On the day the Millennium Challenge Corporation (MCC) signed its second multiyear poverty-reduction agreement - with Honduras for $215 million - the U.S. government entity announced its board of directors has agreed to fund development proposals from Nicaragua and Cape Verde.
The MCC expects to reach more agreements with qualified countries for locally defined development projects in 2005, said MCC's Chief Executive Officer Paul Applegarth June 13 during the Honduras agreement signing ceremony at the State Department.
A Honduran woman stands outside her house in a shanty town on the outskirts of Tegucigalpa June 16, 2005.
The three agreements - or compacts - bring to four the number of country development plans approved by the MCC board since the Bush administration's innovative program for assistance designed to make aid more effective was established in 2004. The first MCC compact, with Madagascar, was signed in April.
The proposed Nicaragua compact is for $175 million and the Cape Verde agreement is for $110 million, according to the MCC.
The Millennium Challenge Account (MCA), which is administered by the MCC, is a model of aid that stresses good governance, accountability and "building a future of hope," said Secretary of State Condoleezza Rice at the signing ceremony. Rice chairs the MCC board.
"Lifting suffering humanity out of poverty is one of the greatest moral challenges of the 21st century, and how the world's democracies rise to that challenge carries profound implications for freedom, growth and security across the globe," the secretary said.
The five-year compact with Honduras aims to help the country - still recovering from a devastating 1998 hurricane - build on the foundation of democratic change begun in the 1980s and of the economic liberalization of the 1990s, according to the MCC.
"Our citizens must see that democracy delivers more than just promises" but also the structure for economic growth and development, said Honduras President Ricardo Maduro Joest at the signing ceremony.
The MCC compact "will be a key motivator for sustainability of good policies in the economic, social and political area," Maduro said.
The Honduras government sought input from the general public on the development-funding proposal it submitted to the MCC 10 months earlier. The proposal calls for the inclusion of nongovernmental organizations of the local independent board that will monitor how the aid money is spent and the results it will achieve.
MCA funding in Honduras will support programs that promote economic growth by increasing productivity of high-value agricultural products and the business skills of farmers, and by reducing transportation costs, making it easier for farmers to receive production inputs and transport their harvests to market.
"This agreement is a testament to Honduras' commitment to good governance and establishing the right policy framework in order to use aid effectively," said Paul Applegarth, MCC chief executive officer.
"The MCC has provided incentives for Honduras to build a political and economic infrastructure which will lead to long-term development,” said Congressman Jim Kolbe, also attending the signing ceremony. Kolbe, a Republican from Arizona and MCC supporter since the Bush administration came forward with the new aid idea, chairs the House of Representatives Appropriations foreign operations subcommittee. The idea for an MCC was formally set forth at the global Finance for Development conference in Monterrey, Mexico, in 2002.
"We cannot diminish poverty through wealth transfers alone,” Kolbe said.
"Poverty reduction can come by increasing opportunities for "wealth creation in the developing world," he said.
U.S. Trade Representative Rob Portman, who also serves on the MCC board, said the Honduras compact would maximize the link between development and trade policy, adding that the proposed free-trade agreement between the United States and Central American countries and the Dominican Republic (CAFTA-DR) would be a “powerful tool” to help reduce poverty through trade.
CAFTA would lower tariffs for food and other consumer products and thereby increase the standard of living of people in Honduras, Portman said. “The Honduran compact provides fertile soil that will allow the CAFTA opportunities to take root and to flourish,” according to the trade representative.
Currently, 64 percent of Hondurans live at the poverty level, Applegarth added. The trade agreement is expected to help reduce poverty, helping nations benefit broadly from free trade.
Source: U.S. Department of State