Latin America has made real progress toward
democratic consolidation in recent decades, but violence,
corruption and weak institutions in the region could undermine
these democratic gains, according to Adolfo Franco, assistant
administrator for Latin America and the Caribbean at the
U.S. Agency for International Development (USAID).
In May 25 testimony before the House International
Relations Committee's Subcommittee on the Western Hemisphere,
Franco said that although democracy has taken hold in most
of Latin America, democracy and good governance are not
one and the same. He added that trends linked to poor governance
could unravel past democratic progress.
Franco pointed out that violence and high
crime rates in Latin America are creating instability and
impeding economic development. He said that corruption is
also undermining development efforts, and weak institutions
are compromising governments' abilities to provide services
to their constituents.
The struggle of Latin American governments
with these governance challenges has eroded perceptions
of government legitimacy and undermined public support for
democracy, Franco said.
"When governance and rule of law are
weak, all efforts to promote democratic development suffer,"
he said. "Efforts to reduce poverty and promote free
trade and economic growth cannot compete with the offspring
of bad governance, which include poorly defined property
rights, high transaction costs and economic risks, corruption,
and greatly reduced domestic and foreign investment."
To help Latin governments confront governance
challenges, Franco said, USAID has allocated approximately
$271 million in financial year 2005 for efforts to support
democracy and encourage good governance.
He told lawmakers that the focus of USAID
governance programs in the region is justice-sector modernization.
The U.S. official noted that the region has made progress
on a number of fronts toward more modern justice systems
with USAID support -- particularly the transition to oral,
Franco noted that 12 Latin nations have
adopted more modern accusatory, oral criminal procedures
since 1992. He said that USAID has trained thousands of
judges, prosecutors, litigators, law professors and community
activists to smooth the transition to these more modern
In addition to USAID support for efforts
to overhaul criminal procedures codes in the region, Franco
said, USAID also supported the creation or strengthening
of justice-sector institutions -- including independent
prosecutors, constitutional courts, judicial councils, and
human-rights ombudsmen. He noted that USAID also continues
to work with national and regional civil-society groups
to improve the ability of citizens to monitor government
functions and to ensure that governments are serving their
Franco concluded that these and other U.S.
efforts to confront poor governance in Latin America are
in the U.S. national interest.
"Our partnership with Latin American
governments to strengthen the rule of law and increase transparency
and accountability is one of mutual benefit," he said.
"It is clearly in the U.S. government's interest to
utilize our toolkit of diplomacy, defense, and development
to counter the destabilizing effects that poor governance,
corruption, and weak rule of law have on political and economic
systems throughout Latin America, and the threats they pose
to vital American interests."
Following is the text of Franco's prepared
Testimony of Adolfo A. Franco,
Bureau for Latin America and the Caribbean,
United States Agency for International Development
Committee on International Relations,
Subcommittee on the Western Hemisphere,
U.S. House of Representatives
Wednesday, May 25, 2005
"TRANSPARENCY AND RULE OF LAW IN LATIN
Mr. Chairman, thank you for the opportunity
to appear before the Subcommittee on the Western Hemisphere
of the House International Relations Committee. I have had
the privilege to appear before you on a number of occasions
over the past weeks, where I have discussed with you such
issues as the state of democracy in the Western Hemisphere,
rising crime and gang violence in Latin America and, most
recently, key accomplishments related to Plan Colombia.
Today, I will be discussing the related and equally important
issues of transparency, rule of law, and governance in Latin
Last week, the elected presidents of Central
America and the Dominican Republic met with President Bush
to discuss the state of play of the Central America-Dominican
Republic Free Trade Agreement. They said that the overriding
benefit of CAFTA, even beyond its value in promoting economic
growth and generating employment, is that it will strengthen
democracy. They are right. The link between economic prosperity
and democracy is becoming increasingly irrefutable. CAFTA-DR
is teaching us that trade, democracy, and development are
all means to the same end -- freedom, security, and prosperity.
We at USAID recognize this in all of our efforts to promote
democratic consolidation and economic growth throughout
Latin America and the Caribbean.
In 2001, when USAID Administrator Natsios
took office, he commissioned a report entitled "Foreign
Aid in the National Interest." The key message of that
report was the importance of mainstreaming development into
the national foreign policy process. The report's findings
supported the vision laid out in the National Security Strategy
of the United States, published in September 2002, which
served as President Bush's vehicle for announcing his determination
to help build strong democracies throughout the world. This
has been a core task of USAID since its inception at the
time of the Marshall Plan. Indeed, much of USAID's experience
in implementing large scale democracy strengthening programs
commenced in Latin America in the early 1980s and focused
on addressing large-scale human rights abuses perpetrated
under the notorious Central American dictatorships.
From Despotism to Democracy - Latin
America Has Come a Long Way
In the early 1990s, Latin America emerged
from two decades of authoritarian rule, violent civil strife,
and widespread human rights violations. The Latin America
we know today is largely democratic, as civilian governments
have replaced military rule in nearly every country in the
hemisphere. Indeed, many countries have now witnessed several
generations of free and fair elections. As democracy has
taken root, human rights violations have been drastically
reduced and governments have taken actions to promote peace
and reconciliation. Latin America has also witnessed an
expansion of decentralization with central governments beginning
to share power and responsibility with local governments.
This has created new spaces of political participation for
historically excluded populations and improved local governments'
capacity to deliver on the promises of democracy.
The attitudes of governments in the region
have also significantly evolved over the last fifteen years
and political will to address these vital, but sensitive,
subjects is on the rise. Rule of law and corruption have
become central in political party platforms across the region,
and governments are increasingly promoting initiatives to
increase transparency, such as freedom of information legislation
and the creation of ombudsman offices to monitor corruption
allegations. "Corruption" is no longer an unmentionable
word in the hallways of Latin American government, as it
was just fifteen years ago, and governments are finally
showing the will to aggressively prosecute official wrongdoing.
II. Poor Governance is the Bane
Although democracy has taken hold across
most of the region, Latin America is conveying a clear message
that democracy and good governance are not one and the same.
I should note here that the term governance encompasses
the capacity of the state to deliver public services, the
commitment to the public good, the rule of law, and the
degree of transparency and accountability. Elected governments
alone do not guarantee good governance. Although Latin America
has made real progress toward democratic consolidation in
the past decades, we are seeing some very worrisome trends
-- each of which is linked to poor governance -- that could
very well unravel many of these democratic gains.
First, Latin America is one of the most
violent regions in the world, with crime rates more than
double the world average. High levels of crime are not only
creating instability in many countries -- they are also
reducing overall productivity and discouraging investment
flows. As I mentioned to the Subcommittee on April 20, in
my testimony on crime and gang violence, Latin America is
caught in a vicious circle, where economic growth is thwarted
by high crime rates and where a lack of economic opportunity,
in turn, is contributing to a rise in crime. The large numbers
of youth without realistic expectations of employment are
fueling a growing problem of gang violence in Central America,
Mexico, Jamaica, and Colombia. In addition, Latin America
is contending with a number of other debilitating threats
including organized crime, narco-trafficking, money laundering,
and trafficking in persons. It is important to note that
such illicit activities flourish where the rule of law is
weak, corruption is rife and public institutions lack accountability
A second key trend that is compromising
development efforts is corruption. Corruption destroys citizen
trust in government and undermines government legitimacy.
Corruption exacerbates poverty, deters foreign investment,
stifles economic growth and sustainable development, and
undermines legal and judicial systems. The World Bank estimates
that corruption and weak rule of law reduce annual growth
by as much as fifteen percent. By diverting or misallocating
government resources, corruption prevents public services
from reaching those most in need of them.
Public sector corruption is, above all else,
a symptom of failing governance. In Latin America, there
are a number of drivers that are fueling corruption, all
of which are linked to weak institutions and the absence
of good governance structures. This third trend of persistently
weak institutions is compromising governments' ability to
deliver services to their constituents. For example, the
civil services in many countries are still in transition
after having undergone a series of reforms, and are thus
characterized by weak accountability, low levels of transparency,
and inefficiency. These conditions often give rise to a
structure of incentives that is conducive to corrupt behavior.
In addition, cumbersome legislation, bogged down with ill-defined
and overlapping roles and responsibilities of various government
offices, increases the discretionary power of public officials.
When this discretion is coupled with lack of oversight and
accountability, the opportunities for corruption further
expand. We also know that corruption thrives where the rule
of law is weakly embedded and where justice is partial.
One study found that 96 percent of crimes in Mexico went
unpunished between 1996 and 2003. Throughout Latin America,
we find that laws apply to some but not to others, and laws
that are enforced not in the name of the public interest,
but to advance individual interests.
III. Waning Public Faith in Democracies
That Aren't Delivering
The relatively young democracies of Latin
America are struggling with governance challenges that are
eroding government legitimacy and stability which brings
us to the fourth disturbing trend that is characterizing
the region -- undermined public support for democracy. According
to one United Nations study, only roughly 43 percent of
Latin Americans are "fully supportive" of democracy.
Last year, USAID-funded public surveys on attitudes toward
democracy revealed some very worrisome findings. The surveys
revealed that, as citizens become increasingly frustrated
with rising levels of crime, soaring corruption, and poor
service delivery, they are losing their faith in democracy
and democratic institutions. Even more troubling, the least
trusted democratic institutions in Latin America are also
among the most important institutions in a democracy --
political parties, the justice system, legislatures, and
IV. Poor Governance Strains All
When governance and rule of law are weak,
all efforts to promote democratic development suffer. The
rule of law is an essential underpinning of democracy and
a market economy. It establishes and protects legitimate
democratic authority, safeguards human rights and civil
liberties, provides a venue for dispute resolution, and
is a necessary check against the abuses of executive power.
Good governance and rule of law are critical to every sector
in which USAID works, including economic growth, health,
education, and the environment.
For example, efforts to reduce poverty and
promote free trade and economic growth cannot compete with
the offspring of bad governance, which include poorly defined
property rights, high transaction costs and economic risks,
corruption, and greatly reduced domestic and foreign investment.
A prerequisite for trade integration is a rule-based system
where contracts are honored, where governments provide the
legal infrastructure needed for transparent enforcement,
and where information can be exchanged openly and freely.
Former Secretary of State Colin Powell accurately zeroed
in on the problem when he remarked that "Private capital
is a coward, a chicken. It flees from corruption and bad
policies. It doesn't want to go where there's a conflict.
It doesn't want to go where there's corruption."
In the health sector, we see the same trends
affecting governments' ability to deliver much needed health
services. A World Bank study last year concluded that even
a very modest improvement in corruption levels results in
a 29 percent decrease in infant mortality rates and a 52
percent increase in satisfaction among recipients of public
health care. The same holds true for the education and environment
sectors. In the education sector, expenditure leakages and
bribes for services have been shown to eat up upwards of
50 percent of national education budgets. In the environmental
arena, corruption in the extractive industries, such as
forestry, mining, natural gas, and oil, is particularly
destructive, not only due to the large sums of money typically
involved, but also because of the long-term devastation
that such activities can pose to a country's natural resource
reserve if proper safeguards are not institutionalized.
V. USAID Programs
The United States continues to be Latin
America's largest donor. President Bush has been firm in
his commitment to the strengthening of democracy in our
region, as evidenced by the steady increase in funding for
democracy assistance since he came into office. In FY 2001,
USAID's budget for building democracy, strengthening governance,
promoting human rights, and addressing conflict in the Latin
America and Caribbean region was approximately $106 million.
This year, FY 2005, the USAID budget for the same activities
is approximately $271 million. These numbers demonstrate
President Bush's and Administrator Natsios' understanding
that democracy-building is a long-term process that does
not end with elections. As the President stated in a speech
at the International Republican Institute last week, "When
people risk everything to vote, it can raise expectations
that their lives will improve immediately -- but history
teaches that the path to a free society is long and not
USAID continues to be engaged in a number
of efforts to strengthen the rule of law, promote justice-sector
and legal reform, and increase transparency and accountability
in Latin America. In fact, justice-sector modernization
remains the largest focus of USAID governance programs in
the region. Rule of law and justice reform initiatives are
undertaken as part of democracy promotion programs, with
the goal of establishing democratic authority, protecting
rights, exerting a check on other branches of government,
and complementing efforts to build security in post-conflict
situations. In addition, legal reform activities such as
commercial code reform, development of tax law systems,
intellectual property rights protection, and commercial
dispute resolution, are undertaken to promote economic growth.
With USAID support, the region has progressed
on a number of fronts towards increasingly modernized justice
systems -- specifically, the transition to oral, adversarial
trials and a consolidation of the independence of the judiciary.
In 1992, Guatemala became the first country in Latin America
to comprehensively reform its Criminal Procedures Code.
Eleven countries followed in Guatemala's footsteps, resulting
in twelve countries that have adopted some form of modern
accusatory, oral criminal proceedings. This set the stage
for the long-awaited elimination of the much-abused all-paper
systems. As a result of these reforms, between 1982 and
2002, the incidence of pre-trial detention dramatically
declined in many countries. In Mexico, for example, the
level of pre-trial detention declined from 74 to 41 percent
and, in Bolivia, from 90 to 36 percent. Oral criminal trials
have also significantly reduced the length and cost of trials.
In Bolivia, the length of trials dropped from an average
of four years to four months, while the cost of trials decreased
from an average of $2,400 to $400.
Since the 1980s, USAID has supported the
creation of and strengthening of other justice-sector institutions,
including independent prosecutors, constitutional courts,
judicial councils, and human rights ombudsmen. USAID has
trained thousands of judges, prosecutors, litigators, law
professors, and community activists to ensure a smooth transition
to modern judicial systems. In Honduras and Bolivia, every
criminal judge in both countries was trained on their newly
adopted criminal procedures. USAID also works with national
and regional civil society networks to improve citizens'
roles in monitoring government functions to guarantee that
government is serving the interests of its constituents,
and to ensure that citizens have access to information that
will help them understand and evaluate government decisions.
The National Security Strategy clearly identifies
development as the third key tool, along with defense and
diplomacy, for achieving national security. We have come
to recognize that security is the foundation upon which
all progress in development rests. USAID is increasingly
working with police and the range of other actors in the
security sector chain -- including the judicial and legal
systems, the military, and communities -- to address pressing
security challenges in the region. To do so, countries must
overcome the legacy of police in many Latin American countries
as law-breakers rather than law enforcers. Community policing
efforts in El Salvador, Jamaica, and Colombia are demonstrating
that transforming the historically negative relationship
between the police and the communities they serve into a
collaborative relationship based on mutual trust, is not
an unrealistic goal.
Here in the U.S., a common quip is that
there are too many lawyers, too much law. However, in many
other parts of the world, Latin America included, the opposite
is often true. The issue is not too much law or too many
rich lawyers, but too little access to law and often, not
enough of it. Binding contracts and the courts that should
justly and judiciously enforce them are often reserved for
a small elite, while the majority of the country is left
to deal with arbitrary action and decision. The challenge
then is to increase the access and quality of justice for
all citizens. In Guatemala, Colombia, and El Salvador, justice
centers, justice houses, and alternative dispute resolution
mediation centers are providing a variety of services to
the poor, ranging from arbitration and witness protection
to neighborhood dispute resolution and family violence response
services. These justice centers and houses are not only
increasing access to legal services, but also to other social
services, and are making justice for the poor more swift
and more effective.
USAID also supports the development of modern,
computerized case-tracking systems to improve the administration
of justice and reduce opportunities for corruption. In Guatemala,
the number of lost files dropped from 1,000 in 1997 to 1
in 1999. Improvements in legal education and new merit-based
selection systems are ensuring that more and more judges
and prosecutors are selected based on their merit, rather
than personal connections.
The legitimacy of governments is derived
from the governed. Only if governments are accountable to
democratic oversight and bound by and respectful of the
rule of law can governments claim to act on behalf of the
people. It is this legitimacy which gives governments the
capacity to implement successful anti-corruption reforms
and generates support from society for these reforms. In
January of this year, the Administrator highlighted the
need to address corruption when he approved USAID's new
Anti-Corruption Strategy. Using the strategy as our guide,
we will do more to spotlight the dynamics of grand corruption
- corruption that involves the most vested, economic and
political elite in a country and generally the largest sums
of money. This will involve tackling the very incentives
structures that allow those to benefit from the status quo.
We understand that this is no small task. We will work closely
with our colleagues at the State Department and other agencies,
and reformers in the countries where we work, to study the
problem and develop new programs to deal with grand corruption
that complement our ongoing efforts to address lower-level
administrative corruption. We will also improve our understanding
of how corruption affects the various sectors in which we
work and design multi- and cross-sectoral programs to address
it. Finally, we will support reformers with rapid response
assistance, and stand behind diplomatic initiatives that
raise anticorruption issues to the highest level. All of
these efforts will help support United States leadership
in combating corruption and building good governance across
Latin America and the world.
The "Foreign Aid in the National Interest"
report that I mentioned early on in my testimony rightly
states that "no amount of resources transferred or
infrastructure built can compensate for -- or survive --
bad governance. Predatory, corrupt, wasteful, abusive, tyrannical
incompetent governance is the bane of development."
The president's Millennium Challenge Account, or MCA, recognizes
the fundamental correlation between governance and the effectiveness
of development aid. Eligibility for MCA funds is contingent
on, among other things, a government's commitment to "ruling
justly." As President Bush stated, since "good
government is an essential condition of development [the
MCA] will reward nations that root out corruption, respect
human rights, and adhere to the rule of law." That
is, a government must first demonstrate the political will
and clear commitment to addressing corruption and improving
governance in their country before they will be considered
for MCA assistance. USAID will continue to work closely
with the Millennium Challenge Corporation on the MCA "Threshold
Program"-an MCA program currently administered by USAID
that supports countries the MCC has determined to be on
the threshold of MCA eligibility. Three countries in Latin
America were among the first to achieve eligibility for
MCA assistance - Bolivia, Honduras, and Nicaragua -- and
two have attained MCA threshold status - Guyana and Paraguay.
I look forward to continue working with my fellow panelists
and colleagues in the Department of State, Millennium Challenge
Corporation, and other agencies to promote economic growth
and democratic consolidation in the Americas.
Our partnership with Latin American governments
to strengthen the rule of law and increase transparency
and accountability is one of mutual benefit. It is clearly
in the U.S. government's interest to utilize our toolkit
of diplomacy, defense, and development to counter the destabilizing
effects that poor governance, corruption, and weak rule
of law have on political and economic systems throughout
Latin America, and the threats they pose to vital American
interests. President Bush, during his meeting with the presidents
of Central America and the Dominican Republic, emphasized
the benefits of continued cooperation with our neighbors
in Latin America. He stated, "The United States was
built on freedom, and the more we have of it in our backyard,
the freer and safer and more prosperous all of the Americas
Working in partnership with Latin American
governments, we can be true to the principles that President
Bush and Secretary Rice have called essential to the health
of all democracies -- security, prosperity, and dignity.
Working in partnership, we can honor the hundreds of thousands
of Latin Americans that gave their lives in their struggle
to leave a better, more democratic and just world behind
for their children.
Mr. Chairman, this concludes my statement.
I welcome any questions that you and other members of the
Subcommittee might have.