El Salvador entered into a peace accord in 1992 that ended a decade of civil conflict. Human capital formation lagged and public investment was deferred during the war, contributing to a high incidence of poverty in the country (approximately 66 percent). The Northern Zone fared the worst; its mountainous territory served as a primary staging ground for the conflict, increasing violence and instability in the area and causing an exodus of large numbers of residents. Despite the significant national economic growth that followed the peace accord, progress stagnated and the poverty rate in the Northern Zone climbed significantly higher than the national average.
Overcoming these obstacles and unifying the Northern Zone with the rest of the country became a national priority. A comprehensive development program was needed to enable the region’s people to fully participate in El Salvador’s growth, the benefits of regional integration, and the economic opportunities brought about by free trade agreements. The five-year MCC compact provided a historic opportunity to fulfill these goals and revive El Salvador’s economic development.
MCC and the Government of El Salvador signed the compact in November 2006. It focused on the Northern Zone of the country, a region that includes half of El Salvador’s poorest municipalities and has substantial unrealized potential for sustainable development. The Northern Zone is also an important source of water, energy, biodiversity, and environmental resources for the country and the region.
The compact was implemented by FOMILENIO, an institution established by the Government of El Salvador as a requirement of the compact. 1 The Government of El Salvador and MCC expect over 706,000 people to benefit over 20 years from this investment.
- Original Amount at Compact Signing:
- Amount spent:
November 29, 2006
- Entry Into Force:
September 20, 2007
September 20, 2012
Estimated benefits correspond to $446,354,417 of compact funds, where cost-benefit analysis was conducted.
- 706,335Estimated beneficiaries over 20 years
MCC considers beneficiaries of projects to be those individuals who realize improved standards of living, primarily through higher incomes, as a result of economic gains generated by MCC-funded projects.
- $276,837,800Estimated net benefits over 20 years
(2008 USD) “Estimated Net Benefits” is the sum of all projected net benefits accruing over the life of the project, typically 20 years, evaluated at a 10% discount rate. Estimates are reported in millions of U.S. dollars in the year that the ERR analysis was completed.