has

announced other initiatives that do not need appropriated funds to implement.

Generally, OFDA provides emergency aid which lasts 30 to 90 days. The same

is true for Department of Defense humanitarian assistance. After the initial emergency

is over, assistance is provided through other channels, such as the regular country

development programs of USAID.

6

Private donations may be made to the private agencies working in the area which are listed

on the Internet at [http://www.interaction.org] or by phone at 202-667-8227. Cash

contributions through the Organization of American States can be made at any Citibank

branch in the country to the Central America (or specific country) Disaster Relief Fund.

Those wishing to provide relief services or supplies can contact Volunteers in Technical

Assistance (VITA) at 703-276-1914 or [http://www.vita.org].

7

Sec. 506 of the Foreign Assistance Act of 1961 (P.L. 87-195) authorizes the President to

draw down articles and services from any U.S. agency. Title 10, section 2551 authorizes the

use of DOD funds to transport humanitarian relief items and provide other humanitarian

assistance to the extent authorized annually by Congress.

8

Title 10, section 402, is named after former Member of Congress Jeremiah Denton. It

authorizes shipment of privately donated humanitarian goods on U.S. military aircraft on a

space available basis. For further information on this program, see CRS Report 95-976 F,

DOD Assistance in Foreign Humanitarian and Disaster Relief, the Current Congressional

Controversy. 1995. or the USAID web site [http://www.info.usaid.gov/hum_response].

CRS-5

Types of Assistance

USAID’s Office of Foreign Disaster

Assistance. OFDA provided assistance valued at

nearly $34 million in the immediate aftermath of

the storm. This includes cash, to purchase relief

supplies and rent transportation locally, personnel

to coordinate relief activities and assess longer

term needs, and shipments of relief supplies which

were not already in the area, such as emergency

water systems. It also included funding for an

emergency shelter program for Honduras which

enabled schools being used for shelter to reopen as

schools.

Table 2. USAID/OFDA

Aid to Central America

(2/10/99)

Honduras

Nicaragua

Guatemala

El Salvador

Costa Rica

Belize

Regional

Total

$14,704,648

4,844,267

1,257,013

1,123,451

45,000

25,000

11,660,000

33,659,379

USAID Development Aid. USAID is providing $5 million in Development

Assistance money for micro enterprise credits. (The Inter-American Development

Bank is providing an additional $12 million in credits). The United States pledged an

additional $120 million in reconstruction aid at the December 10-11 meeting of

donors sponsored by the IADB and the World Bank. This will be provided through

reprogramming existing food aid, child survival, and development assistance funds

appropriated in FY1999 and directing $18 million of FY2000 foreign assistance

funding toward reconstruction activities. These funds will be used to rehabilitate

transportation infrastructure, restore public utilities and health care, reestablish crop

and livestock production, and revitalize the economic sector. The $120 million will

be allocated to Honduras ($66 million), Nicaragua ($32 million), El Salvador ($16

million), and Guatemala ($5 million). For a breakdown of total USAID funding,

including the money appropriated in the emergency supplemental, P.L. 106-31, see

the individual country sections.

Food Aid. USAID has approved $52 million in Food for Peace emergency food

aid (P.L. 480 Title II) to Honduras, Nicaragua, and Guatemala (60,000 tons to

Honduras, 18,000 tons to Nicaragua, and 7,600 tons to Guatemala, and a $1 million

contribution to the World Food Program for El Salvador). This represents 50% of

the overall food aid needs in the region. In addition, the Department of Agriculture

has approved $10 million in concessional loans (P.L. 480 Title I) which will be

divided between El Salvador and Guatemala, and $20 million in grants (Food for

Progress) which will be divided between Honduras and Nicaragua. Surplus wheat and

corn, valued at $33 million will also go to the region under section 416 (b) of P.L. 814399. According to the Department of Agriculture, 60,000 tons of surplus wheat will

go to both Honduras and Nicaragua, and 30,000 tons each to El Salvador and

Guatemala. The surplus corn amounts to 50,000 tons, of which 15,000 tons will go

9

Under this section, the Secretary of Agriculture may furnish eligible commodities for carrying

out assistance programs in developing countries and friendly countries under the Food for

Peace Act and the Food for Progress Act and for such other purposes as approved by the

Secretary of Agriculture.

CRS-6

to Nicaragua. The food will be sold in the region and the money raised will be used

for rehabilitation programs.

Defense Department. DOD had provided about $150 million to the relief and

reconstruction program when the second phase of their effort ended on February 27,

1999. This included $75 million in drawdown of equipment, $50 million from the

DOD Overseas Humanitarian, Disaster and Civic Aid Program, $25 million from the

CINC Initiative Fund, and $5 million to airlift OFDA relief supplies. Military

assistance to the region included flights of relief supplies, helicopter delivery, medical

personnel, water purification activities and infrastructure reconstruction activities and

included the efforts of 5,300 military personnel. The first phase, emergency relief,

ended on November 26. On November 27, the military services began the second

phase focusing on infrastructure repair and health care. In mid March, there were

1,600 personnel still serving in the region. The final reconstruction phase, which

would be funded primarily through the emergency supplemental, will be a National

Guard and Reserve program called New Horizons, composed primarily of Reserve

and National Guard engineering personnel. It will focus on roads, bridges, and public

buildings such as schools and health clinics. The average daily number of U.S.

personnel in each country under New Horizons will be 550 in Honduras and 350 in

Guatemala, El Salvador, and Nicaragua. The Department of Defense estimates that

23,000 U.S. personnel will rotate through the region in the New Horizons program

(which also includes the Caribbean) through the end of September and that the

program will cost $70 million10, of which $14 million has already been found in the

Department of Defense budget.

Debt Relief.11 The destruction of Hurricane Mitch has placed additional

financial strains on affected Central American countries, especially Nicaragua and

Honduras which are both heavily indebted nations. Many organizations and national

donors, including the United States, are examining alternative approaches for relieving

these financial difficulties. Nicaragua’s debt stock totals about $5.9 billion,

representing 21% of exports and 37% of revenues. Honduras owes $3.6 billion, 16%

of exports and about one-third of revenues. Only a small amount of the debt — $94

million for Nicaragua and $144 million for Honduras — is owed to the United States.

The U.S. has placed a moratorium on Nicaraguan and Honduran debt payments to the

U.S. for 1999 and 2000, an amount projected to total $54 million over the two years.

This mechanism does not represent debt forgiveness, but is similar to a debt

rescheduling where the payments are deferred and spread out over a longer period of

time, but are eventually repaid. On December 11, the United States further announced

that it was prepared to negotiate debt forgiveness arrangements with Honduras and

Nicaragua, canceling 67% and 90% of their debts, respectively. Forgiving foreign

debt, however, requires advance appropriations which the Treasury Department

sought in the February 16 supplemental request. The $16 million requested covered

the budgetary costs of expanding debt reduction for Honduras and permitting the

cancellation of $103 million of face value of Honduran debt owed to the United

States.

10

Reuters. U.S. military expands Central America program. Feb. 2, 1999.

11

Prepared by (name redacted), Specialist in Foreign Affairs.

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Relief of debt owed by Nicaragua and Honduras to international financial

institutions (IFIs), the largest part of their debt stock, represents 40-50% of their debt

service requirements over the next two years. Britain and other European nations

have helped establish a trust fund at the World Bank (Central America Emergency

Trust Fund) into which donors can contribute money — $115 million as of January

6 — to help the two countries service their IFI debts. The Administration included

a $25 million contribution to this Fund in the supplemental request.

U.S. Immigration Implications.12 In the aftermath of Hurricane Mitch, the

Attorney General on November 5, 1998, temporarily suspended the deportation of

aliens from El Salvador, Guatemala, Honduras, and Nicaragua. The Administration

then weighed the option of providing Temporary Protected Status (TPS) to aliens

from these four countries who are residing illegally in the United States.13 Proponents

of granting TPS to the Central Americans maintained it is an appropriate humanitarian

response because people should not be forced to return to countries devastated by the

natural disaster. Opponents feared TPS for those Central Americans in the United

States would serve as a magnet to the millions of people displaced by the hurricane,

prompting many of them to seek entry to the United States.

On December 30, 1998, the Attorney General designated TPS for undocumented

Hondurans and Nicaraguans in the United States as of that date. The Administration

maintained that the extraordinary displacement and damage from Hurricane Mitch

warranted TPS for 18 months for Hondurans and Nicaraguans. Guatemalans and

Salvadorans had their stays of removal extended for 60 days — until March 8, 1999.

Some have criticized the Attorney General for not giving TPS to Guatemalans and

Salvadorans, arguing that the Clinton Administration is continuing a longstanding

pattern of differential treatment. 14 The Administration maintains that hurricane

damage in Guatemala and El Salvador was not extensive enough to justify TPS. The

Administration did not extend the stay of removal for Guatemalan and Salvadorans

beyond the March 8 deadline. Acting Assistant Secretary of State Peter Romero

stressed the importance of maintaining control of national borders. “We’re aware of

12

Prepared by (name redacted), CRS Domestic Social Policy Division.

13

TPS offers blanket relief for aliens who may not meet the legal definition of refugee but are

nonetheless fleeing potentially dangerous situations. According to the Immigration and

Nationality Act, it may be granted under the following conditions: there is ongoing armed

conflict posing serious threat to personal safety; a foreign state requests TPS because it

temporarily cannot handle the return of nationals due to environmental disaster; or, there are

extraordinary and temporary conditions in a foreign state that prevent aliens from returning,

provided that granting TPS is consistent with U.S. national interests. For further discussion,

see: CRS Report 98-759, Immigration: Temporary Protected Status Background and Issues,

by (name redacted).

14

For background, see: CRS Report 97-810, Central American Asylum Seekers: Impact of

1996 Immigration Law, by (name redacted); and CRS Report 98-3,

The Nicaraguan

Adjustment and Central American Relief Act: Hardship Relief and Long-Term

Undocumented Aliens, by (name redacted).

CRS-8

the burden of returnees, but we also see a troubling situation in terms of the flow of

people to the United States.”15

The media, meanwhile, are reporting that significant numbers of displaced

Central Americans are moving north to the United States in the wake of Hurricane

Mitch’s devastation. One account cites Border Patrol agents in Brownsville, Texas,

saying that apprehensions of Hondurans increased by 61% in the last three months of

1998.16 There appears to be confusion on the part of some displaced Nicaraguans and

Hondurans who incorrectly think that they will be given TPS when they arrive in the

United States. The State Department, nonetheless, maintains that there is no hard

evidence of a mass exodus of displaced Central Americans to the United States. For

further information on this, see CRS Report RS20101, Migration to the United States

of Displaced Central Americans: Trends and Issues.

The Administration and Congress are now faced with serious questions about

their detention policy and the adequacy of resources to respond to displaced Central

Americans. Current law calls for the Immigration and Naturalization Service (INS)

to detain aliens entering the United States without proper immigration documents, but

adequate detention space is an issue. About 1,500 Hondurans, for example, were

reportedly apprehended and detained along the South Texas border near Brownsville,

but INS has reportedly released many displaced Central Americans because of

overcrowded conditions in the detention facilities.

The reports of INS releasing some of these aliens on their own recognizance

prompted criticism from those who support the mandatory detention policy, including

the House Judiciary Immigration Subcommittee Chair Lamar Smith. That some

criminal aliens already present and detained in the United States might be released

was of particular concern. Many critics of the release policy maintain that releasing

the aliens will only encourage more displaced Central Americans to seek refuge in the

United States, thereby creating a magnet effect. The Administration, arguing that it

does not currently have the resources to detain all of the Central Americans crossing

the border, requested and received $80 million in the emergency FY1999

supplemental appropriations request for increased detention bed space to

accommodate criminal aliens from Central America as well as the potential influx of

displaced Central Americans.

Peace Corps. The first 23 former Peace Corps volunteers left for Central

America and the Caribbean in late January to help with the long term reconstruction

of the region. Most of this first group will go to Honduras, with a few in Guatemala

and the Caribbean. A later group of at least 20 more volunteers will be sent to

Nicaragua and El Salvador. Over the course of a year, approximately 100 volunteers

will be in the region. The program allows them to volunteer for up to 6 months of

service and is funded through the Peace Corps budget.

15

USIS Washington File. March 4, 1999. Ambassador Romero previews Clinton trip to

Central America.

16

“Painful Exodus Follows Hurricane’s Havoc,” by Hector Tobar, Los Angeles Times,

February 10, 1999.

CRS-9

Other Activities. At the December 10-11, 1998 meeting of donors, the

Administration promised to work with Congress to gain approval for Carribean Basin

Initiative (CBI) enhancement which will reduce trade barriers between these countries

and the United States. The Administration bill, H.R. 1834, was introduced by

Congressman John Lewis on May 18, 1999. The Administration will submit bilateral

investment treaties with Nicaragua and Honduras to the Senate. The Overseas

Private Investment Corporation (OPIC) announced an investment facility for Central

America and the Caribbean to meet the need for medium and long term capital on

February 10. (The joint OPIC/ Citibank initiative will provide $200 million in new

projects for the region through the private sector.) In addition, on April 7, OPIC

announced the approval of $100 million insurance coverage for an electricity

distribution project in Guatemala and a $54 million political risk insurance contract

for Nicaragua. On December 15, 1998, at a USAID sponsored meeting to encourage

private sector aid to Central America, several other U.S. agencies announced aid

proposals which would be provided through agency budgets. These include a

program to provide Department of Housing and Urban Affairs (HUD)/ private sector

housing assistance (HUD will provide $5 million while the private sector will provide

housing materials at cost). The Department of Commerce will focus on increasing

trade and investment to the region and using its expertise in ensuring safe and

environmentally friendly buildings. The U.S. Geological Service scientists are

assessing the geological risk areas in Central America to guide rebuilding. FEMA, the

Federal Management Agency will assist HUD and Commerce in this area. The

Department of Energy announced assistance in energy technology. The Small

Business Administration will perform the same role in the Central American disaster

as it does in U.S. disasters, as the banker for small business, homeowners, and renters.

Department of Transportation will focus on rebuilding the transportation

infrastructure, including a $1.3 million harbor navigation system for the region. This

will be part of a transportation reconstruction effort by all the countries of the

Americas. In all, the Administration expects more than 12 U.S. Cabinet agencies to

be involved in the reconstruction effort. On January 28, the State Department

announced the signature of a U.S.-Honduras agreement to provide a private audit of

all donor assistance programs. A similar agreement with the government of

Nicaragua is anticipated. The United States will provide funding for the audits.

Private sector assistance has already been substantial and is expected to continue

to grow. On January 28, 1999, Department of State Counselor Wendy Sherman

estimated the value of private U.S. donations at $28 million. On March 2, 1999, the

American Red Cross announced that Honduras, Nicaragua, Guatemala and El

Salvador will share $38 million which the public has donated in a record setting

response to a disaster. As of February 24, DOD had transported over 11 million

pounds of private relief supplies under the Denton program. USAID Administrator

Atwood stated at hearings on February 24 that USAID is currently matching private

corporate donations of goods and services from more than 50 U.S. businesses with

needs in the region.

CRS-10

Legislative Actions

Supplemental Appropriation. 17

The emergency

Table 3. Estimated Country Allocation

supplemental appropriation

of USAID Supplemental Funds

requested by the Administration on

($s - millions)

February 16 included both new

funding and reimbursement to

Honduras

$291.0

USAID and the Department of

Nicaragua

94.1

Defense for money already spent.

Guatemala

25.0

El Salvador

20.5

Aid to Central America was passed

Regional

131.0

by Congress on May 20 as part of a

Dominican Republic

29.0

much larger supplemental bill. P.L.

Haiti

9.8

106-31 adds $621 million in new

Eastern Caribbean

3.0

funds to be administered by USAID,

Colombia

10.0

Regional

131.0

according to USAID press

18

information. Other U.S. agencies

will also take part in program

implementation through transfers of

funds from USAID. The anticipated country allocations of this money are shown in

Table 3. The law requires that all funds be expended within two years and in the

sectors identified by Congress for each country. USAID identified the overall sector

spending as: public health-$136 million, restart economies-$283 million, housing and

schools-$55 million, assistance to local governments-$21.5 million, clearing land

mines-$2 million, USAID operating costs-$5.5 million, USAID inspector general and

General Accounting Office audit-$2 million, DOD New Horizons exercises-$54.3

million. In addition, USAID information states that the law includes $41 million in

debt restructuring and relief (of which $25 million is the promised U.S. contribution

to the Central America Emergency Trust Fund). USAID/OFDA and Department of

Defense disaster relief accounts received $158 million to replenish some of the funds

spent in the region. Environmental management and disaster mitigation programs are

funded at $64 million. The law includes $50 million for Caribbean recovery from

Hurricane Georges and $10 million for earthquake relief in Colombia. Finally, the

Immigration and Naturalization Service received $80 million to support increased

detention facilities for criminal aliens and the greater number of Central American

illegal aliens coming as a result of the storm (See previous section on immigration

implications). The supplemental included most of the assistance pledged by the United

States since the disaster occurred with the exception of the trade provisions, including

expansion of the Caribbean Basin Initiative.

During hearings by the Foreign Operations Subcommittee of the House

Appropriations Committee on February 24, Subcommittee members expressed

concern about corruption and accountability among regional governments and

17

For detailed information on the Supplemental Appropriations bill, see CRS Report RL

30083, Supplemental Appropriations for FY1999: Central America Disaster Aid, Middle East

Peace, and Other initiatives.

18

Emergency supplemental package for Central America, the Caribbean, and Colombia. Fact

sheet released by the Bureau for Western Hemisphere Affairs. May 25, 1999.

CRS-11

suggested establishing a special disaster account or requiring certification reports to

give Congress and the Administration better oversight of the funds. Members also

questioned whether debt relief should be included in emergency legislation. Finally,

several members suggested appropriating an additional $25 million, which would

entirely eliminate Honduran and Nicaraguan bilateral debt to the United States. In the

full committee mark up on March 12, the committee agreed to appropriate most of

the money requested without any additional restrictions. However, the Committee

identified funds from other programs which could be used to offset the cost of the

supplemental and avoid additional expenditures. The Senate Appropriations

Committee, which marked up the legislation (S. 544) on March 4, had first raised the

issue of offsetting the cost of the supplemental. After the House mark up, press

reports indicated that the governors of several states were concerned because $350

million of the recommended recission would come from welfare block grants to states.

The Office of Management and Budget threatened to recommend a Presidential veto

of the legislation because of the source of the funds chosen for offset. The Senate

passed S. 544 on March 23. The House passed H.R. 1141 on March 24 by a vote

of 220-211. As finally passed, P.L. 106-31 dropped all the offsets in the Central

American part of the bill, added $1 million to the DOD drawdown account and $6

million for the DOD New Horizons program. An additional $37 million was added

for Caribbean reconstruction, bringing the total appropriation for Central American

and the Caribbean to $999.9 million.

Other Legislation Senator Bob Graham of Florida and nine cosponsors

introduced S 371, the Central American and Caribbean Relief Act, on February 4,

1999.19 Much of the bill focuses on trade enhancement and additional trade benefits

for the countries included under the Caribbean Basin Initiative. These include offering

affected countries the same trade and tariff treatment as the North American Free

Trade Agreement (NAFTA) countries and special temporary trade and tariff benefits.

S. 371 also includes reconstruction assistance which is similar to the administration.

The House companion bill, H.R. 984, was introduced on March 4 by Representative

Crane and reported favorably to the full committee on May 18. The Administration

bill to provide trade benefits to the Central American countries, H.R. 1834, was

introduced on May 18 by Representative John Lewis.

19

For information on trade issues, see CRS Issue Brief 95017, Trade and the Americas.

CRS-12

International Assistance

The United States provides

Table 4. International Cash Assistance to

assistance as part of an

international effort and much Central American Countries as of 12/1/98

assistance is being provided by

Honduras

$23, 931,969

other governments and

Nicaragua

16,028,509

international agencies. The U.N.

El Salvador

7,542,501

Office for the Coordination of

Guatemala

4,554,249

Humanitarian Affairs (OCHA)

tracks contributions to disasters

Belize

448,486

from donors around the world.

Region

350,055,749

While the information is generally

Total

$402,561,463

spotty and incomplete, Table 4

shows the distribution of over Source: UN OCHA

$402 million which had been

pledged or contributed as of

December 1, as reported by governments to OCHA. It does not include non-cash

contributions in services or in kind (such as trucks and aircraft, crews, and emergency

and medical personnel). Many countries have made substantial non-cash

contributions, including both military and civilian personnel. By December 7, the

reported cash contributions had risen to $426 million. U.N. agencies such as the

World Food Program (WFP) and UNICEF, and regional agencies such as the Pan

American Health Organization, are using donations from governments to provide

food and health assistance such as vaccination and sanitation programs to head off

outbreaks of disease. The European Union had contributed 200 million EUs by the

end of 1998 (1EU=$1.06) and has announced a pledge of 250 EUs for reconstruction

over the next four years. Over 150 U.N. volunteers (similar to U.S. Peace Corps

volunteers) provide both emergency and reconstruction assistance. Aid is also

flowing through private voluntary organizations with programs in the area. The Red

Cross, for example, mobilized 11,000 volunteers from the region and is receiving

assistance from governments and Red Cross affiliates around the world. The

Reliefweb web site lists many of these voluntary organizations.

United Nations follow-on activities began shortly after the disaster as well. A

November 12, 1998 meeting of donors and affected countries established a U.N.

sponsored Inter-Agency Transitional Appeal to raise $153 million for relief and

immediate rehabilitation for the next 6 months (until May 31, 1999). As of May 20,

1999, $109.5 million or 72% of the amount had been pledged or contributed.

The U.N. agencies are also providing damage assessments and reconstruction

estimates to donors. The United Nations Environment Program (UNEP) provided

an assessment of environmental damage in November for use of regional governments

and donors. The UNDP/World Bank damage assessment provided the basis for the

first donor meeting in December. A Food and Agriculture Organization (FAO)/ WFP

assessment of food aid needs and crop damage was given to donors in late January.

In early February 1999, an inter-agency team from OCHA, UNDP, UNICEF, and

World Health Organization (WHO), traveled to the region to evaluate Central

CRS-13

American disaster mitigation and rehabilitation needs for presentation to a meeting on

the subject on February 16-19.

Washington Conference. On December 10 and 11, the IADB and the World Bank

hosted the first international donor conference to discuss reconstruction needs in the

region. Fifty donor nations and multilateral agencies, as well as the countries of

Central America attended the meeting in Washington. According to USAID, a total

of about $6 billion in assistance was pledged at the meeting. The World Bank

pledged about $1 billion in new interest-free credits to Honduras and Nicaragua. El

Salvador and Guatemala will also receive assistance through the Bank’s traditional

lending process. The IADB announced new financing totaling $246 million: $158.2

for Honduras, $48.6 for Nicaragua, and $40 million for Guatemala. (Since raised to

a total of $370 million) Prior to the meeting, the IADB had redirected $430 million

in previously approved loans to emergency programs in the region and the World

Bank had redirected $200 million of its already approved projects toward emergency

projects in the region. The Paris Club of creditor nations, composed of most of the

industrialized countries, announced a three year moratorium on debt repayment and

began discussion of the eventual write off of most of the debt. (On January 7, 1999,

the Paris Club announced the write off of 80% of Nicaragua’s debt and the

consideration of a similar plan for Honduras.) The United States pledged a

multifaceted aid package at the meeting. (See section on U.S. assistance)

Stockholm Conference. At the conference of the Consultative Group on the

Reconstruction and Transformation of Central America held in Stockholm on May

25-28, 1999, countries were asked to make long term aid commitments based on the

Central American governments’ expressed needs and more careful assessments of

damage to the region. The estimated aid commitment was about $9 billion. The

unofficial estimate of the additional bilateral money which donors will provide for

reconstruction is $1.5 billion. In addition to the United States, the major donors are

Japan-$249 million, Sweden-$185 million, Denmark-$170 million, and Canada-$112

million. General bilateral aid pledged to the region will add an estimated $1.1 billion

including $682 million from Spain, $202 million from Germany, and $104 million

from Norway. An additional $500 million is estimated to have been reprogrammed

to reconstruction projects by various governments. U.N. agencies and private

voluntary agencies are adding reconstruction programs funded by these national

donors as well as with private contributions.

At the Stockholm Conference, the Inter-American Development Bank and the

World Bank announced that they would commit $5.3 billion over the next four years

to the five Central American countries. This includes the aid already committed to

the region since the Hurricane struck in 1998. The aid will be composed of

concessionary loans, debt relief, redirection of existing projects, and special projects

geared to reconstruction.20

The U.S. delegation statement summarized the approach agreed to by the

conference participants. First, for environmental security, projects will stress good

land use planning, environmental and geological analysis in all sectors from

20

Inter-American Development Bank. May 28,1999. Reliefweb. Http://www.reliefweb.int.

CRS-14

transportation to agriculture to housing. Second, reconstruction projects must ensure

that economic and social opportunities reach all, including the poor, the indigenous

community, and other disadvantaged groups. Third, projects will emphasize

decentralization and local government decision making. Fourth, projects will stress

accountability and include safeguards to prevent misappropriation or misuse of funds.

Finally, the progress of reconstruction will be monitored through country level and

donor committee mechanisms.21

21

Statement of U.S. delegation to the Consultative Group on the Reconstruction and

Transformation of Central America. May 28, 1999. Http://hurricane.info.usaid.gov/ pledge.

htm.

CRS-15

Current Situation By Country

Honduras22

Background on Honduras. Before Hurricane Mitch devastated Honduras, the

country already faced significant development challenges. With a per capita income

of less than $750 and a poverty rate above 65%, the country was among the poorest

in the hemisphere. According to AID, the country's most daunting challenges

included: severe poverty, protectionist economic tendencies, archaic judicial practices,

inadequate education and health care systems, and widespread environmental

degradation. Health care in the country was weak, with infant mortality holding at

40 deaths per 1000 live births.23 In FY1998, the United States provided about $21

million in assistance to Honduras, consisting largely of development assistance ($12

million), food aid ($5.1 million), and a Peace Corps program ($3.1 million). For

FY1999, before the storm, the Administration had planned to provide $29.6 million

in assistance, consisting of $21.9 million in development assistance, $4.4 million in

food aid, $2.8 million for a Peace Corps presence, and $0.5 million for International

Military Education and Training. After the storm, assistance to Honduras increased

substantially, as the United States provided significant amounts of emergency and

reconstruction assistance (see “Emergency and Reconstruction Response” below).

Current President Carlos Flores Facusse, of the Liberal Party (PLH), is the 5th

president since the country's return to civilian democratic rule in 1981 after ten years

of military government. President Flores was elected in November 1997, defeating

his National Party (PNH) rival by a margin of 10%. He succeeded Carlos Roberto

Reina, also from the PLH. For most of this century, the PLH and the PNH have been

the two dominant parties; both are considered center-right parties and there appear

to be few ideological differences between the two. The Honduran military has been

a powerful force in domestic politics since the 1950s. From 1963 until 1971, and

again from 1972 until 1982, the military essentially controlled the national

government. After the country's return to civilian rule, the military continued to

operate as an autonomous institution with considerable involvement in economic

activities, but in the 1990s successive Honduran administrations have taken steps to

reduce the power of the military. In 1997, the national police were transferred from

military to civilian control and in September 1998 the Honduran Congress approved

constitutional reforms to abolish the position of commander-in-chief of the armed

forces in favor of a civilian-appointed defense minister under the direct authority of

the President. These reforms were ultimately ratified in late January 1999, and

President Flores appointed the nation’s first civilian defense minister, Edgardo Dumas.

The United States has had close relations with Honduras, particularly dating

back to the 1980s when the country became a staging area for anti-Sandinista contra

excursions into Nicaragua. In 1983, the United States introduced a force of about

22

Prepared by Mark Sullivan, Specialist in Latin American Affairs

23

U.S. Agency for International Development, Congressional Presentation, Fiscal Year 1999,

Annex IV, Latin American and the Caribbean, pp. 113-114.

CRS-16

1,200 troops known as Joint Task Force Bravo located at Soto Cano (formerly

Palmerola) Air Base in Honduras. The troops were involved in military training

exercises and supporting U.S. counterinsurgency and intelligence operations in the

region. Over the years, the troop level of the force has been reduced, and before

Hurricane Mitch struck was estimated to be about 500; the main mission of the force

in recent years has been support for training exercises and U.S. counterdrug activities.

Extent of the Damage. 24 The Honduran government reported that, as a result

of the hurricane, 5,657 persons were killed, 8,052 were missing, 11,762 were injured,

and around 1.9 million were affected by the storm. Reportedly some 70,000 houses

were damaged and more than 92 bridges were destroyed and another 75 bridges were

damaged. Damage to the country’s export cash crops was severe, including most

notably the banana industry which lost some 90% of its plants. In contrast, the

country's domestic staple crops sustained less damage. Extensive flooding and wind

damage were reported throughout the country, although AID officials report that the

most heavily affected areas were several of the Bay Islands and the cities of

Tegucigalpa, San Pedro Sula, La Ceiba, Tocoa, Trujillo, and Choluteca. As of early

December 1998, road access had improved significantly in the affected areas and all

areas that the U.S. military had been flying relief supplies to were open to surface

transportation.

According to the Inter-American Development Bank’s Consultative Group for

the Reconstruction of Central America, damage estimates for Honduras amount to

about $3.6 billion (with almost $2.2 billion in direct damage and $1.5 billion in

indirect damage). Some 56% of the total damage, $2.1 billion, was concentrated in

the country’s productive sectors, including the agriculture, livestock, fisheries, and

forestry sectors. Damage of infrastructure accounted for another 14%, or about $512

million of the total damage. Damage in the social sectors of housing, health, and

education accounted for 28% of the total, with housing accounting for the majority

of the damage.

Before the storm, economic growth estimates for 1998 were about 4% and were

expected to increase to 5% in 1999.25 But the storm's widespread damage to the

agricultural sectors, particularly cash crops, lowered economic growth to around 3%

for 1998 and it is estimated that the Honduran economy will contract by almost 4%

24

Damage estimates are drawn from: U.S. Agency for International Development. Bureau for

Humanitarian Response. Office of U.S. Foreign Disaster Assistance. Central America —

Hurricane Mitch. Summary Fact Sheet. February 10, 1999. Anderson, John Ward. "Mitch

Left Honduras a Republic Without Bananas," Washington Post, November 19, 1998, p. A39;

Rohter, Larry. "Now Ruined Economies Afflict Central America." New York Times,

November 12, 1998. P. A10; and Sanchez, Isabel. "Nicaragua, Honduran Storm Victims Still

Awaiting International Aid," Agence-France Presse, November 18, 1998.

25

"Honduras: Country Update," Economist Intelligence Unit (EIU) ViewsWire, September

25, 1998.

CRS-17

in 1999.26 The maquila (export processing) sector survived the effects of the

hurricane and is projected to grow strongly in 1999.27

Emergency and Reconstruction Response. Numerous countries, U.N.

agencies, and nongovernmental organizations have contributed to the relief effort in

Honduras. The U.N. Office for the Coordination of Humanitarian Affairs (OCHA),

which tracks assistance from donors around the world, shows that around $400

million in donations had been pledged or contributed to the region as of early

December 1998. On December 3, 1998, the United Nations issued an appeal for an

additional $153 million for the region (on top of approximately $400 million already

provided) with Honduras accounting for almost $83 million of that appeal. The

appeal will fund UN projects in such areas as clean water, emergency health services,

food, shelter, and education. International donor conferences were held in December

1998 in Washington and in May 1999 in Stockholm, with billions pledged to Central

America from bilateral donors such as the United States, Japan, Sweden, Denmark,

and Canada, and multilateral donors such as the World Bank, Inter-American

Development Bank. (See section above on “International Assistance.”)

The U.S. response in Honduras has consisted of substantial emergency relief and

reconstruction efforts with a variety of U.S. agencies involved. AID's Disaster

Assistance and Response Team (DART) responded immediately with some 15

disasters specialists in the country beginning in late October. The assistance included

funds: for the local purchase and transport of relief supplies; for U.S. military

deployment of aircraft for aerial assessments, search and rescue operations, and the

delivery of relief supplies; and for grants for non-governmental organizations such as

CARE to administer a variety of disaster response projects in such areas as water and

sanitation, housing, transportation, and health.

Since Honduras was the country most severely affected by the storm, it is slated

to receive the largest share of the FY1999 supplemental package of assistance for the

region (P.L. 106-31, signed into law May 21, 1999), $307 million out of a total of

almost $1 billion. The assistance for Honduras consists of: $121 million for economic

reactivation (policies to reactivate the economy and assist small and medium

producers and micro-enterprises); $90 million for public health (projects to repair,

rebuild, or rehabilitate rural water supply and sanitation systems); $20 million for

housing (projects to ensure permanent housing solutions); $20 million for education

(projects to finance the repair and rehabilitation of damaged schools); $32 million for

disaster mitigation and the environment (projects to support disaster preparedness

plans, management plans for local watersheds, and disaster mitigation infrastructures);

$3 million for local government infrastructure; $5 million for transparency and

accountability (the establishment of an independent oversight function to monitor the

hurricane reconstruction program); and $16 million for the reduction of bilateral debt

owed to the United States.

With regard to debt relief, the Clinton Administration initially called for a

moratorium (not debt forgiveness) of the country's debt service obligations owed to

26

“Honduras: Country Risk Summary,” EIU ViewsWire, July 7, 1999.

27

“Honduras: Country Outlook,” EIU ViewsWire, June 2, 1999.

CRS-18

the United States over the next two years. (Similar actions were taken by other

nations, like Canada and Germany, while France announced that it would provide

Honduras outright debt forgiveness.) But the FY1999 supplemental appropriations

package (P.L. 106-31) went further and includes $16 million that will reduce the face

value of Honduras’ debt by about $103 million. Currently, Honduras has

approximately $140 million in debt outstanding to the U.S. government (out of a total

debt stock of some $3.6 billion) so that the Administration’s request would reduce the

country’s bilateral debt to the United States by about two-thirds.

The FY1999 supplemental appropriations package also includes a $25 million

contribution to a Central American Emergency Trust Fund, administered by the World

Bank, to help over the cost of debt service owned to the World Bank and other

international financial institutions. The majority of Honduran foreign debt, over 60%,

is owed to the international financial institutions (World Bank, Inter-American

Development Bank, etc.) and some observers maintain that any efforts to relieve the

country's debt burden should include relieving debt owed to the IFIs. Britain and

several other nations already have pledged assistance to the World Bank trust fund.

(For additional information, see "Debt Relief" section above.)

The U.S. military presence in Honduras, estimated at 500 before the storm, grew

to over 1,300 after the storm, as soldiers became involved in the relief effort

throughout Central America. Military helicopters and aircraft delivered relief supplies,

and military engineering units cleared and helped repair key roads. In early February

1999, the U.S. Southern Command announced that its work in the region would

continue through September 1999 and would focus on “nation building” efforts,

including the building of schools, the repairing of bridges, and the operation of

medical clinics.28 A U.S. Southern Command official noted in June 1999 that the the

U.S. military efforts in the Central America region will utilize over 21,000 personnel,

drawn primarily from National Guard and reserve units, through September.29

The Honduran government faces numerous challenges in its reconstruction

efforts over the short and long-term. The government is faced with the challenge of

providing housing for thousands who lost their homes. Controlling the spread of

disease is also a major concern in addition to the dramatic increase in the number of

street children, dubbed “Mitch kids” by social workers.30 Some observers have raised

the potential of social stability in Honduras if aid is not distributed fairly or if concerns

arise over corruption involving assistance. For example in January 1999, riot police

broke up a demonstration of some 1,000 protesters in Choluteca, who were

demanding land on which to build houses.31 Longer-term reconstruction issues center

on whether efforts will be made to overcome environmental damage and poor land

use which augmented the destruction of Hurricane Mitch. Some observers maintain

that floods like those caused by Hurricane Mitch will continue unless something is

28

“U.S. Military Expands Central America Program.” Reuters. February 2, 1999.

29

Rothwell, Glenn. “In Hurricane’s Wake, Reconstruction Efforts Continue in Central

America,” U.S. Information Agency, June 25, 1999.

30

Deane, Daniela. “Mitch Kids Alone, Adrift” USA Today, February 2, 1999.

31

“Violence Erupts in Storm-Hit Honduras,” Reuters, January 20, 1999.

CRS-19

done to address the issue of proper land use (e.g. preventing shantytowns from being

built along riverbanks and unstable hillsides).32

A controversial issue that arose recently was an April 20, 1999, vote by the

Honduran Congress to limit the power and term of the National Commissioner for

Human Rights. The current commissioner, Dr. Leo Valladares, has gained

international prominence for his efforts to bring to justice those responsible for the

disappearance of 184 people during the 1980s. He had recently issued a report on the

country’s distribution of international aid after Hurricane Mitch, which generally was

positive, but did note some potential mishandling of aid. Protests by Honduran

popular organizations, as well strong international criticism, prompted the Honduran

Congress to rescind its action on April 27, 1999. Press reports maintain that the

reputations of the Flores government and the Congress were tarnished in such a way

that international aid donors will pay more attention to the issue of transparency and

accountability in the reconstruction process.33

Nicaragua34

Background.35 Before the hurricane struck, Nicaragua was one of the poorest

countries in the western hemisphere, second only to Haiti. Its per capita GDP is

$438, less than it was in 1979 before the Sandinistas took power. Unemployment had

been falling before Hurricane Mitch, but nonetheless was at 16%; 36% were

underemployed. Social indicators are low: almost 50% of the population lives at or

below the poverty line; life expectancy is 62 years; the infant mortality rate is 50 per

1,000 live births, and only 28% of first graders complete primary school.

AID’s strategy in Nicaragua has been to help further consolidate democratic

institutions, encourage sustainable growth in income and employment, improve

maternal and child health, and expand primary education. The Administration’s

FY1999 request for assistance to Nicaragua included: $15.9 million for development

assistance, $6.6 million for child survival and disease programs, $2.3 million for

P.L.480 Title II programs. ($1.5 million in Economic Support Funds was included in

the Latin America and Caribbean Regional request.)

Nicaragua began free market reforms in 1991, a year after the election of

President Violeta Chamorro, who followed 12 years of Sandinista rule. Since then,

Nicaragua has made significant progress in some areas of economic development.

1998 was the fourth consecutive year of economic growth, which was 5% in 1997.

32

Goldoftas, Barbara. “Unnatural Disasters,” San Francisco Chronicle, January 11, 1999,

p. A17.

33

“Honduras Politics: Allegations Over Misuse of Funds Sparks Outcry,” EIU ViewsWire,

June 1, 1999.

34

Prepared by Maureen Taft Morales , Analyst in Latin American Affairs.

35

U.S. Department of State, Background Notes: Nicaragua, March 1998; U.S. Agency for

International Development, Congressional Presentation, Fiscal Year 1999, Annex IV, Latin

America and the Caribbean, pp.144-148.

CRS-20

Inflation was reduced from 13,500% to 12%, the foreign debt was cut in half, and 351

state enterprises were privatized.

Democratic reforms also progressed under President Chamorro. Nicaragua had

essentially been ruled by the Somoza family for over four decades (1936-1979) until

ousted by a coalition of forces led by the Sandinista National Liberation Front

guerrillas in July 1979. When the pro-Soviet Sandinistas gained control of the

government and pursued increasingly radical social policies, U.S.-backed “contras”

launched an eight year war (1982-1990) against the government. The Central

American peace agreement ending that war called for democratic elections. When

Chamorro took office in April 1990, she inherited a fragile peace and a highly

polarized country. The first years of her term she pursued a policy of “national

reconciliation.” Constitutional reforms in 1995 strengthened the legislature’s powers

and tightened civilian controls over the military. In January 1997 Chamorro

transferred power to another democratically-elected president, Arnoldo Aleman.

But Nicaragua still had a long way to go before achieving sustainable, broadbased economic growth and consolidated democratic reform. Before the hurricane

inflicted its damage, AID said that “the transition from past failed policies will take

at least another four to five years to complete with sustained donor assistance

levels....Graduation from U.S. assistance is not anticipated in the near-term.”36

Extent of the Damage.37 Hurricane Mitch inflicted most of its damage in

Nicaragua with torrential rains which caused extensive floods and mudslides. The

Hurricane left 2,863 people dead, and 884 missing in Nicaragua, according to the

Nicaraguan National Emergency Commission as of November 19, with the count

expected to continue to rise. Many of these were due to a large mudslide that

engulfed ten communities at the base of the Casitas Volcano when hurricane-driven

rains filled the dormant volcano’s lake until it burst through the volcano’s sides.

Across the country, 867,752 people were displaced, and more than 30,000 houses

were either completely or partially destroyed.

Damage from Hurricane Mitch totals 44.4% of Nicaragua’s GDP (Nicaragua’s

GDP for 1996 was $2.3 billion), according to the Inter-American Development Bank

Consultative Group for the Reconstruction of Central America (December 1998).

Total damage is reported to be $898 million. Damage to the social sectors (housing,

health, and education) equals $239 million; to infrastructure (roads, bridges, railways,

telecommunications) $340 million; to the productive sectors (agriculture, fisheries and

forestry, manufacturing, trade, restaurants and hotels) $310 million; and to the

36

Congressional Presentation, p. 145.

37

U.S. Agency for International Development, Hurricane Mitch Fact Sheet #17, Nov. 19,

1998; U.S. AID ReliefWeb, “ U.S. Efforts to Help Rebuild Central America,” Nov. 19, 1998;

U.S. AID press release, “U.S. Disaster Relief for Hurricane Mitch Exceeds $263 Million”,

Nov. 23, 1998; USAID Summary Fact Sheet, Feb. 10, 1999; Cynthia Corzo and Arnold

Markowitz, “Nature Slams Nicaragua Again”, Miami Herald, Nov. 4, 1998; Andres Viglucci,

“Nicaragua Overwhelmed by Floods of Misery”, Miami Herald, Nov. 4, 1998; InterAmerican

Development Bank Consultative Group for the Reconstruction of Central America, “Central

America: A Preliminary Overview of Damages Caused by Hurricane Mitch”, Dec. 10,1998.

CRS-21

environment, $8.5 million. The hurricane damaged 30% of Nicaragua’s banana crop;

in 1996 banana exports provided some of the country’s fastest economic growth.

What little transportation system existed was crippled by the storm, with 71 bridges

destroyed throughout the country and 70% of roads impassable. Since then, the

roads to the northwestern Pacific coast region have been cleared enough to allow

wide distribution of relief supplies there. Nonetheless, the lack of infrastructure prior

to the storm, and the region’s remoteness have made damage assessments difficult.

The other areas most severely affected by the storm, the north-central region and the

northeastern Atlantic coast, continue to be difficult to reach.

President Arnoldo Aleman has also expressed concern about the possibility of

more deadly landslides. His office has identified 41 communities that face “major

risks” of landslides, and urged those living near volcanoes to move elsewhere. On

November 3, a volcano just 22 miles from Casitas Volcano erupted; its lava flowed

on the side where there are no villages. The last time it erupted, however, three years

ago, the eruption lasted about four months and 6,000 people had to evacuate the area.

Flood waters brought swarms of disease-carrying mosquitoes, and swept away

communities’ latrines, contaminating water and contributing to epidemics of malaria,

dengue fever, leptospirosis, and cholera in the wake of the storm.

Emergency and Reconstruction Response. OFDA is reviewing relief

assistance proposals that focus primarily on agricultural and health projects for

Nicaragua. Nicaragua will be receiving a portion of the Clinton Administration’s

overall assistance package for the region, which includes food aid, development

assistance, Department of Defense assistance (defense stocks and services), and debt

relief.

The OFDA began operating in Nicaragua on October 29, conducting

assessments, assisting national search and rescue operations, and other activities in

response to the disaster. OFDA provided funds for the purchase and transportation

within Nicaragua of critical relief supplies, such as medicine, food, and shelter

material. OFDA airlifts of relief supplies to Nicaragua began on Nov. 4. Total

USAID/OFDA assistance to Nicaragua totaled $4.8 million as of February 10, 1999.

USAID will now begin the transition from critical emergency relief assistance to

longer-term rehabilitation, reconstruction and development initiatives.

Many other countries, international agencies, and private organizations are

contributing to the relief effort in Nicaragua, providing supplies, personnel, or

technical assistance. The Nicaraguan government has reported receipt of almost $11

million in goods and cash from all over the world, from Taiwan to Denmark. Mexico

provided relief supplies as well as soldiers and helicopters to help deliver them. The

Nicaraguan government accepted Cuba’s offer of 3,000 pounds of medical supplies,

and, after initially rejecting them, later accepted the services of several Cuban medical

teams.

Several countries, including France, Brazil, and Germany, have canceled or eased

Nicaragua’s debt. The Clinton Administration declared a moratorium on Nicaragua’s

debt payments to the United States for the next two years. Nicaragua’s $90 million

CRS-22

debt to the United States represents a small portion of its total debt of about $5.9

billion.

The United Nations issued an appeal for additional funds to help Central America

recover from Hurricane Mitch’s devastation; $38.2 million were requested to assist

Nicaragua in sectors such as health, water and sanitation, shelter, food security,

agriculture, and education.

Guatemala38

Background. With a population of over 10 million and a GDP of $18 billion,

Guatemala is the most populous and the most economically important country in

Central America, accounting for over a third of the region’s population and economic

production, despite the existence of a large non-integrated indigenous population.

After decades of military rule and guerrilla conflict, the country has experienced

democratic government since 1985 and is in the early phase of implementation of the

late 1996 peace accord that ended the 36-year-old guerrilla conflict. President Alvaro

Arzu of the National Advancement Party (PAN) was elected in a runoff election in

January 1996 and in his three and a half years in office he has advanced free market

economic policies and the peace process.39 Doubts about the peace process emerged

in April 1998 when Monsignor Juan Gerardi was killed a few days after he released

the Church’s Restoration of Historical Memory report documenting extensive human

rights abuses by the military. The government charged a fellow priest and roommate

in the murder, and the investigation is continuing although the courts freed the suspect

in February 1999. Church and human rights groups are convinced that elements of

the military are involved, and they have criticized government prosecutors. At the

end of February 1999, the Guatemalan Historical Clarification Commission,

established under U.N. auspices by the Peace Accords, released its report,

documenting numerous human rights abuses in the past, most committed by military

forces.

In October 1998, the Guatemalan Congress approved constitutional amendments

to reduce the role of the military and to grant rights to indigenous peoples, as called

for in the peace accord. After some delays, the constitutional reforms were submitted

to popular referendum on May 16, 1999, in a peaceful climate except for the killing

of the Assistant General Secretary of the leftist New Guatemalan Democratic Front

(FDNG) a few days before the referendum. With a turnout of only 18.5% of the

eligible participants, the voters rejected the reforms in the referendum, with 55.25%

voting against the reforms, and 44.75% voting for the reforms. Observers state that

the status of the constitutional reforms and implementation of the peace accords are

important topics of debate in the upcoming presidential elections to be held on

November 7,1999.

38

Prepared by (name redacted), Specialist in Latin American Affairs.

39

For background, see U.S. Department of State, Background Notes: Guatemala, March

1998; and U.S. Agency for International Development, Congressional Presentation, Fiscal

Year 1999, Annex IV, Latin America and the Caribbean.

CRS-23

President Clinton visited Guatemala and other countries in Central America in

March 1999 and indicated continuing U.S. economic assistance for the region

following the destruction caused by Hurricane Mitch. He also indicated continuing

support for the peace process in Guatemala and for the economic and political

reforms adopted. On May 20, 1999, in keeping with pledges made on the trip, the

Clinton Administration issued new immigration regulations that made it easier for

Guatemalans and Salvadorans living abroad to avoid deportation and to obtain legal

status in the United States.

Even before Hurricane Mitch, Guatemala faced serious development challenges,

with large sectors of the indigenous population living in isolation and poverty, while

the country was emerging from a 36-year guerrilla conflict. Guatemala received $67

million in U.S. assistance in FY1998, and initially was programmed to receive $75

million in FY1999 assistance in regular and reprogrammed aid. Most of the aid for

Guatemala has been for health and poverty reduction programs and support for

implementation of the peace process. Following Hurricane Mitch, the Administration

requested $48.6 million in regular development assistance and economic support

funding for FY2000, and it requested $25 million in FY1999 supplemental assistance

for Guatemala as part of the reconstruction assistance for the region.

Extent of the Damage. Hurricane Mitch moved northwestward across

Guatemala on November 1, 1998, causing heavy rains and severe flooding.40

According to AID damage reports, there were 268 deaths, 106,600 evacuees, and a

total of 750,000 people affected, with over 22,600 homes destroyed or heavily

damaged. In terms of infrastructure, 121 bridges were damaged or destroyed and 90

stretches of road were affected, although most were operable by mid-November. The

longest lasting damage was to agricultural productive capacity, with the U.S. Embassy

estimating in November that 95% of the nation’s banana crop was decimated, 25-60%

of the corn, bean, coffee, and sugar crops were destroyed, and 30% of the cattle herd

was lost. The IDB Consultative Group for the Reconstruction of Central America

concluded that Guatemala had suffered $562.7 million in direct and indirect damage

as a result of Hurricane Mitch, with $387.5 million in damage to productive sectors

(principally agriculture) and $115.5 million in damage to infrastructure.

Emergency and Reconstruction Response. The United States has provided

$9.5 million in emergency relief assistance for Guatemala, and nearly $30 million in

rehabilitation and reconstruction assistance, mostly DoD-provided assistance to repair

bridges and roads, and medical assistance in affected areas. In general, AID

identified water treatment and addressing health issues, such as malaria, dengue,

cholera, and diarrhea as the highest immediate priorities. According to the Pan

American Health Organization, Guatemala had the highest risk for cholera epidemic

activity of any of the five countries affected by Mitch. Due to the devastation suffered

by the agricultural sector, AID recommended seeds and tools assistance programs as

a priority during long-term recovery. Guatemala indicated that it might not be

interested in forgiveness of its debt because that might make it impossible to obtain

40

For a good after-the-fact damage report, see USAID/Guatemala, Hurricane Mitch Special

Objective, 1999, available under Hurricane Relief Efforts on AID’s homepage

(http://www.info.usaid.gov).

CRS-24

future credits. The U.N. appeal covering the next six months anticipated devoting

$14 million to Guatemala, primarily in the health and water and sanitation sectors.

Guatemala’s share of the new U.S. funding in the Emergency Supplemental

Appropriations Act for FY1999 (H.R. 1141, P.L. 106-31), approved in May 1999,

is $25 million, of which $24 million is for economic reactivation, and $1 million is for

disaster mitigation.41 Most of the funds for economic reactivation will be used for a

range of activities to restore and improve agricultural production, and most of the

funds for disaster mitigation will be used to work with the community-level

committees, which were formed in response to Hurricane Mitch, to improve their

preparation and organization to respond to future disasters.

El Salvador42

Background. El Salvador is a small, densely-populated country of 5 million

inhabitants that is experiencing increasing political pluralism since the resolution of

a long guerrilla conflict that extended from the 1970s to the 1990s.43 President

Armando Calderon Sol of the conservative National Republican Alliance (ARENA)

was inaugurated President for a 5-year term (1994-1999) on June 1, 1994, after

defeating Ruben Zamora, the candidate of the leftist coalition which included the

former guerrillas of the Farabundo Marti National Liberation Front (FMLN).

President Calderon Sol continued the economic policies of his predecessor and

generally advanced compliance with the 1992 peace accords, although he faced labor

unrest and a wave of criminal activity. With economic conditions faltering somewhat,

ARENA suffered a loss of support in the March 1997 legislative and municipal

elections, with the leftist FMLN equaling ARENA in the Legislative Assembly and

winning the mayorship of San Salvador. ARENA recovered strongly in the

presidential elections of March 7, 1999, however. The ARENA candidate, Francisco

Flores, won the election with 52% of the vote (more than the majority required for

election in the first round) while the runner up, FMLN candidate Facundo Guardado,

received only 29% of the vote. President-elect Francisco Flores was inaugurated as

President on June 1, 1999, and promised to attack crime and generate employment.

President Clinton visited El Salvador and other countries in Central America in

March 1999. He praised the country for the economic and democratic progress and

he indicated continuing U.S. economic assistance for the region following the

destruction caused by Hurricane Mitch. Responding to a major Salvadoran concern,

the Clinton Administration issued new immigration regulations on May 20, 1999, that

made it easier for Guatemalans and Salvadorans living abroad to avoid deportation

and to obtain legal status in the United States.

41

Emergency Supplemental Package for Central America, The Caribbean, and Colombia,

Fact Sheet released by the State Department’s Bureau for Western Hemisphere Affairs, May

25, 1999.

42

Prepared by (name redacted), Specialist in Latin American Affairs.

43

For background, see El Salvador under Calderon Sol, CRS Issue Brief 94048, by (n ame re

dacted).

CRS-25

Even before Hurricane Mitch, El Salvador faced serious developmental

challenges, with continuing poverty and a large number of illegal immigrants abroad.

Since 1997, AID has been implementing a six-year rural poverty alleviation strategy.

El Salvador received $35.8 million in U.S. assistance in FY1998, and was initially

programmed to receive $51.4 million in FY1999 from regularly scheduled and

reprogrammed aid. Most of the development assistance for El Salvador has been to

promote economic growth, democracy, health, and access to clean water. In early

1999, following Hurricane Mitch, the Administration requested $38.9 million in

development assistance and economic support funds for FY2000, and it requested

$20.5 million in FY1999 supplemental assistance for El Salvador as part of the

reconstruction assistance for the region.

Extent of the Damage. El Salvador was affected by heavy rains, winds, and

flooding as Tropical Storm Mitch passed through Honduras and Guatemala in late

October and early November 1998.44 According to AID reports, the Government of

El Salvador reported that 374 people died or were missing as a result primarily of

flash floods. The Government estimated in early November that 55,864 people had

been displaced, with 10,372 houses damaged, but most of the displaced population

returned home by November 24. Fifteen bridges, including three major bridges over

the Lempa River, were destroyed, and the country’s roads were seriously damaged.

About 60% of the paved roads suffered some surface damage, and secondary roads

suffered severe damage. Damage to agriculture was significant, particularly in basic

grains, coffee, and sugarcane. Health issues were viewed as the most critical

problems in El Salvador. The IDB Consultative Group for Reconstruction of Central

America concluded that El Salvador sustained $261.9 million in direct and indirect

damage, with $160.6 million in damage to productive sectors (mostly agriculture) and

$73.1 million in damage to infrastructure.

Emergency and Reconstruction Response. The United States has provided

$37.7 million in initial assistance, including $420,000 in DoD assistance, $20.7 million

in food assistance, and $15.7 million in ongoing AID assistance. The government

estimates the cost of reconstruction at $1.3 billion. The U.N. appeal covering the

next six months anticipates spending $16 million in the health, water and sanitation,

agriculture, and education areas.

El Salvador’s share of the new U.S. funding for reconstruction in the Emergency

Supplemental Appropriations Act for FY1999 (H.R. 1141, P.L. 106-31), approved

in May 1999, is $20.5 million, including $3.5 million in public health and water

projects, $2 million for construction of housing, $3 million to rehabilitate and

refurbish damaged schools, $4 million for disaster preparedness activities, and $8

million for economic reactivation projects.45

44

For a good after-the-fact damage report, see USAID/El Salvador, Hurricane Mitch Special

Objective, 1999, available under Hurricane Relief Efforts on AID’s homepage

(http://www.info.usaid.gov).

45

Emergency Supplemental Package for Central America, The Caribbean, and Colombia,

Fact Sheet released by the State Department’s Bureau for Western Hemisphere Affairs, May

25, 1999.

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