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RR RUEHWEB

DE RUEHSN #0786/01 1151318
ZNR UUUUU ZZH
R 251318Z APR 07
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 6023
RUEHGT/AMEMBASSY GUATEMALA 4874
RUEHMU/AMEMBASSY MANAGUA 2192
RUEHSJ/AMEMBASSY SAN JOSE 3634
RUEHDG/AMEMBASSY SANTO DOMINGO 0682
RUEHTG/AMEMBASSY TEGUCIGALPA 0813

UNCLAS SAN SALVADOR 000786 
 
SIPDIS 
 
SIPDIS 
 
FOR OES/ENV RACHEL KASTENBERG AND BOB WING 
WHA/EPSC JUN BANDO 
USAID/LAC/RSD JOHN GARRISON 
USTR ENVIRONMENT AND NATURAL RESOURCES MARA M. BURR 
 
E.O. 12958: N/A 
TAGS: EAID SENV ETRD CAFTA ELAB ES
SUBJECT: REGIONAL PRIORITIES FOR ENVIRONMENT PROJECTS THAT SUPPORT 
CAFTA-DR IMPLEMENTATION 
 
REF: STATE 37718 
1) Summary: As requested in reftel, this cable contains Post 
priorities for CAFTA-DR regional environment activities for FY 2007. 
The proposals described here build upon priorities presented by 
Trade and Environment representatives the week of March 21 to 23 at 
the meeting convened by State/OES and State/WHA.  In addition to the 
country delegations, representatives from USAID/Guatemala, 
USAID/Dominican Republic, USAID/Honduras, UQID/El Salvador, US 
Embassy/Costa Rica, US Embassy/El Salvador and USAID/Washington. 
The proposals presented here build upon work already started using 
FY2006 CAFTA funding and identify areas where additional support 
will be needed from specific US government agencies, who will be 
presenting their proposals under separate cover for funding to 
complement these activities. 
For regional CAFTA-DR environmental activities, Post is presenting 
three proposals: 
- Institutional Strengthening for Effective Implementation and 
Enforcement of Environmental Laws and Multilateral Agreements:  $3.1 
Million. 
- Improved Private-Sector Environmental Performance and Access to 
Financing: $1.85 Million. 
 
- Improved Management of Regional Watersheds: $ 1.6 Million. 
 
End Summary. 
 
Introduction 
------------ 
 
2) Nearly 18 months ago, Post began a consultative process to 
identify key labor and environment trade capacity needs in the 
region for FY 2006 and beyond.  This process, consisting of 
consultations with Government colleagues, regional integration 
institutions, and the private sector, identified several priority 
needs.  These needs mirror the priorities in the CAFTA-DR 
Environment Cooperation Agreement (ECA) and are presented in order 
of priority as identified by the countries. 
 
3) With USG support, regional environmental integration and 
cooperation in Central America has been developing for more than 15 
years.  Regional integration is a means for a more rational use of 
natural resources and a better quality of life for Central 
Americans.  Through a formal agreement with the Secretariat for 
Central America Integration (SICA), USAID's regional mission in El 
Salvador (E-CAM) manages a regional portfolio of trade, labor and 
environment activities.  The Comision Centroamericana para Ambiente 
y Desarrollo (CCAD), an organization created under SICA, is mandated 
by the Central American governments to conduct regional 
environmental activities. 
 
4) E-CAM has established a core management team of high-level 
professionals within CCAD, who will coordinate and implement the 
assistance outlined in these proposals.  For FY 2006 funds, several 
Central American countries (Guatemala, Nicaragua and El Salvador) 
recognized the expertise within E-CAM and CCAD and requested that 
their bilateral activities be incorporated into the E-CAM portfolio. 
 They may continue to do so in the future. 
 
5) The proposals presented here represent a consensus view of the 
Central American governments of key regional projects necessary to 
help them meet the requirements of the CAFTA-DR environment 
provisions. 
 
¶I.  Institutional Strengthening for Effective Implementation and 
Enforcement of Environmental Laws and Multilateral Agreements 
--------------------------------------------- ------- 
 
6) PURPOSE: This activity will strengthen the ability of El 
Salvador, Costa Rica, Guatemala, Honduras, Nicaragua and the 
Dominican Republic to develop sound environmental regulations and 
policies and effectively enforce existing environmental legislation. 
 This also meets the number one priority identified by the parties 
in the ECA work plan and continued to be a stated priority at the 
March 2007 meeting with the CAFTA-DR focal points.  It is a 
recognized priority in the CAFTA-DR agreement (chapter and verse), 
and is clearly a priority of Congress. 
 
7) DESCRIPTION AND JUSTIFICATION: While the challenge of meeting the 
obligations of CAFTA-DR and other agreements falls primarily on the 
national governments of each country, a regional approach is 
essential to harmonize implementation across borders.  Current 
environmental laws throughout the region need to be harmonized to 
reduce trade barriers brought about by differing standards and 
 
systems.  Environmental law enforcement within the CAFTA-DR 
countries is weak because existing institutions have limited human 
and financial resources and many lack the necessary authority to 
enforce laws. Existing legal frameworks often lack the implementing 
regulations and procedures, hindering implementation.  USAID will 
work with EPA and relevant government ministries by using the CCAD 
regional environment platform.  This approach will build continuity 
through changes in governments, build on positive experiences in 
countries to date, and offer economies of scale managing similar 
initiatives by the same team of experts in an efficient and 
cost-effective manner. 
 
8) Compliance with Multilateral Environment Agreements (MEA's) is 
also low due to limited resources and lack of trained personnel. 
One of the major risks posed by the establishment of common borders 
under CAFTA-DR is the unregulated transport of endangered species 
and hazardous chemicals.  This activity will ensure that countries 
have the tools and systems to meet their obligations under CITES, 
UNFCC, and the Montreal Protocol.  The US Government has encouraged 
the region to speak as one vote in MEA matters.  Through CCAD, USAID 
will coordinate different donors and players working on these issues 
to ensure a more strategic response to problems at hand. 
 
9) The ultimate goal of the program is that CAFTA-DR countries will 
have the tools necessary to promote environmental compliance and 
enforce environmental legislation. 
 
10)  EXPECTED RESULTS: 
 
-  At least 50 government officials/trainers trained in each country 
on how to use relevant environmental management principles and 
tools, including the use of regulatory and administrative 
incentives. 
 
-  An internal assessment and plan on how to more efficiently use 
budgetary resources for environmental management is completed by 
each government. 
 
-  Six environmental regulations or administrative procedures are 
developed each year of the activity. 
 
-  A regional system for certifying environmental auditors, quality 
labs and service providers is developed. 
 
-  National environmental officials in the CAFTA-DR countries have 
the capacity to review Environmental Impact Assessments (EIAs), 
design and implement new policies and procedures, and to clearly 
define relationships between various levels of government for 
analysis, involvement and follow up in the EIA process. 
 
-  Increased access to sound environmental data for decision-makers 
through Regional Visualization and Monitoring System (SERVIR) 
expansion. 
 
-  Increased air quality monitoring stations in each country.  Air 
quality index approach for air quality forecasting applied 
regionally. 
 
-  Build national capacity to respond to citizen complaints. 
 
-  Intra-governmental mechanisms for effective enforcement of at 
least three key international environmental agreements are 
established and working. 
 
-  At least six customs experts will have developed the skills to 
provide training to fellow customs officers on MEA enforcement 
giving customs officials a better understanding of their role in 
enforcing environmental laws, including international agreements and 
domestic implementing legislation. 
 
-  CAFTA-DR countries will improve their performance in meeting 
CITES obligations through harmonized procedures and regulations. 
Police and customs officers will have basic awareness and knowledge 
of CITES.  Scientific and Management Authorities will have 
sufficient capacity to document population status to meet CITES 
obligations and update regional lists, leading to better regulation 
of endangered flora and fauna. 
 
-  Improved management of trans-boundary movement of hazardous 
chemicals. 
 
SPECIFIC ACTIVITIES: 
 
Technical assistance to governments to develop harmonized 
environmental regulations and implement procedures and policies that 
provide clear guidance to business and level the playing field for 
trade. 
 
11)  Eliminate law enforcement gaps.  ($350,000)  This activity will 
help Governments develop the needed regional framework environmental 
legislation to fill existing legal gaps.  Work will focus on 
priority sectors as defined by the CAFTA-DR Trade Ministries. 
USAID/E-CAM, working through CCAD and EPA, will develop enforcement 
procedures such as investigating and gathering of evidence, building 
a case, to determining how to prosecute, and presenting that case 
and evidence effectively to a judicial body.  Result: Six 
environmental regulations or administrative procedures are developed 
each year of the activity. 
 
Technical Assistance to Environmental Ministries and enforcement 
agencies to Qprove implementation of environmental laws. 
 
12)  Enforcement Training and Improved Procedures.  ($650,000)  This 
activity will institutionalize training programs to strengthen the 
capacity of authorities (judges, prosecutors, and inspectors) toQnsistently apply existing environmental protection procedures. 
USAID/E-CAM through CCAD, will strengthen the capacity of CAFTA-DR 
countries to identify and effectively prosecute environmental 
crimes.  While EPA and CCAD have worked to build local capacity for 
enforcement training, there is a need to institutionalize this 
training through different venues, such as universities or ministry 
training centers.  USAID/E-CAM will also work to promote clerkships 
with university environmental law programs, continue to develop and 
improve judicial training material and educate the press on the 
workings of the judicial system in environmental matters. 
 
13) Environmental Budgets.  ($240,000)  USAID/E-CAM will work with 
SICA, SIECA and CCAD, to help CAFTA-DR countries harmonize 
regulations and procedures that allow ministries and municipalities 
to use licensing, concession, and other use fees for management of 
natural resources and funding of environmental law enforcement.  We 
will also develop a regional strategy to create or use financial and 
economic incentives to contribute to environmental protection in 
productive sectors.  Results: At least 50 government 
officials/trainers trained in each country on how to use relevant 
environmental management principles and tools, including the use of 
regulatory and administrative incentives.  An internal assessment 
and plan on how to more efficiently use budgetary resources for 
environmental management is completed by each government. 
 
Technical Assistance to promote the adoption of environmental 
responsibility, audits, and EMS programs ($350,000) 
 
14)  Environmental Management Systems (EMS) was identified as a 
priority by all CAFTA-DR countries at the March 2007 meeting in El 
Salvador.  USAID/E-CAM, working with CCAD and EPA, will assist key 
environment quality labs to attain international accreditation on 
EMS, as well as the certification and registration of environmental 
auditors and other environmental service providers, ensuring they 
are held to common standards throughout the region.  CCAD, with 
technical assistance from EPA will train authorities in relevant 
environmental management principles and tools, including the use of 
regulatory and administrative incentives (such as public-private 
partnerships and flexible voluntary mechanisms).  Result: A regional 
system for certifying environmental auditors, quality labs and 
service providers is developed. 
 
Strengthening Environmental Impact Assessment Review (Permitting 
Decision-Making) ($240,000) 
 
15)  The strengthening of the Environment Impact Assessment process 
was identified as a priority by all CAFTA-DR countries at the March 
2007 meeting in El Salvador.  It is anticipated that EPA will 
receive funds to carry out this activity and that some of those 
funds will need to be funneled to CCAD through the grant agreement 
E-CAM has with that entity.  They will strengthen the EIA process in 
CAFTA-DR countries, particularly national review criteria, systems, 
procedures and monitoring process. Result:  National and local 
environmental officials in the CAFTA-DR countries  have the capacity 
to review EIA's, design and implement new policies and procedures, 
and to clearly define relationships between various levels of 
government for analysis, involvement and follow up in the EIA 
process. 
 
Environmental Monitoring for Informed Decision-Making ($350,000) 
 
16)  Access to sound environmental data is essential to support 
science-based decision-making, a key to ensuring objective rules, 
avoiding arbitrary decision-making, and enabling an informed public 
to participate meaningfully in democratic decision-making processes. 
 Additional resources are needed to further expand the geographic 
coverage of the Regional Visualization and Monitoring System 
(SERVIR) and Mesoamerican Environmental Information System (SIAM) 
and integrate into both systems more disparate environmental 
information and data working in partnership with EPA, NASA and 
GEOSS, universities and national governments.  It is anticipated 
that NASA will receive funds to carry out this activity and that 
some of those funds will need to be funneled to CCAD through the 
grant agreement E-CAM has with that entity.  Result:   Increased 
access to sound environmental data for decision-makers through 
SERVIR expansion. 
 
Air Quality Management:  Emissions Inventories ($150,000) 
 
17)  EPA will continue to work with CCAD and CAFTA-DR countries to 
implement the regional policy and national strategies for air 
quality management.  It is anticipated that EPA will receive funds 
to carry out this activity and that some of those funds will need to 
be funneled to CCAD through the grant agreement E-CAM has with that 
entity.  Results: Increased air quality monitoring stations in each 
country.  Air quality index approach for air quality forecasting 
applied regionally. 
 
Technical Assistance to comply with CAFTA-DR environmental 
requirements including support for Public Complaints Units and the 
Civil Society Outreach Unit to promote awareness of environmental 
provisions of CAFTA-DR and the ECA. ($400,000) 
 
18)  Strengthen Environmental Units.  Building on procedures 
established by the ECA for the regional Environmental Claims 
Secretariat, CCAD will assist national claims units to develop 
 
SIPDIS 
consistent procedures to resolve environmental claims.  Continue to 
support the implementation of the Environmental Chapter of the 
CAFTA-DR and the ECA and strengthen the national and regional 
offices involved in the application of CAFTA-DR, the Environmental 
Affairs Council and the ECA's Environmental Cooperation Commission. 
Result:  Build national capacity to respond to citizen complaints. 
 
19)  Regional Environmental Information.  CCAD will help strengthen 
mechanisms for public complaints and communications and increase 
public understanding of the CAFTA-DR and ECA environment provisions, 
specifically the procedures of the Environment Secretariat in SIECA. 
 Support will include expanding e-government applications and access 
to environmental information.    Result:  Build national capacity to 
respond to citizen complaints. 
 
20)  Strengthening and Coordination between Ministries and 
Institutions.  CCAD will continue to support the participation and 
coordination of high-ranked functionaries from the Environment and 
Economy/Commerce Ministries from CAFTA-DR on important trade and 
environment issues and in the compliance with the provisions of 
CAFTA-DR.  USAID also proposes to expand inter-ministerial 
communications through the creation of a new SICA working group with 
representatives from the Fisheries and Environment Ministries. 
Result:  Build national capacity to respond to citizen complaints. 
Expand country compliance with Multilateral Environmental Agreements 
(MEA's) including CITES 
21)  Regional Mechanisms for Effective Enforcement of MEAs. 
($135,000).  MEA implementation is hindered by missing procedures. 
A set of procedural road maps will be developed and tailored to meet 
each country's specific legislative conditions.  USAID will help 
strengthen the registration and procedures for the sound management 
and trans-boundary movement of pesticides, hazardous materials, 
substances and wastes, including procedures for Prior Informed 
Consent.  Regional norms will be developed in some specific 
instances (such as chemical importation and use), where they are 
lacking.  Informational materials will be prepared regarding waste, 
toxic chemicals, endangered species and biodiversity, and 
ozone-depleting substances.  Linkages at the national level between 
key enforcement stakeholders, customs officers, customs training 
institutes, national focal points for MEA's, judges, and prosecutors 
will be strengthened.  Result:  Intra-governmental mechanisms for 
effective enforcement of at least three key international 
environmental agreements are established and working. 
 
22)  CAFTA-DR countries will improve their performance in meeting 
CITES obligations through harmonized procedures and regulations. 
Result:  Scientific and Management Authorities will have sufficient 
capacity to document population status to meet CITES obligations and 
 
updated regional lists, allowing better regulation of endangered 
flora and fauna, will be available.  The initiative will also 
improve management of trans-boundary movement of hazardous 
chemicals. 
 
23)  Build capacity for effective MEA enforcement. ($235,000).  Law 
enforcement officers (customs, police, judges) lack the tools and 
knowledge to effectively enforce existing legislation related to 
MEA's.  An assessment will be conducted to determine which CITES 
species should be targeted for intervention, based on their 
importance to trade (this analysis has not been done yet).  There 
are also multiple players providing MEA capacity building.  CCAD 
will help coordinate regional capacity building through its various 
MEA working groups and regional forums to ensure that training is 
effective and not duplicative.  Result:   At least six customs 
experts will have developed the skills to provide training to fellow 
customs officers on MEA enforcement giving customs officials a 
better understanding of their role in enforcing environmental laws, 
including international agreements and domestic implementing 
legislation. 
 
24)  U.S. POLICY OBJECTIVES.  As signatories to CAFTA-DR, 
participating countries are required to improve and effectively 
enforce their existing environmental laws.  The ECA work plan 
identifies environmental law enforcement as a priority under section 
1.1 "Strengthening Environmental Law Compliance and Enforcement 
Systems: Support the strengthening of national systems for effective 
enforcement of Parties' environmental legislation, including 
administrative and judicial procedures."  It is a key USG policy 
goal that this commitment be met. 
 
25) Furthermore, as signatories to CAFTA-DR, participating countries 
are required to implement and improve compliance with multilateral 
agreements to which they are all party.  This project will address 
three activities identified in the ECA work plan as follows: 
 
26) Activity 1.3.1. Strengthen capacity for national implementation 
of CITES, RAMSAR, the Montreal Protocol and other relevant MEA's to 
which we are all Party, including by disseminating procedures for 
their implementation and undertaking public awareness campaigns. 
 
27)  Activity 1.3.2. Provide training and capacity building to 
Scientific and Management Authorities, Customs authorities and 
national police to enhance implementation of CITES. 
 
28)  Activity 1.3.3. Develop programs and projects to provide 
economic instruments to protect wildlife at the regional and 
national levels. 
 
29)  Activity 1.3.4. Strengthen the enforcement of restrictions on 
trade in ozone depleting substances under the Montreal Protocol and 
the development of innovative mechanism for encouraging cross 
boundary engagement in reducing the use of such substances. 
 
30)  This project fits under Economic Growth Objective, Environment 
Program Area.  It meets the requirements under the Natural Resources 
and Biodiversity and Clean Productive Environment Elements of the 
Joint State/USAID Framework.  [lb1] 
31)  NEW/PREVIOUS WORK.  USAID has built a strong foundation for 
policy work throughout the region, working in close collaboration 
with bilateral and regional organizations including CCAD, local and 
international NGO's, USG agencies (DOI, EPA, USDA, NOAA, DOC, NASA) 
and other organizations.  Thanks to USAID's early work with EPA and 
CCAD, a framework document to develop effective environmental laws 
and regulations was developed and served as the base for creating 
most of the Environment Ministries in the region.  Successes include 
the framework regulation for wastewater, a regional manual for 
environmental inspections, and the harmonized administrative 
procedures for sanctions for environmental crimes.   Using FY 2006 
funds CCAD has been working closely with EPA specialists to provide 
training on law enforcement in the Dominican Republic.  Regional 
coordination meetings with judicial authorities, customs officials, 
and other key entities have addressed how regional training will be 
provided to customs officials and border authorities on CITES, as 
well as how bi-national guidelines will be applied.  The countries 
have also met and begun to individually implement the regional 
policy for clean production developed last year and begun to develop 
model voluntary agreements in key sectors for the region.  These 
trade capacity building activities will enable the countries to take 
advantage of new trade and investment opportunities and businesses 
to become more competitive, without loosing sight of existing 
environmental legislation. 
32)  USAID has built a strong foundation for policy work throughout 
 
 
the region, working in close collaboration with the Central American 
Governments through CCAD.  USAID has worked with CCAD and EPA to 
promote knowledge of relevant MEA's and harmonization of regulations 
and procedures.  In collaboration with EPA and NASA, USAID is 
helping countries meet the United National Framework Convention on 
Climate Change (UNFCCC) requirements to produce a report on their 
greenhouse gas emissions through the development of tools and 
improvements in data quality.  Activities planned here complement 
the UNDP GEF activities on climate change, the World Bank efforts on 
payments for environmental services, and the Spanish Cooperation's 
biodiversity conservation work.   Through CCAD, USAID is cooperating 
with GTZ's air quality project, JICA's solid waste management 
activities and IUCN's Environmental Impact project.  The Danes just 
started a project to strengthen the capacity of SICA as a regional 
integration body. 
33)  The experience these actors have gained working in the region 
will allow us to quickly target assistance to fill legislative gaps 
and address enforcement priorities in each country. 
34)  ESTIMATED COST.   $3.1 Million.  This funding is requested for 
regional activities only.  Bilateral requests will come from 
bilateral missions and the U.S. Embassy in Costa Rica.  Matching 
funds will be provided from national governments through CCAD.  The 
amount includes 6% for program management. 
35) LOCAL BUY IN.  Local authorities identified "Strengthening each 
Party's environmental management systems, including strengthening 
institutional and legal frameworks" as the first priority in the 
Cooperative Work Program.  The Cooperative Work Program was 
formulated through interagency coordination among the Ministries of 
Environment and Trade of each of the countries in the region and 
based upon joint and consensual decisions.  On the ground activities 
will be developed regionally or nationally, depending on local 
capacity. 
 
36)  PUBLIC DIPLOMACY.  This project would provide a venue to 
increase the visibility of USG efforts to conserve/maintain the 
environment in Central America and the Dominican Republic. 
 
II. Improved Private-Sector Environmental Performance and Access to 
Financing 
--------------------------------------------- ----- 
 
37)  PURPOSE:  This activity will improve the private sector's 
environmental performance and competitiveness by providing flexible 
incentives for them to adopt clean production technologies in their 
production processes.  USAID will spearhead public-private 
partnerships that leverage private sector resources to achieve 
voluntary compliance with national environmental laws. 
 
38)  DESCRIPTION AND JUSTIFICATION: Contamination from industry 
poses a serious risk to the region's ability to comply with 
CAFTA-DR.  The private sector plays an influential role in 
determining whether governments develop and implement legislation 
that addresses environmental hazards.  The implementation of 
voluntary mechanisms to enhance environmental performance will bring 
together the private sector and Government as partners to reduce 
contamination.   This program will create public private 
partnerships that will encourage voluntary compliance with 
environmental legislation.  It will enlist the private sector in 
making investments that both improve environmental performance yet 
also have a direct impact on firm competitiveness by reducing costs. 
 
 
39)  EXPECTED RESULTS: 
 
- Net reduction in energy consumption and expenditures. 
 
- Net reduction in waste water generation from production processes 
and improved solid waste management through the more efficient use 
of inputs. 
 
- Public employees and private sector businesses more knowledgeable 
about best practices that will improve environmental performance. 
 
- Net savings in firm production costs due to more efficient 
processes. 
 
Specific Activities: 
-------------------- 
 
Improved Private-Sector Environmental Performance 
40) Develop public-private partnerships. ($600,000) Regional 
public-private partnerships and alliances are being promoted at the 
national level with private sector companies and NGOs to facilitate 
 
the transfer and adoption of cleaner production technologies.  USAID 
will also work with governments to promote voluntary and flexible 
mechanisms to encourage public/private partnerships to improve 
environmental protection, promote pollution prevention, and help 
green supply chains.  USAID will also support the development of 
market incentives and economic incentives for environmental 
management. 
41) Promote clean production best practices and cooperation. 
($550,000)  USAID will promote clean production schemes in 
productive processes, applying best practices to improve efficiency 
in the use of raw materials and inputs.  USAID will promote 
incentives by creating a program to recognize private sector success 
and performance through national environmental innovation awards, in 
cooperation with other donors.  These clean production and energy 
efficiency activities are part of a broader strategy through 2010. 
Additional FY07 funds are needed to continue working regionally to 
promote a more uniform approach to implementing cleaner production 
policies and practices and avoid duplicity of efforts at the 
national level.  Funding will be directed towards regional cleaner 
production training in priority economic sectors.  Funding will also 
help expand the regional Environmental Innovation Prize for Clean 
Production and improve its visibility. 
42) Regional Clean Production Information Center. ($250,000) 
Funding is needed to help get the Regional Cleaner Production 
Information Center fully staffed and operational.  The Center will 
not only provide information but it will also help to strengthen 
national cleaner production centers and promote greater coordination 
across countries and donors.  The Center will also help facilitate 
cooperation with between Central American, U.S. and other Latin 
American cleaner production centers. 
43) Clean Production Exchanges.  ($150,000) Funding will also be 
used to help send representatives from CAFTA-DR countries to this 
year's Bi-Annual Environmental Performance Track regional meeting in 
the U.S. which brings together officials from EPA's regional 
offices, as well as state and local governments to discuss 
environmental compliance and cleaner production issues.  Such a 
visit by officials from El Salvador in 2005 was instrumental in 
helping the country launch its cleaner production program and 
initiate partnerships with the private sector.  Funds would also be 
used to help facilitate follow-on visits to the region and 
cooperation from US cleaner production centers and State and 
municipal cleaner production and compliance assistance programs. 
44)  Mobilizing financing for cleaner production and clean energy 
development. ($300,000) One of the biggest limitations businesses 
face is the lack of capital available in the region to make clean 
production improvements.  The clean production Development Credit 
Authority establishes a non-traditional line of credit for private 
sector companies in the region interested in making clean production 
improvements.  The Development Credit Authority reduces the risk 
banks face by providing partial loan guarantees.  USAID is seeking 
funding for CCAD to continue to promote the DCA and other clean 
production and energy efficiency finance mechanisms throughout the 
region. 
45) U.S. POLICY OBJECTIVES.  The Governments in the region recognize 
that incentives and other flexible and voluntary mechanisms can 
contribute to the achievement and maintenance of environmental 
protection.  The Cooperative Work Program stresses under Article 
1.1.8 the need to strengthen the private sector's ability to comply 
with environmental legislation.  U.S. policy interests are best 
served by a cooperative effort between the private sector and 
government. 
46) NEW/PREVIOUS WORK.  USAID has already established a regional 
clean production Development Credit Authority (scheduled to end in 
2010) and funds a clean production expert at CCAD who works with the 
Clean Production Centers in each country (many of them funded by 
USAID bilateral programs) to encourage private sector businesses to 
make clean production improvements.  The clean production 
Development Credit Authority provides a partial loan guarantee to 
banks to encourage loans in clean production. USAID El Salvador 
recently started a clean production activity with the World 
Environment Center, to promote private sector-led clean production 
in El Salvador.  This activity will complement efforts by providing 
funding to disseminate best practices and develop public private 
partnerships so that government authorities, clean production 
centers, banks and the private sector work in harmony to promote 
voluntary compliance with existing environmental laws.  Model 
voluntary agreements between the private sector and the government 
will be developed for use throughout the region.  The Regional Clean 
Production Center network is being strengthened and the Regional 
Clean Production node in Nicaragua will provide information 
regarding new clean production technologies. 
47) ESTIMATED COST.  $1,850,000 in DA or ESF for 2007.  Amount 
includes 6% management costs. 
 
48) LOCAL BUY-IN.  Chapter 17 of CAFTA-DR (Article 17.4) establishes 
the need for flexible voluntary mechanisms to improve environmental 
performance and environmental cooperation to facilitate the 
development and transfer of appropriate technologies.  Demand for 
clean production technologies is increasing throughout the region as 
increased energy costs make businesses less competitive in global 
markets.  We expect to leverage at least $1 million from the private 
sector through a public private partnership. 
49) PUBLIC DIPLOMACY.  This activity provides public visibility 
through the Environmental Innovation Prize for Clean Production.  As 
Environment Ministries have enthusiastically embraced clean 
production as a way of addressing the twin goals of reduced 
pollution and increased competitiveness, USG public diplomacy 
efforts can highlight these "win-win" solutions. 
 
 
III.  Creating Incentives for Improved Management of Critical 
Biodiversity-rich Watersheds 
--------------------------------------------- 
 
50) PURPOSE: This activity will enhance market incentives for 
improved natural resource management in El Salvador, Costa Rica, 
Guatemala, Honduras, and Nicaragua and build the basis for 
sustainable financing in three watersheds of high biodiversity 
importance. 
 
51) DESCRIPTION AND JUSTIFICATION:  Central America has exceptional 
biodiversity that needs to be conserved for both its current 
economic value and potential future value.  The future growth of the 
region depends on the health of its natural resource base.  For 
example, sustainable flows of income from tourism and the 
availability of clean water supplies are both directly related to 
environmental health.    However, there are insufficient financial 
resources to fully fund and implement protected area and watershed 
management plans.  Governments rarely allocate adequate funds for 
the environment during the budget process and current policies 
rarely allow for significant generation and retention of fees for 
management at the local level.  There are few incentives for local 
producers to manage their natural resource base themselves. 
Recognizing the potential of tourism and non-traditional 
agricultural and forestry products, this activity will help build 
market-based incentives for improved natural resource management. 
 
52) Expected Results: 
 
- Improve visitor infrastructure at 10 target sites. 
 
- Reduce environmental infractions by the tourism sector. 
 
- Reduce resource degradation by six communities within and near 
protected areas. 
 
- Increased trade of sustainably produced environmental goods and 
services. 
 
- Increase the level of sustainable financing available for resource 
management. 
 
- Increase the level of sustainable financing made available for 
resource management through "payment for environmental services." 
 
SPECIFIC ACTIVITIES: 
 
53)  Improvement of tourism infrastructure.  Visitor infrastructure, 
such as trails, observation towers, and information centers, will be 
improved at priority sites identified by Tourism and Environment 
Ministries.  Guides, and other service providers, such as hotel 
staff, and transportation providers, will be trained in best 
practices. 
 
54) Increased options for sustainable income generation.  Many rural 
residents have few income generation options, a pattern that 
encourages adoption of environmentally destructive agricultural 
practices.  USAID will build on its experience in identifying and 
promoting alternative livelihoods for communities near protected 
areas.  Community members will be provided specialized technical 
assistance and vocational training. Where possible, assistance will 
be provided in establishing market access for natural products from 
communities living near protected areas. 
 
55) Helping governments remove barriers that keep funds from 
reaching protected areas.  The activity will address policy 
constraints that prevent funds from getting to where they are needed 
 
for improved management.  It will also address capacity limitations 
that prevent local residents from identifying, producing and trading 
in environmental goods and services. 
 
56) "Payment for Environmental Services" as a concept for improved 
management will be promoted with selected local and national 
governments, building on the existing experience at sites in Costa 
Rica, Honduras, Nicaragua and Guatemala.  Payments for Environmental 
Services will be implemented at selected target sites. 
Environmental payment service systems will be reviewed by experts, 
and their findings will be discussed at public meetings.  Findings 
of evaluations will be provided to NGOs, the general public, as well 
as national and local government. 
 
57) U.S. POLICY OBJECTIVES: This activity directly addresses 
priorities established by the signatories of CAFTA-DR in the ECA 
work plan that highlights the need for sustainable financing for 
natural resource management.  Specifically, it addresses ECA work 
plan activities that include: 
 
58) Activity 3.2.1. Improve visitor infrastructure and services to 
increase tourism while better protecting the resources. 
 
59) Activity 3.2.2. Promote alternative livelihoods based on 
sustainable resource use for communities within and near protected 
areas. 
 
60) Activity 3.3.1. Promote activities directed towards 
strengthening the capacity of the Region to identify, produce and 
trade in environmental goods and services. 
 
61) Activity 3.3.2. Promote and implement market schemes for 
environmental services. 
 
62) Activity 3.3.3. Validate and promote at a regional level the use 
of evaluation methodologies for environmental payment services 
systems. 
 
63) This project fits under Economic Growth Objective, Environment 
Program Area.  It meets the requirements under the Natural Resources 
and Biodiversity Element of the Joint State/USAID Framework. 
 
64) NEW/PREVIOUS WORK:  USAID has experience working on tourism, 
payments for environmental services, and certification of 
environmental goods in the region.  USAID has worked in close 
collaboration with the Central American governments through CCAD. 
Some examples include the development of a tri-national ecotourism 
route in the Gulf of Honduras and the development of public use 
plans for protected areas.  In the agriculture sector, USAID support 
for sustainably produced gourmet coffee led to the sale of 6.6 
million pounds of certified organic coffee and over 237,000 tons of 
certified environmentally friendly bananas.  In addition, over 
60,000 cubic meters of certified timber products were sold.  In this 
activity, USAID will build upon this foundation and work on these 
issues through local organizations.  Activities complement the World 
Bank efforts on payments for environmental services and the 
Interamerican Development Bank work on tourism. 
 
65) ESTIMATED COST: USAID received $600,000 in FY06 funds, which 
will be issued as grants to local organizations this year.  USAID 
requests an additional $1,600,000 for FY07. 
 
66) LOCAL BUY-IN:   During the March 07 meeting, countries endorsed 
continuing work in trans-boundary watersheds.  In addition to work 
in the Gulf of Honduras and La Amistad/Cahuita, the countries 
requested additional support to work in the San Juan Watershed 
(between Guatemala and El Salvador) and Trifinio (Guatemala, El 
Salvador, and Honduras).  USAID recommends DOI consider this request 
when drafting their proposal. 
 
67) PUBLIC DIPLOMACY STRATEGY: The activities described here 
represent some of the most visible and valued USG investments in the 
region.  By directly working with communities around protected 
areas, USAID can positively influence the livelihoods of thousands 
of individuals and demonstrate that free-trade agreements, 
environmental progress and income growth for the poor are not 
incompatible.  In the past, the public diplomacy opportunities of 
such programs have proven to be enormous. 
 
Comment: 
-------- 
68)  REGIONAL PROGRAM EXPENDITURES:  Through March 30, 2007 CCAD had 
accrued $1 million in total expenditures.  ($550,000 in Regional 
 
funds, $100,000 in Nicaragua funds and $100,000 in El Salvador funds 
and $200,000 in Guatemala bilateral funds).  During the first three 
months of this year, CCAD doubled expenditures each month.  This 
trend is expected to continue over the next six months as 
implementation is ramped up in response to the approval of the 
workplans in November 2006. 
 
69)  NASA received FY2006 funds on March 30, 2007 to begin 
implementing its work plan and EPA is in the process of negotiating 
a new agreement.  EPA has indicated that it does intend to begin 
expending FY2006 funds until August/September 2007.  EPA and NASA 
are soliciting funds for FY2007 under separate requests.  The 
Regional Watershed mechanism is in the last phases of contract 
negotiation and should begin implementation in June 2007. 
 
70)  Post thanks those involved in the inter agency process for the 
opportunity to provide input into the environment and labor 
agreements.  Regional buy-in to the process is of vital importance, 
and we believe the programs outlined will provide the maximum 
benefit and compliance with the CAFTA-DR agreement.  We understand 
that the interagency group is working to obligate the funding for FY 
2007 as equitably and as rapidly as possible.  Post hopes that 
future project requests will provide as much time as possible to 
work with the CAFTA-DR governments, business and NGO communities to 
develop these project ideas. We also wish to ensure that projects 
have the ability to access follow-on funding in future years to make 
sure that commitments negotiated within CAFTA-DR are complied with. 
Overall compliance with the letter and the spirit of the FTA are our 
goals, and some projects will require a several year commitment to 
see them through to their conclusion.  We hope to have the backing 
of the interagency group to make these programs a success.  End 
Comment. 
 
Glazer 
 
[lb1]Where do we show the sub-elements?