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  • Closed Compact Report:  Closed Compact Report: Honduras Compact
  • May 2020

Introduction

In June 2005, the Millennium Challenge Corporation (MCC) and the Government of Honduras (GoH) signed a five-year, $215 million compact designed to increase the country’s economic growth and reduce poverty by alleviating two key impediments to economic growth: low agricultural productivity and high transportation costs. The compact consisted of two projects:

  • The Rural Development Project aimed to increase the productivity, market access, and business skills of farmers and their employees who owned or worked on small- and medium sized farms. It included four activities: (i) Farmer Training and Development (FTDA); (ii) Farmer Access to Credit, (iii) Farm to Market Roads, and (iv) the Agricultural Public Goods Grant Facility (APGGF).
  • The Transportation Project aimed to reduce transportation costs and improve market access between targeted production centers and national, regional and global markets. This project included three activities: (i) North and South Segments of Highway CA-5, (ii) Secondary Roads, and (iii) Vehicle Weight Control.

At the time of compact signing, the GoH and MCC expected approximately 1.7 million people to benefit from the investment over 20 years.

On June 28, 2009, Honduras's democratically elected leader, President Manuel Zelaya, was removed from office. This undemocratic transfer of power involved the participation of the civilian institutions of the Honduran government as well as the military, raising complex factual and legal questions. After closely monitoring the situation, and in consultation with other U.S. government agencies, on July 17, 2009, MCC informed the de facto GoH that funding through the compact was at risk due to actions inconsistent with MCC's policies. On September 3, 2009, the Department of State announced the termination of a broad range of assistance to the de facto government as a result of the coup d’état that took place on June 28 and the failure to restore the democratic and constitutional order. On September 9, 2009, MCC's Board of Directors terminated funding for certain projects and activities under the compact after determining that the undemocratic removal of Zelaya and the failure to re-establish the democratic order in Honduras were contrary to the criteria used to determine eligibility for MCC assistance. The Board instructed MCC to take the necessary actions to carry out the termination. Effective on October 2, 2009, MCC terminated $10 million in funding that was allocated for activities that had not yet commenced: (i) the Vehicle Weight Control Activity under the Transportation Project and (ii) the uncommitted portion of the Farm to Market Roads Activity (approximately 93 km) under the Rural Development Project.

Upon compact completion on September 29, 2010, the GoH had spent 99.5 percent of the revised compact budget of $205 million.

Under the Transportation Project, 49.5 km of highway and 65.5 km of secondary roads were upgraded. This was complemented by 495km rural roads, which were improved under the Rural Development Project. The independent Transportation evaluation found statistically significant, but small reductions in travel times and costs for key services; however, the modest increase in monthly agriculture income was offset by a modest decrease in monthly non-agriculture income.

Under the Rural Development Project’s FTDA, more than 7,000 farmers participated in training and technical assistance activities. By 2010, more than 6,000 of these farmers were harvesting high-value horticulture crops on more than 9,000 hectares, with more than 16,000 business plans prepared by program farmers with assistance from the program. Through the Access to Credit Activity, participating lenders disbursed $12 million in loans to more than 5,400 farmers, agribusinesses, and other producers and vendors in the horticulture industry. The APGGF Activity connected more than 950 farmers to small scale community irrigation systems, with 400 hectares under irrigation and developed 10 new agricultural technologies, such as potato seeds, coffee hybrids, and natural pest control, as part of the grant facility. For FTDA, MCC has concerns with the quality of the methods used for analysis in the independent evaluation and therefore limits the conclusions regarding outcomes it can draw from the report. There were no independent evaluations of Access to Credit or APGGF.

This report provides a summary of the tangible results of the compact program, documents changes in compact activities and the reasons behind them, details information on performance against targets in the monitoring plan and summarizes the results of independent evaluations that have been completed.