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.

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.

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.

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.

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.

The first disbursement is authorized.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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