Hearing of the Subcommittee on Western Hemisphere, Peace Corps, and Narcotics Affairs of the Senate Committee on Foreign Relations - Nominations

Interview

SEN. DODD: (Off mike) -- microphone. My apologies to our witnesses and others in the room. We -- the voting gods always arrange for a vote to occur just about the time a hearing's supposed to start. I see my colleagues are here as well to introduce some of our witnesses, and I'll share a few opening comments quickly and turn to my colleague from Tennessee and then welcome our guest here as well.

So this morning -- this afternoon, rather -- this hearing of the Committee on Foreign Relations will come to order, and the committee meets to consider the nomination of seven individuals to assume key leadership positions of the administration in this hemisphere. There will be two panels at today's hearing.

On the first panel, we have four nominees. The president has nominated Robert Callahan to be the ambassador to the Republic of Nicaragua; we're looking at Heather Hodges to be the ambassador of the Republic of Ecuador; Hugo Llorens to be the ambassador to the Republic of Honduras; and Stephen McFarland to be the ambassador to the Republic of Guatemala.

On the second panel, we have three nominees. The president has nominated Peter Cianchette -- is that the correct pronunciation? Is he here?

Is that the correct pronunciation? Is that correct? I thank you very much -- to be the ambassador to the Republic of Costa Rica; Samuel Speck to be the commissioner for the United States on the U.S.- Canada International Joint Commission; and Barbara Stephenson to be the ambassador to the Republic of Panama.

So I want to congratulate all of our nominees on your willingness to serve and congratulate you on being nominated by the president to be an ambassador. I also welcome my colleagues -- Senator Collins, Senator Snowe, Senator Martinez, my good friend as well, from Florida -- who have joined us to introduce Mr. Cianchette and Mr. Llorens. In addition, I understand Senator Voinovich will be here to introduce Mr. Speck.

SEN. VOINOVICH: I'm here.

SEN. DODD: You are here. Thank you, George, I'm sorry. I didn't see you there.

Since the end of the Cold War, U.S. foreign policy towards Central and South America has tended to focus narrowly on three issues: elections, trade and drug programs. And while I understand and accept that three focuses will need to remain very much components of any policy in the region, I believe that alone they have never been sufficient to bring about the real holistic change that the hemisphere requires, that its people demand, and that serve the interests of the United States as well.

In the broadest sense, we need to see political development to include civil society, institution building, social contracts and, of course, the rule of law. We must see beyond free trade as a panacea to Latin America's social and economic woes and instead work as well to embrace holistic development, which should include not only trade but also investments in infrastructure, education, public health, foreign aid and direct investment.

And we must no longer stay the course in our failed policies of drug eradication and demand reduction. Rather, we must create smarter, targeted anti-drug programs, work to replace black market economies with legitimate investment, and strengthen civilian law enforcement and justice institutions. I credit the administration with proposing the Merida Initiative to respond to concerns voiced by our neighbors in their request for aid in combating increasing drug trafficking and violence and violence in Mexico and Central America. I support the spirit of Merida and I hope to work closely with our allies to make sure that we tackle these collective concerns.

But (in my view ?), the Merida Initiative will never fully succeed if we don't also work to put in place adequate institutions that can systematically address civil society institution building as well as corruption and the rule of law. Our Central America neighbors will need well-trained and equipped military forces to confront the most violent criminals. But I would strongly argue that the regional also needs equally well-trained and equipped police and civilian authorities operating in a fair and impartial judicial system to enforce and uphold the rule of law.

In joining with our neighbors to combat these increasing problems, we must recognize that our neighbors are taking important steps to respond to the needs of their citizens, and they are doing so because they are closer than ever to completing the transition to stable, democratic civil societies -- one with social contracts who are tackling some of their society's most difficult problems.

With the exception of Cuba, every nation in the Western Hemisphere has a democratically elected government. But many problems still persist, as we all know. Inequality plagues our hemisphere. Income and wealth disparities in Latin America are the worst in the world. Nicaragua, for example, is the second poorest country in our hemisphere. In the region, social and economic exclusion are rampant, fostering conditions in which political radicalism thrives and crime rates soar to six times greater than the rest of the world.

As a result of these debilitating conditions, millions of Latin Americans have emigrated from the region to seek better opportunities for themselves and their families. Nearly 100 million people have left Latin America since World War II. Many countries, such as Guatemala and El Salvador, are struggling with impunity.

Now, given this duality -- on the one hand continuing challenges we face with poverty, impunity, crime and violence and, on the other hand, democratic governments responding to their people's needs -- the question seems to be how we in the United States will work to promote our mutual interests in partnership with our neighbors to the south, because of a renewed relationship with a stronger, more prosperous and democratic Latin America that can handle its own political, social and economic affairs is in everyone's interests, especially those of the United States, I would add.

Nicaragua, Costa Rica, Ecuador, Honduras, Guatemala and Panama are diverse countries with proud histories. Some face serious challenges with poverty and inequality, others with crime and violence, but all of these countries have democratic governments, and the United States must take the lead in engaging these neighbors, working in a respectful manner towards advancing our mutual interests in the broadest sense.

So I welcome all of you to the committee this afternoon and congratulate you again on being selected by our president to serve in these important posts. And I look forward to engaging in a good discussion with you this afternoon, along with my colleagues, on these critical matters.

Now let me turn to my ranking subcommittee member, Senator Bob Corker of Tennessee, for his opening statement, and then we will turn to our fellow senators who are here to present their witnesses.

Bob?

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SEN. DODD: Great. Well, thank you very, very much.

And we're now going to -- what I'd like to do -- and if you want to spread out a little bit, I know you've got -- I know you're all going to be close to each other in the years ahead, but more breathing room there -- and then what I'll do is Mr. Llorens, I'll begin with you and then go to Ms. Hodges and Mr. Callahan and Mr. McFarland.

If you could, I'd like you to try and keep your remarks to about five minutes or so. I'm not going to bang down the gavel obviously, but you understand the -- I mean, the members would like to maybe raise some questions with you. And any other supporting documents or information you think would be helpful for the committee to consider during the nomination process, we're happy to include those in the record as well.

And I know they've done this already to some degree, but I thought, Mr. Llorens, I always think it's a special moment and it's -- I'm sure you'll make reference, all of you will, to your family and friends who've gathered here as well, but I always like to welcome them to the committee. This is a very high moment, a very important moment to be nominated to be an ambassador to represent our country -- is a very special moment. I've been involved in this committee for 27 years, and I still find it one of the best jobs of all I have, is to have a confirmation hearing for people to serve. And I always love the fact that people bring their families with them as well. So if you'd -- I don't know if you have any here; if you do, we're happy to have them recognized. Why don't you do that?

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SEN. DODD: Well, thank you very, very much. I should have made note earlier, but I see my former colleague Ben Gilman here.

And Ben, I want to thank you for coming over, a former member of the House, and we served together many years ago. A wonderful member of the House Foreign Affairs Committee and very active in foreign policy issues, so we're honored to have you on the Senate side, come over.

I always tell people the story when I left the House and came to the Senate, Morris Udall turned to me and he said, "By going to the Senate, you have improved the intelligence of both bodies," coming over to -- (laughter) -- so I thank you for coming over.

Let me first of all tell you how pleased I am the president has nominated five of you here that are career Foreign Service officers. This doesn't happen often enough, and I think it's very exciting the fact that your careers are being recognized and the value contribution you've made not only in this region, but of course I think all of you have had tremendous experience in the region as well. And I know that's always a battle back and forth in how these decisions are made.

And as I mentioned earlier, my brother, Tom, taught at Georgetown. He was never in the Foreign Service per se, but I think was almost considered part of the family since he was so closely associated with the issues over the years.

But the fact that there are people who work so very hard in this region year in and year out and many times don't get the opportunity to serve as our ambassadors in these countries because in so many cases these ambassadors or embassies end up in the sort of political column, so to speak. And there's a value in that, too. They can be very good ambassadors, I think.

But the fact that the president has asked those of you who have served so well over the years with other countries, I commend him for that. I think this is something we need to recognize more often, so I commend all of you on your service to the region.

And let me -- there's obviously a lot of people in front of us here, and I'm going to ask maybe just a couple of generic questions and ask you to respond to them because I think they apply to all.

The Merida Initiative -- and my good friend Bob Menendez has a strong interest in the subject matter as well, and I'm very interested in hearing his comments and thoughts on it. I mentioned, Bob, before you came in just -- I'm supportive of the idea, but in my view it needs to be expanded. I'm worried that if it's just going to be a sort of more equipment kind of a program where we're talking about high-priced equipment, helicopters, weapons and the like -- I'm not arguing that can be a major contributor to all of this, but it seems to me it's got to be broader based than that.

Is there sufficient attention being paid to civilian institution building, the rule of law in this agreement? Should we begin by vetting key units in the police and judiciary to be sure that there's going to be minimal corruption in the process as we go forward with a major investment in the region? Is serious political will a necessary condition for the success of this initiative in your minds? Are they willing to take the difficult steps to actually confront the corruption-laden problems that exist in so many of these cases? I say that with a deep regret about what happens in these nations. And are you satisfied, to the extent you can be at this juncture, that those kinds of concerns are going to be addressed?

And I'd like to hear all of you comment on whether or not you agree with this or have a different perspective on this. I think it'd be helpful for the committee at this juncture here since you are experienced hands in all of this and know the area so well, what are your reactions to this?

And as a committee of jurisdiction, we're going to be very interested in following this and how it works. And I'm going to be particularly turning to Bob and asking him to be the lead on all of this as we go through it in this subcommittee.

But I'd be very interested, Mr. Llorens, beginning with you and maybe on down in the order we've talked to each other, to share some thoughts about this initiative. Is it enough? Should it be more? Are you concerned that it's limited, it seems, in one area? And how satisfied are you about the will, the corruption issues, the vetting process and the like?

MR. LLORENS: Yeah. Thank you, Mr. Chairman.

Well, certainly I know that for Central America we're asking for $50 million for this year, and I think it's plussed up to $100 million next year. You know, in speaking specifically, I do agree that you need to have a holistic approach to dealing with the whole issue of crime, impunity, rule of law, and it has to be holistic and it has to be strategic.

I've looked at the specific Merida Initiatives and we do have, you know, training, you do have equipment, but you also have issues -- you know, you do have community outreach, you do have programs to work with prosecutors, with the judicial system.

Because I totally agree -- I mean, I think if we don't build and focus a lot of our assistance to strengthening those institutions, none of this aid is going to be sustainable. So I look at the categories that are involved in institution building and in prevention, in community outreach as a critical component of the Merida Initiative. I agree.

SEN. DODD: Thank you very much.

Ms. Hodges?

MS. HODGES: Sir, of course the Merida Initiative is not related to Ecuador but --

SEN. DODD: I'm sorry. I apologize.

MS. HODGES: Yeah, but I would like to comment on the fact that one of the positive things that we have in our relationship with the government of Ecuador is the government's, President Correa's, firm commitment to combating corruption and to, you know, to work in this area. And much of our assistance already goes to programs that are related to corruption, to working on the judicial system, working on the judicial system in the areas of criminal investigation. We have provided Ecuador with its first-time-ever automated database on criminal cases and things like that.

So again, I would certainly support something like that.

SEN. DODD: Thank you.

Mr. Callahan?

MR. CALLAHAN: Yes, thank you, Mr. Chairman.

For Nicaragua, yes, I'd echo what Hugo Llorens said. There's a very important component in Merida which addresses the rule of law and institution building, and that goes to the heart of trying to reduce if not eliminate corruption. Corruption is unquestionably a problem. A World Bank study placed Nicaragua in the 23rd percentile.

But in preparing for these hearings and in talking with a number of my colleagues in the government, including the DEA and the people at the Department of Defense who deal with the Nicaragua police, they have a very high regard for the chief of police in Nicaragua, a woman named Amenta Grenara (ph), who is highly professional and determined to make her police force professional.

So I would think that we can with some confidence trust them to use the money wisely and to attempt to reduce if not eliminate corruption, which is a problem.

SEN. DODD: That's very good. Thanks very much.

Mr. McFarland?

MR. MCFARLAND: Yes, Mr. Chairman.

I agree with you, Mr. Chairman, that for the Merida Initiative to be successful there has to be a holistic approach, and there has to be support for the institutions that underpin the rule of law, not just for the agents that actually execute the actions.

I'd like to point out in the case of Guatemala the part of the Merida agreement which, if approved by Congress, would focus on gang activities illustrates some of this approach.

It starts with prevention efforts that are carried out by NGOs and community organizations. Then there's community policing. There is support with -- support training equipment for the police as well as support for vetted units. There's communications equipment and other training for the police to be able to link up with counterparts in other countries. There's considerable training and support, and I think here the political element is crucial and it's one we have to monitor carefully for prosecutors as well. There is support for reform of prisons to ensure that they are not simply used as another office by gang members. And at the same time, there is additional work on prevention at the prisons focused on first-time offenders and juvenile offenders.

And I think that kind of holistic approach could be a useful model, sir.

SEN. DODD: Well, that's very encouraging.

And I'd be very interested -- I know the committee would be -- in any additional thoughts as you end up in your posts, thoughts for the committee to consider as we evaluate the program.

I want to say to you, Mr. Callahan, I was struck with your testimony in your opening statement and I appreciate it very, very much. I think the T.S. Eliot quote is a very apt one -- it probably could be used a lot of places -- about the persistence of memory. And I welcome your comments. We've had a sort of a troubled history over the last more than 20 years -- more than that now -- with Nicaragua, and you can get preoccupied with the history. But as you point out I think in your testimony, we've got to look ahead as well, and it's important we do that. And so your comments I think will be welcomed.

And it's an opportunity, and I hope that the Ortega government and others will hear your words this afternoon and understand what they -- as I imply them to be an opening -- and to take advantage of that comment you made this morning. This is an opportunity to try and get on a better track than we've been in, so I appreciate immensely your testimony. It's very smart.

Now let me turn to Senator Corker.

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SEN. DODD: Is that is, John?

Well, thank you.

I want to just raise, I was looking over the -- this is a good question that Senator Isakson's raised, not just about Nicaragua but generally in the region. And again, you're looking -- what is it, a gallon of gas, I think, in Venezuela is like 7 cents, and obviously having a huge potential influence in the region. We're aware of it in Bolivia. (Inaudible) -- the efforts in Ecuador with the recent events that have unfolded between Venezuela, Colombia and Ecuador, the relationship of Brazil. It gets complicated. It isn't all a rosy picture.

The world is changing its views regionally on President Chavez. And Brazil is a classic example. I think there might have been one relationship or one attitude to begin with, and that has certainly been modified, given some of the energy issues that have evolved over the years.

But it's a good question. And because the influence and the certainly struggling countries economically, where you can offer low- cost energy at a time you're trying to hold your country together, is a very appealing offer to receive. And obviously, he's extracting commitments in return.

But I hope we'll look at some of these ways in which we can expand economic opportunities as well. I was looking at the remittance issue in Latin America. And someone gave me these numbers, and I -- 2005, 22 million people from Latin America worked in the developed world. They returned, the 22 million, $54 billion in remittances to the region. That was more than all the foreign direct investment and foreign aid for the entire region with the remittances going back.

And a good part of that ($)54 billion, I don't know how it breaks out of the ($)54 billion what percentage of the United States, but I presume it's a fairly healthy chunk of that going back.

We have our own downturn in the economy here, and those numbers get adversely affected. In Honduras, ($)2.7 billion in remittances were sent back in the country in 2007. That made up a quarter, 25 percent of the GDP of the country. And so there's a direct correlation in terms of what happens here.

I noticed in foreign aid, Nicaragua, by the way, 26 percent of foreign aid -- makes up 26 percent of Nicaragua's budget in the country. And I presume the bulk of that comes from us, is that true? I don't know if that foreign aid number is -- foreign aid -- is that U.S. foreign aid? U.S. foreign aid.

MR. CALLAHAN: It's of all sorts. And it's international foreign aid as well.

SEN. DODD: (Inaudible) -- want to just comment on this general question, because obviously I'm a believer -- I think foreign aid can be of help. And certainly there's a value in all of that.

But the realities of the world in the 21st century, just given our own budget constraints on how much you can actually do, and the importance of wealth creation, immigration policy -- I mentioned earlier 100 million people have left the region since World War II, primarily over economic issues, I presume, in some cases political, obviously.

Intolerable to live where you did, your family did, and you made that decision that many of us this side of the dais' families did. Okay, so Bob Menendez certainly reflects exactly what your family went through. And yet albeit, many others are leaving for economic reasons. And how do we begin to get our arms around this issue in a holistic way that I've mentioned, that Senator Menendez has mentioned, Senator Corker has mentioned would be helpful?

The IDB, USAID -- do you have any thoughts as a panel here on how we might look at this out of the box, a bit differently, and ways in which to address these issues beyond the traditional ways we've been talking about it over the last number of years?

MR. LLORENS: It's a very good question, Mr. Chairman.

I -- you know, I would say one of the things I think that's very important, that a country like Honduras receives significant economic assistance from the United States. You have $43 million in bilateral assistance. You have the Millennium Challenge Account, which is $215 million over five years. The United States obviously provides a lot of money through the multilateral banks. So there is significant amount of economic assistance.

I would look at something, for example, in terms of being really effective on the ground, something I'd look at is just to make sure that, you know, donor coordination is really effective. And maybe it is. But it's something that, you know, I would like to look at in making sure that the major donors, the multilateral banks, the major bilateral donors are working together so when you look at the development issues, you really -- whether it's educational, whether it's health, where you really -- are we really being holistic and strategic as the donor community? So I'd say that's one thing.

The other thing I would mention is the fact that certainly, I think that the Central America Free Trade Agreement in the sense that it locks in the trade benefits for both countries, but for Central America, the region, and for the United States, I think it provides a certain amount of stability so that it's sort of a platform for growth, I think, for Honduras and Central America.

But the overriding issue, of course, is that you have to get back to the rule of law, you have to get -- you know, the good governance issues, corruption, which you all mention. And I think that this is an issue. This is really the task. And it's a task that the Central American democracies have to take the lead on.

But I think the United States has to make sure that, you know, our assistance is -- comes with the fact that we're going to ask our democratic friends in Central America to raise the standard, to have a better investment climate, to have rule of law, to improve the basis for an independent judiciary. And that's going to be the key to be able to create sustainable development.

SEN. DODD: Ambassador Hughes (sic)?

MS. HODGES: I would say that one thing that's very important is to -- well, for many, many years, we've been looking at these issues of what's pushing people, what's pulling people. And I feel -- I'm very confident in the programs that we're working with that promote economic prosperity -- reasons for people to stay, you know, in their countries.

Ecuador has, I think, something like 2 million immigrants in the United States, and probably many of them for many years. I think that in Ecuador, we should be looking at, you know, doing more in terms of, again, working with the government of Ecuador to reduce corruption, the things that are -- you know, corruption really hurts the everyday man or woman, their pocketbook. And, you know, to help people realize that it really is in all of our interest to fight against corruption. And any of the programs related to social justice, the same thing. These give people a reason to stay in their own countries and to build their institutions and to believe that they will have a better future for themselves and for their children.

SEN. DODD: Mr. Callahan?

MR. CALLAHAN: Yes, Mr. Chairman. And you and Senator Menendez spoke about a holistic approach, and I think it's applicable here as well. Progress does come slowly. If we look, as you well know because you've been following this as close as any of us in the State Department for the last 25 years, there has been enormous progress in Latin America, not only in the return to democracy but respect for human rights, which we should acknowledge and compliment them ---

SEN. DODD: I agree.

MR. CALLAHAN: -- Central American and the Latin Americans for.

But I agree with my colleagues who talk about corruption. I think this is an enormous problem throughout Latin America. And the only way to reduce it or eliminate it is by encouraging the people who are governing the country to do so honestly and effectively. And I think a lot of our capacity building, a lot of our money and training goes into that. Exchanges can help.

But I think we have to accept that this will be as slow as was the return to democracy.

SEN. DODD: Yeah.

MR. MCFARLAND: Mr. Chairman, in terms of Guatemala, I think that if we take a step back and look at the accomplishments over the last, say, 20 years, certainly peace, the return to democracy, the putting the military back into what we would consider to be the traditional military role of not carrying out internal security missions but rather defending borders, promoting free trade, a lot of the important items have been done at least in part.

The -- to echo some of my colleagues, several of the missing parts, the parts where I think we really have to focus attention on, are transparency and rule of law, and investing in health and education of the people.

I think, to echo again something that some of my colleagues have said, it's important that we try to coordinate the significant U.S. donor efforts with other donors, with the countries involved. I think the private sector in each of these countries is also a potential benefactor of a better-trained work force and a potential contributor, if you will, to grassroots programs.

The -- ultimately, I think that, you know, Latin Americans watch events in Venezuela and Cuba with interest. But I think those models have little direct relevance for them. It's hard to replicate them in other countries. That doesn't mean, though, that they will continue to support blindly their governments if they perceive that they're not being fair or if they're behaving unjustly.

SEN. DODD: Well, there are aspirational qualities to all of that. And I agree with you.

Just end on this note, but I spoke last week at the Naval Academy to the -- they had the Forrestal Lecture, and they asked me to come and talk about Latin America. And I -- the point I want to make is Latin America's right on the cusp of this tremendous advance in democracy, which is no small achievement.

It's really been remarkable what's happened from one end of the continent to the next, with the obvious exception of Cuba. It's really been -- and not easy. It's gone through an awful lot to get there. But we're on the cusp of really breaking open, I think, all of these other issues.

So it's unlike other parts of the world, which are, respectfully, far further behind in this effort. Latin America really is on the edge of breaking into a 21st century of achieving all the potential greatness that's capable in this hemisphere.

So this is really a critical moment, in my view, of getting this right. And if we do what Bob has suggested in expanding this Merida thing, really working on these other avenues that need to be exploited if we're going to make this program succeed, I think we have an opportunity to really have a big influence and make a big difference in this hemisphere.

So it's sitting there now. You think of other parts of the world, and imagine they had achieved what had been achieved in Latin America, and we're sitting there. Think how much further along and more hopeful we might be about some of the potential changes.

So it really is a very -- it's a time of optimism, in my view. With all of the problems out there, this is a time of optimism, in my view, in Latin America.

So I welcome your nominations.

Any additional questions I have, I'll submit along -- and obviously, there are a ton of -- I could think of just a load of questions I'd love to ask each and every one of you, but I'll restrain myself and submit them to question.

Bob, you had some additional --

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SEN. DODD: Thank you very much, Senator. And we'll do that.

We thank all four of you and wish you the very best. We'll try and move this along over the coming weeks. Senator Biden will schedule the appropriate timing for confirmation votes. I don't know when that'll happen, but I'm sure we'll keep you posted and informed.

I presume all of your paperwork and everything else has been complete. And there may be some additional questions that'll come in, and we'll try to get them to you quickly and urge you to respond to them quickly as well. That would certainly move the process along as well.

Thank all four of you for your service and for your response today.

Let me invite the second panel to come up.

And I just said to my staff, I'm not sure how we figured out how to do this. We threw Ecuador in the middle here of Central America and we've got Costa Rica in with Canada. So there's a -- (name inaudible) -- nice to see you.

Peter Cianchette, Mr. Sam Speck and Barbara Stephenson, if you'd join us here at the table.

I'm sorry there. I apologize. We're -- we sit on the Banking Committee together, too, so we're doing a little banking. (Laughter.)

(Laughs.) I apologize.

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SEN. DODD: Well, thank you very, very much. Appreciate that.

We've been joined by Senator Feingold of Wisconsin.

Thank you, Senator, for being with us.

I'll just ask a couple of questions of you, if I can, and then I'll quickly turn to my colleagues and raise -- have them raise whatever issues they're interested in.

Ms. Stephenson, let me ask you about the plans on the Panama Canal. What -- this was a remarkable event. I happened to be there in 19 -- I'm trying to think what year it was now. We celebrated it there. So it's 1979 and then 1989. And the 10th anniversary, I went down to celebrate that anniversary date, and was very impressed with how things were working.

At the time, obviously a very controversial issue, and it was before I arrived in the Senate, but that was about as heated a debate in the country, on where you stood. And people like Howard Baker, Paul Sarbanes, who played a critical role in that issue, and a lot of people -- Barry Goldwater -- John Wayne, I recall. People have forgotten some of the people who were heroic in that effort and the importance of that conclusion.

But I know there's some talk about plans of expanding the canal and the like. Want to share with us what you know about that?

MS. STEPHENSON: Yes, sir. It is -- it's good to have someone who remembers just how controversial that was, because I certainly -- when I arrived in Panama, the feelings about that were still very raw and bubbling near the surface. And it certainly was here on the Senate.

And I think both sides feel really good about the way that it's unfolded. It's -- the handover happened in 1999, so the Panama Canal Authority runs the canal. Revenues are up. Accidents in canal waters are down. Transit times have been shortened. So really by every measure, the canal is being run efficiently and effectively. And it's a source of pride for Panamanians, and it's an excellent source of transit for us.

Panamanians had a referendum in 2007 and decided yes, indeed, they would expand the canal, so it would add a third set of locks and the work will go on for about the next 10 years. The budget right now is about $5 billion. You will remember, there are ships that are actually built called Panamex, which are, you know, big, boxy ships that just slide through those locks. The third set of locks would be bigger so that you could actually have not only more traffic going through, but you could take through ships that are bigger than those specifications.

So it's broken into a number of phases. Some U.S. companies have already won portions of it. CH2M Hill won the project management contract. An American law firm won the legal advice contract. And there's a design-build contract that's going out also. Some U.S. companies are part of some of the bids that are there for that.

I was reading a piece in the Spanish press, Spanish-language press, boning up on my Spanish, and see that the canal expansion project won a big award in Verona, Italy, for sort of the best civil engineering project going forth this year.

So it's a source of real pride. And I think the concerns we've had that were very present in the 1977 debate about whether our interests could be preserved if we -- (audio break) -- I think it's another thing to look back on with a real sense of pride, is that our ships still transit it. We're still by far the biggest user. But it runs very well and it's a source of great pride for Panama, too.

So I think it's one of those where we can all look back on it and feel very good about having done the right thing.

SEN. DODD: Yeah. It's a remarkable history. I was in London about a month ago. And I love maps. I went to an old map store, and I found an old map, an 1850 map of Panama that identified the potential sources of a canal drawn onto the map, including the one that's the Panama Canal, but also the San Juan River going into Lake Managua --

MS. STEPHENSON: Right. Remember?

SEN. DODD: It was the earlier idea that the Vanderbilts were promoting at the time. So it's a wonderful little piece of history to know that 50 years before any of this started, there were people already moving in that direction.

On Costa Rica, you know, and I was thinking, in a way, here you got Torrijos in Panama, you've got Oscar Arias in Costa Rica, you've got Daniel Ortega in Nicaragua -- (laughter) -- you know, got the -- Bush is in the White House. I mean this is -- (laughs) -- things sort of -- nothing's changed a lot in terms of names in the region.

Oscar Arias is someone that all of us have worked with over the years on various points.

And explain a little bit about how this would work. You were very -- you're optimistic about how the CAFTA agreement is working in Costa Rica. It was a very -- it was a major election item for Oscar Arias and his campaign -- survived and won the election. And you had a -- it's in the process of its ratifying and implementing CAFTA. But it's clear the public remains divided on this issue still, I think, is reports we get out of Costa Rica. You seem to indicate otherwise.

Is it divided or not? How is this going?

MR. CIANCHETTE: (Off mike.) Excuse me, Senator.

Certainly, that was a very close election. As you most likely well know, they -- there was a public referendum, a countrywide referendum on CAFTA. It was ratified. It was a narrow -- narrowly passed, but yet now enjoys a greater level of support than it did when it was -- (inaudible) -- for that referendum last fall, in October of 2007.

I think at this -- there's been much discussion around the country. Certainly a referendum of that nature causes lots of people to be educated in discussion. And I really believe from everything that I've learned in the intense research I've been doing the last couple months that Costa Ricans understand by and large that they've been given a unique opportunity to partner with other allies, with other countries in the region, and most importantly with the United States, and that this is -- truly presents them with a unique opportunity.

So I believe that the support for this agreement has increased. And certainly, the president, President Arias, has been steadfast in his support and his belief that it is in the best interest of his country. And he's continued to work with the assembly. They've made great progresses.

As you may know, they did receive an extension to enter into the agreement fully -- had the ratification, but now it's required that they have a number of modifications to their laws and regulations to fully implement.

They're making very good progress on that. I believe that that'll happen. And if I am confirmed and fortunate enough to serve there, I will continue to work with the president and other stakeholders to make certain that they understand that this is a last best chance, if you will, for them to join this unique opportunity. And I believe they will. And I will lend whatever support I can to that.

SEN. DODD: Well, thank you very, very much.

I've got a couple of questions for you, Mr. Speck, but I want to respect my colleagues' presence here and their time constraints.

And I know Senator Feingold -- thought I had some question, but I understand, Bob, you have 10 minutes before you got to be in another meeting, and I don't want to -- I want you, if you have any questions here, then we'll jump to Russ.

I'm going to step out for one second just to -- (inaudible) -- back room here. So, Russ, take over.

BREAK IN TRANSCRIPT

SEN. DODD: Thank you very much, Senator.

And I want to thank all three of you. I wish you well in the coming days. You may have heard what I said to the previous panel. We'll try and move this process along, and any additional questions members have, and I suspect there may be some -- we'll try to get them to you very quickly. For those who -- staff, notify your respective members of how important I'd like -- it is to get these questions asked and then response to it, and we'll try to see if we can schedule a markup of these nominations.

Congratulations to all three of you. And thank you again for being here today.

The committee will stand adjourned. (Sounds gavel.)

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