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43–080 CC








JUNE 25, 1997

Printed for the use of the Committee on International Relations

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BENJAMIN A. GILMAN, New York, Chairman
HENRY J. HYDE, Illinois
CASS BALLENGER, North Carolina
EDWARD R. ROYCE, California
JAY KIM, California
TOM CAMPBELL, California
JON FOX, Pennsylvania
LINDSEY GRAHAM, South Carolina
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ROY BLUNT, Missouri
SAM GEJDENSON, Connecticut
TOM LANTOS, California
PAT DANNER, Missouri
WALTER CAPPS, California
BRAD SHERMAN, California
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida
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RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff

Subcommittee on the Western Hemisphere
ELTON GALLEGLY, California, Chairman
CASS BALLENGER, North Carolina
JAY KIM, California
ROY BLUNT, Missouri
WALTER H. CAPPS, California
BRAD SHERMAN, California
VINCE MORELLI, Subcommittee Staff Director
PAUL BONICELLI, Professional Staff Member
DAVID ADAMS, Democratic Professional Staff Member
HOLLY FEIOCK, Staff Associate
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    Mr. John Hamilton, Deputy Assistant Secretary for Central America and the Caribbean, U.S. Department of State
    Mr. Mark Schneider, Assistant Administrator, Bureau for Latin America and the Caribbean Agency for International Development
    Dr. Cynthia Arnson, Senior Program Associate, Woodrow Wilson International Center for Scholars
    Dr. Michael Shifter, Program Director, Inter-American Dialogue

Prepared statements:
Congressman Robert Menendez
Mr. John Hamilton
Mr. Mark Schneider
Dr. Cynthia Arnson
Dr. Michael Shifter

House of Representatives,
Subcommittee on the Western Hemisphere,
Committee on International Relations,
Washington, DC.
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    The Subcommittee met, pursuant to notice, at 1:40 p.m., in room 2200, Rayburn House Office Building, Washington, DC, Hon. Elton Gallegly (chairman of the Subcommittee) presiding.
    Mr. GALLEGLY. Today, the Subcommittee continues its oversight hearings on the hemisphere by focusing our attention on Central America.
    Ten years ago, much of Central America was engulfed in either civil war, guerilla war or was under military authoritarian rule.
    The United States was deeply involved in two of these conflicts, and had just recently helped resolve another by deploying U.S. military forces.
    The economies of many of these nations in the 1980's were mostly closed, State-owned or State-controlled systems with high inflation, low currency value and little or no trade. Human rights were nonexistent and corruption reigned supreme.
    Today, the situation in the region is quite different. The civil wars in Nicaragua and El Salvador are a thing of the past, and the guerrilla war in Guatemala has been resolved. All of the nations in the region are now run by democratically elected governments, the economies are more open and regional trade is steadily increasing.
    All this makes for a very positive assessment of the Central American region. However, there are issues for which we must remain concerned. Corruption still seems to prevail in many countries. Poverty is not being alleviated fast enough. Rule-of-law institutions, such as the police and judicial systems, remain weak. And the threat of drugs is growing more pervasive.
    Consequently, the United States must remain actively engaged in the region in order to encourage the continued growth of democracy, to help strengthen the economies and to support a strong rule of law.
    The President's recent trip to Costa Rica was most welcome and represented a positive commitment to the region which must continue to be built upon.
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    I want to turn just very briefly to another issue which has become very emotional over the past few weeks, and that, of course, is the issue of legal status of several hundred thousand Nicaraguans, Salvadorans and Guatemalans living in this country.
    Let me say from the outset that as a member of the Immigration Subcommittee and as one who has played a prominent role in writing the Illegal Immigration Reform bill passed last year by Congress, I consider this issue mostly an immigration issue and not entirely a foreign policy issue such as some would like for it to become.
    I understand the concern of the Central American nations involved about mass deportations and I do not believe that that will happen. In fact, the President has made some pretty strong statements along those lines. But for those nations to tell us that we should not send back any of their citizens because it would jeopardize their democracy or to cut off the remittances would hurt their economies is not fully acceptable.
    Unless these persons in question, who by the way entered this country without documentation and therefore technically illegally, can prove their cases for asylum, and most could not in their first go around, I will not support a special exemption for them. I would not support a special exemption for them because I think that would send a worse signal.
    Last year Congress did change the rules of the game. We did it on immigration, we did it on welfare, and I am sure there are many welfare mothers who would have preferred to have been grandfathered from the work requirements built into the welfare bill. But if we are going to place these kinds of new requirements on our own citizens we should not ask for special exemptions for noncitizens.
    Now, I know a number of members have written to the President to ask that these persons in question receive fair hearings of their appeals. I certainly agree with that as long as their cases are heard on the merits of their asylum claims and not on the economic and political argument being raised by those who know those arguments are not suitable in asylum cases.
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    Do we have any other members that have an opening statement they would like to make?
    Mr. Menendez.
    Mr. MENENDEZ. Thank you, Mr. Chairman.
    Mr. Chairman, I herald the decision of the Federal Court judge that clearly stated the procedures and gave an opportunity for the Nicaraguans, and I believe by virtue of his decision, even broader than that, to Salvadorans and Guatemalans, an opportunity to pursue what the United States as always considered its fundamental difference between this democracy and other democracies in other countries in the world that are not democracies, and that is due process, notice and an opportunity to be heard.
    I do not believe that due process can be overcome by an ex-post facto law that retroactively nullifies the rights of individuals.
    And I make that statement as a premise to what this hearing is all about in terms of where we are headed in Central America, which was a cold war battleground led by dictators and plagued by violence, which has undergone transformation to democracy, fledgling, but still to democracy, where fights between parties are now conducted with words and sometimes protests rather than bullets.
    In the recent elections in Nicaragua and El Salvador we witnessed a peaceful transfer of power from one government to another, and while democracy has come to Central America, the fragility of the political, social and economic situation in these countries should not be underscored. And that is why I believe that in fact the issue at stake as it relates to those people who sought refuge in this country under previous Administrations and in fact were told that they were welcomed here as a result of our foreign policy abroad in those countries, and the instability that we would create in the very countries for which we spent millions of dollars trying to promote democracy and a respect for human rights raises what some may view as an immigration issue, but which I would respectfully disagree and say it is also a foreign policy issue. It is in the national interest of the United States to ensure that the democracies that are beginning to take full hold in Central America, for which we spent millions of American dollars to promote, do not come apart.
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    If you consider that annual remittances from the United States, for example, to Nicaragua, and over $200 million, more than Nicaragua's annual export revenues, if you consider their unemployment rate is over 60 percent, and if you consider that in El Salavador remittances are estimated to be over a billion dollars or 15 percent of El Salavador's GNP, then you will understand the consequence of how a massive return of individuals into economies that are liberalizing, and trying to do what we want them to do, become market reform economies, would be impacted, dramatically and negatively.
    And so if we look at places like Nicaragua, where tension is already running high, where Sandinistas who recently staged protests which nearly paralyzed the country, and where on Monday, former Sandinista leader, Daniel Ortega, warned that he may take arms again if President Arzu does not respond to their concerns, underwrites what I think we will realize is our concern.
    So I have other statements, Mr. Chairman, but to get through the hearing I would ask that my full statement be considered in the record.
    Mr. GALLEGLY. Without objection.
    [The prepared statement of Mr. Menendez appears in the appendix.]
    Mr. GALLEGLY. Mr. Ballenger, do you have anything?
    Mr. BALLENGER. I have no statement.
    Mr. GALLEGLY. Our first panel of witnesses includes Mr. John Hamilton, Deputy Assistant Secretary of State for Central America, and Mr. Mark Schneider, Assistant Administrator of the Agency for International Development.
    Gentlemen, your full statement will be made a part of the record of the hearing. And with that, I will move to you, Mr. Hamilton.
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    Mr. HAMILTON. Thank you very much, Mr. Chairman. I am delighted at this opportunity to appear before your subcommittee. I have prepared a written statement, which I ask be submitted into the record.
    Mr. GALLEGLY. Without objection.
    Mr. HAMILTON. And in my remarks now, I would like to focus on the President's May 8 meeting with the Presidents of Central America and the Dominican Republic and Costa Rica, and where we are in our Central American policy and where we go from here.
    Let me say, first of all, that I think that we and the Central Americans alike were delighted by the meeting and with its outcomes. There were intensive consultations and preparations that went into the meeting. Secretary of State Albright met with her counterparts from all of the countries involved on April 1 here in Washington. Assistant Secretary Davidow and Special Envoy Mac McClarty held a number of additional meetings.
    What we wanted the Central American meeting to do was to be forward looking both in terms of substance and procedure; to talk about the emerging issues of trade, immigration, law enforcement cooperation; and procedurally, to put in place a structure of ongoing engagement and dialog in all of these areas.
    We believe that the meeting achieved those objectives. Let me cite just some of the principal outcomes.
    First of all, the Secretary agreed to meet at least on an annual basis with her colleagues from the region. This is something that throughout the 1980's and 1990's has not happened. Attorney General Reno and ONDCP Chief General McCaffrey will meet with the ministers from the region responsible for public security and law enforcement to develop a regional action plan for cooperation in all areas of law enforcement.
    We have a date now of August 21 that has been proposed to the other governments for that first meeting. Let me say that in general our cooperation with the Central Americas and law enforcement is quite good, but we believe this meeting is going to give renewed energy and focus to our interaction with them.
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    In the area of trade, our Special Trade Representative and the trade ministers from the region have constituted themselves in a Regional Trade and Investment Council. The first meeting of that first new entity will be likely taking place in July. We have proposed dates that did not work out. We are going back with some new dates.
    The purpose of that Trade and Investment Council is to encourage further specific liberalization, and specifically to discuss further steps to expand our trade and investment relationship.
    As you know, the President committed to submit a so-called Caribbean Basin Trade Enhancement Act to the Congress when he was in San Jose. He did that last week. That bill is now here and its central features are that it is designed as a transition to an FTAA, a Free Trade Agreement of the Americas, by the year 2005. So the bill takes us out through that 8-year period. It grants preferences essentially equivalent to those that Mexico receives, but it does so in tranches. Half of the preferences are granted up front; the remainder at a 3-year interval, provided that the conditionality set forth in the law is met. Those conditions are in themselves designed to be incentives to Central Americans, taking the kind of steps to prepare them for full partnership in an FTAA.
    We hope that bill will have strong support of the members of this committee. We think it is just absolutely vital to sustaining the process of trade liberalization and growth in the export of nontraditional products, which are currently fueling Central American development.
    The immigration issue was a central topic of conversation in San Jose. I think you all understand the concerns that the Central Americans, particularly the Nicaraguans, Salvadorans and Guatemalans, have raised. They are concerned about both the disruption to families of citizens who have put down roots in this country, and of the impact on their economies of what they fear would be large-scale deportations.
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    The President pointed out, let me say first, that he is committed to enforcing the law. He pointed out that there is legal immigration to the United States of over 900,000 people a year. But in order to protect public support for legal immigration, he says it is necessary to enforce the law against illegal immigration.
    That said, he was emphatic that there would be no targeting of an individual national population; that he did not believe that the deportations of Central Americans would be massive in nature. At the same time he said that he wanted to carry out the law in a way that would fully respect the human rights of those involved and in a humane way. And specifically, he committed to consulting broadly with the Congress to determine if there are a range of legislative and other ways of remedying what he characterized as unintended consequences of the Act.
    My written testimony gives a number of observations about trends and developments within the region. Some are regional. Some are country-specific. I think generally my testimony portrays a Central America that, as yours does, sir, is not without continuing daunting challenges, but where the broad trend of events is very positive indeed. None of us underestimate the problems remaining. But when one thinks where the region was as recently as the beginning of this decade, the progress has been remarkable.
    [The prepared statement of Mr. Hamilton appears in the appendix.]
    Mr. GALLEGLY. Thank you very much, Mr. Secretary.
    I would like to do our first round of questions. Sometimes we hear both witnesses, but because of the comments that you made I would really like to give everybody a chance to ask a couple of questions and respond.
    Mr. BALLENGER. I would just like to apologize to you all. I cannot stay. I have got a markup going, and I will have to leave.
    Mr. GALLEGLY. That is not acceptable.
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    Mr. BALLENGER. Glad to hear that.
    Mr. GALLEGLY. Mr. Secretary, one would assume that the immigration bill that passed last year and that was signed into law by the President of the United States, the law that the President signed, I assume, he would have thought was a humane law; is that correct?
    Mr. HAMILTON. I think the Administration was on record as having some misgivings about the law, sir.
    Mr. GALLEGLY. So you are saying, in effect, then the President signed a law that he had misgivings about?
    Mr. HAMILTON. There were features of the law that the Administration had opposed, yes.
    Mr. HAMILTON. I think in any particular instance the President is faced with an up or down decision on a piece of legislation, and he approves and signs legislation, not all of which he necessarily agrees with.
    Mr. GALLEGLY. One of the comments that you made about one of the real concerns of deportation of those that have no legal right to be in this country would be because it would be disruptive to their families.
    Could you explain why it would be disruptive to their families? Why we would force disruption rather than give them the option? Are you saying that children or spouses or whatever that might be legal residents or citizens of the United States would not be welcome in their native countries?
    Mr. HAMILTON. No, I think all of the Central American Presidents have made quite clear that they want to receive back citizens of their countries, but they are quite genuinely concerned that it be done in a way that those who have put down roots here that may have particular situations of hardship be considered on a case-by-case basis.
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    Mr. GALLEGLY. When you say hardship, do you mean economic hardship?
    Mr. HAMILTON. Economic and personal hardship.
    Mr. Chairman, let me also make the point, which is one that the President made in San Jose, it is the case that the population we are talking about are not here as legal immigrants, but it is not necessarily the case that they are here illegally—they are here in a legally protected status, they have been, a subset of the illegal population that we are talking about of nearly 300,000 citizens from these three countries have been here in various temporary protected statuses.
    Mr. GALLEGLY. You said that the Presidents and the respective governments want to encourage the return of their natives to their homeland. I am not really convinced that that is a real genuine statement.
    How do you provide an incentive for these people when we know that these folks, in most cases, that are going back, or forced back to their country are an economic liability in two ways? With the high unemployment and so on, it provides added problems of unemployment. But even more importantly, it eliminates the asset of the remittances. So is that not a conflict? And what incentive does the foreign government have to encourage those folks to return if it creates an added economic liability and it eliminates an economic benefit?
    Mr. HAMILTON. Well, I think what you are doing is simply pointing up reasons why the situation is very complex, and I think both they and we at any given moment are in a situation of managing the tension between the various dimensions of the problem.
    There are adverse consequences to large-scale deportations still as the Central American economies are recovering from the 1980's, precisely the things that you point out. But I take them at their word. I have heard it at any number of levels and in any number of contexts, that it is not that they are not denying, one, our right to deport, or, two, that they would not like in the abstract to see their citizens be able to return. But it is the prospect of doing so massively at a time when their economies are still fragile that has them concerned.
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    Mr. GALLEGLY. How does the President propose that we explain this to our constituents in a State like California where we have several million folks that are illegally in the country?
    In the L.A. school system alone, there are approximately 500,000 students that are not the children of legal immigrants but illegal immigrants in the public school system. The State of California has been spending millions and millions more every year in education, and we have dropped from number 2 or number 3 in the Nation with scholastic scores to number 45 in the Nation.
    How do you explain to the people of California the consequences of accepting more immigrants, not only illegal immigrants, but those that have non legal right to be here to start with? How do we explain that?
    Mr. HAMILTON. First of all, I think the case to be made is the humanitarian one, and I think you would explain it in terms of appealing to traditional American generosity and sense of fair play.
    Remember too, Mr. Chairman, that we are talking about a subset of the estimated five million undocumented foreign nationals in this country; that is to say, maybe—what is that, about 6 or 7 percent of the total.
    Mr. GALLEGLY. That number is, some would say, very fluid. If you accept five or six million, considering that less than 10 years ago we made five million immigrants that were illegally in this country legal through amnesty, and then to say that we would not be faced with any more illegal immigration because this would be the cure-all, only to find that now we have another five or six million and not to mention the effect that that has had on increased citizens by virtue of illegals that have come here. So the numbers, if you want to say 5 or 7 percent, I think that that is a very, very conservative number, and I think anyone that can count to ten without taking their shoes off would agree with that.
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    I do not want to take up all the time, and I would defer to Mr. Menendez.
    Mr. HAMILTON. May I make one final point, sir?
    Mr. GALLEGLY. Sure.
    Mr. HAMILTON. The fact that Salvadorans alone are remitting $1.2 billion a year suggests to me that we are talking about a population that is, by and large, as most Central Americans are, enormously hard working, enterprising. We are not saying that they are here in legal status, but by and large they are respectful of our laws and in fact——
    Mr. GALLEGLY. Mr. Secretary, I have never challenged that they are not hard working people or that they violate the law. I will tell you that a substantial amount of the money that goes to El Salavador, to Nicaragua, and Mexico in the form of remittances is not all from hard work in the fields of California. A substantial amount of that is coming from welfare checks in the form of AFDC that would otherwise go to children—to the children that are citizens of the United States or of legal immigrant parents.
    I met with the ambassador of Mexico a couple of weeks ago, and he acknowledged that Mexico is dependent on the over $1 billion a year in remittances. There is over $1 billion going to El Salavador and I would assume it is several hundred million to Nicaragua, and so on and so on.
    Mr. Menendez.
    Mr. MENENDEZ. Thank you, Mr. Chairman.
    Mr. Secretary, how long have you been dealing with Central America?
    Mr. HAMILTON. Since 1992 consecutively, but I have served 1989 to 1992 in Costa Rica and worked the issue 1983 to 1986 here in Washington.
    Mr. MENENDEZ. That is about a decade all told.
    In that context with your experience can you tell me what happens—well, first of all, these people who we are talking about, did they not come here under some form of color of law during the Reagan and Bush administrations?
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    Mr. HAMILTON. The Reagan administration set up the Nicagaruan review program in 1987 as a kind of court of last resort, an additional one to those provided by law, to ensure that the Nicagaruan population received a full and fair hearing. In the case of El Salvador, the Congress itself, concerned that the asylum process was not being fair to that population, passed legislation creating temporary protected status for Salvadorans. That was not done for the case of the Guatemalans, but the Guatemalans were part of the class action suit that resulted in the American Baptist Church case, which puts their citizens, some 60,000 that are registered under that case in a similarly legally protected status.
    Mr. MENENDEZ. So to some degree, one way or the other, either by judicial decrees or by administrative action or by legislative action, these people are not quite in the same categories of others who just simply cross the border and are here, in all other respects illegally. Would that be fair to say?
    Mr. HAMILTON. I think so.
    Mr. MENENDEZ. Would it be fair to say that the democracy that is taking place in Central America today is still fledgling?
    Mr. HAMILTON. Still fledgling?
    Mr. MENENDEZ. Yes.
    Mr. HAMILTON. Yes, sir.
    Mr. MENENDEZ. Would it be fair to say that the return or the loss of more than a country's annual export revenues would have a dramatic effect on the economy and could produce therefore disruption in that democracy?
    Mr. HAMILTON. I think it is fair to point to that. At the same time, Mr. Menendez, we would not anticipate that the deportations could or would take place massively over a short period of time. It would be stretched out. And at the same time there is a flow of legal immigration continuing into the United States from all of these countries.
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    But, yes, that is, as my statement indicated, as all of the Central Americans themselves say, that is a very real concern.
    Mr. MENENDEZ. Would it be fair to say that if you took 15 percent of a country's GNP and in fact it dissipated totally, that that would have some dire consequences to its economy as it tries to liberalize its economy?
    Mr. HAMILTON. Yes, accepting the premise that you would lose 15 percent, of course it would.
    Mr. MENENDEZ. Would it be fair to say that the United States has a national interest in terms of foreign policy in promoting democracy in Central America?
    Mr. HAMILTON. Absolutely.
    Mr. MENENDEZ. Now, would it be fair to say that the United States spent millions of dollars in promoting democracy in Central America?
    Mr. HAMILTON. Hundreds of millions.
    Mr. MENENDEZ. Hundreds of millions. I stand corrected. Thank you.
    So the bottom line is, is that it is fair to say that there is a foreign policy concern of the United States which serves its national interests as it relates to the consequence in this particular case of how we impact the economies of these countries vis-a-vis the loss of remittances and the loss of—or actually I should say the impact of a massive immigration should it take place?
    Mr. HAMILTON. Well, I think you sketch out very well the major foreign policy dimension. It is also a foreign policy consideration the kind of relationship that we have with other countries, the way we treat other countries. And so the human dimension of this is, if you will, a kind of foreign policy consideration as well.
    Mr. MENENDEZ. One final question, Mr. Chairman.
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    Let me ask you, my understanding of particularly illegal immigration problems that we have, is created primarily for two basic reasons. One, people avoiding civil conflict, war; and second, looking for economic opportunity.
    So when we cement the seeds of economic prosperity in a country and when we have political stability is it not fair to say that we stymie the tie of immigration, at least from those countries that have both political stability and economic stability?
    Mr. HAMILTON. Yes, I think that is fair.
    Mr. MENENDEZ. Thank you.
    Mr. GALLEGLY. If I might just enter into a colloquy here for a moment with my good friend, Congressman Menendez. That is what our immigration policy is all about unless I am mistaken. It is a big part of why we allow and promote close to a million people the legal right to immigrate to this country every year. In fact, more people legally immigrate to this country every year than all the rest of the countries in the world combined.
    However, once we have had that debate, the House and the Senate and the President signs it into law. Unless we change legislatively our immigration programs, we do have a definition between legal and illegal.
    And would you not agree that we should enforce our immigration laws as they are written until they can be amended or modified?
    Mr. MENENDEZ. I think, Mr. Chairman, that we should enforce the laws that are constitutional. Already we have a premise by a Federal Court judge that there is more than compelling evidence that the fact is that the rights of these individuals who are here under some form of color of law have in fact had their rights violated under the U.S. Constitution, sufficient enough to grant an extraordinary relief, which is an injunction.
    I do not believe that we promote the law by defending that which violates the law.
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    Mr. GALLEGLY. Would the gentleman then agree that we probably should move this case forward and have an adjudication by the courts immediately on this other than just having an understanding of what——
    Mr. MENENDEZ. I would be happy to make sure that the rights of the individuals who we eviscerated by that bill, and who had pending rights under the previous existing law should have that opportunity. And if that opportunity says to them that we are sorry, you do not have a case, then I am happy to enforce the law of the United States and have them deported.
    But I do not believe that retroactively in an ex-post facto matter, speaking as an attorney and not as a Member of Congress right now, and this is not free legal advice if there is anybody out there that asks, the fact of the matter is, having given all the disclaimers——
    Mr. GALLEGLY. Paying dearly for it.
    Mr. MENENDEZ [continuing]. we should go ahead and do that. I believe that we best uphold the Constitution, Mr. Chairman, by observing it.
    Mr. GALLEGLY. I certainly do not disagree with that.
    Mr. Ballenger.
    Mr. BALLENGER. I am not a lawyer. I am a businessman. Nobody has approached this immigration situation, it is very emotional, I think, in Florida, Texas and California. I come from North Carolina where we are heavily industrialized, and the census they took in 1970, we had, as far as we could guess, 700 Hispanics in a four-county area of about 300,000 people. In 7 years, it has gone to 17,000 Hispanics, and our unemployment rate is still below 3 percent.
    Now, if our government goes hog wild and tries to send a whole bunch of people back, we are going to have to shut down our businesses because we have not got the people. I mean, California has got them all, and I do not know how fast we can ship them from California to North Carolina, but we have got to do it——
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    Mr. GALLEGLY. Would the gentleman yield?
    Mr. BALLENGER. Sure.
    Mr. GALLEGLY. Why is it that we have more in California than we do in North Carolina?
    Mr. BALLENGER. You are closer.
    Mr. GALLEGLY. Well, that is not an answer.
    Mr. BALLENGER. Most of your Hispanics are Mexicans.
    Mr. GALLEGLY. Well, let me——
    Mr. BALLENGER. But my Hispanics are mostly Central American.
    Mr. GALLEGLY. Why do we not have more in Texas? Texas is closer.
    Mr. BALLENGER. Well, it is because of your economy, being able to absorb them and pay the bills.
    Mr. GALLEGLY. I would just remind the gentleman that in the city of Los Angeles over two-thirds of every birth that takes place in a county-operated hospital the mother has no legal right to be in the country, which means that a very large percentage are——
    Mr. BALLENGER. I realize you all have problems, and I have heard this a whole bunch of times. I was trying to bring in something a little bit different.
    Mr. BALLENGER. The fact that the economy of our country depends to a very large extent on the two or three million Hispanics that have come here just lately, and all you have got to do is look at every hotel around the city of Washington, just about every restaurant, and I think what they have done is they have filled in. In my own area of North Carolina in business in the 1970's we ran out of people. And unluckily for the Hmongs and the Vietnamese, we lost the war there, and they all came to our country. Unfortunately for them but fortunately for us in North Carolina, we have a great deal of industry where those people have supplied the ability for industrial growth. But if we send a whole bunch of them back, the economy of the United States would have one heck of a time replacing those folks as far as work goes.
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    Let me ask him a question about the Central American common market. You mentioned that. There has been working there, the fact is before all the civil wars and everything they had a little common market that was going fairly well, and then the civil wars came along and destroyed that.
    Has that come back into existence again?
    Mr. HAMILTON. Yes, sir, it has, with one major difference. The common market of the 1960's was really based on an import substitution model of development. That is, it put up a common external tariff and sought to produce in Central America products that they had been importing as a way of reducing their foreign exchange bill.
    The model that they are currently adopting is an outward looking, trade liberalizing model, and one that we believe, and I think they are utterly convinced, is much more in step with the process of global economic liberalization.
    Mr. BALLENGER. I think the bill we are debating on the floor today or tomorrow, the Caribbean Basin Initiative, the effort on the part of those people to reach some sort of equalization with Mexico, and I think you mentioned that in your discussion, but at least parity, I think, is in that bill that we are debating, is it not?
    Mr. HAMILTON. Yes, the Caribbean Basin Trade Enhancement Act will give trade preferences within 3 years essentially equivalent to those that Mexico enjoys under the NAFTA, assuming that the second tranche of preferences——
    Mr. BALLENGER. What is tranche?
    Mr. HAMILTON. Installation and installment payment.
    Mr. BALLENGER. Oh, OK.
    Mr. HAMILTON. What happens, Mr. Ballenger, they give half the trade preferences up front unconditionally. The second half is conditioned on the Central Americans taking steps in a number of areas. And once those are granted, and assuming that they are, then they have preferences essentially equivalent to those that Mexico has.
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    Mr. BALLENGER. How far is that from free trade?
    Mr. HAMILTON. Well, it could still leave us a fair extent from free trade because it would not necessarily be the case that we would have gotten complete and unfettered access to their markets. But one of the conditions is essentially that they give us Most Favored Nation status for any benefits they give to third parties. So there is a condition on increased U.S. access to their markets.
    We already supply anywhere from 40 to 60 percent of their imports. So, actually, notwithstanding that these are in comparison relatively small economies, there is a tremendously important market here for U.S. goods. Over 30 million people, 40 million if you include all of the CBI region, over 40 million, and growing economies with significant further potential for growth.
    Mr. BALLENGER. As a person who has traveled in and out of the region for about 35 years, I have never seen, and I realize there is yet some distance to go, a country that picked itself up from the civil war as did El Salavador, to create the vital economy that they have developed there. Personally, that is the reason I introduced that resolution that we are going to vote on. And the fact that as politicians go, and I realize nobody is perfect, but when Freddie Christiani was President of El Salavador and they were trying to kill him, and they overran his home two or three times, once at a lake and once in the city, he still made the effort for peace.
    I do not know, maybe he was too rich to be satisfactory to some people, but to my way of thinking I have never seen a better qualified guy. The fact is I kiddingly have said it is too bad we cannot clone him and bring him up here and run him. I think he could run as a Republican and win; might even run as a Democrat and win. I do not know. But I would just like to say that.
    And I apologize to both of you, but I have a markup going on in Education and Labor, and enjoyed being with you. Good luck.
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    Mr. HAMILTON. Thank you.
    Mr. GALLEGLY. Thank you, Mr. Ballenger.
    And thank you, Secretary Hamilton.
    Mr. Schneider.
    Mr. SCHNEIDER. Thank you, Mr. Chairman.
    I should add before Congressman Ballenger leaves that I want to commend and congratulate the Congressman, the Chairman and the Committee for the resolution on El Salavador. I think it is very appropriate and very helpful.
    I also believe that the Committee's focus on Central America at this time, so soon after the President's visit, is important in order to raise attention to what is happening in Central America. The positive change for the people of Central America is such a foreign policy success for the United States, a bipartisan foreign policy success.
    In the words of the San Jose declaration, the President reaffirmed ''The remarkable democratic transformation in Central America taking place.'' I think it is important to recognize now that opposition political movements in Central America are represented by legal political parties, with representation at the national and local level. Armed conflict stemming from ideological division has been replaced by peaceful debate about their countries' future.
    Mr. Chairman, I think it is also important to recognize that stability in Central America promotes U.S. interests through the fostering of strong trade relations. Let me just give you a couple of statistics.
    United States exports to Central America now exceed $7.5 billion. They have grown at an annual rate of 14 percent since 1990. Our exports to those seven Central American countries exceed the combined total of all U.S. exports to all the countries of Eastern Europe and to all the countries of the newly independent States of the former Soviet Union. At the same time, those Central American countries import almost 50 percent of their goods and services from the United States.
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    As you have noted, nearly half of their population remains in poverty. Bringing those people into the national economy will generate even greater demand for goods and services and results in rapid expansion of U.S. exports and the jobs associated with those exports.
    And let me also somewhat delicately note the linkage between prosperity and stability in Central America and decreasing immigration pressures. There is simply no question that what we do in terms of increasing the capacity of those countries to grow, to provide for opportunity for their citizens, particularly in countries like El Salavador with enormous population pressures, lessens the pressure on those citizens to emigrate to the United States.
    I should also note that USAID plays a critical role by focusing at this moment in Central America on three complementary themes: Completing the transition from war to peace; promoting sustainable development in all of its aspects; and advancing regional integration. All three of these themes were central at the San Jose Summit where the final declaration demonstrated the political will of the region's leaders to work together to pursue a prosperous and democratic hemisphere.
    To some degree last month I witnessed the end of the cold war in Central America. I had the honor of accompanying Secretary Albright to the last demobilization camp in Tululche, Guatemala, where about 50 of the remaining ex-combatants from the war were awaiting their opportunity to go back to a new life and rejoin civilian society. It is a tremendous achievement for the Guatemalan people. Unfortunately, I think it is one that has not received sufficient attention from the media and from the American public. That makes this committee's work in spotlighting these events in Central America enormously important.
    I think that we have a bipartisan interest in supporting the implementation of those peace accords and helping Guatemala move forward to achieve a new vision for their country. I was pleased to lead our delegation to the consultative group. I believe our early and significant contribution of some $260 million over the next 4 years to ''Implement Peace Agreement'' was a major factor in the international community pledging nearly $2 billion in support of economic, social and political growth in that country, support essential to the achievement of the promise of the peace agreements.
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    I should add that we have completed on time the full demobilization of nearly 3,000 ex-combatants. We were a major part of a joint effort by the international community to build those camps, to register those individuals, to provide them with civilian documentation, to determine where they wanted to go and what their needs would be to rejoin Guatemalan society. We have done that, and it is a remarkable achievement.
    The people that I talked to at that camp were very clear that their goals are to become farmers, to become small businessmen, to obtain an education. These are people who spent the last 10 to 15 years in the hills fighting the conflict.
    USAID will be a significant part of the international effort to support the efforts of the Guatemalan Government; to provide vocational education, agriculture, and other programs to integrate those ex-combatants into society.
    Let me turn if I may, as you asked, Mr. Chairman, to comment briefly on El Salavador. Since the signing of the Chapultepec Peace Accords in January 1992, largely through the U.S. Government's effort and USAID programs, some 35,000 Salvadorans have received land, title to the land, and technical assistance and credit to farm it through the land transfer program. I am pleased to say that another 2,000 men and women have received vocational training, some high school, and in some cases university education as well. Agricultural and micro-enterprise credit has been channeled through some 50 nongovernmental organizations and the Agricultural Development Bank.
    You have focused in your resolution on the election. Last month, I met with Hector Silva, the newly elected mayor of San Salvador. My first experience in El Salavador was as a Peace Corps volunteer in 1965, and I have followed El Salavador for the past 30 years. What I found most remarkable was that the night of the election the ARENA party chairman acknowledged the victory of the opposition candidate in the mayoral election in San Salvador; accepted the fact that there was a transition in that city; that everyone recognized that those local and parliamentary elections were free and fair; and that they were accepted as legitimate by winner and loser alike. That presents an enormous advance to consolidating democracy in the region.
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    Earlier this year, as you know, I testified before the Subcommittee on Nicaragua and the three transitions of war to peace, dictatorship to democracy, and moving from a centralized command economy to a market economy. Significant progress has been made, but at the same time there are still an enormous amount of obstacles to achieving the kind of country that Nicaragua wants.
    You have mentioned, Mr. Chairman, some of the threats to progress in Central America. Everything that you have listed I would agree represents a continuing challenge to the United States and to the governments and the people of Central America. Corruption, strengthening the rule of law, the threat of drugs, and, I would say particularly, poverty constitute enormous challenges to all of the parties involved on all sides of the political spectrum, and the public and private sector alike in every country in the region.
    And while there are undoubtedly going to be difficulties, it is in all of our interest, our common interest, to see that those challenges are overcome, and that that region achieves in the 21st century its hope of democracy, development and justice.
    Thank you.
    [The prepared statement of Mr. Schneider appears in the appendix.]
    Mr. GALLEGLY. Thank you, Mr. Schneider.
    You know, since 1990, USAID has, along with other international donors, provided over, and correct me if I am wrong, $4 or $5 billion to Nicaragua; is that correct?
    Mr. SCHNEIDER. With all other donors, it may be close. Ours is about $800 million, I would say.
    Mr. GALLEGLY. Yet in a report that gives these numbers Nicaragua still remains second only to Haiti in the hemisphere as it relates to the issue of poverty with, I guess, an annual average income of about $450 or $500?
    Mr. SCHNEIDER. Correct.
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    Mr. GALLEGLY. If that is the case, can you kind of give us an idea of where that $4 or $5 billion has gone?
    Mr. SCHNEIDER. Yes, you must remember that in 1990, in Nicaragua, as a result of the conflict and the flawed economic policies, but 10 years of conflict particularly, that their income had regressed to what it was in the early 1950's. So they had moved back from a point in the 1980's, back to a point 30 years into the past in terms of their economic well being and their economic infrastructure.
    Everything that has occurred up to the present since 1990 has been attempting to reestablish economic infrastructure that would permit investment. For example, there was 13,000 percent inflation in 1990 when the Chomorro Government came into office. Now, inflation is down to the low teens.
    What has occurred now this past 7 years really has been establishing a base for growth. And I will say that if you look at a series of indicators, you are beginning to see that. In the last 3 years, you have had GDP growth of 3, 4, 5% Now, for the first time in 13 years, you have had GDP growth per capita in Nicaragua. So you are beginning to see some return.
    In agriculture, for example, the small farmers, particularly in the areas of conflict, had no access to technical assistance or to credit. We are beginning to help create institutions to provide that.
    Mr. GALLEGLY. I see our colleague from California, my good friend, Mr. Capps, has joined us. Do you have any questions for——
    Mr. CAPPS. One of the problems I have is I just walked into the room, and I have not heard the testimony and have not read the testimony. So then why am I talking? Because I am sitting here.
    But there has been a big discussion this past week in the Congress about human rights, and in looking through the report, and maybe you have already covered this, if you have, I will back off. It seems like there has been an increase in human rights in the countries that we are dealing with here today, and that is a positive sign.
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    I actually do not always know what that means because I am not sure human rights always translates across cultural boundaries, but at the same time if there is increase in human rights, there is also an increase in crime. And I think the question I would ask is, how do you put those two facts together?
    Or, Mr. Chairman, if that has already been covered, I can withdraw it.
    Mr. GALLEGLY. Go ahead. It has not been.
    Mr. SCHNEIDER. Let me start on the human rights if I could, particularly because it seems to me it is enormously important to recognize what has changed with respect to human rights. It is not merely that during the period of the 1970's and the 1980's that you had violence against individuals, that you had repression from the government's own police, that you had the military engaging in violence against its citizens, through torture, disappearances, and violations of the physical integrity of the people but you are also talking about violating human rights through the guerilla wars that were underway throughout that period.
    Now, in one of the most important changes taking place in the region, you are beginning to see the rule of law apply across the board to everyone. That is a fundamental change, and it is an enormous change in those societies: El Salavador, Guatemala, Nicaragua, and Honduras. It means an enormous amount. It means people can stay in their own country; that they can be confident that the police and the legal systems will protect their rights.
    In terms of human rights, it is important to understand how important that change is; that you are beginning to see a rule of law, you are beginning to have the people on the outside of the political spectrum come inside to be represented, to run for office, to be elected, to have a way of conveying their concerns.
    At the same time, as this process begins, those systems of law are very fragile. Police, courts, prosecutors are going through a process of becoming trained and capable of playing their role. It is in that context that you see the problem with crime particularly. You are still building up the justice systems of these countries, and at the same time you have an economic situation in which you have got an enormous amount of misery, and the combination of that results in additional problems with respect to crime.
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    Mr. CAPPS. Go ahead.
    Mr. HAMILTON. Just a couple of additional points. I think sources of the rise in criminal activity that we have seen include those that Mr. Schneider pointed out, continuing high unemployment is one. There is also the problem of the easy availability of arms throughout the region. But I think the really new factor that we are seeing is the introduction in Central America of various kinds of transnational crimes. Narcotics trafficking being the most prominent of them, but we are also seeing organized international criminal syndicates taking some of their business through the region from alien smuggling to stolen cars to various kinds of contrabands, and that is one of the emerging baskets of issues that we have in our relationships with these countries.
    And so we have a real opportunity here because we need the cooperation of the Central Americans in these areas because some of this criminal activity, a good deal of it affects us. But they need our cooperation too, and that is why we are really coming together in, I think, a very constructive and promising way to focus on this, and that is the purpose of the meetings that the Attorney General will hold with her colleagues here in Washington later this summer.
    Mr. CAPPS. OK, thank you.
    Just to follow up. I think if you did not think about this and if you did not know the situation in those countries, you would say that one would hope that with the increase in human rights would come a decrease in crime. Just the fact that the two are happening, looking like they are pulling apart, gives me some pause for concern.
    Mr. HAMILTON. You have an increase in crime even in Costa Rica, which I think we all agree has had an exemplary record of respect for human rights. Not even Costa Rica has been immune from this increase in crime.
    Mr. CAPPS. I do not know if anybody else in the room is fascinated by that, but I really am. You know, we have had a whole discussion this week about China, and I was in China in December, and I know we are not talking about China today. But when I raised questions about human rights in China among the leadership there, the response was maybe not so much human rights, but we do not have so much crime. And we look at your country and we see increases in crime.
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    The correlation there is a troublesome one for me. I think we have to find a way to make those facts more compatible with each other, not contradictory.
    Mr. HAMILTON. Yes. I think when we as a government talk about violations of human rights we typically think of violations by entities of the State, by police, by military, by those that exercise the authority of the State. And I think almost by definition those that are committing crimes are not stage agents. And so I would explain or reconcile sort of the incompatible trends in that way, sir.
    Mr. CAPPS. Thank you.
    Mr. GALLEGLY. I thank you both, Mr. Schneider, Mr. Secretary, and I look forward to continued dialog. We still have some difficult issues to resolve, and I do want to go on record, as I did with the President of Nicaragua yesterday, to say that I am not sure what the resolution is. I understand the investment issue down there. I was a part of it, I would like to think, in a small way when I was there with Jimmy Carter as an observer in the first free and open elections when Ms. Chomorro was elected, and was there on several occasions before and after.
    So to say that my mind is closed on the issue is not fair, but I do think that we have to look at the effect that it has on U.S. citizens as well, and the way we must represent those folks. So I think we have to have an understanding by the President and by the leaders in those countries as to what political pressures and domestic problems we have ourselves as a result of that. And if they understand that, maybe we can come to some kind of common ground to where we can serve both our needs.
    Thank you both very much.
    Our second panel, we have Dr. Cynthia Arnson, Senior Program Associate of the Woodrow Wilson Center, and Dr. Michael Shifter, Program Director, Inter-American Dialogue.
    Thank you very much for joining us today. Dr. Arnson, we will take your statement at this point, and we will make your entire statement a part of the record of the hearing, and welcome.
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    Dr. ARNSON. Thank you, Mr. Chairman, and other members of the Subcommittee. I am pleased to address the Subcommittee on Central America. This subcommittee over the last two decades has been one, if not the preeminent forum for the discussion of Central America and the appropriate U.S. policy response, and I am delighted to be part of an ongoing discussion of events on the region.
    I want to focus my remarks, as Administration witnesses have done, on outstanding issues regarding the consolidation of peace processes in El Salavador, Guatemala, and Nicaragua, and ways that the U.S. policy and the Congress can be helpful.
    The last several years have seen important advances, many of which are familiar to you; the signing of the Peace Accord in Guatemala in December of last year; the demobilization of combatants; and the formation of multi-sectorial commissions in Guatemala to carry out the numerous commitments made under the Peace Accord. Constitutional reforms and draft legislation have been introduced. However, what I think has been less than optimal is carrying forward in the post-war period the spirit of broad consultation between the government and civil society that characterized the period of the actual negotiations.
    In El Salavador, there have been many major accomplishments in addition to the holding of the election last March that has been the subject of prior conversation. The establishment of a new national civilian police, the abolishing of the old security forces, the reduction and purging of the army, and the transfer of land to former combatants and other civilians stand as major accomplishments. Real power is now contested in the electoral arena as witnessed again last March when the FMLN, the former enemies in arms of the ARENA Government, achieved significant gains, and those gains were respected.
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    Significant doubt remains, however, that the central government will allow its former enemies to govern and the ruling ARENA party would seem to have every political incentive to deny the FMLN to govern in municipalities as a way of denying them the political benefit of delivering to their constituents.
    I think that U.S. policy can do much to strengthen the party system and the credibility of politicians in general by encouraging consensus, by encouraging the equitable distribution of State resources regardless of ideology.
    In Nicaragua, unfortunately, political polarization remains deeply entrenched. Politics continue to be highly fragmented and personalized, and political discourse still reverberates all too much with accusations that one side or another is either too conciliatory or not conciliatory enough to the Sandinistas.
    Disputes over property, as you are well aware, continue to deter both foreign and domestic investment, although less so, I think, since 1995, and they still poison the political dialog in Nicaragua and between Nicaragua and the United States.
    The resolution of the property issues must involve heavy doses of compromise on all sides, those who benefited from the so-called piñata must return or justly compensate prior owners; at the same time I think there must be a recognition that it is neither politically practical nor desirable to take land away from poor rural farmers or urban squatters.
    There are two general additional concerns regarding peace processes. The first is common crime. The wars have ended, but the violence continues. This has been fueled by the proliferation of weapons, the lack of employment opportunities for former combatants and young people, as well as the involvement of former or active duty elements of the security forces in organized crime.
    Mr. Capps mentioned the seeming contradiction between the respect for human rights and the rise in crime. And I would simply say that efforts to combat crime must not be accompanied by law and order measures that violate human rights and undermine the significant progress that has been made to date.
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    The threat posed by crime is intimately and structurally related to poverty, which constitutes the second major area of concern with respect to peace processes. Economic growth rates between 1991 and 1996 in Central America have not been sufficient to generate employment commensurate with growth in the work force, and with the exception of El Salavador, have stood below 4 to 5 percent per year. Per capita GDP has fallen in Nicaragua, Guatemala and Honduras, and only Costa Rica and El Salavador have posted modest gains.
    More important, however, in El Salavador and Guatemala, the two countries emerging from the most brutal wars of the last decade, social expenditure as a percentage of GDP, as well as per capita social expenditure, are among the lowest in the Western Hemisphere. I think this indicator is especially disturbing in the light of the need for increased government spending after a war to address former combatants, affected populations, and eliminate some of the root cases that contributed to conflict.
    As my time has run out, a final comment about President Clinton's trip to the region. The San Jose Declaration, I think, is an important statement of principles, but there is a need for specific action in order to put those principles in operation.
    The first concerns immigration which has been amply discussed. If I may respectfully disagree, I think that it is not possible to separate the domestic policy implications of immigration reform from the foreign policy implications, and I would simply identify myself with the remarks of others that have argued that it is in the national interest of the United States to consolidate peace processes and democracies in the region, and that we must pursue domestic and foreign policy objectives that are not in fundamental contradiction.
    The second and last issue is that of free trade. The expanded CBI benefits that have been introduced fall short of the desire for a free trade area on the part of the Central American governments. There are many statements in the San Jose Declaration about workers' rights, about social investment, about ensuring that the benefits of growth are shared by all, and I would underscore that these commitments to developing human potential must not remain in the realm of pure verbiage.
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    Thank you very much, Mr. Chairman.
    [The prepared statement of Dr. Arnson appears in the appendix.]
    Mr. GALLEGLY. Thank you, Dr. Arnson.
    Dr. Shifter.
    Dr. SHIFTER. Thank you, Mr. Chairman. I appreciate this opportunity. I would like to focus my comments on some ideas and recommendations that the Congress might consider in shaping its Central American policy.
    My prepared testimony includes an analysis of recent trends and developments in the region. I have emphasized in my testimony the tremendous progress that has been made in the last several years. Central American governments have succeeded in getting their economies and their armed forces under control. The political achievements of peace have been remarkable by any measure.
    But there are also serious problems, some longstanding and some new. Poverty, unemployment and social conditions remain acute. Modest growth and political change have not solved those problems. There are also more recent problems that have been alluded to, especially soaring crime rates. Not political violence as in the past, but social violence. This is what dominates the region's newspaper headlines. Some but not all the crimes are related to the spread of drug-related activities, including trafficking and money laundering. The problem of crime and public order may pose the greatest challenge to building and advancing democracy in Central America.
    Central Americans from the government, nongovernmental and private sectors will together deal with these and other challenges. The United States can, however, help sustain the progress that has been made, help relieve the strain, and help avoid any reversals. The region's advances are remarkable but not irreversible. It would neither be desirable nor feasible for the United States to pay as much attention to Central America as it did in the 1980's, but it would be a mistake to pay only limited and sporadic attention to the region as the United States has done in the past several years.
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    Let me share with you five ideas that might be considered to make U.S. policy toward the region more effective.
    First, the Congress should pass the Caribbean Basin Initiative Enhancement legislation now under consideration. It should seek to establish closer commercial ties with Central America by embracing the region's proposal for a reciprocal free trade agreement with the United States. Congress should also take the necessary steps to eventually bringing Central America into NAFTA. These steps would send a strong and positive signal to the region. It would also help spur economic growth which is essential for dealing with the region's social and economic agenda.
    Second, Congress should give even greater support for multilateral initiatives aimed at promoting democracy and strengthening social and environmental progress in Central America. It should redirect already declining resources to bolster the United Nations and Organization of American States in their efforts to build peace, monitor human rights and elections, and reintegrate ex-combatants. Congress should also back higher levels of support to initiatives through the multilateral banks in democratic governance and social sectors that seek to deal directly with the region's distress and insecurity. Priority should be given to Guatemala to help make its promising peace settlement succeed—and to women and indigenous groups, the most vulnerable sectors throughout the region.
    The third idea has to do with immigration. I join with Dr. Arnson in believing that this is an issue which has a foreign policy dimension, and I believe that what is needed is a reinterpretation of the current law that takes into account its effects on U.S. policy toward Central America and U.S. interests in supporting a peaceful, stable and productive region. This issue offered an opportunity for the Congress to show foresight, vision and goodwill.
    The fourth area refers to the issue of political reconciliation in Central America. At a minimum, the United States should avoid fueling greater polarization. In Nicaragua particularly, the United States should try to foster a broad political accommodation on such sensitive issues as the return of previously confiscated property and the role of the armed forces. This country cannot afford further political polarization.
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    Finally, on an issue that has not been mentioned, I would say that Congress should honor and carry out the Panama Canal treaties. Questions about the future management of the canal have more to do with economic resources than security concerns. For any new project or idea that seeks to set up a center to coordinate efforts in fighting drugs in the hemisphere, Congress should insist that it be genuinely multilateral and under civilian supervision. The United States should try to encourage, to the extent possible, greater civilian capacity, participation and control in security matters.
    Finally, President Clinton's visit to the region last month was welcome and positive. The President expressed concern and showed understanding on many of these issues that I mentioned. There was, however, little concrete progress on the two issues of highest priority for the Central American Presidents, trade and immigration.
    The Congress should go further on these issues, quickly passing the Caribbean Basin Initiative Enhancement legislation under consideration, and committing itself to more flexible and humane interpretation of the new immigration legislation.
    Thank you kindly. I very much appreciate the opportunity.
    [The prepared statement of Dr. Shifter appears in the appendix.]
    Mr. GALLEGLY. Thank you both.
    Dr. Shifter, you have mentioned, and I am not sure I completely understood your position, as it relates to the property settlement. You know, that is a central issue there, I think without question, in a country that has massive land reserves, if you will, there are still some significant political problems regarding the issue of property acquisition.
    Now, how do you propose to resolve this? What are your thoughts?
    Dr. SHIFTER. Well, I agree with Dr. Arnson, and I firmly believe there has to be accommodation on both sides. Right now, there seems to be substantial inflexibility. My sense is that the United States might play a role in trying to bring both sides together to seek a negotiated solution to the problem. I think there has to be flexibility on both sides on this.
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    Mr. GALLEGLY. Would you not agree, and I ask Dr. Arnson the same thing, it is really more political in nature than it is actual land value or economic to those involved?
    Dr. SHIFTER. Yes. I think it is fundamentally a political issue. There are economic and technical issues involved, but these are minor compared to the dominant political challenge. Again, I think the United States should really try, first, to avoid fueling polarization and, second, to see if there is an opportunity to play a constructive role in seeking accommodation on both sides of this question.
    But I think it is fundamentally a political issue, Mr. Chairman.
    Mr. GALLEGLY. Dr. Arnson.
    Dr. ARNSON. I would agree that it is political, but I would not ignore the economic dimension. One of the things that has impeded resolution of the property issues up till now is the lack of an adequate compensation mechanism. The State bonds that have been offered to private property owners are considered worthless and are not considered just compensation, and so the government has been stymied in its efforts to provide compensation in instances where the State has taken over private land.
    So I would not underplay the economics of the problem. President Aléman initially expressed his desire to ask for the international donor community to provide up to half a billion dollars for the compensation of former owners, and I think that that is a highly unrealistic proposition. There are perhaps bonds from the sale of State enterprises that might be considered worth more than the paper they are printed on by property owners.
    But I would emphasize as part of the compromise and coming together on this, property owners themselves have to show some flexibility and some recognition of the limitations of compensatory mechanisms.
    Mr. GALLEGLY. What about the issue of alternative land? Is that ever anything that has been considered? One thing about Nicaragua in relation to the population, there is a very large land area there.
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    Dr. ARNSON. I think one of the problems is providing land to people in communities from which they did not originate. This is a very severe problem that came up with the attempts to provide benefits to former combatants of the Nicagaruan resistance of the contra force. They were given land in the southeastern part of the country, and that was not where most of the combatants were from, and so they in a matter of weeks or months simply migrated back to their old lands, and found that they had been taken over by Sandinista cooperatives by other people in their absence, and that was an important factor fueling land conflict.
    So it is not simply the availability of agricultural property. I think it has as a lot to do with the location of that land and the quality of the land which is very different in different parts of the country.
    Mr. GALLEGLY. So it is not just a political issue then. It is a very real issue logistically or economically with——
    Dr. ARNSON. Absolutely. I think the political dimension comes primarily from the backlash that would be created by the attempt to remove poor beneficiaries of the land reform or of urban properties from their dwellings. These are not wealthy people. These are not people that have taken over mansions of Nicagaruan citizens who fled to the United States during the war. These are very poor people who benefited from Sandinista policies during the 1980's. And the Sandinistas have shown that they are quite willing and able to stage strikes, demonstrations, work stoppages in protest of government measures that attempt to take that land away from their constituents, and they have brought the country to its knees on numerous occasions, I think most prominently under the previous government, but there was a dust up in April under the Aléman Government. And so I think that is the political dimension of the problem. But the economics of it are not simple, and if they had been, I think this would have been settled long ago.
    Mr. GALLEGLY. Walter.
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    Mr. CAPPS. Thank you.
    I want to thank both of you for the papers. They were extraordinarily rich and give us a lot to think about and a lot to talk about.
    I think I wanted to focus, first of all, on the visit of President Clinton. I am not quite sure how to ask this, but I want to ask a question about Central American attitudes toward the United States in general because I know that there has been considerable tension there, some frustration. Both of you critiqued the President's visit, Dr. Arnson particularly, saying that it cannot simply be, in my words, symbolic and verbiage, but certain things have to follow.
    But when Americans go to Central America in an official capacity are we well received? Are we welcomed? I mean, is that understood to be a positive or is it more big brother? And I am particularly relating that to immigration policy, which I know there is a lot of resistance to there, there is a lot of criticism of it in those countries.
    I may be asking something so general here that it might be impossible to respond, but I would like to get a sense of sort of where we are in a kind of post-colonial world which is not altogether yet post-colonial.
    Dr. ARNSON. If I could break down your question into a couple of smaller parts and attempt to answer it that way.
    I think for the most part there is a great deal of admiration and respect among Central Americans for the United States. The proximity of the two regions means that U.S. culture, U.S. companies, U.S. products are prevalent, and the United States is greatly admired for the standard of life and for, I would say, the cultural exports that go from this country throughout Latin America.
    But I think there is significant resentment over certain aspects of U.S. policy. I think that the immigration issue clearly is one that has united people across the political spectrum in Central America when it has seen that the United States is doing something against their relatives, against their countrymen that everyone in the region recognizes will have such detrimental effects. And so I think there is a kind of nationalistic sense that brings people together regardless of ideology when there are particular policies that are perceived as grossly unfair.
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    And not to reopen old wounds, but I would emphasize that the immigration issue is one that has that potential for souring relations between the United States as a whole and Central Americans in general.
    Mr. CAPPS. Dr. Shifter, would you comment on that one too?
    Dr. SHIFTER. Sure, I would be happy to.
    I think the feelings and sentiments are complicated and ambivalent. I think, though, that if one takes a longer-term view it is clear that the feelings of resentment have diminished quite a bit. The United States is generally viewed positively in the region, as reflected in President Clinton's reception which was overwhelmingly positive and favorable.
    I do not want to belabor the immigration question, but I would underline another issue which is of great concern, which is trade. NAFTA was approved almost 4 years ago now. But the process of extending NAFTA—and particularly including Chile—has substantially stalled. In this context, many Central Americans believe that investment is being diverted to Mexico, and that their vulnerable economies are suffering a great deal as a result.
    I think that some steps—especially approving the NAFTA parity legislation now under consideration—would do a lot to send a signal to Central Americans that the United States is concerned about the negative effects of NAFTA on their economies, and that we are prepared to move forward in according favorable treatment to the region. This would not solve all of the problems, but it would represent a concrete, realistic step that is now being debated and that would be important. Not only symbolically important, but in a very real sense, since Central American economies are moving forward, but still struggling, and would benefit from such a boost.
    Mr. CAPPS. Mr. Chairman, could I have a followup?
    Mr. GALLEGLY. Sure, by all means.
    Mr. CAPPS. I was in an academic environment prior to coming to Congress. And I think what I look for in each one of these situations is an idea, a controlling idea that would really be compelling. And I know, both of you being experts in this field, watched the President carefully when he went there. Now, I am not an expert. I read about it and I follow it. But I was delighted when the President went there.
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    I just want to ask you sort of candidly, are there some things that he could have done that he did not do? I know you talked about it in your paper. But did we miss the big opportunity there where this could have been a larger event than it was, because it does not happen all that often that a President will visit small countries?
    I am thinking primarily from the point of view of the people there; you know, their expectations. And you said he was well received. But I am just wondering was that the kind of event that we can sort of rejoice in, or are we still waiting for more things to come that would create a better relationship between this country and the Central American countries?
    Dr. SHIFTER. Well, I think that, again, the crucial thing is really the follow-through at this point. As I mentioned, there was a sense that expectations were raised in 1993 and 1994, and then there was a sense of disappointment because a lot of the promises that were made were not carried through, and were not sustained. The Mexico crisis and other factors led the United States to retreat and withdraw a bit from the region. And so there is a sense that the United States only tends to be interested in Central America, and Latin America generally, during moments of crisis. Otherwise, if things are going reasonably well, perhaps with some difficulties and problems, then we can kind of pull back.
    And so I think the words that were spoken by the President in Central America were welcome. They were seen as very positive. The President, after all, had not been to Latin America in his first term, so this was a step forward.
    But the question now is whether we will see a firm commitment and follow through on specific issues that are of greatest concern to Central Americans, such as trade and immigration. I think some people felt that the President might have gone a bit further in some of his statements on these policy questions.
    Mr. CAPPS. Like in what respect?
    Dr. SHIFTER. I think President Clinton might have explicitly embraced and responded positively to the proposal made by Central American governments for a reciprocal free trade agreement with the United States. If the President had gone a bit further, and had made a firmer commitment to move forward in seeking to pursue free trade with the region, then the Central Americans would have been even happier. The President might have used stronger language in this sense, instead of saying he would see what he could do on this key issue. I think the real question is what happens now, as we approach fall, to follow through seriously on some of these ideas.
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    Dr. ARNSON. I agree that this is a question of where the proof of the pudding is. The President's statements were broadly welcomed, and everyone I think now is watching to see what actually happens.
    If I might answer your question about a compelling theme or an idea to take away from my statement, if not from the hearing, it has to do with the distribution of the benefits of growth. For the most part, people throughout the region are worse off today than they were when the wars were initiated. I do not want to think about the 30 years of war in Guatemala, but certainly that would be true for Nicaragua and El Salavador whose wars began in the early 1980's. People are materially worse off than they were at the beginning. And I think that is a potentially very destabilizing situation.
    Others have made references to the fact that the democratic process in the region should not be taken for granted, and I cannot underscore that enough. It is very important to promote modernization and liberalization of Central American economies and liberalization of U.S. trade policy. But it is not enough. There must be an active social policy to ensure that the benefits of growth are equitably shared and distributed, or most people will conclude that there was very little to have gained from the peace process and from the advent of democracy.
    Mr. CAPPS. And that would relate then also the point about the rise in crime?
    Dr. ARNSON. I would agree. I would agree. And I think I have pointed out in my statement that the rise in crime has very proximate causes in the end of the war, lots of combatants who know how to fight and know how to do little else, lots of weapons available. It also is deeply rooted in economic conditions.
    Mr. CAPPS. This is my final one and it is very quick one. But, Dr. Shifter, in your paper you say, ''El Salavador is now believed to be the world's most violent country.''
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    Now, I think if you go out on the street here anywhere in this country you would say, ''What is the most violent country in the world?'' It would take a long time, I think, before we think of El Salavador. Just a commentary, but I find that a very startling, disturbing fact.
    Dr. SHIFTER. Well, I agree that that data, taken, incidentally, from the Inter-American Development Bank, are alarming. The fact that, on average, more people are killed every day in El Salvador than during the war years, is an astonishing and troubling fact. This is a central issue, the biggest challenge to democratic governance in the region, that needs to be dealt with.
    Mr. GALLEGLY. Have you traveled to El Salavador?
    Mr. CAPPS. No, I have not, and I still cannot reconcile that with the increase in human rights. I am back to where I was when I walked in here.
    Dr. ARNSON. If I could respond to that though. I think Secretary Hamilton hit the nail on the head when he said that the violation of human rights during the war was primarily associated with military institutions and security forces, essentially carrying out repressive actions against the civilian population. There were also severe violations of international humanitarian law that were committed by the guerillas, and by the armed forces, both sides in the conflict.
    To say that the reforms in State institutions have brought about an improvement in human rights, I think, is not in fundamental contraction with the statement that there has been a spectacular rise in crime due to the lack of economic opportunity and social policy. And so I think that the two issues, can, uncomfortably, but nevertheless coexist.
    Dr. SHIFTER. Can I?
    Mr. GALLEGLY. Yes, go ahead.
    Dr. SHIFTER. I just wanted to make one brief comment. I think it is important to look at Central America in a broader perspective. We should bear in mind that other Latin American countries that went from authoritarian regimes to civilian regimes—not to mention in contemporary South Africa, Russia, and many other societies—also witnessed a comparable crime epidemic. This seems to be a byproduct of such a difficult, but necessary, political process.
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    This does not obviously mean that one should go back to the authoritarian period, but one ought to recognize how tough it is to go through such a transition, which has not been unique to Central America. At the same time, the Central American phenomenon is seriously complicated because it is a region emerging from the wars, with readily available weapons, accompanied by profound poverty. But I think part of what's going on in Central America is common to a wider set of countries going through major changes throughout the world.
    Mr. GALLEGLY. Thank you.
    Mr. CAPPS. Thank you.
    Mr. GALLEGLY. I really appreciated the first question that Walter asked, and one of the things that I have been told that when you go to law school—I did not go to law school, but sometimes you do not ask questions you do not know answers to. And I have a propensity for asking a lot of questions that I do not know answers to because, quite frankly, I think that is the purpose of these hearings. And I really did appreciate the question that you asked Dr. Arnson about how are we viewed in Central America? How do the Central Americans view us with our policies and so on and so forth?
    And, you know, there is a certain irony there because, as I mentioned before, when I was first elected back in the mid-1980's I spent a lot of time in Central America, El Salavador, Nicaragua, Honduras, at a time when there was tremendous turmoil there, and then there with President Carter and the elections.
    I do not think that there is any question in anyone's mind, there is no country in the history of the world that probably spent more energy and time in trying to bring democracy and the self-determination to the people in Central America. Today, as we sit here, there is no country in the world—not even one on the radar scope—that contributes billions of dollars annually to the economies of those countries, if nothing more than in the form of remittances.
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    And for them to really in some ways, as Dr. Arnson said, you did not use the word, but kind of turn up their nose to U.S. policy as it relates to immigration. The question that I would have for Dr. Arnson is how do the Central Americans view the immigration policies of their closest neighbors, their good friends to the north, Mexico?
    Dr. ARNSON. Not being a Central American, I would hesitate to answer that question. Substantial numbers of refugees who fled Guatemala did reside in Mexico for significant portions of the war——
    Mr. GALLEGLY. If they could get across the border.
    Dr. ARNSON. If they could get across the border. But nonetheless there were a lot of camps in southern Mexico along the border that were administered by the United Nations and other agencies.
    For the most part, people when they flee go to a country that they see as a beacon of political liberty and a beacon of opportunity. And I think the United States has fit that bill to a much greater extent than Mexico.
    Mr. GALLEGLY. OK. Well, you were very articulate in skirting the—answering the question.
    Dr. ARNSON. I apologize.
    Mr. GALLEGLY. But I think that the issue that I had is that we talk a lot about our immigration policies, and we receive a tremendous amount of criticism from our friends to the south, Mexico, on our immigration policies. Yet if you take a look at the immigration policies of Mexico on their southern border, I think it is one that none of us would try to model our border patrol or immigration policies after. And I think that that is something that has been sorely missed in the debate on immigration, particularly as it relates—well, we have been talking about Central America today—but with Mexico and the United States, and I think it is worth mentioning.
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    In any event, I just have one final question for you, Dr. Shifter. In one part of your testimony you stated that one of the more welcome and refreshing signs in Central America is the degree to which the United States is no longer a central factor in regional politics. And then I think, and correct me if I am wrong, you went on to state that our policy toward the region may be bordering on neglect and off the radar screen.
    How active should we be?
    Dr. SHIFTER. Well, I think the short answer is less active than we were in the 1980's, and more active than we have been in the last couple of years. I think there has been a sense, again, that we tend to focus a great deal during times of crisis—and then we pull back when the crisis appears to be resolved.
    Mr. GALLEGLY. You are saying the pendulum is swinging a little bit too far?
    Dr. SHIFTER. A little bit too far the other way, in my view.
    I think it is positive that the United States was not an issue in the recent Nicaraguan elections. This is very healthy—a sign of progress. The United States should not be the issue in the political development.
    Mr. GALLEGLY. But is that not our objective, not to establish policy but to open the opportunity for self-determination and not U.S. determination?
    Dr. SHIFTER. Absolutely.
    Mr. GALLEGLY. Is that not our objective?
    Dr. SHIFTER. And I think we fulfilled that objective, but I also think there are other ways to be helpful and to engage productively with the region that perhaps——
    Mr. GALLEGLY. You mean oversight?
    Dr. SHIFTER. We should use this opportunity, particularly following the President's trip, to take advantage of those opportunities. We should directly address and follow through on several key issues. Again, these are fairly modest steps, not major, ambitious undertakings, but they are ways in which we can engage more productively, I think.
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    Mr. GALLEGLY. I thank both of you for being here this afternoon, and I look forward to a continued positive working relationship.
    Dr. ARNSON. Thank you.
    Mr. SNIFTER. Thank you.
    Mr. GALLEGLY. Thank you.
    The Subcommittee will be adjourned.
    [Whereupon, at 3:14 p.m., the Subcommittee was adjourned.]