Speech

February 1, 2008

As Prepared by John J. Danilovich, Chief Executive Officer

Florida International University

‘Poverty Reduction in Latin America—MCC’s Role’

Greetings

I appreciate the warm welcome I received here this morning, and I thank you, Carl, for that kind introduction.

Thank you for all the hard work you and your team put into making this event possible.

Special thanks also to Ed [Glab], and I look forward to joining him, along with

  • Michael McClain and
  • Richard Olson

when the panel convenes.

I’m thrilled to be on the campus of Florida International University and to be here in Miami. It’s cold in Washington! There’s such great interest in the work of the Millennium Challenge Corporation here in Miami, and I’m pleased to have this opportunity to share with you firsthand the strides we are making to fulfill our mission of reducing poverty through economic growth amongst the world’s poorest countries, including our partner countries in the Americas.

Like so many of you, I share your deep interest in the Americas.

Like you, I want to see this hemisphere prosper and grow, through

  • healthy societies,
  • free markets,
  • private enterprise, and
  • transparent and democratic governments.

I was just in Nicaragua and El Salvador last week.

In Nicaragua, thousands of farmers and rural entrepreneurs are benefiting from technical assistance and business development services made possible through MCC funding. I met with President Ortega to discuss the ongoing progress of MCC’s $175 million compact with his country. Despite political differences, we agreed that we can cooperate to defeat our common enemy—poverty.

President Ortega and I presented land titles to over 700 Nicaraguan families and launched the beginning of a transportation project that will rehabilitate a key segment of the Pan-American Highway connecting Nicaragua to Honduras.

And, in El Salvador, where its $461 million compact is just beginning implementation, President Saca and I presented the first of thousands of scholarships funded by MCC’s compact to young students attending vocational training. Economic development and education are linked, and the scholarships are tangible manifestations of this link and of El Salvador’s commitment to empowering people to fully participate in the economic lives of their communities.

I also was presented with a copy of El Salvador’s first-ever Strategic Environmental Assessment. MCC takes issues pertaining to the environment seriously, and El Salvador’s assessment reflects our shared commitment to, and responsibility for, protecting the environment as we move toward sustainable development and economic growth.

I know that many of you are also aware of the unfolding results in our partner countries and are witnesses to how MCC programs are progressing and what we are doing right, and where we can improve.

I hope that you will share your thoughts with us, and we certainly welcome hearing from you.

Importance of Latin American engagement

Today, we have a great opportunity to further our conversation on a region we care immensely about, a region of tremendous relevance and strategic importance.

2007 marked a year of positive and comprehensive U.S. engagement in the Western Hemisphere. Strong, stable, and prosperous neighbors benefit both the region and the United States.

U.S. engagement is based on four pillars:

  • consolidating democracy,
  • promoting prosperity,
  • investing in people, and
  • protecting the security of the democratic state.

Overall U.S. assistance to the region has nearly doubled during the President’s time in office, rising from $862 million in 2001 to a request of $1.47 billion for the 2008 fiscal year.

The State Department’s Assistant Secretary for Western Hemisphere Affairs Thomas Shannon describes the Americas as, "on the cutting edge of transformational political and economic change…”

MCC’s role in that engagement

And, we can point to the work of the Millennium Challenge Corporation as further proof of constructive and positive U.S. engagement in the Americas.

Let there be no mistake about it: the Millennium Challenge Corporation is firmly committed to development, poverty reduction, and economic growth in the Americas.

MCC’s model

MCC awards grants—not loans—to countries that

  • rule justly,
  • invest in the health and education of their people,
  • and promote economic freedom.

MCC partner countries are committed

  • to practicing sound policies in these areas,
  • to building their capacity to lead their development,
  • and to delivering results where they matter most—in the lives of the poor.

MCC’s approach is changing not only the conversation about development but also the expectations. It alters the traditional donor-recipient relationship into one of co-partners in economic development.

To date, we have approved compacts with 16 partner countries worldwide totaling nearly $5.5 billion.

MCC’s threshold program is working with other countries in

  • Africa,
  • the Americas,
  • Eastern Europe, and
  • Asia

to address their policy weaknesses and push them over the threshold to compact eligibility. We see countries

  • fight corruption,
  • strengthen governance, and
  • improve health and education.

MCC’s "aid with accountability” or "aid with responsibility” model serves one mission: to reduce poverty through economic growth, including in the Americas.

There’s a lot of discussion lately about America’s use of "soft power” to further strategic U.S. objectives around the world and to change hearts and win minds of our fellow world citizens. MCC is a part of that "soft power” strategy and exemplifies how development assistance can deliver "smart aid” to poor countries determined to use it wisely.

Using MCC investments to

  • motivate countries to improve their own policy performance,
  • build their own capacity, and
  • stimulate trade and private sector activities for their own benefit is smart aid at work, and we see it at work in the Americas.

MCC’s work in the Americas

In the Americas, MCC has 5-year antipoverty compacts with

  • El Salvador,
  • Honduras, and
  • Nicaragua,

totaling more than $850 million.

We also have 2-year threshold programs with

Paraguay,

Guyana, and

Peru,

totaling an additional $77 million.

In addition to our active engagement with our compact and threshold countries, many others are taking it upon themselves to aggressively reform in the hope of becoming MCC-eligible and qualifying for our assistance. These actions confirm a powerful phenomenon called the "MCC incentive effect.”

MCC is, of course, not the only United States government assistance program in the Americas. Other options offer better fits to tackle the varied challenges of the region. Where we can cooperate with other agencies or donors to maximize resources and generate the greatest development impact, we are doing so. Strong donor coordination, after all, is key to MCC’s work in the Americas.

  • That is why we have learned from and collaborated extensively with USAID in developing our programs in the Americas.
  • That is why MCC’s three compacts in Central America benefit greatly now from close collaboration with USAID missions in those countries.
  • And, that is why we look to USAID as the primary implementer of MCC’s threshold programs in the region.

In addition, we work with other donors in the Americas. For example, in El Salvador, the Central American Bank for Economic Integration has provided a $55 million loan to the National Registry Center to support and expand MCC compact results. The loan supports El Salvador’s Northern Zone development program and will be used to strengthen land rights and modernize the cadastre and property registration systems.

So, how are MCC programs promoting

  • prosperity,
  • growth,
  • democracy, and
  • private enterprise in the Americas?

As compacts and threshold programs continue toward full implementation, results are unfolding to stimulate growth and reduce poverty.

  • Farmers are being trained in Honduras ($215 million) to increase their yields and commercialize their horticultural products.
  • El Salvador’s ($461 million) compact

will make strategic investments in human development through skills training and vocational education, will increase access to social services, and will invest in agriculture and small business development. Increased connectivity is expected to lower transportation costs to markets and for the delivery of social services.

Nicaraguan ($175 million) small- and medium-sized farmers are being trained and supported in marketing their

  • dairy products,
  • beans,
  • cassava, and
  • other crops.

Land titling efforts are also underway in Nicaragua. Prequalification proposals have been submitted and are being evaluated for primary road construction, while feasibility studies and designs are being finalized for improving secondary rural roads.

Through its threshold program, Paraguay ($35 million) has reduced the cost to start a business from $750 to $250, and cut the number of days required to start a business in half. Guyana’s ($7 million) threshold program will also decrease the number of days required to register a business and strengthen the country’s capacity to manage public revenues. Peru’s ($35 million) threshold program will increase immunization rates and fight corruption.

Compact investments in

  • roads,
  • land tenure,
  • rural development,
  • community services, and
  • agricultural productivity

will generate increased trade and greater prosperity for program beneficiaries.

Overall, MCC investments in the Americas are

  • reducing poverty,
  • promoting prosperity,
  • strengthening democracy, and
  • encouraging private enterprise

in three ways.

First, MCC programs contribute to the social justice agenda.

The Americas have made progress in the fight against poverty, but the region still suffers with some 205 million people living in poverty, while 80 million live in extreme poverty.

President Bush, on his last trip to the hemisphere in March 2007, spoke of U.S. support for "social justice” for the people of our neighboring countries through political, economic, and social development.

MCC’s mission of reducing poverty through economic growth helps deliver on this promise.

We focus on the poorest beneficiaries of our programs—on implementing programs that increase their income and, as a result, improve their standard of living.
 

Second, MCC investments promote trade and private enterprise.

Secretary of State Rice had said, "Ultimately…only one force is strong enough to lift people out of the poverty…and to break down social exclusion in the Americas, and that is the sustained economic growth fueled by fair and free trade.”

We agree.

MCC investments are strengthening the economies of

  • El Salvador,
  • Nicaragua, and
  • Honduras,

and helping these neighboring countries and CAFTA-DR partners maximize regional and international trade opportunities.

Each MCC compact in the Americas contains "aid-for-trade” activities to build each country’s capacity to trade.

MCC funding is constructing and improving transportation links between El Salvador and Honduras and between Honduras and Nicaragua. These linked routes will allow goods to cross from the Atlantic to the Pacific and will help farmers more easily move their products to markets in the region, in the U.S., and beyond.

Open markets through free and fair trade also attract private enterprise, a powerful engine for growth and poverty reduction.
The steps MCC partner countries are taking toward open economies send a powerful signal to private investors that conditions for doing business—for investing—in MCC countries are swiftly improving.

Third, the MCC process deepens democracy in the Americas.

We do this by selecting countries based on their good policy performance, including performance on three publicly available indicators on democracy, measuring:

  • political rights,
  • civil liberties, and
  • voice and accountability.

Let me underscore this point: MCC’s focus has been and will remain on the policies—and not the politics—of the region.

We see this in Nicaragua, where the people have made it clear that they are committed to the success of their compact, a point President Ortega acknowledged when I met with him in January. In the plaza of Chinandega where we presented land titles, President Ortega ended his speech by thanking the United States government and American people, proclaiming, "Viva los Estados Unidos!” Who would have ever guessed it!

MCC creates a process in which we can collaborate in a constructive way with governments, despite political differences. This reflects the careful investment of taxpayer funds and fosters peace and stability in the region.

Time and political and economic realities move on. We must capitalize on what is positive and constructive in our relationship, and MCC is certainly a positive and constructive force in our relationships throughout the world.

We support democracy by encouraging a consultative process in developing compact proposals that includes the voice of the people.

The consultative process in El Salvador is one of many striking examples of engaging the public to chart their own course for development. The National Development Commission led a public dialogue on a new vision for El Salvador’s development, gathering opinions and feedback from
citizens nationwide and abroad, NGOs, the private sector, women’s advocacy groups, international institutions, producers, municipal officials, community leaders, and interest groups.

Through over 50 separate events, over 2,500 participants were consulted, resulting in a coherent and comprehensive MCC-El Salvador compact.

We also support democracy by ensuring that partner countries continue working with and through their own institutions to lead the implementation of their compacts and the sustainability of results.
o Nicaragua, for example, passed critical road maintenance funding legislation to ensure the long-term sustainability of the road network, which an MCC investment is upgrading.

Yet, I would underscore that democratic processes are complex, and are ongoing and evolutionary. MCC’s engagement in the Americas—including the power of the "MCC effect” that our assistance generates—continues to inspire policy reforms that are essential for the evolution and institutionalization of democracy.

Conclusion

MCC’s goals in the Americas are straightforward as we move through this decade: the successful and full implementation of our three compacts, and substantial progress on our three threshold programs.

Last October in Washington, Secretary General José Miguel Insulza of the Organization of American States delivered a speech in which he said, "In a continent where there is still much poverty, much crime, and much inequality…I also see democratic progress and so much room for improvement; because our economies are growing, the quality of our governments is better and there is again hope for more stability, growth and justice.”

The Millennium Challenge Corporation contributes to this hope for prosperity in the Americas in partnership with those countries committed to development.

With this commitment, progress will be made—tangible results will be delivered—in the fight against poverty and for economic growth.

We welcome your ongoing help in sharing the MCC story of progress to reduce poverty through growth in the Americas.

And, I am looking forward to the panel presentation and to our discussion this morning; and thank you again for your interest in the Millennium Challenge Corporation’s work in the Americas.