An Ending, or just another Beginning?
El Salvador’s completion of its first MCC compact is just a first step

(This blog is the first in a series on the Millennium Challenge Corporation (MCC), and how its foreign aid policies affect El Salvador’s path toward inclusive, sustainable development.  El Salvador is currently negotiating a second round of MCC funding slated to develop areas such as the Bay of Jiquilisco for agriculture, fisheries and tourism over the next five years.)   

September 20^th marks the official completion of El Salvador’s first compact with the Millennium Challenge Corporation (MCC).  This five-year, $461 million venture in U.S. foreign aid has expanded rural development across a broad swath of El Salvador’s Northern highlands.  The overall goal for this aid?  Reduce the poverty rate of inhabitants in the Northern zone by 8% over the next five years, or by 2017.  In many ways for El Salvador and the MCC, today is not the end of a project, but rather just the beginning.

After five years and the MCC’s $461 million dollars, is the Salvadoran government and rural sector properly equipped to parlay this investment into sustainable, inclusive economic growth over the long term?  And, perhaps more importantly, how has the MCC’s model of development helped El Salvador and the Northern highlands prepare for this moment moving forward?  How can this model be improved?

Of course, it is still far too soon to tell whether this MCC compact will spur the kind of broad-based results required to usher in an across-the-board drop in the poverty rate.  In the meantime, the MCC is already touting several impressive outcomes to commemorate its successful completion:  220 kilometers of rehabilitated or newly-constructed roadways and 23 new bridges cut travel time between Santa Ana and La Unión in half.  Nearly 26,000 rural households now have access to reliable electricity. 30,000 youth enjoyed improved educational programs and facilities.  Over 17,000 farmers received training and inputs to invigorate their fields and small enterprises.

These numbers are nothing to sneeze at, especially given a history of neglect in fostering measureable improvements in El Salvador’s rural areas.  More roadways mean greater access to regional markets and business centers.  Better schools mean more opportunities to train the next generation of Salvadoran professionals.  Electrification improves household living conditions and well-being.  Nevertheless, after the dust settles on construction and training programs, and the contractors shutter offices in the Northern Zone, the real challenge toward sustainability begins.  As the Executive Director MCC’s Salvadoran operation at FOMILENIO stated in La Prensa Grafica, “Our focus here was not about handouts, because instead we provided farmers with the tools necessary to continue benefiting post[compact].”

If the efficacy of these “tools” provided by the MCC is one thing, learning from this first compact is another.  At the MCC’s quarterly Town Hall last week in Washington, CEO Daniel Yohannes talked in detail about the importance of transparency and accountability within the MCC’s work.  It is imperative, he said, to clearly show countries how the results of these compact investments are generating income in impoverished areas.  This is particularly important in cases like El Salvador, which is lining up for a possible second infusion of MCC aid to target the coastal zone beginning in 2013.

It’s important that the development community in El Salvador take a long, objective look at the successes and challenges of this first compact, its social and environmental impacts, and its effect on the country’s political institutions.  Mr. Yohannes’ treatise on transparency is especially critical as El Salvador is already far along in negotiating a second, $270 million compact slated for priority coastal areas like the Bay of Jiquilisco.  To not learn from both the successes and challenges of implementing the Northern zone compact would be a missed opportunity.

Already, the MCC openly admits that in designing its infrastructure and roadway projects in the Northern zone, the costs to resettle and compensate rural households displaced by a new, wider highway corridor were underestimated, and proper policies were nonexistent.  Roadway contracting firms themselves, some foreign and others Salvadoran, became tasked with creating a resettlement scheme on the fly, which led to what the MCC described at its recent Town Hall as “glitches” in compensating and re-locating rural property owners.

Hopefully, lessons learned during this process can be carried over into the proposed second round of funding.  More roadways and infrastructure are being planned to open up development along the coast and through rural communities.  In the case of the Bay of Jiquilisco, this development could potentially affect critical ecosystems in Central America’s most extensive mangrove forest.

At EcoViva, we and our local partners and allies are taking a critical look at how the MCC operates, what has worked in El Salvador and elsewhere, and what hasn’t.  We believe that local development processes, proposed and overseen by community and local government actors in the region, can offer important lessons to consider that add value to U.S. foreign aid investments.  Without this involvement, it will be much harder for El Salvador to take the reins after MCC funding has come and gone.   Five years and $461 million dollars is a terrible thing to waste.