Honduras Compact

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Harvesting Out of Poverty

When we first wrote about Edras Mateo in 2009, he was receiving training through the $30.4 million Farmer Training and Development Activity in the Rural Development Project.

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MCC's Integrated Development Approach Has Produced Results in Honduras

MCC's compact with Honduras takes an integrated approach, linking investments in transportation and agricultural development.

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Policy Reforms Matter: Promoting the Sustainability of MCC Programs in Honduras

MCC and its partner countries look closely at the environment in which MCC investments are being made, and plan reforms to policies that might limit the investment's impact and sustainability.

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In June 2005, the Millennium Challenge Corporation signed a five-year, $215 million Compact with Honduras aimed to reduce poverty by alleviating two key impediments to economic growth: low agricultural productivity and high transportation costs. Strategic investments in rural development and transportation will increase the productivity and business skills of farmers and their employees who operate small- and medium-sized farms, and will reduce transportation costs between targeted production centers and national, regional, and global markets. The MCC Compact in Honduras entered into force (EIF) in September 2005, formally initiating the 5-year timeline for project implementation.

The transportation project in this Compact has been restructured due to escalating global construction costs and an expansion of the construction works required. In September 2009, MCC’s Board decided to partially terminate MCC’s Compact, ceasing to fund the vehicle weight control activity and the portion of the farm to market roads activity corresponding to the construction and improvement of approximately 93 kilometers of rural roads.  The termination is a result of actions by the government of Honduras that are inconsistent with MCC’s eligibility criteria.  In addition, MCC’s Board determined that a hold would be placed on approx. $4 million of MCC funding related to Section 1 of the CA-5 Highway until further notice.


For the most up-to-date information on implementation progress, please read the Quarterly Implementation Status Report.

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  • Signed:
    June 14, 2005
  • Entry into Force:
    September 29, 2005

This project aims to improve the business skills, productivity, market access, and risk management practices of producers who own small and medium farmers.  The intent is to raise incomes for the targeted farmers, their employees, and their communities and strengthen the capacity of those enterprises servicing horticultural production and trade.  Specifically, the project seeks to:

  • Provide farmers training in the production and marketing of high value horticultural crops;
  • Improve farmer access to credit by providing technical assistance to financial institutions, loans to such institutions to improve the availability of funds for rural financial institutions, and expansion of the national lien registry system to improve the environment for asset-based lending;
  • Construct and improve feeder roads that connect farms to market; and
  • Provide grants to support the adaptation of global technological advances in agriculture to local conditions.
  • Project Amount: $68,320,000.00

The Transportation Project aims to reduce transportation costs between Honduran production centers and national, regional and global markets.The project seeks to:

  • Rehabilitate two stretches of the CA-5 Highway;
  • Upgrade key secondary highways to improve the access of rural communities to markets; and
  • Construct a weight control system and issuance of contracts to operate it.
  • Project Amount: $174,290,000.00
  • May 5, 2004

    The MCC Board selects Honduras as eligible for Compact assistance.

    The Board of Directors selects Honduras as one of the 16 countries eligible for MCC funding in 2005. The Board considered both past and current policy performance of the candidate countries in the areas of democratic governance, economic freedom and investing in the health and education of their people, as well as trends that indicated policy improvements or slippage.
  • June 6, 2004

    National consultative process uses the Poverty Reduction Strategy Paper (PRSP).

    The Government of Honduras uses the information from the consultations to inform the Compact proposal submitted to MCC. The Government of Honduras had put together a Poverty Reduction Strategy Paper (PRSP) in 2001. The PRSP was developed with broad participation by 3,500 members from the Honduran government, civil society and the private sector.
  • May 19, 2005

    MCC notifies Congress of intent to sign a Compact with Honduras

    MCC notifies the United States Congress of the intent to enter into a $215 million Millennium Challenge Compact with the Government of the Republic of Honduras to fund transportation and rural development projects benefiting Hondurans throughout the country.
  • September 6, 2005

    MCC Compact signed with Honduras

    The $215 million Compact with Honduras was signed and included two projects: The Transportation Project aimed to reduce transportation costs between Honduran production centers and national, regional and global markets. The Rural Development Project aimed to increase the productivity and business skills of farmers who operate small and medium-size farms, and their employees.
  • September 24, 2005

    MCC Compact with Honduras enters into force

    Entry into force signals the beginning of the implementation phase and five year countdown of the program. The initial stages of the compact focused on the competitive hiring of staff and the preparation of the procurements required for the Compact activities.
  • January 5, 2006

    First disbursement

    The first disbursement is authorized.
  • August 6, 2006

    The first major contract is signed

    MCA-H signs a contract with U.S. firm Fintrac, Inc. to provide technical assistance services in the Farmer Training and Development Activity in the Rural Development Project.
  • May 27, 2007

    MCA-H signs contract for Access to Credit Activity

    U.S. firm ACDI-VOCA wins the public procurement to provide Technical Assistance to Financial Intermediaries, one of the three sub activities of the Access to Credit Activity under the Rural Development Project.
  • July 6, 2007

    200 out of 298 municipalities throughout Honduras participated in rural road events

    MCA-H holds four major events in key cities throughout the country to inform communities about the Rural Roads Activity. MCA-H received submissions for rural roads improvements from the municipalities and clarified any concerns regarding the requirements for participation.
  • October 31, 2007

    First round of Agricultural Public Goods evaluations completed.

    The first round of competition includes a rigorous evaluation process in which 126 project applications were received and only seven were selected, with a total value of $4.167 million. Grants were awarded to projects in irrigation, biological pest control research, potato production research, promotion of competitiveness of SMEs (small and medium enterprises). The grants evaluation committee approves a total of seven grants to projects with a value of $4.167 million.
  • January 6, 2008

    The first Line of Credit for Financial Intermediaries through the Agriculture Trust Fund is approved

    The signing of the first Line of Credit between the Trust Fund Manager and Financial Intermediary FUNED marks the beginning of opportunities for many farmers and rural business to improve their access to credit.
  • March 29, 2008

    625 Program Farmers are harvesting High Value Horticulture Crops

    The Farmer Training and Development Activity in the Rural Development Project, started recruiting farmers. Over 7,000 farmers from all over Honduras are expected to participate in the program.
  • March 31, 2008

    Launching of the Agribusiness Development activity

    As part of the Watershed Management Project, the Agribusiness Development Activity aims to increase agricultural productivity on the islands of Santo Antão, Fogo, and São Nicolau by improving water management and soil conservation, strengthening agribusiness development services, and increasing access to credit and capacity of financial institutions.
  • May 27, 2008

    Construction starts for the first out of 3 secondary roads

    As part of the Transportation Project, construction starts for the upgrading of three key secondary roads (approximately 68 km) to improve the access of rural communities to markets.
  • July 22, 2008

    Construction begins on the CA-5 North Highway

    As part of the Transportation Project, construction for the North Segment of the CA-5 highway from the end of the Comayagua Valley to Taulabé commences. MCC is improving approximately 107 kilometers of the CA-5 Highway to foster market integration and accessibility.
  • September 1, 2008

    Honduras initiates the development of an improved potato seed

    As part of the Agricultural Public Goods Grant Facility in the Rural Development Project, an improved potato seed is developed to improve the competitive chain for potato production and commercialization that will benefit producers living in La Paz, Intibuca and Ocotepeque.
  • October 7, 2008

    The Farmer Training and Development Activity showcase its progress and early results.

    The first results are showcased in an annual event with the participation of government officials and private sector representatives of the largest supermarkets in the country, agriculture input providers, exporters, farmers, produce processors, and the international donor community.
  • December 8, 2008

    The Gov't. of Honduras signs $130 Million loan from Central American Bank of Economic Integration

    The Government of Honduras signs a $130 million loan with the Central American Bank of Economic Integration (CABEI) to help cover higher construction and resettlement costs and an expanded scope of works on the CA-5 Highway.
  • January 30, 2009

    The first progress report on the Access to Credit Activity is issued.

    The report shows that more than 3,000 loans have been disbursed. As part of the Rural Development Project, the Access to Credit Activity is improving farmer access to credit by providing technical assistance to financial institutions, loans to such institutions to improve the availability of funds for rural financial institutions and expansion of the national lien registry system to improve the environment for asset-based lending.
  • February 26, 2009

    Inauguration of a high- tech laboratory for the reproduction of coffee hybrids

    Funded through the Agricultural Public Goods Grant Facility in the Rural Development Project, the Honduran Institute for Café (IHCAFE) constructed and equipped a laboratory for the reproduction of three coffee hybrids.
  • March 30, 2009

    3,274 program farmers are harvesting high-value crops, earning at least $2,000 a hectare.

    The Farmer Training and Development Activity in the Rural Development Project, finished its second year of training farmers in high-value horticulture. Over 7,000 farmers from all over Honduras are expected to be trained over the life of the Compact.
  • April 28, 2009

    Colonia Milenio Pumas, the largest resettlement community is inaugurated

    In order for construction for the Transportation Project to start, resettlement activities had to take place. The largest community, Colonia Milenio Pumas, includes a new school, a market complex for small business owners, and a housing complex, ensuring that the livelihoods of those restored have been restored.
  • September 8, 2009

    MCC's Board of Directors terminates $10 million of MCC assistance

    MCC’s Board of Directors terminated $10 million of MCC assistance for a pattern of actions inconsistent with MCC's policies, reducing the compact to $205 million. The partial termination ceased funding for the Vehicle Weight Control Activity and the uncommitted portion of the Farm to Market Roads Activity corresponding to the improvement of approximately 93 kilometers of rural roads.
  • September 17, 2009

    425 farmers are connected to one of the community irrigation systems

    425 farmers are connected to one of the community irrigation systems built as part of the Agricultural Public Goods Grant Facility, exceeding the Compact target of 392 farmers by 8%. Through the Agricultural Grant Public Goods, MCA-H approved eight projects designed to build community based irrigation systems and to provide the training to farmers to manage those systems. The projects have expanded the irrigation area by 215 hectares.
  • September 20, 2009

    The Gov't. of Honduras enables the road maintenance entity to implement a weight control system.

    Stemming from Compact requirements and intensive coordination with MCA-H and MCC, the Government of Honduras modified the Law of Fondo Vial, the road maintenance entity, to enable it to implement a weight control system on the official road network.
  • January 27, 2010

    The Secured Transaction Law is Passed

    As part of the MCC-funded Access to Credit Activity, the passing of the Secured Transaction Law was a condition precedent to enable the creation of the movable property registry. This law was instrumental to improving the process for pledging collateral and foreclosing on liens and other types of collateral. As a result, individuals and small and medium-sized entrepreneurs will be able to offer items such as tractors, livestock, or accounts payable as collateral to access credit through formal institutions.
  • February 17, 2010

    The first secondary road is completed.

    The Sonaguera-Km. 35 road in the Aguan Valley is the first secondary road to be completed. As part of the Transportation Project, MCC funds are paving and upgrading three key secondary routes (approximately 68 km) for improved access by rural communities to markets.
  • March 9, 2010

    6,029 program farmers are harvesting high-value crops, earning at least $2,000 a hectare.

    The Farmer Training and Development Activity achieved 100% of its overall target of farmers who demonstrate they are harvesting high-value horticulture crops and earning at least $2,000 a hectare. These 6,029 farmers exceeding this threshold represent just over 80% of the more than 7,000 total farmers trained over the life of the Compact.
  • May 4, 2010

    The first road section of the CA-5 is completed.

    The first of four road sections of the CA-5 Highway is completed. As part of the Transportation Project, MCC funds are to improve approximately 107 kilometers of the CA-5 Highway to foster market integration and accessibility.
  • May 9, 2010

    The importance of road maintenance

    To ensure sustainability of the roads being improved with MCC funds, MCC asked the Government of Honduras to pass legislation to empower the national roads maintenance entity, Fondo Vial, to better address road maintenance issues by strengthening the Government’s road maintenance commitments and allocating budget to provide adequate funding for maintenance for the MCC-funded sections, as well as all other roads. As part of the compact agreement with MCC, the Government of Honduras increased its own road maintenance budget from $37 million in 2005 progressively to $64 million in 2010.
  • June 29, 2010

    618 farmers are connected to one of the community irrigation systems.

    618 farmers are connected to one of the community irrigation systems built as part of the Agricultural Public Goods Grant Facility, exceeding the Compact target of 392 farmers by 158%. Through the Agricultural Public Goods Grants Facility, MCA-H approved 11 projects to build community based irrigation systems and to provide training to farmers to manage those systems. The projects expanded the irrigation area by 290 hectares.
  • September 16, 2010

    Compact Closeout Celebration

    Project participants attend a celebratory event along with President Porfirio Lobo and MCC CEO Daniel Yohannes.

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