Results and Lessons Learned from MCC’s First Compacts

Welcome and thank you for spending part of your day with us at the Millennium Challenge Corporation.

These are exciting times for MCC.

Last year, we successfully concluded two Compacts — in Honduras and Cape Verde — and we signed three new Compacts with Moldova, Philippines and Jordan.  We are on track to see five more countries conclude their Compacts this year — Armenia, Benin, Nicaragua, Georgia, and Vanuatu.  And we hope to add three new countries to the MCC family this year.

Let me start off with a summary of what we have accomplished and how we can bring the lessons of our model to bear on our nation’s evolving global development policy.

First, let me explain MCC’s philosophy.  Our approach to development is like a business.  We have a client — the U.S. taxpayer.  We have a partner — the countries we work with.  Our mission is to reduce poverty through economic growth, and we approach it with two goals in mind.

The first is to get the best investment return for the American taxpayer.

The second goal is to put our partner countries on a path to attract more private sector investment, and to reduce aid dependency by increasing their incomes.

As CEO, I keep a close eye on our MCC portfolio.  With the new Compacts and Threshold Programs we have added in the last year, our portfolio has grown to more than 8 billion dollars in development investments worldwide.

Our compact disbursements doubled in the last year to a cumulative total of 2 billion dollars, and contracts for MCC-funded investments worldwide are worth nearly 4 billion dollars.

We invest in projects that partner countries prioritize and projects that are expected to have a good economic rate of return.  MCC’s portfolio focuses on a number of key sectors:

  • 2.7 billion dollars for transportation projects;
  • 1.6 billion dollars for agriculture investments;
  • Half a billion dollars for water and sanitation; and
  • Three-quarters of a billion dollars for health, education, and community services projects.

These investments have allowed our country partners to train over 150,000 farmers in more efficient agriculture techniques that will help increase their incomes by producing higher-quality crops.  We have a total of 82,510 hectares of land under production.  We have provided $66 million in agricultural loans, and have assisted over 3,800 enterprises.

I’d like to give you a very successful story in Ghana. In Ghana alone, we trained over 45,000 farmers. Last year, the World Food Program purchased 1,000 metric tons of maize from mostly MCC-trained Ghanaian farmers, earning them over $350,000 in income.

In Honduras, I met Azucena Urquia.  Azucena told me she never imagined she would be a farmer, know how to plow a field, or how to sell her goods to big grocery stores.  But she received MCC training that taught her how to grow herbs. She was so proud of the sustainable livelihood she had created for herself, and so thankful to the MCC and the United States for the assistance she received. 

Another of my favorite stories comes from Georgia.  I toured a dairy plant owned by a woman named Nino Zambakhidze. Nino received a $124,550 grant through MCC, and then matched it with $158,000 in local funds. She used the grant to establish the dairy plant, and now you can buy her cheese in any major supermarket in Georgia. Nino told me that her dairy plant employs 25 people, not counting the 300 local farmers who supply raw milk. Nino said she pays many of her milk suppliers with improved feed, so they get healthier livestock and she gets higher-quality inputs. These are exactly the kinds of relationships we want to create with MCC investments.

We have supported construction of more than 890 kilometers of roads that link markets and encourage trade, and have another 2,400 kilometers under construction.

And we have constructed, rehabilitated, or equipped more than 200 educational facilities because we know that investing in human capital is one of the most effective ways to lift people out of poverty. Nearly 60,000 students have participated in our educational programs, and over 800 instructors have been trained or certified.

Then there are MCC policy reforms.  Remember — one of MCC’s core principles is: “policies matter.”  We work only with poor but well-governed countries.  We constantly search for ways to use our assistance as incentive to encourage policy reform in our partner countries.

It would be impossible to list them all, but in Cape Verde and Honduras alone, we can point to 7 policy reforms that strengthened governing practices and expanded economic opportunities.

To give you a few examples:

In Honduras, we worked with the government to set aside some road maintenance fees so that the roads we’re building are sustainable for a very long time.

Both in Cape Verde and El Salvador, they cut the number of days required to start a business significantly, creating the best environment for businesses to flourish.

This is some of what we have accomplished, together with our county partners.  The next step is to gather what Paul Harvey would call “the rest of the story.” Did our work result in higher incomes for the citizens of our partner countries?

To answer that question we will get the assessment of independent evaluators in the coming months.  We build rigorous third-party evaluation approaches into our compact programs, so we can isolate the impact of our work on the lives of our targeted beneficiaries. We eagerly await the results of their work.

In the meantime, we are encouraged by the preliminary data that is coming out of Honduras and Cape Verde. 

The most basic measuring stick of MCC’s work is whether we have an impact on incomes.

In Honduras, we have preliminary data from our agriculture program showing that farmers who received help from MCC saw their annual net income rise 88%, from 1,880 dollars per hectare to 3,550 dollars per hectare.

In Cape Verde, we also have preliminary data from our agriculture program.  Last year, farmers in Cape Verde suffered through a season of very bad rains. 

We would expect that farmers that received credit and training in soil and water management through MCC would be better prepared to weather these tough conditions.  As it turns out, they were.

On the island of Santo Antão, farmers who did not receive MCC assistance saw income decrease by 88%, while those who did receive assistance held their losses to just 18%.

I want to stress that this is preliminary data, and we will know much more when the work of our independent evaluators is completed.  But it fits with the personal stories I have heard directly from farmers and entrepreneurs with whom I have visited in our partner countries.

These are results the American people can be proud of. But I would be the first to say we can do even better.

The President reminded us last month that the state of the world today requires us all to “step up our game.”

When I came to MCC 15 months ago, I outlined five key priorities that I would like to achieve in partnership with you — the most important of them being our focus on results.

If we are to stay relevant, we must continuously show results to our constituency.

As I told you earlier, we at MCC operate as a business.  I have shared a lot of results with you today because I see this as a shareholder meeting.

I look around this room and see a lot of American taxpayers, and some of our friends from our partner countries.  I know you all have a stake in what we are trying to accomplish.

For all the big numbers we discussed today, it is also important to remember that when we talk about the return on your investment, we are talking about changing people’s lives for the better.  That’s what is important to us.

We expect the MCC investments you’ve made to benefit more than 171 million people in the poorest countries around the world — and we expect incomes to rise by $12.3 billion over the life of our current investments.

I have traveled in many poor countries around the world.  I have seen firsthand the hopelessness of severe poverty.  I also have seen what can be done when you offer someone the chance to pursue a better life for themselves and their families.

The stories of Azucena’s farm in Honduras and Nino’s dairy plant in Georgia are being multiplied millions and millions of times around the world. 

Giving hope to people like them is the strongest incentive I can imagine to keep focused on our principles and do everything we can to make MCC the most effective agency it can be.

Thank you very much.  My senior staff and I would be happy to take your questions.