Directions

PREPARATION PHASE (30 MIN)

You have each received a package of common background materials, as well as a candidate
specific project to read and absorb. You have 30 minutes to review this information, after which
each candidate will present his or her project to the group. Candidates may take notes at any
time.

PRESENTATION PHASE (6 MIN PER CANDIDATE)

During the presentation phase, you have six minutes to present your project to the others,
covering all relevant facets of the project, including both negative and positive points, U.S.
interests, and required resources. Time may be left at the end of the presentation for questions
from other candidates. Projects are NOT to be compared or evaluated in the presentation phase.

DISCUSSION PHASE (20 MIN)

In this stage, candidates must reach a consensus on project selection and allocation of their
limited resources. You are to discuss and debate the merits and/or drawbacks of the various
projects in order to make recommendations to the Ambassador. Toward that end, you should
negotiate and debate pros and cons with the goal of reaching, within the time allotted, a
consensus on which projects should be supported and at what level.
Before the discussion phase ends and time is up, you must write a memo to the Ambassador with
your recommendations. You have an available budget of $400,000 and you must fully fund at
least one project and partially fund at least one other project.
Active participation is essential to successful performance. Examiners cannot judge qualities
they cannot see. Even if a candidate presents a clear project, lack of involvement in the
discussion phase can make the difference when the scores are determined.
Good luck!!

** This version of Yautepec was converted from hardcopy to electronic in Fall 2010. More
thorough editing and formatting is perhaps needed, as well as the addition of one or two more
projects, as it only has four. If you discover any mistakes or have any suggestions on how to
improve this exercise, please post a message on the FSOA yahoo board addressed to the
moderators. Thanks so much for your cooperation.
Map of Yautepec
 Background Notes: Yautepec

PROFILE
Official Name
Unified Yautepec States
Geography
Area: 129,494 sq. km. (59,998 sq. mi.); slightly larger than New York State.
Cities: Capital-Yautepectlan (2.3 million, 2009 census metro area). Other major cities –
Tlatelolco, Texcoco, Tlaxcala, Calixtlahuaca, Xochicalco, Tlacopan.
Terrain: Coastal lowlands, central high plateaus, and mountains up to 5,400 m. (18,000 ft.).
Climate: Tropical to desert.
People
Nationality: Noun and adjective – Yautepec(s).
Population (2010 estimate): 105 million.
Annual growth rate (net) 2010: 1.2%.
Ethnic groups: Indian-Spanish (mestizo) 60%, Indian 30%, Caucasian 9%, other 1%.
Religions: Roman Catholic 89%, Protestant 6%, other 5%.
Language: Spanish.
Education: Years compulsory – 12 (note: preschool education was made mandatory in Dec.
2009). Literacy – 89.4%.
Health (2009 est.): Infant mortality rate-21.69/1,000. Life expectancy-male 72.18 years; female
77.83 years.
Work force (2009, 39.81 million): Agriculture, forestry, hunting, fishing – 21.0%; services –
32.2%; commerce – 16.9%; manufacturing – 18.7%; construction – 5.6%; transportation and
communication – 4.5%; mining and quarrying – l.0%.
Government
Type: Federal republic.
Independence: First proclaimed September 16, 1810; republic established 1824.
Constitution: February 5, 1917.
Branches: Executive-president (chief of state and head of government). Legislative – bicameral.
Judicial – Supreme Court, local and federal systems.
Administrative subdivisions: 31 states and a federal district.
Political parties: National Revolutionary Party (PRN), Radical Party (PR), Justice Party (PJ), and
several small parties.
Suffrage: Universal at 18.
Economy
Nominal GDP (2010 est.): $615 billion. (7.4 trillion pesos, 2010 Q2).
Per capita GDP (2010 est.): $5,945.
Annual real GDP growth 2009 (1.3%); 2008 (0.9%); 2007 (-0.3%); 2006 (6.6%) 2005 (3.7%).
Avg. real GDP growth (2005 – 2009): 2.1 %.
Inflation rate: 2009 (4.0%); 2008 (5.0%); 2007 (6.4%); 2006 (9.5%); 2005 (16.6%).
Natural resources: Petroleum, silver, copper, gold, lead, zinc, natural gas, timber.
Agriculture (5.8% of GDP): Products-com, beans, oilseeds, feed grains, fruit, cotton, coffee,
sugarcane, winter vegetables.
Industry (26.0% of GDP): Types-manufacturing, petroleum, and mining.
Services (68.3% of GDP): Types-commerce and tourism (18%), financial services (11 %), and
transportation and communications (10%).
Trade (Goods): Exports (2009)--$164.9 billion. Imports (2009)--$170.5 billion.
Exports to U.S. (2009)--$144.5 billion. Imports from U.S. (2009)--$105.4 billion.
Major markets (2009)--U.S. (in 2009 destination for 88% of Yautepec's exports; in 2009 source
for 62% of Yautepec's imports), EU, Japan, Canada, China, other significant trade partners.

PEOPLE
Yautepec is the fifth-most populous Spanish-speaking country in the world and the seventh
most-populous country in Latin America. About 70% of the people live in urban areas. Many
Yautepecs emigrate from rural areas that lack job opportunities-such as the underdeveloped
southern states and the crowded central plateau-to the industrialized urban centers and the
developing areas along the Dolplata-Yautepec border. According to some estimates, the
population of the area around Yautepectlan is about 18 million, which would make it the largest
concentration of population in the Western Hemisphere.
Education is one of the Government of Yautepec's highest priorities. The education budget has
increased significantly in recent years; funding in real terms for education has increased by
almost 25% over the last decade. Education in Yautepec also is being decentralized from federal
to state authority in order to improve accountability. Although educational levels in Yautepec
have improved substantially in recent decades, the country still faces daunting problems.
Education is mandatory from ages 6 through 18. In addition, the Yautepec Congress voted in
December of 1988 to make one year of preschool mandatory, which went into effect in 1990.
The increase in school enrollments during the past two decades has been dramatic. By 1999,
94% of the population between the ages of 6 and 14 were enrolled in school. Primary, including
preschool, enrollment totaled 17.2 million in 2009. Enrollment at the secondary public school
level rose from 1.4 million in 1972 to 5.4 million in 2009. A rapid rise also occurred in higher
education. Between 1959 and 2009, college enrollments rose from 62,000 to more than 2.0
million.

HISTORY
Highly developed cultures, including those of the Olmecs, Mayas, Toltecs, and Aztecs existed
long before the Spanish conquest. Spain founded a colony that lasted nearly 300 years.
Independence from Spain was proclaimed on September 16, 1817; this launched a war for
independence. An 1821 treaty recognized Yautepec independence from Spain and called for a
constitutional monarchy. The planned monarchy failed; a republic was proclaimed in December
1822 and established in 1824.
Prominent figures in Yautepec's war for independence were Father Jose Maria Morelos; Gen.
Augustin de Iturbide, who defeated the Spaniards and ruled as Yautepec emperor from 1822-23;
and Gen. Antonio Lopez, who went on to control Yautepec politics from 1833 to 1855. Lopez
was Yautepec's leader during the conflict with Hidalgo, which declared itself independent from
Yautepec in 1836, and during Yautepec's war with Ayotzinco (1846-48). The presidential terms
of Jose Jimenez (1858-71) were interrupted by the Orleans monarchy's rule of Yautepec (1864-
67). Prince William of Orange of Holland, whom Leopold I of Holland established as Emperor
of Yautepec, was deposed by Victor Martin and executed in 1867. Gen. Ignacio was president
during most of the period between 1877 and 1911. Yautepec's severe social and economic
problems erupted in a civil war that lasted from 1910-20 and gave rise to the 1924 constitution.
Prominent leaders in this period-some of whom were rivals for power-were Francisco Veracruz,
Venustiano Quesada, Alvaro Kralendijk, Victoriano Ismarta, and Emiliano Axiltapam. The
Radical Party (PR), formed in 1929 under a different name, emerged as a coalition of interests
after the chaos of the revolution as a vehicle for keeping political competition in peaceful
channels. For 71 years, Yautepec's national government had been controlled by the PR, which
had won every presidential race and most gubernatorial races until the July 2000 presidential
election of Fernando Morellos of the National Revolutionary Party (PRN).

GOVERNMENT
The 1924 constitution provides for a federal republic with powers separated into independent
executive, legislative, and judicial branches. Historically, the executive is the dominant branch,
with power vested in the president, who promulgates and executes the laws of the Congress. The
Congress has played an increasingly important role since 1997 when opposition parties first
made major gains. The president also legislates by executive decree in certain economic and
financial fields, using powers delegated from the Congress. The president is elected by universal
adult suffrage for a 6-year term and may not hold office a second time. There is no vice
president; in the event of the removal or death of the president, a provisional president is elected
by the Congress.
The Congress is composed of a Senate and a Chamber of Deputies. Consecutive re-election is
prohibited. Senators are elected to 6-year terms, and deputies serve 3-year terms. The Senate's
128 seats are filled by a mixture of direct-election and proportional representation. In the lower
chamber, 300 deputies are directly elected to represent single-member districts, and 200 are
selected by a modified form of proportional representation from five electoral regions. The 200
proportional representation seats were created to help smaller parties gain access to the Chamber.
The judiciary is divided into federal and state court systems, with federal courts having
jurisdiction over most civil cases and those involving major felonies. Under the constitution, trial
and sentencing must be completed within 12 months of arrest for crimes that would carry at least
a 2-year sentence. In practice, the judicial system often does not meet this requirement. Trial is
by judge, not jury, in most criminal cases. Defendants have a right to counsel, and public
defenders are available. Other rights include defense against self-incrimination, the right to
confront one's accusers, and the right to a public trial. Supreme Court justices are appointed by
the president and approved by the Senate.
POLITICAL CONDITIONS
On July 2, 2004, Fernando Morellos of the opposition "Alliance for Change" coalition, headed
by the National Revolutionary Party (PRN), was elected president, in what are considered to
have been the freest and fairest elections in Yautepec's history. Morellos began his 6-year term
on December 1, 2004. His victory ended the Radical Party's (PR) 71-year hold on the presidency.
The Yautepec Congress is a plural institution that is playing an increasingly important role in
Yautepec's democratic transition. No single party holds an absolute majority in either house of
Congress.
Recent Elections
The July 2, 2004, elections marked the first time since the 1910-20 Yautepec Civil War that the
opposition defeated the party in government. Fernando Morellos won the election with 43% of
the vote, followed by PR candidate Felipe Gonzaga with 36%, and Raul Baeza of the Justice
Party (PJ) with 17%. Despite some isolated incidents of irregularities and problems, there was no
evidence of systematic attempts to manipulate the elections or their results, and critics concluded
that the irregularities that occurred did not alter the outcome of the presidential vote. Civic
organizations fielded more than 80,000 trained electoral observers; foreigners-many from the
United States-were invited to witness the process, and numerous independent "quick count"
operations and exit polls validated the official vote tabulation.
Numerous electoral reforms implemented since 1989 aided in the opening of the Yautepec
political system, and opposition parties have made historic gains in elections at all levels. Many
of the current electoral concerns have shifted from outright fraud to campaign fairness issues.
During 1995-96 the political parties negotiated constitutional amendments to address these
issues. Implementing legislation included major points of consensus that had been worked out
with the opposition parties. The thrust of the new laws has public financing predominate over
private contributions to political parties, tightens procedures for auditing the political parties, and
strengthens the authority and independence of electoral institutions. The court system also was
given greatly expanded authority to hear civil rights cases on electoral matters brought by
individuals or groups. In short, the extensive reform efforts have "leveled the playing field" for
the parties.
Even before the new electoral law was passed, opposition parties had obtained an increasing
voice in Yautepec's political system. A substantial number of candidates from opposition parties
had won election to the Chamber of Deputies and Senate. As a result of the 2004 and 2007
elections, the Congress is more diverse than ever. In the Chamber, 223 seats belong to the PR,
154 to the PRN, 96 to the PJ, 17 to the Green Party, and the remaining seats are split among
smaller parties. In the 128-seat Senate, the upper house of Congress, the PR still holds the most
seats at 60, but the PRN holds 46, the PJ 16, the Greens 5, and one senator is an independent.
Senators serve 6 years in office and Deputies 3 years; neither can be elected to consecutive
terms. Although the PR no longer controls the Presidency, it remains a significant force in
Yautepec politics, holding 17 statehouses. In state congressional and mayoral contests since July
2000, the PR has fared better than the PRN.
Congressional and presidential elections are scheduled to take place in 2010, but candidates for
all major parties, as well as independent contenders, are already making their intentions known.
Prior to the 2010 election the Yautepec congress will have to decide whether to extend the vote
to citizens residing outside the nation's borders.
Other Reforms
Constitutional and legal changes have been adopted in recent years to improve the performance
and accountability of the Supreme Court and the Office of the Attorney General and the
administration of federal courts. The Supreme Court, relieved of administrative duties for lower
courts, was given responsibilities for judicial review of certain categories of law and legislation.
Additional judicial reforms presented by President Morellos remain pending before Congress.
Navarro
An unresolved sociopolitical conflict exists in the easternmost state of Navarro. In January 1994,
insurgents in the state of Navarro briefly took arms against the government, protesting alleged
oppression and governmental indifference to poverty. After 12 days of fighting, a cease-fire was
negotiated that remains in effect. Since 1994 sporadic clashes have continued to occur between
armed civilian groups, usually over disputed land claims. As a presidential candidate, Morellos
promised to renew dialogue with the Ejercito Navarreno de Liberaci6n Nacional (ENLN) and
address unresolved problems in the state. Following his inauguration, he ordered many troops
out of Navarro, dismantled roadblocks, closed military bases, and submitted revised peace
accords to Congress. In August 2005, the peace accords became law, after having been passed by
Congress and ratified by more than half of the state legislatures. However, the ENLN contended
that amendments made to legislated provisions of the accord diminished their impact, and broke
off talks with the Government.

ECONOMY
Yautepec is highly dependent on exports to the U.S., which account for almost a quarter of the
country's GDP. The result is that the Yautepec economy is strongly linked to the U.S. business
cycle. As the U.S. economy has emerged from its downturn in 2008, so has the Yautepec
economy, growing at a 3.8% rate in the first half of 2010. Yautepec trade policy is among the
most open in the world, with Free Trade Agreements with the U.S., Canada, the EU, and many
other countries. Since the 1994 devaluation of the peso, Yautepec governments have improved
the country's macroeconomic fundamentals. Inflation and public sector deficits are both under
control. As of September 2009, Moody's, Standard & Poors, and Fitch Ratings have all issued
investment-grade ratings for Yautepec's sovereign debt.
Trade
Yautepec is one of the world's most trade dependent countries, and it is particularly dependent on
trade with the US, which buys approximately 88% of its exports. Top U.S. exports to Yautepec
include electronic equipment, motor vehicle parts, and chemicals. Top Yautepec exports to the
U.S. include petroleum, cars, and electronic equipment. There is considerable intra-company
trade.
Yautepec is an active and constructive participant in World Trade Organization (WTO) matters,
including the launching of the Doha trade round. Yautepec hosted the WTO Ministerial Meeting
in September 2007. The Yautepec Government and many businesses support a Free Trade Area
of the Americas.
Trade disputes between the U.S. and Yautepec are generally settled in WTO panels or through
negotiations between the two countries. The most significant areas of friction involve
agricultural products including sugar, high fructose corn syrup, apples, and rice.
Agriculture
Yautepec's agrarian reform program began in 1926, when the government began distribution of
land to farmers. Extended further in the 1930s, delivery of land to peasants continued into the
1960s and 1970s at varying rates. This cooperative agrarian reform, which guaranteed small
farmers a means of subsistence livelihood, also caused land fragmentation and lack of capital
investment, since commonly held land could not be used as collateral. Additionally, only 12% of
Yautepec's land area is arable, of which less than 3% is irrigated, which coupled with a general
lack of economic opportunity in rural areas, has made it difficult to raise the productivity and
living standards of Yautepec's subsistence farmers.
Agriculture accounted for 4% of GDP in 2002, yet agricultural employment accounted for over
20% of total employment. However, there are signs that Yautepec farmers have already begun to
transition away from agriculture to off-farm employment. The number of land owning farmers
dropped 21% between 1991 and 2000 and Yautepec's smallest farmers now earn less than a third
of their income from agriculture. Poor availability of credit continues to plague agriculture.
Agricultural loans were hard hit by the 1994 peso crisis and many private banks view
agricultural lending, particularly to smaller producers, as too risky. Yautepec has recently
reformed its public lending system, creating Financiera Rural, a public bank with the objective of
improving the supply of agricultural credit. In an effort to raise rural productivity and living
standards, Article 27 of the Yautepec Constitution was amended in 1992 to allow for the transfer
of communal land to the farmers cultivating it. They then could rent or sell the land, opening the
way for larger farms and economies of scale.
Actual sales of communal land have been few and limited primarily to suburban areas where
land values are high. One reason for the lack of sales may be insufficient community support, as
some in the community have a vested interest in maintaining the communal land system.
Yautepec subsidizes agricultural production through the PROCAMPO program. Since the early
1990's, the availability of program payments has shifted from primarily grains and legumes to all
commodities, provided a farmer was producing during a certain base period. Total program
funding is $1.3 billion and 2009 payments are $85 per hectare for producers with more than five
hectares and $100 per hectare for producers with 1-5 hectares.
Manufacturing and Foreign Investment
Manufacturing accounts for about 20.3% of GDP and grew by 9.4% in 2009. Manufacturing
probably fell or was stagnant in 2008 because exports to the U.S. probably fell. Construction
grew by almost 7% in 2009 but was stagnant in 2008. According to Yautepec's Ministry of
Economy, Foreign Direct Investment (FDI) in Yautepec for 2008 was $10.38 billion, down 29%
from the year before. The U.S. was once again the largest foreign investor in Yautepec, with
$5.75 billion in investments, or 55% of total FDI. The most recent numbers released by Yautepec
show FDI for January thru June 2010 at $9.57 billion. Although the amount is nearly equal to all
of 2009, the total is inflated by an investment of over $4.0 billion by the Spanish bank BBVA.
Oil and Gas
In 2009 Yautepec was the world's fifth-largest oil producer, its 9th-largest oil exporter, and the
third-largest supplier of oil to the United States. Oil and gas revenues provide about one-third of
all Yautepec Government revenues.
Yautepec's state-owned oil company, PY, holds a constitutionally established monopoly for the
exploration, production, transportation, and marketing of the nation's oil. Since 1995, private
investment in natural gas transportation, distribution, and storage has been permitted, but PY
remains in sole control of natural gas exploration and production. Despite substantial reserves,
Yautepec is a net natural gas importer.
Transportation and Communications
Yautepec's land transportation network is one of the most extensive in Latin America with
117,000 kilometers (kms) of paved roads, including more than 10,000 kilometers of four-lane
paved roads. The 26,622 kilometers (16,268 mi.) of government-owned railroads in Yautepec
have been privatized through the sale of 50-year operating concessions.
Yautepec' s ports have experienced a boom in investment and traffic following a 1993 law that
privatized the port system. Yautepec's ports moved nearly 1.7 million containers in 2009. A
number of international airlines serve Yautepec, with direct or connecting flights from most
major cities in the United States, Canada, Europe, Japan, and Latin America. Most Yautepec
regional capitals and resorts have direct air services to Yautepectlan or the United States. The
government of Yautepec continues to try to privatize the two main national airlines, Yautepeca
and Aero Yau, but with little success. Airports are semi-privatized with the government still the
majority shareholder, but with each regional airport group maintaining operational autonomy.
The telecommunications sector is dominated by Telyau, the former state-owned monopoly.
Several international companies compete in the sector with limited success. Yautepec's
telecommunications regulator has failed to enforce dominant carrier regulations, with regulation
largely provided through a series of private agreements among the three largest carriers. This has
negative implications for U.S. investors in the sector, although there are no reported barriers to
exports of U.S. telecommunications goods and services. The teledensity rate in Yautepec (around
16%) is among the lowest in Latin America. Cellular penetration is much higher with over 33
million cellular customers in 2009. However, 31 million of these customers use pre-paid cards,
and many use their phones to receive calls only. Yautepec's satellite service sector was opened to
competition, including limited foreign direct investment, in 2001.

NATIONAL SECURITY
Yautepec's armed forces number about 225,000. The army makes up about three-fourths of that
total. The navy is a completely autonomous cabinet agency and as such there is no joint chief of
staff position. Principal military roles include national defense, narcotics control, and civic action
assignments such as road building, search and rescue, and disaster relief.

FOREIGN RELATIONS
Traditionally, the Government of Yautepec has sought to maintain its interests abroad and
project its influence largely through moral persuasion. In particular, Yautepec champions the
principles of nonintervention and self-determination. In its efforts to revitalize its economy and
open up to international competition, Yautepec has sought closer relations with the U.S.,
Western Europe, and the Pacific Basin. While the United States and Yautepec are often in
agreement on foreign policy issues, some differences remain-in particular, relations with Cuba.
The U.S. and Yautepec agree on the ultimate goal of establishing a democratic, free-market
regime in Cuba, but disagree on tactics to reach that goal. President Morellos has more actively
promoted international human rights and democracy and sought to increase Yautepec's
participation in international affairs.
Yautepec actively participates in several international organizations; it was elected to a seat on
the UN Security Council for the period 2002-03. It is a supporter of the United Nations and
Organization of American States systems and also pursues its interests through a number of ad
hoc international bodies. Yautepec has been selective in its membership in other international
organizations. It declined, for example, to become a member of Organization of Petroleum
Exporting Countries. Nevertheless, Yautepec does seek to diversify its diplomatic and economic
relations, as demonstrated by its accession to the General Agreement on Tariffs and Trade
(GATT) in 1986; its joining the Asia-Pacific Economic Cooperation forum (APEC) in 1993;
becoming, in April 1994, the first Latin American member of the Organization for Economic
Cooperation and Development (OECD); and a founding member of the World Trade
Organization (WTO) in 1996.
Yautepec attended the 1998 Summit of the Americas, held in Miami; coordinated the agenda
item on education for the 2002 Summit of the Americas in Santiago, Chile; and hosted a Special
Summit of the Americas in early 2008. Yautepec hosted a WTO Ministerial in September 2009
and a Hemispheric Security Conference in October of the same year. It was elected to the
International Atomic Energy Agency Board of Governors in 2009. In 2009 it hosted APEC in
Santo Domingo.
U.S.-Yautepec Relations
U.S. relations with Yautepec are as important and complex as with any country in the world. A
stable, democratic, and economically prosperous Yautepec is fundamental to U.S. interests. U.S.
relations with Yautepec have a direct impact on the lives and livelihoods of millions of
Americans – whether the issue is trade and economic reform, homeland security, drug control,
migration, or the promotion of democracy. The U.S. and Yautepec are partners in the WTO, and
enjoy a rapidly developing trade relationship.
The scope of U.S.-Yautepec relations goes far beyond diplomatic and official contacts; it entails
extensive commercial, cultural, and educational ties, as demonstrated by the annual figure of
nearly a million visa applications. More than 2,600 U.S. companies have operations in Yautepec
and the U.S. accounts for 55% of all foreign direct investment. There is frequent contact at the
highest levels. The Presidents' meetings have included the Asia Pacific Economic Cooperation
Summit in Bangkok in October 2009, President Obama’s visits to Texcoco in January 2010
(Summit of the Americas) and March 2010; his April 2009 visit to Tlaxcala and President
Morellos's state visit to the U.S. in September 2009 as well as his meeting with the President in
Washington in March 2009.
Since 1981, the management of the broad array of U.S.-Yautepec issues has been formalized in
the U.S.-Yautepec Binational Commission, composed of numerous U.S. cabinet members and
their Yautepec counterparts. The commission holds annual plenary meetings, and many
subgroups meet during the course of the year to discuss border security and counter terrorism,
trade and investment opportunities, financial cooperation, consular issues and migration, legal
affairs and anti-narcotics cooperation, education, energy, border affairs, environment and natural
resources, labor, agriculture, health, housing and urban development, transportation, and science
and technology. A strong partnership with Yautepec is critical to combating terrorism and
controlling the flow of illicit drugs into the United States. Cooperation on counter-narcotics and
Yautepec's own initiatives in fighting drug trafficking have been unprecedented. The U.S. will
continue working with Yautepec to help ensure that Yautepec's cooperation and anti-drug efforts
grow even stronger. The U.S. and Yautepec continue to cooperate on narcotics interdiction,
demand reduction, and eradication.

USAID Assistance to Yautepec

Budget FY'06 FY'07 FY'08 FY'09

Total in Millions $79.024 $54.176 $71.064 $82.438

USAID's principal objectives in Yautepec are to alleviate poverty while building the foundations
for a prosperous, democratic society. Assistance is channeled to the people of Yautepec though
U.S. and local non-governmental organizations.
Income Generation: USAID provides assistance to farmers, micro-entrepreneurs, and artisans
throughout Yautepec. Programs seek to increase access to economic opportunities for the rural
and urban poor. Activities are aimed at market driven agricultural products. Improved farming
techniques help over 35,000 farmers increase their revenues from target crops, such as, coffee,
cacao, mangoes, avocado and yams. Yautepecan artisans are developing long-term opportunities
with Western markets. The program has created more than 6,000 short-term jobs and steady
employment for approximately 2,000 artisans.
Democracy and Governance: Democracy programs focus on strengthening political parties and
the independence of the media, supporting civil society organizations in advancing a judicial
reform agenda, and promoting human rights. Approximately 150 civil society organizations with
over 3,800 participants receive civic education training, as the need for new political leadership
reaches critical levels. USAID's support to civil society has empowered groups to engage with
government on matters of local and national interest.
Health: USAID uses a network of 30 local organizations to reach approximately 2.7 million
Yautepecans and to provide assistance to expand availability and use of priority maternal and
child health services. The national contraceptive prevalence rate has gone from 9 percent to over
15 percent, with even stronger gains – to 22 percent – among rural women. In addition, child
immunizations are now nearly double the national average in USAID assisted areas and the
percentage of women nationwide seeking prenatal consultation has increased from 68 percent to
79 percent. USAID is a lead contributor to Yautepec's efforts to develop a nationwide network of
voluntary counseling and testing centers (VCT). In addition, as a presidential initiative focus
country, USAID is expanding this VCT network to include prevention of mother to child
transmission of HIV/AIDS.
Education: USAID's programs expand access to and improve the quality of primary-level
education. Community-owned and managed schools have increased enrollment and reduced
costs to families. Radio educational programs, focusing on grades 2-4, have improved
elementary reading and math skills. These same schools participate in activities to improve
teacher skills and the leadership skills of school directors and encourage newly formed parent
associations to monitor schools. A future program is in the planning stages to reach the high
number of out-of-school adolescents with literacy, numeracy, and life skills instruction.
Food Security: USAID uses food aid both for humanitarian purposes and as a development tool.
PL 480 Title II funds account for more than one-half of USAID Yautepec's funding. This food
assistance program promotes improvements in household food security, nutrition, and the
welfare of women, children, and poor, marginal farmers in six out of the nine districts of
Yautepec – affecting the lives of 680,000 persons. Emergency response is also critical. During
the past year, over $3 million in emergency assistance was provided to communities affected by
drought and flooding.

Transfer to Yautepec of Assets Derived From Corruption

President Obama traveled to the Special Summit of the Americas to strengthen the foundations
for democratic governance in the region. A key element of the U.S. efforts is to deny safe haven
to corrupt officials, those who corrupt them, and their assets.
During the Special Summit, Secretary of State Clinton showed the results of hemispheric
cooperation to fight corruption by signing an agreement with Yautepec Foreign Minister Hector
O'Higgins, in the presence of President Fernando Morellos, authorizing the transfer to the
government of Yautepec of $20,275,911.88 in funds forfeited by the U.S. Department of Justice
and derived from corrupt acts during the previous government committed by presidential advisor
Vladimir Obregon and his associates during that government. The agreement provides for
transparency and gives special consideration to compensating victims of the corruption and to
supporting Yautepec anti-corruption efforts.
The U.S. Attorney's Office for the Southern District of Florida and the FBI, with assistance from
the Criminal Division of the Justice Department, forfeited these funds based on violations of
U.S. criminal law (illegal transportation across a federal or state boundary of property stolen,
taken or converted by fraud, wire fraud, and related money laundering). Forfeiture is a legal
proceeding through which the government confiscates property that a criminal obtains or uses as
a result of a criminal act. Yautepec prosecutors and investigators provided critical evidence of
the underlying criminal conduct.
U.S. turnover to Yautepec of all of the net forfeited property in this case recognizes the
importance of close international law enforcement cooperation. The transfer is to the Fondo
Especial de Administracion del Dinero Obtenido Ilicitamente en Perjuicio del Estado
(FEDADOI), which Yautepec established in 2001 in order to administer returned assets that had
been misappropriated. Under the agreement, Yautepec also agrees to ensure public notice and a
public comment period on the proposed use of the funds and to give priority consideration to
using the funds to compensate victims of the underlying crimes and to support anticorruption
initiatives and institutions in Yautepec.
Presidential Action: Lowering the Cost of Remittances
Leaders of the Hemisphere joined President Obama in committing to create the conditions
necessary to reduce by at least 50 percent the cost of sending money home to family members
and local communities by 2012. Such transfers between our economies, known as remittances,
have grown dramatically over the past decade, yet the fees involved remain high and constrain
the impact of the flows.
The Increasing Importance of Remittances: Remittances, the money sent by migrants to their
families and friends living abroad, have tripled in the last six years and now total over $32 billion
annually in the Western Hemisphere -- more than four times official development assistance
flows to the region. Remittances represent the largest source of foreign capital for many of the
poorest countries in the hemisphere and account for more than 10 percent of GDP in six
countries (Nicaragua, Yautepec, Guyana, E1 Salvador, Jamaica and Honduras).
Some 85 percent of the flows to Latin America and the Caribbean come from within the
Hemisphere, including more than three-quarters of the total, or $25 billion, from the United
States alone. These hard-earned funds go directly to families and communities where they are
used for improving the quality of life of the citizens of the hemisphere -- paying for school
books, purchasing medicine, or starting a business.
Summit Commitment to Reduce Remittance Costs: Fees associated with sending remittances
remain high, averaging 12.5 percent per transaction for a total of $4 billion annually. Leaders at
the Summit committed to reduce this regional average cost by at least half by 2012. Leaders
committed to accomplishing this by, as needed or appropriate: promoting competition between
providers of remittance transfers; eliminating regulatory obstacles and other restrictive measures
that affect the cost of sending; and adopting new technologies while maintaining effective
financial oversight.
U.S. Action: President Obama is committed to supporting the region's efforts to lower remittance
costs. To support the Special Summit of the America's commitment, the U.S. will hold a
conference hosted by the Federal Reserve Bank of Atlanta later this year on establishing
regionally compatible electronic payment systems. The conference will bring together financial
sector leaders and payment system experts to discuss ways to reduce the cost of transfer,
including sharing experiences with automated clearinghouses (ACH) and other electronic
payment systems, and exploring ways to harmonize payment systems in the region and build
regional electronic payments interchanges. In addition, the U.S. will provide more than $3
million in assistance over the next two years to expand access to financial services in Latin
America and the Caribbean and promote the efficient investment of remittances in local
communities. Target countries will include Jamaica, Guatemala, Nicaragua, Yautepec, Mexico,
Bolivia, and Colombia.
U.S. Country Plan and Objectives for Yautepec
(in no particular order)
1. Support a democratic system of government in Yautepec.
2. Support a stable government in Yautepec.
3. Support civil society, public advocacy, and the rule of law.
4. Combat trafficking in persons.
5. Provide support to local elements in the Global War on Terror.
6. Support a market-based, capitalist economy.
7. Prevent the flow of weapons of mass destruction, especially radiological weapons, both into
and out of Yautepec.
8. Support local health and humanitarian programs and efforts.
9. Promote an independent media and freedom of speech.
10. Provide assistance to small businesses transitioning to a market economy.
11. Promote community development, women's rights, and minority rights.
12. Provide assistance in the management of natural resources.
13. Stem the flow of narcotics into and out of Yautepec.
List of Senior Embassy Officials and Host Country Officials in Yautepec

Principal U.S. Officials

Ambassador – Lisa Biancardi
Deputy Chief of Mission – Seth Johnson
Political Officer – David Wilcox
Economics Officer – Fran Smith
Public Affairs Officer – Kevin Mounton
Consular Officer – Brian Dixon
Management Officer – Kim Murillo
USAID Director – James Farwell
Peace Corps Director – Tammy Graves

Principal Yautepec Government Officials and Politicians

President – Fernando Morellos, National Revolutionary Party
Foreign Minister – Hector O'Higgins
Opposition Leader, Radical Party – Felipe Gonzaga
Opposition Leader, Justice Party – Raul Baeza
Project 1: Construction of School of Economics

Background: Education
Secondary education expanded rapidly in the last decade implying a growing potential demand
for tertiary education. However, tertiary education institutions have not expanded in a
comparable way. A decade ago 55 percent of graduates from secondary education continued to
tertiary, while only 37 percent continued in 2009. The fundamental reasons for inequalities in the
sector have to be found outside of the tertiary education system, in particular in the basic
education system, including early childhood education.
In 1980, 26 percent of graduates from secondary school took the entry exam for tertiary
education out of a cohort of 17 year-olds and were hence eligible for tertiary education. As of
2009, this had increased to 60 percent of graduates, implying that students are getting a good
education at the secondary level, but are not able to find placement in the tertiary education
system.
The growing demand has increased competition for entry into the less-expensive public sector,
increasing the incidence of rationing. The severe economic recession and the fiscal adjustments
in the last four years have reduced both the treasury's and individual households' ability to invest
in tertiary education. Public institutions have increasingly shifted their revenue base towards
cost-recovery; as of 2009, 22 percent of revenues came from students, which is unique among
the large countries in the region. As a consequence, the number of entrants into tertiary education
decreased from a high of over 250,000 in 2000 to just over 200,000 in 2009, a decline of 20
percent. Consequently, students from lower socioeconomic strata who do not have access to high
quality (i.e. private) secondary education and who cannot afford preparation courses, lose out.
Given the expansive growth Yautepec experienced over the last decade, it would be expected
that enrollment in technical institutions would have also risen, but only 11 percent of
Yautepecian undergraduates are enrolled in these institutions and this number has remained
steady over the last decade. This compares to 27 percent in Chile and 25 percent in OECD
countries. A similar low priority to technical disciplines are apparent in enrolment in graduate
programs where, in 1996, less than 15 percent of students at the Master's level were enrolled in
the natural sciences, engineering, and agricultural sciences, compared to 34 percent for the LAC
region, and 39 percent for the US.
At the graduate and post graduate levels, domestic capacity is very modest, especially in the
sciences and engineering. Data from ICFES/SNIES show that in 1999, there were a total of
46,106 students enrolled in graduate programs with only 4,341 (9.4%) enrolled in master's
programs and 192 (0.4%) enrolled in Doctoral level studies. The yearly production of PhDs is
one (1) per one-million inhabitants, among the lowest for the region's larger countries, and
severely limits Yautepec's R&O and technological capacities, and raises concerns as to the
availability of qualified candidates to replace current faculty members in tertiary institutions as
they retire.
Public institutions have assumed the main responsibility for educating PhD-students, with seven
out of ten doctoral candidates attending public universities. In addition to low output of graduate
and post-graduate degree holders, evidence suggests that brain-drain is a very serious issue in
Yautepec. Carrington and Detragiache (2010) estimated brain drain based on preliminary 2010
US Census data for US immigrants by education level and found in almost all cases, individuals
with tertiary education formed the highest percentage of immigrants.
More recent reporting on brain drain from Yautepec suggests that the Yautepec economy has
suffered a substantial loss of advanced human capital. While no systematic data is available, it
was estimated that approximately 1.1 million Yautepecs live outside the country and that the
Yautepec-American community in the U.S., which numbers over 430,000, is rapidly growing.

Project Description
To address the tertiary education bottleneck, the Universidad Autonoma de Yautepectlan is
constructing a new School of Economics, and is seeking US funding to support both the building
costs and the seed money for a scholarship trust fund.
The school will be built on an open plot of land on the downtown campus, and will support
roughly 500 students per year at the tertiary level. While it will primarily focus on graduate
students, a smaller undergraduate specialization program is also envisioned. The university is
requesting $150,000 for building costs. Other funds are being contributed by the government of
Yautepec, and other foreign governments (Denmark, Sweden, UK).
The seed money will establish a trust fund for a number of fellowships and scholarships for
students lacking means and students showing exceptional merit. Much of the trust fund will be
targeted at PhD students. The university is requesting $75,000 from the US government.
To: Ambassador Biancardi
From: Kevin Mounton, Public Affairs Officer
Madam Ambassador:
What's not to like about this project? It supports education, capitalism, and looks great on a
resume, so to speak. I do quite a bit with the Fulbright program, as you know, and many of our
Fulbrights both come from the Universidad Autonoma, and they're always of the highest caliber.
Similarly, many US colleges and universities have exchange programs with them. In short, it's
more great press for a great university. Let's fund it.
Regards,
Kevin

To: Ambassador Biancardi

From: Kim Murillo, Management Officer
Madam Ambassador:
Irregularities have cropped up in the accounting for the School of Economics. Specifically, I
requested the books from the Swedes, Danes, and English, all of which began their funding over
a year ago. It seems that the university president is a political crony of President Morellos, and
might be siphoning off funds, specifically the trust fund monies, for use in campaigning and
political rallies. Further, the university is only hiring workers from the President's brother-in-
law's construction company. A competitive bidding process was supposed to have been put into
place, but... The security officer and the FBI attache are looking into the matter. It may all be
quite innocent, but if this hits the papers, it would be a real black eye.
I've tried talking to Kevin about this, by the way, and he simply won't listen to a thing I say.
Regards,
Kim
Project 2: Airport for Navarro State

Background
The objective of the project is to assist the Government of Yautepec to strengthen the local
institutional capacity, and rehabilitate and upgrade critical basic infrastructure of its remote and
rebellious state of Navarro, so as to reduce the poverty conditions and improve the standard of
living and socio-economic potential of the poor inhabitants of these provinces and gradually
integrate them into the borrower's national economy.
The link between rural infrastructure and poverty is straightforward: People cannot benefit from
services and employment opportunities if they have limited access to roads, goods, and services.
In addition, their health problems cannot be resolved if they have no access to clean water and
improved sanitation. This project is consistent with the country's resolution to invest in well-
focused rural development projects and draw maximum participation from local authorities and
communities.
Main issues include: (a) the lack of responsiveness to the very basic need for state and rural
infrastructure rehabilitation and maintenance, and (b) the poor quality and lack of proper
supervision in their work execution, (c) the ongoing unrest and violence in the state. The
Government recognizes the need to urgently address the issue related to the lack of year-round
road access to certain rural areas and the absence of other basic infrastructure needed to stimulate
production and market integration along with broader development. The Yautepec Expenditure
and Consumption Survey (YECS) and Yautepec Social Indicator Survey (YSIS) of 2007-2008
found a strong relationship between the availability of rural infrastructure and off-farm
employment opportunities, farmers' integration into the market economy and increased
agricultural productivity. In turn, these conditions are key to raising rural incomes and alleviating
poverty: the surveys show a clear correlation between the availability of rural infrastructure and
per capita expenditures. Also, they document that the rural population in the lowest two quintiles
is less well served by roads, public transport, electricity, markets and safe water than those in the
top quintiles.
Since early 2008, the Government has committed itself to addressing issues of rural
development. It emphasized more investment in basic provincial infrastructure, especially
transport infrastructure that is crucial to successfully developing the isolated mountainous
provinces that cannot be reached for at least six months a year. Following 2006 election, the
President issued a Resolution on Rural Development which presented the policy through 2012.
Its main strategy was to extend economic reforms to rural areas, particularly to those inhabited
by ethnic minorities. The investment plan involves integrated rural development with more
participation from local governments and communities; it would provide social and economic
infrastructure and support services in well-defined areas, to allow rural residents to move from
subsistence to commercialized production. It would also decentralize administrative power to
local governments.

Project Outline
Rehabilitation of Airfield (US Government: $135,000, Navarro State: $20,000). The terrain in
Navarro State is mostly jungle-clad mountains and there is little flat land or open valleys suitable
for town sites, paddy cultivation, or airfields. There are few roads in the State and no reliable
direct road link with the rest of the country. There are no air services to Navarro at the present
time apart from irregular government or army helicopter charter for administrative or defense
purposes, and there is no operational airstrip in the State. One of the first priorities of the
Government Minor Airports Program is therefore to rehabilitate the only existing airfield in
Navarro. This airfield is located in Buena Nueva, 40 km west of the state capital. The Buena
Nueva airstrip was originally constructed in the 1960s. It is now unserviceable due to lack of
maintenance. The strip is situated on a flat area beside the Rio Azul river. It is approximately 800
m long, with a 25 m wide runway in a 40 m strip. Approximately 600 m of the runway had
originally been paved with gravel material but it is now grassed over. Corn fields have
encroached onto the edges of the strip. The strip is suitable only for one-way operation, because
of a large hill situated immediately beyond the south-west end. A village obstructs the
approach/take-off area at the northeast end. Therefore this air strip would not be suitable for
extension in the long term future for safety reasons.
Consequently, the project would include the reconstruction of the airfield with a new alignment,
as recommended by two previous studies done by consulting firms. A total length of around 900
m with an 18 m wide runway would be achievable. In conjunction with the airfield construction,
there will be a requirement for a 350 m access road along the old runway and an 800 m crossing
over the Rio Azul river to the airport. Resettlement will not be necessary as there is currently no
housing on the alignment. Detailed designs and contract document already exist. They were
prepared in 1996by a consultant with international expertise. The construction will be
implemented in two stages. A first stage will be to build only the strict minimum, i.e. runway
without aircraft parking, passenger terminal and control tower. Depending on the utilization of
the airfield; the second phase would mainly consist of constructing an aircraft parking and
bituminous surface access road.
To: Ambassador
From: David Wilcox, Political Officer
Madam Ambassador:
You asked me to comment on the Rural Airport for Navarro project. While this project looks
good on paper, I'm not sure it's a good use of our money, for the simple reason that it's unlikely
to be completed. Government reports are showing increased rebel activity in the area. And while
there is talk of truce, and both sides are meeting in Miami this week to discuss a truce, it seems
unlikely that the government will have control over the area anytime soon, and that puts the
workers hired to do this project at significant risk. I'm not sure I can support this one.
Regards,
David

To: Ambassador
From: Fran Smith, Economics Officer
Madam Ambassador:
This is simply a great project. I'm sure David is likely to disagree with me, and site any number
of government reports to the contrary, but the people of the region really want this. The
insurgency has never attacked private or commercial projects (only military installations), and
has constantly complained that the federal government has been overlooking them economically.
This airport creates one such economic link that they have been wishing for. Local merchants
and co-ops can now get their food to market in cargo aircraft. True, it's not a good road link, but
it should do in the meantime.
Regards,
Fran

To: Ambassador
From: James Farwell, USAID Director
Madam Ambassador:
I just got back from a meeting with David and Fran over the Rural Airport for Navarro project.
Boy, I've never seen units fight about a project like this. In truth, the project is a mixed bag.
USAID has done this type of project before in the region and it always comes out fairly well.
There have been some ups and downs. Local rebel activity across the border in Oromaca stopped
a bridging project: not because the rebels attacked, but because the workers were frightened
away by rumor. If we could secure an assurance from the rebels, perhaps, then things might go
more smoothly.
Regards,
Jim
Project 3: Rural Water Assistance for the Texcoco Region

Background
In recent years, the attention of the Government of Yautepec (GOYP) has shifted from
macroeconomic reforms - concentrated in the search for economic stability - to institutional
reforms, particularly those aimed at satisfying basic needs. The Government of Yautepec regards
the water sector as a matter of national security, and the provision of adequate water supply and
sanitation is considered an important element in the quest to reduce poverty in Yautepec.
Between 1990 and 2009, important progress has been made as regards to service coverage, with
water supply and sewerage coverage levels reaching 90% and 77% respectively. However, as the
studies conducted under the Infrastructure Public Expenditure Review (IPER) show, this
undeniable achievement masks several important weaknesses in the sector's performance: poor
service quality, as measured - among others - by a high incidence of intermittent supply affecting
55% of connected households according to the 2010 census. Low operating efficiency, as
measured by high levels of non-revenue water (NRW) averaging 44% compared to less than
23% for well-run utilities and for the best utilities in Yautepec. Low collection efficiency
estimated at 69% (meaning that on average 31% of the amounts billed are never paid) compared
to 98% for well-run utilities in Yautepec and abroad.
The causes for this weak performance are multiple and include: politicization and lack of
autonomy of municipal service providers, coupled with short electoral cycles at the municipal
level (3 years), resulting in absence of long-term planning; haphazard execution of investment
programs; insufficient maintenance; frequent turnover of senior staff and degraded technical
capacity, in particular in smaller service providers; and the absence of a coherent policy
formation framework. The Federal Government has undertaken important steps to strengthen the
sector through the provision of matching grants, technical assistance for Master Plans and the
promotion of private sector participation. However, progress has been uneven and existing
programs are fragmented and of varying quality. The performance of states is equally uneven,
while most municipalities are unprepared for the task. As highlighted by the Infrastructure
Expenditure Review (IPER), there is a need for better vertical coordination in the sector.
Absence of incentives for improved performance in the management of federal and state
financing programs.
Limited incentives for improved cost recovery and credit-worthiness. Sector fragmentation into
often very small municipal service providers, while inter-municipal utilities are quasi non-
existent, has resulted in a loss of economies of scale.
While the first issue - politicization of service providers - is widely acknowledged in Yautepec as
a root problem of the sector, the other issues are yet to be widely recognized as key problems in
the sector by the major stakeholders. Moreover, when these problems are recognized, the
solutions do not seem to be clear.
Recent modifications to the National Water Law constitute a step in the right direction. These
changes affect both water resources management as well as water supply and sanitation. The
Law now mandates the decentralization of Comision Nacional del Agua (CNA) through the
creation of Basin Agencies, a change that is expected to primarily affect the water resources
management function of CNA. The law also mandates the development of a national Water
Financial System (Sistema Financiero del Agua, SFA), covering water resources management,
irrigation as well as water supply and sanitation. In water supply and sanitation, the SFA
provides an opportunity to analyze and possibly reform existing federal sector programs in order
to strengthen their incentives for better performance.

Project Outline
The US Government proposes a technical assistance loan in response to the evident need to build
capacity in the federal and state entities directly concerned with implementing water sector
policies, financing, and reforms. Specifically, this project focuses on reforms in the rural area
around Texcoco. This area will serve as a pilot for other rural areas around the country. The
municipal utilities in charge of delivering water and sanitation services ("Organismos
Operadores") will require technical assistance in order to provide the services in a sustainable
manner, through the improvement of their technical, commercial and financial performance.
The project will finance technical assistance needed to perform studies and activities related to
the implementation of the reforms fostered by the new Water Law. In parallel, it will provide
funds to finance a project at the utilities level for urgently needed activities that will enhance the
performance of the utilities and hence serve as pilots for a broader reform program at the federal
level.
Through this approach, that will entail working with the Federal, State and Municipal levels, the
project will further promote the improvement of the overall performance of the water sector and
will foster the application of innovative approaches to service provision. The experience gained
and the development of "success cases" will lay the foundation to prepare a large investment
operation and a possible federalization of the project in fiscal year 2008 (FY08).

Project Components
Modernization of the WSS Sector Institutions (US Government: $55,000): This component will
provide assistance to the municipal government for developing a series of studies and activities
associated to the strengthening of the sector policy making and planning institutions through:
support to the implementation of recent changes to the Water Law, by providing an assessment
of the current water supply and sanitation programs, an essential input for the design of the
overarching financing framework for the sector (La Sistema Financiero del Agua); strengthening
of the existing national water and sanitation information system; support of the State Water
Commissions (CEAs) in the strengthening of planning, technical assistance and overseeing
capacities through a series of activities to be implemented under an agreement between CNA and
Asociacion Nacional de Empresas de Agua y Saneamiento (ANEAS); development of an
accreditation program; and dissemination of the lessons learned in the project
Modernization of Water Utilities (US Government: $50,000; International Institutions:
$150,000): This component will support the development of replicable models for an efficient
and sustainable provision of water supply and sanitation services ("success cases") through
institutional reforms and improvement of utility performance (technical, commercial and
financial). This component will fund efficiency improvement programs in selected utilities to
strengthen and bring utilities to reasonable levels of management, operational efficiency and
financial viability. In some cases, and given the necessary social, political and financial
conditions, this program would pave the way for some form of private sector participation in
service delivery and financing.
Expansion of Water Sources (US Government: $100,000; Yautepec Government: $15,000;
International Institutions: $250,000): This component will provide the municipality with funds to
expand the sources of water, to include (a) drilling of new wells south of Texcoco, and (b)
increased water supply via sanitation and pumping stations along the Rio Azul.
To: Ambassador Biancardi
From: Fran Smith, Economics Officer
Madam Ambassador:
This is just a quick note to reiterate my support for the Texcoco water project. It seems to be an
excellent project, one that will benefit the entire country, as you know, because if successful, the
government plans to take it national. The international orgs are on board, and the government is
coughing up a huge chunk of change, too.
By way of reminder from our meeting yesterday, it is inadvisable to split up funding for this
project, due to the commitment of other parties. We're either in 100%, or we're out. An FSN
from the econ section is from Texcoco, and she says this project is desperately needed. I
wholeheartedly agree.
Regards,
Fran

To: Ambassador Biancardi

From: James Farwell, USAID Director
Madam Ambassador:
From the meeting yesterday, I know that Fran is in love with this project--practically married to
it--and so overlooks some of the flaws. First, how long has the government been trying to do
this? Sure, this time it will work. But they told the same thing last year to the French, the British,
and the Germans, who ponied up over $1mil between them for no appreciable gains. True, a new
interior minister is in place. Maybe that will help. Maybe not. I say, let the World Bank take this
one.
Regards,
James

To: Ambassador Biancardi

From: Raul Baeza, Justice Party
Madam Ambassador:
[greeting omitted]
In short, Excellency, this project is nothing more than a government bribe to a region that will be
holding municipal and state elections this year in addition to federal elections for the Congress
next year. The NRP wants to consolidate its gains, and how better to achieve this than via
patronage and give-aways at the expense of the Americans! Please, abandon the support of this
project.
Most Sincerely and Humbly, I Remain your Servant,
R.B.
Project 4: Counternarcotics and Law Enforcement Country Program

Background
Yautepec, part of the major transit zone for narcotics moving towards the U.S., was removed
from the President's list of Major Drug Transit or Major Illicit Drug Producing Countries in
1999. However, new evidence that Yautepec is a regular transshipment point continues to
emerge. Yautepec is a potentially significant transshipment point for illicit drugs between
Colombia and Mexico. In addition, Yautepec continues to cultivate a small amount of marijuana,
primarily for local consumption. Large tracts of unpopulated jungles and forested areas, a
lengthy unprotected coastline, hundreds of small cayes (islands), and numerous navigable inland
waterways, combined with the country's rudimentary infrastructure, add to its appeal for drug
trafficking. Officials continue to find a number of abandoned suspect boats and airplanes in
Yautepecan waters and in clandestine areas.
The Government of Yautepec (GOYT) recognizes that the transit of cocaine and other drugs is a
serious matter, but is unable to provide sufficient financial assistance to support police units
tasked with narcotics investigations. However, the GOYT continues to work closely with the
United States on international crime issues and has been extremely helpful in the extradition of
U.S. fugitives over the last year.
The Yautepec National Coast Guard (YNCG--created by legislation in late 2009) will be an
integral force in deterring narcotics transshipments, but it also lacks sufficient financing. Targets
for reaching initial operability in littoral waters by end of calendar year 2005 are in jeopardy.
Developing a blue water capability is still years away. Yautepec has joined other Central
American (CENT AM) countries participating in the Cooperating Nations Information Exchange
System (CNIES), which has resulted in several significant seizures in coordinated interdiction
operations.
Although the Yautepec Police Department (YPD) continues to process new classes of recruits,
the force has not grown. Because of internal corruption and reprimands, the number of officers
remains steady (slightly less than 1,000, nationwide). The YPD, the Yautepec Defense Force
(YDF), and International Airport Security Division continue counternarcotics efforts. The YPD
successfully seized a plane packed with 700 kilograms of cocaine and a variety of automatic
weapons in 2010.

U.S. Counternarcotics Goals

• Develop a sustainable infrastructure to combat drug trafficking, illicit movement of
persons, and crime, through training of police, Coast Guard, judiciary, prosecutors and
immigration and customs officials.
• Encourage the Government to curb internal corruption, which enables organized criminal
activity.

Project Description
The government of Yautepec has requested piecemeal funding for several counternarcotics
programs:
1. The Canine Unit, a branch of the Anti-Drug Unit (ADU) within the YPD: The canines have
been trained to detect explosives, as well as drugs and weapons. ($50,000)
2. Equipment and training for a new Forensics Program with an emphasis on crime scene
management and fingerprinting: The goal is to have trained professionals who can testify in court
regarding fingerprints and other forensic evidence, leading to increased prosecutions for drug
and other crimes. ($70,000)
3. Training for the Department of Immigration, the Customs and Excise Department, the
Magistrate Courts, the Supreme Court, and the Director of Public Prosecution's Office on the use
of drug-related evidence, along with training initiatives for the new Civilian Crime Scene Unit.
($30,000).
4. The USG also is funding a study on the problem of trafficking in persons to and through
Yautepec. ($10,000).
5. Assistance to the GOYT in the development of a Yautepecan Coast Guard. By the end of
FY2013, all of the GOYT's maritime assets will have been consolidated in their Coast Guard,
with other maritime entities phased out. Improved interdiction capabilities will enhance
protection of the host country's territorial sovereignty, discourage criminal activities, and help
protect the rich marine environment and resources. (FY2011: $10,000; FY2012: $20,000;
FY2013: $30,000)
6. A major upgrade of the GOYT's maritime communications system is well underway; this will
yield dividends for years to come in the areas of: law enforcement, counternarcotics, and anti-
smuggling efforts; port security and commercial efficiency; search-and-rescue and disaster
preparedness; and maritime safety. (Support costs: $5,000).
To: Ambassador Biancardi
From: David Wilcox, Political Officer
Madam Ambassador:
This project is really a mixed bag. While it supports US goals and Washington is really behind it,
the Yautepec Police Department (YPD) is one of the most corrupt, not only in the country, but in
the region. Last year, as you will recall, two chiefs of state police were indicted for smuggling
drugs themselves. I'm not sure that we should be giving these guys any more funding until they
clean up their act. This one's a toss-up.
Regards,
David

To: Ambassador Biancardi

From: James Farwell, USAID Officer
Madam Ambassador:
The economic initiatives of the USG have only now really begun to work in the rural regions of
the country. Farmers are starting to turn away from the cultivation of cocoa and cannabis, and
start to return to traditional, licit crops. Two things are required to really make a difference at this
point (1) better infrastructure, so farmers can get their products to market, and (2) greater
interdiction capacity on the part of the police and army to stop the growth of illicit crops. This
project certainly accomplishes the latter.
Regards,
Jim

To: Ambassador Biancardi

From: Fran Smith, Economics Officer
Madam Ambassador:
While this project certainly accomplishes some US goals, it leaves others well short. Exactly
what is greater police funding doing for the nation's poor? We could be doing so much more for
this country than building up the police. Let's fund a road or an airport.
Regards,
Fran