A November 1987 field report of the Water and Sanitation for Health (WASH) project (PN-AAZ-304; ARDA 14/3, Item 069) analyzed levels of coverage, investment plans, and additional funding needed to meet the urban and rural water supply and sanitation (WS&S) targets of the Central American Initiative (CAI). This document updates that report through 1988 and assesses the current WS&S situation in the region. According to the Kissinger Commission, the CAI's WS&S objectives were to be met by 1989. The 1987 report indicated that only 2 of 24 country objectives - urban sanitation in Belize and rural sanitation in Costa Rica - had been met by the end of 1986. The present update indicates that an additional 860,000 persons are being served with adequate water supply and an additional 1.232 million with adequate sanitation. With these advances, it is expected that 12 of the 24 objectives will be met by 1989. Nevertheless, the increase in persons served by adequate WS&S facilities in the past 2 years has been only slightly greater than regional population increases. Further, of the 12 remaining objectives, 10 will not be met until sometime after 1992. A continuing problem is that committed funds are substantially below the investment levels required to meet the objectives and develop the long-term approach needed to build sustainable WS&S facilities and institutions. Includes country profiles of the six CAI countries - Belize, Guatemala, Honduras, El Salvador, Costa Rica, Panama - and of Nicaragua.