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Winning the Peace – USAID and the Demobilization of the Nicaraguan Contras

In the 1980s, one of the focal points of U.S. foreign policy was the rise of leftist militants throughout the globe, particularly in Central America. Under the Reagan Doctrine, the U.S. in 1982 began actively supporting anti-Communist insurgents — the Contras — in Nicaragua in their fight against the Sandinistas. By 1985, public support for the Contras had waned after reports surfaced that the Contras had trafficked in cocaine and used “death squads.”

After Congress prohibited aid to the Contras, the Reagan Administration, under Lt. Col. Oliver North, began funding them illegally, in what would be known as the Iran-Contra Affair. After the Contras and Sandinistas agreed to a cease-fire in March 1988, Congress passed a law that put non-lethal Contra aid under the auspices of the U.S. Agency for International Development (USAID).

Ted Morse, a well-regarded USAID veteran who had served all over Africa, but never in Latin America, was tasked with directing the program. He describes the difficult circumstances AID had to deal with, including the logistics of feeding 30,000 people in remote jungle terrain; the extreme sensitivity of such a politicized issue, which had the attention of President Reagan himself; the threats from the Contras, especially when they found out they were going to get in-kind donations, and not cash as they had with the CIA; the headache of trying to keep transparent accounting; and helping the new political parties learn about democracy. Morse was interviewed by W. Haven North beginning in May 1998.

Go here for further reading from the Ambassador to Honduras regarding the Iran-Contra Affair. Read other Moments on Latin America.


“A GAO report showed that the State Department could not account for 50 percent of the money”

Q: Why AID was ordered to take this on when other agencies were involved?

MORSE: Other agencies had been involved; that was the problem. AID was asked to do it by Congress because they wanted to get it away from the CIA and from the NSC [National Security Council] because of all that had just gone on in the Iran-Contra affair.

They didn’t want to militarize it by giving it to the Department of Defense, even though the task was to support uniformed, armed Contras and their families and keep them armed and keep them from going to war, not restarting it, but to keep them in a state of readiness as pressure on the Esquipulas Peace Process, which was going on to try and settle the Nicaragua-Honduras-Costa Rica-Central American Contra war.

The feeling was that, if the Contras were disarmed and disbanded immediately, then they wouldn’t be out there as a potential pressure to be reactivated if the peace process broke down. But, at the same time, they didn’t want them to go back to fight in the middle of the peace process. So, they didn’t want the military to handle them for fear that it would militarize the situation.

The State Department had once before administered Contra aid for almost a two-year period when it had been taken away from the CIA; but there was a GAO report that showed that the State Department could not account for 50 percent of the money that had been given to them. So, virtually by default, they turned to AID and said, “This is a humanitarian task. You are to keep these people well fed and well exercised and healthy, well clothed; but, don’t let them go back to war.”

Q: How many Contras are you talking about? What was the scale of the situation?

MORSE: The State Department gave a figure of 11,000; I gave a figure of 30,000. He went berserk. This was [pictured, Under Secretary of State, future President of the World Bank] Bob Zoellick.

He closed his book, looked at me and said, “If you’re lying to me, I will have you fired out of here so fast; and, you’re not going to make a fool out of me before Congress by giving me numbers that are so inflated.”

I looked back at him and replied, “Mr. Zoellick, both those number are right. You asked that question in a way that how many Contras there are how many are we feeding and caring for. If you want to know how many armed fighters there are, there are 11,000; but, with their families and their support units, we are feeding 30,000 people.” Still, those are the numbers we are dealing with….

[USAID Administrator] Allen [Woods] said, “…Try and keep the Agency‘s reputation intact so that we are not seen as part of what has tinged the Iran-Contra, that politicized it; and, let’s not get us into the kind of support for military/paramilitary that we got out of after Vietnam. But be as responsive as we need to  be in order to carry out U.S. foreign policy of feeding the Contras, clothing them, keeping them healthy and exercised, but not engaged in a military way. Give me an action plan.”

I think I stayed up all that night, partly out of nervous anxiety, partly out of jet lag and partly because of shear fear of what the hell we were getting into. We met again at 7:30 a.m. the next day. I laid out what we would need in the way of a task force, what authorities. I said, “I’ve got to have “notwithstanding” authority [which allows a USG agency to provide assistance when it would otherwise be prohibited, such as for democracy promotion or for disaster relief].  When I was on the Hill yesterday, the people on the Hill said, ‘You’ll get it. We’ll give you the notwithstanding authority when we give you the money.’

“Trying to figure out how much money, how many uniforms, how much food, how much medicine, how many airdrops, was a nightmare”

The overwhelming majority of the [Contras] were on the Nicaragua/Honduras border in the deep jungle. They had camps there. They were temporary camps that were literally makeshift. You could see they had been moved from time to time but, they probably had been in those camps for about a year….

We also immediately signed a helicopter contract so that we would have helicopter support into those very remote and rugged areas. By road, we moved the major supplies to the other camps as time allowed. Most were inaccessible; and, you had to airdrop food, clothing and medicine to them….

I met with Contra leaders on the ground. Their estimates [of number of troops] were different from the three that I had [from various government agencies]; so, trying to figure out how much money, how many uniforms, how much food, how much medicine, how many airdrops, how many helicopters, how many planes, how often, was a nightmare.

It was just like dealing with refugees. How many people are at risk and how many need food? Soon, we could learn who was inflating the estimates and for what reasons, for personal aggrandizement or for corruption or by incompetence.

There were more accountability ways than people were happy with at first. When Time Magazine reported on it, they said that “the AID system that’s now conducting Contra aid is so tight that people are complaining that the food and the medicine is not getting through and that they are literally x-raying every bunch of bananas that goes out.” The reason for that was that we had a very elaborate control system; but, it had to be flexible enough to be responsive and fast enough.

The first thing was that we provided everything in kind. That caused huge concerns. The Contras were accustomed to getting cash; the CIA had given them primarily cash. The frustrations and the dangers that we were facing were because, when we switched it from cash to “things in kind”, it didn’t sound like that could cause problems.

In about the sixth week, we were summoned out into the jungle. We went out into the jungle and were met by what would be the equivalent of their G4, their logistics man, Commandante Douglas. Douglas has a fourth grade education. He had grown up in the Contras and was a pretty tough character. He also had made one hell of a lot of money when the previous support was cash.

The money for the food was passed to him under the CIA program. There were many other channels that money was going out. Douglas said, “Look you gringos, you don’t know how to take care of us. You say you’re paying for these tall, fat, heavy cows and what we get delivered to us are these skinny, short, underweight things that won’t feed our people. You don’t know how to feed our people. We can feed ourselves. You just give us the money the way we had it before; and, we will buy the food and feed our people.”

“Don’t you ever, ever pull a gun on any of us again or your people will go hungry”

I replied, “No. I explained to Commandante Enrique Bermudez, as we explained to you and to the whole senior Contra staff, that process has changed. That’s changed because of the way we, AID, have to operate.” He really got angry. He had been, obviously, siphoning off a lot of money. Now his money source had been cut off.

He couldn’t turn around and sell the cows when they were being brought in because the people needed them and slaughtered them immediately for food. There was no refrigeration, obviously, out there; so, we delivered live cows. He was waving his pistol around. I’m accustomed to being around guns; but, they still scare the devil out of me. His was loaded; and, he had his finger on the trigger. At one point, he put it down on the log table. When he put it down, I threw the gun off into the bushes.

We were sitting at a log plank table where they had just split logs in half; and, that’s all there was. His men quickly pulled up their guns and pointed them at us. I remember that one of our staff was really frightened and I was too. I said, “Don’t you ever pull a gun on any of us ever again – me, my staff, any of our representatives. We are here to feed you, to clothe you, to make sure you’re healthy with medicine. None of us are armed. We will never come in here with arms. Don’t you ever, ever pull a gun on any of us again or your people will go hungry for three days.”

“You can’t do that. You can’t cut off our food.”

“If you threaten us and you change the rules, then the rules will change about how often you’re fed. If you change the rules and you’re going to threaten us, pull weapons on us, we’re not your enemies, we’re not here to hurt you, and we’re not here to in any way harass you.”

Our AID contracting man said in Spanish, “If you really think I’m buying these light cows and paying for heavy ones, I’ll just brand them when we buy them so you get what we’re paying for. Your men are with ours. When we go to buy, one of your men is right there to see what we’re buying.” We bought the cattle locally and then had to transport them by truck out of Tegucigalpa and then through a couple of provinces.

Douglas was angrily frustrated at that answer….He and his contingent of about 40 men just stood up and stomped off into the bush. We never heard another word after that but that was the first “accountability” confrontation. They wanted cash again.

We did inventories of everything, including medicines. There never had been an inventory. They said, “That’s our business. You’re not to go into our warehouses.” Their warehouses were just palm-thatched huts.

I said, “Well, our people will come in and do the inventory so we know how many uniforms you have and need.”

“You don’t know how many we have inside.” This was now the quartermaster section. How many uniforms they wanted didn’t match with how many people had to be fed.

Through us, our U.S. military were providing the uniforms. We worked out a logistics arrangement where the U.S. military would still fly them as far as Tegucigalpa. We would do the inventories. We would see how many were being distributed….

“We were heavily criticized by some who were the big supporters of the Contras about the tight oversight and accountability systems we put in place”

Early on, I went to the seven Congressional Oversight Committees and said, “We need to agree with you and, through you, the GAO [Government Accounting Office] and with our own Inspectors and our own auditors what the accountability standards are for this extraordinary program. How far are we to account for what kinds of things? If you really want us to take care of people inside, do you want us inside Nicaragua? Do you want the GON [Government of Nicaragua]  to know where we’re going inside and what we’re giving them inside?”

“No, you’re an overt operation. Before, it was a covert operation; so, they went in covertly and took care of the people inside….”

“Here is our proposal. We will get people on the inside to identify who their family members are outside where we can count them. The family members have to show identity of who is inside, how many are inside. We’ll correlate it with the records that came from DIA [Defense Intelligence Agency] and CIA and your own records on the Oversight Committee. They’re not going to agree.

“We’re going to have to agree on what’s a common number and what amount of monthly cash is to go in so that the Contras inside can buy food, and so that they won’t, as they’ve threatened to do, use their guns to force people to give them food if they didn’t have any money to buy food. You don’t want enough cash that it looks like we’re paying them off.…I’ve got the records of how many got paid how much. We can’t justify that amount, much lower.”

“We’re glad, Mr. Morse, that you have it much lower. We think it’s a lower figure. The accountability standard will be that you turn cash over to one of the commandantes at the border and they sign for it and they take it in.” …

Our plan was that we said we wanted a signature from each of them:  get a signature from each one who got his cash for food, that will be the acceptable accountability standard. When we get back the signatures, we can cross check them with families, lists, names from people outside where we have access to them.… We had four lists of all the Contras. None of them agreed.

We did one other accountability thing. Congress said, “GAO is going to do an audit on you.”…

I said, “Fine. Then we will call for a concurrent audit by our AID auditors and, if we’re going to have a concurrent audit by your GAO and our auditors, I’m going to use some of this money to hire a private audit firm to make sure you’ve got something credible to audit. Otherwise, you won’t have any receipts, you won’t have any records. Rather than have AID staff do this, I want a private audit firm to keep those records for us.”

So we hired Price Waterhouse. They had people on the ground. They had people who were Spanish speaking in their local dialect.

At first, PW didn’t want to take it on, but eventually those were the people to whom every single receipt went first, not to AID or GAO, but to an independent audit firm. We were heavily criticized by some who were the big supporters of the Contras about the tight oversight and accountability systems we put in place. We literally had our own officers, then Price Waterhouse, our AID auditors, AID inspectors and a Contra officer.

PW reported to me and our staff. GAO reported to the Oversight Committees. They said, “You’ll not be able to work under all of this. It will slow the program down.”

I said, “No, they’re all there to expedite it.” Any time we had a question, I could turn to the AID and GAO people either in the field or here in Washington and say, “Look, we’re about to do this. This is how we intend to do it. Do you have any problem with that?”

I wanted concurrent auditing, not something that came out six months after a potential problem. That is how Price Waterhouse and the other auditors and inspectors interfaced. We had 121 audits done on us in two years by the whole system, up and down.

When we closed down at the end of the two years, there was not one outstanding audit recommendation. Nobody every closed us down or stopped us because of the way we were doing something….

“’Nobody has come into this Appropriations Committee and given money back before’”

We agreed initially on what a tolerable loss would be, what I called the “evaporation rate,” especially of gasoline. We had to bring in trucks and put in bladders that had been used in Africa for delivering water. I just adapted the same kind of logistics to the Contras about delivering gasoline remotely out there in bladders.

At first, the evaporation rate was really high. One of the Contras was on each truck. One would ride in the delivery truck. The contractor would drive it. Then we would periodically put our own person on it for spot checking. When we started to put our own people on the delivery trucks for spot checking, and quickly put a Price Waterhouse auditor on it, the evaporation rate stopped. We didn’t have any more thefts of gasoline.

The Contra logistics people on Douglas’ staff privately told us that under the CIA they would get half of what started out each time.

Q: It was sold en route?

MORSE: Or siphoned off by agreement, whether it was the driver, the company, the Contras, the police… You had to go through a lot of military and police checks to get out to where you were going.….

Deputy Secretary John Whitehead asked if I would go with him to the White House one day to see the President. He wanted an update on the Contras….We went in the Oval Office to see President Reagan.

He was almost paternalistic in his attitude to the Contras and paternalistic in the way that he addressed me and Deputy Secretary Whitehead: “I hear you’re doing a wonderful job taking care of our boys.” He had a personal identification with them.

I wasn’t in there very often with him, a couple of times. His attachment to the Contras was very clear. I’ll leave it at that.

We got $30 million for the first six months. By the way, when Allen recruited me, he said, “It’s in the legislation that this is a six-month operation.…”

At the end of about four and one-half months, I went back up to the Oversight Committees’ staff and said, “This is what we’re spending. This program is going to go on for a second six months. This is what we’re doing. I’ll have $6 million of the initial $30 million left over. We can turn that back to you but we’re going to need $30 million for the next period because these costs weren’t incurred: they were start-up costs; they are recurrent costs.”

They said…,“Nobody has come into this Appropriations Committee and given money back before. Henceforth, you get whatever amount of money you want for this exercise.”

I said, “I can be honest to that trust.” So, it ran about $30 million every six months and, sometimes we’d give money back. We ran it for two years at roughly that level.

After the Esquipulas peace process got to the agreement that there would be a national election, they added to the six months legislation that AID should support the election process in there. So, we got extra money, $20 million to support the election….

Getting the Contras to go back to civilian life

Q: Did we attempt to do any development type activities?

MORSE: Oh, yes. You know, my commitment there, you take every emergency and try to turn it into a development advantage. Regarding development, we first of all did a survey of all the Contra families and those combatants “on vacation” in the camps:  how old, male/female, children, adults, how much schooling, what did they do before, farmers, skilled people? Then we did another survey on their aspirations when this is over.

We hired Creative Associates (CA) that have quite a bit of experience with Latin America. They are education people primarily, but have a lot of social psychology experience. We worked closely with them. They were fabulous partners.

With the aspirations, you could find out who felt they wanted to go back to school when the war was over. We kept putting it in terms of: “After the elections, you will be demobilized and go back into a civilian life. What do you want to do at that point? Where will you go? What kind of a living? What family responsibilities?” The majority of them were campesinos. They wanted to go back and farm. They were hoping to get a cow, a plow, seeds and access to land.

Land was very important to them, overriding. Who wanted to go back and continue their schooling even though they maybe only had four years of schooling? At what level? Was it realistic? Could they sit in the classroom with younger kids? Were there adult education programs? Which ones had been working as mechanics on their Contra vehicles? Which ones had become really good paramedics and knew medicine from working with injured/sick Contras? What were their functions and their assignments within the Contra system that would indicate some skills?

So, we put all that information together and then sponsored programs that ranged from numeracy and literacy through vocational training. CA offered everything where they had some skill/interest – electricity, woodworking, metalworking, auto mechanic.

I bet we trained enough barbers to cut all the hairs in Central America every day. You could train a barber within two or three days with a comb and scissors start-up kit! Those who wanted to go back to school and who were ready to start to study CA were tested, giving them a sense of hope, a sense of future. This was the biggest change.

Psychologically, to begin to think of themselves as civilians when up to then their identity came from that gun and that uniform. We were trying to build up to the point where we had to demobilize them and disarm them and mentally they could see themselves with an identity that was different when you stripped off the uniform, when you took away their gun.

Were they psychologically going to do this? Or were they going to run off, take their gun, go into the bush and become bandits and earn their living the way they had always earned a living, through their gun? That’s what they knew.

Creative Associates was extremely helpful in doing the surveying, then arranging the training and doing the psychological preparations for all of this. So, we had all of these classes going on. That was another thing – keep them busy, so they didn’t get bored and go off and become just bandits and just run away from the Contra organization.

We wanted to keep the discipline and use their own structure for that discipline. We had to find that balance of using their organization, discipline to accomplish the coming psychological change, the civilian preparation to go back. We trained them in democracy and gave them enough faith that they could achieve their purpose through an election instead of through the guns, through the rebellion. These were pretty simple concepts, but critical for sustainability. The testing and training was well received, especially by the families in the camps. Remember, we were dealing with a total of 30,000 people….

Among them, there were other sensitivities; and, it took a lot of work on our part to deal with some. There were a couple hundred female sex slaves. The men talked about them as their girlfriends, as their wives, as female combatants; but especially through the insights that we got through contractors working the medical side, we could see a lot of female abuse that was coming into the medical tents.

These “classrooms and clinics” were all pretty much tents except for the big hospital, which was closed down right after we got there. It was at a Honduran army base. These women, a couple of hundred of them, had been so traumatized, some of them taken in their early teens as sex slaves all over the war.

How do you deal with them? What special needs will they have? Many who would literally service as many as 10 and 12 men in a single night. Others were traumatized because they were in love with one man, but then he had to share her with others. There were others who had borne several children. So, we had a whole separate program of maternal and child healthcare and psychological counseling and that kind of operation with them….

The end of the peace process and the beginning of the electoral process

Let’s turn to the election. When the Esquipulas peace process got to the point where they said there would be a national election to settle who would run Nicaragua, Congress did appropriate the other $20 million for election support.

AID wasn’t that involved in “supporting elections” so, we laid out and took up and cleared with them what we proposed as parameters. They bought exactly what we laid out. We would not support a particular candidate.

We would not support a particular party. We would support the democratic and the election processes. We could support people who were doing electoral educational materials, for what democracy and an election would be, but not campaign materials for a particular party or candidate. We could support rallies that were training people in getting out the vote, registering to vote but, if it turned to the point where it was a political rally for a particular candidate or party, no.

So, we had a whole series of what the standards were for supporting the elections. There were some who felt, “Well, Mrs.[Violeta] Chamorro is the American candidate and we should support her and her party.”

But, to be fair, when we said, “Whatever we’re going to do for Mrs. Chamorro, we will do for Daniel Ortega,” they were furious on the right about that and tried to stop it. But, by that time, we had built enough understanding with the Oversight Committees that they didn’t stop us.

We knew we wanted to work for both Central American democracy and with human rights and election groups. We needed to work with the whole country. We’re working with an election process inside Nicaragua, whereas before we were not inside Nicaragua. We were working outside Nicaragua.

Q: Were you doing this election work with the Contras?

MORSE: We thought they’re all going to go inside, go home to vote, therefore tilting the election numbers because they’ll go. One of the more interesting parts of this was trying to be balanced and trying to support the electoral process at a pace that was demanded by the Esquipulas peace process. Again, the notwithstanding clause was applied to work with the U.S.-based democracy and elections groups, including the National Democratic Institute and the National Republican Institute.…

We had to rotate the staff every six months, except for some who agreed to stay longer. We were just bringing people in from wherever we could get our hands on – a financial controller, a field operator, a director. We had an absolutely fantastic group of people. To pull good AID staff out of worldwide missions and Washington assignments was often disruptive. I tried to provide recognition and incentives to lessen that….

Repatriation, and turning swords into plowshares

Q: What about the Contras out of Honduras? Were you involved in that? Presumably, they were supposed to be repatriated.

MORSE: We turned them over to what had been agreed to in the Esquipulas peace process, that an international organization rather than we, the U.S., would take them back in for fear of by Central Americans and the Nicaraguans that we would somehow tilt it.

So we looked at several different organizations. I called a man who I had known when he was the Controller of AID, who was now the Deputy for the UN High Commission for Refugees, Doug Stafford. Doug and we had hours of conversation on the telephone and asked if UNHCR would take them. Of course, the Contras weren’t refugees in the historical precedent; but, they were cross-border. He agreed in principle.

I kept arguing, “Wait a minute, your definition of a refugee is somebody who is outside his own country, across the border. Then how do we deal with the Contras inside?”

“Well, then maybe the OAS [Organization for American States] has to take care of them,” he offered. So we had long discussions with the OAS about what part they would play.

Then we talked to the UN system in terms of receiving them when they came inside. Who got the buses? Who verified who was legitimate? Who were the Nicaraguans going to accept? How do you know these aren’t Hondurans that are infiltrating and immigrating? How do they show their Nicaraguan citizenship, their coming home? Who pays for the buses? Where do they go? What kind of reception center? What processing arrangements? All of that.

It was a tremendous operation that took a lot of coordination with the UNHCR, the Honduran government, the Nicaraguan government, our government, the OAS, the contactors, the UN and the Contras before they could leave the camps to destroy their weapons.

Then there was the whole process of planning turning in their weapons and then taking a blowtorch and cutting the barrels off and literally making them inoperable, or welding their breech closed, disposing ammunition and anything lethal that they should not take…all of this. Then how many were brought in versus how many they probably had and how many they buried under the palm trees and all the rest of this lethal stuff. So it was a nightmare.

Q: What incentive did they have to give up their weapons?

MORSE: They wouldn’t be allowed to get on the bus to go home; and, they wouldn’t be given the repatriation package until they had turned in a minimum of one weapon per person.

Q: The package was financial and what else?

MORSE: Financial and in-kind support, on the inside, depending on whether they were going home or to school, a vocation, small business or back on the land. Also, in terms of that process, we tried to get them to form a veterans’ association. Their influence had been through the gun; and, their political influence was through their military command structure. We tried to teach them that in a democracy their influence was going to have to come through their political association. Were they willing and able to stay united and have spokespersons who could put pressure on the elected government?

There were some on the Hill and in Central America that thought keeping them associated would allow the Contras to be called back quickly to renew fighting. They elected spokespersons; but, they wanted them to be active military people, not as a retiree or a veterans’ association. That had to be established in country. They had to set up their own offices but, were we allowed to pay for that office while they were setting it up? It was part of the demobilization process. There were a thousand little things like that that you could spend time on, that we could go through.

Then there were disagreements that went on between the three fronts because the Southern Front and the Atlantic Front were willing to follow a different repatriation model than the Northern and Costa Rican fronts were. Were they allowed to take their medicines and their vehicles back inside? Was that going to threaten the peace process because all this was inside that could be mobilized quickly and lead back to war? There were thousands of little decisions like that to be made day in and day out. Our people on the ground were taking them into account with good political sensitivity.

Not all [of them returned to Nicaragua]. Some of them had married Hondurans and Costa Ricans and wanted to stay out. Others were afraid to go back; they didn’t think they would be protected, because of maybe people who knew what they had done as fighters. So there were many that elected to stay out. I don’t know what the figures ultimately were but my guess is that 90% of them went back.