MCC shutdown would risk global trust, cede ground to China, experts warn

Last week, the Millennium Challenge Corporation — a U.S. aid agency focused on economic development — was informed by the Department of Government Efficiency, or DOGE, that it must rapidly wind down all operations, with significant staffing reductions. The fallout could be more than just abandoned infrastructure projects, it could lead to a major erosion of trust in the United States, experts told Devex. But that may not be final. Efforts are underway to save the agency, especially given speculation that Secretary of State Marco Rubio may not have been informed of the plan in advance, several sources told Devex on condition of anonymity due to the sensitivity of the information. It appears that various parts of the U.S. government were not aligned on MCC’s fate. The agency had recently received a fiscal year 2026 budget from the White House Office of Management and Budget — a sign of continued support that made the possible shutdown all the more surprising, several sources told Devex. Ambassadors in MCC partner countries were caught off guard by the news, unable to inform or plan with local partners. In many cases, local governments found out about the agency’s possible closure through the media. On Thursday, Zambia’s finance minister, Situmbeko Musokotwane, told Devex he was still awaiting formal communication. “A big piece of what is going on right now is people making sure everyone understands how much bipartisan support MCC has, because it’s not clear that DOGE is coordinated with other parts of the executive branch,” Alicia Phillips Mandaville, who worked at MCC in the early years and again during the Biden administration as the vice president of the Department of Policy and Evaluation, told Devex. There is an effort at the State Department to buy more time for decisions on the agency’s future. The deadline for staff to take the deferred resignation or early retirement programs was extended on Monday by a week, an MCC employee who requested anonymity for fear of retribution, told Devex. Staff want the deadline extended so any decision can be made as part of the Trump administration’s foreign assistance review, with the State Department and the White House weighing in. “There is a lot of concern within MCC and with our stakeholders that DOGE has usurped this decision making authority and that a small group of DOGE staffers do not realize the national security impacts of ending our programs abruptly, recklessly,” the employee said, adding that the feeling is Rubio is best placed to make the decision. But even as efforts continue to preserve MCC, DOGE has begun canceling contracts in recent days, according to sources who requested anonymity for fear of retaliation. The agency’s fate likely hinges on Rubio, who as secretary of state serves as the chairman of MCC’s board — the only entity with authority to approve or terminate compacts or large grant agreements. Several sources noted that MCC compact agreements function similarly to treaties, requiring mutual commitment to specific actions. MCC’s board also includes Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, the acting CEO of MCC. It is supposed to have four private sector board members, though only one — Ander Crenshaw — is currently in place. His term has been repeatedly extended as Congress has failed to confirm new appointees. If MCC is dismantled, “what we've fundamentally broken is the trust between the United States and American country partners all around the world, throughout Africa, throughout Asia. We've created an enormous vacuum now where, not only will we leave behind white elephant projects, we will have broken political trust that just does not get regained quickly, overnight,” said Fatema Sumar, an adjunct lecturer in public policy at Harvard Kennedy School and executive director of the Harvard Center for International Development, who previously served as MCC’s vice president of compact operations. “That's the biggest tragedy of this, to leave country partners in the lurch,” she said, adding that these are some of the poorest countries, many of which are dealing with fiscal or budgetary challenges. A model that worked MCC works with countries that meet a strict set of governance criteria and provides large grants to address key economic constraints — often in exchange for policy reforms. It has also served, especially in recent years, as a tool to counter Chinese influence. It emphasizes measurable outcomes and accountability, using a scorecard system to evaluate countries based on 20 indicators — including corruption, political rights, and civil liberties — to determine eligibility for MCC funding. “This is a complete tear down of the current architecture and retreat from global leadership, and it's going to have consequences for U.S. national security and foreign policy.” --— Fatema Sumar, adjunct lecturer in public policy, Harvard Kennedy School The agency has invested nearly $17 billion in 47 countries in the past 20 years, aimed at improving economic growth, earning a reputation for being data-driven and transparent. “It's stunning to me, the irony to go after an agency that has, time and time, delivered one of the most cost-effective ways of bringing people out of poverty,” Sumar said. “It has had year after year, clean audits, a clean track record of no waste, fraud, or abuse because it has such a strict focus on accountability and measuring results.” MCC consistently ranks as the most transparent bilateral aid agency, according to Publish What You Fund. With a modest $900 million annual budget, it is widely seen as great value for money, sources said. That is part of what has left many confused about the news that it would be shut down. “MCC is so transparent and has such a really visible public commitment to being clear about what it does and how it does it, and has so many visible rules about how it spends its money that some of the charges people laid against the development sector as a whole, no one thought you could really level them against MCC,” Mandaville said, adding that they haven’t been but that didn’t prevent the effort to shut it down. MCC was founded under former President George W. Bush as part of an effort to reform and modernize foreign aid by using an innovative mechanism focused on good governance, accountability, and measurable results. Its model has made it popular among lawmakers from both parties over the years, including as recently as December, when Congress approved a bill to expand the number of countries where it can work. “It's very sad to see an institution that really had demonstrated an innovative, nontraditional approach that delivers results that had bipartisan support dismantled,” said Patrick Fine, a nonresident senior fellow at the Brookings Institution. But the move to close MCC also signals a broader shift in the administration’s approach to foreign engagement, he said. Some MCC staff, speaking anonymously for fear of retaliation, reported that DOGE had told leadership that the agency did not align with the Trump administration’s policies. “The bigger story is why does the administration view this as superfluous or inconsequential or not necessary to its conduct of foreign policy and foreign affairs. And there, I think the only answer that you can come up with is that the administration is not interested in building partnerships, particularly with developing countries, which it appears they view as weak and inconsequential and not important to the interests of the U.S.,” Fine said. Sumar echoed this, calling it a full retreat from global leadership. “This is not just a bureaucratic reshuffling of the decks. This is a complete tear down of the current architecture and retreat from global leadership, and it's going to have consequences for U.S. national security and foreign policy, and it's going to cost millions of people their lives and economic livelihoods,” she said. A broken trust MCC compacts take years to develop and are built on trust and partnership, several former MCC leaders told Devex. A unilateral suspension of those compacts and partnerships runs counter to the core of what MCC was founded on, John Simon, who helped build MCC in the early days, told Devex. “The first impact is going to be a real erosion of trust in the United States,” he said, adding that these countries were told they were special and “getting a particularly attractive partnership relationship with the United States and now with very little warning and very little preparation that’s being thrown in the toilet.” While MCC has canceled compacts before, it was only when a country breached its commitments or experienced a coup. In this case, even high-performing countries would have their compact cancelled. Detritus With MCC compacts in varying phases — some signed, some underway — the impact will differ. But in some cases, U.S. flag-bearing projects could be abandoned as well as reforms aimed at making those places more friendly to U.S. businesses. Think incomplete road projects, abandoned, electric lines not fully connected, and more. “To the extent you have these half-finished infrastructure projects, they’ll be monuments to U.S. inconsistency and U.S. neglect. A giant advertisement in the middle of a country about how the United States can’t be trusted,” Simon said. Terminating compacts before the work is complete will “scatter construction detritus” — waste or debris — and symbolize U.S. betrayal as a business partner, Mandaville said. MCC has terminated compacts before, even in midstream, but the process has been drawn out and careful. In one case, it rebuilt a runway even after compact cancellation because it was the only runway and served critical national needs, including for the U.S. military. A win for China In recent years, MCC has been touted as a U.S. tool to counter the Chinese government’s influence, particularly through its large-scale infrastructure Belt and Road Initiative. Abandoning projects midway leaves a clear opportunity for Beijing to swoop in and complete them, painting the U.S. as an unreliable partner, several experts said. “MCC works in countries where China has been outcompeting the U.S. on infrastructure so it works exactly on the turf where the competition between China and the U.S. is most direct and most high stakes,” in Africa and parts of Asia, Nancy Lee, a senior policy fellow at the Center for Global Development, said. Nepal is one such battleground. Its MCC compact, a decade in the making, became the focus of fierce geopolitical tension between the U.S. and China. Despite Chinese pressure and a misinformation campaign, Nepal eventually committed. “We’ve had many ups and downs, and it’s really centered on whether or not Nepal could trust the United States at the end of the day to see it through. There’s been a lot of questions about that,” Sumar said. When MCC’s projects were paused as part of the foreign assistance review earlier this year, many in Nepal saw it as a de facto suspension of their compact. Chinese-supported political parties declared they had been right all along — the U.S. couldn’t be trusted, Mandaville said. Abandoning the compact, which centers on roads and electricity lines, will “leave a huge gaping hole and a trust deficit between the United States and Nepal. But more importantly, it's going to create an entire vacuum that Beijing and others will easily exploit and sell,” Sumar said. And it wouldn’t be the first time China has swooped in and finished MCC projects, claiming them as their own. Mandaville noted she had seen it before, when MCC pulled out due to coups or other violations. An alternate path Several proposals are circulating about how MCC could be adapted to align with the Trump administration's goals — if it survives, Simon said. “It's painful to see something that has brought so much good in the world to be so summarily vaporized. Like so much of what's being destroyed, it can't be rebuilt. MCC was built on this concept of partnership and trust with the partner nations. And that's not easily going to be resuscitated.” He pointed out that it took years to set up MCC’s systems. One leaked reorganization plan earlier this year proposed merging MCC into the U.S. International Development Finance Corporation, created during the first Trump administration. “Trump has the chance to make MCC great by changing it or merging it with the DFC that he created, but instead DOGE is giving the Chinese government huge wins all over Africa, Asia, and Latin America,” said James Mazzarella, a former senior MCC official, and national security official during the first Trump administration. “If MCC isn’t shut down like this in such a rush, there are smart proposals being floated, oddly enough some of them by current Trump officials, that would allow the agency to eventually merge with the DFC, maybe even be used as part of the sovereign wealth fund idea, and certainly to secure supply chains and critical minerals.” If the U.S. truly wants better cooperation with foreign governments, it should expand MCC, not shut it down “in a way that pisses all of them off,” he said.