MCC looks beyond borders in Central America

By Claire Luke 12 May 2015

Millennium Challenge Corp. CEO Dana Hyde and Guatemalan Minister of Foreign Affairs Carlos Raúl Morales sign a $28 million threshold program on April 8, 2015. Photo by: U.S. Embassy Guatemala / CC BY-NC-ND

Millennium Challenge Corp. CEO Dana Hyde has made no secret about the fact that she wants the agency to pursue regional compacts, in addition to the single-country compacts it currently undertakes. In Central America, conditions might be right to get that regional ball rolling, Hyde told Devex in an exclusive interview.

U.S. aid agencies and advocates are beginning to pay more attention to Central America. The U.S. Congress continues to deliberate over a $1 billion aid plan to the region, and MCC’s work in Guatemala, Honduras and El Salvador — the so-called Northern Triangle — will look to tackle many of the same issues put forward in the administration’s U.S. Strategy for Engagement in Central America.

Currently, the MCC is allowed only one compact per country at a time, which it says hampers regional collaboration across programs. Most countries that would be eligible to participate in a regional compact either already have a compact underway, or neighbor a country that does. That makes it difficult for MCC to find two or more countries that could both begin a regional compact at the same time, so the agency is asking Congress for the authority to implement concurrent compacts.

“Our ability to reduce poverty through growth is maximized across borders,” Hyde told Devex, adding, “We see in Central America how much more growth we could provide with connecting roads.”

Linking roads would promote regional trade to create economic growth in a region beset by violence and economic depression that fuels illegal immigration, an MCC executive summary states. The summary also stated that to the extent it can, MCC is already conducting some regional work in Central America — namely by coordinated public-private partnerships.


Still, legislative changes would allow a broader expansion of this kind of work. The effort has been well received, Hyde said, and she remains “cautiously optimistic” as the conversation in Congress is “moving forward.”

The strategic pivot enjoys at least one powerful champion in Congress. Texas Republican Rep. Kay Granger, chair of the House Appropriations subcommittee on state and foreign operations, told Devex in January that she approached MCC with the idea of expanding beyond the single-country model to regional compacts.

“I’m becoming more and more uncomfortable with funding a country, instead of funding to solve problems and look at regions,” Granger said.

The administration’s Central America plans might be harder to push. Congress has voiced significant concerns about the administration’s proposed strategy — and funding boost — for the region, citing persistent violence, corruption and general ineffectiveness of previous efforts to aid the region.

Scott Hamilton, Central America director at the U.S. Department of State’s Bureau of Western Hemisphere Affairs, told Devex on the sidelines of a hearing last month that MCC’s work in the Northern Triangle countries should be an encouraging sign that the countries are serious about improving their own governance. MCC only works with countries that have demonstrated commitment to reforms and satisfied a list of governance indicators. Hamilton leaned heavily on that argument when he pressed Congress to pass the U.S. Strategy for Engagement plan.

“The three countries invited in independent monitoring organizations … They’re saying we’re more open than we’ve ever been,” Hamilton told Devex.

With its announcement last month of a compact with Guatemala, MCC now has $320 million committed through compact and threshold programs in the three Northern Triangle countries.

The compacts echo many of the core focus areas in the U.S. administration’s agenda, Hyde said, citing efforts to create an environment for faster economic growth and employment, improve education outreach and quality, partner on projects with the private sector, and build strong governance and transparency.

“Our work is complementary to what’s contained in the request, but the work we’re doing there now isn’t dependent on new requests,” she told Devex.

In Guatemala, MCC is working to increase tax revenue and domestic resource mobilization, and partnering with a new public-private partnership agency to prepare “new projects in the pipeline” — a model MCC is interested in bringing to in Honduras and El Salvador, Hyde shared.  

“The future of development won’t be about the amount of aid dollars, but how that assistance will help catalyze economic growth, specifically private investment,” Hyde said in an address at the Center for Global Development in April.

There is, “tremendous opportunity to shape PPPs or engage blended finance or co-finance,” Hyde said, adding, “you’ll see in the next decade MCC employing those opportunities in investment.”

The agency is also constantly looking at new ways data can drive its development decisions, Hyde told Devex, describing data as “an extreme sport” for the agency. MCC is particularly interested in expanding data efforts around gender equality and governance, which could help assuage some of Congress’s concerns about transparency and accountability in the region.

MCC recently entered a three-year partnership with U.S. President’s Emergency Plan for AIDS Relief to increase data on gender, economics and health and partnered with Data2X to focus on data gaps in gender and on prioritizing sex disaggregated data, an effort Hyde described as, “sorely needed.”

The effort could be particularly useful in Central America, where gender inequality remains a major constraint to development, with reports of domestic violence and femicide on the rise and persistent inequality of access to health care and education for women.

Stay tuned to Devex for more news and analysis of U.S. aid, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.

About the author

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Claire Luke

Claire is a journalist passionate about all things development, with a particular interest in labor, having worked previously for the Indonesia-based International Labor Organization. She has experience reporting in Cambodia, Nicaragua and Burma, and is happy to be immersed in the action of D.C. Claire is a master's candidate in development economics at the George Washington Elliott School of International Affairs and received her bachelor's degree in political philosophy from the College of the Holy Cross.


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